STOCK PURCHASE AGREEMENT
Agreement
entered into effective December 1, 2007, by and among RemoteMDx, Inc., a Utah
corporation (the "Buyer"), and Xxxxx
X.
Xxxxxxxx, an individual residing in the State of Mississippi (the "Seller"). The
Buyer and the Seller are referred to collectively herein as the "Parties."
The
Seller owns all of the outstanding capital stock of Court Programs, Inc., a
Mississippi corporation ("CPI"), Court
Programs
of Northern Florida, Inc., a Florida corporation (“CPNF”), and Court
Programs of Florida, Inc., a Florida corporation (“CPF”). CPI, CPNF,
and
CPF are sometimes referred to individually as a “CP Entity” and
collectively in this Agreement as the “CP
Entities”.
This
Agreement contemplates a transaction in which the Buyer will purchase from
the
Seller, and the Seller will sell to the Buyer, a minimum of 51% and up to 100%
of the outstanding capital stock of the CP Entities in return for cash and
shares of Buyer’s common stock or a combination thereof.
Now,
therefore, in consideration of the premises and the mutual promises herein
made,
and in consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows.
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1.
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Definitions.
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"Accredited
Investor"
has the meaning set forth in Regulation D promulgated under the Securities
Act.
"Adverse
Consequences"
means all actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court costs
and
reasonable attorneys' fees and expenses.
"Affiliate"
has the
meaning set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.
"Affiliated
Group"
means any affiliated group within the meaning of Code §1504(a) or any similar
group defined under a similar provision of state, local or foreign
law.
“Auditor”
means
the
independent registered public accounting firm selected by Buyer.
"Basis"
means any past
or present fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction that
forms or could form the basis for any specified consequence.
"Buyer"
has the
meaning set forth in the preface above.
"Closing"
has the
meaning set forth in Section 2(c) below.
"Closing
Date" has the
meaning set forth in Section 2(c) below.
"COBRA"
means the
requirements of Part 6 of Subtitle B of Title I of ERISA and Code §4980B and of
any similar state law.
"Code"
means the
Internal Revenue Code of 1986, as amended.
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"Confidential
Information" means any information concerning the businesses and affairs
of the CP Entities that is not already generally available to the
public.
"Controlled
Group" has
the meaning set forth in Code §1563.
"Deferred
Intercompany
Transaction" has the meaning set forth in
Reg. §1.1502-13.
"Disclosure
Schedule"
has the meaning set forth in Section 4 below.
"Employee
Benefit
Plan" means any "employee benefit plan" (as such term is defined in ERISA
§3(3)) and any other material employee benefit plan, program or arrangement
of
any kind.
"Employee
Pension Benefit
Plan" has the meaning set forth in ERISA §3(2).
"Employee
Welfare Benefit
Plan" has the meaning set forth in ERISA §3(1).
"Environmental,
Health, and
Safety Requirements" shall mean all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended and as now or hereafter in
effect.
"ERISA"
means the
Employee Retirement Income Security Act of 1974, as amended.
"ERISA
Affiliate"
means each entity which is treated as a single employer with any of the CP
Entities for purposes of Code §414.
"Excess
Loss Account"
has the meaning set forth in Reg. §1.1502-19.
"Fiduciary"
has the
meaning set forth in ERISA §3(21).
"Financial
Statement"
has the meaning set forth in Section 4(g) below.
"GAAP"
means United
States generally accepted accounting principles as in effect from time to
time.
"Indemnified
Party"
has the meaning set forth in Section 8(d) below.
"Indemnifying
Party"
has the meaning set forth in Section 8(d) below.
"Intellectual
Property" means (a) all inventions (whether patentable or unpatentable
and whether or not reduced to practice), all improvements thereto, and all
patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and
all
applications, registrations, and renewals in connection therewith, (e) all
trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies
and
tangible embodiments thereof (in whatever form or medium).
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"Knowledge"
means
actual knowledge after reasonable investigation.
"Liability"
means any
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.
"Most
Recent Balance
Sheet" means the balance sheet contained within the Most Recent Financial
Statements.
"Most
Recent Financial
Statements" has the meaning set forth in Section 4(g) below.
"Most
Recent Fiscal Month
End" has the meaning set forth in Section 4(g) below.
"Most
Recent Fiscal Year
End" has the meaning set forth in Section 4(g) below.
"Multiemployer
Plan"
has the meaning set forth in ERISA §3(37).
“Net
Revenues” means
gross revenues less returns and allowances determined in accordance with
GAAP.
"Ordinary
Course of
Business" means the ordinary course of business consistent with past
custom and practice (including with respect to quantity and
frequency).
"Party"
has the
meaning set forth in the preface above.
"PBGC"
means the
Pension Benefit Guaranty Corporation.
"Person"
means an
individual, a partnership, a corporation, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization, or a governmental
entity (or any department, agency, or political subdivision
thereof).
"Process
Agent" has
the meaning set forth in Section 10(p) below.
"Prohibited
Transaction" has the meaning set forth in ERISA §406 and Code
§4975.
"Purchase
Price" has
the meaning set forth in Section 2(b) below.
"Reportable
Event" has
the meaning set forth in ERISA §4043.
"Securities
Act" means
the Securities Act of 1933, as amended.
"Securities
Exchange
Act" means the Securities Exchange Act of 1934, as amended.
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"Security
Interest"
means any mortgage, pledge, lien, encumbrance, charge, or other security
interest, other than (a) mechanic's, materialmen's, and similar liens, (b)
liens
for Taxes not yet due and payable or for Taxes that the taxpayer is contesting
in good faith through appropriate proceedings, (c) purchase money liens and
liens securing rental payments under capital lease arrangements, and (d) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller"
has the
meaning set forth in the preface above.
"Subsidiary"
means any
corporation with respect to which a specified Person (or a Subsidiary thereof)
owns a majority of the common stock or has the power to vote or direct the
voting of sufficient securities to elect a majority of the
directors.
"Tax"
means any
federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code §59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax
Return" means any
return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
"Third
Party Claim"
has the meaning set forth in Section 8(d) below.
2. Purchase
and Sale of
Shares.
(a) Sale
of CP Entities
Shares. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from Seller, and Seller agrees to sell
to the Buyer, that number of shares of the several CP Entities (the “Shares”) indicated
opposite Seller’s name on the attached Schedule 2(a) in
exchange for the consideration specified below in Section 2(b).
(b) Purchase
Price. In consideration for the sale of the Shares to Buyer,
Buyer agrees to pay to the Seller at the Closing, $1,147,500 (the "Purchase Price") by
delivery of (i) cash of $300,000 by wire transfer or delivery of other
immediately available funds, and (ii) 212,000 shares of common stock of Buyer
(the “Buyer
Shares”) for the balance of the Purchase Price.
(c) The
Closing. The closing of the transaction contemplated by this
Agreement (the "Closing") shall
take
place at the offices of Durham Xxxxx & Xxxxxxx in Salt Lake City, Utah,
commencing at 10:00 a.m. local time on or before December 31, 2007, or such
other date as the Parties may mutually determine, but in any event no later
than
January 20, 2007 (the "Closing
Date");
(d) Deliveries
at the
Closing. At the Closing, (i) the Seller will deliver to the
Buyer the various certificates, instruments, and documents referred to in
Section 7(a) below, (ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 7(b) below,
(iii) Seller will deliver to the Buyer stock certificates representing the
Shares as listed on Schedule 2(a),
endorsed in blank or accompanied by duly executed assignment documents, and
(iv)
the Buyer will deliver to Seller the Purchase Price specified in Section 2(b)
above.
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(e) Buyer’s
Option.
(i) Option
Price. In consideration of the payment of the Purchase Price
as provided above, Seller hereby grants to Buyer the right, at Buyer’s sole
election and option, to purchase all remaining shares of the CP Entities
(the
“Remaining
Shares”) on or before March 1, 2009. The price for such
Remaining Shares shall be an amount equal to the Net Revenues of CPI for
the 12
months ending December 31, 2008, as determined by the Auditor multiplied
by 49%
(the “Buyer’s Option
Price”).
(ii) Exercise
of
Option. Buyer may exercise its option to purchase the
Remaining Shares at any time on or after January 1, 2009, by giving Seller
a
minimum of fifteen (15) days written notice. The closing of the
purchase of the Remaining Shares under this Section 2(e) shall occur on or
before March 1, 2009 or such later date as the Parties may then
agree. The Buyer’s Option Price may be paid, at the sole option of
Buyer, in cash or in shares of Buyer’s common stock valued at the market price
for such shares averaged over the five trading days immediately preceding the
closing date for such purchase, or in a combination of cash and Buyer’s common
stock.
(iii)
Resolution of Personal
Obligations. Seller has personally guaranteed certain
obligations of the CP Entities (the “Seller Guarantees”).
Upon the exercise and closing of the Buyer’s Option granted above, the CP
Entities shall undertake to obtain the release of Seller under any and all
Seller Guarantees to relieve Seller of his personal liability
thereunder.
(f) Registration
of Buyer
Shares. Subject to the terms and conditions of this Agreement, the Buyer
shall prepare and file with the SEC, within 90 days from the issuance of the
Buyer Shares as part of the Purchase Price as provided in Section 2(b) of this
Agreement, a registration statement on SB-2 (or, if the Company is then
eligible, on Form S-3) under the Securities Act for the registration of such
shares for resale by Seller.
3. Representations
and
Warranties Concerning the Transaction.
(a) Representations
and
Warranties of the Seller. Seller represents and warrants to
the Buyer that the statements contained in this Section 3(a) are correct and
complete as of the date of this Agreement and will be correct and complete
as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3(a)), except
as set forth in Schedule 3(a)
attached hereto.
(i) Authorization
of
Transaction. The Seller has full power and authority to
execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions. The Seller need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this
Agreement.
(ii)
Noncontravention. Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Seller is a party or by which he is bound or to which any of his assets
is
subject.
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(iii) Brokers'
Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(iv)
Investment. The
Seller (A) understands that the Buyer Shares have not been registered under
the
Securities Act, or under any state securities laws, and are being offered and
sold in reliance upon federal and state exemptions for transactions not
involving any public offering, (B) is acquiring the Buyer Shares solely for
his
own account for investment purposes, and not with a view to the distribution
thereof, (C) is a sophisticated investor with knowledge and experience in
business and financial matters, (D) has received certain information concerning
the Buyer and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in holding the
Buyer Shares, (E) is able to bear the economic risk and lack of liquidity
inherent in holding the Buyer Shares, and (F) is an Accredited
Investor.
(v) Shares. The
Seller holds of record and owns beneficially the number of Shares set forth
next
to his name in Section 4(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act
and state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. The Seller is not a party to any option, warrant, purchase
right, or other contract or commitment that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock of the CP Entities (other
than this Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any
capital stock of the CP Entities.
(b) Representations
and
Warranties of the Buyer. The Buyer represents and warrants to
the Seller that the statements contained in this Section 3(b) are correct and
complete as of the date of this Agreement and will be correct and complete
as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3(b)), except
as set forth in Schedule 3(b)
attached hereto.
(i) Organization
of the
Buyer. The Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(ii) Authorization
of
Transaction. The Buyer has full power and authority (including
full corporate power and authority) to execute and deliver this Agreement and
to
perform its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of the Buyer, enforceable in accordance
with its terms and conditions. The Buyer need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(iii) Noncontravention. Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Buyer
is subject or any provision of its charter or bylaws.
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(iv) Brokers'
Fees. The Buyer has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Seller could become liable or
obligated.
(v) Investment. The
Buyer is not acquiring the Shares with a view to or for sale in connection
with
any distribution thereof within the meaning of the Securities Act.
4. Representations
and
Warranties Concerning the CP Entities. The Seller represents
and warrants to the Buyer that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
4),
except as set forth in the disclosure schedule delivered by the Seller to the
Buyer on the date hereof and initialed by the Parties (the "Disclosure
Schedule"). Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
(a) Organization,
Qualification,
and Corporate Power. Each CP Entity is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Each CP Entity is duly authorized
to conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Each CP Entity has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used
by
it. Section 4(a) of the Disclosure Schedule lists the directors and
officers of each CP Entity. The Seller has delivered to the Buyer
correct and complete copies of the charter and bylaws of each CP Entity (as
amended to date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of each
CP
Entity are correct and complete. No CP Entity is in default under or
in violation of any provision of its charter or bylaws.
(b) Capitalization. Section
4(b) of the Disclosure Schedule sets forth for each CP Entity the authorized
capital stock, the number of shares issued and outstanding, and the number
of
shares held in treasury. All of the issued and outstanding Shares
have been duly authorized, are validly issued, fully paid, and nonassessable,
and are held of record by the Seller as set forth in Section 4(b) of the
Disclosure Schedule. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the CP Entities
to
issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
CP
Entities. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the CP
Entities.
(c) Noncontravention. Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which any CP
Entity is subject or any provision of the charter or bylaws of any CP Entity
or
(ii) conflict with, result in a breach of, constitute a default under, result
in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any CP Entity is a party
or
by which it is bound or to which any of its assets is subject (or result in
the
imposition of any Security Interest upon any of its assets). No CP
Entity needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in
order for the Parties to consummate the transactions contemplated by this
Agreement.
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(d) Brokers'
Fees. No CP Entity has any Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(e) Title
to
Assets. The CP Entities have good and marketable title to, or
a valid leasehold interest in, the properties and assets used by them, located
on their premises, or shown on the Most Recent Balance Sheet or acquired after
the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since
the
date of the Most Recent Balance Sheet.
(f) Subsidiaries. Section
4(f) of the Disclosure Schedule sets forth for each Subsidiary of the CP
Entities (i) its name and jurisdiction of incorporation, (ii) the number of
shares of authorized capital stock of each class of its capital stock, (iii)
the
number of issued and outstanding shares of each class of its capital stock,
the
names of the holders thereof, and the number of shares held by each such holder,
and (iv) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock
of each Subsidiary of the CP Entities have been duly authorized and are validly
issued, fully paid, and nonassessable. the CP Entities or one of its
Subsidiaries holds of record and owns beneficially all of the outstanding shares
of each Subsidiary of the CP Entities, free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. There are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could
require any CP Entity to sell, transfer, or otherwise dispose of any capital
stock of any of its Subsidiaries or that could require any Subsidiary of the
CP
Entities to issue, sell, or otherwise cause to become outstanding any of its
own
capital stock. There are no outstanding stock appreciation, phantom
stock, profit participation, or similar rights with respect to any Subsidiary
of
the CP Entities. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock
of
any Subsidiary of the CP Entities. No CP Entity controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not
a
Subsidiary of the CP Entities.
(g) Financial
Statements. Attached hereto as Exhibit A are the following
financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income for
each CP Entity as of and for the fiscal years ended March 31, 2005, 2006 and
2007 (the "Most Recent
Fiscal Year End"); and (ii) unaudited balance sheets and statements of
income for each CP Entity (the "Most Recent Financial
Statements") as of and for the 8 months ended November 30, 2007 (the
"Most Recent Fiscal
Month End"). The Financial Statements (including the notes
thereto) have not been prepared in accordance with GAAP, however Seller believes
that they present fairly the financial condition of the CP Entities as of such
dates and the results of operations of each CP Entity for such periods, are
correct and complete, and are consistent with the books and records of the
CP
Entities (which books and records are correct and complete).
(h) Events
Subsequent to Most
Recent Fiscal Year End. Since the Most Recent Fiscal Year End,
there has not been any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of any CP
Entity. Without limiting the generality of the foregoing, since that
date:
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(i) No
CP Entity has sold, leased, transferred, or assigned any of its assets, tangible
or intangible, other than for a fair consideration in the Ordinary Course of
Business;
(ii) No
CP Entity has entered into any agreement, contract, lease, or license (or series
of related agreements, contracts, leases, and licenses) either involving more
than $10,000 or outside the Ordinary Course of Business;
(iii) No
party (including any CP Entity) has accelerated, terminated, modified, or
cancelled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $10,000 to
which any CP Entity is a party or by which any of them is bound;
(iv) No
CP Entity has imposed any Security Interest upon any of its assets, tangible
or
intangible;
(v) No
CP Entity has made any capital expenditure (or series of related capital
expenditures) either involving more than $10,000 or outside the Ordinary Course
of Business;
(vi) No
CP Entity has made any capital investment in, any loan to, or any acquisition
of
the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more than $10,000 or
outside the Ordinary Course of Business;
(vii)
No CP Entity has issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than $10,000 singly or
$10,000 in the aggregate;
(viii) No
CP Entity has delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;
(ix)
No CP Entity has cancelled, compromised, waived, or released any right or claim
(or series of related rights and claims) either involving more than $10,000
or
outside the Ordinary Course of Business;
(x) No
CP Entity has granted any license or sublicense of any rights under or with
respect to any Intellectual Property;
(xi) There
has been no change made or authorized in the charter or bylaws of any CP
Entity;
(xii) No
CP Entity has issued, sold, or otherwise disposed of any of its capital stock,
or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital
stock;
(xiii) No
CP Entity has declared, set aside, or paid any dividend or made any distribution
with respect to its capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock;
(xiv) No
CP Entity has experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property;
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(xv) No
CP Entity has made any loan to, or entered into any other transaction with,
any
of its directors, officers, and employees outside the Ordinary Course of
Business;
(xvi) No
CP Entity has entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such contract
or agreement;
(xvii) No
CP Entity has granted any increase in the base compensation of any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(xviii) No
CP Entity has adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment
for
the benefit of any of its directors, officers, and employees (or taken any
such
action with respect to any other Employee Benefit Plan);
(xix) No
CP Entity has made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(xx) No
CP Entity has made or pledged to make any charitable or other capital
contribution outside the Ordinary Course of Business;
(xxi) There
has not been any other material occurrence, event, incident, action, failure
to
act, or transaction outside the Ordinary Course of Business involving any CP
Entity; and
(xxii) No
CP Entity has committed to any of the foregoing.
(i) Undisclosed
Liabilities. No CP Entity has any Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of
the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
(j) Legal
Compliance. Each of the CP Entities, its Subsidiaries, and
their respective predecessors and Affiliates has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local,
and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to
comply.
(k) Tax
Matters.
(i) Each
CP Entity has filed all Tax Returns that it was required to file. All such
Tax
Returns were correct and complete in all respects. All Taxes owed by any CP
Entity (whether or not shown on any Tax Return) have been paid. No CP Entity
currently is the beneficiary of any extension of time within which to file
any
Tax Return. No claim has ever been made by an authority in a jurisdiction where
any CP Entity does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Security Interests on any of the assets
of
any CP Entity that arose in connection with any failure (or alleged failure)
to
pay any Tax.
(ii)
Each CP Entity has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
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(iii) No
Seller or director or officer (or employee responsible for Tax matters) of
any
CP Entity expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of any CP Entity either (A) claimed or raised by any authority
in writing or (B) as to which Seller and the directors and officers (and
employees responsible for Tax matters) of the CP Entity has Knowledge based
upon
personal contact with any agent of such authority. Section 4(k) of the
Disclosure Schedule lists all federal, state, local, and foreign income Tax
Returns filed with respect to any CP Entity for taxable periods ended on or
after December 31, 2000, indicates those Tax Returns that have been audited,
and
indicates those Tax Returns that currently are the subject of audit. The Seller
has delivered to the Buyer correct and complete copies of all federal income
Tax
Returns, examination reports, and statements of deficiencies assessed against
or
agreed to by any CP Entity since December 31, 2000.
(iv) No
CP Entity has waived any statute of limitations in respect of Taxes or agreed
to
any extension of time with respect to a Tax assessment or
deficiency.
(v)
No CP Entity has filed a consent under Code §341(f) concerning collapsible
corporations. No CP Entity has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code §280G. No CP Entity has been a United States real property
holding corporation within the meaning of Code §897(c)(2) during the applicable
period specified in Code §897(c)(1)(A)(ii). No CP Entity is a party
to any Tax allocation or sharing agreement. No CP Entity (A) has been
a member of an Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was one of the CP Entities)
or
(B) has any Liability for the Taxes of any Person (other than any CP Entity)
under Reg. §1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise.
(vi) Section
4(k) of the Disclosure Schedule sets forth the following information with
respect to each CP Entity (or, in the case of clause (B) below, with respect
to
each of the Subsidiaries) as of the most recent practicable date: (A) the basis
of the CP Entities or any Subsidiary in its assets; (B) the basis of the
stockholder(s) of the Subsidiary in its stock (or the amount of any Excess
Loss
Account); (C) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable to the CP Entities or a Subsidiary; and (D) the amount
of
any deferred gain or loss allocable to the CP Entities or a Subsidiary arising
out of any Deferred Intercompany Transaction.
(vii) The
unpaid Taxes of the CP Entities (A) did not, as of the Most Recent Fiscal Month
End, exceed the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (B) do not exceed that reserve as adjusted for the passage of
time
through the Closing Date in accordance with the past custom and practice of
the
CP Entities in filing their Tax Returns.
(l) Real
Property.
(i) Section
4(l)(i) of the Disclosure Schedule lists and describes briefly all real property
that any CP Entity owns. With respect to each such parcel of owned real
property:
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(A) The
identified owner has good and marketable title to the parcel of real property,
free and clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special assessments not yet delinquent
and recorded easements, covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the marketability of title, of the
property subject thereto;
(B) There
are no pending or threatened condemnation proceedings, lawsuits, or
administrative actions relating to the property or other matters affecting
materially and adversely the current use, occupancy, or value
thereof;
(C) The
legal description for the parcel contained in the deed thereof describes such
parcel fully and adequately, the buildings and improvements are located within
the boundary lines of the described parcels of land, are not in violation of
applicable setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure" classifications),
and do not encroach on any easement which may burden the land, and the land
does
not serve any adjoining property for any purpose inconsistent with the use
of
the land, and the property is not located within any flood plain or subject
to
any similar type restriction for which any permits or licenses necessary to
the
use thereof have not been obtained;
(D) All
facilities have received all approvals of governmental authorities (including
licenses and permits) required in connection with the ownership or operation
thereof and have been operated and maintained in accordance with applicable
laws, rules, and regulations;
(E) There
are no leases, subleases, licenses, concessions, or other agreements, written
or
oral, granting to any party or parties the right of use or occupancy of any
portion of the parcel of real property;
(F) There
are no outstanding options or rights of first refusal to purchase the parcel
of
real property, or any portion thereof or interest therein;
(G) There
are no parties (other than the CP Entities) in possession of the parcel of
real
property, other than tenants under any leases disclosed in Section 4(l)(i)
of
the Disclosure Schedule who are in possession of space to which they are
entitled;
(H) All
facilities located on the parcel of real property are supplied with utilities
and other services necessary for the operation of such facilities, including
gas, electricity, water, telephone, sanitary sewer, and storm sewer, all of
which services are adequate in accordance with all applicable laws, ordinances,
rules, and regulations and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcel of real property;
and
(I) Each
parcel of real property abuts on and has direct vehicular access to a public
road, or has access to a public road via a permanent, irrevocable, appurtenant
easement benefitting the parcel of real property, and access to the property
is
provided by paved public right-of-way with adequate curb cuts
available.
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(ii) Section
4(l)(ii) of the Disclosure Schedule lists and describes briefly all real
property leased or subleased to any CP Entity. Seller has delivered to the
Buyer
correct and complete copies of the leases and subleases listed in Section
4(l)(ii) of the Disclosure Schedule (as amended to date). With respect to each
lease and sublease listed in Section 4(l)(ii) of the Disclosure
Schedule:
(A) The
lease or sublease is legal, valid, binding, enforceable, and in full force
and
effect;
(B) The
lease or sublease will continue to be legal, valid, binding, enforceable, and
in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(C) no
party to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(D) No
party to the lease or sublease has repudiated any provision
thereof;
(E) There
are no disputes, oral agreements, or forbearance programs in effect as to the
lease or sublease;
(F) With
respect to each sublease, the representations and warranties set forth in
subsections (A) through (E) above are true and correct with respect to the
underlying lease;
(G) No
CP Entity has assigned, transferred, conveyed, mortgaged, deeded in trust,
or
encumbered any interest in the leasehold or subleasehold;
(H) All
facilities leased or subleased thereunder have received all approvals of
governmental authorities (including licenses and permits) required in connection
with the operation thereof and have been operated and maintained in accordance
with applicable laws, rules, and regulations;
(I) All
facilities leased or subleased thereunder are supplied with utilities and other
services necessary for the operation of said facilities; and
(J) the
owner of the facility leased or subleased has good and marketable title to
the
parcel of real property, free and clear of any Security Interest, easement,
covenant, or other restriction, except for installments of special easements
not
yet delinquent and recorded easements, covenants, and other restrictions which
do not impair the current use, occupancy, or value, or the marketability of
title, of the property subject thereto.
(m) Intellectual
Property.
(i) the
CP Entities own or have the right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property necessary for the operation
of the businesses of the CP Entities as presently conducted and as presently
proposed to be conducted. Each item of Intellectual Property owned or used
by
any CP Entity immediately prior to the Closing hereunder will be owned or
available for use by the CP Entities or the Subsidiary on identical terms and
conditions immediately subsequent to the Closing hereunder. Each CP Entity
has
taken all necessary action to maintain and protect each item of Intellectual
Property that it owns or uses.
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(ii)
No CP Entity has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of third parties,
and
none of the Seller and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the CP Entities has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that any CP Entity must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of the Seller, no third party
has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of any CP Entity.
(iii) Section
4(m)(iii) of the Disclosure Schedule identifies each patent or registration
which has been issued to any CP Entity with respect to any of its Intellectual
Property, identifies each pending patent application or application for
registration which any CP Entity has made with respect to any of its
Intellectual Property, and identifies each license, agreement, or other
permission which any CP Entity has granted to any third party with respect
to
any of its Intellectual Property (together with any exceptions). The Seller
has
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date). Section 4(m)(iii) of the Disclosure Schedule also identifies each
trade name or unregistered trademark used by any CP Entity in connection with
any of its businesses. With respect to each item of Intellectual Property
required to be identified in Section 4(m)(iii) of the Disclosure
Schedule:
(A) The
CP Entities possess all right, title, and interest in and to the item, free
and
clear of any Security Interest, license, or other restriction;
(B)
The item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(C) No
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is pending or is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) No
CP Entity has ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with respect
to
the item.
(iv) Section
4(m)(iv) of the Disclosure Schedule identifies each item of Intellectual
Property that any third party owns and that any CP Entity uses pursuant to
license, sublicense, agreement, or permission. The Seller has delivered to
the
Buyer correct and complete copies of all such licenses, sublicenses, agreements,
and permissions (as amended to date). With respect to each item of Intellectual
Property required to be identified in Section 4(m)(iv) of the Disclosure
Schedule:
(A)
the license, sublicense, agreement, or permission covering the item is legal,
valid, binding, enforceable, and in full force and effect;
(B)
the license, sublicense, agreement, or permission will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in Section 2 above);
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(C) no
party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(D) no
party to the license, sublicense, agreement, or permission has repudiated any
provision thereof;
(E) with
respect to each sublicense, the representations and warranties set forth in
subsections (A) through (D) above are true and correct with respect to the
underlying license;
(F) the
underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(G) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is pending or is threatened which challenges the legality, validity,
or
enforceability of the underlying item of Intellectual Property; and
(H) no
CP Entity has granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(v) To
the Knowledge of Seller, no CP Entity will interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual Property
rights of third parties as a result of the continued operation of its businesses
as presently conducted and as presently proposed to be conducted.
(n) Tangible
Assets. the CP Entities own or lease all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of their
businesses as presently conducted and as presently proposed to be
conducted. Each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is
in
good operating condition and repair (subject to normal wear and tear), and
is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
(o) Inventory. The
inventory of the CP Entities consists of raw materials and supplies,
manufactured and purchased parts, goods in process, and finished goods, all
of
which is merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is slow-moving, obsolete, damaged, or defective,
subject only to the reserve for inventory writedown set forth on the face of
the
Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for
the
passage of time through the Closing Date in accordance with the past custom
and
practice of the CP Entities.
(p) Contracts. Section
4(p) of the Disclosure Schedule lists the following contracts and other
agreements to which any CP Entity is a party:
(i) any
agreement (or group of related agreements) for the lease of personal property
to
or from any Person providing for lease payments in excess of $10,000 per
annum;
(ii)
any agreement (or group of related agreements) for the purchase or sale of
raw
materials, commodities, supplies, products, or other personal property, or
for
the furnishing or receipt of services, the performance of which will extend
over
a period of more than one year, result in a material loss to any CP Entity,
or
involve consideration in excess of $10,000;
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(iii)
any agreement concerning a partnership or joint venture;
(iv)
any agreement (or group of related agreements) under which it has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, in excess of $10,000 or under which it has imposed
a Security Interest on any of its assets, tangible or intangible;
(v) any
agreement concerning confidentiality or noncompetition;
(vi)
any agreement with any of the Seller and his Affiliates (other than the CP
Entities);
(vii) any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other material plan or arrangement for the benefit
of its current or former directors, officers, and employees;
(viii) any
collective bargaining agreement;
(ix) any
agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $50,000
or
providing severance benefits;
(x) any
agreement under which it has advanced or loaned any amount to any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(xi) any
agreement under which the consequences of a default or termination could have
a
material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of any CP Entity; or
(xii) any
other agreement (or group of related agreements) the performance of which
involves consideration in excess of $10,000.
The
Seller has delivered to the Buyer a correct and complete copy of each written
agreement listed in Section 4(p) of the Disclosure Schedule (as amended to
date)
and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 4(p) of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default, and
no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the
agreement.
(q) Notes
and Accounts
Receivable. All notes and accounts receivable of the CP
Entities are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom
and
practice of the CP Entities.
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(r) Powers
of
Attorney. There are no outstanding powers of attorney executed
on behalf of any CP Entity.
(s)
Insurance. Section
4(s) of the Disclosure Schedule sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, Liability, and workers' compensation coverage and bond and surety
arrangements) to which any CP Entity has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past 10
years:
(i) the
name, address, and telephone number of the agent;
(ii) the
name of the insurer, the name of the policyholder, and the name of each covered
insured;
(iii) the
policy number and the period of coverage;
(iv) the
scope (including an indication of whether the coverage was on a claims made,
occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage;
and
(v) a
description of any retroactive premium adjustments or other loss-sharing
arrangements.
With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect; (B) the policy will continue to
be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C)
neither any CP Entity nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. Each CP Entity has been covered during the
past 10 years by insurance in scope and amount customary and reasonable for
the
businesses in which it has engaged during the aforementioned
period. Section 4(s) of the Disclosure Schedule describes any
self-insurance arrangements affecting any CP Entity.
(t) Litigation. Section
4(t) of the Disclosure Schedule sets forth each instance in which any CP Entity
(i) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (ii) is a party or is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits,
proceedings, hearings, and investigations set forth in Section 4(t) of the
Disclosure Schedule could result in any material adverse change in the business,
financial condition, operations, results of operations, or future prospects
of
any CP Entity. None of the Seller and the directors and officers (and
employees with responsibility for litigation matters) of the CP Entities has
any
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against any CP Entity.
(u) Product
Warranty. Each product manufactured, sold, leased, or
delivered by any CP Entity has been in conformity with all applicable
contractual commitments and all express and implied warranties, and no CP Entity
has any Liability (and there is no Basis for any present or future action,
suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) for replacement or repair thereof
or
other damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the CP
Entities. No product manufactured, sold, leased, or delivered by any
CP Entity is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Section
4(u) of the Disclosure Schedule includes copies of the standard terms and
conditions of sale or lease for each CP Entity (containing applicable guaranty,
warranty, and indemnity provisions).
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(v) Product
Liability. No CP Entity has any Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) arising out of any injury to individuals or property
as a
result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by any CP Entity.
(w) Employees. To
the Knowledge of any of the Seller and the directors and officers (and employees
with responsibility for employment matters) of the CP Entities, no executive,
key employee, or group of employees has any plans to terminate employment with
any CP Entity. No CP Entity is a party to or bound by any collective
bargaining agreement, nor have any of them experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining
disputes. No CP Entity has committed any unfair labor
practice. None of the Seller and the directors and officers (and
employees with responsibility for employment matters) of the CP Entities has
any
Knowledge of any organizational effort presently being made or threatened by
or
on behalf of any labor union with respect to employees of any CP
Entity.
(x) Employee
Benefits
(i) Section
4(x) of the Disclosure Schedule lists each Employee Benefit Plan that any CP
Entity maintains, to which any CP Entity contributes or has any obligation
to
contribute, or with respect to which any CP Entity has any material Liability
or
potential Liability.
(A) Each
such Employee Benefit Plan (and each related trust, insurance contract, or
fund)
has been maintained, funded and administered in accordance with the terms of
such Employee Benefit Plan and complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and other
applicable laws.
(B)
All required reports and descriptions (including annual reports (IRS Form 5500),
summary annual reports, and summary plan descriptions) have been timely filed
and/or distributed in accordance with the applicable requirements of ERISA
and
the Code with respect to each such Employee Benefit Plan. The requirements
of
COBRA have been met with respect to each such Employee Benefit Plan which is
an
Employee Welfare Benefit Plan subject to COBRA.
(C) All
contributions (including all employer contributions and employee salary
reduction contributions) which are due have been made within the time period
prescribed by ERISA to each such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been made to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and practice
of the CP Entities. All premiums or other payments for all periods ending on
or
before the Closing Date have been paid with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each
such Employee Benefit Plan which is intended to meet the requirements of a
"qualified plan" under Code §401(a) has received a determination from the
Internal Revenue Service that such Employee Benefit Plan is so qualified, and
nothing has occurred since the date of such determination that could adversely
affect the qualified status of any such Employee Benefit Plan.
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(E) The
market value of assets under each such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the present value of all vested and nonvested Liabilities thereunder
determined in accordance with PBGC methods, factors, and assumptions applicable
to an Employee Pension Benefit Plan terminating on the date for
determination.
(F) The
Seller has delivered to the Buyer correct and complete copies of the plan
documents and summary plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent annual report (IRS
Form 5500, with all applicable attachments), and all related trust agreements,
insurance contracts, and other funding arrangements which implement each such
Employee Benefit Plan.
(ii) With
respect to each Employee Benefit Plan that any of the CP Entities, their
Subsidiaries, and any ERISA Affiliate maintains, to which any of them
contributes or has any obligation to contribute, or with respect to which any
of
them has any material Liability or potential Liability:
(A) No
such Employee Benefit Plan which is an Employee Pension Benefit Plan (other
than
any Multiemployer Plan) has been completely or partially terminated or been
the
subject of a Reportable Event. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
instituted or threatened.
(B)
There have been no Prohibited Transactions with respect to any such Employee
Benefit Plan. No Fiduciary has any Liability for breach of fiduciary duty or
any
other failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the administration or
the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or threatened. None of the Seller and the
directors and officers (and employees with responsibility for employee benefits
matters) of the CP Entities has any Knowledge of any Basis for any such action,
suit, proceeding, hearing, or investigation.
(C) No
CP Entity has incurred, and none of the Seller and the directors and officers
(and employees with responsibility for employee benefits matters) of the CP
Entities has any reason to expect that any CP Entity will incur, any Liability
to the PBGC (other than with respect to PBGC premium payments not yet due)
or
otherwise under Title IV of ERISA (including any withdrawal liability as defined
in ERISA §4201) or under the Code with respect to any such Employee Benefit Plan
which is an Employee Pension Benefit Plan, or under COBRA with respect to any
such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(iii) None
of the CP Entities, their Subsidiaries, and any ERISA Affiliate contributes
to,
has any obligation to contribute to, or has any Liability (including withdrawal
liability as defined in ERISA §4201) under or with respect to any Multiemployer
Plan.
(iv) No
CP Entity maintains, contributes to or has an obligation to contribute to,
or
has any material Liability or potential Liability with respect to, any Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with
COBRA).
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(y) Guaranties. No
CP Entity is a guarantor or otherwise is liable for any Liability or obligation
(including indebtedness) of any other Person.
(z) Environmental,
Health, and
Safety Matters
(i) Each
of the CP Entities, their Subsidiaries, and their respective predecessors and
Affiliates has complied and is in compliance with all Environmental, Health,
and
Safety Requirements.
(ii) Without
limiting the generality of the foregoing, each of the CP Entities, their
Subsidiaries and their respective Affiliates has obtained and complied with,
and
is in compliance with, all permits, licenses and other authorizations that
are required pursuant to Environmental, Health, and Safety Requirements for
the
occupation of its facilities and the operation of its business; a list of all
such permits, licenses and other authorizations is set forth on the attached
"Environmental and
Safety Permits Schedule."
(iii)
Neither the CP Entities, their Subsidiaries, nor their respective predecessors
or Affiliates has received any written or oral notice, report or other
information regarding any actual or alleged violation of Environmental, Health,
and Safety Requirements, or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to any of them
or
its facilities arising under Environmental, Health, and Safety
Requirements.
(iv) None
of the following exists at any property or facility owned or operated by the
CP
Entities or their Subsidiaries: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3) materials or
equipment containing polychlorinated biphenyls, or (4) landfills, surface
impoundments, or disposal areas.
(v) None
of the CP Entities, their Subsidiaries, or their respective predecessors or
Affiliates has treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any substance, including without
limitation any hazardous substance, or owned or operated any property or
facility (and no such property or facility is contaminated by any such
substance) in a manner that has given or would give rise to liabilities,
including any Liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, pursuant
to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Solid
Waste Disposal Act, as amended ("SWDA") or any
other
Environmental, Health, and Safety Requirements.
(vi) Neither
this Agreement nor the consummation of the transaction that is the subject
of
this Agreement will result in any obligations for site investigation or cleanup,
or notification to or consent of government agencies or third parties, pursuant
to any of the so-called "transaction-triggered" or "responsible property
transfer" Environmental, Health, and Safety Requirements.
(vii) Neither
the CP Entities, their Subsidiaries, nor any of their respective predecessors
or
Affiliates has, either expressly or by operation of law, assumed or undertaken
any Liability, including without limitation any obligation for corrective or
remedial action, of any other Person relating to Environmental, Health, and
Safety Requirements.
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(viii) No
facts, events or conditions relating to the past or present facilities,
properties or operations of the CP Entities, their Subsidiaries, or any of
their
respective predecessors or Affiliates will prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements, give rise to
any
investigatory, remedial or corrective obligations pursuant to Environmental,
Health, and Safety Requirements, or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental, Health, and Safety Requirements, including without limitation
any
relating to onsite or offsite releases or threatened releases of hazardous
materials, substances or wastes, personal injury, property damage or natural
resources damage.
(aa) Certain
Business
Relationships with the CP Entities and Their
Subsidiaries. None of the Seller and his Affiliates has been
involved in any business arrangement or relationship with any CP Entity within
the past 12 months, and none of the Seller and his
Affiliates
owns any asset, tangible or intangible, which is used in the business of any
CP
Entity.
(bb) Disclosure. The
representations and warranties contained in this Section 4 do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Section 4
not
misleading.
5. Pre-Closing
Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each
of the Parties will use his reasonable best efforts to take all action and
to do
all things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section
7
below).
(b) Notices
and
Consents. The Seller will cause each CP Entity to give any
notices to third parties, and will cause each CP Entity to use its reasonable
best efforts to obtain any third party consents, that the Buyer reasonably
may
request in connection with the matters referred to in Section 4(c)
above. Each of the Parties will (and the Seller will cause each CP
Entity to) give any notices to, make any filings with, and use its reasonable
best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters referred
to
in Section 3(a)(ii), Section 3(b)(ii), and Section 4(c) above.
(c) Operation
of
Business. The Seller will not cause or permit any CP Entity to
engage in any practice, take any action, or enter into any transaction outside
the Ordinary Course of Business. Without limiting the generality of
the foregoing, the Seller will not cause or permit any CP Entity to (i) declare,
set aside, or pay any dividend or make any distribution with respect to its
capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, or (ii) otherwise engage in any practice, take any action, or enter
into
any transaction of the sort described in Section 4(h) above.
(d) Preservation
of
Business. The Seller will cause each CP Entity to keep its
business and properties substantially intact, including its present operations,
physical facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees.
(e) Full
Access. Seller will permit, and Seller will cause each CP
Entity to permit, representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations the CP Entities, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to each CP Entity.
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(f) Notice
of
Developments. The Seller will give prompt written notice to
the Buyer of any material adverse development causing a breach of any of the
representations and warranties in Section 4 above. Each Party will
give prompt written notice to the others of any material adverse development
causing a breach of any of his own representations and warranties in Section
3
above. No disclosure by any Party pursuant to this Section 5(f),
however, shall be deemed to amend or supplement Schedule 3(a), Schedule 3(b),
or
the Disclosure Schedule or to prevent or cure any misrepresentation, breach
of
warranty, or breach of covenant.
(g) Exclusivity. Seller
will not (and Seller will not cause or permit any CP Entity to) (i) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities,
or
any substantial portion of the assets, of any CP Entity (including any
acquisition structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. Seller will not vote his Shares in favor of any such
acquisition structured as a merger, consolidation, or share
exchange. The Seller will notify the Buyer immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
6. Post-Closing
Covenants. The Parties agree as follows with respect to the
period following the Closing.
(a) General. In
case at any time after the Closing any further action is necessary to carry
out
the purposes of this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole cost
and
expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 8 below). The Seller
acknowledges and agrees that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the CP
Entities.
(b) Litigation
Support. In the event and for so long as any Party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing
Date
involving any CP Entity, each of the other Parties will cooperate with him
or it
and his counsel in the contest or defense, make available their personnel,
and
provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Section 8
below).
(c) Transition. Seller
will not take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of any CP Entity from maintaining the same business relationships
with
the CP Entities after the Closing as it maintained with the CP Entities prior
to
the Closing.
(d) Confidentiality. Seller
will treat and hold as such all of the Confidential Information, refrain from
using any of the Confidential Information except in connection with this
Agreement, and deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all tangible embodiments (and all copies) of the
Confidential Information which are in his possession. In the event
that Seller is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena,
civil
investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, Seller
is,
on the advice of counsel, compelled to disclose any Confidential Information
to
any tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however,
that the disclosing Seller shall use his reasonable best efforts to obtain,
at
the reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall
designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the public immediately
prior to the time of disclosure.
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(e) Covenant
Not to
Compete. For a period of five years from and after the closing
of the sale of the Remaining Shares under either the Buyer’s Option or the
Seller’s Option under Section 2, above, Seller will not engage directly or
indirectly in any business that any CP Entity conducts as of the Closing Date
in
any geographic area in which any CP Entity conducts that business as of the
Closing Date; provided, however,
that no owner of less than 1% of the outstanding stock of any publicly-traded
corporation shall be deemed to engage solely by reason thereof in any of its
businesses. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 6(e) is invalid
or unenforceable, the Parties agree that the court making the determination
of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing
the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(f) Operation
of
Business. Seller will not cause or permit the CP Entities to
engage in any practice, take any action, or enter into any transaction outside
the Ordinary Course of Business. Without limiting the generality of
the foregoing, Seller will not cause or permit the CP Entities or any Subsidiary
of the CP Entities to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or otherwise
acquire any of its capital stock, (ii) offer or sell any equity or debt
securities for cash or other consideration, or (iii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 4(h) above without the prior written consent of
Buyer. Following the Closing, the number of members of board of
directors of the CP Entities will be adjusted to five, of which Buyer shall
appoint three and Seller shall appoint two directors. Following the Closing,
Buyer shall cause the CP Entities to remain current and in good standing under
all loan and other agreements underlying the Seller Guarantees until those
obligations have been paid in full or the requisite releases obtained as
provided in Section 2(e)(iii) above.
7.
Conditions to
Obligation to Close.
(a)
Conditions to
Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) The
representations and warranties set forth in Section 3(a) and Section 4 above
shall be true and correct in all material respects at and as of the Closing
Date;
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(ii) The
Seller shall have performed and complied with all of their covenants hereunder
in all material respects through the Closing;
(iii) the
CP Entities shall have procured all of the third party consents specified in
Section 5(b) above;
(iv) No
action, suit, or proceeding shall be pending or threatened before any court
or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of
any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Buyer to own Shares and
to
control the CP Entities, or (D) affect adversely the right of any CP Entity
to
own its assets and to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(v) The
Seller shall have delivered to the Buyer a certificate to the effect that each
of the conditions specified above in Section 7(a)(i)-(iv) is satisfied in all
respects;
(vi) The
Buyer shall have received from counsel to the Seller an opinion in form and
substance as set forth in Exhibit B attached hereto, addressed to the Buyer,
and
dated as of the Closing Date;
(vii) All
actions to be taken by the Seller in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be reasonably satisfactory in form and substance to the Buyer.
The
Buyer
may waive any condition specified in this Section 7(a) if it executes a writing
so stating at or prior to the Closing.
(b) Conditions
to Obligation of
the Seller. The obligation of the Seller to consummate the
transactions to be performed by them in connection with the Closing is subject
to satisfaction of the following conditions:
(i) The
representations and warranties set forth in Section 3(b) above shall be true
and
correct in all material respects at and as of the Closing Date;
(ii)
The Buyer shall have performed and complied with all of its covenants hereunder
in all material respects through the Closing;
(iii) No
action, suit, or proceeding shall be pending or threatened before any court
or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of
any
of the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(iv) The
Buyer shall have delivered to the Seller a certificate to the effect that each
of the conditions specified above in Section 7(b)(i)-(iii) is satisfied in
all
respects;
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(v)
The Seller shall have received from counsel to the Buyer an opinion in form
and
substance as set forth in Exhibit C attached hereto, addressed to the Seller,
and dated as of the Closing Date; and
(vi) All
actions to be taken by the Buyer in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be reasonably satisfactory in form and substance to the Seller.
The
Seller may waive any condition specified in this Section 7(b) if he executes
a
writing so stating at or prior to the Closing.
8. Remedies
for Breaches of
This Agreement.
(a) Survival
of Representations
and Warranties. All of the representations and warranties of
the Parties contained in this Agreement shall survive the Closing hereunder
(even if the damaged Party knew or had reason to know of any misrepresentation
or breach of warranty or covenant at the time of Closing) and continue in full
force and effect forever thereafter (subject to any applicable statutes of
limitations).
(b) Indemnification
Provisions
for Benefit of the Buyer.
(i) In
the event Seller breaches (or in the event any third party alleges facts that,
if true, would mean the Seller has breached) any of his representations,
warranties, and covenants contained herein (other than the covenants in Section
2(a) above and the representations and warranties in Section 3(a) above), and,
if there is an applicable survival period pursuant to Section 8(a) above,
provided that the Buyer makes a written claim for indemnification against the
Seller pursuant to Section 11(g) below within such survival period, then the
Seller agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or the alleged
breach).
(ii) In
the event Seller breaches (or in the event any third party alleges facts that,
if true, would mean the Seller has breached) any of his covenants in Section
2(a) above or any of his representations and warranties in Section 3(a) above,
and, if there is an applicable survival period pursuant to Section 8(a) above,
provided that the Buyer makes a written claim for indemnification against the
Seller pursuant to Section 11(g) below within such survival period, then the
Seller agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or the alleged
breach).
(iii) Seller
agrees to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of, relating
to,
in the nature of, or caused by any Liability of any CP Entity (x) for any Taxes
of the CP Entities with respect to any Tax year or portion thereof ending on
or
before the Closing Date (or for any Tax year beginning before and ending after
the Closing Date to the extent allocable (determined in a manner consistent
with
Section 9(c)) to the portion of such period beginning before and ending on
the
Closing Date), to the extent such Taxes are not reflected in the reserve for
Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the face of the Closing
Balance Sheet, and (y) for the unpaid Taxes of any Person (other than any CP
Entity) under Reg. §1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise.
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(iv) Seller
agrees to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of, relating
to,
in the nature of, or caused by Seller’s conduct of the business of the CP
Entities both before and after the Closing.
(c) Indemnification
Provisions
for Benefit of the Seller. In the event the Buyer breaches (or
in the event any third party alleges facts that, if true, would mean the Buyer
has breached) any of its representations, warranties, and covenants contained
herein, and, if there is an applicable survival period pursuant to Section
8(a)
above, provided that Seller makes a written claim for indemnification against
the Buyer pursuant to Section 11(g) below within such survival period, then
the
Buyer agrees to indemnify Seller from and against the entirety of any Adverse
Consequences the Seller may suffer through and after the date of the claim
for
indemnification (including any Adverse Consequences the Seller may suffer after
the end of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach).
(d) Matters
Involving Third
Parties.
(i) If
any third party shall notify any Party (the "Indemnified Party")
with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other Party
(the
"Indemnifying
Party") under this Section 8, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any
Indemnifying Party will have the right to defend the Indemnified Party against
the Third Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified
Party in writing within 15 days after the Indemnified Party has given notice
of
the Third Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature
of,
or caused by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations hereunder,
(C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good faith judgment of
the
Indemnified Party, likely to establish a precedential custom or practice
materially adverse to the continuing business interests of the Indemnified
Party, and (E) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
(iii) So
long as the Indemnifying Party is conducting the defense of the Third Party
Claim in accordance with Section 8(d)(ii) above, (A) the Indemnified Party
may
retain separate co-counsel at its sole cost and expense and participate in
the
defense of the Third Party Claim, (B) the Indemnified Party will not consent
to
the entry of any judgment or enter into any settlement with respect to the
Third
Party Claim without the prior written consent of the Indemnifying Party (not
to
be withheld unreasonably), and (C) the Indemnifying Party will not consent
to
the entry of any judgment or enter into any settlement with respect to the
Third
Party Claim without the prior written consent of the Indemnified Party (not
to
be withheld unreasonably).
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(iv) In
the event any of the conditions in Section 8(d)(ii) above is or becomes
unsatisfied, however, (A) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to,
the
Third Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Parties will remain responsible for
any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to
the
fullest extent provided in this Section 8.
(e) Determination
of Adverse
Consequences. All indemnification payments under this Section
8 shall be deemed adjustments to the Purchase Price.
(f) Other
Indemnification
Provisions. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable, or common
law
remedy (including without limitation any such remedy arising under
Environmental, Health, and Safety Requirements) any Party may have with respect
to the CP Entities, their Subsidiaries, or the transactions contemplated by
this
Agreement. Seller hereby agrees that he will not make any claim for
indemnification against any CP Entity by reason of the fact that het was a
director, officer, employee, or agent of any such entity or was serving at
the
request of any such entity as a partner, trustee, director, officer, employee,
or agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such claim is pursuant to any statute, charter document,
bylaw, agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Buyer against such Seller (whether
such action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
9. Tax
Matters. The following provisions shall govern the allocation
of responsibility as between Buyer and Seller for certain tax matters following
the Closing Date:
(a) Tax
Periods Ending on or
Before the Closing Date. Buyer shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for the CP Entities
for
all periods ending on or prior to the Closing Date which are filed after the
Closing Date. Buyer shall permit the CP Entities to review and
comment on each such Tax Return described in the preceding sentence prior to
filing. Seller shall reimburse Buyer for Taxes of the CP Entities
with respect to such periods within fifteen (15) days after payment by Buyer
or
the CP Entities of such Taxes to the extent such Taxes are not reflected in
the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown
on
the face of the Closing Balance Sheet.
(b) Tax
Periods Beginning Before
and Ending After the Closing Date. Buyer shall prepare or
cause to be prepared and file or cause to be filed any Tax Returns of the CP
Entities for Tax periods which begin before the Closing Date and end after
the
Closing Date. Seller shall pay to Buyer within fifteen (15) days
after the date on which Taxes are paid with respect to such periods an amount
equal to the portion of such Taxes which relates to the portion of such Taxable
period ending on the Closing Date to the extent such Taxes are not reflected
in
the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown
on
the face of the Closing Balance Sheet. For purposes of this Section,
in the case of any Taxes that are imposed on a periodic basis and are payable
for a Taxable period that includes (but does not end on) the Closing Date,
the
portion of such Tax which relates to the portion of such Taxable period ending
on the Closing Date shall (x) in the case of any Taxes other than Taxes based
upon or related to income or receipts, be deemed to be the amount of such Tax
for the entire Taxable period multiplied by a fraction the numerator of which
is
the number of days in the Taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire Taxable period, and
(y)
in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant Taxable period ended
on the Closing Date. Any credits relating to a Taxable period that
begins before and ends after the Closing Date shall be taken into account as
though the relevant Taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall
be
made in a manner consistent with prior practice of the CP Entities.
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(c) Cooperation
on Tax
Matters.
(i) Buyer,
the CP Entities and Seller shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention and (upon
the other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. the CP Entities
and Seller agree (A) to retain all books and records with respect to Tax matters
pertinent to the CP Entities relating to any taxable period beginning before
the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered into
with any taxing authority, and (B) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, the CP Entities or Seller, as
the
case may be, shall allow the other party to take possession of such books and
records.
(ii) Buyer
and Seller further agree, upon request, to use their best efforts to obtain
any
certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) Buyer
and Seller further agree, upon request, to provide the other party with all
information that either party may be required to report pursuant to Section
6043
of the Code and all Treasury Department Regulations promulgated
thereunder.
(d) Tax
Sharing
Agreements. All tax sharing agreements or similar agreements
with respect to or involving the CP Entities shall be terminated as of the
Closing Date and, after the Closing Date, the CP Entities shall not be bound
thereby or have any Liability thereunder.
(e) Certain
Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid by Seller
when due, and Seller will, at his own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
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28
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10.
Termination.
(a) Termination
of
Agreement. Certain of the Parties may terminate this Agreement
as provided below:
(i) The
Buyer and the Seller may terminate this Agreement by mutual written consent
at
any time prior to the Closing;
(ii) The
Buyer may terminate this Agreement by giving written notice to the Seller on
or
before the 30th day following the date of this Agreement if the Buyer is not
reasonably satisfied with the results of its continuing business, legal,
environmental, and accounting due diligence regarding the CP
Entities;
(iii) The
Buyer may terminate this Agreement by giving written notice to the Seller at
any
time prior to the Closing (A) in the event the Seller has breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, the Buyer has notified the Seller of the breach, and the
breach has continued without cure for a period of 15 days after the notice
of
breach or (B) if the Closing shall not have occurred on or before January 20,
2008, by reason of the failure of any condition precedent under Section 7(a)
hereof unless the failure results primarily from the Buyer itself breaching
any
representation, warranty, or covenant contained in this Agreement);
and
(iv) The
Seller may terminate this Agreement by giving written notice to the Buyer at
any
time prior to the Closing (A) in the event the Buyer has breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, Seller has notified the Buyer of the breach, and the breach
has continued without cure for a period of 15 days after the notice of breach
or
(B) if the Closing shall not have occurred on or before January 20, 2008, by
reason of the failure of any condition precedent under Section 7(b) hereof
(unless the failure results primarily from Seller themselves breaching any
representation, warranty, or covenant contained in this Agreement).
(b) Effect
of
Termination. If any Party terminates this Agreement pursuant
to Section 10(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach).
11. Miscellaneous.
(a) Press
Releases and Public
Announcements. No Party shall issue any press release or make
any public announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the Buyer and the Seller;
provided,
however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable best efforts to advise the other Parties prior to making
the disclosure).
(b) No
Third-Party
Beneficiaries. This Agreement shall not confer any rights or
remedies upon any Person other than the Parties and their respective successors
and permitted assigns.
(c) Entire
Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
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(d) Succession
and
Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties named herein and their respective successors and
permitted assigns. No Party may assign either this Agreement or any
of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Seller; provided, however,
that the Buyer may (i) assign any or all of its rights and interests hereunder
to one or more of its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
the Buyer nonetheless shall remain responsible for the performance of all of
its
obligations hereunder).
(e) Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the same
instrument.
(f) Headings. The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(g) Notices. All
notices, requests, demands, claims, and other communications hereunder will
be
in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set
forth
below:
If
to the Seller:
|
||
Xxxxx
X. Xxxxxxxx
|
||
c/o
Court Programs
|
||
0000
000xx
Xxxxx X.
|
||
Xxxx
Xxxx Xxxxx, XX 00000-0000
|
||
Copy
to:
|
||
n/a
|
||
__________________________
|
||
__________________________
|
||
If
to the Buyer:
|
||
RemoteMDx,
Inc.
|
||
000
Xxxx Xxxxx Xxxxxx Xxxxx
|
||
Xxxxx
000
|
||
Xxxxx,
Xxxx 00000
|
||
Copy
to:
|
||
Durham
Xxxxx & Xxxxxxx, PC
|
||
Attn:
Xxxxx X. Xxxxxxx, Esq.
|
||
000
Xxxx Xxxxxxxx, Xxxxx 000
|
||
Xxxx
Xxxx Xxxx, Xxxx 00000
|
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Any
Party
may send any notice, request, demand, claim, or other communication hereunder
to
the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless
and
until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) Governing
Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Utah without giving effect
to
any choice or conflict of law provision or rule (whether of the State of Utah
or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Utah.
(i) Amendments
and
Waivers. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by the Buyer and the
Seller. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall
be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction.
(k) Expenses. Each
of the Parties, the CP Entities, and their Subsidiaries will bear his or its
own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The
Seller agrees that no CP Entity has borne or will bear any of the Seller’s costs
and expenses (including any of his legal fees and expenses) in connection with
this Agreement or any of the transactions contemplated hereby.
(l) Construction. The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions
of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. The Parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the
fact
that there exists another representation, warranty, or covenant relating to
the
same subject matter (regardless of the relative levels of specificity) which
the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or
covenant.
(m) Incorporation
of Exhibits,
Annexes, and Schedules. The Exhibits, Annexes, and Schedules
identified in this Agreement are incorporated herein by reference and made
a
part hereof.
(n) Specific
Performance. Each of the Parties acknowledges and agrees that
the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy
to
which they may be entitled, at law or in equity.
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(o) Submission
to
Jurisdiction. Each of the Parties submits to the jurisdiction
of any state or federal court sitting in Salt Lake City, Utah, in any action
or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in
any
such court. Each of the Parties waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives
any
bond, surety, or other security that might be required of any other Party with
respect thereto. Nothing in this Section 10(o), however, shall affect
the right of any Party to bring any action or proceeding arising out of or
relating to this Agreement in any other court or to serve legal process in
any
other manner permitted by law or at equity. Each Party agrees that a
final judgment in any action or proceeding so brought shall be conclusive and
may be enforced by suit on the judgment or in any other manner provided by
law
or at equity.
*****
[Signatures
appear on following page.]
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32
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IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement on December
21,
2007, effective December 1, 2007.
REMOTEMDX,
INC.
By: Xxxxxxx
X.
Xxxxx
Title: Chief
Financial Officer
Xxxxx
X.
Xxxxxxxx
Xxxxx
X.
Xxxxxxxx, (an individual)
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