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EXHIBIT 2.2
SHARE PURCHASE AGREEMENT
DATED AS OF DECEMBER 22, 1999
BY AND AMONG
MEDICAL DEVICE MANUFACTURING, INC.
D/B/A RIVO TECHNOLOGIES,
(THE "PURCHASER")
NOBLE-MET LTD.
(THE "COMPANY")
AND
THE SHAREHOLDERS OF NOBLE-MET LTD.
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..................................................................................2
Section 1.1 Certain Definitions..........................................................................2
Section 1.2 Terms Generally..............................................................................11
ARTICLE II PURCHASE AND SALE OF STOCK...................................................................12
Section 2.1 Purchase and Sale............................................................................12
Section 2.2 Payment of Purchase Price....................................................................12
Section 2.3 Adjustment to Purchase Price.................................................................15
Section 2.4 Allocation of Purchase Price.................................................................17
ARTICLE III THE CLOSING..................................................................................17
Section 3.1 Closing......................................................................................17
Section 3.2 Closing Deliveries...........................................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS................................19
Section 4.1 Corporate Organization.......................................................................19
Section 4.2 Ownership of Shares..........................................................................20
Section 4.3 Authorization, Etc...........................................................................20
Section 4.4 No Conflict..................................................................................20
Section 4.5 Governmental Consents........................................................................20
Section 4.6 Capital Stock................................................................................21
Section 4.7 Financial Statements.........................................................................21
Section 4.8 Absence of Certain Changes or Events.........................................................21
Section 4.9 No Undisclosed Liabilities...................................................................24
Section 4.10 Property, Assets; Inventory..................................................................24
Section 4.11 Intellectual Property........................................................................24
Section 4.12 Tax Matters..................................................................................26
Section 4.13 Real Property................................................................................27
Section 4.14 Material Contracts...........................................................................28
Section 4.15 Relationship with Suppliers & Customers......................................................30
Section 4.16 Notes and Accounts Receivable; Bank Accounts.................................................30
Section 4.17 Insurance....................................................................................31
Section 4.18 Employees....................................................................................31
Section 4.19 Employee Benefits............................................................................31
Section 4.20 Environmental Compliance.....................................................................34
Section 4.21 Litigation and Claims, Compliance with Laws..................................................36
Section 4.22 Affiliate Transactions.......................................................................36
Section 4.23 Records......................................................................................37
Section 4.24 Brokers, Finders, Etc........................................................................37
Section 4.25 Representations and Warranties Generally.....................................................37
Section 4.26 Competing Business...........................................................................37
Section 4.27 Year 2000 Program............................................................................37
Section 4.28 Product Warranty and Liability...............................................................38
Section 4.29 Other Information............................................................................38
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER..................................................38
Section 5.1 Organization.................................................................................38
Section 5.2 Authorization, Etc...........................................................................39
Section 5.3 Brokers' Fees................................................................................39
Section 5.4 Capital Stock................................................................................39
Section 5.5 No Conflict..................................................................................39
Section 5.6 Financial Statements.........................................................................40
Section 5.7 Absence of Certain Changes or Events.........................................................40
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Section 5.8 No Undisclosed Liabilities...................................................................40
Section 5.9 Other Information............................................................................40
ARTICLE VI THE SELLERS' AND THE COMPANY'S OBLIGATIONS BEFORE CLOSING....................................40
Section 6.1 General......................................................................................40
Section 6.2 Access.......................................................................................41
Section 6.3 Operation of Business........................................................................41
Section 6.4 Preservation of Business; Insurance..........................................................41
Section 6.5 Notices and Consents.........................................................................41
Section 6.6 Exclusivity..................................................................................41
Section 6.7 Delivery of Schedules; Notice of Developments; Update of Schedules...........................42
Section 6.8 Confidentiality..............................................................................42
Section 6.9 Financial Statements.........................................................................43
Section 6.10 Company Obligations; Affiliate Agreements....................................................43
Section 6.11 Real Property................................................................................43
Section 6.12 Termination of ESOP and ERISA Plans..........................................................44
Section 6.13 Section 338(h)(10) Election..................................................................44
ARTICLE VII PURCHASER'S OBLIGATIONS BEFORE CLOSING.......................................................45
Section 7.1 Due Diligence................................................................................45
Section 7.2 Confidentiality..............................................................................46
Section 7.3 Consent of Lenders...........................................................................46
Section 7.4 Delivery of Schedules; Notice of Developments; Update of Schedules...........................46
ARTICLE VIII CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE..............................................47
Section 8.1 Representations and Warranties True..........................................................47
Section 8.2 Performance..................................................................................47
Section 8.3 No Material Adverse Effect...................................................................47
Section 8.4 Consents.....................................................................................47
Section 8.5 No Proceedings, Injunctions, Etc.............................................................47
Section 8.6 Accounts.....................................................................................47
Section 8.7 Minimum Net Worth............................................................................48
Section 8.8 The Sellers' and Officer's Certificates......................................................48
Section 8.9 Tax Review...................................................................................48
Section 8.10 Repayment of Debt............................................................................48
Section 8.11 Opinion of Sellers' Counsel..................................................................48
Section 8.12 Resignations.................................................................................48
Section 8.13 Regulatory and Third Party Approvals.........................................................48
Section 8.14 Financial Statements.........................................................................48
Section 8.15 Financing....................................................................................48
Section 8.16 Lender's Due Diligence Review................................................................49
Section 8.17 Real Property................................................................................49
Section 8.18 Noncompetition Agreements....................................................................49
Section 8.19 Other Damages................................................................................49
Section 8.20 Employment Agreement.........................................................................49
Section 8.21 Shareholders' Agreement......................................................................49
Section 8.22 Lease Agreement..............................................................................49
Section 8.23 Termination and Release of Options...........................................................49
Section 8.24 Environmental Permits and Compliance.........................................................50
Section 8.25 Redemption of Shares in the ESOP Plan........................................................50
ARTICLE IX CONDITIONS PRECEDENT TO SELLERS' PERFORMANCE.................................................50
Section 9.1 Representations and Warranties True..........................................................50
Section 9.2 Performance..................................................................................50
Section 9.3 Consents.....................................................................................50
Section 9.4 No Proceedings, Injunctions, Etc.............................................................50
Section 9.5 Tax Review...................................................................................50
Section 9.6 Shareholders' Agreement......................................................................50
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Section 9.7 Opinion of Purchaser's Counsel...............................................................50
Section 9.8 Officer's Certificate........................................................................51
Section 9.9 Employment Agreement.........................................................................51
Section 9.10 Purchaser Secretary's Certificate............................................................51
Section 9.11 Environmental Permits and Compliance.........................................................51
ARTICLE X POST-CLOSING COVENANTS.......................................................................51
Section 10.1 General......................................................................................51
Section 10.2 Litigation Support...........................................................................51
Section 10.3 Tax Matters..................................................................................51
Section 10.4 Public Disclosure; Confidentiality...........................................................52
Section 10.5 Cooperation with Initial Public Offering.....................................................52
Section 10.6 Employee Benefits............................................................................52
Section 10.7 ERISA Excise Tax.............................................................................52
Section 10.8 Post-Closing Operation of Business...........................................................53
Section 10.7 Eligible Employee Agreements.................................................................53
ARTICLE XI INDEMNIFICATION..............................................................................53
Section 11.1 Indemnification by the Sellers...............................................................53
Section 11.2 Indemnification by Purchaser.................................................................54
Section 11.3 Procedures for Third-Party Claims............................................................54
Section 11.4 Procedures for Direct Claims.................................................................56
Section 11.5 Limitations of Indemnification Obligations...................................................56
Section 11.6 Survival of Representations, Warranties and Covenants........................................57
ARTICLE XII TERMINATION..................................................................................57
Section 12.1 Termination of Agreement.....................................................................57
Section 12.2 Effect of Termination........................................................................58
ARTICLE XIII MISCELLANEOUS................................................................................58
Section 13.1 Fees and Expenses............................................................................58
Section 13.2 Entire Agreement.............................................................................58
Section 13.3 Amendments...................................................................................58
Section 13.4 Taxes........................................................................................59
Section 13.5 Governing Law; Consent to Jurisdiction; Service of Process...................................59
Section 13.6 Representation by Counsel....................................................................59
Section 13.7 Assignment...................................................................................59
Section 13.8 Headings.....................................................................................59
Section 13.9 Notices......................................................................................59
Section 13.10 Counterparts.................................................................................61
Section 13.11 Severability.................................................................................61
Section 13.12 Specific Performance.........................................................................62
Section 13.13 Legal Fees and Expenses......................................................................62
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SCHEDULES
Schedule 2.1(b) Option Payments
Schedule 4.1 Corporate Organization
Schedule 4.4 No Conflict
Schedule 4.6 Capital Stock
Schedule 4.7 Financial Statements
Schedule 4.8 Absence of Certain Changes or Events
Schedule 4.9 No Undisclosed Liabilities
Schedule 4.10(a) Liens
Schedule 4.10(b) Tangible Personal Property
Schedule 4.11(a) Intellectual Property
Schedule 4.11(c) Computer Programs
Schedule 4.11(d) Licenses
Schedule 4.12 Tax Matters
Schedule 4.13(a) Real Property
Schedule 4.14 Material Contracts
Schedule 4.15 Relationship with Suppliers & Customers
Schedule 4.16 Notes and Accounts Receivable; Bank Accounts
Schedule 4.17 Insurance
Schedule 4.18 Employees
Schedule 4.19(a) Employee Benefits: Plans & ERISA Plans
Schedule 4.19(c) Liability Under Title IV of ERISA
Schedule 4.19(n) Acceleration of Benefits
Schedule 4.20 Environmental Compliance
Schedule 4.21(a) Litigation
Schedule 4.21(b) Compliance with Laws
Schedule 4.22 Affiliate Transactions
Schedule 4.26 Competing Business
Schedule 4.27 Year 2000 Program
Schedule 4.28 Product Warranty and Liability
Schedule 5.1 Organization
Schedule 5.5 Conflict
Schedule 5.6 Financial Statements
Schedule 5.7 Absence of Certain Changes or Events
Schedule 5.8 No Undisclosed Liabilities
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SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "Agreement"), dated as of December
22, 1999, is entered into by and among Medical Device Manufacturing, Inc. (d/b/a
Rivo Technologies), a Colorado corporation (the "Purchaser"), Noble-Met Ltd., a
Virginia corporation (the "Company"), and each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"),
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇," and together with ▇▇▇▇▇▇▇▇, the "Principal
Shareholders") and the other shareholders of the Company executing this
Agreement: ▇▇▇▇▇ ▇. Page ("Page"), ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇ 1998 Trust (the Principal Shareholders, together with
such other shareholders are hereafter individually referred to as a "Seller" and
collectively referred to as "Sellers").
RECITALS:
A. Purchaser desires to purchase and Sellers desire to sell all of the
outstanding capital stock of the Company, on the terms and for the consideration
described below, so that Purchaser will become the sole owner of the Company and
all of the issued and outstanding capital stock of the Company.
B. The authorized capital stock of the Company consists of solely of
5,000,000 shares of common stock (the "Shares"), no par value, of which
4,149,776 Shares are issued and outstanding as of the date hereof.
C. At Closing after the redemption of the Shares from the ESOP Plan,
Sellers will own all of the issued and outstanding capital stock of the Company.
Annex I to this Agreement sets forth the number of Shares owned by each Seller
and the proportionate share of the Purchase Price (as defined below) to be
received by each Seller with respect to all Shares owned by such Seller. By
entering into this Agreement, each of Sellers expressly confirm and agree to
Annex I and the accuracy of the information provided therein.
D. Pursuant to the Buy-Sell Agreement, dated December 31, 1998, to
which each Seller and the Company are a party, there is a right of first refusal
to purchase shares of the Company. By entering into this Agreement, each Seller
and the Company expressly waives any right of first refusal.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1 Certain Definitions. As used in this Agreement, the
following terms shall have the meanings set forth or as referenced below:
"Actions" shall mean any litigation and proceedings of any nature,
whether at law or in equity, before any court, arbitrator, arbitration panel or
Governmental Authority.
"Adjustment Notice" shall have the meaning set forth in Section
2.3(c)(i) of this Agreement.
"Affiliate" of a Person shall mean any Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person.
"Allocations" shall have the meaning set forth in Section 6.13(b) of
this Agreement.
"Auditor" shall have the meaning set forth in Section 2.2(d)(iii) of
this Agreement.
"Auditor's Earnout Report" shall have the meaning set forth in Section
2.2(d)(iii) of this Agreement.
"Auditor's Report" shall have the meaning set forth in Section
2.3(c)(iii) of this Agreement.
"Balance Sheet" shall have the meaning set forth in Section 4.7 of this
Agreement.
"Balance Sheet Date" shall mean December 31, 1998.
"Built-In Gain Tax" shall mean the federal and state income taxes
payable pursuant to Section 1374 of the Code.
"Certificate of Designation" shall have the meaning set forth in
Section 2.2(b) of this Agreement.
"Clean-up" shall mean removal or remediation of, or other response to
(including, without limitation, testing, monitoring, sampling or investigating
of any kind) any Release of Hazardous Materials or Contamination, to the
satisfaction of all applicable governmental agencies, in compliance with
Environmental Laws and in compliance with good commercial practice.
"Closing" shall have the meaning set forth in Section 3.1 of this
Agreement.
"Closing Balance Sheet" shall mean the audited balance sheet for FY
1999.
"Closing Cash Payment" shall have the meaning set forth in Section
2.2(a) of this Agreement.
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"Closing Date" shall have the meaning set forth in Section 3.1 of this
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the initial paragraph of
this Agreement.
"Computer Programs" shall mean (a) any and all computer software
programs and software development tools, including all source and object code,
(b) databases and compilations, including any and all data and collections of
data, whether machine readable or otherwise, (c) all descriptions, flow-charts
and other work product used to design, plan, organize and develop any of the
foregoing, (d) all domain names and the content contained on the respective
Internet site(s), and (e) all documentation, including user manuals and training
materials, relating to any of the foregoing.
"Contamination" shall mean the presence of, or Release on, under, from
or to the Real Property of any Hazardous Material, except the routine storage
and use of Hazardous Materials from time to time in the ordinary course of
business, in compliance with Environmental Laws and in compliance with good
commercial practice.
"Contracts" shall mean all contracts, agreements, indentures, licenses,
leases, commitments, arrangements, sales orders and purchase orders of every
kind, whether written or oral.
"Convertible Preferred Stock" shall have the meaning set forth in
Section 2.2(b) of this Agreement.
"Damages" shall mean, collectively, losses, Liabilities, Liens, costs,
damages, claims and expenses (including reasonable fees and disbursements of
counsel, consultants or experts and expenses of investigation) and, without
limiting the generality of the foregoing, with regard to environmental matters
shall also include specifically response costs, corrective action costs, natural
resource damages, costs to comply with orders or injunctions, damages or awards
for property damage or personal injury, fines, penalties and costs for testing,
remediation or cleanup costs, including those related to administrative review
of site remediation.
"Direct Claim" shall have the meaning set forth in Section 11.4 of this
Agreement.
"Dollars" and "$" shall mean United States dollars.
"Due Diligence Period" shall have the meaning set forth set forth in
Section 7.1(a) of this Agreement.
"Early Tax" shall have the meaning set forth in Section 6.13(c) of this
Agreement.
"Earnout Adjustment Notice" shall have the meaning set forth in Section
2.2(d)(i) of this Agreement.
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"Earnout Adjustment Objection Notice" shall have the meaning set forth
in Section 2.2(d)(ii).
"Earnout Amount" shall have the meaning set forth in Section 2.2(c)(i)
of this Agreement.
"Earnout Objection Period" shall have the meaning set forth in Section
2.2(d)(ii) of this Agreement.
"Earnout Verification Period" shall have the meaning set forth in
Section 2.2(d)(i) of this Agreement.
"EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization, all as determined in accordance with GAAP, and
applied on a consistent basis, and adjusted to take into account the adjustments
shown on Annex III attached hereto and such other adjustments to which Purchaser
and Sellers' Representative may mutually agree.
"Eligible Employees" shall mean employees who are full-time employees
of the Company on the Closing Date and who remain in the full-time employ of the
Company up to and including the date on which the Earnout Amount allocated to
Eligible Employees is paid; provided, however, that if the MER Acquisition
occurs by March 31, 2000, ▇▇▇ ▇▇▇▇▇▇▇ shall be deemed an Eligible Employee and
shall be entitled to 1/11 of the earnout amount allocated to Eligible Employees
pursuant to Section 2.2(c)(ii) of this Agreement, which amount shall not exceed
$1,000,000.
"Eligible Employee Agreements" shall have the meaning set forth in
Section 2.2(c)(ii) of this Agreement.
"Election" shall mean an election valid under Section 1.338(h)(10)-1 of
the Treasury Regulations.
"Election Taxes" shall mean the increase in Taxes owed by Sellers as a
result of the Election, which shall be estimated at the Closing and subject to
increase or decrease thereafter in accordance with Section 6.13(b) of this
Agreement.
"Employee Incentive Bonus Agreement" shall mean the agreement executed
by each Eligible Employee with regard to the earnout amount allocated to the
Eligible Employees pursuant to Section 2.2(c)(ii), the form of which shall be
mutually agreed to by the parties hereto and shall be attached hereto as
Exhibit K.
"Employment Agreement" shall have the meaning set forth in Section 8.20
of this Agreement.
"Employment Laws" shall mean all federal, state, local and municipal
Laws in effect at or prior to Closing relating to employees, dependent
contractors and independent contractors and their employment, or rendition of
services, including but not limited to taxation, health, labor,
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labor/management relations, occupational health and safety, pay equity,
employment equity or discrimination, employment standards, benefits and workers'
compensation.
"Environment" shall mean the environment or natural environment as
defined in any Environmental Laws, including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata and any sewer
system.
"Environmental Claim" shall mean any litigation, proceeding,
investigation, prosecution, order, citation, directive or notice (written or
oral) by any Person alleging potential liability for Damages arising out of,
based on or resulting from (a) the presence, release or threatened release into
the Environment of any Hazardous Material at any location, whether or not owned
or operated by the Company or (b) circumstances forming the basis of any
violation or alleged violation of any Environmental Law or Damages thereunder.
"Environmental Laws" shall mean all federal, state, local and municipal
Laws in existence, enacted or in effect at or prior to Closing relating to
pollution or protection of public health and safety, the workplace and the
Environment, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport, labeling, advertising, sale, display or
handling of Hazardous Materials. "Environmental Laws" shall include, but not be
limited to the following statutes and all rules and regulations relating
thereto, all as amended and modified from time to time:
(x) The Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("▇▇▇▇") 42 U.S.C. Sections 9601-9675; the
Resource Conservation and Recovery Act of 1976 ("RCRA") 42 U.S.C.
Section 6901-6991; the Clean Water Act 33 U.S.C. Section 1321 et seq.;
the Clean Air Act 42 U.S.C. Sections 7401 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA") 7 U.S.C. Section
136 et seq.; the Toxic Substances Control Act ("TSCA") 15 U.S.C.
Sections 2601-2671; and the Food, Drug and Cosmetic Act ("FDCA"), and
(y) all similar state and local laws, statutes, codes,
ordinances, regulations and rules.
"Environmental Liabilities" shall mean Damages relating to or arising
in any way from Environmental Laws, Environmental Claims or both.
"Environmental Permits" shall have the meaning set forth in Section
4.20(b) of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall have the meaning set forth in Section 4.19(a)
of this Agreement.
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"ERISA Plans" shall have the meaning set forth in Section 4.19(a) of
this Agreement.
"ESOP Plan" shall mean the portion of the Employee's Stock Ownership
And Retirement Savings Plan of Noble-Met, Ltd., which consists of ESOP Stock
Accounts and ESOP Cash Accounts (as defined in such plan), as in effect prior to
Closing.
"Financial Statements" shall have the meaning set forth in Section 4.7
of this Agreement.
"FY 1998" shall mean the Fiscal Year ended December 31, 1998.
"FY 1999" shall mean the Fiscal Year ended December 31, 1999.
"FY 2000" shall mean the Fiscal Year ended December 31, 2000.
"FY 2001" shall mean the Fiscal Year ended December 31, 2001.
"401(k) Plan" shall mean the Company's 401(k) feature in the Employee's
Stock Ownership And Retirement Savings Plan of Noble-Met, Ltd., as in effect
prior to Closing.
"GAAP" shall mean generally accepted accounting principles, as in
effect in the United States, from time to time.
"Governmental Authority" shall mean any agency, public or regulatory
authority, instrumentality, department, commission, court, ministry, tribunal or
board of any government, whether foreign or domestic and whether national,
federal, provincial, state, regional, local or municipal.
"Gross-Up Payment" shall mean an amount paid to Sellers at Closing (as
adjusted thereafter in accordance with Section 6.13 of this Agreement) to
reimburse Sellers for Taxes payable by Sellers resulting from Sellers' receipt
of cash equal to the sum of all Gross-Up Payments and the Election Taxes.
"Hazardous Materials" shall mean those materials that are regulated by
or form the basis of liability under Environmental Laws and includes, without
limitation, (a) all substances identified under any Environmental Law as a
pollutant, contaminant, hazardous substance, liquid, industrial or solid or
hazardous waste, hazardous material or toxic substance, dangerous substance or
dangerous good, (b) petroleum or petroleum derived substance or waste, (c)
asbestos or asbestos-containing material, (d) PCBs or PCB-containing materials
or fluids, (e) any other substance with respect to which a Governmental
Authority may require environmental investigation or remediation and (f) any
radioactive material or substance.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended, and any regulations promulgated thereunder.
"Indebtedness" shall mean (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services (other
than current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices) and
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including earn-out or similar contingent purchase amounts, (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under lease, (d) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, (e) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof and (f) all guarantees by such Person of
obligations of others.
"Indemnifying Party" shall mean any Person or Persons required to
provide indemnification under this Agreement.
"Indemnifying Sellers" shall have the meaning set forth in Section 11.1
of this Agreement.
"Indemnitee" shall mean any Person or Persons entitled to
indemnification under this Agreement.
"Intellectual Property" shall mean all intellectual property rights
used in the business of the Company as currently conducted or as presently
contemplated by the Company to be conducted, including all patents and patent
applications, trademarks, trademark registrations and applications; service
marks, service ▇▇▇▇ registrations and applications, logos, designs, proprietary
rights, slogans and general intangibles of like nature, together with all
goodwill related to the foregoing; trade names, copyrights, copyright
registrations and applications; Computer Programs; product plans, technology,
process engineering, drawings, schematic drawings, secret processes; proprietary
knowledge, including without limitation, trade secrets, know-how, confidential
confirmation, proprietary processes and formulae.
"Investigation" shall mean any investigation of any nature by any
Governmental Authority.
"Knowledge" with respect to any particular representation or warranty
contained in this Agreement, when used to apply to the "Knowledge" of the
Company or the "Knowledge" of any of Sellers, shall be deemed to be followed by
the phrase "after due inquiry" and shall mean the actual knowledge or conscious
awareness after due inquiry of Sellers or W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Laws" shall mean statutes, common laws, rules, ordinances,
regulations, codes, licensing requirements, orders, judgments, injunctions,
decrees, licenses, permits and bylaws of a Governmental Authority.
"Lease" shall have the meaning set forth in Section 8.22 of this
Agreement.
"Lenders" shall mean senior lenders to Purchaser.
"Liabilities" shall mean debts, liabilities, commitments, obligations,
duties and responsibilities of any kind and description, whether absolute or
contingent, monetary or non-monetary, direct or indirect, known or unknown or
matured or unmatured, or of any other nature.
"Licenses" shall have the meaning set forth in Section 4.11(d) of this
Agreement.
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"Lien" shall mean any security interest, lien, mortgage, claim, charge,
pledge, restriction, equitable interest or encumbrance of any nature and in the
case of securities any put, call or similar right of a third party with respect
to such securities.
"Litigation" shall mean any litigation, legal action, arbitration,
proceeding, material demand, material claim or investigation pending, or to the
Knowledge of Sellers threatened, planned or reasonably probable, against,
affecting or brought by or against the any of Sellers, the Company, the
Company's present or former employees or independent contractors affiliated at
any time with Sellers or the Company.
"Material Adverse Effect" shall mean, with respect to the same or any
similar events, acts, conditions or occurrences, whether individually or in the
aggregate, a material adverse effect on or change in (a) any of the business,
condition (financial or otherwise), operations, assets or liabilities of the
Company taken as a whole, (b) the legality or enforceability against Sellers of
this Agreement or (c) the ability of any Seller to perform his, her or its
obligations and to consummate the transactions under this Agreement. For
purposes of clause (a) of this definition and without limiting the generality of
the foregoing, an effect or change with respect to the same or any similar
event(s), act(s), condition(s) or occurrence(s) individually or in the aggregate
with respect to which the Company would have $50,000 in the aggregate or more in
Damages being imposed upon or sustained by the Company shall constitute a
Material Adverse Effect or change.
"Material Contract" shall have the meaning set forth in Section 4.14(a)
of this Agreement.
"Maximum Indemnification Amount" shall have the meaning set forth in
Section 11.5(b) of this Agreement.
"MER Acquisition" shall mean the acquisition by Purchaser or an
Affiliate of Purchaser of the stock or all or substantially all of the assets of
"Medical Engineering Resources, Ltd." or "MER."
"▇▇▇▇▇▇" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"Minimum Net Worth" shall mean net assets and liabilities of $4,465,000
as reflected on the Closing Balance Sheet.
"Net Proceeds" shall have the meaning set forth in Section 11.5(b) of
this Agreement.
"Net Worth" shall mean the net worth of the Company adjusted to take
into account the adjustments shown on Annex II attached hereto.
"1998 EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization for FY 1998 as determined by the FY 1998 Financial
Statements, which shall be prepared in accordance with GAAP, applied on a
consistent basis, and adjusted to take into account the adjustments shown on
Annex III attached hereto and such other adjustments to which Purchaser and
Sellers' Representative may mutually agree.
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"1999 EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization for FY 1999 as determined by the FY 1999 Financial
Statements, which shall be prepared in accordance with GAAP, applied on a
consistent basis, and adjusted to take into account the adjustments shown on
Annex III attached hereto and such other adjustments to which Purchaser and
Sellers' Representative may mutually agree.
"1999 EBITDA Estimate" shall have the meaning set forth in Section
2.3(a) of this Agreement.
"Noncompetition Agreements" shall have the meaning set forth in Section
8.18 of this Agreement.
"Notice of Settlement" shall have the meaning set forth in Section
11.3(c) of this Agreement.
"Notice to Contest" shall have the meaning set forth in Section 11.3(c)
of this Agreement.
"Notice to Defend" shall have the meaning set forth in Section 11.3(a)
of this Agreement.
"Objection Notice" shall have the meaning set forth in Section
2.3(c)(ii) of this Agreement.
"Objection Period" shall have the meaning set forth in Section
2.3(c)(ii) of this Agreement.
"Options" shall mean the outstanding options to acquire Shares granted
to various employees of the Company.
"Page" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"PBGC" shall have the meaning set forth in Section 4.19(d) of this
Agreement.
"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, firm, partnership or other entity or
government or Governmental Authority.
"Plans" shall have the meaning set forth in Section 4.19(a) of this
Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.2 of
this Agreement.
"Purchaser" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Purchaser Directive" shall have the meaning set forth in Section 10.8
of this Agreement.
"Purchaser Indemnitee" shall have the meaning set forth in Section 11.1
of this Agreement.
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"Purchaser Secretary's Certificate" shall have the meaning set forth in
Section 3.2(b)(iv) of this Agreement.
"Real Property" shall have the meaning set forth in Section 4.13 of
this Agreement.
"Regulatory Action(s)" shall mean any claim, demand, action or
proceeding brought or instigated by any governmental agency in connection with
any Environmental Law (including without limitation civil, criminal or
administrative proceedings), whether or not seeking costs, damages, penalties or
expenses.
"Release" shall mean the spilling, leaking, disposing, discharging,
emitting, depositing, injecting, leaching, escaping or any other release or
threatened release, however defined, and whether intentional or unintentional,
of any Hazardous Material.
"Revised Schedules" shall have the meaning set forth in Section 6.7(b)
of this Agreement.
"Schedules" shall mean the disclosure schedules delivered pursuant to
this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sellers" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Sellers' Opinion" shall have the meaning set forth in Section 8.11 of
this Agreement.
"Sellers' Proposed Earnout Adjustment" shall have the meaning set forth
in Section 2.2(d)(i) of this Agreement.
"Sellers' Representative" shall mean the representative selected by
Sellers and the Eligible Employees who shall initially be ▇▇▇▇▇▇▇▇.
"Shareholders' Agreement" shall have the meaning set forth in Section
8.21 of this Agreement.
"Shares" shall have the meaning set forth in Recital A of this
Agreement.
"SPD" shall have the meaning set forth in Section 4.19(b)(iv) of this
Agreement.
"Subscription Agreement" shall have the meaning set forth in Section
2.2(b) of this Agreement.
"Subsidiary" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by the Company.
"Survey" shall have the meaning set forth in Section 6.11 of this
Agreement.
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"Systems" shall have the meaning set forth in Section 4.28(a) of this
Agreement.
"Tax Returns" shall mean all returns, declarations, reports, forms,
estimates, information returns, statements or other documents (including any
related or supporting information) filed or required to be filed with or
supplied to any Governmental Authority in connection with any Taxes.
"Taxes" shall mean all taxes, charges, fees, duties, levies, penalties
or other assessments, including, without limitation, income, gross receipts,
excise, real and personal property, sales, transfer, license, payroll,
withholding, social security, franchise, unemployment insurance, workers'
compensation, employer health tax, Built-In Gain Tax or other taxes, imposed by
any Governmental Authority and shall include any interest, penalties or
additions to tax attributable to any of the foregoing.
"Terminated Plans" shall have the meaning set forth in Section 4.19(p)
of this Agreement.
"Third Party Claim" shall have the meaning set forth in Section 11.3(a)
of this Agreement.
"Third Party Environmental Claim(s)" shall mean third party claims,
actions, demands or proceedings (other than Regulatory Actions) based on
negligence, trespass, strict liability, nuisance, toxic tort or detriment to
human health or welfare due to any Release of Hazardous Materials or
Contamination, and whether or not seeking costs, damages, penalties or expenses.
"Title Commitment" shall have the meaning set forth in Section 6.11 of
this Agreement.
"Title Company" shall have the meaning set forth in Section 6.11 of
this Agreement.
"Title Defect" shall have the meaning set forth in Section 6.11 of this
Agreement.
"2000 EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization for FY 2000 as determined by the FY 2000 Financial
Statements, which shall be prepared in accordance with GAAP, applied on a
consistent basis, and adjusted to take into account the adjustments shown on
Annex III attached hereto and such other adjustments to which Purchaser and
Sellers' Representative may mutually agree.
"2001 EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization for FY 2001 as determined by the FY 2001 Financial
Statements, which shall be prepared in accordance with GAAP, applied on a
consistent basis, and adjusted to take into account the adjustments shown on
Annex III attached hereto and such other adjustments to which Purchaser and
Sellers' Representative may mutually agree.
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"Verification Period" shall have the meaning set forth in Section
2.3(c)(i) of this Agreement.
Section 1.2 Terms Generally. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation" even if not actually
followed by such phrase unless the context expressly provides otherwise. All
references herein to Annexes, Articles, Sections, paragraphs, Exhibits and
Schedules shall be deemed references to this Agreement unless the context shall
otherwise require. Unless otherwise expressly defined, terms defined in the
Agreement shall have the same meanings when used in any section, Exhibit or
Schedule and terms defined in any section, Exhibit or Schedule shall have the
same meanings when used in the Agreement or in any other section, Exhibit or
Schedule. The words "herein," "hereof," "hereto" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
provision of this Agreement.
ARTICLE II
PURCHASE AND SALE OF STOCK
Section 2.1 Purchase and Sale.
(a) Subject to the terms and conditions set forth in this
Agreement, on the Closing Date (as defined below in Section 3.1) Sellers will
sell to Purchaser, and Purchaser shall purchase from Sellers, the Shares for the
Purchase Price set forth in Section 2.2 below.
(b) On or immediately prior to the Closing Date, all
outstanding Options shall be canceled and, in lieu thereof, converted into the
right to receive, as soon as reasonably practicable as of or after the Closing
Date, a cash payment from the Company in amounts as set forth on Schedule 2.1(b)
as shall be determined by Sellers' Representative. Such amounts shall be paid to
each Option holder as soon as reasonably practicable as of or after completion
of the FY 1999 audit contemplated by Section 2.3 below.
(c) Prior to the Closing Date, the Company shall, and Sellers
shall cause the Company to, (i) take all steps necessary to cause the Company's
stock option plans to be cancelled on or prior to the Closing Date and, in lieu
thereof, converted into the right to receive a cash payment and to otherwise
make any amendments to the terms of such stock option plans that are necessary
to give effect to the transactions contemplated by this Agreement, and (ii) use
all necessary efforts to obtain at the earliest practicable date all written
consents from holders of Options to the cancellation of such holder's Options to
take effect at the Closing Date. Notwithstanding any other provision of this
Section, payment may be withheld in respect of any Option until necessary or
appropriate consents are obtained with respect to such Option.
(d) Prior to the Closing Date, the Company will redeem the
Shares in the ESOP Plan in a procedure to be mutually agreed by the parties
hereto.
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Section 2.2 Payment of Purchase Price. Payment of the purchase price
(the "Purchase Price") shall be as follows:
(a) At Closing, Purchaser shall deliver a payment of
$21,500,000, subject to adjustment as provided in Section 2.3 (the "Closing Cash
Payment"), by wire transfer of immediately available federal funds to Sellers,
in accordance with their respective ownership of the Shares as set forth on
Annex I. The Cash Closing Payment shall be reduced on a dollar-for-dollar basis
by the amount of the aggregate payment to be made for any outstanding Options in
accordance with Section 2.1(b), and such amount shall be paid by Purchaser to
Sellers or the Company, as mutually agreed, for use in making the cash payment
referred to in Section 2.1(b).
(b) At Closing, Purchaser shall issue to each Seller that is
an "accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act shares of Convertible Preferred Stock of
Purchaser ("Convertible Preferred Stock") the number of which shares of
Convertible Preferred Stock shall be determined by multiplying such Seller's
percentage interest of Shares in the Company immediately prior to the Closing,
but after redemption of the Shares in the ESOP Plan by the Company as
contemplated in Section 2.1(d) above, as set forth on Annex I times 3,500,000
and dividing that product by twelve (12). If a Seller is not an "accredited
investor," then, notwithstanding anything to the contrary herein, such Seller
will not receive Convertible Preferred Stock as a portion of the Purchase Price
paid to such Seller and instead will receive an amount of immediately available
federal funds equal to the product of their percentage interest of Shares in the
Company immediately prior to the Closing as set forth on Annex I times
$3,500,000. The Convertible Preferred Stock shall have the rights and
preferences set forth in the certificate of designation for the Convertible
Preferred Stock attached hereto as Exhibit A (the "Certificate of Designation")
as corrected, which shall be the same class of shares as acquired in connection
with this transaction by KRG Capital Fund I, L.P. and its affiliated funds. In
connection with the issuance of the Convertible Preferred Stock to Sellers
pursuant to this Section 2.2(b), Sellers shall each be required to execute a
subscription agreement in the form attached hereto as Exhibit B (the
"Subscription Agreement").
(c) (i) Within thirty (30) days after the delivery of audited
financial statements of the Company for the fiscal year ending December 31, 2000
and, in no event later than April 15, 2001, Purchaser shall pay, or shall cause
the Company to pay, to Sellers an amount not to exceed $10,000,000 (the "Earnout
Amount") equal to the product of either (A) four (4) or (B) four and two tenths
(4.2) if the MER Acquisition occurs before March 31, 2000 and the amount, if
any, by which 2000 EBITDA exceeds 1999 EBITDA. In the event that the Earnout
Amount earned in accordance with the preceding sentence is less than
$10,000,000, then, for the twelve-month period ending December 31, 2001,
Purchaser shall pay, or shall cause the Company to pay to Sellers within thirty
(30) days after the delivery of audited financial statements of the Company for
the fiscal year ending December 31, 2001 and, in no event later than April 15,
2002, the further Earnout Amount of the product of either (X) three (3) or (Y)
three and fifteen hundredths (3.15) if the MER Acquisition occurs before March
31, 2000 and the amount, if any, by which 2001 EBITDA exceeds 2000 EBITDA;
provided, however, that the aggregate Earnout Amount paid or payable in
accordance with this Section 2.2(c)(i) shall not exceed $10,000,000. The Earnout
Amount shall be allocated among Sellers on a pro rata basis
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based on their relative ownership of the Shares on the Closing Date. Payment of
the Earnout Amount shall, at the option of each Seller be in the form of either
(I) one hundred percent (100%) cash or (II) up to twenty five percent (25%)
Convertible Preferred Stock at $12.00 per share and the balance in cash.
(ii) An amount (A) not to exceed either (x)
$10,000,000 or (y) $11,000,000 if the MER Acquisition occurs before March 31,
2000 and (B) calculated in the same manner as the Earnout Amount allocated to
the Sellers shall be paid to the Eligible Employees in accordance with the
provisions of the Employee Incentive Bonus Agreement to be executed at Closing,
provided, that in order to be eligible for the earnout amount under this Section
2.2(c)(ii), Eligible Employees shall be required to execute a confidentiality,
noncompetition, nonsolicitation and assignment of inventions agreement, the form
of which shall be mutually agreed to by the parties hereto and shall be attached
hereto as Exhibit C (the "Eligible Employee Agreements"). Payment of the earnout
amount under this Section 2.2(c)(ii) to Eligible Employees shall, at the option
of each Eligible Employee, be in the form of either (I) one hundred percent
(100%) cash or (II) up to twenty five percent (25%) stock appreciation rights in
the Company. Such stock appreciation rights plan shall be adopted within sixty
(60) days of the Closing Date.
(d) Following the Closing, if Sellers and/or Eligible
Employees disagree on the determination of the Earnout Amount or the earnout
amount allocated to Eligible Employees as set forth in Section 2.2(c)(i) and
Section 2.2(c)(ii), respectively, Sellers' Representative shall represent
Sellers and the Eligible Employees in any such disagreement and the following
procedure shall be employed:
(i) Sellers' Representative shall have until
forty-five (45) days after receipt of Purchaser's determination of the Earnout
Amount (the "Earnout Verification Period") to verify Purchaser's determination
of the actual Earnout Amount(s). During such period, at the request of the
Sellers' Representative, Purchaser shall cause the Company to provide such
representative back-up financial information and working papers and the like
necessary for such verification. Any proposed adjustments to such determination
shall be made by written notice by Sellers' Representative to Purchaser within
the Earnout Verification Period (an "Earnout Adjustment Notice"), setting forth
(A) Sellers' objections to Purchaser's determination of the actual Earnout
Amount, (B) Seller's determination of the actual Earnout Amount, and (C)
Sellers' proposed actual Earnout Amount (the "Sellers' Proposed Earnout
Adjustment"). If Sellers' Representative does not deliver an Earnout Adjustment
Notice to Purchaser within the applicable Earnout Verification Period,
Purchaser's determination of the actual Earnout Amount shall be final and
binding on the parties.
(ii) To the extent that Purchaser has any objection
to Sellers' Proposed Earnout Adjustment, such objection shall be made by a
written notice to Sellers' Representative that sets forth the basis for such
objection (the "Earnout Adjustment Objection Notice") within fifteen (15) days
after delivery of the Earnout Adjustment Notice (the "Earnout Objection
Period"). If Purchaser does not object to Sellers' Earnout Adjustment Notice
within the applicable Earnout Objection Period, then Sellers' Proposed Earnout
Adjustment shall be final and binding on the parties.
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(iii) If Purchaser delivers an Earnout Adjustment
Objection Notice in response to any Earnout Adjustment Notice delivered by
Sellers, and Sellers' Representative and Purchaser are unable to agree upon the
amount of any Proposed Earnout Adjustment within ten (10) days after receipt of
the Earnout Adjustment Objection Notice, then an independent "Big Five"
accounting firm to be mutually agreed upon by Purchaser and Sellers'
Representative (the "Auditor") shall be requested to conduct a review and
determine the amount of the actual Earnout Amount. The Auditor shall be
instructed in performing such review that Purchaser and Sellers' Representative
shall each be provided with copies of any and all correspondence and drafts
distributed to any party. Each of Sellers' Representative and Purchaser shall be
granted reasonable access to all documents made available to the Auditor by the
other party, provided that any information contained in such documents shall be
subject to the confidentiality provisions set forth in this Agreement. Prior to
issuing its final determination, the Auditor shall issue a draft of its report
to Purchaser and Sellers' Representative and Purchaser and Sellers'
Representative shall have the opportunity to provide the Auditor with input and
any additional information that such party deems relevant, provided that the
Auditor shall not be required to use any such input or information in connection
with its review and determination. The Auditor shall promptly deliver copies of
its report to Purchaser and Sellers' Representative, setting forth its
determination of the actual Earnout Amount (the "Auditor's Earnout Report").
Fifty percent of the costs and expenses of the Auditor and the Auditor's Report
contemplated by this Section shall be borne by Purchaser, and the remainder of
such costs shall be borne by Sellers.
(e) At Closing, Purchaser shall assume any and all
Indebtedness of the Company as of the Closing Date, provided, however, that in
no event shall such Indebtedness net of cash as of the Closing Date exceed
$6,000,000.
Section 2.3 Adjustment to Purchase Price.
(a) Following the Closing, the Company shall engage Deloitte &
Touche to complete an audit for FY 1999, including a determination of FY 1999
EBITDA; provided, however, that the cost of such audit shall be excluded from
EBITDA calculations but only to the extent that the cost of such Deloitte &
Touche audit exceeds the cost of a comparable audit by KPMG LLP and only to the
extent of the excess. The Purchase Price will be subject to the following
adjustments, based on the difference between 1999 EBITDA and $4,400,000 (the
"1999 EBITDA Estimate"):
(i) if 1999 EBITDA exceeds the 1999 EBITDA Estimate,
the Purchase Price will be increased by the product of 6.50 and the amount by
which 1999 EBITDA exceeds the ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
(ii) if the 1999 EBITDA Estimate exceeds 1999 EBITDA,
the Purchase Price will be decreased by the product of 6.50 and the amount by
which the 1999 EBITDA Estimate exceeds ▇▇▇▇ ▇▇▇▇▇▇; and
(iii) if the 1999 EBITDA Estimate equals 1999 EBITDA,
the Purchase Price will not be adjusted pursuant to this Section 2.3(a).
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(iv) any increase to the Purchase Price as a result
of an adjustment under this Section 2.3(a) shall be paid upon the earlier of (A)
forty-five (45) days after delivery of the Closing Balance Sheet and audited
statements of income and cash flow for FY 1999 or (B) resolution of the
procedures set forth in Section 2.3(c);
(v) any decrease to the Purchase Price as a result of
an adjustment under this Section 2.3(a) shall be offset against any Earnout
Amount; provided, however, that in the event no Earnout Amount is due, Sellers
shall pay the amount of the downward adjustment to the Purchase Price to
Purchaser within thirty (30) days of delivery of the audited balance sheet for
FY 2001 and audited statements of income and cash flow for FY 2001.
(b) Following the Closing, the Company shall engage Deloitte &
Touche to complete an audit of the Net Worth as of December 31, 1999; provided,
however, that the cost of such audit shall be excluded from Net Worth
calculations. The Purchase Price will be subject to the following adjustments,
based on the difference between the Net Worth as of December 31, 1999 and the
Minimum Net Worth:
(i) if the Net Worth exceeds the Minimum Net Worth,
the Purchase Price will be increased by a dollar-for-dollar amount equal to the
amount by which the Net Worth exceeds the Minimum Net Worth;
(ii) if the Minimum Net Worth exceeds the Net Worth,
the Purchase Price will be decreased by a dollar-for-dollar amount equal to the
amount by which the Minimum Net Worth exceeds the Net Worth; and
(iii) if the Minimum Net Worth equals the Net Worth,
the Purchase Price will not be adjusted pursuant to this Section 2.3(b).
(iv) any increase or decrease to the Purchase Price
as a result of an adjustment under this Section 2.3(b) shall be paid upon the
earlier of (A) forty-five (45) days after delivery of the Closing Balance Sheet
and audited statements of income and cash flow for FY 1999 or (B) resolution of
the procedures set forth in Section 2.3(c);
(c) If Sellers disagree with Purchaser's determination of the
1999 EBITDA and/or Net Worth as of December 31, 1999, the Sellers'
Representative shall represent Sellers in any such disagreement and the
following procedure shall be employed:
(i) Sellers' Representative shall have until forty
five (45) days after Purchaser's determination of the 1999 EBITDA and the Net
Worth (the "Verification Period") to verify Purchaser's determination of 1999
EBITDA and the Net Worth. During such period, at the request of the Sellers'
Representative, Purchaser shall cause the Company to provide such representative
back-up financial information and working papers and the like necessary for such
verification. Any adjustments to Purchaser's determination shall be made by
written notice to Purchaser within the Verification Period (an "Adjustment
Notice"), setting forth (A) Sellers' objections to Purchaser's determination of
the 1999 EBITDA and the Net Worth, (B) Sellers' determination of the 1999 EBITDA
and the Net Worth, and (C) the proposed Purchase Price
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adjustment (the "Proposed Purchase Price Adjustment"). If Sellers'
Representative does not deliver an Adjustment Notice to Purchaser within the
Verification Period, Purchaser's determination of the 1999 EBITDA and Net Worth
shall be final and binding on the parties.
(ii) To the extent that Purchaser has any objection
to the Proposed Purchase Price Adjustment, such objection shall be made by a
written notice to Sellers' Representative that sets forth the basis for such
objection (the "Objection Notice") within ten (10) days after delivery of the
Adjustment Notice (the "Objection Period"). If Purchaser does not object to the
Proposed Purchase Price Adjustment within the Objection Period, then the
Proposed Purchase Price Adjustment shall be final and binding on the parties.
(iii) If Purchaser delivers an Objection Notice in
response to any Adjustment Notice delivered by Sellers, and Sellers'
Representative and Purchaser are unable to agree upon the amount of any Proposed
Purchase Price Adjustment within ten (10) days after receipt of the Objection
Notice, then an Auditor (other than Deloitte & Touche) shall be requested to
conduct a review and determine the amount of the 1999 EBITDA and the Net Worth.
The Auditor shall be instructed in performing such review that Purchaser and
Sellers' Representative shall each be provided with copies of any and all
correspondence and drafts distributed to any party. Each of Sellers'
Representative and Purchaser shall be granted reasonable access to all documents
made available to the Auditor by the other party, provided that any information
contained in such documents shall be subject to the confidentiality provisions
set forth in this Agreement. Prior to issuing its final determination, the
Auditor shall issue a draft of its report to Purchaser and Sellers'
Representative and Purchaser and Sellers' Representative shall have the
opportunity to provide the Auditor with input and any additional information
that such party deems relevant, provided that the Auditor shall not be required
to use any such input or information in connection with its review and
determination. The Auditor shall promptly deliver copies of its report to
Purchaser and Sellers' Representative, setting forth its determination of the
1999 EBITDA and the Net Worth (the "Auditor's Report"). The Auditor's Report
will be conclusive and binding upon both Purchaser and Sellers and any
adjustments to the Purchase Price shall be paid in accordance with Sections
2.3(a)(iv), 2.3(a)(v) and/or 2.3(b)(iv), as applicable. Fifty percent of the
costs and expenses of the Auditor and the Auditor's Report contemplated by this
Section shall be borne by Purchaser, and the remainder of such costs shall be
borne by Sellers.
Section 2.4 Allocation of Purchase Price.
The Purchase Price to be paid by Purchaser to Sellers and the
liabilities of the Company (plus other relevant items) shall be allocated among
the assets of the Company for all purposes as set forth on Exhibit D hereto
which shall be mutually agreed on at or prior to the Closing Date. The
allocation of the Purchase Price was bargained and negotiated for and each party
shall file all Tax Returns in a manner consistent with Exhibit D.
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ARTICLE III
THE CLOSING
Section 3.1 Closing. The delivery of the Shares pursuant to Section 2.1
and the payment of the Purchase Price pursuant to Section 2.2 (hereinafter
called the "Closing") shall take place at 10:00 a.m. (Denver time) at the
offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, on or before January 31, 2000 or on such other date, time and place as
may be mutually agreed upon by the parties hereto. The date on which the Closing
occurs is referred to herein as the "Closing Date." The transactions
contemplated herein to be consummated at Closing shall be deemed to take effect
at 12:01 a.m. (East Coast time) on the Closing Date.
Section 3.2 Closing Deliveries.
(a) By Sellers and the Company. At the Closing, Sellers shall
deliver or cause to be delivered to Purchaser the following:
(i) certificates representing the Shares duly
endorsed by the appropriate Seller, for transfer to Purchaser or accompanied by
duly executed stock powers, in either case executed in blank and otherwise in
form acceptable for transfer on the books of the Company;
(ii) the certificates pursuant to Section 8.8;
(iii) the resignations of the Company's and the
Company's Subsidiaries' directors and officers, pursuant to Section 8.12;
(iv) the stock books, stock ledgers, minute books and
corporate seals of the Company;
(v) a copy of the Articles of Incorporation of the
Company, certified by the Virginia State Corporation Commission, and a
Certificate of Good Standing from the Virginia State Corporation Commission each
dated not more than ten (10) days before the Closing Date;
(vi) the bylaws of the Company, along with a
certificate executed by the Secretary of the Company, dated as of the Closing
Date, certifying that such copies are true, correct and complete, and that such
bylaws were duly adopted and have not been amended or rescinded;
(vii) any approvals required pursuant to Section
8.13;
(viii) the Noncompetition Agreements, executed by
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Page as set forth in Section 8.18;
(ix) the Employment Agreement, executed by ▇▇▇▇▇▇▇▇,
as set forth in Section 8.20;
(x) the Shareholders' Agreement, as set forth in
Section 8.21; and
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(xi) the Sellers' Opinion as set forth in Section
8.11.
(b) By Purchaser. At the Closing, Purchaser shall deliver or
cause to be delivered to Sellers the Purchase Price and the following:
(i) stock certificates for a total of 291,670 shares
of Convertible Preferred Stock reduced by the quotient of the amount of cash
paid pursuant to Section 2.2(b) above to Sellers who are not "accredited
investors" divided by twelve (12);
(ii) the officer's certificate described in Section
9.8;
(iii) a copy of the Articles of Incorporation of
Purchaser, certified by the Secretary of State of the State of Colorado, and a
Certificate of Good Standing from the Secretary of State of the State of
Colorado, each dated not more than ten (10) days before the Closing Date;
(iv) a certificate executed by the Secretary of
Purchaser certifying that an attached copies of the bylaws of Purchaser and of
the minutes of Purchaser authorizing this transaction and the election of
▇▇▇▇▇▇▇▇ to the Board of Directors of Purchaser are true, correct and complete
copies thereof and that such bylaws and minutes were duly adopted and have not
been amended or rescinded ("Purchaser Secretary's Certificate");
(v) a copy of the Shareholders' Agreement executed by
Purchaser as set forth in Section 9.6;
(vi) the Employment Agreement, executed by Purchaser;
and
(vii) the Purchaser's Opinion as set forth in Section
9.7.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS
The Company and each of Sellers jointly and severally represent and
warrant to Purchaser as set forth in this Article IV.
Section 4.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. Except as set forth on Schedule 4.1, the Company has
no Subsidiaries, and does not have a direct or indirect ownership interest in
any Person. The Company is qualified to do business in the jurisdictions set
forth in Schedule 4.1. The Company has the power and authority (corporate and
otherwise) to own, lease and operate its respective properties and assets and to
carry on its business as now being conducted and is duly qualified or licensed
to do business as a foreign corporation in good standing in the jurisdictions in
which the failure to qualify would reasonably be expected to have a Material
Adverse Effect. Sellers have delivered to Purchaser complete and correct copies
of the Company's charter documents and all amendments thereto to the date
hereof.
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Section 4.2 Ownership of Shares. The Shares are owned by Sellers free
and clear of all Liens, other than restrictions imposed by federal and state
securities laws. Annex I sets forth the name of each Person owning Shares and
the amount of Shares owned by such Person. Other than the Shares held by
Sellers, all of which are set forth and accounted for in Annex I, there are no
Shares of the Company issued or outstanding. Upon the consummation of the
transactions contemplated hereby, Purchaser will acquire good title to the
Shares free and clear of all Liens, other than the restrictions on subsequent
transfers imposed by federal and state securities laws.
Section 4.3 Authorization, Etc. The Company and each of Sellers has
full power and authority to execute, deliver and perform their obligations under
this Agreement and the documents and instruments contemplated hereby and to
carry out the transactions contemplated hereby and thereby. The Company and each
of Sellers has duly approved and authorized the execution and delivery of this
Agreement and the documents and instruments contemplated hereby and the
consummation of the transactions contemplated hereby and thereby, and no other
corporate proceedings or other action on the part of the Company or any of
Sellers are necessary to approve and authorize the execution, delivery and
performance by the Company and each of Sellers of this Agreement and the
documents and instruments contemplated hereby or the consummation by the Company
and Sellers of the transactions contemplated hereby or thereby. This Agreement
constitutes a legal, valid and binding agreement of the Company and each of
Sellers, enforceable against the Company and each of Sellers in accordance with
its terms, except that (a) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
Section 4.4 No Conflict. Except as set forth in Schedule 4.4, neither
the execution, delivery or performance of this Agreement or the other documents
and instruments to be executed and delivered by the Company or Sellers pursuant
hereto, nor the consummation by the Company or Sellers of the transactions
contemplated hereby or thereby, nor compliance by the Company or Sellers with
any of the provisions hereof or thereof will (a) conflict with or result in any
breach of any provision of the Articles of Incorporation, Bylaws or similar
organizational documents of the Company, (b) constitute a change in control
under or require the consent from or the giving of notice to a third party,
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, or result in the creation of any
Lien upon or affecting any of the Company's assets or properties pursuant to,
any of the terms, conditions or provisions of any contractual obligation of the
Company, (c) violate any order, writ, injunction, decree, statute, rule or
regulation of any Governmental Authority applicable to the Company or Sellers or
to which any of their properties or assets may be bound or (d) result in
triggering of any right of first refusal or other right under any agreement to
which the Company or Sellers is a party.
Section 4.5 Governmental Consents. Except under the HSR Act, no
consent, order or authorization of, or registration, declaration or filing with,
any Governmental Authority is
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required in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby by Sellers
and the Company.
Section 4.6 Capital Stock. As of the date hereof, the authorized
capital stock of the Company consists of 5,000,000 shares of common stock, no
par value per share, of which 4,149,776 Shares are issued and outstanding and
owned by Sellers. Except as set forth on Schedule 4.6, there are no outstanding
subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any Shares, including any rights of conversion or exchange
under any outstanding securities or other instruments. All outstanding Shares
have been validly issued and are fully paid, nonassessable and free of
preemptive or similar rights.
Section 4.7 Financial Statements. The Company has delivered to
Purchaser the Company's Financial Statements. For the purposes of this
Agreement, "Financial Statements" shall mean: (a) its unaudited balance sheet as
of September 30, 1999, and the related statement of income and cash flows for
the nine-month period then ended; (b) an audited balance sheet for FY 1998 (the
"Balance Sheet") as of the Balance Sheet Date and audited statements of income
and cash flow for the fiscal year then ended; and (c) an audited balance sheet
for FY 1997 as of December 31, 1997 and audited statements of income and cash
flow for the fiscal year then ended. Except as set forth on Schedule 4.7, the
Financial Statements are in accordance with the books and records of the Company
(which books and records are correct and complete), correct and complete in all
material respects, and fairly present the financial position of the Company and
its results of operations as of and for the periods indicated in accordance with
GAAP and have been prepared in accordance with GAAP consistently applied.
Section 4.8 Absence of Certain Changes or Events. Except as set forth
on Schedule 4.8, since the Balance Sheet Date (a) the Company has conducted its
business only in the ordinary course and consistent with past practice, (b)
there has not been any developments or events which have had or to Sellers'
Knowledge could reasonably be expected, with the passage of time, to have,
individually or in the aggregate, a Material Adverse Effect and (c) except as
contemplated in this Agreement, the Company has not:
(i) adopted any amendment to its Articles of
Incorporation, Bylaws or similar organization documents;
(ii) (A) sold, leased, transferred or disposed of any
assets or rights other than in the ordinary course of business consistent with
past practice, which assets or rights do not involve more than $50,000 in the
aggregate (B) incurred any Lien thereupon, except for Liens incurred in the
ordinary course of business consistent with past practice which Liens would not
in the aggregate exceed $50,000, (C) acquired or leased any assets or rights
other than assets or rights in the ordinary course of business consistent with
past practice, that individually or in the aggregate would involve more than
$50,000 or (D) entered into any commitment or transaction with respect to (A),
(B) or (C) above;
(iii) (A) incurred, assumed or refinanced any
Indebtedness or (B) made any loans, advances or capital contributions to, or
investments in, any Person;
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(iv) paid, discharged or satisfied any liability,
obligation, or Lien other than payment, discharge or satisfaction of (A)
Indebtedness as it matures and become due and payable or (B) liabilities,
obligations or Liens in the ordinary course of business consistent with past
practice;
(v) (A) changed any of the accounting or tax
principles, practices or methods used by the Company, except as required by
changes in applicable Tax Laws or (B) changed reserve amounts or policies;
(vi) entered into any employment contract or other
arrangement or made any change in the compensation payable or to become payable
to any of Sellers or any of the Company's officers, employees, agents,
consultants or Persons acting in a similar capacity (other than general
increases in wages to employees who are not officers or Persons acting in a
similar capacity or Affiliates in the ordinary course consistent with past
practice), or to Persons providing management services, entered into or amended
any employment, severance, consulting, termination or other agreement or
employee benefit plan or made any loans to any of its Affiliates, officers,
employees, agents or consultants or Persons acting in a similar capacity or made
any change in its existing borrowing or lending arrangements for or on behalf of
any of such Persons pursuant to an employee benefit plan or otherwise;
(vii) paid or made any accrual or arrangement for
payment of any pension, retirement allowance or other employee benefit pursuant
to any existing plan, agreement or arrangement to any Affiliate, officer,
employee or Person acting in a similar capacity; or paid or agreed to pay or
made any accrual or arrangement for payment to any Affiliate, officers,
employees or Persons acting in a similar capacity of any amount relating to
unused vacation days, except payments and accruals made in the ordinary course
consistent with past practice; except as contemplated by this Agreement, grant,
issue, accelerate or accrue salary or other payments or benefits pursuant to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan, agreement
or arrangement, or any employment or consulting agreement with or for the
benefit of any Affiliate, officer, employee, agent or consultant or Person
acting in a similar capacity, whether past or present; or amend in any material
respect any such existing plan, agreement or arrangement in a manner consistent
with the foregoing;
(viii) entered into any collective bargaining
agreement;
(ix) made any payments (other than regular
compensation payable to officers and employees or Persons acting in a similar
capacity of the Company in the ordinary course consistent with past practice),
loans, advances or other distributions (other than such distributions that did
not and are not reasonably likely to result in the Net Worth of the Company as
of December 31, 1999 being less than the Minimum Net Worth), or enter into any
transaction, agreement or arrangement with, Sellers, Company's Affiliates,
officers, employees, agents, consultants or Persons acting in a similar
capacity, stockholders of their Affiliates, associates or family members;
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(x) made or authorized any capital expenditures,
except in the ordinary course of business consistent with past practice not in
excess of $50,000 individually or $200,000 in the aggregate;
(xi) incurred any Taxes, except in the ordinary
course of business consistent with past practice;
(xii) settled or compromised any Tax liability or
agreed to any adjustment of any Tax attribute or made any election with respect
to Taxes;
(xiii) failed to duly and timely file any Tax Return
with the appropriate Governmental Authorities required to be filed by it in a
true and complete and correct form or to timely pay all Taxes shown to be due
thereon;
(xiv) (A) entered into, amended, renewed or permitted
the automatic renewal of, terminated or waived any right under, any Material
Contract, or, except in the ordinary course of business consistent with past
practice, any other agreement, or (B) took any action or failed to take any
action that, with or without either notice or lapse of time, would constitute a
default under any Material Contract;
(xv) (A) made any change in its working capital
practices generally, including accelerating any collections of cash or accounts
receivable or deferring payments or (B) failed to make timely accruals,
including with respect to accounts payable and liabilities incurred in the
ordinary course of business;
(xvi) failed to renew (at levels consistent with
presently existing levels), terminated or amended or failed to perform any of
its obligations or permitted any material default to exist or caused any
material breach under, or entered into (except for renewals in the ordinary
course of business consistent with past practice), any material policy of
insurance;
(xvii) has not experienced any material damage,
destruction, or loss to its property not covered by insurance;
(xviii) disposed of or permitted to lapse any
material Intellectual Property;
(xix) except in the ordinary course of business
consistent with past practice pursuant to appropriate confidentiality
agreements, and except as required by any Law or any existing agreements set
forth on Schedule 4.14 or as may be reasonably necessary to secure or protect
intellectual or other property rights of the Company, provided any confidential
information to any Person other than Purchaser;
(xx) suffered total or significant partial loss of
the business of any customers;
(xxi) there has been no material change in the normal
operating balances of the Corporation's inventory;
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(xxii) changed the compensation levels applicable to
any class of Company employees; or
(xxiii) paid any bonuses payable or to become payable
to any of Sellers or any of the Company's officers, employees, agents,
consultants or Persons acting in a similar capacity.
Section 4.9 No Undisclosed Liabilities. The Company has no Liabilities
that would be material to the Company taken as a whole, except for such
Liabilities as (a) are set forth on Schedule 4.9 hereto, (b) are reflected on
the Financial Statements or (c) were incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice and which
individually and in the aggregate have not had and could not reasonably be
expected, with the passage of time, to have a Material Adverse Effect.
Section 4.10 Property; Inventory.
(a) The Company owns, or otherwise has a valid leasehold
interest providing sufficient and legally enforceable rights to use, all of the
property and assets used in the conduct of its businesses as historically
conducted. Except as set forth on Schedule 4.10(a), the Company has good and
marketable title to all assets reflected on the Financial Statements or acquired
since the Balance Sheet Date, free and clear of all Liens, other than immaterial
assets disposed of since the Balance Sheet Date in the ordinary course of
business consistent with past practice. Such assets are in good operating
condition and repair (ordinary wear and tear excepted), have been reasonably
maintained consistent with standards generally followed in the industry and are
suitable for their present uses.
(b) Schedule 4.10(b) sets forth by office location as of the
November 30, 1999, a complete and accurate list of all furniture, equipment,
automobiles and all other tangible personal property (including its net book
value) owned by, in the possession of, or used by the Company in connection with
its business as currently conducted and which have an initial book value in
excess of $2,500 per item. Except as set forth on Schedule 4.10(a), no such
tangible personal property is held under any lease, security agreement,
conditional sales contract, or other title retention or security arrangement or
subject to any liens or encumbrances, or is located other than in the possession
of the Company.
(c) The Company's inventory consists of raw materials,
work-in-process and consignment and finished goods salable by the Company in the
ordinary course of business. The Financial Statements reflect an adequate
reserve for all the Company's inventory that is slow-moving, as determined in
accordance with the Company's customary practices, or is obsolete, damaged or
defective.
Section 4.11 Intellectual Property.
(a) Except as set forth on Schedule 4.11(a), the Company is
the sole and exclusive owner of, or has the valid right to use, sell and
license, the Intellectual Property necessary or otherwise material to the
conduct of its business, free and clear of all Liens.
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Schedule 4.11(a) sets forth a complete and accurate list (including which the
Company is the owner or licensee thereof) of all (i) patents and patent
applications, (ii) trademark or service ▇▇▇▇ registrations and applications,
(iii) copyright registrations and applications and (iv) material unregistered
copyrights, service marks, trademarks and trade names, each as owned or licensed
by the Company. The Company currently is listed in the records of the
appropriate United States or state agency as the sole owner of record for each
owned application and registration listed on Schedule 4.11(a).
(b) The registrations listed on Schedule 4.11(a) are valid and
subsisting, in full force and effect in all material respects and have not been
canceled, expired or abandoned. There is no pending, existing, or to the
Knowledge of Sellers, threatened, opposition, interference, cancellation
proceeding or other legal or governmental proceeding before any court or
registration authority in any jurisdiction against the registrations listed on
Schedule 4.11(a) or the Intellectual Property.
(c) Schedule 4.11(c) lists all of the Computer Programs other
than off-the-shelf applications which are owned, licensed, leased or otherwise
used by the Company in connection with the operation of its businesses as
currently conducted, and identifies which is owned, licensed, leased, or
otherwise used, as the case may be. Each Computer Program listed on Schedule
4.11(c) is either (i) owned by the Company, (ii) currently in the public domain
or otherwise available to a Company without the license, lease or consent of any
third party, or (iii) used under rights granted to a Company pursuant to a
written agreement, license or lease from a third party, which written agreement,
license or lease is set forth on Schedule 4.11(c). The Company uses the Computer
Programs set forth on Schedule 4.11(c) in connection with the operation of its
business as conducted on the date hereof and such use does not violate the
rights of any third party. All Computer Programs set forth in Schedule 4.11(c)
were either developed by (x) employees of the Company within the scope of their
employment; (y) third parties as "work-made-for-hire," as that term is defined
under Section 101 of the United States copyright laws, pursuant to written
agreements; or (z) independent contractors who have assigned their rights to the
Company pursuant to written agreements.
(d) Schedule 4.11(d) sets forth a complete and accurate list
of all agreements pertaining to the use of or granting any right to use or
practice any rights under any Intellectual Property, whether the Company is the
licensee or licensor thereunder (the "Licenses") and any written settlements or
assignments relating to any Intellectual Property. The Licenses are valid and
binding obligations of each party thereto, enforceable against each such party
in accordance with their terms, and there are no breaches or defaults under any
Licenses.
(e) No trade secret or confidential know-how material to the
business of the Company as currently operated has been disclosed or authorized
to be disclosed to any third party, other than pursuant to a non-disclosure
agreement that protects the Company's proprietary interests in and to such trade
secrets and confidential know-how.
(f) The conduct of the business of the Company does not
infringe upon any intellectual property right owned or controlled by any third
party and to the Knowledge of Sellers, no third party is infringing upon any
Intellectual Property owned by the Company and no
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such claims have been made against a third party by the Company. There are no
claims or suits pending or, to the Knowledge of Sellers, threatened, and the
Company has not received any written notice of a third party claim or suit (x)
alleging that the Company's activities or the conduct of its businesses
infringes upon or constitutes the unauthorized use of the proprietary rights of
any third party or (y) challenging the ownership, use, validity or
enforceability of the Intellectual Property.
(g) There are no settlements, consents, judgments, orders or
other agreements which restrict the rights of the Company to use any
Intellectual Property, or other agreements which restrict the Company's rights
to use any Intellectual Property owned by the Company.
(h) The consummation of the transactions contemplated hereby
will not result in the loss or impairment of the right of Purchaser or its
successors to own or use any of the Intellectual Property currently owned or
used by the Company nor will it require the consent of any Governmental
Authority or third party in respect of any such Intellectual Property and no
present or former employee, or officer of the Company has any right, title, or
interest, directly or indirectly, in whole or in part, in any Intellectual
Property.
Section 4.12 Tax Matters.
(a) The Company has timely filed with the appropriate
governmental agencies complete and accurate Tax Returns required to be filed by
it in respect of all applicable Taxes of the Company required to be paid through
the date hereof, and will timely file any such Tax Return required to be filed
by it prior to the Closing Date with respect to all applicable Taxes required to
be paid through the Closing Date. All such Tax Returns were prepared in
compliance with applicable law and all Taxes due, or claimed to be due by any
taxing authority, pursuant thereto (whether or not shown as due on any Tax
Return) have been paid. In addition, all Taxes due or claimed to be due by any
taxing authority (whether or not shown on any Tax Return), prior to the Closing
Date for which the Company may be liable in its own right or as a transferee of
the assets of, or successor to, any corporation, person, association,
partnership, joint venture or other entity, have been paid on a timely basis, or
an adequate reserve has been established therefor. The Company is currently not
the beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to pay
any Tax.
(b) The Company has withheld and paid all Taxes that the
Company is required to withhold and pay in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party.
(c) Except as set forth on Schedule 4.12, to the Knowledge of
Sellers, there is no basis for any Tax authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no action, suit,
proceeding, audit, investigation, assessment, dispute or claim concerning any
Tax liability of the Company, either (i) claimed or raised by any
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authority delivered to the Company in writing or (ii) based upon personal
contact with any agent of such authority.
(d) Sellers will make available to Purchaser at the Company's
corporate offices prior to Closing correct and complete copies of all federal,
state, local and foreign income Tax Returns and all written communications from
the Internal Revenue Service or other Tax authorities relating to any such Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by the Company since December 31, 1993.
(e) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, and no power of attorney granted by the Company with
respect to any Tax matter is currently in force.
(f) The Company has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that under any
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code. The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code. The Company is not a party to any Tax allocation or sharing agreement. The
Company, (i) has not been a member of an affiliated group filing a consolidated
federal income Tax Return, (ii) is not and has not ever been a partner in a
partnership or an owner of an interest in an entity treated as a partnership for
federal income tax purposes and (iii) has no liability for the Taxes of any
person (other than the Company) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise.
(g) Except as set forth on Schedule 4.12, the unpaid Taxes of
the Company do not exceed the reserve for Tax liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company in filing its Tax
Returns.
(h) The Company has been a validly electing S corporation
within the meaning of Sections 1361 and 1362 of the Code since January 1, 1993,
and will be an S corporation up to and including the Closing Date. The Company
has not in the past 10 years (a) acquired assets from another corporation in a
transaction in which the Company's tax basis for the acquired assets was
determined in whole or in part by reference to the tax basis of the acquired
assets (or any other property) in the hands of the transferor or (b) acquired
the stock of any corporation that is a qualified subchapter S subsidiary.
Section 4.13 Real Property.
(a) Schedule 4.13(a) lists all real property owned, leased or
subleased to the Company (the "Real Property"), and in the case of leased real
property, identifies the lessor, rental rate, lease term, expiration date and
existence of a renewal option. Sellers have delivered to Purchaser correct and
complete copies of the leases and subleases listed in Schedule 4.13(a), as such
leases or subleases have been amended to date. The current use of the Real
Property by
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the Company does not violate the certificate of occupancy thereof or any local
zoning or similar land use or other Laws and none of the structures on the Real
Property encroaches upon real property of another Person, and no structure of
any other Person encroaches upon any Real Property. The Company has not received
notice of any pending or threatened condemnation proceeding, or of any sale or
other disposition in lieu of condemnation, affecting any of the Real Property.
Each parcel of Real Property abuts on or has direct vehicular access to a public
road. With respect to each lease and sublease listed, except as otherwise
indicated in Schedule 4.13(a):
(i) the lease or sublease is in full force and effect
and will remain in full force and effect on identical terms after the Closing,
without the need to obtain the consent of any party thereto
(ii) the Company is in possession of the leased
premises and all rental and other obligations of the Company are current;
(iii) the Company is not in breach or default (or has
not received notice of breach or default), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default or permit
termination, modification or acceleration under such lease or sublease;
(iv) to the Knowledge of Sellers, no party has
repudiated any provision of such lease or sublease;
(v) there are no disputes, oral agreements or
forbearance programs in effect as to the lease or sublease to which the Company
is a party;
(vi) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold
or subleasehold;
(vii) all facilities leased or subleased thereunder
have received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof by the Company and
have been operated and maintained by the Company in compliance with applicable
laws, except to the extent that the failure to receive any such approval,
license or permit for any such facility, or to operate and maintain any such
facility in compliance with applicable laws would not have a Material Adverse
Effect on such facility or the Company's use of such facility as currently used;
and
(viii) the properties on which all facilities leased
or subleased thereunder reside are used in a manner consistent with applicable
zoning, and all such facilities leased or subleased have all requisite permits,
to allow the Company to operate all retail and distribution aspects of its
business thereon and therein in full compliance with applicable laws and
contractual obligations.
Section 4.14 Material Contracts.
(a) Schedule 4.14 lists each of the following contracts and
other agreements (or, in the case of oral contracts, summaries thereof) to which
the Company is a party or by or to
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which the Company or any of its assets or properties is bound or subject (such
contracts and agreements being "Material Contracts"):
(i) any advertising, market research and other
marketing agreements;
(ii) any employment, severance, noncompetition,
consulting or other agreements of any nature with any current or former
stockholder, partner, officer or employee of the Company or any Affiliate of any
of such Persons;
(iii) any agreements relating to the making of any
loan or advance by the Company;
(iv) any agreements providing for the indemnification
by the Company of any Person;
(v) any agreements with any Governmental Authority
except those entered into in the ordinary course of business which are not
material to the Company;
(vi) any contracts, agreements and other arrangements
for the sale of assets or for the furnishing of services, goods or products by
or to the Company, including supply agreements, (A) with firm commitments having
a value in excess of $10,000 or (B) having a term which is greater than six
months and which is not terminable by the Company on less than 90 days' notice
without the payment of any termination fee or similar payment;
(vii) any broker, distributor, dealer, representative
or agency agreements;
(viii) any agreements (including settlement
agreements) currently in effect pursuant to which the Company licenses the right
to use any Intellectual Property to any Person or from any Person, and research
and development agreements;
(ix) any confidentiality agreements entered into by
the Company during the period commencing five years prior to the date hereof
pursuant to which confidential information has been provided to a third party or
by which the Company was restricted from providing information to third parties,
other than those (A) entered into the ordinary course of business relating to
the Company's operations or (B) the terms of which prohibit the disclosure of
the existence of such confidentiality agreement, provided that no agreement
described in this Section 4.14(a)(ix) prevents the Company from carrying on its
business as presently conducted, requires the transfer, licensing or disclosure
of any technology or otherwise could reasonably be expected, with the passage of
time, to result in a Material Adverse Effect;
(x) any voting trust or similar agreements relating
to any of the Ownership Interests to which any of Sellers or the Company is a
party;
(xi) any joint venture, partnership or similar
documents or agreements;
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(xii) any agreements that limit or purport to limit
the ability of the Company to own, operate, sell, transfer, pledge or otherwise
dispose of any assets; and
(xiii) all other agreements, contracts or commitments
not made in the ordinary course of business which are material to the Company.
(b) Each Material Contract is legal, valid and binding on and
enforceable against the Company and the other parties thereto and is in full
force and effect. Upon consummation of the transactions contemplated by this
Agreement, to the Knowledge of Sellers, each Material Contract shall remain in
full force and effect without any loss of benefits thereunder and without the
need to obtain the consent of any party thereto to the transactions contemplated
by this Agreement. The Company is not (and with the giving of notice or lapse of
time would not be) in material breach of, or material default under, any
Material Contract and, to the Knowledge of Sellers, no other party thereto is in
material breach of, or material default under, any Material Contract. The
Company has not received any written notice that any Material Contract is not
enforceable against any party thereto, that any Material Contract has been
terminated before the expiration of its term or that any party to a Material
Contract intends to terminate such Material Contract prior to the termination
date specified therein, or that any other party is in breach of, or default
under, any Material Contract. True and complete copies of all Material Contracts
or, in the case of oral agreements, if any, written summaries thereof have been
delivered to Purchaser.
Section 4.15 Relationship with Suppliers & Customers. To the Knowledge
of Sellers, except as set forth in Schedule 4.15, the Company currently has good
relationships with its suppliers and customers. The Company currently is not in
dispute with any current or former supplier of material to the Company or any
customer of the Company, and, except as set forth on Schedule 4.15, since
December 31, 1998, no supplier to or customer of the Company has notified the
Company that it will stop doing business, or reduce its business, with the
Company, the cessation or reduction of which business would have a Material
Adverse Effect. Schedule 4.15 lists the ten (10) largest (in terms of dollar
volume) customers and suppliers of the Company during each of the three (3)
immediately preceding fiscal years of the Company.
Section 4.16 Notes and Accounts Receivable; Bank Accounts. Schedule
4.16 sets forth, as of November 30, 1999, all notes and accounts receivable of
the Company. Except as set forth in Schedule 4.16, all notes and receivables of
the Company reflected on the Financial Statements or created after the Balance
Sheet Date arose from valid transactions in the ordinary course of business and
are valid receivables not subject to setoffs or counterclaims, are current and
collectible and will be collected in accordance with their terms at their
recorded amounts, subject to any reserves for bad debts reflected in the
Financial Statements. The Company has historically maintained a level of
accounts payable and accounts receivable appropriate to service its respective
operations. Sellers will deliver to Purchaser no later than the Closing Date a
revised schedule of all notes and accounts receivable of the Company as of one
business day prior to the Closing Date. Schedule 4.16 also sets forth (a) all
related party notes and accounts receivable (including those that will be repaid
or offset prior to Closing) and (b) all bank accounts maintained by the Company.
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Section 4.17 Insurance. Schedule 4.17 sets forth a complete and
accurate list as of the date hereof of all primary, excess and umbrella
policies, bonds and other forms of insurance owned or held by or on behalf of or
providing insurance coverage to the Company and its business, properties and
assets (or its officers, salespersons, agents or employees or Persons acting in
a similar capacity) and the extent, if any, to which the limits of liability
under such policies have been exhausted. True and complete copies of such
policies have been delivered to Purchaser. All such policies are in full force
and effect and all such policies in such amounts will be outstanding and in full
force and effect without interruption until the Closing. The Company has not
received notice of default under any such policy, nor has it received written
notice of any pending or threatened termination of cancellation, coverage
limitation or reduction, or material premium increase with respect to any such
policy. Schedule 4.17 sets forth a complete and accurate summary of all of the
self-insurance coverage provided by the Company. No letters of credit have been
posted and no cash has been restricted to support any reserves for insurance on
the Balance Sheet.
Section 4.18 Employees.
(a) Except as set forth in Schedule 4.18, to the Knowledge of
Sellers, no executive, key employee or group of employees has any plans to
terminate employment with the Company. The Company is not a party to or bound by
any collective bargaining agreement nor has the Company experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. The Company has not taken any action, or omitted to take any action,
that would result in any unfair labor practice except any such action or
omission that would not result in a Material Adverse Effect. No organizational
effort is presently being made or, to the Knowledge of Sellers, is threatened by
or on behalf of any labor union with respect to employees of the Company. All of
the Company's current procedures, policies and training practices with respect
to employee matters, including, without limitation, those relating to the hiring
and termination of employees and worker safety, conform with applicable Laws to
which the Company is subject, except for any such nonconformance that would not
result in a Material Adverse Effect. The Company is not subject to any claim for
overdue overtime compensation due to any employee, and no such claim has been
threatened.
(b) The Company has not received a notice of any violation of
any immigration and naturalization laws relating to employment and employees and
has properly completed and maintained all applicable forms (including, but not
limited to, I-9 forms) and, to the Knowledge of Sellers, the Company is in
compliance with all such immigration and naturalization laws and there are no
citations, investigations, administrative proceedings or formal complaints of
violations of the immigration or naturalization laws pending or threatened
before the Immigration and Naturalization Service of any federal, state or
administrative agency or court against or involving the Company or any of
Sellers.
Section 4.19 Employee Benefits.
(a) Schedule 4.19(a) contains a true and complete list of each
employment, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, stock appreciation right or other stock-based incentive,
severance, change-in-control, or termination
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pay, hospitalization or other medical, disability, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, and each other employee benefit plan,
program, agreement or arrangement, sponsored, maintained or contributed to or
required to be contributed to by the Company or an Affiliate of the Company,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of Section
4001(b)(1) of ERISA, `for the benefit of any current or former employee or
director of the Company or any ERISA Affiliate (the "Plans"). Schedule 4.19(a)
identifies each of the Plans that is an "employee welfare benefit plan," or
"employee pension benefit plan" as such terms are defined in Sections 3(1) and
3(2) of ERISA (such plans being hereinafter referred to collectively as the
"ERISA Plans"). Except as specifically set forth on Schedule 4.19(a), neither
the Company nor any ERISA Affiliate has any formal plan or commitment, whether
legally binding or not, to create any additional Plan or modify or change any
existing Plan that would affect any current or former employee or director of
the Company or any ERISA Affiliate.
(b) With respect to each of the Plans, the Company has
heretofore delivered to Purchaser true and complete copies of each of the
following documents, as applicable:
(i) a copy of the Plan documents (including all
amendments thereto) for each written Plan or a written description of any Plan
that is not otherwise in writing;
(ii) a copy of the annual report or Internal Revenue
Service Form 5500 Series, if required under ERISA, with respect to each ERISA
Plan for the last three Plan years ending prior to the date of this Agreement
for which such a report was filed;
(iii) a copy of the actuarial report, if required
under ERISA, with respect to each ERISA Plan for the last three Plan years
ending prior to the date of this Agreement;
(iv) a copy of the most recent Summary Plan
Description ("SPD"), together with all summaries of material modification issued
with respect to such SPD, if required under ERISA, with respect to each ERISA
Plan, and all other material employee communications relating to each ERISA
Plan;
(v) if the Plan is funded through a trust or any
other funding vehicle, a copy of the trust or other funding agreement (including
all amendments thereto) and the latest financial statements thereof, if any;
(vi) all contracts relating to the Plans with respect
to which the Company or any ERISA Affiliate may have any liability, including
insurance contracts, investment management agreements, subscription and
participation agreements and record keeping agreements; and
(vii) the most recent determination letter received
from the IRS with respect to each Plan that is intended to be qualified under
Section 401(a) of the Code.
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(c) Except as disclosed on Schedule 4.19(c), no liability
under Title IV of ERISA has been incurred by the Company or any ERISA Affiliate
since the Balance Sheet Date that has not been satisfied in full.
(d) The Pension Benefit Guarantee Corporation (the "PBGC") has
not instituted proceedings pursuant to Section 4042 of ERISA to terminate any of
the ERISA Plans subject to Title IV of ERISA; and no condition exists that
presents a material risk that such proceedings will be instituted by the PBGC.
(e) With respect to each of the ERISA Plans that is subject to
Title IV of ERISA, the present value of accumulated benefit obligations under
such Plan, as determined by the Plan's actuary based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Plan's actuary with respect to such Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such Plan
allocable to such accumulated benefit obligations.
(f) Neither the Company nor any ERISA Affiliate, any of the
ERISA Plans, any trust created thereunder, or to the Knowledge of Sellers, any
trustee or administrator thereof has engaged in a transaction or has taken or
failed to take any action in connection with which the Company or any ERISA
Affiliate could be subject to any material liability for either a civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to
Section 4975(a) or (b), 4976 or 4980B of the Code.
(g) All contributions and premiums which the Company or any
ERISA Affiliate is required to pay under the terms of each of the ERISA Plans
and Section 412 of the Code, have, to the extent due, been paid in full or
properly recorded on the financial statements or records of the Company and none
of the ERISA Plans or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, as of the last day of the most recent
fiscal year of each of the ERISA Plans ended prior to the date of this
Agreement. No lien has been imposed under Section 412(n) of the Code or Section
302(f) of ERISA on the assets of the Company or any ERISA Affiliate and no event
or circumstance has occurred that is reasonably likely to result in the
imposition of any such Lien on any such assets on account of any ERISA Plan.
(h) None of the ERISA Plans is a "multiemployer plan," as such
term is defined in Section 3(37) of ERISA.
(i) Each of the Plans has been operated and administered in
all material respects in accordance with applicable Laws, including but not
limited to ERISA and the Code.
(j) Each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified. Except for the
ESOP, the Company has applied for and received a currently effective
determination letter from the IRS stating that it is so qualified, and no event
has occurred with would affect such qualified status.
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(k) Any fund established under an ERISA Plan that is intended
to satisfy the requirements of section 501(c)(9) of the Code has so satisfied
such requirements.
(l) No amounts payable under any of the Plans or any other
contract, agreement or arrangement with respect to which the Company or any
ERISA Affiliate may have any liability could fail to be deductible for federal
income tax purposes by virtue of Section 280G of the Code.
(m) No Plan provides benefits, including death or medical
benefits (whether or not insured) with respect to current or former employees of
any of the Company or any ERISA Affiliate after retirement or other termination
of service (other than (i) coverage mandated by applicable Laws, (ii) death
benefits or retirements benefits under any "employee pension plan," as that term
is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of the Company or an ERISA Affiliate or (iv)
benefits, the full direct cost of which is borne by the current or former
employee (or beneficiary thereof)).
(n) Except as specifically set forth in this Agreement, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee, officer or director of the Company or
any ERISA Affiliate to severance pay, unemployment compensation or any other
similar termination payment or (ii) except as set forth on Schedule 4.19(n),
accelerate the time of payment or vesting or increase the amount of or otherwise
enhance any benefit due any such employee, officer or director.
(o) There are no pending or, to the Knowledge of Sellers,
threatened or anticipated, claims by or on behalf of any Plan, by an employee or
beneficiary under any such Plan, or otherwise involving any such Plan (other
than routine claims for benefits).
(p) Sellers have taken or prior to the Closing Date will have
caused the Company to take all corporate actions necessary and appropriate to
authorize the termination of the 401(k) Plan of the Company or any similar plan
of any Subsidiary (the "Terminated Plans").
Section 4.20 Environmental Compliance.
(a) Except as disclosed in Schedule 4.20: (i) the Company and
all Real Property is currently, and at all times during the Company's ownership
or operation of its business has been, in compliance with all applicable
Environmental Laws; and (ii) at all times during the Company's ownership or
operation of the Real Property, there has not been, nor is there now occurring,
any Release of any Hazardous Material or any Contamination on, under or from the
Real Property, except any such Release permitted by, and made in accordance
with, applicable Environmental Laws. Except as disclosed on Schedule 4.20, to
the Knowledge of Sellers, at all times prior to the Company's ownership or
operation of the Real Property, there did not occur any Release of any Hazardous
Material or any Contamination on, under or from the Real Property, except any
such Release permitted by, and made in accordance with, applicable Environmental
Laws.
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(b) The Company has obtained and maintained in full force and
effect, all environmental permits, licenses, certificates of compliance,
approvals and other authorizations necessary to conduct the activities and
business of the Company as currently conducted and to own or operate the Real
Property (collectively the "Environmental Permits"). The Company has conducted
its activities and business in compliance in all material respects with all
terms and conditions of any Environmental Permits. The Company has filed all
reports and notifications required to be filed under applicable Environmental
Laws.
(c) Except as disclosed in Schedule 4.20, neither Sellers nor
the Company have received any notice that any Third Party Environmental Claims
or Regulatory Actions have been asserted or assessed against the Company or the
Real Property and, except as disclosed on Schedule 4.20, no Third Party
Environmental Claims or Regulatory Actions are pending or, to the Knowledge of
Sellers, threatened, against the Company or the Real Property arising out of or
due to, or allegedly arising out of or due to, (i) the Release on, under or from
the Real Property of any Hazardous Materials; (ii) any Contamination of the Real
Property, including, without limitation, the presence of any Hazardous Material
which has come to be located on or under the Real Property from another
location; (iii) any violation or alleged violation of any Environmental Law with
respect to the Real Property or the activities of the Company; (iv) any injury
to human health or safety or to the environment by reason of the past or present
condition of, or past or present activities on or under, the Real Property; or
(v) the generation, manufacture, storage, treatment, handling, transportation or
other use, however defined, of any Hazardous Material by or for the Company on
or off the Real Property.
(d) Except as disclosed in Schedule 4.20, the Company has not
stored, transported, handled, treated, processed, used or disposed of any
Hazardous Materials on, in or under the Real Property, including specifically,
but not limited to, polychlorinated biphenyls ("PCBs"), asbestos or asbestos
containing materials, radon, urea formaldehyde or radioactive materials, except
as any of the foregoing actions is permitted by, and taken in accordance with,
applicable Environmental Laws.
(e) Except as disclosed in Schedule 4.20, the Company has not
transported or arranged for the transportation of any Hazardous Materials to any
location which is: (i) listed on the EPA's National Priorities List of Hazardous
Waste Sites (the "National Priorities List"); (ii) listed on the Comprehensive
Environmental Response, Compensation, Liability Information System ("CERCLIS")
or on any similar state list; or (iii) the subject of any Regulatory Action
which may lead to claims against Purchaser for damages to natural resources,
personal injury, Clean-up costs or Clean-up work, including, but not limited to,
claims under CERCLA.
(f) Except as disclosed on Schedule 4.20, none of the Real
Property is listed in the National Priorities List or any other list, schedule,
log, inventory or record, however defined, maintained by any federal, state or
local governmental agency with respect to sites from which there is or has been
a Release of any Hazardous Material or any Contamination. Except as disclosed on
Schedule 4.20, to the Knowledge of Sellers, no part of the Real Property was
ever used, nor is it now being used (i) as a landfill, dump or other disposal,
storage, transfer or handling area for Hazardous Materials which requires a
permit under Environmental Laws; or
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(ii) as a gasoline service station. There are no underground or above ground
tanks on the Real Property.
Section 4.21 Litigation and Claims, Compliance with Laws.
(a) Schedule 4.21(a) sets forth all Litigation as of the date
hereof, including the name of the claimant, the date of the alleged act or
omission, a detailed narrative as to the nature of the alleged act or omission,
the date the matter was referred to an insurance carrier of the Company (if
referred), the estimated amount of exposure, the amount the Company has
reserved, or the amount of the Company's claim and estimated expenses of the
Company in connection with such matters. There is no Litigation which is not
fully covered by the insurance policies referenced in Section 4.17. Neither the
Company, nor the Company's assets or properties, are subject to any order,
consent decree, settlement or similar agreement with any Governmental Authority.
There is no judgment, injunction, decree, order or other determination of an
arbitrator or Governmental Authority specifically applicable to the Company or
any of its properties or assets. There is no Litigation relating to alleged
unlawful discrimination or sexual harassment. As of the date hereof, there is no
Litigation which seeks to prevent consummation of the transactions contemplated
hereby or which seeks material damages in connection with the transactions
contemplated hereby.
(b) Except as set forth in Schedule 4.21(b), the Company has
complied and is in compliance with all Laws applicable to the Company and its
business except where the failure to be in compliance would not, to the
Knowledge of the Sellers and the Company, reasonably be expected, with the
passage of time, to have a Material Adverse Effect. Except as set forth in
Schedule 4.21(b), the Company holds all material licenses, permits and other
authorizations of Governmental Authorities necessary to conduct its business as
now being conducted or, under currently applicable Laws, to continue to conduct
its business as now being conducted. Except as set forth in Schedule 4.21(b),
there is no intent to make any changes in the conduct of the business of the
Company that will result in or cause the Company to be in noncompliance with
applicable Laws or that will require changes in or a loss of any such licenses,
permits or other authorizations or an increase in any expenses related thereto
except where such noncompliance, change, loss or increase would not reasonably
be expected to have a Material Adverse Effect. Such licenses, permits and other
authorizations as aforesaid held by the Company are valid and in full force and
effect, and there are no (i) Actions pending, or to the Knowledge of Sellers,
threatened or (ii) Investigations to the Knowledge of Sellers pending or
threatened that could result in the termination, impairment or nonrenewal
thereof.
Section 4.22 Affiliate Transactions. Schedule 4.22 lists all
agreements, arrangements and currently proposed agreements and arrangements, by
or between the Company, on the one hand, with or for the benefit of any current
or former shareholder, partner, officer or other Affiliate of the Company or any
of such Person's Affiliates, or any entity in which any such Person has a direct
or indirect material interest. Schedule 4.22 lists all payments of any kind
since January 1, 1999, from the Company, to or for the benefit of any current or
former partner, officer or other Affiliate of the Company or any of such
Person's Affiliates, or any entity in which any such Person has a direct or
indirect material interest. All outstanding debts and other obligations of the
Company to any Partner were incurred in return for fair and adequate
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consideration paid or delivered by them in cash or other property. All debts of
any Sellers or the Company's officers or the respective Affiliates of the
Company to the Company are reflected on the Financial Statements.
Section 4.23 Records.
(a) The corporate minute books of the Company contain complete
and accurate records of all actions taken by Sellers and the Board of Directors
and all committees thereto of the Company. Complete and accurate copies of all
such minute books have been delivered by the Company to Purchaser. All officers
and directors of the Company have been properly elected.
(b) The accounting books and records of the Company are
complete and correct, have been maintained in accordance with applicable Laws
and accurately reflect the basis for the financial condition and results of
operations of the Company set forth in the financial statements delivered to
Purchaser.
Section 4.24 Brokers, Finders, Etc. Neither the Company nor Sellers
have employed, or are subject to the valid claim of, nor has the Company or
Sellers incurred any Liability that would be payable by the Company, for any
brokerage, finder's or other fees or commissions of any broker, finder or other
financial intermediary in connection with the transactions contemplated by this
Agreement.
Section 4.25 Representations and Warranties Generally. The
representations and warranties contained in any particular section of this
Article IV are not exclusive as to any particular subject matter covered by such
section and different sections may apply different tests to the same or similar
matters. One section of the Disclosure Schedules may specifically cross
reference other applicable sections or parts thereof of the Disclosure Schedules
without repeating disclosure that applies to more than one section.
Section 4.26 Competing Business. Except as set forth on Schedule 4.26,
Sellers have no direct or indirect interest of any nature whatever in any Person
which competes with, conducts any business similar to, has any arrangement or
agreement with, or is involved in any way with, any business similar to the
business of the Company.
Section 4.27 Year 2000 Program. Except as set forth in Schedule 4.27:
(a) All devices, systems, machinery, information technology,
computer software and hardware and other date sensitive technology
(collectively, the "Systems") necessary for the Company to carry on its business
as conducted immediately prior to the Closing Date are Year 2000 Compliant to
the extent necessary to ensure no material disruption of the operations of
Purchaser. As used herein, Year 2000 Compliant means that such Systems are
designed to be used prior to, during and after the Gregorian calendar year 2000
A.D. and will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of, date
data which represents or references different centuries or more than one
century.
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(b) The Company has undertaken an adequately detailed
inventory, review and assessment of all areas within its business operations
that could be adversely affected by the failure of the Company to be Year 2000
Compliant on a timely basis, developed an adequately detailed plan and timeline
for becoming Year 2000 Compliant on a timely basis and to date, implemented the
plan in accordance with that timetable in all material respects.
(c) The Company has made written inquiry of each of its key
suppliers, vendors and customers, and has obtained in writing confirmation from
all such Persons, as to whether such Persons have initiated programs to become
Year 2000 Compliant and on the basis of such confirmations, the Company
reasonably believes that all such Persons will be or will become so compliant.
Section 4.28 Product Warranty and Liability.
It is the Company's standard practice to sell each product sold by the
Company in conformity with all applicable contractual commitments, if any, and
all express and implied warranties of the manufacturer. All products sold by the
Company have been sold in conformity with such practice, except for such
deviations therefrom that are not and would not have a Material Adverse Effect.
No product sold by the Company is subject to any other guaranty, warranty or
other indemnity beyond the applicable standard terms and conditions of sale.
Schedule 4.28 sets forth a list of all product liability claims raised or
asserted against the Company since January 1, 1996. No third party has advised
the Company that it has any liability arising out of any injury to individuals
or property as a result of the ownership, possession or use of any product sold
by the Company prior to Closing.
Section 4.29 Other Information. No representation or warranty of the
Company or Sellers in this Agreement, nor any statement, certificate or other
document furnished or to be furnished by the Company or Sellers to Purchaser
pursuant to this Agreement, nor the exhibits and schedules hereto, contains any
untrue statement of a material fact, or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
Section 5.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
Except as set forth on Schedule 5.1, Purchaser has no Subsidiaries, and does not
have a direct or indirect ownership interest in any Person. Purchaser is
qualified to do business in the jurisdictions set forth in Schedule 5.1. The
Company has the power and authority (corporate and otherwise) to own, lease and
operate its respective properties and assets and to carry on its business as now
being conducted and is duly qualified or licensed to do business as a foreign
corporation in good standing in the jurisdictions in which the ownership, lease
or operation of its property or the conduct of its
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business requires such qualification. Sellers have delivered to Purchaser
complete and correct copies of the Company's charter documents and all
amendments thereto to the date hereof.
Section 5.2 Authorization, Etc. Purchaser has full corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the documents and instruments contemplated hereby and to carry out the
transactions contemplated hereby and thereby. Purchaser has duly approved and
authorized the execution and delivery of this Agreement and the documents and
instruments contemplated hereby and the consummation of the transactions
contemplated hereby and thereby, and no other corporate proceedings on the part
of Purchaser are necessary to approve and authorize the execution, delivery and
performance by Purchaser of this Agreement and the documents and instruments
contemplated hereby and the consummation by Purchaser of the transactions
contemplated hereby and thereby. This Agreement constitutes a legal, valid and
binding agreement of Purchaser, enforceable against Purchaser in accordance with
its terms, except that (a) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
Section 5.3 Brokers' Fees. Purchaser has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Sellers could become
liable or obligated.
Section 5.4 Capital Stock. As of the date hereof, the authorized
capital stock of Purchaser consists of (a) 30,000,000 shares of common stock,
par value $0.01 per share, of which 150,000 shares of voting common stock are
issued and outstanding and 0 shares of non-voting convertible common stock are
issued and outstanding and (b) 20,000,000 shares of preferred stock, par value
$0.01 per share, of which (i) 2,500,000 shares have been designated as
Convertible Preferred Stock of which 868,372 shares are issued and outstanding
and (ii) 300,000 shares have been designated as Class B-1 Preferred Stock of
which 300,000 shares are issued and outstanding. Except for warrants issued to
NationsCredit Commercial Corporation for 85,000 shares of non-voting convertible
common stock, there are no outstanding subscriptions, options, warrants, calls,
rights, contracts, commitments, understandings, restrictions or arrangements
relating to the issuance, sale, transfer or voting of any capital stock of
Purchaser, including any rights of conversion or exchange under any outstanding
securities or other instruments. All outstanding shares of capital stock have
been validly issued and are fully paid, nonassessable and free of preemptive or
similar rights.
Section 5.5 No Conflict. Except as set forth in Schedule 5.5, neither
the execution, delivery or performance of this Agreement or the other documents
and instruments to be executed and delivered by Purchaser pursuant hereto, nor
the consummation by Purchaser of the transactions contemplated hereby or
thereby, nor compliance by Purchaser with any of the provisions hereof or
thereof will (a) conflict with or result in any breach of any provision of the
Articles of Incorporation, Bylaws or similar organizational documents of
Purchaser, (b) constitute a change in control under or require the consent from
or the giving of notice to a third party, result in a violation or breach of, or
constitute (with or without due notice or lapse of time
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or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, or result in the creation of any Lien upon
or affecting any of Purchaser's assets or properties pursuant to, any of the
terms, conditions or provisions of any contractual obligation of the Company or
(c) violate any order, writ, injunction, decree, statute, rule or regulation of
any Governmental Authority applicable to Purchaser or to which any of its
properties or assets may be bound.
Section 5.6 Financial Statements. Except as set forth on Schedule 5.6,
when delivered in accordance with this Agreement, Purchaser's financial
statements, which will be the interim financial statements through September 30,
1999 shall be (a) prepared in accordance with GAAP, applied on a consistent
basis throughout the periods covered thereby, (b) present fairly the financial
condition and results of operations of Purchaser and its wholly-owned subsidiary
as of the dates and for the periods specified therein, (c) be correct and
complete in all material respects and (d) be consistent with the books and
records of Purchaser (which books and records are and will be correct and
complete).
Section 5.7 Absence of Certain Changes or Events. Except as set forth
on Schedule 5.7, since September 30, 1999 (a) Purchaser has conducted its
business only in the ordinary course and consistent with past practice and (b)
there has not been any developments or events which have had or could reasonably
be expected, with the passage of time, to have, individually or in the
aggregate, a Material Adverse Effect.
Section 5.8 No Undisclosed Liabilities. Purchaser has no Liabilities
that would be material to Purchaser taken as a whole, except for such
Liabilities as (a) are set forth on Schedule 5.8 hereto, (b) are reflected on
the financial statements delivered pursuant to Section 5.6 hereof or (c) were
incurred since the September 30, 1999 in the ordinary course of business
consistent with past practice and which individually and in the aggregate have
not had and could not reasonably be expected, with the passage of time, to have
a Material Adverse Effect.
Section 5.9 Other Information. No representation or warranty of
Purchaser in this Agreement, nor any statement, certificate or other document
furnished or to be furnished by Purchaser to Sellers pursuant to this Agreement,
nor the exhibits and schedules hereto, contains any untrue statement of a
material fact, or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE VI
SELLERS' AND THE COMPANY'S OBLIGATIONS BEFORE CLOSING
Sellers and the Company covenant that from the date of this Agreement
until the Closing:
Section 6.1 General. Each of Sellers and the Company will use his or
its best efforts to take all action and to do all things necessary in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction of the closing conditions set forth in Article VIII
below).
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Section 6.2 Access. For a period of thirty (30) days, commencing on the
date of the execution of this Agreement, Purchaser and its counsel, accountants
and other representatives shall have access during business hours of the Company
to all properties, books, accounts, records, contracts and documents of or
relating to the Company. Sellers and the Company shall furnish or cause to be
furnished to Purchaser and its Lenders and their representatives all data and
information concerning the business, finances and properties of the Company that
may reasonably be requested to complete its due diligence review pursuant to
Section 7.1 of this Agreement.
Section 6.3 Operation of Business. The Company will carry on its
business and activities diligently and in substantially the same manner as they
previously have been carried out and, except as expressly contemplated by this
Agreement, shall not make or institute any unusual or novel methods of
manufacture, purchase, sale, lease, management, accounting or operation that
vary materially from those methods used by the Company as of the date of this
Agreement. Without limiting the generality of the foregoing, except as
contemplated by this Agreement, during the period from the date of this
Agreement to the Closing Date, Sellers will not cause or permit the Company to
(a) declare, set aside, or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase or otherwise acquire any of its
capital stock or (b) otherwise engage in any practice, take any action or enter
into any transaction of the type described in Section 4.8 above, other than in
the ordinary course of business. Notwithstanding anything to the contrary in
this Section 6.3, Sellers may cause the Company to distribute amounts necessary
to pay monthly or quarterly tax payments to Sellers, including amounts necessary
for the January 15, 2000 tax payment, provided, however, that in no event shall
such payments diminish the Minimum Net Worth.
Section 6.4 Preservation of Business; Insurance. Except as contemplated
by this Agreement, Sellers will cause the Company to, and the Company will, keep
its business and properties substantially intact, including its present
operations, physical facilities, working conditions and relationships with
lessors, lessees, licensors, licensees, suppliers, customers and employees, and
to continue to carry its existing insurance, subject to variations in amounts
required by the ordinary operations of its business.
Section 6.5 Notices and Consents. Sellers will cause the Company to,
and the Company will, use its best efforts to obtain any third-party consents,
including, without limitation, the consent of lessors and sublessors. If
required by law, Sellers and the Company shall cooperate and share information
regarding the preparation of any filings required by the HSR Act and will seek
early termination of any waiting period imposed by the HSR Act. Sellers shall be
responsible to pay fifty percent (50%) of the filing fees and costs in
connection with all filings required by the HSR Act, with the remaining fifty
percent (50%) to be paid by Purchaser.
Section 6.6 Exclusivity. Until the earliest of (a) the date of Closing,
or (b) the termination (for whatever reason) of this Agreement, neither the
Company nor Sellers shall solicit, initiate or encourage any other bids for the
sale of all or any portion of the equity or assets of the Company or enter into
any other negotiations for the sale of all or any portion of the equity or
assets of the Company without the written consent of Purchaser. Sellers will
notify Purchaser immediately if any person makes any proposal, inquiry or
contact with respect to any of the
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foregoing. Notwithstanding the foregoing, if by January 15, 1999 the financing
commitments set forth in Section 8.15 hereof have not been obtained, the
exclusivity provisions of this Section 6.6 shall automatically terminate.
Section 6.7 Delivery of Schedules; Notice of Developments; Update of
Schedules
(a) Sellers will give prompt written notice to Purchaser of
any development causing a breach of any of the representations and warranties in
Article IV above. No disclosure by Sellers pursuant to this Section 6.7,
however, shall be deemed to amend or supplement the Schedules, unless set forth
in the Revised Schedules (as defined below) in accordance with and subject to
the terms of subparagraph (b) of this Section 6.7, or to prevent or cure any
misrepresentation or breach of warranty; provided, however, if Purchaser
determines not to terminate this Agreement pursuant to Section 12.1 and to
consummate the transactions contemplated hereby despite the existence of a
misrepresentation or breach of warranty of which Purchaser has been informed in
writing by Sellers, the facts giving rise to such misrepresentation or breach
may be set forth in the Revised Schedules (as defined below) at Closing and such
disclosure shall be deemed to amend or supplement the Schedules for purposes of
curing such misrepresentation or breach of warranty.
(b) At least five (5) business days prior to the Closing Date,
Sellers shall deliver to Purchaser revised Schedules (the "Revised Schedules")
which shall amend and revise the Schedules to reflect events or developments
which have occurred since the date hereof to the date of delivery of the Revised
Schedules and would have been appropriate subject matter for the Schedules in
accordance with representations and warranties set forth in Article IV.
Notwithstanding anything herein to the contrary, the Revised Schedules are not
intended and shall not be used or interpreted to correct misstatements or
omissions in the Schedules as of the date of execution of this Agreement unless
Purchaser determines not to terminate this Agreement pursuant to Section 12.2
and to consummate the transactions contemplated hereby despite the existence of
such misstatements or omissions in the Schedules of which Purchaser has been
informed in writing by Sellers, in which case the facts giving rise to such
misstatements or omission may be set forth in the Revised Schedules at Closing
and such disclosure shall be deemed to amend or supplement the Schedules for
purposes of curing such misstatements or omission.
Section 6.8 Confidentiality. Sellers and the Company agree that, unless
and until the Closing has been consummated, Sellers, the Company and its
officers and directors and other representatives of Sellers and the Company
shall hold in strict confidence, and shall not use to the detriment of
Purchaser, (a) any data or information with respect to the business of Purchaser
obtained in connection with this transaction or Agreement or (b) the terms or
existence of this Agreement. If the transactions contemplated by this Agreement
are not consummated, Sellers will return to Purchaser all data and information
that Purchaser may reasonably request, including, but not limited to,
worksheets, tests, reports, manuals, lists, memoranda and other documents
prepared by or made available to Sellers in connection with this transaction.
The foregoing shall not preclude Sellers or the Company from (x) the use or
disclosure of such information which currently is known generally to the public
or which subsequently has come into the public domain, other than by way of
disclosure by any of Sellers or the Company in
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violation of this Agreement or (y) the disclosure of such information to the
extent required by law or court order, provided that, to the extent practicable,
prior to such disclosure required by law or court order, Sellers or the Company
will give Purchaser prior written notice of the nature of the required
disclosure.
Section 6.9 Financial Statements. The Company shall promptly prepare at
the end of each month, and in any event within 10 days after the prior month's
end, promptly deliver to Purchaser the balance sheet, income statement and
statement of cash flows, prepared consistently with the practices used in
preparation of the Financial Statements, of the Company for each month ended
between the date of this Agreement and the Closing Date.
Section 6.10 Company Obligations; Affiliate Agreements.
(a) At or prior to the Closing, except with respect to amounts
owed by or to the Company and any Subsidiary, Sellers shall, and Sellers shall
cause each of their respective Affiliates to, repay any Indebtedness or other
amounts owing from such Persons to the Company.
(b) At Closing, upon the election of Sellers either (i)
Sellers shall cause the Company to repay all revolving lines of credit and other
interest-bearing Indebtedness in excess of six million dollars ($6,000,000) with
a portion of the Closing Cash Payment or (ii) Purchaser shall repay all such
revolving lines of credit and other interest-bearing debt of the Company by wire
transfer and receive a dollar-for-dollar reduction in the Purchase Price in the
amount equal to such repayments.
(c) At the Closing, other than as specified in writing by
Purchaser at least five (5) days prior to the Closing Date, Sellers shall cause
all agreements between any Sellers or their Affiliates, on the one hand, and the
Company, on the other hand to be terminated in all respects such that there is
no liability thereunder on the part of the Company. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Page
agree, jointly and severally, to indemnify Purchaser for any cost or expense
incurred in connection with the obligations specified in this Section 6.10.
Section 6.11 Real Property. Sellers shall provide to Purchaser, within
ten days after the date of this Agreement, (a) a commitment of title insurance
(the "Title Commitment") issued by a nationally-recognized title insurance
company (the "Title Company"), and photocopies of all recorded items described
as exceptions therein, committing to insure in reasonable amounts, (b) the
Company's fee interest in any Real Property, (c) the Company's leasehold
interest in any Real Property and (d) an ALTA-ASCM survey (the "Survey") of the
Real Property, certified to Purchaser and the Title Company and the Lender, if
applicable. If Purchaser shall notify Sellers within twenty (20) days of its
receipt of both the Title Commitment and the Survey of any Lien or other matter
affecting fee or leasehold title to the Real Property which, in the
determination of Purchaser, will interfere with the use of the Real Property
(each a "Title Defect"), Sellers shall exercise their best efforts to remove or,
with the consent of Purchaser, cause the Title Company to commit to insure over
by endorsement, each Title Defect prior to Closing. Purchaser shall be
responsible for all cost and expenses related to the Title Commitment and the
Survey
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Section 6.12 Termination of ESOP and ERISA Plans. Subject to Section
10.6 of this Agreement, immediately prior to the Closing, the Company will
contribute to its 401(k) Plan all employee deferrals and any related matching or
other employer contributions. The Company will adopt a resolution terminating
its 401(k) Plan which termination shall be effective one day prior to Closing.
After Closing, if Purchaser determines to complete the 401(k) Plan termination,
it will apply to the Internal Revenue Service for a determination letter to the
effect that the termination of the Company's 401(k) Plan will not affect the
qualified status of the Company's 401(k) Plan and will make all necessary
amendments and otherwise comply with all applicable laws in connection with such
termination. Upon receipt of a favorable determination letter from the Internal
Revenue Service, Purchaser will direct the trustees of the Company's ESOP Plan
to distribute or transfer assets pursuant to and in compliance with the terms of
the Employee's Stock Ownership And Retirement Savings Plan of Noble-Met, Ltd.
and the governing provisions of the Code. Purchaser retains the discretion to
reinstate the 401(k) Plan after Closing and to merge the 401(k) Plan into
another employee pension benefit plan of the Purchaser; provided, however, that
Purchaser shall indemnify and hold harmless Sellers from any claim, damage, loss
or expense resulting from or related to such reinstatement or merger incurred by
Sellers, their employees or agents.
Section 6.13 Section 338(h)(10) Election.
(a) Upon the request of Purchaser, the Company, Sellers and
Purchaser shall jointly make the election provided for by Section 338(h)(10) of
the Code and Section 1.338(h)(10)-1 of the Treasury Regulations and any
comparable election under state or local tax law with respect to the purchase of
the capital stock of the Company (collectively, the "Election"). At the Closing,
Sellers shall deliver a Form 8023-A to Purchaser, with Sections 3a and 4 through
6 completed and signed by all Sellers. Also, Purchaser and Sellers shall
cooperate with each other to take all actions necessary and appropriate,
including filing such additional forms, returns, elections, schedules and other
documents as may be required to effect and preserve a timely Election in
accordance with the provisions of Section 1.338(h)(10)-1 of the Treasury
Regulations (or any comparable provisions of state or local tax law) or any
successor provisions. Sellers and Purchaser shall report the purchase by
Purchaser of the Shares pursuant to this Agreement consistent with the Election
and shall take no position inconsistent therewith in any Tax Return, any
proceeding before any taxing authority or otherwise.
(b) In connection with the Election, as soon as practicable
after the Closing, Sellers and Purchaser shall act together in good faith to
determine and agree upon (i) the Election Taxes and the Gross-Up Payment and
(ii) the "Modified Aggregate Deemed Sale Price" of the Company's assets (within
the meaning of, and in accordance with, Section 1.338(h)(10)-1(f) of the
Treasury Regulations) and Purchaser shall make a reasonable determination of the
proper allocations (the "Allocations") of the Modified Aggregate Deemed Sale
Price among the assets of the Company (in accordance with Section 338(b)(5) of
the Code and the Treasury Regulations promulgated thereunder) and shall deliver
to Sellers a copy of the Allocations for their review. Sellers and Purchaser
shall (i) be bound by such determination and such allocation for purposes of
determining any Taxes, (ii) prepare and file their Tax Returns on a basis
consistent with such determination of the Modified Aggregate Deemed Sale Price
and such Allocations and (iii) take no position inconsistent with such
determination and Allocations on any applicable Tax Return,
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in any proceeding before any taxing authority or otherwise. In the event that
any of the Allocations is disputed by any taxing authority, the party receiving
notice of the dispute shall promptly notify the other party hereto concerning
resolution of the dispute.
(c) If as a result of the publication of Temporary or Final
Regulations on purchase price allocations in asset acquisitions, Sellers are
unable to use the "open transaction" method to report the income attributable to
the Earnout Amount, Purchaser shall make the following payments to Sellers: (i)
an amount equal to twelve percent (12%) of the calendar year 2000 federal and
state income tax liability that is attributable to the potential for Sellers to
receive all or a portion of the Earnout Amount (the "Early Tax"), and (ii) an
amount equal to twelve percent (12%) of the difference between the Early Tax and
the calendar year 2001 federal and state income taxes Sellers would have paid on
the amount paid to Sellers in calendar year 2001 pursuant to Section 2.3(c). The
amount set forth in Section 6.13(c)(i) shall be paid on April 15, 2001 and the
amount set forth in Section 6.13(c)(ii) shall be paid on April 15, 2002.
(d) If the Built-In Gain Tax exceeds $60,000, Sellers shall
pay Purchaser fifty percent (50%) of such excess.
ARTICLE VII
PURCHASER'S OBLIGATIONS BEFORE CLOSING
Section 7.1 Due Diligence.
(a) The parties agree that Purchaser shall conduct a due
diligence investigation of the Company (including, without limitation, a review
of the information, documents and other matters identified on the Disclosure
Schedule or delivered pursuant to the terms of this Agreement and investigations
of the Company's customers) which commenced upon the signing of the letter of
intent and, except as provided in subsection (c) below, shall be completed by
Purchaser within thirty (30) days after the execution and delivery date of this
Agreement (the "Due Diligence Period").
(b) Purchaser and Sellers acknowledge that, for a period at
least equal to the Due Diligence Period, Purchaser and Lenders shall require a
due diligence review, including, a Phase I and Phase II environmental review in
scope and substance, and pursuant to such methods, as may be mutually agreed
upon by Purchaser, its Lenders and Sellers. Any such environmental review will
be performed by recognized experts mutually acceptable to the Company, Purchaser
and the Lenders and engaged on behalf of Purchaser. A Phase II environmental
review will be performed only to the extent recommended by such expert and
required by Lenders. In the event any Phase II environmental review is required,
Sellers shall use their best efforts, and shall cause the Company to use its
best efforts, to secure all consents necessary to permit any such Phase II
environmental review to proceed. The Company shall be responsible for the costs
and expenses related to the Phase I environmental review and Phase II
environmental review (to the extent such a review is deemed necessary);
provided, however, that Purchaser shall pay for any such costs and expenses to
the extent they exceed $25,000.00 in the aggregate.
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(c) Any inventory of raw, consignment and finished goods taken
on or prior to the Closing Date shall be performed by the Company's personnel
using methods and procedures mutually acceptable to the parties hereto.
Purchaser's representative shall have the right to observe the taking of any
such inventory and have access to any documentation relating thereto.
Section 7.2 Confidentiality. Purchaser agrees that, unless and until
the Closing has been effected, Purchaser and its officers, directors and other
representatives shall hold in strict confidence, and shall not disclose or use
to the detriment of Sellers or the Company, (a) any and all data and information
with respect to the business of the Company or Sellers obtained in connection
with this Agreement or (b) the terms or existence of this Agreement. If the
transactions contemplated by this Agreement are not consummated, Purchaser will
return to Sellers all data and information that Sellers may reasonably request,
including, but not limited to, worksheets, tests, reports, manuals, lists,
memoranda and other documents prepared by or made available to Purchaser in
connection with this transaction. The foregoing shall not preclude Purchaser
from (x) the use or disclosure of such information which currently is known
generally to the public or which subsequently has come into the public domain,
other than by way of disclosure by any of Purchaser in violation of this
Agreement or (y) the disclosure of such information to the extent required by
law or court order, provided that, to the extent practicable, prior to such
disclosure required by law or court order, Purchaser will give Sellers prior
written notice of the nature of the required disclosure.
Section 7.3 Consent of Lenders. Immediately upon execution of this
Agreement, Purchaser shall use its best efforts to obtain debt financing
described in Section 8.15 and the consent of any such Lenders to the
transactions contemplated by this Agreement.
Section 7.4 Delivery of Schedules; Notice of Developments; Update of
Schedules.
(a) Purchaser will give prompt written notice to Sellers of
any development causing a breach of any of the representations and warranties in
Article V above. No disclosure by Purchaser pursuant to this Section 7.3,
however, shall be deemed to amend or supplement the Schedules, unless set forth
in the Revised Schedules in accordance with and subject to the terms of
subparagraph (b) of this Section 7.3, or to prevent or cure any
misrepresentation or breach of warranty; provided, however, if the transactions
contemplated hereby are consummated despite the existence of a misrepresentation
or breach of warranty of which Sellers have been informed in writing by
Purchaser, the facts giving rise to such misrepresentation or breach may be set
forth in the Revised Schedules at Closing and such disclosure shall be deemed to
amend or supplement the Schedules for purposes of curing such misrepresentation
or breach of warranty.
(b) At least five (5) business days prior to the Closing Date,
Purchaser shall deliver to Sellers Revised Schedules which shall amend and
revise the Schedules to reflect events or developments which have occurred since
the date hereof to the date of delivery of the Revised Schedules and would have
been appropriate subject matter for the Schedules in accordance with
representations and warranties set forth in Article V. Notwithstanding anything
herein to the contrary, the Revised Schedules are not intended and shall not be
used or interpreted to correct misstatements or omissions in the Schedules as of
the date of execution of this Agreement unless the transactions contemplated
hereby are consummated despite the existence of such
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misstatements or omissions in the Schedules of which Sellers have been informed
in writing by Purchaser, in which case the facts giving rise to such
misstatements or omission may be set forth in the Revised Schedules at Closing
and such disclosure shall be deemed to amend or supplement the Schedules for
purposes of curing such misstatements or omission.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
The obligations of Purchaser to purchase the Shares under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
conditions set out below. Purchaser may waive any or all of these conditions in
whole or in part without prior notice.
Section 8.1 Representations and Warranties True. Except as otherwise
permitted by this Agreement, all representations and warranties by Sellers in
this Agreement, or in any written statement that shall be delivered to Purchaser
by Sellers under this Agreement, shall be true on and as of the Closing Date as
though made at that time.
Section 8.2 Performance. Sellers shall have performed, satisfied, and
complied, in all material respects, with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by them,
or any of them, on or before the Closing Date.
Section 8.3 No Material Adverse Effect. During the period from the
Balance Sheet Date to the Closing Date, there shall not have been any Material
Adverse Effect in the financial condition or the results of operations of the
Company or the relationship between the Company and any significant customers,
and the Company shall not have sustained any loss or damage to its assets,
whether or not insured, that materially affects its ability to conduct a
material part of its business.
Section 8.4 Consents. Sellers and the Company shall have procured all
of the third-party authorizations and consents specified in this Agreement,
including, without limitation, the consents of lessors under any leases to
Purchaser. In addition, any waiting period under the HSR Act, if applicable,
shall have expired or been terminated.
Section 8.5 No Proceedings, Injunctions, Etc. No action, suit or
proceeding shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction
wherein an unfavorable injunction, judgment, order, decree ruling or charge
would (a) prevent consummation of any of the transactions contemplated by this
Agreement, (b) cause any of the transactions contemplated by this Agreement to
be rescinded or voided following consummation, (c) affect adversely the right of
Purchaser to own and vote the Shares or (d) affect adversely the right of the
Company to own its assets and to operate its business (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect).
Section 8.6 Accounts. The Company's accounts payable and accounts
receivable shall be in a condition consistent with the ordinary course of
business, as determined by historical conditions for the Company.
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Section 8.7 Minimum Net Worth. The Closing Balance Sheet shall reflect,
at a minimum, the Minimum Net Worth. Sellers shall have delivered to Purchaser
an estimated Closing Balance Sheet dated within five (5) days of the Closing
Date.
Section 8.8 Sellers' and Officer's Certificates. Sellers shall have
delivered to Purchaser a certificate to the effect that each of the conditions
specified above in Sections 8.1 through 8.7 have been satisfied.
Section 8.9 Tax Review. Purchaser shall have completed its review of
the tax implications of the structure of the transactions contemplated by this
Agreement to its satisfaction.
Section 8.10 Repayment of Debt. Contemporaneous with Closing, Sellers
shall cause the Company to repay all revolving lines of credit and other
interest-bearing debt of the Company in excess of six million dollars
($6,000,000) which shall be treated as a Purchase Price reduction, or Purchaser
shall repay all such revolving lines of credit and other interest-bearing debt
of the Company by wire transfer and receive a dollar for dollar reduction in the
Purchase Price in the amount equal to such repayments.
Section 8.11 Opinion of Sellers' Counsel. Purchaser shall have received
from ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, P.L.C., counsel to Sellers, an opinion,
addressed to Purchaser and dated as of the Closing (the "Sellers' Opinion"), the
form and substance of which shall be mutually agreed to by the parties and shall
be attached hereto as Exhibit E.
Section 8.12 Resignations Purchaser shall have received the
resignations, effective as of the Closing, of the following directors of the
Company: ▇▇▇▇▇▇ and Page and the resignations of all of the officers of the
Company and all of the directors and officers of the Company's Subsidiaries,
other than those whom Purchaser shall have specified in writing at least five
(5) days prior to the Closing Date.
Section 8.13 Regulatory and Third Party Approvals. Sellers and the
Company shall be in receipt of all necessary regulatory or third party
approvals, including, but not limited to, any approvals required under the HSR
Act.
Section 8.14 Financial Statements. The Company shall have (a) a 1998
EBITDA of not less than $4,100,000 and (b) an unaudited balance sheet as of
September 30, 1999, and the related statement of income and cash flows for the
nine-month period then ended that support the 1999 EBITDA Estimate. In the event
that the Company's 1998 EBITDA or 1999 EBITDA Estimate do not meet these
requirements, the Purchase Price shall be adjusted as provided for in Section
2.3(a) hereof.
Section 8.15 Financing. Purchaser shall have received commitments for
$20,000,000 in senior term, revolver debt and subordinated debt financing for
the consummation of the transactions contemplated by this Agreement, on terms
and conditions acceptable to Purchaser in its discretion.
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Section 8.16 Lender's Due Diligence Review. Lenders shall have been
satisfied in all respects with the results of their due diligence review of the
Company and its operations and assets, and Purchaser shall have obtained the
consent of its Lenders to the transactions contemplated by this Agreement.
Section 8.17 Real Property. There shall be no Title Defects which the
Title Company has not deleted from the Title Commitments or, with the consent of
Purchaser, committed to insure over by endorsement.
Section 8.18 Noncompetition Agreements. Each of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and
Page shall have executed a five (5) year Noncompetition Agreement, which shall
include covenants not to (a) compete with Purchaser or the Company or any
Affiliates of either of them, or (b) raid or solicit the employees, agents,
Affiliates or customers Purchaser or the Company. The Noncompetition Agreement
shall be in substantially the form set forth on Exhibit F hereto.
Section 8.19 Other Damages. Notwithstanding any other provision of this
Agreement to the contrary, any breaches of the representations, warranties or
covenants set forth herein or the occurrence of any event which could result in
a Material Adverse Effect shall not be deemed a failure to satisfy the
conditions set forth in Sections 8.1, 8.2, 8.3, and 8.4 if the aggregate Damages
that could reasonably be expected to result from all such breaches and events do
not exceed $250,000, and if the aggregate Damages resulting from such breaches
and events exceed $250,000, the conditions set forth in Sections 8.1, 8.2, 8.3,
and 8.4 shall be deemed not to have been satisfied. Nothing set forth in this
Section 8.19 shall be interpreted as a waiver of any breach of any
representation, warranty or covenant in this Agreement, and, notwithstanding any
other provision contained in this Agreement to the contrary, Sellers shall
indemnify, defend, and hold harmless Purchaser against, and in respect of, any
Damages resulting from such breaches and events, as contemplated by this Section
8.19, dollar-for-dollar and without regard to the limitations set forth in
Section 11.5.
Section 8.20 Employment Agreement. ▇▇▇▇▇▇▇▇ shall have executed an
employment agreement (the "Employment Agreement"), in substantially the form set
forth on Exhibit G hereto.
Section 8.21 Shareholders' Agreement. At Closing, Purchaser, the
Company and Sellers shall enter into a shareholders' agreement (the
"Shareholders' Agreement") in the form of Exhibit H attached hereto.
Section 8.22 Lease Agreement. At Closing, Purchaser and Image, L.C., a
Virginia limited liability company and an Affiliate of the Company, shall enter
into a lease in the form of Exhibit I attached hereto, for the ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ facility in Salem, Virginia (the "Lease").
Section 8.23 Termination and Release of Options. Prior to or at
Closing, Sellers shall have obtained written consents and releases from all
holders of Options to cancel such holder's Options, which consents and releases
shall be in a form reasonably satisfactory to Purchaser.
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Section 8.24 Environmental Permits and Compliance. Prior to or at
Closing, the parties hereto shall have reached a mutually satisfactory agreement
as to the resolution of the environmental compliance issues identified prior to
closing which shall include (a) the Company's quantity generator permit status
and (b) the monitoring program requested by local government authorities and the
possible treatment requirements.
Section 8.25 Redemption of Shares in the ESOP Plan. Prior to Closing,
Sellers shall have caused the Company to redeem the Shares in the ESOP Plan
pursuant to a procedure agreed to by the parties hereto.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLERS' PERFORMANCE
The obligation of Sellers to sell and transfer the Shares under this
Agreement are subject to the satisfaction at or before the Closing of all the
following conditions. Sellers may waive any or all of these conditions in whole
or in part without prior notice.
Section 9.1 Representations and Warranties True. All representations
and warranties by Purchaser contained in this Agreement or in any written
statement delivered by Purchaser under this Agreement shall be true on and as of
the Closing Date as though such representations and warranties were made on and
as of that date.
Section 9.2 Performance. Purchaser shall have performed and complied
with all covenants and agreements and satisfied all conditions that it is
required by this Agreement to perform, comply with, or satisfy before or at the
Closing.
Section 9.3 Consents. Purchaser shall have procured all of the
third-party authorizations and consents specified in this Agreement. In
addition, any waiting period under the HSR Act, if applicable, shall have
expired or been terminated.
Section 9.4 No Proceedings, Injunctions, Etc. No action, suit or
proceeding shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction
wherein an unfavorable injunction, judgment, order, decree ruling or charge
would (a) prevent consummation of any of the transactions contemplated by this
Agreement or (b) cause any of the transactions contemplated by this Agreement to
be rescinded or voided following consummation.
Section 9.5 Tax Review. The Company, the Principal Shareholders and
Page shall have completed their review of the tax implications of the structure
of the transactions contemplated by this Agreement to their satisfaction.
Section 9.6 Shareholders' Agreement. At Closing, Purchaser and each of
the stockholders of Purchaser shall continue to be bound by the Shareholders'
Agreement.
Section 9.7 Opinion of Purchaser's Counsel. Sellers shall have received
from ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., counsel to Purchaser, an opinion, addressed to
Sellers and dated as of
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the Closing (the "Purchaser's Opinion"), the form and substance of which shall
be mutually agreed to by the parties and shall be attached hereto as Exhibit J.
Section 9.8 Officer's Certificate. Purchaser shall have delivered to
Sellers' Representative a certificate by its Chief Executive Officer to the
effect that each of the conditions specified above in Sections 9.1 through 9.6
have been satisfied.
Section 9.9 Employment Agreement. Purchaser shall have executed the
Employment Agreement.
Section 9.10 Purchaser Secretary's Certificate. Purchaser shall have
delivered the Purchaser Secretary's Certificate.
Section 9.11 Environmental Permits and Compliance. Prior to or at
Closing, the parties hereto shall have reached a mutually satisfactory agreement
as to the resolution of the environmental compliance issues identified prior to
closing which shall include (a) the Company's quantity generator permit status
and (b) the monitoring program requested by local government authorities and the
possible treatment requirements.
ARTICLE X
POST-CLOSING COVENANTS
The parties agree as following with respect to the period following the
Closing.
Section 10.1 General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
including obtaining any third-party consents not obtained prior to Closing, each
of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Article XI below). Sellers acknowledge and agree that from and after the
Closing, Purchaser will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to the Company.
Section 10.2 Litigation Support. In the event that and for so long as
any party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
(including Tax audits) in connection with (a) any transaction contemplated under
this Agreement or (b) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transition on or prior to the Closing Date involving the Company, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party
(unless the contesting or defending party is entitled to indemnification
therefor under Article XI below).
Section 10.3 Tax Matters. Sellers and Purchaser agree to provide each
other with such cooperation and information as either of them reasonably may
request of the other in relation to
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(a) preparation of any Tax Return of the Company or with respect to the
Company's operations, (b) determining any Taxes or right to a refund of Taxes of
the Company or with respect to the Company's operations or (c) responding to any
audit or examination of Tax Returns of the Company or with respect to the
Company's operations.
Section 10.4 Public Disclosure; Confidentiality. From and after the
Closing Date, Sellers shall keep confidential all information relating to the
Company and its operations. The foregoing shall not preclude Sellers from (a)
the use or disclosure of such information which currently is known generally to
the public or which subsequently has come into the public domain, other than by
way of disclosure by any of Sellers in violation of this Agreement or (b) the
disclosure of such information to the extent required by law or court order,
provided that, to the extent practicable, prior to such disclosure required by
law or court order, Sellers will give Purchaser prior written notice of the
nature of the required disclosure.
Section 10.5 Cooperation with Initial Public Offering. Sellers shall
use their reasonable best efforts to cooperate with Purchaser, the Company and
their respective representatives and agents in connection with any proposed
initial public offering of capital stock of the Company or Purchaser after the
Closing Date, including, but not limited to, providing, organizing and preparing
information regarding the Company and participating in underwriter due diligence
sessions and investor meetings at such times as are requested by the
underwriters of such public offering.
Section 10.6 Employee Benefits. Purchaser shall, for a period of not
less than three (3) years post-Closing, maintain the Company's profit-sharing
plan as it exists as of the date hereof; provided, however, that the Company and
Sellers' Representative may agree at any time to amend, modify, replace or
terminate such profit-sharing plan. Purchaser shall use its commercially
reasonable best efforts to ensure that post-Closing the Company's employees will
enjoy comparable employee benefits as the Company provides prior to Closing,
including the Company's bonus program and 401(k) Plan. Notwithstanding the
foregoing, the parties agree that the Company shall endeavor to restructure the
compensation program to replace all or part of the 401(k) matching program with
a modified bonus plan (modified from that in effect pre-Closing), which modified
plan shall be in effect no later than March 31, 2000. In addition to the
foregoing, by June 30, 2000, Purchaser shall establish a stock option plan
involving at least ten percent (10%) of the outstanding stock of Purchaser, for
which all employees of Purchaser, its subsidiaries, and its divisions who have
tenured service of one (1) year or more shall be eligible.
Section 10.7 ERISA Excise Tax. Notwithstanding any other provision of
this Agreement to the contrary, Sellers acknowledge and agree that if excise
taxes under ERISA or other charges or fees on account of the early termination
of the ESOP and repayment of the ESOP indebtedness exceed $50,000 then (a)
Sellers shall pay fifty percent (50%) of the amount in excess of $50,000 and (b)
to the extent such excise taxes or other charges or fees are incurred by the
Company as a result of the early termination of the ESOP and repayment of the
ESOP indebtedness, Purchaser shall be entitled to offset the amount incurred by
the Company on a dollar-for-dollar basis by one-half of the amount of such
excise taxes or other charges or fees in excess of $50,000 against the Earnout
Amount; provided, however, that in the event no Earnout
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Amount is due or as otherwise determined by Purchaser, Purchaser shall be
entitled to exercise all available rights and remedies to recover such amounts
from Sellers.
Section 10.8 Post-Closing Operation of Business. Until the earlier of
December 31, 2001 and the time when Purchaser has paid the full Earnout Amount,
if Purchaser directs or causes Company to take and/or refrain from taking any
action or actions (each a "Purchaser Directive") which Sellers' Representative
reasonably believes will have a material effect on 2000 EBITDA or 2001 EBITDA
then Sellers' Representative shall, within fifteen (15) business days of the
Purchaser Directive provide a written objection to the Purchaser's Board of
Directors. After receipt of such objection notice, Purchaser shall, to the
reasonable satisfaction of Sellers' Representative, (a) attempt to reassess and
restructure the Purchaser Directive and/or (b) adjust the calculation of the
Earnout Amount to account for the Purchaser Directive. If Purchaser and Sellers'
Representative cannot reach agreement on appropriate modifications to the
Purchaser Directive and/or the calculation of the Earnout Amount, then a
third-party valuation and appraisal expert, selected by the agreement of
Purchaser and Sellers' Representative, shall be engaged to provide an
independent assessment of the effect of the Purchaser Directive on 2000 EBITDA
and/or 2001 EBITDA, as applicable. The cost of such third-party valuation and
appraisal expert shall be excluded from the calculation of 2000 EBITDA and/or
2001 EBITDA, as applicable. Notwithstanding the foregoing, the parties hereto
agree that, unless otherwise agreed to by Purchaser and Sellers' Representative,
for twenty-four (24) months from the Closing Date, Purchaser shall not relocate
the Company's manufacturing operations from their present location in Salem,
Virginia.
Section 10.9 Eligible Employee Agreements. Sellers' Representative
shall use commercially reasonable efforts to cause Eligible Employees to enter
into the Eligible Employee Agreements and shall in every event make execution of
an Eligible Employee Agreement a condition to an Eligible Employee's eligibility
to participate in the earnout amount allocated to Eligible Employees pursuant to
Section 2.2(c)(ii) hereof.
ARTICLE XI
INDEMNIFICATION
Section 11.1 Indemnification by Sellers. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and
Page ("Indemnifying Sellers") agree, jointly and severally, to indemnify
Purchaser and every Affiliate (and their respective officers, directors,
shareholders, agents and representatives) of Purchaser (which shall specifically
include the Company) (each a "Purchaser Indemnitee") against and hold them
harmless from any and all Damages which may be asserted against, imposed upon or
sustained by a Purchaser Indemnitee by reason of or arising out of the breach,
default, inaccuracy or failure of any of the warranties, representations,
covenants or agreements of the Company or Sellers contained in this Agreement or
in any certificate or instrument required to be delivered pursuant hereto. In
addition to the foregoing, Indemnifying Sellers agree, jointly and severally to
indemnify Purchaser Indemnitees against and hold them harmless from any and all
Damages which may be asserted against, imposed upon or sustained by a Purchaser
Indemnitee as a result of any of the following: (a) liability for Taxes for any
period up to and including the Closing; (b) Litigation; (c) Environmental
Liabilities arising for any period up to and including the Closing; (d) any
product liability claim arising for any period up to and including the Closing;
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(e) liabilities pursuant to the Occupational Health & Safety Act or any laws
relating to health and safety arising for any period up to and including the
Closing; (f) any liabilities resulting from (I) infringements or claimed
infringements on the Company's Intellectual Property arising for any period up
to and including the Closing or (II) infringements or claimed infringements by
the Company on the Intellectual Property of a third party arising for any period
up to and including the Closing; (g) liability for any excise tax under ERISA or
other charges or fees resulting from the early termination of the ESOP and the
repayment of the ESOP indebtedness; (h) liabilities or obligations incurred by
the Company prior to the Closing Date or attributable to the period prior to
Closing; and (i) cancellation of the Options and payments of cash in exchange
for such cancellation.
Section 11.2 Indemnification by Purchaser. From and after Closing,
Purchaser agrees to indemnify Sellers and hold them harmless from and against
any and all Damages which may be asserted against, imposed upon or sustained by
Sellers at any time by reason of or arising out of the breach, default,
inaccuracy or failure of any warranties, representations, conditions, covenants
or agreements of Purchaser contained in this Agreement or in any certificate,
instrument or document delivered pursuant hereto.
Section 11.3 Procedures for Third-Party Claims.
(a) If any Indemnitee receives written notice of the assertion
of any claim or of the commencement of any action or proceeding by any entity
who is not a party to this Agreement (a "Third Party Claim") against or
affecting such Indemnitee, and if such assertion were presumed to be true
(regardless of the actual outcome) then a party could be obligated to provide
indemnification under this Agreement as a result of or in connection with such
claim, action or proceeding, such Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event no later than thirty
(30) calendar days after receipt of such written notice of such Third Party
Claim; provided, however, that failure to give notice as provided in this
paragraph (a) shall not relieve the Indemnifying Party of its indemnification
obligations under this Article XI except to the extent that such Indemnifying
Party is actually prejudiced by such failure. Said written notice to the
Indemnifying Party shall set forth the basis of the Third Party Claim in
reasonable detail and include copies of all pertinent correspondence relating to
such Third Party Claim. The Indemnifying Party will have the right to assume and
control the defense of any Third Party Claim at such Indemnifying Party's sole
expense and by such Indemnifying Party's own counsel, by giving written notice
to the Indemnitee (the "Notice to Defend") no later than thirty (30) calendar
days after receipt of the above-described notice of such Third Party Claim. The
Indemnitee also will have the right to participate in the defense of any Third
Party Claim assisted by counsel of its own choosing, but all fees and expenses
of such counsel shall be paid by the Indemnitee. The Indemnifying Party and the
Indemnitee will cooperate with each other in good faith in such defense and make
available all employees and books and records in its control as reasonably
deemed necessary with respect to such defense (but not to the extent that would
require waiver of any privilege). If the Indemnitee does not receive from the
Indemnifying Party a Notice to Defend with respect to a Third Party Claim or a
written notice of objection to the claim for indemnification specifying in
reasonable detail the basis for the objection within the 30 day period described
above, the Indemnitee may, at its option, elect to solely defend the Third Party
Claim assisted by counsel of its own choosing, and the
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Indemnifying Party will be liable for all reasonable costs and expenses, and all
settlement amounts (subject to and in accordance with paragraph (c) below of
this Section 11.3) or other liabilities, losses, damages and injuries paid or
incurred in connection therewith to the extent such claim is or would have been
indemnifiable under this Agreement if such claim is or had been proved. In such
event, the Indemnifying Party will also have the right to participate in the
defense of any Third Party Claim assisted by counsel of its choosing at its own
expense.
(b) If, within the thirty (30) day period set forth in
paragraph (a) above of this Section 11.3, an Indemnitee receives a Notice to
Defend from an Indemnifying Party with respect to any Third Party Claim, the
Indemnifying Party will not be liable for any legal expenses of the Indemnitee
incurred after receipt by the Indemnitee of such Notice to Defend.
(c) In the event there is a dispute between the Indemnifying
Party and Indemnitee concerning whether a Third Party Claim should be contested,
settled or compromised, it shall be settled, compromised or contested, in
accordance with the next succeeding sentences; provided, however, that the
Indemnitee, or its respective successors or assigns, shall neither be required
to refrain from paying or satisfying any claim which has matured by court
judgment or decree, unless appeal is taken thereafter and proper appeal bond
posted by the Indemnifying Party, nor shall the Indemnitee be required to
refrain from paying or satisfying any Third Party Claim after and to the extent
that such Third Party Claim has resulted in an unstayed injunction. The
Indemnifying Party shall not, without the Indemnitee's prior written consent,
not to be unreasonably withheld, settle or compromise any action or claim or
consent to the entry of any judgment with respect to any action, claim or
proceeding for anything other than money damages paid by the Indemnifying Party
unless the settlement does not involve the imposition of any liability or
obligation on the Indemnitee or any restriction on its activities. The
Indemnifying Party may, without the Indemnitee's written consent, settle or
compromise any such action or claim or consent to entry of any judgment with
respect to any such action or claim which requires solely the payment of money
damages by the Indemnifying Party. Subject to the foregoing, in the event that
the Indemnifying Party, on the one hand, or the Indemnitee, on the other hand,
has reached a good faith, bona fide settlement, agreement or compromise, subject
only to approval hereunder, with any claimant regarding a matter which may be
the subject of indemnification hereunder and desires to settle on the basis of
such agreement or compromise, such party who desires to so settle or compromise
shall notify the other party in writing of its desire setting forth the terms of
such settlement or compromise (the "Notice of Settlement"). The Third Party
Claim may be settled or compromised on such basis unless within twenty (20) days
of the receipt of the Notice of Settlement the party who issued the Notice of
Settlement receives a notice from the other party of its desire to continue to
contest the matter (the "Notice to Contest") and, in such case:
(i) Should the Indemnitee deliver a Notice to
Contest, the claim shall be so contested and the liability of the Indemnifying
Party shall be limited as provided in clause (iii) below;
(ii) If the settlement or compromise could result in
a further claim for indemnification being made against the Indemnifying Party
and if the Indemnifying Party
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delivers the Notice to Contest, the claim shall be so contested and the
liability of the Indemnitee shall be limited as provided in clause (iii) below;
and
(iii) If a matter is contested as provided in clauses
(i) or (ii) above and is later adjudicated, settled, compromised or otherwise
disposed of and such adjudication, compromise, settlement or disposition results
in a liability, loss, damage or injury in excess of the amount for which one
party desired previously to settle the matter, then the liability of such party
shall be limited to such lesser proposed settlement amount (plus attorney's fees
and expenses to the date of the proposed but unapproved settlement to the extent
provided for in paragraphs (a) and (b) above) and the party contesting the
matter shall be solely responsible for any additional amount.
Section 11.4 Procedures for Direct Claims. Any claim for which an
Indemnitee intends to assert a right to indemnifiable Damages under this
Agreement which does not result from a Third-Party Claim (a "Direct Claim")
shall be asserted by giving each Indemnifying Party reasonably prompt written
notice thereof, and each Indemnifying Party shall have a period of forty-five
(45) calendar days from the receipt thereof within which to respond to such
Direct Claim. If any Indemnifying Party does not so respond within such
forty-five (45) calendar day period, such Indemnifying Party shall be deemed to
have rejected such claim, in which event the Indemnitee shall be free to pursue
such remedies as may be available to the Indemnitee pursuant to this Agreement.
A failure to give timely notice as provided in this Section 11.4 shall not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage, incurred an obligation or liability which
otherwise would have been avoided, or was otherwise actually prejudiced.
Section 11.5 Limitations of Indemnification Obligations.
(a) All the representations and warranties made by Purchaser
or Sellers in this Agreement shall survive until eighteen (18) months following
the Closing Date; provided, however, that the representations and warranties in
Sections 4.12, 4.13(a)(vii), 4.13(a)(viii), the penultimate sentence of 4.18(a),
4.18(b), 4.19(i), 4.20(a)(i), 4.20(b), 4.20(c)(iii) and the first sentence of
4.21(b) shall survive until the expiration of the applicable statutes of
limitation; provided, further, that the representations and warranties in
Sections 4.1, 4.2, 4.3, 4.4 and 4.6 shall survive without termination. In the
event notice of any claim for indemnification under Section 11.3(a) hereof shall
have been given within the applicable survival period, the representations and
warranties that are the subject of such indemnification claim shall survive
until such time as such claim is finally resolved. The covenants and agreements
of the parties set forth in this Agreement and the indemnification obligations
of the parties hereunder shall survive indefinitely except as expressly provided
herein.
(b) Subject to the second sentence of this Section 11.5(b), a
Purchaser Indemnitee shall not have any right to indemnification under this
Agreement until the aggregate of all amounts claimed by all Purchaser
Indemnitees exceeds $300,000 and in such event the indemnification obligations
of the respective Indemnifying Parties hereunder shall apply to all Damages in
excess of such amount. In no event shall (i) the individual liability of an
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Indemnifying Seller for Damages pursuant to this Article XI exceed twenty-five
percent (25%) of the Net Proceeds, as fully adjusted in accordance with the
terms herein and (ii) the aggregate liability of Indemnifying Sellers for
Damages pursuant to this Article XI exceed $5,000,000 (the "Maximum
Indemnification Amount"). For purposes of this Agreement, the "Net Proceeds"
shall mean the portion of the Purchase Price (including the Closing Cash
Payment, Convertible Preferred Stock or the Earnout Amount) allocable to such
Seller. Notwithstanding the foregoing, any claim by a Purchaser Indemnitee
pursuant to Section 11.1(i) shall not be subject to the limitations set forth in
the first sentence of this Section 11.5(b).
(c) A Seller Indemnitee shall not have any right to
indemnification under this Agreement until the aggregate of all amounts claimed
by all Seller Indemnitees exceeds $300,000 and, in such event, the respective
Indemnifying Parties shall be liable only for the amount in excess of $300,000;
provided, however, that the maximum aggregate liability payable to all Seller
Indemnitees by Purchaser for Damages pursuant to and in accordance with this
Agreement shall not in any event exceed the Maximum Indemnification Amount.
Section 11.6 Survival of Representations, Warranties and Covenants. The
representations, warranties, covenants, indemnities, conditions and agreements
contained herein are and will be deemed to be continuing representations,
warranties, covenants, indemnities, conditions and agreements that survive the
Closing and remain in full force and effect regardless of any investigations or
knowledge of or on behalf of any party, but subject to the applicable
limitations contained in Section 11.5.
ARTICLE XII
TERMINATION
Section 12.1 Termination of Agreement.
The parties may terminate this Agreement as provided below:
(a) Either Purchaser or Sellers may terminate this Agreement
by mutual written consent at any time prior to the Closing.
(b) Purchaser may terminate this Agreement by written notice
to Sellers at any time prior to Closing if its Lenders refuse to consent to the
transaction contemplated by this Agreement.
(c) Purchaser may terminate this Agreement by giving written
notice to Sellers at any time prior to the Closing (i) in the event Sellers have
breached any material representation, warranty or covenant contained in this
Agreement in any material respect, Purchaser has notified Sellers of the breach,
and the breach has continued without cure for a period of thirty (30) days after
the notice of breach or (ii) if the Closing shall not have occurred on or before
January 31, 2000, by reason of the failure of any condition precedent under
Article VIII hereof (unless the failure results primarily from Purchaser itself
breaching any representation, warranty or covenant contained in this Agreement).
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(d) Purchaser may terminate this Agreement if it is not
satisfied in all respects with the results of its due diligence review of the
Company and the Company's operations and assets; provided, however, that if
Purchaser does not exercise the termination right contained in this Section
12.1(d) within thirty days of execution of this Agreement, such termination
right shall lapse.
(e) Sellers may terminate this Agreement by giving written
notice to Purchaser at any time prior to the Closing (i) in the event Purchaser
has breached any material representation, warranty or covenant contained in this
Agreement in any material respect, Sellers has notified Purchaser of the breach,
and the breach has continued without cure for a period of thirty (30) days after
the notice of breach or (ii) if the Closing shall not have occurred on or before
January 31, 2000 by reason of the failure of any condition precedent under
Article IX hereof (unless the failure results primarily from Sellers themselves
breaching any representation, warranty or covenant contained in this Agreement).
Section 12.2 Effect of Termination. If any party terminates this
Agreement pursuant to Section 12.1 above, all rights and obligations of the
parties hereunder hereof shall terminate without any liability of any party to
any other party. Nothing set forth in this Section 12.2 shall mitigate or
otherwise compromise the rights or obligations of the parties under Section
13.12 or in the event of a breach of the terms or provisions of this Agreement
generally.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Fees and Expenses. Except as contemplated by this
Agreement, until Closing, all costs and expenses incurred in connection with
negotiating and preparing this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
Section 13.2 Entire Agreement. This Agreement, which also includes the
Annexes, Schedules and Exhibits hereto, sets forth the entire agreement and
understanding among the parties and merges and supersedes all prior discussions,
agreements and understandings of every kind and nature among them as to the
subject matter hereof, and no party shall be bound by any condition, definition,
warranty or representation other than as expressly provided for in this
Agreement or as may be on a date on or subsequent to the date hereof duly set
forth in writing signed by each party which is to be bound thereby.
Section 13.3 Amendments. This Agreement (including the Annexes,
Disclosure Schedules and Exhibits hereto) shall not be changed, modified or
amended except by a writing signed by each party to be charged, and this
Agreement may not be discharged except by performance in accordance with its
terms or by a writing signed by each party to be charged. The rights and
remedies of the parties hereunder are cumulative and not exclusive of any other
right or remedy any party may have. No failure or delay by any party hereto in
exercising any right, power or privilege shall operate as a waiver of any such
right, power or privilege, except as expressly set forth in this Agreement. No
waiver of any default shall constitute a waiver of any
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other or any subsequent default. No single or partial exercise of any right,
power or privilege shall preclude the further or other exercise of the same or
other right, power or privilege.
Section 13.4 Taxes. Any Taxes in the nature of a sales or transfer tax,
any stock transfer tax or any other taxes that may be or may become payable by
Sellers including, but not limited to, any Taxes resulting from or ensuing as a
consequence of the consummation of any transaction contemplated hereby shall be
paid by Sellers, and Sellers shall indemnify and hold harmless Purchaser from
and against all such Taxes.
Section 13.5 Governing Law; Consent to Jurisdiction; Service of
Process. This Agreement and its validity, construction and performance shall be
governed in all respects by the laws of the State of Colorado without giving
effect to principles of conflicts of law. Purchaser, each Seller and the Company
hereby agree and consent to be subject to the exclusive jurisdiction of the
federal and state courts of Colorado located in Denver, Colorado in any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby. Each party hereby irrevocably consents to the service of
any and all process in any such suit, action or proceeding by the delivery of
such process to such party at the address and in the manner provided in Section
13.9.
Section 13.6 Representation by Counsel. Each party and its counsel
cooperated in the drafting and preparation of this Agreement and the documents
referred to herein. Accordingly, any rule of law or any legal decision that
would require interpretation of any ambiguities in this Agreement against the
party that drafted it is of no application and is hereby expressly waived by
each party.
Section 13.7 Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors,
legal representatives and permitted assigns. The Agreement may not be assigned
by any of Sellers except with the prior written consent of Purchaser; provided,
however, that any Seller may assign this Agreement to any member of his family
or to any trust for the benefit of such family member. Purchaser may assign this
Agreement only to an Affiliate of Purchaser. Nothing herein contained shall
confer or is intended to confer on any third party or entity which is not a
party to this Agreement any rights under this Agreement, except for Purchaser
and its Affiliates which are acknowledged to be third party beneficiaries and
Purchaser Indemnitees who are acknowledged to be third party beneficiaries under
Article XI.
Section 13.8 Headings. The headings in the Articles, Sections,
paragraphs, Exhibits, Schedules and sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
Section 13.9 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
FedEx, to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
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(a) if to Purchaser, to:
Rivo Technologies
c/o KRG Capital Partners, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Tower One, Suite 1500
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Medical Device Manufacturing, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Sellers, to:
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ 1998 Trust
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Sellers' Representative
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Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, ▇.▇.▇.
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Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 13.10 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 13.11 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants
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and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
Section 13.12 Specific Performance. The parties hereto agree that if
any of the provisions of this Agreement are not performed in accordance with
their specific terms or are otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
Section 13.13 Legal Fees and Expenses. In the event that any
arbitration or legal action is brought for the enforcement of this Agreement, or
because of any alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in said action or proceeding, in addition to any other
relief to which such party may be entitled.
[SIGNATURE PAGES FOLLOW]
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SIGNATURES
IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
and each of Sellers has signed this Agreement as of the date first written
above.
PURCHASER
MEDICAL DEVICE MANUFACTURING, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Title: CEO & President
----------------------------
COMPANY
NOBLE-MET, LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
Title: President
----------------------------
SELLERS
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ 1998 Trust, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Trustee
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