STOCK SALE AND PURCHASE AGREEMENT
EXHIBIT
2.1
This
Stock Sale and Purchase Agreement (this “Agreement”) is made as of September 21,
2006, by LIL' DRUG STORE PRODUCTS, INC., an Iowa corporation (“Seller”), XXXXXXX
USA B.V., a private company with limited liability organized under the laws
of
the Netherlands (the “Company”), the Seller’s shareholders set forth on the
signature page attached hereto (the “Shareholders”), and MEDTECH PRODUCTS INC.,
a Delaware corporation (“Buyer”).
RECITALS
Seller
desires to sell, and Buyer desires to purchase, all of the issued and
outstanding shares (the “Shares”) of capital stock of the Company, a
wholly-owned subsidiary of Seller, for the consideration and on the terms set
forth in this Agreement.
The
Shareholders, as the record and beneficial owners of 96.8% of all of the
outstanding capital stock of Seller, will indirectly benefit from the sale
of
the Shares by Seller to Buyer and therefore desire to execute this Agreement
for
the limited purposes set forth below.
AGREEMENT
The
parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For
purposes of this Agreement, the following terms have the meanings specified
or
referred to in this Section 1:
“Accounts
Receivable” - as defined in Section 3.7.
“Affiliate”
- with respect to any Person, any other Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the Person specified.
“Agreement”
- as defined in the first paragraph of this Agreement.
“Allocation”
- as defined in Section 2.5.
“Annual
Balance Sheet” - the balance sheet of the Company as of December 31, 2005
included in the Annual Financial Statements.
“Annual
Financial Statements” - as defined in Section 3.4.
“Assignment
and Assumption” - as defined in Section 2.4(a)(vi).
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“Business”
means the business carried on by the Company which involves the design,
marketing, sale and distribution of the Products in the Territory.
“Business
Day” - means any day other than a Saturday, Sunday or holiday on which
commercial banks located in New York City are obligated or authorized by law
or
executive order to close.
“Business
Intellectual Property” - as defined in Section 3.15.
“Buyer”
-
as defined in the first paragraph of this Agreement.
“Buyer’s
Advisors” - as defined in Section 5.1.
“Check-the-box
Election” - as defined in Section 3.9(b).
“Closing”—as
defined in Section 2.3.
“Closing
Date”—the date and time as of which the Closing actually takes
place.
“Company”
- as defined in the first paragraph of this Agreement.
“Company
Transaction Expenses” - all of the following to the extent incurred or accrued
by the Company on or before the Closing Date: (i) all out-of-pocket costs and
expenses incurred in connection with the transactions contemplated hereby,
including, without limitation, investment advisory fees and expenses, other
consultant, legal, Tax, accounting, travel, due diligence and related fees
and
expenses, and escrow agent fees and expenses; (ii) all payments required to
be
made by the Company to any Person due to the consummation of the Contemplated
Transactions; and (iii) all fees and expenses incurred by the Company in
connection with the termination of any Company Indebtedness.
“Company
Indebtedness” - as defined in Section 2.2.
“Consent”—any
approval, consent, ratification, waiver, or other authorization.
“Confidentiality
Agreement” - means the confidentiality agreement dated April 24, 2006 between
Seller and Buyer or any of its Affiliates.
“Contemplated
Transactions”—all of the transactions contemplated by this Agreement, including,
without limitation:
(a) the
sale
of the Shares by Seller to Buyer; and
(b) the
performance by Buyer and Seller of their respective covenants and obligations
under this Agreement.
“Contract”—any
agreement, commitment, contract, instrument, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding, in whole or in part, upon a party thereto.
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“Damages”—as
defined in Section 9.2.
“Deed
of
Transfer” - the notarial deed of transfer for the Shares substantially in the
form attached hereto as Exhibit B.
“Disclosure
Schedule”—the Disclosure Schedule delivered by Seller to Buyer concurrently with
the execution and delivery of this Agreement and attached hereto as Exhibit
A.
“Disregarded
Entity” - as defined in Section 3.9(b).
“Divestiture
Agreement” - all agreements or arrangements by which the Company sold or
divested itself, directly or through a Subsidiary, of any material portion
of
its assets, including the sale of all or substantially all of the capital stock
or other ownership interests of any of its Subsidiaries.
“Encumbrance”—any
burden charge, claim, condition, covenant, deed of trust, easement,
encroachment, equitable interest, hypothecation, lease, lien, mortgage, option,
pledge, security interest, sublease, title defect, title retention agreement,
right of first refusal, or restriction of any kind, including, without
limitation, any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership, other than any applicable federal
or state securities law restrictions.
“Environment”—soil,
land surface or subsurface strata, surface waters, groundwaters, air or any
other environmental medium or natural resource.
“Environmental
Law”—any Legal Requirement that requires or relates to:
(a) advising
appropriate authorities, employees, and the public of intended or actual
releases of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions and of the commencements of activities,
such as resource extraction or construction, that could have significant impact
on the Environment;
(b) preventing
or reducing to acceptable levels the release of pollutants or hazardous
substances or materials into the Environment;
(c) reducing
the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;
(d) assuring
that products are designed, formulated, packaged, and used so that they do
not
present unreasonable risks to human health or the Environment when used or
disposed of;
(e) protecting
resources, species, or ecological amenities;
(f) reducing
to acceptable levels the risks inherent in the transportation of hazardous
substances, pollutants, oil, or other potentially harmful
substances;
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(g) cleaning
up pollutants that have been released, preventing the threat of release, or
paying the costs of such clean up or prevention; or
(h) making
responsible parties pay private parties, or groups of them, for damages done
to
their health or the Environment, or permitting self-appointed representatives
of
the public interest to recover for injuries done to public assets.
“ERISA”
-
the Employee Retirement Income Security Act of 1974, as amended, and any
successor law, and regulations and rules issued pursuant to that act or any
successor law.
“Facilities”—any
leaseholds or other interests currently or formerly owned or operated by the
Company and any buildings, plants, structures, or equipment currently or
formerly owned or operated by the Company.
“FDA
Act”
- the United States Federal Food, Drug and Cosmetic Act, as amended, and rules
and regulations issued thereunder.
“Financial
Statements” - as defined in Section 3.4.
“GAAP”
-
means United States generally accepted accounting principles, as in effect
from
time to time, applied on a consistent basis.
“Governmental
Authority” - any (a) federal, state, regional, county, city, municipal or local
government, whether foreign or domestic; (b) governmental or quasi-governmental
authority of any nature including any regulatory or administrative agency,
commission, department, board, bureau, court, tribunal, arbitrator, arbitral
body, agency, branch, official entity, or other administrative or regulatory
body obtaining authority from any of the foregoing; or (c) other Person
exercising, or entitled to exercise, any administration, executive, judicial,
legislative, notice, regulatory or taxing authority or power of any
nature.
“Hazardous
Materials”—any waste or other substance that is listed, defined, designated, or
classified as, or otherwise determined to be, hazardous, radioactive, or toxic
or a pollutant or a contaminant under or pursuant to any Environmental Law.
“Indemnified
Persons”—as defined in Section 9.2.
“Interim
Balance Sheet” - the balance sheet of the Company as of August 31, 2006 included
in the Interim Financial Statements.
“Interim
Financial Statements”—as defined in Section 3.4.
“Inventory”
- means the usable and merchantable finished goods, components, raw materials
and displays of the Product which are not obsolete having expiration dating
of
not less than twenty-four (24) months and representing not more than six (6)
months of forecasted requirements for sale of any SKU within the Territory.
For
the avoidance of doubt, Inventory shall not include Xxxxxxx Kids products or
any
components or raw materials not usable by Pharmaspray and/or the Company as
of
the Closing Date.
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“IRC”—the
Internal Revenue Code of 1986, as amended, or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor
law.
“IRS”—the
United States Internal Revenue Service or any successor agency, and, to the
extent relevant, the United States Department of the Treasury.
“Knowledge”
- and all other words of similar meaning, whether or not capitalized, when
used
with respect to (i) Seller shall mean the actual knowledge or knowledge that
may
be obtained by the officers of Seller after making Due Inquiry; and (ii) Buyer
shall mean the actual knowledge or knowledge that may be obtained by the
officers of Buyer after making Due Inquiry. For the purposes of this definition,
the term “Due Inquiry” by an individual means inquiry, after review of the
specific provision(s) of this Agreement in question, of such peers or
subordinates whom such individual determines in reasonable good faith to be
the
appropriate Persons to be approached with respect to the particular fact or
matter in question, about such particular fact or matter in question and who
the
Person making the inquiry reasonably believes has personal knowledge of the
particular fact or matter in question.
“Legal
Requirement”—any federal, state, local, municipal, foreign, international,
multinational, or other administrative order, constitution, law, ordinance,
principle of common law, regulation, statute, or treaty.
“Material
Adverse Effect” - means, with respect to any Person or any of its Subsidiaries
(together as one party for purposes of this Section), an individual or
cumulative adverse change in or effect on (i) the business, properties, assets,
condition (financial or otherwise), liabilities or results of operations of
such
party which is, or could reasonably be expected to be, materially adverse
to the
business, properties, assets, condition (financial or otherwise), liabilities
or
results of operations of such party and its Subsidiaries taken as a whole,
(ii)
such Person or any of its Subsidiaries as a result of the cancellation,
amendment or postponement for a period of three months or more of any current
or
proposed Material Contract, or (iii)
the
ability of such Person to perform its material obligations under this Agreement
and the Related Agreements.
“Material
Contract” - as defined in Section 3.12.
“Non-Compete
Activities” - as defined in Section 5.3(a).
“Notary”
- means Daan ter Braak, civil law notary (notaris),
or
his/her deputy (plaatsvervanger).
“Order”
-
an order, award, decision, injunction, judgment, ruling, subpoena, or verdict
issued or rendered by any court, administrative agency or other Governmental
Authority (A) to which the Company or any of its businesses, assets or
properties is subject, or (B) to which Seller is subject with respect to
Seller’s ownership of or ability to sell or vote the Shares.
“Ordinary
Course of Business” - the ordinary course
of
Business consistent with past custom and practice (including with respect to
quantity and frequency).
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“Organizational
Documents”— (a) the articles or certificate of incorporation and the bylaws of a
corporation; (b) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (c) any amendment
to any of the foregoing (including but not limited to the current articles
of
association (statuten)
of the
Company).
“Permits”
- as defined in Section 3.24(ii).
“Person”—any
individual, corporation, general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or governmental body.
“Pharmaspray”
- means Pharmaspray B.V., a company organized and existing under the law of
the
Netherlands.
“Post-Closing
Tax Period” - as defined in Section 10.1(b).
“Pre-Closing
Tax Period” - as defined in Section 10.1(a).
“Proceeding”—any
action, arbitration, audit, hearing, investigation, litigation, or suit
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Authority.
“Product”
- the OTC cryogenic treatment for warts sold under the XXXXXXX trademark and
the
cryogenic professional use treatment for warts under the XXXXXXX PRO trademark,
both of which utilize the Business Intellectual Property.
“Purchase
Price” - as defined in Section 2.2.
“Related
Agreements” - means, with respect to a party hereto, the Transition Agreement,
the Assignment and Assumption, the Xxxxxxx Assignment and any other agreement
or
instrument executed by such party in connection with this
Agreement.
“Representative”—with
respect to a particular Person, any director, officer, employee, affiliate,
agent, consultant, advisor, or other representative of such Person, including
legal counsel, accountants, and financial advisors.
“Restricted
Period” - as defined in Section 5.3(a).
“Returns”
- any claim for credit or refund for unsold Product or other merchandise by
any
customer or account of Seller, the Company or Buyer, whether or not accompanied
by the Product or other merchandise originally sold, and whether or not damaged,
out of date or otherwise impaired.
“Right
of
Set-Off” - as defined in Section 9.10.
“Securities
Act”—the Securities Act of 1933, as amended, or any successor law, and
regulations and rules issued pursuant to that Act or any successor
law.
“Seller”
- as defined in the first paragraph of this Agreement.
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“Shareholders”
- as defined in the first paragraph of this Agreement.
“Shares”—as
defined in the Recitals of this Agreement.
“Share
Sale Agreement”—the Share Sale Agreement dated June 10, 2003 between
Xxxxxxx Holding as the seller, Seller as the purchaser, and the Company, for
the
sale by the seller of the entire issued and outstanding share capital of the
Company to the purchaser.
“SKU”
-
means one or more non-obsolete shelf keeping units of the Product.
“Straddle
Period” - as defined in Section 10.1(c).
“Subsidiary”—with
respect to any Person (the “Owner”), any corporation or other Person of which
securities or other interests having the power to elect a majority of that
corporation's or other Person's board of directors or similar governing body,
or
otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not occurred)
are
held by the Owner or one or more of its Subsidiaries; when used without
reference to a particular Person, “Subsidiary” means a Subsidiary of the
Company.
“Tax”
or
“Taxes” means any federal, state, local or foreign net or gross income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium (including taxes under Section 59A of the IRC), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
conveyance, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax, governmental fee or like assessment, together with
any
interest and penalties, additions to tax or additional amounts imposed by any
Governmental Authority.
“Tax
Authority” means any Governmental Authority with responsibility for
Taxes.
“Tax
Return” means all returns, reports, elections, forms, declarations, statements,
estimated returns, claims for refund and information returns supplied or
required to be supplied to a Tax Authority relating to Taxes.
“Territory”
- means the United States of America (including its territories and
possessions), Canada, Mexico, Bermuda and the Dominican Republic.
“Trade
Adjustment” - means any unilateral financial adjustment by a customer or account
of Seller, the Company or Buyer wherein such customer or account makes a
reduction of an amount to be paid or credited to Buyer, Seller or the Company
as
a consequence of alleged or actual prior or subsequent commercial dealings
in
the Product or in connection with prior or subsequent commercial dealings in
other products where those commercial dealings are treated by the account as
offsets to obligations to Buyer, Seller or the Company relating to the Product.
“Transfer
Taxes: - as defined in Section 10.3.
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“Transition
Agreement” - as defined in Section 2.4(a)(v).
“U.S.
Patent” - as defined in Section 3.15.
“Xxxxxxx
Assignment” - as defined in Section 2.4(a)(iv).
“Xxxxxxx
B.V.” - means that certain private company with limited liability organized
under the laws of the Netherlands which has among its affiliates Xxxxxxx Holding
and Xxxxxxx Medical Products A.G.
“Xxxxxxx
Europe B.V.” means that certain private company with limited liability organized
under the laws of the Netherlands formerly affiliated with Xxxxxxx Holding
but
which as of the date of this Agreement is a wholly owned subsidiary of Omega
Pharma N.V. Xxxxxxx Europe B.V. is not a party to this Agreement.
“Xxxxxxx
Holding” - means Xxxxxxx Holding B.V., a private company with limited liability
organized under the laws of the Netherlands which is an affiliate of Xxxxxxx
B.V.
2. SALE
AND TRANSFER OF SHARES; CLOSING
2.1
SHARES
Subject
to the terms and conditions of this Agreement, at the Closing, Seller will
sell
and transfer all of the Shares of capital stock of the Company to Buyer, and
Buyer will purchase all of the Shares of capital stock of the Company from
Seller, free and clear of any Encumbrances except as set forth on Schedule
2.1.
Subject
to the terms and conditions of this Agreement, Seller shall transfer title
to
the Shares to Buyer, and Buyer shall accept the same from Seller, at Closing
through the execution of the Deed of Transfer before the Notary.
2.2
PURCHASE
PRICE
Subject
to the further provisions of this Section 2.2, the purchase price (the “Purchase
Price”) for all of the Shares of capital stock of the Company shall be
$31,500,000 payable in cash at Closing to Seller. The Purchase Price assumes
that, as of the Closing, (i) the Company will have no outstanding debt and
no
obligations not in the Ordinary Course of Business (any such indebtedness and
obligations, “Company Indebtedness”); and (ii) the Company will have Inventory
in an aggregate amount equal to at least $950,000 which shall be saleable in
the
Ordinary Course of Business; provided, that Company Indebtedness shall not
include trade debt and normal operating liabilities not incurred in the Ordinary
Course of Business. The Purchase Price shall be (i) (x) increased by the amount,
if any, by which the Company’s Inventory (valued at cost) as of the Closing
(based on a physical inventory taken by Buyer and Seller on the Closing Date)
exceeds $950,000; or (y) decreased by the amount, if any, by which the Company’s
Inventory (valued at cost) as of the Closing (based on a physical inventory
taken by Buyer and Seller on the Closing Date) is less than $950,000; (ii)
decreased by the amount, if any, of Company Indebtedness as of the Closing;
and
(iii) decreased by the amount of Company Transaction Expenses. For purposes
of
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calculating
the amount to be wired at Closing, the amount of Inventory shall be determined
on the Closing Date based on Seller’s perpetual inventory system. Each of Seller
and Buyer agree to cooperate with the other regarding any post-closing
adjustments that need to be made to the Purchase Price to reflect the actual
amount of Inventory as of the Closing.
2.3
CLOSING
Subject
to the satisfaction of all of the closing conditions contained in this
Agreement, the purchase and sale (the “Closing”) provided for in this Agreement
will take place at the offices of Seller’s counsel, Xxxxxxx & Xxxxx PC,
Cedar Rapids, Iowa, at 10:00 a.m. (local time) on or about September 21, 2006,
or at such other time and place as the parties may agree. The execution of
the
Deed of Transfer will take place on the Closing Date at the offices of Van
Doorne N.V., Xxxxxxxxxxxxx
000, 0000 XX Xxxxxxxxx,
Xxx
Xxxxxxxxxxx.
2.4
CLOSING
OBLIGATIONS
At
the
Closing, after the Notary has received sufficient confirmation that the Purchase
Price has been transferred by Buyer and received by Seller in accordance with
Sections 2.2 and 2.4(b)(i), Seller and Buyer shall execute the Deed of Transfer
before the Notary and shall procure that the Notary shall execute the Deed
of
Transfer. Seller shall procure that the Company will acknowledge the transfer
of
the Shares, by signing the Deed of Transfer.
At
the
Closing:
(a) Seller
will deliver to Buyer:
(i) certificates
representing the Shares, duly endorsed (or accompanied by duly executed stock
powers) and any other documents reasonably necessary to transfer to Buyer the
entire right, title and interest in and to all of the Shares of capital stock
of
the Company;
(ii) a
certificate, dated as of the Closing Date and executed by the Chief Executive
Officer or Chief Financial Officer of Seller certifying in such detail as Buyer
may reasonably request that the conditions specified in Sections 6.1 and 6.2
hereof have been fulfilled with respect to Seller and the Company and certifying
that Seller and the Company have obtained all consents and approvals required
with respect to the Contemplated Transactions;
(iii) [Intentionally
Omitted];
(iv) a
duly
executed counterpart of an Assignment and Assumption Agreement between Seller
and Buyer under which Seller transfers and assigns to Buyer, and Buyer expressly
assumes, certain rights and obligations under the Share Sale Agreement, such
agreement to be in substantially the form attached hereto as Exhibit C (the
“Xxxxxxx Assignment”)
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(v) a
duly
executed counterpart of a transition services agreement between Buyer and Seller
in substantially the form attached hereto as Exhibit D (the “Transition
Agreement”);
(vi) a
duly
executed counterpart of an assignment and assumption agreement between Seller
and Buyer under which Seller transfers and assigns to Buyer, and Buyer expressly
assumes, those trade and marketing programs listed in Schedule 3.20, such
assignment and assumption agreement to be in substantially the form attached
hereto as Exhibit E (the “Assignment and Assumption”);
(vii) a
disclaimer duly executed by Seller’s lenders terminating any Encumbrances held
by them with respect to the Shares;
(viii)
a
xxxx of
sale as of Closing in a form acceptable to Buyer reflecting the transfer of
all
Inventory of Product in the possession of Seller from Seller to
Company;
(ix)
a
license
agreement in favor of Buyer, the Company and Pharmaspray duly executed by
Xxxxxxx Europe in the form of Exhibit F;
(x) [Intentionally
Omitted];
(xi) the
releases referenced in Section 6.14; and
(xii)
other
documents reasonably requested by Buyer.
(b)
Buyer
will deliver to Seller:
(i)
subject
to the Purchase Price adjustments in Section 2.2, $31,500,000 by wire transfer
to the account specified by Seller on and as of the Closing Date.
(ii)
a
certificate dated as of the Closing Date and executed by the Chief Executive
Officer or Chief Financial Officer of Buyer certifying in such detail as Seller
may reasonably request that the conditions specified in Sections 7.1 and 7.2
hereof have been fulfilled with respect to Buyer and certifying that Buyer
has
obtained all consents and approvals required with respect to the Contemplated
Transactions;
(iii)
a
duly
executed counterpart of the Transition Agreement;
(iv)
a
duly
executed counterpart of the Assignment and Assumption;
(v)
[Intentionally
Omitted];
(vi) |
a duly executed counterpart of the Xxxxxxx Assignment;
|
(vi) [Intentionally
Omitted]; and
(viii) other
documents reasonably requested by Seller.
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2.5 |
PURCHASE
PRICE ALLOCATION
|
Buyer
and
Seller agree to allocate the Purchase Price (and all other capitalizable costs)
among the Company’s assets for federal, state and local Tax purposes in
accordance with IRC Section 1060, as set forth on the allocation schedule
attached as Schedule 2.5. Buyer and Seller agree to use such Allocation (the
“Allocation”) for all relevant federal, state, local or foreign Tax purposes,
and to file timely one or more IRS Forms 8594 and any similar forms required
under state or local law in accordance with the requirements of IRC Section
1060
(or such state or local law) and the Allocation. Neither Buyer nor Seller shall
take any position, whether in a Tax audit, on a Tax Return or otherwise, that
is
inconsistent with the Allocation unless required to do so by applicable Legal
Requirements.
3. REPRESENTATIONS
AND WARRANTIES OF SELLER
Seller
hereby represents and warrants to Buyer as follows:
3.1
ORGANIZATION
AND GOOD
STANDING
(a) The
Company is a private company with limited liability duly organized, validly
existing and in good standing under the laws of the Netherlands, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own
or
use, and to perform all its obligations under the Contracts. The Company is
duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership
or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification (each of which such states or
jurisdictions is set forth in Schedule 3.1(a). The Company is not in violation
of its Organizational Documents and no decision to amend the articles of
association of the Company has been made.
(b) Seller
is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Iowa, with full corporate power and authority to conduct
its business as it is now being conducted and to own or use the properties
and
assets that it purports to own or use. Seller is not in violation of its
Organizational Documents.
3.2 AUTHORITY;
NO CONFLICT
(a)
This
Agreement has been duly authorized, executed and delivered by Seller and the
Company and constitutes the legal, valid, and binding obligation of Seller
and
the Company, enforceable against Seller and the Company in accordance with
its
terms, subject to (i) bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally; and (ii)
general principles of equity. Each of Seller and the Company has the absolute
and unrestricted right, power, authority, and capacity to execute and deliver
this Agreement and the Related Agreements to which it is a party and to perform
its obligations under this Agreement and the Related Agreements to which it
is a
party.
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(b) Except
as
set forth in Schedule 3.2(b), neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse
of
time):
(i)
contravene,
conflict with, or result in a violation of (A) any provision of the
Organizational Documents of the Company or Seller, or (B) any resolution adopted
by the board of directors or the shareholder(s) of the Company or Seller;
(ii) contravene,
conflict with, or result in a violation of, or give any Governmental Authority
or other Person the right to challenge any of the Contemplated Transactions
or
to exercise any remedy or obtain any relief under, any Legal Requirement or
any
Order to which the Company or Seller, or any of the business, properties and
assets operated, owned or used by the Company or Seller, may be
subject;
(iii)
contravene,
conflict with, or result in a violation of any of the terms or requirements
of,
or give any Governmental Authority the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any permit or governmental authorization that
is
held by the Company or Seller or that otherwise relates to the business of,
or
any of the assets owned or used by, the Company or Seller;
(iv) cause
Buyer or the Company to become subject to, or to become liable for the payment
of, any Tax;
(v) contravene,
conflict with, or result in a violation or breach of any provision of, or give
any Person the right to declare a default or exercise any remedy under, or
to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Contract related to the Company or its Business; or
(vi) result
in
the imposition or creation of any Encumbrance upon or with respect to the Shares
or any of the assets owned or used by the Company.
Except
as
set forth in Schedule 3.2(b), neither Seller nor the Company is or will be
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions. Schedule 3.2(b) contains
a complete and accurate list of all consents and notices needed in connection
with this Agreement, the Related Agreements and the transactions contemplated
herein and in the Related Agreements. The consents set forth in Schedule 3.2(b)
have been obtained on or prior to the date hereof.
3.3 CAPITALIZATION;
TITLE TO SHARES AND POWER TO CONVEY
(a) The
authorized equity securities of the Company consist of 180 normal shares of
capital stock with a nominal value of Euro 100 per share, of which 180 shares
are issued and outstanding on the date hereof and are represented by the Shares.
All of the issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid-up in accordance
with
all requirements of applicable law and nonassessable and, except as set forth
on
Schedule 3.3(a), none of them are subject to or were issued in violation of
pre-emptive rights, rights
12
of
first
offer or first refusal or similar rights, or in violation of the Securities
Act
or any other applicable securities law. On the date of this Agreement, there
are
no, and as of the Closing Date there will be no, outstanding subscriptions,
options, warrants or other agreements or commitments or other rights of any
kind
to acquire (including securities exercisable or exchangeable for or convertible
into), or obligating the Company to issue, any shares of capital stock of the
Company, or giving any Person the right to receive any benefits or rights
similar to any rights enjoyed by or accruing to the benefit of the holders
of
any shares of capital stock of the Company. The Company is not subject to any
obligations (contingent or otherwise) to repurchase, redeem, call or otherwise
retire, or to register, any shares of capital stock. On the date of this
Agreement, the Shares owned by Seller collectively constitute, and on the
Closing Date the Shares will constitute, all of the issued and outstanding
shares of capital stock of the Company. There are no Contracts with respect
to
(i) voting of any shares of capital stock of the Company; or (ii) transfer
of,
or transfer restrictions on, any shares of capital stock of the Company. The
Company does not own or have any Contract to acquire, any equity securities
or
other securities of any Person or any direct or indirect equity or ownership
interest in any other entity or business.
(b) Seller
is, and will be on the Closing Date, the sole record and beneficial owner of
the
Shares and, except as set forth on Schedule 3.3(b), has, and will have on the
Closing Date, good title to the Shares free and clear of all Encumbrances of
any
nature whatsoever. All corporate formalities have been taken to grant Seller
the
full right and capability to sell and deliver the Shares as contemplated by
this
Agreement. Upon execution of the Deed of Transfer at the Closing in accordance
with the first paragraph of Section 2.4, Buyer shall have acquired from Seller
good, legal and equitable title to the Shares free and clear of all Encumbrances
of any nature whatsoever, except as otherwise noted in Schedule
3.3(b).
3.4 FINANCIAL
STATEMENTS
Seller
has delivered to Buyer: (a) audited balance sheets of the Company as at
December 31 in each of the years 2003, 2004 and 2005, and the related
audited statements of income, changes in shareholders' equity, and cash flow
for
each of the fiscal years then ended (the “Annual Financial Statements”); and (b)
an unaudited balance sheet of the Company as of August 31, 2006 and the related
unaudited statements of income, changes in shareholders' equity, and cash flow
for the eight months then ended (the “Interim Financial Statements;” together
with the Annual Financial Statements, the “Financial Statements”). The Financial
Statements (i) have been prepared in accordance with the books and records
of
the Company, (ii) have been prepared in accordance with GAAP, and (iii) fairly
present the financial condition and the results of operations, changes in
shareholders' equity, and cash flow of the Company as at the respective dates
of
and for the periods referred to in the Financial Statements, subject, in the
case of the Interim Financial Statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate,
be
material). Schedule 3.4 contains true, correct and complete copies of the
Financial Statements.
3.5 BOOKS
AND
RECORDS
13
The
minute books, stock record books, financial books and records, and other records
of the Company and Seller with respect to the Business, all of which have been
made available to Buyer, are complete and correct and have been maintained
in
accordance with sound business practices. At the Closing, all of those books
and
records will be in the possession of the Company or its agent.
3.6 TITLE
TO
PROPERTIES; ENCUMBRANCES
Schedule
3.6 contains a complete and accurate list of all fixed assets, leaseholds or
other interests therein owned by the Company. The Company has good and valid
right, title and interest in and to or, in the case of leased properties or
properties held under license, good and valid leasehold or license interests,
respectively, in all of its assets and properties, including, but not limited
to, all of the machinery, equipment, terminals, computers, vehicles, and all
other assets and properties (real, personal or mixed, tangible or intangible)
reflected in the Annual Balance Sheet and the Interim Balance Sheet and all
of
the properties and assets purchased or otherwise acquired by the Company since
the date of the Interim Balance Sheet (except for personal property sold since
the date of the Interim Balance Sheet in the Ordinary Course of Business. All
material properties and assets reflected in the Annual Balance Sheet and the
Interim Balance Sheet, or acquired since the respective dates thereof, are
free
and clear of all Encumbrances. The properties and assets owned or leased by
the
Company are sufficient in all material respects for the conduct of the business
of the Company as it is now conducted, and such properties and assets are in
working order (reasonable wear and tear excepted).
3.7 ACCOUNTS
RECEIVABLE
Except
as
set forth on Schedule 3.7, the Company shall have no accounts receivable on
its
books and records; provided, that, if there are any receivables in existence
on
the Closing Date, they shall be collected by the Company for the account of
Buyer. Notwithstanding the generality of the foregoing, all accounts receivable
of the Company reflected on the Annual Balance Sheet or the Interim Balance
Sheet or on the accounting records of the Company as of the Closing Date
(collectively, the “Accounts Receivable”) represent or will represent valid
obligations arising from sales actually made or services actually performed
in
the Ordinary Course of Business and, to the Knowledge of Seller, are not subject
to any defenses, set-offs or counterclaims, and subject only to reserves
reflected on Schedule 3.7. Except as set forth on Schedule 3.7, all items which
are required by GAAP to be reflected as Accounts Receivable on the Financial
Statements and on the books and records of the Company are so reflected and
have
been recorded in accordance with GAAP. Since June 2003, the Company has not
changed the period for determining when Accounts Receivable become
uncollectible. Schedule 3.7 is a true and complete aged list of all the Accounts
Receivable relating to the Company as of the day immediately prior to the date
hereof, and except as set forth on Schedule 3.7, none of the Accounts Receivable
included in the Financial Statements are owed by the Company's shareholders
or
relate to any employees or Affiliates of the Company. Schedule 3.7 sets forth
a
list of any and all Accounts Receivable from employees, shareholders and
Affiliates of the Company, including, without limitation, all notes, loans,
advances or other monies owed to the Company by any past or present
employee.
3.8 INVENTORY
14
Except
as
set forth on Schedule 3.8, (i) Inventory shall be comprised of inventory
consistent with the books and records of the Company and Seller (with respect
to
the Business); and (ii) the Company shall not be liable for any components
for
the Product provided by third-party suppliers. Notwithstanding the generality
of
the foregoing, any raw materials, work in process, spare parts, and other
inventory of the Company and Seller (with respect to the Business) as set forth
on the Financial Statements and Seller’s financial statements, respectively, are
in usable or salable condition in the Ordinary Course of Business at the amounts
carried on such financial statements and on the books and records of the Company
and Seller (with respect to the Business). The raw materials, work in process,
spare parts, and other inventory are (a) not obsolete or excessive and are
of at
least the standard quality for such items; (b) suitable for the manufacture
and
distribution of the Products; (c) not in excess of the normal purchasing
patterns of the Company and Seller (with respect to the Business); and (d)
adequate to meet the Company’s and Seller’s expected shipping requirements.
Except as set forth on Schedule 3.8, the amounts of the inventories reflected
on
the Financial Statements and Seller’s financial statements and on the books and
records of the Company and Seller (with respect to the Business) have been
determined in accordance with GAAP.
3.9 TAXES
Except
as
set forth in Schedule 3.9:
(a) All
Tax
Returns required to be filed with any Governmental Authority by the Company
or
Seller or with respect to the Company’s assets or the Business have been timely
filed and were accurate and complete in all material respects. All Taxes due
and
payable by the Company or Seller or with respect to the Company’s assets or the
Business (whether or not shown on any Tax Return) have been timely paid in
full.
Neither the Company nor Seller is currently the beneficiary of or has applied
for any extension of time within which to file any Tax Return. There are no
Encumbrances with respect to Taxes on any of the Company’s or Seller’s assets,
other than Encumbrances for Taxes not yet due and payable. No claim has ever
been made by any Governmental Authority in a jurisdiction in which the Company
or Seller does not file Tax Returns that the Company or Seller is or may be
subject to Tax in that jurisdiction and, to the Knowledge of Seller, there
is no
basis on which a Governmental Authority could validly assert such a claim.
(b) Seller
purchased the Shares on June 10, 2003 and timely made a valid election under
IRC
Section 338 with respect to such purchase. For United States Tax purposes,
Seller treated such election as a liquidation of the Company into Seller
pursuant to IRC Section 332. Such election did not result in the Company
recognizing any income subject to federal, state or local Tax. The Company
made
a valid election to be treated as an entity disregarded from its owner (a
“Disregarded Entity”) for federal, state and local income and franchise Tax
purposes pursuant to Treasury Regulation Section 301.7701-3 by filing IRS Form
8023 (the “Check-the-box Election”) on March 10, 2004. The Check-the-box
Election has been effective at all times since June 10, 2003 and will remain
effective at all times through the Closing Date. For all federal, state and
local income or franchise Tax purposes, Seller is deemed to own the Company’s
assets directly and to be engaged directly in the Business.
(c) The
Company and Seller have withheld and paid all Taxes required to have been
withheld and paid in connection with any amounts paid or owing to any employee,
independent contractor, creditor, shareholder, partner, member or other third
party, and have timely and properly
15
(d) No
dispute concerning any Tax liability of the Company or Seller (with respect
to
the Business) is pending or, to the Knowledge of Seller, threatened. No Tax
proceedings by a Governmental Authority are pending or are being conducted
with
respect to the Company or Seller (with respect to the Business). With respect
to
Taxes for which the statute of limitations remains open, neither the Company
nor
Seller (with respect to the Business) has received from any foreign, federal,
state or local Governmental Authority (i) any notice indicating an intent to
open a Tax audit or other review, (ii) any request for information related
to
Tax matters, or (iii) any notice of deficiency or proposed adjustment for any
amount of Tax proposed, asserted or assessed against the Company or Seller
or
with respect to the assets of the Company or the Business, in each case other
than with respect to an audit, review or examination that has been completed
and
closed and with respect to which the Company or Seller has paid all Taxes
asserted or assessed by the Governmental Authority. The Company has not waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency of a Tax.
(e) Schedule
3.9 of the Disclosure Schedule sets forth a complete and accurate list of all
jurisdictions in which the Company or the Business is subject to Tax and of
all
Tax Returns filed by the Company with respect to the Company or the Business
since the Company’s formation on December 13, 2002. Seller has provided to Buyer
correct and complete copies of all such Tax Returns and of all examination
reports and statements of deficiencies assessed against or agreed to by the
Company for all Tax periods as to which the statute of limitations remains
open.
(f) Neither
the Company nor Seller (with respect to the Company or its assets or the
Business) has ever obtained from a Governmental Authority a ruling with respect
to Taxes. There is no pending request by the Company or Seller (with respect
to
the Company or its assets or the Business) for a ruling by a Governmental
Authority with respect to Taxes.
(g) The
Company will not be required to include any item of income in, or exclude any
item of deduction from, Taxable income for any Taxable period (or portion
thereof) ending after the Closing Date as a result of any (i) change in method
of accounting for a taxable period ending on or prior to the Closing Date (under
IRC Section 481(c) or any corresponding or similar provision of state, local
or
foreign income Tax law); (ii) closing agreement with a Tax Authority; (iii)
prior intercompany transactions, the income or gain on which was deferred and
will become Taxable as a result of the purchase by Buyer of the Shares; (iv)
installment sale made prior to the Closing Date; or (v) prepaid amount received
on or prior to the Closing Date.
(h) The
Company is not liable for any unpaid Taxes for any Taxable period beginning
before the effective date of the Check-the-box Election.
(i)
Neither
Seller nor the Company has been a United States real property holding
corporation within the meaning of IRC Section 897(c)(2) during the applicable
period specified in IRC Section 897(c)(1)(A)(ii).
(j)
Neither
the Company nor Seller (with respect to the Company, its assets or the Business)
has ever been required to make any material adjustment by the IRS pursuant
to
IRC
16
(k) Neither
the Company nor Seller (with respect to the Company, its assets or the Business)
is party to any Tax sharing agreement. Neither the Company nor Seller has any
liability for Taxes of any other Person as a transferee or successor, by
contract or otherwise.
3.10 EMPLOYEE
BENEFITS
Since
June 2003, the Company has had no employees other than the two management level
employees set forth on Schedule 3.10. The one current employee of the Company,
as of the Closing, will become an employee of Seller or one of its Affiliates
and Seller will be responsible for all severance or other benefits, if any,
which may be or become payable to such employee as a result of the termination
of his employment with the Company. The Company does not now, nor has it ever,
maintained any employee benefit plans subject to the provisions of ERISA, nor
does the Company have, nor will it have, any obligation to make any contribution
to an employee benefit plan maintained by another which is subject to ERISA
with
respect to periods prior to the Closing. The Company has provided for and timely
paid any and all required employee benefits. The Company has at all times
complied with all applicable Legal Requirements relating to employment and
labor
matters.
As
of
Closing the Company has no employees and no former employees to whom there
is
any residual debt, duty or obligation of any kind whatsoever. At Closing Seller
will have delivered to Buyer releases in favor of the Company from all former
employees in a form acceptable to Buyer.
3.11 LEGAL
PROCEEDINGS; ORDERS
Except
as
set forth in Schedule 3.11, there is no pending Proceeding:
(a) that
has
been commenced by or against the Company or that otherwise relates to or may
affect the Shares or the business of, or any of the assets owned or used by,
the
Company; or
(b) that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, the consummation of the Contemplated
Transactions.
To
the
Knowledge of Seller, (1) no such Proceeding has been threatened, and (2) no
event has occurred or circumstance exists that may give rise to or serve as
a
basis for the commencement of any such Proceeding.
3.12 CONTRACTS;
NO DEFAULTS
17
Schedule
3.12 contains a complete and accurate list, and Seller has made available or
delivered to Buyer true and complete copies of, all Material Contracts relating
to the Company, or its business, properties or assets including each licensing
agreement or other Contract with respect to patents, trademarks, copyrights,
or
other intellectual property, including, without limitation, agreements with
current or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Business Intellectual
Property.
For
purposes of this Section 3.12, the term “Material Contract” will include,
without limitation, (i) any employment or consulting agreement, (ii) any
Contract restraining the Company from engaging or competing in any manner in
any
business, (iii) any Contract that may require expenditures by or generate
receipts to the Company in excess of $10,000, (iv) any Contract relating to
indebtedness, any guaranty, direct or indirect, of any obligation of another
Person, (v) any settlement or conciliation with respect to any claim asserted
by
any Person, or (vi) any Contract between the Company and Seller or any
Affiliates of Seller. The Company is not in breach of any Contract listed in
Schedule 3.12. To the Knowledge of Seller, no other party to any Contract listed
in Schedule 3.12 is in breach of or default under or in violation of any such
Contract. Each Contract listed in Schedule 3.12 is in full force and effect
and
constitutes the valid and binding obligation of the parties thereto, enforceable
against each of such parties in accordance with its terms. No event has occurred
that (with or without notice or lapse of time) may result in a breach or default
under or violation of any Contract listed in Schedule 3.12 or give any party
to
any such Contract the right to exercise a remedy, or accelerate the maturity
or
performance of, or terminate or modify, any such Contract.
Except
as
set forth in Schedule 3.12, (i) no consent of any Person is needed in order
for
a Material Contract to continue in full force and effect in accordance with
its
terms without penalty, acceleration, or rights of early termination by reason
of
the consummation of the transactions contemplated by this Agreement and the
Related Agreements, and (ii) the Company has not received notice that it is
in
violation of, breach of, or default under any, or is in violation of, breach
of,
or default under any, Material Contract, nor to Knowledge of Seller is any
other
party to any such Material Contract in violation of, material breach of, or
default under any such Material Contract.
With
respect to any Material Contract, there are no pending claims (other than
Accounts Receivable) by or against the Company, or, to the Knowledge of Seller,
threatened claims by or against the Company arising out of or relating to any
such Material Contract.
3.13 INSURANCE
Schedule
3.13 sets forth a true and complete list of all policies of insurance to which
the Company is a party or under which the Company, or any properties, assets,
director or officer of the Company, is or has been covered at any time within
the three years preceding the date of this Agreement. All premiums with respect
thereto are currently paid and, to the Knowledge of the Seller, the Company
is
in compliance in all material respects with the terms and conditions thereof.
The Company has given timely notice to the appropriate insurance carrier with
respect to any potential claims which may be covered by such insurance policies.
Except as set forth in Schedule 3.13, (i) no dispute with any insurance carrier
exists with respect to the scope of any insurance coverage, (ii) the Company
has
not received any refusal of coverage or any notice that a defense will be
afforded with
18
reservation
of rights, (iii) the Company has not received any notice of cancellation,
termination or reduction in coverage or any other indication that any insurance
policy is no longer in full force or effect or will not be renewed, and (iv)
none of the insurance policies listed in Schedule 3.13 will terminate or lapse
(or be affected in any other adverse manner) by reason of the consummation
of
the Contemplated Transactions.
3.14 ENVIRONMENTAL
MATTERS
Except
as
set forth in Schedule 3.14, the Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. Seller has no basis to expect any actual or threatened
Proceeding, Order, notice, or other communication from (i) any Governmental
Authority or private citizen acting in the public interest, or (ii) the current
or prior owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any actual
or
threatened obligation to undertake or bear the cost of any Environmental
liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which Seller or the Company has
had
an interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by Seller, the Company, or any other Person for
whose conduct they are or may be held responsible, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
3.15 INTELLECTUAL
PROPERTY
Schedule
3.15 lists each patent, utility model, industrial design, registered trademark,
design xxxx, service xxxx and trade name, registered copyright and domain name,
and each published application for any of the foregoing, domestic and foreign,
that is necessary for the operation of the Business as presently conducted
(collectively, the “Business Intellectual Property”). Except as set forth in
Schedule 3.15: (a) the Company has, directly or indirectly, the entire right,
title and interest in and to the Business Intellectual Property, free and clear
of all Encumbrances; (b) there is no claim or notice of infringement of the
intellectual property rights of any other Person pending or, to the Knowledge
of
Seller threatened against the Company; (c) the Business Intellectual Property
of
the Company is valid, subsisting, in full force and effect and has not been
compromised, abandoned or passed into the public domain in any respect, and
all
necessary registration, maintenance and renewal documentation and fees in
connection with the Business Intellectual Property have been timely filed with
appropriate authorities and paid; (d) to the Knowledge of Seller, no Person
is
infringing on or misappropriating any Business Intellectual Property; (e) to
the
Knowledge of Seller, the operation of the Business does not infringe or
misappropriate the intellectual property rights of any other Person; (f) no
present or former employee of the Company or Seller has any proprietary,
financial or other interest, direct or indirect, in any Business Intellectual
Property; and (g) the Company has taken commercially reasonable precautions
to
protect inventions, trade secrets and know how constituting Business
Intellectual Property, including the execution of appropriate agreements. U.S.
Patent No. 6,296,410 (Ruizendaal) (“U.S. Patent”) listed in Schedule 3.15 is
acknowledged to be an essential asset of the Company in “as issued” form. There
has been no material impairment or determination of invalidity of the U.S.
Patent.
19
3.16 BROKERS
OR FINDERS
Except
for the investment banking fees of Xxxxxx Xxxxxxx & Co., LLC set forth on
Schedule 3.16, Seller, the Company and their officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders
fees or agents commissions or other similar payment in connection with this
Agreement and will indemnify, defend and hold Buyer harmless from any such
payment alleged to be due by or though Seller or the Company as a result of
any
action of Seller, the Company or any of their officers or agents in connection
with this Agreement.
3.17 OFFICERS
AND DIRECTORS; BANK ACCOUNTS
Schedule
3.17 lists (i) all officers and directors of the Company, (ii) all Persons
holding a power of attorney, or appointment of general agency, executed by
or on
behalf of the Company (and a brief summary of any such power or appointment),
and (iii) all banks in which the Company has an account or safe deposit or
lock
box, the account or box number, and the name of every person authorized to
draw
thereon or having access thereto.
3.18 PRODUCT
WARRANTY; ADVERTISING
All
Products sold or delivered by the Company since June 2003 have been in
conformity in all material respects with all applicable contractual commitments
and all express and implied warranties, and the Company has no liability (and,
to Seller’s Knowledge, there is no reasonable basis for any present or future
action, suit, proceeding, charge, complaint, claim or demand against it giving
rise to any such liability) for replacement or other damages in connection
therewith, except for any such liability that has not had or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Except as set forth in Schedule 3.18, no product or Product
sold
or delivered by the Company is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale of the
Company which are attached hereto in Schedule 3.18.
3.19 PRODUCT
LIABILITY
Except
as
set forth in Schedule 3.19, neither Seller nor the Company has been notified
in
writing of any claims (and neither Seller nor the Company has any Knowledge
of
any threatened claims) arising out of any injury to individuals or property
as a
result of the ownership, possession or use of any products or Products sold
or
delivered by the Company.
There
has
been no, and to Seller’s Knowledge, there exists no reasonably likely basis for
(i) withdrawal or suspension of any approval or consent of any Governmental
Authority with respect to any Product distributed or sold by the Company, or
(ii) recall, withdrawal, seizure or suspension by order of any Governmental
Authority of any Product. There are no defects in the designs, specifications,
or processes developed and/or owned by the Company with respect to any Product
sold or otherwise distributed by the Company that will give rise to any
liabilities, damages, fines, assessments, losses, penalties, or expenses, and
to
the Company’s Knowledge, there are no such defects in the designs,
specifications, or processes developed and/or owned by others and used by the
Company with respect to any such Product sold or otherwise
distributed.
20
3.20
TRADE
AND
MARKETING PROGRAMS
Schedule
3.20 lists all existing programs, practices or arrangements that relate to
trade
discounts, trade promotions, marketing, promotional sales or coupons related
to
any products or Products sold by the Company.
3.21 PRODUCT
FORMULA, PROCESSING DETAILS AND KNOW-HOW
The
Company has, and will have following the Closing, possession of, and the full
right to use and exploit, all product formulae, processing details, know-how
and
Business Intellectual Property applicable to its products, including those
products that have been, or are currently being, developed by any third party
manufacturers.
3.22 REAL
PROPERTY
Except
as
disclosed in Schedule 3.22, the Company does not now, nor has it ever, owned
or
leased any real property. As of Closing, the Company has no leasehold or
leasehold termination obligations of any kind whatsoever.
3.23 NO
UNDISCLOSED LIABILITIES
Except
as
set forth in Schedule 3.23 or reflected in the Annual Financial Statements
or
the Interim Financial Statements, the Company has no liabilities or obligations
of any nature (whether absolute, accrued, contingent, matured or otherwise,
and
whether due or to become due) except liabilities or obligations arising in
the
Ordinary Course of Business since the respective dates thereof.
3.24 COMPLIANCE
WITH LAWS
Except
as
set forth in Schedule 3.24:
(i) the
Company has conducted its business in compliance in all respects with all
applicable Legal Requirements;
(ii) the
Company has all licenses, certificates of occupancy, permits and other
authorizations of all Governmental Authorities (“Permits”) required for the
operation of the Business, and all such Permits are valid and in full force
and
effect;
(iii)
no
event
has occurred, and to Seller’s Knowledge, no event is expected that (with or
without notice or lapse of time) (A) may constitute or result in a violation
by
the Company of, or a failure by the Company to comply with, any Legal
Requirement or the terms and conditions of any Permit; or (B) may give rise
to
any obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(iv)
the
Company has not received, and to Seller’s Knowledge, the Company does not expect
to receive any oral or written notice or other communication from any
Governmental Authority regarding any actual, alleged or potential (A) violation
of or failure to comply with any Legal Requirement, or the terms and conditions
of any Permit, by the
21
3.25 CONSENTS
Except
as
set forth in Schedule 3.25, no Consent of, and no notice to or filing or
registration with, any Governmental Authority, domestic or foreign, is required
in connection with the execution, delivery and performance of this Agreement,
the Related Agreements and the transactions contemplated herein and therein
by
Seller or the Company. Except as set forth in Schedule 3.25, no Consent of,
or
notice to, any other Person, including without limitation, parties to loans,
Contracts or other agreements, is required in connection with the execution,
delivery and performance of this Agreement, the Related Agreements and the
transactions contemplated herein and therein by Seller or the
Company.
3.26 FDA
All
inventories of finished goods in existence on the Closing Date will have been
manufactured in accordance with good manufacturing practices, as defined by
the
FDA Act. None of such finished goods inventories will be adulterated or
misbranded within the meaning of the FDA Act.
3.27 AFFILIATE
TRANSACTIONS
Schedule
3.27 contains a complete and correct list of all Contracts or commitments,
and
of all transfers of assets, assumptions of liabilities or other transactions,
whether or not entered into in the Ordinary Course of Business, to or by which
the Company, on the one hand, and Seller or any shareholder, director, officer
or employee of the Company or Seller, or any family member, relative or
Affiliate of any such shareholder, director, officer or employee, on the other
hand, is or has been a party or otherwise bound or affected, and that (i) are
currently in effect or pending; or (ii) involve continuing liabilities or
obligations. Except as set forth in Schedule 3.27, to the Knowledge of Seller,
no shareholder, director, officer, or employee of the Company, or any family
member, relative or Affiliate of any such shareholder, director, officer, or
employee: (i) owns, directly or indirectly, and whether on an individual, joint
or other basis, any interest in (A) any property or asset used in or held for
use by the Company in connection with the Business; or (B) any Person that
is a
supplier, provider, customer or competitor of the Company; (ii) serves as a
director, officer or employee of any Person that is a supplier, provider,
customer or competitor of the Company; or (iii) has received any loans or is
otherwise a debtor of, or made any loans to or is otherwise a creditor of,
the
Company.
3.28 PROVIDERS
AND SUPPLIERS
Except
as
set forth in Schedule 3.28, no provider or supplier of the Company has cancelled
or otherwise terminated, or made any written or oral threat to the Company
to
cancel or terminate, its relationship with the Company, or has at any time
since
December 31, 2005 decreased or threatened to decrease materially its services
or
supplies to the Company.
22
3.29 PAYMENTS
Neither
the Company, nor any director, officer, managing director (or functional
equivalents of the foregoing), equityholder, employee, Affiliate, agent or
other
Person associated with or acting on behalf of the Company, has used any funds
of
the Company for any unlawful contribution, gift, entertainment or expense
relating to political activity, or made any direct or indirect unlawful payments
to any foreign or domestic official or employee of any Governmental Authority
from funds of the Company, or made any unlawful rebate or kickback or other
unlawful payment.
3.30 CONTROLS
AND PROCEDURES
The
Company maintains accurate and complete books and records reflecting its assets
and liabilities and maintains proper and adequate internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are recorded
only in accordance with management’s authorization, (ii) transactions are
recorded as necessary to permit preparation of the financial statements of
the
Company in accordance with GAAP and to maintain accountability for the assets
and liabilities of the Company, (iii) receipts and expenditures of the Company
are executed only in accordance with management’s authorization, (iv)
unauthorized acquisition, disposition or use of assets is prevented or timely
detected, and (v) accounts, notes and other receivables are recorded accurately,
and proper and adequate procedures are implemented to effect the collection
thereof on a current and timely basis. There are no material weaknesses in
the
design or operation of such internal accounting controls that could adversely
affect the Company’s ability to initiate, record, process and report financial
data.
3.31 FULL
DISCLOSURE
No
representation or warranty by Seller in this Agreement or in any certificate
furnished or to be furnished by the Company or Seller pursuant to this Agreement
or the Related Agreements contains or will contain any untrue statement of
a
material fact, or omits or will omit to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein
or
therein, in light of the circumstances under which they are made, not
misleading.
3.32
RELIANCE
The
representations and warranties made by Seller in this Agreement, the Schedules
and Annexes attached hereto and the Related Agreements are made by Seller with
the knowledge and expectation that Buyer is placing complete reliance thereon
in
entering into, and performing its obligations under, the Agreement and the
Related Agreements and the same shall not be affected in any respect whatsoever
by any investigation conducted by or on behalf of Buyer, whether in
contemplation of or pursuant to this Agreement, the Related Agreements or
otherwise.
3.33 COMPANY
TRANSACTION EXPENSES
Schedule
3.33 sets forth a complete and accurate list of all Company Transaction Expenses
incurred or accrued by the Company through and including the Closing
Date.
23
3.34 EVENTS
SUBSEQUENT TO MOST RECENT FISCAL YEAR END
Since
December 31, 2005, nothing has occurred that, individually or in the aggregate,
has, or is reasonably likely to have, a Material Averse Effect.
3.35
CONDUCT
OF BUSINESS
Except
for the transfer and sale of certain Inventory by Seller to the Company in
connection with the Closing of this transaction, since December 31, 2005, the
Company has conducted the Business only in the Ordinary Course of
Business.
3.36
DIVESTITURE
AGREEMENTS
Other
than the Share Sale Agreement, the Company is not a party to any Divestiture
Agreement that remains in full force and effect in any respect on or after
the
Closing Date.
3.37
ACCOUNTS
AND NOTES PAYABLE
Except
as
set forth on Schedule 3.37, the Company shall have no accounts payable on its
books and records. Notwithstanding the generality of the foregoing, Schedule
3.37 sets forth a true and correct aged list of all accounts and notes payable
of the Company as of the date immediately preceding the Closing Date. All
accounts and notes payable have arisen in the Ordinary Course of Business and
represent valid indebtedness of the Company, for the exclusive benefit of the
Company. Except as set forth on Schedule 3.37, all items which are required
by
GAAP to be reflected as accounts and notes payable on the Financial Statements
and on the books and records of the Company are so reflected and have been
recorded in accordance with GAAP. The Company does not have any accounts payable
to any of its directors, officers, employees, shareholders or any other
Affiliates of the Company.
3.38
NO
LEASED
OR OWNED CAR EXPENSE
As
of
Closing, the Company has no debt, contract or other obligation with respect
to
the lease, rental or ownership of any car, truck or other motor
vehicle.
4. REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to Seller as follows:
4.1 ORGANIZATION
AND GOOD STANDING
Buyer
is
a corporation duly organized, validly existing, and in good standing under
the
laws of the State of Delaware, with full corporate power and authority to
conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use.
24
4.2 AUTHORITY;
NO CONFLICT
(a) This
Agreement has been duly authorized, executed and delivered by Buyer and
constitutes the legal, valid, and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, subject to (i) bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally; and (ii) general principles of equity. Buyer
has
the absolute and unrestricted right, power, and authority to execute and deliver
this Agreement and the Related Agreements to which it is a party and to perform
its obligations hereunder and thereunder.
(b) Neither
the execution and delivery of this Agreement by Buyer nor the consummation
or
performance of any of the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any
provision of Buyer's Organizational Documents;
(ii) any
resolution adopted by the board of directors or the shareholders of
Buyer;
(iii) any
Legal
Requirement or Order to which Buyer may be subject; or
(iv) any
Contract to which Buyer is a party or by which Buyer may be bound.
Except
for the consent of the board of directors of Buyer, which consent has been
granted, Buyer is not and will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated
Transactions.
4.3 CERTAIN
PROCEEDINGS
There
is
no pending Proceeding that has been commenced against Buyer and that challenges,
or may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions. To Buyer's Knowledge,
no
such Proceeding has been threatened.
4.4 BROKERS
OR FINDERS
Buyer
and
its officers and agents have incurred no obligation or liability, contingent
or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement and will indemnify and hold
Seller harmless from any such payment alleged to be due by or through Buyer
as a
result of the action of Buyer or its officers or agents.
4.5 ACCREDITED
INVESTOR
Buyer
is
an “Accredited Investor” within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act.
25
4.6 EXPERIENCE;
PURCHASE FOR OWN ACCOUNT
Buyer
has
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment
in
the Company, and it is able financially to bear the risks thereof. The Shares
are being acquired for Buyer's own account for the purpose of investment and
not
with a view to or for sale in connection with any distribution
thereof.
4.7 ACCESS
TO
INFORMATION
Buyer
has
had an opportunity to discuss the Company's business, management and financial
affairs with the Company's management and the conditions of the sale of the
Shares.
4.8 NO
PUBLIC
MARKET; RESTRICTED SHARES
Buyer
understands that (i) the Shares have not been registered under the
Securities Act, and (ii) the Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration requirement.
5. COVENANTS
OF SELLER
5.1
ACCESS
AND INVESTIGATION
Prior
to
the Closing Date, Seller shall have caused the Company to (a) afford Buyer
and
its representatives and prospective lenders and their representatives
(collectively, “Buyer's Advisors”) full access to the Company's personnel,
contracts, books and records, and other documents and data, (b) furnish Buyer
and Buyer's Advisors with copies of all such contracts, books and records,
and
other existing documents and data as Buyer may reasonably request, and (c)
furnish Buyer and Buyer's Advisors with such additional financial, operating,
and other data and information as Buyer may reasonably request.
5.2
OPERATION
OF THE BUSINESS OF THE COMPANY
(a) Prior
to
the Closing Date, Seller shall have caused the Company to conduct the business
of the Company only in the Ordinary Course of Business consistent with past
practice, use its best efforts to preserve intact the current business
organization of the Company and maintain the relations and goodwill with
suppliers, customers, creditors, agents, and others having business
relationships with the Company; provided, however, notwithstanding any other
provisions in this Agreement, prior to Closing the following shall
occur:
(i)
|
The
Company shall assign any and all rights it has in and to the tradename,
fictitious name or d/b/a “Lil' Drug Store International,” or any similar
name, to Seller;
|
(ii)
|
The
Company may distribute or dividend to Seller the Company's cash and
accounts receivable due from Seller and Aurium Pharma Inc.; provided
that
|
26
the Company shall retain in its bank accounts sufficient cash to satisfy all checks outstanding as of the Closing; and |
(iii)
|
The
Company shall have assigned certain intangible properties of the
Company
unrelated to the Products to Seller or an affiliate of
Seller.
|
5.3 |
NON-COMPETITION;
NON-SOLICITATION; NON-DISPARAGEMENT
|
For
purposes of this Section 5.3, all references to Buyer shall be deemed to include
all of the Affiliates, successors and assigns of Buyer,
and all references to Seller and the Shareholders shall be deemed to include
all
of their Affiliates, successors, assigns, heirs, and personal and legal
representatives of Seller or the Shareholders, as applicable.
(a) Seller
and the Shareholders acknowledge that the agreements and covenants contained
in
this Section 5.3 are essential to protect the value of the Business being
acquired by Buyer or any of its Affiliates. Therefore, Seller and the
Shareholders agree that during the period commencing on the Closing Date and
ending on the fifth (5th)
anniversary of the Closing Date (such period is hereinafter referred to as
the
“Restricted Period”), neither Seller nor the Shareholders shall, anywhere in the
United States of America or any of the countries in which Seller has engaged
in
the Business on or prior to the Closing Date or Buyer has engaged in business
on
or prior to the Closing Date, participate or engage, for themselves, through
or
on behalf of or in conjunction with any Person, whether as an agent, consultant,
shareholder, director, officer, employee, member, manager, partner, joint
venturer, creditor, investor or in any other capacity, in the Non-Compete
Activities (as defined below); provided,
however,
that
the foregoing shall not prohibit (i) the ownership by Seller or the Shareholders
of equity securities of a public company in an amount not to exceed 2% of the
issued and outstanding shares of such company; and (ii) the commercialization
by
Seller and/or the Shareholders of products directly related to hemorrhoid care
or other cryogenic devices to treat hemorrhoids. For purposes of this Agreement,
the “Non-Compete Activities” means the Business directly related to wart care or
other cryogenic devices to treat benign skin lesions, i.e., warts and skin
tags.
(b) During
such Restricted Period, each of Seller and the Shareholders agrees that it
will
not at any time or for any reason (i) solicit or divert any business or clients
or customers away from Buyer or any of its Affiliates; (ii) induce any
customers, clients, suppliers, agents or other Persons under contract or
otherwise associated or doing business with Buyer or any of its Affiliates,
to
reduce or alter any such association or business with Buyer or any of its
Affiliates; (iii) hire any Person employed by Buyer or any of its Affiliates
or
any Person who has left the employ of Buyer or any of its Affiliates during
the
preceding five (5) years; and (iv) solicit any person in the employment of
Buyer
or any of its Affiliates to (A) terminate such employment, and/or (B) accept
employment, or enter into any consulting arrangement, with any Person other
than
Buyer or any of its Affiliates.
(c) (i)
Seller and the Shareholders agree not to make or cause to be made, directly
or
indirectly, any disparaging or derogatory statements concerning Buyer or any
of
its Affiliates or their respective businesses, services, reputations, or
prospects, or its past or present officers, directors, employees, attorneys,
and
agents. Seller and the Shareholders further agree not to intentionally do or
say
anything to damage any of the business, supplier, or customer relationships
of
Buyer or any of
27
(ii) Buyer
agrees not to make or cause to be made, directly or indirectly, any disparaging
or derogatory statements concerning Seller or any of its Affiliates, or their
respective businesses, services, reputations, or prospects, or Seller’s past or
present officers, directors, employees, attorneys, and agents. Buyer further
agrees not to intentionally do or say anything to damage any of the business,
supplier, or customer relationships of Seller or any of its Affiliates nor
in
any way, directly or indirectly, assist any Person in inducing or otherwise
counseling, advising, encouraging, or soliciting any Person to terminate or
in
any way diminish its relationship with Seller or any of its Affiliates.
(d) Seller,
the
Shareholders and their Affiliates shall not at any time, directly or indirectly,
use or purport to authorize any Person to use any name, xxxx, copyright, logo,
trade dress or other identifying words or images which are the same as or
similar to those used currently or in the past by Buyer, Seller, the
Shareholders or their Affiliates in connection with any product or service
in
connection with the Business. In addition, Seller, the Shareholders and their
Affiliates shall not at any time, directly or indirectly, challenge, or
cooperate with any third-party challenging or desiring to challenge, any of
the
Business Intellectual Property; nor shall Seller, the Shareholders and their
Affiliates threaten to take any of such actions. Seller and the Shareholders
acknowledge that compliance with the restrictions set forth in this Section
5.3
will not prevent any of them from earning a livelihood.
5.4 GENERAL
CONFIDENTIALITY
For
purposes of this Section 5.4, all references to Seller and the Shareholders
shall be deemed to include all of their Affiliates, successors, assigns, heirs
and personal and legal representatives of Seller or the Shareholders, as
applicable. Seller and the Shareholders acknowledge that the intangible property
and all other confidential or proprietary information with respect to the
business and operations of the Business are, after the Closing Date, valuable,
special and unique assets of Buyer. Seller and the Shareholders shall not,
at
any time after the Closing Date, disclose,
directly or indirectly, to any Person, or use or purport to authorize any Person
to use any confidential or proprietary information with respect to the Business,
whether or not for their own benefit, without the prior written consent of
Buyer
unless required by law, including, without limitation, (i) trade secrets,
designs, formulae, drawings, intangible property, diagrams, techniques, research
and development, specifications, data, know-how, formats, marketing plans,
business plans, budgets, strategies, forecasts and client data; (ii) information
relating to products, (iii) the names of customers and contacts, the marketing
strategies, the names of its vendors and suppliers, the cost of materials and
labor, the prices obtained for services sold (including the methods used in
price determination, manufacturing and sales costs), lists or other written
records used in the Business, compensation paid to employees and consultants
and
other terms of employment, production operation techniques or any other
confidential information of, about or pertaining to the Business, and any other
information and material relating to any customer, vendor, licensor, licensee,
or other party in connection with the Business, (iv) all tangible material
that
embodies any confidential and proprietary information as well as all records,
files, memoranda, reports, price lists, drawings, plans, sketches and other
written and graphic records, documents, equipment, and the like, and (v) any
28
other
confidential information or trade secrets which Seller or the Shareholders
may
acquire or develop in connection with or as a result of the performance of
the
terms and conditions of this Agreement, excepting only such information as
is
already known to the public or which may become known to the public without
any
fault of Seller or the Shareholder in violation of any confidentiality
restrictions. Seller and the Shareholders acknowledge that Buyer would not
enter
into this Agreement without the assurance that all such confidential and
proprietary information will be used for the exclusive benefit of
Buyer.
5.5 CONTINUING
OBLIGATIONS; EQUITABLE REMEDIES
The
restrictions set forth in Sections 5.3 and 5.4 are considered by the parties
to
be reasonable for the purposes of protecting the value of the Business and
goodwill of Buyer. Buyer, Seller, and the Shareholders acknowledge that Buyer
would be irreparably harmed and that monetary damages would not provide an
adequate remedy to Buyer in the event the covenants contained in Sections 5.3
and 5.4 were not complied with in accordance with their terms. Accordingly,
Seller and the Shareholders agree that any breach or threatened breach by any
of
them of any provision of Sections 5.3 or 5.4 shall entitle Buyer to injunctive
and other equitable relief to secure the enforcement of these provisions, in
addition to any other remedies (including damages) which may be available to
Buyer. If Seller, the Shareholders or any of their Affiliates breaches the
covenant set forth in Section 5.3, the running of the non-compete period
described therein shall be tolled for so long as such breach continues. It
is
the desire and intent of the parties that the provisions of Sections 5.3, and
5.4 be enforced to the fullest extent permissible under the Legal Requirements
and public policies of each jurisdiction in which enforcement is sought. If
any
provisions of Section 5.3 relating to the time period, scope of activities
or
geographic area of restrictions is declared by a court of competent jurisdiction
to exceed the maximum permissible time period, scope of activities or geographic
area, as the case may be, the time period, scope of activities or geographic
area shall be reduced to the maximum which such court deems enforceable. If
any
provisions of Section 5.3 or 5.4 other than those described in the preceding
sentence are adjudicated to be invalid or unenforceable,
the invalid or unenforceable provisions shall be deemed amended (with respect
only to the jurisdiction in which such adjudication is made) in such manner
as
to render them enforceable and to effectuate as nearly as possible the original
intentions and agreement of the parties. In addition, if any party brings an
action to enforce Sections 5.3 or 5.4 hereof or to obtain damages for a breach
thereof, the prevailing party in such action shall be entitled to recover from
the non-prevailing party all attorney’s fees and expenses incurred by the
prevailing party in such action.
6. CONDITIONS
PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's
obligation to purchase the Shares and to take the other actions required to
be
taken by Buyer at the Closing is subject to the satisfaction, at or prior to
the
Closing, of each of the following conditions (any of which may be waived by
Buyer, in whole or in part, in its sole discretion):
6.1 ACCURACY
OF REPRESENTATIONS
The
representations and warranties of Seller contained in this Agreement and any
of
the Related Agreements to which it is a party shall be true and correct in
all
material respects (except for such representations and warranties as are
qualified by materiality or Material Adverse Effect, which representations
and
warranties shall be true and correct in all respects), on the Closing Date
(other
29
than
such
representations and warranties that are expressly made as of an earlier date
which need only be true and correct in all material respects or true and
correct, as the case may be, as of such earlier date).
6.2 SELLER'S
PERFORMANCE
(a) All
of
the covenants and obligations that Seller or the Company is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing must
have been duly performed and complied with in all material
respects.
(b) Each
document required to be delivered pursuant to Section 2.4(a) must have been
delivered to Buyer.
6.3 NO
PROCEEDINGS
There
must not have been commenced or threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated
Transactions.
6.4 NO
CLAIM
REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There
must not have been made or threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right
to
acquire or to obtain beneficial ownership of, any stock of, or any other voting,
equity, or ownership interest in, the Company, or (b) is entitled to all or
any
portion of the Purchase Price payable for the Shares in accordance with Section
2.2 hereof.
6.5 NO
PROHIBITION
Neither
the consummation nor the performance of any of the Contemplated Transactions
will, directly or indirectly (with or without notice or lapse of time),
contravene, or conflict with, or result in a material violation of, or cause
Buyer or any Person affiliated with Buyer to suffer any material adverse
consequence under, (a) any applicable Legal Requirement or Order, or (b) any
Legal Requirement or Order that has been published, introduced, or otherwise
formally proposed by or before any governmental body.
6.6 PERMITS
The
Company shall have received or been granted, or otherwise have in effect as
of
the Closing, all Permits and other Consents, approvals and authorizations of
any
Governmental Authority listed on Schedule 6.6 hereto or otherwise required
for
the operation of the Business in all material respects.
6.7 CONSENTS
All
of
the Consents, approvals and waivers listed in Schedule 6.7 hereto shall have
been obtained.
30
6.8 CLOSING
PAPERS
Seller
and the Company shall have executed and delivered to Buyer all of the other
closing documents, instruments and certificates reasonably requested by Buyer
and its counsel, pursuant to any term or provision of this
Agreement.
6.9 NO
MATERIAL ADVERSE CHANGE
No
event,
occurrence, fact, condition, change, development or effect shall exist or shall
have occurred that, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect, and Buyer shall
have
received a certificate signed by the Chief Executive Officer of Seller to that
effect.
6.10 EVIDENCE
OF TRANSFER OF SHARES
Seller
shall have delivered to Buyer evidence reasonably satisfactory to Buyer and
its
counsel that all actions necessary under the Organizational Documents of the
Company and the laws of the Netherlands to transfer the record and beneficial
ownership of all of the Shares of capital stock of the Company to Buyer have
been taken including, without limitation, the execution and delivery of the
Deed
of Transfer.
6.11
|
OFFICER’S CERTIFICATE WITH RESPECT TO THE SELLER AND THE COMPANY
|
Buyer
shall have received certificates in a form reasonably acceptable to Buyer,
dated
the Closing Date, executed by an executive officer of each of Seller and the
Company, as applicable, certifying as of the Closing Date (i) a true and
complete copy of the certificate of incorporation and bylaws of Seller and
the
Company on the Closing Date; (ii) the resolutions adopted by the Board of
Directors with respect to the approval of this Agreement and the Related
Agreements to which it is a party and the transactions contemplated hereby
and
thereby; and (iii) that the original minute books of the Company as delivered
to
Buyer or its agent on the Closing Date contains (a) all material written minutes
or consents of material meetings and actions of the equityholders or Board
of
Directors of the Company in the possession of Seller or the Company, and (b)
the
other organizational documents of the Company.
6.12 SELLER
CLOSING CERTIFICATE
Buyer
shall have received a certificate, dated the Closing Date, executed by Seller,
certifying that, as of the Closing Date, the conditions set forth in Sections
6.1 and 6.2 have been satisfied.
6.13 GOOD
STANDING CERTIFICATES
Buyer
shall have received from Seller a certificate issued by the appropriate
Governmental Authority of the jurisdiction of incorporation of each of Seller
and the Company, certifying as of a date within thirty (30) days of the Closing
Date, the good standing of each of Seller and the Company,
and the
Certificate of Incorporation of Seller and the articles of association of the
Company.
31
6.14 RESIGNATIONS;
RELEASES
Buyer
shall have received (i) the resignations, effective contemporaneously with
the
Closing, of each director and officer of the Company
in a
form satisfactory to Buyer; and (ii) written releases from Seller, the
Shareholders and all of the former employees of the Company in substantially
the
form attached hereto as Exhibit G.
6.15 PAYOFF
LETTERS; LIEN RELEASES
Except
as
set forth in Schedule 6.15, Buyer shall have received payoff letters and/or
lien
releases, as applicable, in a form satisfactory to Buyer, with respect to the
payoff amounts under the Company’s outstanding loan facilities or any other
arrangement pursuant to which a lien has been filed against the
Company.
The
payoff letters shall indicate that the Encumbrances relating to such debt or
other arrangements shall be discharged contemporaneously with the
Closing.
6.16 RELATED
AGREEMENTS
Seller
and the Company shall have executed and delivered each of the Related Agreements
to which they are parties and such agreements and instruments shall be in full
force and effect.
6.17 BOOKS
AND
RECORDS
Counsel
to Buyer, or Buyer’s agent, shall have received the stock book, stock
certificates, stock ledger, minute books, corporate seal and all other corporate
books and records of the Company and any other books and records related to
the
Business in the possession of Seller.
6.18 UPC
AND
PACKAGING AUTHORIZATION
Seller
shall deliver a letter authorizing the use by Buyer and its Affiliates of
Seller’s existing UPC codes and packaging for the Product for a period of
eighteen (18) months after the Closing Date.
7.
CONDITIONS
PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's
obligation to sell the Shares and to take the other actions required to be
taken
by Seller at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Seller, in whole or in part, in its sole discretion):
7.1 ACCURACY
OF REPRESENTATIONS
The
representations and warranties of Buyer contained in this Agreement and any
of
the Related Agreements to which it is a party shall be true and correct in
all
material respects (except for such representations and warranties as are
qualified by materiality, which representations and warranties shall be true
and
correct in all respects), on the Closing Date (other than such representations
and warranties that are expressly made as of an earlier date which need only
be
true and correct in all material respects or true and correct, as the case
may
be, as of such earlier date).
32
7.2 BUYER'S
PERFORMANCE
(a) All
of
the covenants and obligations that Buyer is required to perform or to comply
with pursuant to this Agreement at or prior to the Closing must have been
performed and complied with in all material respects.
(b) Each
document required to be delivered by Buyer pursuant to Section 2.4(b) must
have
been delivered to Seller and Buyer and must have made the cash payment required
to be made by Buyer pursuant to Section 2.4(b)(i).
7.3 NO
INJUNCTION
There
must not be in effect any Legal Requirement or any injunction or other Order
that (a) prohibits the sale of the Shares by Seller to Buyer, and (b) has been
adopted or issued, or has otherwise become effective, since the date of this
Agreement.
7.4 CLOSING
PAPERS
Buyer
shall have executed and delivered to Seller all of the other closing documents,
instruments and certificates reasonably requested by Seller and its counsel,
pursuant to any term or provision of this Agreement.
7.5 RESOLUTIONS
Buyer
shall have delivered to Seller a copy, certified by the Secretary or Assistant
Secretary of Buyer, of resolutions adopted by the Board of Directors of Buyer
approving the Agreement, the Related Agreements to which it is a party and
the
Contemplated Transactions.
7.6 BUYER
CLOSING CERTIFICATE
Seller
shall have received a certificate, dated the Closing Date, executed by Buyer,
certifying that, as of the Closing Date, the conditions set forth in Sections
7.1 and 7.2 have been satisfied.
7.7 GOOD
STANDING CERTIFICATE
Seller
shall have received from Buyer a certificate issued by the Secretary of State
of
Delaware certifying as of a date within thirty (30) days of the Closing Date,
the good standing of Buyer.
8. TERMINATION
8.1
TERMINATION
EVENTS
This
Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by
either
Buyer or Seller if a material breach of any provision of this Agreement has
been
committed by the other party and such breach has not been waived; provided
that
the non-
33
breaching
party has provided the breaching party with a thirty (30) day period in which
to
cure such breach and such breach has not been cured.
(b) (i)
by
Buyer if any of the conditions in Section 6 has not been satisfied as of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Buyer to comply with its obligations under
this Agreement) and Buyer has not waived such condition on or before the Closing
Date; or (ii) by Seller, if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is
or
becomes impossible (other than through the failure of Seller or the Company
to
comply with its obligations under this Agreement) and Seller has not waived
such
condition on or before the Closing Date;
(c) by
mutual
written consent of Buyer and Seller; or
(d) by
either
Buyer or Seller if the Closing has not occurred (other than through the failure
of any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before September 22, 2006, or such
later
date as the parties may agree upon.
8.2 EFFECT
OF
TERMINATION
Each
party's right of termination under Section 8.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement
is
terminated pursuant to Section 8.1, all further obligations of the parties
under
this Agreement will terminate, except that Sections 8.2, 12.1, 12.4 and 12.7
will survive; provided, however, that if this Agreement is terminated by a
party
because of the breach of this Agreement by the other party or because one or
more of the conditions to the terminating party's obligations under this
Agreement are not satisfied as a result of the other party's failure to comply
with its obligation under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
9. INDEMNIFICATION;
REMEDIES
9.1
RIGHT
TO
INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
The
right
to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected
by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time by the Person claiming such right of
indemnification, whether before or after the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy or inaccuracy of
or
compliance with, any such representation, warranty, covenant, or obligation.
The
waiver of any conditions to Closing will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
9.2 INDEMNIFICATION
AND PAYMENT OF DAMAGES BY SELLER
Seller
will indemnify and hold harmless Buyer, the Company, and their respective
Representatives, shareholders, controlling persons, and Affiliates
(collectively, the “Indemnified Persons”) for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including
34
incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) and/or diminution of value, whether
or
not involving a third-party claim (collectively, “Damages”), arising, directly
or indirectly, from or in connection with:
(a) any
breach of any representation or warranty made by Seller in this Agreement,
the
Disclosure Schedules, the supplements to the Disclosure Schedules, or any other
certificate or document delivered by Seller pursuant to this
Agreement;
(b) any
breach by Seller or the Shareholders of any covenant or obligation of Seller
or
the Shareholders in this Agreement or in any of the Related
Agreements;
(c) any
product shipped or manufactured by, or any services provided by, the Company
or
Seller with respect to the Business prior to the Closing Date;
(d) any
claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by any
such
Person with Seller, the Shareholders or the Company (or any Person acting on
their behalf) in connection with any of the Contemplated
Transactions;
(e) the
matter set forth on Schedule 9.2(e);
(f) any
revaluation of intangible assets contemplated in Section 3.5 of the Share Sale
Agreement, subject to the Xxxxxxx Assignment; provided, however, nothing
contained in the Xxxxxxx Assignment shall obviate in any way the Indemnified
Persons’ rights and protections set forth in this Section 9.2(f);
or
(g) the
matters set forth on Schedule 9.2(g).
The
remedies provided in this Section 9.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Person
against Seller.
9.3
INDEMNIFICATION
AND PAYMENT OF DAMAGES BY THE SHAREHOLDERS
The
Shareholders will indemnify and hold harmless the Indemnified Persons for,
and
will pay to the Indemnified Persons the amount of, Damages arising, directly
or
indirectly, from or in connection with:
(a) any
breach of the representation and warranty made by Seller in Section 3.15 of
this
Agreement and with respect thereto in the Disclosure Schedules or any
supplements to the Disclosure Schedules; or
(b) any
breach by the Shareholders of any covenant or obligation of the Shareholders
set
forth in Sections 5.3, 5.4, 5.5 and 9 of this Agreement; or
(c) the
matters set forth on Schedule 9.2(g).
35
Notwithstanding
anything contained herein to the contrary, the Shareholders shall have no
liability to any of the Indemnified Persons pursuant to this Section 9.3 unless
and until such Indemnified Persons have first sought indemnification for Damages
from Seller pursuant to Sections 9.2(a) (with respect to a breach of Section
3.15 only), 9.2(b) or 9.2(g), respectively, and Seller has not, will not or
is
unable to indemnify such Indemnified Persons for such Damages which Seller
is
required to pay pursuant to the terms of this Agreement. The aggregate liability
of the Shareholders under this Section 9.3 shall not exceed the lesser of (i)
$9,500,000; or (ii) the aggregate amount of distributions to the Shareholders
by
Seller on and after the Closing Date in excess of distributions sufficient
to
pay the Shareholders’ federal and state income taxes directly related to
Seller’s sale to Buyer of all of the issued and outstanding capital stock of the
Company pursuant to the terms hereof.
9.4 INDEMNIFICATION
AND PAYMENT OF DAMAGES BY BUYER
Buyer
will indemnify and hold harmless Seller, and will pay to Seller the amount
of
any Damages arising, directly or indirectly, from or in connection with (a)
any
breach of any representation or warranty made by Buyer in this Agreement or
in
any certificate or document delivered by Buyer pursuant to this Agreement,
(b)
any breach by Buyer of any covenant or obligation of Buyer in this Agreement
or
in any of the Related Agreements, (c) any claim by any Person for brokerage
or finder's fees or commissions or similar payments based upon any agreement
or
understanding alleged to have been made by such Person with Buyer (or any Person
acting on its behalf) in connection with any of the Contemplated Transactions;
or (d) any claim by any Person based on any Product shipped or manufactured
by, or any services provided by, the Company after the Closing
Date.
9.5 SURVIVAL
All
representations and warranties made by the parties in this Agreement or in
any
certificate, schedule, statement, document, or instrument furnished hereunder
or
in connection with the negotiation, execution and performance of this Agreement
shall survive the Closing for a period ending upon the first anniversary of
the
Closing Date; provided, however, that the representations and warranties set
forth in (i) Sections 3.1, 3.2, 3.3, 3.6, 3.16, 3.33, 4.1, 4.2 and 4.4 shall
survive the Closing indefinitely; (ii) Sections 3.9, 3.10, 3.14, 3.18, 3.19
and
3.26 shall survive until sixty (60) days after the expiration of the applicable
statute of limitations; and (iii) Section 3.15 shall survive the Closing until
midnight on December 31, 2011. Notwithstanding anything herein to the contrary,
if notice has been given by any Indemnified Person pursuant to Sections 9.7
or
9.8 on or before the end of any applicable survival period, then such
Indemnified Person’s right to indemnification with respect to the breach of
representation or warranty that is the subject of such notice shall survive
until final resolution and payment, if any, with respect thereto. Any covenant
set forth in this Agreement that is to be performed on or prior to Closing
shall
survive until the one-year anniversary date of the Closing, and all other
covenants of the Company shall survive for the period of time set forth in
the
particular covenant, and, if no time is set forth, such covenant shall survive
the Closing indefinitely. Any claim for indemnification other than
indemnification claims set forth in Sections 9.2(a) and 9.3(a) shall survive
the
Closing indefinitely; provided, however, a claim for indemnification based
on
the covenants and obligations set forth in Section 10 shall survive until sixty
(60) days after the expiration of the applicable statute of limitations.
36
If
the
Closing occurs, Seller and/or the Shareholders will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or
covenant or obligation to be performed and complied with unless on or before
the
expiration of the applicable survival period an Indemnified Person notifies
Seller and/or the Shareholders of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by such Indemnified Person.
9.6 LIMITATIONS
ON AMOUNT—BUYER, SELLER AND THE SHAREHOLDERS
Notwithstanding
anything to the contrary in any other section of this Agreement:
(a) (i) Buyer
shall have no obligation to indemnify Seller pursuant to Section 9.4(a) until
the aggregate total for all Damages incurred or suffered by Seller pursuant
to
9.4(a) exceeds $250,000, in which event the right to be indemnified shall apply
to the full amount of such Damages, and (ii) Seller and the Shareholders shall
have no obligation to indemnify the Indemnified Persons pursuant to Sections
9.2(a) and 9.3(a) until the aggregate total of all Damages incurred or suffered
by the Indemnified Persons exceeds $250,000, in which event the right to be
indemnified shall apply to the full amount of such Damages; and
(b) The
aggregate liability of (i) Seller under Sections 9.2(a) shall not exceed
$2,100,000 except that the limit of aggregate liability for breach of the
representation and warranty appearing in Section 3.15 shall be $9,500,000.
For
the avoidance of doubt, (i) any indemnification payments made by Seller pursuant
to Section 9.2(a) with respect to a breach of any representation and warranty
by
Seller other than Section 3.15 shall in no way reduce the indemnification cap
of
$9,500,000 applicable to a breach of Section 3.15; and (ii) the Indemnified
Persons shall be entitled to indemnification in an amount up to $9,500,000
in
the event of a breach of Section 3.15, notwithstanding the existence of any
other indemnification claims by the Indemnified Persons against Seller or the
payment by Seller of prior indemnification claims by the Indemnified Persons.
The aggregate liability of Buyer under Section 9.4(a) shall not exceed
$2,100,000; provided,
however, that the limitations in this Section 9.6 shall not apply to Damages
for
inaccuracies in or breaches of the representations and warranties of Seller
set
forth in Sections 3.1, 3.2, 3.3, 3.6, 3.9, 3.10, 3.14, 3.16, 3.18, 3.26 or
3.33
or of Buyer set forth in Sections 4.1, 4.2 and 4.4. The limitations set forth
in
this Section shall not: (i) limit a party’s ability to enforce its rights and
obligations under this Agreement by a decree of specific performance or other
equitable relief issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith; (ii)
apply to claims brought by Seller against Buyer which arise out of Buyer’s
failure to pay the Purchase Price in accordance with Section 2.2 to Seller
on
the Closing Date; (iii) apply to claims brought by Buyer against Seller which
arise out of Seller’s failure to sell all of the Shares of capital stock of the
Company to Buyer on the Closing Date; or (iv) apply to a claim brought by the
Indemnified Persons against Seller and/or the Shareholders in which a court
of
competent jurisdiction issues a final, unappealable judgment, order or decree
concluding that Seller’s and/or the Shareholders’ actions or inactions
constituted fraud or willful misconduct.
9.7
PROCEDURE
FOR INDEMNIFICATION—THIRD PARTY CLAIMS
(a) Promptly
after receipt by an indemnified party under Section 9.2, 9.3 or 9.4 of notice
of
the commencement of any Proceeding against it, such indemnified party will,
if a
claim is to be
37
made
against an indemnifying party under Section 9.2, 9.3 or 9.4, give notice to
the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is irrevocably
and materially prejudiced by the indemnified party's failure to give such
notice.
(b) If
any
Proceeding referred to in Section 9.7(a) is brought against an indemnified
party
and it gives notice to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will, unless the claim involves Taxes, be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would
be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding,
the
indemnifying party will not, as long as it diligently conducts such defense,
be
liable to the indemnified party under this Section 9 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding,
in
each case subsequently incurred by the indemnified party in connection with
the
defense of such Proceeding, other than reasonable costs of investigation. If
the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made
in
that Proceeding are within the scope of and subject to indemnification; (ii)
no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding
or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that
are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of
the
commencement of any Proceeding and the indemnifying party does not, within
ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding,
the
indemnifying party will be bound by any determination made in such Proceeding
or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding
the foregoing, if an indemnified party determines in good faith that there
is a
reasonable probability that a Proceeding may adversely affect it or its
Affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified party may,
by
written notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will not
be
bound by any determination of a Proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably withheld,
delayed or conditioned).
(d) Seller,
the Shareholders and Buyer hereby consent to the non-exclusive jurisdiction
of
any court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Seller, the Shareholders and/or Buyer with respect
to
such a claim anywhere in the world.
38
9.8 PROCEDURE
FOR INDEMNIFICATION—OTHER CLAIMS
A
claim
for indemnification for any matter not involving a third-party claim may be
asserted by written notice to the party from whom indemnification is
sought.
9.9 CO-INDEMNIFICATION
The
existence of a third-party co-indemnitor in favor of the Indemnified Persons
with respect to the U.S. Patent shall in no way reduce or eliminate to any
extent the indemnification obligations of Seller and the Shareholders pursuant
to this Section 9. Furthermore, to the extent there exists a third-party
co-indemnitor in favor of the Indemnified Persons with respect to the U.S.
Patent, the Indemnified Persons shall not be entitled to collect a payment
in
excess of the Damages incurred by such Indemnified Persons.
9.10
SET-OFF
Each
of
Buyer and Seller shall have the right, at any time, to set off against any
payments or obligations otherwise owing to the other party hereto (including,
without limitation, other indemnification payments that are payable by Seller,
the Shareholders or Buyer, as applicable, pursuant to Sections 9.2, 9.3 or
9.4)
any amount owed by Seller, the Shareholders and/or Buyer to the Indemnified
Persons as indemnification payments pursuant to Section 9 (the “Right of
Set-Off”). Either party exercising the Right of Set-Off shall be required to
provide written notice of its good-faith claim of any amount owed by the other
party hereto to the Indemnified Persons, but shall thereafter not be required
to
proceed against or exhaust any other remedy or source of security prior to
exercising the Right of Set-Off.
10. TAX
MATTERS
10.1
RESPONSIBILITY
FOR TAX RETURNS AND TAXES
(a) Seller
and the Company shall prepare, or cause to be prepared, and timely file, or
cause to be timely filed, all Tax Returns required to be filed on or prior
to
the Closing Date by the Company or by Seller with respect to the Business.
Seller shall report all income, gains, losses or expenses of the Company
realized by the Company or by Seller with respect to the Business on or before
the Closing Date during Seller’s taxable year that includes the Closing Date on
Seller's federal, state and local income or franchise Tax Returns for the period
ending on or after the Closing Date. Subject to the foregoing sentence, Buyer
shall prepare, or cause to be prepared, and file, or cause to be filed, all
Tax
Returns of the Company required to be filed after the Closing Date. If any
such
Tax Return relates in whole or in part to a Taxable period that ends on or
before the close of business on the Closing Date, or the portion through the
close of business on the Closing Date of a Straddle Period, as defined below
(each such period or portion, a “Pre-Closing Tax Period”), Buyer shall permit
Seller to review and comment on such Tax Return prior to filing.
(b) Seller
shall be responsible for and shall pay all Taxes of the Company or relating
to
the Business for all Pre-Closing Tax Periods. Buyer or the Company shall be
responsible for and shall pay all Taxes of the Company or relating to the
Business for any Taxable period that begins
39
(c) Taxes
of
the Company or with respect to the Business for any Taxable period that includes
but does not end on the Closing Date (a “Straddle Period”) shall be allocated to
Pre-Closing Tax Periods and Post-Closing Tax Periods as follows: (i) Income
and franchise Taxes shall be allocated based on an interim closing of the books
as of the close of business on the Closing Date; and (ii) all Taxes other than
income and franchise Taxes shall be allocated pro-rata to each day in the
Straddle Period.
(d) The
obligations of Seller, the Company and Buyer in this Section 10 are expressly
subject to the terms of the Xxxxxxx Assignment.
10.2
COOPERATION
ON TAX MATTERS
(a) Seller
and the Company will (i) retain all of their books and records with respect
to
Tax matters pertinent to the Company relating to any Pre-Closing Tax Period
to
the extent such books and records are in the respective party's possession
as of
the Closing Date until the expiration of the statute of limitations with respect
to such Tax period (including, to the extent notified by Seller or Buyer, as
the
case may be, of any extensions thereof), and abide by all record retention
agreements entered into with any Tax Authority, and (ii) give each other
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, such party will
allow the other party to take possession of such books and records.
(b) Buyer,
the Company and Seller will, upon the reasonable request from the other party,
use their commercially reasonable efforts to obtain any certificate or other
document from any Governmental Authority or any other Person that may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, without limitation, with respect to the Contemplated
Transactions).
(c) Buyer,
the Company and Seller shall cooperate fully, as and to the extent reasonably
requested by the other parties, in connection with the filing of Tax Returns
pursuant to this Section 10 and in any audit, litigation or other
proceedings with respect to Taxes; provided that Seller shall have the right
to
control and settle, in its sole discretion, any audit, litigation or other
proceeding to the extent it relates solely to a liability for Taxes for a
Pre-Closing Tax Period and does not affect any Taxes or Tax attribute of the
Company or Buyer for a Post-Closing Tax Period. Such cooperation shall include
the retention and, upon the request of a party, the provision of records and
information that are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.
10.3 TRANSFER
TAXES
All
transfer, documentary, sales, use, stamp, registration duties, recording and
other such Taxes and fees (collectively, “Transfer Taxes”), and the costs of
filing Tax Returns and other documentation with respect to Transfer Taxes
incurred in connection with the consummation of the transactions contemplated
by
this Agreement shall be borne one-half (1/2) by Buyer and one-half (1/2) by
Seller.
40
Buyer
will file, or cause to be filed, all necessary Tax Returns and other
documentation with respect to all such Transfer Taxes and, if required by
applicable law, Seller will join in the execution of any such Tax Returns and
other documentation.
10.4 REFUNDS
Any
Tax
refunds that are received by the Company that relate to Pre-Closing Tax Periods
shall be for the account of Seller, and the Company or Buyer shall pay over
to
Seller, Seller's pro rata share of any such refund within 15 days after receipt
thereof.
10.5 AMENDMENT
OF TAX RETURNS
Neither
the Company nor Buyer shall, without the prior written consent of Seller file,
or cause to be filed any amended Tax Return of the Company relating to a
Pre-Closing Tax Period where such amendment would materially adversely alter
the
Tax liabilities of Seller for such period.
10.6 TAX
TREATMENT
(a) Buyer
and
Seller agree that, based upon Seller’s representation in Section 3.9(b), for
federal and applicable state and local income and franchise Tax purposes, the
Company is a Disregarded Entity and the purchase of the Shares is deemed to
be
the purchase of all the Company’s assets. To the extent applicable, each of
Buyer and Seller shall file its respective Tax Returns in accordance with the
preceding sentence.
(b) Any
indemnification payment made pursuant to Section 9 shall be treated for all
Tax
purposes as an adjustment to the Purchase Price for the Shares.
11.
NON-INDEMNITY
CLAIMS AND ADJUSTMENTS; RETURNS
(a) All
Trade
Adjustments shall be immediately resolved between the parties without resort
to
the indemnification process set forth in Section 9 hereof. Without regard to
the
merits of any individual Trade Adjustment, each of Seller and Buyer shall make
whole the other party with respect to any Trade Adjustment within three (3)
Business Days of receipt of written documentation that such Trade Adjustment
has
occurred. Each of Seller and Buyer shall be obligated to cooperate fully in
the
equitable resolution of Trade Adjustments for a period of six months subsequent
to the Closing.
(b) All
sales
of the Product to third parties prior to the Closing are and shall be for the
account of Seller which shall have full financial responsibility for any Returns
of Products sold prior to the Closing. All sales of Product to third parties
subsequent to the Closing are and shall be for the account of Buyer which shall
have full financial responsibility for any Returns of Products sold after the
Closing. Notwithstanding the foregoing, Buyer shall have responsibility for
all
of the Returns (i) if such Returns are a direct result of Buyer’s (w) modifying
or changing the trade dress or formula for a Product; (x) increasing pricing
for
a Product; (y) eliminating any trade and marketing programs set forth on
Schedule 3.20 which are to be launched after the Closing Date; or (z)
recommending that a Product be removed from a planogram; or (ii) after the
six
month anniversary of the Closing Date regardless of the date of original sale
to
a third-party purchaser.
41
Notwithstanding
the foregoing, all Returns of Xxxxxxx Kids product shall be for the account
of
Seller which shall have full responsibility for same.
12. GENERAL
PROVISIONS
12.1 EXPENSES
Except
as
otherwise expressly provided in this Agreement, each party to this Agreement
will bear its respective expenses incurred in connection with the preparation,
negotiation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants; provided, that Seller shall also bear all expenses
incurred by the Company in connection with the preparation, negotiation,
execution and performance of this Agreement and the Contemplated Transactions,
including all fees and expenses of agents, representatives, counsel and
accountant, to or for the Company. Seller will pay all amounts payable to Xxxxxx
Xxxxxxx & Co., LLC in connection with this Agreement and the Contemplated
Transactions; such amount will be included in the Company Transaction Expenses.
In the event of termination of this Agreement, the obligation of each party
to
pay its own expenses will be subject to any rights of such party arising from
a
breach of this Agreement by another party.
12.2 PUBLIC
ANNOUNCEMENTS
Unless
consented to by the other party hereto in advance, or required by Legal
Requirements (including, without limitation, the rules and regulations of the
New York Stock Exchange or any other applicable securities exchange), prior
to
the Closing Seller and Buyer shall keep this Agreement strictly confidential
and
may not make any disclosure of this Agreement to any Person. To the extent
reasonably practicable under applicable Legal Requirements, the parties will
consult with each other before making any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions.
Seller and Buyer will consult with each other concerning the means by which
the
Company's customers and suppliers and others having dealings with the Company
will be informed of the Contemplated Transactions, and Buyer will have the
right
to be present for any such communication.
12.3 NOTICES
All
notices, consents, waivers, and other communications under this Agreement must
be in writing and will be deemed to have been duly given when (a) delivered
by
hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested),
in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate
by
notice to the other parties):
42
Seller
and the
Company (prior to the Closing):
Lil'
Drug
Store Products, Inc.
0000
Xxxxxxxxxxx Xxxxx XX
Xxxxx
Xxxxxx, XX 00000
Attn:
Xxxxxxxxxxx X. XxXxxx, President
Facsimile
No.: (000) 000-0000
with
a
copy to (which shall not constitute notice):
Xxxxxxx
& Xxxxx PC
X.X.
Xxx
0000
Xxxxx
Xxxxxx, XX 00000-0000
Attn:
Xxxxxxx X. Xxxx
Facsimile
No.: (000) 000-0000
Buyer:
Medtech
Products Inc.
00
Xxxxx
Xxxxxxxx
Xxxxxxxxx,
XX 00000
Attn: Chief
Executive Officer
Facsimile
No.: 000-000-0000
with
a
copy to:
Medtech
Products Inc.
00
Xxxxx
Xxxxxxxx
Xxxxxxxxx,
Xxx Xxxx 00000
Attn: Xxxxxxx
X. Xxxxx, Esq.
Facsimile
No.: (000) 000-0000
The
Company (after the Closing):
Xxxxxxx
USA B.V.
00
Xxxxx
Xxxxxxxx
Xxxxxxxxx,
XX 00000
Attn: Chief
Executive Officer
Facsimile
No.: 000-000-0000
with
a
copy to:
Xxxxxxx
USA B.V.
00
Xxxxx
Xxxxxxxx
Xxxxxxxxx,
Xxx Xxxx 00000
Attn: Xxxxxxx
X. Xxxxx, Esq.
Facsimile
No.: (000) 000-0000
43
The
Shareholders:
To
the
address and/or facsimile number set forth below each Shareholder’s signature on
the signature page attached hereto.
12.4 GOVERNING
LAW; JURISDICTION; SERVICE OF PROCESS
(a) This
Agreement and the legal relations among the parties hereto shall be governed
by
and construed in accordance with the laws of the State of New York, without
giving effect to provisions thereof relating to conflict of laws.
(b) The
parties hereto irrevocably and unconditionally consent to submit to the
jurisdiction of the United States District Court in Westchester County, New
York
(or if such court does not have subject matter jurisdiction, then the
jurisdiction of the court of the State of New York located in Westchester
County, New York), in addition to any other appropriate jurisdictions, for
any
actions, suits or proceedings arising out of or relating to this Agreement
and
the transactions contemplated hereby, and waive any objection to venue laid
therein, including, without limitation, any objection based on forum
non-conveniens.
12.5 FURTHER
ASSURANCES
The
parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents,
and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
12.6 WAIVER
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to
in
this Agreement will operate as a waiver of such right, power, or privilege,
and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless
in
writing signed by the other applicable parties; (b) no waiver that may be given
by a party will be applicable except in the specific instance for which it
is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
12.7 ENTIRE
AGREEMENT AND MODIFICATION
This
Agreement and the Confidentiality Agreement supersede all prior agreements
(whether oral or written) between the parties with respect to the subject matter
hereof and thereof (including without limitation the Letter of Intent dated
June
9, 2006 between Buyer and Seller) and constitute (along
44
with
the
documents referred to in this Agreement) a complete and exclusive statement
of
the terms of the agreement between the parties with respect to the subject
matter hereof and thereof. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
12.8 DISCLOSURE
SCHEDULE
(a) The
disclosures in any numbered part of the Disclosure Schedule, and those in any
Supplement thereto, must relate only to the representations and warranties
in
the similarly numbered Section of the Agreement to which they expressly relate
and not to any other representation or warranty in this Agreement.
(b) In
the
event of any inconsistency between the statements in the body of this Agreement
and those in the Disclosure Schedule (other than an exception expressly set
forth as such in the Disclosure Schedule with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
12.9 ASSIGNMENTS,
SUCCESSORS, AND NO THIRD-PARTY RIGHTS
None
of
the parties hereto may assign any of its rights under this Agreement without
the
prior consent of the other parties, which will not be unreasonably withheld,
delayed or conditioned; provided, however, that from and after the Closing
Buyer
shall have the right without such consent (i) to assign its rights and
obligations hereunder to any Affiliate or to any successor to all or
substantially all of the business and assets of Buyer; or (ii) to collaterally
assign its rights hereunder to any lender. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to
the
benefit of the successors and permitted assigns of the parties. Except as
specifically set forth or referred to herein, nothing expressed or referred
to
in this Agreement will be construed to give any Person other than the parties
to
this Agreement and the Indemnified Persons any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. Except as specifically set forth or referred to herein, this
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement, their successors and
permitted assigns and the Indemnified Persons.
12.10 SEVERABILITY
If
any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the
extent not held invalid or unenforceable.
12.11 SECTION
HEADINGS, CONSTRUCTION
The
headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to “Section”
or “Sections” refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word “including” does not limit the preceding words or terms.
45
12.12 SPECIFIC
PERFORMANCE
Each
of
the parties shall have and retain all rights and remedies, at law or in equity,
including rights to specific performance and injunctive or other equitable
relief, arising out of or relating to a breach or threatened breach of this
Agreement. Without limiting the generality of the foregoing, each of the parties
acknowledges that money damages would not be a sufficient remedy for any breach
or threatened breach of this Agreement and that irreparable harm would result
if
this Agreement were not specifically enforced. Therefore, the rights and
obligations of the parties shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith,
without the necessity of posting a bond or other security or proving actual
damages and without regard to the adequacy of any remedy at law. A party’s right
to specific performance or injunctive relief shall be in addition to all other
legal or equitable remedies available to such party.
12.13 COUNTERPARTS
This
Agreement may be executed in two or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
12.14 |
COOPERATION,
NO DUTY TO MAINTAIN
|
Buyer,
Seller and the Company agree to reasonably cooperate with each other subsequent
to Closing to implement the general objectives of this transaction for the
mutual benefit of the parties. Notwithstanding the generality of the foregoing,
Buyer shall have no obligation to maintain the existence of Company and shall
have no responsibility for damage to Seller as a result of the loss of any
license, permit, right, entitlement or benefit associated with the termination
or wind-up of the Company; provided, however, Buyer shall be solely responsible
for any fees and expenses incurred in connection with Buyer’s decision to
terminate or wind-up the existence of the Company.
46
IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of
the date first written above.
SELLER: BUYER:
LIL'
DRUG
STORE PRODUCTS, INC.
MEDTECH
PRODUCTS INC.
By: /s/ Xxxxxxxxxxx X. XxXxxx | By: /s/ Xxxxx X. Xxxx |
Name: Xxxxxxxxxxx X. XxXxxx | Name: Xxxxx X. Xxxx |
Title: President | Title: President |
COMPANY:
XXXXXXX
USA B.V.
By:
___/s/ R. T. Devilee___ _______
Name:
X. X. Xxxxxxx
Title:
Managing Director
The
Shareholders are executing this Agreement solely in connection with their
limited obligations set forth in Sections 5.3, 5.4, 5.5 and 9 hereof.
/s/ Xxxxxxxxxxx X. XxXxxx
Xxxxxxxxxxx
X. XxXxxx
/s/ Xxxxxxx X. XxXxxx
Xxxxxxx
X. XxXxxx
47