EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
BY AND AMONG
ENZO LIFE SCIENCES, INC.
AXXORA LIFE SCIENCES, INC.
AND
THE STOCKHOLDERS, OPTIONHOLDERS AND WARRANTHOLDERS
NAMED ON SCHEDULE I HERETO
MAY 29, 2007
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TABLE OF CONTENTS
PAGE
Article I. PURCHASE AND SALE OF COMPANY SECURITIES..............................................................2
1.1 Purchase and Sale of the Common Shares and Preferred Shares from the Selling
Securityholders.....................................................................................2
1.2 Further Assurances..................................................................................2
1.3 The Closing.........................................................................................2
1.4 Actions at the Closing..............................................................................2
1.5 Purchase Price for the Company Securities...........................................................3
1.6 Treatment of Company Stock Options and Company Warrants.............................................3
1.7 Escrow Cash.........................................................................................4
1.8 Securityholders' Representatives....................................................................4
1.9 Currency............................................................................................7
1.10 Withholding.........................................................................................7
Article II. REPRESENTATIONS AND WARRANTIES OF THE SELLING
SECURITYHOLDERS REGARDING THE SELLING SECURITYHOLDERS AND
THE COMPANY SECURITIES...............................................................................7
2.1 Selling Securityholders Representations and Warranties..............................................7
Article III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SELLING SECURITYHOLDERS REGARDING THE COMPANY........................................................9
3.1 Organization, Qualification, Corporate Power, Etc..................................................10
3.2 Capitalization.....................................................................................10
3.3 Authorization of Transaction.......................................................................11
3.4 Noncontravention...................................................................................12
3.5 Undisclosed Liabilities............................................................................12
3.6 Tax Matters........................................................................................12
3.7 Assets.............................................................................................15
3.8 Owned Real Property................................................................................15
3.9 Real Property Leases...............................................................................16
3.10 Intellectual Property..............................................................................16
3.11 Contracts, Customers and Suppliers.................................................................19
3.12 Accounts Receivable................................................................................20
3.13 Powers of Attorney.................................................................................20
3.14 Insurance..........................................................................................21
3.15 Litigation.........................................................................................21
3.16 Employees..........................................................................................21
3.17 Employee Benefits..................................................................................23
3.18 Environmental Matters..............................................................................25
3.19 Legal Compliance and Permits.......................................................................26
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3.20 Certain Business Relationships With Affiliates, Officers and Directors.............................26
3.21 Books and Records, Bank Accounts, Etc..............................................................27
3.22 Brokers' Fees......................................................................................27
3.23 Financial Statements...............................................................................27
3.24 Absence of Material Adverse Effect.................................................................27
3.25 Inventory..........................................................................................28
3.26 Product Liability..................................................................................28
3.27 Guarantees.........................................................................................28
3.28 Earnout Payments, Etc..............................................................................28
3.29 Disclosure.........................................................................................28
Article IV. REPRESENTATIONS AND WARRANTIES OF THE BUYER.........................................................29
4.1 Organization, Qualification and Corporate Power, Etc...............................................29
4.2 Authorization of Transaction.......................................................................29
4.3 Noncontravention...................................................................................29
4.4 Litigation.........................................................................................30
4.5 Investment Intent..................................................................................30
4.6 Buyer Financial Capacity...........................................................................30
4.7 Brokers' Fees......................................................................................30
4.8 Disclosure.........................................................................................30
Article V. COVENANTS...........................................................................................30
5.1 Closing Efforts....................................................................................30
5.2 Governmental and Third-Party Notices and Consents..................................................30
5.3 Operation of Business..............................................................................31
5.4 Access to Information..............................................................................33
5.5 Expenses...........................................................................................34
5.6 Notification.......................................................................................34
5.7 Director and Officer Indemnification...............................................................35
5.8 Employment Matters.................................................................................36
5.9 Tax Matters........................................................................................37
5.10 FIRPTA.............................................................................................41
5.11 Withholding Forms..................................................................................41
5.12 Financial Statements...............................................................................41
5.13 Inventory..........................................................................................42
5.14 Payoff of Indebtedness.............................................................................42
5.15 Termination of Certain Agreements..................................................................42
5.16 Resignation of Managing Director of Axxora Deutschland GmbH........................................42
5.17 Non-Competition; Non-Solicitation and Confidentiality Covenants....................................42
Article VI. CONDITIONS TO CLOSING...............................................................................44
6.1 Conditions to Obligations of the Buyer.............................................................44
6.2 Conditions to Obligations of the Company and the Selling Securityholders...........................46
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Article VII. INDEMNIFICATION.....................................................................................47
7.1 Indemnification by the Selling Securityholders.....................................................47
7.2 Indemnification by the Buyer.......................................................................48
7.3 Indemnification Claims.............................................................................49
7.4 Survival...........................................................................................51
7.5 Indemnification Limitations........................................................................52
7.6 Treatment of Indemnity Payments....................................................................55
7.7 Subrogation of Rights..............................................................................55
Article VIII. TERMINATION........................................................................................55
8.1 Termination of Agreement...........................................................................55
8.2 Effect of Termination..............................................................................57
Article IX. DEFINITIONS.........................................................................................57
Article X. MISCELLANEOUS.......................................................................................67
10.1 Press Releases and Announcements...................................................................67
10.2 No Third Party Beneficiaries.......................................................................68
10.3 Entire Agreement...................................................................................68
10.4 Succession and Assignment..........................................................................68
10.5 Counterparts and Facsimile Signature...............................................................68
10.6 Headings...........................................................................................68
10.7 Notices............................................................................................68
10.8 Governing Law......................................................................................69
10.9 Amendments and Waivers.............................................................................69
10.10 Severability.......................................................................................70
10.11 Submission to Jurisdiction.........................................................................70
10.12 Waiver of Jury Trial...............................................................................70
10.13 Construction.......................................................................................70
10.14 Specific Performance...............................................................................71
Schedule I List of Selling Securityholders
Schedule II Company Securities as of Closing
Schedule III List of Agreements to be Terminated Prior to Closing
Schedule IV Consents and Agreements to be Obtained as a Condition to Closing
Disclosure Schedule Relating to Selling Securityholders and Company Representations and
Warranties
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Exhibit A Form of ▇▇▇▇▇▇▇▇ Employment Agreement
Exhibit B Form of Sales Employment Agreement
Exhibit C Form of ▇▇▇▇▇▇▇▇▇ Employment Agreement
Exhibit D Form of ▇▇▇▇▇▇ Employment Agreement
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT") is made as of May 29,
2007 by and among Enzo Life Sciences, Inc., a New York corporation (the
"BUYER"), Axxora Life Sciences Inc., a Delaware corporation (the "COMPANY"), the
stockholders of the Company listed on SCHEDULE I attached hereto (individually,
a "STOCKHOLDER" and, collectively, the "STOCKHOLDERS"), who collectively own all
of the issued and outstanding capital stock of the Company, each holder of a
Company Stock Option (as defined herein) listed on SCHEDULE I attached hereto
(individually, an "OPTIONHOLDER" and, collectively, the "OPTIONHOLDERS"), and
each holder of a Company Warrant (as defined herein) listed on SCHEDULE I
attached hereto (individually, a "WARRANTHOLDER" and, collectively, the
"WARRANTHOLDERS"). For purposes of this Agreement, the term "SELLING
SECURITYHOLDERS" shall refer to the Stockholders, the Optionholders and the
Warrantholders, collectively.
PRELIMINARY STATEMENT
Each of the Stockholders owns the number of issued and outstanding
shares of common stock, $0.01 par value, of the Company ("COMMON SHARES") and
the number of issued and outstanding shares of Series A convertible preferred
stock, $0.01 par value, of the Company ("PREFERRED SHARES") set forth opposite
his, her or its name on SCHEDULE I attached hereto, which Common Shares and
Preferred Shares in the aggregate represent all of the issued and outstanding
shares of capital stock of the Company as of the date hereof; each Optionholder
is the rightful holder of outstanding Company Stock Options representing the
right to acquire the number of Common Shares upon exercise of such Company Stock
Option set forth opposite his or her name on SCHEDULE I attached hereto, which
in the aggregate represent all outstanding Company Stock Options; and each
Warrantholder is the rightful holder of outstanding Company Warrants
representing the right to acquire the number of Common Shares upon exercise of
such Company Warrants set forth opposite his, her or its name on SCHEDULE I
attached hereto, which in the aggregate represent all outstanding Company
Warrants.
Prior to the Closing (as defined herein), each Optionholder shall
exercise all of such Optionholder's outstanding Company Stock Options and each
Warrantholder shall exercise all of such Warrantholder's outstanding Company
Warrants, in each case in accordance with the terms of this Agreement, and after
giving effect to the exercise of such Company Stock Options and Company
Warrants, immediately prior to the Closing each of the Selling Securityholders
shall own the number of issued and outstanding Company Securities (as defined
herein) set forth opposite such Selling Securityholder's name on SCHEDULE II
hereto.
The Buyer desires to purchase, and the Selling Securityholders desire
to sell, the Company Securities for the consideration set forth below, subject
to the terms and conditions of this Agreement.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I.
PURCHASE AND SALE OF COMPANY SECURITIES
1.1 PURCHASE AND SALE OF THE COMMON SHARES AND PREFERRED SHARES
FROM THE SELLING SECURITYHOLDERS. Subject to and upon the terms and conditions
of this Agreement, at the Closing, each Selling Securityholder shall sell,
transfer, convey, assign and deliver to the Buyer, and the Buyer shall purchase,
acquire and accept from each Selling Securityholder, all of the Common Shares
and all of the Preferred Shares owned by such Selling Securityholder immediately
prior to the Closing (after giving effect to the exercise in full of all
outstanding Company Stock Options and Company Warrants as contemplated in
Section 1.6 hereof immediately prior to the Closing), as set forth opposite such
Selling Securityholder's name on SCHEDULE II attached hereto. At the Closing,
each Selling Securityholder shall deliver to the Buyer appropriate evidence of
the transfer of all of the Common Shares and the Preferred Shares owned by such
Selling Securityholder to the Buyer.
1.2 FURTHER ASSURANCES. At any time and from time to time after
the Closing, at the Buyer's request and without further consideration, each of
the Selling Securityholders shall promptly execute and deliver such instruments
of sale, transfer, conveyance, assignment and confirmation, and take all such
other action as the Buyer may reasonably request, more effectively to transfer,
convey and assign to the Buyer, and to confirm the Buyer's title to, all of the
Common Shares and the Preferred Shares owned by all Selling Securityholders
immediately prior to the Closing, to put the Buyer in actual possession and
operating control of the assets, properties and business of the Company, to
assist the Buyer in exercising all rights with respect thereto and to carry out
the purpose and intent of this Agreement and the transactions contemplated
hereby.
1.3 THE CLOSING. The Closing shall take place at the offices of
▇▇▇▇▇▇▇▇▇ Traurig, LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, commencing at 9:00
a.m., New York City time, on the Closing Date.
1.4 ACTIONS AT THE CLOSING. At the Closing:
(a) the Company and the Selling Securityholders shall
deliver to the Buyer the various certificates, instruments and documents
referred to in Section 6.1;
(b) the Buyer shall deliver to the Company the various
certificates, instruments and documents referred to in Section 6.2;
(c) each of the Selling Securityholders shall deliver to
the Buyer all of his, her or its Common Shares and Preferred Shares, with
appropriate instruments of transfer; and
(d) the Buyer shall make the deliveries provided in
Section 1.5.
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1.5 PURCHASE PRICE FOR THE COMPANY SECURITIES.
(a) The aggregate purchase price to be paid by the Buyer
in respect of all of the Company Securities shall be $16,321,750 (the "PURCHASE
PRICE"). The Purchase Price shall be payable in the manner described in
paragraph (b) of this Section 1.5.
(b) At the Closing, the Buyer shall deliver:
(i) to each Selling Securityholder, the portion of
the Purchase Price (after reduction of the Purchase Price by the payments
specified in (ii) and (iii) below) due to such Selling Securityholder, as set
forth opposite each such Person's name on SCHEDULE II attached hereto, by check
or wire transfer of immediately available funds to the account designated by
each Selling Securityholder at least five Business Days prior to Closing;
(ii) to the Escrow Agent, an amount in cash equal to
$1,280,000 (such amount, exclusive of all interest and other amounts earned
thereon but giving effect to any reductions thereto while held on deposit with
the Escrow Agent, in accordance with the Escrow Agreement, referred to herein as
the "ESCROW CASH"), to be held and invested in a segregated account pursuant to
the terms of the Escrow Agreement, as a reserve to satisfy any claims by a Buyer
Indemnified Party for indemnity pursuant to ARTICLE VII; and
(iii) to the Escrow Agent, an amount in cash equal to
$50,000 (such amount, together with all interest and other amounts earned
thereon and giving effect to any reductions thereto while held on deposit with
the Escrow Agent, in accordance with the Escrow Agreement, referred to herein as
the "REPRESENTATIVE ESCROW AMOUNT"), to be held and invested in a segregated
account pursuant to the terms of the Escrow Agreement, as a reserve to pay the
Representative Expenses as set forth in Section 1.8(e).
1.6 TREATMENT OF COMPANY STOCK OPTIONS AND COMPANY WARRANTS.
(a) Effective prior to the Closing, the Company and each
Optionholder shall take all actions necessary to cause each Company Stock Option
then outstanding to become fully vested and exercisable with respect to all
Common Shares subject thereto and, immediately prior to the Closing, each
unexercised Company Stock Option (or portion thereof) then outstanding shall be
fully exercised by the Optionholder thereof for the number of Common Shares set
forth opposite such Optionholder's name on SCHEDULE II attached hereto, and each
such Company Stock Option shall be thereupon cancelled, terminated and
extinguished. Upon such cancellation of a Company Stock Option, each
Optionholder shall cease to have any rights with respect to a Company Stock
Option. At the Closing, all of such Common Shares set forth opposite each such
Optionholder's name on SCHEDULE II attached hereto shall be sold, transferred,
conveyed, assigned and delivered to the Buyer by the Selling Securityholder
thereof (and former Optionholder) in accordance with the provisions of Section
1.1. Prior to the Closing, the Board of Directors of the Company shall take all
such actions necessary or desirable to (i) effectuate the provisions of this
Section 1.6(a), (ii) terminate the Company Stock Plan and cancel, terminate and
extinguish all outstanding Company Stock Options effective immediately prior to
the Closing, including, without limitation, obtaining all necessary written
consents and acknowledgements and, if appropriate, amending the terms of the
Company Stock Plan to
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effectuate the foregoing, and (iii) take or cause to be taken all such actions
as are required to cause and ensure that from and after the Closing, no
Optionholder (or former Optionholder) or any participant in the Company Stock
Plan shall have any right thereunder to acquire any capital stock of any
Acquired Company, the Buyer or any of its Affiliates or any other rights thereto
or interest therein. At or prior to the Closing, the Company shall furnish the
Buyer with evidence of all of the foregoing in form and substance reasonably
satisfactory to the Buyer.
(b) Effective prior to the Closing, the Company and each
Warrantholder shall take all actions necessary to cause each Company Warrant
then outstanding to become fully exercisable with respect to all Common Shares
subject thereto and, immediately prior to the Closing, each unexercised Company
Warrant (or portion thereof) then outstanding shall be fully exercised by the
Warrantholder thereof for the number of Common Shares set forth opposite such
Warrantholder's name on SCHEDULE II attached hereto, and each such Company
Warrant shall be thereupon cancelled, terminated and extinguished. Upon such
cancellation of a Company Warrant, each Warrantholder shall cease to have any
rights with respect to a Company Warrant. At the Closing, all of such Common
Shares set forth opposite each such Warrantholder's name on SCHEDULE II attached
hereto shall be sold, transferred, conveyed, assigned and delivered to the Buyer
by the Selling Securityholder thereof (and former Warrantholder) in accordance
with the provisions of Section 1.1. Prior to the Closing, the Board of Directors
of the Company shall take all such actions necessary or desirable to (i)
effectuate the provisions of this Section 1.6(b), (ii) cancel, terminate and
extinguish all outstanding Company Warrants effective immediately prior to the
Closing, including, without limitation, obtaining all necessary written consents
and acknowledgements to effectuate the foregoing, and (iii) take or cause to be
taken all such actions as are required to cause and ensure that from and after
the Closing, no Warrantholder (or former Warrantholder) shall have any right
thereunder to acquire any capital stock of any Acquired Company, the Buyer or
any of its Affiliates or any other rights thereto or interest therein. At or
prior to the Closing, the Company shall furnish the Buyer with evidence of all
of the foregoing in form and substance reasonably satisfactory to the Buyer.
1.7 ESCROW CASH. On the Closing Date, the Buyer shall deliver to
the Escrow Agent (i) the Escrow Cash for the purpose of securing the
indemnification obligations of the Selling Securityholders set forth in ARTICLE
VII of this Agreement and (ii) the Representative Escrow Amount for the purpose
of paying the Representative Expenses as set forth in Section 1.8(e). The Escrow
Cash and the Representative Escrow Amount shall be held in segregated escrow
accounts to be maintained separately as trust funds and shall not be subject to
any lien, attachment, trustee process or any other judicial process of any
creditor of any Party, and shall be held and disbursed solely for the purposes
and in accordance with the terms of the this Agreement and the Escrow Agreement.
1.8 SECURITYHOLDERS' REPRESENTATIVES.
(a) The Selling Securityholders hereby appoint, authorize
and empower each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, acting
jointly (in such capacity and any successor(s) appointed pursuant to or in
accordance with Section 1.8(b), the "SECURITYHOLDERS' REPRESENTATIVES"), to act
on behalf of each Selling Securityholder in connection with, and to facilitate
the consummation of the transactions under, this Agreement, which shall include
the power and authority (i) to take all action necessary in connection with (x)
the waiver of any
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condition to the obligations of the Selling Securityholders to consummate the
transactions contemplated hereby, or (y) the defense or settlement of any claims
for which the Selling Securityholders may be required to indemnify the Buyer
pursuant to ARTICLE VII hereof and the compliance with court orders, binding
arbitration decisions or settlement terms with respect to any such claims,
PROVIDED, THAT, any such settlement affects the Selling Securityholders on a
proportionate basis with no individual Selling Securityholder becoming liable
for more than such Selling Securityholder's Pro Rata Share, (ii) to give and
receive all notices required to be given under this Agreement, copies of which
shall be promptly provided to each Selling Securityholder, (iii) to execute and
deliver the Escrow Agreement and to perform their obligations thereunder
(including authorizing deliveries to the Buyer of Escrow Cash in satisfaction of
any claims for which the Selling Securityholders may be required to indemnify
the Buyer pursuant to ARTICLE VII hereof and authorizing deliveries of the
Representative Escrow Amount, in each case in accordance with the terms of the
Escrow Agreement), and (iv) to take any and all additional action as is
contemplated to be taken by or on behalf of the Selling Securityholders by the
terms of this Agreement, in each case without having to seek or obtain the
consent of any Person under any circumstance. The Buyer and the Company hereby
waive any conflict of interest that may arise in the appointment of ▇▇. ▇▇▇▇▇▇▇▇
as a Securityholders' Representative and in the performance of his
responsibilities in such capacity under the terms of this Agreement and the
Escrow Agreement.
(b) In the event that ▇▇. ▇▇▇▇▇▇▇▇ or ▇▇. ▇▇▇▇▇▇▇▇▇▇
dies, becomes unable to perform his responsibilities hereunder or resigns from
such position, the other Securityholders' Representative shall act as the sole
Securityholders' Representative. In the event that both of ▇▇. ▇▇▇▇▇▇▇▇ and ▇▇.
▇▇▇▇▇▇▇▇▇▇ die, become unable to perform their responsibilities hereunder or
resign as Securityholders' Representatives, such person or persons selected by
the Selling Securityholders who held a majority of the outstanding Company
Securities immediately prior to the Closing shall serve as the Securityholders'
Representative(s) and shall be deemed to be the Securityholders'
Representative(s) for all purposes of this Agreement.
(c) All decisions and actions by the Securityholders'
Representatives, including any agreement between the Securityholders'
Representatives and the Buyer relating to the defense or settlement of any
claims for which the Selling Securityholders may be required to indemnify the
Buyer pursuant to ARTICLE VII hereof, shall be binding upon all of the Selling
Securityholders without the Securityholders' Representatives having to notify,
seek or obtain the consent of any Selling Securityholder under any circumstance,
and no Selling Securityholder shall have the right to object, dissent, protest
or otherwise contest the same.
(d) By their execution of this Agreement, the Selling
Securityholders agree that:
(i) the Buyer shall be able to rely conclusively on the
instructions and decisions of the Securityholders' Representatives as
to the determination of the settlement of any claims for
indemnification by any Buyer Indemnified Party pursuant to ARTICLE VII
hereof, the payment of any Representative Expenses pursuant to Section
1.8(e) hereof or any other actions required or permitted to be taken by
the Securityholders' Representatives hereunder, and no Party hereunder
shall have any cause of action against the Buyer or the
Securityholders' Representatives for any action taken
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by the Buyer in reliance upon the instructions or decisions of the
Securityholders' Representatives;
(ii) all actions, decisions and instructions of the
Securityholders' Representatives shall be conclusive and binding upon
all of the Selling Securityholders, and each Selling Securityholder
hereby waives any and all claims against the Securityholders'
Representatives and agrees that he, she or it will have no claim or
cause of action and will not make any claim or take any action against
the Securityholders' Representatives for any action taken, decision
made or instruction given by the Securityholders' Representatives under
this Agreement (or any omission thereof under this Agreement), except
for fraud, willful misconduct or intentional breach of this Agreement
by the Securityholders' Representatives;
(iii) the Selling Securityholders shall severally indemnify
the Securityholders' Representatives and hold them harmless against any
Damages incurred without fraud, willful misconduct or intentional
breach of this Agreement on the part of the Securityholders'
Representatives and arising out of or in connection with the acceptance
or administration of their duties hereunder, including out-of-pocket
costs and expenses and legal fees and other legal costs reasonably
incurred by the Securityholders' Representatives;
(iv) the provisions of this Section 1.8 are independent
and severable, are irrevocable and coupled with an interest and shall
be enforceable notwithstanding any rights or remedies that any Selling
Securityholder may have in connection with the transactions
contemplated by this Agreement;
(v) remedies available at law for any breach of the
provisions of this Section 1.8 are inadequate; therefore, the Buyer,
the Securityholders' Representatives and the Company shall be entitled
to temporary and permanent injunctive relief without the necessity of
proving damages if any such Party brings an action to enforce the
provisions of this Section 1.8; and
(vi) the provisions of this Section 1.8 shall be binding
upon the executors, heirs, legal representatives and successors of each
Selling Securityholder, and any references in this Agreement to a
Selling Securityholder or to the Selling Securityholders shall mean and
include the successors to the Selling Securityholders' rights
hereunder, whether pursuant to testamentary disposition, the laws of
descent and distribution or otherwise.
(e) Each of the Securityholders' Representatives may
incur out-of-pocket expenses (including attorney's fees and court costs) on
behalf of the Selling Securityholders in his capacity as a Securityholders'
Representative (collectively, the "REPRESENTATIVE EXPENSES"). The Representative
Expenses will be paid solely out of the Representative Escrow Amount in
accordance with the Escrow Agreement. Upon the expiration of the Escrow
Agreement in accordance with its terms, any funds remaining in the
Representative Escrow Amount that shall not have been used to pay Representative
Expenses shall be distributed to the Selling Securityholders according to their
Pro Rata Share.
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1.9 CURRENCY. All references herein to "Dollars" and amounts
preceded by a "$" shall be construed as references to United States dollars.
1.10 WITHHOLDING. The Buyer shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any Selling Securityholder such amounts as the Buyer is required to deduct and
withhold under the Code, or any provisions of foreign, state or local Tax Law,
with respect to the making of such payment. To the extent that amounts are so
withheld by the Buyer, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the Selling Securityholder, in respect
of whom such deduction and withholding was made by the Buyer.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLING SECURITYHOLDERS
REGARDING THE SELLING SECURITYHOLDERS AND THE COMPANY
SECURITIES
2.1 SELLING SECURITYHOLDERS REPRESENTATIONS AND WARRANTIES. Each
Selling Securityholder severally (and not jointly) represents and warrants to
the Buyer that, except as set forth in the Disclosure Schedule, the statements
contained in this Section 2.1 are true and correct as of the date of this
Agreement and will be true and correct as of the Closing as though made as of
the Closing, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties will be true and correct as of such date).
(a) TITLE TO SHARES. As of the date of this Agreement,
such Selling Securityholder holds beneficially and of record and has good and
marketable title to: (i) the Common Shares and Preferred Shares set forth
opposite such Selling Securityholder's name on SCHEDULE I hereto, (ii) the
Company Stock Options set forth opposite such Selling Securityholder's name on
SCHEDULE I hereto, and (iii) the Company Warrants set forth opposite such
Selling Securityholder's name on SCHEDULE I hereto, in each case free and clear
of any and all covenants, conditions, restrictions, voting trust arrangements,
options, Security Interests, and adverse claims or rights whatsoever
("ENCUMBRANCES"), other than restrictions on transferability under the
applicable U.S. federal and state securities Laws. As of the Closing, such
Selling Securityholder shall hold beneficially and of record and shall have good
and marketable title to the Common Shares and Preferred Shares which are to be
transferred to the Buyer by such Selling Securityholder pursuant hereto, as set
forth opposite such Selling Securityholder's name on SCHEDULE II attached
hereto, free and clear of any and all Encumbrances, other than restrictions on
transferability under the applicable U.S. federal and state securities Laws.
Such Selling Securityholder is not a party to any voting trust, proxy or other
agreement or understanding with respect to the voting of any capital stock of
the Company. SCHEDULE I to this Agreement sets forth a true and correct
description of all Common Shares, Preferred Shares, Company Stock Options and
Company Warrants beneficially owned and held of record by such Selling
Securityholder as of the date hereof, and SCHEDULE II to this Agreement sets
forth a true and correct description of all Common Shares and Preferred Shares
to be beneficially owned and held of record by such Selling Securityholder as of
the Closing Date.
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(b) ORGANIZATION OF CERTAIN SELLING SECURITYHOLDERS. If
such Selling Securityholder is a corporation, trust or other legal entity, it is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or other formation.
(c) AUTHORIZATION OF TRANSACTION. Such Selling
Securityholder has the full right, power and authority to execute and enter into
this Agreement and all other agreements contemplated hereby to which it is a
party, to perform its obligations hereunder and thereunder and to transfer,
convey and sell to the Buyer at the Closing the Common Shares and Preferred
Shares to be sold by such Selling Securityholder hereunder and, upon
consummation of the purchase contemplated hereby, the Buyer will acquire from
such Selling Securityholder good and marketable title to such Common Shares and
Preferred Shares, free and clear of any and all Encumbrances, other than any
Encumbrances created by the Buyer and any restrictions on transferability under
applicable U.S. federal and state securities Laws. If such Selling
Securityholder is a corporation, trust or other legal entity, the execution and
delivery by such Selling Securityholder of this Agreement and all other
agreements contemplated hereby to which it is a party, and the consummation by
such Selling Securityholder of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate, trust or other
action on the part of such Selling Securityholder. This Agreement and all other
agreements contemplated hereby to which it is a party, have each been, or when
executed and delivered by such Selling Securityholder shall be, duly and validly
executed and delivered by such Selling Securityholder and each constitutes a
valid and binding obligation of such Selling Securityholder, enforceable against
such Selling Securityholder in accordance with its terms, subject to applicable
Laws and bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar Laws affecting creditors' rights and remedies generally
and to general principles of equity.
(d) NONCONTRAVENTION. Subject to compliance with the
applicable requirements of the Securities Act, and any applicable state
securities Laws, such Selling Securityholder is not a party to, subject to or
bound by any agreement or any judgment, order, writ, prohibition, injunction or
decree of any Governmental Entity which would prevent the execution, delivery or
performance of this Agreement by such Selling Securityholder or any other
agreements contemplated hereby to which it is a party, or the transfer,
conveyance and sale of the Common Shares and Preferred Shares to be sold by such
Selling Securityholder to the Buyer pursuant to the terms hereof. Neither the
execution and delivery by such Selling Securityholder of this Agreement and all
other agreements contemplated hereby to which it is a party, nor the
consummation by such Selling Securityholder of the transactions contemplated
hereby and thereby, will (i) conflict with or violate any provision of the
formation or similar documents of such Selling Securityholder, (ii) require on
the part of the Selling Securityholder any notice to or filing with, or any
permit, authorization, consent or approval of, any Governmental Entity, (iii)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party the right to terminate, accelerate,
modify or cancel, or require any notice, consent or waiver under, any contract
or instrument to which the Selling Securityholder is a party or by which the
Selling Securityholder is bound or to which its assets are subject, except, with
respect to this Section 2.1(d)(iii), (A) any conflict, breach, default,
acceleration, termination, modification or cancellation which would not have a
material adverse effect upon the consummation of the transactions contemplated
hereby or result in any Liability to the Company
8
or (B) any notice, consent or waiver the absence of which would not have a
material adverse effect upon the consummation of the transactions contemplated
hereby or result in any Liability to the Company, or (iv) violate any
constitution, judgment, ruling, charge, order, writ, injunction, decree,
statute, rule or regulation, or other restriction of any Governmental Entity
applicable to the Selling Securityholder.
(e) POWERS OF ATTORNEY. There are no outstanding powers
of attorney executed on behalf of such Selling Securityholder relating to any
Company Securities, Company Stock Options or Company Warrants, this Agreement or
any other agreements contemplated hereby, other than any power of attorney,
including any stock powers, required to be executed by such Selling
Securityholder in connection with the transactions contemplated hereby and
delivered to the Buyer at Closing.
(f) NO CLAIMS AGAINST THE COMPANY. Such Selling
Securityholder has not at any time instituted any claim, proceeding, action,
suit or cause of action against the Company or any of its Affiliates, or any of
their respective predecessors or Affiliates in its capacity as a holder of
securities of the Company, and is not aware of any grounds for any such claim or
proceeding in its capacity as a holder of securities of the Company.
(g) REPRESENTATION REGARDING COUNSEL. Each Selling
Securityholder acknowledges that ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇ ▇▇▇▇▇▇") has solely
represented the Company in connection with this Agreement and the transactions
contemplated hereby. Each Selling Securityholder acknowledges and agrees that
(i) ▇▇▇▇▇▇ ▇▇▇▇▇▇ is not representing the interests of such Selling
Securityholder in connection with this Agreement and the transactions
contemplated hereby, and such Selling Securityholder is not relying on ▇▇▇▇▇▇
▇▇▇▇▇▇ in determining whether to enter into this Agreement and the other
agreements contemplated hereby and (ii) such Selling Securityholder has been
advised to seek independent counsel and independent Tax advice, to the extent
such Selling Securityholder deems appropriate, to protect his, her or its
interests in connection herewith and therewith.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS REGARDING THE COMPANY
Each of the Company and the Selling Securityholders, jointly and
severally, represents and warrants to the Buyer that, except as set forth in the
Disclosure Schedule, the statements contained in this ARTICLE III are true and
correct as of the date of this Agreement and will be true and correct as of the
Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date (in
which case such representations and warranties will be true and correct as of
such date). For purposes of this ARTICLE III, the phrase "TO THE KNOWLEDGE OF
THE COMPANY OR THE SELLING SECURITYHOLDERS" or "OF WHICH THE COMPANY IS AWARE"
or any variation of any of the foregoing or phrase of similar import shall be
deemed to refer to the actual knowledge of (i) any directors or executive
officers of any Acquired Company or (ii) one or more Selling Securityholders of
a particular fact, circumstance, event or other matter.
9
3.1 ORGANIZATION, QUALIFICATION, CORPORATE POWER, ETC.
(a) Section 3.1 of the Disclosure Schedule contains a
list for each Acquired Company of its name, its jurisdiction of formation, other
jurisdictions in which it is authorized to do business, and its capitalization.
Each Acquired Company is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized, with full power and
authority to conduct its business as it is now being conducted and to own, lease
or use the properties and assets that it purports to own, lease or use. Each
Acquired Company is duly qualified or licensed to do business as a foreign
corporation and is in corporate and tax good standing (where such concepts are
recognized under applicable Law) in each state or other jurisdiction where
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
(b) Other than the Acquired Companies listed on Section
3.1 of the Disclosure Schedule, there are no other corporations, partnerships,
joint ventures, associations or other entities in which any Acquired Company
owns, of record or beneficially, any direct or indirect equity or other interest
or any right (contingent or otherwise) to acquire the same.
(c) The Company has delivered or made available to Buyer
copies of the Organizational Documents of each Acquired Company, as currently in
effect.
(d) Except as set forth in Section 3.1(d) of the
Disclosure Schedule, no Acquired Company has conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name.
3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists
of (i) 40,000,000 Common Shares, of which 6,635,496 shares are issued and
outstanding as of the date hereof and 10,999,365 shares shall be issued and
outstanding as of the Closing Date, and (ii) 26,000,000 Preferred Shares, of
which 25,674,778 shares are issued and outstanding as of the date hereof and
25,674,778 shares shall be issued and outstanding as of the Closing Date.
(b) SCHEDULE I sets forth a list of all the holders of
capital stock of the Company, showing the number of shares of such capital stock
held by each such holder thereof as of the date hereof, and SCHEDULE II sets
forth a list of all of the holders of capital stock of the Company, showing the
number of shares of such capital stock which shall be held by each such holder
thereof as of the Closing Date. All of the outstanding equity securities and
other securities of each Acquired Company (other than the Company) are owned of
record and beneficially by one or more of the Acquired Companies, free and clear
of all Encumbrances. All of the issued and outstanding shares of capital stock
of, or other equity interests in, each of the Acquired Companies have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
unfulfilled contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of any Acquired Company. All of the issued and
outstanding shares of capital stock, or other equity interests in, each of the
Acquired Companies have been offered, issued and sold in compliance with all
applicable U.S. federal and state securities Laws and, to
10
the knowledge of the Company or the Selling Securityholders, with all applicable
foreign securities Laws.
(c) Section 3.2(c) of the Disclosure Schedule sets forth
a list of: (i)(A) the number of Common Shares issued under the Company Stock
Plan, (B) the number of Common Shares subject to outstanding Company Stock
Options under the Company Stock Plan, (C) the number of Common Shares reserved
for future issuance under the Company Stock Plan and (D) the number of Common
Shares subject to outstanding Company Warrants; (ii) all Optionholders and, with
respect to each such Optionholder's outstanding Company Stock Options, (A) the
number of Common Shares subject to such Company Stock Options, (B) the exercise
price, the date of grant and the vesting schedule (including any acceleration
provisions with respect thereto) applicable to such Company Stock Options, and
(C) whether such Company Stock Options are intended to qualify as incentive
stock options (within the meaning of Section 422 of the Code); and (iii) all
Warrantholders and, with respect to each such Warrantholder's outstanding
Company Warrants, (A) the number of Common Shares subject to such Company
Warrants and (b) the exercise price and the date of grant applicable to such
Company Warrants.
(d) Except as set forth on SCHEDULE I and Section 3.2(c)
of the Disclosure Schedule (which exceptions apply only with respect to this
representation as made as of the date hereof and not as of the Closing Date),
(i) no subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital stock of
any Acquired Company is authorized or outstanding, (ii) no Acquired Company has
an obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right or to issue or distribute to
holders of any shares of its capital stock any evidence of indebtedness or
assets of any Acquired Company, (iii) no Acquired Company has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any shares of
its capital stock or any interest therein or to pay any dividend or to make any
other distribution in respect thereof, and (iv) there are no outstanding or
authorized stock appreciation, phantom stock, restricted stock, profit
participation or other rights based on or measured by the value of any equity
security of, or interest in, any Acquired Company. The Company has taken all
such actions as are required to cause and ensure that the Company Stock Plan
shall terminate immediately prior to the Closing.
(e) There is no agreement, written or oral, between any
Acquired Company and any holder of its securities or among any holders of its
securities, relating to the sale or transfer (including agreements relating to
rights of first refusal, co-sale rights or "drag-along" rights), registration
under the Securities Act, or voting, of the capital stock of such Acquired
Company.
3.3 AUTHORIZATION OF TRANSACTION. The Company has all requisite
power and authority to execute and deliver this Agreement and all other
agreements contemplated hereby to which the Company is a party and to perform
its obligations hereunder and thereunder. The execution and delivery by the
Company of this Agreement and all other agreements contemplated hereby to which
the Company is a party, and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate action on the part of the Company. This Agreement and all
other agreements contemplated hereby to which the Company is a party, have each
been, or when
11
executed and delivered by the Company will be, duly and validly executed and
delivered by the Company and each constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar Laws affecting creditors' rights and
remedies generally and to general principles of equity.
3.4 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act, and any applicable state securities Laws,
neither the execution and delivery by the Company of this Agreement, nor the
consummation by the Company of the transactions contemplated hereby, will (a)
conflict with or violate any provision of the Statutes and Organizational
Documents, as applicable, of any Acquired Company, (b) require on the part of
any Acquired Company any notice to or filing with, or any permit, authorization,
consent or approval of, any Governmental Entity, (c) conflict with, result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in any
party the right to terminate, accelerate, modify or cancel, or require any
notice, consent or waiver under, (i) any Scheduled Agreement or any contract or
instrument set forth or required to be set forth on Section 3.17(a) of the
Disclosure Schedule, or (ii) any other contract or instrument to which an
Acquired Company is bound or to which its assets are subject, except, with
respect to this Section 3.4(c)(ii), (A) any conflict, breach, default,
acceleration, termination, modification, or cancellation which would not have a
material adverse effect upon the consummation of the transactions contemplated
hereby or result in any Liability to the Company or (B) notice, consent or
waiver the absence of which would not have a material adverse effect upon the
consummation of the transactions contemplated hereby or result in Liability to
the Company, (d) result in the imposition of any Security Interest upon any
assets of any Acquired Company, or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to any Acquired Company or any of
the properties or assets of any Acquired Company.
3.5 UNDISCLOSED LIABILITIES. Except for (a) Liabilities that are
reflected, or for which reserves were established, on the Most Recent Balance
Sheet and (b) Liabilities incurred in the Ordinary Course of Business from and
after the Most Recent Balance Sheet Date, the Acquired Companies have no
Liabilities of any nature that would be required to be reflected on a balance
sheet for the Acquired Companies prepared in accordance with GAAP or which has
had, or could reasonably be expected to have, a Company Material Adverse Effect.
Other than as set forth in Section 3.5 of the Disclosure Schedule, none of the
Acquired Companies has any (i) indebtedness evidenced by any bond, debenture,
note, mortgage, indenture or other debt instrument or debt security, (ii) notes
or accounts payable to trade creditors or accrued expenses not arising in the
Ordinary Course of Business, (iii) amounts owing as deferred purchase price for
the purchase of any property, (iv) guarantees or indemnity with respect to
indebtedness or obligations of a type described in clauses (i)-(iii) above of
any other Person, or (v) indemnification obligations of any nature arising in
connection with the acquisition or disposition of assets (tangible or
intangible) or properties.
3.6 TAX MATTERS.
(a) FILING OF TAX RETURNS. Each Acquired Company has
timely filed with the appropriate Governmental Entities all material Tax Returns
required to be filed under any
12
applicable Laws. All such Tax Returns are complete and accurate in all material
respects. The Acquired Companies are not currently the beneficiary of any
extension of time within which to file any Tax Return. No written claim has ever
been made by any Governmental Entity in a jurisdiction where any Acquired
Company does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction.
(b) PAYMENT OF TAXES. All Taxes due and owing by the
Acquired Companies and any of their predecessors or Affiliates (whether or not
shown on any Tax Returns) have been paid on a timely basis. All withholding Tax
requirements imposed on the Acquired Companies for the period ending on or
before the Closing Date have been satisfied in full in all respects or recorded
as a Liability on the Most Recent Financial Statements. The unpaid Taxes of the
Acquired Companies did not, (i) as of the date of the Most Recent Balance Sheet,
exceed the accruals and reserve for Tax Liability (excluding any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent Balance Sheet, and (ii) will
not exceed that reserve as adjusted for operations and transactions through the
Closing Date in accordance with past custom and practice of such Acquired
Companies in filing their Tax Returns. No liens for Taxes exist with respect to
any assets or properties of any of the Acquired Companies, except for statutory
liens for Taxes not yet due and liens for Taxes an Acquired Company is
contesting in good faith through appropriate proceedings and for which adequate
reserves have been established.
(c) AUDITS, INVESTIGATIONS OR CLAIMS. No deficiencies for
Taxes of the Acquired Companies have been claimed or proposed or assessed in
writing by any Governmental Entity. There are no pending or, to the knowledge of
the Company or the Selling Securityholders, threatened audits, assessments or
other actions for or relating to any Liability in respect of Taxes of the
Acquired Companies (or their predecessors or Affiliates), and there are no
matters under discussion with any governmental authorities, or known to the
Selling Securityholders or the Acquired Companies, with respect to Taxes that
are likely to result in an additional Liability for Taxes with respect to the
Acquired Companies (or their predecessors or Affiliates). The Company has
delivered or made available to Buyer complete and accurate copies of foreign,
federal, state and local Tax Returns of the Acquired Companies (and their
respective predecessors and Affiliates) for the years ended December 31, 2003,
2004 and 2005, and complete and accurate copies of all audited examination
reports and statements of deficiencies assessed against or agreed to by any
Acquired Company (or its respective predecessors) since December 31, 2001. The
U.S. federal and state and the foreign income Tax Returns of the Acquired
Companies have been audited by the IRS or the prescribed Governmental Entity in
the relevant jurisdiction or are closed by the statute of limitations for all
taxable years through the taxable years specified for such Tax Returns in
Section 3.6(c) of the Disclosure Schedule. The Acquired Companies have not (nor
has any predecessor or Affiliate) waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency, nor has any request been made in writing for any such extension or
waiver. No power of attorney (other than powers of attorney authorizing
employees of the Company to act on behalf of the Company) with respect to any
Taxes has been executed or filed with any Tax authority or other Governmental
Entity.
(d) TAX ELECTIONS. All material elections with respect to
Taxes affecting any Acquired Company are set forth on Section 3.6(d) of the
Disclosure Schedule. No Acquired
13
Company (i) has agreed, and is not required, to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise; (ii) has elected at any time to be treated as an S corporation within
the meaning of Sections 1361 or 1362 of the Code; or (iii) has made any of the
foregoing elections and is not required to apply any of the foregoing rules
under any comparable state or local Tax provision.
(e) DEFERRED TAX LIABILITIES. Except as reflected in the
Most Recent Financial Statements (including the schedules thereto) of the
Acquired Companies, none of the Acquired Companies shall be required to include
in a taxable period ending after the Closing taxable income attributable to
income that accrued (for purposes of their Most Recent Financial Statements) in
a prior taxable period but was not recognized for Tax purposes in any prior
taxable period as a result of the installment method of accounting, the
completed contract method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481 of the Code or
comparable provisions of state or local Tax Law, domestic or foreign.
(f) TAX SHARING AND PRE-FILING AGREEMENTS. There are no
Tax-sharing, indemnity, allocation, pre-filing, or advance pricing agreements or
similar arrangements with respect to or involving any Acquired Company, and,
after the Closing Date, no Acquired Company shall be bound by any such
agreements or similar arrangements or have any Liability thereunder for amounts
due in respect of periods prior to the Closing Date.
(g) OTHER ENTITY LIABILITY. No Acquired Company has ever
been a member of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which is the Company). No
Acquired Company has any Liability for the Taxes of any Person (other than other
members of the affiliated group of which the Company is the parent) (i) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv)
otherwise.
(h) USRPHC. No Acquired Company has ever been a United
State real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in section 897(c)(1)(A)(ii)
of the Code.
(i) PARTNERSHIPS AND SINGLE MEMBER LLCS. Except as set
forth in Section 3.6(i) of the Disclosure Schedule, no Acquired Company (i) is a
partner for Tax purposes with respect to any joint venture, partnership, or
other arrangement or contract which is treated as a partnership for Tax
purposes, or (ii) owns a single member limited liability company which is
treated as a disregarded entity.
(j) DISALLOWANCE OF INTEREST DEDUCTIONS. None of the
outstanding indebtedness of the Acquired Companies constitutes indebtedness with
respect to which any interest deductions may be disallowed under Sections 163(i)
or 163(l) or 279 of the Code or under any other provision of applicable Law.
(k) TAX SHELTERS. The Acquired Companies have not entered
into any transaction identified as a "reportable transaction" or "listed
transaction" for purposes of Code Section 6707A(c) or Treasury Regulations
Sections 1.6011-4(b)(2) or 301.6111-2(b)(2). No
14
Acquired Company has entered into any transaction that, if the treatment claimed
by it were to be disallowed, the transaction would result in a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
(l) SPIN-OFFS. The Acquired Companies have not
distributed the stock of any corporation in a transaction satisfying the
requirements of Section 355 of the Code since December 31, 2004, and the stock
of the Acquired Companies has not been distributed in a transaction satisfying
the requirements of Section 355 of the Code since December 31, 2004.
(m) INVERSION TRANSACTIONS. None of the Acquired
Companies is an expatriated entity (as defined in Section 7874(a)(2)(A) of the
Code) or a surrogate foreign corporation (within the meaning of Section
7874(a)(2)(B) of the Code).
(n) INVESTMENTS IN UNITED STATES PROPERTY. Except as set
forth in Section 3.6(n) of the Disclosure Schedule, none of the Acquired
Companies has made an investment in United Sates property subject to Section 956
of the Code.
(o) STATE TAX RETURNS. None of the Acquired Companies has
assets or personnel, or carries on activities, in any State of the United States
other than California. None of the Acquired Companies is required to file Tax
Returns (other than sales, use or similar Tax Returns) in any State of the
United States other than California or to file sales, use or similar Tax Returns
in any State of the United States other than California and Indiana.
3.7 ASSETS.
(a) Each Acquired Company has good and marketable title
to all of the material assets (tangible or intangible) purported to be owned by
such Acquired Company, free and clear of all Security Interests. Each Acquired
Company owns or leases all tangible assets sufficient for the conduct of its
business as presently conducted. Such tangible assets, taken as a whole, are all
of the tangible assets necessary for the conduct of the business of the Acquired
Companies as presently conducted, have been maintained in accordance with normal
industry practice, are in functional operating condition and repair (subject to
normal wear and tear) and are suitable for the purposes for which they are
presently used.
(b) Section 3.7(b) of the Disclosure Schedule sets forth
a list of all equipment, motor vehicles and assets (including IT Assets) which
have a book value as reflected on the Most Recent Balance Sheet of over $10,000
and which are leased by the Company. Each item of equipment, motor vehicle and
other asset that any Acquired Company has possession of pursuant to a lease
agreement or other contractual arrangement is in such condition that, if such
item of equipment, motor vehicle or other asset were returned to its lessor or
owner on the Closing Date in accordance with the applicable lease or contract,
the Acquired Company would not be charged any additional payments due to the
condition of such item of equipment, motor vehicle or other asset.
3.8 OWNED REAL PROPERTY. None of the Acquired Companies currently
has, or has had at any time during its existence, any Owned Real Property.
15
3.9 REAL PROPERTY LEASES. Section 3.9 of the Disclosure Schedule
lists all Leases to which any Acquired Company is a party. The Company has made
available to the Buyer a true and complete copy of each such Lease. With respect
to each such Lease:
(a) such Lease is in full force and effect, and such
Lease affords the applicable Acquired Company a valid leasehold interest to the
real property that is the subject of the Lease;
(b) the transactions contemplated by this Agreement do
not require the consent of any other party to such Lease, will not result in a
breach of or constitute (with or without due notice or lapse of time or both) a
default under such Lease, and will not otherwise cause such Lease to cease to be
in full force and effect immediately following the Closing in accordance with
the terms thereof as in effect immediately prior to the Closing;
(c) no Acquired Company has collaterally assigned or
granted any Security Interest in such Lease; and
(d) no Acquired Company nor, to the knowledge of the
Company or the Selling Securityholders, any other party, is in breach or
violation of, or default under, any such Lease, and no event has occurred, is
pending (including the transactions contemplated hereby) or, to the knowledge of
the Company or the Selling Securityholders, is threatened, which, after the
giving of notice, with lapse of time, or otherwise, would permit the
termination, modification or acceleration of rent under such Lease or would
constitute a material breach or default by the applicable Acquired Company or,
to the knowledge of the Company or the Selling Securityholders, any other party
under such Lease.
3.10 INTELLECTUAL PROPERTY.
(a) Section 3.10(a) of the Disclosure Schedule contains a
list of each registration for the Company Intellectual Property and any
application for registration therefore (including each registered Internet
domain name of any Acquired Company) as well as material unregistered Company
Intellectual Property. Each Acquired Company owns or has all the rights to use
pursuant to a valid and enforceable written license, sublicense, agreement or
permission all Intellectual Property and IT Assets necessary to conduct the
business of such Acquired Company as presently conducted, and, to the knowledge
of the Company or the Selling Securityholders, any other Intellectual Property
and IT Asset used by any Acquired Company in the conduct of its business as
presently conducted. Each item of Company Intellectual Property and IT Asset
owned by the Acquired Companies, and, to the knowledge of the Company or the
Selling Securityholders, each other item of Intellectual Property and IT Asset
used by any Acquired Company in the conduct of its business as presently
conducted, will be owned or available for use by the Buyer immediately following
the Closing on substantially identical terms and conditions as it was
immediately prior to the Closing. The Company Intellectual Property, the IT
Assets, and the other Intellectual Property used in the business of the Acquired
Companies, together with the rights granted to the Acquired Companies pursuant
to the agreements listed in Section 3.10(f) of the Disclosure Schedule and under
any "shrink-wrap" or "click-wrap" license agreements, are sufficient for the
continued conduct of the business of the Acquired Companies in every
jurisdiction where it is conducted after the Closing in the same
16
manner as such business was conducted prior to the Closing in all material
respects, and neither the execution of this Agreement nor the consummation of
any transaction contemplated hereby will materially adversely affect any of the
rights of the Acquired Companies with respect to the Company Intellectual
Property or third-party Intellectual Property licensed to the Acquired Companies
pursuant to the above-referenced agreements. Each of the Acquired Companies has
taken all necessary or desirable action to maintain and protect each item of
Company Intellectual Property that it owns or uses in its business and has
timely paid all filing, examination, issuance, post registration and maintenance
fees, annuities and the like associated with or required with respect to any of
the registered and applied for Company Intellectual Property listed in Section
3.10(a) of the Disclosure Schedule, and all documents, assignments, recordations
and certificates necessary to be filed by the each of the Acquired Companies to
demonstrate its ownership of any such registered or applied for Company
Intellectual Property or to maintain its effectiveness have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, so that no item required to be
listed in Section 3.10(a) of the Disclosure Schedule has lapsed, expired or been
abandoned or canceled other than in the Ordinary Course of Business.
(b) There exist no actions, charges, complaints, claims,
demands or proceedings asserted by the Company, the Selling Securityholders or
any other Acquired Company alleging that any Person is or has interfered with,
infringed upon, misappropriated, violated or otherwise come into conflict with
any Company Intellectual Property or IT Asset of any Acquired Company, and, to
the knowledge of the Company or the Selling Securityholders, there is no basis
for any such action, charge, complaint, claim, demand or proceeding.
(c) No Acquired Company nor the Company Intellectual
Property has in the past or is now interfering with, infringing upon, violating,
constituting a misappropriation of, or otherwise coming into conflict with any
Intellectual Property rights of any Person (including any claim that an Acquired
Company must license or refrain from using any Intellectual Property rights of
any third party). Section 3.10(c) of the Disclosure Schedule lists each written
complaint, claim or notice, or written threat thereof, received by any Acquired
Company alleging any such infringement, violation or misappropriation since July
29, 2004. The Company has made available to the Buyer a summary of all written
documentation in the Company's possession relating to claims or disputes known
to the Company or the Selling Securityholders concerning any Company
Intellectual Property owned by any Acquired Company.
(d) Section 3.10(d) of the Disclosure Schedule identifies
each license or other agreement currently in effect pursuant to which any
Acquired Company has licensed, distributed or otherwise granted any rights to
any third party with respect to, any Company Intellectual Property. No Acquired
Company and, to the knowledge of the Company or the Selling Securityholders, no
other party to any such license or other agreement is in breach or default
thereof (including with respect to any exclusivity provisions thereof) and no
event has occurred that with or without notice or lapse of time would constitute
a breach or default thereof (including with respect to any exclusivity
provisions thereof) or permit termination, modification or acceleration
thereunder, and all products sold pursuant to any such distribution, license or
other agreement to which any Acquired Company is a party are sold and used in
the territories where contractual rights are granted pursuant to such agreements
strictly in accordance with the terms of such agreements and in accordance with
applicable Law.
17
(e) Section 3.10(e) of the Disclosure Schedule identifies
each item of Company Intellectual Property that is owned by a party other than
any Acquired Company, and the license or other agreement pursuant to which any
Acquired Company uses it, if any (excluding non-customized, off the shelf
software programs licensed by any Acquired Company pursuant to "SHRINK WRAP" or
"CLICK-THROUGH" licenses). No Acquired Company and, to the knowledge of the
Company or the Selling Securityholders, no other party to any such license or
other agreement is in breach or default thereof (including with respect to any
exclusivity provisions thereof) and no event has occurred that with or without
notice or lapse of time would constitute a breach or default thereof (including
with respect to any exclusivity provisions thereof) or permit termination,
modification or acceleration thereunder. No Acquired Company has made any
payments to any third Person in connection with the procurement or grant to any
Acquired Company of any distribution rights.
(f) Section 3.10(f) of the Disclosure Schedule identifies
each sponsoring, research and development or other agreement entered into since
July 29, 2004 (whether expired or currently in effect) pursuant to which any
Acquired Company has sponsored or otherwise collaborated in the research and
development of Intellectual Property. No Acquired Company and, to the knowledge
of the Company or the Selling Securityholders, no other party to any such
agreement currently in force is in breach or default thereof and no event has
occurred that with or without notice or lapse of time would constitute a breach
or default thereof or permit termination, modification or acceleration
thereunder.
(g) The Acquired Companies have exercised a degree of
care that is consistent with the standards of the industry in which the Acquired
Companies operate (but in no event less than a reasonable degree of care) in
order to protect the secrecy and maintain the confidentiality of all trade
secrets of the Acquired Companies, including the adoption of a policy requiring
that all employees and independent contractors who are involved in the creation
of Intellectual Property for the Acquired Companies enter into non-disclosure
and invention assignment agreements in the Acquired Companies' standard forms.
Each such employee and independent contractor, if any, has executed and
delivered to the Company or another Acquired Company such an agreement and, to
the knowledge of the Company or the Selling Securityholders, none of such
employees or independent contractors, if any, is in violation thereof. To the
knowledge of the Company or the Selling Securityholders, no trade secret has
been disclosed or authorized to be disclosed to any third party other than
pursuant to a non-disclosure agreement that adequately protects the Acquired
Companies' proprietary interests in and to such trade secrets.
(h) All right, title, and interest in and to the Company
Intellectual Property consisting of copyright created, conceived, developed, or
produced by any employee of an Acquired Company (in whole or in part, alone or
jointly with others, and regardless of whether conceived on or off the premises
of an Acquired Company or during business hours) is a work made for hire and is
owned by one of the Acquired Companies, free and clear of any and all liens,
licenses or other restrictions.
(i) Section 3.10(i) of the Disclosure Schedule contains a
true, accurate and complete list of material IT Assets owned by, or used and
necessary to conduct the business of, any Acquired Company as presently
conducted.
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3.11 CONTRACTS, CUSTOMERS AND SUPPLIERS.
(a) Section 3.11 of the Disclosure Schedule lists the
following agreements (written or oral) to which any Acquired Company is a party
as of the date of this Agreement:
(i) any agreement for the lease of personal property from
or to third parties providing for aggregate lease payments by any
Acquired Company in excess of $10,000 per annum or which has a term
extending for more than one (1) year;
(ii) any agreement for the purchase of products or for the
receipt of services which involves the payment by any Acquired Company
of more than the sum of $10,000 per annum or which has a term extending
for more than three (3) years;
(iii) any partnership, joint venture or limited liability
company agreement;
(iv) any agreement under which any Acquired Company has
created, incurred, assumed or guaranteed (or may create, incur, assume
or guarantee) indebtedness for borrowed money or any capitalized lease
obligation, or under which any Acquired Company has imposed (or may
impose) a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement for the acquisition of a business or
entity, or substantially all of the assets of a business or entity
(including by merger or consolidation);
(vi) any agreement concerning noncompetition or
nonsolicitation, or an agreement that otherwise restricts the ability
of any Acquired Company to compete, to which any Acquired Company is a
party;
(vii) any agreement for the employment of any individual on
a full-time, part-time or other basis and any consulting agreement, in
each case that is not terminable at will by the applicable Acquired
Company and without the payment of severance, termination or similar
compensation or benefits (other than required by Law) or requires
payment of amounts after the date hereof in excess of $25,000 of base
pay per annum;
(viii) any agreement under which any Acquired Company has
advanced or loaned any amount to any of its directors, officers, and
employees;
(ix) any agreement in which any current or former officer,
director or stockholder of the Company is directly or indirectly
interested;
(x) any settlement, conciliation or similar agreement,
the performance of which will involve aggregate payments after the
Closing Date of consideration in excess of $10,000; and
(xi) any agreement (other than agreements of the type
described in subclauses (i) through (x) above) that involves aggregate
future payments by any Acquired Company in excess of $10,000 per annum
or which has a term extending for more than one (1) year.
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(b) Section 3.11 of the Disclosure Schedule also sets
forth a list of:
(i) The 20 largest customers of the Acquired Companies,
in terms of the aggregate revenues to the Acquired Companies during the
fiscal year ended December 31, 2006 (such customers being referred to
herein as the "MAJOR CUSTOMERS"); and
(ii) the 20 largest suppliers of the Acquired Companies,
in terms of the aggregate charges to the Acquired Companies during the
fiscal year ended December 31, 2006 (such suppliers being referred to
herein as the "MAJOR SUPPLIERS").
(c) Except as set forth on Section 3.11 of the Disclosure
Schedule, since December 31, 2004, (i) there has not been any material adverse
change in the business relationship with any Major Customer or Major Supplier,
and (ii) there has been no material dispute between any Acquired Company and any
Major Customer or Major Supplier. No Acquired Company has received any written
notice or, to the knowledge of the Company or the Selling Securityholders, any
oral notice, that (x) any Major Customer intends to reduce its purchases from
any Acquired Company in any material respect or otherwise intends to materially
adversely change its business relationship with any Acquired Company or (y) that
any Major Supplier intends to reduce its sale of goods or services to any
Acquired Company in any material respect or otherwise intends to materially
adversely change its business relationship with any Acquired Company.
(d) The Company has made available to the Buyer a copy of
each written agreement listed or required to be listed in Sections 3.10 or 3.11
of the Disclosure Schedule (the "SCHEDULED AGREEMENTS"). Neither any Acquired
Company nor, to the knowledge of the Company or the Selling Securityholders, any
other party, is in material breach or default under, any Scheduled Agreement,
and no event has occurred, is pending (including the transactions contemplated
hereby) or, to the knowledge of the Company or the Selling Securityholders, is
threatened, which (with or without due notice or lapse of time or both) would
constitute a material breach or default by any Acquired Company or, to the
knowledge of the Company or the Selling Securityholders, any other party under a
Scheduled Agreement.
3.12 ACCOUNTS RECEIVABLE. All trade accounts receivable and other
receivables of any Acquired Company reflected on the Most Recent Balance Sheet
are valid receivables and are not subject to material setoffs or counterclaims,
except as reflected in reserves on the Most Recent Balance Sheet. All trade
accounts receivable and other receivables of any Acquired Company that have
arisen since the Most Recent Balance Sheet Date are valid receivables and are
not subject to setoffs or counterclaims, are current and collectible in
accordance with their terms within 90 days of Closing (with respect to U.S.
customers of any Acquired Company) and within 180 days of Closing (with respect
to non-U.S. customers of any Acquired Company), in each case at their recorded
amounts, except in each case as reflected in reserves for uncollectible accounts
in such Acquired Company's books and records.
3.13 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of any Acquired Company.
20
3.14 INSURANCE. Section 3.14 of the Disclosure Schedule lists each
insurance policy (including medical malpractice, fire, theft, casualty,
comprehensive general liability, workers' compensation, business interruption,
environmental, product liability and automobile insurance policies and bond and
surety arrangements) to which any Acquired Company is a party, all of which are
in full force and effect. There is no material claim pending under any such
policy as to which coverage has been questioned, denied or disputed by the
underwriter of such policy. All premiums due and payable under all such policies
have been paid or reflected in the Financial Statements (unless such premiums
became due after the date of the Financial Statements), no Acquired Company is
liable for retroactive premiums, and each Acquired Company is otherwise in
compliance in all material respects with the terms of such policies. No Acquired
Company, nor to the knowledge of the Company or the Selling Securityholders, any
other party to such policy is in material breach or default and no event has
occurred that, with the notice or the lapse of time, would constitute such a
material breach or default, or permit termination, modification, or acceleration
under the policy and, to the knowledge of the Company or the Selling
Securityholders, no party has repudiated any provision of any such policy. To
the knowledge of the Company or the Selling Securityholders there is no
threatened termination of, or premium increase with respect to, any such policy.
Each such policy will continue to be in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing.
3.15 LITIGATION. Section 3.15 of the Disclosure Schedule sets forth
all claims, suits, actions and proceedings pending by or before any Governmental
Entity or arbitrator to which any Acquired Company is a party. Except as set
forth in Section 3.15 of the Disclosure Schedule, there are no claims, suits,
actions or proceedings pending, relating to, affecting or, to the knowledge of
the Company or the Selling Securityholders, threatened against any Acquired
Company, by or before any Governmental Entity or any arbitrator or by any third
party nor, to the knowledge of the Company or the Selling Securityholders, is
there any reasonable basis therefor. There are no injunctions, judgments, orders
or decrees of any Governmental Entity or arbitrator outstanding, relating to,
affecting or, to the knowledge of the Company or the Selling Securityholders,
threatened against any Acquired Company. Except as set forth in Section 3.15 of
the Disclosure Schedule, since July 29, 2004, there has been no investigation,
inquiry, review, notice of violation or complaint made, issued, filed or, to the
knowledge of the Company or the Selling Securityholders, threatened, by or
before any Governmental Entity or any arbitrator or by any third party with
respect to or involving any Acquired Company.
3.16 EMPLOYEES.
(a) Section 3.16(a) of the Disclosure Schedule contains a
list of all current employees of the Acquired Companies whose annual base salary
exceeds $25,000 per year, along with the position and the annual rate of
compensation of each such person. No Acquired Company employee at the Vice
President level or higher has provided notice of such employee's intent to
terminate employment with such Acquired Company and, to the knowledge of the
Company or the Selling Securityholders, no such employee presently plans to
terminate employment with such Acquired Company.
(b) No Acquired Company is now or has been a party to or
bound by any collective bargaining or similar agreement, nor during the past
five years has any Acquired
21
Company experienced any strikes, slowdowns, work stoppages, grievances,
lockouts, claims of unfair labor practices or other collective bargaining
disputes and, to the knowledge of the Company or the Selling Securityholders, no
such strikes, slowdowns, work stoppages, grievances, lockouts, claims of unfair
labor practices or other collective bargaining disputes are threatened. There
are no labor unions or other organizations, either currently or within the past
five years, representing, purporting to represent or, to the knowledge of the
Company or the Selling Securityholders, attempting to represent any employees of
any Acquired Company.
(c) To the knowledge of the Company or the Selling
Securityholders, no Acquired Company has violated any law, order, judgment or
arbitration award of any court, arbitrator or government authority regarding the
terms and conditions of employment of employees, former employees or prospective
employees or other labor related matters, including any laws, orders, judgments
or awards relating to wrongful discharge, discrimination, personal rights,
leaves of absence, wages, hours, collective bargaining, fair labor standards or
occupational health and safety.
(d) Each Acquired Company has properly classified all of
its service providers as either employees or independent contractors. Each
Acquired Company has withheld and paid to the appropriate governmental authority
all amounts required to be withheld from compensation paid to its employees and
is not liable for any arrears of Taxes, penalties or other sums for failure to
withhold and pay applicable Taxes. Each Acquired Company has paid in full to its
employees or adequately accrued for in accordance with GAAP or applicable
foreign Laws, all wages, salaries, commissions, bonuses, benefits and other
compensation due to or on behalf of such employees. There is no claim in dispute
against any Acquired Company with respect to payment of wages, salary or
overtime pay that has been asserted or is now pending or threatened with respect
to any current or former service providers of such Acquired Company.
(e) In the three years prior to the date hereof, no
Acquired Company has effectuated (i) a "PLANT CLOSING" (as defined in the Worker
Adjustment and Retraining Notification Act (the "WARN ACT") or any similar
state, local or foreign Law) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of any
Acquired Company, or (ii) a "MASS LAYOFF" (as defined in the WARN Act, or any
similar state, local or foreign law) affecting any site of employment or
facility of any Acquired Company. No Acquired Company has material Liabilities,
whether contingent or absolute, relating to workers' compensation benefits that
are not fully insured against by a bona fide third-party insurance carrier to
the extent required by applicable Law. With respect to each state workers'
compensation arrangement that is funded wholly or partially through an insurance
policy or public or private fund, all premiums required to have been paid to
date under such insurance policy or fund have been paid.
(f) Section 3.16(f) of the Disclosure Schedule sets forth
any and all indebtedness in excess of $10,000 owed by any current or former
employee, consultant or director of any Acquired Company to any Acquired
Company.
22
3.17 EMPLOYEE BENEFITS.
(a) Section 3.17(a) of the Disclosure Schedule contains a
complete and accurate list of all Company Plans. Complete and accurate copies of
(i) all Company Plans which have been reduced to writing (including all
amendments thereto), (ii) written summaries of all unwritten Company Plans,
(iii) all related current trust agreements, insurance contracts and summary plan
descriptions and material written employee communications distributed generally
to employees within 12 months preceding the date hereof regarding such Company
Plans, (iv) the most recent annual reports filed on IRS Form 5500 (including all
exhibits and attachments thereto) for each Company Plan, (v) if a Company Plan
is intended to qualify under Section 401(a) of the Code, the most recent IRS
determination or opinion letter applicable to such Company Plan, and (vi) all
material, non-routine communications with any governmental entity or agency,
including the U.S. Department of Labor, the IRS and the Pension Benefit Guaranty
Corporation, within the three years preceding the date hereof and relating to a
Company Plan have been made available to Buyer. Except as necessary to comply
with applicable Laws, none of the Acquired Companies has made any plan or
commitment to create any new or additional Company Plan or to modify any
existing Company Plan that would result in a material increase in the
compensation or benefits provided to any current or former employee, consultant
or director of any Acquired Company or the spouses, beneficiaries or other
dependents thereof.
(b) Each of the Acquired Companies has, in all material
respects, (i) timely made or, to the extent not yet due, accrued on its
consolidated financial statements, all required contributions (including all
employer contributions and employee salary reduction contributions) thereto, and
(ii) timely paid all premiums and expenses to or in respect of such Company
Plan. Each of the Acquired Companies and each Company Plan are in compliance in
all material respects with the applicable provisions of ERISA, the Code and
foreign law applicable to any Company Plan and any regulations thereunder.
Except as set forth on Section 3.17(b) of the Disclosure Schedule, no Company
Plan or related trust holds assets that include securities issued by any
Acquired Company.
(c) With respect to each Company Plan, (i) no breaches of
fiduciary duty or other failures to act or comply in connection with the
administration or investment of the assets of a Company Plan in connection with
which any Acquired Company or a fiduciary could reasonably be expected to incur
a material Liability have occurred; and (ii) no non-exempt prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code that could reasonably be expected to result in material Liability to any
Acquired Company has occurred; and (iii) no lien has been imposed under the
Code, ERISA or any comparable foreign law.
(d) There are no Legal Proceedings (including any audits
or investigation by the IRS, the U.S. Department of Labor, the Pension Benefit
Guaranty Corporation or any other federal, state or foreign Governmental
Authority), except claims for benefits payable in the normal operation of the
Company Plans, pending or, to the knowledge of the Company or the Selling
Securityholders, threatened, against, by, on behalf of, relating to or involving
any Company Plan.
23
(e) Each Company Plan that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination or
opinion letter from the IRS on which each Acquiring Company that is a
participating employer in such Company Plan is entitled to rely and (i) no
prototype plan has been modified or amended such that the plan would be
considered an individually designed plan, (ii) no such determination or opinion
letter has been revoked and revocation has not been threatened, and (iii) no act
or omission has occurred that would reasonably be expected to adversely affect
the qualification of such Company Plan. Each Company Plan that is intended to
qualify under any law of any foreign jurisdiction has received any required
approval of a governmental authority of a foreign jurisdiction which approval
has not been revoked and, to the knowledge of the Company or the Selling
Securityholders, no event or circumstance exists that has adversely affected or
is likely to adversely affect such qualification or approval.
(f) No Company Plan is, and no Acquired Company nor any
ERISA Affiliate maintains, contributes to, or, in the six years preceding the
date of this Agreement, has maintained or been obligated to contribute to an
Employee Benefit Plan subject to Section 412 of the Code, Title IV of ERISA or
comparable funding obligations imposed under the laws of any foreign
jurisdiction.
(g) At no time in the six years preceding the date of
this Agreement has any Acquired Company or any ERISA Affiliate been obligated to
contribute to any "MULTIEMPLOYER PLAN" (as defined in Section 4001(a)(3) of
ERISA) or "MULTIPLE EMPLOYER PLAN" (as defined in Section 413(c) of the Code).
(h) No Acquired Company has obligations under any Company
Plan or otherwise to provide benefits after termination of employment or service
to any current or former employees, consultants or directors of any Acquired
Company (or to any spouse, dependent or beneficiary of any of the foregoing),
including obligations to provide health, accident, disability or life insurance
coverage, but excluding continuation of health coverage required to be continued
under Section 4980B of the Code or other applicable law and insurance conversion
privileges provided under state law. There has been no communication to any
current or former employee, consultant or director or any retiree of any
Acquired Company, or the spouses, dependents or beneficiaries of any of the
foregoing, that would reasonably be expected to promise or guarantee any such
health, accident, disability or life insurance coverage.
(i) Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, either alone or in
combination with another event (whether contingent or otherwise) will (i)
entitle any current or former employee, consultant or director of any Acquired
Company or any group of such employees, consultants or directors to any payment
or benefit; (ii) increase the amount of compensation or benefits due to any such
employee, consultant or director; or (iii) accelerate the vesting, funding or
time of payment of any compensation, equity award or other benefit.
(j) Each Company Plan that is a nonqualified deferred
compensation plan subject to Code Section 409A has been operated and
administered in good faith compliance with Code Section 409A from the period
beginning January 1, 2005 through the date hereof.
24
(k) With respect to each Company Plan providing
compensation or benefits to any employee or former employee of any Acquired
Company (or any dependent or beneficiary thereof) which is subject to the laws
of any jurisdiction outside of the United States (the "FOREIGN PLANS"): (i) such
Foreign Plan has been maintained in all material respects in accordance with all
applicable requirements and all applicable laws, (ii) if intended to qualify for
special Tax treatment, such Foreign Plan meets all requirements for such
treatment, (iii) if intended or required to be funded and/or book-reserved, such
Foreign Plan has been funded and/or book reserved, as appropriate, based upon
reasonable actuarial assumptions, and (iv) no material Liability exists or
reasonably could be imposed upon the assets of any Acquired Company by reason of
such Foreign Plan.
(l) Each Acquired Company is in compliance in all
material respects with (i) the requirements of the applicable health care
continuation and notice provisions of Section 4980B of the Code, as amended, and
the regulations (including proposed regulations) thereunder and any similar
state law, and (ii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996, as amended, and the regulations
(including the proposed regulations) thereunder.
(m) Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, either alone or in
combination with another event (whether contingent or otherwise) will result in
any "parachute payment" under Code Section 280G (whether or not such payment is
considered to be reasonable compensation for services rendered).
3.18 ENVIRONMENTAL MATTERS. Except as disclosed in Section 3.18 of
the Disclosure Schedule:
(a) each Acquired Company presently complies with all
applicable Environmental Laws, and has all permits, licenses and other
authorizations required thereunder;
(b) no Acquired Company has owned, operated or leased, or
presently owns, operates or leases, real property (including the real property
subject to the Leases disclosed on Section 3.9 of the Disclosure Schedule) on
which Hazardous Substances are present, whether in air, soil, water, or building
materials, in violation of Environmental Laws;
(c) there are no pending, or, to the knowledge of the
Company or the Selling Securityholders, threatened, civil or criminal
investigations, demands, inquiries, proceedings, or information requests
regarding any Acquired Company's compliance with Environmental Laws;
(d) no Acquired Company is or has been a party to any
court order, administrative order, consent order or other agreement (other than
a duly issued permit) with a Governmental Entity under any Environmental Laws;
(e) no Acquired Company presently owns, operates or
leases any building (including the real property subject to the Leases disclosed
on Section 3.9 of the Disclosure Schedule) in which asbestos, underground
storage tanks, or polychlorinated bi-phenols are present;
25
(f) to the knowledge of the Company or the Selling
Securityholders, no Acquired Company presently has Environmental Liability;
(g) to the knowledge of the Company or the Selling
Securityholders, the Environmental Liability of each Acquired Company (if any)
has been fully estimated and disclosed in accordance with applicable accounting
standards, including but not limited to FIN 47, FASB 143, FASB 5, SEC Staff
Accounting Bulletin 92, and American Institute of Certified Public Accountants
Statement of Position 96-1, as appropriate; and
(h) no Acquired Company has generated, used, stored,
shipped, Released, disposed, or exposed any person to Hazardous Substances in
violation of Environmental Laws.
3.19 LEGAL COMPLIANCE AND PERMITS.
(a) Each of the Acquired Companies is, and since December
31, 2004 has been, in compliance with each applicable Law of any federal, state,
local or foreign government, or any Governmental Entity, including the Foreign
Corrupt Practices Act, 15 U.S.C. 78dd-1 et seq., and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced or, to the knowledge of the Company or the Selling
Securityholders, threatened against any of them alleging any failure to so
comply.
(b) Each Acquired Company has in effect all Permits
necessary for it to own, lease or operate its properties and assets and to carry
on its business and operations as presently conducted. Section 3.19 of the
Disclosure Schedule sets forth a list of all such Permits. Each such Permit is
in full force and effect, the applicable Acquired Company is in compliance with
the terms of each such Permit, and no suspension, revocation or cancellation of
such Permit is pending or, to the knowledge of the Company or the Selling
Securityholders, threatened. The consummation of the transactions contemplated
by this Agreement will not cause the suspension, revocation or cancellation of
any such Permit. Neither the Company nor the Selling Securityholders has any
knowledge of any condition that would cause any such Permit to fail to continue
in full force and effect immediately following the Closing.
3.20 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES, OFFICERS AND
DIRECTORS. No Affiliate, officer or director of any Acquired Company (other than
another Acquired Company) (a) owns any property or right, tangible or
intangible, which is used in the business of any Acquired Company, or (b) owes
any money to, or is owed any money by, any Acquired Company. Section 3.20 of the
Disclosure Schedule describes any business transactions or relationships between
any Acquired Company and any Affiliate (other than another Acquired Company),
officer or director of any Acquired Company (other than those based on his or
her status as an officer or director) which occurred or have existed since the
beginning of the time period covered by the Financial Statements. No Affiliate,
officer or director of any Acquired Company owns any interests in an entity that
is competitive with the business of any Acquired Company.
26
3.21 BOOKS AND RECORDS, BANK ACCOUNTS, ETC.
(a) The minute books and other similar records of each
Acquired Company are correct and complete in all material respects and have been
prepared in a timely manner in accordance with applicable Laws and record all
meetings and consents in lieu of meetings of each such Acquired Company's board
of directors (and any committees thereof, whether permanent or temporary) and
shareholders since the date of its incorporation, and such records accurately
reflect in all material respects all transactions referred to in such minutes
and consents.
(b) Section 3.21 of the Disclosure Schedule lists the
names and locations of all banks and trust companies in which any Acquired
Company has any account, line of credit or safety deposit box and the names of
persons having signature or drawing authority with respect thereto or access
thereto.
3.22 BROKERS' FEES. No Acquired Company has incurred, nor will any
Acquired Company incur, directly or indirectly, any Liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
3.23 FINANCIAL STATEMENTS. The Company has provided, or made
available, to the Buyer the following financial statements (collectively, the
"FINANCIAL STATEMENTS"): (i) an audited consolidated balance sheet as of
December 31, 2004 and the unaudited statements of income, changes in
stockholders' equity, and cash flow for the period from August 1, 2004 to
December 31, 2004, and audited consolidated balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
years ended December 31, 2005 and December 31, 2006 (the "MOST RECENT FISCAL
YEAR END") for the Company and its Subsidiaries; and (ii) unaudited consolidated
and consolidating balance sheets as of March 31, 2007 and the unaudited
statement of income, changes in stockholders' equity, and cash flow (the "MOST
RECENT FINANCIAL STATEMENTS") as of and for the three (3) months ended March 31,
2007 (the "MOST RECENT BALANCE SHEET DATE") for the Company and its
Subsidiaries. The Financial Statements (including the notes thereto, as
applicable) have been prepared in accordance with GAAP throughout the periods
covered thereby, present fairly in all respects that are material to the
business of the Acquired Companies taken as a whole the financial condition of
the Company and its Subsidiaries as of such dates and the results of operations
of the Company and its Subsidiaries for such periods, and are consistent with
the books and records of the Company and its Subsidiaries; PROVIDED, HOWEVER,
that the Most Recent Financial Statements and the unaudited statements of
income, changes in stockholders' equity, and cash flow for the period from
August 1, 2004 to December 31, 2004 are subject to normal year-end audit
adjustments and lack footnotes and other presentation items.
3.24 ABSENCE OF MATERIAL ADVERSE EFFECT. Since the Most Recent
Fiscal Year End, there has been no Effect on the business, assets, condition
(financial or otherwise) or operating results of the Acquired Companies, taken
as a whole, which has had, or could reasonably be expected to have, a Company
Material Adverse Effect.
27
3.25 INVENTORY. No later than two Business Days prior to Closing,
the Company has delivered to the Buyer a schedule containing an accurate and
complete breakdown of all inventory (including raw materials, work in process
and finished goods) of each Acquired Company as of May 23, 2007 (the "INVENTORY
SCHEDULE"). Except as set forth in the Inventory Schedule, all of the Acquired
Companies' existing inventory is, in all material respects, usable, merchantable
and saleable at historical gross profit margins, net of reserves, in the
Ordinary Course of Business. Except as set forth in the Inventory Schedule, the
inventory levels, net of reserves, including excess inventory and obsolete
items, as reflected in the Inventory Schedule, are adequate for the conduct of
operations of the Acquired Companies in the Ordinary Course of Business.
3.26 PRODUCT LIABILITY.
(a) Each product sold, licensed or delivered by each
Acquired Company has been in material conformity with all applicable product
specifications and contractual commitments, and the Acquired Companies have no
Liability, individually or in the aggregate (and to the knowledge of the Company
or the Selling Securityholders, there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand giving rise to any Liability, individually or in the aggregate, that has
had or could reasonably be expected to result in a Company Material Adverse
Effect) for replacement thereof or other damages in connection therewith.
(b) No product sold, licensed or delivered by any
Acquired Company is subject to any contractual guaranty, warranty, or other
indemnity, whether provided by an Acquired Company, a third party or otherwise.
There are no existing or, to the knowledge of the Company or the Selling
Securityholders, threatened product liability, failure to adequately warn or
other similar claims against any Acquired Company relating to or involving the
products of any Acquired Company.
3.27 GUARANTEES. No Acquired Company is a guarantor or otherwise
liable for any Liability (including indebtedness) of any other Person (other
than another Acquired Company).
3.28 EARNOUT PAYMENTS, ETC. No Acquired Company has any current or
future Liabilities with respect to any earnout payments or other contingent
payments with respect to any acquisition of assets or that would be triggered as
a result of the transactions contemplated by this Agreement.
3.29 DISCLOSURE. None of the information furnished by any Selling
Securityholder or by the Company to the Buyer in this Agreement, the Company
Certificate, the Disclosure Schedule or in any other certificate or other
document delivered by any Acquired Company or the Securityholders'
Representatives pursuant to this Agreement, or in any other Schedule or Exhibit
hereto or thereto, is, in any material respect, false or misleading or contains
any misstatement of a material fact, or omits to state any material fact
required to be stated in order to make the statements herein or therein not
misleading in light of the circumstances under which they were made.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company and the Selling
Securityholders that the statements contained in this ARTICLE IV are true and
correct as of the date of this Agreement and will be true and correct as of the
Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date (in
which case such representations and warranties will be true and correct as of
such date):
4.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER, ETC. The
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of New York, with full corporate power and authority to conduct
its business as it is now being conducted. The Buyer is duly qualified or
licensed to do business as a foreign corporation and is in corporate and tax
good standing (where such concepts are recognized under applicable Law) in each
state or other jurisdiction where either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it requires
such qualification, except where the failure to be so qualified or in good
standing would not reasonably be expected to have a Buyer Material Adverse
Effect.
4.2 AUTHORIZATION OF TRANSACTION. The Buyer has all requisite
power and authority to execute and deliver this Agreement and all other
agreements contemplated hereby to which the Buyer is a party and to perform its
obligations hereunder and thereunder. The execution and delivery by the Buyer of
this Agreement and all other agreements contemplated hereby to which the Buyer
is a party, and the consummation by the Buyer of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of the Buyer. This Agreement and all other
agreements contemplated hereby to which the Buyer is a party have each been, or
when executed and delivered by the Buyer will be, duly and validly executed and
delivered by the Buyer and each constitutes a valid and binding obligation of
the Buyer, enforceable against it in accordance with its terms, subject to
applicable subject to applicable Laws and bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar Laws affecting creditors'
rights and remedies generally and to general principles of equity.
4.3 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act, any applicable state securities Laws and the
Exchange Act, neither the execution and delivery by the Buyer of this Agreement
nor the consummation by the Buyer of the transactions contemplated hereby, will
(a) conflict with or violate any provision of the certificate of incorporation
or by-laws of the Buyer, (b) require on the part of the Buyer any notice to or
filing with, or any permit, authorization, consent or approval of, any
Governmental Entity, (c) conflict with, result in breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in the
acceleration of obligations under, create in any party the right to terminate,
accelerate, modify or cancel, or require any notice, consent or waiver under,
any material contract or instrument to which the Buyer is a party or by which
the Buyer is bound or to which its assets are subject, except, with respect to
this Section 4.3(c), (i) any conflict, breach, default, acceleration,
termination, modification or cancellation which would not adversely affect the
consummation of the transactions contemplated hereby or have a Buyer
29
Material Adverse Effect or (ii) any notice, consent or waiver the absence of
which would not have a Buyer Material Adverse Effect, or (d) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Buyer or
any of its properties or assets.
4.4 LITIGATION. There are no actions, suits or legal,
administrative or arbitration proceedings pending against, or, to the Buyer's
knowledge, threatened against, the Buyer which would adversely affect the
Buyer's performance under this Agreement or the consummation of the transactions
contemplated by this Agreement.
4.5 INVESTMENT INTENT. The Company Securities will be acquired by
the Buyer for its own account without a view to a distribution or resale
thereof. The Company Securities will only be sold or otherwise disposed of by
the Buyer pursuant to a registration or an exemption therefrom under the
Securities Act and in compliance with any other applicable securities laws.
4.6 BUYER FINANCIAL CAPACITY. The Buyer has access to and at the
Closing will have on hand, or will have available to it from credit or other
financing sources, sufficient cash to enable it to timely perform its
obligations hereunder, including to pay the Purchase Price as provided in
Section 1.5 and all fees and expenses payable by the Buyer pursuant to this
Agreement.
4.7 BROKERS' FEES. The Buyer will not incur, directly or
indirectly, any Liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
4.8 DISCLOSURE. None of the information furnished by the Buyer in
this Agreement, the Buyer Certificate or in any other certificate or other
document delivered by the Buyer pursuant to this Agreement, or in any Schedule
or Exhibit hereto or thereto, is, in any material respect, false or misleading
or contains any misstatement of a material fact, or omits to state any material
fact required to be stated in order to make the statements herein or therein not
misleading in light of the circumstances under which they were made.
ARTICLE V.
COVENANTS
5.1 CLOSING EFFORTS. Each of the Parties shall use its
commercially reasonable best efforts to take all actions and to do all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement.
5.2 GOVERNMENTAL AND THIRD-PARTY NOTICES AND CONSENTS.
(a) Prior to the Closing, each Party shall use its
commercially reasonable best efforts to obtain, at its expense, all waivers,
permits, consents, approvals or other authorizations from Governmental Entities,
and to effect all registrations, filings and notices with or to Governmental
Entities, as may be required for such Party to consummate the transactions
contemplated by this Agreement and to otherwise comply with all applicable Laws
in connection with the consummation of the transactions contemplated by this
Agreement.
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(b) Prior to the Closing, the Company shall use its
commercially reasonable best efforts to obtain, at its expense, all such
waivers, consents or approvals from third parties listed on Sections 3.4 and
3.9(b) of the Disclosure Schedule.
5.3 OPERATION OF BUSINESS. Except as contemplated by this
Agreement or set forth on Section 5.3 of the Disclosure Schedule, during the
period from the date of this Agreement to the Closing, the Acquired Companies
shall conduct their operations in the Ordinary Course of Business and in
material compliance with all Laws applicable to the operation of its business
and, to the extent consistent therewith, use its commercially reasonable best
efforts to preserve intact its current business organization, keep its physical
assets in good working condition, keep available the services of its current
officers and employees and preserve its relationships with clients, customers,
suppliers, manufacturers, distributors, consultants, licensors, licensees or
other Persons having business dealings with it to the end that its goodwill and
ongoing business shall not be impaired. Except as contemplated by this Agreement
or set forth on Section 5.3 of the Disclosure Schedule and subject in all events
to applicable Law, without limiting the generality of the foregoing, prior to
the Closing, the Acquired Companies shall not, without the written consent of
the Buyer:
(a) take any action to amend, or authorize the amendment
of their Organization Documents;
(b) issue, sell, or otherwise dispose of any capital
stock, bonds or other corporate securities (including upon conversion of any
convertible securities or upon exercise of any options, warrants or other
similar rights), except as expressly provided in Section 1.6 hereof, or grant
any option or issue any warrant or other right to purchase or subscribe for any
of such securities or issue any securities convertible into any such securities;
(c) issue any note, bond, or other debt security or
create, incur, assume or guarantee any obligation or Liability (absolute or
contingent);
(d) mortgage, pledge, or subject to any lien, charge or
any other encumbrance any of assets, tangible or intangible, or properties,
other than Permitted Encumbrances;
(e) sell, lease, assign or transfer any of its assets,
tangible or intangible, except in the Ordinary Course of Business;
(f) declare, set aside or pay any divided or make any
distribution with respect to its capital stock (whether in cash or kind) or
redeem, purchase or otherwise acquire any of its capital stock;
(g) cancel, compromise, waive or release any debts or
claims;
(h) delay or postpone the payment of accounts payable and
other Liabilities, except in the Ordinary Course of Business;
(i) merge or consolidate with or into any corporation or
other entity;
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(j) enter into any material strategic relationship or
alliance in which any Acquired Company agrees to share profits, pay royalties,
or grant exclusive rights of any nature to any material assets of any Acquired
Company to any third party;
(k) pay, promise or grant, whether orally or in writing,
any increase in the wages, salaries, bonuses, other compensation, pensions,
severance payments, fringe benefits or other benefits payable by any Acquired
Company to any of its employees, consultants or directors, including any
increase or change pursuant to any Company Plan, other than increases in the
cash salaries of non-officer employees of any Acquired Company in the Ordinary
Course of Business (in an amount, for each employee, not to exceed 5% of such
employee's annual cash salary); or (ii) enter into, promise to enter into or
amend any Company Plan (except as required by Law);
(l) make or change any material Tax election or make any
termination, revocation or cancellation of any such election, settle or
compromise any claim, notice, audit report or assessment in respect of Taxes,
change any annual Tax accounting period, adopt or change any method of Tax
accounting, file any amended material Tax Return, enter into any Tax allocation
agreement, Tax sharing agreement, Tax indemnity agreement, pre-filing agreement,
or closing agreement relating to any Tax, surrender any right to claim a Tax
refund, or consent to any extension or waiver of the statute of limitations
period applicable to any Tax claim or assessment;
(m) modify, amend, alter or terminate any of its
executory contracts identified in Section 3.11 of the Disclosure Schedule which
provide for (or will provide for as proposed to be amended) aggregate payments
by any Acquired Company in excess of $50,000 per annum;
(n) take or permit any act or omission constituting a
breach or default by any Acquired Company under any contract, indenture or
agreement identified or required to be identified in Section 3.11 of the
Disclosure Schedule;
(o) fail to operate its business and maintain its books,
accounts and records in the Ordinary Course of Business;
(p) enter into any lease, contract, agreement or
understanding (or series of related leases, contracts, agreements or
understandings), or amendment thereto, other than those entered into in the
Ordinary Course of Business, which call for aggregate payments of less than
$25,000 in any one year period and do not extend for a term of more than one
year;
(q) accelerate, terminate, modify or cancel any
agreement, contract, lease or license (or series of related agreements,
contracts, leases or licenses) involving more than $50,000 in the aggregate in
any one-year period to which any Acquired Company is a party or by which any of
them is bound;
(r) incur any capital expenditure in excess of $25,000 in
one instance or $50,000 in the aggregate;
(s) make any capital investment in or any acquisition of
the securities or assets of, any other Person (or series of related capital
investments and acquisitions);
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(t) make any loans or advances of money, other than to
directors, officers or employees exclusively for business expenses in the
Ordinary Course of Business and in accordance with applicable Law;
(u) enter into any agreement the primary purpose of which
is to provide indemnification or any collective bargaining agreement, whether
written or oral, or modify the terms of any existing such agreement;
(v) transfer, assign or grant any license or sublicense
to any rights under or with respect to Company Intellectual Property, or amend
or modify in any material respect any rights in the Company Intellectual
Property;
(w) enter into any other transaction with, any of its
directors, officers and employees outside of the Ordinary Course of Business;
(x) settle any litigation or waive, release or assign any
rights or claims thereunder except as necessary to satisfy closing conditions
hereunder;
(y) disclose any confidential information of any of the
Acquired Companies or the Buyer;
(z) make or change any accounting method, election or
practice in a manner that is inconsistent with historical practice or change any
accounting period except, in each case, as may be required to meet changes in
applicable accounting standards; or
(aa) commit or agree to do any of the foregoing in the
future.
5.4 ACCESS TO INFORMATION.
(a) The Company shall permit representatives of the Buyer
(including Buyer's legal counsel and tax and accounting advisors) to have
reasonable access (at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company) to all premises,
properties, personnel, financial, tax and accounting records (including the work
papers of the Company's independent accountants and the general ledgers of the
Acquired Companies), contracts, other records and documents, and personnel, of
or pertaining to the Acquired Companies.
(b) The Buyer (i) shall treat and hold as confidential
any Confidential Information, (ii) shall not use any of the Confidential
Information except in connection with this Agreement, and (iii) if this
Agreement is terminated for any reason whatsoever, shall return to the Company
all tangible embodiments (and all copies) thereof which are in its possession.
Notwithstanding the previous sentence, the Buyer may disclose any and all
Confidential Information to any banking or lending institution in connection
with any loan or loan application so long as such banking or lending institution
is aware of the confidential nature of the information and agree to treat and
hold as confidential such information to the same extent and manner as agreed by
the Buyer.
33
5.5 EXPENSES. The Company has provided the Buyer with a schedule
setting forth in reasonable detail and clarity the Transaction Expenses (as
defined below) to be paid or incurred by any Acquired Company (the "FEE
SCHEDULE"). At the Closing, the Buyer will pay all of the Transaction Expenses
incurred by any Acquired Company, to the extent such Transaction Expenses were
set forth on the Fee Schedule, by wire transfer of immediately available funds
to the accounts designated by the Company at least five Business Days prior to
Closing. "TRANSACTION EXPENSES" shall mean the costs and expenses incurred by
any Acquired Company in connection with the negotiation, preparation and
execution of this Agreement, including the fees and expenses of all attorneys,
accountants, brokers, investment bankers or other advisors or third Persons
employed or retained by or on behalf of such Party in connection therewith.
Except as specifically set forth in this Agreement and in the Escrow Agreement
and the fees and reasonable expenses of Silicon Valley Bank payable by the
Company upon completion of the transactions contemplated by this Agreement
pursuant to the Loan and Security Agreement dated May 5, 2003, each of the
Parties shall bear its own costs and expenses incurred in connection with the
negotiation, preparation and execution of this Agreement, including the fees and
expenses of all attorneys, accountants, brokers, investment bankers or other
advisors or third Persons employed or retained by or on behalf of such Party
("ADVISORS") in connection therewith. For the avoidance of doubt, each Selling
Securityholder shall be responsible for the fees and expenses of any Advisors
employed or retained by or on behalf of such Selling Securityholder in
connection with the transactions contemplated by this agreement, and any such
fees or expenses shall not be a liability of the Company or the Buyer.
5.6 NOTIFICATION.
(a) Between the date of this Agreement and the Closing
Date, the Company and each Selling Securityholder will promptly (and in no event
later than 24 hours) notify Buyer in writing if such Party becomes aware of any
Effect that causes or constitutes a breach of any of the Selling
Securityholders' or the Company's representations and warranties as of the date
of this Agreement, or if such Party becomes aware of any Effect after the date
of this Agreement that would cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such Effect. During the same period, the
Company and each Selling Securityholder will promptly (and in no event later
than 24 hours) notify Buyer in writing if such Party becomes aware of any breach
of any covenant of the Company or any Selling Securityholder or of any Effect
that may make the satisfaction of the conditions in Section 6.1 impossible or
unlikely. No disclosure by any Party pursuant to this Section 5.6(a), however,
shall prevent or cure any misrepresentation or any breach of any representation,
warranty or covenant of the Company and the Selling Securityholders contained in
this Agreement or adversely affect any of Buyer's rights or remedies under this
Agreement with respect thereto, including, without limitation, any rights to
indemnification pursuant to ARTICLE VII hereof; PROVIDED, HOWEVER, that if such
disclosure is made by the Company and/or the Securityholders' Representatives by
a written supplement or amendment to the Disclosure Schedule on or prior to the
second Business Day prior to the Closing Date, referencing this Section 5.6(a)
and the other relevant Section(s) of this Agreement and the Disclosure Schedule
to which such disclosure relates, and setting forth in reasonable detail the
Effects that cause or constitute such breaches or misrepresentations, and the
Buyer shall not have terminated this Agreement pursuant to Section 8.1(g) within
two Business Days after Buyer's receipt of such supplement or amendment to the
Disclosure Schedule, no Buyer
34
Indemnified Party shall have any rights to indemnification pursuant to ARTICLE
VII in respect of such specified misrepresentations or breaches set forth in
such amendment or supplement to the Disclosure Schedule.
(b) Between the date of this Agreement and the Closing
Date, the Buyer will promptly (and in no event later than 24 hours) notify the
Company and the Securityholders' Representatives in writing if it becomes aware
of any Effect that causes or constitutes a breach of any of the Buyer's
representations and warranties as of the date of this Agreement, or if it
becomes aware of any Effect after the date of this Agreement that would cause or
constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such Effect. During the same period, the Buyer will promptly (and in no event
later than 24 hours) notify the Company and the Securityholders' Representatives
in writing if it becomes aware of any breach of any covenant of the Buyer or of
any Effect that may make the satisfaction of the conditions in Section 6.2
impossible or unlikely. No disclosure by the Buyer pursuant to this Section
5.6(b), however, shall prevent or cure any misrepresentation or any breach of
any representation, warranty or covenant of the Buyer contained in this
Agreement or adversely affect any of the Selling Securityholders' rights or
remedies under this Agreement with respect thereto, including, without
limitation, any rights to indemnification pursuant to ARTICLE VII hereof;
PROVIDED, HOWEVER, that if such disclosure is made by the Buyer by written
notice to the Company and the Securityholders' Representatives on or prior to
the second Business Day prior to the Closing Date, referencing this Section
5.6(b) and the other relevant Section(s) of this Agreement to which such
disclosure relates, and setting forth in reasonable detail the Effects that
cause or constitute such breaches or misrepresentations, and the Company and the
Selling Securityholders holding a majority of the outstanding Company Securities
shall not have terminated this Agreement pursuant to Section 8.1(h) within two
Business Days after their receipt of such written notice, no Selling
Securityholder shall have any rights to indemnification pursuant to ARTICLE VII
in respect of such specified misrepresentations or breaches set forth in such
written notice.
5.7 DIRECTOR AND OFFICER INDEMNIFICATION.
(a) Section 5.7 of the Disclosure Schedule lists each
indemnification agreement or arrangement currently in place to which the Company
and one or more current or former officers or directors of the Company is a
party. From and after the Closing Date, the Buyer shall indemnify, defend and
hold harmless, to the fullest extent permitted under applicable law, the
individuals who on or prior to the Closing Date were directors or officers of
any Acquired Company (collectively, the "INDEMNITEES") with respect to all acts
or omissions by them in their capacities as such or taken at the request of any
Acquired Company at any time prior to the Closing Date. The Buyer agrees that
all rights of the Indemnitees to indemnification and exculpation from
Liabilities for acts or omissions occurring at or prior to the Closing Date as
provided in the certificate of incorporation or by-laws of any Acquired Company
as now in effect, and any indemnification agreements or arrangements of any
Acquired Company shall survive the Closing Date and shall continue in full force
and effect in accordance with their terms. Such rights shall not be amended, or
otherwise modified in any manner that would adversely affect the rights of the
Indemnitees, unless such modification is required by Law. In addition, the Buyer
shall pay any expenses of any Indemnitee under this Section 5.7, as incurred to
the fullest extent permitted under applicable Law, PROVIDED, THAT, the person to
whom
35
expenses are advanced provides an undertaking to repay such advances to the
extent required by applicable Law.
(b) For the six-year period commencing immediately after
the Closing Date, the Buyer shall maintain in effect the Company's current
directors' and officers' liability insurance covering acts or omissions
occurring prior to the Closing Date with respect to those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy on terms with respect to such coverage and amount no less favorable to
the Company's directors and officers currently covered by such insurance than
those of such policy in effect on the date hereof; PROVIDED, THAT, the Buyer may
substitute therefor policies of a reputable insurance company the terms of
which, including coverage and amount, are no less favorable to such directors
and officers than the insurance coverage otherwise required under this Section
5.7(b).
(c) The provisions of this Section 5.7: (i) are intended
to be for the benefit of, and shall be enforceable by, each Indemnitee, his or
her heirs and his or her representatives; and (ii) are in addition to, and not
in substitution for, any other rights to indemnification or contribution that
any such person may have by contract or otherwise.
(d) The obligations of the Buyer under this Section 5.7
shall not be terminated or modified in such a manner as to adversely affect any
Indemnitee to whom this Section 5.7 applies without the consent of the affected
Indemnitee (it being expressly agreed that the Indemnitees to whom this Section
5.7 applies shall be third-party beneficiaries of this Section 5.7).
(e) Notwithstanding anything in this Agreement to the
contrary, Buyer shall not be required to indemnify any Indemnitee pursuant to
this Section 5.7, and no Selling Securityholder shall be entitled to any
indemnification pursuant to this Section 5.7 in his or her capacity as an
Indemnitee, with respect to any matter for which a Buyer Indemnified Party is
entitled to indemnification pursuant to ARTICLE VII hereof.
5.8 EMPLOYMENT MATTERS.
(a) EMPLOYEE BENEFITS. Prior to Closing, each individual
who is an employee of any Acquired Company immediately prior to the Closing
shall be offered the opportunity to continue as an employee of such Acquired
Company immediately after the Closing (each, a "CONTINUING EMPLOYEE"). Effective
as of the Closing Date and until the first anniversary thereof, subject to
Section 5.8(b) below, the Buyer shall cause the Company (or one of its
Affiliates after the Closing) to provide to each Continuing Employee health and
welfare benefits that are, in the aggregate, substantially comparable to the
health and welfare benefits provided to such Continuing Employee as of the date
of this Agreement. For the avoidance of doubt, for purposes of this Section 5.8,
"health and welfare" benefits shall not include any cash or equity compensation,
or any vacation or other Paid Time Off accrual. For purposes of determining
eligibility to participate and vesting where length of service is relevant under
any benefit plan or arrangement in which any Continuing Employee becomes
eligible to participate, Continuing Employees shall receive service credit for
service with any Acquired Company prior to the Closing Date to the same extent
such service credit was granted under comparable Company
36
Plans. Buyer shall, to the maximum extent permitted under any applicable benefit
plans or arrangements in which Continuing Employees become eligible to
participate, (i) cause to be waived all limitations as to preexisting
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Continuing Employees; and (ii) provide
each Continuing Employee with credit for any co-payments and deductibles paid in
the plan year including the date on which the Continuing Employee becomes
eligible to participate in the applicable plans or arrangements of the Buyer, in
satisfaction of any applicable deductible or out-of-pocket requirements.
(b) NO THIRD-PARTY RIGHTS; NO RIGHT TO CONTINUED
EMPLOYMENT. No provision of this Section 5.8 shall create any third-party
beneficiary or other rights in any Continuing Employee or former employee
(including any beneficiary or dependent thereof) in respect of (i) continued
employment (or resumed employment) with Buyer, any Acquired Company or any of
their Affiliates, or (ii) any benefits that may be provided, directly or
indirectly, under any Company Plans or any similar plan or arrangement which may
be established or maintained by Buyer, any Acquired Company or any of their
respective Affiliates. No provision of this Section 5.8 shall obligate Buyer,
any Acquired Company or any of their Affiliates to adopt or maintain any benefit
plan at any time.
5.9 TAX MATTERS.
(a) TAX RETURNS FOR PRE-CLOSING TAX PERIODS. The Company
shall prepare or cause to be prepared in a manner consistent with the past
practices of the Acquired Companies and timely file or cause to be timely filed
all Tax Returns for the Acquired Companies required to be filed by the Acquired
Companies prior to the Closing (after taking into account any extensions) (each,
a "PRE-CLOSING TAX RETURN"). All such Pre-Closing Tax Returns shall be complete
and accurate in all material respects. The Company shall pay or cause to be paid
on a timely basis all Taxes due and payable in respect of such Pre-Closing Tax
Returns that are so filed. Each of the Acquired Companies shall accrue a reserve
in its books and records and Most Recent Financial Statements in accordance with
past practices for Taxes payable by such Acquired Company for which no
Pre-Closing Tax Return is due prior to the Closing. The Buyer shall prepare or
cause to be prepared in a manner consistent with the past practices of the
Acquired Companies and timely file or cause to be timely filed all Tax Returns
for the Acquired Companies for all Pre-Closing Tax Periods (but not for Straddle
Periods or any portion thereof which are dealt with in Section 5.9(b)) that are
not required to be and have not been filed prior to the Closing Date (each, a
"POST-CLOSING TAX RETURN"); PROVIDED, HOWEVER, that subject to the Dispute
Notice process set forth in Section 5.9(i) below, the Buyer shall not be
required to take a position or other method of reporting in such Post-Closing
Tax Return if the Arbiter makes a determination that such position or method of
reporting is not reasonably likely to be sustained upon audit. The Buyer shall
provide to the Securityholders' Representatives drafts of all such Post-Closing
Tax Returns for review and comment at least 30 days prior to the due date for
the filing of each such Post-Closing Tax Return, including extensions, or such
shorter period as is necessary to allow for the timely filing of such
Post-Closing Tax Return. Not later than 15 days after the Buyer has provided
such Post-Closing Tax Return, the Securityholders' Representatives shall notify
the Buyer of the existence of any objection, specifying in reasonable detail the
nature and basis of such objection, the Securityholders' Representatives may
have to any item set forth on such draft Post-Closing Tax Return (a "DISPUTE
NOTICE"). The Buyer and the Securityholders'
37
Representatives agree to consult and resolve in good faith any such objection.
If any such dispute has not been resolved by the due date for filing any such
Post-Closing Tax Return, the Buyer shall file such Tax Return on its due date in
such manner as it deems appropriate, and the Parties shall submit any dispute
relating to such Tax Return, including whether an amended return should be
filed, to the Arbiter in accordance with the procedures set forth in Section
5.9(i). Within 15 days after the date on which Taxes are paid with respect to
any Post-Closing Tax Return (or if a dispute relating to the amount of such
Taxes has been submitted to the Arbiter, within 15 days after the Arbiter's
determination is rendered), the Buyer and the Securityholders' Representatives
shall execute and the Buyer shall deliver written notice instructing the Escrow
Agent to distribute to the Buyer from the Escrow Cash the amount, if any, by
which such Taxes of the Acquired Companies in respect of such Post-Closing Tax
Return (or if a dispute relating to the amount of such Taxes was submitted to
the Arbiter, the amount of Taxes determined by the Arbiter to be the correct
amount of Taxes owed) exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the balance sheet in the Company's
Most Recent Financial Statements as adjusted for operations and transactions
through the Closing Date in accordance with past custom and practice of such
Acquired Companies in filing their Tax Returns.
(b) APPORTIONMENT OF TAXES FOR STRADDLE PERIODS. All
Taxes with respect to or of the Acquired Companies that relate to a Straddle
Period shall be apportioned to the Pre-Closing Tax Period as follows: (i) in the
case of Taxes that are either (A) based upon or related to income, receipts,
capital or net worth, or (B) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or intangible)
(other than Taxes on conveyances pursuant to this Agreement that are governed by
Section 5.9(f)), such Taxes apportioned to the Pre-Closing Tax Period shall be
deemed equal to the amount which would be payable if the Tax year ended with the
Closing Date; and (ii) in the case of Taxes imposed on a periodic basis other
than those described in clause (i), including property Taxes and similar ad
valorem obligations, such Taxes shall be deemed to be the amount of such Taxes
for the entire Straddle Period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding period),
multiplied by a fraction the numerator of which is the number of calendar days
in the period ending on the Closing Date and the denominator of which is the
number of calendar days in the entire period. All transactions not in the
Ordinary Course of Business occurring on the Closing Date after the Closing
shall be apportioned to a Post-Closing Tax Period.
(c) TAX RETURNS FOR STRADDLE PERIODS. The Buyer shall
prepare or cause to be prepared in a manner consistent with the past practices
of the Acquired Companies and timely file or cause to be timely filed all Tax
Returns for the Acquired Companies for all Straddle Periods (each, a "STRADDLE
PERIOD TAX RETURN"); PROVIDED, HOWEVER, that subject to the Dispute Notice
process provided in Section 5.9(i) below, the Buyer shall not be required to
take a position or other method of reporting in such Straddle Period Tax Return
if the Arbiter makes a determination that such position or method of reporting
is not reasonably likely to be sustained upon audit. Buyer shall provide to the
Securityholders' Representatives drafts of all such Straddle Period Tax Returns
for review and comment at least 30 days prior to the due date for the filing of
each such Straddle Period Tax Return, including extensions, or such shorter
period as is necessary to allow for the timely filing of such Straddle Period
Tax Return. Not later than 15 days after Buyer has provided such Straddle Period
Tax Return, the Securityholders'
38
Representatives shall provide to Buyer any Dispute Notice. Buyer and the
Securityholders' Representatives agree to consult and resolve in good faith any
such objection. If any such dispute has not been resolved by the due date for
filing any such Straddle Period Tax Return, the Buyer shall file such Tax Return
on its due date in such manner as it deems appropriate, and the Parties shall
submit any dispute relating to such Tax Return, including whether an amended
return should be filed, to the Arbiter in accordance with the procedures set
forth in Section 5.9(i). Within 15 days after the date on which Taxes are paid
with respect to any Straddle Period Tax Return (or if a dispute relating to the
amount of such Taxes has been submitted to the Arbiter, within 15 days after the
Arbiter's determination is rendered), the Buyer and the Securityholders'
Representatives shall execute and the Buyer shall deliver written notice
instructing the Escrow Agent to distribute to the Buyer from the Escrow Cash the
amount, if any, by which such Taxes of the Acquired Companies that are
attributable to the Straddle Period pursuant to Section 5.9(b) (or if a dispute
relating to the amount of such Taxes was submitted to the Arbiter, the amount of
Taxes determined by the Arbiter to be the correct amount of Taxes owed), when
added to any Taxes of the Acquired Companies payable in respect of any
Post-Closing Tax Return pursuant to Section 5.9(a), exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the face of the balance
sheet in the Company's Most Recent Financial Statements as adjusted for
operations and transactions through the Closing Date in accordance with past
custom and practice of such Acquired Companies in filing their Tax Returns.
(d) COOPERATION ON TAX MATTERS. Buyer, the Acquired
Companies, the Securityholders' Representatives and the Selling Securityholders
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Agreement
and any Tax Proceeding. Such cooperation shall include the retention and (upon
the other party's request) the provision of records and information which are
reasonably relevant to any such Tax Proceeding, the provision of powers of
attorney and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Buyer, the Acquired Companies, the Securityholders' Representatives,
and the Selling Securityholders' agree (i) to retain all books and records with
respect to Tax matters pertinent to the Acquired Companies relating to any
Taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified, any extensions thereof) of
the respective Taxable periods, plus 60 days, and to abide by all record
retention agreements entered into with any Taxing authority, (ii) to deliver or
make available to Buyer on the Closing Date, copies of all such books and
records, and (iii) if the other party so requests in writing, Buyer, the
Acquired Companies, the Securityholders' Representatives, and the Selling
Securityholders, as the case may be, shall, before destroying or discarding such
books and records, allow the other party to take possession of them at such
other party's expense. Buyer and the Securityholders' Representatives further
agree, upon request, to use their commercially reasonable best efforts to obtain
any certificate or other document from any Governmental Entity or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including with respect to the transactions contemplated hereby).
(e) CONTEST PROVISIONS. If, subsequent to the Closing,
Buyer or any Acquired Company receives notice of a Tax Proceeding with respect
to any Tax Return for a Pre-Closing Tax Period for which the Selling
Securityholders are or may be required to indemnify the Buyer
39
or any Acquired Company pursuant to this Agreement, then within 20 days after
receipt of such notice, the Buyer shall notify in writing the Securityholders'
Representatives of such notice; provided, that the failure of the Buyer or any
Acquired Company to so notify the Securityholders' Representative shall not
relieve the Selling Securityholders of any indemnification obligation hereunder
except to the extent that the defense of such Tax Proceeding is prejudiced by
the failure to give such notice. The Securityholders' Representatives shall have
the right to control the conduct and resolution of such Tax Proceeding,
PROVIDED, HOWEVER, that if any of the issues raised in such Tax Proceeding could
have an impact on Taxes of any Acquired Company for a Post-Closing Tax Period,
then (i) the Buyer shall have the opportunity to control jointly the conduct and
resolution of only the portion of such Tax Proceeding which could have an impact
on Taxes of any Acquired Company in any Post-Closing Tax Period and (ii) the
Securityholders' Representatives shall not enter into any settlement of or
otherwise compromise any such Tax Proceeding without the prior written consent
of the Buyer; and PROVIDED, FURTHER, that if the Selling Securityholders are not
reasonably expected to fully indemnify Buyer pursuant to this Agreement for any
losses arising from such Tax Proceeding, then the Securityholders'
Representatives shall afford Buyer the opportunity to control jointly the
conduct and resolution of such Tax Proceeding. If the Securityholders'
Representatives shall have the right to control the conduct and resolution of
such Tax Proceeding but elect in writing not to do so within ten days of
receiving notice of such Tax Proceeding, then Buyer shall have the right to
control the conduct and resolution of such Tax Proceeding, PROVIDED, THAT, Buyer
shall keep the Securityholders' Representatives informed of all developments on
a timely basis and Buyer shall not resolve such Tax Proceeding in a manner that
could reasonably be expected to have an adverse impact on the indemnifying
parties' indemnification obligations under this Agreement without
Securityholders' Representatives written consent, which shall not be
unreasonably withheld, conditioned or delayed. Each party shall bear its own
costs for participating in such Tax Proceeding.
(f) CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other substantially similar Taxes and fees (including
any penalties and interest) incurred in connection with this Agreement and the
purchase by the Buyer of the Company Securities (collectively, "TRANSFER TAXES")
shall be paid by the Buyer when due, and the Buyer and Selling Securityholders
shall jointly prepare and timely file all necessary Tax Returns and other
documentation with respect to all such Transfer Taxes. Any expenses incurred in
making such filings shall be paid by the Buyer.
(g) POWERS OF ATTORNEY AND OTHER TAX AGREEMENTS. All
powers of attorney, Tax sharing agreements or similar arrangements with respect
to or involving any Acquired Company shall be terminated prior to the Closing
Date and, after the Closing Date, such Acquired Company shall not be bound
thereby or have any Liability thereunder for amounts due in respect of periods
ending on or before the Closing Date.
(h) TAXES INDEMNIFIED. The Selling Securityholders shall
be responsible for, and shall (without any right of contribution from any
Acquired Company or any right of indemnification against any Acquired Company),
indemnify, defend and hold harmless the Buyer Indemnified Parties (as defined
herein) from and against any and all Taxes imposed by any Governmental Entity on
the Acquired Companies with respect to any Pre-Closing Tax Period (including,
without limitation, the Taxes contemplated in Sections 5.9(a) and (b)) to the
40
extent that such Taxes are in excess of the provision for Taxes in the Company's
Most Recent Financial Statement as adjusted for operations and transactions
through the Closing Date in accordance with past custom and practice of such
Acquired Companies in filing their Tax Returns. The Buyer shall be responsible
for, and shall indemnify and hold harmless the Selling Securityholders from, all
Taxes imposed by any Governmental Entity on the Acquired Companies with respect
to any Post-Closing Tax Period. Any claim for indemnification pursuant to this
Section 5.9(h) shall be governed by the provisions of ARTICLE VII; PROVIDED,
HOWEVER, that the procedures for dealing with claims from Governmental Entities
relating to Taxes shall be governed by Section 5.9(a) rather than Section
7.3(a).
(i) TAX RETURN DISPUTE RESOLUTION. If a dispute arises
under Sections 5.9(a) or 5.9(c) relating to the filing of any Tax Returns, the
Securityholders' Representatives and the Buyer shall promptly consult each other
in an effort to resolve such dispute. If any such point of disagreement cannot
be resolved within 15 days of the date of consultation, all points of
disagreement concerning such Tax Returns shall be submitted to
PricewaterhouseCoopers LLP, or other nationally recognized independent
accounting firm selected by the Buyer and the Securityholders' Representatives
(the "ARBITER"). The Buyer and the Securityholders' Representatives each agree
to execute, if requested by the Arbiter, a reasonable engagement letter. All
fees and expenses of the Arbiter shall be borne equally by the Selling
Securityholders, in accordance with their Pro Rata Share, and the Buyer. The
Arbiter shall act as an arbitrator to determine, based solely on the
presentations by the Securityholders' Representatives and the Buyer, and not by
independent review, only those issues remaining in dispute. The Arbiter's
determination shall be made within 30 days of its engagement, shall be set forth
in a written statement delivered to the Securityholders' Representatives and the
Buyer and shall be final and binding on the parties hereto.
5.10 FIRPTA. Prior to the Closing, (i) the Company shall deliver to
the Buyer and to the IRS notices that the Common Shares are not "U.S. real
property interests" in accordance with Treasury Regulations under Sections 897
and 1445 of the Code, or (ii) each of the Selling Securityholders shall deliver
to the Buyer certifications that they are not foreign persons in accordance with
the Treasury Regulations under Section 1445 of the Code, in either case,
together with authorization for Buyer to deliver such notices or certifications
to the IRS upon the Closing.
5.11 WITHHOLDING FORMS. At or prior to the Closing, each Selling
Securityholder shall deliver to the Buyer a properly completed IRS Form W-9
establishing an exemption from backup withholding.
5.12 FINANCIAL STATEMENTS. The Company and the Securityholders'
Representatives each agree to cooperate with the Buyer in good faith with
respect to any filings required by the Buyer or any of its Affiliates with the
U.S. Securities and Exchange Commission ("SEC") and revise or prepare any
financial statements, including the Financial Statements and a balance sheet
dated as of the Closing Date, required to be included in any such filing in a
form appropriate for such filing, and use its commercially reasonable best
efforts to obtain any consents of independent accounting firms required in
connection therewith, at the Buyer's sole expense.
41
5.13 INVENTORY. At the request of the Buyer, the current Chief
Executive Officer and the Chief Financial Officer of the Company each shall use
commercially reasonable best efforts to assist the Buyer in completing within 15
days after the Closing Date an accurate and complete statement of all inventory
(including raw materials, work in process and finished goods) for each Acquired
Company as of the Closing Date.
5.14 PAYOFF OF INDEBTEDNESS. Prior to the Closing Date, the Company
shall take all actions required to be taken, and Buyer shall cooperate fully
with the Company, to enter into all necessary arrangements with Silicon Valley
Bank, as the lender under the Loan and Security Agreement, dated May 5, 2003, as
amended, and with Silicon Valley Bank, as the lender under the Loan and Security
Agreement, dated July 28, 2004, as amended (together, the "FACILITIES"), to
obtain pay-off letters in customary form that will permit (i) either the Company
to pay or otherwise satisfy or discharge, in full, immediately prior to the
Closing, or the Buyer to pay or otherwise satisfy or discharge, in full, at or
following the Closing, all aggregate principal amount of borrowings then
outstanding under the Facilities, if any, and all then outstanding reimbursement
obligations under drawn letters of credit, together with all unpaid interest
accrued thereon and other fees and expenses payable in respect thereof (it being
hereby agreed that the Company and the Buyer shall mutually determine whether
the Company or the Buyer shall make such payments and when) and (ii) the Buyer,
immediately following such payment, satisfaction or discharge, to obtain
evidence, in form and substance reasonably satisfactory to the Buyer, to the
effect that (A) all Security Interests held by Silicon Valley Bank in connection
with the Facilities shall have been released, (B) all UCC Financing Statements
in respect of such Security Interests shall have been terminated and (C) the
Acquired Companies shall have been released from all Liabilities under the
Facilities and all related guarantees and pledges.
5.15 TERMINATION OF CERTAIN AGREEMENTS. Prior to the Closing, the
Company and the Selling Securityholders party thereto shall cause each of the
agreements set forth on SCHEDULE III to be terminated, and to be of no further
force and effect, and shall deliver evidence of such termination to the Buyer in
form and substance reasonably satisfactory to the Buyer.
5.16 RESIGNATION OF MANAGING DIRECTOR OF AXXORA DEUTSCHLAND GMBH.
If the Buyer shall request following the Closing, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D. shall
promptly (and in no event later than 24 hours after such request) resign as
Geschaftsfuhrer (Managing Director) of Axxora Deutschland GmbH.
5.17 NON-COMPETITION; NON-SOLICITATION AND CONFIDENTIALITY
COVENANTS. The covenants and agreements contained in this Section 5.17 are made
severally (and not jointly) solely by the Selling Securityholders named in this
Section 5.17.
(a) NON-COMPETITION. During a period of two years from the Closing
Date, each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Sales, ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇, and their respective Affiliates, for himself, herself
or itself or on behalf of or in conjunction with any other Person, will not,
directly or indirectly, compete, own, operate, control, or participate or engage
in the ownership, management, operation or control of, or be connected with as
an officer, employee, partner, director, shareholder, representative,
consultant, independent contractor, guarantor, advisor or in any other manner or
otherwise have a financial interest in, any other Person that is engaged in a
business that directly competes with any business of any
42
Acquired Company, including the development, production, manufacturing,
in-licensing, commercialization and worldwide marketing and sales of life
sciences research reagents and the development, operation and worldwide
marketing of online purchasing marketplaces for research reagents and businesses
ancillary thereto (the "BUSINESS"); PROVIDED, HOWEVER, that nothing contained in
this Section 5.17(a) shall be deemed to prevent such Party from (i) beneficially
owning, directly or indirectly, 5% or less of any class of securities of an
entity that has a class of securities registered under Section 12 of the
Exchange Act or (ii) directly or indirectly (as a principal or agent or
otherwise and alone or in association with any other Person) carrying on,
engaging or taking part in, rendering services to or owning, sharing in the
earnings of or investing in the stocks, bonds or other securities of any Person
10% or less of whose gross revenues for the preceding calendar year were not,
and for the calendar year in question are not reasonably expected to be, derived
from being engaged in the Business; PROVIDED, FURTHER, that such relationships
do not constitute bad faith efforts to circumvent the covenant set forth in this
Section 5.17(a).
(b) NON-SOLICITATION. During a period of two years from the
Closing Date, each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Sales,
▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇, and their respective Affiliates, for himself,
herself or itself or on behalf of or in conjunction with any other Person, will
not, directly or indirectly: (i) solicit, endeavor to entice away from any
Acquired Company, or otherwise interfere with or disrupt, or attempt to
interfere with or disrupt, the relationship, contractual or otherwise, between
any Acquired Company, on the one hand, and any Person who is employed by or
otherwise engaged to perform services for any Acquired Company, on the other
hand, or (ii) solicit, endeavor to entice away from any Acquired Company, or
otherwise interfere with or disrupt, or attempt to interfere with or disrupt,
the relationship, contractual or otherwise, between any Acquired Company, on the
one hand, and any Person who is or was within the then most recent two year
period, a client, customer, supplier, manufacturer, distributor, consultant,
licensor, licensee or other Person having business dealings with any Acquired
Company, on the other hand.
(c) CONFIDENTIALITY. From and after the Closing Date, each of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Sales, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇, and their respective Affiliates, for himself, herself or itself or on
behalf of or in conjunction with any other Person, will not, directly or
indirectly, print, publish, divulge or communicate to any Person or use for his,
her or its own account any trade or business secret, process, method or means,
or any other Confidential Information concerning any Acquired Company. Such
Party further agrees and acknowledges that all of such Confidential Information,
in any form, and copies and extracts thereof, are and shall remain the sole and
exclusive property of the Acquired Companies and upon termination of his or her
employment with any Acquired Company, the Buyer or any of their respective
Affiliates, such Party shall return to the Acquired Companies the originals and
all copies of any such Confidential Information provided to or acquired by such
Party in connection with the performance of his duties for the Acquired
Companies, and shall return to the Acquired Companies all files, correspondence
and/or other communications received, maintained and/or originated by such Party
during the course of his or her employment, and no copy of any such materials
shall be retained by such Party. Such Party further covenants and agrees that he
or she shall retain the Confidential Information received or obtained in trust
for the sole benefit of the Acquired Companies and their successors and assigns.
In the event that such Party is requested pursuant to subpoena or other legal
process to disclose any of the Confidential
43
Information, such Party will provide the Acquired Companies with prompt notice
so that the Acquired Companies may seek a protective order or other appropriate
remedy and/or waive compliance with this Section 5.17(c). In the event that such
protective order or other remedy is not obtained or that the Acquired Companies
waive compliance with the provisions of Section 5.17(c), such Party will furnish
only that portion of the Confidential Information which is legally required.
(d) GENERAL. Each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ Sales, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇, and their respective Affiliates,
further acknowledge and agree that: (i) the covenants contained in this Section
5.17 are essential elements of this Agreement and that but for the agreements of
such Party to comply with such covenants, the Buyer would not have entered into
this Agreement; (ii) the covenants contained in this Section 5.17 are reasonable
and necessary in terms of time, area and geographic scope, and line of business;
(iii) the covenants contained in this Section 5.17 are reasonable and necessary
in terms of time, area and geographic scope, and line of business to protect the
Acquired Companies' legitimate business interests, which include their interests
in protecting the Acquired Companies' (A) valuable Confidential Information, (B)
substantial relationships with customers, suppliers, licensors, licensees and
other Persons having business dealings with the Acquired Companies, and (C)
customer goodwill associated with the businesses of the Acquired Companies; and
(iv) such Party has independently consulted with their respective counsel and
have been advised concerning the reasonableness and propriety of such covenants
with specific regard to the Business. Each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D., ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Sales, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇, and their respective
Affiliates, expressly authorize the enforcement of the covenants provided for in
this Section 5.17 by (A) the Buyer, the Acquired Companies and their respective
Affiliates, (B) the Buyers' and the Acquired Companies' permitted assigns, and
(C) any successor to any business of any Acquired Company. To the extent that
the covenants provided for in this Section 5.17 may later be deemed by a court
of competent jurisdiction to be overly broad with respect to its duration or
with respect to any particular activity or geographic area such that it is not
enforceable, the court of competent jurisdiction making such determination shall
have the power to reduce the duration or scope of such provision, and to add or
delete specific words or phrases to or from such provision, to the extent
necessary to render such provision enforceable. Such provision, as so modified,
shall then be enforced by the Parties hereto.
ARTICLE VI.
CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of the
Buyer to consummate the transactions contemplated by this Agreement is subject
to the satisfaction (or, where legally permissible, the waiver by the Buyer) of
the following conditions:
(a) the representations and warranties set forth in
ARTICLES II and III of this Agreement that are qualified as to "materiality"
(including by reference to a specified dollar amount) or "Company Material
Adverse Effect" shall be true and correct, and those not so qualified shall be
true and correct in all material respects, as of the date of this Agreement and
as of the Closing Date as though made on the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case such
44
representations and warranties qualified as to materiality (including by
reference to a specified dollar amount) or "Company Material Adverse Effect"
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, on and as of such earlier date); PROVIDED, HOWEVER,
that notwithstanding the foregoing, the representations and warranties set forth
in Sections 2.1(a), 2.1(b), 2.1(c), 2.1(e), 2.1(f), 3.2, 3.3, 3.20 and 3.22
shall be true and correct in all respects as of the date of this Agreement and
as of the Closing Date as though made on the Closing Date;
(b) the Company and each of the Selling Securityholders
shall have performed or complied in all material respects with each of their
agreements and covenants required to be performed or complied with under this
Agreement as of or prior to the Closing Date;
(c) there shall have been no Effect on the business,
assets, condition (financial or otherwise) or operating results of the Acquired
Companies, taken as a whole, since the date of this Agreement which has had, or
could reasonably be expected to have, a Company Material Adverse Effect;
(d) the Company shall have delivered to the Buyer the
Company Certificate;
(e) the Company shall have obtained, and shall have
provided copies thereof to the Buyer, all of the waivers, permits, consents,
approvals or other authorizations, and effected all of the registrations,
filings and notices referred to (i) in Section 5.2(a) which are required on the
part of the Company and (ii) on Schedule IV;
(f) no action, suit or proceeding shall be pending or
threatened by or before any Governmental Entity seeking to (i) prohibit or
impose any limitation, burden or restriction on the ability of the Buyer to have
or to exercise, from and after the Closing, full rights and incidents of
beneficial ownership of all of the outstanding shares of capital stock and other
equity interests of and in the Acquired Companies, including with respect to
dividends, voting and dispositive power, (ii) prevent or delay the consummation
of the transactions contemplated by this Agreement or (iii) cause any of the
transactions contemplated by this Agreement to be rescinded following the
Closing;
(g) no Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any judgment, order, decree, stipulation,
ruling or injunction enjoining, preventing, restraining, prohibiting, making
unlawful or delaying the consummation of the transactions contemplated by this
Agreement;
(h) the Buyer shall have received copies of the
resignations, effective as of the Closing, of each director of the Company
(other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D.);
(i) the Escrow Agreement executed in connection with the
execution of this Agreement shall remain in full force and effect and no action
shall have been taken by the parties thereto to rescind such agreement;
(j) employment agreements, substantially in the forms
attached hereto as Exhibits A, B, C and D, shall have been executed and
delivered by each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D., ▇▇▇▇▇▇ ▇. Sales, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇, respectively;
45
(k) the Company shall have delivered to the Buyer a
FIRPTA certification of non-foreign status executed by the Company and
satisfying the requirements of Sec. 1.1445-2(b)(2)(i) of the United States
Treasury Regulations promulgated under the Code;
(l) the Buyer shall have received the pay-off letters,
releases and other documents specified in Section 5.14 hereof;
(m) the Buyer shall have received evidence of the
termination of the agreements specified in Section 5.15 hereof;
(n) the Company shall have delivered the Inventory
Schedule to the Buyer (no later than two Business Days prior to the Closing
Date), in form and substance satisfactory to the Buyer; and
(o) the Buyer shall have received such other certificates
and instruments, reasonably satisfactory in form and substance to Buyer
(including certificates of good standing of each of the Acquired Companies in
its jurisdiction of organization and the various foreign jurisdictions in which
it is qualified, certified charter documents, excerpts from the Commercial
Register, certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request in connection with the
Closing.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling Securityholders
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction (or, where legally permissible, the waiver by the Company and the
Securityholders' Representatives) of the following conditions:
(a) the representations and warranties set forth in
ARTICLE IV of this Agreement that are qualified as to "materiality" or "Buyer
Material Adverse Effect" shall be true and correct, and those not so qualified
shall be true and correct in all material respects, as of the date of this
Agreement and as of the Closing Date as though made on the Closing Date, except
to the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties qualified as to
"materiality" or "Buyer Material Adverse Effect" shall be true and correct, and
those not so qualified shall be true and correct in all material respects, on
and as of such earlier date); PROVIDED, HOWEVER, that notwithstanding the
foregoing, the representations and warranties set forth in Sections 4.2, 4.5,
4.6 and 4.7 shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date as though made on the Closing Date;
(b) the Buyer shall have performed or complied in all
material respects with each of its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the Closing;
(c) the Buyer shall have delivered to the Company the
Buyer Certificate;
(d) Buyer shall have obtained, and shall have provided
copies thereof to the Company, all of the waivers, permits, consents, approvals
or other authorizations, and effected all of the registrations, filings and
notices referred to in Section 5.2(a) which are required on the part of Buyer;
46
(e) no action, suit or proceeding shall be pending or
threatened by or before any Governmental Entity seeking to (i) prevent or delay
the consummation of the transactions contemplated by this Agreement or (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following the Closing;
(f) no Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any judgment, order, decree, stipulation,
ruling or injunction enjoining, preventing, restraining, prohibiting, making
unlawful or delaying the consummation of the transactions contemplated by this
Agreement;
(g) the Escrow Agreement executed in connection with the
execution of this Agreement shall remain in full force and effect and no action
shall have been taken by the parties thereto to rescind such agreement; and
(h) the Company shall have received such other
certificates and instruments, reasonably satisfactory in form and substance to
the Company, as it shall reasonably request in connection with the Closing.
ARTICLE VII.
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE SELLING SECURITYHOLDERS. Each Selling
Securityholder shall (without any right of contribution from any Acquired
Company or any right of indemnification against any Acquired Company), jointly
and severally (except as expressly set forth in subparagraphs (a) and (b) of
this Section 7.1) indemnify, defend and hold harmless the Buyer and its
Affiliates and each of their respective directors, officers, employees, agents
and representatives (collectively, the "BUYER INDEMNIFIED PARTIES") from and
against any and all Damages incurred or suffered by such Buyer Indemnified Party
resulting from or arising out of (directly or indirectly) or in connection with:
(a) any breach of or any inaccuracy in any representation
or warranty of the Company or the Selling Securityholders contained in this
Agreement, the Company Certificate, the Disclosure Schedule or any other
certificate or other document delivered by any Acquired Company or the
Securityholders' Representatives pursuant to this Agreement, or in any other
Schedule or Exhibit hereto or thereto; PROVIDED, THAT, the indemnification
obligations of the Selling Securityholders with respect to breaches of the
representations and warranties set forth in ARTICLE II shall be several, and not
joint;
(b) any breach of or failure to perform any covenant or
agreement of the Company or the Selling Securityholders contained in this
Agreement; PROVIDED, THAT, the indemnification obligations of the Selling
Securityholders named in Section 5.17 with respect to breaches of the covenants
and agreements set forth in Section 5.17 shall be several, and not joint;
(c) any failure of the Company Certificate to be true and
correct;
(d) any Taxes for which the Buyer is entitled to receive
payment from the Escrow Cash or is otherwise entitled to indemnification
pursuant to Section 5.9; or
47
(e) any claim by any Person for brokerage or finder's
fees or commissions based upon any agreement or understanding alleged to have
been made by any such Person with any Selling Securityholder or any Acquired
Company (or any Person acting on their behalf) in connection with any of the
transactions contemplated by this Agreement.
The Buyer shall take all reasonable steps to mitigate any Damages upon becoming
aware of any event which would reasonably be expected to, or does, give rise
thereto, including incurring costs only to the minimum extent necessary to
remedy the breach which gives rise to the Damages. With respect to each Buyer
Indemnified Party other than Buyer, each Selling Securityholder acknowledges and
agrees that the Buyer is contracting on its own behalf and for such Buyer
Indemnified Party and the Buyer shall obtain and hold the rights and benefits
provided for in this Section 7.1 in trust for and on behalf of such Buyer
Indemnified Party. The Buyer shall have full power and authority on behalf of
each Buyer Indemnified Party to take any and all actions on behalf of, execute
any and all instruments on behalf of, and execute or waive any and all rights
of, each Buyer Indemnified Party under this ARTICLE VII.
7.2 INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify,
defend and hold them harmless against, any and all Damages incurred or suffered
by:
(a) the Selling Securityholders resulting from or arising
out of (directly or indirectly) or in connection with:
(i) any breach of or any inaccuracy in any
representation or warranty of the Buyer contained in this Agreement,
the Buyer Certificate or any other certificate or other document
delivered by the Buyer pursuant to this Agreement, or in any Schedule
or Exhibit hereto or thereto;
(ii) any breach or failure to perform any
covenant or agreement of the Buyer contained in this Agreement;
(iii) any failure of the Buyer Certificate to be
true and correct;
(iv) any claim by any Person for brokerage or
finder's fees or commissions based upon any agreement or understanding
alleged to have been made by any such Person with Buyer (or any Person
acting on its behalf) in connection with any of the transactions
contemplated by this Agreement;
(v) any Taxes for which the Selling
Securityholders are entitled to indemnification pursuant to Section
5.9; or
(b) any Indemnitee for breach of Section 5.7.
The Selling Securityholders and the Indemnitees shall take all reasonable steps
to mitigate any Damages upon becoming aware of any event which would reasonably
be expected to, or does, give rise thereto, including incurring costs only to
the minimum extent necessary to remedy the breach which gives rise to the
Damages.
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7.3 INDEMNIFICATION CLAIMS.
(a) All claims for indemnification made under this
Agreement resulting from, related to or arising out of a third-party claim
against an Indemnified Party (other than a claim for Taxes, which shall be
governed by Section 5.9(e)) shall be made in accordance with the following
procedures. An Indemnified Party shall promptly deliver an Expected Claim Notice
to the Indemnifying Party of the commencement of any action, suit or proceeding
relating to a third-party claim for which indemnification may be sought or, if
earlier, upon the assertion of any such claim by a third party, and if the
Indemnified Party is a Buyer Indemnified Party, the Buyer shall deliver a copy
of the Expected Claim Notice to the Escrow Agent. No reasonable delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party is thereby prejudiced. Within 20 calendar
days after delivery of such notification, the Indemnifying Party may, upon
written notice thereof to the Indemnified Party, assume control of the defense
of such action, suit, proceeding or claim if (a) the Indemnifying Party accepts
full responsibility for the matter, (b) the Indemnifying Party reasonably
demonstrates it has the financial resources necessary to defend against the
matter and fulfill its indemnification obligations and (c) the Indemnifying
Party conducts the defense with reasonable diligence. If the Indemnifying Party
does not assume control of such defense, the Indemnified Party shall control
such defense. The Party not controlling such defense may participate therein at
its own expense; PROVIDED, THAT, if the Indemnifying Party assumes control of
such defense and the Indemnified Party reasonably concludes, based on advice
from counsel, that the Indemnifying Party and the Indemnified Party have
conflicting interests with respect to such action, suit, proceeding or claim,
the reasonable fees and expenses of counsel to the Indemnified Party solely in
connection therewith shall be considered "Damages" for purposes of this
Agreement; PROVIDED, HOWEVER, that in no event shall the Indemnifying Party be
responsible for the fees and expenses of more than one counsel for all
Indemnified Parties. The Party controlling such defense shall keep the other
Party advised of the status of such action, suit, proceeding or claim and the
defense thereof and shall consider recommendations made by the other Party with
respect thereto. The Indemnified Party shall not agree to any settlement of such
action, suit, proceeding or claim, or admit any Liability with respect thereto,
without the prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld, conditioned or delayed. The Indemnifying Party
shall not agree to any settlement of such action, suit, proceeding or claim that
does not include a complete release of the Indemnified Party from all Liability
with respect thereto or that imposes any Liability on the Indemnified Party
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld, conditioned or delayed.
(b) In order to seek indemnification under this ARTICLE
VII, an Indemnified Party shall deliver a Claim Notice to the Indemnifying
Party. If the Indemnified Party is a Buyer Indemnified Party, the Buyer shall
deliver a copy of the Claim Notice to the Escrow Agent.
(c) Within 20 calendar days after delivery of a Claim
Notice, the Indemnifying Party shall deliver to the Indemnified Party a
Response, in which the Indemnifying Party shall either: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which
case the Response shall be accompanied by a payment by the Indemnifying Party to
the Indemnified Party of the Claimed Amount, by check or by wire transfer of
49
immediately available funds; PROVIDED, THAT, if the Indemnified Party is a Buyer
Indemnified Party, then to the extent the Escrow Cash has not theretofore been
depleted or released pursuant to the terms of this Agreement and the Escrow
Agreement, the Buyer shall deliver to the Escrow Agent, within three Business
Days following the delivery of the Response, a written notice executed by the
Indemnifying Party and the Buyer instructing the Escrow Agent to distribute to
Buyer such amount of Escrow Cash as is equal to the Claimed Amount), (ii) agree
that the Indemnified Party is entitled to receive the Agreed Amount (in which
case the Response shall be accompanied by a payment by the Indemnifying Party to
the Indemnified Party of the Agreed Amount, by check or by wire transfer of
immediately available funds; PROVIDED, THAT, if the Indemnified Party is a Buyer
Indemnified Party, then to the extent the Escrow Cash has not theretofore been
depleted or released pursuant to the terms of this Agreement and the Escrow
Agreement, the Buyer shall deliver to the Escrow Agent, within three Business
Days following the delivery of the Response, a written notice executed by the
Indemnifying Party and the Buyer instructing the Escrow Agent to distribute to
Buyer such amount of Escrow Cash as is equal to the Agreed Amount) or (iii)
dispute that the Indemnified Party is entitled to receive all or part of the
Claimed Amount. The Indemnifying Party (and its representatives) shall have
reasonable access during the foregoing 20-calendar day period and the
30-calendar day period referred to in Section 7.3(d) below to the books, records
and other information in the possession or control of the Indemnified Party
during regular business hours to the extent necessary to verify the claim for
indemnification and the Claimed Amount. Notwithstanding anything herein to the
contrary, all distributions to the Buyer out of the Escrow Cash shall not
include any interest or income accrued or earned with respect to the Escrow Cash
under the terms of the Escrow Agreement.
(d) During the 30-calendar day period following the
delivery of a Response that reflects a Dispute, the Indemnifying Party and the
Indemnified Party shall use commercially reasonable best efforts to resolve the
Dispute. If the Dispute is not resolved within such 30-calendar day period, the
Indemnifying Party and the Indemnified Party shall discuss in good faith the
submission of the Dispute to binding arbitration. In the absence of an agreement
by the Indemnifying Party and the Indemnified Party to arbitrate a Dispute, such
Dispute shall be resolved in a Delaware state court or U.S. federal district
court sitting in the State of Delaware, in accordance with Section 10.11. If the
Indemnified Party is a Buyer Indemnified Party, the Buyer shall deliver to the
Escrow Agent, promptly following the resolution of the Dispute (whether by
mutual agreement, arbitration, judicial decision or otherwise), a written notice
executed by the Buyer and the Indemnifying Party instructing the Escrow Agent as
to what (if any) portion of the Escrow Cash shall be distributed to Buyer and
the Selling Securityholders (which notice shall be consistent with the terms of
the resolution of the Dispute). The Escrow Agent may rely on, and shall release
funds from the Escrow Cash in accordance with, any of the following: (i) the
joint written instructions executed by the Indemnifying Party and the
Indemnified Party, (ii) the final nonappealable order of a court having
competent jurisdiction over the matters relating to the Claim Notice that is the
subject of a Dispute or (iii) if a Dispute was submitted to binding arbitration,
the final decision of the arbitrator(s) in the matters relating to the Claim
Notice that is the subject of a Dispute.
(e) Notwithstanding the other provisions of this Section
7.3, if a third party asserts (other than by means of a lawsuit) that an
Indemnified Party is liable to such third party for a monetary obligation which
may constitute or result in Damages for which such Indemnified Party may be
entitled to indemnification pursuant to this ARTICLE VII, and such Indemnified
Party
50
reasonably determines that it has a valid business reason to fulfill such
obligation and that such Indemnified Party or such third party is likely to
suffer irreparable harm if the Indemnified Party follows the procedures in this
Section 7.3, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior consent from the Indemnifying Party (PROVIDED, THAT,
such Indemnified Party shall provide such notice to the Indemnifying Party as is
possible under the circumstances), (ii) such Indemnified Party may subsequently
make a claim for indemnification in accordance with the provisions of this
ARTICLE VII, and (iii) such Indemnified Party shall be reimbursed, in accordance
with the provisions of this ARTICLE VII, for any such Damages for which it is
entitled to indemnification pursuant to this ARTICLE VII (subject to the right
of the Indemnifying Party to dispute the Indemnified Party's entitlement to
indemnification, or the amount for which it is entitled to indemnification,
under the terms of this ARTICLE VII, including the application of Sections 7.4
or 7.5).
(f) If a Buyer Indemnified Party makes a claim for
indemnification based on an alleged breach of any covenant in Section 5.17, the
Buyer shall promptly notify the affected Selling Securityholder and the
Securityholders' Representatives of such claim, and the Buyer and the
Securityholders' Representatives shall permit the affected individual Selling
Securityholder to take over any defense and/or settlement of such claim, which
will be at the affected Selling Securityholder's sole expense. Each Selling
Securityholder agrees that the Securityholders' Representatives shall have no
obligation to defend any such claims and will not use any of the Representative
Escrow Amount with respect to such claims.
(g) For purposes of this Section 7.3, (i) if the Selling
Securityholders comprise the Indemnifying Party, any references to the
Indemnifying Party (except provisions relating to an obligation to make any
payments) shall be deemed to refer to the Securityholders' Representatives, and
(ii) if the Selling Securityholders comprise the Indemnified Party, any
references to the Indemnified Party (except provisions relating to an obligation
to make or a right to receive any payments) shall be deemed to refer to the
Securityholders' Representatives. The Securityholders' Representatives shall
have full power and authority on behalf of each of the Selling Securityholders
to take any and all actions on behalf of, execute any and all instruments on
behalf of, and execute or waive any and all rights of, the Selling
Securityholders under this ARTICLE VII and the Escrow Agreement.
7.4 SURVIVAL.
(a) The representations and warranties set forth in
Sections 2.1(a), 2.1(b), 2.1(c) and 2.1(e) of this Agreement, and the
indemnification obligations relating thereto, shall survive the Closing
indefinitely. The representations and warranties set forth in Section 3.6 of
this Agreement, and the indemnification obligations relating thereto, shall
survive the Closing through the expiration of the applicable statute of
limitations period. All other representations and warranties of the Parties set
forth in this Agreement, and the indemnification obligations relating thereto,
shall survive the Closing and expire one year after the Closing Date. If an
Indemnified Party delivers to an Indemnifying Party, before expiration of a
representation or warranty, either a Claim Notice based upon a breach of such
representation or warranty, or an Expected Claim Notice based upon a breach of
such representation or warranty, then the applicable representation or warranty
shall survive until, but only for purposes of, the resolution of the matter
covered by such notice. If the legal proceeding or written claim with respect to
51
which an Expected Claim Notice has been given is definitively withdrawn or
resolved in favor of the Indemnified Party, the Indemnified Party shall promptly
so notify the Indemnifying Party; and if the Indemnified Party has delivered a
copy of the Expected Claim Notice to the Escrow Agent and Escrow Cash has been
retained in escrow after the termination date set forth in the Escrow Agreement
with respect to such Expected Claim Notice, the Indemnifying Party and the
Indemnified Party shall promptly deliver to the Escrow Agent a written notice
executed by both Parties instructing the Escrow Agent to distribute such
retained Escrow Cash to the Selling Securityholders in accordance with the terms
of the Escrow Agreement.
(b) The covenants contained in this Agreement which by
their terms apply or are to be performed in whole or in part after the Closing,
and the indemnification obligations relating thereto (including the
indemnification obligations of the Parties relating to Taxes contained in
Section 5.9), shall survive the Closing for the relevant statute of limitations
period, unless a different period is expressly contemplated herein.
7.5 INDEMNIFICATION LIMITATIONS.
(a) Notwithstanding anything to the contrary contained
herein:
(i) no individual claim (or series of related
claims) for indemnification (x) under Sections 7.1(a) arising from any
inaccuracy in any representation or warranty set forth in Section 3.6
or under Sections 7.1(d) (regardless of whether or not the underlying
liability is disclosed on Section 3.6(a) of the Disclosure Schedule)
shall be assertable unless it is (or they are) for an amount in excess
of the sum of $200,000, in the aggregate (the "TAX THRESHOLD AMOUNT"),
or (y) under Sections 7.1(a) (other than arising from any inaccuracy in
any representation or warranty set forth in Section 3.6), (b), (c) or
(e) or 7.2(a) shall be assertable unless it is (or they are) for an
amount in excess of $100,000, in the aggregate (the "GENERAL THRESHOLD
AMOUNT" and, together with the Tax Threshold Amount, the "THRESHOLD
AMOUNTS"); PROVIDED, HOWEVER, that once the applicable Threshold Amount
is exceeded with respect to the relevant class of claims (i.e. $200,000
for the Tax Threshold Amount and $100,000 for the General Threshold
Amount), each claim of such class (or series of related claims) shall
be assertable for all such amounts (including the applicable Threshold
Amount), and the Parties shall be liable with respect to claims of such
class for all of the aggregate Damages related to such claims
(including the applicable Threshold Amount)(subject to the limitations
contained in subsections (ii) and (iii) of this Section 7.5(a) and
Section 7.5(b) below); PROVIDED, FURTHER that any claim described in
clause (i)(x) above shall be applied solely towards the Tax Threshold
Amount and not the General Threshold Amount and any claim described in
clause (i)(y) above shall be applied solely towards the General
Threshold Amount and not the Tax Threshold Amount; and PROVIDED,
FURTHER that the limitations in this clause (i) do not apply to any
claim relating to any breach of or any inaccuracy in any representation
or warranty set forth in Sections 2.1(a), 2.1(b), 2.1(c) or 2.1(e) or
any breach of any covenant or agreement set forth in Section 5.17, and
do not apply to any claim relating to Section 7.2(b);
(ii) the aggregate Liability of the Selling
Securityholders under this ARTICLE VII, shall not exceed the Escrow
Cash; PROVIDED, HOWEVER, the limitation in this
52
clause (ii) does not apply to any claim relating to any breach of or
any inaccuracy in any representation or warranty set forth in Sections
2.1(a), 2.1(b), 2.1(c) or 2.1(e) or any breach of any covenant or
agreement set forth in Section 5.17; and
(iii) the aggregate Liability of the Buyer under
this ARTICLE VII, shall not exceed $1,280,000; PROVIDED, THAT, the
limitation in this clause (iii) does not apply to any claim relating to
Section 7.2(b).
(b) Except for any breach of or any inaccuracy in any
representation or warranty set forth in ARTICLE II or Section 3.6, for any
breach of any covenant or agreement set forth in Section 5.17, or for any Taxes
for which the Buyer is entitled to receive payment from the Escrow Cash or is
otherwise entitled to indemnification pursuant to Section 5.9, any recovery for
indemnification by any Buyer Indemnified Party pursuant to this ARTICLE VII
shall be made solely against the Escrow Cash pursuant to the terms of this
Agreement and the Escrow Agreement. With respect to any breach of or any
inaccuracy in any representation or warranty set forth in Section 3.6 or for any
Taxes for which the Buyer is entitled to receive payment from the Escrow Cash or
is otherwise entitled to indemnification pursuant to Section 5.9, any recovery
for indemnification by any Buyer Indemnified Party pursuant to this ARTICLE VII
shall first be made against the Escrow Cash and, once the Escrow Cash has been
fully released under the terms of the Escrow Agreement at the termination
thereof, the Buyer Indemnified Parties may recover for indemnification pursuant
to this ARTICLE VII directly against the Selling Securityholders, subject to the
limitation set forth in subsection (i) of Section 7.5(a); PROVIDED, HOWEVER,
that the aggregate Liability of the Selling Securityholders under this ARTICLE
VII with respect thereto from and after the date of such release of the Escrow
Cash shall not exceed the aggregate amount of Escrow Cash (if any) distributed
to the Selling Securityholders at the termination of the Escrow Agreement. With
respect to any breach of or any inaccuracy in any representation or warranty by
a Selling Securityholder set forth in Sections 2.1(d) or 2.1(f), any recovery
for indemnification by any Buyer Indemnified Party pursuant to this ARTICLE VII
shall first be made against such Selling Securityholder's Pro Rata Share of the
Escrow Cash and, once such Selling Securityholder's Pro Rata Share of the Escrow
Cash has been fully depleted, the Buyer Indemnified Parties may recover for
indemnification pursuant to this ARTICLE VII directly against such Selling
Securityholder, subject to the limitations set forth in subsections (i) and (ii)
of Section 7.5(a); PROVIDED, HOWEVER, that the aggregate Liability of such
Selling Securityholder under this ARTICLE VII with respect thereto shall not
exceed the lesser of (i) his, her or its Pro Rata Share of the Purchase Price
and (ii) the Escrow Cash. With respect to any breach of or any inaccuracy in any
representation or warranty by a Selling Securityholder set forth in Sections
2.1(a), 2.1(b), 2.1(c) or 2.1(e), or any breach of any covenant or agreement set
forth in Section 5.17 by a Selling Securityholder named in Section 5.17, any
recovery for indemnification by any Buyer Indemnified Party pursuant to this
ARTICLE VII shall first be made against such Selling Securityholder's Pro Rata
Share of the Escrow Cash and, once such Selling Securityholder's Pro Rata Share
of the Escrow Cash has been fully depleted or has been released under the terms
of the Escrow Agreement at the termination thereof, the Buyer Indemnified
Parties may recover for indemnification pursuant to this ARTICLE VII directly
against such Selling Securityholder; PROVIDED, HOWEVER, that the aggregate
Liability of such Selling Securityholder under this ARTICLE VII with respect
thereto shall not exceed his, her or its Pro Rata Share of the Purchase Price.
53
(c) Except with respect to claims based on fraud or
willful breach or for injunctive relief or other equitable remedies, after the
Closing, the rights of the Indemnified Parties under this ARTICLE VII shall be
the sole and exclusive remedies of the Indemnified Parties and their respective
Affiliates with respect to any and all claims covered by this ARTICLE VII and
any and all claims otherwise relating to the transactions that are the subject
of this Agreement.
(d) If the Closing occurs, no Selling Securityholder
shall have any right of contribution against the Acquired Companies with respect
to any breach by the Company of any of its representations, warranties,
covenants or agreements, and in furtherance of the foregoing, upon the
occurrence of the Closing, each Selling Securityholder hereby fully and finally
releases the Acquired Companies from any claim of any kind or nature for, and
waives any and all rights of every kind or character with respect to,
indemnification or contribution by the Acquired Companies with respect to such
representations, warranties, covenants or agreements.
(e) Notwithstanding anything to the contrary elsewhere in
this Agreement, no Party shall, in any event, be liable to any other person for
any multiple, consequential, incidental, indirect, special or punitive damages,
including loss of future revenue, income or profits, diminution of value or loss
of business reputation or opportunity relating to the breach or alleged breach
hereof.
(f) Notwithstanding any other provision of this ARTICLE
VII, the amount of Damages recoverable by an Indemnified Party under this
ARTICLE VII with respect to an indemnity claim shall be reduced by the amount of
(i) any payment received by such Indemnified Party (or an Affiliate thereof),
with respect to the Damages to which such indemnity claim relates, from an
insurance carrier (including with respect to insurance against professional
Liability) and (ii) the present value of any current or reasonably expected Tax
deduction, Tax credit or other Tax benefit to such Indemnified Party with
respect to the receipt of such indemnity payment or as a result of the Damages
(the "TAX BENEFIT"). Damages shall also exclude any Liability based upon a
claim, assessment or deficiency for foreign, federal, state and/or local income
or franchise Taxes which arise from adjustments which have the effect only of
shifting income, credits and/or deductions from one fiscal period to another. An
Indemnified Party shall use commercially reasonable best efforts to pursue, and
to cause its Affiliates to pursue, all insurance claims to which it may be
entitled in connection with any Damages it incurs, and the Parties shall
cooperate with each other in pursuing insurance claims with respect to any
Damages or any indemnification obligations with respect to Damages. If an
Indemnified Party (or an Affiliate) receives any insurance payment or incurs a
Tax Benefit in connection with any claim for Damages for which it has already
received an indemnification payment from the Indemnifying Party, it shall pay to
the Indemnifying Party, within 30 days of receiving such insurance payment or
incurring such Tax Benefit, an amount equal to the excess of (A) the amount
previously received by the Indemnified Party under this ARTICLE VII with respect
to such claim plus the amount of the insurance payments received and any Tax
Benefit incurred, over (B) the amount of Damages with respect to such claim
which the Indemnified Party has become entitled to receive under this ARTICLE
VII.
(g) Notwithstanding any other provision of this ARTICLE
VII, the Parties agree that if the effect of any misrepresentation or breach of
any representation and warranty or covenant contained in this Agreement, the
Company Certificate, the Disclosure Schedule or any
54
other certificate or other document delivered by any Acquired Company or the
Securityholders' Representatives pursuant to this Agreement, or in any other
Schedule or Exhibit hereto or thereto, is that (i) the amount of the trade
accounts receivable and other receivables or the inventory (including raw
materials, work in process and finished goods) of the Acquired Companies (net of
reserves, including excess inventory and obsolete items reflected on the Most
Recent Balance Sheet) have been overstated (it being hereby agreed that if the
misrepresentation or breach relates specifically to the period of time within
which any trade accounts receivable or other receivables are collectible, if
such trade accounts receivable or other receivables are in fact collected in
full by any Acquired Company subsequent to such represented period of time but
prior to April 30, 2008, such misrepresentation or breach shall not be deemed to
have overstated the trade accounts receivables or other receivables reflected on
the Most Recent Balance Sheet for purposes of this Section 7.5(g)), or (ii) the
amount of the Liabilities of the Acquired Companies (or the reserves established
therefor) have been understated, the Buyer's Damages caused by such
overstatement or understatement, as applicable, shall in no event exceed the net
amount by which such overstated trade accounts receivable and other receivables,
such overstated inventory and/or such understated Liabilities reduces, in the
aggregate, the Consolidated Net Working Capital; PROVIDED, HOWEVER, that nothing
contained in this Section 7.5(g) shall be deemed to limit (A) the calculation of
the Buyer's Damages with respect to any misrepresentation or breach of any of
the representations and warranties contained in Section 3.6 or any of the
covenants contained in Section 5.9 of this Agreement or (B) the indemnification
obligations of the Selling Securityholders relating to such representations,
warranties and covenants or with respect to any Taxes for which the Buyer is
entitled to receive payment from the Escrow Cash or is otherwise entitled to
indemnification pursuant to Section 5.9. For purposes of this Section 7.5(g),
all calculations shall be made in accordance with GAAP.
7.6 TREATMENT OF INDEMNITY PAYMENTS. Any payments made to an
Indemnified Party pursuant to this ARTICLE VII shall be treated as an adjustment
to the Purchase Price for Tax purposes.
7.7 SUBROGATION OF RIGHTS. In the event any payment is made in
respect of Damages pursuant to this ARTICLE VII, the Indemnifying Party who made
such payment shall be subrogated to the extent of such payment to any related
rights of recovery of the Indemnified Party receiving such payment against any
third party other than any Buyer Indemnified Party, the Company or any of their
respective Affiliates.
ARTICLE VIII.
TERMINATION
8.1 TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement, prior to the Closing, as provided below:
(a) the Parties may terminate this Agreement by mutual
written consent signed by the Buyer, the Company and the Selling Securityholders
holding a majority of the outstanding Company Securities;
55
(b) the Buyer may terminate this Agreement by giving
written notice to the Company and the Securityholders' Representatives if the
Company or any Selling Securityholder is in breach of any representation,
warranty or covenant contained in this Agreement (excluding any breach of which
the Company and/or the Securityholders' Representatives have notified the Buyer
by a written supplement or amendment to the Disclosure Schedule pursuant to and
in accordance with the proviso to the third sentence of Section 5.6(a)), and
such breach, individually or in combination with any other such breach (i) would
cause the conditions set forth in clauses (a) or (b) of Section 6.1 not to be
satisfied and (ii) has not been or is incapable of being cured prior to the
earlier of (A) seven Business Days after delivery by the Buyer to the Company
and the Securityholders' Representatives of written notice thereof or (B) June
30, 2007;
(c) the Company and the Selling Securityholders holding a
majority of the outstanding Company Securities may terminate this Agreement by
giving written notice to the Buyer if the Buyer is in breach of any
representation, warranty or covenant contained in this Agreement (excluding any
breach of which the Buyer has notified the Company and the Securityholders'
Representatives by a written notice pursuant to and in accordance with the
proviso to the third sentence of Section 5.6(b)), and such breach, individually
or in combination with any other such breach (i) would cause the conditions set
forth in clauses (a) or (b) of Section 6.2 not to be satisfied and (ii) has not
been or is incapable of being cured prior to the earlier of (A) seven Business
Days after delivery by the Company to the Buyer of written notice thereof or (B)
June 30, 2007;
(d) the Buyer may terminate this Agreement by giving
written notice to the Company and the Securityholders' Representatives if the
Closing shall not have occurred on or before June 30, 2007 by reason of the
failure of any condition precedent under Section 6.1 (unless the failure results
primarily from a breach by the Buyer of any representation, warranty or covenant
contained in this Agreement);
(e) the Company and the Selling Securityholders holding a
majority of the outstanding Company Securities may terminate this Agreement by
giving written notice to the Buyer if the Closing shall not have occurred on or
before June 30, 2007 by reason of the failure of any condition precedent under
Section 6.2 (unless the failure results primarily from a breach by the Company
or any Selling Securityholder of any representation, warranty or covenant
contained in this Agreement);
(f) the Buyer may terminate this Agreement by giving
written notice to the Company and the Securityholders' Representatives if there
has been an Effect on the business, assets, condition (financial or otherwise)
or operating results of the Acquired Companies, taken as a whole, since the date
of this Agreement which has had, or could reasonably be expected to have, a
Company Material Adverse Effect;
(g) the Buyer may terminate this Agreement by giving
written notice to the Company and the Securityholders' Representatives within
two Business Days after the Buyer's receipt of a written supplement or amendment
to the Disclosure Schedule pursuant to and in accordance with the proviso to the
third sentence of Section 5.6(a), if the subject of the disclosure contained
therein, individually or in combination with any other breach or
56
misrepresentation, would adversely effect the benefits to be obtained by the
Buyer under this Agreement, as determined in the Buyer's sole discretion; and
(h) the Company and the Selling Securityholders holding a
majority of the outstanding Company Securities may terminate this Agreement by
giving written notice to the Buyer within two Business Days after their receipt
of a written notice from the Buyer pursuant to and in accordance with the
proviso to the third sentence of Section 5.6(b), if the subject of the
disclosure contained therein, individually or in combination with any other
breach or misrepresentation, would adversely effect the benefits to be obtained
by the Selling Securityholders under this Agreement, as determined in the
discretion of the Company and the Selling Securityholders holding a majority of
the outstanding Company Securities.
8.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Sections 8.1(a), (d), (e) or (f), all obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party for breaches of this Agreement described
in the following sentence); PROVIDED, THAT, the provisions of Section 5.4(c)
(Confidentiality) shall survive any termination of this Agreement. If this
Agreement is terminated pursuant to Sections 8.1(b), 8.1(c), 8.1(g) or 8.1(h) as
a result of willful breach of any Party, or because one or more of the
conditions to the terminating Party's obligations under this Agreement is not
satisfied as a result of the other Party's willful failure to comply with its
obligations under this Agreement, the terminating Party's right to pursue all
legal, equitable and other remedies will survive such termination unimpaired.
ARTICLE IX.
DEFINITIONS
For purposes of this Agreement, each of the following terms shall have
the meaning set forth below.
"ACQUIRED COMPANIES" means the Company and its Subsidiaries,
collectively.
"ADVISORS" shall have the meaning set forth in Section 5.5.
"AFFILIATE" shall mean any affiliate, as defined in Rule 12b-2 under
the Exchange Act.
"AGREED AMOUNT" shall mean part, but not all, of the Claimed Amount as
mutually agreed by the Buyer and the Securityholders' Representatives.
"AGREEMENT" shall have the meaning set forth in the first paragraph of
this Agreement.
"ARBITER" shall have the meaning set forth in Section 5.9(i) of this
Agreement.
"BUSINESS" shall have the meaning set forth in Section 5.17(a) of this
Agreement.
"BUSINESS DAY" shall mean any day other than (a) a Saturday or Sunday
or (b) a day on which the United States federal government is closed for the
observance of any holiday.
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"BUYER" shall have the meaning set forth in the first paragraph of this
Agreement.
"BUYER CERTIFICATE" shall mean a certificate, executed by the Buyer, to
the effect that each of the conditions specified in clauses (a) and (b) of
Section 6.2 is satisfied in all respects.
"BUYER INDEMNIFIED PARTIES" shall have the meaning set forth in Section
7.1.
"BUYER MATERIAL ADVERSE EFFECT" shall mean any material adverse change,
event, circumstance or development with respect to Buyer's ability to consummate
the transactions contemplated by this Agreement. For the avoidance of doubt, the
Parties agree that the terms "material," "materially" or "materiality" as used
in this Agreement with an initial lower case "m" shall have their respective
customary and ordinary meanings, without regard to the meaning ascribed to Buyer
Material Adverse Effect.
"CERCLA" shall mean the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CLAIM NOTICE" shall mean written notification which contains (i) a
description of the Claimed Amount, (ii) a statement that the Indemnified Party
is entitled to indemnification under Article VII for the Claimed Amount and a
reasonable explanation of the basis therefor, and (iii) a demand for payment in
the amount of such Damages and is accompanied by reasonable documentation
evidencing the basis therefor and amount thereof and copies of all notices and
documents (including court papers) received by the Indemnified Party relating
thereto.
"CLAIMED AMOUNT" shall mean the amount of any Damages incurred by the
Indemnified Party.
"CLOSING" shall mean the closing of the transactions contemplated by
this Agreement.
"CLOSING DATE" shall mean (i) two Business Days after the last of the
conditions set forth in Sections 6.1 and 6.2 are satisfied other than those
conditions that are to be satisfied at Closing, (ii) not later than June 30,
2007, or (iii) at such other time as the parties may agree.
"CODE" shall mean the Internal Revenue Code of 1986, as amended and in
effect at the relevant time.
"COMMERCIAL REGISTER" shall mean the Swiss Commercial Register as
defined in the Ordinance of June 7, 1937 on Commercial Register.
"COMMON SHARES" shall have the meaning set forth in the second
paragraph of this Agreement.
"COMPANY" shall have the meaning set forth in the first paragraph of
this Agreement.
"COMPANY CERTIFICATE" shall mean a certificate, executed by the Company
and the Securityholders' Representatives, to the effect that each of the
conditions specified in clauses (a) through (c), inclusive, of Section 6.1 is
satisfied in all respects.
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"COMPANY INTELLECTUAL PROPERTY" shall mean the Intellectual Property
owned by or licensed to any Acquired Company and covering, incorporated in,
underlying or used in connection with the business of any Acquired Company as
presently conducted, including, without limitation, the electronic information
and ordering marketplace platform used by the Acquired Companies in their
business.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean any state of facts,
change, event, circumstance, development, condition, occurrence, action,
omission or effect (an "EFFECT") that is materially adverse to the business,
assets, condition (financial or otherwise) or operating results of the Acquired
Companies, taken as a whole, or the ability of the Company to consummate timely
the transactions contemplated hereby, other than any Effect with respect to, (i)
the economy in general, (ii) the industry in which the Acquired Companies
operate, including changes in legal, accounting or regulatory changes or
conditions, but only to the extent that the effects thereof on the Acquired
Companies, taken as a whole, are not disproportionately more adverse than the
effects thereof on comparable companies operating in the industry in which the
Acquired Companies operate, (iii) the announcement of this Agreement and the
transactions contemplated thereby, (iv) the effect of any change arising in
connection with earthquakes, hostilities, acts of war, sabotage or terrorism or
military actions or any escalation or material worsening of any such
hostilities, acts of war, sabotage or terrorism or military actions, or (v) the
effect of any action taken by the Buyer or its Affiliates with respect to the
transactions contemplated hereby or with respect to the Company. For the
avoidance of doubt, the Parties agree that the terms "material," "materially" or
"materiality" as used in this Agreement with an initial lower case "m" shall
have their respective customary and ordinary meanings, without regard to the
meaning ascribed to Company Material Adverse Effect.
"COMPANY PLAN" shall mean any Employee Benefit Plan maintained,
contributed to or required to be contributed to, by any Acquired Company or any
ERISA Affiliate for the benefit of any current or former employee, director or
consultant of any Acquired Company or any dependent or beneficiary thereof.
"COMPANY SECURITIES" shall mean all of the Common Shares and the
Preferred Shares listed on SCHEDULE II attached hereto.
"COMPANY STOCK OPTION" shall mean any stock option to purchase Common
Shares granted under the Company Stock Plan that is outstanding.
"COMPANY STOCK PLAN" shall mean the Company's 2004 Stock Plan adopted
on August 27, 2004.
"COMPANY WARRANT" shall mean any warrant to purchase Common Shares that
is outstanding.
"CONFIDENTIAL INFORMATION" shall mean and include information treated
as confidential or as a trade secret by any Acquired Company, including, but not
limited to, information regarding contemplated products, models, compilations,
business and financial methods or practices, marketing, merchandising and
selling techniques, customers, vendors, suppliers, trade secrets, training
programs, manuals or materials, technical information, contracts, systems,
procedures,
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mailing lists, know-how, trade names, improvements, pricing, price lists,
financial or other data (including the revenues, costs or profits associated
with any Acquired Company or its products or services), business plans,
strategy, code books, invoices and other financial statements, computer
programs, software systems, databases, discs and printouts, other plans
(technical or otherwise), customer and industry lists, supplier lists,
correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the Business (whether
or not developed, devised, or otherwise created in whole or in part by the
efforts of the Person in question), which, with respect to the Buyer, is
furnished to the Buyer by the Company in connection with the transactions
contemplated by this Agreement and, with respect to any other Person, is known
by or is in the possession of such Person; PROVIDED, HOWEVER, that it shall not
include any information (A) which, at the time of disclosure, is available
publicly, (B) which, after disclosure, becomes available publicly through no
fault of the Buyer or such Person, as applicable, (C) which, in the case of the
Buyer, the Buyer demonstrably knew or to which the Buyer had access prior to
disclosure without an obligation of confidentiality or (D) the Buyer or such
Person rightfully obtains from a source other than any Acquired Company without
an obligation of confidentiality.
"CONSOLIDATED NET WORKING CAPITAL" shall mean the excess of current
assets over current Liabilities as shown on the Most Recent Balance Sheet.
"CONTINUING EMPLOYEES" shall have the meaning set forth in Section
5.8(a).
"DAMAGES" shall mean any and all actual or reasonably foreseeable
debts, obligations and other liabilities (excluding contingent liabilities and
the matters listed in Section 7.5(e)), damages (including damages for injury to,
or loss of, natural resources), fines, fees, penalties, interest obligations,
diminution in value, deficiencies, awards, losses, costs and expenses (including
amounts paid in settlement, interest, court costs, costs of investigators, fees
and expenses of attorneys, accountants, financial advisors, engineers,
environmental consultants and other experts, and other expenses of litigation),
other than any of the foregoing that has been specifically accrued for or
reserved against in the Most Recent Balance Sheet (to the extent of such reserve
or accrual).
"DISCLOSURE SCHEDULE" shall mean the disclosure schedule provided by
the Company to the Buyer on the date hereof.
"DISPUTE" shall mean the dispute resulting if the Indemnifying Party in
a Response disputes its Liability for all or part of the Claimed Amount.
"DISPUTE NOTICE" has the meaning set forth in Section 5.9(a).
"DOLLARS" has the meaning set forth in Section 1.9.
"EMPLOYEE BENEFIT PLAN" shall mean any employment, consulting,
severance, termination, pension, retirement, profit sharing, bonus, incentive,
deferred compensation, retention, change in control, savings, life, health,
disability, accident, medical, insurance, vacation or other material employee
compensation or welfare fringe benefit plan, program,
60
arrangement, agreement or commitment and any stock option, stock appreciation,
restricted stock, phantom equity or other equity-based plan, program,
arrangement, policy (whether formal or informal) or commitment, including each
"employee benefit plan" as defined in Section 3(3) of ERISA.
"ENCUMBRANCES" has the meaning set forth in Section 2.1(a).
"ENVIRONMENT" has the meaning set forth at 15 U.S.C. ss. 2602 and 42
U.S.C. ss. 9601(8).
"ENVIRONMENTAL LAWS" shall mean all applicable international, foreign,
federal, state, and local treaties, compacts, legally enforceable standards,
statutes, ordinances, orders (including orders on consent), approvals, permits,
judgments, liens, deed restrictions, agreements, rules, regulations, guidance,
and common law duties relating to or concerning protection of the public health
and public welfare, human health, worker safety, or the Environment.
"Environmental Laws" include but are not limited to: (A) The Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et.
seq.; The Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et. seq.,
The Toxic Substances Control Act, 15 U.S.C. ss. 2601 et. seq., The Safe Drinking
Water Act, 42 U.S.C. ss. 300(h) et. seq., The Clean Water Act, 33 U.S.C. ss.
1251 et. seq., The Clean Air Act, 42 U.S.C. ss. 7401 et. seq., and The Federal
Food, Drug, and Cosmetics Act, 21 U.S.C. ss. 301 et seq.; (B) statutes, permits,
rules, industry best practices, and common law duties regulating or relating to
all human exposure (including but not limited to workplace exposure) to or the
discharge, Release, removal, generation, storage, transportation, or disposal of
Hazardous Substances; and (C) statutes, permits, rules, industry best practices,
and common law duties regarding workplace safety.
"ENVIRONMENTAL LIABILITY" shall mean all monetary or other liabilities,
obligations, or Damages related to or arising from the actual violation of
Environmental Laws or the actual or threatened Release of Hazardous Substances.
A known or reasonably anticipated obligation or duty to Remediate any real
property is an Environmental Liability.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" shall mean any entity which is a member of (1) a
controlled group of corporations (as defined in Section 414(b) of the Code), (2)
a group of trades or businesses under common control (as defined in Section
414(c) of the Code), or (3) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of the Code),
any of which includes or within the six years preceding the date of this
Agreement included any Acquired Company.
"ESCROW AGREEMENT" shall mean the escrow agreement executed by the
Buyer, the Securityholders' Representatives and the Escrow Agent concurrently
with the execution of this Agreement.
"ESCROW AGENT" shall mean Citibank, N.A.
"ESCROW CASH" has the meaning set forth in Section 1.5(b)(ii).
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"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXPECTED CLAIM NOTICE" shall mean a notice that an Indemnified Party
in good faith reasonably expects to incur Damages resulting from, related to or
arising out of an actual third-party claim, or a written threat of a
third-party, against the Indemnified Party for which it is entitled to
indemnification under ARTICLE VII and is accompanied by copies of all notices
and documents (including court papers) received by the Indemnified Party
relating thereto and a description in reasonable detail (to the extent known by
the Indemnified Party) of the facts constituting the basis for such claim;
PROVIDED, THAT, such Expected Claim Notice shall expire on the six-month
anniversary thereof if a Claim Notice has not been filed within such period with
respect to the underlying expected claim.
"FACILITIES" shall have the meaning set forth in Section 5.14.
"FEE SCHEDULE" shall have the meaning set forth in Section 5.5.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section
3.23.
"FOREIGN PLANS" shall have the meaning set forth in Section 3.17(k).
"GAAP" shall mean generally accepted accounting principles in the
United States as of the date hereof.
"GOVERNMENTAL ENTITY" shall mean any supranational, national, federal,
state, local, municipal or foreign government or any court, tribunal, judicial
or arbitral body, administrative or regulatory agency, public authority,
commission or board or other governmental department, bureau, branch, agency, or
any instrumentality of any of the foregoing.
"HAZARDOUS SUBSTANCES" shall mean any and all substances (whether
solid, liquid or gas) or organisms: (i) that are "pollutants," as defined at 33
U.S.C. ss.1362(6), "solid waste," as defined at 42 U.S.C. ss.6903(27),
"hazardous waste," as defined at 42 U.S.C. ss.6903(5), "hazardous substances,"
as defined at 42 U.S.C. ss.9601(14), or "toxic" as defined at 15 U.S.C. ss.
1261(g); or (ii) that may harm or impair human health or the environment,
including, but not limited to, petroleum and petroleum products and
constituents, asbestos and asbestos-containing materials, polychlorinated
biphenyls, lead, radon, chlorinated solvents, radioactive materials, flammables,
explosives, medical waste, biological agents, or contaminants such as mold or
microbial matter, or (iii) that are regulated by Environmental Laws.
"▇▇▇▇▇▇ ▇▇▇▇▇▇" shall have the meaning set forth in Section 2.1(g).
"INDEMNIFIED PARTY" shall mean a party entitled, or seeking to assert
rights, to indemnification under Article VII.
"INDEMNIFYING PARTY" shall mean the party from whom indemnification is
sought by the Indemnified Party.
"INDEMNITEE" shall have the meaning set forth in Section 5.7(a).
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"INTELLECTUAL PROPERTY" shall mean all of the following in any
jurisdiction throughout the world: (i) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereof,
and all patents (including design patents), patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof; (ii)
all trademarks, service marks, trade names, domain names; (iii) all
copyrightable works, copyrights, designs and mask works; (iv) all trade secrets
and confidential business information (including ideas; research and
development; concepts; methods; systems; engineering; models; designs; drawings;
prototypes; compositions; manufacturing, servicing, repair, production and other
proprietary techniques, processes, formulae, methods, schematics, technology,
know-how, computer software programs and applications (including source code;
executable code; data; databases; uniform resource locators and related
documentation, and including any such software that relates to an electronic
information and ordering marketplace platform used in the business of the
Acquired Companies); technical data; product designs; material uses; drawings;
specifications; customer and supplier lists; pricing and cost information; and
business and marketing plans and proposals); (v) applications for, registrations
of, and renewals in connection with any intellectual property such as patents,
trademarks, service marks, trade names, domain names, copyrights and designs;
(vi) all advertising and promotional materials; (vii) all moral rights, rights
of publicity and other tangible or intangible proprietary or confidential
information and materials of a similar nature; (viii) all copies and tangible
embodiments thereof (in whatever form or medium); and (ix) all goodwill
associated with the foregoing.
"INVENTORY SCHEDULE" shall have the meaning set forth in Section 3.25.
"IRS" means the Internal Revenue Service of the United States.
"IT ASSETS" means computers, firmware, middleware, servers,
workstations, routers, hubs, switches, data communications lines, and all other
information technology equipment (including any such assets as may be used to
support any electronic information and ordering marketplace platform), and all
associated documentation.
"LAWS" means any federal, state, local, municipal, foreign or other
law, statute, constitution, principle of common law, resolution, ordinance,
code, edict, decree, rule, court order, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise put into effect
by or under the authority of any Governmental Entity.
"LEASE" shall mean any lease, sublease, licenses, concessions and other
agreements (written or oral), including all amendments, extensions, renewals,
guarantees, and other agreements with respect thereto, pursuant to which an
Acquired Company leases or subleases any real property from another party,
except leases or subleases for temporary accommodations provided to an Acquired
Company in the Ordinary Course of Business.
"LEGAL PROCEEDING" shall mean any action, suit, proceeding, claim,
arbitration or investigation by or before any Governmental Entity or before any
arbitrator.
"LIABILITY" shall mean any liability or obligation of whatever kind or
nature (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether
63
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
"MAJOR CUSTOMERS" shall have the meaning set forth in Section
3.11(b)(i).
"MAJOR SUPPLIERS" shall have the meaning set forth in Section
3.11(b)(ii).
"MATERIALS OF ENVIRONMENTAL CONCERN" shall mean any: pollutants,
contaminants or hazardous substances (as such terms are defined under CERCLA),
pesticides (as such term is defined under the Federal Insecticide, Fungicide and
Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined
under the Resource Conservation and Recovery Act), chemicals, other hazardous,
radioactive or toxic materials, oil, petroleum and petroleum products (and
fractions thereof), or any other material (or article containing such material)
listed or subject to regulation under any law, statute, rule, regulation, order,
Permit, or directive due to its potential, directly or indirectly, to harm the
environment or the health of humans or other living beings.
"MOST RECENT BALANCE SHEET" shall mean the unaudited balance sheet of
the Company as of the Most Recent Balance Sheet Date.
"MOST RECENT BALANCE SHEET DATE" shall have the meaning set forth in
Section 3.23.
"MOST RECENT FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 3.23.
"MOST RECENT FISCAL YEAR END" shall have the meaning set forth in
Section 3.23.
"OPTIONHOLDER" shall have the meaning set forth in the first paragraph
of this Agreement.
"ORDINARY COURSE OF BUSINESS" shall mean the ordinary course of
business consistent with past custom and practice (including with respect to
frequency and amount) of the Acquired Companies.
"ORGANIZATIONAL DOCUMENTS" shall mean (a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the limited liability company agreement (or similar agreement
serving the same function) and the certificate of formation (or similar
agreement serving the same function) of a limited liability company, (e) any
charter or similar document adopted or filed in connection with the creation,
formation, or organization of a Person; and (f) any amendment to any of the
foregoing.
"OWNED REAL PROPERTY" shall mean each item of real property owned by
any Acquired Company.
"PAID TIME OFF" shall mean any vacation, sick days, personal leave or
other available paid absence from service to an Acquired Company.
"PARTIES" shall mean the Buyer, the Company and the Selling
Securityholders.
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"PERMITS" shall mean all permits, licenses, registrations,
certificates, orders, approvals, franchises, and similar rights issued by or
obtained from any Governmental Entity (including those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property).
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in the
definition of "Security Interest."
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"POST-CLOSING TAX PERIOD" shall mean any taxable period or portion
thereof beginning after the Closing Date.
"POST-CLOSING TAX RETURN" shall have the meaning set forth in Section
5.9(a).
"PRE-CLOSING TAX PERIOD" shall mean any taxable period or portion
thereof ending on or before the Closing Date.
"PRE-CLOSING TAX RETURN" shall have the meaning set forth in Section
5.9(a).
"PREFERRED SHARES" shall have the meaning set forth in the second
paragraph of this Agreement.
"PRO RATA SHARE" shall mean a Selling Securityholder's pro rata share
(expressed as a percentage) of the Purchase Price to be delivered at Closing as
set forth opposite such Selling Securityholder's name on SCHEDULE II hereto.
"PURCHASE PRICE" shall have the meaning set forth in Section 1.5(a).
"RELEASE" means any "release" as defined at 42 U.S.C. ss.9601(22),
"disposal," as defined at 42 U.S.C. ss.6903(3), spill, migration, or other
movement of, or human exposure to, Hazardous Substances in excess of relevant
limits or requirements under applicable Environmental Laws.
"REMEDIATE" and "REMEDIATION" include, but are not limited to, any
removal, remedial, or response action (as defined at 42 U.S.C. 9601(23)-(25));
corrective action; any activity to investigate, clean up, detoxify,
decontaminate, contain or excavate, or otherwise remove any Hazardous Substance;
any actions to prevent, cure or mitigate any Release or threatened Release of
any Hazardous Substance or to mitigate conditions that may or do endanger human
health or the Environment.
"REPRESENTATIVE ESCROW AMOUNT" shall have the meaning set forth in
Section 1.5(b)(iii).
"REPRESENTATIVE EXPENSES" shall have the meaning set forth in Section
1.8(e).
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"RESPONSE" shall mean a written response containing the information
provided for in Section 7.3(c).
"SCHEDULED AGREEMENTS" shall have the meaning set forth in 3.11(d).
"SEC" shall have the meaning set forth in Section 5.12.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY INTEREST" shall mean any mortgage, pledge, security interest,
lien, charge or encumbrance (whether arising by contract or by operation of
law), other than (i) liens in favor of mechanics, materialmen carriers and
warehouseman, to secure claims for labor, materials or supplies and other like
liens, (ii) liens arising under worker's compensation, unemployment insurance,
social security, retirement, and similar programs mandated by applicable Law,
(iii) liens on goods in transit incurred pursuant to documentary letters of
credit, in each case arising in the Ordinary Course of Business and not material
to the Company, (iv) liens for Taxes not yet due and payable or Taxes that are
being contested in good faith by appropriate proceedings, (v) liens that arise
under zoning, land use or similar Laws and other imperfections of title or
Encumbrances which do not materially affect the use or marketability of the
property subject thereto. Items (i) through (v) in the immediately preceding
sentence shall be collectively referred to herein as "Permitted Encumbrances."
"SECURITYHOLDERS' REPRESENTATIVES" shall have the meaning set forth in
Section 1.8(a).
"SELLING SECURITYHOLDERS" shall have the meaning set forth in the first
paragraph of this Agreement.
"STOCKHOLDERS" shall have the meaning set forth in the first paragraph
of this Agreement.
"STRADDLE PERIOD" shall mean any taxable period or portion thereof
beginning before and ending after the Closing Date.
"STRADDLE PERIOD TAX RETURN" shall have the meaning set forth in
Section 5.9(c).
"SUBSIDIARY" shall mean any corporation, partnership, trust, limited
liability company or other non-corporate business enterprise in which the
Company (or another Subsidiary) holds stock or other ownership interests
representing (a) more than 50% of the voting power of all outstanding stock or
ownership interests of such entity or (b) the right to receive more than 50% of
the net assets of such entity available for distribution to the holders of
outstanding stock or ownership interests upon a liquidation or dissolution of
such entity.
"TAX" or "TAXES" shall mean all taxes, charges, fees, levies or other
similar assessments or liabilities in the nature of taxes, including income,
gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, financial transaction, withholding,
employment, unemployment, insurance, social security, business license, business
organization, environmental, workers compensation, payroll, profits, license,
lease, service, service use, severance, stamp, occupation, escheat, windfall
profits, customs, duties, franchise, estimated and other taxes imposed by the
United States of America or any state, local or foreign
66
government, or any agency thereof, or other political subdivision of the United
States or any such government, whether or not disputed, and any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any tax or any contest or dispute thereof.
"TAX BENEFIT" shall have the meaning set forth in Section 7.5(f).
"TAX PROCEEDING" shall mean any audit, administrative appeal, claim for
refund, or contest or defense against any assessment, notice of deficiency, or
other proposed adjustment relating to any and all Taxes of the Acquired
Companies or for which the Acquired Companies may be liable.
"TAX RETURNS" shall mean all reports, returns, declarations, statements
or other information required to be supplied to a Taxing authority or
Governmental Entity with jurisdiction over Taxes.
"THRESHOLD AMOUNT" shall have the meaning set forth in Section
7.5(a)(i).
"TRANSACTION EXPENSES" shall have the meaning set forth in Section 5.5.
"TRANSFER TAXES" shall have the meaning set forth in Section 5.9(f).
"WARRANTHOLDER" shall have the meaning set forth in the first paragraph
of this Agreement.
"WARN ACT" shall have the meaning set forth in Section 3.16(e).
ARTICLE X.
MISCELLANEOUS
10.1 PRESS RELEASES AND ANNOUNCEMENTS. Any press release or other
public announcement with respect to this Agreement or the transactions
contemplated hereby will be issued, if at all, at such time and in such manner
as Buyer determines. Prior to the Closing, the Company and the Selling
Securityholders shall keep this Agreement strictly confidential and may not make
any disclosure of this Agreement or the transactions contemplated hereby to any
Person unless consented to by Buyer in advance or required by applicable law or
regulation (in which case the Selling Securityholders or the Company, as the
case may be, will provide Buyer with a copy of the proposed disclosure prior to
making the disclosure and will consider Buyer's comments in good faith). The
Selling Securityholders, the Company and Buyer will consult with each other
concerning the means by which the Acquired Companies' employees, customers,
suppliers and others having dealings with the Acquired Companies will be
informed of the transactions contemplated hereby, and Buyer will have the right
to be present for any such communication; provided, that, prior to Closing Buyer
shall not contact or communicate with any of the Acquired Companies' employees,
customers, suppliers or others having dealings with any Acquired Company without
the prior written consent of the Company.
67
10.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; PROVIDED, HOWEVER, that (a) the
provisions of Article VII concerning indemnification are intended for the
benefit of the Indemnified Parties, (b) the provisions of Section 5.7 concerning
indemnification are intended for the benefit of the individuals specified
therein and (c) the provisions of Section 1.8(d) are intended for the benefit of
the Securityholders' Representatives.
10.3 ENTIRE AGREEMENT. This Agreement, together with the
agreements, documents, certificates (including, without limitation, the Company
Certificate and the Buyer Certificate), Exhibits and Schedules referred to
herein (including, without limitation, the Disclosure Schedule)), constitutes
the entire agreement among the Parties and supersedes any prior understandings,
agreements or representations by or among the Parties, written or oral, with
respect to the subject matter hereof. Without limiting the foregoing, the
Company Certificate, the Buyer Certificate, the Disclosure Schedule and all
other Schedules and Exhibits to this Agreement are hereby incorporated by
reference in, and made a part of, this Agreement as if set forth in full herein.
10.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Parties; provided, however, that Buyer may (i) assign any
or all of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases Buyer nonetheless shall remain
responsible for the performance of all its obligations hereunder).
10.5 COUNTERPARTS AND FACSIMILE SIGNATURE. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument. This
Agreement may be executed by facsimile signature.
10.6 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered (i) four
Business Days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one Business Day after it is sent for next
Business Day delivery via a reputable nationwide overnight courier service, and
(ii) on the same day it is sent by telefax machine, in each case to the intended
recipient and address or telefax number set forth below:
68
IF TO THE COMPANY:
Axxora Life Sciences Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Sales, CPA & CFO
IF TO THE SECURITYHOLDERS' REPRESENTATIVES:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ CH-4415 Lausen
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇ Switzerland
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ Phone No.: + ▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
Fax No.: + ▇▇ ▇▇ ▇▇▇ ▇▇ ▇▇
IF TO THE BUYER: COPY TO:
Enzo Life Sciences, Inc. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇. The Met Life Building
Farmingdale, New York ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇, Ext 135 ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Ph.D., Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
President Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Any Party may change the address and/or telefax number to which notices,
requests, demands, claims, and other communications hereunder are to be sent by
giving the other Parties notice in the manner herein set forth.
10.8 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to principles or rules of conflict of laws to the extent such principles
or rules are not mandatorily applicable by statute and would require or permit
the application of the laws of another jurisdiction.
10.9 AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Closing. No amendment of
any provision of this Agreement shall be valid unless the same shall be in
writing and signed by the Buyer, the Company and the Securityholders'
Representatives. No waiver of any right or remedy hereunder shall be valid
unless the same shall be in writing and signed by the Party giving such waiver.
No waiver by any Party with respect to any default, misrepresentation or breach
of warranty or covenant hereunder shall be deemed to extend to any prior or
subsequent default,
69
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
10.10 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
10.11 SUBMISSION TO JURISDICTION. The Parties hereto hereby (a)
submit to the exclusive jurisdiction of any federal or state court sitting in
the State of Delaware for the purpose of any action arising out of or relating
to this Agreement brought by any Party hereto and (b) irrevocably waive, and
agree not to assert by way of motion, defense, or otherwise, in any such action,
any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
execution, that the action is brought in an inconvenient forum, that the venue
of the action is improper, or that this Agreement or the transactions
contemplated by this Agreement may not be enforced in or by any of the
above-named courts.
10.12 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION.
10.13 CONSTRUCTION.
(a) The language used in this Agreement shall be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
70
(c) Any reference herein to "including" shall be
interpreted as "including without limitation."
(d) Any reference to any Article, Section or paragraph
shall be deemed to refer to an Article, Section or paragraph of this Agreement,
unless the context clearly indicates otherwise.
10.14 SPECIFIC PERFORMANCE. Each Party acknowledges and agrees that
the other Parties would be damaged irreparably if any provision of this
Agreement is not performed in accordance with its specific terms or is otherwise
breached. Accordingly, each Party agrees that the other Parties will be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and its terms and
provisions in any Legal Proceeding instituted in any court of the United States
or any state thereof having jurisdiction over the Parties and the matter,
subject to Sections 10.8 and 10.11, in addition to any other remedy to which
they may be entitled, at law or in equity.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGES FOLLOW]
71
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
THE BUYER:
ENZO LIFE SCIENCES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
THE COMPANY:
AXXORA LIFE SCIENCES INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D.
Title: President & CEO
THE SELLING SECURITYHOLDERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------- -------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ TRUST
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ -------------------------------------
--------------------------------- Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ Title: Trustee
▇▇▇▇▇▇▇▇▇▇ CHILDREN'S TRUST FOR
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ THE BENEFIT OF ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------- ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Trustee
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Trustee
▇▇▇▇▇▇▇▇▇▇ CHILDREN'S TRUST FOR
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ - DIVERSIFIED FUND THE BENEFIT OF ▇▇▇▇▇▇▇ ▇▇▇▇▇
By:/s/ ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------- By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Trustee
Name: ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ -------------------------------------
Title: Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Trustee
/s/ ▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------
▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇
SEMELY CONSELL & GESTION SA
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------- --------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CEO Title: Director
THE ▇▇▇▇▇▇▇▇ FAMILY TRUST
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Trustee
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
NOORFRA AG
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director
IOWA RIVERSIDE LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Trustee
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Trustee
Title: Managing Member
/s/ ▇▇▇▇▇▇ Sales
-------------------------------
▇▇▇▇▇▇ Sales
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇
SVB FINANCIAL GROUP
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Derivatives Manager
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ Ravi Kalahashi
-------------------------------
Ravi Kalahashi
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE I
Axxora Life Sciences Inc.
List of Selling Securityholders
CLASS/ CERT CERT
SERIES NO. DATE SHAREHOLDER NO. SHARES
------ --- ---- ----------- ----------
Common 18 08/31/04 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,945,648
Common 19 08/31/04 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 972,824
Common 20 08/31/04 ▇▇▇▇▇ ▇▇▇▇ 648,550
Common 21 08/31/04 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 259,420
Common 22 08/31/04 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 648,550
Common 23 08/31/04 ▇▇▇▇▇ ▇▇▇▇▇▇ 324,275
Common 24 08/31/04 ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ - Diversified Fund 1,686,229
Common 25 08/01/06 ▇▇▇▇▇▇ ▇▇▇▇▇▇ 150,000
TOTAL COMMON: 6,635,496
Series A A-1 08/31/04 ▇▇▇▇▇ ▇▇▇▇▇▇▇ 135,115
Series A A-2 08/31/04 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 108,092
Series A A-3 08/31/04 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 459,389
Series A A-4 08/31/04 ▇▇▇▇ ▇▇▇▇▇▇ 1,080,916
Series A A-5 08/31/04 ▇▇▇▇▇ ▇▇▇▇▇▇ 108,092
Series A A-6 08/31/04 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 270,229
Series A A-7 08/31/04 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ trust dated May 14, 1982 2,405,038
Series A A-8 08/31/04 ▇▇▇▇▇▇▇▇▇▇ Children's trust dated March 15, 1989 for the 756,641
benefit of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Series A A-9 08/31/04 ▇▇▇▇▇▇▇▇▇▇ Children's trust dated March 15, 1989 for the 756,641
benefit of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Series A A-10 08/31/04 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 135,115
CLASS/ CERT CERT
SERIES NO. DATE SHAREHOLDER NO. SHARES
------ --- ---- ----------- ----------
Series A ▇-▇▇ ▇▇/▇▇/▇▇ ▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇ 432,366
Series A A-12 08/31/04 Semely Conseil & Gestion SA 108,092
Series A A-13 08/31/04 The ▇▇▇▇▇▇▇▇ Family Trust dated October 8, 2002 540,458
Series A A-14 08/31/04 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 162,137
Series A A-15 08/31/04 Noorfra AG 270,229
Series A A-16 08/31/04 Iowa Riverside LLC 10,809,161
Series A A-17 08/31/04 ▇▇▇▇▇▇ Sales 108,092
Series A A-18 05/02/05 ▇▇▇▇ ▇▇▇▇▇▇▇ 4,920,283
Series A A-19 05/02/05 ▇▇▇▇ ▇▇▇▇▇▇ 2,108,692
TOTAL SERIES A: 25,674,778
Warrants ▇▇▇▇▇ ▇▇▇▇▇▇▇ 13,512
Warrants ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 10,809
Warrants ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 45,939
Warrants ▇▇▇▇ ▇▇▇▇▇▇ 108,092
Warrants ▇▇▇▇▇ ▇▇▇▇▇▇ 10,809
Warrants ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 27,023
Warrants ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ trust dated May 14, 1982 240,504
Warrants ▇▇▇▇▇▇▇▇▇▇ Children's trust dated March 15, 1989 for the 75,664
benefit of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Warrants ▇▇▇▇▇▇▇▇▇▇ Children's trust dated March 15, 1989 for the 75,664
benefit of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Warrants ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 13,511
Warrants ▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇ 43,237
CLASS/ CERT CERT
SERIES NO. DATE SHAREHOLDER NO. SHARES
------ --- ---- ----------- ----------
Warrants Semely Conseil & Gestion SA 10,809
Warrants The ▇▇▇▇▇▇▇▇ Family Trust dated October 8, 2002 54,046
Warrants ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 16,214
Warrants Noorfra AG 27,023
Warrants Iowa Riverside LLC 1,080,916
Warrants ▇▇▇▇▇▇ Sales 10,809
Warrants Silicon Valley Bank 200,000
TOTAL COMMON WARRANTS 2,064,581
CLASS/ CERT CERT
SERIES NO. DATE SHAREHOLDER NO. SHARES
------ --- ---- ----------- ----------
Options ▇▇▇▇▇ ▇▇▇▇▇▇▇ 150,000
Options ▇▇▇▇▇ ▇▇▇▇▇▇ 150,000
Options ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 850,000
Options ▇▇▇▇▇ ▇▇▇▇▇▇ 425,000
Options ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 425,000
Options ▇▇▇▇▇▇ Sales 425,000
Options ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 250,000
Options ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 200,000
Options ▇▇▇▇ ▇▇▇▇▇▇▇ 150,000
Options ▇▇▇▇▇▇▇ ▇▇▇▇▇ 200,000
TOTAL COMMON OPTIONS 3,225,000
TOTAL 37,599,855
SCHEDULE II
COMMON TO TOTAL
CURRENT COMMON BE ISSUED COMMON PREFERRED A SHARE OF LESS
COMMON SHARE ON WARRANT SHARES AND SHARES AND TOTAL ESCROW CURRENT
ISSUED OPTIONS EXERCISE DISTRIBUTION DISTRIBUTION PROCEEDS -1330000 PROCEEDS
------------- --------------- ------------ ------------- ------------- ---------- ----------- -----------
1 ▇▇▇▇▇ ▇▇▇▇▇▇▇
Number of Shares - 150,000 7,453 157453 135115
Price per Share** 0.412664 0.458921
-------------------------
Proceeds 64975 62007 126982 -10347 116635
2 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Number of Shares 1,945,648 850,000 25,▇▇▇ ▇▇▇▇▇▇▇ 459389
Price per Share 0.412664 0.458921
-------------------------
Proceeds 1164122 210823 1374945 -112039 1262906
3 ▇▇▇▇ ▇▇▇▇▇▇
Number of Shares - - 59,626 59626 1080916
Price per Share 0.412664 0.458921
-------------------------
Proceeds 24606 496055 520661 -42427 478234
4 ▇▇▇▇▇ ▇▇▇▇▇▇
Number of Shares - 425,000 5,962 430962 108092
Price per Share 0.412664 0.458921
-------------------------
Proceeds 177843 49606 227448 -18534 208914
5 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Number of Shares 972,824 425,000 14,906 1412730 270229
Price per Share 0.412664 0.458921
-------------------------
Proceeds 582983 124014 706997 -57611 649387
6 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Number of Shares 259,420 - - 259,420 -
Price per Share 0.412664 0.458921
-------------------------
Proceeds 107,053 - 107,053 (8,723) 98,330
COMMON TO TOTAL
CURRENT COMMON BE ISSUED COMMON PREFERRED A SHARE OF LESS
COMMON SHARE ON WARRANT SHARES AND SHARES AND TOTAL ESCROW CURRENT
ISSUED OPTIONS EXERCISE DISTRIBUTION DISTRIBUTION PROCEEDS -1330000 PROCEEDS
------------- --------------- ------------ ------------- ------------- ---------- ----------- -----------
7 ▇▇▇▇▇ ▇▇▇▇▇▇
Number of Shares 324,275 - - 324,275 -
Price per Share 0.412664 0.458921
Proceeds 133,817 - 133,817 (10,904) 122,912
8 ▇▇▇▇▇▇▇ ▇▇▇▇▇
Number of Shares - 200,000 - 200,000 -
Price per Share 0.412664 0.458921
-------------------------
Proceeds 82,533 - 82,533 (6,725) 75,808
9 ▇▇▇▇▇▇ ▇▇▇▇▇▇
Number of Shares 150,000 - - 150,000 -
Price per Share 0.412664 0.458921
-------------------------
Proceeds 61,900 - 61,900 (5,044) 56,856
10 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ trust dated May 14, 1982
Number of Shares - - 132,668 132,668 2,405,038
Price per Share 0.412664 0.458921
-------------------------
Proceeds 54,747 1,103,723 1,158,471 (94,400) 1,064,071
11 ▇▇▇▇▇▇▇▇▇▇ Children's trust dated March 15, 1989 for the benefit of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Number of Shares - - 41,738 41,738 756,641
Price per Share 0.412664 0.458921
-------------------------
Proceeds 17,224 347,239 364,463 (29,699) 334,764
12 ▇▇▇▇▇▇▇▇▇▇ Children's trust dated March 15, 1989 for the benefit of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Number of Shares - - 41,738 41,738 756,641
Price per Share 0.412664 0.458921
-------------------------
Proceeds 17,224 347,239 364,463 (29,699) 334,764
COMMON TO TOTAL
CURRENT COMMON BE ISSUED COMMON PREFERRED A SHARE OF LESS
COMMON SHARE ON WARRANT SHARES AND SHARES AND TOTAL ESCROW CURRENT
ISSUED OPTIONS EXERCISE DISTRIBUTION DISTRIBUTION PROCEEDS -1330000 PROCEEDS
------------- --------------- ------------ ------------- ------------- ---------- ----------- -----------
13 Iowa Riverside LLC
Number of Shares - - 596,260 596,260 10,809,161
Price per Share 0.412664 0.458921
-------------------------
Proceeds 246,055 4,960,555 5,206,610 (424,268) 4,782,343
14 ▇▇▇▇▇ ▇▇▇▇
Number of Shares - - 648,550 -
648,550
Price per Share 0.412664 0.458921
-------------------------
Proceeds 267,633 - 267,633 (21,808) 245,825
15 ▇▇▇▇ ▇▇▇▇▇▇
Number of Shares - - - - 2,108,692
Price per Share 0.412664 0.458921
-------------------------
Proceeds - 967,724 967,724 (78,856) 888,868
16 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Number of Shares - 200,000 - 200,000 -
Price per Share 0.412664 0.458921
-------------------------
Proceeds
82,533 - 82,533 (6,725) 75,808
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Number of Shares 648,550 656,003 135,115
Price per Share - 7,453
0.412664 0.458921
Proceeds -------------------------
270,709 62,007 332,716 (27,112) 305,604
18 The ▇▇▇▇▇▇▇▇ Family Trust ed October 8, 2002
Number of Shares - - 29,813 29,813 540,458
Price per Share 0.412664 0.458921
-------------------------
Proceeds 12,303 248,028 260,330 (21,213) 239,117
19 ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ -
Diversified Fund
Number of Shares 1,686,229 - - 1,686,229 -
COMMON TO TOTAL
CURRENT COMMON BE ISSUED COMMON PREFERRED A SHARE OF LESS
COMMON SHARE ON WARRANT SHARES AND SHARES AND TOTAL ESCROW CURRENT
ISSUED OPTIONS EXERCISE DISTRIBUTION DISTRIBUTION PROCEEDS -1330000 PROCEEDS
------------- --------------- ------------ ------------- ------------- ---------- ----------- -----------
Price per Share 0.412664 0.458921
-------------------------
Proceeds 695,847 - 695,847 (56,702) 639,145
20 ▇▇▇▇▇ ▇▇▇▇▇▇
Number of Shares - 150,000 - 150,000 -
Price per Share 0.412664 0.458921
-------------------------
Proceeds 61,900 - 61,900 (5,044) 56,856
21 ▇▇▇▇▇▇ Sales
Number of Shares - 425,000 5,962 430,962 108,092
Price per Share 0.412664 0.458921
-------------------------
Proceeds 177,843 49,606 227,448 (18,534) 208,914
22 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Number of Shares - - 5,962 5,962 108,092
Price per Share 0.412664 0.458921
-------------------------
Proceeds 2,460 49,606 52,066 (4,243) 47,823
23 ▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇
Number of Shares - - 23,850 23,850 432,366
Price per Share 0.412664 0.458921
-------------------------
Proceeds 9,842 198,422 208,264 (16,971) 191,293
24 Semely Conseil & Gestion SA
Number of Shares - - 5,962 5,962 108,092
Price per Share 0.412664 0.458921
-------------------------
Proceeds 2,460 49,606 52,066 (4,243) 47,823
25 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Number of Shares - - 8,944 8,944 162,137
Price per Share 0.412664 0.458921
-------------------------
Proceeds 3,691 74,408 78,099 (6,364) 71,735
COMMON TO TOTAL
CURRENT COMMON BE ISSUED COMMON PREFERRED A SHARE OF LESS
COMMON SHARE ON WARRANT SHARES AND SHARES AND TOTAL ESCROW CURRENT
ISSUED OPTIONS EXERCISE DISTRIBUTION DISTRIBUTION PROCEEDS -1330000 PROCEEDS
------------- --------------- ------------ ------------- ------------- ---------- ----------- -----------
26 Noorfra AG
Number of Shares - - 14,906 14,906 270,229
Price per Share 0.412664 0.458921
-------------------------
Proceeds 6,151 124,014 130,165 (10,607) 119,558
27 ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Number of Shares - 250,000 - 250,000 -
Price per Share 0.412664 0.458921
-------------------------
Proceeds 103,166 - 103,166 (8,407) 94,759
28 ▇▇▇▇ ▇▇▇▇▇▇▇
Number of Shares - 150,000 - 150,000 4,920,283
Price per Share 0.412664 0.458921
-------------------------
Proceeds 61,900 2,258,023 2,319,923 (189,042) 2,130,881
29 Silicon Valley Bancshares
Number of Shares - - 110,325 110,325 -
Price per Share 0.412664 0.458921
-------------------------
Proceeds 45,527 - 45,527 (3,710) 41,817
-----------------------------------------------------------------------
Total Shares 6,635,496 3,225,000 1,138,869 10,999,365 25,674,778
=======================================================================-------------------------------------
Total Proceeds $ 4,539,045 $11,782,705 $16,321,750 $(1,330,000) $14,991,750
=============================================================
**Price per share as shown is rounded at six decimal places
SCHEDULE III
Amended and Restated Investors Rights Agreement, dated April 29, 2005, by and
among Axxora Life Sciences, Inc. and the Investors listed on Schedule A thereto.
Amended and Restated Stockholders' Agreement, dated April 25, 2005, by and among
Axxora Life Sciences, Inc. and the Stockholders listed on Schedule A and
Schedule B thereto.
Amended and Restated Voting Agreement, dated April 29, 2005, by and among Axxora
Life Sciences, Inc. and the Investors listed on Schedule A, Schedule B and
Schedule C thereto.
SCHEDULE IV
CONSENTS AND AGREEMENTS TO BE OBTAINED AS A CONDITION TO CLOSING
Execution of Side Letter with Vector Laboratories acknowledging continuing
distribution relationship and agreeing to notice prior to termination of same.
Written consent of ▇▇▇▇▇▇ Biomedical Laboratories, Inc. ("▇▇▇▇▇▇") with respect
to the License, dated September 13, 1999, between ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Corporation.