Exhibit 10.27
MEMBERSHIP PURCHASE AGREEMENT
BETWEEN
PHC, INC.
AND
PIVOTAL RESEARCH CENTERS, LLC
AND ITS SELLERS
XXXXX X. XXXXX, XXXXX X. XXXXXXX, AND XXXXXXX X. XXXXXXX
Dated April 30, 2004
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.....................................................8
1.1 Certain Defined Terms...........................................8
1.2 Other Defined Terms............................................16
1.3 Construction...................................................17
ARTICLE II THE TRANSACTION................................................18
2.1 Purchase and Sale..............................................18
2.2 Prior to Closing...............................................18
2.3 Purchase Price.................................................19
2.4 Purchase Price Adjustment......................................19
2.5 Allocations of Purchase Price..................................20
2.6 Closing........................................................20
ARTICLE III COVENANTS OF BUYER.............................................20
3.1 Collection of Accounts Receivable of Buyer.....................20
3.2 Public Registration of Closing Stock...........................20
3.3 Security for Payment of Notes..................................21
3.4 Buyer's Working Capital Commitment.............................21
3.5 Buyer's Working Capital Commitment.............................21
3.6 Xxxxx Guaranty Leasehold Agreements............................21
3.7 Compliance with Pharmaceutical Contracts.......................22
3.8 Continuing Legal Status of Pivotal.............................22
3.9 Compliance with Leasehold Agreements...........................22
3.10 No Corporate Overhead Charges..................................22
3.11 Prohibition on Assignments, Transfers..........................22
3.12 Prohibition on Material Indebtedness...........................23
ARTICLE IV COVENANTS OF SEller.............................................23
4.1 Covenant Not to Compete or Interfere With Business.............23
4.2 Termination of Covenant........................................24
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLERS......................24
5.1 Pivotal Organization...........................................24
5.2 Power and Authority............................................24
5.3 Capitalization.................................................25
5.4 Subsidiaries...................................................25
5.5 No Conflict....................................................25
5.6 Licenses.......................................................25
5.7 Contracts......................................................26
5.8 Equipment and Other Property...................................27
5.9 Real Property..................................................27
5.10 Intellectual Property Rights...................................28
5.11 Employee Benefit Matters.......................................28
5.12 Labor Matters..................................................30
5.13 Tax Matters....................................................30
5.14 Environmental Matters..........................................32
5.15 Insurance......................................................33
5.16 Customers, Distributors and Suppliers..........................33
5.17 Affiliate Transactions.........................................33
5.18 Liability......................................................33
5.19 Full Disclosure................................................34
5.20 Financial Statements...........................................34
5.21 No Changes.....................................................34
5.22 Contracts......................................................36
5.23 Litigation and Legal Proceedings...............................36
5.24 Approvals; Consents............................................36
5.25 Compliance with Law............................................37
5.26 Title to Transferred Interest..................................37
5.27 Finders........................................................37
5.28 Securities Disclosure..........................................37
5.30 Disclosure.....................................................37
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ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER......................37
6.1 Organization.................................................37
6.2 Power and Authority..........................................38
6.3 Authorized Closing Stock.....................................38
6.4 Finders......................................................38
6.5 Approvals; Consents..........................................38
6.6 Compliance with Other Instruments; Law.......................38
6.7 Investment Representations...................................38
6.8 SEC Filings..................................................39
ARTICLE VII CONDITIONS TO CLOSING........................................39
7.1 Conditions to Obligations of the Sellers.....................39
7.2 Conditions to Obligations of the Buyer.......................40
7.3 Concurrent Conditions........................................40
ARTICLE VIII SURVIVAL AND INDEMNIFICATION.................................41
8.1 Survival.....................................................41
8.2 Indemnification..............................................41
8.3 Limitation of Liability and Termination of Indemnification...42
8.4 Adjustment of Purchase Price.................................43
8.5 Claims Resulting from Breach of Representation or Warranty...43
8.6 Mitigation...................................................43
ARTICLE IX TAX COVENANTS AND RELATED MATTERS............................43
9.1 Returns......................................................43
9.2 Cooperation..................................................43
9.3 Allocation of Taxes..........................................43
ARTICLE X MISCELLANEOUS................................................43
10.1 Right of Set-Off.............................................43
10.2 Breach or Failure to Perform.................................44
10.3 Entire Agreement; No Third-Party Beneficiaries...............44
10.4 Public Announcement..........................................44
10.5 Expenses.....................................................44
10.6 Notices......................................................44
10.7 Waivers and Amendments.......................................45
10.8 Governing Law; Severability..................................45
10.9 Headings.....................................................45
10.10 Assignment...................................................45
10.11 Binding Effect...............................................45
10.12 Arbitration of Disputes......................................46
10.13 Counterparts.................................................46
10.14 Termination of Certain Agreements............................46
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EXHIBITS
EXHIBIT Recital B - Seller's Membership Interests
EXHIBIT 1.1A - Colombo Employment Agreement
EXHIBIT 1.1B - Xxxxx Employment Agreement
EXHIBIT 1.1C - Pivotal LLC Agreement
EXHIBIT 2.2(a) - Closing Certificate
EXHIBIT 2.3(d)(i) - Note A
EXHIBIT 2.3(d)(ii) - Note B
EXHIBIT 2.3(d)(iii) - Note C
EXHIBIT 2.4(b) - PTO Policy
EXHIBIT 2.6(b) - Assignment Agreement
EXHIBIT 3.11 - Form of Guaranty
EXHIBIT 7.1(b) - Buyer's Opinion of Counsel
EXHIBIT 7.1(h) - Pledge Agreement
EXHIBIT 7.1(i) - Security Agreement
EXHIBIT 7.1(j) - Financing Statement
EXHIBIT 7.2(b) - Sellers' Opinion of Counsel
SCHEDULES
SCHEDULE 1.1A - Key Employee
SCHEDULE 2.2(a) - Reserve Account
SCHEDULE 2.5 - Fixed Assets
SCHEDULE 3.6 - Xxxxx Guaranty Leasehold Agreement
SCHEDULE 3.9 - Leasehold Agreements
SCHEDULE 3.10 - Charges for Legal and Accounting Expenses
SCHEDULE 5.20(c) - Encumbrances on Accounts and Notes Receivables
(Interim Financial Statements)
SCHEDULE 5.21(b) - Changes to Employee Compensation and Benefits
SCHEDULE 5.21(c) - Encumbrances on Assets
SCHEDULE 5.22 - Pharmaceutical Contracts
SCHEDULE 5.28 - Securities Disclosures
SCHEDULE 6.6 - Defaults or Violation Resulting from
Transaction Documents
DISCLOSURE SCHEDULE
Section 2.1 - Membership Interests
Section 2.2(b) - Bank Accounts
Section 2.2(c) - Accounts Receivable
Section 5.3 - Members of Pivotal
Section 5.5 - Conflicts
Section 5.6 - Licenses
Section 5.7 - Material Contracts
Section 5.8 - Equipment
Section 5.9(a) - Leased Real Property
Section 5.9(b) - Improvements Not in Good Condition
Section 5.9(c) - Insufficient Utilities and Services on Leased
Real Property
Section 5.10 - Intellectual Property
Section 5.11(a) - Employee Plans
Section 5.11(c)(iv) - Termination for Cause
Section 5.12 - Labor Agreements
Section 5.13 - Taxes
Section 5.14 - Environmental Matters
Section 5.15(a) - Insurance Policies
Section 5.15(b) - Invalid Insurance Policies
Section 5.15(c) - Cancelled Pharmaceutical Companies and
Suppliers
Section 5.17 - Affiliate Insurance Policies
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Section 5.16 - 10 Largest Customer Transactions
Section 5.16 - 10 Largest Customer Transactions
Section 5.16 - 10 Largest Customer Transactions
Section 5.20(a) - Financial Statements
Section 5.20(b) - GAAP Liabilities
Section 5.22 - Pharmaceutical Contract Violations
Section 5.23 - Litigation
Section 5.24 - Consents and Approvals
Section 5.25 - Non-Compliance with Laws
Section 5.29 - Pre-Closing Conditions
Section 6.7 - Investment Representations
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MEMBERSHIP PURCHASE AGREEMENT
February ___, 2003
The parties to this Membership Purchase Agreement (the "Agreement") are PHC,
Inc., a Massachusetts corporation ("PHC" or "Buyer"), Pivotal Research Centers,
L.L.C., an Arizona limited liability company ("Pivotal"), Xxxxx X. Xxxxx
("Xxxxx"), Xxxxxxx X. Xxxxxxx ("Xxxxxxx"), and Xxxxx X. Xxxxxxx ("Colombo")
(Xxxxx, Xxxxxxx and Colombo may be collectively referred to herein as the
"Sellers" and Xxxxx and Xxxxxxx X. Xxxxxxx may be collectively referred to
herein as the "Executives" or individually, as the case may be, as an
"Executive").
RECITALS
A. WHEREAS, Pivotal is in the business of providing clinical research
services to Pharmaceutical Companies (as defined below) and their
designated contract research organizations. Pivotal's offices and
research facilities are located at 00000 X. 00xx Xxxxx, Xxxxx 000,
Xxxxxx, Xxxxxxx (the "Peoria Location"), and 0000 X. Xxxx Xxxxxx Xxxx,
Xxxxx 000, Xxxx, Xxxxxxx; (the "Mesa Location," and together with the
Peoria Location, and any Successor Location (as defined below) the
"Locations");
B. WHEREAS, as of the date hereof, each of the Sellers is a Member of
Pivotal and owns of record and beneficially a Membership Interest in
Pivotal set forth next to such Seller's name on Exhibit Recital B
hereto;
C. WHEREAS, subject to such terms and conditions as are specified herein,
each of the Sellers desires to sell all of such Seller's Membership
Interest;
D. WHEREAS, neither party hereto would enter into this Agreement without
the Executives and the Buyer entering into the Employment Agreements
(defined below) and as such those agreements constitute material
inducements to all parties to enter into this Agreement; and
E. WHEREAS, subject to the terms and conditions as are specified herein
Buyer desires to purchase the Membership Interests.
AGREEMENT
Now, therefore, with reference to the foregoing recitals, all of which are
incorporated herein by this reference, in consideration of the premises and of
the mutual agreements and covenants hereinafter set forth, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, the following terms
have the following meanings:
"Accredited Investor" means a natural person whose Net Worth, or joint Net
Worth with such natural person's spouse, exceeds $1,000,000 as of the date of
this Agreement.
"Act" means the Arizona limited liability company act.
"Action" means any claim, action, suit, arbitration or proceeding by or
before any Governmental Authority or arbitrator.
"Acquisition Financing" means the financing obtained by Buyer to pay the
Closing Cash Consideration of this Agreement.
"Affiliate" means, when used with respect to a specified Person, another
Person that, either directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a specified Person.
"Assets" mean all of Pivotal's right, title and interest in and to all
properties, assets and rights of any kind, whether tangible or intangible, real
or personal, owned by Pivotal, or in which Pivotal has any interest whatsoever.
"Audited Financial Statements" means the audited balance sheet of Pivotal
for the twelve month periods ending June 30, 2002 and June 30, 2003, and the
related audited statements of income, cash flow and Members' capital for the
twelve months ended June 30, 2002 and June 30, 2003, respectively, together with
the notes thereto and the report of Pivotal's independent auditors thereon.
"Benefit Arrangement" means any employment, consulting, severance or other
similar contract, arrangement or policy (written or oral) and each plan,
arrangement, program, agreement or commitment (written or oral) providing for
insurance coverage (including, without limitation, any self insurance
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health or
accident benefits (including, without limitation, any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Internal Revenue
Code providing for the same or other benefits) or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement insurance,
compensation or benefits which (i) is not a Welfare Plan, Pension Plan or
Multi-employer Plan, (ii) is entered into, maintained, contributed to or
required to be contributed to, as the case may be, by Pivotal or any ERISA
Affiliate or under which Pivotal or any ERISA Affiliate may incur any liability,
and (ii) covers any employee or former employee of Pivotal or any ERISA
Affiliate (with respect to their relationship with any such entity).
"Board of Directors" means the board of managers of Pivotal as constituted
pursuant to the Pivotal LLC Agreement.
"Books and Records" means all books of account and other financial records
pertaining to Pivotal.
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"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in Washington, DC.
"Capitalized Lease Liabilities" means, without duplication, all monetary
obligations of Pivotal under any leasing or similar arrangement which, in
accordance with GAAP, would be classified as a capitalized lease, and, for
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Clinical Research Services" means clinical research services and clinical
research operations including, but not limited to, any such activities conducted
by any of Buyer, Pivotal, PPR or any Subsidiary or Affiliate of any of the
foregoing.
"Closing Stock Price" means the lower of a number equal to the closing
price of PHC Stock as reported by the NASDAQ Bulletin Board on the day (i)
immediately preceding the Closing Date, or (ii) immediately preceding the
Buyer's authorized release of a public statement describing the Buyer'
acquisition of Pivotal.
"Colombo Employment Agreement" means the employment agreement between
Pivotal and Xxxxxxx X. Xxxxxxx in the form attached hereto as Exhibit 1.1A.
"Contract" means any agreement, contract, lease, note, loan, evidence of
Liabilities, purchase order, letter of credit, franchise agreement, undertaking,
covenant not to compete, employment agreement, license, instrument, obligation,
commitment, purchase and sale order, quotation or other executory commitment,
including, but not limited to, Pharmaceutical Contracts, to which Pivotal is a
party or which related to Pivotal's businesses or any of its assets or
properties, whether oral or written, express or implied, and which pursuant to
its terms has not expired, terminated or been fully performed by the parties
thereto.
"Disclosure Schedule" means the disclosure schedule attached hereto.
"Discounted Closing Stock Price" means the Closing Stock Price multiplied
by .75.
"Employee Plans" means all Benefit Arrangements, Multi-employer Plans,
Pension Plans and Welfare Plans.
"Employment Agreements" means the Colombo Employment Agreement and the
Xxxxx Employment Agreement, collectively.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, encumbrance or other right of third parties, whether
voluntarily incurred or arising by operation of law, and includes, without
limitation, any agreement to give any of the foregoing in the future, and any
contingent or conditional sale agreement or other title retention agreement or
lease in the nature thereof.
"Equity Securities" of any Person means (i) shares of capital stock,
limited liability company interests or other equity securities of such Person,
including, with respect to Pivotal, the Membership Interests, (ii)
subscriptions, calls, warrants, options or commitments of any kind or character
relating to, or entitling any Person to purchase or otherwise acquire, any
capital stock, limited liability company interests or other equity securities of
such Person, (iii) securities convertible into or exercisable or exchangeable
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for shares of capital stock, limited liability company interests or other equity
securities of such Person, and (iv) equity equivalents, interests in the
ownership, or earnings of, or equity appreciation, phantom stock or other
similar rights of, or with respect to, such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is (or at any relevant time was) a
member of a "controlled group of corporations" with, under "common control"
with, or a member of a "affiliated service group" with, or otherwise required to
be aggregated with, the company or any of its subsidiaries as set forth in
Section 414(b), (c), (m) or (o) of the Internal Revenue Code.
"Facility" means any real property or facility owned, leased, operated or
used at any time by Pivotal or any of their respective Affiliates or by a
predecessor of Pivotal or any of such predecessor's respective Affiliates
including, but not limited to, the Locations.
"Financing Statement" means a financing statement filed in accordance with
the Uniform Commercial Code as enacted in the State of Arizona in the form
attached hereto as Exhibit 7.1(j).
"Fixed Assets" has the meaning set forth in Section 2.5 and Schedule 2.5.
"GAAP" means United States generally accepted accounting principles in
effect from time to time applied consistently throughout the period involved.
"Governmental Authority" means any government, any governmental entity,
department, commission, board, agency or instrumentality, and any court,
tribunal, or judicial or arbitral body, whether federal, state, local or
foreign.
"Governmental Order" means any order, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Handling of Substances" means the production, use, generation, storage,
treatment, recycling, disposal, discharge, release or other handling or
disposition of Substances.
"Improvements" means any buildings, facilities, other structures and
improvements, building systems and fixtures located on or under any real
property owned or leased by Pivotal.
"Intellectual Property Rights" means all (i) domestic and foreign
registrations of trademarks, service marks, logos, corporate names, protected
models, designs, created works, trade names or other trade rights of Pivotal,
(ii) pending applications by for any such registrations, (iii) rights in or to
patents, copyrights and pending applications therefore of Pivotal, (iv) of
Pivotal's rights to other trademarks; service marks, logos, corporate names,
protected models, designs, created works, trade names and other trade rights and
all other trade secrets, designs, plans, specifications, technology, know-how,
methods, designs, concepts and other proprietary rights, whether or not
registered, (v) rights under any licenses of Pivotal to use any of the
foregoing, (vi) standard operating procedures developed by Pivotal and existing
prior to the Closing which constitute trade secrets, including, but not limited
to, those standard operating procedures set forth in Pivotal's "Standard
Operating Procedures Manual," and (vii) databases constituting proprietary
information or trade secrets developed by Pivotal, including, but not limited
to, Pivotal's patient database in existence as of the Closing..
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"Interim Financial Statements" means the unaudited financial statements of
Pivotal as of July 30, 2003, August 30, 2003, September 30, 2003, October 30,
2003, November 30, 2003, and December 30, 2003 and the related unaudited
statements of income, cash flows and Members' capital of Pivotal for the one
month periods then ended.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"IRS" means the United States Internal Revenue Service.
"Key Employee" means the Pivotal employees named in the attached Schedule
1.1A.
"Xxxxx Employment Agreement" means the employment between Pivotal and Xxxxx
in the form attached hereto as Exhibit 1.1B.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order or rule of common law.
"Liabilities" means (i) indebtedness of Pivotal for borrowed money to any
Person, (ii) obligations of Pivotal evidenced by bonds, notes, debentures, or
similar instruments, (iii) obligations of Pivotal under capitalized leases, (iv)
obligations of Pivotal under conditional sale, title retention or similar
agreements or arrangements creating an obligation of Pivotal with respect to the
deferred purchase price of property (other than customary trade credit), (v)
interest rate and currency obligation swaps, xxxxxx or similar arrangements
(other than interest rate caps, the cost of which have been paid in full prior
to the date hereof) (vi) accrued benefits of Pivotal employees as of Closing
including, but not limited to, accrued vacation, pre-paid benefits and expenses
for which adequate provisions have not been made pursuant to the Reserve Account
requirements set forth in Section 2.2(a) of this Agreement which shall not
include PTO which is subject to the provisions of Section 2.4(b), and (vii) all
obligations of Pivotal to guarantee any of the foregoing types of obligations on
behalf of any Person other than Pivotal.
"Licenses" means all of the licenses, permits and other governmental
authorizations required for the operation of the business of Pivotal and
including, without limitation, any and all activities of Pivotal in connection
with, related, or pertaining thereto.
"Line of Credit" means the line of credit financing provided by Buyer's
lender to Pivotal in an amount not less than $1,000,000.
"Loan Document" means a document evidencing Acquisition Financing or the
Line of Credit.
"Loss Contract" means any Contract for which Pivotal has accrued a loss on
its financial statements or which Pivotal reasonably expects, based on Pivotal's
knowledge as of the date hereof and the Closing Date (as applicable), will
result in a loss.
"Losses" of a Person means any and all losses, liabilities, damages,
claims, awards, judgments, and expenses (including, without limitation, the
costs of reasonable investigation, remediation and attorneys' fees) suffered or
incurred by such Person, provided, however, in the case of Pivotal any such
Losses shall be net of insurance proceeds actually collected with respect to
such Losses.
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"Material Adverse Effect" or "Material Adverse Change" means, with respect
to any Person, any material adverse effect on or material adverse change with
respect to the business, operations, assets, liabilities, condition (financial
or otherwise), or results of operations of such Person and its Subsidiaries,
taken as a whole.
"Members" means all of the members of Pivotal, collectively.
"Membership Interest" means an interest in the capital and profits of
Pivotal, together with all property rights and all other rights accorded to the
record and/or beneficial holder of such interest, whether pursuant to the
Pivotal LLC Agreement, applicable Law (including the Act) or otherwise.
"Multi-employer Plan" means any "multi-employer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (i) Pivotal or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which Pivotal or any ERISA Affiliate may
incur any liability and (ii) covers any employee or former employee of Pivotal,
its Subsidiaries or any ERISA Affiliate (with respect to their relationship with
any such entity).
"Net Debt" means (x) the Liabilities of Pivotal as of the Closing Date,
minus (y) the aggregate cash and cash equivalents of Pivotal as of the Closing
Date.
"Net Worth" means the excess of total assets of fair market value,
including home, home furnishings and automobiles, over total liabilities. A
principal residence shall be valued either at (A) cost (including the cost of
improvements, net of current Encumbrances on the property) or (B) appraised
value as determined by a written appraisal used by an institutional lender
making a loan secured by such property, including the cost of subsequent
improvements, net of current Encumbrances on such property.
"Non-Pivotal Business" means Post-Closing, the Clinical Research Services
business of Buyer other than the Pivotal Business.
"Note A" means a promissory note in the form attached hereto as Exhibit
2.3(d)(i) in the original principal amount of $1,000,000 executed by PHC as
maker and the Sellers as holders.
"Note B" means a promissory note in the form attached hereto as Exhibit
2.3(d) (ii) in the original principal amount of $500,000 executed by PHC as
maker and the Sellers as holders.
"Note C" means a promissory note in the form attached hereto as Exhibit 2.3
(d)(iii) in the original principal amount of $1,000,000 executed by PHC as maker
and the Sellers as holders.
"Note Consideration" means, the Note A Consideration, the Note B
Consideration, and the Note C Consideration, collectively.
"Note C Shares" means a number of shares of PHC stock which may be issued
to Sellers pursuant to the terms of Note C.
"Notes" means Note A, Note B, and Note C, collectively.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
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"Pension Plan" shall mean any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multi-employer Plan) (i) which Pivotal or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five years prior to the Closing Date, maintained,
administered, contributed to or was required to contribute to, or under which
Pivotal or any ERISA Affiliate may incur any liability (including, without
limitation, any contingent liability) and (ii) which covers any employee or
former employee of Pivotal or any ERISA Affiliate (with respect to their
relationship with any such entity).
"Percentage Interest" means, with respect to any Membership Interest, the
relative Percentage Interest in the capital and profits of Pivotal represented
by such Membership Interest.
"Person" means any natural person, corporation, limited partnership,
general partnership, limited liability company, joint stock company, joint
venture, association, company, trust or other organization, or any Governmental
Authority.
"PHC Stock" means capital stock of PHC.
"Pharmaceutical Company" means a Person engaged in research and
development, manufacture, distribution, sale, or promotion of pharmaceuticals or
related products or services.
"Pharmaceutical Contract" means a Contract between Pivotal and a
Pharmaceutical Company.
"Pivotal Business" means the business of providing Clinical Research
Services to Pharmaceutical Companies and their respective designated contract
research organizations conducted primarily at the Locations.
"Pivotal LLC Agreement" means the agreement between the Members with
respect to the governance of their Membership Interests in Pivotal attached
hereto as Exhibit 1.1 C.
"Pledge Agreement" means that certain Pledge Agreement, in the form
attached hereto as Exhibit 7.1(h), of even date herewith by Buyer as pledgor and
Sellers as pledgees.
"Post-Closing" means any period or portion thereof that begins after the
Closing Date.
"PPR" means Pioneer Pharmaceutical Research, Inc., a wholly owned
subsidiary of PHC, with facilities located in Michigan, Utah, and Nevada.
"Pre-Closing" means any period or portion thereof that ends before the
Closing Date.
"Prospective Customer" means any Person with which any employee, consultant
or other party affiliated with Pivotal or the Buyer has engaged in discussions
with concerning Clinical Research Services offered by Pivotal or the Buyer
within the immediately preceding 12 month period of the later of the sale of all
of such Sellers' Membership Interest or the termination of such Seller's
employment with the Buyer, if applicable.
"Purchase Price" means, subject to adjustment as provided herein, (w) the
aggregate Closing Cash Consideration, plus (x) the Closing Stock, plus (y) the
Note Consideration.
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"Representative" means, with respect to any Seller, such other Person who
has been duly authorized to act on such Seller's behalf through the grant of a
power of attorney to the Representative with respect to the transactions
contemplated hereby and by the Transaction Documents, which power of attorney
shall be in writing, shall be notarized, shall expressly authorize such
Representative to execute on behalf of such Seller this Agreement, any
Transaction Documents to which such Seller is a party and any other instrument,
certificate or agreement with respect to the transactions contemplated hereby or
thereby and to execute on such Seller 's behalf a Membership Interest Assignment
Agreement with respect to such Seller's Membership Interest, and shall otherwise
be in form and substance satisfactory to Buyer and its counsel in its sole and
absolute discretion.
"Return" or "Returns" means all reports, returns, declarations, claims for
refund or statements of any kind or nature relating to Taxes, and any schedule
or attachment thereto and any amendment thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means that certain Security Agreement, in the form
attached hereto as Exhibit 7.1(i), of even date herewith.
"Subsidiary" of any Person means any other Person (i) of which such first
Person (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, more than 50% of the stock or other Equity Securities,
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such other Person or (ii) the
operations of which are consolidated with such first Person, pursuant to GAAP,
for financial reporting purposes.
"Substances" means any toxic, hazardous, or other regulated wastes,
substances, products, pollutants or materials, including, without limitation,
radioactive materials, asbestos, polychlorinated biphenyls, radon gas, petroleum
and petroleum products.
"Successor Location" means any Facility located in greater Phoenix, Arizona
metropolitan area, other than a Location, at which Clinical Research Services
are conducted Post-Closing.
"Tax" or "Taxes" means any federal, state, local or foreign net or gross
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium (including taxes under Internal Revenue Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, offer, registration, value added, alternative or add on minimum, estimated
or other tax, governmental fee or like assessment or charge of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not, imposed by any Governmental Authority or arising under any Tax
Law or agreement, including, without limitation, any joint venture or
partnership agreement.
"Tax Return" means any return, declaration, report, claim for refund, or
information or return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendments thereof.
"Transaction Documents" means: (i) this Agreement, (ii) the Assignment
Agreement, (iii) the Colombo Employment Agreement, (iv) the Xxxxx Employment
Agreement, (v) the Security Agreement, (vi), the Financing Statements, (vii) the
Pledge Agreement, (viii) Note A, (ix) Note B, (ix) Note C, and (xi) such other
documents that now or in the future may be executed by the parties in connection
with the transaction evidenced therein, together with any renewals and
modifications thereof.
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"Treasury Regulations" means the regulations issued pursuant to the
Internal Revenue Code.
"Welfare Plan" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, (a) which Pivotal, or any ERISA Affiliate, maintains,
administers, contributes to or is required to contribute to, or under which
Pivotal, or any ERISA Affiliate, may incur any liability and (b) which covers
any employee or former employee of Pivotal or any ERISA Affiliate (with respect
to their relationship with any such entity).
1.2 Other Defined Terms. The following terms have the meaning for such
terms in the sections set forth below:
Term Section
_________________________________________________________
AAA 10.12(a)
Accounts Receivable 2.2 (c)
Adjusted Accounts Receivable 2.2 (c)
Arbitration Notice 10.12(a)
Assignment Agreement 2.6 (b)
CERCLA 5.14(b)
Claim 8.2 (d)
Claim Notice 8.2 (d)
Closing 2.6 (a)
Closing Cash Consideration 2.3 (b)
Closing Certificate 2.2 (a)
Closing Date 2.6 (a)
Closing Stock 2.3 (c)
Closing Stock Consideration 2.3 (c)
Concurrent Transaction 7.3
Cure Period 10.2
Employment Laws 5.12
Environmental Laws 5.14(a)
Equipment 5.8
Escrow Agent 10.1
Escrow Agreement 10.1
Exchange Act 6.8
Indemnifying Party 8.2 (d)
Leased Real Property 5.9 (a)
Locations Recital A
Material Contracts 5.7 (a)
Mesa Location Recital A
Note A Consideratin 2.3 (d)(i)
Note B Consideraton 2.3 (d)(ii)
Note C Consideration 2.3 (d)(iii)
Peoria Location Recital A
Pivotal Operating Expenses 2.2 (a)
Pre-Closing Partial Period 5.13(b)
PTO 2.4 (b)
PTO Policy 2.4 (b)
Receivable Expiration Dae 3.1
Related Party Transactin 5.17
Reserve Account 2.2 (a)
SEC 6.8
SEC Reports 6.8
Set-Off Notice 10.1
Third Party Notice 8.2 (d)
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(a) References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications
thereto.
(b) References to statutes shall include all regulations pr omulgated
thereunder and references to statutes or regulations shall be
construed as including all statutory and regulatory provisions
consolidating, amending or replacing the statute or regulation.
The Language Construction.
(c) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using
the singular or plural number also include the plural or singular
number, respectively, (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire
Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; (v) the word
"including" shall mean "including, without limitation" and (vi)
the word "or" shall be disjunctive but not exclusive.
(d) 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.
(e) The annexes, schedules and exhibits to this Agreement are a
material part hereof and shall be treated as if fully
incorporated into the body of the Agreement.
(f) Wherever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified.
(g) meanings given to them and shall be construed in accordance with
under GAAP.
ARTICLE II
THE TRANSACTION
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, each of the Sellers jointly and severally
agree to sell to Buyer, and Buyer agrees to purchase from each of the
Sellers, the Membership Interests held by such Seller. Section 2.1 of
the Disclosure Schedule sets forth the aggregate Membership Interests
to be sold to and purchased by Buyer which represent all of the
Membership Interests of Pivotal. Except as limited by Section 8.2(e)
with respect to Xxxxxxx, all obligations of Sellers hereunder shall be
joint and several obligations of each of them. All amounts to be paid
to Sellers hereunder shall be paid pro rata in accordance with their
respective Percentage Interest.
2.2 Prior to Closing. Immediately prior to Closing, Pivotal shall take the
following actions:
(a) Pre-Closing Adjustments. All operating expenses of Pivotal
incurred or accrued prior to the Closing Date (the "Pivotal
Operating Expenses"), including but not limited to rent, phone,
insurance, equipment leases, utilities, regular semi-monthly
salary expenses and unreimbursable advertising and travel
expenses, shall be pro-rated as of the Closing Date, and all
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Closing related expenses, including, but not limited to, legal
and accounting fees and costs incurred by Pivotal shall be paid
in full prior to the Closing Date. Prior to the Closing, Sellers
shall deliver to Buyer a certificate signed by the chief
financial officer of Pivotal ("Closing Certificate") setting
forth, in detail, the Pivotal Operating Expenses and the amounts
to be pro-rated as of the Closing Date. The Closing Certificate
is attached hereto as Exhibit 2.2(a). Immediately prior to
Closing, Pivotal shall pay all operating expenses that are then
due and payable, and shall deposit into the reserve account
described in Schedule 2.2(a) (the "Reserve Account") an amount
sufficient to cover all operating expenses incurred or to be
incurred by Pivotal on or prior to the Closing Date that are not
yet due and payable, offset by the amount of any pro-rated
Pivotal Operating Expenses pertaining to a period Post-Closing
which are paid in advance of Closing by Pivotal, plus the amount
of any security deposits under any Contracts including, but not
limited to, leases. In addition, Sellers shall deposit into the
Reserve Account that portion of projected employee bonuses that
have accrued up to the Closing Date. Non-cash items such as
depreciation shall not be deemed to be operating expenses for
purposes of this Section 2.2(a).
(b) Cash in Accounts. After making deposits into the Reserve Account
in accordance with Section 2.2(a), prior to Closing Pivotal shall
distribute pro-rata to Sellers one hundred percent (100%) of all
cash in any bank account maintained by Pivotal, including, but
not limited to, those bank accounts listed in attached Section
2.2(b) of the Disclosure Schedule containing the name and address
of the financial institution at which such account is maintained,
the applicable account number of each such account, and the
balance of each such account prior to any such distribution.
(c) Accounts Receivable. (i) Pivotal shall distribute to Sellers, pro
rata in accordance with their respective Percentage Interests,
the Accounts Receivable (as defined below); (ii) Post-Closing,
Pivotal shall remit to Sellers, in accordance with their
respective Percentage Interests, the proceeds of all of Pivotal's
accounts receivable existing or created prior to the Closing Date
including, but not limited to those accounts receivable set forth
on Section 2.2(c) of the Disclosure Schedule (the "Accounts
Receivable"), which accounts shall be collected and remitted to
Sellers in accordance with Section 3.1. The parties acknowledge
that, due to the nature of the Pivotal Business as conducted on
the date hereof, the number of Pivotal's accounts receivable
created during any given month may not be determined until the
succeeding month when Pivotal reconciles its accounting records
with operations records to determine the actual number of
accounts receivable created during the previous month. Not later
than thirty (30) days following the Closing, the parties shall,
upon examination of Pivotal's Books and Records, review Pivotal's
Books and Records in order to determine whether the Accounts
Receivable constitute the actual number of Pivotal accounts
receivable existing or created prior to the Closing Date and
shall prepare a written list of such Accounts Receivable mutually
agreeable to both Buyer and Sellers ("Adjusted Accounts
Receivable"). In the event the Accounts Receivable differ from
the Adjusted Accounts Receivable, then Buyer shall remit to
Sellers the proceeds of the Adjusted Accounts Receivable in the
manner described in Section 3.1.
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2.3 Purchase Price.
(a) Generally. In consideration for the sale by each Seller of the
Membership Interests being sold to Buyer pursuant to this
Agreement, Buyer shall pay, in the aggregate, to each Seller such
Seller's allocable share of the Purchase Price as adjusted in
accordance with Section 2.4.
(b) Closing Cash Consideration. At the Closing, Buyer shall, in the
aggregate, pay to each Seller, by wire transfer in immediately
available funds to an account or accounts designated at least two
Business Days prior to the Closing by such Seller in a written
notice to Buyer, an amount in cash (such amount, the "Closing
Cash Consideration") equal to $1,500,000 multiplied by such
Seller's Percentage Interest.
(c) PHC Closing Stock. At Closing, Buyer shall deliver to each Seller
a number of shares (the "Closing Stock") of PHC Stock (the
"Closing Stock Consideration") equal to (w) $500,000 (U.S.)
multiplied by such Seller's Percentage Interest, divided by (x)
the Closing Stock Price.
(d) Note Consideration.
(i) Promissory Note A. At Closing, Buyer shall deliver to
Sellers Note A ("Note A Consideration").
(ii) Promissory Note B. At Closing, Buyer shall deliver to
Sellers Note B ("Note B Consideration").
(iii) Promissory Note C. At Closing, Buyer shall deliver to
Sellers Note C ("Note C Consideration").
2.4 Purchase Price Adjustment.
(a) Note Consideration Adjustment. The Note Consideration shall be
subject to adjustment as set forth in the Notes in accordance
with their terms. In the event of a conflict between any of the
defined terms of any Note and the defined terms referred to in
this Agreement, the defined terms of this Agreement shall govern.
Upon any such adjustment, the Purchase Price hereunder shall be
deemed adjusted accordingly, provided however, that all such
adjustments to the Purchase Price shall be deemed to be an
adjustment to the portion thereof allocated to "goodwill"
according to Section 2.5 hereof, and that no adjustment shall be
made to any other category of allocation.
(b) PTO Adjustment. Prior to the Closing Date, Pivotal maintained a
policy whereby employees of Pivotal were entitled to personal
time off ("PTO"). PTO accrued according to such policy, and any
unused time, was transferred to the employee's "Serious Health
Condition" account to be used in the event of an extended illness
or other approved leave of absence. Buyer intends to maintain the
PTO Policy (defined below) Post-Closing. However, the parties
acknowledge and agree that certain changes to the PTO Policy may
be necessary in the future due to changing business conditions.
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A copy of the existing policy relating to PTO (the "PTO Policy")
is attached as Exhibit 2.4(b). If any Pivotal employee terminates
their employment between the Closing Date and December 31, 2003,
any funds for PTO actually paid to such employee upon termination
shall be paid by Sellers within five days of such termination.
Such amounts shall be deemed Liabilities of Pivotal occurring
prior to the Closing Date and, at Buyer's option, Buyer may, upon
thirty days prior written notice to Sellers, set off any such
amounts payable by Sellers against the Note Consideration. Prior
to the expiration of such thirty-day period Sellers may pay any
sums due hereunder directly to Buyer. Notwithstanding the
foregoing, the existence or payment of such amounts shall not
independently result in or cause a breach of Sellers'
representations or warranties regarding Liabilities.
2.5 Allocation of Purchase Price. The Purchase Price shall be allocated as
follows: (a) $85,361 (U.S.) to fixed assets listed in Schedule 2.5,
(the "Fixed Assets") (b) $350,000 (U.S.) to the Closing Stock, and (c)
the remainder to goodwill.
2.6 Closing.
(a) The closing of the purchase and sale of the Membership Interests
(the "Closing") shall take place on February __, 2004 at such
place or time, or on such other date, as the Buyer and the
Sellers shall agree (the "Closing Date").
(b) At the Closing, each Seller (or his or its duly authorized
Representative) shall deliver or cause to be delivered to Buyer:
(i) a duly authorized, executed and delivered Assignment
Agreement in the form attached as Exhibit 2.6(b) (each an
"Assignment Agreement") evidencing the assignment and transfer by
such Seller of the Membership Interests being sold by such Seller
pursuant to this Agreement to Buyer; and (ii) the certificate and
other documents required to be delivered by such Seller pursuant
to Section 7.2.
ARTICLE III
COVENANTS of Buyer
Buyer covenants to the Sellers as follows:
3.1 Collection of Accounts Receivable of Buyer. Buyer will use reasonable
commercial efforts to collect the Adjusted Accounts Receivable and,
except as otherwise provided in Section 10.1, concerning Buyer's right
of setoff, shall remit all amounts collected to Sellers' account no
less frequently than monthly. Buyer shall periodically provide Sellers
with a report of all collection activities relating to the Adjusted
Accounts Receivable in accordance with Buyer's normal collection
reporting practices. Sellers shall take no action, directly or
indirectly, with respect to collection of an Adjusted Account
Receivable prior to a date which is 180 days subsequent to the
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creation of such Adjusted Account Receivable (each a "Receivable
Expiration Date") without Buyer's prior written consent or unless so
directed by Buyer in such Seller's capacity as an employee of Pivotal.
With respect to any given Adjusted Account Receivable, Sellers shall
have no recourse against Buyer for Buyer's failure or inability to
collect such Adjusted Account Receivable prior to the applicable
Receivable Expiration Date. At any time subsequent to the Receivable
Expiration Date of an Adjusted Account Receivable, Sellers may, with
ten (10) days prior written notice to Buyer, initiate collection
activities related to such Adjusted Account(s) Receivable on their own
behalf. Upon Sellers' written notice to Buyer following the occurrence
of any Receivable Expiration Date, Buyer will provide such information
concerning such Adjusted Account Receivable to Sellers as is
reasonably necessary for Sellers to undertake such collection
activities. In the case of a Debtor to whom Pivotal provides products
or services subsequent to the Closing Date, or incurs any liability to
Pivotal, any payments received by Pivotal from such Debtor shall be
applied first to any Adjusted Account Receivable with respect to such
Debtor then, the remainder, if any, shall be retained by Pivotal
unless such Debtor identifies, in writing, that such payments are
being made with reference to particular products or services provided
by Pivotal at a particular time (e.g., "for clinical research services
performed in April 2004") in which case such payment will be applied
to the particular account receivable so referenced.
Public Registration of Closing Stock. Buyer will file with the SEC and
any other necessary regulatory body a registration statement and any
other documents required to publicly register the Closing Stock, which
shall be filed within ninety (90) days after the Closing Date. Buyer
will use its good faith and diligent efforts to secure the approval of
such registration statement so that the Closing Stock issued to
Sellers shall be publicly registered and freely tradable and not
subject to any trading restrictions. If the SEC shall refuse to
approve such registration statement within 180 days after the Close
Date, despite Buyer's good faith and diligent efforts to secure such
approval, then Sellers shall have the right to instruct Buyer, in
writing, to discontinue such efforts and deliver to each Seller a
number of shares of PHC Stock equal to (w) $500,000 multiplied by such
Seller's Percentage Interest, divided by (x) the Discounted Closing
Stock Price, following Sellers' surrender to Buyer of the Closing
Stock issued to Sellers on the Closing Date.
3.2 Security for Payment of Notes. The obligations evidenced by the Notes
shall be secured by the Membership Interests and the Assets of the
Pivotal Business. Such security shall be evidenced by (i) a first
priority security interest in all of the Membership Interests, and
(ii) a security interest in all of the Assets of the Pivotal Business
(including without limitation rights to all trade names, trademarks,
and all goodwill associated therewith, all employment contracts with
employees employed by Pivotal), subject only to the priority of the
Acquisition Financing and the Line of Credit. Sellers will receive the
Pledge Agreement, the Security Agreement, and the Financing Statements
and whatever other collateral assignments and other documents or
instruments related thereto are reasonably necessary to secure payment
under each of the Notes. Buyer will take reasonable measures to ensure
that the Acquisition Financing and the Line of Credit will be
maintained separate and apart from other credit facilities of Buyer so
that, for such time as any amount remains outstanding under the Notes,
only the Acquisition Financing and the Line of Credit are in a
security position senior to the Notes and only to the extent such a
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senior position has, in fact, been validly created. Sellers agree to
execute any and all documents reasonably necessary to evidence the
senior position of the Acquisition Financing and the Line of Credit
including, but not limited to, the execution of a subordination
agreement in a form reasonably acceptable to Sellers. Except as
otherwise provided herein, until such time as all of the Notes have
been paid in full, Buyer will keep the Assets of the Pivotal Business
segregated from Buyer's assets to ensure Sellers' ability to perfect
their security interest in the Membership Interests and the Assets of
the Pivotal Business.
3.3 Buyer's Clinical Research Operations. Buyer understands that Seller's
ability to receive payments under the Notes bears a direct relation to
Xxxxxxx X. Xxxxxxx and Xxxxx'x input in the decision making process
regarding Buyer's Clinical Research Services since Sellers may receive
more, or less, Note consideration based on the performance of Xxxxxxx
X. Xxxxxxx and Xxxxx with respect to the Pivotal Business and the
Non-Pivotal Business. Except as otherwise provided in this Agreement,
Buyer agrees that if (a) Buyer terminates the employment of Xxxxx or
Xxxxxxx X. Xxxxxxx other than for "Cause", as defined in the
Employment Agreements, or (b) either Xxxxxxx X. Xxxxxxx or Xxxxx
terminate their Employment Agreements for "Good Reason," as defined in
the Employment Agreements, then Sellers shall, subject to Sellers'
continuing compliance with the terms of the Transaction Documents, be
entitled to freeze the Remaining Principal (as defined in the Notes)
of Notes A and B according to the terms thereof and such Notes shall
no longer be subject to adjustment and payments will thereafter
continue to be made to Sellers in accordance with the schedule for
payments set forth in each such Note as of the date of the termination
of Xxxxx'x or Xxxxxxx X. Xxxxxxx'x employment. Notwithstanding the
foregoing, Seller's rights to freeze the Remaining Principal of Notes
A and B under this Section 3.4 shall terminate in the event that any
one or more of them breaches Article IV or V of this Agreement.
3.4 Buyer's Working Capital Commitment. Buyer covenants to obtain the Line
of Credit to fund the working capital requirements of the Pivotal
Business. The Line of Credit shall be available to be drawn down
immediately after Closing in such increments as may be reasonably
necessary to fund such working capital requirements, shall remain
available until the second anniversary of the Closing, and shall be
used solely to fund operations at the Locations.
3.5 Xxxxx Guaranty Leasehold Agreements. Buyer further covenants to take
all reasonably necessary actions and execute any reasonably necessary
documents that may be required to remove Xxxxx X. Xxxxx as a personal
guarantor of the leasehold obligations identified in the lease
described in Schedule 3.6 and shall in all events indemnify Xxxxx from
any and all claims or expenses of any nature whatsoever resulting from
any breach of any of such leasehold obligations that occur after the
Closing Date.
3.6 Compliance with Pharmaceutical Contracts. Buyer covenants that it
shall not engage in any conduct in breach of a Pharmaceutical Contract
that would have a Material Adverse Effect on Pivotal or the Pivotal
Business.
3.7 Continuing Legal Status of Pivotal. Buyer covenants to maintain the
legal existence of Pivotal in good standing from and after the Closing
Date until such time as Buyer is reasonably certain that it has
obtained all of the necessary authorities and consents to assign
Pivotal's obligations under all then current Pharmaceutical Contracts.
Buyer understands that the Pharmaceutical Contracts entered into by
-- 39 --
Pivotal typically include indemnification rights that run to the
benefit of Pivotal and most such contracts contain assignment
restrictions that prohibit the assignment of such contracts to third
parties without the express written consent of the Pharmaceutical
Company.
3.8 Compliance with Leasehold Agreements. Buyer covenants that it shall
not engage in any conduct in breach of any of the leasehold agreements
identified in Schedule 3.9 that would have a Material Adverse Effect
on Pivotal.
3.9 No Corporate Overhead Charges. Buyer hereby covenants that it will not
impose any overhead charges or administrative expenses upon the
Pivotal Business from the date of Closing and for a period of 5 years
thereafter except for accounting and legal charges and costs and other
expenses actually incurred by Buyer on behalf of or relating to the
Pivotal Business, which charges and expenses for legal and accounting
expenses shall not exceed the amounts set forth on Schedule 3.10. In
addition, Buyer understands and acknowledges that Pivotal may assume
certain responsibilities for the Non-Pivotal Business that, prior to
the Closing Date, was handled by Buyer's staff and that Buyer's
clinical research sites may have historically been charged corporate
level overheard fee by Buyer. To the extent that Pivotal assumes such
responsibilities, Buyer agrees that it will not assess to the
Non-Pivotal Business an overheard charge for such service. This
provision is not intended to restrict or prohibit Buyer from passing
through to the Pivotal Business actual costs and expenses of the
Pivotal Business that are originally incurred and paid by Buyer at the
corporate level, including but not limited to Pivotal employee travel
on behalf of the Pivotal Business, and legal expenses incurred to
defend claims arising out of the Pivotal Business.
3.10 Prohibition on Assignments, Transfers. Buyer will not assign, sell,
transfer or convey any Assets of the Pivotal Business or the
Membership Interests except in accordance with the terms of the
Security Agreement or the Pledge Agreement, as applicable; provided,
however, that the Buyer may, assign such Assets and Membership
Interests in whole or in part without the prior written consent of any
other party hereto (i) to a Subsidiary or Affiliate of Buyer as part
of a restructuring or reorganization of PHC or its business, provided
that contemporaneous with such assignment, such Subsidiary or
Affiliate shall execute in favor of Sellers documents substantially
similar in form to the Security Agreement and the Pledge Agreement and
pursuant to which such Subsidiary or Affiliate provides to Sellers a
security interest in all of the assets and capital stock of such
Subsidiary or Affiliate, and provided further that Buyer shall
guaranty such Subsidiary's or Affiliate's payment and performance
under the Transaction Documents, which guaranty must be in the form
set forth in attached Exhibit 3.11, (ii) to a lender as security in a
manner consistent with Buyer's obligations under the Transaction
Documents, and (iii) to any Person who acquires all or substantially
all of the Equity Securities or assets of Buyer (by merger,
recapitalization, sale or otherwise) provided that Sellers' security
interest in the Assets of the Pivotal Business and the Membership
Interests is maintained. If Buyer desires to sell or transfer its
interest in the Pivotal Business, and if such sale or transfer is not
part of a transaction involving the acquisition of all or
substantially all of the Equity Securities or assets of Buyer, as
contemplated under subsection (iii) above, then Buyer shall either (a)
if such transaction is to be consummated within eighteen months of the
expiration of the Notes, obtain Seller's prior written consent to such
sale or transfer, (provided that contemporaneous with such sale or
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transfer, the acquiring entity shall execute in favor of Sellers
documents substantially similar in form to the Security Agreement and
the Pledge Agreement and pursuant to which such acquiring entity
provides to Sellers a security interest in all of the assets and
capital stock of the Pivotal Business), or (b) pay to Sellers the
remaining Purchase Price prior to effecting such sale or transfer,
including but not limited to all Remaining Principal and interest
under the Notes, or (c) freeze the Remaining Note Principal on all of
the Notes and provide Sellers with a written guaranty of payment under
the Notes, which guaranty is in the form set forth in attached Exhibit
3.11 (provided that contemporaneous with such sale or transfer, the
acquiring entity shall execute in favor of Sellers documents
substantially similar in form to the Security Agreement and the Pledge
Agreement and pursuant to which such acquiring entity provides to
Sellers a security interest in all of the assets and capital stock of
the Pivotal Business).
3.11 Prohibition on Material Indebtedness. Buyer will not incur material
indebtedness on behalf of the Pivotal Business other than the Line of
Credit without the written consent of Sellers.
ARTICLE IV
COVENANTS OF SELLER
4.1 Covenant Not to Compete or Interfere With Business. Each Seller agrees
that they will not compete with Pivotal or Buyer in Clinical Research
Services for a period of (i) five (5) years after the Closing Date, or
(ii) three (3) years after the termination of each Seller's employment
with the Buyer or Pivotal, whichever is later, and that for a period
of (i) five years after the Closing Date, or (ii) three (3) years
after the termination of such Seller's employment with the Buyer or
Pivotal, whichever is later, they will not, directly or indirectly,
individually or as a non-public shareholder, director or officer of
any corporation, a partner of any partnership, a member of a limited
liability company, an owner of any entity or as an employee, agent,
consultant or advisor of any entity, (a) recruit or hire any employee
of the Buyer or Pivotal, or otherwise attempt to solicit or induce any
employee to leave the employment of the Buyer or Pivotal; (b) solicit
any customer or Prospective Customer of the Buyer or Pivotal for the
performance of Clinical Research Services or otherwise interfere with
the business relationships between the Buyer or Pivotal, or their
respective customers, suppliers and others with whom Buyer or Pivotal
conducts any Clinical Research Services business; provided, however,
that, in the event Xxxxx solicits any customer or Prospective Customer
of the Buyer or Pivotal for products or services other than Clinical
Research Services during the five-year period following the Closing
Date, Xxxxx shall provide written notice of the same to Buyer; (c)
individually or through any entity perform any services for any
customer or Prospective Customer of the Buyer or Pivotal which are
directly competitive with the Buyer's or Pivotal's Clinical Research
Services which the Buyer or Pivotal may perform for such customers and
Prospective Customers, regardless of whether or not the Buyer or
Pivotal has or is now providing such Clinical Research Services; or
(d) accept employment by any customer or Prospective Customer of the
Buyer or Pivotal unless the business of such customer or Prospective
Customer of the Buyer or Pivotal does not directly compete with the
Clinical Research Services business of the Buyer or Pivotal.
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(a) Each Seller acknowledges that the protections of the Buyer and
Pivotal set forth in this Article IV of this Agreement are of
vital concern to the Buyer and Pivotal, that monetary damages for
any violation thereof would not adequately compensate the Buyer
and Pivotal and that the Buyer and Pivotal are each engaged in a
highly competitive business. Accordingly, each Seller agrees that
the restrictions set forth in this Article IV may be enforced by
injunction proceedings (without the necessity of posting bond)
whether or not such Seller's employment with the Buyer has
terminated.
(b) If any term or condition of this Agreement shall be invalid or
unenforceable to any extent or in any application, including, but
not limited to the non-competition covenants in this Article IV,
then the remainder of this Agreement, and such term or condition,
except to such extent or in such application, shall not be
affected thereby, and each and every term and condition of this
Agreement shall be valid and enforced to the fullest extent and
in the broadest application permitted by law.
(c) The Sellers agree and acknowledge that the restrictions set forth
in this Article IV are fair, reasonable and necessary to protect
the legitimate business interests of the Buyer and Pivotal, that
adequate consideration has been received by the Sellers for such
obligations, that these obligations will not prevent the Sellers
from earning a livelihood, and that these obligations will
survive the termination of this Agreement and the termination of
such Seller's employment with the Buyer and Pivotal.
(d) Any breach of any covenant or obligation under this Article IV
will result in irremediable and/or incalculable damage to Buyer
and/or Pivotal, as applicable. It is therefore agreed that Buyer
either on its own accord or on Pivotal's behalf, be entitled to
(a) obtain injunctive relief without the necessity of posting a
bond and/or (b) cause Sellers to specifically perform their
obligations hereunder. Any action to enjoin a breach or
threatened breach of this Article IV may be brought in an action
at law or in equity (without the necessity of posting bond) and
shall be in addition to any other remedies available to such
party.
(e) Notwithstanding anything in this Section 4.1 to the contrary,
Xxxxxxx'x obligations under this Section 4.1 shall terminate two
years after the Closing Date. Xxxxxxx shall be entitled to
participate, as an owner, advisor, board member or in any other
capacity, in the clinical psychiatry business conducted by his
brother, Xxxx Xxxxxxx, as currently conducted provided that
Xxxxxxx'x participation in that business does not violate his
obligations under Section 4.1.
4.2 Termination of Covenant. Sellers' obligations under Section 4.1 above
will terminate in the event Buyer breaches any one of the Notes by
failing or refusing to make payments under such Notes when due for a
period of six months, in the aggregate, during the terms of the Notes.
-- 42 --
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the Disclosure Schedule, the Sellers, subject to the
limitations set forth herein, jointly and severally represent and warrant to
Buyer as follows as of the Closing Date unless otherwise specified:
5.1 Pivotal Organization. Pivotal is a limited liability company; duly
organized, validly existing and in good standing under the laws of the
State of Arizona and has the requisite limited liability company power
and authority to own, operate or lease the properties and assets now
owned, operated or leased by it and to carry on its business as
currently conducted by Pivotal. Pivotal is duly qualified to conduct
business as a foreign limited liability company and is in good
standing in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary except where failure to do so would not have a
Material Adverse Effect. True and complete copies of the Pivotal
articles of organization and Pivotal LLC Agreement (in each case, as
amended to the date of this Agreement) have been made available by
Pivotal for review by the Buyer.
5.2 Power and Authority.
(a) Pivotal has all necessary and requisite limited liability company
power and authority to execute and deliver this Agreement and the
Transaction Documents and to perform fully its obligations
hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
the Transaction Documents and the performance by Pivotal of its
obligations thereunder and the consummation of the transactions
contemplated thereby have been duly and validly authorized by all
necessary action on the part of Pivotal and Pivotal's Board of
Directors. Each of the Transaction Documents is a valid and
binding obligation of Pivotal enforceable against Pivotal in
accordance with its terms, except to the extent such
enforceability (a) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors generally, or (b) is subject to general principles of
equity.
(b) Each Seller has all requisite power and authority to execute and
deliver, and to perform all of its obligations under, all
Transaction Documents to which such Seller is a party. Such
Seller has taken all necessary action required to authorize the
execution, delivery and performance of this Agreement and all
instruments and other documents to be executed and delivered by
such Seller in connection herewith, including each Transaction
Document to which such Seller is a party, and the consummation of
the transactions contemplated hereby and thereby to be
consummated by it. This Agreement has been, and each Transaction
Document to which such Seller is a party will be, duly and
validly executed and delivered by such Seller and constitutes a
legal, valid and binding obligation of such Seller enforceable
against such Seller in accordance with its terms, except to the
extent such enforceability (a) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally, or (b) is subject to
general principles of equity.
-- 43 --
5.3 Capitalization. Section 5.3 of the Disclosure Schedule sets forth a
true and correct list of each of the Members of Pivotal, and with
respect to each such Member, such Member's Percentage Interest in
Pivotal. The Members listed on Section 5.3 of the Disclosure Schedule
are the record and, beneficial holders of one hundred percent (100%)
of the issued and outstanding Membership Interests in Pivotal and the
Members own those Membership Interests free and clear of any and all
claims, liens and encumbrances of any nature whatsoever. Other than
the Membership Interests set forth on Section 5.3 of the Disclosure
Schedule, no other Person owns or holds any Equity Securities of
Pivotal, any interest in the profits or losses of Pivotal, any rights
to affect the management of Pivotal (other than the right of the Board
of Managers to manage Pivotal under the terms of the Pivotal LLC
Agreement) or any rights to receive distributions from Pivotal. Except
for the Pivotal LLC Agreement and the Transaction Documents, there are
no contracts to which Pivotal, or any Member, is a party relating to
the issuance, sale, or transfer of any Equity Securities of Pivotal.
Except for the Pivotal LLC Agreement, (i) there are no outstanding
subscriptions, calls, commitments, warrants or options for the
purchase of Membership Interests in, or other Equity Securities of,
Pivotal, or (ii) there are no other commitments of any kind for the
granting or issuance of additional Membership Interests or other
Equity Securities by Pivotal or the repurchase, redemption or other
acquisition by Pivotal of any Membership Interests currently
outstanding. Each of the Membership Interests that are issued and
outstanding are duly authorized, validly issued, fully paid and
non-assessable and except as set forth in the Pivotal LLC Agreement
are free of any preemptive or other similar rights. None of the
existing Membership Interests was issued in violation of the
Securities Act or any other applicable Law. Except for the Pivotal LLC
Agreement, there are no equity holder agreements, voting trusts,
proxies or other agreements or understandings with respect to or
concerning the purchase, sale or voting of the Membership Interests to
which Pivotal or, to the knowledge of Pivotal, any other Person is a
party or by which Pivotal or, to the knowledge of Pivotal, any other
Person is bound.
5.4 Subsidiaries. Pivotal has no Subsidiaries.
5.5 No Conflict. The execution, delivery and performance of this Agreement
by Pivotal and each of the Sellers and the consummation of the
transactions contemplated hereby do not and will not (a) violate or
conflict with the Pivotal LLC Agreement, (b) conflict with or violate
in any material respect any Law or Governmental Order applicable to
Pivotal or the Sellers, (c) except as set forth in Section 5.5 of the
Disclosure Schedule, violate, conflict with, result in any material
breach of, or constitute a material default (or event which with the
giving of notice or lapse of time, or both, would become a material
default) under, or result in or give to others any rights of
termination, amendment, acceleration or cancellation under, or result
in of any Encumbrance on the Membership Interests or on any of the
assets or properties of Pivotal pursuant to, any Material Contract or
material License to which Pivotal or any Seller is a party or by which
any of their assets or properties is bound, (d) conflict with or
result in a material violation or breach of any term of provision of
any Law or Governmental Order applicable to such Seller, or any of its
assets or properties, or (e) except as
-- 44 --
set forth in Section 5.5 of the Disclosure Schedule (i) conflict with
or result in a violation or breach of, (ii) constitute (with or
without notice or lapse of time or both) a default under, or (iii)
require such Seller to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under
the terms of, any contract (other than consents required in connection
with the Pivotal LLC Agreement) to which such Seller is a party or by
which any of its assets or properties is bound.
5.6 Licenses. Section 5.6 of the Disclosure Schedule sets forth a true
correct list of each of the Licenses held by Pivotal or issued by any
Governmental Authority. Such Licenses constitute all of the Licenses
required for the conduct of the business of Pivotal as presently
conducted and any and all other activities related or pertaining
thereto. Each such License is valid, binding and in full force and
effect, and Pivotal is not in default (or with the giving of notice or
lapse of time or both, would be in default) under any such License.
There are no proceedings pending, or threatened, that seek the
revocation, cancellation, suspension or adverse modification of any
such License. Except as set forth on Section 5.6 of the Disclosure
Schedule, all required filings with respect to such Licenses have been
timely made and all required applications for renewal thereof have
been timely filed, except for such failure to do any of the foregoing
as would not lead to the revocation, cancellation, suspension or
adverse modification of any such License. No such License will
terminate or be subject to termination or revocation as a result of
the transactions contemplated by this Agreement.
5.7 Contracts.
(a) Section 5.7 of the Disclosure Schedule lists the following
Contracts to which Pivotal is a party or by which its assets may
be bound (collectively, the "Material Contracts") in effect as of
the date of this Agreement:
(i) any Contract or series of Contracts that Pivotal reasonably
anticipates will, in accordance with its terms, involve
aggregate payments by or to Pivotal;
(ii) any lease of real property or any lease of personal property
involving any annual expense;
(iii) any Contract containing covenants materially limiting the
freedom of Pivotal to engage in any line of business or
compete with any Person;
(iv) any material distribution, franchise, license, sales,
commission, consulting agency or advertising Contracts;
(v) all Contracts evidencing Liabilities;
(vi) all Contracts relating to the sale or disposition of
properties or Assets of Pivotal (other than the sale of
inventory in the ordinary course of business);
-- 45 --
(vii) each Contract to which any Key Employee of Pivotal is bound
which in any manner purports to (A) restrict such employee's
freedom to engage in any line of business or to compete with
any other Person, or (B) assign to any other Person rights
to any material invention, improvement, or discovery related
to Clinical Research Services;
(viii) all Contracts relating to Intellectual Property Rights;
(ix) each joint venture Contract, partnership agreement, limited
liability company or other Contract (however named)
involving a sharing of profits, losses, costs, or
liabilities by Pivotal with any other Person;
(x) each Contract providing for payments to or by any Person or
entity based on sales, purchases or profits, other than
direct payments for goods;
(xi) each Contract providing for capital expenditures after the
date hereof;
(xii) each written warranty, guaranty or other similar
undertaking with respect to contractual performance extended
by Pivotal other than in the ordinary course of business;
and
(xiii) each Loss Contract.
Except as set forth in Section 5.7 of the Disclosure Schedules, Pivotal has
delivered or made available to the Buyer true, correct and complete copies of
all of the Material Contracts listed on Section 5.7 of the Disclosure Schedule,
including all amendments and supplements thereto.
(b) Except as set forth in Section 5.7 of the Disclosure Schedules,
Pivotal is not (and Pivotal has received no notice, nor has any
knowledge that any other party to any Material Contract is), in
breach or violation of, or default under, any of the Material
Contracts which, individually, involves claims, damages or
Liabilities in excess of $5,000. Except as set forth in Section
5.7 of the Disclosure Schedule, each Material Contract is in full
force and effect (and will remain in full force and effect upon
consummation of the actions contemplated hereby) and is a valid
agreement, arrangement or commitment of Pivotal, enforceable
against Pivotal in accordance with its terms and is a valid
agreement, arrangement or commitment of each other party thereto,
enforceable against such party in accordance with its terms,
except in each case where enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and except where enforceability is subject to
the application of equitable principles or remedies.
5.8 Equipment and Other Property. Except as set forth in Section 5.8 of
the Disclosure Schedule, Pivotal owns and has good and marketable
title to the equipment and other tangible items used in the operations
-- 46 --
of the Pivotal Business reflected on the books of Pivotal as owned by
Pivotal (the "Equipment"), free and clear of all Encumbrances. The
Equipment, taken as a whole, is in good operating condition and repair
(subject to normal wear and tear) and is suitable for the purposes for
which it is presently or has historically been used. Except as
otherwise contemplated by this Agreement, Pivotal owns, or, in the
case of leases and licenses, has valid and subsisting leasehold
interests or licenses in, all of the material properties and assets of
whatever kind (whether real or personal, tangible or intangible and
including, without limitation, all material intellectual property)
used in its business, in each case free and clear of Encumbrances.
5.9 Real Property.
(a) Pivotal owns no real property. Section 5.9(a) of the Disclosure
Schedule describes and lists the name of the record owner of all
real property now leased or licensed for use by Pivotal (such
leasehold or licensed interest, the "Leased Real Property").
Except as set forth on Section 5.9(a) of the Disclosure Schedule,
Pivotal has a valid leasehold interest in, and enjoys peaceful
and undisturbed possession (consistent with historical use) of,
all Leased Real Property free and clear of all Encumbrances.
Except as set forth on Section 5.9(a) of the Disclosure Schedule,
Sellers have no knowledge of any leases, subleases, licenses,
occupancy agreements, options, rights, concessions or other
agreements or arrangements, written or oral, granting to any
Person the right to purchase the Leased Real Property, or the
right to use or occupy any of the Leased Real Property. Except as
set forth on Section 5.9(a) of the Disclosure Schedule, the
Leased Real Property is all of the real property used in the
business of Pivotal as currently conducted.
(b) Except as disclosed in Section 5.9(b) of the Disclosure Schedule,
all Improvements owned, leased, or used by Pivotal on the Leased
Real Property appear to be in good condition and repair in all
material respects (normal wear and tear excepted). To the extent
applicable to a tenant of Leased Real Property, Pivotal has
obtained Licenses from any Governmental Authority having
jurisdiction over any of the Leased Real Property, or other right
from any other Person, necessary to permit the lawful use and
operation of the Improvements.
(c) The Leased Real Property and the Improvements appear to be
sufficiently supplied in all material respects with utilities and
other services as necessary for the operation of such Leased Real
Property and Improvements as currently operated including
adequate water, storm and sanitary sewer, gas, electric, and
telephone facilities, except as set forth on Section 5.9(c) of
the Disclosure Schedule.
(d) Pivotal has not received written notice of any special assessment
individually or in the aggregate, relating to any Leased Real
Property or any portion thereof and no such special assessment is
-- 47 --
pending or threatened. There are no pending or threatened
condemnation proceedings with respect to any of the Leased Real
Property.
(e) On or prior to the date hereof, Pivotal has delivered to Buyer
true and correct copies of the most current title reports, title
policies and surveys currently in the possession of Pivotal with
respect to any of the Leased Real Property.
5.10 Intellectual Property Rights. Section 5.10 of the Disclosure Schedule
lists all of Pivotal's Intellectual Property Rights. Pivotal owns
and/or has the right to use each of the Intellectual Property Rights
listed on Section 5.10 of the Disclosure Schedule. The Intellectual
Property Rights constitute all of the material intellectual property
necessary to conduct the business of Pivotal in the manner presently
conducted. None of the Intellectual Property Rights is involved in any
pending or threatened Action. Except as set forth in Section 5.10 of
the Disclosure Schedule, no other Person has the right to use any of
the Intellectual Property and no Person is infringing upon any
Intellectual Property Rights. Pivotal's use of the Intellectual
Property Rights is not infringing upon or otherwise violating the
rights of any other Person. No proceedings have been instituted
against or notices received by Pivotal that are presently outstanding
alleging that Pivotal's use of the Intellectual Property Rights
infringes upon or otherwise violates any rights of a third party.
5.11 Employee Benefit Matters.
(a) Disclosure; Delivery of Copies of Relevant Documents and Other
Information. Section 5.11(a) of the Disclosure Schedule contains
a complete list of Employee Plans. Pivotal has delivered to Buyer
a true and complete set of copies of (a) all Employee Plans and
related trust agreements, annuity contracts or other funding
instruments; (b) the latest IRS determination letter obtained
with respect to any such Employee Plan qualified or exempt under
Section 401 or 501 of the Internal Revenue Code; (c) Forms-5500
and certified financial statements for each Employee Plan
required to file such form, together with the most recent
actuarial report, if any, prepared by the Employee Plan's
enrolled actuary; (d) all summary plan descriptions for each
Employee Plan required to prepare, file and distribute summary
plan descriptions; (e) all summaries furnished to employees,
officers and directors of Pivotal and its Subsidiaries of all
incentive compensation, other plans and fringe benefits for which
a summary plan description is not required; and (f) the
notifications to employees of their rights under Section 4980B of
the Internal Revenue Code.
(b) Each Pension Plan required to be listed in Section 5.11(a) of the
Disclosure Schedule, and the related trust, if any, now meet and
since inception have met, the requirements for qualification
under Internal Revenue Code Section 401(a) and are currently, and
since their inception have been, exempt from taxation under
Internal Revenue Code Section 501(a); the Internal Revenue
-- 48 --
Service has issued a favorable determination or advisory letter
with respect to the qualified status of each such Pension Plan
and trust, and has not taken any action to revoke such letter;
Pivotal has performed all obligations required to be performed by
it under the Pension Plan (including the making of all
contributions), is not in default under, or in violation of, and
have no knowledge of any such default or violation of any other
party to the Pension Plan.
(c) Representations. Except as set forth in Section 5.11(a) of the
Disclosure Schedule:
(i) Pension Plans. Pivotal has no pension plans
(ii) Multi-employer Plans. There are no Multi-employer Plans, and
neither Pivotal nor any ERISA Affiliate has ever maintained,
contributed to, participated or agreed to participate in a
Multi-employer Plan.
(iii) Welfare Plans.
(A) Each Welfare Plan which covers or has covered employees
or former employees of Pivotal (with respect to their
relationship with such entities) has been maintained,
and presently is, in material compliance with its terms
and, both as to form and operation, with the
requirements prescribed by any and all statutes,
orders, rules and regulations which are applicable to
such Welfare Plan, including without limitation ERISA
and the Internal Revenue Code.
(B) An estimate of the liabilities of Pivotal and its ERISA
Affiliates for providing retiree life medical benefits
coverage to active and retired employee of Pivotal and
such ERISA Affiliates has been made and is reflected on
Pivotal's balance sheets and the books and records of
Pivotal according to Statement of Financial Accounting
Standards No. 106. Pivotal or an ERISA Affiliate has
the right to modify and to terminate all Welfare Plans
which cover retirees with respect to both retired and
active employees.
(C) Each Welfare Plan which is a "group health plan," as
defined in Section 607(1) of ERISA, has been operated
in material compliance with the provisions of Part 6 of
Title I, Subtitle B of ERISA and Section 4980B of the
Internal Revenue Code at all times.
(iv) Benefit Arrangements. Each Benefit Arrangement is in
material compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Benefit
Arrangement, including, without limitation, the Internal
Revenue Code. Except as set forth on Section 5.11(c)(iv) of
the Disclosure Schedules, and except as provided by law, the
-- 49 --
employment of all persons presently employed or retained by
Pivotal is terminable at will.
(v) Fiduciary Duties and Prohibited Transactions. Neither
Pivotal nor any fiduciary of any Welfare Plan or Pension
Plan has any material liability with respect to any
transaction in violation of Sections 404 or 406 of ERISA or
any "prohibited transaction," as defined in Section
4975(c)(1) of Internal Revenue Code, for which no exemption
exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Internal Revenue Code. Pivotal has not
participated in a violation of Part 4 of Title I, Subtitle B
of ERISA by any plan fiduciary of any Welfare Plan or
Pension Plan or has any unpaid civil penalty under Section
502(1) of ERISA.
(vi) Litigation. There is no action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action, governmental audit or
investigation relating to benefits under any Employee Plan
that is pending or threatened or anticipated against Pivotal
or any ERISA Affiliate.
(vii) Unpaid Contributions, UBIT. Neither Pivotal nor any ERISA
Affiliate has any material liability for unpaid
contributions with respect to any Pension Plan,
Multi-employer Plan or Welfare Plan. Pivotal or an ERISA
Affiliate has made all required contributions under each
Employee Plan for all prior periods or proper accruals been
made and are reflected on the appropriate balance sheet and
books and records of Pivotal. No Employee Plan is subject to
any tax under Section 511 of the Internal Revenue Code.
(viii) Parachute Payments. There is no contract, agreement,
plan or arrangement covering any employee or former employee
of Pivotal that provides for the payment by Pivotal of any
amount (i) that is not deductible under Section 162(a)(1) or
404 of the Internal Revenue Code or (ii) that is an "excess
parachute payment" pursuant to Section 2806 of the Internal
Revenue Code.
(ix) No Amendments. Neither Pivotal nor any ERISA Affiliate has
any announced plan or legally binding commitment to create
any additional Employee Plans which are intended to cover
employees or former employees of Pivotal or to amend or
modify any existing Employee Plan which covers or has
covered employees or former employees of Pivotal.
(x) No Other Material Liability. No event has occurred in
connection with which Pivotal or any ERISA Affiliate or any
Employee Plan, directly or indirectly, could be subject to
any material liability (A) under any statute, regulation or
governmental order relating to any Employee Plans or (B)
pursuant to any obligation of Pivotal or any ERISA Affiliate
to indemnify any person against liability incurred under any
such statute, regulation or order as they relate to the
-- 50 --
Employee Plans.
(xi) No Acceleration or Creation of Rights. Neither the execution
and delivery of this Agreement or any of the Transactional
Documents by Pivotal nor the consummation of the
transactions contemplated hereby or thereby will result in
the acceleration or creation of any rights of any person to
benefits under any Employee Plan (including, without
limitation, the acceleration of the vesting of any
Membership Interests, the acceleration of the accrual or
vesting of any benefits under any Pension Plan or the
acceleration or creation of any rights under any severance,
parachute or change in control agreement).
5.12 Labor Matters. Section 5.12 of the Disclosure Schedule sets forth a
true and correct list of (i) all collective bargaining agreements to
which Pivotal is a party and (ii) all written employment or severance
agreements to which Pivotal is a party with respect to any employee,
former employee and which may not be terminated at will, or by giving
notice of 30 days or less, without cost penalty. Except as set forth
in Section 5.12 of the Disclosure Schedule, Pivotal has not entered
into any severance or similar arrangement in respect of any present
employee of Pivotal that will result in any obligation (absolute or
contingent) of Buyer or Pivotal to make any payment to any present
employee of Pivotal following termination of employment or upon a
change of control of Pivotal. Except as set forth in Section 5.12 of
the Disclosure Schedule, Pivotal has not engaged in any unfair labor
practice and there are no complaints against Pivotal pending before
the National Labor Relations Board or any similar state or local labor
agency by or on behalf of any employee of Pivotal. Except as disclosed
in Section 5.12 of the Disclosure Schedule, there are no
representation questions, arbitration proceedings, labor strikes, slow
downs or stoppages, grievances or other labor disputes pending or, to
the knowledge of Pivotal, threatened with respect to the employees of
Pivotal, and Pivotal has not experienced any attempt by organized
labor to cause Pivotal to comply with or conform to demands of
organized labor relating to its employees. Except as disclosed in
Section 5.12 of the Disclosure Schedule, Pivotal has complied in all
material respects with all laws, rules and regulations relating to
employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the
payment of social security and similar taxes, occupational safety and
health (hereinafter collectively referred to as the "Employment Laws."
Pivotal is not liable for the payment of material taxes, fines,
penalties or other amounts, however designated, for failure to comply
with any of the foregoing Employment Laws.
5.13 Tax Matters. Except to the extent disclosed on Section 5.13 of the
Disclosure Schedules:
(a) Pivotal has duly filed with the appropriate Tax authorities all
Tax Returns required to be filed, and such Tax Returns are true,
complete, and correct in all material respects.
-- 51 --
(b) Pivotal has duly paid in full or set aside for payment in the
Reserve Account all Taxes that accrue or are payable by Pivotal
in respect of any taxable periods that end on or before the
Closing Date. Pivotal has duly paid in full all Taxes that accrue
or are payable by Pivotal for any taxable period that begins
before the Closing Date and ends thereafter, to the extent that
such Taxes are attributable to the portion of such period ending
on the Closing Date (the "Pre-Closing Partial Period"); or
established an adequate reserve in the Interim Financial
Statements or the Reserve Account for the portion of the
Pre-Closing Partial Period covered thereby.
(c) There is no audit or other matter in controversy with respect to
any Taxes due and owing by Pivotal, and there is no Tax
deficiency or claim assessed or proposed or threatened (whether
orally or in writing) against Pivotal, other than in respect of
any such audits, controversies, deficiencies, assessments, or
assessments that are being contested in good faith, for which
adequate reserves have been established in accordance with GAAP,
and which is set forth on Section 5.13 of the Disclosure
Schedules;
(d) Pivotal has withheld all Taxes required to have been withheld and
paid by Pivotal in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other
third party, and such withheld Taxes have either been duly paid
to the proper Governmental Authority or set aside in accounts for
such purpose;
(e) Pivotal has not (i) waived any statutory period of limitations
for the assessment of any Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency other than in
the case of any such waivers or extensions in respect of an
assessment or deficiency of Tax the liability of which has been
satisfied or settled, (ii) filed a consent under the Internal
Revenue Code, or (iii) has any liability for the Taxes of any
other person as defined in Section 7701(a)(1) of the Internal
Revenue Code or under Treas. Reg. ss. 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee,
successor or by contract;
(f) No claim has been made in any taxable year which remains open in
respect of such claim by an authority in a jurisdiction where
Pivotal does not file Tax Returns that Pivotal is or may be
subject to taxation by that jurisdiction, other than in the case
of any such claims the liability of which has been satisfied or
settled;
(g) None of the assets of Pivotal (i) are required to be treated as
being owned by any other Person pursuant to the so-called safe
harbor lease provisions of former Section 168(f)(8) of the
Internal Revenue Code, (ii) secures any debt the interest on
which is tax-exempt under Internal Revenue Code Section 103(a),
or (iii) is tax-exempt use property within the meaning of
Internal Revenue Code Section 168(h);
-- 52 --
(h) Pivotal has not agreed to and is not required to make any
adjustment pursuant to Internal Revenue Code Section 481(a) by
reason of a change in accounting method initiated by Pivotal and
the IRS has not proposed any such adjustment or change in
accounting method;
(i) Pivotal has been treated since its formation, as a partnership
which is not subject to United States federal or state income
tax, and is not, and has never been, treated as an association
taxable as a corporation for United States federal and state
income tax purposes and has never made an election under Treasury
Regulations Section 301.7701-3(c)(1)(i) or any analogous state or
local statutory or regulatory provision) to be treated for
federal or state or local tax purposes as an entity other than
one described in Treasury Regulations Section 301.7701-3;
(j) Pivotal has not requested an extension of the time within which
to file any Tax Return for which such Tax Return has not been
filed;
(k) Pivotal has no obligation under any Tax allocation or sharing
agreement, and after the Closing Date, Pivotal shall not be a
party to, bound by or have any obligation under any Tax
allocation or sharing agreement or have any liability thereunder
for amounts due in respect of periods prior to and including the
Closing Date;
(l) Pivotal has not made any payments, nor is Pivotal obligated to
make any payments, and is not a party to any agreement that could
obligate it to make any payments that will not be deductible
under Internal Revenue Code Section 280G;
(m) Pivotal has not been a United States real property holding
corporation within the meaning of Internal Revenue Code Section
897(c)(2) during the applicable period specified in Internal
Revenue Code Section 897(c)(1)(A)(ii) and is not described in
either the first sentence of Treasury Regulation Section
1.897-7T(a) or 1.445-11T(d)(1);
(n) Pivotal has not entered into transfer pricing agreements or other
like arrangements with respect to any foreign jurisdiction;
(o) Pivotal has not participated in or cooperated with an
international boycott or has been requested to do so in
connection with any transaction or proposed transaction.
5.14 Environmental Matters.
(a) Except as disclosed in Section 5.14 of the Disclosure Schedule,
(i) Pivotal is and at all times has been in compliance with all
Laws relating to pollution or the environment (including, without
limitation, the Handling of Substances or the presence of
Substances, under or from any real property) the Medical Waste
Tracking Act, or the Resource Conservation Recovery Act and any
-- 53 --
amendments or modifications thereto ("Environmental Laws"), and
(ii) Pivotal is in compliance with all of its Licenses issued
under Environmental Laws.
(b) Except as disclosed in Section 5.14 of the Disclosure Schedule,
neither Sellers nor Pivotal has received any written request for
information, or been notified that either is a potentially
responsible party, under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any similar Environmental Law with respect to any
current or former Leased Real Property or any other location used
or associated with the business of Pivotal.
(c) Except as disclosed in Section 5.14 of the Disclosure Schedule,
neither Sellers nor Pivotal has received any notice of any
violation or alleged violation of any Environmental Law in
connection with the Leased Real Property or operation of the
Pivotal Business.
(d) Except as disclosed in Section 5.14 of the Disclosure Schedule,
there are no writs, injunctions, decrees, orders or judgments
outstanding, or any actions, suits, claims, proceedings or
investigations pending or threatened, relating to compliance with
or liability under any Environmental Laws affecting Pivotal.
(e) Except as disclosed in Section 5.14 of the Disclosure Schedule,
to the knowledge of the Sellers, none of the Leased Real Property
is listed or proposed for listing on the "National Priorities
List" under CERCLA, or on the Comprehensive Environmental
Response, Compensation and Liability Information System
maintained by the United States Environmental Protection Agency,
or any similar state list of sites requiring investigation or
cleanup.
(f) Except as disclosed in Section 5.14 of the Disclosure Schedule,
there is no Substance spilled, discharged released or disposed of
by Pivotal arising out of the conduct of the Pivotal Business
that may pose any material risk to safety, health or the
environment on or under any property owned, leased or operated by
Pivotal, currently or in the past, there has heretofore been no
spillage, discharge, release or disposal of any Substance on or
under such property by Pivotal arising out of the conduct of the
Pivotal Business in any amount or of a nature that could
reasonably be expected to result in material liability to
Pivotal.
(g) Except as disclosed in Section 5.14 of the Disclosure Schedule,
Pivotal has not assumed or retained, by contract or operation of
law in connection with the sale or transfer of any assets or
business, any material liabilities arising from or associated
with or otherwise in connection with such assets or business of
any kind, fixed or contingent, known or not known, under any
applicable Environmental Law.
-- 54 --
(h) True, complete and correct copies of the written reports, and all
parts thereof, of all environmental audits or assessments in the
possession, custody or control of Pivotal that have been
conducted in respect of any Leased Real Property within the past
five years, either by Pivotal or attorney, environmental
consultant or engineer engaged for such purpose, have been
delivered to Buyer.
5.15 Insurance.
(a) Section 5.15(a) of the Disclosure Schedule contains an accurate
and complete description of all policies property, fire and
casualty, product liability, workers' compensation, and other
forms of insurance held by Pivotal. True, correct and complete
copies of such insurance policies have been made available to
Buyer.
(b) Except as disclosed in Section 5.15(b) of the Disclosure
Schedule, all policies listed on Section 5.15(a) of the
Disclosure Schedule (i) are valid, outstanding, and enforceable
policies, and (ii) will not terminate or lapse by reason of the
transactions contemplated by this Agreement.
(c) Except as set forth in Section 5.15(c) of the Disclosure
Schedule, Pivotal has not received (i) any notice of cancellation
of any policy listed on Section 5.15(a) of the Disclosure
Schedule or refusal of coverage thereunder, (ii) any notice that
any issuer of such policy has filed for protection under
applicable bankruptcy laws or is otherwise in the process of
liquidating or has been liquidated, or (iii) any other notice
that such policies are no longer in full force or effect or that
the issuer of any such policy is no longer willing or able to
perform its obligations thereunder.
5.16 Customers, Distributors and Suppliers. Section 5.16 of the Disclosure
Schedule sets forth a complete and accurate list of the names of
Pivotal's (i) ten (10) largest customer Pharmaceutical Companies for
the most recent fiscal year listed based on revenue received by
Pivotal, setting forth the approximate amount of payments received
from each such customer during the most recent fiscal year and (ii)
the suppliers for the most recent fiscal year showing the approximate
total purchases in dollars by Pivotal from each such supplier during
such fiscal year. Except as disclosed in Section 5.16 of the
Disclosure Schedule, Pivotal has not received any communication from
any customer or supplier named on Section 5.16 of the Disclosure
Schedule of any intention to terminate or materially reduce purchases
from or supplies to Pivotal.
5.17 Affiliate Transactions. Except as set forth on Section 5.17 of the
Disclosure Schedule, (i) no officer, manager under the Pivotal LLC
Agreement, member, or Affiliate of Pivotal, (ii) no individual related
by blood, marriage or adoption to any person described in clause (i)
and (iii) no entity in which any of the foregoing persons described in
clause (i) or clause (ii) owns individually or in the aggregate a
greater than 10% beneficial interest is a party to any agreement,
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contract, commitment or transaction with Pivotal or has a material
interest in any material property used by Pivotal (any such agreement,
contract, commitment, transaction or interest, a "Related Party
Transaction"). All Related Party Transactions shall be terminated
prior to the Closing Date.
5.18 Liability. Except as set forth on Section 5.18 of the Disclosure
Schedule, neither Pivotal nor the Sellers have committed any act or
omission which would result in, or has any knowledge of any facts or
circumstances which would give rise to, (i) any material liability not
covered by insurance (other than deductibles or self retention amounts
under such insurance policies) or (ii) any liability in excess of the
reserve established therefore on Pivotal's Audited Financial
Statements or the Reserve Account. Except as set forth in Section 5.18
of the Disclosure Schedule, none of Kirby, Bonacci, Xxxxxxx X.
Xxxxxxx, Xxxxx X. XxXxxxxx, Xxxx Xxxxxxxx, or Chrysonne Rinderkinecht
have ever been the subject of (a) any Action relating to Pivotal, the
business of Pivotal, or the conduct of any activities by or on behalf
of Pivotal in any capacity whatsoever, or (b) any investigation by any
Governmental Authority, medical board, hospital, health care
organization or any professional organization, related or pertaining
to the practice of medicine on behalf of Pivotal or the business of
Pivotal, or the conduct of any activities by or on behalf of Pivotal
in any capacity whatsoever, or any other activities on behalf of
Pivotal or the business of Pivotal.
5.19 Full Disclosure. No representation or warranty made by Pivotal or any
Seller in this Agreement, nor any Transaction Document or any
document, exhibit, statement, certificate or schedule attached to the
Transaction Document to which Pivotal or such Seller is a party or
delivered by Pivotal at the Closing to Buyer in connection with the
transactions contemplated hereby contains any untrue statement of
material fact or omits to state any material fact necessary in order
to make the statement contained herein or therein not misleading.
5.20 Financial Statements.
(a) Attached as Section 5.20(a) of the Disclosure Schedule are true
and complete copies of (i) the Audited Financial Statements and
(ii) the Interim Financial Statements. Except as set forth in the
notes thereto or as disclosed in Section 5.20(a) of the
Disclosure Schedule, all such financial statements (including the
footnotes thereto) were prepared in accordance with GAAP and
fairly present in all material respects the financial condition,
results of operations and changes in cash flows and Member's
capital of Pivotal as of the dates thereof and for the periods
covered thereby, subject to, in the case of the Interim Financial
Statements, normal recurring year-end adjustments (the effect of
which is not expected to be material) and the absence of
footnotes. Pivotal's fiscal and tax year are both based on the
calendar year.
(b) Pivotal has no liabilities required to be disclosed in accordance
with GAAP, other than liabilities (i) reflected and reserved
against on Pivotal's balance sheet as of June 30, 2003, (ii)
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disclosed in Section 5.20(b) of the Disclosure Schedule, or (iii)
incurred since June 30, 2003 in the ordinary course of business,
consistent with Pivotal's past practice, which, individually or
in the aggregate, will not have a Material Adverse Effect on
Pivotal.
(c) Except as set forth on Schedule 5.20(c), the accounts and notes
receivable reflected on the Interim Financial Statements are free
and clear of any Encumbrance.
(d) As of the Closing Date, Pivotal has no Net Debt.
5.21 No Changes.
(a) Except as otherwise disclosed to Buyer, since the date of the
Interim Financial Statements, there has not been any event or
condition that has materially and adversely affected Pivotal's
business, prospects, condition, affairs, operations, properties
or assets other than events affecting the economy or Pivotal's
industry generally. (b) Except as expressly contemplated by this
Agreement or as set forth on Schedule 5.21(b), since September
30, 2003, there has been no:
(i) (a) increase in the compensation payable or to become
payable to Pivotal to any of its employees or independent
contractors, except for normal increases in the ordinary
course of business, (b) bonus, incentive compensation,
service award or other like benefit granted, made or
accrued, contingently or otherwise, for or to the credit of
any of the personnel, except in the ordinary course of
business, (c) employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or
agreed to by Pivotal for any personnel except pursuant to
the existing Employee Plans described in Section 5.11(a) of
the Disclosure Schedules or (d) new employment agreement to
which Pivotal is a party except as contemplated by this
Agreement;
(ii) addition to or modification of the Employee Plans other than
(a) contributions made in accordance with the normal
practices of Pivotal or (b) the extension of coverage to
other personnel who became eligible after September 30,
2003.
(iii) cancellation of any Liabilities or waiver of any rights of
substantial value to Pivotal;
(iv) cancellation, termination or material amendment of any
Material Contract, License or other instrument of Pivotal
that adversely affects Pivotal;
(v) failure to operate the business of Pivotal in the ordinary
course in any material respect so as to use reasonable
efforts to preserve the business intact, to keep available
the services of employees and independent contractors, and
-- 57 --
to preserve the goodwill of Pivotal's suppliers, customers
and other Persons having business relations with Pivotal;
(vi) change in accounting methods or practices by Pivotal;
(vii) revaluation by Pivotal of any of its respective assets or
properties, including without limitation, writing off notes
or accounts receivable;
(viii) Liabilities incurred by Pivotal or any commitment to incur
Liabilities entered into by Pivotal, or any loans made or
agreed to be made by Pivotal, other than Liabilities
incurred in the ordinary course of business consistent with
past practice or loans to fund insurance;
(ix) declaration, setting aside for payment or payment of
dividends or distributions in respect of any Equity
Securities of Pivotal or any redemption, purchase or other
acquisition by Pivotal of any of Pivotal's Equity Securities
except for such distributions to Sellers on the date hereof
pursuant to Section 2.2(a)-(b) of this Agreement;
(x) issuance or reservation for issuance by Pivotal of, or
commitment to issue or reserve for issuance of, any Equity
Securities of Pivotal;
(xi) execution, termination, or material amendment of any lease
for real or personal property involving annual payments; or
xii) any agreement by Pivotal to do any of the foregoing.
(c) Except as expressly contemplated by this Agreement or as set
forth on Schedule 5.21(c), since September 30, 2003, Pivotal has
not:
(i) discharged or satisfied any lien or paid any obligation or
liability, other than current liabilities paid in the
ordinary course of business;
(ii) mortgaged or pledged any of its properties or assets or
subjected them to any Liabilities, except Liabilities for
current property taxes not yet due and payable;
(iii) sold, assigned or transferred any of its tangible assets,
except in the ordinary course of business, or canceled any
debts or claims, except in the ordinary course of business;
(iv) sold, assigned or transferred any Intellectual Property,
trade secrets or other intangible assets, or disclosed any
proprietary confidential information to any person; (v) made
capital expenditures or incurred any commitments or
liabilities other than in the ordinary course of business;
(vi) made any loans or advances to, guarantees for the benefit
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of, or any investments in, any persons;
(vii) suffered any damage, destruction or casualty loss whether
or not covered by insurance; or
(viii) entered into any other transaction other than in the
ordinary course of business.
5.22 Contracts. Schedule 5.22 sets forth a list of Pharmaceutical Contracts
to which Pivotal is a party and is currently performing, or has agreed
to perform Clinical Research Services Post-Closing. Pivotal and each
and every other party to each such contract are not in material breach
or default, and are not alleged to be in material breach or default
under any such contract, and no event has occurred and no condition or
state of facts exists (or would exist upon the giving of notice or the
lapse of time or both) that would become or cause a material breach,
default or event of default under any such contract or would cause an
acceleration of any liability under any such contract. Except as set
forth in Section 5.22 of the Disclosure Schedules, Pivotal has not
received any notice of actual, alleged, possible or potential default
or violation with respect to any such contract.
5.23 Litigation and Legal Proceedings.
(a) Except as set forth in attached Section 5.23 of the Disclosure
Schedule, (i) there are no Actions pending or threatened against
Pivotal, or any of its employees arising out of, related or
pertaining to their relationship or employment with Pivotal, or
any of the assets or properties of Pivotal, before any court or
administrative agency involving a claim; (ii) Pivotal and its
assets and properties used in the business of Pivotal are not
subject to any Governmental Order, (iii) neither Pivotal nor any
of its assets or properties are subject of any pending or
threatened investigation by any Governmental Authority, (iv)
there are no unsatisfied judgments against Pivotal, and (v)
Pivotal is not subject to any arbitration proceedings under
collective bargaining agreements or otherwise any governmental
investigations or inquiries (including inquiries as to the
qualification to hold or receive any license or permit). The
foregoing includes, without limiting its generality, actions
pending or threatened involving the prior employment of any of
Pivotal's employees, or their use in connection with Pivotal's
business of any information or techniques allegedly proprietary
to any of its former employers. There is no action, suit,
proceeding, claim or investigation initiated by Pivotal currently
pending.
(b) There are no Governmental Orders outstanding and no Actions
pending or threatened against, relating or affecting any Seller
or any of its assets or properties which could reasonably be
expected to result in the issuance of a Governmental Order
restraining, enjoining or otherwise prohibiting or making illegal
the consummation by such Seller of any of the transactions
contemplated by this Agreement or any of the Transaction
Documents to which such Seller is a party or which could
-- 59 --
reasonably be expected to have a material adverse effect on the
validity or enforceability as against such Seller of this
Agreement or any of the Transaction Documents to which such
Seller is a party or the ability of such Seller to perform his,
her or its obligations hereunder or thereunder.
5.24 Approvals; Consents. Except as set forth on Section 5.24 of the
Disclosure Schedule and other than consents required in connection
with the Pivotal LLC Agreement which consents have been obtained prior
to the date hereof, no consent, approval, authorization, license,
order or permit of, or declaration, filing or registration with, or
notification to, any Governmental Authority, or any other Person,
including, but not limited to, any party to a Contract, is required to
be made or obtained by Pivotal or any Seller in connection with the
execution, delivery and performance of the Transaction Documents and
the consummation of the transactions contemplated hereby and thereby.
5.25 Compliance with Law. Except as disclosed in Section 5.25 of the
Disclosure Schedule and except for compliance by Pivotal with any Laws
to the extent Sellers are making a representation and warranty with
respect to such Laws in this Article V pursuant to any section other
than this Section 5.25, including, Environmental Laws addressed in
Section 5.14, Employment Laws addressed in Section 5.12, Laws relating
to Employee Plans addressed in Section 5.11, and Laws relating to
Taxes addressed in Section 5.13, Pivotal and the Sellers are, and at
all times during the past five (5) years have been, in compliance in
all respects with all applicable Laws. Except as disclosed in Section
5.25 of the Disclosure Schedule, neither the Sellers, nor Pivotal has
received any written notice during the past five (5) years to the
effect that any Seller or Pivotal is not in compliance in any respect
with applicable Laws. Except as set forth in Section 5.25 of the
Disclosure Schedule, Pivotal has not, during the past five (5) years,
conducted any internal investigation in connection with which Pivotal
retained or sought advice from outside legal counsel with respect to
any actual, potential or alleged material violation of any Law by a
Seller, Pivotal, or any of Pivotal's employees, officers, directors or
agents.
5.26 Title to Transferred Interest. Each Seller owns, beneficially and of
record, such Seller's Membership Interest free and clear of any
Encumbrances. The delivery to Buyer of a duly authorized and executed
Assignment Agreement at the Closing will transfer to Buyer good and
valid title to such Seller's Membership Interest free and clear of any
Encumbrances except for those in favor of the Sellers described in the
Transaction Documents. Except for any of this Agreement, the Pivotal
LLC Agreement, and any Transaction Documents to which such Seller is a
party, such Seller is not a party to any contract, agreement, proxy or
other similar instrument with respect to the sale or voting of, or
otherwise relating to or affecting such Seller's Membership Interest.
5.27 Finders. No broker's, finder's or any other similar fee, expense or
commission has been or shall be incurred by or on behalf of Pivotal or
the Sellers in connection with the origin, negotiation, execution or
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
-- 60 --
5.28 Securities Disclosure. Sellers have reviewed all SEC Reports filed
from the period commencing on January 1, 2002, and ending on the
Closing Date. The Closing Stock is sold to Sellers in reliance upon
Sellers' representations and warranties which shall include that,
except as set forth in Schedule 5.28, each Seller is an Accredited
Investor.
5.29 Pre-Closing Conditions. Except as set forth in Section 5.29 of the
Disclosure Schedule, there are no Pre-Closing claims, disputes,
conflicts, facts, circumstances, conditions, events, or occurrences
which individually, or in the aggregate, would, except for those items
for which Sellers have deposited funds into the Reserve Account,
result, directly or indirectly, in any damage or liability to Pivotal
or the Pivotal Business, or impair the Sellers ability to perform
their obligations hereunder.
5.30 Disclosure. Pivotal's disclosure of an item in a Disclosure Schedule
attached to this Agreement shall be deemed actual notice thereof to
Buyer with respect to the applicable Section of this Agreement to
which such disclosure applies, but only to the extent of the actual
disclosure set forth in writing therein.
-- 61 --
ARTICLE VI
Representations and Warranties of Buyer
The Buyer represents and warrants to Sellers as follows:
6.1 Organization. Buyer is a corporation duly formed, validly existing and
in good standing under the laws of the State of Massachusetts and has
the requisite power and authority to own or lease its properties and
to carry on its business as now conducted. Buyer is duly qualified to
conduct business as a foreign corporation and is in good standing in
each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such
qualification necessary, except where failure to do so would not have
a Material Adverse Effect.
6.2 Power and Authority. Buyer has all requisite power and authority to
enter into the Transaction Documents and to perform fully its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and
delivery of the Transaction Documents and the performance by Buyer of
its obligations thereunder and the consummation of the transactions
contemplated thereby have been duly and validly authorized by all
necessary action on the part of Buyer. Each of the Transaction
Documents is a valid and binding obligation of Buyer enforceable
against Buyer in accordance with its terms, except to the extent such
enforceability (a) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors
generally, or (b) is subject to general principles of equity.
6.3 Authorized Closing Stock. Buyer's Board of Directors has duly
authorized the Closing Stock and the Note C Shares. The Closing Stock
has been duly and validly issued, fully paid and is non-assessable.
When issued, the Note C Shares will have been duly and validly issued,
fully paid and non-assessable
6.4 Finders. No broker's, finder's or any similar fee has been or shall be
incurred by or on behalf of Buyer in connection with the origin,
negotiation, execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby, except such fees
as Buyer shall pay to Bathgate Capital Partners, which fees, if any,
shall be the sole and separate responsibility of Buyer.
6.5 Approvals; Consents. All consents, approvals, orders or authorizations
of, or registrations, qualifications, designations, declarations or
filings with, any Governmental Authority or Person on the part of
Buyer required in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement shall have been obtained prior to, and
be effective as of, the Closing.
6.6 Compliance with Other Instruments; Law. The execution, delivery and
performance of the Transaction Documents by the Buyer, and the
consummation of the transactions contemplated thereby will not result
in any violation, nor be in conflict with or constitute, with or
-- 62 --
without the passage of time and giving of notice, a default under any
such provision, nor, except as set forth on Schedule 6.6, or otherwise
provided in this Agreement or a Loan Document, result in the creation
or imposition of any lien pursuant to any such provision.
6.7 Investment Representations. Except as set forth in Section 6.7 of the
Disclosure Schedules:
(a) Buyer understands that the Membership Interests have not been
registered under the Securities Act, or any state security act
and are being sold to Buyer by reason of specific exemptions
under the provisions thereof.
(b) Buyer understands that the Membership Interests are "restricted
securities" under applicable federal securities laws and that the
Securities Act and the rules of the Securities and Exchange
Commission promulgated thereunder provide in substance that Buyer
may dispose of the Membership Interests only pursuant to an
effective registration statement under the 1933 Act or an
exemption from registration if available.
(c) Buyer acknowledges that neither Pivotal nor any person acting on
behalf of Pivotal has used general solicitation, general or
public mass media or mass mailing in connection with the offer,
solicitation or sale of the Membership Interests.
(d) Buyer is an "accredited investor" as defined in Rule 501 Under
Regulation D promulgated under the Securities Act.
6.8 SEC Filings. Buyer has filed all forms, reports and documents (the
"SEC Reports") required to be filed by Buyer with the Securities and
Exchange Commission ("SEC") for the period commencing on January 1,
2003 through the date hereof. Each such SEC Report, when filed,
complied in all respects with the requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and the applicable
rules and regulations thereunder and, as of their respective dates,
none of the SEC Reports contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of the Sellers. The obligations of the
Sellers and Pivotal to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment or waiver, at or
prior to the Closing, of each of the following conditions:
(a) Representations and Warranties Covenants. (i) The representations
and warranties of Buyer contained in this Agreement and in each
Transaction Document shall be true and correct in all material
respects as of the Closing (or, in the case of representations
and warranties of Buyer which address matters only as of a
particular date, as of such date) and (ii) the covenants and
agreements contained in this Agreement and in each Transaction
-- 63 --
Document to be complied with by Buyer on or prior to the Closing
shall have been complied with in all material respects.
(b) Opinion. Buyer shall have delivered the legal opinion of Arent
Fox Xxxxxxx Xxxxxxx & Xxxx, PLLC in the form of Exhibit 7.1(b) to
this Agreement;
(c) Good Standing. Buyer shall have delivered to Sellers evidence of
the good standing of Buyer issued by the Massachusetts Secretary
of State not later than within five (5) days prior to the
Closing.
(d) Registration of Closing Stock. All steps shall have been taken to
affect the issuance of the Closing Stock in compliance with all
applicable federal and state securities laws.
(e) Buyer shall have executed Note A;
(f) Buyer shall have executed Note B;
(g) Buyer shall have executed Note C;
(h) Buyer shall have executed the Pledge Agreement in favor of the
Sellers in the form attached hereto as Exhibit 7.1(h);
(i) Buyer shall have executed the Security Agreement in the form
attached hereto as Exhibit 7.1(i);
(j) Buyer shall have executed the Financing Statement in favor of the
Sellers in the form attached hereto as Exhibit 7.1(j);
(k) Buyer shall have obtained the Acquisition Financing and the Line
of Credit financing.
(l) Buyer shall have transferred the Closing Stock to the Sellers,
subject to the obligations on registration set forth in this
Agreement.
7.2 Conditions to Obligations of the Buyer. The obligations of the Buyer
to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or waiver, at the Closing, of each of the
following conditions:
(a) Sellers' Representations and Warranties; Covenants. (i) The
representations and warranties of each of the Sellers contained
in this Agreement and in each of the Transaction Documents shall
be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing (or,
in the case of representations and warranties of the Sellers
which address matters only as of a particular date, as of such
date) and (ii) the covenants and agreements contained in the
Transaction Documents to be complied with by the Sellers at or
prior to the Closing shall have been complied with in all
material respects; it being understood by the parties hereto that
it shall be a condition of the Buyer's obligations to consummate
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the transactions with any Seller that all of the Sellers shall
have satisfied the condition set forth in this Section 7.2.
(b) Legal Opinion. Sellers shall have delivered the legal opinion of
Xxxxxxx X. XxXxx, P.C., counsel to Sellers, in the form of
Exhibit 7.2(b) to this Agreement;
(c) Tender for Purchase. Each Seller or its Representative shall have
delivered at the Closing an Assignment Agreement with respect to
the Membership Interests being sold by such Seller pursuant to
this Agreement and shall otherwise have performed or shall
perform at the Closing, the obligations of such Seller described
in Section 7.1, it being understood by the parties hereto that it
shall be a condition of the Buyer's obligation to consummate the
transactions with any Seller that all of the Sellers shall have
satisfied the condition set forth in this Section 7.2.
(d) Good Standing. Pivotal shall have delivered to Buyer evidence of
the good standing of Pivotal in the State of Arizona issued by
the Secretary of State of the State of Arizona, and evidence of
good standing issued by the applicable Governmental Authority in
every other jurisdiction where Pivotal is registered or qualified
to conduct business, within 5 days prior to the Closing.
(e) Third Party Consents. The consents, approvals, permissions or
acknowledgments or notices listed on Section 5.24 of the
Disclosure Schedule shall have been obtained or made, and Buyer
shall have received reasonably acceptable written evidence
thereof;
(f) Resignation of Managers. Each member of the Board of Directors of
Pivotal shall have resigned as elected or appointed managers of
Pivotal effective as of the Closing Date.
(g) Related Party Transactions. All Related Party transactions shall
have been terminated, effective as of the Closing Date and all
sums payable by Pivotal pursuant to such Related Party
Transactions shall have been paid in full.
(h) Assignment. Each of Sellers shall have executed an Assignment
Agreement.
(i) Commitment. The Buyer shall have received a binding
commitment from a lender acceptable to Buyer to provide to
Buyer the Acquisition Financing and the Line of Credit.
7.3 Concurrent Conditions. As a condition to closing for all parties
hereto, each of the following transactions (collectively, the
"Concurrent Transactions") shall have been consummated at or prior to
the Closing:
(a) Due Diligence. Buyer and each Seller shall have completed, and
shall in each of their sole and absolute discretion be satisfied
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with the results of, all business, financial and legal due
diligence that it deems necessary or appropriate in connection
with the Transaction Documents.
(b) General. The form and substance of all instruments and documents
executed and delivered in connection with the Closing shall be
reasonably acceptable to Sellers, Buyer and their respective
counsel.
(c) Xxxxx Employment Agreement. Xxxxx shall have executed the Xxxxx
Employment Agreement.
(d) Colombo Employment Agreement. Xxxxxxx X. Xxxxxxx shall have
executed the Colombo Employment Agreement.
(e) No Injunction. No injunction or restraining order shall be in
effect or threatened that restrains or prohibits the consummation
of the transactions contemplated hereby or that would limit or
adversely affect Buyer's ownership of the Membership Interests or
Sellers' ownership of the Closing Stock, and no proceedings for
such purpose shall be pending, and no Governmental Authority
shall have enacted, issued promulgated, enforced or entered into
any statute, rule, regulation, injunction or other Governmental
Order that is in effect and has the effect of making the
transaction contemplated by this Agreement or any of the
Transaction Documents illegal or otherwise restricts or delays
the consummation of transactions.
(f) Certified Documents. Each of Pivotal and Buyer shall have
executed and delivered to each other a certificate certifying the
resolutions of the directors and members of their respective
entities with respect to the transactions contemplated by the
Transaction Documents.
(g) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
injunction or other Governmental Order which is in effect and has
the effect of making the transactions contemplated by any of the
Transaction Documents illegal or otherwise prohibiting
consummation of such transactions.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 Survival. Subject to the limitations and other provisions of this
Agreement, the representations, warranties and covenants of the
parties contained herein and in any certificate delivered at the
Closing shall survive the Closing and shall remain in full force and
effect, regardless of any investigation made by or on behalf of the
Sellers or the Buyer, for a period of six years after the Closing
Date. For purposes of this Agreement, all references to the Buyer, the
Sellers and Pivotal shall include successors and assigns.
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8.2 Indemnification.
(a) Subject to the arbitration provisions of Section 10.12, from and
after the Closing each Seller, jointly and severally, shall
indemnify, defend and hold harmless the Buyer from and against
any and all Losses whether or not involving any third party
claim, arising out of, resulting from or relating to (i) any
breach on the Closing Date of any representation or warranty of
such Seller contained in Article V hereof or set forth in any
certificate delivered by such Seller or his or its Representative
hereof; (ii) any breach of any covenant or agreement of such
Seller contained herein; or (iii) any litigation whether or not
disclosed in Section 5.23 of the Disclosure Schedule resulting
from a Pre-Closing event, facts, circumstances, conditions
whether or not asserted prior to the Closing Date.
(b) Subject to the arbitration provisions of Section 10.12, from and
after the Closing Sellers shall jointly and severally indemnify,
defend and hold harmless the Buyer and its Affiliates from and
against all Losses from Taxes (i) with respect to all periods of
Pivotal ending prior to the Closing Date or (ii) with respect to
any period of Pivotal beginning before the Closing Date and
ending after the Closing Date, but only with respect to the
Pre-Closing Partial Period. Payment of any amount due under this
Section 8.2 shall be made within 30 days following written notice
by Buyer that payment of such amounts to the appropriate tax
authority is due.
(c) Subject to the arbitration provisions of Section 10.12, from and
after the Closing Buyer shall indemnify, defend and hold harmless
Sellers from and against any and all Losses, whether or not
involving any third party claim, arising out of, resulting from
or relating to (i) any breach on the date hereof or on the
Closing Date of any representation or warranty of such Buyer
contained in Article VI hereof, or (ii) any breach of any
covenant or agreement of such Buyer contained herein.
(d) If a claim for Losses (a "Claim") is to be made by an indemnified
party, such indemnified party shall give written notice (a "Claim
Notice") to the party against whom such Claim is being asserted,
in the case of indemnification pursuant to Section 8.2(a)-(c),
the recipient of such notice referred to below as the
"Indemnifying Party"), in either case promptly after such
indemnified party becomes aware of any fact, condition or event
which may give rise to Losses for which indemnification may be
sought under this Section 8.2. If any lawsuit or other action is
filed or instituted against any indemnified party with respect to
a matter subject to indemnity hereunder, notice thereof (a "Third
Party Notice") shall be given to the indemnifying party as
promptly as practicable (and in any event within fifteen (15)
calendar days after the service of the citation or summons). The
failure of any indemnified party to give timely notice hereunder
shall not affect such indemnified party's rights to
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indemnification hereunder, except to the extent of actual damage
caused by such failure. After receipt of a Third Party Notice,
the Indemnifying Party shall have the right to (i) take control
of the defense and investigation of such lawsuit or action, (ii)
employ and engage attorneys of its own choice (subject to the
approval of the indemnified party, such approval not to be
unreasonably withheld) to handle and defend the same, at the
indemnifying party's sole cost, risk and expense, and (iii)
compromise or settle such claim, which compromise or settlement
shall be made only with the written consent of the indemnified
party (such consent not to be unreasonably withheld). The
indemnified party shall cooperate in all reasonable respects with
the Indemnifying Party and such attorneys in the investigation,
trial and defense of such lawsuit or action and any appeal
arising therefrom; and the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom. If the
Indemnifying Party fails to assume the defense of such claim
within thirty (30) calendar days after receipt of the Third Party
Notice (or such earlier date, if the failure to assume the
defense on such earlier date would materially impair the ability
of such indemnified party to defend such claim), the indemnified
party against which such claim has been asserted will (upon
delivering notice to such effect to the Indemnifying Party) have
the right to undertake the defense, compromise or settlement of
such claim (all at the cost and expense of the Indemnifying
Party) and the Indemnifying Party shall have the right to
participate therein at its own cost.
(e) Notwithstanding the foregoing, Xxxxxxx'x liability to Buyer under
this Agreement and the Transaction Documents, with respect to
each individual Loss shall not exceed an amount equal to (x)
Xxxxxxx'x Percentage Interest multiplied by (y) the amount of
each individual Loss, not to exceed, in the aggregate, for all
Losses, the total amount of consideration paid to Xxxxxxx
hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, any
breach of a representation or warranty under this Agreement that
results in a Loss or Losses that do not exceed $5,000 on an
individual basis, or $25,000 in the aggregate, shall not give
rise to an indemnifiable or arbitratable claim or liability under
this Agreement, provided, however, that this provision shall not
limit Buyer's right to pursue relief under Article IV of this
Agreement.
8.3 Limitation of Liability and Termination of Indemnification. The
liability of any indemnifying party under Sections 8.2 or 8.3 shall
terminate upon the termination of survival of the subject
representation, warranty or covenant as described in Section 8.1.
8.4 Adjustment of Purchase Price. Any payment under this Section 8 shall
be treated by the parties as an adjustment to the Purchase Price for
tax purposes.
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8.5 Claims Resulting from Breach of Representation or Warranty. From and
after the Closing Date, no Seller shall have any right of contribution
or indemnification against Pivotal and shall not seek recourse from
Pivotal for any amounts paid to Buyer as a result of any Claim arising
from or relating to a breach by any Seller of any of its
representations, warranties, covenants or other agreements contained
herein.
8.6 Mitigation. The parties hereto shall make commercially reasonable
efforts to mitigate any Losses subject to any claim for
indemnification pursuant to this Section 8.6; provided that, no party
shall be required to assert any claim against any customer or supplier
in order to so mitigate such Losses.
ARTICLE IX
TAX COVENANTS AND RELATED MATTERS
9.1 Returns. Sellers shall cause to be prepared and timely filed all Tax
Returns of Pivotal for taxable years or periods ending on or before
the Closing Date but which are due to be filed after Closing Date
(taking into account all applicable extensions of time for filing).
The Sellers agree not to amend any Tax Return of Pivotal for any
period on or before the Closing Date without the prior written consent
of Buyer unless, prior to such amendment, a party obtains a formal tax
opinion from a nationally recognized law firm that it is more likely
than not that the position taken by Pivotal could be sustained in the
event of an audit. In the event Pivotal obtains such an opinion, Buyer
agrees to amend such Tax Return in a manner consistent with said
opinion.
9.2 Cooperation. Buyer and Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
filing of any Tax Returns for Pivotal, the facing and prosecution of
any Tax claims and any audit, litigation or other proceeding with
respect to Taxes. 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 audit,
litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
9.3 Allocation of Taxes. In the case of Taxes that are payable with
respect to a taxable period that begins before the Closing Date and
ends after the Closing Date, the portion of such Taxes payable for the
period ending on the Closing Date shall be (a) in the case of any
property or ad valorem tax, the amount of such tax for the entire
period multiplied by a fraction, the numerator of which is number of
days in the period ending on the Closing Date and the denominator of
which is the number of days in the entire period, and (b) in the case
of all other Taxes, determined based upon the activities, taxable
income or taxable loss of Pivotal for the portion of the period ending
on the Closing Date.
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ARTICLE X
MISCELLANEOUS
10.1 Right of Set-Off. Subject to the conditions set forth in this Section
10.1, Buyer shall have the right to apply or set-off any adjustments
to the Purchase Price as provided herein to any future payments due to
Sellers hereunder. If Buyer shall in good faith determine that a
set-off is necessary, Buyer shall promptly notify Sellers in writing
of such determination and shall provide Sellers with a summary of
Buyer's justification for such determination (the "Set-Off Notice").
In the event any Seller disagrees with Buyer's exercise of such setoff
right, such Seller will notify Buyer of their position in writing
within 5 business days from the date of their receipt of the Set-Off
Notice and either Buyer or Sellers shall thereupon be entitled to
initiate arbitration proceedings under Section 10.12 to resolve such
dispute. If Buyer is attempting to exercise its set-off rights under
this Section 10.1 and if Buyer has not received written notice from
Xxxxx, acting in his capacity as Sellers' representative for purposes
of this Section 10.1 (or any other Seller designated by Sellers, in
writing, with notice to the Buyer, to act in the capacity as Sellers'
representative), indicating that set-off is appropriate, then all
amounts alleged by Buyer to be subject to such set-off right shall be
paid into an escrow account with the Escrow Agent on or before the
date such amounts are due to be paid to Sellers. The amount escrowed
shall in no event be greater than the amount alleged by Buyer to be
the subject of a set-off claim. All escrowed monies shall be disbursed
from the escrow account in the manner instructed by the arbitrator
selected in accordance with Section 10.12 to resolve the set-off
dispute but in no event later than five (5) Business Days subsequent
to the arbitrator's decision. In the event the arbitrator selected by
the parties holds that Buyer is not entitled to exercise its right of
setoff hereunder, a default interest rate of 15% shall, in lieu of the
rate of interest provided under the applicable Note, apply to the
amount subject to the setoff during the pendency of the arbitration
proceedings. Buyer and Seller shall, within 30 days after the Closing
Date, select a mutually acceptable escrow agent (the "Escrow Agent")
and prepare a mutually acceptable form of escrow agreement (the
"Escrow Agreement") to be utilized in the event Buyer elects to
exercise its set-off right under this Section 10.1.
10.2 Breach or Failure to Perform. Unless otherwise set forth in this
Section 10.2, if a party to this Agreement shall breach or fail to
perform any provision of this Agreement, such party shall have the
right to cure such breach or non-performance within the applicable
"Cure Period" (as defined below). For purposes of this Agreement, the
term "Cure Period" shall mean a period of time that commences upon the
giving of written notice by a non-breaching party to the breaching
party(ies) that a breach has occurred and expires, in the event of a
breach relating to a representation or warranty contained in Article V
or VI of this Agreement, thirty (30) calendar days from the date such
notice is given or deemed given, or, in the case of any other breach,
ten (10) calendar days from the date such notice is given or deemed
given. Notwithstanding the foregoing, no Cure Period shall be
available in the event of a breach of Sections 5.1, 5.2, 5.3, 5.5, and
5.26 of this Agreement.
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10.3 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the
documents referred to herein constitute the entire agreement among the
parties with respect to the subject matter hereof, and no other
agreements, warranties, representations or covenants regarding the
subject matter hereof shall be of any force of effect unless in
writing, executed by the party to be bound thereby and dated on or
after the date hereof. This Agreement is not intended to confer upon
any person other than the parties hereto any rights or remedies.
10.4 Public Announcement. Unless otherwise required by applicable Law, and
except as otherwise provided herein, Sellers shall make no public
announcements in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media
without the prior written consent of Buyer, and the parties shall
cooperate as to the timing and contents of any such announcement.
10.5 Expenses. All costs and expenses, including, without limitation, fees
and disbursements of counsel, financial advisors and accountants
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs
and expenses, whether or not the Closing shall have occurred and, for
purposes of determining the EBITDA under the Notes, Post-Closing Buyer
shall not allocate such transaction-related expenses to the Pivotal
Business or the Non-Pivotal Business.
10.6 Notices. All notices or other communications hereunder shall be made
in writing and shall be deemed duly given (a) when personally
delivered to the intended recipient (or an officer of authorized
representative of the intended recipient), (b) on the day of
transmittal when sent by facsimile with confirmation of receipt if
sent prior to 5:00 pm, or on the immediately following day if sent
after 5:00 pm, (c) on the first business day after the date sent when
sent by a nationally recognized overnight courier service, or (d)
three business days after it is sent by first class U.S. mail, postage
prepaid, to the intended recipient at the address set forth below:
(a) if to Pivotal or to Buyer, to:
PHC, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Shear, President
Facsimile No.: (000) 000-0000
with a copy to:
Arent Fox Xxxxxxx Xxxxxxx & Xxxx, PLLC
0000 Xxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: J. Xxxxx Xxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to a Seller, to him or her at the address set forth below
his/her signature to this Agreement.
-- 71 --
Any party may change the address to which notices and communications hereunder
are to be delivered by giving the other parties notice in the manner set forth
herein.
10.7 Waivers and Amendments. This Agreement may be amended, superseded,
canceled, renewed or extended and any terms hereof may be waived only
by a written instrument signed by all of the parties hereto or, in the
case of a waiver, by the party waiving compliance with such terms.
10.8 Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without
giving effect to any choice of law or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than
the State of Delaware. Should any clause, section or part of this
Agreement be held or declared to be void or illegal for any reason,
all other clauses, sections or parts of this Agreement shall
nevertheless continue in full force and effect.
10.9 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.10Assignment. This Agreement shall not be assigned by operation of Law
or otherwise; provided, however, that Buyer may assign this Agreement
and such Buyer's rights and obligations hereunder without the prior
written consent of any other party hereto (i) to any person who
acquires all or substantially all of the Equity Securities or assets
of Buyer (by merger, recapitalization, sale or otherwise), provided
that contemporaneous with such assignment, Sellers' security interest
in the Assets of the Pivotal Business and the Membership Interests are
likewise assigned in accordance with the requirements set forth in
Section 3.11 of this Agreement, or (ii) to a Subsidiary or Affiliate
of Buyer as part of a restructuring or reorganization of PHC or its
business, provided that such Subsidiary or Affiliate shall comply with
the requirements set forth in Section 3.11 of this Agreement, and
provided further that Buyer shall guaranty such Subsidiary's or
Affiliate's payment and performance under the Transaction Documents,
which guaranty shall be in the form set forth in attached Exhibit
3.11.
10.11Binding Effect. This Agreement shall be binding upon, and inure to
the benefit of, the parties and their respective successors. This
Agreement and all rights and obligations hereunder shall not be
assignable by any party without the prior written consent of all of
the other parties.
10.12 Arbitration of Disputes.
(a) Appointment of Arbitrator. Any dispute that arises under this
Agreement shall be settled by arbitration. Any party may commence
an arbitration proceeding by submitting to the other parties a
written notice of intent to arbitrate (the "Arbitration Notice").
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All arbitration proceedings shall be conducted under the rules of
the American Arbitration Association (the "AAA"). Unless one
party objects, a sole arbitrator appointed by the AAA shall
conduct the arbitration. If one party so objects, each party
shall select an arbitrator within thirty (30) days of receipt of
an Arbitration Notice. If a party fails or refuses to appoint an
arbitrator during such thirty (30) day period, then the
arbitrator selected by the other party shall conduct the
arbitration. In the event both parties select an arbitrator
within such thirty (30) day time period, then such arbitrators
shall have an additional thirty days to select an arbitrator to
conduct the arbitration. In the event the two arbitrators
selected by the parties fail to agree on the appointment of a
third arbitrator to conduct the arbitration, either one or both
parties may, by written notice to the AAA, request that the AAA
select an arbitrator to conduct the arbitration. In such event,
the arbitrator shall be appointed and the arbitration proceedings
shall commence within 30 days after the AAA receives a copy of
the Arbitration Notice. The prevailing party in any proceeding in
accordance with this Section 10.12 shall be awarded attorneys'
fees and related costs.
(b) Proceedings. The decision and award of the arbitrator shall be
rendered within 45 days after commencement of the arbitration
proceedings, unless otherwise mutually agreed by the parties. The
decision of the arbitrator shall be final and binding on the
parties, not subject to appeal, and shall be enforceable in any
court of competent jurisdiction. The decision of the arbitrator
shall be in writing, shall state the arbitrator's conclusions and
shall be signed by the arbitrator. Arbitration proceedings shall
be conducted in the following locations: (i) if the arbitration
proceeding is initiated by the Sellers as a result of an alleged
breach by Buyer of any of the Transaction Documents, then the
forum for the arbitration shall be Phoenix, Arizona; (ii) if the
arbitration is initiated by Buyer as a result of an alleged
breach by the Sellers of any of the Transaction Documents, then
the forum for the arbitration shall be Washington, D.C.;
10.13Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the
same agreement.
10.14Termination of Certain Agreements. The parties hereto and the parties
to the Pivotal LLC Agreement acknowledge that this Agreement shall
operate to terminate the Pivotal LLC Agreement and neither Pivotal,
nor any Seller shall have any rights or liabilities thereunder
(including any distribution for taxes with respect to income of
Pivotal prior to the Closing) whether relating to the period before,
on or after the Closing Date.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
on the date and year first above written.
PHC, Inc., A MASSACHUSETTS CORPORATION
By: /s/ Xxxxx X. Shear
__________________________________________
Xxxxx X. Shear, President
PIVOTAL RESEARCH CENTERS, L.L.C.
By: /s/ Xxxxx X. Xxxxx
__________________________________________
Xxxxx X. Xxxxx, President
SELLERS:
/s/ Xxxxx X. Xxxxx
__________________________________________
Xxxxx X. Xxxxx
0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx Xxxxxx, XX 00000
/s/ Xxxxx X. Colmbo
__________________________________________
Xxxxx X. Xxxxxxx
0000 X. Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
/s/ Xxxxxxx X. Xxxxxxx
__________________________________________
Xxxxxxx X. Xxxxxxx
0000 X. Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
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