EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of May 20, 1998, among TECTRIX FITNESS EQUIPMENT, INC.,
a California corporation (the "Corporation"); the persons named on Exhibit A
hereto (the "Shareholders"), constituting the holders of all of the outstanding
shares of the capital stock of the Corporation; and CYBEX INTERNATIONAL, INC., a
New York corporation (the "Buyer").
WHEREAS, the Shareholders desire to sell, and the Buyer desires to acquire,
all of the outstanding capital stock of the Corporation for the consideration
set forth below;
NOW, THEREFORE, in consideration of the respective representations,
warranties and agreements hereinafter set forth, the Shareholders, the Buyer and
the Corporation represent, warrant and agree as follows:
1. Sale and Purchase of Stock; Cancellation of Options. (a) Stock.
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In reliance on the representations, warranties and covenants contained herein
and subject to the terms and conditions hereof, at the Closing hereinafter
referred to, each Shareholder shall sell, convey, transfer and deliver to the
Buyer, and the Buyer shall purchase from each Shareholder, the number of shares
of the common stock, without par value, of the Corporation (the "Stock"), set
opposite their respective names below, constituting in the aggregate all of the
issued and outstanding capital stock of the Corporation.
(b) Options. (i) Prior to the Closing, each holder of the options
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to acquire shares of the Stock listed on Exhibit B hereto (the "Out-the-Money
Options") shall enter into a Cancellation Agreement, in form and substance
satisfactory to the Buyer, which shall provide that at the Closing all of the
Out-the-Money Options shall be canceled and discharged, in consideration of the
obligation of the Corporation to pay to the holders thereof the sums indicated
on said Exhibit B. The aggregate sum so payable is a reduction to the Purchase
Price payable by the Buyer to the Shareholders hereunder.
(ii) Prior to the Closing, each holder of options to acquire
shares of the Stock with an exercise price less than the Purchase Price per
share hereunder has exercised in full such option and is a selling Shareholder
hereunder.
2. Purchase Price. (a) Gross Amount. The aggregate Purchase Price for
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the sale and purchase of the Stock hereunder shall be $23.4 million, subject to
adjustment as
provided in subparagraphs (b) and (d) below. The aggregate Purchase Price, so
adjusted, shall be allocated among the Shareholders in accordance with the
allocation percentages indicated next to their respective names on Exhibit A
hereto. As additional consideration for the sale and purchase of the Stock
hereunder, the Shareholders will have the opportunity to earn, in addition to
the Purchase Price, the Contingent Earnout, as more fully defined in paragraph
2A above.
(b) Adjustments to Gross Purchase Price. In addition to the
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Closing Balance Sheet adjustments pursuant to subparagraph (d) below, the
aggregate Purchase Price shall be reduced by the following:
(i) The sum payable to the Corporation Lender, as specified in
subparagraph (c)(ii) below, less any Excess Cash, as defined below;
(ii) Any fees and expenses of investment advisors (including
the sums payable to Xxxxxxxxx & Xxxxx), attorneys or accountants incurred by the
Corporation in connection with the transactions contemplated hereby, to the
extent not satisfied by the Shareholders, and any other costs which Buyer and
Corporation agree are to reduce the Purchase Price;
(iii) The aggregate amounts payable to the holders of the Out-
the-Money Options pursuant to the Cancellation Agreements; and
(iv) Bonuses payable to employees of the Corporation, as set
forth on Schedule 2(b)(iv) hereof.
(c) Payment. The Purchase Price hereunder, after payment of or
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provision for the amounts specified in subparagraph (b) above, shall be
satisfied as follows:
(i) A portion of the Purchase Price equal to the result of (x)
$21.06 million, minus (y) all adjustments to the purchase price specified in
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subparagraph (b) above (the "Cash Portion"), shall be allocated among the
Shareholders in the proportions specified on Exhibit A hereto and shall be
satisfied at Closing by the wire transfer of the Cash Portion to the Shareholder
Representatives, which shall act as paying agent on behalf of the Shareholders
(the "Paying Agent"). Such wire transfer shall be to such account as shall be
designated by the Paying Agent at least two business days prior to the
Closing. Buyer shall have no further obligation or liability for the Cash
Portion, once so paid to the Paying Agent.
(ii) The Buyer will pay to California United Bank, Santa Xxx Xxxxxx
(the "Corporation Lender") at the Closing, by wire transfer to such account as
shall be designated by the Corporation Lender at least two business days prior
to the Closing, an amount sufficient to retire all principal, interest and other
sums owed as of the Closing Date by the Corporation to the Corporation Lender.
(iii) A portion of the Purchase Price equal to the result of (x) $2.34
million, minus (y) the adjustment, if any, to the purchase price pursuant to
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subparagraph (d) below, shall be satisfied by the delivery to the Shareholder
Representatives (as defined in paragraph 15(j) below) of the Buyer's secured
promissory note, dated the Closing Date and in a principal amount equal to such
portion of the Purchase Price, payable to the order of the Shareholder
Representatives for the ratable benefit of the Shareholders (the "Secured
Note"). The Secured Note shall be substantially in the form of Annex I hereto
and shall mature, bear interest, be payable as to principal and interest and be
subject to such other terms as are provided therein. The Secured Note will be
delivered to the Shareholder Representatives within ten days after the final
determination of the adjustment, if any, to the Purchase Price pursuant to
subparagraph (d) below. The Secured Note shall be secured by a letter of credit
from First Union National Bank, substantially in the form of Annex II (the
"Letter of Credit"). The Letter of Credit will provide that draws thereon will
require the joint signature of Buyer and a Shareholder Representative or as
directed by a court of competent jurisdiction.
(d)(i) Closing Balance Sheet Adjustments. For purposes hereof, the
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following terms shall have the meanings indicated:
"Balance Sheet" has the meaning specified in paragraph 4(d)
below.
"Closing Balance Sheet" means a balance sheet setting forth the
Corporation's assets, liabilities and shareholders' equity as of the Closing
Date (exclusive of liabilities which shall have reduced the Purchase Price
pursuant to paragraph 2(b)(ii) , (iii) and (iv) above and exclusive of any
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Excess Cash), prepared in accordance with generally acceptable accounting
principles applied on a basis consistent with the accounting principles used in
preparation of the Balance Sheet.
"Deficiency Amount" means the amount, if any, by which the
amount set forth on the Closing Balance Sheet on the line item captioned
"Shareholders Equity" is less than the Target Net Worth.
"Excess Cash" means the amount, if any, of the Corporation's
cash on hand as of the Closing Date, in excess of the Corporation's cash as of
December 31, 1997, as indicated on the Balance Sheet.
"Target Net Worth" means the amount set forth on the Balance
Sheet on the line item captioned "Shareholders Equity", minus (x) the VR Asset
Writedown (as defined below) and (y) $100,000.
"VR Asset Writedown" means the sum of (a) the decrease, if any,
in the book value of the Corporation's net intangible assets between the Balance
Sheet and the Closing Balance Sheet, and (b) the decrease, if any, in the book
value of the Corporation's tooling related to the Virtual Reality Bike and
Virtual Reality Climber (the "VR Products"), and (c) the increase, if any, in
the portion of the inventory reserve for excess and obsolescence specifically
related to the VR Products.
(ii) Promptly after the Closing, Buyer shall prepare the
Closing Balance Sheet. Xxxxxx Xxxxxxxx (the "Auditors") shall examine the
Closing Balance Sheet in accordance with generally accepted auditing standards,
render their unqualified report thereon, and furnish such report to the
Shareholder Representatives and Buyer within 60 days after the Closing.
Shareholder Representatives shall, within thirty days following delivery of the
Closing Balance Sheet by Buyer, notify Buyer of its acceptance or rejection
thereof, and if the Shareholder Representatives shall fail to so notify Buyer it
shall be deemed to have accepted the Closing Balance Sheet. If the Shareholder
Representatives reject the Closing Balance Sheet, Buyer and the Shareholder
Representatives shall designate a mutually acceptable third party (which shall
be a nationally recognized firm of independent certified public accountants),
who shall make an independent determination of the disputed aspects of the
Closing Balance Sheet and whose determination shall be final and binding on the
parties hereto, and whose fees shall be borne equally by Buyer and Shareholders.
(iii) If the Closing Balance Sheet, as finally determined
pursuant to subparagraph (ii) above, shall indicate no Deficiency Amount, there
shall be no adjustment to the Purchase Price pursuant to this subparagraph (d).
If, on the other hand,
the Closing Balance Sheet indicates a Deficiency Amount, the Purchase Price
shall be reduced on a dollar-for-dollar basis equal to the Deficiency Amount.
Such reduction to the Purchase Price shall be effectuated by reduction to the
principal balance represented by the Secured Note. Not later than five business
days after the final determination of the Deficiency Amount, if any, Buyer shall
deliver to the Shareholders' Representative the Secured Note contemplated by
Section 2(c)(iii) above.
2A Contingent Earnout. In addition to the Purchase Price payable
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hereunder, as additional consideration for the sale of the Stock hereunder, the
Shareholders shall have the right to receive, in the aggregate, additional
payments of up to $6.6 million, based upon the Corporation's post-Closing net
margin performance (the "Contingent Earnout"). The Contingent Earnout will be
payable, if at all, in accordance with the following provisions:
(a) The following terms, when utilized in this paragraph 2A, have the
meanings indicated:
"Accounting Period" means, as applicable, (i) the period
commencing May 24, 1998 and ending December 31, 1998, (ii) calendar year 1999,
(iii) calendar year 2000, and (iv) the period commencing January 1, 2001 and
ending May 25, 2001.
"Net Margin" means the Buyer and its subsidiaries' consolidated
sales (without regard to inter-company transfers) of Products minus the
Corporation's cost of such sales, all determined by the Buyer's independent
certified public accountants in accordance with generally accepted accounting
principles consistently applied with those heretofore followed by the
Corporation. Cost of sales will in no event include increased depreciation or
amortization caused by the sale and purchase of Stock hereunder.
"Products" means the Corporation's stepper and bike products
existing at the Closing, as the same may be modified, changed or improved, and
any other stepper or bike product sold by the Buyer or its affiliates, exclusive
of (i) the Hiker (and any derivatives thereof), (ii) any of Buyer's current bike
products, but only to the extent manufactured prior to January 1,1999, and (iii)
parts sales.
"Initial Threshold Amount" and "Net Margin Amount to Achieve
Basic Earnout" means, with respect to each Accounting Period, the sums indicated
below:
Initial Net Margin Amount
Accounting Threshold To Achieve
Period Amount Basic Earnout
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1998 $ 5,896,500 $ 7,862,000
1999 11,150,250 14,867,000
2000 11,902,500 15,870,000
2001 5,340,000 7,120,000
(b) The Shareholders shall have the right to receive, with respect to
each Accounting Period, an amount equal to the result of:
(i) the Net Margin for such Accounting Period, up to but not
exceeding the Net Margin Amount to Achieve Basic Earnout for such Accounting
Period, minus the Initial Threshold Amount for such Accounting Period, with the
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result multiplied by 40% (40.70825%, in the case of the year 2000); plus
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(ii) the Net Margin, if any, for such Accounting Period in
excess of the Net Margin Amount to Achieve Basic Earnout for such Accounting
Period, multiplied by 50%; provided that the sum of the amounts payable pursuant
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to this clause (ii) in all Accounting Periods shall not exceed in the aggregate
$2 million. Examples of calculations of the Contingent Earnout are set forth on
Schedule 2A hereto.
(c) The Contingent Earnout, if any, payable with respect to each
Accounting Period shall be based solely upon the Net Margin performance for such
Accounting Period, and the Shareholders will not be charged for any failure to
achieve the Initial Threshold Amount for any prior or subsequent Accounting
Period. In no event will the Contingent Earnout exceed, in the aggregate, $6.6
million.
(d) The Contingent Earnout, if any, payable with respect to each
Accounting Period shall be allocated among the Shareholders in the proportion
specified on Exhibit A hereto and shall be satisfied by the payment of such sum
to the Paying Agent within sixty days following the end of such Accounting
Period. Buyer shall have no further obligation or liability for such portion of
the Contingent Earnout, once so paid to the Paying Agent. Each such payment
shall be accompanied by the Buyer's report,
setting forth the total sales and cost of sales of the Products during the
Accounting Period and the method of computing the Contingent Earnout. The
Shareholder Representatives and their representatives may, but not more
frequently than once in any calendar year, inspect the Buyer's books and records
to the extent necessary to confirm the accuracy of such reports. Any such
inspection shall be during regular business hours and shall be subject to the
Shareholder Representatives and their representatives executing a
confidentiality agreement in form agreed to prior to the date hereof. The
obligation of the Buyer to make Contingent Earnout payments is subject to the
provisions of paragraph 13 below.
3. Closing. (a) The closing of the sale and purchase of the Stock (the
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"Closing") shall take place at the offices of Xxxxxxx, Phleger & Xxxxxxxx,
L.L.P., 00 Xxxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxx on May 21, 1998, or at such
other time, date and place as the Corporation and the Buyer shall mutually
agree, but in any event on or before June 30, 1998. The date of the Closing is
referred to in this Agreement as the Closing Date.
(b) The Closing shall be effectuated as follows:
(i) The various payments described in paragraph 2(b) above
which are a reduction to the Purchase Price shall be made or provided for;
(ii) The Buyer shall make the wire transfer specified in
paragraph 2(c)(i) above;
(iii) Each Shareholder shall deliver to Buyer good and
marketable title to the shares of Stock sold hereunder by such Shareholder, free
and clear of all claims, liens, options, charges and encumbrances of any nature
whatsoever, by delivering to Buyer a certificate or certificates evidencing such
shares duly endorsed in blank for transfer or accompanied by stock powers duly
executed in blank, with all requisite documentary or stock transfer stamps
affixed. Shareholders will pay all federal, state, county and local taxes
(including all requisite transfer taxes) which may be due or payable by reason
of a consummation of such sale and purchase.
4. Representations, Warranties and Covenants of Corporation and
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Shareholders. Except as set forth in the various schedules to this Agreement
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(hereinafter collectively referred to as the "Disclosure Schedule"), Corporation
and Shareholders hereby represent, warrant and covenant to Buyer as of the date
hereof and the time of the Closing as
follows:
(a) Corporation's Organization, Etc. Corporation is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of California, is duly qualified as a foreign corporation in all
jurisdictions wherein the character of the property owned or leased or the
nature of the business transacted by it makes qualification as a foreign
corporation necessary, except if the failure to be so qualified would not have a
material adverse effect upon the assets or business of the Corporation, and has
the corporate power to own its properties and carry on its business as presently
conducted.. The Corporation does not own any capital stock or other equity
interest in any other corporation or other organization, except for the
interests in the corporations described in Schedule 4(a) hereto ( the
"Subsidiaries"). Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of its
incorporation, is duly qualified as a foreign corporation in all jurisdictions
wherein the character of the property owned or leased or the nature of the
business transacted by it makes qualification as a foreign corporation
necessary, except if the failure to be so qualified would not have a material
adverse effect upon the assets or business of such Subsidiary, and has the
corporate power to own its properties and carry on its business as presently
conducted. True and correct copies of the Certificate of Incorporation, By-Laws
or other constituent documents of Corporation and each Subsidiary have been
provided to Buyer.
(b) Capitalization; Stock Ownership. (i) The Corporation's
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authorized capital stock consists of 15,000,000 shares of Common Stock, without
par value, of which 7,484,483 shares are issued and outstanding. There are no
existing options, calls, or commitments of any character whatsoever, or
agreements to grant the same, relating to authorized or issued shares of the
Corporation, and the Corporation has no outstanding securities convertible into
or exercisable for any such shares, or any options, calls or commitments of any
character whatsoever with respect to the issuance or sale of any such
convertible securities, except for the stock options described on Schedule 4(b)
hereto, all of which shall be canceled and discharged on or before the Closing
as provided herein.
(ii) Each Shareholder is the owner, beneficially and of record,
of the number of shares of Stock of the Corporation set forth opposite his name
on Exhibit A hereto, free and clear of any claim, lien, option, charge,
restriction or encumbrance of any nature whatsoever, except for those imposed by
applicable state or federal securities laws. All the issued and outstanding
shares of Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. The Shareholders have full
requisite power and authority to sell the Stock to the Buyer according to the
terms and the provisions of this Agreement so as to vest in the Buyer (and at
Closing the Shareholders shall vest in Buyer) good and marketable title to the
Stock free and clear of any claim, lien, option, charge or encumbrance. Each
Shareholder has all requisite power and authority to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly authorized, executed and delivered by
each Shareholder and constitutes the legal, valid, and binding obligation of
each Shareholder, enforceable in accordance with its terms.
(iii) Each Subsidiary's authorized and outstanding capital stock
is as set forth on Schedule 4(b) hereto. The Corporation owns all of the
outstanding capital stock of each Subsidiary. There are no existing options,
calls, or commitments of any character whatsoever, or agreements to grant the
same, relating to authorized or issued shares of any Subsidiary, and none
thereof have any outstanding securities convertible into or exercisable for any
such shares, or any options, calls or commitments of any character whatsoever
with respect to the issuance or sale of any such convertible securities.
(iv) All of the issued capital stock of Corporation and the
Subsidiaries has been offered, sold and issued in compliance with all applicable
securities laws.
(c) Corporate Authority; Etc. The execution, delivery and
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performance by Corporation of this Agreement and the Non-Competition Agreements
and the Employment Agreements (as defined below) (collectively with this
Agreement, the "Acquisition Documents"), have been duly authorized by all
necessary corporate action and will not violate any provision of law or of
Corporation's or any Subsidiary's Certificate of Incorporation or By-Laws or
other constituent document, or result in the breach of, or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any
property or assets of Corporation or any Subsidiary pursuant to, any indenture,
agreement or instrument to which Corporation or any Subsidiary is a party or by
which Corporation or any Subsidiary or any of their respective property may be
bound or affected. The Acquisition Documents to which Corporation is a party
have been or at Closing will be duly executed and delivered by Corporation and
constitute or will constitute the legal, valid and binding obligations of
Corporation, enforceable in accordance with their respective terms.
(d) Financial and Other Data. Corporation has delivered to Buyer
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copies of the following consolidated financial statements (the "Financial
Statements") of the Corporation and the Subsidiaries:
(i) Balance sheets as of December 31, 1997 (the "Balance
Sheet"), 1996 and 1995 and March 31, 1998; and
(ii) Statements of income, shareholders' equity and cash flow
for the years ended December 31, 1997, 1996 and 1995 and the statement of income
for the three months ended March 31, 1998.
The Financial Statements for the years ended December 31, 1995,
1996 and 1997 have been audited by Ernst & Young. The Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated, the above-referenced
balance sheets present fairly in all material respects the financial position of
the Corporation and the Subsidiaries as of their respective dates, and the
above-referenced statements of income present fairly in all material respects
the results of operations of the Corporation and the Subsidiaries for the
periods covered thereby.
(e) Accounts. Except as set forth on Schedule 4(e), the accounts
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receivable of the Corporation and the Subsidiaries as of the date hereof and on
the Closing Date (i) represent transactions for good and valuable consideration
resulting from bona fide sales to third parties in the ordinary course of
business, (ii) are not subject to any known defenses, set-offs or
counterclaims, and (iii) to the best of Corporation's and Shareholders'
knowledge are legally enforceable (except as such enforceability may be limited
by bankruptcy, insolvency or other legal or equitable principles affecting the
enforcement of creditor's rights generally). The accounts receivable as of the
Closing will be collectible at the aggregate gross recorded amount thereof, less
the reserve set forth on the Balance Sheet, in the ordinary course of business.
The foregoing representation of collectibility will not apply to any account
receivable which becomes uncollectible due to (x) dealer elimination or
selection decisions by Buyer or (y) a customer being placed on credit hold,
within 90 days after the Closing Date, by Buyer as a result of past-due accounts
owed to Buyer. Since the date of the Balance Sheet, there has been no material
adverse change in the Corporation's or Subsidiaries' accounts receivable.
(f) Litigation, Etc. Except as described on Schedule 4(f) hereto,
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there is
no litigation, proceeding or governmental investigation pending or, to the best
knowledge of Corporation and Shareholders, threatened against or relating to the
Corporation or any Subsidiary, their respective properties or business, or the
transactions contemplated by this Agreement. The consummation of the
transactions contemplated by this Agreement will not require the consent,
approval, authorization or order of any court or governmental authority, except
for such consents, approvals, or authorizations as have heretofore been
obtained. There are no decrees, injunctions or orders of any court or
governmental department or agency regarding Corporation or any Subsidiary, their
respective properties or business.
(g) Compliance with Laws. Corporation and the Subsidiaries have
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complied in all respects with all federal, state, county, local and foreign
laws, statutes, ordinances, rules, regulations, and orders (collectively, the
"Laws") relating to the Corporation or the Subsidiaries or their respective
assets, except for violations which do not, alone or in the aggregate, have a
material adverse effect upon such assets or the business or financial condition
of the Corporation or any Subsidiary. The operation of Corporation's and each
Subsidiary's business at their current locations is in conformity in all
material respects with all applicable zoning ordinances and regulations. The
Corporation and the Subsidiaries have all material licenses, franchises,
permits, certificates, authorizations, consents, licenses and approvals required
by law or any governmental authority or agency for (i) the conduct of the
Corporation's and each Subsidiary's business as presently conducted, or (ii) the
execution, delivery or performance of this Agreement or any instrument
hereunder. Neither Corporation nor any Subsidiary is in default or
noncompliance in any material respect under any of such permits, certificates,
consents, approvals, authorizations, orders, licenses, franchises and/or other
similar authority, except for defaults which do not, alone or in the aggregate,
have a material adverse effect upon the assets or business of the Corporation
and the Subsidiaries, taken as a whole. The consummation of the transactions
herein contemplated including, but not limited to, the execution, delivery, and
consummation of the Acquisition Documents, do not, and will not, constitute a
violation of or default under, conflict with, or result in a breach of any
judgment, order, award, decree, of any court, administrative agency or
governmental body or Law.
(h) Assets; Absence of Liens and Encumbrances, Etc. Except as
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otherwise reflected on Schedule 4(h), the Corporation and the Subsidiaries have
good and marketable title (with respect to real estate, of record and insurable
at standard rates) to all their respective properties and assets, real,
personal, tangible and intangible, including the
assets included on the Balance Sheet (other than such items as may have been
disposed of in the ordinary course of business between the date of the Balance
Sheet and the Closing Date) or on the Closing Balance Sheet, free and clear of
all claims, liens, options, charges and encumbrances of any nature whatsoever,
except for such minor imperfections of title and encumbrances as do not
materially detract from the value, or interfere with the present use, of such
assets or otherwise impair business operations in any material respect. Such
assets are in good repair and operating condition, normal wear and tear
excepted, and include all assets necessary to conduct the business of the
Corporation and the Subsidiaries as it has been conducted. Except as otherwise
indicated on Schedule 4(h), there is no material right of setoff under any of
the contracts, agreements, leases or other documents set forth on Schedule
4(l)(iv), each is in full force and effect, and there is no material default or
event which but for notice or lapse of time or both would constitute a material
event of default under any such contract, agreement or lease.
(i) Liabilities. Other than liabilities specifically set forth on
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the Balance Sheet and trade payables incurred by the Corporation or a Subsidiary
in the ordinary course of business after the date of the Balance Sheet, the
Corporation and the Subsidiaries have no liabilities or obligations (whether
accrued, absolute, contingent or otherwise) of any nature whatsoever that are or
would be of a nature required to be reflected in a balance sheet or the notes
thereto prepared in accordance with generally accepted accounting principles.
(j) Absence of Certain Changes or Events. Since December 31, 1997,
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except as disclosed on Schedule 4(j) hereto, there has not been:
(i) Any change in the financial condition, assets,
liabilities, prospects, or business of Corporation or any Subsidiary, other than
changes which have not, individually or in the aggregate, been materially
adverse to the Corporation and its Subsidiaries, taken as a whole;
(ii) Any declaration, setting aside or payment of any dividend
or other distribution in respect of the Corporation's or any Subsidiary's
capital stock, or any redemption of Corporation's or any Subsidiary's capital
stock, or any change in the authorized, issued or outstanding capital stock of
Corporation or any Subsidiary, or agreement or commitment with respect to any
thereof;
(iii) Any increase, other than in the ordinary course of
business
consistent with past practice, in the compensation payable or to become payable
by Corporation or a Subsidiary to any of its directors, officers, employees or
agents whose total compensation for services rendered is currently at an annual
rate of more than $25,000, or any bonus, incentive compensation, service award
or other like benefit, granted, made or accrued, contingently or otherwise, to
or to the credit of any of the directors, officers, employees or agents thereof,
other than in the ordinary course of business consistent with past practice, or
any employee welfare, pension, retirement or similar payment or arrangement made
or agreed to by Corporation or a Subsidiary;
(iv) Any significant labor trouble, or any material
controversies or unsettled grievances pending or threatened, between Corporation
or a Subsidiary and any of their respective employees or a collective bargaining
organization representing or seeking to represent such employees;
(v) Any conducting of business by Corporation or a Subsidiary
other than in the ordinary course;
(vi) To the Corporation's and Shareholders' knowledge, any
loss of a customer or material change in relationship with any supplier, whose
purchases from or by the Corporation and the Subsidiaries, as applicable, during
the twelve months preceding the date of this Agreement exceeded $50,000.
(vii) The entry into, termination of, receipt of notice of
termination of, or amendment of or modification to (x) any license,
distributorship, dealer, supplier, sales representative, joint venture, credit
or similar agreement or (y) any contract or commitment involving a total
remaining commitment by or to the Corporation or a Subsidiary in excess of
$100,000;
(viii) Any borrowing or lending of money by Corporation or a
Subsidiary other than drawings on the Corporation's line(s) of credit in the
ordinary course of business;
(ix) Any individual capital expenditure, or incurring of
liability therefor, in excess of $10,000; or
(x) Any loans to or guaranty of the indebtedness of any
Shareholder, employee or family member of any thereof.
(k) Inventories. The inventories of the Corporation and the
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Subsidiaries as of the date hereof, and as of the Closing Date shall, consist of
items of a quality and quantity usable or saleable in the normal course of the
Corporation's business. The values for the inventories set forth on the Balance
Sheet were determined in accordance with generally accepted accounting
principles, and values of obsolete inventory and inventory of below-standard
quality, if any, have been properly reserved against and written off in the
Balance Sheet, in accordance with generally accepted accounting principles. The
inventories of the Corporation and the Subsidiaries as of the Closing will be at
customary levels and will be sufficient to support normal operations.
(l) Schedules. The following Schedules which are attached hereto
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contain accurate lists and summary descriptions of the following:
SCHEDULE 4(l)(i): (A) A complete list of all fixed assets,
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including real estate, owned or leased by the Corporation or any Subsidiary and
(B) a schedule identifying the Corporation's and each Subsidiary's vehicles,
machinery, equipment, tools, replacement parts, molds and furniture and
fixtures, including the location of all such items which are not located at the
Corporation's principal offices.
SCHEDULE 4(l)(ii): All written contracts with employees.
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SCHEDULE 4(l)(iii): All of the Corporation's registered
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intellectual or similar property, including but not limited to patents,
copyrights, trade names and trademarks, and applications therefor, and
registrations thereof.
SCHEDULE 4(l)(iv): All contracts, leases, agreements and other
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documents and commitments of the Corporation or any Subsidiary, including
agreements with suppliers, customers and distributors, providing for the payment
by or to the Corporation and the Subsidiaries during the twelve month periods
preceding and following the Closing of amounts in excess of $50,000.
SCHEDULE 4(l)(v): All policies of insurance in force with
----------------
respect to the Corporation or any Subsidiary or their respective assets.
SCHEDULE 4(l)(vi): All mortgages, promissory notes, bonds and
-----------------
other evidences of indebtedness upon which the Corporation or any Subsidiary is
obligated.
SCHEDULE 4(l)(vii): The customers and suppliers of the
------------------
Corporation or any Subsidiary with whom the volume of transactions with the
Corporation and the Subsidiaries in the year ended December 31, 1997 equaled or
exceeded, in the case of customers, $50,000, or in the case of suppliers,
$250,000.
SCHEDULE 4(l)(viii): All permits, licenses, orders,
-------------------
authorizations or other approvals necessary to operate the Corporation's
business as presently conducted.
SCHEDULE 4(l)(ix): All of Corporation's labor contracts and
-----------------
collective bargaining agreements and all employee profit-sharing, incentive,
deferred compensation, welfare, pension, retirement, group insurance and other
employee benefit plans, arrangements and practices (including all trust
agreements and the most recent determination letters of the United States
Internal Revenue Service relating to such plans), relating to the Corporation or
any Subsidiary or their respective employees ("Employee Benefit Plans").
SCHEDULE 4(l)(x): The names and current annual rates of
----------------
compensation of all the officers, employees and agents of the Corporation or any
Subsidiary, together with a summary (containing estimates to the extent
necessary) of (i) existing bonuses, additional compensation (whether current or
deferred) and other like benefits, if any paid to such persons in the two prior
fiscal years or subsequent thereto, and (ii) any other payments made by or on
behalf of the Corporation or any Subsidiary to any labor organization or
representative, employee, or agent of any labor organization in the two prior
fiscal years or subsequent thereto.
SCHEDULE 4(l)(xi): The name of each institution in which the
-----------------
Corporation or any Subsidiary has a bank account or safety deposit box, the
number of any such account or box and the names of all persons authorized to
draw thereon or to have access thereto.
SCHEDULE 4(l)(xii): All marketable securities, and all other
------------------
notes or other obligations evidenced by written instruments, owned by the
Corporation or any Subsidiary.
Accurate and complete copies of the leases, agreements,
contracts, commitments, plans and other documents referred to in the foregoing
Schedules have been delivered by Corporation to Buyer.
(m) Tax Matters. Corporation and the Subsidiaries each has duly and
-----------
timely filed with the appropriate governmental agencies (federal, state, foreign
and local) all tax and other returns required to be filed by it, all of which
have been accurately prepared. All federal, state, local and foreign taxes,
assessments, interest, and penalties, and all other sums owed to any other
governmental authority or agency, whether federal, foreign, state or local
(collectively, "Taxes"), due, owing and payable, or which may be due, owing and
payable, have been fully paid or duly provided for in the Financial Statements.
The accrual for taxes which is reflected in the Closing Balance Sheet shall be
sufficient for the payment of all accrued and unpaid Taxes for the period ending
on the Closing Date and for all periods prior thereto. Neither the
Corporation's or any Subsidiary's United States Federal or State Income Tax
Returns have been audited by the United States Internal Revenue Service ("IRS")
or any other state, local or foreign taxing authority. Except as set forth on
Schedule 4(m), (i) there are no agreements by the Corporation or any Subsidiary
for the extension of time for the assessment of any Tax, (ii) no claim for Taxes
due is being contested by Corporation or any Subsidiary, and (iii) neither
Corporation nor any Subsidiary has received notice from the IRS or any other
taxing authority of any deficiency or other adjustment which has not been
satisfied, and Corporation and Shareholders have no knowledge that such a notice
may be sent. The Corporation has delivered to the Buyer true and complete
copies of the Federal income tax and foreign and state income and franchise tax
returns relative to the operations of the Corporation and the Subsidiaries for
the fiscal years ended December 31, 1992 to 1997, inclusive, together with true
and complete copies of all reports of Federal and state tax authorities relating
to examinations of such returns, except for 1997 Federal and State income tax
returns, as to which extensions have been filed.
(n) Employee Benefit Plans and Agreements. (i) Except as set forth
-------------------------------------
on Schedule 4(n), neither corporation nor any Subsidiary has any employment
agreements, arrangements, contracts, or understandings (other than at will
arrangements which can be terminated without cost on not more than thirty days
notice), whether enforceable or unenforceable, or written or oral with any
employee, labor organization, representative of any labor organization relating
to their respective employees. Neither Corporation nor any Subsidiary has
violated any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, equal opportunity in employment, or
employee's health, safety, wages and hours.
(ii) There are no labor disputes existing, or to the best of
Corporation's and Shareholders' knowledge, threatened, involving strikes,
slowdowns,
work stoppages, job actions or lockouts of any employees of the Corporation or
any Subsidiary. There are no unfair labor practices or petitions for election
pending before the National Labor Relations Board or any other federal or state
labor commission relating to the employees of Corporation or any Subsidiary. No
demand for recognition heretofore made by any labor organization is pending with
respect to Corporation or any Subsidiary.
(o) Pension Plans. Neither Corporation nor any Subsidiary is or has
-------------
been a party to any multi-employer retirement plan. No Employee Benefit Plan is
in material violation of any of the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and no prohibited transaction within
the meaning of Title I or Title II of ERISA has occurred and is continuing with
respect to any such plan. With respect to each Employee Benefit Plan: (i) the
minimum funding standards have been met for each year in which Section 302 of
ERISA or Section 412 of the Internal Revenue Code of 1986, as amended (the
"Code"), were applicable, and no waiver of the minimum funding standards has
been requested for any such year, (ii) no events have occurred which are
required to be reported to the Pension Benefit Guaranty Corporation ("PBGC")
under Section 4043(b) of ERISA, (iii) all premiums required to be paid to the
PBGC have been paid, (iv) there is no unfunded liability, (v) such plans as are
intended to be qualified under Section 401(a) of the Code have received,
subsequent to January 1, 1989, favorable determination letters from the Internal
Revenue Service with respect to such qualified status and at all times have been
operated in a manner consistent therewith, and (vi) all report forms or other
information required to be filed with any government agency or to be delivered
to any plan participant or beneficiary have been filed, distributed or made
available.
(p) Patents, Licenses, and Trademarks. Except as set forth on
---------------------------------
Schedule 4(p):
(i) Corporation and the Subsidiaries each owns or has the
right to use all patents, trademarks, trade names, copyrights and rights
utilized in its business, including those set forth on Schedule 4(l)(iii),
------------------
without any obligation or liability for royalties, fees, or other compensation
to any owner, licensor, or other claim to any of the foregoing, and free and
clear of any right, lien, encumbrance, charge or claim of any other person or
entity, such that the manufacture, sale, marketing, lease or distribution by the
Corporation or any Subsidiaries of their respective products, and the use,
marketing, sale, lease or distribution by any third party (including Buyer and
its affiliates) of products
manufactured by Corporation or any Subsidiary, will not conflict with or
infringe upon any right or claimed right of any other person.
(ii) There are no pending claims against Corporation or any
Subsidiary which assert the invalidity, abuse, misuse or unenforceability of any
of its patents, trademarks, trade names, copyrights and rights with respect to
any of the foregoing, and neither Corporation nor any Subsidiary is infringing
any patent, trademark, trade name or other right, or application therefor, of
any other party.
(iii) All employees, and former employees, of the Corporation or
any Subsidiary who have been involved in the development of any of the
Corporation's proprietary rights have executed and delivered to Corporation a
patent and non-disclosure agreement in the form heretofore provided to Buyer.
(iv) All agreements and other instruments relating to the
exercise of rights by, or the grant of rights to, the Corporation or any
Subsidiary under patent or other proprietary rights of third parties (including
licenses, assignments and covenants not to xxx) remain in full force and effect,
the Corporation and the Subsidiaries have fully complied with all of their
obligations thereunder, and there is no default or event which but for notice or
lapse of time or both would constitute an event of default thereunder, nor is
there any assertion of such a default or event. The transactions contemplated by
this Agreement shall not constitute a breach or default of the provisions of any
such agreement or instrument or otherwise permit the termination or limitation
thereof.
(q) Environmental Matters. Except as set forth in Schedule 4(q)
---------------------
hereto: (i)Corporation and the Subsidiaries hold, and their respective
businesses have been conducted in compliance with, all environmental permits,
certificates, licenses, approvals, registrations and authorizations
(collectively, "Permits") required under all applicable environmental laws,
rules and regulations, and all of such Permits are in full force and effect.
Such Permits, if any, are listed on Schedule 4(l)(viii) hereto and will continue
-------------------
in full force and effect notwithstanding the transactions contemplated hereby.
The Corporation's and the Subsidiaries' businesses have been conducted in
material compliance with all, and the conduct thereof is not in material
violation of any, applicable environmental statutes, rules, regulations,
ordinances and orders of any federal, state, local or foreign governmental or
regulatory agency or authority (collectively, "Authorities"), including those
relating to Hazardous Substances (as defined below).
(ii) No notice, citation, summons or order has been issued,
no
complaint has been filed and no penalty has been assessed within the five years
preceding the date of this Agreement or, to the knowledge of the Corporation and
the Shareholders, at any time prior to such five year period, and no
investigation or review is pending or threatened by any Authority with respect
to (A) any alleged violation in the conduct of the Corporation's or any
Subsidiary's business or with respect to their respective assets of any
environmental statute, ordinance, rule, regulation or order of any Authority; or
(B) any alleged failure to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with the conduct
of the Corporation's or any Subsidiary's business; or (C) any generation,
treatment, storage, recycling, transportation or disposal of any Hazardous
Substance in connection with the conduct of the Corporation's or any
Subsidiary's business or with respect to the Assets. "Hazardous Substances"
shall mean and include any hazardous substances defined in the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
any hazardous materials defined in the Hazardous Materials Transportation Act,
any hazardous wastes defined in the Resources Conservation and Recovery Act
("RCRA"), any toxic substances defined in the Toxic Substances and Control Act
("TSCA"), any pollutant or contaminant as defined in the Clean Water Act and
hazardous substances, hazardous wastes, hazardous materials, toxic substances or
pollutants or contaminants defined in corresponding state and local laws,
ordinances and regulations, including petroleum products and radioactive
materials.
(iii) Neither Corporation nor any Subsidiary has received any
request for information, notice of claim, demand or other notification that it
is or may be potentially responsible with respect to any investigation or actual
release of any Hazardous Substances in connection with the conduct of its
business.
(iv) Neither Corporation nor any Subsidiary has used,
generated, treated, stored, recycled or disposed of any Hazardous Substances on
any property now or previously owned, operated or leased by Corporation's or any
Subsidiary's business nor, to the Corporation's and Shareholders' knowledge, has
any other person treated, stored, recycled or disposed of any Hazardous
Substances on any property now or previously owned, operated or leased by
Corporation or any Subsidiary in connection with the conduct of their respective
businesses, except in compliance with applicable environmental laws.
(v) To the Corporation's and Shareholders' knowledge, no
PCB's, asbestos or urea formaldehyde insulation is or has been present in any
property now or
previously owned, operated or leased by Corporation or any Subsidiary, nor are
there any underground storage tanks, active or abandoned, at any property now or
previously owned, operated or leased by Corporation or any Subsidiary in
connection with the conduct of the Corporation's or any Subsidiary's business.
(vi) No Hazardous Substance generated by the conduct of the
Corporation's or any Subsidiary's business has been recycled, treated, stored,
disposed of or transported, except in compliance with applicable environmental
laws.
(vii) Neither Corporation nor any Subsidiary has transported
any Hazardous Substances or arranged for the transportation of such substances
to any location which is listed or proposed for listing under CERCLA, RCRA, or
on any similar state list, or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against
Corporation or any Subsidiary for cleanup costs, remedial work, damages to
natural resources or for personal injury claims, including, but not limited to,
claims under CERCLA.
(viii) No Hazardous Substance has been released, spilled,
leaked, discharged, disposed of, pumped, poured, emitted, emptied, injected,
leached, dumped or allowed to escape ("Released") by Corporation or any
Subsidiary, nor to the knowledge of the Corporation and the Shareholders has
Corporation or any Subsidiary permitted any other person to so Release any
Hazardous Substance.
(ix) No oral or written notification of a Release of a
Hazardous Substance has been filed by or on behalf of Corporation or any
Subsidiary in connection with the conduct of the Corporation's or any
Subsidiary's business or in relation to any property now or previously owned,
operated or leased by Corporation or any Subsidiary, nor is any such property
listed or proposed for listing on the National Priority List promulgated
pursuant to CERCLA, on RCRA or on any similar state list of sites requiring an
investigation or cleanup.
(x) There are no environmental liens on any properties owned
or leased by Corporation or any Subsidiary and no government actions have been
taken or are in process or pending which would subject any such properties to
such liens. Except as set forth on Schedule 4(q) hereto, to the knowledge of
-------------
Corporation and the Shareholders, there have been no environmental inspections,
investigations, studies, audits, tests, reviews or other analyses conducted in
relation to any property or business now or previously owned, operated, or
leased by Corporation or any Subsidiary.
(xi) Corporation and Shareholders know of no facts or
circumstances related to environmental matters concerning the conduct of the
Corporation's or any Subsidiary's business or with respect to their respective
assets that could lead to any future environmental claims or liabilities under
any presently existing environmental statute, ordinance, rule, regulation or
order of any Authority which, individually or in the aggregate, could reasonably
be expected to have a material adverse effect upon the value of the
Corporation's or any Subsidiary's assets or business, or the possession, use,
occupancy or operation of any material portion of the Corporation's or any
Subsidiary's business or assets.
(r) Insurance. The Corporation and the Subsidiaries, and their
---------
respective properties, businesses and assets, are covered by such fire,
casualty, product liability and other insurance policies as are listed on
Schedule 4(l)(v) hereto.
(s) No Brokers. All negotiations relative to this Agreement and
----------
the transactions contemplated hereby have been carried on by the Corporation
directly with the Buyer without the intervention of any other person as a result
of the act of the Corporation or any Shareholder in such manner as to give rise
to any valid claim against any of the parties hereto for a brokers commission,
finder's fee or other like payment, except for Xxxxxxxxx & Xxxxx LLC, whose fees
will be borne by the Shareholders.
(t) Disclosure. No representation or warranty of the Corporation or
----------
any Shareholder made in this Agreement, any of the Acquisition Documents or any
instrument or certificate delivered hereunder or thereunder contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
5. Representations and Warranties by Buyer. Buyer hereby represents and
----------------------------------------
warrants to Corporation as of the date hereof and the time of the Closing as
follows:
(a) Organization. Buyer is a corporation duly organized, validly
-------------
existing and in good standing under the laws of the State of New York.
(b) Corporate Authority, Etc. All requisite corporate action has
-------------------------
been taken to authorize the execution, delivery and performance of this
Agreement by Buyer. This Agreement and the Secured Note (the "Buyer Acquisition
Documents") have been or at Closing will be duly executed and delivered by Buyer
and constitute or will
constitute the legal, valid and binding obligations of Buyer, enforceable in
accordance with their respective terms.
(c) Consents, Etc. The consummation of the transactions contemplated
-------------
by the Buyer Acquisition Documents will not (i) require the consent, approval,
authorization or order of any court or governmental authority, or (ii)
constitute a violation of or default under, conflict with, or result in a breach
of (A) any judgment, order, award, decree, of any court, administrative agency
or governmental body or laws to which Buyer is subject, or (B) any agreement or
instrument to which Buyer is a party or by which it is bound. There are no
decrees, injunctions or orders of any court or governmental department or agency
affecting Buyer's ability to consummate the transactions contemplated hereunder.
(d) No Brokers. All negotiations relative to this Agreement and
----------
the transactions contemplated hereby have been carried on by the Buyer directly
with the Corporation without the intervention of any other person as a result of
any act of the Buyer in such manner as to give rise to any valid claim against
any of the parties hereto for a brokers commission, finder's fee or other like
payment except Xxxxxx, Xxxxxx & Co., whose fees shall be borne by the Buyer.
(e) SEC Reports and Financial Statements. Buyer has made available
------------------------------------
to the Corporation a true and complete copy of each form, report, schedule,
registration statement, definitive proxy statement and other document (together
with all amendments thereof and supplements thereto) filed by Buyer with the SEC
since June 30, 1997 (as such documents have since the time of their filing been
amended or supplemented, the "Buyer SEC Reports"), which are all the documents
-----------------
(other than preliminary material) that Buyer was required to file with the SEC
since such date. As of their respective dates, the Buyer SEC Reports (i)
complied as to form in all material respects with the requirements of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), or the Securities Exchange Act of 1934, as amended, and
--------------
the rules and regulations thereunder (the "Exchange Act"), as the case may be,
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim consolidated financial statements (including, in each case,
the notes, if any, thereto) included in the Buyer SEC Reports (the "Buyer
-----
Financial Statements") complied as to form in all material respects with the
--------------------
published rules and regulations of the SEC as of the date thereof with respect
thereto, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted by
Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited
interim financial statements, to normal, recurring year-end audit adjustments
which are not expected to be, individually or in the aggregate, materially
adverse to the Buyer) the consolidated financial position of the Buyer and its
consolidated subsidiaries as at the respective date thereof and the consolidated
results of their operations and cash flows for the respective periods then
ended.
(f) Litigation, Etc.. The consummation of the transactions
----------------
contemplated by this Agreement will not require the consent, approval,
authorization or order of any court or governmental authority. There are no
material decrees, injunctions or orders of any court or governmental department
or agency regarding Buyer, its properties or business.
(g) Absence of Certain Changes. Since December 31, 1997, there
--------------------------
has not been any change in the financial condition, assets, liabilities,
prospects, or business of Buyer, other than changes which have not, individually
or in the aggregate, been materially adverse to the Buyer.
(h) Compliance with Laws. Buyer has complied in all respects
--------------------
with all federal, state, county, local and foreign laws, statutes, ordinances,
rules, regulations, and orders (collectively, the "Laws") relating to Buyer or
its assets, except for violations which do not, alone or in the aggregate, have
a material adverse effect upon such assets or the business or financial
condition of the Buyer. Buyer has all material licenses, franchises, permits,
certificates, authorizations, consents, licenses and approvals required by law
or any governmental authority or agency for (i) the conduct of its business as
presently conducted, or (ii) the execution, delivery or performance of this
Agreement or any instrument hereunder. Buyer is not in default or noncompliance
in any material respect under any of such permits, certificates, consents,
approvals, authorizations, orders, licenses, franchises and/or other similar
authority. The consummation of the transactions herein contemplated including,
but not limited to, the execution, delivery, and consummation of the Acquisition
Documents, do not, and will not, constitute a violation of or default under,
conflict with, or result in a breach of any judgment, order, award, decree, of
any court, administrative agency or governmental body or Law.
(i) Disclosure. No representation or warranty of Buyer made in
----------
this Agreement or any of the Acquisition Documents contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
6. Conditions Precedent to Shareholders' Obligations. The obligations of
--------------------------------------------------
Shareholders at the Closing shall be subject to the satisfaction of the
following conditions precedent at Closing (each of which may be waived in
writing by Corporation):
(a) Representations. All representations and warranties of Buyer
---------------
contained herein, taken as whole, shall be true and correct on the Closing Date
in all material respects as if made on such date; all agreements of Buyer
contained herein shall have been complied with in all material respects; and
Corporation shall have received a certification of Buyer, dated the Closing Date
and executed by Buyer's President or Vice President, to each such effect.
(b) Payment. The Paying Agent shall receive the wire transfer
-------
specified in paragraph 2(c)(i).
(c) Delivery to Shareholder Representatives. The Shareholder
---------------------------------------
Representatives shall receive a duly executed copy of the Letter of Credit.
(d) Options. The holders of the Out-the-Money Options shall
-------
simultaneously receive the payments specified in paragraph 1(b)(i).
(e) Employment Agreements. Buyer shall have entered into employment
---------------------
agreements (the "Employment Agreements") with Xxxxx X. Xxxxxxx, Xx., Xxxxxxx X.
Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxx Xxxxx, and Xxxxx X. Xxxxxxxx, substantially in
the forms of Annex III hereto; provided, that the condition set forth in this
subparagraph (e) shall be deemed waived in the event that any or all of such
individuals refuse to enter into such employment agreements.
(f) Governmental Consents. All necessary governmental consents
---------------------
and approvals to the transactions contemplated hereby shall have been obtained.
(g) Actions or Proceedings. No preliminary or permanent injunction
----------------------
or other order by any federal or state court of competent jurisdiction that
makes it illegal
or otherwise prevents the consummation of the transactions contemplated hereby
shall have been issued and shall remain in effect.
(h) Opinion of Counsel. Buyer shall have delivered to Corporation
-------------------
an opinion, dated the Closing Date, of its counsel, Xxxxxx & Xxxxxxx, in form
and substance reasonably satisfactory to the Corporation.
(i) Approval. All corporate action required to be taken by Buyer
--------
with respect to the execution, delivery and performance of the Buyer Acquisition
Documents shall have been taken and shall continue to be in full force and
effect.
(j) Third Party and Governmental Consents. All necessary third
-------------------------------------
party and governmental consents and approvals to the transactions contemplated
hereby shall have been obtained.
7. Conditions Precedent to Buyer's Obligations. The obligations of Buyer
--------------------------------------------
at the Closing shall be subject to the satisfaction of the following conditions
precedent at Closing (each of which may be waived in writing by Buyer):
(a) Representations. All representations and warranties of
----------------
Corporation and/or Shareholders contained herein, taken as a whole, shall be
true and correct on the Closing Date in all material respects as if made on such
date; all agreements of Corporation and/or Shareholders contained herein shall
have been complied with in all material respects; and Buyer shall receive a
certification, dated the Closing Date, executed by Corporation's President or
Vice President, made on behalf of the Corporation and of each Shareholder, to
each such effect.
(b) Approval. All action required by law to be taken by the
--------
Shareholders with respect to the execution, delivery and performance of the
Acquisition Documents shall have been taken and shall continue to be in full
force and effect.
(c) Stock Certificates. Each Shareholder shall have delivered to
------------------
the Buyer the certificate or certificates representing the Stock to be purchased
from such Shareholder hereunder, duly endorsed in blank for transfer or
accompanied by stock powers executed in blank, with signature guaranteed and
with all requisite documentary or stock transfer tax stamps affixed.
(d) Opinion of Counsel. There shall have been delivered to the
------------------
Buyer the opinion, dated the Closing Date, of Corporation's counsel, Xxxxxxx,
Xxxxxxx & Xxxxxxxx, LLP, in form and substance reasonably satisfactory to the
Buyer.
(e) Other Documents. The Buyer shall have received such other
---------------
documents, in form and substance satisfactory to the Buyer, as the Buyer may
reasonably request.
(f) Non-Competition Agreement. Each of Messrs. Xxxxx X. Xxxxxxx,
-------------------------
Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxxx Xxxxx and Xxxxxxx Xxxxxx, shall
have delivered to the Corporation a duly executed non-competition agreement
substantially in the form of Annex IV hereto (the "Non-Competition Agreements").
(g) Judgment, Tax Lien and Uniform Commercial Code Searches. The
--------------------------------------------------------
Corporation shall have delivered to the Buyer, each dated not earlier than April
__, 1998 (i) Federal and State judgment and tax lien searches and (ii) certified
copies of Requests for Information or Copies (Form UCC-11) or equivalent reports
from all appropriate jurisdictions listing all effective financing statements
which name either the Corporation or a Subsidiary (under its present or any
previous name or any trade names) as debtor, together with copies of such
financing statements. Such searches shall indicate the existence of no liens or
encumbrances.
(h) Resignations. All members of the Board of Directors and each
------------
officer of the Corporation and each Subsidiary shall have resigned.
(i) Due Diligence Investigations. The results of the due diligence
----------------------------
investigations referred to in paragraph 8(e) below shall have been satisfactory
to Buyer in its reasonable discretion.
(j) Third Party and Governmental Consents. All necessary third
-------------------------------------
party and governmental consents and approvals to the transactions contemplated
hereby shall have been obtained.
(k) Option Terminations. The Cancellation Agreements
-------------------
referred to in paragraph 1(b) above shall have been executed and delivered to
the Buyer., and shall be in the form attached hereto as Annex V.
(l) Employment Agreements. Messrs. Sweeney, Sweeney, Xxxxxxxx,
---------------------
Xxxxx, and Xxxxxxxx shall have entered into the Employment Agreements.
(m) Financing. The Buyer shall have obtained, on commercially
---------
reasonable terms satisfactory to the Buyer in its discretion, bank financing of
the Purchase Price in such amount as is determined appropriate by Buyer.
(n) Injunction; Litigation. No preliminary or permanent
----------------------
injunction or other order by any federal or state court of competent
jurisdiction that makes illegal or otherwise prevents the consummation of the
transactions contemplated hereby shall have been issued and remains in effect.
There shall not be pending or overtly threatened any litigation, suit, action or
proceeding by any person which could reasonably be expected to materially
adversely affect the Corporation and the Subsidiaries, taken as a whole, or
their respective assets or business.
8. Further Agreements. The parties further agree as follows:
-------------------
(a) Further Assurances. Corporation, Shareholders and Buyer each
-------------------
agree that it will, upon request of the other at any time after the Closing Date
and without further consideration, execute and deliver such other documents and
instruments and take such other action as may reasonably be requested to carry
out more effectively the purpose and intent of this Agreement.
(b) Conduct of Corporation's Business. Pending the Closing,
---------------------------------
Corporation shall not permit:
(i) any conduct of the Corporation's or any Subsidiary's
business other than in the ordinary course;
(ii) any increase in the compensation payable or to become
payable to any of the Corporation's or any Subsidiary's employees or agents or
any bonus, incentive compensation, service award or other like benefit, granted,
made or accrued, contingently or otherwise, to or to the credit of any thereof,
or any employee welfare, pension, retirement, profit-sharing or similar payment
or arrangement or union or collective bargaining agreement made or agreed to by
Corporation or any Subsidiary pertaining to the Corporation's or any
Subsidiary's employees;
(iii) any borrowing or lending of money by Corporation or any
Subsidiary other than trade payables in the ordinary course of business;
(iv) any declaration, payment or accrual of any dividend or
other distribution to any of the Corporation's or any Subsidiary's shareholders,
any redemption or issuance of any of their respective capital stock or
securities convertible into capital stock or commitment to grant the same, or
any retirement of any debt or obligation owed to the Corporation's or any
Subsidiary's shareholders (except the Corporation); provided, that the
Corporation may make distributions to its Shareholders which, together with all
other distributions made in 1998, do not exceed the net profit of the
Corporation for the period from January 1, 1998 to the Closing Date, so long as
such distributions do not cause a Deficiency Amount;
(v) any forgiveness of any liabilities or obligations owed to
the Corporation or any Subsidiary by any affiliated person;
(vi) any capital expenditure, or incurring of liability
therefor, by the Corporation or any Subsidiary in an amount for any individual
expenditure in excess of $10,000;
(vii) any failure on the part of the Corporation or any
Subsidiary to use its best efforts to preserve its business organization intact,
to keep available the services of its present officers and employees, and to
preserve Corporation's and each Subsidiary's assets (including intellectual
property) and the business and the goodwill of its suppliers, customers,
referring sources and others having business relations with it; or
(viii) any act or omission which would cause the Corporation to
be unable to restate as of the Closing the representations set forth in
paragraph 4(j) above.
(c) Post-Closing Employment. The Buyer agrees that it will continue
-----------------------
through October 31, 1998 the employment of the Corporation's employees who are
based at the Irvine, California facility. If any such employee is terminated,
without cause, prior to such date, the terminated employee shall receive, in
addition to any other severance payable to him, a continuation of salary through
October 31, 1998.
(d) Transition. Shareholders agree to take any reasonable action
-----------
requested by Buyer in order to promote the smooth transition of the
Corporation's business to Buyer.
(e) Investigations. (i) Buyer may prior to the Closing Date,
--------------
through its employees, agents and representatives, make or cause to be made such
investigations during normal and reasonable business hours as it deems necessary
or advisable of the properties, assets, businesses, books and records of the
Corporation and the Subsidiaries. In such regard, Corporation shall permit
Buyer and its employees, agents and representatives to have full access to the
premises of the Corporation and each Subsidiary and all books and records of the
Corporation and the Subsidiaries, and Corporation shall furnish to Buyer such
financial, operating and technical data and other information as Buyer shall
from time to time reasonably request. It is understood that such investigations
shall include environmental investigations of Corporation's business locations
and investigations with respect to the intellectual property rights of
Corporation and the Subsidiaries.
(ii) The parties acknowledge that the terms and provisions of
the Confidentiality Agreement dated ________, 1998, shall continue in full force
and effect pending the Closing and, in the event that the Closing does not
occur, indefinitely in accordance with its terms.
(f) Section 338(h)(10) Election. The parties agree to make a
---------------------------
joint election pursuant to Section 338(h)(10) of the Internal Revenue Code of
1986, as amended, and to sign and file with the IRS such forms and reports as
may be necessary or appropriate with respect thereto. Incremental corporate
level income taxes resulting from this election will be accrued on the Closing
Balance Sheet in accordance with generally accepted accounting principles.
(g) Reduction of Letter Credit. The Shareholder Representatives
--------------------------
shall promptly notify the bank issuing the Letter of Credit of any reduction of
the unpaid principal of the Secured Note, whether due to (x) any adjustment
finally determined pursuant to paragraph 2(d) above or (y) the payment thereof
by Buyer or (2) a reduction in principal pursuant to paragraph 13(a) below. Such
notice shall further direct the bank to reduce the amount available to be drawn
under the Letter of Credit to the then unpaid principal balance.
9. Indemnification by Shareholders. (a) Subject to the provisions of
-------------------------------
subparagraph (b) below, Shareholders agree to indemnify, defend and hold
harmless Buyer from and against any loss, costs, damages, or expense (including
reasonable attorneys' fees) (collectively referred to herein as "Damages"), net
of any proceeds of
insurance received by the Corporation or the Buyer pertaining to the item of
Damages, arising from or relating to:
(i) Any and all damage or deficiency resulting from any
misrepresentation, omission, breach of warranty or non-fulfillment of any
covenant or agreement on the part of Corporation or Shareholders under this
Agreement or any document delivered hereunder; or
(ii) Any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expense, including reasonable attorneys' fees,
incident to any of the foregoing.
(b) (i) Notwithstanding the provisions of subparagraph (a) of this
paragraph 9, and except as provided in clause (ii) below, the Buyer's sole
remedy for any claim for indemnity pursuant to said subparagraph (a) shall be to
offset such claims against amounts due from time to time on the Secured Note or
payments of the Contingent Earnout, or both, as more fully provided in paragraph
13 below. All such offsets shall be applied ratably among the Shareholders.
(ii) Notwithstanding the provisions of clause (i) of this
subparagraph (b), each Shareholder shall be fully liable and responsible,
without limitation, to the Buyer for any misrepresentation by such Shareholder
contained in paragraph 4(b)(ii) of this Agreement, or due to the actual fraud of
such Shareholder.
10. Indemnification by Buyer. Buyer agrees to indemnify, defend and hold
------------------------
harmless Shareholders from and against any Damages arising from or relating to
(i) any misrepresentation, omission, breach of warranty or agreement made by
Buyer herein or any document delivered hereunder, (ii) the operation of the
Corporation's business from and after the Closing, or (iii) any and all actions,
suits, proceedings, demands, assessments, judgments, costs and expense,
including reasonable attorneys' fees, incident to any of the foregoing.
11. Limitations on Indemnity Obligations. Notwithstanding the provisions
------------------------------------
of paragraphs 9 and 10 above:
(a) Neither party shall have the right to receive indemnification
from the other hereunder unless the aggregate amount of indemnification with
respect to all claims
of such party exceeds the sum of $100,000, in which event the indemnifying party
or parties shall be responsible for the full amount of indemnification in excess
of the $100,000 aggregate threshold; provided that the foregoing limitation
shall not be applicable to any claim of breach of any representation contained
in paragraph 4(p)(i), (ii), or (iv) of this Agreement.
(b) Neither party shall have the right to receive indemnification
from the other hereunder with respect to any single or series of events, facts
or conditions involving a breach or inaccuracy of a representation or warranty
if the Damages from such claim, or series of related claims, are equal to or
less than $10,000 (an "Immaterial Claim"), provided that the sum of all
Immaterial Claims does not exceed $50,000.
12. Claims for Indemnification. (a) Whenever any claim shall arise for
--------------------------
indemnification under paragraph 9 or 10 hereof, the indemnified party shall
notify the indemnifying party in writing of the claim and, when known, the facts
constituting the basis for such claim (an "Indemnification Claim Notice"). In
-----------------------------
the event of any such claim for indemnification hereunder resulting from or in
connection with any claim of or legal proceedings by a third party (any such
claim or legal proceeding being referred to herein as a "Proceeding"), the
Indemnification Claim Notice shall specify, if known, the amount or an estimate
of an amount of the liability arising therefrom. In the event the indemnifying
party intends to contest its obligation to indemnify the indemnified party
against any such claim, the indemnifying party shall deliver to the indemnified
party, within thirty (30) days of the date of the Indemnification Claim Notice,
a written notice (the "Contest Notice") stating that the indemnifying party
--------------
intends to contest the claims set forth in the Indemnification Claim Notice.
Any such contest shall be resolved in the manner specified in paragraph 17
below.
(b) In connection with any claim which may give rise to indemnity
hereunder resulting from or arising out of any Proceeding, the indemnifying
party may, upon written notice to the indemnified party, assume the defense of
such Proceeding, without prejudice to the right of the indemnifying party to
contest its obligation to indemnify the indemnified party against such claim and
subject to their reservation of such right in connection therewith. If the
indemnifying party assumes the defense of such Proceeding, the indemnifying
party shall select counsel reasonably acceptable to the indemnified party to
conduct the defense of such Proceeding and shall take all steps necessary in the
defense or settlement thereof. If the Shareholders are the indemnifying party,
all reasonable defense costs incurred by the indemnifying party will be paid by
the
Buyer subject to immediate and permanent offset pursuant to paragraph 13 hereto.
The indemnified party shall be entitled to participate in (but not control) the
defense of any such Proceeding, with its own counsel and at its own expense.
(c) If the indemnifying party does not assume the defense of any
such Proceeding within thirty (30) days after the date of the Indemnification
Claim Notice:
(i) The indemnified party may defend such Proceeding in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the indemnifying party,
on such terms as the indemnified party may reasonably deem appropriate and all
costs of litigation incurred by the indemnified party shall be included in the
calculation of the Damages; and
(ii) The indemnifying party shall be entitled to participate in
(but not control) the defense of such Proceeding, with their counsel and at
their own expense.
(d) In the event that the indemnifying party elects to assume the
defense of a Proceeding pursuant to this paragraph 12, the indemnifying party
shall not make any settlement of the Proceeding which would give rise to
liability on the part of the indemnified party or would restrict or limit the
business or activities of the indemnified party or its affiliates, without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld, conditioned or delayed (it being acknowledged that
Buyer's refusal to consent to any settlement which includes more than immaterial
limits or restrictions on the acts or business of Buyer or its affiliates shall
be deemed reasonable).
(e) If the Shareholders are the indemnifying party, all actions and
decisions by the indemnifying party shall be made by the Shareholder
Representatives.
13. Right of Offset and Deferral. (a) The right of any Shareholder or
-----------------------------
the Shareholder Representatives or Paying Agent, on behalf of the Shareholders,
to receive payments of the Contingent Earnout or on the Secured Note is subject
to any and all defenses of Buyer based upon, or arising out of, breach of any
representation, warranty, covenant or indemnity obligation for which any
Shareholder shall be liable to Buyer, and Buyer may, by written notice to
Shareholder Representatives, elect to offset against the payment (or, to the
extent necessary, payments) next due hereunder or thereunder amounts for which
any Shareholder is so liable. The amount of such set-off shall in no
event bear interest, unless such set-off is finally determined, pursuant to
paragraph 17 below, to be improper, in which case the portion of the set-off
which is so determined to be improper shall bear interest from the date the
payment was originally due until paid, at the rate specified in the Secured
Note. The Shareholder Representatives shall have the right to object to any set-
off by the Buyer hereunder, and any such objection shall be resolved in the
manner specified in paragraph 17 below. Acceptance by any Shareholder, the
Paying Agent or the Shareholder Representatives of any payments so reduced by
set-off shall not be deemed an accord, compromise or waiver of rights, and
failure by Buyer to utilize the set-off mechanism shall not be deemed a
relinquishment, forgiveness, waiver, bar or defense in respect of any claim or
right (including the continuing right to set-off) of Buyer. The Buyer agrees to
utilize this right of offset solely in good faith. If the assertion of the right
of offset pertains to an estimate of the likely loss to be suffered by the Buyer
with respect to a particular matter, such estimate shall be made by the Buyer
reasonably and in good faith.
(b) Buyer shall have the right to defer any principal installment or
interest payment otherwise due and payable under the Secured Note or any payment
of the Contingent Earnout in the event that, prior to the regularly scheduled
due date for such principal installment or payment, any litigation or proceeding
is commenced or threatened in writing against or relating to the Corporation,
the Buyer or any affiliate of the Buyer, on grounds which, if proven correct,
would constitute a breach of any representation set forth in paragraph
4(b)(i),(ii) or (iv) of this Agreement, or in the event that the Buyer or the
Corporation has commenced a declaratory judgment action in response to such
threat. Such deferral shall continue indefinitely until such matter has been
finally settled in full or has been finally adjudicated in full by a court of
competent jurisdiction or, in the case of threatened litigation, in the event
litigation has not been commenced within one year following the date of the most
recent threat.
(c) The Buyer will not be deemed in default or violation of this
Agreement or the Secured Note due to the exercise by the Buyer of its rights of
offset against, or right of deferral of, payments due hereunder or on the
Secured Note, unless such offset or deferral is finally determined, pursuant to
paragraph 17 below, to be improper and the offset or deferred payment or
payments, and any interest thereon, are not fully made within thirty days
following such final determination.
14. Termination. (a) This Agreement may be terminated at any time prior
-----------
to the consummation of the Closing hereunder, in accordance with the following
provisions:
(i) By mutual agreement of the Buyer and the Corporation; or
(ii) By the Corporation if any of the conditions set forth in
paragraph 6 shall not have been met or waived in writing by the Corporation by
the Closing Date; or
(iii) By the Buyer if any of the conditions provided for in
paragraph 7 of this Agreement shall not have been met or waived in writing by
the Buyer by the Closing Date; or
(iv) By either Buyer or Corporation in the event that the
Closing shall not have occurred on or prior to June 30, 1998.
(b) Nothing in this paragraph 14 shall be deemed to excuse either
party for a breach of any of its obligations or agreements undertaken or made in
this Agreement.
15. Miscellaneous. (a) Expenses. Buyer, Corporation and Shareholders
------------- --------
each agrees to pay its own costs and expenses in connection with the
transactions contemplated by this Agreement, provided that Corporation's
brokerage, legal and accounting expenses will be borne by Shareholders.
(b) Survival. Notwithstanding any presumption to the contrary, all
--------
representations, covenants, warranties and agreements contained in this
Agreement shall survive the Closing indefinitely.
(c) Law; Benefit. The provisions of this Agreement shall be
------------
construed in accordance with the laws of the State of California. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns.
(d) Notices. Any notice, request, demand, consent, approval, or
-------
other communication required or permitted under this Agreement will be written
and will be deemed to have been given (i) when personally delivered or sent by
telecopy, or (ii) on the next day after delivery to a nationally-recognized
express delivery service with instructions for overnight delivery; or (iii) on
the third day after it is deposited in any depository regularly maintained by
the United States postal service, postage prepaid,
certified or registered mail, return receipt requested, addressed to the
following address or to such other address as the party to be notified shall
have specified to the other party in accordance with this paragraph:
If to Buyer:
Cybex International, Inc.
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: President
Facsimile No.: (000) 000-0000
With a required copy to:
Cybex International, Inc.
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Chief Financial Officer
Facsimile No.: (000) 000-0000
And to:
Xxxxxx & Xxxxxxx,
A Professional Corporation
Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esquire
Facsimile No: (000) 000-0000
If to Corporation:
Tectrix Fitness Equipment, Inc.
00 Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
With a required copy to:
Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxxx, Phleger & Xxxxxxxx LLP
00 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
If to Shareholders, to their respective addresses on
Exhibit A.
If to Shareholder Representatives:
(e) Entire Agreement; Etc. This Agreement sets forth the entire
----------------------
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings of the parties with respect
thereto. This Agreement may be amended or supplemented solely by a writing
executed by the parties hereto.
(f) Public Announcement. Any public announcement made by either
-------------------
party prior to Closing pertaining to the transactions contemplated under this
Agreement shall be subject to the prior approval of the other party, except as
required by applicable laws or stock exchange requirements.
(g) Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.
(h) Headings. The headings preceding the text of this Agreement are
--------
inserted solely for convenience of reference and shall not constitute a part of
this Agreement nor affect its meaning, construction or effect.
(i) Choice of Forum; Service of Process. The Buyer irrevocably
-----------------------------------
consents and submits to the non-exclusive jurisdiction of the courts of the
State of California and the United States District Court sitting therein and
waives any objection based upon venue or forum non conveniens with respect to
--------------------
any action instituted therein, relating to the enforcement of the obligation of
the Buyer to satisfy the Purchase Price hereunder, including without limitation
enforcement of the Secured Note, or the Contingent Earnout. The Shareholders
irrevocably consent and submit to the non-exclusive jurisdiction of the
courts of the State of New Jersey and the United States District Court sitting
therein and waive any objection based on venue or forum non conveniens with
--------------------
respect to any action instituted therein pertaining to any other matter arising
under this Agreement or any of the other Acquisition Documents. The Shareholders
hereby waive personal service of any and all process upon it or them and consent
that all such service of process may be made by certified mail (return receipt
requested) directed to their respective addresses for notices hereunder and
service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails or, at Buyer's option, by service
upon the person in any other manner provided under the rules of any such courts.
(j) Shareholder Representatives. Xxxxx X. Xxxxxxx, Xx., Xxxxxxx X.
---------------------------
Xxxxxxx and Xxxxx Xxxxx, or the survivor thereof, are hereby appointed the
Shareholder Representatives to act on behalf of the Shareholders in accordance
with the terms hereof. Each Shareholder hereby irrevocably appoints the
Shareholder Representatives as his agent and attorney in fact to take any and
all action in the name of and for and on behalf of such Shareholder pursuant to
this Agreement or any document delivered hereunder or otherwise relating
thereto, the Shareholder Representatives specifically having the right to bind
the Shareholders. All authority conferred hereby shall be irrevocable and not
be terminated by operation of law, whether by death or incapacity of a
Shareholder or the occurrence of any other event. Buyer may conclusively rely,
without independent investigation, upon any instruction, direction, agreement,
certificate or other document which it receives, signed by any Shareholder
Representative.
(k) Non-Waiver of Rights. It is understood and agreed that no
--------------------
failure or delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any right,
power or privilege hereunder.
(l) Knowledge. The terms "knowledge", "known" or similar terms as
---------
used herein refers to the knowledge of each Shareholder and each officer of the
Corporation.
16. Shareholders' Agreement. The Corporation and the Shareholders hereby
-----------------------
(a) consent to the sale and transfer of the Stock pursuant to this Agreement,
notwithstanding any contrary provision set forth in the Shareholders' Agreement
dated as of February 29, 1996 by and among the Corporation and its stockholders
and (b) agree that such Shareholders' Agreement shall terminate and be of no
further force and effect
from and after the Closing.
17. Arbitration.
-----------
(a) Arbitration Required. Any controversy, claim or dispute between
--------------------
the parties to this Agreement arising out of, in connection with, or in relation
to the interpretation, validity, performance or breach of this Agreement shall,
at the request of either party, be resolved to the exclusion of a court of law
by binding arbitration, in accordance with the Arbitration Procedures set forth
herein. Arbitration may be commenced at any time by any party seeking
arbitration by written notice to the other party(ies) by first class mail,
postage prepaid, which notice shall contain a description of the dispute, the
amount involved, and the remedy sought. The arbitrator shall be selected by the
joint agreement of the parties, but if they do not so agree within fifteen (15)
business days after the date of the notice referred to above, the selection
shall be made pursuant to the rules from the panels of arbitrators maintained by
J.A.M.S./Endispute, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx. The arbitration shall
be held within 90 days after the mailing of the initiating notice, and the
arbitrator shall render his decision within ninety (90) days of appointment.
(b) Pre-Hearing Conference Discovery. The arbitrator shall schedule
--------------------------------
a pre-hearing conference to reach agreement on procedural matters, arrange for
the exchange of information, obtain stipulations, and attempt to narrow the
issues. The parties will submit a proposed discovery schedule to the arbitrator
at the pre-hearing conference. The scope and duration of discovery will be
within the sole discretion of the arbitrator.
(c) Hearing. The parties must file briefs with the arbitrator at
-------
least three (3) days before the hearing, specifying the facts each intends to
prove and analyzing the applicable law. The parties have the right to
representation by legal counsel throughout the arbitration proceedings.
Judicial rules of evidence and procedure relating to the conduct at the hearing,
examination of witnesses, and presentation of evidence shall not apply. Any
relevant evidence, including hearsay, shall be admitted by the arbitrator if it
is the sort of evidence on which responsible persons are accustomed to rely on
in the conduct of serious affairs, regardless of the admissibility of such
evidence in a court of law.
(d) Witnesses. Within reasonable limitations, both sides at the
---------
hearing may call and examine witnesses for relevant testimony, introduce
relevant exhibits or
other documents, cross-examine or impeach witnesses who shall have testified
orally on any matter relevant to the issues, and otherwise rebut evidence, as
long as these rights are exercised in an efficient and expeditious manner. Any
party may request the oral evidence to be given under oath.
(e) Stenographic Record. Any party desiring a stenographic record
-------------------
may secure a court reporter to attend the proceedings. The requesting party
must notify the other parties of the arrangements in advance of the hearings and
must pay for the cost incurred.
(f) Award. The arbitrator shall decide the matters submitted based
-----
upon the evidence presented, the terms of this Agreement, and applicable laws.
The arbitrator shall issue a written award which shall state the bases of the
award and include detailed findings of fact and conclusions, and shall mail the
award to each of the parties within thirty (3) days after the close of the
hearing. Any court of competent jurisdiction may enter judgment upon any award,
either by confirming the award or by vacating, modifying or correcting the
award. The court shall vacate, modify or correct any award: (i) based upon the
grounds referred to in the Federal Arbitration Act, (ii) where the arbitrator's
findings of fact are not supported by substantial evidence, or (iii) where the
arbitrator's conclusions of law are erroneous.
(g) Fees and Expenses. The arbitrator has the authority to award
-----------------
attorney fees, witness fees, and other costs and expenses of the arbitration to
the prevailing party.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
CYBEX INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
TECTRIX FITNESS EQUIPMENT, INC.
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------------------
The undersigned have executed this Agreement to
indicate their acceptance of the rights and
obligations of the Shareholder Representatives
hereunder.
SHAREHOLDER REPRESENTATIVES
/s/ Xxxxx X. Xxxxxxx Xx.
-----------------------------------------------
Xxxxx X. Xxxxxxx, Xx.
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxx.
/s/ Xxxxx X. Xxxxx
-----------------------------------------------
Xxxxx Xxxxx
THE "SHAREHOLDERS"
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxxx Family Trust
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxx Trust
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxx Xxxxxxx
-----------------------------------------------
Xxxx Xxxxxxx
/s/ X. Xxxxxxxx Xxxxxx
-----------------------------------------------
Xxxxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxx
-----------------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
-----------------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxx
/s/ J. Xxxxx Xxxxx
-----------------------------------------------
J. Xxxxx Xxxxx
/s/ Xxxxx Xxxxxx
-----------------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxx X. Xxxxx
-----------------------------------------------
Xxxxx X. Xxxxx
/s/ Emile and Xxxxx Xxxxxxxxx
-----------------------------------------------
Emile and Xxxxx Xxxxxxxxx
/s/ Xxxxxx, Xxxxxxx & Xxxx Xxx Xxxxxxx
-----------------------------------------------
Xxxxxx, Xxxxxxx & Xxxx Xxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
-----------------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxx Xxxxxx
-----------------------------------------------
Xxxx Xxxxxx
/s/ Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxx & Xxxxx X. Xxxxxxx
/s/ Laurel and Xxxx Xxxxxx
-----------------------------------------------
Laurel & Xxxx Xxxxxx
/s/ Xxxxx Xxxxxxx
-----------------------------------------------
Xxxxx Xxxxxxx
