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EXHIBIT 10.4
CONTINGENT PAYMENT AGREEMENT
THIS CONTINGENT PAYMENT AGREEMENT (the "Agreement") made and entered
into this 4th day of May, 1995, by and among YOUNG DENTAL MANUFACTURING
COMPANY, a Missouri corporation ("Buyer"), THE XXXXXXX X. XXXXXXXX TRUST dated
July 25, 1978 ("Xxxxxxxx"), one of the stockholders of LORVIC HOLDINGS, INC., a
Delaware corporation ("Lorvic Holdings"), and BOATMEN'S TRUST COMPANY (the
"Escrow Agent"). All capitalized terms not defined herein shall have the same
meanings as set forth in the Purchase Agreement (as herein defined).
WHEREAS, Buyer and the stockholders of Lorvic Holdings, including
Xxxxxxxx, are parties to a certain Stock Purchase Agreement made as of May 4,
1995 (the "Purchase Agreement"), pursuant to which Buyer is purchasing all of
the capital stock of Lorvic Holdings and its wholly owned subsidiary, The
Lorvic Corporation, a Delaware corporation ("Lorvic Corporation");
WHEREAS, Xxxxxxxx is willing to represent and warrant that for the tax
periods ending on or before the Closing Date of Lorvic Holdings and Lorvic
Corporation, neither Lorvic Holdings nor Lorvic Corporation shall have any tax
liabilities, together with any interest, penalties, additions to tax or
additional amounts with respect thereto, for any tax matter other than those
Lorvic Holdings represents and warrants to have been paid or properly reflected
on the Closing Balance Sheet pursuant to Section 3.1(o) of the Purchase
Agreement ("Excess Taxes");
WHEREAS, Buyer desires to withhold Five Hundred Thousand Dollars
($500,000) (the "Initial Escrow Amount") from Xxxxxxxx and to make the payment
of the same contingent upon the expiration of the applicable statutes of
limitation without the assessment of any Excess Taxes which Xxxxxxxx represents
and warrants that neither Lorvic Holdings nor Lorvic Corporation owes; and
WHEREAS, Buyer is willing to deposit the Initial Escrow Amount with
the Escrow Agent upon the terms hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Representation and Warranty of Xxxxxxxx. Xxxxxxxx represents
and warrants to Buyer that for the tax periods of Lorvic Holdings and Lorvic
Corporation ending on or before Closing Date, neither Lorvic Holdings nor
Lorvic Corporation shall have any liability for Excess Taxes. This
representation and warranty shall survive until such time as the assessment or
collection of any Excess Taxes with respect to any tax periods of Lorvic
Holdings or Lorvic Corporation ending on or before the
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Closing Date is prevented by the operation of any law or rule of law.
2. Establishment of Escrow Account. The Escrow Agent shall
establish at is offices located at St. Louis, Missouri an escrow account (the
"Escrow Account") and shall cause all funds deposited into the Escrow Account
to be held, invested and distributed in accordance with the terms of this
Agreement. The amount deposited into the Escrow Account, together with any
proceeds of investments thereof, that may be held in the Escrow Account from
time to time are hereinafter referred to as "Escrow Funds." The Escrow Agent
shall keep appropriate records to reflect the current value from time to time
of the Escrow Funds, including appropriate adjustments for disbursements and
income earned and losses in respect thereof.
3. Delivery of Escrow Funds. Buyer hereby agrees to deliver or
cause to be delivered to Escrow Agent in accordance with the terms of this
Agreement the Initial Escrow Amount, in cash, to be held hereunder as Escrow
Funds.
4. Investment of Escrow Funds. The Escrow Funds shall be
invested and reinvested by the Escrow Agent in the Escrow Agent's Tax Exempt
Money Market Fund or, if otherwise specifically directed to do so by Buyer, in
obligations issued or guaranteed by any state or political subdivision thereof
(including stripped obligations the principal of and interest on which have
been separated and offered for sale separate from each other) and, rated in the
second highest category if rated as short term obligations or not lower than
the third highest category if rated as long term obligations by Xxxxx'x
Investors Service, Inc. ("Moody's") or by Standard & Poor's Corporation
("Standard & Poor's"), each of New York, New York, or their respective
successors.
5. Notice of Claim. (a) Defense of Claim. Promptly after the
assertion by any governmental agency against Lorvic Holdings or Lorvic
Corporation of a claim that either Lorvic Holdings or Lorvic Corporation may be
liable for any Excess Tax (a "Claim"), Buyer shall promptly notify Xxxxxxxx.
Thereupon, Xxxxxxxx shall have the right, upon written notice (the "Defense
Notice") to Buyer within 30 days after receipt by Xxxxxxxx of notice of the
Claim (or sooner if such claim so requires) to conduct, at Nemanick's own
expense, the defense against the Claim. In the event of a Claim, Xxxxxxxx
shall have the right to reasonable access to the pertinent documents and
records of Lorvic Holdings and/or Lorvic Corporation in the defense of a Claim.
The Defense Notice shall specify the counsel Xxxxxxxx shall appoint to defend
such Claim. Buyer shall have the right to employ separate counsel in any such
Claim and/or participate in the defense thereof, but the fees and expenses of
such counsel shall not be included as part of any amount to be reimbursed
hereunder. Xxxxxxxx shall apprise Buyer of all significant developments. In
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the event Xxxxxxxx shall fail to (i) give a Defense Notice within such 30 day
period, or (ii) provide a reasonable defense against the prosecution of a
Claim, Buyer may conduct such defense and the cost thereof shall be
reimbursable from the Escrow Funds, as provided in Paragraph (b) hereof.
(b) Payment to Buyer. Upon joint written instructions by Buyer
and Xxxxxxxx to the Escrow Agent, Buyer shall be entitled to payment from the
Escrow Funds for the following:
(i) The full amount of any Excess Tax payable to a taxing
jurisdiction; and
(ii) All reasonable costs and expenses incurred in defending
any Claim for Excess Tax in the event that Xxxxxxxx
fails to provide a reasonable defense.
The amount(s) subject to reimbursement pursuant to this Paragraph (b)
shall be calculated net of any amounts which have been previously recovered by
Buyer from other collateral sources (such as contractual indemnities of any
person which are contained outside this Agreement).
6. Earnings. The Escrow Agent shall remit to Buyer, on or before
March 10 of each year during the term hereof, an amount, which shall be
certified to the Escrow Agent by Buyer and Xxxxxxxx, equal to the Federal,
State and local tax liability of Buyer with respect to the taxable income of
the Escrow Funds for the prior calendar year. Buyer shall pay all taxes due on
such earnings and shall indemnify and hold Xxxxxxxx harmless therefrom.
7. Release of Escrow Funds. Upon joint written instructions by
Buyer and Xxxxxxxx to the Escrow Agent, the Escrow Agent shall release and pay
to Xxxxxxxx the remaining balance of the Escrow Funds as soon as practicable
after either of the following events:
(a) the time that the assessment or collection of any
Excess Taxes is prevented by operation of any law or rule of law; or
(b) Xxxxxxx X. Xxxxxxxx fails to receive any monetary
compensation to which he is entitled under that certain Employment and
Noncompetition Agreement dated May 4, 1995 between Xxxxxxx X. Xxxxxxxx
and Buyer.
8. Parties' Interest and Escrow Funds. The interest of the
Parties in the Escrow Funds shall not be subject to sale, assignment, transfer,
pledge, encumbrance or other disposition while held in the Escrow Account,
except as specifically contemplated by Section 15 hereof.
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9. Responsibility of the Escrow Agent. The Escrow Agent accepts the
agency created by this Agreement upon the terms and conditions hereof and
undertakes to perform such duties and only such duties as are specifically set
forth herein. No provision of this Agreement shall be construed to relieve the
Escrow Agent from liability for its own gross negligence or willful misconduct,
except that:
(a) The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement, and no
implied covenants, duties or obligations shall be read into this
Agreement against the Escrow Agent nor shall the Escrow Agent be bound
by the provisions of any other agreements between the other parties
hereto beyond the specific terms hereof; the Escrow Agent shall not be
liable for any action taken, suffered or omitted by it in good faith
and reasonably believed by it to be authorized or within the
discretion, rights, duties, privileges or powers conferred upon it by
this Agreement; the Escrow Agent shall not be liable for any error of
judgment made in good faith by a responsible officer or officers of
the Escrow Agent, unless the Escrow Agent was grossly negligent in
ascertaining the pertinent facts or in employing such officer or
officers; and the Escrow Agent shall not be liable to any person with
respect to any action taken, omitted or suffered to be taken by it in
accordance with the provisions of this Agreement or in accordance with
the written directions of Xxxxxxxx or Buyer as provided herein or of a
court of competent jurisdiction except in the case of the Escrow
Agent's gross negligence or willful misconduct.
(b) The Escrow Agent may act in reliance upon and be
protected in acting or refraining from acting upon any instrument or
signature believed to be genuine and may assume that any person
purporting to give any writing, notice, advice or instruction in
connection with the provisions hereof has been duly authorized to do
so.
(c) The Escrow Agent may consult with counsel, auditors and
other experts and any opinion of counsel or written opinion of such
auditors or other experts shall be full and complete authorization and
protection with respect to any action taken or suffered or omitted by
the Escrow Agent thereunder in good faith and in accordance with such
opinion of counsel or opinion of such auditors or other experts within
the area of their respective expertise.
(d) The Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either
directly or by or through its agents or attorneys. Nothing in this
Agreement shall be deemed to impose upon the Escrow Agent any
liability to any other
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person as a result of any failure of the Escrow Agent to qualify to do
business or to act as fiduciary or otherwise in any jurisdiction other
than the jurisdiction of its formation.
(e) No property held in escrow by the Escrow Agent hereunder
shall be subject to any setoff, counterclaim, recoupment or other
right which the Escrow Agent may have against either of the other
parties hereto or against any other person for any reason whatsoever.
(f) If any dispute arises between Buyer and Xxxxxxxx as to
which of them is entitled to delivery of the disputed portion of the
Escrow Funds, or if the Escrow Agent is uncertain as to its
obligations hereunder, the Escrow Agent may, but shall not be
obligated to, either (i) commence an interpleader action against Buyer
and Xxxxxxxx in any state court located within St. Louis County,
Missouri, or federal court located in St. Louis, Missouri, and deposit
the disputed Escrow Funds with such court, whereupon the Escrow Agent
may apply to the court for an order discharging it from all further
liability to any other party to this Agreement, or (ii) refrain from
any action and continue to hold the disputed portion of the Escrow
Funds pending a resolution of the dispute by either a court of
competent jurisdiction or by a written agreement signed by Buyer and
Xxxxxxxx. For the purposes of any action or proceeding contemplated
by clause (i) above, each party hereby consents to the jurisdiction of
said courts and agrees that service of process in any such action or
proceeding may be made by certified or registered mail at the address
for notices to such party provided in this Agreement.
10. Expenses; Indemnification. Each of (i) Buyer and (ii) Xxxxxxxx
agrees to pay one-half of any fees or expenses charged by the Escrow Agent for
its services to be performed hereunder. In addition, Buyer and Xxxxxxxx hereby
agree jointly to indemnify the Escrow Agent for, and to hold it harmless
against, any loss, liability or expense incurred without gross negligence or
willful misconduct on the part of the Escrow Agent, arising out of or in
connection with its entering into this Agreement and carrying out its duties
hereunder, including the costs and expenses of defending itself against any
claim of liability.
11. Removal and Resignation. The Escrow Agent may at any time be
removed by the written direction of Xxxxxxxx and Buyer. The Escrow Agent or
any successor escrow agent may at any time resign and be discharged of the
agency hereby created by giving written notice to each of Xxxxxxxx and Buyer
specifying the date upon which it desires that such resignation shall take
effect. Such removal or resignation shall take effect on the date specified in
the notice of removal or resignation, which date shall not be earlier than 60
days after the giving of the notice
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of removal or resignation unless a successor escrow agent shall have been
appointed pursuant to Section 12 hereof and shall have accepted such
appointment, in which event such removal or resignation shall take effect
immediately upon the acceptance by such successor escrow agent. In the event
of such removal or resignation, Buyer and Xxxxxxxx shall take prompt steps to
have a successor escrow agent appointed in the manner hereinafter provided.
12. Appointment of Successor Escrow Agent. If at any time the Escrow
Agent shall resign or be removed or if at any time a vacancy shall occur in the
office of the Escrow Agent for any other cause, a successor escrow agent shall
be appointed by a written instrument executed by Buyer and Xxxxxxxx and
delivered to the Escrow Agent and the successor escrow agent. Upon acceptance
of said instrument by the successor escrow agent, the resignation or removal of
the Escrow Agent shall become effective and such successor escrow agent shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder. If no successor escrow agent shall have been appointed
at the effective date of resignation of the Escrow Agent, the Escrow Agent or
either other party hereto shall petition a court of competent jurisdiction for
the appointment of a successor and the Escrow Agent's duties shall be purely
ministerial until such appointment is effective.
13. Termination. This Agreement shall terminate upon the release of
all Escrow Funds held in the Escrow Account hereunder pursuant to Section 7
hereof or upon written agreement of the parties hereto, which agreement, in the
case of the Escrow Agent, shall not be unreasonably withheld.
14. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by facsimile
transmission, telexed or mailed by overnight delivery service or by registered
or certified mail (return receipt requested), postage prepaid, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof):
To the Escrow Agent:
Boatmen's Trust Company
Corporate Trust Department
000 Xxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Telecopier No.: 000-000-0000
Attention: H. E. Bradford
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To Buyer:
Young Dental Manufacturing Company
00000 Xxxxxxxxx Xxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxx 00000
Telecopier No: 000-000-0000
Attention: Chief Financial Officer
To Xxxxxxxx:
Xxxxxxx X. Xxxxxxxx
000 Xxxxxxxx
Xxxx & Xxxxxxx, Xxxxxxxx 00000
15. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Escrow Agent, Buyer and Xxxxxxxx and their
respective successors and permitted assigns. Any reference to a party
contained in this Agreement shall be deemed to apply to such party's successors
and permitted assigns to the extent there shall be any. No party hereto may
assign its rights and obligations hereunder without the written consent of the
other parties hereto. Any purported assignment in violation of the provisions
of this Section 15 shall be null and void.
16. Amendments and Modifications. This Agreement may not be amended
or modified in any respect without the express written consent of Buyer,
Xxxxxxxx and the Escrow Agent.
17. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Missouri without regard
to the conflict of laws principles thereof.
18. Counterparts. This Agreement may be executed in any number of
counterparts, and by any party on a separate counterpart, each of which as so
executed and delivered shall be deemed an original but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any party hereto to produce or account for
more than one such counterpart executed and delivered by such party.
19. No Waiver. The failure of any party to insist, in any one or
more instances, upon the timely performance of any of the terms, covenants or
conditions of this Agreement and to exercise any right hereunder, shall not be
construed as a waiver or relinquishment of the future performance of any such
term, covenant or condition or the future exercise of such right, but the
obligations of the other parties with respect to such future performance shall
continue in full force and effect.
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20. Descriptive Headings. The descriptive heading of the sections of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
IN WITNESS WHEREOF, each of the Escrow Agent, Buyer and Xxxxxxxx have
caused this Agreement to be duly executed and delivered, all as of the date
first above written.
BOATMEN'S TRUST COMPANY
By: /s/ Xxxxx Xxxxxx
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YOUNG DENTAL MANUFACTURING COMPANY
By:/s/ Xxxxxx X. Xxxxxxxx
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THE RICHMOND X. XXXXXXXX TRUST
By:/s/ Xxxxxxx X. Xxxxxxxx
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XXXXXXX X. XXXXXXXX, Trustee
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