ASSET PURCHASE AGREEMENT
By and Among
▇▇▇▇▇▇▇ VETERINARY SUPPLY, INC.
(Purchaser)
▇▇▇▇▇▇▇▇▇ DENTAL COMPANY
(Parent)
And
▇. ▇. ▇▇▇▇▇▇▇, INC.
(Company)
JAW HOLDINGS
(Shareholder)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(Principals)
DATE: July 9, 2001
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
DEFINITIONS
ARTICLE 2
PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Purchase of Assets and Assumption of Liabilities................................................... 11
2.2 Purchase Price..................................................................................... 14
2.3 Payment of Purchase Price on the Closing Date...................................................... 16
2.4 Escrow of Purchase Price........................................................................... 17
2.5 Determination of Purchase Price Adjustments; Closing Balance Sheet; Final Payment.................. 17
2.6 Closing and Closing Deliveries..................................................................... 20
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization....................................................................................... 24
3.2 Capitalization..................................................................................... 24
3.3 Due Authorization.................................................................................. 24
3.4 No Breach.......................................................................................... 25
3.5 Clear Title........................................................................................ 25
3.6 Condition of Assets................................................................................ 25
3.7 Litigation......................................................................................... 25
3.8 Labor Matters...................................................................................... 26
3.9 [THIS SECTION INTENTIONALLY OMITTED]............................................................... 26
3.10 Employee Benefits.................................................................................. 26
3.11 No Guaranties...................................................................................... 28
3.12 Financial Statements............................................................................... 28
3.13 Absence of Certain Developments.................................................................... 28
3.14 Intellectual Property.............................................................................. 30
3.15 Compliance with Laws............................................................................... 30
3.16 Operating Contracts................................................................................ 30
3.17 Real Estate........................................................................................ 30
3.18 Accounts Receivable................................................................................ 32
-i-
TABLE OF CONTENTS
-----------------
Page
----
3.19 Books and Records; Bank Accounts................................................................... 32
3.20 Employees and Employee Related Commitments......................................................... 32
3.21 Permits............................................................................................ 33
3.22 Other Material Contracts and Obligations........................................................... 33
3.23 Subsidiaries....................................................................................... 34
3.24 Insurance.......................................................................................... 34
3.25 Brokers............................................................................................ 34
3.26 Relationship with Related Persons.................................................................. 34
3.27 Hazardous Materials................................................................................ 35
3.28 Other Environmental Matters........................................................................ 35
3.29 Debt Instruments................................................................................... 36
3.30 Customers and Suppliers............................................................................ 36
3.31 Shareholder Loans.................................................................................. 37
3.32 Adequacy of Properties............................................................................. 37
3.33 Absence of Certain Business Practices.............................................................. 37
3.34 Trade Regulation................................................................................... 37
3.35 Representation Regarding the Shareholder........................................................... 37
3.36 Inventories........................................................................................ 37
3.37 Representation Regarding SEC Reports............................................................... 38
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PARENT
4.1 Organization....................................................................................... 38
4.2 Due Authorization.................................................................................. 39
4.3 No Breach.......................................................................................... 39
4.4 Brokers............................................................................................ 40
4.5 Articles of Incorporation and Bylaws............................................................... 40
4.6 Capitalization..................................................................................... 40
4.7 SEC Reports........................................................................................ 41
4.8 Parent Stockholders' Consent....................................................................... 41
-ii-
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 5
PERFORMANCE AND COVENANTS PENDING CLOSING
5.1 Access to Information.............................................................................. 41
5.2 Conduct of Business................................................................................ 42
5.3 Encumbrances....................................................................................... 42
5.4 Pay Increases...................................................................................... 42
5.5 Restrictions on New Contracts...................................................................... 42
5.6 Preservation of Business........................................................................... 42
5.7 Payment and Performance of Obligations............................................................. 43
5.8 Restrictions on Sale of Assets..................................................................... 43
5.9 Prompt Notice...................................................................................... 43
5.10 Consents........................................................................................... 43
5.11 Copies of Documents................................................................................ 43
5.12 No Solicitation of Other Offers.................................................................... 43
5.13 Accounts Receivable and Payable.................................................................... 44
5.14 Inventory.......................................................................................... 44
5.15 Insurance.......................................................................................... 44
5.16 Filing Reports and Making Payments................................................................. 44
5.17 Capital Expenditures............................................................................... 44
5.18 Company Name Change................................................................................ 44
5.19 Litigation......................................................................................... 45
5.20 Notification of Inaccuracy......................................................................... 45
5.21 Lien Search........................................................................................ 45
5.22 Payment of Affiliate Liabilities................................................................... 45
5.23 Environmental Site Assessment...................................................................... 45
5.24 Shareholder Approval............................................................................... 45
5.25 S Corporation Distributions........................................................................ 46
5.26 Phantom Stock Plan and Stock Unit Agreements; Non-Competition and Restrictive Covenant
Agreements......................................................................................... 46
5.27 Related Persons Leased Real Estate Leases.......................................................... 46
5.28 Landlord/Lessor Estoppel Certificates.............................................................. 46
-iii-
TABLE OF CONTENTS
-----------------
Page
----
5.29 Cooperation with Respect to Permits, Licenses and Regulatory Matters................................. 47
ARTICLE 6
MUTUAL CONDITIONS PRECEDENT TO THE PARTIES' OBLIGATIONS
6.1 Proceedings.......................................................................................... 47
6.2 Consents and Approvals............................................................................... 48
6.3 Antitrust Matters.................................................................................... 48
6.4 Shareholder Approval................................................................................. 48
ARTICLE 7
ADDITIONAL CONDITIONS PRECEDENT TO THE PURCHASER'S AND THE PARENT'S OBLIGATIONS
7.1 Accuracy of Representations and Warranties........................................................... 48
7.2 Compliance with Covenants and Agreements............................................................. 49
7.3 No Material Adverse Change........................................................................... 49
7.4 Approval by Counsel.................................................................................. 49
7.5 Legal Opinion........................................................................................ 49
7.6 [THIS SECTION INTENTIONALLY NOT USED]................................................................ 49
7.7 Corporate Action..................................................................................... 49
7.8 Employees............................................................................................ 49
7.9 Non-Competition Agreements........................................................................... 49
7.10 Schedule of Paid Transactional Expenses.............................................................. 49
7.11 Schedule of Paid Phantom Stock Value................................................................. 50
7.12 Securities Laws...................................................................................... 50
ARTICLE 8
ADDITIONAL CONDITIONS PRECEDENT TO THE COMPANY'S, THE SHAREHOLDER'S AND THE
PRINCIPALS' OBLIGATIONS
8.1 Accuracy of Representations and Warranties........................................................... 50
8.2 Compliance with Covenants and Agreements............................................................. 50
8.3 Approval by Counsel.................................................................................. 50
8.4 Legal Opinion........................................................................................ 51
8.5 Delivery of Receipt for Purchase Price and the Shares................................................ 51
-iv-
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by the Company, the Shareholder and the Principals................................. 51
9.2 Indemnification by the Purchaser and the Parent.................................................... 52
9.3 Procedure for Indemnification...................................................................... 53
9.4 Dispute Resolution................................................................................. 54
9.5 Effect of Insurance................................................................................ 56
ARTICLE 10
FEDERAL SECURITIES LAWS MATTERS
10.1 Resale Registration................................................................................ 57
10.2 Registration Procedures............................................................................ 58
10.3 Registration Expenses.............................................................................. 60
10.4 Indemnification and Contribution................................................................... 60
10.5 Transfer of Registration Rights; Transfer of Shares................................................ 62
10.6 Limitation on Resale............................................................................... 62
10.7 Representations and Warranties..................................................................... 62
ARTICLE 11
PERFORMANCE FOLLOWING THE CLOSING DATE
11.1 Further Acts and Assurances........................................................................ 64
11.2 Non-Competition Agreement.......................................................................... 65
11.3 Non-Solicitation Agreement......................................................................... 65
11.4 Confidential Information........................................................................... 65
11.5 Reasonableness of Covenants........................................................................ 66
11.6 Injunctive Relief.................................................................................. 66
11.7 Blue Pencil Doctrine............................................................................... 66
11.8 Right of Offset/Recoupment and Escrow.............................................................. 66
11.9 Employee Retention................................................................................. 67
11.10 Certain Tax Matters................................................................................ 68
11.11 Withdrawal from States as Foreign Corporation...................................................... 69
11.12 Consents........................................................................................... 69
11.13 Parent Guaranty.................................................................................... 69
-v-
TABLE OF CONTENTS
-----------------
Page
----
11.14 Corporate Existence................................................................................ 69
ARTICLE 12
TERMINATION
12.1 Termination........................................................................................ 70
12.2 Return of Documents and Nondisclosure.............................................................. 70
ARTICLE 13
MISCELLANEOUS
13.1 Survival of Representations and Warranties, Covenants and Agreements............................... 71
13.2 Preservation of and Access to Records.............................................................. 71
13.3 Cooperation........................................................................................ 71
13.4 Public Announcements............................................................................... 71
13.5 Notices............................................................................................ 72
13.6 Entire Agreement................................................................................... 73
13.7 Remedies........................................................................................... 73
13.8 Amendments......................................................................................... 73
13.9 Successors and Assigns............................................................................. 73
13.10 Fees and Expenses.................................................................................. 73
13.11 Governing Law and Jurisdiction..................................................................... 74
13.12 Counterparts and Facsimile Signatures.............................................................. 74
13.13 Headings........................................................................................... 74
13.14 Scope of Agreement................................................................................. 74
13.15 Number and Gender.................................................................................. 74
13.16 Severability....................................................................................... 75
13.17 Parties in Interest................................................................................ 75
13.18 Waiver............................................................................................. 75
13.19 Construction....................................................................................... 75
13.20 Specific Performance............................................................................... 75
13.21 Supplementation of Schedules....................................................................... ▇▇
-▇▇-
▇▇▇▇▇ PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 9/th/ day of July, 2001, by and among ▇▇▇▇▇▇▇ VETERINARY SUPPLY, INC.,
a Minnesota corporation (the "Purchaser"), ▇▇▇▇▇▇▇▇▇ DENTAL COMPANY, a Minnesota
corporation (the "Parent"), and ▇. ▇. ▇▇▇▇▇▇▇, INC., a corporation organized
under the laws of the Commonwealth of Massachusetts (the "Company"), JAW
HOLDINGS, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Shareholder"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, each individuals and residents of the
Commonwealth of Massachusetts (each individually, a "Principal" and
collectively, the "Principals").
RECITALS
--------
A. The Company is a full service distributor of veterinary supplies to
more than 10,000 companion animal health clinics in approximately 26 states and
offers its customers a broad selection of veterinary supply products including
pharmaceuticals, diagnostics, biologicals, instruments, equipment, and supplies
from a wide variety of manufacturers.
B. The Shareholder is the owner of all the issued and outstanding shares
of capital stock of the Company.
C. The Principals are (i) collectively, either directly or indirectly,
owners of the outstanding shares of beneficial interest of the Shareholder, (ii)
employed by the Company as senior management officers, and (iii) serve on the
Company's Board of Directors.
D. The Purchaser desires to purchase and assume, as applicable, and the
Company desires to sell, transfer, convey, assign and deliver, as applicable,
(i) substantially all of the assets of the Company pursuant to this Agreement,
and (ii) certain liabilities and obligations of the Company pursuant to the
purchase of such assets.
E. It is the intention of the parties hereto that, upon consummation of
the transactions contemplated by and pursuant to this Agreement, the Purchaser
shall own substantially all of the assets of the Company other than the Excluded
Assets.
AGREEMENT
---------
In consideration of the foregoing Recitals and the mutual promises
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Purchaser, the
Parent, the Company, the Shareholder and the Principals agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified:
1
"1940 Act" has the meaning set forth in Section 10.7(b) of this Agreement.
"AAA Rules" has the meaning set forth in Section 9.4(b) of this Agreement.
"Acquisition Proposal" means any proposal relating to the possible
acquisition of the Company whether by way of merger, purchase of capital stock
of the Company representing fifty percent (50%) or more of the voting power or
equity of the Company, purchase of all or substantially all of the assets of the
Company, or otherwise.
"Affiliate" when used in reference to a specified Person, means any Person
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with the specified Person.
"Agency Retail Sales Gross-Up" means the sale amount as invoiced to a
customer by the payor of the agency commission, determined in accordance with
GAAP.
"Agreement" has the meaning set forth in the introductory paragraph hereof.
"Ancillary Documents" means the documents, instruments and agreements to be
executed and/or delivered by the parties pursuant to this Agreement.
"Applicable Laws" means any and all laws, ordinances, constitutions,
regulations, statutes, treaties, rules, codes, and Injunctions adopted, enacted,
implemented, promulgated, issued, entered or deemed applicable by or under the
authority of any Governmental Body having jurisdiction over a specified Person
or any of such Person's properties or assets.
"Assets" has the meaning set forth in Section 2.1(a)(i) of this Agreement.
"Assumed Liabilities" has the meaning set forth in Section 2.1(b)(i) of
this Agreement.
"Auditor" has the meaning set forth in Section 2.5(a) of this Agreement.
"Balance Sheet" has the meaning set forth in Section 3.12 of this
Agreement.
"Balance Sheet Date" has the meaning set forth in Section 3.12 of this
Agreement.
"Basket Amount" has the meaning set forth in Section 9.1 of this Agreement.
"Benefit Plan" means any and all "employee benefit plans" (within the
meaning of Section 3(3) of ERISA), stock option, restricted stock, stock
purchase, stock appreciation, phantom stock or plan maintained, sponsored or
participated in by the Company.
"Business" as used in this Agreement means the purchase, marketing, sale
(including telesales and telemarketing) and/or distribution of veterinary supply
products, including without limitation, diagnostics, biologicals, instruments,
equipment and supplies, primarily applicable, but not limited to, products that
are used for the maintenance, treatment and prevention of ailments of and
diseases in animals, including companion pets and, to a lesser extent, the
supply of animal food. Upon the Purchaser's receipt of registrant Permits
necessary under Applicable
2
Law to purchase, sell and distribute pharmaceutical (controlled substance)
products, the "Business" shall also include the purchase, marketing, sales and
distribution of pharmaceuticals for use in the treatment of animals.
"Closing" has the meaning set forth in Section 2.6(a) of this Agreement.
"Closing Balance Sheet" has the meaning set forth in Section 2.5(a)(i) of
this Agreement.
"Closing Date" has the meaning set forth in Section 2.6(a) of this
Agreement.
"Closing Date Cash" has the meaning set forth in Section 2.3 of this
Agreement.
"Closing Date Purchase Price" has the meaning set forth in Section 2.3 of
this Agreement.
"Closing Certificate" has the meaning set forth in Section 2.5(a) of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or rules and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning set forth in the introductory paragraph hereof.
"Company Indemnified Parties" has the meaning set forth in Section 9.2 of
this Agreement.
"Competing Business" has the meaning set forth in Section 3.26 of this
Agreement.
"Confidential Information" means any information or compilation of
information not generally known to the public or the industry or which the
Company has not disclosed to third parties without a written obligation of
confidentiality, which is proprietary to the Company, relating to the Company's
procedures, techniques, methods, concepts, ideas, affairs, products, processes
and services, including, but not limited to, information relating to marketing,
merchandising, selling, research, development, manufacturing, purchasing,
accounting, engineering, financing, costs, customers, plans, pricing, billing,
needs of customers and products and services used by customers, all lists of
customers and their addresses, prospects, sales calls, products, services,
prices and the like as well as any specifications, formulas, plans, drawings,
accounts or sales records, sales brochures, code books, manuals, trade secrets,
knowledge, know-how, pricing strategies, operating costs, sales margins, methods
of operations, invoices or statements and the like; provided, however, that the
term "Confidential Information" shall not be deemed to include (i) information
which becomes generally available to the public other than as a result of
disclosure by the Company, the Shareholder or the Principals, or (ii) becomes
available to the applicable party on a non-confidential basis and without any
breach of an agreement of confidentiality from a source other than the Company,
the Shareholder or its shareholders, the Principals, the Purchaser or the
Parent.
3
"Contract" means any agreement, lease of non-Real Estate, license agreement
(other than a license granted by a Governmental Body), contract, consensual
obligation, promise, commitment, arrangement, understanding or undertaking,
(whether written or oral and whether express or implied) of any type, nature or
description that is legally binding but excluding leases of Leased Real Estate.
As used herein, the word "Contract" shall be limited in scope if modified by an
adjective specifying the type of contract to which this Agreement or a Section
hereof refers.
"Controlled Group" has the meaning set forth in Section 3.10(a) of this
Agreement.
"Controlled Person" when used in reference to a specified Person, means any
Person that is directly or indirectly, through one or more intermediaries,
controlled by a specified Person.
"DEA" means the United States Drug Enforcement Administration.
"DEA Fees" has the meaning set forth in Section 2.2(v) of this Agreement.
"DOJ" means the United States Department of Justice.
"Debt Instruments" has the meaning set forth in Section 3.29 of this
Agreement.
"Disclose" means to reveal, deliver, divulge, disclose, publish,
communicate, show or otherwise make known or available to any other Person, or
in any way to copy, any of the Company's Confidential Information.
"Earn-Out" has the meaning set forth in Section 2.2(a) of this Agreement.
"Earn-Out Date" has the meaning set forth in Section 2.2(a) of this
Agreement.
"Earn-Out Payment" has the meaning set forth in Section 2.2(a) of this
Agreement.
"Earn-Out Payment Date" has the meaning set forth in Section 2.2(a) of this
Agreement
"Earn-Out Period" has the meaning set forth in Section 2.2(a) of this
Agreement.
"Encumbrance" means and includes:
(i) with respect to any personal property, any intangible property or
any property other than real property, any security or other property
interest or right, claim, lien, pledge, option, charge, security interest,
contingent or conditional sale, or other title claim or retention agreement
or lease or use agreement in the nature thereof, whether voluntarily
incurred or arising by operation of law, and including any agreement to
grant or submit to any of the foregoing in the future; and
(ii) with respect to any real property, any mortgage, lien, easement,
interest, right-of-way, condemnation or eminent domain proceeding,
encroachment, any building, use or other form of restriction, encumbrance
or other claim (including adverse or prescriptive) or right of third
parties (including Governmental Bodies), any lease or
4
sublease, boundary dispute, and agreements with respect to any real
property including: purchase, sale, right of first refusal, option,
construction, building or property service, maintenance, property
management, conditional or contingent sale, use or occupancy, franchise or
concession, whether voluntarily incurred or arising by operation of law,
and including any agreement to grant or submit to any of the foregoing in
the future.
"Environmental Consultant" has the meaning set forth in Section 5.23 of
this Agreement.
"Environmental Laws" means any and all Applicable Laws (i) regulating the
use, treatment, generation, transportation, storage, control or disposal of any
Hazardous Material, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. (S)9601 et
seq.) ("CERCLA"), the Resource Conservation and Recovery Act (42 U.S.C. (S)6901
et seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S)1801 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. (S)1251 et seq.), the
Clean Water Act (33 U.S.C. (S)1251 et seq.), the Clean Air Act (42 U.S.C. (S)
7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.),
and all state laws correlary thereto, and/or (ii) relating to the protection of
the environment and public or worker health and safety, all as existing, defined
or interpreted as of the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" has the meaning set forth in Section 2.4 of this Agreement.
"Escrow Agreement" has the meaning set forth in Section 2.4 of this
Agreement.
"Escrow Fund" has the meaning set forth in Section 2.4 of this Agreement.
"Escrow Period" has the meaning set forth in Section 2.4 of this Agreement.
"Estimated Working Capital Adjustment" has the meaning set forth in Section
2.2(b) of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Excluded Assets" has the meaning set forth in Section 2.1(a)(ii) of this
Agreement.
"Excluded Liabilities" has the meaning set forth in Section 2.1(b)(ii) of
this Agreement.
"FTC" means the United States Federal Trade Commission.
"Final Order" has the meaning set forth in Section 6.2 of this Agreement.
"Financial Statements" has the meaning set forth in Section 3.12 of this
Agreement.
"GAAP" means generally accepted accounting principles in the United States.
"GSC" has the meaning set forth in Section 10.6 of this Agreement.
5
"Governmental Body" means any:
(i) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign or other government;
(iii) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, board, commission, department,
instrumentality, office or other entity, and any court or other tribunal);
(iv) multi-national organization or body; and/or
(v) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory or
taxing authority or power of any nature.
"HSR" means the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended.
"Hazardous Materials" means any and all (i) toxic or hazardous pollutants,
contaminants, chemicals, wastes, materials or substances listed or identified
in, or regulated by, any Environmental Law, and (ii) any of the following,
whether or not included in the foregoing: polychlorinated biphenyls, asbestos in
any form or condition, urea-formaldehyde, petroleum, including crude oil or any
fraction thereof, natural gas, natural gas liquids, liquified natural gas,
synthetic gas usable for fuel or mixtures thereof, nuclear fuels or materials,
chemical wastes, radioactive materials and explosives.
"Holder" means each and any Principal and any Persons to whom each and any
Principal transfers the Shares pursuant to or as provided in Section 10.5
hereof, if the Person to whom the Shares are transferred acquires the Shares as
Registrable Securities.
"IRS" means the United States Internal Revenue Service.
"Indemnified Party" has the meaning set forth in Section 9.3 of this
Agreement.
"Indemnifying Party" has the meaning set forth in Section 9.3 of this
Agreement.
"Independent Accountants" has the meaning set forth in Section 2.5(f) of
this Agreement.
"Injunction" means any and all writs, rulings, awards, directives,
injunctions (whether temporary, preliminary or permanent), judgments, decrees or
orders (whether executive, judicial or otherwise) adopted, enacted, implemented,
promulgated, issued, entered or deemed applicable by or under the authority of
any Governmental Body.
"Intellectual Property" means any and all (i) inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations in
part, revisions, extensions and reexaminations thereof; (ii) trademarks, service
6
marks, trade dress, logos, trade names, assumed names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith; (iii) copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith; (iv) mask works and all applications, registrations and renewals in
connection therewith; (v) trade secrets and confidential business information
(including ideas, research and development, know-how, technology, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals); (vi)
computer software (including data and related software program documentation in
computer-readable and hard-copy forms); (vii) other intellectual property and
proprietary rights of any kind, nature or description, including web sites, web
site domain names and other e-commerce assets and resources of any kind or
nature; and (viii) copies of tangible embodiments thereof (in whatever form or
medium).
"Knowledge" or "Best Knowledge" means that an individual will be deemed to
have "Knowledge" or "knowledge" of a particular fact or other matter if such
individual is actually (not constructively or imputedly) aware of such fact or
other matter; provided, however, that Knowledge by the Company or the
Shareholder of a particular fact or other matter shall mean the actual (and not
constructive or imputed) awareness of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ III, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. Pounds, ▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇.
"Leased Real Estate" has the meaning set forth in Section 3.17 of this
Agreement.
"Liability" or "Liabilities" means any and all debts, liabilities and/or
obligations of any type, nature or description (whether known or unknown,
asserted or unasserted, secured or unsecured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become due).
"Loss" or "Losses" has the meaning set forth in Section 9.1 of this
Agreement.
"Material Adverse Effect" or "Material Adverse Change" means, in connection
with any Person, any event, change or effect that is materially adverse,
individually or in the aggregate, to the condition (financial or otherwise),
properties, Assets, Liabilities, revenues, income, business, operations, results
of operations of such Person, taken as a whole; provided, however, the foregoing
shall not be deemed to include any event, change or effect which arises with
respect to (i) conditions of change that are primarily the result of the
national economy whereby the effect or change is generally universal upon
businesses as a whole or within an industry as a whole, or (ii) uniformly
applied legislative or judicial Applicable Laws or Final Orders that have
general applicability to business as a whole or an industry as a whole.
"Net Current Assets" has the meaning set forth in Section 2.2(b) of this
Agreement.
7
"Net Sales" means the sales of the Company from distributed products
calculated in accordance with GAAP and consistent with the Company's historical
application of GAAP as set forth in the Financial Statements.
"Operating Contracts" has the meaning set forth in Section 3.16 of this
Agreement.
"Ordinary Course of Business" means an action taken by a Person only if
such action is consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person.
"PCB's" has the meaning set forth in Section 3.28(g) of this Agreement.
"Paid Phantom Stock Value" has the meaning set forth in Section 7.11 of
this Agreement.
"Paid Transactional Expenses" has the meaning set forth in Section 7.10 of
this Agreement.
"Parent" has the meaning set forth in the introductory paragraph hereof.
"Parent Common Stock Price" shall have the meaning set forth in Section 2.3
of this Agreement.
"Parent's Common Stock" shall mean the common stock of the Parent, par
value $.01 per share.
"Parent SEC Reports" shall have the meaning set forth in Section 4.7 of
this Agreement.
"Permits" means all right, title and interest in and to any permits,
licenses, certificates, filings, authorizations, approvals, or other indicia of
authority (and any pending applications for approval or renewal of a Permit), to
own, construct, operate, sell, inventory, disburse or maintain any asset or
conduct any business as issued by any Governmental Body.
"Permitted Encumbrances" means such minor Encumbrances, charges and
imperfections which do not, individually or in the aggregate detract from, in
any material way, the value or use of any Asset, or otherwise interfere with, in
any material way, the quiet enjoyment of any Asset under any lease or leasehold
interest.
"Person" means any individual, corporation (including any non-profit
corporation), general, limited or limited liability partnership, limited
liability company, joint venture, estate, trust, association, organization, or
other entity or Governmental Body.
"Phantom Stock Plan" means the ▇. ▇. ▇▇▇▇▇▇▇ Phantom Stock Plan adopted and
effective September 1, 1998.
"Phantom Stock Value" has the meaning set forth in Section 5.26 of this
Agreement.
"Principal" or "Principals" has the meaning set forth in the introductory
paragraph hereto.
8
"Proceeding" means any suit, litigation, arbitration, hearing, audit,
investigation or other action (whether civil, criminal, administrative or
investigative) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a Prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any Prospectus supplement, and by
all other amendments and supplements to the Prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
"Purchase Price" has the meaning set forth in Section 2.2 of this
Agreement.
"Purchase Price Adjustments" has the meaning set forth in Section 2.2
of this Agreement.
"Purchaser" has the meaning set forth in the introductory paragraph
hereof.
"Purchaser Indemnified Parties" has the meaning set forth in Section
9.1 of this Agreement.
"Real Estate" has the meaning set forth in Section 3.17(b) of this
Agreement.
"Registrable Securities" means the Shares; provided, however, that any
Shares shall cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective and
such Registrable Securities have been disposed of pursuant to such effective
Registration Statement, or (ii) such Registrable Securities become eligible for
sale pursuant to Commission Rule 144(k) (or any similar provision then in force)
under the Securities Act, or (iii) the Shares cease to be owned by any Holder.
"Registration Statement" means any registration statement of the
Purchaser that covers any of the Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to any such
registration statement, including post-effective amendments, in each case
including the Prospectus, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"Related Person" or "Related Persons" means, with respect to a
particular individual:
(i) each other member of such individual's Family (as
hereafter defined); and
(ii) any Controlled Person of one or more members of such
individual's Family.
With respect to a specified Person other than an individual:
(i) any Controlled Person of such specified Person; and
9
(ii) each Person that serves as a director, governor,
officer, manager, general partner, executor or trustee of such
specified Person (or in a similar capacity). For purposes of this
definition, the "Family" of an individual includes (i) such individual,
(ii) the individual's spouse, (iii) any lineal ancestor or lineal
descendant of the individual, or (iv) a trust for the benefit of any of
the foregoing.
"Related Persons Leased Real Estate Leases" has the meaning set forth
in Section 5.27 of this Agreement.
"Required Filing Date" has the meaning set forth in Section 10.1(a) of
this Agreement.
"Response Period" has the meaning set forth in Section 2.5(e) of this
Agreement.
"Schedules" has the meaning set forth in the introductory paragraph to
Article 3 of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Shares" means the shares of the Parent's Common Stock issued to the
Principals pursuant to Section 2.3 of this Agreement.
"Shareholder" has the meaning set forth in the introductory paragraph
hereof.
"Shelf Registration Statement" has the meaning set forth in Section
10.1(a) of this Agreement.
"Site Assessment" has the meaning set forth in Section 5.23 of this
Agreement.
"Stock Unit Agreement" or "Stock Unit Agreements" means the Stock Unit
Agreements respectively entered into on September 22, 1998 between the Company
and (i) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (a/k/a ▇▇▇▇ ▇. ▇▇▇▇▇▇▇), and (ii) ▇▇▇▇▇ ▇▇▇▇▇▇▇ (a/k/a
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇).
"Supplement" has the meaning set forth in Section 13.21 of this
Agreement.
"Suspension Notice" has the meaning set forth in Section 10.2(d) of
this Agreement.
"Suspension Period" has the meaning set forth in Section 10.2(d) of
this Agreement.
"Target Effective Date" means the date thirty (30) days after the
earlier of (i) a Required Filing Date, or (ii) the date on which the Shelf
Registration Statement is actually filed with the Commission.
"Target Effective Period" means the period of time between the date on
which a Shelf Registration Statement is actually declared effective and the
later of (i) the date which is sixty (60) months following the date hereof, and
(ii) the date which is three (3) months after the date on which all Holders
cease to be an Affiliate of the Purchaser, provided the Purchaser provides each
Holder with an opinion of counsel to such effect.
10
"Tax" or "Taxes" means any and all net income, gross income, gross
revenue, gross receipts, net receipts, ad valorem, franchise, profits, transfer,
sales, use, social security, employment, unemployment, disability, license,
withholding, payroll, privilege, excise, value-added, severance, stamp,
occupation, property, customs, duties, real estate and/or other taxes,
assessments, levies, fees or charges of any kind whatsoever imposed by any
Governmental Body, together with any interest or penalty relating thereto.
"Tax Return" or "Tax Returns" means any return, declaration, report,
claim for refund or information return or statement relating to Taxes,
including, without limitation, any schedule or attachment thereto, any amendment
thereof, and any estimated report or statement.
"Termination Agreements" has the meaning set forth in Section 5.26(a)
of this Agreement.
"Third Party" means a person not a party to this Agreement, excluding
any Related Person.
"Threatened" means a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made in writing, or any notice has been given in writing that would lead a
reasonably prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter will, with substantial certainty, be asserted,
commenced, taken or otherwise pursued in the future; provided, however, that the
foregoing shall not include customer billing disputes in the Ordinary Course of
Business.
"Transactional Expenses" has the meaning set forth in Section 13.10 of
this Agreement.
"Use" means to appropriate any of the Company's Confidential
Information for the benefit of oneself or any other Person other than the
Company.
"Working Capital Adjustment" has the meaning set forth in Section
2.2(b) of this Agreement.
ARTICLE 2
PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Purchase of Assets and Assumption of Liabilities. In reliance
upon the representations, warranties and covenants contained in this Agreement
as of the date hereof and on the Closing Date, the Purchaser agrees to (i)
purchase the Assets (as defined below) from the Company, and (ii) assume the
Assumed Liabilities (as defined below), in each case on the terms and conditions
set forth in this Agreement. The sale, transfer, conveyance, assignment and
delivery of the Assets by the Company shall convey (x) good and valid title to
the Assets that are tangible assets, (y) all of the Company's interests in and
to the Assets that are intangible assets, and (z) good and valid title to the
Assets that are, and all of the Company's interests in and to the Assets that
are, mixed assets, free and clear of any and all Encumbrances, except for the
Assumed Liabilities and the Permitted Encumbrances.
11
(a) Assets.
(i) Assets. The Purchaser will purchase or assume, as
applicable, all right, title and interest in and to all of the assets
of the Company, other than the Excluded Assets, which are related to,
used, necessary or useful in the conduct of the Business of the
Company, including (A) cash and cash equivalents, (B) any and all
accounts receivable, (C) prepaid expenses, (D) inventory and supplies,
(E) property, equipment and other tangible personal property as set
forth by site location on Schedule 2.1(a)(i)(E), (F) cash value of
life insurance, (G) deposits, (H) Intellectual Property and other
intangible assets, including all of the computer software, goodwill of
the Company, guarantees, the corporate, assumed and trade names of the
Company (and all derivatives thereof) as set forth by jurisdictional
filing on Schedule 2.1(a)(i)(H), (I) all of the Company's Permits to
the extent transferable as set forth by site location and
jurisdictional issuance on Schedule 2.1(a)(i)(I), (J) the Company's
rights and benefits of and under the Operating Contracts and Leased
Real Estate leases as set forth by site location on Schedule
2.1(a)(i)(J), (K) ownership and all rights in and to all life
insurance policies and all current or pending claims or current rights
to claim reimbursement or payment under the non-life insurance
policies of the Company and rights to the Purchaser as an additional
insured in, to and under the Company's insurance policies as set forth
on Schedule 2.1(a)(i)(K), (L) all Benefit Plans of the Company, and
(M) the documents, books and records (financial or otherwise) relating
to the Business, whether in tangible or intangible form, including
ledgers, files, correspondence, lists, human resource policies,
procedures manuals and the like, creative materials, advertising and
promotional materials, studies, reports and other printed, written or
electronic materials (the "Assets").
(ii) Excluded Assets. Notwithstanding anything to the contrary
contained in Section 2.1(a) of this Agreement, the following assets of
the Company (the "Excluded Assets") are not part of the sale and
purchase contemplated hereunder, are excluded from the Assets, shall
remain the property of the Company after the Closing and shall not be
purchased or assumed by the Purchaser: (A) any right, title or
interest in the investments of the Company in Phoenix Scientific, Inc.
and Phoenix Pharmaceutical, Inc., (B) deferred income Taxes and
credits of the Company, (C) ownership of insurance policies of the
Company to the extent not specifically set forth in Section
2.1(a)(i)(K), (D) any claims and actions by the Company against the
officers and directors of the Company which arise from the management
or operation of the Company prior to or on the Closing Date, (E) the
non-transferable Permits set forth by site location and Governmental
Body issuer on Schedule 2.1(a)(ii)(E), (F) the Contracts and Leased
Real Estate leases set forth on Schedule 3.17 that are to be either
terminated at and upon the Closing or retained by the Company,
including the Phantom Stock Plan, the Stock Unit Agreements, the April
2, 1991 Shareholders Agreement by and among the Company and the former
shareholders of the Company, and the Related Persons Leased Real
Estate Leases described in Section 5.27, (G) the Company's Tax returns
and associated workpapers, and all claims for refunds of Taxes and
other fees and charges of a Governmental Body,
12
(H) any shares of capital stock of the Company held in its treasury,
(I) the corporate charter of the Company, (J) the Company's
qualifications to conduct business, arrangements with registered
agents, taxpayer and other identification numbers, seals, minute
books, stock transfer books, and other documents relating to the
organization, maintenance and existence of the Company, (K) those
assets listed on Schedule 2.1(a)(ii)(K) and (L) any rights of the
Company under this Agreement and the Ancillary Documents.
(b) Liabilities.
(i) Assumed Liabilities. The Purchaser will assume the
Liabilities of the Company, including (A) trade accounts payable and
accrued and other Liabilities incurred by the Company prior to or on
the Closing Date which are set forth on the Closing Balance Sheets,
(B) the obligations of the Company under the Operating Contracts and
Leased Real Estate leases as set forth on Schedule 2.1(a)(i)(J),
except for any breach, defaults or non-current amounts owing under or
arising pursuant to such Operating Contracts and Leased Real Estate
leases on or prior to the Closing Date, to either (x) furnish goods,
services and other non-cash benefits to a Third Party after the
Closing, or (y) to pay for goods, services, and other non-cash
benefits that a Third Party will furnish to the Purchaser after the
Closing, (C) employee disputes and claims (excluding claims described
in Section 3.20(b)) that are disclosed in the Schedules prior to the
Closing Date, and (D) the obligations of the Company under any Permit
transferred to the Purchaser as set forth on Schedule 2.1(a)(i)(I),
except for any breach, default or violation of Applicable Law arising
pursuant to such Permit which has as its basis any event, act,
occurrence or omission on or before the Closing Date; provided,
however, that the Assumed Liabilities shall not include the Excluded
Liabilities (the "Assumed Liabilities").
(ii) Excluded Liabilities. The Purchaser shall not assume
the following Liabilities of the Company: any Liability arising from,
in connection with or incident to (A) the Phantom Stock Plan, the
Stock Unit Agreements or the Termination Agreements, (B) any
Transactional Expenses paid by or relating to the Company, to the
extent not included in the Paid Transactional Expenses, (C) any income
Tax Liability of the Company or any former shareholder or the
Shareholder of the Company, (D) any Tax Liability of or incurred by
the Company, the Shareholder, the Principals, any Related Person or
Third Party, or the Assets which has as its basis any event, act,
occurrence or omission on or before the Closing Date which is not set
forth on the Closing Balance Sheet, (E) any Taxes, fees or penalties
as described in Section 11.10(a) of this Agreement, (F) any Liability
arising from, incident to or in connection with an Excluded Asset, (G)
any Liability owed to the Shareholder or any Related Person or
Affiliate of either the Company, the Shareholder or the Principals,
whether or not arising in the Ordinary Course of Business, (H) any
breach, defaults, or violations of Applicable Law which has as its
basis any event, act, occurrence or omission prior to the Closing Date
or non-current amounts owing which are not set forth on the Closing
Balance Sheet under or pursuant to the Operating
13
Contracts, the Leased Real Estate leases or any Permit, (I) claims by
current or former employees of the Company that are described in
Section 3.20(b), (J) any Proceeding having as its basis any event,
act, occurrence or omission prior to the Closing Date and which is not
disclosed in Schedule 3.7 of this Agreement, (K) any Liability arising
from, in connection with or incident to any Benefit Plan (except for
accounts payable and accrued expenses set forth on the Closing Balance
Sheet), any breach of fiduciary duty under any Benefit Plan, any
prohibited transaction under the Code or ERISA and any COBRA Liability
which, in each case, has as its basis an event, act, occurrence or
omission prior to the Closing Date, and (L) any claim which arises
from, in connection with or incident to any products liability claim
not fully covered by (i) an applicable policy of insurance paid or
payable to the Purchaser or the Company, or (ii) a reserve or accrual
set forth on the Closing Balance Sheet that in any way arises from,
without limitation, products purchased, sold, distributed, brokered or
otherwise associated with the Company on or prior to the Closing Date
(the "Excluded Liabilities").
2.2 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be the aggregate of Ninety-Two Million Five Hundred Thousand
Dollars ($92,500,000) (in cash and Shares as described in Section 2.3), plus or
minus, as applicable, the sum of the following adjustments (collectively, the
"Purchase Price Adjustments"):
(i) plus, the Earn-Out (as defined and as described in Section
2.2(a)); and
(ii) plus, or minus, as applicable, the Working Capital
Adjustment (as described in Section 2.2(b)); and
(iii) minus, the Paid Transactional Expenses (as set forth on
Schedule 7.10); and
(iv) minus, the Paid Phantom Stock Value (as set forth on
Schedule 7.11); and
(v) minus, one-half (1/2) of the professional fees and costs
incurred by the Purchaser or the Parent (limited to those of ▇▇▇▇▇,
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, P.C. and ▇▇▇▇▇▇ Associates) in connection with
DEA Permit matters and correlary state Permits required by any
Governmental Body Inventory (the "DEA Fees").
(a) Earn-Out. The Company shall be entitled to two percent (2%) of
the aggregate of the sum of (i) Net Sales, and (ii) twenty percent (20%) of
the Agency Retail Sales Gross-Up, which, in such aggregate, are in excess
of $150,000,000 each year from and after the first day of the first whole
fiscal month (July 29, 2001) following the Closing Date (the "Earn-Out
Date"), for a period of five (5) years from and after the Earn-Out Date
(the "Earn-Out"). For purposes of this Agreement, the applicable year shall
consist of twelve (12) fiscal months corresponding to the Parent's monthly
fiscal
14
reporting periods, commencing with fiscal August through and including
fiscal July of each applicable year. In the event the Parent changes its
reporting periods, the applicable year for purposes of this Agreement shall
be adjusted accordingly (and equitably) so that the Company shall have the
benefit of a measuring period consisting of twelve (12) consecutive fiscal
months. The five (5) year Earn-Out (the "Earn-Out Period") shall not have a
dollar amount limit or "cap" during the Earn-Out Period; provided, however,
that the Company's right to receive the Earn-Out may be offset or recouped
by the Purchaser in accordance with the procedures and provisions set forth
in Section 11.8 of this Agreement against amounts due to the Company
hereunder in the event that (i) the Persons described in Section 11.2 of
this Agreement engage in an activity in violation of the provisions of such
Section 11.2 which results in a Loss or Losses to the Purchaser or the
Parent, or (ii) the Company, the Shareholder or the Principals owe any
other indemnity to the Purchaser from a Loss or Losses. The accrual and/or
payment of the Earn-Out is not and shall not be dependent or otherwise
affected by the termination of the employment of any of the Principals.
The Earn-Out shall be calculated and payment made to the Company
within sixty (60) days after the end of each yearly anniversary of the
Earn-Out Date (each, an "Earn-Out Payment Date") in respect of the Earn-Out
Period. All Earn-Out payments (each, an "Earn-Out Payment") shall be
accompanied by Net Sale and Agency Retail Sales Gross-up documentation and
the Purchaser's calculation of the Earn-Out accrued and payable in respect
of such period of the Earn-Out Period, and shall set forth in reasonable
detail any offset or recoupment claimed by the Purchaser. The total Earn-
Out Payment, less the claimed offset or recoupment amount, if any, which is
properly remitted to the Escrow Agent as required by Section 11.8, shall
equal the portion of the annual Earn-Out Payment to be made by the
Purchaser to the Company or its assignees on such Earn-Out Payment Date.
Each Earn-Out Payment shall be made solely in cash. In the event of a
dispute involving the computation of the Earn-Out that the Purchaser and
the Company (or its assignees) cannot resolve within twenty (20) days
following the earlier of the Company's (or its assigns) receipt of the
Earn-Out Payment or the Earn-Out Payment Date, the parties shall engage the
Independent Accountants and follow the procedures in Section 2.5(f) to
resolve the dispute.
In the event that all or a material part of the Business in the hands
of the Purchaser is sold to a Third Party in any form of asset or stock
sale, merger, exchange or similar transaction, the definitive acquisition
agreement for any such transaction shall provide that the acquiror shall
assume the remaining obligations with respect to the Earn-Out as described
in this Section 2.3. In addition to the foregoing, the Parent's Guarantee
of the Purchaser's obligations under this Agreement shall apply equally to
the Earn-Out Payment obligations due from such acquiring party.
(b) Working Capital Adjustment. The "Working Capital Adjustment"
shall be equal to the amount by which the Company's current Assets minus
the Company's current Assumed Liabilities (the "Net Current Assets"), each
as reported on the Company's Closing Balance Sheet, exceeds or does not
exceed $22,000,000. The composition of, and adjustments required under this
Agreement to, current Assets and current Assumed Liabilities for purposes
of preparation of the Closing Balance Sheet are
15
set forth in Section 2.5 hereof. The estimated amount of the Working
Capital Adjustment (the "Estimated Working Capital Adjustment") shall be
jointly agreed upon between the Company and the Purchaser in good faith
prior to the Closing and the Estimated Working Capital Adjustment so
determined shall be added to or withheld, as applicable, from the amount
payable to the Company at Closing (pursuant to Section 2.2(ii)) and
reconciled after the Closing Date in accordance with Section 2.5 hereof.
2.3 Payment of Purchase Price on the Closing Date. The Purchase Price to
be paid on the Closing Date shall be calculated as follows: Ninety-Two Million
Five Hundred Thousand Dollars ($92,500,000) plus or minus, as applicable, the
sum of:
(i) plus or minus, the Estimated Working Capital Adjustment;
and
(ii) minus, the Purchase Price Escrow Fund (as defined and
described in Section 2.4); and
(iii) minus, the Paid Transactional Expenses (as set forth on
Schedule 7.10); and
(iv) minus, the Paid Phantom Stock Value (as set forth on
Schedule 7.11); and
(v) minus, one-half (1/2) of the DEA Fees.
The sum of the foregoing shall be the "Closing Date Purchase Price." Except
for the amount of $10,706,875 which is allocated to the Shares, the Closing Date
Purchase Price shall be paid in cash at and upon the Closing by wire transfer of
immediately available funds to an account designated in writing by the Company
at least three (3) business days prior to the Closing Date (the "Closing Date
Cash"). The number of shares to be issued by the Purchaser and delivered at and
upon the Closing (the "Shares") will be calculated by dividing $10,706,875 by
the Parent Common Stock Price (except no fractional shares shall be issued). The
Company, the Shareholder and the Principals acknowledge and agree that the
Shares shall be equally divided and delivered to, and in the respective names
of, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. Delivery of
the Shares to these individuals will be conclusively regarded as payment to and
delivery of the Shares to the Company in satisfaction of the Purchaser's
obligation to issue and deliver the Shares as Purchase Price pursuant to this
Agreement. The parties acknowledge that (i) the foregoing issuance of the Shares
shall be deemed to concurrently occur as part of a distribution of the Shares by
the Company to the Shareholder followed by pro-rata distribution to the
beneficial holders of the Shareholder and (ii) the delivery of the Shares will
be reported for Tax purposes consistent with this and the preceding sentence.
The term the "Parent Common Stock Price" shall mean the average of the
reported last sale prices of the Parent's Common Stock as reported on the Nasdaq
National Market System for each of the twenty (20) trading days immediately
preceding the second trading day prior to the Closing Date. Notwithstanding the
foregoing, if between the date of this Agreement and the Closing Date the
outstanding shares of the Parent's Common Stock shall have been changed into a
different number of shares or a different class or series, by reason of any
stock dividend,
16
subdivision, reclassification, recapitalization, split, combination, exchange of
shares or any similar action which would increase or decrease the number of
issued and outstanding shares, the formula above shall be equitably and
correspondingly adjusted to reflect stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or
similar action.
2.4 Escrow of Purchase Price. At and upon the Closing, $3,000,000 of
immediately available funds from the Closing Date Purchase Price shall be
deposited with US Bank National Association (or such other institution selected
by the Purchaser with the reasonable consent of the Company) as escrow agent
("Escrow Agent"), such deposit to constitute the escrow fund (the "Escrow
Fund"), and shall be governed by the terms of the escrow agreement in the form
attached hereto as Exhibit A (the "Escrow Agreement"). The Escrow Fund shall
terminate eighteen (18) months from and after the Closing Date (the period from
the Closing Date to the date eighteen (18) months from and after the Closing
Date is referred to as the "Escrow Period"). The procedure for claims of Loss or
Losses upon and disbursements from the Escrow Fund shall be governed by the
terms of the Escrow Agreement.
2.5 Determination of Purchase Price Adjustments; Closing Balance Sheet;
Final Payment.
(a) Promptly following the Closing Date (but in any event within
sixty (60) days after the Closing Date), the Company shall cause to be
prepared and delivered to the Purchaser a certification (the "Closing
Certificate") prepared by Love, Bollus, ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, or any other
independent firm of certified public accountants selected by the Company
(the "Auditor"). The Closing Certificate shall include:
(i) A closing balance sheet (the "Closing Balance Sheet")
prepared in accordance with Section 2.5(c) of this Agreement;
(ii) A calculation and comparison of the (x) Net Current
Assets as calculated from the Closing Balance Sheet, and (y) the
amount of the Estimated Working Capital Adjustment. In the event that:
(A) Net Current Assets on the Closing Balance
Sheet exceed the Estimated Working Capital Adjustment, then
the Purchase Price is increased by the amount of such
difference and shall be due to the Company; or
(B) Net Current Assets on the Closing Balance
Sheet do not exceed the Estimated Working Capital Adjustment,
then the Purchase Price is decreased by the amount of such
difference and shall be due to the Purchaser;
(iii) The foregoing increase or decrease to the Purchase
Price shall be summarized and computed in the aggregate as either an
amount (A) due to the Purchaser, or (B) due to the Company, with
interest thereon computed in accordance with Section 2.5(g);
17
(iv) Copies of all supplementary documents, work papers,
and other data relating to the Closing Certificate; and
(v) Such other supplementary evidence as the Purchaser
may reasonably require either prior to or after delivery of the
Closing Certificate, including the evidence described in Section 2.5
below.
(b) In connection with the preparation of the Closing Balance Sheet
and all other matters arising under the Closing Certificate, the Purchaser
shall afford the Company and its representatives complete access to the
books, records, personnel and facilities of or pertaining to the Company to
permit the Auditor to review such information as is necessary or desirable
to prepare the Closing Balance Sheet and all other statements arising under
the Closing Certificate. In connection with all matters related to the
Auditor's workpapers, preparation and calculations of the Closing Balance
Sheet, the Company, the Shareholder and the Principals shall provide, or
cause to have provided, all workpapers, calculations, source documents and
notes promulgated or utilized by the Auditors for use by the Purchaser in
its review and analysis of the Closing Balance Sheet and the Closing
Certificate.
(c) The Closing Balance Sheet shall consist of the report of the
Auditor, substantially in the form of Exhibit B-1 hereto, based on the
balance sheet of the Company as of the close of business on the Closing
Date in accordance with GAAP consistently applied by the Company (including
any change in accounting methods or principles disclosed in any Schedule or
Supplement) and without giving effect to the consummation of the
transactions contemplated hereby; provided, however, that the Closing
Balance Sheet shall be subject to and prepared in conformity with year-end
audit accrual and estimation practices of the Company such that all pro-
rata adjustments, accruals, reserves, allowances and similar year-end
adjustments are prepared for and included in the Closing Balance Sheet, as
if the Closing Balance Sheet were a year-end statement; provided, further,
that in the event any accounting matter is not treated in conformity with
GAAP in the Company's historical Financial Statements, whether or not
consistently applied in such non-conforming manner, the standard required
by GAAP shall be followed regardless of materiality. The Auditor's
statement on the Closing Balance Sheet shall be unqualified, except for the
modifications to GAAP mandated by this Agreement for the proper
presentation and calculation of the matters required to be included with
and in the Closing Certificate. The expense of the preparation of the
Closing Balance Sheet by the Auditor shall be borne by the Company.
Notwithstanding the foregoing, the parties hereby agree that,
regardless of whether otherwise required by GAAP, or whether inconsistent
with the past accounting practices of the Company, the Closing Balance
Sheet shall be adjusted so that the Closing Balance Sheet shall not
reflect:
(i) accruals for the expenses associated with the preparation
of the Closing Balance Sheet; any such accruals shall be reversed and
adjusted by a debit to accounts payable or accrued expenses and a
credit to retained earnings; and
18
(ii) Paid Transactional Expenses or accruals for Transactional
Expenses; any such Paid Transactional Expenses or accruals of
Transactional Expenses shall be reversed and adjusted by (i), in the
case of Paid Transactional Expenses, a debit to cash and a credit to
retained earnings, and (ii), in the case of an accrual of
Transactional Expenses, a debit to accounts payable and accrued
expenses and a credit to retained earnings; and
(iii) Paid Phantom Stock Value or accruals for the Phantom
Stock Value (in whole or in part); any such Paid Phantom Stock Value
or accruals of Phantom Stock Value shall be reversed and adjusted by
(i), in the case of Paid Phantom Stock Value, a debit to cash and a
credit to retained earnings, and (ii), in the case of an accrual, a
debit to accounts payable or accrued expenses and a credit to retained
earnings.
(d) The itemized calculations required by Section 2.5(a) (ii) shall
be presented and calculated in accordance with Exhibit B-2 hereto.
(e) If the Purchaser concludes that any matter reported in the
Closing Certificate is not accurate, the Purchaser shall, within thirty
(30) days after its receipt of the Closing Certificate (the "Response
Period"), deliver to the Company a written statement setting forth a
specific description of each of its objections and each of any
discrepancies believed to exist. If no notice of any objections or
discrepancies is given within the Response Period, then the calculations
set forth in the Closing Certificate shall be controlling for all purposes
of this Agreement, and the Purchaser or the Company, as the case may be,
shall pay the other the amount which they are obligated to pay in
accordance with the Closing Certificate pursuant to Section 2.5 (g) below.
(f) The Purchaser and the Company shall use good faith efforts to
jointly resolve the properly noticed objections and discrepancies within
fifteen (15) days of the receipt of the written statement of objections and
discrepancies, which resolution, if achieved, shall be fully and completely
binding upon all parties to this Agreement and not subject to further
review, appeal, or dispute. If the Purchaser and the Company are unable to
resolve the objections and discrepancies to their mutual satisfaction
within such fifteen (15) day period, then the matter shall be submitted to
KPMG Peat Marwick, Chicago, Illinois (the "Independent Accountants"). In
submitting a dispute to the Independent Accountants, each of the parties
shall concurrently furnish, at its own expense, to the Independent
Accountants and the other party such documents and information as the
Independent Accountants may request. Each party may also furnish to the
Independent Accountants such other information and documents as it deems
relevant, with the appropriate copies and notification being concurrently
given to the other party. Neither party shall have or conduct any
communication, either written or oral, with the Independent Accountants
without the other party either being present or receiving a concurrent copy
of any written communication. The Independent Accountants may conduct a
conference concerning the objections and disagreements between the Company
and the Purchaser, at which conference each party shall have the right to
(i) present its documents, materials and other evidence (previously
provided to the Independent Accountants and the other party), and (ii) to
have present its or their advisors, accountants
19
and/or counsel. The Independent Accountants shall promptly (but not to
exceed thirty (30) days from the date of engagement of the Independent
Accountants) render a decision on the issues presented, and such decision
shall be final and binding on the parties.
(g) Within five (5) days following the earlier to occur of (i) any
failure to object to the Closing Certificate within the Response Period, or
(ii) receipt of the Independent Accountant's decision with respect to such
dispute, if the Purchaser is determined to owe an amount to the Company,
the Purchaser shall pay such amount in cash to the Company, and if the
Company is determined to owe an amount to the Purchaser, the Company shall
pay such amount in cash to the Purchaser. All amounts owed by the Purchaser
or the Company to the other in accordance with this Section 2.5 shall be
paid by certified or bank cashier's check or by wire transfer of
immediately available funds with interest computed thereon from the Closing
Date at the prime rate announced by, and charged on the Closing Date by, US
Bank National Association, Minneapolis, Minnesota.
2.6 Closing and Closing Deliveries.
(a) Closing and Closing Date. Subject to the satisfaction or
waiver of the conditions precedent contained in Articles 6, 7 and 8
hereof, the closing of the transactions contemplated by this Agreement
(the "Closing") shall be held at a mutually agreed time after (i) all
consents and approvals required to consummate the transactions
contemplated hereby have been received from any Governmental Body,
including the FTC and DOJ, and (ii) all other conditions to the
Closing have been duly satisfied or waived in writing, at the offices
of ▇▇▇▇▇▇ and ▇▇▇▇▇▇, Professional Association, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, and shall be as of the opening of
business on such day. Such date is referred to in this Agreement as
the "Closing Date."
(b) Documents to be Delivered by the Company, the Shareholder
and the Principals. At the Closing, the Company, the Shareholder and
the Principals shall execute, where necessary or appropriate, and
deliver to the Purchaser each and all of the following:
(i) A certificate in the form of Exhibit C hereto
signed by the Company, the Shareholder and the Principals, dated
as of the Closing Date, to the effect that the representations
and warranties made by the Company, the Shareholder and the
Principals in this Agreement (as modified by the Schedules and
any Supplement(s)) and in any Ancillary Documents to be executed
and/or delivered by the Company, the Shareholder or the
Principals pursuant to this Agreement are true and correct in
all material respects at and as of the Closing and the Company,
the Shareholder and the Principals have each performed and
complied, in all material respects, with all of their respective
covenants, agreements and obligations under this Agreement which
are to be performed and complied with by the Company, the
Shareholder and/or the Principals at or prior to the Closing;
20
(ii) An Assignment and Assumption Agreement in the form
of Exhibit D hereto executed by the Company;
(iii) A ▇▇▇▇ of Sale in the form of Exhibit E hereto
executed by the Company;
(iv) A copy of the duly adopted resolutions of the
Board of Directors of the Company certified by an officer of the
Company approving this Agreement and authorizing the execution
and delivery of this Agreement by the Company, including the
documents, instruments and agreements to be executed and/or
delivered by the Company pursuant hereto, and the consummation
of the transactions contemplated hereby and thereby;
(v) A copy of the duly adopted resolutions of the
trustees of the Shareholder certified by an officer or trustee
of the Shareholder approving this Agreement and authorizing the
execution and delivery of this Agreement by the Shareholder and
the Company, including the documents, instruments and agreements
to be executed and/or delivered by the Shareholder and the
Company pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby;
(vi) The Estimated Working Capital Adjustment;
(vii) The Escrow Agreement executed by the Company and
the Escrow Agent;
(viii) The fully-executed Non-Competition and Restrictive
Covenant Agreements described in Sections 5.26(b) and 7.9;
(ix) The Payroll Tax Reporting Agreement in the form of
Exhibit F hereto executed by the Company;
(x) Copies of fully-executed and delivered Termination
Agreements for the Stock Unit Agreements as described in Section
5.26(a);
(xi) The Related Persons Leased Real Estate Leases
executed by the Related Person lessors as described in Section
5.27;
(xii) The executed and delivered termination agreements
for the Leased Real Estate leases with the Related Person
lessors as described in Section 5.27;
(xiii) The executed landlord/lessor estoppel certificates
for each parcel of non-Related Person Leased Real Estate as set
forth and disclosed in Schedule 3.17 (in conformity with Section
5.28) and the executed consent of such landlord/lessors of the
Purchaser's assumption of the Company's rights and obligations
under the lease of such Leased Real Estate;
21
(xiv) Delivery and assignment of any and all documents
relating to Permits which by their terms are assignable;
(xv) A duly executed written opinion letter by counsel for
the Company and the Shareholder dated as of the Closing Date,
addressed to the Purchaser, as contemplated by Section 7.5 of this
Agreement;
(xvi) The Company shall execute and deliver to the Purchaser
in blank (without completing the buyer insert) the assignment
provision of all vehicle, equipment and other personal property title
certificates (or reasonably acceptable transfer documentation which
will be accepted by applicable Governmental Bodies and Third Parties,
where applicable) with a detailed list thereto (organized by the
Company site location) describing (A) the vehicle, equipment or
personal property, (B) the vehicle, equipment or personal property
identification number, and (C) the state issuing the title
certificate;
(xvii) Certificates of good standing, legal existence or the
state equivalent thereof for the Company and the Shareholder dated
within five (5) days prior to the Closing Date issued by the Secretary
of State of Massachusetts and foreign qualification good standing
certificates for the Company in each state set forth in Schedule 3.1;
(xviii) The non-foreign person affidavit as described in
Section 11.10(b) duly executed by the Company;
(xix) All consents approving the transfer of any Asset or the
assumption of any Assumed Liability required by the terms of any
Contract or Permit (without charge to the Purchaser or material change
to the terms of the Contract or Permit);
(xx) The Schedule of Paid Transactional Expenses required by
Section 7.10;
(xxi) The itemized Schedule of Paid Phantom Stock Value
as required by Section 7.11; and
(xxii) Such other documents and items as are reasonably
necessary or appropriate to effect the consummation of the
transactions contemplated hereby or which may be customary under local
law.
(c) Documents to be Delivered by the Purchaser. At the Closing, the
Purchaser shall execute, where necessary or appropriate, and deliver to the
Company each and all of the following:
(i) Payment of the Purchase Price to be paid on the Closing
Date pursuant to the methods and determined in accordance with Section
2.3 hereof in the form of cash and Shares;
22
(ii) A certificate in the form of Exhibit G hereto signed by
a duly authorized officer of the Purchaser and the Parent, and dated
as of the Closing Date, to the effect that (x) the representations and
warranties made by the Purchaser and the Parent in this Agreement and
in any Ancillary Documents to be executed and/or delivered by the
Purchaser and the Parent pursuant to this Agreement are true and
correct in all material respects at and as of the Closing, and (y) the
Purchaser and the Parent have each performed and complied, in all
material respects, with all of their respective covenants, agreements
and obligations under this Agreement which are to be performed and
complied with by the Purchaser on or prior to the Closing;
(iii) A copy of the duly adopted resolutions of the Board of
Directors of the Purchaser certified by an officer of the Purchaser
approving this Agreement and authorizing the execution and delivery of
this Agreement, including the Ancillary Documents to be executed
and/or delivered by the Purchaser pursuant hereto, and the
consummation of the transactions contemplated hereby and thereby;
(iv) A copy of the duly adopted resolutions of the Board of
Directors of the Parent certified by an officer of the Parent
approving this Agreement and authorizing the execution and delivery of
this Agreement, including the Ancillary Documents to be executed
and/or delivered by the Purchaser and the Parent pursuant hereto, and
the consummation of the transactions contemplated hereby and thereby;
(v) The Assignment and Assumption Agreement executed by
the Purchaser;
(vi) The Escrow Agreement executed by the Purchaser and the
Escrow Agent;
(vii) The Non-Competition and Restrictive Covenant Agreements
described in Section 7.9 executed by the Purchaser;
(viii) The Payroll Tax Reporting Agreement executed by the
Purchaser;
(ix) The Related Persons Leased Real Estate Leases described
in Section 5.27 executed by the Purchaser;
(x) A duly executed written opinion letter by counsel for
the Purchaser and the Parent, dated as of the Closing Date, addressed
to the Company, as contemplated by Section 8.4 of this Agreement;
(xi) The Estimated Working Capital Adjustment;
(xii) The Parent Guaranty in the form of Exhibit L executed by
the Parent; and
23
(xiii) Such other documents and items as are reasonably
necessary or appropriate to effect the consummation of the
transactions contemplated hereby or which may be customary under local
law.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to the Purchaser and the Parent to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company,
the Shareholder and the Principals (as individuals) each represent and warrant
to the Purchaser and the Parent that each and all of the following
representations and warranties (as modified by the Schedules to this Agreement
(the "Schedules") and any Supplement delivered by the Company and/or the
Shareholder pursuant to Section 13.21 of this Agreement) are true and correct as
of the date of this Agreement and will be true and correct as of the Closing
Date. The Schedules shall be arranged in paragraphs generally corresponding to
the sections and subsections contained in this Article 3 and shall be presented
in a manner that is reasonably contemplated to provide the disclosures requested
by the Purchaser.
3.1 Organization.
(a) The Company. The Company is a corporation duly organized,
legally existing and in good standing under the laws of the Commonwealth of
Massachusetts. The Company has all requisite power and authority, corporate
and otherwise, to own, operate and lease its properties and assets and to
conduct the Business as it is now being conducted. As set forth in Schedule
3.1, the Company is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of every state or
jurisdiction in which the nature of their activities or of their properties
owned, leased or operated makes such qualification necessary and in which
the failure to be so qualified could reasonably be expected to have a
Material Adverse Effect on the Company.
(b) The Shareholder. The Shareholder is a Massachusetts Business
Trust subject to Chapter 182 of the Massachusetts General Laws and is duly
organized and legally existing under the laws of the Commonwealth of
Massachusetts. The Shareholder has all requisite power and authority to
own, operate and lease its properties and assets and to conduct its
business as it is now being conducted.
3.2 Capitalization. The authorized capital stock of the Company consists
solely of 21,000 shares of common voting stock no par value, of which 1,260
shares are issued and outstanding on the date hereof and owned beneficially and
of record by the Shareholder.
3.3 Due Authorization. The execution, delivery and performance of this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by the Company, the Shareholder and the Principals pursuant to
this Agreement, and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action, corporate
or otherwise. This Agreement and the documents, instruments and agreements to be
executed and/or delivered by the Company, the Shareholder and the Principals
24
pursuant to this Agreement have been or will be on or before the Closing Date
duly and validly authorized, executed and delivered by such parties and the
obligations of such parties hereunder and thereunder are or will be upon such
execution and delivery valid, legally binding and enforceable against such
parties in accordance with their respective terms.
3.4 No Breach. The Company has full power and authority to sell, assign,
transfer, convey and deliver to the Purchaser the Assets to be sold hereunder.
Each of the Company, the Shareholder and the Principals has full power and
authority to otherwise perform its obligations under this Agreement and the
documents, instruments and agreements to be executed and/or delivered pursuant
hereto. The execution and delivery of this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by the Company, the
Shareholder and the Principals pursuant to this Agreement, and the consummation
of the transactions contemplated hereby and thereby will not: (i) violate any
provision of the (x) Declaration of Trust dated December 27, 1999 (filed
December 29, 1999), as amended, of the Shareholder, or (y) the Articles of
Organization, as amended and restated, or Bylaws, as amended, (or comparable
governing documents or instruments) of the Company, (ii) violate any Applicable
Laws or Injunction applicable to the Company, the Shareholder or the Principals,
(iii) other than the filing required by HSR and except as provided in Schedule
3.4 hereto, require any filing with, Permit from, authorization, consent or
approval of, or the giving of any notice to, any Person, (iv) except as provided
in Schedule 3.4 hereto, result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give another party
any rights of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, Permit (including, but not limited to, any Permits, approvals or
authorizations of any Governmental Body), Leased Real Estate lease, Benefit Plan
or other Contract to which the Company, the Shareholder or the Principals are a
party, or by which they or any of their properties or assets may be bound, or
(v) result in the creation or imposition of any Encumbrance on any of the
Assets.
3.5 Clear Title. Except as otherwise set forth on Schedule 3.5 hereto,
on the Closing Date, (i) the Company holds good and valid title to all of the
Assets that are tangible assets, (ii) all of the Company's interests in and to
the Assets that are intangible assets are valid and enforceable, (iii) the
Company holds good and valid title to the Assets that are valid and enforceable
interests in, the Assets that are mixed assets, (iv) the Company holds valid and
enforceable leasehold interests in all Leased Real Estate and all leased non-
real estate Assets, and (v) the Assets and leasehold interests are free and
clear of any and all Encumbrances, except for the Permitted Encumbrances, of any
kind, nature and description whatsoever.
3.6 Condition of Assets. Except as set forth in Schedule 3.6 hereto, the
Assets constituting property, plant, equipment and other personal property (i)
have in all material respects been properly maintained, (ii) are in all material
respects in good operating condition and repair, subject only to ordinary wear
and tear, and (iii) are all the assets used to operate, and necessary to
operate, the Company's Business as currently conducted.
3.7 Litigation. Except as described in Schedule 3.7 hereto, there is no
pending Proceeding:
25
(a) that has been commenced by or served upon the Company, the
Shareholder or the Principals, or of which the Company, the Shareholder or
the Principals have Knowledge (other than any Proceeding which generally
affects the business of all Persons conducting business similar to the
Company and in which the Company is not a named defendant); or
(b) to the Company's, the Shareholder's or the Principals'
Knowledge, that, as of the date of execution of this Agreement and the
Closing Date, challenges, or that will have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby.
To the Knowledge of the Company, the Shareholder or the Principals, no such
Proceeding has been Threatened. Except as provided in Schedule 3.7 hereto, to
the Knowledge of the Company, the Shareholder or the Principals, the Company is
not a party to or subject to the provisions of any Injunction which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company or impair the ability of the Shareholder or the
Principals to consummate the transactions contemplated hereby.
3.8 Labor Matters. Except as set forth in Schedule 3.8 hereto, the
Company has never been a party to any collective bargaining agreement or other
labor Contract. There has never been, and there is not presently pending or
existing, and to the Company's, the Shareholder's or the Principals' Knowledge
there is not Threatened, (i) any strike, slowdown, walkout, picketing, work
stoppage, labor arbitration or other Proceeding in respect of the grievance of
any Company employee, (ii) any application or complaint filed by any Company
employee or union with the National Labor Relations Board, or any comparable
Governmental Body, (iii) any organizational activity or other labor dispute
against or affecting the Company, and no application for certification of a
collective bargaining agreement is pending or, to the Company's, the
Shareholder's or the Principals' Knowledge, is Threatened. There is no lockout
of any employees by the Company and no such action is contemplated by the
Company. Except as set forth in Schedule 3.8 hereto, there is no allegation,
charge, complaint or Proceeding pending or, to the Company's, the Shareholder's
or the Principals' Knowledge, Threatened by any Person against the Company or
any of its current or former officers, directors or employees relating to
employment, equal employment opportunity, discrimination, harassment, wrongful
discharge, unfair labor practices, immigration, wages, hours, benefits,
collective bargaining, the payment of social security or similar Taxes,
occupational safety and health or plant closing.
3.9 [THIS SECTION INTENTIONALLY OMITTED].
3.10 Employee Benefits.
(a) Benefit Plans. Except as described in Schedule 3.10 hereto,
the Company does not maintain or contribute to any Benefit Plans. Without
limiting the generality of the foregoing provision of this Section, except
as described in Schedule 3.10 hereto, there are no pension plans, welfare
plans or employee benefit plans qualified under Section 401(a) of the Code
to which the Company is required to contribute. Except as described in
Schedule 3.10 hereto, the Company does not and will not have any unfunded
Liability for services rendered prior to the Closing Date under any
26
Benefit Plans. The Company is not in any material default under any Benefit
Plan. Except as set forth in Schedule 3.10, neither the Company, nor any
Person now or formerly part of a controlled group with the Company, within
the meaning of Section 412(c)(11)(B)(ii) of the Code (the "Controlled
Group"), maintains or has ever maintained a "defined benefit plan," as
defined in Section 3(35) of ERISA, that is subject to Section 412 of the
Code and Section 302 of ERISA. Except as set forth in Schedule 3.10 hereto,
neither the Company nor any other member of its Controlled Group
contributes to or has, or could reasonably be expected to have, any
Liability (including but not limited to withdrawal Liability) with respect
to any multi-employer plan (as defined in Section 4064(a) of ERISA or
Section 4001(a)(3) of ERISA). Other than claims for benefits in the
Ordinary Course of Business, there are no actions, suits, disputes,
arbitrations or other material claims pending or, to the Company's, the
Shareholder's or the Principals' Knowledge, Threatened with respect to any
Benefit Plan.
(b) Other Plans. None of the Benefit Plans maintained by the
Company provides health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by
part six of subtitle B of title I of ERISA).
(c) Documents. The Company has made available to the Purchaser the
following documents, as they may have been amended to the date hereof,
embodying or relating to each Benefit Plan of the Company listed in
Schedule 3.10 hereto: (i) all written plan documents for each such Benefit
Plan, including all amendments to each such Benefit Plan, any related trust
agreements, group annuity contracts, insurance policies or other funding
agreements or arrangements, (ii) the most recent determination letter
received from the IRS, if any, as to the qualified status of any such
Benefit Plan under Section 401(a) of the Code, (iii) the current summary
plan description, if any, for each such Benefit Plan, and (iv) the most
recent annual return/report on form 5500, 5500-C or 5500-R, if any, for
each such Benefit Plan.
(d) Fiduciary Duty. nEITHER THE cOMPANY, NOR, TO THE cOMPANY'S, THE
shareholder's or the Principals' Knowledge, any other fiduciary of any
Benefit Plan listed on Schedule 3.10 hereto engaged in any transaction with
respect to such Benefit Plan or failed to act in a manner with respect to
such Benefit Plan which could reasonably be expected to subject the Company
to any material Liability for a breach of fiduciary duty under ERISA or any
other Applicable Law.
(e) COBRA. The Company has complied in all material respects with
the coverage continuation requirements of all Applicable Laws, including
Sections 601 through 609 of ERISA, Section 4980B of the Code, and the
requirements of any similar state law regarding continued insurance
coverage, and the Company has incurred no material Liability with respect
to its failure to offer or provide continued coverage in accordance with
the foregoing requirements, nor is there any suit pending, or to the
Company's, the Shareholder's or the Principals' Knowledge, Threatened, with
respect to such requirements.
27
3.11 No Guaranties. Except as set forth on Schedule 3.11, (i) none of the
obligations of the Company is guaranteed by, or subject to a similar contingent
Liability to, any Person, and (ii) the Company has not guaranteed, or otherwise
become contingently liable for, any Liability of any Person.
3.12 Financial Statements. The Company has furnished true and correct
copies of the financial statements of the Company identified in Schedule 3.12
hereto (the "Financial Statements") to the Purchaser. All of said Financial
Statements, including any notes thereto, are true and correct in all material
respects and fairly present the financial position and condition of the Company
as of their respective dates and the results of its operations for the periods
covered in accordance with GAAP applied by the Company on a consistent basis
throughout the periods covered thereby and on a basis consistent with that of
prior years and periods; provided, however, that any interim Financial
Statements listed on such Schedule are subject to year-end adjustments and lack
footnotes and other required presentation items. Except for Liabilities (i)
reflected or reserved against in the balance sheet (the "Balance Sheet") of the
Company as of December 31, 2000 (the "Balance Sheet Date") or in the notes
thereto, (ii) incurred in the Ordinary Course of Business since the Balance
Sheet Date (none of which resulted from, arose out of, is related to, or was
caused by any breach of Contract, breach of warranty, tort, infringement or
violation of Applicable Laws), (iii) arising under Contracts to which the
Company is a party, and/or (iv) described on Schedule 3.12 hereto, the Company
does not have any Liabilities which, individually or in the aggregate, would
have a Material Adverse Effect on the Company. The reserves reflected in the
Balance Sheet are adequate.
3.13 Absence of Certain Developments. Except for the transactions
contemplated by this Agreement or as otherwise set forth on Schedule 3.13
hereto, since May 9, 2001, the Company has conducted the Business only in the
Ordinary Course of Business and has not:
(a) Sold, leased, assigned or otherwise transferred any material
properties or assets, or disposed of or permitted to lapse any rights in
any Permit or Intellectual Property owned or used by the Company, other
than in the usual and Ordinary Course of Business, or organized any new
business entity or acquired any equity securities, assets, properties, or
business of any Person or any equity or ownership interest in any business
or merged with or into or consolidated with any other Person;
(b) Suffered, sustained or incurred any material Loss or waived or
released any material right or claim, whether or not in the Ordinary Course
of Business;
(c) Suffered, sustained or incurred any material damage,
destruction or casualty loss to any material properties or assets, whether
or not covered by insurance;
(d) Engaged in any transaction not in the Ordinary Course of
Business;
(e) Made any capital expenditure (or series of related capital
expenditures) exceeding $50,000;
(f) Subjected any of its properties or assets to any Encumbrance,
whether or not in the Ordinary Course of Business;
28
(g) Issued any note, bond or other debt security, created,
incurred or assumed any indebtedness for borrowed money or capitalized
lease obligation or otherwise incurred any material Liability, except
current Liabilities incurred in the Ordinary Course of Business;
(h) Discharged or satisfied any Encumbrance, or paid any material
Liability, other than current Liabilities shown on the Company's Balance
Sheet as of the Balance Sheet Date, and current Liabilities incurred in the
Ordinary Course of Business since the Balance Sheet Date;
(i) Declared, set aside or paid a dividend or made any other
distribution with respect to any class or series of capital stock of the
Company, or directly or indirectly redeemed, purchased or otherwise
acquired any shares of any class or series of the Company's capital stock;
(j) Increased the salary, wage or other compensation or level of
benefits payable or to become payable by the Company to any of its
officers, directors, employees or agents other than in the Ordinary Course
of Business;
(k) Loaned money to any Person or guaranteed any loan to or
Liability of any Person, whether or not in the Ordinary Course of Business;
(l) Except as described in the Schedules hereto, amended or
terminated any of the Operating Contracts (as hereinafter defined), except
in the Ordinary Course of Business;
(m) Changed accounting methods or practices (including, without
limitation, any change in depreciation, amortization or cost accounting
policies or rates);
(n) Suffered, sustained or incurred any Material Adverse Change;
(o) Received notice from any customer, supplier, vendor,
Governmental Body or any other Person which would, with
substantial certainty, give rise to or result in a Material
Adverse Effect on the Company;
(p) Delayed or postponed the payment of accounts payable or other
Liabilities outside of the Ordinary Course of Business;
(q) Entered into any employment Contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such
Contract or agreement or adopted, amended, modified or terminated any
Benefit Plan for the benefit of any of the Company's directors, officers
and employees;
(r) Made any change or amendment in its articles of organization,
bylaws, or other governing instruments;
(s) Issued or sold any securities; acquired, directly or
indirectly, by redemption or otherwise, any
29
such equity security; or granted or entered into any options, warrants,
calls or commitments of any kind with respect thereto; and/or
(t) Entered into any Contract to do any of the foregoing.
3.14 Intellectual Property. Schedule 3.14 hereto contains a list and
description of all Intellectual Property owned by the Company or used by the
Company in the operation of the Business. Except as set forth in Schedule 3.14,
the Shareholder has no Knowledge of any asserted claim to the effect that the
operation of the Business or the possession or use in the Business of any of the
Intellectual Property listed and described on Schedule 3.14 hereto, infringes
the intellectual property rights of any other Person. Except as set forth in
Schedule 3.14, the Company, the Shareholder and the Principals have no Knowledge
of any claim that any of the Intellectual Property listed and described on
Schedule 3.14 is invalid; and, except as provided in Schedule 3.14 hereto, the
Company is not obligated under any Contract or otherwise to pay royalties, fees
or other payments with respect to any of the Intellectual Property listed and
described on Schedule 3.14 hereto. Except as set forth in Schedule 3.14, the
consummation of the transactions contemplated by this Agreement will not
adversely affect the use by the Company of any of the Intellectual Property
owned or used by the Company in the operation of its Business.
3.15 Compliance with Laws. The Business has been operated, and the Company
is in compliance in all material respects with the requirements of all
Applicable Laws to which the Company is subject. The Company has not received
any notice of, and the Company, the Shareholder and the Principals have no
Knowledge of any violation of a material nature of any Applicable Laws
respecting the Company.
3.16 Operating Contracts. Except as disclosed in Schedule 3.16, and except
with respect to Contracts that have been fully performed as of the date hereof
and have no further force or effect, the Company is not a party to any oral or
written Contract. All of the Contracts listed on such Schedule 3.16 hereto are
referred to in this Agreement as the "Operating Contracts." All of the Operating
Contracts were made in the Ordinary Course of Business, and, to the Company's,
the Shareholder's and the Principals' Knowledge, are valid, binding and
currently in full force and effect. The Company is not in default under any of
the Operating Contracts, and, to the Company's, the Shareholder's and the
Principals' Knowledge, no event has occurred which, through the passage of time
or the giving of notice, or both, would constitute a default by the Company or
give rise to a right of termination or cancellation by another party under any
of the Operating Contracts, or cause the acceleration of any Liability of the
Company, or result in the creation of any Encumbrance upon any of the Company's
properties or assets. To the Company's, the Shareholder's and the Principals'
Knowledge, no other party is in default under any of the Operating Contracts.
Except as described on Schedule 3.16 hereto, none of the Operating Contracts
have been canceled, terminated, amended or modified. Except as provided in
Schedule 3.4 hereto, the consummation of the transactions contemplated hereby
will not require the consent or approval of any Person under any of the
Operating Contracts.
3.17 Real Estate. The Company owns no real property other than the
leasehold interests described in Schedule 3.17 (section (a) of such Schedule
shall describe all leasehold interests with respect to Related Person lessors
and section (b) of such Schedule shall describe all
30
leasehold interests with respect to unrelated party lessors) attached hereto
with respect to each parcel of real estate leased by the Company (the "Leased
Real Estate"):
(a) Schedule 3.17 contains a complete and accurate listing and
description (including the parties, term, expiration date(s), address,
and description of the leased premises) of each written or oral lease
regarding Leased Real Estate which is not likewise described on
Schedule 3.16 hereto;
(b) Except as set forth on Schedule 3.17 hereto, to the
Knowledge of the Shareholder, there are no public improvements
affecting any parcel of Leased Real Estate (collectively the "Real
Estate"), including, but not limited to, water, sewer, sidewalk,
street, alley, curbing, landscaping or related improvements, which have
been commenced and/or completed and for which an assessment has not
been levied or, to the Shareholder's Knowledge, which may be levied
after the date of this Agreement and, in each case which would become
the obligation of the Purchaser by, upon or pursuant to assumption of
the Leased Real Estate;
(c) Except as set forth in Schedule 3.17 hereto, there are no
deferred real or personal property Taxes or assessments with respect to
the Real Estate which may or will become due and payable as a result of
the consummation of the transaction contemplated hereby;
(d) Except as set forth in Schedule 3.17 hereto, to the
Company's, the Shareholder's or the Principals' Knowledge, there are no
condemnation Proceedings pending or Threatened with respect to all or
any part of any parcel of Leased Real Estate;
(e) To the Company's, the Shareholder's or the Principals'
Knowledge, there are no existing conditions which, under Applicable
Laws in effect prior to or as of the Closing Date, would require
repair, alteration or correction of any parcel of Real Estate and there
are no conditions that could give rise to the same, in each case which
would become the obligation of the Purchaser by, upon or pursuant to
assumption of the Leased Real Estate;
(f) To the Company's, the Shareholder's or the Principals'
Knowledge, except as set forth in Schedule 3.17 hereto, (a) there are
no existing structural, mechanical or other defects of material
significance in any of the buildings, improvements, fixtures and
equipment, including the roof, heating, ventilating, air conditioning,
electrical, plumbing and sanitary disposal systems, located on any
parcel of Real Estate which would become the obligation of the
Purchaser by, upon or pursuant to assumption of the Leased Real Estate,
and (b) all such buildings, improvements, fixtures and equipment,
including the roof, heating, ventilating, air conditioning, electrical,
plumbing and sanitary disposal systems for which the Company is
currently responsible, will be until the Closing Date, maintained in
good repair, working order and condition, ordinary wear and tear
excepted;
(g) Except as set forth in Schedule 3.17 hereto, the Company has
not received any notice, and the Company, the Shareholder and/or the
Principals have no Knowledge that, the improvements on each parcel of
Real Estate and the Company's use thereof does
31
not or may not comply in all material respects with any and all
building, zoning, subdivision, traffic, parking, land use, occupancy,
health and other Applicable Laws pertaining to the Real Estate or to
the development, construction, management, use and operations of the
improvements thereon;
(h) Except as set forth in Schedule 3.17 hereto, to the
Knowledge of the Shareholder, the improvements located on each parcel
of Real Estate for which the Purchaser would have responsibility under
any Leased Real Estate lease, including fences, driveways and other
structures occupied, used or claimed by the Company, are wholly within
the boundary lines of such parcels of Real Estate and such improvements
and the Company's present uses thereof do not in any material respect
infringe or encroach upon the rights of any other Person; and
(i) Except as set forth in Schedule 3.17 hereto, to the
Knowledge of the Shareholder, the Company has all operating Permits
necessary for the operation of the Business on the Leased Real Estate,
and all such Permits are current. To the Knowledge of the Shareholder,
except as set forth in Schedule 3.17, the Company has all easements, or
access through public utility easements, on to private property,
construction permits, highway crossing licenses and permits (and other
similar licenses and permits) and right-of-way-licenses reasonably
necessary to conduct the Business.
3.18 Accounts Receivable. The Company's accounts receivable and other
rights to the payment of money represent, and on the Closing Date will
represent, valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business.
3.19 Books and Records; Bank Accounts. All of the Company's books of
account and other financial and corporate records relating to the Business have
been made available to the Purchaser and its representatives. Such books of
account and records are current, complete, true and correct in all material
respects. All such books and records are consistent with the Financial
Statements listed on Schedule 3.12 hereto. Attached hereto as part of Schedule
3.19 is a list of all of the Company's bank accounts, security accounts and
other similar accounts, and the names of all Persons authorized to draw thereon
or have access thereto, as well as the identification of all safety deposit
boxes, and the Persons authorized to have access to those boxes.
3.20 Employees and Employee Related Commitments.
(a) Schedule 3.20 hereto contains a list of the names,
positions, annual salary rates, hourly wage rates, severance benefits
and accrued vacation and sick leave, as of the date hereof, of all
present employees of the Company (including those on furlough, leave,
disability (short- or long-term) or layoff of any kind). Except as set
forth in Schedule 3.20, none of the employees has informed the Company
or the Shareholder that he/she intends to terminate employment with the
Company. Schedule 3.20 also sets forth a description of any written
Contract, other than the Benefit Plans described on Schedule 3.10
hereto, with respect to the conditions of employment of any of the
Company's employees. All employees are employed on an "at will" basis.
32
(b) Except for the claims set forth in Schedule 3.20, the
consummation of the transactions described in this Agreement, in and of
themselves, will not entitle any current or former employee of the
Company to severance pay, unemployment compensation or any other
payment, or accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee or former employee.
(c) Except as set forth in Schedule 3.20 hereto, to the
Knowledge of the Company, no employee of the Company has, in the course
and scope of employment with the Company, been exposed to any Hazardous
Materials in such a manner as to be harmed thereby (whether such harm
is now known to exist or will be discovered in the future).
3.21 Permits. Except as set forth in Schedule 3.21, the Company has
obtained all Permits of each and every Governmental Body having jurisdiction
over the Company or any of the Assets to operate and carry on the Business as it
is now being conducted. All such Permits are listed on Schedule 3.21 hereto.
3.22 Other Material Contracts and Obligations. Except for the
Operating Contracts and the Contracts disclosed on Schedule 3.22 hereto, the
Company is not a party to or bound by any:
(a) Dealer, distributorship or sales agency agreements,
excluding purchase orders with respect to the purchase or sale of
products or services in the Ordinary Course of Business;
(b) Advertising Contracts;
(c) Contract for capital expenditures having a remaining balance
in excess of $50,000;
(d) Leases with respect to any property, real or personal,
whether as lessor or lessee, except for any lease having a term of one
year or less or aggregate rents payable over its life of $50,000 or
less;
(e) Contract containing covenants by the Company, the
Shareholder, or any officer, director, employee or Affiliate of the
Company or the Shareholder not to compete in any lines of business or
with any Person;
(f) Franchise or license agreements;
(g) Except as disclosed in Schedule 3.13, loan or credit
agreements, promissory notes or other evidences of indebtedness,
including all agreements or commitments for future loans, extensions of
credit or financing, excluding credit extended by the Company to its
customers;
(h) Contract or purchase order for the purchase of any services,
raw materials, supplies or equipment involving payments of more than
$5,000 per annum or an
33
aggregate of more than $10,000, excluding purchase orders for the
purchase of products or services entered into in the Ordinary Course
of Business; or
(i) Contract for the sale of any properties, assets or services
involving a value estimated at more than $50,000, excluding purchase
orders for the sale of products or services in the Ordinary Course of
Business.
3.23 Subsidiaries. The Company has no subsidiaries. Except as set
forth on Schedule 3.23 hereto, the Company does not own any shares of stock or
other securities or equity interests, directly or indirectly, in any other
Person. Except as disclosed or described in this Agreement or as set forth on
Schedule 3.23 hereto, the Company is not subject to any obligation or
requirement to provide funds to, or invest in, any Person.
3.24 Insurance. The Company has maintained and will continue to
maintain until the Closing Date the insurance described in Schedule 3.24, which
insurance covers the Company's tangible real and personal property and assets,
whether owned or leased, against loss or damage by fire or other casualty. All
such insurance is in full force on the date of this Agreement and is carried
with insurers licensed in the states affected by such policies. The Company has
promptly and adequately notified the Company's insurance carriers of any and all
claims known to the Shareholder with respect to the operations, products or
services of the Company for which the Company is insured. The Company has not
been refused any insurance coverage by any insurance carrier to which it has
applied for insurance during the past three (3) years.
3.25 Brokers. Except for the engagement of The ▇▇▇▇▇▇▇ Company LLC by
the Company, neither the Company, the Shareholder nor the Principals have
employed or engaged any broker, finder, agent, banker or Third Party, nor have
they otherwise dealt with anyone purporting to act in the capacity of a finder
or broker in connection with the transactions contemplated hereby. No
commissions, finder's fees or like charges have been or will be incurred by the
Company in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. Any such commissions,
finders' fees or like charges shall be directly chargeable to the Company as
contemplated by the terms of this Agreement.
3.26 Relationship with Related Persons. Except as set forth in
Schedule 3.26 hereto, the Shareholder, the former shareholders, directors,
officers, and employees of the Company, and their Related Persons do not have
any interest in any of the Assets and do not own, of record or as a beneficial
owner, an equity interest or any other financial or profit interest in any
Person that (i) has had business dealings or a material financial interest in
any transaction with the Company or, (ii) has engaged or is engaged in
competition with the Company with respect to any line of Business of the Company
in any market served or anticipated to be served by the Company (a "Competing
Business") (except for less than three percent (3%) of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market). To the Knowledge of the Company,
the Shareholder or the Principals, and except as set forth on Schedule 3.26
hereto, the Shareholder is not, and no shareholder of the Shareholder, director
or officer of the Company and none of their Related Persons is a party to any
Contract with, or has any claim or right against, the Company, other than the
rights the officers and directors of the Company have with respect to
indemnification under state law. All
34
money owed by the Company to its shareholders, directors or officers, or their
Related Persons, (other than for salary) are for bona fide debts and are set
forth in Schedule 3.26 hereto.
3.27 Hazardous Materials. Except as set forth in Schedule 3.27 hereto,
to the Knowledge of the Company, the Shareholder or the Principals, the Company
has never generated, transported, stored, handled, disposed of or contracted for
the disposal of any Hazardous Materials, except in material compliance with
Environmental Laws. Except as set forth on Schedule 3.27 hereto, the Company is
not listed as a potentially responsible party under CERCLA or any comparable or
similar Applicable Law, the Company has not received notice of such a listing
and the Company has no Knowledge of any facts or circumstances which could give
rise to such a listing. Except as described in Schedule 3.27 hereto, to the
Knowledge of the Company, the Shareholder or the Principals, the Real Estate is
free of any and all Hazardous Materials.
3.28 Other Environmental Matters.
(a) Except as set forth on Schedule 3.28 hereto, the Real Estate
has been operated by the Company and is in compliance in all material
respects with all Applicable Laws, including Environmental Laws. To
the Knowledge of the Company, the Shareholder or the Principals,
except as set forth on Schedule 3.28 hereto, the Company otherwise
complies in all material respects with all Environmental Laws. To the
Knowledge of the Company, the Shareholder or the Principals, except as
set forth on Schedule 3.28 hereto, the Company has obtained or has
taken appropriate steps, as required by Environmental Laws and
Applicable Laws, to obtain all environmental, health and safety
Permits and other authorizations necessary for the ownership and
operation of the Business, and to the Knowledge of the Company, the
Shareholder or the Principals, all of the Permits and other such
authorizations are in good standing, and the Company is in compliance
in all material respects with such Permits and other such
authorizations. The Real Estate is not subject to any "Super-Fund"
type Encumbrances by any Person arising from the release or Threatened
release of any Hazardous Materials in, on or under the Real Estate.
(b) To the Knowledge of the Company, all of the third parties
with which the Company has engaged or contracted to accept, treat,
transport, store, dispose or remove any Hazardous Material from the
Real Estate were properly permitted at the relevant time to perform
the foregoing activities or conduct.
(c) Except as described on Schedule 3.28 hereto, there are not
currently and to the Knowledge of the Company, the Shareholder or the
Principals, never have been any ▇▇▇▇▇ or underground and/or above
ground storage tanks (whether or not currently in use) on any parcel
of Real Estate and, to the extent such tanks are described in Schedule
3.28, all such ▇▇▇▇▇ and tanks are, to the Knowledge of the Company,
the Shareholder or the Principals, not leaking and in compliance with
Environmental Laws.
(d) Except as set forth on Schedule 3.28 hereto, no part of any
parcel of Real Estate is now being used, nor, to the Knowledge of the
Company, the Shareholder or the Principals, has any parcel of Real
Estate ever been used, as a landfill, dump or other
35
disposal, storage, transfer, treating or handling area for any
Hazardous Materials except in material compliance with all
Environmental Laws, or as a gasoline service station or a facility for
selling, dispensing, transferring or treating Hazardous Materials.
(e) To the Knowledge of the Company, the Shareholder or the
Principals, and except as set forth in Schedule 3.28 hereto, the
Company is not subject to any investigation, nor has the Company
received any written notification within the past two years of any
Proceeding alleging or addressing (i) any violation of Environmental
Laws, or (ii) any claims or Liabilities and costs arising from the
release or Threatened release of any Hazardous Materials. To the
Knowledge of the Company, the Shareholder or the Principals, there has
been no release of any Hazardous Materials in a reportable quantity
under Environmental Laws at, to or from the Real Estate.
(f) Except as set forth in Schedule 3.28 hereto, to the
Knowledge of the Company, the Shareholder or the Principals, there is
not constructed, placed, deposited, stored, disposed or located on the
Real Estate any asbestos in friable form.
(g) Except as set forth in Schedule 3.28 hereto, to the
Knowledge of the Company, the Shareholder or the Principals, there is
not constructed, placed, deposited, stored, disposed nor located on
the Real Estate any polychlorinated biphenyls ("PCBs") or
transformers, capacitors, ballasts, or other equipment which contain
dielectric fluid containing PCBs.
(h) Except as set forth in Schedule 3.28 hereto, to the
Knowledge of the Company, the Shareholder or the Principals, there is
not constructed, placed, deposited, stored, disposed nor located on
the Real Estate any insulating material containing urea formaldehyde.
3.29 Debt Instruments. Schedule 3.29 is a true, correct and complete
list showing the names of the parties and outstanding indebtedness as of the
respective dates set forth on Schedule 3.29 under all mortgages, indentures,
notes, guarantees and other obligations for or relating to borrowed money,
purchase money debt (including conditional sales contract and capital leases) or
covenants not to compete (the "Debt Instruments") for which the Company is
primarily or secondarily obligated. The Company has previously delivered to the
Purchaser true, complete and correct copies of each of the Debt Instruments.
Except as described in Schedule 3.29, the Company has performed all of the
material obligations required to be performed by it, is not in material default
under any of the provisions of any of the Debt Instruments, and there has not
occurred any event which, (with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a default.
3.30 Customers and Suppliers. To the Knowledge of the Company, the
Shareholder or the Principals, no material customer or a group of customers of
the Company has notified the Company that at any time on or after May 31, 2001,
the customer intends to terminate, cancel, limit or modify the customer's
business relationship with the Company. No vendor, supplier, dealer,
representative or consultant of the Company which is material to the Company's
business operations has notified the Company after May 31, 2001, that it intends
to terminate, cancel, limit or modify its business relationship with the Company
in any material respect.
36
3.31 Shareholder Loans. Except as set forth in Schedule 3.31, there
are no loans, advances or other obligations for borrowed money owing by the
Company to the Shareholder as of the date hereof, and no amount shall be owing
for such obligations at and upon the Closing. Except as set forth in Schedule
3.31, the Shareholder does not have any claim of any kind against the Company,
and no amount shall be owing for such obligations at and upon the Closing.
3.32 Adequacy of Properties. The Company owns, leases or otherwise has
adequate rights to use all tangible and intangible personal property necessary
for the conduct of its Business in the manner in which such Business is
presently being conducted with no conflict with or infringement of the rights of
others, and none of such property or the Company's rights thereto is subject to
any proceeding pending, or to the Best Knowledge of the Company, the Shareholder
or the Principals, Threatened, which may result in the revocation, termination,
supervision, cancellation or adverse modification of any such property.
3.33 Absence of Certain Business Practices. Except as disclosed in
Schedule 3.33, neither the Company nor any Person acting on its behalf has,
directly or indirectly, within the past six (6) years given or agreed to give
any gift or similar benefit to any customer, supplier, governmental employee or
other Person who is or may be in a position to help or hinder the Business of
the Company (or assist the Company in connection with any actual or proposed
transaction) which (i) might subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or Proceeding, (ii) if not given in
the past, might have had an adverse effect on the financial condition, Business
or results of operations of the Company, or (iii) if not continued in the
future, might adversely affect the financial condition, Business or operations
of the Company or which might subject the Company to suit or penalty in any
private or governmental litigation or Proceedings.
3.34 Trade Regulation. Except as set forth on Schedule 3.34, (a) all
of the prices charged by the Company in connection with the marketing, sale or
distribution of any products or services have been in compliance with all
Applicable Laws, and (b) no claims have been communicated or, to the Knowledge
of the Company, the Shareholder or the Principals, Threatened in writing against
the Company with respect to wrongful termination of any dealer, distributor or
any other marketing entity, discriminatory pricing, price fixing, unfair
competition, false advertising, or any other violation of any Applicable Laws
relating to anti-competitive practices or unfair trade practices of any kind,
and to the Company's Knowledge, no specific situation, set of facts, or
occurrence provides any basis for any such claim against the Company.
3.35 Representation Regarding the Shareholder. The Shareholder is the
sole and lawful, legal, equitable and direct owner of all of the shares of the
Company.
3.36 Inventories. Except as set forth in Schedule 3.36:
(a) All inventories of the Company are of good, usable and
merchantable quality in all material respects and do not include
obsolete or discontinued items;
37
(b) All inventories of the Company are of such quality as to
meet the usual and customary quality control standards of the Business
and any applicable quality control standards of any applicable
Governmental Body;
(c) All inventories of the Company that are finished goods are
saleable as current inventories in the Ordinary Course of Business;
and
(d) All inventories of the Company are recorded on the financial
records at the lower of cost or market, except with respect to its
LIFO inventory or as otherwise required by GAAP.
Schedule 3.36 lists the location of all such inventories. The Company has
followed all Company policies with respect to excess and obsolete inventory and
the computation of LIFO inventory.
3.37 Representation Regarding SEC Reports. The Company and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ represent, acknowledge and
agree that each of them (i) have received, reviewed and have otherwise had
access to the Parent SEC Reports, the Parent public announcements of its results
of operations for the fiscal year ending April 28, 2001 and (ii) do not require,
and have not requested (after offer being made by the Parent) any further
information concerning or regarding the Parent.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE
PARENT
As an inducement for the Company, the Shareholder and the Principals
to enter into this Agreement and consummate the transactions contemplated
hereby, the Purchaser and the Parent hereby each represent and warrant to the
Company, the Shareholder and the Principals that each and all of the following
representations and warranties (as modified by the Schedules and any Supplement
delivered by the Purchaser pursuant to Section 13.21 of this Agreement) are true
and correct as of the date of this Agreement and will be true and correct as of
the Closing Date. The Schedules shall be arranged in paragraphs generally
corresponding to the sections and subsections contained in this Article 4 and
shall be presented in a manner that is reasonably contemplated to provide the
disclosures requested by the Company.
4.1 Organization.
(a) The Purchaser. The Purchaser is a corporation duly
organized, legally existing and in good standing under the laws of the
State of Minnesota, and has all requisite power and authority,
corporate and otherwise, to own, operate and lease its properties and
assets and to conduct its business as it is now being conducted. The
Purchaser is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of every state or
jurisdiction in which the nature of its activities or of its
properties owned, leased or operated makes such qualification
necessary and in which the failure to be so qualified could reasonably
be expected to have a Material Adverse Effect on the Purchaser.
38
(b) The Parent. The Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Minnesota, and has all requisite power and authority, corporate and
otherwise, to own, operate and lease its properties and assets and to
conduct its business as it is now being conducted. The Parent is duly
qualified to transact business as a foreign corporation and is in good
standing under the laws of every state or jurisdiction in which the
nature of its activities or of its properties owned, leased or
operated makes such qualification necessary and in which the failure
to be so qualified could reasonably be expected to have a Material
Adverse Effect on the Parent.
4.2 Due Authorization.
(a) General Transaction. The execution, delivery
performance of this Agreement, including the documents, instruments
and agreements to be executed and/or delivered by the Purchaser and
the Parent pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of
the Purchaser and the Parent. This Agreement and the documents,
instruments and agreements to be executed and/or delivered by the
Purchaser and/or the Parent pursuant to this Agreement have been, or
will be on or before the Closing Date, duly and validly authorized,
executed and delivered by each of the Purchaser and the Parent and the
respective obligations of the Purchaser and the Parent hereunder and
thereunder are or will be valid, legally binding and enforceable
against the Purchaser and the Parent in accordance with their
respective terms.
(b) Reservation of Shares. The Shares to be issued pursuant to
this Agreement have been duly reserved and authorized for issuance,
and such Shares shall be validly issued, fully paid and nonassessable
and, assuming the accuracy of the representations and warranties of
the Principals, issued in compliance with applicable federal and state
securities laws.
4.3 No Breach.
(a) The Purchaser. The Purchaser has full power and authority,
corporate and otherwise, to perform its obligations under this
Agreement and the documents, instruments and agreements to be executed
by the Purchaser pursuant hereto. The execution and delivery of this
Agreement, including the documents, instruments and agreements to be
executed by the Purchaser pursuant to this Agreement, and the
consummation of the transactions contemplated hereby and thereby will
not: (i) violate any provision of the Articles of Incorporation or
Bylaws (or comparable governing documents or instruments) of the
Purchaser, (ii) violate any Applicable Laws or Injunction applicable
to the Purchaser, (iii) other than (A) the filing required by HSR, and
(B) applicable requirements of the Securities Act, the Exchange Act
and state securities "blue sky" laws, require any filing with, Permit
from, authorization, consent or approval of, or the giving of any
notice to, any Person, (iv) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default (or give another party any rights of termination, cancellation
or acceleration) under, any of the terms,
39
conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, Permit (including, but not limited to, any
Permits, appeals or authorizations of any Governmental Body), lease or
other Contract to which the Purchaser is a party, or by which it or
any of its assets or properties.
(b) The Parent. The Parent has full power and authority,
corporate and otherwise, to purchase the Assets being purchased
hereunder and to otherwise perform its obligations under this
Agreement and the documents, instruments and agreements to be executed
by the Parent pursuant hereto. The execution and delivery of this
Agreement, including the documents, instruments and agreements to be
executed by the Parent pursuant to this Agreement, and the
consummation of the transactions contemplated hereby and thereby will
not: (i) violate any provision of the Articles of Incorporation or
Bylaws (or comparable governing documents or instruments) of the
Parent, (ii) violate any Applicable Laws or Injunction applicable to
the Parent, (iii) other than (A) the filing required by HSR, and (B)
applicable requirements of the Securities Act, the Exchange Act and
state securities "blue sky" laws, require any filing with, Permit
from, authorization, consent or approval of, or the giving of any
notice to, any Person, (iv) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default (or give another party any rights of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, franchise, Permit
(including, but not limited to, any Permits, appeals or authorizations
of any Governmental Body), lease or other Contract to which the Parent
is a party, or by which it or any of its assets or properties.
4.4 Brokers. Other than Credit Suisse First Boston, neither the
Purchaser nor the Parent has employed or engaged any broker, finder, agent,
investment banker or Third Party nor have either of them otherwise dealt with
anyone purporting to act in the capacity of a finder or broker, in connection
with the transactions contemplated hereby.
4.5 Articles of Incorporation and Bylaws. The Parent has previously
delivered to the Company a true, complete and correct copy of the Articles of
Incorporation, the Bylaws or equivalent organizational documents, each as
amended to date, of the Parent. Such Articles of Incorporation, Bylaws and
equivalent organizational documents are in full force and effect. The Parent is
not in violation of any provision of its Articles of Incorporation, By-laws or
equivalent organizational documents.
4.6 Capitalization. The authorized capital stock of the Parent
consists of 100,000,000 shares of the Parent's Common Stock and 30,000 shares of
preferred stock, $.01 par value per share. As of April 28, 2001, (i) 67,489,466
shares of the Parent's Common Stock were issued and outstanding, and (ii) no
shares of preferred stock were outstanding. As of April 28, 2001, 4,050,000
shares of the Parent's Common Stock were reserved for issuance under the
Parent's 1992 Stock Option Plan, 675,000 shares of the Parent's Common Stock
were reserved for issuance under Parent's 1992 Director Stock Option Plan,
1,375,000 shares of the Parent's Common Stock were reserved for issuance under
the Parent's Employee Stock Purchase Plan, and 3,000,000 shares of the Parent's
Common Stock were reserved for issuance under the Parent's Capital Accumulation
Plan.
40
4.7 SEC Reports. The Parent has filed all forms, reports and documents
required to be filed by it with the SEC since April 29, 1995 and has heretofore
made available to the Company, in the form filed with the SEC (excluding any
exhibits thereto), (i) its Annual Report on Form 10-K for the fiscal year ended
April 29, 2000, and (ii) all other forms, reports, registration statements and
other documents filed by the Parent with the SEC since April 29, 1995 (the
forms, reports, registration statements and other documents referred to in
clauses (i) and (ii) above being referred to herein, collectively, as the
"Parent SEC Reports"). The Parent SEC Reports and any other forms, reports and
other documents filed by the Parent with the SEC after the date of this
Agreement (i) were or will be prepared in accordance with the requirements of
the Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder, and (ii) did not at the time they were filed, or will
not at the time they are filed, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were or are made, not misleading. Except as set forth in the
Parent SEC Reports, since April 29, 2000 there has not been any Material Adverse
Change in the Business, results of operations, condition (financial or
otherwise), properties, Assets, Liabilities or obligations of the Parent that
would be required to be disclosed in Financial Statements prepared in accordance
with GAAP.
4.8 Parent Stockholders' Consent. No consent or approval of the
stockholders of the Parent is required (i) to enter into this Agreement and the
Ancillary Documents to which it is a party or to consummate the transactions
contemplated hereby and thereby, or (ii) to issue the Shares.
ARTICLE 5
PERFORMANCE AND COVENANTS PENDING CLOSING
The Company, the Shareholder and the Principals covenant and agree that
from and after the date of this Agreement and until the earlier of the Closing
Date or the termination of this Agreement in accordance with Article 12 hereof:
5.1 Access to Information. At the request of the Purchaser, the Company
shall, from time to time, give or cause to be given to the Purchaser, its
officers, employees, counsel, accountants and other representatives, upon
reasonable notice to the Company, reasonable access during normal business
hours, without undue disruption to the Company's Business, to the properties and
assets and all of the books, minute books, title papers, records, files,
Contracts, insurance policies, environmental records and reports, licenses and
documents of every character of the Company relating to the Business, and the
Company shall furnish or cause to be furnished to the Purchaser, its officers,
employees, counsel, accountants and other representatives all of the information
with respect to the Company and/or the Company's properties or assets as any of
them may reasonably request. Subject to the prior consent of the Company, which
consent shall not be unreasonably withheld, delayed or conditioned, the
Purchaser, its officers, employees, counsel, accountants and other
representatives shall have the authority to interview, as reasonably necessary
and without undue disruption to the Company's Business, all employees,
customers, vendors, suppliers and other parties having relationships with the
Company, and the Company shall make such introductions as may be requested;
provided, however, that access to
41
customers shall, if at all, be done in a commercially reasonably manner
consistent with the best interests of the Company and shall be subject to the
prior consent of the Company, which consent shall not be unreasonably withheld,
delayed or conditioned. In addition, the Purchaser may, subject to the
conditions stated above, at its sole cost and expense, at any time prior to the
Closing Date, through its officers, employees, counsel, accountants and other
representatives, conduct such investigations and examinations of the Company's
properties and assets as it deems necessary or advisable, and the Company will
provide reasonable cooperation to such Persons in such investigations.
5.2 Conduct of Business. The Company shall carry on the Business
diligently, only in the Ordinary Course of Business and substantially in the
same manner as heretofore conducted and will keep and maintain the Company's
properties and assets in good and safe repair and condition consistent with past
practices. Except for the filings described on Schedule 5.2 or except as
contemplated by Section 5.16, the Company shall not make any regulatory filings
with any Governmental Body, except in the Ordinary Course of Business or with
the prior written consent of the Purchaser (which consent shall not be
unreasonably withheld, delayed or conditioned).
5.3 Encumbrances. The Shareholder shall not, directly or indirectly,
perform or fail to perform any act which would, with substantial certainty, in
the creation or imposition of any Encumbrance on any of the properties or assets
of the Company or otherwise adversely affect the marketability of the Company's
title to any of its properties or assets, outside of the Ordinary Course of
Business.
5.4 Pay Increases. Except for normal increases in the Ordinary Course of
Business, and the transactions specifically contemplated by this Agreement, the
Shareholder shall not permit the Company, and the Company shall not, without the
prior written consent of the Purchaser, grant any increase in the salaries or
rate of pay to any employees of the Company, grant any increase in any benefits
or establish, adopt, enter into, make any new grants or awards under, or amend
any collective bargaining agreement, employment agreement or Benefit Plan for
the benefit of any of the employees of the Company.
5.5 Restrictions on New Contracts. Except with the prior written consent of
the Purchaser, or as specifically contemplated by this Agreement, which consent
shall not be unreasonably withheld, the Shareholder shall not permit the Company
to, and the Company shall not, enter into any Contract, incur any Liability,
assume, guarantee or otherwise become liable or responsible for any Liability of
any other Person, make any loans, advances or capital contributions to any other
Person (except for extensions of credit to its customers in the Ordinary Course
of Business), or waive any right or enter into any other transaction, in each
case other than in the Ordinary Course of Business and consistent with the
Company's normal business practices. Without limiting the foregoing, for the
purposes of this Agreement, any Contract involving the sum of $20,000 or more
shall be deemed to be outside the Ordinary Course of Business.
5.6 Preservation of Business. The Shareholder and the Company shall use
reasonable efforts to preserve the Company's Business and its business
organization intact, to keep available to the Purchaser the present employees of
the Company and to preserve for the
42
Purchaser the present goodwill and relationship of the Company with its vendors,
suppliers, customers and others having business relationships with the Company.
5.7 Payment and Performance of Obligations. The Company shall, and the
Shareholder will cause the Company to, timely pay and discharge all invoices,
bills and other monetary Liabilities.
5.8 Restrictions on Sale of Assets. The Shareholder shall not permit the
Company to, and the Company shall not, sell, assign, transfer, lease, sublease,
pledge or otherwise encumber or dispose of any of the Assets, except (i) for the
sale of inventory in the Ordinary Course of Business and at regular prices, and
(ii) as otherwise specifically contemplated by this Agreement.
5.9 Prompt Notice. The Shareholder shall promptly notify the Purchaser in
writing upon becoming aware of any of the following: (i) any claim, demand or
other Proceeding that may be brought, Threatened or commenced against the
Company, its officers or directors, (ii) any changes in the accuracy of the
representations and warranties made by either the Company or the Shareholder in
this Agreement, (iii) any Injunction or any complaint praying for an Injunction
restraining or enjoining the consummation of the transactions contemplated
hereby, or (iv) any notice from any Person of its intention to institute an
investigation into, or institute a Proceeding to restrain or enjoin the
consummation of the transactions contemplated hereby or to nullify or render
ineffective this Agreement or such transactions if consummated.
5.10 Consents. As soon as reasonably practicable, the Company will use
commercially reasonable efforts to obtain or cause to be obtained all of the
consents and approvals of all Persons necessary for the parties hereto to
consummate the transactions contemplated hereby, including with respect to the
consents and approvals listed on Schedule 3.4 hereto. After the Closing the
provisions of Section 11.12 of this Agreement shall apply.
5.11 Copies of Documents. The Company agrees that as soon as reasonably
possible following the execution hereof, it shall furnish or make available to
the Purchaser a true, complete and accurate copy of each Operating Contract and
any additional Contract listed on Schedule 3.22 hereto.
5.12 No Solicitation of Other Offers. The Shareholder and the Company will
not, and will not permit their respective representatives, investment bankers,
agents and Affiliates to, directly or indirectly, (i) solicit or encourage
submission of or any inquiries, proposals or offers by, (ii) participate in any
negotiations with, (iii) afford any access to the properties, books or records
of the Company to, (iv) accept or approve, or (v) otherwise assist, facilitate
or encourage, or enter into any Contract with, any Person or group (other than
the Purchaser and its Affiliates, agents and representatives), in connection
with any Acquisition Proposal. In addition, the Shareholder and the Company will
not, and will not permit their respective representatives, investment bankers,
agents and Affiliates to, directly or indirectly, make or authorize any
statement, recommendation or solicitation in support of any Acquisition Proposal
made by any Person or group (other than the Purchaser). In addition, the
Shareholder and the Company will
43
immediately cease any and all existing activities, discussions or negotiations
with any parties with respect to any of the foregoing.
5.13 Accounts Receivable and Payable. The Company shall not, and the
Shareholder shall not cause the Company to, accelerate the collection of its
accounts receivable or delay the payments of its accounts payable or other
Liabilities, in each case arising out of the operation of the Business in a
manner which would be inconsistent with past practice.
5.14 Inventory. The Company shall, and the Shareholder shall cause the
Company to, maintain the levels of inventory, materials and supplies used in the
Business consistent with past practice.
5.15 Insurance.
(a) The Company shall, and the Shareholder shall cause the
Company to, maintain in full force and effect all insurance coverages for
the Company's properties and assets substantially comparable to coverages
existing on the date hereof.
(b) Upon, or immediately following the Closing, the Company shall
use best reasonable commercial efforts to name the Purchaser and the Parent
as additional insureds on each and all policies of insurance owned by the
Company (excluding life insurance policies).
5.16 Filing Reports and Making Payments. The Company shall, and the
Shareholder shall cause the Company to, timely file all required reports and
notices with each and every applicable Governmental Body and timely make all
payments due and owing to each such Governmental Body, including, but not by way
of limitation, any filings, notices and/or payments required by reason of the
transactions contemplated by this Agreement.
5.17 Capital Expenditures. The Company shall not, and the Shareholder
shall not permit the Company to, make any capital expenditures in excess of
$25,000 individually or $100,000 in the aggregate without the Purchaser's prior
written consent, which consent shall not be unreasonably withheld.
5.18 Company Name Change. On or before the Closing, the Shareholder shall
cause the Company to, and the Company shall, change its corporate name such that
neither the name "▇▇▇▇▇▇▇" nor the term "veterinary" appears in and is not
otherwise used in the new corporate name of the Company. The Company shall
deliver evidence of such name change and the corporate action taken by the
Company and/or the Shareholder to the Purchaser at the Closing, and the Company
shall also provide to the Purchaser the filing and receipt documents issued to
the Company by the Secretary of State of the Commonwealth of Massachusetts in
connection with such name change. In addition to the foregoing, the Company
shall promptly provide at the Purchaser's request any and all consents and other
instruments and documents which allow the use of the Company name, or any
derivative thereof, in all jurisdictions where the Company is registered and/or
licensed to do business in order to facilitate the Purchaser's filings in such
jurisdiction for the purpose of conducting the Business therein.
44
5.19 Litigation. From the date hereof and through the Closing Date,
the Company will notify the Purchaser in writing of any actions or Proceedings
of the type required to be described in Section 3.7 of this Agreement, that,
from the time hereof, are, to the Company's Knowledge, Threatened or commenced
against the Company or the Shareholder or against any trustee, officer, director
or employee of the Company or the Shareholder relating to the Business or the
Company.
5.20 Notification of Inaccuracy. The Company and the Shareholder each
agree to promptly notify the Purchaser in writing of any material inaccuracy
made by either the Company and/or the Shareholder in this Agreement of which
either the Company or the Shareholder become aware prior to the Closing Date and
which could result in a Material Adverse Effect with respect to the Company. The
Purchaser agrees to promptly notify the Company in writing of any material
inaccuracy made by the Purchaser or the Parent in this Agreement of which the
Purchaser or the Parent become aware prior to the Closing Date and which could
result in a Material Adverse Effect with respect to the Purchaser or the Parent.
The foregoing shall not limit the ability of the Company or the Purchaser to
Supplement the Schedules.
5.21 Lien Search. Within seven (7) days prior to the Closing Date, the
Company shall deliver an Encumbrance search report to the Purchaser which
discloses any and all UCC-1 filings, tax liens, and litigation filed with
respect to the Company in all state and county jurisdictions in which the
Company has a business location.
5.22 Payment of Affiliate Liabilities. Prior to the Closing, the
Company shall remit to the Shareholder, any Related Persons and any Affiliates,
the amount of any indebtedness of the Company to the Shareholder and any such
Related Persons and Affiliates; provided, however, no such payment once made
shall reasonably be anticipated to reduce the Company's Net Current Assets below
$22,000,000.
5.23 Environmental Site Assessment. Subject to the terms of the
existing Leases, and consent of Third Party landlords, as applicable, the
Company shall permit the Purchaser or any reasonably qualified environmental
consultant designated by the Purchaser (the "Environmental Consultant") to
conduct a Phase I environmental site assessment, and, if reasonably determined
by the Purchaser to be necessary based on the Environmental Consultant's
recommendation, a Phase II environmental site assessment (collectively, the
"Site Assessment") of the Real Estate prior to Closing. Beginning immediately
after the execution hereof and subject to the terms of the existing leases and
consents of the applicable Third Party landlords, if applicable, the
Environmental Consultant shall have reasonable access to the Real Estate during
normal business hours, upon reasonable notice; provided, however, that neither
the Purchaser nor the Environmental Consultant shall unreasonably interfere with
the normal business operations of the Company. The Purchaser shall pay all fees
and expenses of the Environmental Consultant. The Purchaser shall indemnify and
hold the Company harmless from, against and in respect of any and all property
damage caused by the Environmental Consultant.
5.24 Shareholder Approval. The Shareholder shall vote affirmatively
for the approval of this Agreement and the transactions contemplated hereby.
45
5.25 S Corporation Distributions. Notwithstanding any provision to the
contrary set forth in this Agreement, the Company shall be authorized to make
dividend distributions to its Shareholder during the period from execution of
this Agreement to and on the Closing Date to a maximum amount not to exceed the
lesser of (i) taxed and to be taxed undistributed flow-through income of the
Company which is available to the Shareholder without decreasing the
Shareholder's basis in the shares held in the Company under the Code, or (ii)
the amount, when aggregated with all other payments and distributions to the
Shareholder, executives or other employees of the Company which will not, once
made, be reasonably anticipated to reduce the Company's Net Current Assets below
$22,000,000.
5.26 Phantom Stock Plan and Stock Unit Agreements; Non-Competition and
Restrictive Covenant Agreements.
(a) Phantom Stock Plan and Stock Unit Agreements. The Stock Unit
Agreements (granted under the Phantom Stock Plan) between the Company and
(i) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (a/k/a ▇▇▇▇ ▇. ▇▇▇▇▇▇▇), and (ii) ▇▇▇▇▇ ▇▇▇▇▇▇▇ (a/k/a
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇) shall be valued as of the Closing Date in accordance with
the terms of the Phantom Stock Plan and the respective Stock Unit
Agreements (the "Phantom Stock Value"). Prior to the Closing, the Company
and each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall enter into termination
agreements (the "Termination Agreements") which will terminate their
respective Stock Unit Agreements and, thereafter, all rights to
compensation under their respective Stock Unit Agreements, if any, shall be
determined solely pursuant to such Termination Agreements. The terms of the
Termination Agreements with Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ shall be reasonably
acceptable to the Purchaser. The Paid Phantom Stock Value shall be a
reduction of the Purchase Price payable to the Company.
(b) Non-Competition and Restrictive Covenant Agreements. In
connection with the Company's termination of the Stock Unit Agreements with
Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ shall each enter
into a Non-Competition and Restrictive Covenant Agreement in the form of
Exhibit H hereto.
5.27 Related Persons Leased Real Estate Leases. At and upon the
Closing, the Purchaser shall enter into Leased Real Estate leases with the
respective Related Person lessors, JAW Realty Trust u/d/t dated June 11, 1985,
▇▇▇▇ Park Realty Trust, ▇. ▇. ▇▇▇▇▇▇▇ Pennsylvania, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as
Trustee of the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Realty Trust u/d of trust dated June 1, 1988
and JAW Florida, Inc. in the form of Exhibit I hereto (the "Related Persons
Leased Real Estate Leases"). Concurrently upon the execution of the Related
Persons Leased Real Estate Leases, the Company shall enter into termination
agreements acceptable to the Purchaser with each of the Related Person lessors
described herein for the Leased Real Estate leased by the Company with and from
such Related Persons. The obligations of the Purchaser under each such Related
Persons Leased Real Estate Lease shall be guaranteed by the Parent.
5.28 Landlord/Lessor Estoppel Certificates. In addition to the consents
required under Section 5.10, promptly on and after the date hereof, the Company
and the Shareholder shall make best reasonable commercial efforts to obtain
landlord/lessor estoppel certificates from
46
each of the landlords/lessors of the Leased Real Estate who are not Related
Persons, set forth and disclosed in Schedule 3.17. Such estoppel certificates
shall include (i) the parties to the Leased Real Estate lease, (ii) the dates of
commencement and termination of the Leased Real Estate lease, (iii) description
of any extension, option or expansion terms, (iv) date of last payment under the
Leased Real Estate lease and confirmation that all such payments under such
lease have been paid in full to the date of the estoppel certificate, (v)
confirmation that no additional rents, costs, charges or assessments are
accruing and/or due under such lease, and (vi) a statement by the
landlord/lessor that there are no breaches, defaults or other occurrences or
events by either party under such lease as of the date of the estoppel
certificate.
5.29 Cooperation with Respect to Permits, Licenses and Regulatory
Matters.
(a) Permits. The Company shall at its sole cost and expense
promptly perform such lawful acts and execute and deliver to the
Purchaser such documents as the Purchaser may reasonably request to
obtain the full benefits of the transfer of ownership of the Assets, and
the Company shall cooperate with the Purchaser to obtain for the
Purchaser all transferable and nontransferable Permits issued by a
Governmental Body necessary or appropriate to continue the operation of
the Business by the Purchaser in the Ordinary Course of Business (as
conducted by the Company) from and after the Closing Date. To the extent
allowed by Applicable Law, the Company hereby licenses to the Purchaser
and agrees to the use of by the Purchaser, for no additional
consideration, all Permits between the Closing Date and the completion of
any required transfer process.
(b) Regulatory Matters. Upon execution of this Agreement, the
Purchaser and the Company shall promptly proceed to file or transmit, as
applicable, or assist in the Purchaser's filing or transmittal, as
applicable, of all applications, consent requests and associated
documentary material required by or necessary to obtain all approvals of
any Governmental Body necessary to complete or satisfy the conditions to
Closing with respect to the transactions contemplated by this Agreement.
ARTICLE 6
MUTUAL CONDITIONS PRECEDENT TO THE PARTIES' OBLIGATIONS
Unless waived in writing by the parties, each and every obligation of
the Purchaser and the Parent, on the one hand, and the Company, the Shareholder
and the Principals, on the other hand, to be performed at or upon the Closing
shall be subject to the satisfaction at or prior thereto of each and all of the
following conditions precedent:
6.1 Proceedings. There being no (i) Proceedings which have been
brought, asserted, commenced or Threatened against the Purchaser, the Parent,
the Company, the Shareholder and/or the Principals by any Person involving or
affecting in any way the Purchaser's, the Parent's, the Company's, the
Shareholder's or the Principals' consummation of the transactions contemplated
hereby, or (ii) Applicable Laws restraining or enjoining, or which may
reasonably be expected to nullify or render ineffective, this Agreement or the
consummation of the transactions contemplated hereby or which otherwise could
reasonably be expected to have a Material Adverse Effect on the Assets or the
Business.
47
6.2 Consents and Approvals. The Purchaser and the Company shall have
received evidence, in form and substance reasonably satisfactory to the
respective counsel for the Purchaser and the Company, that all consents,
waivers, releases, authorizations, approvals, licenses, certificates, Permits
and franchises of all Persons (including each and every Governmental Body) set
forth on Schedule 5.10(a) of this Agreement. All consents of a Governmental Body
shall be by Final Order; provided, however, that if the Purchaser and the
Company waive the condition of Governmental Body consent by Final Order, the
parties shall consider the Governmental Body consent without Final Order
sufficient to proceed to Closing according to the other terms of this Agreement.
"Final Order" means an action or decision of the Governmental Body as to which
(i) no request for a stay is pending, no stay is in effect, and any deadline for
filing such request that may be designated by statute or regulation has passed,
(ii) no petition for rehearing or reconsideration or application for review is
pending and the time for the filing of such petition or application has passed,
(iii) the Governmental Body does not have the action or decision under
reconsideration on its own motion and the time within which it may effect such
reconsideration has passed, and (iv) no judicial appeal is pending or in effect
and any deadline for filing any such appeal that may be designated by statute or
rule has passed.
6.3 Antitrust Matters. All waiting periods under HSR have expired, no
temporary restraining order, preliminary Injunction or permanent Injunction
enjoining the consummation of the transactions contemplated herein has been
entered by any court, no action seeking to enjoin the consummation of this
transaction has been commenced by any Person, and neither the FTC, the DOJ nor
any State Attorney General has Threatened to take any action to enjoin or
challenge the transaction contemplated herein. The Purchaser and the Company
shall make all filings and submit information requested or required under HSR
with the FTC and the DOJ. Neither party hereto shall initiate any substantive
discussion with the FTC or DOJ concerning the transactions contemplated by this
Agreement without giving the other party reasonable prior notice of such
discussion and a reasonable opportunity to participate therein. Each party shall
promptly report to the other the fact and general nature of any substantive
discussion initiated with it by the FTC or DOJ concerning the transactions
contemplated by this Agreement.
6.4 Shareholder Approval. The Shareholder shall have approved this
Agreement and the transactions contemplated hereby in accordance with
Massachusetts Applicable Law.
ARTICLE 7
ADDITIONAL CONDITIONS PRECEDENT TO THE PURCHASER'S AND THE PARENT'S OBLIGATIONS
Unless waived by the Purchaser in writing, each and every obligation of
the Purchaser and the Parent to be performed at the Closing shall be subject to
the satisfaction at or prior thereto of each and all of the following conditions
precedent:
7.1 Accuracy of Representations and Warranties. The representations and
warranties (as modified by the Schedules and any Supplement(s) which has not
been objected to by the Purchaser) made by each of the Company and the
Shareholder in this Agreement and in the Ancillary Documents, shall be true and
correct in all material respects at and as of the
48
Closing with the same force and effect as though such representations and
warranties had been made or given at and as of the Closing.
7.2 Compliance with Covenants and Agreements. The Shareholder and the
Company shall have performed and complied in all material respects with all of
the covenants, agreements and obligations under this Agreement which are to be
performed or complied with by them at or prior to the Closing, including the
execution and/or delivery of the documents, instruments and agreements specified
in Section 2.6(b) hereof or in such documents, instruments and agreements, all
of which shall be reasonably satisfactory in form and substance to counsel for
the Purchaser.
7.3 No Material Adverse Change. As of the Closing Date, nothing shall
have occurred which, in the reasonable judgment of the Purchaser could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
7.4 Approval by Counsel. All actions, Proceedings, instruments and
documents required of the Company to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
have been reasonably satisfactory to and approved by counsel for the Purchaser,
and such counsel shall have been furnished with such certified copies of actions
and Proceedings and such other instruments and documents as they shall have
reasonably requested.
7.5 Legal Opinion. The Purchaser and the Parent shall have received an
opinion from the counsel for the Shareholder and the Company, dated as of the
Closing Date, in form and substance satisfactory to the Purchaser and the Parent
in the Purchaser's and the Parent's reasonable commercial discretion.
7.6 [THIS SECTION INTENTIONALLY NOT USED]
7.7 Corporate Action. The Purchaser shall have received (a) a
certificate of the Clerk of the Company as to the incumbency and signatures of
the officers and directors, and (b) a legal existence certificate of existence
from (i) the State of Massachusetts for the Shareholder and the Company, and
(ii) with respect to the Company, foreign qualification good standing
certificates from each jurisdiction set forth on Schedule 3.1.
7.8 Employees. No employee of the Company who is set forth on Schedule
7.8 hereto shall have ceased to be employed by the Company or expressed an
intention to terminate his or her employment with the Company.
7.9 Non-Competition Agreements. Each of the shareholders of the
Shareholder and the employees of the Company who are set forth on Schedule 7.9
shall have executed and delivered non-competition and restrictive covenant
agreements in the form of Exhibit J hereto.
7.10 Schedule of Paid Transactional Expenses. The Company shall have
delivered to the Purchaser an itemized schedule of the Company which sets forth
the aggregate amount of Transactional Expenses paid by the Company through the
Closing Date (the "Paid Transactional Expenses") as Schedule 7.10 to this
Agreement.
49
7.11 Schedule of Paid Phantom Stock Value. The Company shall have
delivered to the Purchaser an itemized schedule of the Company which sets forth
the aggregate amount of Phantom Stock Value paid by the Company through the
Closing Date (the "Paid Phantom Stock Value") as Schedule 7.11 to this
Agreement.
7.12 Securities Laws. The Parent shall have made all necessary filings
under the Securities Act, the Exchange Act and applicable blue sky or similar
securities laws and shall have received all authorizations necessary to issue
shares of the Parent's Common Stock pursuant to this Agreement and the Closing
of the transactions contemplated hereby. The Parent shall have reasonably
concluded in good faith that the proposed offer and sale of the Parent's Common
Stock in the transactions contemplated by this Agreement shall qualify as a
private offering exempt from registration under Regulation D promulgated under
the Securities Act.
ARTICLE 8
ADDITIONAL CONDITIONS PRECEDENT TO THE COMPANY'S,
THE SHAREHOLDER'S AND THE PRINCIPALS' OBLIGATIONS
Unless waived by the Company in writing, each and every obligation of
the Company, the Shareholder and the Principals to be performed at the Closing
shall be subject to the satisfaction at or prior thereto of each and all of the
following conditions precedent:
8.1 Accuracy of Representations and Warranties. The representations and
warranties (as modified by the Schedules and any Supplement(s) which have not
been objected to by the Company) made by the Purchaser and the Parent in this
Agreement, including the Ancillary Documents to be executed and/or delivered by
the Purchaser or the Parent pursuant to this Agreement, shall be true and
correct in all material respects at and as of the Closing with the same force
and effect as though such representations and warranties had been made or given
at and as of the Closing.
8.2 Compliance with Covenants and Agreements. The Purchaser and the
Parent shall have performed and complied in all material respects with all of
their respective covenants, agreements and obligations under this Agreement
which are to be performed or complied with by them at or prior to the Closing,
including the execution and/or delivery of the documents, instruments and
agreements specified in Section 2.6(c) hereof or in such documents, instruments
and agreements, all of which shall be reasonably satisfactory in form and
substance to counsel for the Shareholder.
8.3 Approval by Counsel. All actions, Proceedings, instruments and
documents required of the Purchaser or the Parent to carry out the transactions
contemplated by this Agreement or incidental thereto and all other related legal
matters shall have been reasonably satisfactory to and approved by counsel for
the Shareholder, and such counsel shall have been furnished with such certified
copies of actions and Proceedings and such other instruments and documents as
they shall have reasonably requested.
50
8.4 Legal Opinion. The Company shall have received an opinion from the
counsel for the Purchaser and the Parent, dated as of the Closing Date, in form
and substance satisfactory to the Company in the Company's reasonable commercial
discretion.
8.5 Delivery of Receipt for Purchase Price and the Shares. The Purchaser
shall have delivered to the Company, against receipt of the executed ▇▇▇▇ of
Sale, Assignment and Assumption Agreement and the other documents and
instruments to be delivered by the Purchaser pursuant to this Agreement for the
Assets, the Purchase Price to be paid on the Closing Date determined in
accordance with Section 2.3 and the Parent shall have delivered the Shares.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by the Company, the Shareholder and the Principals.
The Company, the Shareholder and each Principal (individually) hereby jointly
and severally covenants and agrees to indemnify and hold the Purchaser and the
Parent, and their respective officers, directors, employees, Affiliates,
shareholders and agents, and each of their respective heirs, personal
representatives, successors and assigns (the "Purchaser Indemnified Parties"),
harmless from, against and in respect of any and all losses, costs, expenses
(including without limitation, reasonable attorneys' fees and disbursements of
counsel), Liabilities, damages (excluding incidental, consequential or punitive
damages), fines, penalties, charges, assessments, judgments, settlements,
claims, causes of action and other obligations of any nature whatsoever
(individually, a "Loss" and collectively, "Losses") that any of them may at any
time, directly or indirectly, suffer, sustain, incur or become subject to, to
the extent arising out of, based upon or resulting from or on account of each of
the following; provided, however, that the Purchaser Indemnified Parties shall
not be entitled to indemnification for any Losses arising out of breaches or the
falsity of representations and warranties made by the Company, the Shareholder
or the Principals if the Purchaser or the Parent had Knowledge of such breaches
or falsity prior to the Closing:
(a) the breach or falsity of any representation or warranty made by
the Company, the Shareholder or the Principals in this Agreement (as
amended by any Supplement properly provided and not objected to pursuant
to Section 13.21 hereof), including the Ancillary Documents to be
executed and/or delivered by the Company, the Shareholder or the
Principals pursuant hereto and thereto; or
(b) the breach of any covenant or agreement made by the Company,
the Shareholder or the Principals in this Agreement, including the
Ancillary Documents to be executed and/or delivered by the Company, the
Shareholder or the Principals; or
(c) any and all Excluded Liabilities; or
(d) any claim by any shareholder of the Shareholder or any Related
Persons of the Company or the Principals in its, his or her capacity as
such, except with respect to a party's rights under this Agreement or any
Ancillary Document.
51
Provided, however, that the Company, the Shareholder and the Principals
shall not be required to provide such indemnification for a Loss or Losses
resulting from (x) a breach or falsity of any representation and warranty in
this Agreement or any Ancillary Document, or (y) the breach of a covenant of
this Agreement or any Ancillary Document, or (z) an Excluded Liability, unless
and until the Purchaser Indemnified Parties shall have sustained aggregate
Losses as a result of one or more such breaches or falsities of Three Hundred
Thousand Dollars ($300,000) (the "Basket Amount") (and then only for claims
which in the aggregate, when combined with all other claims for Losses result in
Losses which exceed the Basket Amount), except that the Basket Amount shall not
apply to any Loss or Losses arising from, in connection with or incident to (i)
Transactional Expenses and any amounts paid or incurred in connection with
obtaining DEA Permits, (ii) income Tax Liabilities of the Company, the
Shareholder or the Principals, (iii) claims by any shareholder of the
Shareholder or any Related Persons of the Company or the Principals, (iv) the
Phantom Stock Plan, the Stock Unit Agreements or the Termination Agreements, (v)
any Taxes, fees or penalties as described in Section 11.10(a) of this Agreement,
and (vi) any Liability arising from, incident to or in connection with an
Excluded Asset.
Notwithstanding the foregoing, any Loss or aggregate Losses to be
the Principals to the Purchaser, the Parent or their Affiliates under this
Agreement shall not exceed $30 million. Any claim of indemnification by the
Purchaser or the Parent from, in connection with or incident to any Loss or
Losses related to a Registration Statement shall be governed by Section 10.4(b)
of this Agreement.
9.2 Indemnification by the Purchaser and the Parent. The Purchaser and
the Parent jointly and severally covenant and agree to defend, indemnify and
hold the Company, the Shareholder and the Principals (individually and
collectively), and their respective officers, trustees, beneficiaries, heirs,
personal representatives, successors and assigns (the "Company Indemnified
Parties"), harmless from, against and in respect of any and all Losses that any
of them may at any time, directly or indirectly, suffer, sustain, incur or
become subject to, to the extent arising out of, based upon or resulting from or
on account of each or all of the following:
(a) the breach or falsity of any representation or warranty made
by the Purchaser or the Parent in this Agreement (as amended by any
Supplement properly provided and not objected to pursuant to Section
13.21 hereof), including the Ancillary Documents to be executed and/or
delivered by the Purchaser pursuant hereto and thereto; or
(b) the breach of any covenant or agreement made by the Purchaser
or the Parent in this Agreement, including the Ancillary Documents to
be executed and/or delivered by the Purchaser or the Parent pursuant
hereto or thereto; or
(c) any Assumed Liabilities; or
(d) any and all damages caused by the Environmental Consultant.
52
Any claim of indemnification by the Company, the Shareholder and the
Principals arising from, in connection with or incident to any Loss or Losses
related to a Registration Statement shall be governed by Section 10.4(a).
9.3 Procedure for Indemnification. In the event any of the Purchaser
Indemnified Parties or the Company Indemnified Parties intends to seek
indemnification pursuant to the provisions of Sections 9.1 or 9.2 hereof (the
"Indemnified Party"), the Indemnified Party shall promptly give notice hereunder
to the other party (the "Indemnifying Party") after obtaining written notice of
any claim, investigation, or the service of a summons or other initial or
continuing legal or administrative process or Proceeding in any action
instituted against the Indemnified Party as to which recovery or other action
may be sought against the Indemnified Party because of the indemnification
provided for in Section 9.1 or 9.2 hereof, and, if such indemnity shall arise
from the claim of a Third Party, the Indemnified Party shall permit the
Indemnifying Party to assume the defense of any such claim and any litigation
resulting from such claim; provided, however, that the Indemnified Party shall
not be required to permit such an assumption of the defense of any claim or
Proceeding which, if not first paid, discharged or otherwise complied with,
would result in a material interruption or disruption of the business of the
Indemnified Party, or any material part thereof. Notwithstanding the foregoing,
the right to indemnification hereunder shall not be affected by any failure of
the Indemnified Party to give such notice (or by delay by the Indemnified Party
in giving such notice) unless, and then only to the extent that, the rights and
remedies of the Indemnifying Party shall have been prejudiced as a result of the
failure to give, or delay in giving, such notice. Failure by the Indemnifying
Party to notify the Indemnified Party of its election to defend any such claim
or action by a Third Party within twenty (20) days after notice thereof shall
have been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its right to defend such claim or action.
If the Indemnifying Party assumes the defense of such claim,
investigation or Proceeding resulting therefrom, the obligations of the
Indemnifying Party hereunder as to such claim, investigation or Proceeding shall
include taking all steps necessary in the defense or settlement of such claim,
investigation or Proceeding and holding the Indemnified Party harmless from and
against any and all Losses arising from, in connection with or incident to any
settlement approved by the Indemnifying Party or any judgment entered in
connection with such claim, investigation or Proceeding (subject to the
remaining Basket Amount, if any, and indemnification limits set forth in this
Agreement), except where, and only to the extent that, the Indemnifying Party
has been prejudiced by the actions or omissions of the Indemnified Party. The
Indemnifying Party shall not, in the defense of such claim or any Proceeding
resulting therefrom, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) except with the written consent of the
Indemnified Party (which consent shall not be unreasonably withheld, delayed or
conditioned) or enter into any settlement (except with the written consent of
the Indemnified Party, which consent shall not be unreasonably withheld, delayed
or conditioned) unless (i) there is no finding or admission of any violation of
Applicable Law and no material effect on any claims that could reasonably be
expected to be made against the Indemnified Party, (ii) the sole relief provided
is monetary damages that are paid in full for Losses (subject to the remaining
Basket Amount (which will be paid by the Purchaser or the Parent), if any, but
which payment does not exceed the indemnification limits set forth in this
Agreement), and (iii) the settlement shall include the giving by the claimant or
the plaintiff to the Indemnified Party a release from all Liability in respect
to such claim or litigation.
53
If the Indemnifying Party assumes the defense of such claim,
investigation or Proceeding resulting therefrom, the Indemnified Party shall be
entitled to participate in the defense of the claim, but solely by observation
and comment to the Indemnifying Party, and the counsel selected by the
Indemnified Party shall not appear on its behalf in any Proceeding arising
hereunder. The Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it to participate in its defense unless any of
the following shall apply: (i) the employment of such counsel shall have been
authorized in writing by the Indemnifying Party, or (ii) the Indemnifying
Party's legal counsel shall advise the Indemnifying Party in writing, with a
copy to the Indemnified Party, that there is a conflict of interest that would
make it inappropriate under applicable standards of professional conduct to have
common counsel. If clause (i) or (ii) in the immediately preceding sentence is
applicable, then the Indemnified Party may employ separate counsel at the
expense of the Indemnifying Party to represent the Indemnified Party, but in no
event shall the Indemnifying Party be obligated to pay the costs and expenses of
more than one such separate counsel for any one complaint, claim, action or
Proceeding in any one jurisdiction.
If the Indemnifying Party does not assume the defense of any such claim
by a Third Party or litigation resulting therefrom after receipt of notice from
the Indemnified Party, the Indemnified Party may defend against such claim or
litigation in such manner as it reasonably deems appropriate, and unless the
Indemnifying Party shall deposit with the Indemnified Party a sum equivalent to
the total amount demanded in such claim or litigation plus the Indemnified
Party's estimate of the cost (including attorneys' fees) of defending the same,
the Indemnified Party may settle such claim or Proceeding on such terms as it
may reasonably deem appropriate and the Indemnifying Party shall, subject to its
defenses and the applicability of any remaining threshold loss amount provided
for in Section 9.1 hereof, promptly reimburse the Indemnified Party for the
amount of such settlement and for all reasonable costs (including attorneys'
fees), expenses and damages incurred by the Indemnified Party in connection with
the defense against or settlement of such claim, investigation or litigation, or
if any such claim or litigation is not so settled, the Indemnifying Party shall,
subject to its defenses and the applicability of any remaining Basket Amount
provided for in Section 9.1 hereof, promptly reimburse the Indemnified Party for
the amount of any final nonappealable judgment rendered with respect to any
claim by a Third Party in such litigation and for all costs (including
attorneys' fees), expenses and damage incurred by the Indemnified Party in
connection with the defense against such claim or litigation, whether or not
resulting from, arising out of, or incurred with respect to, the act of a Third
Party.
Each party shall cooperate in good faith and in all respects with each
Indemnifying Party and its representatives (including without limitation its
counsel) in the investigation, negotiation, settlement, trial and/or defense of
any Proceedings (and any appeal arising therefrom) or any claim. The parties
shall cooperate with each other in any notifications to and information requests
of any insurers. No individual representative of any Person, or their respective
Affiliates shall be personally liable for any Loss or Losses under this
Agreement, except as specifically agreed to by said individual representative.
9.4 Dispute Resolution. In the event a dispute arises under this
Agreement, except with respect to Sections 2.2(b) and 2.5 or equitable remedies
pursued under this Agreement
54
(including Section 11.6), such disputes shall be resolved in the manner set
forth in this Section 9.4.
(a) If a dispute arises under this Agreement, including any question
regarding the existence, validity, interpretation or termination hereof,
which is not described as an exception in this Section 9.4, the Purchaser
and/or the Parent on the one hand and the Company and the Shareholder and
the Principals on the other, may invoke the dispute resolution procedure
set forth in this Section 9.4 by giving written notice to the other party.
The parties shall enter into discussions concerning this dispute. If the
dispute is not resolved as a result of such discussion in ten (10) days, an
attempt will be made to resolve the matter by a formal nonbinding mediation
with an independent neutral mediator agreed to by the parties. If the
parties cannot agree on a mediator within a period of ten (10) days after
expiration of the ten (10) day period for resolution by discussion, then
either party may apply to any court of competent jurisdiction for
appointment of a mediator, which appointment shall be binding and
nonappealable. Upon commencement of the mediation process, the parties
shall promptly communicate with respect to a procedure and schedule for the
conduct of the Proceeding and for the exchange of documents and other
information related to the dispute. The mediation process shall be deemed
ended if the dispute has not been resolved within thirty (30) days after
appointment of the mediator.
(b) All claims, disputes or other matters in question between the
parties to this Agreement arising out of or relating to this Agreement
which are not resolved by mediation in accordance with Section 9.4(a)
within thirty (30) days after appointment of mediator shall be submitted
for, subject to and decided by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
currently in effect as of the date of this Agreement ("AAA Rules"), except
to the extent those rules are inconsistent with this Section 9.4. Any
arbitration must be held in Minneapolis, Minnesota by a single arbitrator
mutually selected by the parties hereto or, if the parties hereto cannot
agree on the appointment of such arbitrator within ten (10) days following
the date notice of the dispute is given by a party to the adverse party, an
arbitrator selected according to the AAA Rules. The arbitrator's award
shall be final, conclusive and binding upon all parties to this Agreement,
and judgment may be entered upon it in accordance with the Federal
Arbitration Act in any court of general jurisdiction in Minnesota, or in
any United States District Court having jurisdiction in Minnesota. The
arbitrator shall be required to provide in writing to the parties the basis
for the award or order of such arbitrator, and a court reporter shall
record all hearings (unless otherwise agreed to by the parties), with such
record constituting the official transcript of such Proceedings. The
Company, the Shareholder, the Principals, the Purchaser and the Parent
specifically desire this Arbitration clause to be governed by the United
States Federal Arbitration Act, and not by the arbitration laws of any
state.
(c) The Company, the Shareholder, the Principals, the Purchaser and
the Parent agree and consent that any legal action, suit or Proceeding
seeking to enforce this Section 9.4 or to confirm or contest any
arbitration award shall be instituted and adjudicated solely and
exclusively in any court of general jurisdiction in Minnesota, or in the
United States District Court having jurisdiction in Minnesota and the
Company, the
55
Shareholder, the Principals, the Purchaser and the Parent each agree that
venue will be proper in such courts and waive any objection which they may
have now or hereafter to the venue of any such suit, action or Proceeding
in such courts, and irrevocably consent and agree to the jurisdiction of
said courts in any such suit, action or Proceeding. The Company, the
Shareholder, the Principals, the Purchaser and the Parent further agree to
accept and acknowledge service of any and all process which may be served
in any such suit, action or Proceeding in said courts, and also agree that
service of process or notice upon them shall be deemed in every respect
effective service of process or notice upon them, in any suit, action,
Proceeding or arbitration demand, if given or made: (i) according to
Applicable Law, (ii) according to the AAA Rules, (iii) by a Person over the
age of eighteen who personally serves such notice or service of process on
the Company, the Shareholder, the Principals, the Purchaser or the Parent,
as the case may be, or (iv) by certified mail, return receipt requested,
mailed to the Company, the Shareholder, the Principals, the Purchaser or
the Parent, as the case may be, at their respective addresses set forth in
this Agreement.
(d) In the event of arbitration filed or instituted between or among
the parties pursuant to this Section 9.4, the prevailing party will be
entitled to receive from the adverse party all costs, damages and expenses,
including reasonable attorney's fees, incurred by the prevailing party in
connection with that action or Proceeding, whether or not the controversy
is reduced to judgment or award. The prevailing party will be that party
who is determined by the arbitrator to have prevailed on the major disputed
issues.
9.5 Effect of Insurance. An Indemnified Party who has a right to make a
claim under any policy of insurance with respect to an indemnified claim made by
the Indemnified Party shall make such claim on a prompt and competent basis in
the manner required by the insurance carrier. The Indemnified Party shall
promptly and diligently pursue such claim and shall cooperate fully with the
insurance carrier and the Indemnifying Party in the prosecution of the claim or
claims. In the event an Indemnified Party receives insurance proceeds with
respect to Losses for which the Indemnified Party has made an indemnification
claim prior to the date on which the Indemnifying Party is required pursuant to
this Article 9 to pay such indemnification claim, the indemnification claim
shall be reduced by an amount equal to such insurance proceeds received by the
Indemnified Party less all reasonable out-of-pocket costs incurred by the
Indemnified Party in its pursuit of such insurance proceeds. If such insurance
proceeds are received by the Indemnified Party after the date on which the
Indemnifying Party is required pursuant to this Article 9 to pay such
indemnification claim, the Indemnified Party shall, no later than five (5) days
after the receipt of such insurance proceeds, reimburse the Indemnifying Party
in an amount equal to such insurance proceeds (but in no event in an amount
greater than the Losses theretofore paid to the Indemnified Party by the
Indemnifying Party) less all reasonable out-of-pocket costs incurred by the
Indemnified Party in obtaining such insurance proceeds. In either case, the
Indemnifying Party shall compensate the Indemnified Party for all costs incurred
by the Indemnified Party subsequent to either the reduction of any
indemnification claim as provided above, or the delivery of any such insurance
proceeds to the Indemnifying Party as provided above, as the case may be, as a
result of any such insurance, including, but not limited to, retrospective
premium adjustments, experience-based premium adjustments (whether retroactive
or prospective) and indemnification or surety obligations of the Indemnified
Party to any insurer. A claim for such costs shall be made by an Indemnified
Party by delivery of a
56
written notice to the Indemnifying Party requesting compensation and specifying
this Section 9.5 as the basis on which compensation for such costs is sought,
and the Indemnifying Party shall pay such costs no later than thirty (30) days
after receiving the written notice requesting such compensation. Notwithstanding
the foregoing, except to the extent set forth in the first two sentences of this
Section 9.5, the Indemnified Party is not required to pursue a recovery from an
insurer as a precondition to the Indemnifying Party's obligation to pay any
indemnification claim as required by this Article 9, and the Indemnifying Party
shall not be entitled to delay any payment beyond the respective payment dates
for any indemnification claims referred to in this Article 9 for the purpose of
awaiting receipt of insurance proceeds or credits therefor as provided herein.
ARTICLE 10
FEDERAL SECURITIES LAWS MATTERS
10.1 Resale Registration.
(a) Filing, Effectiveness. As soon as practicable but not later
than the ninetieth (90/th/) day following the Closing of the transactions
contemplated by this Agreement (the "Required Filing Date"), the Parent
shall prepare and file with the Commission one "shelf" registration
statement (the "Shelf Registration Statement") on the appropriate form for
an offering to be made on a continuous basis pursuant to Rule 415 under the
Securities Act (or any successor rule or similar provision then in effect)
covering all of the Registrable Securities. The Parent shall use
commercially reasonable efforts to have the Shelf Registration Statement
declared effective on or before the Target Effective Date and to keep such
Shelf Registration Statement continuously effective for the Target
Effective Period. Any Holder of Registrable Securities shall be permitted
to withdraw all or any part of the Registrable Securities from a Shelf
Registration Statement at any time prior to the effective date of such
Shelf Registration Statement, but the Parent shall be under no further
obligation to register such Securities pursuant to this Section 10.1.
(b) Supplements; Amendments. The Parent agrees, if necessary, to
supplement or amend the Shelf Registration Statement, as required by the
rules, regulations or instructions applicable to the registration form used
by the Parent for such Shelf Registration Statement or by the Securities
Act, and the Parent agrees to furnish to the Holders, Holders' counsel and
any managing underwriter copies of any such supplement or amendment prior
to its being used and/or filed with the Commission. The Parent may postpone
the filing of any Registration Statement required hereunder for a
reasonable period of time, not to exceed sixty (60) days, if the Holder has
(i) been advised by outside legal counsel that such filing would require
the disclosure of a material transaction or other matter and the Parent
determines reasonably and in good faith that such disclosure would have a
Material Adverse Effect on the Parent, and (ii) the Parent has delivered to
Holder the Suspension Notice contemplated by Section 10.2(d). The
disclosure to any Holder of any such material transaction, or of the
existence thereof, pursuant to the preceding sentence, shall be held in
confidence by Holder until the Parent or a Third Party not under the
control of Holder has made a public disclosure thereof.
57
(c) Effective Registration. A registration will not be deemed to
have been effected unless the Registration Statement has been declared
effective by the Commission; provided, however, that if after it has been
declared effective, the offering of Registrable Securities pursuant to a
Registration Statement is interfered with by any stop order, Injunction or
other order or requirement of the Commission or any other Governmental
Body, such Registration Statement will be deemed not to have become
effective during the period of such interference until the offering of
Registrable Securities pursuant to such Registration Statement may legally
resume.
10.2 Registration Procedures. In connection with the obligations of the
Parent to effect or cause the registration of any Registrable Securities
pursuant to the terms and conditions of this Agreement, the Parent shall use
reasonable efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended method of distribution thereof, and
in connection therewith:
(a) The Parent shall prepare and file with the Commission the
Shelf Registration Statement or other similar form under the Securities Act
which permits secondary sales of securities in a "shelf registration," and
use reasonable efforts to cause such Registration Statement to become
effective and remain effective in accordance with the provisions of this
Agreement; provided, however, that at least three (3) business days prior
to filing a Shelf Registration Statement or Prospectus or any amendments or
supplements thereto, the Parent shall furnish to the Holders of the
Registrable Securities covered by such Shelf Registration Statement,
Holders' counsel and the underwriters, if any, draft copies of all such
documents proposed to be filed, which documents will be subject to the
review by Holders' counsel and the underwriters, if any;
(b) The Parent shall promptly prepare and file with the
Commission such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration
Statement effective and shall timely file with the Commission all required
filings under the Exchange Act as are necessary to keep the Registration
Statement effective for as long as such registration is required to remain
effective pursuant to the terms hereof; shall cause the Prospectus to be
supplemented by any required Prospectus supplement, and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities Act;
and shall comply with the provisions of the Securities Act applicable to it
with respect to the disposition of all Registrable Securities covered by
such Registration Statement during the applicable period in accordance with
the intended methods of disposition by Holder set forth in such
Registration Statement or supplement to the Prospectus;
(c) The Parent shall promptly furnish to Holder such number of
copies of the Prospectus (including each preliminary Prospectus) and any
amendments or supplements thereto, as Holder may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Securities being sold by Holder;
(d) The Parent shall promptly notify Holder, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has
been filed and, with respect to a Registration Statement or any post-
effective amendment, when the same has become
58
effective, (ii) of any request by the Commission or any state securities
authority for amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement, (iv) of the
issuance by any state securities commission or other regulatory authority
of any order suspending the qualification or exemption from qualification
of any of the Registrable Securities under state securities or "blue sky"
laws, and (v) of the happening of any event which makes any statement made
in a Registration Statement or related Prospectus untrue or which requires
the making of any changes in, or additional disclosure to, such
Registration Statement or Prospectus so that they will not contain any
untrue statement of a material fact or omit to state any 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.
As soon as practicable following expiration of the Suspension Period (as
defined below), the Parent shall prepare and file with the Commission and
furnish a supplement or amendment to such Prospectus so that, as thereafter
deliverable to the purchasers of such Registrable Securities following the
effective date thereof, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
Upon receipt of any notice by Holder from the Parent of the happening
of any event of the kind described in Section 10.2(d) above (a "Suspension
Notice"), Holder shall forthwith discontinue disposition of the Registrable
Securities pursuant to the Shelf Registration Statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 10.2(d) or until
Holder is advised in writing by the Parent that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated by reference in the Prospectus, and, if so
directed by the Parent, will, or will request any broker-dealer acting as
Holder's agent to, deliver to the Parent (at the Parent's expense) all
copies, other than permanent file copies then in Holder's or a broker-
dealer's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice; provided, however, that in
no event shall the period from the date on which Holder receives a
Suspension Notice to the date on which Holder receives either the advice or
copies of the supplemented or amended Prospectus contemplated by Section
10.2(d) (the "Suspension Period") exceed sixty (60) days. All Suspension
Notices shall be based upon the advice of the Parent's counsel and shall
not be limited in number or duration so long as the Suspension Notice has
as its basis and the Parent is following Commission regulations, rules,
Injunctions or other Applicable Law, or the rules of any exchange.
(e) Rule 144. The Parent covenants that it will file any reports
required to be filed by it under the Securities Act and the Exchange Act,
and the rules and regulations adopted by the Commission thereunder (or, if
the Parent is not required to file such reports, it will, upon the request
of any Holder, make publicly available other information so long as
necessary to permit sales of the Registrable Securities under Rule 144
under the Securities Act), and it will take such further action as any
Holder may request, all to
59
the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (b) any
successor rule or similar provision or regulation hereafter adopted by the
Commission.
(f) Rule 144A. The Parent covenants that it will file all
reports required to be filed by it under the Securities Act and the
Exchange Act, and the rules and regulations adopted by the Commission
thereunder (or if the Parent is not required to file such reports, it will,
upon the request of any Holder, make available other information so long as
necessary to permit sales of the Registrable Securities pursuant to Rule
144A under the Securities Act), and it will take such further action as any
Holder may request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144A, as such rule may be amended from time to time, or (b) any successor
rule or similar provision or regulation hereafter adopted by the
Commission.
10.3 Registration Expenses. The Parent shall bear all expenses incurred
in connection with the registration of the Registrable Securities pursuant to
Section 10.1 of this Agreement. Such expenses shall include, without limitation,
all printing, legal and accounting expenses incurred by the Parent and all
registration and filing fees imposed by the Commission, any state securities
commission or the NASDAQ Stock Market. Each Holder shall be responsible for any
brokerage fees or commissions and Taxes of any kind (including, without
limitation, transfer Taxes) with respect to any disposition, sale or transfer of
Registrable Securities and for any legal, accounting and other expenses incurred
by such Holder.
10.4 Indemnification and Contribution.
(a) Indemnification by the Parent. The Parent agrees to
indemnify, defend and hold harmless, to the full extent permitted by law, each
Holder from and against any Loss and all Losses to which Holder may become
subject under the Securities Act or otherwise, insofar as such Loss or Losses
(or Proceedings in respect thereof) arise out of or are based upon any untrue
statement of material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities were registered
under the Securities Act, or caused by any omission to state therein a material
fact necessary to make the statements therein in light of the circumstances
under which they were made not misleading, or caused by any untrue statement of
a material fact contained in any Prospectus (as amended or supplemented if the
Parent shall have furnished any amendments or supplements thereto), or caused by
any omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
except insofar as such Loss or Losses arise out of or are based upon any such
untrue statement or omission based upon information relating to Holder furnished
in writing to the Parent by Holder specifically for use therein; provided,
however, that the Parent shall not be liable to Holder under this Section
10.4(a) to the extent that any such Loss or Losses were caused by the fact that
Holder sold Registrable Securities to a Person as to whom it shall be
established that there was not sent or given, at or prior to the written
confirmation of such
60
sale, a copy of the Prospectus as then amended or supplemented if, but only if,
(i) the Parent has previously furnished copies of such amended or supplemented
Prospectus to Holder, and (ii) such Loss or Losses were caused by any untrue
statement or omission contained in the Prospectus so delivered which was
corrected in such amended or supplemented Prospectus; and provided further that
the indemnity agreement contained in this Section 10.4(a) shall not apply to
amounts paid in settlement of any Loss or Losses if such settlement is effected
without the consent of the Parent, which consent shall not be unreasonably
withheld.
(b) Indemnification by the Holder. Holder agrees to indemnify and hold
harmless the Parent, its stockholders, directors, officers and each Person, if
any, who controls the Parent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Parent to Holder, but only with reference to
information relating to Holder furnished in writing to the Parent by Holder
specifically for use in any Registration Statement (or any amendment thereto) or
any Prospectus (or any amendment or supplement thereto); provided, however, that
Holder shall not be obligated to provide such indemnity to the extent that such
Loss or Losses result from the failure of the Parent to promptly amend or take
action to correct or supplement any such Registration Statement or Prospectus on
the basis of corrected or supplemental information provided by Holder to the
Parent expressly for such purpose; and provided further that the indemnity
agreement contained in this Section 10.4(b) shall not apply to amounts paid in
settlement of any such Loss or Losses if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld. In no
event shall the Liability of Holder hereunder be greater in amount than the
amount of the proceeds received by Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Contribution. To the extent that the indemnification provided for
in Sections 10.4(a) or 10.4(b) is held by a court of competent jurisdiction to
be unavailable to an Indemnified Party or is insufficient in respect of any Loss
or Losses, then each Indemnifying Party under such paragraph, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Loss or Losses in
such proportion as is appropriate to reflect the relative fault of the Parent on
the one hand and Holder on the other hand in connection with the statements or
omissions that resulted in such Loss or Losses, as well as any other relevant
equitable considerations. The relative fault of the Parent on the one hand and
of Holder on the other hand shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to state
a material fact relates to information supplied by the Parent or by Holder and
the parties' relative intent, Knowledge, access to information and opportunity
to correct or prevent such statement or omission.
If indemnification is available under Section 10.4(a) or 10.4(b), the
Indemnifying Parties shall indemnify each Indemnified Party to the full extent
provided in such Sections without regard to the relative fault of said
indemnifying party or Indemnified Party or any other equitable consideration
provided for in this Section 10.4(c). The Parent and Holder agree that it would
not be just or equitable if contribution pursuant to
61
this Section 10.4(c) were determined by pro rata allocation or by any other
method of allocation that does not take account of the equitable
considerations referred to herein. The aggregate contribution Liability of
each Holder under this Section 10.4(c) shall not exceed the net proceeds
received by such Holder in connection with sale of shares pursuant to the
Registration Statement.
10.5 Transfer of Registration Rights; Transfer of Shares. The
registration rights of the Holder and any subsequent Holder under this Article
10 may be transferred to any transferee of Registrable Securities that acquires
at least 50,000 shares of Registrable Securities (appropriately adjusted for
stock splits, stock dividends and the like), provided that such transferee
makes, and is able to make, the representations and warranties set forth in
Section 10.7, and agrees in writing to be bound by the terms of this Article 10.
The Purchaser and the Parent each hereby acknowledge and consent to the transfer
of the Shares by the Company to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the manner described in Section 2.3 of this Agreement,
subject to the provisions of Sections 10.6 and 10.7 hereof.
10.6 Limitation on Resale. The Shares are offered and sold by the Parent
pursuant to exemptions from registration under the Securities Act. Because the
Shares are issued in a transaction not involving a public offering, such
securities are "restricted securities" as that term is defined in Rule
144(a)(3). Further, each Holder covenants and agrees that the Shares may not be
resold for a period of three (3) years following the Closing, and then only as
permitted under the Securities Act and the applicable state securities laws
pursuant to registration thereunder or an exemption therefrom. Notwithstanding
the language herein or in the Parent's Policy Statement on Confidential
Information and Securities Trading dated December 1, 1999, the foregoing
restrictions shall not preclude the Holder from executing or entering into with
▇▇▇▇▇▇▇, Sachs & Co. ("GSC") industry-standard "European-style" options
("Options") to hedge or collar the Shares and from pledging the Shares in
connection therewith (a "Permitted Pledge"); provided that: (i) the Options
shall not expire prior to the third anniversary of the Closing Date; and (ii) no
Permitted Pledge shall permit the settlement of the Options or require a
disposition of the pledged Shares prior to the third (3rd) anniversary of the
Closing Date (except to the extent permitted by the proviso to the immediately
following sentence). The Holder shall provide the Parent with duly-executed
copies of any Options or other agreement evidencing a Permitted Pledge, which
documentation shall provide that no disposition of the Shares so pledged may be
made prior to such 3rd anniversary date; provided, however, that such documents
may provide for a disposition prior to such 3rd anniversary of pledged Shares in
certain events such as those that make it impossible or commercially
impracticable for a major investment bank to continue to hedge its exposure
under the Permitted Pledge or similar instrument, including an event which
causes the Shares to cease to exist as a separate trading security of the
Parent, such as an acquisition of the Parent. The Parent consents to the
registration of the Shares in the name of GSC (or an Affiliate thereof) as
nominee of the Holder, subject to the Parent's review of documentation between
GSC and the Holder evidencing GSC's agreement (by letter to the Parent or
otherwise) to honor the provisions of this Section.
10.7 Representations and Warranties. As a material inducement to the
Purchaser and the Parent to enter into this Agreement and to consummate the
transactions contemplated hereby, the Holders each represent and warrant:
62
(a) Holder is acquiring the shares of the Parent's Common Stock to be
issued hereunder for Holder's own account for investment only and not with a
view to, or with any intention of, a distribution or resale thereof, in whole or
in part, in violation of the Securities Act or any rule or regulation
thereunder, as amended from time to time.
(b) No Holder is directly or indirectly controlled by, or acting on behalf
of any Person which is, an "investment company" within the meaning of the
Investment Company Act of 1940 (the "1940 Act"), as amended, or required to
register as such under the 1940 Act.
(c) Each Holder (i) has carefully reviewed the information provided by the
Parent, (ii) has requested and received such other information, as he has deemed
relevant, regarding the Parent for purposes of evaluating his acquisition of the
Parent's Common Stock to be issued hereunder, (iii) is aware of the risks
associated with an investment in the Parent's Common Stock, and (iv) has not
received any form of general solicitation or advertising in connection with his
decision to acquire the Parent's Common Stock hereunder. No Holder has relied in
any way on any information with respect to the Parent's Common Stock or the
Parent generally other than the representations of the Parent contained herein
or materials furnished by the Parent in writing in connection herewith.
(d) Each Holder acknowledges and understands that (i) the Parent's Common
Stock to be issued to Holder hereunder has not been registered under the
Securities Act or any state securities laws, (ii) the Parent's Common Stock to
be issued to Holder hereunder will be subject to transfer restrictions under the
Securities Act and applicable state securities laws and may not be transferred
unless (x) subsequently registered under the Securities Act and applicable state
securities laws or (y) there is delivered to the Parent an opinion of counsel
satisfactory to the Parent that such registration is not required, and (iii) the
Parent will place a restrictive legend on the certificate(s) representing the
Parent's Common Stock to be issued to Holder hereunder, containing the following
language:
The shares represented by this certificate were issued without
registration under the Securities Act of 1933, as amended (the
"Securities Act") and without registration under applicable state
securities laws, in reliance upon exemptions contained in the
Securities Act and such laws. No transfer of these shares or any
interest therein may be made except pursuant to effective
registration statements under said laws unless this Corporation has
received an opinion of counsel satisfactory to it that such transfer
or disposition does not require registration under said laws and, for
any sales under Rule 144 of the Securities Act, such evidence as it
shall request for compliance with that rule. Further, sale, transfer
or other disposition of the Shares prior to July 10, 2004 is
restricted under the terms and conditions of an Asset Purchase
Agreement dated as of July 9, 2001, by and between, among others, the
Corporation and the holder of the shares represented by this
certificate. Copies of such agreements are available for inspection
by parties having an interest therein at the executive offices of the
Corporation.
63
Upon written request, and subject to Section 10.6, the Parent
agrees to issue to Holder a replacement stock certificate for the
Parent's Common Stock without the foregoing references to the
Securities Act in such legend upon the registration under the
Securities Act of the shares of the Parent's Common Stock represented
thereby, or upon the expiration of the restrictions imposed by Rule
144 of the Securities Act.
(e) Each Holder represents that it, he or she is an
"accredited investor" within the meaning of Commission Rule 501(c)
under the Securities Act, and (i) is able to bear the economic risks
of the acquisition of shares of the Parent's Common Stock hereunder
and has adequate means of providing for current needs and possible
contingencies, (ii) either alone or with his advisors has had the
opportunity to ask questions and receive answers concerning the
Parent and the terms and conditions of the acquisition of the
Parent's Common Stock, as well as the opportunity to obtain any
additional information necessary to verify the accuracy of
information furnished in connection therewith which the Purchaser
possesses or can acquire without unreasonable effort or expense, and
(iii) together with his advisors, if any, has such Knowledge and
experience in financial and business matters that Holder is capable
of evaluating the merits and risks of this acquisition of the
Parent's Common Stock, and of making an informed investment decision.
(f) Each of the Shareholder and the Principals are
Affiliates of the Company and, as such, (i) are subject to the resale
restrictions with respect to the Shares pursuant to Rules 145(c) and
145(d) of the Securities Act, and (ii) resales of the Shares by any
and all of them must and shall be in compliance with Sections 10.6
and 10.7 of this Agreement.
ARTICLE 11
PERFORMANCE FOLLOWING THE CLOSING DATE
The following covenants and agreements are to be performed after the
Closing by the parties and shall continue in effect for the periods
respectively indicated or, where no indication is made, until performed:
11.1 Further Acts and Assurances. The parties agree that, at any
time and from time to time, on and after the Closing Date, upon the
reasonable request of the other party, they will do or cause to be done
all such further acts and things and execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered any and all papers,
documents, instruments, agreements, assignments, transfers, assurances and
conveyances as may be necessary or desirable to carry out and give effect
to the provisions and intent of this Agreement. In addition, from and
after the Closing Date, the Purchaser and the Company will afford to the
other and their respective attorneys, accountants and other
representatives access, during normal business hours, to such personnel,
books and records relating to the Company or the Business as may
reasonably be required in connection with the preparation of financial
information, the filing of Tax Returns and the operation of the Business,
and will cooperate in all reasonable respects in connection with claims
and Proceeding asserted by or against third parties, relating to or
arising from the transactions contemplated hereby.
64
11.2 Non-Competition Agreement. During the period of thirty-six
months (36) months from and after the Closing Date, each of the Company,
the Shareholder and the Principals, on behalf of themselves, their Related
Persons and their respective Controlled Person, covenant and agree that
they will not, without the Purchaser's prior written consent, which may be
withheld or given in its sole discretion, directly or indirectly, or
individually or collectively within the United States of America, lend any
material credit, advice or assistance, or engage in any activity or act in
any manner, including but not limited to, as an individual, owner, sole
proprietor, founder, associate, promoter, partner, joint venturer,
shareholder (other than as a less than three percent (3%) shareholder of a
publicly traded corporation), officer, director, trustee, manager,
employer, employee, licensor, licensee, principal, agent, salesman,
broker, representative, consultant, advisor, investor or otherwise for the
purpose of establishing, operating or managing any business or entity that
is engaged in a Competing Business with respect to the Purchaser (as
successor in interest to the Business of the Company); provided, however,
that nothing in this Section 11.2 shall prohibit such parties from
continuing to own their present equity interests in Phoenix
Pharmaceuticals and Phoenix Scientific; provided further, however, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ shall be permitted hereunder to continue to serve as a member
of the Board of Directors of Phoenix Pharmaceuticals and Phoenix
Scientific if, and only so long as, such companies (each evaluated
individually) do not become competitive with the Business as conducted by
the Purchaser or the Parent after the Closing Date, unless ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ is given written consent, which may be withheld for any reason, by
either the Purchaser or the Parent to continue in such board service.
11.3 Non-Solicitation Agreement. During the period of thirty-six
(36) months from and after the Closing Date, each of the Company, the
Shareholder and the Principals, on behalf of themselves, their Related
Persons and each of their Controlled Persons, covenant and agree that they
will not, whether for their own account or for the account of any other
Person, directly or indirectly interfere with the Purchaser's relationship
with or endeavor to divert or entice away from the Purchaser any Person
who or which at any time during the term of such Person's affiliation with
the Company or the Purchaser is an employee, vendor, supplier or customer
of the Purchaser. The foregoing shall not apply to employees, vendors,
suppliers or customers who have not, at the time of any solicitation, had
such a relationship for at least a period of six (6) months with either
the Purchaser or the Company.
11.4 Confidential Information. Each of the Company, the Shareholder
and the Principals understands and agrees that the Business of the Company
is based upon specialized work and that it has, along with its
shareholders, Related Persons and/or Controlled Persons, received, had
access to and/or contributed to Confidential Information. Except as may be
necessary or desirable (i) for defense of a Loss or conducting or
participating in a Proceeding in accordance with Sections 9.1, 9.3 or 9.4
hereof, (ii) in enforcing the Company's, the Shareholder's or the
Principals' rights under this Agreement or any Ancillary Document, (iii)
for the purpose of filing any report with any Governmental Body, (iv) in
connection with advice sought from an attorney, accountant or similar
professional, or (v) in connection with their continued individual
employment by the Purchaser or employment by or position with the Parent,
each of the Company, the Shareholder and the Principals agree that at all
times from and after the Closing Date, they, and their trustees, officers,
directors, shareholders, Related Persons and Controlled Persons, shall
keep secret all such Confidential Information and that they will not
directly or indirectly Use or Disclose the same to any Person without
first obtaining the written
65
consent of the Purchaser, which consent may be withheld or given in the
Purchaser's sole discretion. At any time the Purchaser may so request, the
Company, the Shareholder and the Principals and their trustees, officers,
directors, shareholders, Related Persons and Controlled Persons, shall
turn over to the Purchaser all Confidential Information compiled by or
delivered to such Persons, including copies thereof, in their possession,
it being agreed that the same and all information contained therein are at
all times the exclusive property of the Purchaser.
11.5 Reasonableness of Covenants. The Company, the Shareholder and the
Principals, on behalf of themselves, their trustees, officers, directors,
shareholders, Related Persons and Controlled Persons, acknowledge and agree that
the geographic scope and period of duration of the restrictive covenants
contained in Sections 11.2, 11.3 and 11.4 of this Agreement are both fair and
reasonable and that the interests sought to be protected by the Purchaser are
legitimate business interests entitled to be protected. The Company, the
Shareholder and the Principals further acknowledge and agree that the Purchaser
would not have purchased the Assets from the Company pursuant to this Agreement
unless the Company, the Shareholder and the Principals each agreed to the
covenants contained in such Sections.
11.6 Injunctive Relief. The parties agree that the remedy of
damages at law for the breach by any party of any of the covenants
contained in Sections 10.1(a), 10.1(b), 10.2, 10.3, 10,6, 11.1, 11.2, 11.3
or 11.4 is an inadequate remedy. In recognition of the irreparable harm
that a violation by (i) the Company, the Shareholder or the Principals and
their trustees, officers, directors, shareholders, Related Persons or
Affiliates, of any of the covenants, agreements or obligations arising
under Sections 10.6, 11.1, 11.2, 11.3 or 11.4 would cause the Purchaser
and the Parent, and (ii) the Purchaser and the Parent or their officers
and directors of any of the covenants, agreements or obligations arising
under Section 10.1(a), 10.1(b), 10.2, 10.3 or 11.1, would cause the
Company, the Shareholder and the Principals, (x) the Company, the
Shareholder and the Principals, and (y) the Purchaser and the Parent, each
agree on behalf of themselves and their trustees, officers, directors,
shareholders, Related Persons and Affiliates, that in addition to any
other remedies or relief afforded by law, an Injunction against an actual
or Threatened violation or violations may be issued against it and/or them
and every other Person concerned thereby, without the necessity of posting
bond, it being the understanding of the parties that both damages and
Injunction shall be proper modes of relief and are not to be considered
alternative remedies.
11.7 Blue Pencil Doctrine. In the event that any of the restrictive
covenants contained in this Article shall be found by a court of competent
jurisdiction to be unreasonable by reason of its extending for too great a
period of time or over too great a geographic area or by reason of its
being too extensive in any other respect, then such restrictive covenant
shall be deemed modified to the minimum extent necessary to make it
reasonable and enforceable under the circumstances.
11.8 Right of Offset/Recoupment and Escrow.
(a) Right of Offset/Recoupment. The Purchaser shall have a
right of offset and/or recoupment against any amount owed to the
Company or its successors or assigns in the event any claim for a
Loss or Losses is asserted by the Purchaser pursuant to the
provisions of Article 9 hereof. The Purchaser acknowledges and agrees
that no right of offset and/or recoupment with respect to (i) a
breach or falsity of any representation or
66
warranty under this Agreement or any Ancillary Document, (ii) the
breach of a covenant of this Agreement or any Ancillary Document
(subject to the exceptions set forth in Section 9.1 hereof), or (iii)
an Excluded Liability (subject to the exceptions set forth in Section
9.1 hereof), in each case where the foregoing are subject to the
Basket Amount, may be made unless and until the Basket Amount set
forth in Section 9.1 is fully utilized in accordance with its terms.
Such offset/recoupment, if exercised by the Purchaser in the manner
contemplated herein, shall be limited by the Purchaser's reasonably
estimated amount of such Loss or Losses.
(b) Escrow. In the event that the Purchaser determines that
it has a right of offset or recoupment against the Company as
described in paragraph (a) immediately above, the Purchaser shall (i)
send notice to the Company that it intends to assert a right of
offset and/or recoupment hereunder, and (ii) deposit the estimated
amount of the Loss or Losses subject to offset and/or recoupment with
the Escrow Agent established by the parties on the Closing Date or
pursuant to a new escrow agreement established by the parties to
serve the purposes of this Section 11.8. Any such payment timely made
to the Escrow Agent or the escrow agent under the newly established
escrow account shall constitute a payment against any amount due to
the Company (or its successors and assigns), including any Earn-Out
Payment, and shall be fully credited against the amount to be paid
thereunder and no breach or default under the obligation under this
Agreement (or any other instrument associated with the obligation)
can and shall be asserted by the Company (or its successors and
assigns), the Shareholder or the Principals. The escrow account shall
be established with the Escrow Agent or the escrow agent under the
newly established escrow account and governed by the terms of the
Escrow Agreement or the new escrow agreement. The amounts deposited
pursuant to this Section 11.8 shall be controlled by the Escrow Agent
or the escrow agent under the newly established escrow account in
accordance with the terms of the Escrow Agreement or the newly
established escrow agreement and the determination of the Purchaser's
claim for Loss or Losses shall be determined in accordance with
Article 9 of this Agreement.
11.9 Employee Retention. Except as provided in this Section 11.9,
the Purchaser will offer employment to all employees set forth on Schedule
3.20 as at-will employees, at substantially the same salary as previously
provided by the Company, and will employ such employees, provided that
each such employee agrees to be so hired. It is understood that the
employment of the employees of the Company that accept the Purchaser's
offer of employment will not commence until immediately following the
close of business on the Closing Date, except that the employment of
individuals receiving short-term disability benefits or an approved leave
of absence on the Closing Date will become effective as of the date they
present themselves for work with the Purchaser immediately upon the
termination of the short-term disability benefits or approved leave of
absence, respectively; provided, that nothing herein shall require the
Purchaser to employ any employee who does not report for work before or at
the conclusion of an authorized short-term disability leave of absence or
other authorized leave of absence, provided, further, that a leave of
absence shall be considered to be "Authorized" if it is authorized by law
or was authorized by the Company pursuant to the Company's disability
leave of absence or other leave of absence policies. Any employee that
falls within the immediately preceding sentence is so indicated on
Schedule 11.9.
67
The Purchaser shall provide to the Company's employees the Benefit
Plans and other employee benefits that are provided to the Parent's employees
from time to time; provided, however, that the Purchaser may choose to continue
any or all of the Company's Benefit Plans, including the Company's 401(k) plan,
after the Closing in lieu of providing the Parent's Benefit Plans to the former
employees of the Company.
The Purchaser shall credit all former employees of the Company who
become employees of the Purchaser, for the purpose of medical, dental, health
and life insurance, the Parent's 401(k) plan, the Parent's Employee Stock
Ownership Plan (for purposes of eligibility but not vesting) and paid time off
with all of their prior service/employment time with the Company. Nothing in
this Section 11.9 is intended to create, or shall create or confer, any rights
or remedies upon any Person other than the Purchaser or the Company and their
respective successors and assigns, nor shall this Section 11.9 create any right
of employment for any employee of the Company.
The Purchaser shall not treat any Company employee as a "new" employee
for purposes of any exclusion under any health plan or dental plan of the
Purchaser or any of its Affiliates for a pre-existing medical condition and
shall make appropriate arrangements with its insurance carrier(s) to ensure such
result.
11.10 Certain Tax Matters.
(a) Income and Transfer Taxes. All income, transfer,
registration, sales and use, excise, franchise and similar Taxes and
fees of any kind (including all penalties and interest) which arise
from, in connection with or are imposed incident to the sale of the
Assets or any other transaction that occurs pursuant to this Agreement
shall be borne and timely paid (without penalty or distraint) solely by
the Company.
(b) Non-foreign Person Affidavit. The Company shall furnish to
the Purchaser on or before the Closing Date a non-foreign Person
affidavit as required by Section 1445 of the Code in the form attached
hereto as Exhibit K.
(c) Allocation of Purchase Price. Within thirty (30) days
following the Closing Date, the Purchaser and the Company shall, in a
reasonable manner after appropriate consultation, determine the fair
market value of the Assets, and the Purchaser and the Company shall
allocate in writing the Purchase Price among the Assets as required by
Section 1060 of the Code and the Treasury Regulations thereunder in
connection with the transactions contemplated by this Agreement. Such
allocation and fair market values shall be set forth on Schedule
11.10(c) hereto. The Purchaser and the Company, as appropriate, shall
file an Asset Acquisition Statement on Form 8594 (which conforms with
the parties' allocation) with their federal income Tax Returns for the
Tax year in which the Closing occurs and shall contemporaneously
provide the other party with a copy of the Form 8594 being filed. Each
party agrees not to assert, in connection with any Tax Return, claim,
audit or similar Proceeding, any allocation of the Purchase Price which
contradicts the allocation and fair market values determined by the
parties hereunder.
68
(d) Post-Closing Access and Cooperation. From and after the
Closing Date, the Purchaser agrees to permit the Company to have
reasonable access, during normal business hours, to the Company's books
and records, to the extent that such books and records relate to a pre-
Closing period, and personnel, for the purpose of enabling the
Shareholder to: (i) prepare Tax Returns of the Company, (ii)
investigate or contest any Tax matter, and (iii) evaluate any claim for
indemnification made by the Purchaser or the Parent.
11.11 Withdrawal from States as Foreign Corporation. Promptly following
the Purchaser's written notification to the Company of the Purchaser's receipt
of all Permits necessary to own and operate the Business, the Company may
withdraw as a corporation from states in which it is presently qualified.
11.12 Consents. After the Closing Date, the Company and the Purchaser
will cooperate and will each use commercially reasonable efforts to obtain any
consents listed on Schedule 5.10(a) and Schedule 5.10(b) that are not obtained
prior to the Closing Date. Anything to the contrary notwithstanding, this
Agreement shall not operate to assign any Contract, or any claim, right or
benefit arising thereunder or resulting therefrom, if an attempted assignment
thereof, without the consent of a Third Party thereto, would constitute a
breach, default or other contravention thereof or in any way adversely affect
the rights of the Company or the Purchaser thereunder. In the event that a
consent required to assign any Contract or Permit is not obtained on or prior to
the Closing Date, then, subject always to the terms of the applicable Contract
or Permit and to the extent permitted by Applicable Law, the parties will use
commercially reasonable efforts to (i) provide to the Purchaser the benefits of
the applicable Contract to the extent related to the Business, (ii) relieve the
Company to the extent possible, of the performance obligations of the applicable
Contracts and Permits, (iii) cooperate in any reasonable and lawful arrangement
designed to provide the benefits to the Purchaser, including entering into
subcontracts for performance, and (iv) enforce at the request of the Purchaser
and for the account of the Purchaser any rights of the Company arising from any
such Contract or Permit (including the right to elect to terminate such Contract
in accordance with the terms thereof upon the request of the Purchaser).
11.13 Parent Guaranty. The Parent shall guarantee the due performance
and payment by the Purchaser of all of its obligations arising under this
Agreement and any Ancillary Document in the form of the guaranty attached hereto
as Exhibit L.
11.14 Corporate Existence. The Company shall remain in existence and
good standing in Massachusetts and in all states in which the Company has sites
for the period during which any of the Purchaser's DEA Permit applications are
pending and not yet issued and effective for the operation of the Business with
respect to controlled substances regulated and licensed pursuant to such
Permits.
69
ARTICLE 12
TERMINATION
12.1 Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned after the date of this
Agreement, but not later than the Closing:
(a) by mutual written consent of all parties hereto;
(b) by the Purchaser or the Company if any of the conditions
provided for in Article 6 of this Agreement have not been met and have
not been waived in writing by the party seeking to terminate on or
before the Closing Date;
(c) by the Purchaser if any of the conditions provided for in
Article 7 of this Agreement have not been met (other than through the
failure of the Purchaser or the Parent to comply with their obligations
under this Agreement) and have not been waived or deemed waived in
accordance with the provisions of this Agreement in writing by the
Purchaser on or before the Closing Date;
(d) by the Company if any of the conditions provided for in
Article 8 of this Agreement have not been met (other than through the
failure of the Company, the Shareholder or the Principals to comply
with their obligations under this Agreement) and have not been waived
in writing by the Company on or before the Closing Date;
(e) by either the Purchaser or the Company if the Closing
shall not have occurred on or before September 30, 2001; and
(f) by a party who objects to a Supplement pursuant to
Section 13.21.
In the event of termination or abandonment by any party as provided in this
Section 12.1, written notice shall forthwith be given to the other party and,
except as otherwise provided herein, each party shall pay its own expenses
incident to preparation or consummation of this Agreement and the transactions
contemplated hereunder and no party shall have any Liability to any other party
hereunder except such Liability as may arise as a result of a breach hereof.
12.2 Return of Documents and Nondisclosure. If this Agreement is
terminated for any reason pursuant to Section 12.1 hereto, each party and its
counsel shall return all documents and materials which shall have been furnished
by or on behalf of the other party, and all copies thereof, and each party
hereby covenants that it will not Use or Disclose to any Person any Confidential
Information about the other party or any information about the transactions
contemplated hereby, except insofar as may be necessary to comply with the
requirements of any Governmental Body or Final Order or to assert its rights
hereunder.
70
ARTICLE 13
MISCELLANEOUS
13.1 Survival of Representations and Warranties, Covenants and Agreements.
Each of the representations and warranties of the parties contained in this
Agreement and in any Exhibit, Schedule, certificate, instrument or document
delivered by or on behalf of any of the parties hereto pursuant to this
Agreement and the transactions contemplated hereby shall survive the Closing of
the transactions contemplated hereby and any investigation made by the parties
or their agents for a period of eighteen (18) months after the Closing, after
which no claim for indemnification for any misrepresentation, or for the breach
or falsity of any representation or warranty under this Agreement or any
Ancillary Document, may be brought, and no action with respect thereto may be
commenced, and no party shall have any Liability or obligation with respect
thereto, unless (i) the Indemnified Party gave written notice to the
Indemnifying Party specifying with particularity the misrepresentation or a
breach of representation or warranty claimed on or before the expiration of such
period, (ii) the claim relates to a breach of any representations or warranties
contained in Sections 3.10 or 3.25, in which case the right to indemnification
shall survive until the expiration of the applicable statute of limitations, or
(iii) the claim relates to any representation or warranty in Sections 3.5 or
10.7, in which case the representation or warranty shall indefinitely survive
the Closing. The covenants and agreements arising from, incident to or in
connection with this Agreement shall survive the Closing indefinitely, until
such covenants and agreements are fully satisfied and require no performance or
forbearance, or the rights of a party hereto expire on a specific date by the
terms hereof; provided, however, the survival period during which the Purchaser
and/or the Parent may make claims under this Agreement for a Loss or Losses
resulting from Excluded Liabilities shall be (x) eighteen (18) months after the
Closing with respect to the Excluded Liabilities described in Sections
2.1(b)(ii)(H), 2.1(b)(ii)(I), 2.1(b)(ii)(J), and 2.1(b)(ii)(L), and (y) the
expiration of the applicable statute of limitations period for the Excluded
Liabilities described in Sections 2.1(b)(ii)(C), 2.1(b)(ii)(D), 2.1(b)(ii)(E)
and 2.1(b)(ii)(K).
13.2 Preservation of and Access to Records. The Purchaser shall preserve
all books and records of the Company transferred as part of the Assets for a
period of six (6) years after the Closing Date; provided, however, the Purchaser
may destroy any part or parts of such records upon obtaining written consent of
the Company for such destruction, which consent shall not be unreasonably
withheld, delayed or conditioned. Such records shall be made available to the
Company and its representatives at all reasonable times during normal business
hours of the Purchaser during said six-year period with the right at its expense
to make abstracts from and copies thereof.
13.3 Cooperation. The parties hereto shall cooperate with each other in all
respects, including using commercially reasonable efforts to assist each other
in satisfying the conditions precedent to their respective obligations under
this Agreement, to the end that the transactions contemplated hereby will be
consummated.
13.4 Public Announcements. The timing and content of all public
announcements relating to the execution of this Agreement and the consummation
of the transactions contemplated hereby shall be approved by both the Purchaser
and the Company prior to the
71
release of such public announcements, and each party agrees to cooperate with
the other party as appropriate to comply with all Applicable Laws. Subsequent to
the date of receipt of all consents and approvals of each Governmental Body
necessary to consummate this transaction, the Parent may make such announcements
and/or advertisements as the Parent, in its sole discretion, deems necessary.
13.5 Notices. All notices, demands and other communications provided for
hereunder shall be in writing and shall be given by personal delivery, via
facsimile transmission (receipt telephonically confirmed), by nationally
recognized overnight courier (prepaid), or by certified or registered first
class mail, postage prepaid, return receipt requested, sent to each party, at
its/his address as set forth below or at such other address or in such other
manner as may be designated by such party in written notice to each of the other
parties. All such notices, demands and communications shall be effective when
personally delivered, one (1) business day after delivery to the overnight
courier, upon telephone confirmation of facsimile transmission or upon receipt
after dispatch by mail to the party to whom the same is so given or made:
If to Purchaser: ▇▇▇▇▇▇▇▇▇ Dental Company
or the Parent ▇▇▇▇▇▇▇ Veterinary Supply, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ and ▇▇▇▇▇▇, Professional Association
2400 IDS Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Company, ▇. ▇. ▇▇▇▇▇▇▇, Inc.
the Shareholder JAW Holdings
and/or the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Principals: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ Procter LLP
Exchange Place
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Cable
▇. ▇▇▇▇▇▇ Lovely, Jr., P.C.
72
13.6 Entire Agreement. This Agreement, including the documents,
instruments, and agreements to be executed by the parties pursuant hereto,
contains the entire agreement of the parties hereto and supersedes all prior or
contemporaneous agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof.
13.7 Remedies. The respective indemnification obligations of the parties
set forth in Article 9 of this Agreement are the exclusive remedies of the
parties and their successors, assigns, heirs, beneficiaries or others seeking to
claim by, through, or on behalf of a party, under this Agreement or any
Ancillary Document, and no other remedy or remedies, whether arising under any
Applicable Law, common law or otherwise, may be used, asserted or prosecuted in
connection with this Agreement or any Ancillary Document and any transaction,
occurrence, or omission arising from, in connection with or otherwise based upon
this Agreement or any Ancillary Document; provided, however, that all equitable
-------- -------
remedies and assertions of fraud and/or intentional misrepresentation shall
remain available and shall not require an election of remedies.
13.8 Amendments. No purported amendment, modification or waiver of any
provision of this Agreement or any of the documents, instruments or agreements
to be executed by the parties pursuant hereto shall be effective unless in a
writing specifically referring to this Agreement and signed by all of the
parties hereto.
13.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns but, except as hereinafter
provided in this Section, nothing in this Agreement is to be construed as an
authorization or right of any party to assign its rights or delegate its duties
under this Agreement without the prior written consent of the other parties
hereto. Notwithstanding the foregoing, in their sole discretion, both the
Purchaser and the Parent may assign their respective rights in and/or delegate
their respective duties under this Agreement to an Affiliate of the Parent. In
the event of such an assignment of rights and/or delegation of duties, all
references to the Purchaser, the Parent, the Company, the Shareholder or any of
the Principals, as applicable to the assignment, in this Agreement shall also be
deemed to be references to the Person to which this Agreement is assigned;
provided that no such assignment and/or delegation shall relieve the assignor of
any of its duties or obligations hereunder or under any Ancillary Document.
13.10 Fees and Expenses. Each party hereto shall pay their own fees and
expenses incurred in connection with negotiating and preparing this Agreement
and consummating the transactions contemplated hereby, including but not limited
to fees and disbursements of their respective attorneys, accountants and
investment bankers. If the transaction is consummated, all fees and expenses,
including legal, accounting, investment banking, broker's and finder's fees and
expenses incurred by the Company in connection with this transaction (the
"Transactional Expenses") shall be deemed expenses of the Company and shall be
borne by the Company. Any Transactional Expenses paid by the Company in excess
of the Paid Transactional Expenses set forth on the itemized schedule delivered
by the Company to the Purchaser pursuant to Section 7.10 hereof shall be, if
asserted against and paid by either the Purchaser or the Parent, recoverable by
the Purchaser from the Escrow Fund as a "Loss" without regard to the Basket
Amount threshold contemplated by Section 9.1.
73
13.11 Governing Law and Jurisdiction. This Agreement, including the
documents, instruments and agreements to be executed and/or delivered by the
parties pursuant hereto, shall be construed, governed by and enforced in
accordance with the internal laws of the State of Minnesota, without giving
effect to the principles of comity or conflicts of laws thereof. The Company,
the Shareholder, the Principals, the Purchaser and the Parent agree and consent
that any legal action, suit or Proceeding seeking to enforce any provision of
this Agreement with the exception of Section 9.4 (which is governed by Section
9.4(c)) shall be instituted and adjudicated solely and exclusively in any court
of general jurisdiction in Minnesota, or in the United States District Court
having jurisdiction in Minnesota and the Shareholder and the Purchaser agree
that venue will be proper in such courts and waive any objection which they may
have now or hereafter to the venue of any such suit, action or Proceeding in
such courts, and each hereby irrevocably consents and agrees to the jurisdiction
of said courts in any such suit, action or Proceeding. The Shareholder and the
Purchaser further agree to accept and acknowledge service of any and all process
which may be served in any such suit, action or Proceeding in said courts, and
also agree that service of process or notice upon them shall be deemed in every
respect effective service of process or notice upon them, in any suit, action,
Proceeding, if given or made (i) according to Applicable Law, (ii) by a Person
over the age of 18 who personally served such notice or service of process on
the Shareholder or the Purchaser, as the case may be, or (iii) by certified
mail, return receipt requested, mailed to the Shareholder or the Purchaser, as
the case may be, at their respective addresses set forth in this Agreement.
13.12 Counterparts and Facsimile Signatures. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same Agreement. The
counterparts of this Agreement and all Ancillary Documents may be executed and
delivered by facsimile signature by any of the parties to any other party and
the receiving party may rely on the receipt of such document so executed and
delivered by facsimile as if the original had been received.
13.13 Headings. The headings of the articles, sections and subsections of
this Agreement are intended for the convenience of the parties only and shall in
no way be held to explain, modify, construe, limit, amplify or aid in the
interpretation of the provisions hereof. The terms "this Agreement," "hereof,"
"herein," "hereunder," "hereto" and similar expressions refer to this Agreement
as a whole and not to any particular article, section, subsection or other
portion hereof and include the Schedules and Exhibits hereto and any document,
instrument or agreement executed and/or delivered by the parties pursuant
hereto.
13.14 Scope of Agreement. Unless the context otherwise requires, all
references in this Agreement or in any Schedule or Exhibit hereto, to the
assets, properties, operations, business, Financial Statements, employees, books
and records, accounts receivable, accounts payable, Contracts or other
attributes of the Business of the Company shall mean such items or attributes as
they are used in, apply to, or relate to the Business of the Company.
13.15 Number and Gender. Unless the context otherwise requires, words
importing the singular number shall include the plural and vice versa and words
importing the use of any gender shall include all genders.
74
13.16 Severability. In the event that any provision of this Agreement is
declared or held by any court of competent jurisdiction to be invalid or
unenforceable, such provision shall be severable from, and such invalidity or
unenforceability shall not be construed to have any effect on, the remaining
provisions of this Agreement, unless such invalid or unenforceable provision
goes to the essence of this Agreement, in which case the entire Agreement may be
declared invalid and not binding upon any of the parties.
13.17 Parties in Interest. Nothing expressed or implied in this Agreement
is intended or shall be construed to confer any rights or remedies under or by
reason of this Agreement upon any Person other than the Company, the
Shareholder, the Principals, the Purchaser and the Parent and their respective
heirs, personal representatives, successors and permitted assigns. Nothing in
this Agreement is intended to relieve or discharge the Liabilities of any third
Person to the Purchaser or the Company.
13.18 Waiver. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and/or delivered by the parties pursuant hereto, may be
waived only by a written instrument executed by the party waiving compliance.
Any such waiver shall only be effective in the specific instance and for the
specific purpose for which it was given and shall not be deemed a waiver of any
other provision hereof or of the same breach or default upon any recurrence
thereof. No failure on the part of a party hereto to exercise and no delay in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
13.19 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The words "including," "include" or "includes"
shall mean including without limitation. The parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
13.20 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to
injunctive relief to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
13.21 Supplementation of Schedules. The Company or the Purchaser may elect
to deliver a supplement ("Supplement") to one or more of the Schedules
previously delivered to the other in accordance with the procedures set forth in
this Section 13.21 as follows:
75
(a) Prior to the Closing Date, any and all Supplements must be in writing
and must be delivered to the other party before the date that is five (5)
business days prior to the scheduled Closing Date. The other party shall be
given the opportunity during the five (5) business days following the delivery
of the proposed Supplement to consider that Supplement. If the recipient does
not object to the contents of the Supplement within such period, the Schedule in
question shall be deemed amended by the Supplement. If the recipient objects to
a proposed Supplement, the sole remedy of such objecting party shall be
termination of this Agreement in accordance Section 12.1(f) of this Agreement,
provided that this limitation of remedies shall only apply if the Supplement was
prepared in connection with or was made necessary by a change in circumstance of
which the party proposing the Supplement was unaware from the date of this
Agreement to the date of the proposed Supplement; and
(b) Any and all Supplements within five (5) business days prior to the
scheduled Closing Date must be in writing and delivered to the other party
pursuant to Section 13.5 of this Agreement, and will only be deemed to amend a
Schedule with the written consent of the recipient of the Supplement.
[SIGNATURE PAGE FOLLOWS]
76
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by duly authorized representations as of the day, month and year first
above written.
SHAREHOLDER: PURCHASER:
JAW HOLDINGS ▇▇▇▇▇▇▇ VETERINARY SUPPLY,
INC.
By /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. By /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------- ----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Trustee and not Its: CFO
--------------------------
individually
By /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III PARENT:
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, Trustee and not
individually ▇▇▇▇▇▇▇▇▇ DENTAL COMPANY
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------- ----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not Its: EVP
--------------------------
individually
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not individually
PRINCIPALS: COMPANY:
/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. ▇. ▇. ▇▇▇▇▇▇▇, INC.
-------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., individually
By /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Its: President
------------------------------------------- --------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, individually
/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
-------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, individually
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, individually
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
77