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EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 12, 2000
BY AND AMONG
MEDICAL DEVICE MANUFACTURING, INC.
D/B/A RIVO TECHNOLOGIES,
(THE "PURCHASER")
MER ACQUISITION CORPORATION
(THE "MERGERSUB")
MEDICAL ENGINEERING RESOURCES, LTD.
(THE "COMPANY")
AND
THE SHAREHOLDERS OF MEDICAL ENGINEERING RESOURCES, LTD.
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS...................................................................1
Section 1.1 Certain Definitions...........................................................1
Section 1.2 Terms Generally...............................................................7
ARTICLE II MERGER........................................................................8
Section 2.1 The Merger....................................................................8
Section 2.2 Closing; Effective Time.......................................................8
Section 2.3 Effect of the Merger..........................................................8
Section 2.4 Articles of Incorporation; Bylaws.............................................8
Section 2.5 Directors and Officers........................................................9
Section 2.6 Surrender of Certificates; Issuance of Merger Consideration; Effect of
Merger on Company Common Stock................................................9
Section 2.7 Delivery of Merger Consideration; Closing Deliveries..........................10
Section 2.8 Stock Transfer Books..........................................................11
Section 2.9 Intended Tax Consequences.....................................................11
Section 2.10 Taking of Necessary Action; Further Action....................................12
Section 2.11 Withholding...................................................................12
Section 2.12 Distribution of Current Assets................................................12
Section 2.13 Pre-Closing Commissions Receivable............................................12
Section 2.14 Tail Commissions..............................................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS.................14
Section 3.1 Corporate Organization........................................................14
Section 3.2 Ownership of Shares...........................................................14
Section 3.3 Authorization, Etc............................................................15
Section 3.4 No Conflict...................................................................15
Section 3.5 Capital Stock.................................................................15
Section 3.6 Financial Statements..........................................................16
Section 3.7 Absence of Certain Changes or Events..........................................16
Section 3.8 No Undisclosed Liabilities....................................................16
Section 3.9 Property, Assets; Inventory; Real Property....................................17
Section 3.10 Intellectual Property.........................................................17
Section 3.11 Tax Matters...................................................................17
Section 3.12 Material Contracts............................................................18
Section 3.13 Relationship with Suppliers & Customers.......................................20
Section 3.14 Notes and Accounts Receivable; Bank Accounts..................................20
Section 3.15 Employees.....................................................................20
Section 3.16 Employee Benefits.............................................................20
Section 3.17 Environmental Compliance......................................................22
Section 3.18 Litigation and Claims, Compliance with Laws...................................22
Section 3.19 Affiliate Transactions; Competing Businesses..................................22
Section 3.20 Brokers, Finders, Etc.........................................................23
Section 3.21 Other Information.............................................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER...................................23
Section 4.1 Organization..................................................................23
Section 4.2 Authorization, Etc............................................................23
Section 4.3 Brokers' Fees.................................................................24
Section 4.4 Capital Stock.................................................................24
Section 4.5 No Conflict...................................................................24
Section 4.6 Financial Statements..........................................................25
Section 4.7 Absence of Certain Changes or Events..........................................25
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Section 4.8 No Undisclosed Liabilities....................................................25
Section 4.9 Other Information.............................................................25
ARTICLE V THE SELLERS' AND THE COMPANY'S OBLIGATIONS BEFORE CLOSING.....................25
Section 5.1 General.......................................................................25
Section 5.2 Access........................................................................26
Section 5.3 Operation of Business.........................................................26
Section 5.4 Preservation of Business; Insurance...........................................26
Section 5.5 Notices and Consents..........................................................26
Section 5.6 Exclusivity...................................................................26
Section 5.7 Delivery of Disclosure Schedules; Notice of Developments; Update of
Disclosure Schedules..........................................................27
Section 5.8 Confidentiality...............................................................27
Section 5.9 Company Obligations; Affiliate Agreements.....................................28
Section 5.10 Due Diligence.................................................................28
Section 5.11 Termination of ERISA Plans....................................................28
ARTICLE VI PURCHASER'S OBLIGATIONS BEFORE CLOSING........................................28
Section 6.1 General.......................................................................28
Section 6.2 Access........................................................................29
Section 6.3 Notices and Consents..........................................................29
Section 6.4 Notice of Developments........................................................29
Section 6.5 Due Diligence.................................................................29
Section 6.6 Confidentiality...............................................................29
Section 6.7 Financial Statements..........................................................30
Section 6.8 Employee Advance..............................................................30
Section 6.9 Convertible Preferred Stock...................................................30
ARTICLE VII CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE...............................30
Section 7.1 Representations and Warranties True...........................................30
Section 7.2 Performance...................................................................30
Section 7.3 No Material Adverse Effect....................................................31
Section 7.4 Consents......................................................................31
Section 7.5 No Proceedings, Injunctions, Etc..............................................31
Section 7.6 The Sellers' and Officer's Certificates.......................................31
Section 7.7 Resignations..................................................................31
Section 7.8 ▇▇▇▇▇▇▇ Noncompetition Agreement..............................................31
Section 7.9 Noncompetition Agreements.....................................................31
Section 7.10 ▇▇▇▇▇▇▇ Employment Agreement..................................................32
Section 7.11 ▇▇▇▇ Employment Agreement.....................................................32
Section 7.12 Services Agreement............................................................32
Section 7.13 Shareholders' Agreement.......................................................32
Section 7.14 Approvals.....................................................................32
Section 7.15 Good Standing; Certified Charter..............................................32
ARTICLE VIII CONDITIONS PRECEDENT TO SELLERS' PERFORMANCE..................................32
Section 8.1 Representations and Warranties True...........................................32
Section 8.2 Performance...................................................................32
Section 8.3 No Material Adverse Effect....................................................33
Section 8.4 Officer's Certificate.........................................................33
Section 8.5 Consents......................................................................33
Section 8.6 No Proceedings, Injunctions, Etc..............................................33
Section 8.7 ▇▇▇▇▇▇▇ Noncompetition Agreement..............................................33
Section 8.8 Noncompetition Agreements.....................................................33
Section 8.9 ▇▇▇▇▇▇▇ Employment Agreement..................................................33
Section 8.10 ▇▇▇▇ Employment Agreement.....................................................33
Section 8.11 Services Agreement............................................................34
Section 8.12 Good Standing; Certified Articles.............................................34
ARTICLE IX POST-CLOSING COVENANTS........................................................34
Section 9.1 General.......................................................................34
Section 9.2 Litigation Support............................................................34
Section 9.3 Tax Matters...................................................................34
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Section 9.4 Public Disclosure; Confidentiality............................................35
Section 9.5 Cooperation with Initial Public Offering......................................35
ARTICLE X INDEMNIFICATION...............................................................35
Section 10.1 Indemnification by the Sellers................................................35
Section 10.2 Indemnification by Purchaser..................................................36
Section 10.3 Limitations of Indemnification Obligations....................................36
Section 10.4 Survival of Representations, Warranties and Covenants.........................37
ARTICLE XI TERMINATION...................................................................37
Section 11.1 Termination of Agreement......................................................37
Section 11.2 Effect of Termination.........................................................38
ARTICLE XII MISCELLANEOUS.................................................................38
Section 12.1 Fees and Expenses.............................................................38
Section 12.2 Entire Agreement; Counterparts; Headings......................................38
Section 12.3 Amendments....................................................................39
Section 12.4 Taxes.........................................................................39
Section 12.5 Governing Law; Consent to Jurisdiction; Service of Process....................39
Section 12.6 Representation by Counsel.....................................................39
Section 12.7 Assignment....................................................................39
Section 12.8 Notices.......................................................................40
Section 12.9 Severability..................................................................41
Section 12.10 Specific Performance..........................................................41
Section 12.11 Legal Fees and Expenses.......................................................41
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of
May 12, 2000, is entered into by and among Medical Device Manufacturing, Inc.
d/b/a Rivo Technologies, a Colorado corporation (the "Purchaser"), MER
Acquisition Corporation, a Minnesota corporation (the "MergerSub"), Medical
Engineering Resources, Ltd., a Minnesota corporation (the "Company"), and each
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇"), (▇▇▇▇▇▇▇
and ▇. ▇▇▇▇▇▇▇ are hereafter individually referred to as a "Seller" and
collectively referred to as the "Sellers").
RECITALS
A. The Boards of Directors of Purchaser, MergerSub, and the Company
believe it is in the best interests of their respective companies and the
stockholders of their respective companies that MergerSub and the Company
combine into a single company through the merger of the Company with and into
the MergerSub with the MergerSub being the surviving entity (the "Merger") and,
in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, all issued and
outstanding shares of common stock of the Company, no par value per share (the
"Company Common Stock"), shall be converted into the right to receive cash and
shares of Class A-3 5% Convertible Preferred Stock of Purchaser (the
"Convertible Preferred Stock") in the amounts and on the terms set forth herein.
C. The Company, Purchaser, MergerSub and Sellers desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code.
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:
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.
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"Affiliate" of a Person shall mean any Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person.
"Articles of Merger" shall have the meaning set forth in Section 2.1 of
this Agreement.
"Balance Sheet Date" shall have the meaning set forth in Section 4.6 of
this Agreement.
"Certificate of Designation" shall have the meaning set forth in
Section 2.6(b) of this Agreement.
"Closing" shall have the meaning set forth in Section 2.2 of this
Agreement.
"Closing Cash Payment" shall have the meaning set forth in Section
2.6(b) of this Agreement.
"Closing Date" shall have the meaning set forth in Section 2.2 of this
Agreement.
"Code" shall mean the meaning set forth in Recital D of this Agreement.
"Company" shall have the meaning set forth in the initial paragraph of
this Agreement.
"Company Common Stock" shall have the meaning set forth in Recital B of
this Agreement.
"Convertible Preferred Stock" shall have the meaning set forth in
Recital B of this Agreement.
"Current Assets" shall mean all of the Company's cash on hand and
deposit, deposits, prepaid expenses, commissions receivable and other current
assets of the Company as may be agreed upon by the parties hereto.
"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.
"Defined Benefit Plan" means a Plan that is or was a "defined benefit
plan" as such term is defined in Section 3(35) of ERISA.
"Dollars" and "$" shall mean United States dollars.
"Due Diligence Period" shall have the meaning set forth set forth in
Section 6.5 of this Agreement.
"Effective Time" shall have the meaning set forth in Section 2.2 of
this Agreement.
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"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, district, and local
laws, and all rules or regulations promulgated thereunder, or common law
holdings, applicable to the Company relating to pollution or protection of the
environment and shall include, without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Toxic Substances Control Act, as amended, the Hazardous Materials Transportation
Act, as amended, the Resource Conservation and Recovery Act, as amended, the
Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean
Air Act, as amended, the Atomic Energy Act of 1954, as amended, the Occupational
Safety and Health Act, as amended, the Emergency Planning and Community
Right-to-Know Act, as amended, and all analogous laws promulgated or issued by
any state or other Governmental Authority.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"ESOP" means employee stock ownership plan within the meaning of
Section 4975(e)(7) of the Code.
"Financial Statements" shall have the meaning set forth in Section 4.6
of this Agreement.
"First Deferred Cash Payment" shall have the meaning set forth in
Section 2.6(c) of this Agreement.
"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.
"Hazardous Substances" shall mean and include, but not be limited to,
any chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum and petroleum products, asbestos and asbestos-containing
materials, polychlorinated biphenyls, lead paint and radon, and any other
substance or waste regulated, classified, listed, or defined under any
Environmental Law.
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"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
consistent with prudent business practices and payable in accordance with
customary practices) and 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
any lease that must be capitalized under GAAP, (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.
"Intellectual Property" shall mean all intellectual property rights
used in or reasonably necessary for 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.
"Invoice" and "Invoices" shall have the meaning set forth in Section
2.13 of this Agreement.
"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 the Sellers and shall mean the actual
knowledge or conscious awareness of the Sellers.
"Laws" shall mean statutes, common laws, rules, ordinances,
regulations, codes, licensing requirements, orders, judgments, injunctions,
decrees, licenses, permits and bylaws of a Governmental Authority.
"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.
"Lien" shall mean any security interest, lien, superlien, 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.
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"Litigation" shall mean any litigation, legal action, arbitration,
proceeding, material demand, material claim or investigation pending against,
affecting or brought by or against the any of the Sellers, the Company, the
Company's present or former employees or independent contractors affiliated at
any time with the Sellers or the Company.
"▇▇▇▇▇▇▇ Employment Agreement" shall have the meaning set forth in
Section 7.10 of this Agreement.
"▇▇▇▇▇▇▇ Noncompetition Agreement" shall have the meaning set forth in
Section 7.8 of this Agreement.
"Manufacturers" shall have the meaning set forth in Section 2.13 of
this Agreement.
"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 the 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 reasonably be expected to have $50,000
in the aggregate or more in Damages being asserted against, 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 3.12(a)
of this Agreement.
"Maximum Indemnification Amount" shall have the meaning set forth in
Section 10.3(b) of this Agreement.
"MBCA" shall mean the Minnesota Business Corporation Act, as amended.
"Merger" shall have the meaning set forth in Recital A of this
Agreement.
"MergerSub" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Merger Consideration" shall mean the Closing Cash Payment, the Closing
Stock Payment, the First Deferred Cash Payment and the Second Deferred Cash
Payment.
"Multiemployer Plan" means a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA.
"Noncompetition Agreement" shall have the meaning set forth in Section
7.9 of this Agreement.
"▇▇▇▇▇▇▇" shall mean ▇▇▇ ▇▇▇▇▇▇▇.
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"Other Arrangement" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not a Plan.
"Pension Plan" means an "employee pension benefit plan" as such term is
defined in Section 3(2) of ERISA.
"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, firm, partnership or other entity or
government or Governmental Authority.
"Plan" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by the Company;
(b) to which the Company contributed or was obligated to contribute or to fund
or provide benefits; or (c) which provides or promises benefits to any person
who performs or who has performed services for the Company and because of those
services is or has been (i) a participant therein or (ii) entitled to benefits
thereunder.
"Pre-Closing Commissions" shall have the meaning set forth in Section
2.13 of this Agreement.
"Purchaser" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Purchaser Indemnitee" shall have the meaning set forth in Section 10.1
of this Agreement.
"Qualified Plan" means a Pension Plan that satisfies, or is intended by
the Company to satisfy, the requirements for tax qualification described in
Section 401 of the Code.
"▇▇▇▇" shall mean ▇▇▇ ▇▇▇▇.
"▇▇▇▇ Employment Agreement" shall have the meaning set forth in Section
7.11 of this Agreement.
"Release" shall mean any emission, spill, seepage, leak, escape,
leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal,
or release of Hazardous Substances from any source into or upon the environment,
including the air, soil, improvements, surface water, groundwater, the sewer,
septic system, storm drain, publicly owned treatment works, or waste treatment,
storage, or disposal systems.
"Revised Schedules" shall have the meaning set forth in Section 5.7(b)
of this Agreement.
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"Schedule" shall mean the disclosure schedules delivered to Purchaser
by the Company and the Sellers or by the Purchaser to the Company and the
Sellers on or prior to the date of this Agreement.
"Second Deferred Cash Payment" shall have the meaning set forth in
Section 2.6(c) of this Agreement.
"Sellers" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Services Agreement" shall have the meaning set forth in Section 7.12
of this Agreement.
"Shareholders' Agreement" shall have the meaning set forth in Section
7.13 of this Agreement.
"Sellers' Representative" shall mean ▇▇▇▇▇▇▇.
"Subscription Agreement" shall have the meaning set forth in Section
2.6(b) of this Agreement.
"Surviving Corporation" shall have the meaning set forth in Section 2.1
of this Agreement.
"Tail Commissions" shall have the meaning set forth in Section 2.14 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 or other taxes, imposed by any Governmental
Authority and shall include any interest, penalties or additions to tax
attributable to any of the foregoing.
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
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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
MERGER
Section 2.1 The Merger. At the Effective Time (as defined in Section
2.2) and subject to and upon the terms and conditions of this Agreement, the
Articles of Merger attached hereto as EXHIBIT A (the "Articles of Merger") and
the applicable provisions of the MBCA, the Company shall be merged with and into
MergerSub, the separate corporate existence of the Company shall cease and
MergerSub shall continue as the surviving corporation of the Merger. MergerSub
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."
Section 2.2 Closing; Effective Time. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place as soon as
practicable after the satisfaction or waiver of each of the conditions set forth
in Articles VII and VIII below or at such other time as the parties agree (the
"Closing Date"). In connection with the Closing, the parties shall cause the
Merger to be consummated by filing the Articles of Merger with the Secretary of
State of the State of Minnesota, in accordance with the relevant provisions of
the MBCA (the time of such filing being the "Effective Time"). The Closing shall
take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and at the offices of ▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional
Association, 4800 Norwest Center, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
which Closing shall occur by overnight delivery and/or facsimile on such date,
time and place as may be mutually agreed upon by the parties hereto.
Section 2.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Articles of Merger and
the applicable provisions of the MBCA. At the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and MergerSub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and MergerSub shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 2.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of
MergerSub, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by the MBCA and the Articles of Incorporation.
(b) At the Effective Time, the Bylaws of MergerSub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by the MBCA, the
Articles of Incorporation of the Surviving Corporation and such Bylaws.
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Section 2.5 Directors and Officers At the Effective Time, the directors
of MergerSub immediately prior to the Effective Time shall be the directors of
the Surviving Corporation, and the officers of MergerSub immediately prior to
the Effective Time, shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
Section 2.6 Surrender of Certificates; Issuance of Merger
Consideration; Effect of Merger on Company Common Stock.
(a) At Closing, Sellers shall surrender to Purchaser
certificates, properly endorsed for transfer or accompanied by duly executed
stock powers, representing all of the issued and outstanding shares of Company
Common Stock held by the Sellers immediately prior to the Effective Time as set
forth on ANNEX I hereto. Each such certificate shall be delivered to canceled,
and, simultaneously with such delivery and cancellation, the Merger
Consideration into which such capital stock shall have been converted in the
Merger shall be delivered to the persons entitled thereto under this Agreement.
From and after the Effective Time, each certificate which prior to the Effective
Time represented shares of capital stock of the Company shall be deemed to
represent only the right to receive the Merger Consideration contemplated
herein, and the Sellers shall cease to have any rights with respect to the
shares of capital stock formerly represented thereby, except as otherwise
provided herein or by law.
(b) At Closing, Purchaser shall deliver to the Sellers in the
amounts set forth on ANNEX I hereto (i) cash in the amount of $250,000 (the
"Closing Cash Payment"), by wire transfer of immediately available federal funds
to Sellers' designated accounts and (ii) certificates duly registered in the
names of the Sellers evidencing 26,456 shares of Convertible Preferred Stock
(the "Closing Stock Payment") which Convertible Preferred Stock shall have a
liquidation preference of $18.90 per share and shall have the other rights and
preferences as set forth in the Certificate of Designation for the Convertible
Preferred Stock attached hereto as EXHIBIT B (the "Certificate of Designation").
In conjunction with the issuance of Convertible Preferred Stock to Sellers, each
Seller shall be required to execute a subscription agreement in the form
attached hereto as EXHIBIT C (the "Subscription Agreement").
(c) On or before the first anniversary of the Closing Date,
Purchaser shall deliver a payment of $175,000 plus interest at a rate of 10% per
annum beginning on the Closing Date and until paid in full, by wire transfer of
immediately available federal funds to Sellers, in accordance with their
respective ownership of the Company Common Stock as set forth on ANNEX I (the
"First Deferred Cash Payment"). On or before the second anniversary of Closing
Date, Purchaser shall deliver a payment of $75,000 plus interest at a rate of
10% per annum beginning on the Closing Date and until paid in full, by wire
transfer of immediately available federal funds to Sellers, in accordance with
their respective ownership of the Company Common Stock as set forth on ANNEX I
(the "Second Deferred Cash Payment"). In the event of any default of the payment
of interest or principal when due under the provisions of this Section 2.6(c),
the Sellers may give written notice thereof to Purchaser. In the event that any
such default is not challenged in good faith or cured within sixty (60) days of
receipt of such written notice, the Sellers may, at their option, declare the
second installment of principal and interest due under this Section 2.6(c)
immediately due and payable.
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(d) At the Effective Time, and without any further action by
any of the parties, all shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect thereto.
Section 2.7 Delivery of Merger Consideration; Closing Deliveries. At
the Closing:
(a) Sellers shall deliver or cause to be delivered to
Purchaser the following:
(i) certificates representing all issued and
outstanding shares of the Company Common Stock held by each Seller as set forth
on ANNEX I duly endorsed by the appropriate Seller, for transfer to the
Purchaser or accompanied by duly executed stock powers, in either case executed
in blank and otherwise in a form acceptable for transfer on the books of the
Company;
(ii) the certificates pursuant to Section 7.6;
(iii) the resignations of the Company's directors and
officers, pursuant to Section 7.7;
(iv) the stock books, stock ledgers, minute books and
corporate seals of the Company;
(v) as set forth in Section 7.15, a copy of the
certified charter, of the Company and a certificate of good standing;
(vi) the bylaws of the Company, along with
certificates executed by each Seller and the Secretary of the Company 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 authorizations, consents or approvals
required pursuant to Section 7.4;
(viii) the Noncompetition Agreements, executed by
▇▇▇▇, as set forth in Section 7.9;
(ix) the ▇▇▇▇▇▇▇ Noncompetition Agreement, executed
by ▇▇▇▇▇▇▇, as set forth in Section 7.8;
(x) the ▇▇▇▇▇▇▇ Employment Agreement, executed by
▇▇▇▇▇▇▇, as set forth in Section 7.10;
(xi) the ▇▇▇▇ Employment Agreement, executed by ▇▇▇▇,
as set forth in Section 7.11;
(xii) the Services Agreement, executed by ▇▇▇▇▇▇▇, as
set forth in Section 7.12;
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(xiii) joinders to the Shareholders' Agreement, as
set forth in Section 7.13;
(xiv) the Subscription Agreements, executed by each
Seller and
(xv) the Articles of Merger signed on behalf of the
Company.
(b) Purchaser shall deliver or cause to be delivered to the
Sellers the following:
(i) the Cash Closing Payment;
(ii) the Closing Stock Payment;
(iii) the certificate pursuant to Section 8.4;
(iv) as set forth in Section 8.12, a copy of the
certified articles of incorporation of the Purchaser and a certificate of good
standing;
(vi) the bylaws of the Purchaser, along with a
certificate executed by the Secretary of the Purchaser certifying that such
copies are true, correct and complete, and that such bylaws were duly adopted
and have not been amended or rescinded;
(vi) any authorizations, consents and approvals
required pursuant to Section 8.5;
(viii) the Noncompetition Agreement, executed by the
Purchaser, as set forth in Section 8.8;
(ix) the ▇▇▇▇▇▇▇ Noncompetition Agreement, executed
by the Purchaser, as set forth in Section 8.7;
(x) the ▇▇▇▇▇▇▇ Employment Agreement and ▇▇▇▇
Employment Agreement, executed by the Purchaser, as set forth in Sections 8.9
and 8.10, respectfully;
(xi) the Services Agreement, executed by the
Purchaser, as set forth in Section 8.11; and
(xi) the Articles of Merger, duly executed by the
MergerSub.
Section 2.8 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company with respect to all shares of capital stock of the
Company shall be closed and no further registration of transfers of such shares
of capital stock shall thereafter be made on the records of the Company.
Section 2.9 Intended Tax Consequences. It is intended by the parties
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code. The Company and Sellers shall be solely responsible for all tax
planning, and for obtaining advice with respect
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to the federal and state income tax consequences to the Company and Sellers of
the Merger and all related transactions. The Company and the Sellers are not
relying on Purchaser, MergerSub or any advisors to Purchaser or MergerSub for
any tax advice with respect to the Merger or related transactions, and shall
have no claim against Purchaser, MergerSub, or any officers, directors,
employees or advisors of Purchaser with respect to any tax consequences of the
Merger or any related transactions. Purchaser and MergerSub shall be solely
responsible for all tax planning, and for obtaining advice with respect to the
federal and state income tax consequences to Purchaser and MergerSub of the
Merger and all related transactions. Purchaser and MergerSub are not relying on
the Company, Sellers or any advisors to the Company and Sellers for any tax
advice with respect to the Merger or related transactions, and shall have no
claim against the Company and Sellers, or any officers, directors, employees or
advisors of the Company with respect to any tax consequences of the Merger or
any related transactions.
Section 2.10 Taking of Necessary Action; Further Action. If at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest (a) the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Company and MergerSub or (b) the
Sellers with the Merger Consideration as described in Sections 2.6 and 2.7, the
officers and directors of the Company, Purchaser and MergerSub are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action, so long as such action is
not inconsistent with this Agreement.
Section 2.11 Withholding. Each of the Surviving Corporation and
Purchaser shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code or any provision of applicable
state, local or foreign tax laws. To the extent that amounts are so withheld by
the Surviving Corporation or Purchaser, as the case may be, such withheld
amounts shall, to the extent properly remitted and reported to the applicable
taxing authorities, be treated for all purposes of this Agreement as having been
paid to such holder in respect of which such deduction and withholding was made
by the Surviving Corporation or Purchaser, as the case may be.
Section 2.12 Distribution of Current Assets. Sellers shall be entitled
to withdraw from the Company all Current Assets existing as of the Closing Date
provided that sufficient assets remain in the Company to satisfy any current
liabilities and Indebtedness of the Company as of the Closing Date. As of the
Closing Date and after giving effect to the preceding sentence, if and to the
extent that current liabilities or Indebtedness of the Company exceeds Current
Assets, Sellers shall promptly pay or cause the payment of such excess current
liabilities or Indebtedness or pay or cause to be paid to Purchaser in currently
available federal funds the amount equal to such excess Indebtedness.
Section 2.13 Pre-Closing Commissions Receivable. The parties hereto
acknowledge and agree that the Company is a manufacturers' representative and
has entered into agreements with the manufacturers identified on Schedule 3.12
(the "Manufacturers") pursuant to which such Manufacturers pay commissions to
the Company for soliciting purchase orders for such
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Manufacturers' products from the customers of such Manufacturers. In connection
with the sale of products by such Manufacturers to their customers, such
Manufacturers will issue invoices to their customers reflecting the purchase
price for the products sold by such Manufacturers to their customers
(individually a "Invoice" and collectively the "Invoices"). Ordinarily, such
Manufacturers pay commissions to the Company for purchase orders solicited by
the Company from such Manufacturers' customers when the Manufacturers receive
payment from such customers on the corresponding Invoices. Notwithstanding any
other provision of this Agreement to the contrary, the parties hereto
acknowledge and agree that all commissions received by the Purchaser, the
Surviving Corporation and/or their respective Affiliates after the Closing from
the Manufacturers with respect to any Invoice or Invoices bearing a date on or
before the Closing Date (the "Pre-Closing Commissions") shall be handled as
follows:
(a) From and after the Closing Date and until such time as
Purchaser determines otherwise, all Manufacturers shall be permitted to continue
to pay Pre-Closing Commissions with checks payable to the order of the Company
which shall be mailed to the Sellers at the Company's current address in
Lakeville, Minnesota. Upon receipt of such commission checks, the Sellers shall
promptly forward the same to Purchaser and process the accompanying reports from
the Manufacturers in their historic fashion and generate a monthly report and
forward to Purchaser each completed monthly report. In the absence of an error
in the Sellers' reports, the Purchaser shall pay or cause the payment of the
amount specified in such reports to ▇▇▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇▇▇▇ in accordance the
next regularly scheduled payroll disbursement.
(b) Unless otherwise specified by the Sellers, Reed shall be
entitled to (i) fifty percent (50%) of all such Pre-Closing Commissions received
from the Manufacturers on sales by such Manufacturers to customers located in
the State of Minnesota assigned to ▇▇▇▇ and (ii) forty percent (40%) of any such
Pre-Closing Commissions received from the Manufacturers on sales by such
Manufacturers to customers located in the United States outside of the State of
Minnesota assigned to ▇▇▇▇.
(c) Unless otherwise specified by the Sellers, ▇▇▇▇▇▇▇ shall
be entitled to eighty percent (80%) of all such Pre-Closing Commissions received
from the Manufacturers with respect to sales by such Manufacturers to their
customers located in Europe.
(d) Unless otherwise specified by the Sellers, ▇▇▇▇▇▇▇ shall
be entitled to (the balance of all Pre-Closing Commissions.
Section 2.14 Tail Commissions. The parties hereto acknowledge and agree
that the Purchaser may elect to terminate the agreements between the Company and
any one or more of the Manufacturers contemporaneously with or following the
Closing. Conversely, the parties hereto acknowledge and agree that one or more
of such Manufacturers may elect to terminate such agreements contemporaneously
with or following the Closing. Notwithstanding any other provision of this
Agreement to the contrary, the parties hereto acknowledge and agree that all
commissions and other compensation received by Purchaser, the Surviving
Corporation and/or their respective Affiliates after the Closing from any
Manufacturers whose agreements with the Company are terminated by Purchaser, the
Surviving Corporation and/or by such Manufacturers
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on or within thirty (30) days after the Closing Date with respect to any Invoice
or Invoices bearing a date after the Closing Date and/or in connection with or
as a result of the termination of such agreement (the "Tail Commissions") shall
be handled as follows:
(a) The processing of commission checks and reports with
respect to the Tail Commissions shall be handled in a manner consistent with
those related to the Pre-Closing Commissions in Section 2.13(a) above.
(b) Unless otherwise specified by the Sellers, Reed shall be
entitled to (i) fifty percent (50%) of all such Tail Commissions received from
the Manufacturers on sales by such Manufacturers to customers located in the
State of Minnesota assigned to ▇▇▇▇ and (ii) forty percent (40%) of any such
Tail Commissions received from the Manufacturers on sales by such Manufacturers
to customers located in the United States outside of the State of Minnesota
assigned to ▇▇▇▇.
(c) Unless otherwise specified by the Sellers, ▇▇▇▇▇▇▇ shall
be entitled to eighty percent (80%) of all such Tail Commissions received from
the Manufacturers with respect to sales by such Manufacturers to their customers
located in Europe.
(d) Unless otherwise specified by the Sellers, ▇▇▇▇▇▇▇ shall
be entitled to the balance of all Tail Commissions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
The Company and each of the Sellers jointly and severally represent and
warrant to the Purchaser as set forth in this Article III.
Section 3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. 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 3.1. The Company has the
power and authority (corporate and otherwise) to own, lease and operate its
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 business makes such qualification necessary and
in which the failure to be so qualified or licensed could reasonably be expected
to have a Material Adverse Effect. The Sellers have delivered to the Purchaser
complete and correct copies of the Company's Articles of Incorporation and
bylaws and all amendments thereto as of the date hereof.
Section 3.2 Ownership of Shares. All issued and outstanding shares of
Company Common Stock are owned by the Sellers free and clear of all Liens, other
than statutory pre-emptive rights and the restrictions imposed by federal and
state securities laws. ANNEX I sets forth the name of each Person owning shares
of Company Common Stock and the amount of shares owned by such Person. Other
than the shares of Company Common Stock held by the
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Sellers, all of which are set forth and accounted for in ANNEX I, there are no
shares of capital stock of the Company issued or outstanding. Upon the
consummation of the transactions contemplated hereby, Purchaser will acquire
good title to the shares of Company Common Stock free and clear of all Liens
other than statutory pre-emptive rights and the restrictions on subsequent
transfers imposed by federal and state securities laws. To the extent any such
statutory pre-emptive rights are applicable to the transaction contemplated
herein, Sellers expressly waive such statutory pre-emptive rights.
Section 3.3 Authorization, Etc. The Company and each of the 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 the 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 the
Sellers are necessary to approve and authorize the execution, delivery and
performance by the Company and each of the Sellers of this Agreement and the
documents and instruments contemplated hereby or the consummation by the Company
and the Sellers of the transactions contemplated hereby or thereby. This
Agreement constitutes a legal, valid and binding agreement of the Company and
each of the Sellers, enforceable against the Company and each of the 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 3.4 No Conflict. Except as set forth in Schedule 3.4, neither
the execution, delivery or performance of this Agreement or the other documents
and instruments to be executed and delivered by the Company or the Sellers
pursuant hereto, nor the consummation by the Company or the Sellers of the
transactions contemplated hereby or thereby, nor compliance by the Company or
the 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 material
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 the Sellers or to which any of their properties or assets may be
bound, (d) require the consent, order or authorization of, or registration,
declaration or filing with, any Governmental Authority or (e) result in
triggering of any right of first refusal or other right under any agreement to
which the Company or the Sellers is a party.
Section 3.5 Capital Stock. As of the date hereof, the authorized
capital stock of the Company consists of 1,000 shares of Company Common Stock,
no par value per share, of which
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200 shares are issued and outstanding and owned by the Sellers. 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 of Company Common Stock,
including any rights of conversion or exchange under any outstanding securities
or other instruments. All outstanding shares of Company Common Stock have been
validly issued and are fully paid, nonassessable and free of preemptive or
similar rights, other than statutory pre-emptive rights which Sellers have
waived to the extent applicable to the transaction contemplated herein.
Section 3.6 Financial Statements. The Company has delivered to the
Purchaser the Company's unaudited and internally generated balance sheet at
December 31, 1999 and the related unaudited and internally generated statement
of income and cash flow for the fiscal year then ended. Such 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. Such financial
statements have not been prepared in accordance with GAAP and have only been
prepared in connection with the preparation of tax returns for the Company and
Sellers.
Section 3.7 Absence of Certain Changes or Events. Except as set forth
on Schedule 3.7, since December 31, 1999 (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 could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
and (c) and except as contemplated in this Agreement, there has not been (i) any
change by the Company in accounting methods, principles or practices except as
required by a change in GAAP, (ii) any sales, disposals or encumbrances of any
material asset or property of the Company, (iii) any entry into any commitment,
understanding or agreement which would require any expenditure in excess of
$2,500 by the Company during the entire term thereof or which would require the
expenditure of money or the acquisition of assets or the performance of services
for a period of more than one year from the date thereof, (iv) any purchase,
redemption or other acquisition, or the entry into any commitment, undertaking
or agreement to purchase, redeem or otherwise acquire, any shares of the
outstanding capital stock of the Company, (v) any sale, issuance or other
disposition of, or the entry into any commitment, understanding or agreement to
sell, issue or otherwise dispose of, any shares of the capital stock of the
Company or any other securities of the Company or (vi) any payment of any
bonuses or premiums or increases in the rate or amount of compensation
(including commissions) or benefits (including insurance and pension benefits)
provided to any employee, agent, officer, director or the Company or any Seller.
Section 3.8 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 3.8 hereto, (b) are reflected on
the Company's balance sheet as of December 31, 1999 or (c) were incurred since
December 31, 1999 in the ordinary course of business consistent with past and
prudent business practices and which individually and in the aggregate have not
had and could not reasonably be expected to have a Material Adverse Effect.
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Section 3.9 Property; Assets; Inventory; Real Property.
(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 necessary or otherwise material to the conduct of its
business. The Company has good and marketable title to all assets reflected on
the balance sheet as of December 31, 1999 or acquired since December 31, 1999,
free and clear of all Liens, other than immaterial assets disposed of since the
December 31, 1999 in the ordinary course of business consistent with past and
prudent business practices. 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, are suitable for
their present uses. The Company's owns no inventory.
(b) Schedule 3.9(b) sets forth as of the date hereof, a
complete and accurate list of all furniture, equipment, automobiles and all
other tangible personal property owned by, in the possession of, or used by the
Company in connection with its business as currently conducted which have an
initial book value of $500 or more per item and which are not listed on Schedule
3.9(c). 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) Schedule 3.9(c) sets forth the office equipment and other
property and assets of the Company that has an initial book value of $100 or
more per item and that shall be transferred to the Sellers immediately prior to
the Closing Date.
(d) The Company owns no real property. In the case of leased
real property, Schedule 3.9(d) sets forth the lessor, rental rate, lease term,
expiration date and existence of a renewal option. The Sellers have delivered to
the Purchaser correct and complete copies of the written leases and subleases,
and in the case of oral leases and subleases, written summaries thereof, listed
in Schedule 3.9(d), as such leases or subleases have been amended to date. For
each leased property, 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.
Section 3.10 Intellectual Property. Schedule 3.10 sets forth all
Intellectual Property rights used in the business of the Company as currently
conducted. The Company owns or has a valid right to use, sell and license the
Intellectual Property set forth on Schedule 3.10 free and clear of all Liens. To
the Knowledge of the Company and the Sellers, the Intellectual Property listed
on Schedule 3.10 does not infringe upon the rights owned or controlled by any
third party and to the Knowledge of the Company and the Sellers no third party
is infringing upon any of the Intellectual Property.
Section 3.11 Tax Matters.
(a) The Company has been a validly electing S corporation
within the meaning of Sections 1361 and 1362 of the Code at all times during its
existence and continues to be an S corporation until its S status terminates as
a result of the Closing. The Company has not
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in the past 10 years (i) 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 (ii) acquired
the stock of any corporation.
(b) 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 pursuant thereto (whether or
not shown as due on any Tax Return) have been paid. In addition, all Taxes due
(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. To the
Knowledge of the Company and the Sellers, 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.
(c) 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.
(d) To the Knowledge of the 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 authority delivered to the Company
in writing or (ii) based upon personal contact by either of the Sellers with any
agent of such authority.
(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.
Section 3.12 Material Contracts.
(a) Schedule 3.12 lists (without duplication) 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 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;
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(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 $2,500 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;
(x) any joint venture, partnership or similar
documents or agreements;
(xi) 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;
(xii) any agreements that impose noncompetition
requirements or exclusive dealing requirements on the Company or that restrict
or purport to restrict the inventory that may be sold by the Company or the type
of customer to which the Company is permitted to sell goods or services; 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 the
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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 the 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 3.13 Relationship with Manufacturers & Customers. To the
Knowledge of the Sellers, except as set forth in Schedule 3.13, the Company
currently has good relationships with the manufacturers it represents and its
customers. The Company currently is not in dispute with any current or former
manufacturer represented by the Company or any customer of the Company, and
since December 31, 1997, no manufacturer represented by 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 3.13 lists the ten (10) largest (in
terms of dollar volume) customers of and manufacturers represented by the
Company during each of the three (3) immediately preceding fiscal years of the
Company. The Company has not entered into any contract or other agreement that
imposes noncompetition requirements or exclusive dealing requirements on the
Company or that restricts or purports to restrict the inventory that may be sold
by the Company or the type of customer to which the Company is permitted to sell
goods or services.
Section 3.14 Bank Accounts. Schedule 3.14 sets forth all bank accounts
maintained by the Company.
Section 3.15 Employees. Except as set forth in Schedule 3.15, to the
Knowledge of the Sellers, no executive, key employee or group of employees has
any plans to terminate employment with 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, conform with applicable Laws to which the Company is subject, except
for any such nonconformance that would not result in a Material Adverse Effect.
Except as set forth on Schedule 3.15, no offer has been made to any employee of
the Company to purchase from or sell to any such employee any portion of the
capital stock or assets of the Company, nor has any discussion taken place
regarding such a transaction or any similar transaction.
Section 3.16 Employee Benefits.
(a) Except as set forth on Schedule 3.16, the Company does not
(i) maintain nor ever has maintained any Plan or Other Arrangement, (ii) is or
ever has been a party to any Plan or Other Arrangement or (iii) has obligations
under any Plan or Other
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Arrangement. No Plan is a Multiemployer Plan. No Plan is an ESOP. No Plan is a
Defined Benefit Plan. The Company has, or will by the Closing date have, made
all contributions and other payments required by and due on or before the
Closing Date under the terms of each Plan and Other Arrangement and has taken no
action (including, without limitation, actions required by Law) relating to any
Plan or Other Arrangement that will increase Purchaser's, MergerSub's or the
Company's obligations under any Plan or Other Arrangement. Except for the
Company's Money Purchase and Profit Sharing Plan and continuation coverage
required by law, no Plan is promises or provides post-retirement medical, life
insurance or other benefits due now or in the future to current, former or
retired employees of the Company. The Company has furnished or made available to
the Purchaser copies of each Plan or Other Arrangement.
(b) The Company and Sellers have complied with all applicable
provisions of the Code, ERISA, the National Labor Relations Act, Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair
Labor Standards Act, the Securities Act, the Securities Exchange Act of 1934,
and all other Laws pertaining to the Plans, Other Arrangements and other
employee or employment related benefits, and all premiums and assessments
relating to all Plans or Other Arrangements. The Company and Sellers have no
liability for any delinquent contributions within the meaning of Section 515 of
ERISA (including, without limitation, related attorneys' fees, costs, liquidated
damages and interest) or for any arrearages of wages. The Company and Sellers
have no pending unfair labor practice charges, contract grievances under any
collective bargaining agreement, other administrative charges, claims,
grievances or lawsuits before any court, Governmental Agency, regulatory body,
or arbiter arising under any Law governing any Plan, and there exist no facts
that could give rise to such a claim. The Company and Sellers have (i) filed or
caused to be filed all returns and reports on the Plans and Other Arrangements
that they are required to file and (ii) paid or made adequate provision for all
fees, interest, penalties, assessments or deficiencies that have become due
pursuant to those returns or reports or pursuant to any assessment or adjustment
that has been made relating to those returns or reports.
(c) Schedule 3.16 sets forth a list of all Qualified Plans.
All Qualified Plans and any related trust agreements or annuity agreements (or
any other funding document) comply and have complied with ERISA, the Code
(including, without limitation, the requirements for Tax qualification described
in Section 401 thereof), and all other Laws. The trusts established under such
Plans are exempt from federal income taxes under Section 501(a) of the Code. The
Company and Sellers have received determination letters issued by the IRS with
respect to each Qualified Plan, and Sellers have furnished to Purchaser true and
complete copies of all such determination letters and all correspondence
relating to the applications therefor. All statements made by or on behalf of
the Company or Sellers to the IRS in connection with applications for
determinations with respect to each Qualified Plan were true and complete when
made and continue to be true and complete. Nothing has occurred since the date
of the most recent applicable determination letter that would adversely affect
the tax-qualified status of any Qualified Plan.
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(d) No Plan or Other Arrangement, individually or
collectively, provides for any payment by Seller or the Company to any employee
or independent contractor that is not deductible under Section 162(a)(1) or 404
of the Code or that is an "excess parachute payment" pursuant to Section 280G of
the Code.
Section 3.17 Environmental Compliance. The Company is in compliance
with, and has no Liability under, the Environmental Laws (and such compliance
includes, but is not limited to, the possession by Company of all permits
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof). There are no existing or pending, or to the Knowledge of
the Sellers, threatened, claims, suits, orders, actions, lawsuits, legal
proceedings or other proceedings based on, and neither the Company nor the
Sellers nor any officer or director of the Company has directly or indirectly
received any formal or informal notice of any Environmental Claims against the
Company or any person or entity whose liability for any Environmental Claims the
Company has assumed or retained either contractually or by operation of law
arising under Environmental Laws. There have been no spills or Releases of
Hazardous Substances at any of the facilities owned, operated or leased by the
Company, nor any spills or Releases at any property formerly owned, operated, or
leased by the Company during the period of such ownership, operation, or
tenancy. There are no consent decrees, consent orders, judgments, judicial or
administrative orders, or Liens relating to any Environmental Laws which
regulate, obligate, or bind the Company.
Section 3.18 Litigation and Claims, Compliance with Laws. The Company
is not subject to any judgment, injunction, order or arbitration decision and
there is no Litigation pending or to the Knowledge of the Company or the Sellers
threatened against the Company. There is no Litigation which would affect
Sellers' ability to perform their obligations hereunder. 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 reasonably be
expected to have a Material Adverse Effect. Except as set forth on Schedule
3.18, 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, including current notice of business activities
reports with the appropriate Governmental Authorities of the States of Indiana,
Minnesota or New Jersey, as applicable. Such licenses, permits and other
authorizations as aforesaid held by the Company are valid and in full force and
effect, and there are no (a) Actions pending, or to the Knowledge of the
Sellers, threatened or (b) to the Knowledge of the Sellers, Investigations
pending or threatened that could reasonably be expected to result in the
termination, impairment or nonrenewal thereof.
Section 3.19 Affiliate Transactions; Competing Businesses. Schedule
3.19 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. All debts of
any Sellers or the Company's officers or the respective Affiliates of the
Company to the Company are reflected on Schedule 3.19. The 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
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agreement with, or is involved in any way with, any business similar to the
business of the Company.
Section 3.20 Brokers, Finders, Etc. Neither the Company nor the Sellers
have employed, or are subject to the valid claim of, nor has the Company or the
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 3.21 Other Information. No representation or warranty of the
Company or the Sellers in this Agreement, nor any statement, certificate or
other document furnished or to be furnished by the Company or the 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 IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Sellers as follows:
Section 4.1 Organization. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado. The Purchaser has the power and authority (corporate and otherwise) to
own, lease and operate its 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 business
makes such qualification necessary and in which the failure to be so qualified
or licensed could reasonably be expected to have a material adverse effect on
the condition (financial or otherwise), properties, assets, Liabilities,
revenues, income, business, operations, results of operations or prospects of
the Purchaser taken as a whole. The Purchaser has delivered to the Sellers
complete and correct copies of the Purchaser's Articles of Incorporation and all
amendments thereto as of the date hereof. MergerSub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota.
Section 4.2 Authorization, Etc. The Purchaser and MergerSub each have
full corporate 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
Purchaser and MergerSub have each 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 Purchaser or
MergerSub are necessary to approve and authorize the execution, delivery and
performance by the Purchaser and MergerSub of this Agreement and the documents
and instruments contemplated hereby and the consummation by Purchaser and
MergerSub of the transactions contemplated hereby and thereby. This Agreement
constitutes a legal, valid and binding
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agreement of Purchaser and MergerSub, enforceable against Purchaser and
MergerSub 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 4.3 Brokers' Fees. Neither Purchaser nor MergerSub has any
Liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
the Sellers could become liable or obligated. Purchaser is obligated for that
certain transaction fee payable to KRG Capital Partners, LLC.
Section 4.4 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 Class A-1
5% Convertible Preferred Stock of which 868,372 shares are issued and
outstanding (ii) 1,400,000 shares have been designated as Class A-2 5%
Convertible Preferred Stock of which 1,125,000 shares are issued and outstanding
and (iii) 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
Banc of America Commercial Finance Corporation for 88,656 shares of non-voting
convertible common stock and except for the restrictions contained in the
Shareholders' Agreement, 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. Purchaser is in the process of adopting a stock
option plan that will result in the reservation of up to ten percent (10%) of
the Purchaser's voting common stock.
Section 4.5 No Conflict. Except as set forth in Schedule 4.5, neither
the execution, delivery or performance of this Agreement or the other documents
and instruments to be executed and delivered by the Purchaser or MergerSub
pursuant hereto, nor the consummation by the Purchaser and MergerSub of the
transactions contemplated hereby or thereby, nor compliance by the Purchaser and
MergerSub 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 Purchaser or MergerSub, as
applicable, (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
Purchaser'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 Purchaser or MergerSub or to which any of their
respective properties
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or assets may be bound, (d) require the consent, order or authorization of, or
registration, declaration or filing with, any Governmental Authority or (e)
result in triggering any right of first refusal or other right under any
agreement to which the Purchaser or MergerSub is a party.
Section 4.6 Financial Statements. Except as set forth on Schedule 4.6,
when delivered in accordance with this Agreement, Purchaser's financial
statements, which will be the audited and reviewed financial statements (the
"Financial Statements") as of and through December 31, 1999 (the "Balance Sheet
Date") 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 4.7 Absence of Certain Changes or Events. Except as set forth
on Schedule 4.7, since the Balance Sheet Date (a) the Purchaser and its
Affiliates have conducted their respective businesses 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 to have,
individually or in the aggregate, a material adverse effect on the condition
(financial or otherwise), properties, assets, Liabilities, revenues, income,
business, operations, results of operations or prospects of the Company and its
Affiliates, taken as a whole.
Section 4.8 No Undisclosed Liabilities. Neither the Purchaser nor any
of its Affiliates have any Liabilities that would be material to the Purchaser
taken as whole, except for such Liabilities as (a) are set forth on Schedule 4.8
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
and prudent business practices and which individually and in the aggregate have
not had and could not reasonably be expected to have a material adverse effect
on the condition (financial or otherwise), properties, assets, Liabilities,
revenues, income, business, operations, results of operations or prospects of
the Purchaser and its Affiliates taken as a whole.
Section 4.9 Other Information. No representation or warranty of the
Purchaser in this Agreement, nor any statement, certificate or other document
furnished or to be furnished by the Purchaser to the 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 V
THE SELLERS' AND THE COMPANY'S OBLIGATIONS BEFORE CLOSING
The Sellers and the Company covenant that from the date of this
Agreement until the Closing:
Section 5.1 General. Each of the Sellers and the Company will use his
or its commercially reasonable efforts to take all action and to do all things
necessary in order to
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consummate and make effective the transactions contemplated by this Agreement
(including satisfaction of the closing conditions set forth in Article VII
below).
Section 5.2 Access. Commencing on the date of the execution of this
Agreement and continuing for the shorter of thirty (30) days or until the
Closing Date, 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. The
Sellers and the Company shall furnish or cause to be furnished to Purchaser and
its lenders and their representatives all data and information in Sellers'
possession, custody or control concerning the business, finances and properties
of the Company that may reasonably be requested to complete its due diligence
review pursuant to Section 6.1 of this Agreement.
Section 5.3 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, the Sellers will not cause or permit the Company
to (a) 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 3.7 above, in each case other than in the
ordinary course of business consistent with past and prudent business practices.
Notwithstanding the foregoing, from and after the date of this Agreement, (x)
the Company may continue to make distributions of cash to the Sellers; provided,
however, that such distributions shall not cause the Company's assets to exceed
current liabilities or Indebtedness and (y) the Company may distribute to the
Sellers the office equipment and other property and assets described in Section
3.9(c) of this Agreement.
Section 5.4 Preservation of Business; Insurance. Except as contemplated
by this Agreement, the 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 5.5 Notices and Consents. The Sellers will use commercially
reasonable efforts to cause the Company to, and the Company will, use its
commercially reasonable efforts to obtain any third-party consents, including,
without limitation, the consent of lessors and sublessors, necessary to
consummate the transactions contemplated hereby.
Section 5.6 Exclusivity. Until the earliest of (a) the date of Closing,
or (b) the termination (for whatever reason) of this Agreement, neither the
Company nor the 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. The Sellers will
notify
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Purchaser immediately if any person makes any proposal, inquiry or contact with
respect to any of the foregoing.
Section 5.7 Delivery of Schedules; Notice of Developments; Update of
Schedules.
(a) The Sellers will give prompt written notice to Purchaser
of any development causing a breach of any of the representations and warranties
in Article III above. No disclosure by the Sellers pursuant to this Section 5.7,
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 5.7, or to prevent or cure any
misrepresentation or breach of warranty; provided, however, if Purchaser
determines not to terminate this Agreement pursuant to Section 11.1 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 the 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 business days prior to the Closing Date, the
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 III.
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 11.2
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 the 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 5.8 Confidentiality. The Sellers and the Company agree that
Sellers, the Company and its officers and directors and other representatives of
the 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, the 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 the Sellers in
connection with this transaction. The foregoing shall not preclude the 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 the Sellers or the
Company 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
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extent practicable, prior to such disclosure required by law or court order, the
Sellers or the Company will give Purchaser prior written notice of the nature of
the required disclosure.
Section 5.9 Company Obligations; Affiliate Agreements.
(a) Except as contemplated by Section 6.8, at or prior to the
Closing, Sellers shall, and the Sellers shall cause each of their respective
Affiliates to, repay any Indebtedness or other amounts owing from such Persons
to the Company.
(b) Prior to the Closing, 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. The Sellers agree to indemnify Purchaser
for any cost or expense incurred in connection with the obligations specified in
this Section 5.9.
Section 5.10 Due Diligence. The parties agree that Sellers shall
conduct a due diligence investigation of the Purchaser and its Affiliates
(including, without limitation, a review of the information, documents and other
matters identified on the schedules or delivered pursuant to the terms of this
Agreement) which commenced upon the signing of the letter of intent and shall be
completed by Sellers prior to the expiration of the Due Diligence Period (as
defined below).
Section 5.11 Termination of ERISA Plans. Prior to the Closing Date, the
Sellers shall cause the Company to and the Company shall (a) provide notice of
termination pursuant to ERISA 204(h) to all participants of the Company's Money
Purchase Plan, (b) adopt a resolution terminating its Money Purchase Plan, which
resolution shall be effective no sooner than fifteen (15) days after proper
notice is given to Money Purchase Plan participants pursuant to ERISA 204(h),
(c) adopt a resolution terminating its Profit Sharing Plan (together with the
Money Purchase Plan, the "Retirement Plans"), which resolution shall be
effective at least one day prior to the Closing Date and (d) contribute to its
Retirement Plans all employee deferrals and any related matching or other
employer contributions necessary or required to maintain the tax qualified
status of the Retirement Plans and any contributions required pursuant to the
terms of the Retirement Plans through the date of termination thereof.
Notwithstanding anything to the contrary herein, Sellers shall indemnify
Purchaser and the Surviving Corporation for all contributions due pursuant to
the Retirement Plans and all Damages resulting from the termination of the
Retirement Plans, including failure to terminate the Retirement Plans in
accordance with ERISA.
ARTICLE VI
PURCHASER'S OBLIGATIONS BEFORE CLOSING
Purchaser and MergerSub covenant that from the date of this Agreement
until the Closing:
Section 6.1 General. The Purchaser will use commercially reasonable
efforts to take all action and to do all things necessary in order to consummate
and make effective the
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transactions contemplated by this Agreement (including satisfaction of the
closing conditions set forth in Article VIII below).
Section 6.2 Access. Commencing on the date of the execution of this
Agreement and continuing for the shorter of thirty (30) days or until the
Closing Date, Sellers and their counsel, accountants and other representatives
shall have access during business hours of the Purchaser to all properties,
books, accounts, records, contracts and documents of or relating to the
Purchaser and/or any of its Affiliates. The Purchaser shall furnish or cause to
be furnished to Sellers and its representatives all data and information in its
possession, custody or control concerning the business, finances and properties
of the Purchaser and/or its Affiliates that may reasonably be requested to
complete their due diligence review pursuant to Section 5.10 of this Agreement.
Section 6.3 Notices and Consents. The Purchaser will use commercially
reasonable efforts to obtain any third-party consents necessary to consummate
the transactions contemplated hereby.
Section 6.4 Notice of Developments. The Purchaser will give prompt
written notice to the Sellers of any development causing a breach of any of the
representations and warranties in Article IV above. No disclosure by the
Purchaser pursuant to this Section 6.4, however, shall be deemed to amend or
supplement such representations and warranties or to prevent or cure any
misrepresentation or breach of warranty; provided, however, if Sellers determine
not to terminate this Agreement pursuant to Section 11.1 and to consummate the
transactions contemplated hereby despite the existence of a misrepresentation or
breach of warranty of which Sellers have been informed in writing by the
Purchaser, the Purchaser's representations and warranties set forth in Article
IV above shall be deemed amended or supplemented as set forth in Purchaser's
notice for purpose of curing such misrepresentation or breach of warranty.
Section 6.5 Due Diligence. 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 Schedules 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 shall be completed by Purchaser within the shorter of
thirty (30) days after the execution and delivery date of this Agreement or
until the Closing Date (the "Due Diligence Period").
Section 6.6 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 the Sellers or the Company, (a) any and all data and
information with respect to the business of the Company or the 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 the Sellers all data and information that
the 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 the 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
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by way of disclosure by any of the 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, the Purchaser will give Sellers prior written
notice of the nature of the required disclosure.
Section 6.7 Financial Statements Purchaser shall deliver the Financial
Statements to the Sellers prior to the expiration of the Due Diligence Period.
Section 6.8 Employee Advance The Purchaser acknowledges that, as of the
date hereof, ▇▇▇▇ owes the Company approximately $16,000 in connection with
certain advances which have heretofore been made by the Company to ▇▇▇▇. Subject
to the terms and conditions of this Agreement and conditioned upon the
consummation of the transactions contemplated hereby, including the execution of
the ▇▇▇▇ Employment Agreement and Noncompetition Agreement by ▇▇▇▇ and the
Purchaser, the obligation of ▇▇▇▇ to repay such advance shall be forgiven only
to the extent provided for in Schedule 3.12 as partial consideration for the
execution of such ▇▇▇▇ Employment Agreement and Noncompetition Agreement by
▇▇▇▇.
Section 6.9 Convertible Preferred Stock. Prior to the Closing,
Purchaser shall take all corporate and other action necessary (a) for the shares
of Convertible Preferred Stock of the Purchaser to be issued to the Sellers
pursuant to this Agreement to be, upon issuance, duly authorized, validly
issued, fully paid, nonassessable and free of any pre-emptive or other similar
rights and (b) to reserve a sufficient number of shares of its voting common
stock to permit the conversion of the Convertible Preferred Stock into voting
common stock of the Purchaser as provided in the Certificate of Designation.
ARTICLE VII
CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
The obligation of the Purchaser to consummate the Merger is subject to
the satisfaction, at or before the Closing, of all the conditions set out below.
The Purchaser may waive any or all of these conditions in whole or in part
without prior notice.
Section 7.1 Representations and Warranties True. Except as otherwise
permitted by this Agreement, (a) all representations and warranties by the
Sellers in this Agreement, or in any written statement that shall be delivered
to the Purchaser by the Sellers under this Agreement, that are qualified by
materiality shall be true in all respects on and as of the Closing Date as
though made at that time and (b) all representations and warranties by the
Sellers in this Agreement, or in any written statement that shall be delivered
to the Purchaser by the Sellers under this Agreement that are not qualified by
materiality shall be true in all material respects on and as of the Closing Date
as though made at that time.
Section 7.2 Performance. With respect to all covenants, agreements and
conditions that are not qualified by materiality, the 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. With respect to all
covenants, agreements and conditions that are qualified by materiality, the
Sellers
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shall have performed, satisfied and complied, in all 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 7.3 No Material Adverse Effect. During the period from December
31, 1999 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 accounts of
Noble-Met, Ltd., a Virginia corporation, 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 7.4 Consents. The Sellers and the Company shall have procured
all of the regulatory and third-party authorizations, consents and approvals
specified in this Agreement.
Section 7.5 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 or (c) 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 7.6 The Sellers' and Officer's Certificates. The Sellers and
the President of the Company shall have delivered to the Purchaser certificates
to the effect that each of the conditions specified above in Sections 7.1
through 7.5 have been satisfied.
Section 7.7 Resignations. The Purchaser shall have received the
resignations, effective as of the Closing, of all of the officers and directors
of the Company.
Section 7.8 ▇▇▇▇▇▇▇ Noncompetition Agreement. ▇▇▇▇▇▇▇ shall have
executed a Noncompetition Agreement (the "▇▇▇▇▇▇▇ Noncompetition Agreement"),
which shall include covenants (a) not to compete with the Purchaser or the
Company or any Affiliates of either of them (b) not to raid or solicit the
employees, agents, Affiliates or customers the Purchaser or the Company and (c)
to provide for technology sharing and assignment of inventions. The ▇▇▇▇▇▇▇
Noncompetition Agreement shall be in substantially the form set forth on EXHIBIT
D hereto.
Section 7.9 Noncompetition Agreements. ▇▇▇▇ shall have executed a
noncompetition agreement ("Noncompetition Agreement") which shall include
covenants (a) not to compete with the Purchaser or the Company or any Affiliates
of either of them (b) not to raid or solicit the employees, agents, Affiliates
or customers the Purchaser or the Company and (c) to provide for technology
sharing and assignment of inventions. The Noncompetition Agreement shall be in
substantially the form set forth as EXHIBIT E hereto.
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Section 7.10 ▇▇▇▇▇▇▇ Employment Agreement. ▇▇▇▇▇▇▇ shall have executed
an employment agreement (the "▇▇▇▇▇▇▇ Employment Agreement"), in substantially
the form set forth on EXHIBIT F hereto.
Section 7.11 ▇▇▇▇ Employment Agreement. ▇▇▇▇ shall have executed an
employment agreement (the "▇▇▇▇ Employment Agreement"), in substantially the
form set forth on EXHIBIT G hereto.
Section 7.12 Services Agreement. At Closing, ▇▇▇▇▇▇▇ shall have
executed a services agreement ("Services Agreement") in substantially the form
set forth as EXHIBIT H hereto.
Section 7.13 Shareholders' Agreement. At Closing, the Purchaser,
Company and the Sellers shall execute joinders to the Purchaser's Shareholders'
Agreement (the "Shareholders' Agreement") in the form of EXHIBIT I attached
hereto.
Section 7.14 Approvals. The Purchaser shall be in receipt of approvals
of the transaction from the Purchaser's board of directors and the Investment
Committee of KRG Capital Partners, LLC.
Section 7.15 Good Standing; Certified Charter. Purchaser shall have
received from Sellers a certified copy of its Articles of Incorporation and a
certificate or certificates of good standing from the Secretary of State of the
State of Minnesota dated no more than ten (10) days prior to the Closing Date
certifying that the Company is as of such date, in good standing and authorized
to transact business as a domestic corporation.
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLERS' PERFORMANCE
The obligation of Sellers to consummate the Merger is subject to the
satisfaction at or before the Closing of all the conditions set out below.
Sellers 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, (a) all representations and warranties by the
Purchaser in this Agreement, or in any written statement that shall be delivered
to the Sellers by the Purchaser under this Agreement, that are qualified by
materiality shall be true in all respects on and as of the Closing Date as
though made at that time and (b) all representations and warranties by the
Purchaser in this Agreement, or in any written statement that shall be delivered
to the Sellers by the Purchaser under this Agreement that are not qualified by
materiality shall be true in all material respects on and as of the Closing Date
as though made at that time.
Section 8.2 Performance. With respect to all covenants, agreements and
conditions that are not qualified by materiality, the Purchaser 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 it, on or before the Closing Date. With respect to all covenants,
agreements and conditions that are qualified by materiality, the Purchaser shall
have
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performed, satisfied and complied, in all respects with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by it, on or before the Closing Date.
Section 8.3 No Material Adverse Effect. During the period from December
31, 1999, to the Closing Date, no acts, conditions or occurrences shall have
occurred which, whether individually or in the aggregate, have had or reasonably
could be expected to have a material adverse effect or change in (a) any of the
business, condition (financial or otherwise), operations, assets or liabilities
of the Purchaser and its Affiliates taken as a whole, (b) the legality or
enforceability against the Purchaser of this Agreement, or (c) the ability of
the Purchaser to perform its obligations and to consummate the transactions
under this Agreement. For purposes of clause (a) and without limiting the
generality of the foregoing, an effect or change with respect to the same or
similar event(s), act(s), condition(s) or occurrence(s) individually or in the
aggregate with respect to which the Company and/or its Affiliates would
reasonably be expected to have $500,000 in the aggregate or more in Damages
being asserted against, imposed upon or sustained by the Purchaser and/or its
Affiliates shall constitute a material adverse effect or change.
Section 8.4 Officer's Certificate. Purchaser shall have delivered to
Sellers' Representative a certificate to the effect that each of the conditions
specified above in Section 8.1, 8.2, 8.3, 8.5 and 8.6 have been satisfied.
Section 8.5 Consents. The Purchaser shall have procured all of the
regulatory and third-party authorizations, consents and approvals specified in
this Agreement.
Section 8.6 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 or (c) affect adversely the right
of the Purchaser or any of its Affiliates to own its assets and to operate its
business (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect.
Section 8.7 ▇▇▇▇▇▇▇ Noncompetition Agreement. The Purchaser shall have
executed and delivered the ▇▇▇▇▇▇▇ Noncompetition Agreement to ▇▇▇▇▇▇▇.
Section 8.8 Noncompetition Agreements. The Purchaser shall have
executed and delivered the Noncompetition Agreement to ▇▇▇▇.
Section 8.9 ▇▇▇▇▇▇▇ Employment Agreement. The Purchaser shall have
executed and delivered the ▇▇▇▇▇▇▇ Employment Agreement to ▇▇▇▇▇▇▇.
Section 8.10 ▇▇▇▇ Employment Agreement. The Purchaser shall have
executed and delivered the ▇▇▇▇ Employment Agreement to ▇▇▇▇.
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Section 8.11 Services Agreement. The Purchaser shall have executed and
delivered the Services Agreement to ▇▇▇▇▇▇▇.
Section 8.12 Good Standing; Certified Articles. The Sellers shall have
received from Purchaser certified articles of organization and a certificate of
good standing from the Secretary of State of the State of Colorado dated no more
than fifteen (15) days prior to Closing Date certifying that the Company is as
of such date, in good standing. Such certified charter shall reflect that the
Certificate of Designation has been duly filed with the office of Colorado
Secretary of State.
ARTICLE IX
POST-CLOSING COVENANTS
The parties agree as following with respect to the period following the
Closing.
Section 9.1 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 X below). The Sellers acknowledge and agree that from and after the
Closing, the 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. Purchaser covenants and agrees to preserve all such
documents, books, records, agreements and financial data for a period of six (6)
years after the Closing Date. All such documents, books, records, agreements and
financial data shall be made available to the Sellers and their representatives
at all reasonable times during normal business hours of Purchaser during said
six year period with the right at their expense to make abstracts from and
copies thereof.
Section 9.2 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 X below).
Section 9.3 Tax Matters. The Sellers and the Purchaser agree to provide
each other with such cooperation and information as either of them reasonably
may request of the other in relation to (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
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Returns of the Company or with respect to the Company's operations. The Sellers
shall prepare or cause to be prepared and file or cause to be filed Tax Returns
for the Company for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. The Sellers shall permit the Purchaser to review
and comment on each such Tax Return described in the preceding sentence prior to
filing. To the extent permitted by applicable law, each Seller shall include any
income, gain, loss, deduction or other Tax item for such period on their Tax
Return in a manner consistent with the Schedules K-1 furnished by the Company to
the Sellers for such periods; provided, however, the Purchaser shall permit the
Sellers to review and comment on each such Schedules K-1 prior to the
finalization and issuance of the same to the Sellers. The Purchaser shall
prepare or cause to be prepared and file or cause to be filed any Tax Returns of
the Company for tax periods which begin before the Closing Date and end after
the Closing Date. The Purchaser shall permit the Sellers to review and comment
upon each such Tax Return described in the preceding sentence prior to filing.
For purposes of this Section 9.3, in the case of any Taxes that are imposed on a
periodic basis and are payable for a taxable period that includes (but does not
end on) the Closing Date, the portion of such tax which related to the portion
of such taxable period ending on the Closing Date shall (x) in the case of any
Taxes other than Taxes based upon or related to income or receipts, be deemed to
be the amount of such Tax for the entire taxable period multiplied by a
fraction, the numerator of which is the number of days in a taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire taxable period, and (y) in the case of any tax based upon or related
to income or receipts be deemed equal to the amount which would be payable if
the relevant taxable period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocation shall be made in a manner
consistent with the prior practices of the Company.
Section 9.4 Public Disclosure; Confidentiality. From and after the
Closing Date, the Sellers shall keep confidential all information relating to
the Company and its operations. The foregoing shall not preclude the 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 the 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, the Sellers will give Purchaser prior
written notice of the nature of the required disclosure.
Section 9.5 Cooperation with Initial Public Offering. Sellers shall use
their commercially reasonable 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.
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnification by the Sellers. The Sellers agree, jointly
and severally, to indemnify the Purchaser and every Affiliate (and their
respective officers, directors,
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shareholders, agents and representatives) of the 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 the Sellers contained
in this Agreement or in any schedule, certificate or instrument required to be
delivered pursuant hereto.
Section 10.2 Indemnification by Purchaser. From and after Closing, the
Purchaser agrees to indemnify the Sellers and hold them harmless from and
against any and all Damages which may be asserted against, imposed upon or
sustained by the 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 the Purchaser contained in this Agreement or in any
schedule, certificate, instrument or document delivered pursuant hereto.
Section 10.3 Limitations of Indemnification Obligations.
(a) All the representations and warranties made by the
Purchaser or the Sellers in this Agreement shall survive until two (2) years
following the Closing Date; provided, however, that the representations and
warranties in Section 3.11 shall survive until the expiration of the applicable
statute of limitation; provided, further, that the representations and
warranties in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 4.1, 4.2, 4.4 and 4.5 shall
survive without termination. In the event notice of any claim for
indemnification under Sections 10.1 or 10.2 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 10.3(b), a
Purchaser Indemnitee shall not have any right to indemnification under this
Agreement until the aggregate of Damages sustained or incurred by all Purchaser
Indemnitees as a result of the breach of the Sellers' representations and
warranties contained in this Agreement exceeds $50,000 and in such event the
indemnification obligations of the respective Indemnifying Parties hereunder
shall apply to all such Damages in excess of such amount. In no event shall the
liabilities of the Sellers for Damages pursuant to this Article X exceed
$1,125,000 (the "Maximum Indemnification Amount").
(c) The Sellers shall not have any right to indemnification
under this Agreement until the aggregate of Damages sustained or incurred by the
Sellers as a result of the breach of the Sellers' representations and warranties
contained in this Agreement exceeds $50,000 and, in such event, the
indemnification obligations of the respective Indemnifying Parties hereunder
shall apply to all such Damages in excess of such amount; provided, however,
that the maximum aggregate liability payable to all Sellers by Purchaser for
Damages pursuant to and in accordance with this Agreement shall not in any event
exceed the Maximum Indemnification Amount.
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(d) Notwithstanding anything to the contrary in this
Agreement, all Damages shall be calculated net of any insurance proceeds
received by the party seeking indemnification hereunder in connection with the
matter giving rise to a claim for indemnification hereunder.
(e) Sellers shall satisfy any indemnification obligation
hereunder (i) first in cash up to the amount of cash consideration paid
hereunder and, if such amount of cash is not sufficient to satisfy Sellers'
indemnification obligations hereunder then (ii) second in Convertible Preferred
Stock received hereunder calculated at a value of $18.90 per share plus accrued
and unpaid dividends thereon. Notwithstanding the foregoing, Sellers shall only
be obligated to satisfy any indemnification obligations hereunder out of cash
consideration actually paid hereunder; provided, however, that if any matter as
to which a Purchaser Indemnitee may be able to assert a claim hereunder is
pending or unresolved, or any other matter as to which such Purchaser Indemnitee
actually or could reasonably be expected to suffer Damages exists, at the time
any payment is due from Purchaser or MergerSub to Sellers, Purchaser or
MergerSub shall have the right, in addition to other rights and remedies and
methods of recovery (whether under this Agreement, the provisions of this
Section 10 and/or applicable laws), to withhold in good faith from such payment
an amount equal to the claim until such matters are resolved. If it is finally
determined that such claims are covered by this Section 10, the amount of such
claims may be offset against the retained payments and the remainder thereof,
together with interest thereon at the rate of ten percent (10%) per annum
(calculated from the date withheld until the date paid in full), shall be
delivered to Sellers pursuant to the Agreement.
Section 10.4 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 Sections 5.7, 6.4 and 10.3.
ARTICLE XI
TERMINATION
Section 11.1 Termination of Agreement.
The parties may terminate this Agreement as provided below:
(a) Either the Purchaser or the Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing.
(b) 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 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 fifteen (15) days after the
notice of breach or (ii) if the Closing shall not have occurred on or before May
31, 2000, by reason of the failure of any condition precedent under Article VII
hereof (unless the failure
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results primarily from Purchaser itself breaching any representation, warranty
or covenant contained in this Agreement).
(c) 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
11.1(d) within the Due Diligence Period, such termination right shall lapse.
(d) 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 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 fifteen (15) days
after the notice of breach or (ii) if the Closing shall not have occurred on or
before May 31, 2000 by reason of the failure of any condition precedent under
Article VIII hereof (unless the failure results primarily from Sellers
themselves breaching any representation, warranty or covenant contained in this
Agreement).
(e) Sellers may terminate this Agreement if it is not
satisfied in all respects with the results of its due diligence review of the
Purchaser and the Purchaser's operations and assets; provided, however, that if
Sellers do not exercise the termination right contained in this Section 11.1(e)
within the Due Diligence Period, such termination right shall lapse.
Section 11.2 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 11.2 shall mitigate or
otherwise compromise the rights or obligations of the parties hereunder or in
the event of a breach of the terms or provisions of this Agreement generally.
ARTICLE XII
MISCELLANEOUS
Section 12.1 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 12.2 Entire Agreement; Counterparts; Headings. 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. 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
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need not sign the same counterpart. 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 12.3 Amendments. Except as set forth in Sections 5.7 and 6.4,
this Agreement (including the Annexes, 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 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 12.4 Taxes. Any Taxes in the nature of a sales or transfer tax,
any stock transfer tax or any other taxes that may be due or may become payable
by the Sellers under Minnesota law 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 the Sellers, and the Sellers
shall indemnify and hold harmless Purchaser from and against all such Taxes.
Section 12.5 Governing Law . 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 12.8.
Section 12.6 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 12.7 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 the Sellers except with the prior written consent of Purchaser. The Purchaser
may assign this Agreement only to an Affiliate of Purchaser. No such assignment
shall relieve Purchaser of its obligations hereunder. 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 (i)
Purchaser and its Affiliates which are
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acknowledged to be third party beneficiaries, (ii) Purchaser Indemnitees who are
acknowledged to be third party beneficiaries under Article X and (iii) ▇▇▇▇ and
▇▇▇▇▇▇▇ who acknowledged to be third party beneficiaries with respect to
Sections 2.13, 2.14 and 6.8 of this Agreement.
Section 12.8 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):
(a) if to the Purchaser, to:
KRG Capital Partners, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Tower One, Suite 1500
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Medical Device Manufacturing, Inc.
d/b/a Rivo Technologies
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Sellers, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Association
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 12.9 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 and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 12.10 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 12.11 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 PAGE FOLLOWS]
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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 the Sellers has signed this Agreement as of the date first written
above.
PURCHASER
MEDICAL DEVICE MANUFACTURING, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and CEO
MERGERSUB
MER ACQUISITION CORPORATION.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and CEO
COMPANY
MEDICAL ENGINEERING RESOURCES, LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
SELLERS
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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