STOCK PURCHASE AGREEMENT
BETWEEN
FENWAY HOLDINGS, L.L.C.
AND
ATRION CORPORATION
Dated as of May 21, 1996
TABLE OF CONTENTS
1. DEFINITIONS . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE OF TARGET SHARES. . . . 5
(a) Basic Transaction . . . . . . . . . 5
(b) Purchase Price. . . . . . . . . . . 5
(c) The Closing . . . . . . . . . . . . 5
(d) Deliveries at the Closing . . . . . 5
(e) Additional Payments . . . . . . . . 5
(f) Preparation of Closing Date Balance
Sheet. . . . . . . . . . . . . . . . . . 6
(g) Adjustment to Preliminary Purchase
Price. . . . . . . . . . . . . . . . . . 8
3. REPRESENTATIONS AND WARRANTIES CONCERNING
THE TRANSACTION . . . . . . . . . . . . . . . 8
(a) Representations and Warranties of the
Seller . . . . . . . . . . . . . . . . . 8
(b) Representations and Warranties of the
Buyer. . . . . . . . . . . . . . . . . . 9
4. REPRESENTATIONS AND WARRANTIES CONCERNING
THE TARGET AND HALKEY . . . . . . . . . . . .10
(a) Organization, Qualification and
Corporate Power. . . . . . . . . . . . .11
(b) Capitalization. . . . . . . . . . .11
(c) Noncontravention. . . . . . . . . .11
(d) Brokers' Fees . . . . . . . . . . .12
(e) Title to Assets . . . . . . . . . .12
(f) Subsidiaries. . . . . . . . . . . .12
(g) Financial Statements. . . . . . . .12
(h) Events Subsequent to Most Recent
Fiscal Month End . . . . . . . . . . . .13
(i) Undisclosed Liabilities . . . . . .15
(j) Legal Compliance. . . . . . . . . .15
(k) Tax Matters . . . . . . . . . . . .15
(l) Real Property . . . . . . . . . . .16
(m) Intellectual Property . . . . . . .17
(n) Contracts . . . . . . . . . . . . .19
(o) Powers of Attorney. . . . . . . . .20
(p) Litigation. . . . . . . . . . . . .20
(q) Employees . . . . . . . . . . . . .21
(r) Employee Benefits . . . . . . . . .21
(s) Guaranties. . . . . . . . . . . . .22
(t) Environment . . . . . . . . . . . .22
(u) Certain Business Relationships with
the Target and Its Subsidiaries. . . . .22
(v) Insurance.. . . . . . . . . . . . .22
(w) Condition and Sufficiency of Assets23
(x) Accounts Receivable . . . . . . . .23
(y) Inventory . . . . . . . . . . . . .23
5. PRE-CLOSING COVENANTS . . . . . . . . . .23
(a) General . . . . . . . . . . . . . .23
(b) Notices and Consents. . . . . . . .24
(c) Operation of Business . . . . . . .24
(d) Access. . . . . . . . . . . . . . .25
(e) Notice of Developments. . . . . . .26
(f) Exclusivity . . . . . . . . . . . .26
6. POST-CLOSING COVENANTS. . . . . . . . . .26
(a) General . . . . . . . . . . . . . .26
(b) Litigation Support. . . . . . . . .27
(c) Covenant Not to Compete . . . . . .27
(d) Confidentiality . . . . . . . . . .27
(e) Non-Solicitation. . . . . . . . . .28
(f) 1994 Financial Statements . . . . .28
(g) Tax Matters . . . . . . . . . . . .28
7. CONDITIONS TO OBLIGATION TO CLOSE . . . .30
(a) Conditions to Obligation of the Buyer30
(b) Conditions to Obligation of the
Seller . . . . . . . . . . . . . . . . .31
8. REMEDIES FOR BREACHES OF THIS AGREEMENT .32
(a) Survival of Representations,
Warranties and Indemnifications. . . . .32
(b) Indemnification Provisions for
Benefit of the Buyer . . . . . . . . . .32
(c) Indemnification Provisions for
Benefit of the Seller. . . . . . . . . .34
(d) Matters Involving Third Parties . .34
(e) Determination of Adverse Consequences35
(f) Other Indemnification Provisions. .35
9. TERMINATION . . . . . . . . . . . . . . .36
(a) Termination of Agreement. . . . . .36
(b) Effect of Termination . . . . . . .36
10. MISCELLANEOUS. . . . . . . . . . . . . .37
(a) Press Releases and Public
Announcements. . . . . . . . . . . . . .37
(b) No Third Party Beneficiaries. . . .37
(c) Entire Agreement. . . . . . . . . .37
(d) Succession and Assignment . . . . .37
(e) Counterparts. . . . . . . . . . . .37
(f) Headings. . . . . . . . . . . . . .37
(g) Notices . . . . . . . . . . . . . .37
(h) Jurisdiction and Governing Law. . .39
(i) Amendments and Waivers. . . . . . .39
(j) Severability. . . . . . . . . . . .40
(k) Expenses. . . . . . . . . . . . . .40
(l) Construction. . . . . . . . . . . .40
(m) Incorporation of Exhibits, Annexes
and Schedules. . . . . . . . . . . . . .40
Exhibit A -- Historical Financial
Statements of Buyer
Exhibit B -- Historical Financial
Statements of Target and
Halkey
Exhibit B-1 -- Pro Forma Most Recent
Balance Sheet
Exhibit C -- Form of Lease for St.
Petersburg, Florida Facility
Exhibit D -- Form of Opinion of Counsel
to the Seller
Exhibit E -- Form of Opinion of Counsel
to the Buyer
Exhibit F -- Asset Allocation for
Seller's 338(h)(10) Election
Exhibit G -- Form of Guaranty of Lease
Schedule I -- Schedule of Current Specified
Products
Annex I -- Exceptions to the Seller'
Representations and
Warranties Concerning the
Transaction
Annex II -- Exceptions to the Buyer's
Representations and
Warranties Concerning the
Transaction
Disclosure Schedule -- Exceptions to
Representations and
Warranties Concerning the
Target and Halkey
STOCK PURCHASE AGREEMENT
Agreement entered into as of May 21, 1996 by
and between Fenway Holdings, L.L.C., a Delaware
limited liability company (the "Seller"), and ATRION
Corporation, an Alabama corporation (the "Buyer").
The Seller and the Buyer are referred to
collectively herein as the "Parties."
The Seller owns all of the outstanding capital
stock of HRC Acquisition Holding Corp., a Delaware
corporation (the "Target"). The Target owns all of
the outstanding capital stock of Halkey-Roberts
Corporation, a Florida corporation ("Halkey").
This Agreement contemplates a transaction in
which the Buyer will purchase from the Seller, and
the Seller will sell to the Buyer, all of the
outstanding capital stock of the Target in return
for the consideration set forth herein.
Now, therefore, in consideration of the
premises and the mutual promises herein made, and in
consideration of the representations, warranties,
and covenants herein contained, the Parties agree as
follows.
1. DEFINITIONS.
"Actual Value" has the meaning set forth in
2(e) below.
"Adverse Consequences" means all actions,
suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, liabilities, obligations,
taxes, liens, losses, expenses and fees, including
court costs and reasonable attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule
12b-2 of the regulations promulgated under the
Securities Exchange Act.
"Affiliated Group" means any affiliated group
within the meaning of Code 1504 or any similar
group defined under a similar provision of state,
local or foreign law.
"Applicable Rate" means the corporate base rate
of interest announced from time to time by
NationsBank, N.A. (Carolinas).
"Buyer" has the meaning set forth in the
preface above.
"Closing" has the meaning set forth in 2(c)
below.
"Closing Date" has the meaning set forth in
2(c) below.
"Closing Date Balance Sheet" has the meaning
set forth in 2(e) below.
"Code" means the Internal Revenue Code of 1986,
as amended.
"Confidential Information" means any
information concerning the business and affairs of
the Target and Halkey that is not generally
available to the public.
"Confidentiality Agreement" has the meaning set
forth in 5(d) below.
"Consolidated Net Book Value" means the excess
of assets over liabilities as shown on the face of
the Closing Date Balance Sheet.
"Disclosure Schedule" has the meaning set forth
in 4 below.
"Draft Closing Date Balance Sheet" has the
meaning set forth in 2(e) below.
"Employee Benefit Plan" means any (i)
nonqualified deferred compensation or retirement
plan or arrangement which is an Employee Pension
Benefit Plan, (ii) retirement plan or arrangement
which is an Employee Pension Benefit Plan and which
is intended to comply with Code 401(a) or (iii)
Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning
set forth in ERISA 3(2).
"Employee Welfare Benefit Plan" has the meaning
set forth in ERISA 3(1).
"Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980 and the Resource Conservation and
Recovery Act of 1976, each as amended, together with
all other laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees,
rulings and charges thereunder) of federal, state,
local and foreign governments (and all agencies
thereof) concerning pollution or protection of the
environment or public health and safety, including
laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or
chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground
water or lands or otherwise relating to the
manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling
of pollutants, contaminants or chemical, industrial,
hazardous or toxic materials or wastes.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Estimated Consolidated Net Book Value" means
$10,093,000.
"Excluded Taxes" mean any Taxes attributable to
any action not in the ordinary course of business
(including any election made or deemed made under
Section 338 of the Code with respect to the Target
or Halkey) taken or caused to be taken by the Buyer,
any of its Affiliates (including, after the Closing,
the Target and Halkey) or any transferee of the
Buyer or any of its Affiliates.
"Fee Period" has the meaning set forth in 2(e)
below.
"Financial Statements" has the meaning set
forth in 4(g) below.
"GAAP" means United States generally accepted
accounting principles as in effect from time to
time.
"High Value" has the meaning set forth in
2(e) below.
"Indemnified Party" has the meaning set forth
in 8(d) below.
"Indemnifying Party" has the meaning set forth
in 8(d) below.
"Intellectual Property" means (a) all patents
and patent applications, (b) all trademarks, service
marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations,
derivations and combinations thereof and all
applications, registrations and renewals in
connection therewith, (c) all copyrights and all
applications, registrations and renewals in
connection therewith, and (d) all computer software
(including data and related documentation).
"Knowledge" means actual knowledge after
reasonable investigation by an executive officer of
the entity or its manager to whom such "knowledge"
is ascribed.
"Low Value" has the meaning set forth in 2(e)
below.
"Most Recent Balance Sheet" means the balance
sheet contained within the Most Recent Financial
Statements.
"Most Recent Financial Statements" has the
meaning set forth in 4(g) below.
"Most Recent Fiscal Month End" has the meaning
set forth in 4(g) below.
"Multiemployer Plan" has the meaning set forth
in ERISA 3(37).
"Net Specified Product Sales" means, for any
applicable period, the amount of gross sales, less
discounts, returns and allowances, of Specified
Products as determined in accordance with GAAP on a
basis consistent with the Most Recent Financial
Statements; provided, however, that if any Specified
Product constitutes a component or part of another
product or package of products, the Net Specified
Product Sales of such Specified Product shall equal
the current separate sales price of such Specified
Products in comparable quantity sales to unrelated
third parties or in the absence of such sales the
fair market value thereof.
"Party" has the meaning set forth in the
preface above.
"Person" means an individual, a partnership, a
corporation, an association, a joint stock company,
a trust, a joint venture, an unincorporated
organization or a governmental entity (or any
department, agency or political subdivision
thereof).
"Preliminary Purchase Price" has the meaning
set forth in 2(b) below.
"Purchase Price" has the meaning set forth in
2 (f) below.
"Sales Fee" has the meaning set forth in 2(e)
below.
"Securities Act" means the Securities Act of
1933, as amended.
"Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended.
"Security Interest" means any mortgage, pledge,
lien, encumbrance, charge or other security
interest, other than (a) mechanic's, materialmen's
and similar liens arising by operation of law of not
yet levied upon, and (b) liens for taxes not yet due
and payable or for taxes that the taxpayer is
contesting in good faith through appropriate
proceedings.
"Seller" has the meaning set forth in the
preface above.
"Specified Products" means only those certain
products identified on Schedule I hereto, together
with all extensions thereof, modifications or
improvements thereto and replacements or
substitutions therefor; provided that to the extent
any of the foregoing Specified Products constitutes
a component or part of another product or package of
products (including so-called "extension sets"), the
term "Specified Products" shall only include any of
such foregoing Specified Products constituting such
component or part and shall not include any other
components or parts of such other product or package
of products.
"Subsidiary" means any Person with respect to
which a specified Person (or a Subsidiary thereof)
owns a majority of the outstanding capital stock (or
other shares of beneficial interest) entitled to
vote generally or has the power to vote or direct
the voting of sufficient securities to elect a
majority of the directors (or any other Persons
serving in a similar role for a Person other than a
corporation).
"Target" has the meaning set forth in the
preface above.
"Target Share" means any share of the Common
Stock, par value $0.01 per share, of the Target.
"Tax" means any federal, state, local or
foreign excise, franchise, income, sales, use,
intangibles, property or other tax of any kind or
nature, including any interest, penalty or addition
thereto, whether disputed or not.
"Tax Return" means any return, declaration,
report, claim for refund or information return or
statement relating to Taxes, including any schedule
or attachment thereto.
"Third Party Claim" has the meaning set forth
in (8)d below.
2. PURCHASE AND SALE OF TARGET SHARES.
(a) Basic Transaction. On and subject to the
terms and conditions of this Agreement, the Buyer
agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of the issued and
outstanding Target Shares for the consideration
specified below in this 2.
(b) Purchase Price. The Buyer agrees to pay
to the Seller (i) at the Closing $12,000,000 in cash
(the "Preliminary Purchase Price") by wire transfer
or delivery of other immediately available funds and
(ii) pursuant to the terms and conditions of 2(e),
the Sales Fee (or other amount referred to therein).
The Preliminary Purchase Price will be subject to
post-Closing adjustment as set forth in this par.2.
(c) The Closing. The closing of the
transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Ropes
& Gray, 885 Third Avenue, New York, New York,
commencing at 9:00 a.m. local time on the business
day following the satisfaction or waiver of all
conditions to the obligations of the Parties to
consummate the transactions contemplated hereby
(other than conditions with respect to actions the
respective Parties will take at the Closing itself)
or such other date as the Buyer and the Seller may
mutually determine (the "Closing Date").
(d) Deliveries at the Closing. At the
Closing, (i) the Seller will deliver to the Buyer
the various certificates, instruments and documents
referred to in par. 7(a) below, (ii) the Buyer will
deliver to the Seller the various certificates,
instruments and documents referred to in par 7(b)
below, (iii) the Seller will deliver to the Buyer
stock certificates representing all of the issued
and outstanding Target Shares, endorsed in blank or
accompanied by duly executed assignment documents
and (iv) the Buyer will deliver to the Seller the
consideration specified in par. 2(b) above.
(e) Additional Payments.
(i) Subject to a maximum aggregate payment
of $700,000, Buyer agrees to pay to Seller
within 30 days of the end of each twelve month
period ending on June 30, commencing with the
twelve month period ending June 30, 1997 and
terminating with the twelve month period ended
June 30, 2001 (the "Fee Period"), an amount
(the "Sales Fee") calculated by multiplying .07
by Net Specified Product Sales for such twelve
month period; provided that, if, after the
calculation and payment of the Sales Fee for a
particular twelve month period, Buyer adjusts
the Net Specified Product Sales occurring in
such twelve month period (all such adjustments
to occur within 60 days of the end of each
twelve month period), Buyer shall increase (if
such adjustment is a positive number) or
decrease (if such adjustment is a negative
number) the Sales Fee payable in the subsequent
twelve month period by the amount attributable
to such adjustment based on the calculation of
the Sales Fee as provided herein; and provided
further that notwithstanding any provision
herein to the contrary, the Sales Fee payable
with respect to the final twelve month period
of the Fee Period shall be paid by Buyer within
60 days of the end of such twelve month period.
Each payment of the Sales Fee shall be
accompanied by a schedule prepared by Buyer
(and certified to by Buyer's chief financial
officer) reflecting the amount of Net Specified
Product Sales for the applicable twelve month
period and any increase or decrease in such
Sales Fee attributable to any adjustment in the
amount of Net Specified Product Sales in any
prior twelve month period. Upon written
request of the Seller made not more than twice
during any such twelve month period, Buyer
shall grant Seller and its representatives
reasonable access to all books and records
reflecting the amount of Net Product Sales for
any prior twelve month period during the Fee
Period.
(ii) If at any time prior to the end of the
Fee Period, Buyer or any of its Affiliates
transfers to any Person who is not a Subsidiary
of Buyer control over the manufacture or sale
of any of the Specified Products (whether by
sale of the business, assets or equity
securities of the Target or Halkey, the merger
or consolidation of the Target or Halkey with
or into any other Person, or by any other
means), Buyer shall contemporaneously with such
transfer pay to Seller the present value of the
excess of $700,000 over the amount of the Sales
Fee theretofore paid by Buyer to Seller in
accordance with this Section 2(e). Such
present value shall be determined by
discounting over the remaining Fee Period such
excess using the Applicable Rate on a compound
annual basis.
(f) Preparation of Closing Date Balance
Sheet.
(i) Within 45 days after the Closing Date,
the Seller will prepare and deliver to the
Buyer a draft consolidated balance sheet (the
"Draft Closing Date Balance Sheet") for the
Target and Halkey as of the close of business
on the day prior to the Closing Date. The
Seller will prepare the Draft Closing Date
Balance Sheet (i) in accordance with GAAP and
(ii) giving effect to the adjustments made to
the Pro Forma Most Recent Balance Sheet
attached hereto as Exhibit B-1, in each case on
a basis consistent with the preparation of the
Pro Forma Most Recent Balance Sheet, including,
without limitation, utilization of the same
methodology with respect to the reserve for
doubtful accounts, inventory reserve, and
depreciation and amortization, subject to the
following specific provisions regarding
preparation (whether or not such provisions are
in accordance with GAAP or are otherwise
consistent with the preparation of the Pro
Forma Most Recent Balance Sheet):
(A) The Closing Date Balance Sheet shall
include (i) a liability in the amount of
$175,000, representing the actual
aggregate amount of the success fees owed
to Halkey's management under the letter
agreements dated January 22, 1996 (the
"Success Fees") and (ii) a corresponding
tax benefit asset in the amount of
$61,250.
(ii) If the Buyer has any objections to the
Draft Closing Date Balance Sheet, it will
deliver a detailed statement describing its
objections to the Seller within 30 days after
receiving the Draft Closing Date Balance Sheet.
The Buyer and the Seller will use reasonable
efforts to resolve any such objections
themselves. If the Parties do not obtain a
final resolution within 30 days after the
Seller has received the statement of
objections, however, the Buyer and the Seller
will select an accounting firm mutually
acceptable to them to resolve any remaining
objections. If the Buyer and the Seller are
unable to agree on the choice of an accounting
firm, they will select a nationally-recognized
accounting firm by lot (after excluding their
respective regular outside accounting firms).
The determination of any accounting firm so
selected will be set forth in writing and will
be conclusive and binding upon the Parties.
The Seller will revise the Draft Closing Date
Balance Sheet as appropriate to reflect the
resolution of any objections thereto pursuant
to this sec. 2(f)(ii). The "Closing Date Balance
Sheet" shall mean the Draft Closing Date
Balance Sheet together with any revisions
thereto pursuant to this sect. 2(f)(ii).
(iii) In the event the Parties submit any
unresolved objections to an accounting firm for
resolution as provided in sec. 2(f)(ii) above, the
Buyer and the Seller will share responsibility
for the fees and expenses of the accounting
firm as follows:
(A) if the accounting firm resolves all
of the remaining objections in favor of the
Buyer (the Consolidated Net Book Value so
determined is referred to herein as the
"Low Value"), the Seller will be
responsible for all of the fees and
expenses of the accounting firm.
(B) if the accounting firm resolves all
of the remaining objections in favor of the
Seller (the Consolidated Net Book Value so
determined is referred to herein as the
"High Value"), the Buyer will be
responsible for all of the fees and
expenses of the accounting firm; and
(C) if the accounting firm resolves some
of the remaining objections in favor of the
Buyer and the rest of the remaining
objections in favor of the Seller (the
Consolidated Net Book Value so determined
is referred to herein as the "Actual
Value"), the Seller will be responsible for
that fraction of the fees and expenses of
the accounting firm equal to (x) the
difference between the High Value and the
Actual Value over (y) the difference
between the High Value and the Low Value,
and the Buyer will be responsible for the
remainder of the fees and expenses.
(iv) The Buyer will make the books, records
and financial staff of the Target and Halkey
available to the Seller and its accountants and
other representatives, and the Seller will make
the work papers and backup materials used in
preparing the Draft Closing Date Balance Sheet
available to the Buyer and its accountants and
other representatives, in each case at
reasonable times and upon reasonable notice at
any time during (A) the preparation by the
Seller of the Draft Closing Date Balance Sheet,
(B) the review by the Buyer of the Draft
Closing Date Balance Sheet and (C) the
resolution by the Parties of any objections
thereto.
(g) Adjustment to Preliminary Purchase Price.
The Preliminary Purchase Price will be adjusted as
follows:
(i) If the Consolidated Net Book Value
exceeds the Estimated Consolidated Net Book
Value, the Buyer will pay to the Seller an
amount equal to such excess (plus interest
thereon at the Applicable Rate from the Closing
Date) by wire transfer or delivery of other
immediately available funds within three
business days after the date on which the
Consolidated Net Book Value finally is
determined pursuant to sec. 2(f) above.
(ii) If the Consolidated Net Book Value is
less than the Estimated Consolidated Net Book
Value, the Seller will pay to the Buyer an
amount equal to such deficiency (plus interest
thereon at the Applicable Rate from the Closing
Date) by wire transfer or delivery of other
immediately available funds within three
business days after the date on which the
Consolidated Net Book Value finally is
determined pursuant to sec. 2(f) above.
The Preliminary Purchase Price as adjusted pursuant
to sub.sec. 2(e)-(f) is referred to herein as the
"Purchase Price."
3. REPRESENTATIONS AND WARRANTIES CONCERNING
THE TRANSACTION.
(a) Representations and Warranties of the
Seller. The Seller represents and warrants to the
Buyer that the statements contained in this sect.3(a)
are correct and complete as of the date of this
Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the
Closing Date were substituted for the date of this
Agreement throughout this sect.3(a)), except as set
forth in Annex I attached hereto.
(i) Organization of Seller. The Seller is
duly organized, validly existing and in good
standing as a limited liability company under
the laws of the State of Delaware.
(ii) Authorization of Transaction. The
Seller has full limited liability company power
and authority to execute and deliver this
Agreement and to perform its obligations
hereunder. No vote of the members of the
Seller, which has not been taken, is required
in connection with the transactions
contemplated hereby. This Agreement
constitutes the valid and legally binding
obligation of the Seller, enforceable in
accordance with its terms and conditions. The
Seller need not give any notice to, make any
filing with or obtain any authorization,
consent or approval of any government or
governmental agency or any other third party in
order to consummate the transactions
contemplated by this Agreement.
(iii) Noncontravention. Neither the
execution and the delivery of this Agreement,
nor the consummation of the transactions
contemplated hereby, will (A) violate any
constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling,
charge or other restriction of any government,
governmental agency or court to which the
Seller is subject or any provision of its
certificate of formation or limited liability
company agreement or (B) conflict with, result
in a breach of, constitute a default under,
result in the acceleration of, create in any
party the right to accelerate, terminate,
modify or cancel or require any notice under
any agreement, contract, lease, license,
instrument or other legally binding arrangement
to which the Seller is a party or by which it
is bound or to which any of its assets is
subject .
(iv) Brokers' Fees. The Seller has no
liability or obligation to pay any fees or
commissions to any broker, finder or agent with
respect to the transactions contemplated by
this Agreement for which the Buyer could become
liable or obligated.
(v) Target Shares. The Seller holds of
record and owns beneficially all of the issued
and outstanding Target Shares free and clear of
any restrictions on transfer (other than
restrictions under the Securities Act and state
securities laws), mortgages, pledges, liens,
encumbrances, charges, security interests,
options, warrants, purchase rights, contracts,
commitments, equities, claims and demands. The
Seller is not a party to any option, warrant,
purchase right or other contract or commitment
that could require the Seller to sell, transfer
or otherwise dispose of any capital stock of
the Target (other than this Agreement). The
Seller is not a party to any voting trust,
proxy or other agreement or understanding with
respect to the voting of any capital stock of
the Target.
(b) Representations and Warranties of the
Buyer. The Buyer represents and warrants to the
Seller that the statements contained in this sec.3(b)
are correct and complete as of the date of this
Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the
Closing Date were substituted for the date of this
Agreement throughout this sect.3(b)), except as set
forth in Annex II attached hereto.
(i) Organization of the Buyer. The Buyer
is a corporation duly organized, validly
existing and in good standing under the laws of
the jurisdiction of its incorporation.
(ii) Authorization of Transaction. The
Buyer has full corporate power and authority to
execute and deliver this Agreement and to
perform its obligations hereunder. This
Agreement constitutes the valid and legally
binding obligation of the Buyer, enforceable in
accordance with its terms and conditions. The
Buyer need not give any notice to, make any
filing with or obtain any authorization,
consent or approval of any government or
governmental agency or any other third party in
order to consummate the transactions
contemplated by this Agreement.
(iii) Noncontravention. Neither the
execution and the delivery of this Agreement,
nor the consummation of the transactions
contemplated hereby, will (A) violate any
constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling,
charge or other restriction of any government,
governmental agency or court to which the Buyer
is subject or any provision of its charter or
bylaws or (B) conflict with, result in a breach
of, constitute a default under, result in the
acceleration of, create in any party the right
to accelerate, terminate, modify or cancel or
require any notice under any agreement,
contract, lease, license, instrument or other
legally binding arrangement to which the Buyer
is a party or by which it is bound or to which
any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no
liability or obligation to pay any fees or
commissions to any broker, finder or agent with
respect to the transactions contemplated by
this Agreement for which the Seller could
become liable or obligated.
(v) Investment. The Buyer is not
acquiring the Target Shares with a view to or
for sale in connection with any distribution
thereof within the meaning of the Securities
Act.
(vi) Financial Ability. The Buyer has the
financial ability to consummate the
transactions contemplated by this Agreement.
Attached hereto as Exhibit A is the audited
consolidated balance sheet as of December 31,
1995 for the Buyer and its Subsidiaries. Such
balance sheet has been prepared in accordance
with GAAP and presents fairly the financial
condition of the Buyer and its Subsidiaries as
of such date. Since such date, there has not
been any material adverse change in the
financial condition of the Buyer and its
Subsidiaries taken as a whole.
4. REPRESENTATIONS AND WARRANTIES CONCERNING
THE TARGET AND HALKEY. The Seller represents and
warrants to the Buyer that the statements contained
in this sect. 4 are correct and complete as of the date
of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as
though the Closing Date were substituted for the
date of this Agreement throughout this Section 4),
except as set forth in the disclosure schedule
delivered by the Seller to the Buyer on the date
hereof and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule is arranged in
paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.
(a) Organization, Qualification and Corporate
Power. Each of the Target and Halkey is a
corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of
its incorporation. Each of the Target and Halkey is
duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where
such qualification is required, except where the
lack of such qualification would not have a material
adverse effect on the assets, operations or
financial condition of the Target and Halkey. Each
of the Target and Halkey has full corporate power
and authority to carry on the businesses in which it
is engaged and to own and use the properties owned
and used by it. The Disclosure Schedule lists the
directors and officers of each of the Target and
Halkey.
(b) Capitalization. The entire authorized
capital stock of the Target consists of 3,000 Target
Shares, of which 1,000 Target Shares are issued and
outstanding. All of the issued and outstanding
Target Shares have been duly authorized, are validly
issued, fully paid and nonassessable. There are no
outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion
rights, exchange rights or other contracts or
commitments that could require the Target to issue,
sell or otherwise cause to become outstanding any of
its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the
Target.
(c) Noncontravention. Neither the execution
and the delivery of this Agreement, nor the
consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any
government, governmental agency or court to which
the Target or Halkey is subject or any provision of
the charter or bylaws of the Target or Halkey or
(ii) conflict with, result in a breach of,
constitute a default under, result in the
acceleration of, create in any party the right to
accelerate, terminate, modify or cancel or require
any notice under any agreement, contract, lease,
license, instrument or other legally binding
arrangement to which the Target or Halkey is a party
or by which either of them is bound or to which any
of their assets is subject (or result in the
imposition of any Security Interest upon any of
their assets), except where the violation, conflict,
breach, default, acceleration, termination,
modification, cancellation, failure to give notice
or Security Interest would not have a material
adverse effect on the assets, operations or
financial condition of the Target and Halkey or on
the ability of the Parties to consummate the
transactions contemplated by this Agreement.
Neither the Target nor Halkey needs to give any
notice to, make any filing with or obtain any
authorization, consent or approval of any government
or governmental agency or any other third party in
order for the Parties to consummate the transactions
contemplated by this Agreement, except where the
failure to give notice, to file or to obtain any
authorization, consent or approval would not have a
material adverse effect on the assets, operations or
financial condition of the Target and Halkey or on
the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(d) Brokers' Fees. Neither the Target nor
Halkey has any liability or obligation to pay any
fees or commissions to any broker, finder or agent
with respect to the transactions contemplated by
this Agreement.
(e) Title to Assets. The Target and Halkey
have good and marketable title to, or a valid
leasehold interest in, the properties and assets
used by them or shown on the Most Recent Balance
Sheet or acquired after the date thereof, free and
clear of all Security Interests, except for
properties and assets disposed of in the ordinary
course of business since the date of the Most Recent
Balance Sheet or except where the failure to have
such title or interest free and clear of all
Security Interests would not have a material adverse
effect on the assets, operations or financial
condition of the Target and Halkey.
(f) Subsidiaries. Halkey is the only
Subsidiary of the Target. The entire authorized
capital stock of Halkey consists of 100 shares of
Common Stock, par value $5.00 per share, all of
which shares are issued and outstanding. All of the
issued and outstanding shares of capital stock of
Halkey have been duly authorized and are validly
issued, fully paid and nonassessable. The Target
holds of record and owns beneficially all of the
outstanding shares of Halkey, free and clear of any
restrictions on transfer (other than restrictions
under the Securities Act and state securities laws),
mortgages, pledges, liens, encumbrances, charges,
security interests, options, warrants, purchase
rights, contracts, commitments, equities, claims and
demands. There are no outstanding or authorized
options, warrants, purchase rights, conversion
rights, exchange rights or other contracts or
commitments that could require the Target to sell,
transfer or otherwise dispose of any capital stock
of Halkey or that could require Halkey to issue,
sell or otherwise cause to become outstanding any of
its own capital stock. There are no outstanding
stock appreciation, phantom stock, profit
participation or similar rights with respect to
Halkey. There are no voting trusts, proxies or
other agreements or understandings with respect to
the voting of any capital stock of Halkey. Neither
the Target nor Halkey controls directly or
indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust
or other business association which is not a
Subsidiary of the Target.
(g) Financial Statements.
(i) Attached hereto as Exhibit B are the
following financial statements (collectively
the "Financial Statements"): (i) unaudited
consolidated balance sheets and statements of
operations and cash flows as of and for the
fiscal year ended September 30, 1994 for
Target; (ii) audited consolidated balance
sheets and statements of operations, changes in
invested capital and cash flows as of and for
the fiscal year ended September 30, 1995 for
the Target; and (iii) unaudited consolidated
balance sheets and statements of income and
cash flow (the "Most Recent Financial
Statements") as of and for the four months
ended January 31, 1996 (the "Most Recent Fiscal
Month End") for the Target. The Financial
Statements (including the notes thereto) have
been prepared in accordance with GAAP applied
on a consistent basis throughout the periods
covered thereby and present fairly the
consolidated financial condition of the Target
and Halkey as of such dates and the
consolidated results of operations of the
Target and Halkey for such periods; provided,
however, that the Most Recent Financial
Statements are subject to normal year-end
adjustments and lack footnotes and other
presentation items.
(h) Events Subsequent to Most Recent Fiscal
Month End. Since the Most Recent Fiscal Month End,
there has not been any material adverse change in
the assets, operations or financial condition of the
Target and Halkey. Without limiting the generality
of the foregoing, since that date:
(i) neither the Target nor Halkey has
sold, leased, transferred or assigned any of
its assets, tangible or intangible, other than
(A) sales of inventory in the ordinary course
of business, (B) the transfer of the real
property and improvements thereon that are the
subject of the form of lease agreement attached
hereto as Exhibit C to the Seller or one or
more of its Affiliates and (C) the sale, lease,
transfer or assignment of other assets having a
fair market value of not more than $10,000 in
the aggregate;
(ii) neither the Target nor Halkey has
entered into any material agreement, contract,
lease or license other than purchase and sales
orders in the ordinary course of business;
(iii) no party (including the Target and
Halkey) has accelerated, terminated, made
material modifications to or canceled any
material agreement, contract, lease or license
to which the Target or Halkey is a party or by
which either of them is bound;
(iv) neither the Target nor Halkey has
imposed any Security Interest upon any of its
assets, tangible or intangible;
(v) neither the Target nor Halkey has made
any capital expenditure other than as
contemplated by the capital expenditure budget
attached as Annex A to the Disclosure Schedule;
(vi) neither the Target nor Halkey has made
any capital investment in or any loan to any
other Person;
(vii) the Target and Halkey have not
created, incurred, assumed or guaranteed more
than $50,000 aggregate indebtedness for
borrowed money and capitalized lease
obligations, except pursuant to the Credit
Agreement dated as of September 15, 1995 among
Halkey, NationsBank, N.A., Bank of America
Illinois, and the other parties named therein
(the "Credit Agreement");
(viii) neither the Target nor Halkey has
granted any license or sublicense of any
material rights under or with respect to any of
its Intellectual Property;
(ix) there has been no change made or
authorized in the charter or bylaws of the
Target or Halkey;
(x) neither the Target nor Halkey has
issued, sold or otherwise disposed of any of
its capital stock or granted any options,
warrants or other rights to purchase or obtain
(including upon conversion, exchange or
exercise) any of its capital stock;
(xi) neither the Target nor Halkey has
declared, set aside or paid any dividend or
made any distribution with respect to its
capital stock (whether in cash or in kind) or
redeemed, purchased or otherwise acquired any
of its capital stock, except in connection with
the transfer described in clause (i)(B) of this
Sect. 4(h);
(xii) neither the Target nor Halkey has
experienced any material damage, destruction or
loss (whether or not covered by insurance) to
its property;
(xiii) none of the Target and its
Subsidiaries has made any loan to, or entered
into any other transaction with, any of its
directors, officers and employees, other than
travel and similar advances in the ordinary
course of business;
(xiv) neither the Target nor Halkey has
entered into any written employment contract or
collective bargaining agreement or made any
material modification to the terms of any
existing such contract or agreement;
(xv) neither the Target nor Halkey has
granted any increase greater than 5% in the
base compensation of any of its directors,
officers and employees;
(xvi) neither the Target nor Halkey has
adopted, terminated or made any modification to
any bonus, profit-sharing, incentive, severance
or other plan, contract or commitment for the
benefit of any of its directors, officers and
employees (or taken any such action with
respect to any other Employee Benefit Plan);
(xvii) neither the Target nor Halkey has made
any other change in employment terms for any of
its directors, officers and employees outside
the ordinary course of business;
(xviii) neither the Target nor Halkey has
canceled any indebtedness owed to either Target
or Halkey in excess of $25,000 in the aggregate
other than any cancellation of indebtedness for
due consideration;
(xix) neither Target nor Halkey has adopted
any change in its accounting practices or
procedures;
(xx) neither Target nor Halkey has operated
its business other than in the ordinary course,
except as specified in any clause of this sect. 4(h); and
(xxi) neither the Target nor Halkey has
committed to do any of the foregoing.
(i) Undisclosed Liabilities. Neither the
Target nor Halkey has any liability in respect of
acts or omissions occurring prior to the Closing
other than (i) any liability reflected in the
Financial Statements, (ii) any liability in respect
of the normal duties and obligations under the
contracts, leases or agreements to which either is a
party, (iii) any liability for Taxes, (iv) any
liability under any Employee Benefit Plan, (v) any
liability incurred since the Most Recent Balance
Sheet Date in the ordinary course of business, (vi)
any liability disclosed in the Disclosure Schedule,
and (vii) any liability which would not have a
material adverse effect on the assets, operations or
financial condition of the Target and Halkey.
(j) Legal Compliance. Since October 1, 1993,
each of the Target and Halkey has complied with all
applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders,
decrees, rulings and charges thereunder) of federal,
state, local and foreign governments (and all
agencies thereof), including without limitation the
USFDA, except where the failure to comply would not
have a material adverse effect on the assets,
operations or financial condition of the Target and
Halkey.
(k) Tax Matters.
(i) Each of the Target and Halkey has
filed all Tax Returns that it was required to
file. All such Tax Returns were correct and
complete in all material respects. All Taxes
owed and payable by the Target or Halkey
(whether or not shown on any Tax Return) have
been paid. Except as set forth in the
Disclosure Schedule, neither the Target nor
Halkey currently is the beneficiary of any
extension of time within which to file any Tax
Return.
(ii) Except for disputes or claims
concerning consolidated, combined or unitary
income Tax Returns including Halkey for periods
ending on or before September 15, 1995 ("USI
Consolidated Returns"), there is no material
dispute or claim concerning any Tax liability
of the Target or Halkey either (A) claimed or
raised by any authority in writing or (B) as to
which the Seller and the directors and officers
of the Target or Halkey have Knowledge based
upon personal contact with any agent of such
authority.
(iii) The Disclosure Schedule lists all
federal, state, local and foreign income Tax
Returns filed with respect to the Target and
Halkey for taxable periods ended on or after
September 15, 1995, indicates those income Tax
Returns that have been audited and indicates
those Income Tax Returns that currently are the
subject of audit. The Seller has delivered to
the Buyer correct and complete copies of all
federal income Tax Returns, examination reports
and statements of deficiencies filed, assessed
against or agreed to by the Target or Halkey
since September 15, 1995. Except with respect
to USI Consolidated Returns, neither the Target
nor Halkey has waived any statute of
limitations in respect of income Taxes or
agreed to any extension of time with respect to
a Tax assessment or deficiency.
(iv) Neither the Target nor Halkey has
filed a consent under Code Sec. 341(f)
concerning collapsible corporations. Neither
the Target nor Halkey has made any material
payments, is obligated to make any material
payments or is a party to any agreement that
under certain circumstances could obligate it
to make any material payments that will not be
deductible under Code Sec. 280G. Neither the
Target nor Halkey has been a United States real
property holding corporation within the meaning
of Code Sec. 897(c)(2) during the applicable
period specified in Code Sec. 897(c)(1)(A)(ii).
Neither the Target nor Halkey is a party to any
tax allocation or sharing agreement.
(l) Real Property.
(i) At the time of the Closing, neither
the Target nor Halkey will own any real
property or be a party to any lease or sublease
with respect to any real property other than
the lease attached to this Agreement as Exhibit
C (the "Lease").
(ii) Upon the execution and delivery of the
Lease by all parties named therein at the
Closing, the Lease shall be a legal, valid and
binding obligation of the lessor named therein
enforceable against such lessor, except where
the illegality, invalidity, nonbinding nature
or unenforceability would not have a material
adverse effect on the assets, operations or
financial condition of the Target and Halkey.
(iii) At the Closing, such lessor shall not
be in material breach or default of the Lease,
and no event shall have occurred with respect
to such lessor which, with notice or lapse of
time, would constitute a material breach or
default or permit termination, modification or
acceleration thereunder.
(iv) At the Closing such lessor shall not
have repudiated in writing any material
provision of the Lease purporting to be binding
upon such lessor.
(v) All facilities located on the real
property described in the Lease have received
all material approvals of governmental
authorities (including material licenses and
permits) required in connection with the
operation of such facilities as currently
operated and have been operated and maintained
in accordance with applicable laws, rules and
regulations in all material respects.
(vi) There are no pending or, to the
Knowledge of the Seller, threatened
condemnation proceedings, lawsuits, or
administrative actions relating to the real
property described in the Lease or other
matters affecting materially and adversely the
current use or occupancy thereof;
(vii) The legal description for the real
property described in the Lease contained in
the deed thereof describes such real property
fully and adequately, and the buildings and
improvements are located within the boundary
lines of the described land and are not in
material violation of applicable setback
requirements, zoning laws and ordinances.
(viii) There are no other leases or subleases
granting to any party or parties (other than
the lessee and its permitted assigns under such
lease) the right of use or occupancy of any
portion of the real property described in the
Lease.
(ix) Except as set forth in the Lease,
there are no outstanding options or rights of
first refusal to purchase the real property
described in the Lease, or any portion thereof
or interest therein.
(x) There are no parties (other than the
Target and Halkey) in possession of the real
property described in the Lease
(xi) All facilities located on the real
property described in the Lease are supplied
with utilities necessary for the operation of
such facilities as currently operated in all
material respects, including gas, electricity,
water, telephone, sanitary, sewer and storm
sewer, all of which services are adequate in
all material respects in accordance with all
applicable laws, ordinances, rules, and
regulations.
(xii) The real property which is described
in the Lease abuts on and has direct vehicular
access to a public road, and access to the
property is provided by paved public right-of-way with adequate
curb cuts available.
(m) Intellectual Property.
(i) Neither the Target nor Halkey has
interfered with, infringed upon,
misappropriated or otherwise come into conflict
with any Intellectual Property rights of third
parties, except where the interference,
infringement, misappropriation or conflict
would not have a material adverse effect on the
assets, operations or financial condition of
the Target and Halkey. To the Knowledge of the
Seller, no third party has interfered with,
infringed upon, misappropriated or otherwise
come into conflict with any Intellectual
Property rights of the Target or Halkey, except
where the interference, infringement,
misappropriation or conflict would not have a
material adverse effect on the assets,
operations or financial condition of the Target
and Halkey.
(ii) The Disclosure Schedule identifies
each patent or registration which has been
issued to the Target or Halkey with respect to
any of its Intellectual Property, identifies
each pending patent application or application
for registration which the Target or Halkey has
made with respect to any of its Intellectual
Property and identifies each material license,
agreement or other permission which the Target
or Halkey has granted to any third party with
respect to any of its Intellectual Property
(together with any exceptions). The Seller has
delivered to the Buyer correct and complete
copies of all such patents, registrations,
applications, licenses, agreements and
permissions (as amended to date). The
Disclosure Schedule also identifies each
material trade name or unregistered trademark
used by the Target or Halkey in connection with
any of its businesses. With respect to each
item of Intellectual Property required to be
identified on the Disclosure Schedule pursuant
to this sec.4(m)(ii):
(A) the Target or Halkey possesses all
right, title and interest in and to the
item, free and clear of any Security
Interest, license or other restriction,
except as set forth in any of the patents,
registrations, applications, licenses,
agreements or permissions identified on the
Disclosure Schedule pursuant to this
sect. (m)(ii);
(B) the item is not subject to any
outstanding injunction, judgment, order,
decree, ruling or charge; and
(C) no action, suit, proceeding,
hearing, investigation, charge, complaint,
claim or demand is pending or, to the
Knowledge of the Seller, is threatened
which challenges the legality, validity,
enforceability, use or ownership of the
item.
(iii) The Disclosure Schedule identifies
each item of Intellectual Property that any
third party owns and that the Target or Halkey
uses pursuant to license, sublicense, agreement
or permission, other than any such item which
the failure of the Target and Halkey to have
any right to use would not have a material
adverse effect on the assets, operations or
financial condition of the Target and Halkey.
The Seller has delivered to the Buyer correct
and complete copies of all such licenses,
sublicenses, agreements and permissions (as
amended to date). With respect to each item of
Intellectual Property required to be identified
on the Disclosure Schedule pursuant to this
sect. 4(m)(iii):
(A) the license, sublicense, agreement
or permission covering the item is legal,
valid, binding, enforceable and in full
force and effect, except where the
illegality, invalidity, nonbinding nature,
unenforceability or ineffectiveness would
not have a material adverse effect on the
assets, operations or financial condition
of the Target and Halkey;
(B) neither the Target nor Halkey, nor
to the Knowledge of the Seller, any other
party to the license, sublicense, agreement
or permission is in material breach or
default thereof, and no event has occurred
with respect to the Target or Halkey or, to
the Knowledge of the Seller, any such other
party, which with notice or lapse of time
would constitute a material breach or
default or permit termination, modification
or acceleration thereunder;
(C) no party to the license, sublicense,
agreement or permission has repudiated in
writing any material provision thereof; and
(D) neither the Target nor Halkey has
granted any sublicense or similar right
with respect to the license, sublicense,
agreement or permission.
(n) Contracts. The Disclosure Schedule lists
the following contracts and other agreements to
which the Target or Halkey is a party:
(i) any agreement (or group of related
agreements) for the lease of personal property
to or from any Person providing for lease
payments in excess of $50,000 per annum;
(ii) any agreement (or group of related
agreements) for the purchase or sale of raw
materials, commodities, supplies, products or
other personal property or for the furnishing
or receipt of services, the performance of
which will extend over a period of more than
one year or involve consideration in excess of
$50,000;
(iii) any agreement concerning a partnership
or joint venture;
(iv) any agreement (or group of related
agreements) under which it has created,
incurred, assumed or guaranteed any
indebtedness for borrowed money, or any
capitalized lease obligation, in excess of
$50,000 or under which it has imposed a
Security Interest on any of its material
assets, tangible or intangible;
(v) any agreement concerning
noncompetition;
(vi) any agreement with the Seller or any
of its Affiliates (other than the Target and
Halkey);
(vii) any profit sharing, stock option,
stock purchase, stock appreciation, deferred
compensation, severance or other material plan
or arrangement for the benefit of any of its
current or former directors, officers or
employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of
any individual on a full-time, part-time,
consulting or other basis providing annual
compensation in excess of $80,000 or providing
material severance benefits;
(x) any agreement under which it has
advanced or loaned any amount to any of its
directors, officers or employees other than in
connection with travel and similar advances in
the ordinary course of business; or
(xi) any other agreement (or group of
related agreements) the performance of which
involves consideration in excess of $50,000.
The Seller has delivered to the Buyer a correct and
complete copy of each written agreement listed on
the Disclosure Schedule pursuant to this sect. 4(n) (as
amended to date) and a written summary setting forth
the terms and conditions of each oral agreement
listed on the Disclosure Schedule pursuant to this sect.4(n).
Except where the illegality, invalidity,
nonbinding nature, unenforceability,
ineffectiveness, breach, default, termination,
modification, acceleration or repudiation would not
have a material adverse effect on the assets,
operations or financial condition of the Target and
Halkey: (A) each such agreement is legal, valid,
binding, enforceable and in full force and effect;
(B) neither Target nor Halkey, nor to the Knowledge
of the Seller, any other party thereto is in breach
or default thereof, and no event has occurred with
respect to the Target or Halkey or, to the Knowledge
of the Seller, any such other party, which with
notice or lapse of time would constitute a breach or
default or permit termination, modification or
acceleration, under such agreement; and (C) no party
has repudiated in writing any provision of such
agreement.
(o) Powers of Attorney. There are no
outstanding powers of attorney executed on behalf of
the Target or Halkey.
(p) Litigation. The Disclosure Schedule sets
forth each instance in which the Target or Halkey
(i) is subject to any outstanding injunction,
judgment, order, decree, ruling or charge or (ii) is
a party, or to the Knowledge of the Seller has been
threatened in writing to be made a party, to any
action, suit or proceeding of, in or before any
court or quasi-judicial or administrative agency of
any federal, state, local or foreign jurisdiction,
except where the injunction, judgment, order,
decree, ruling, action, suit or proceeding would not
have a material adverse effect on the assets,
operations or financial condition of the Target and
Halkey.
(q) Employees. Neither the Target nor Halkey
has experienced any strikes or any material
grievances, claims of unfair labor practices or
other collective bargaining disputes within the past
three years. Neither the Target nor Halkey has
committed any material unfair labor practice. The
Seller does not have any Knowledge of any
organizational effort presently being made or
threatened by or on behalf of any labor union with
respect to employees of the Target or Halkey.
(r) Employee Benefits.
(i) The Disclosure Schedule lists each
Employee Benefit Plan that the Target or Halkey
maintains or to which the Target or Halkey
contributes.
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract or
fund) complies in form and in operation
with the applicable requirements of ERISA
and the Code, except where the failure to
comply would not have a material adverse
effect on the assets, operations or
financial condition of the Target and
Halkey.
(B) All required reports and
descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and Summary
Plan Descriptions) have been filed or
distributed appropriately with respect to
each such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of
Title 1 of ERISA and of Code 4980B have
been met with respect to each such Employee
Benefit Plan which is an Employee Welfare
Benefit Plan, where applicable.
(C) All contributions (including all
employer contributions and employee salary
reduction contributions) which are due have
been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit
Plan.
(D) Each such Employee Benefit Plan
which is an Employee Pension Benefit Plan
and which is intended to comply with Code
401(a) has received a determination letter
from the Internal Revenue Service to the
effect that it meets the requirements of
Code 401(a).
(E) The Seller has delivered to the
Buyer correct and complete copies of the
plan documents and summary plan
descriptions, the most recent determination
letter received from the Internal Revenue
Service, the most recent Form 5500 Annual
Report and all related trust agreements,
insurance contracts and other funding
agreements which implement each such
Employee Benefit Plan.
(ii) With respect to each Employee Benefit
Plan that the Target or Halkey maintains or to
which either of them contributes or to which
either has contributed within the last six
years:
(A) No such Employee Benefit Plan which
is an Employee Pension Benefit Plan has
been completely or partially terminated.
(B) No action, suit or proceeding with
respect to the administration or the
investment of the assets of any such
Employee Benefit Plan (other than routine
claims for benefits) is pending, except
where the action, suit or proceeding would
not have a material adverse effect on the
assets, operations or financial condition
of the Target and Halkey.
(C) No Employee Benefit Plan is or was a
defined benefit plan subject to Code 412
or Title IV of ERISA or a Multiemployer
Plan.
(s) Guaranties. Neither the Target nor Halkey
is a guarantor or otherwise is liable for any
liability or obligation (including indebtedness) of
any other Person.
(t) Environment.
(i) Except where the noncompliance or
failure to obtain would not have a material
adverse effect on the assets, operations or
financial condition of the Target and Halkey,
each of the Target, Halkey and their respective
predecessors (A) has complied with all
Environmental Laws, (B) has obtained and been
in compliance with the terms and conditions of
all permits, licenses and other authorizations
which are required of it under the
Environmental Laws and (C) has complied with
all other limitations, restrictions,
conditions, standards, prohibitions,
requirements, obligations, schedules and
timetables which are contained in the
Environmental Laws.
(ii) Neither the Target nor Halkey has any
liability (and none of the Target, Halkey and
their respective predecessors has handled or
disposed of any substance, arranged for the
disposal of any substance or owned or operated
any property or facility in any manner that
could give rise to any liability) for damage to
any site, location or body of water (surface or
subsurface) or for any reason under any
Environmental Law, except where the liability
would not have a material adverse effect on the
assets, operations or financial condition of
the Target and Halkey.
(u) Certain Business Relationships with the
Target and Its Subsidiaries. None of the Seller or
any of its Affiliates (other than the Target and
Halkey) has been involved in any material business
arrangement or relationship with the Target or
Halkey within the past 12 months and none of the
Seller or any of its Affiliates owns any material
asset, tangible or intangible, which is used in the
business of any of the Target or Halkey.
(v) Insurance. The Disclosure Schedule sets
forth the following information with respect to each
material insurance policy for any policy period
commencing on or after September 15, 1995 with
respect to which any of the Target or Halkey is a
party, a named insured, or otherwise the beneficiary
of coverage:
(i) the name of the insurer, the name of
the policyholder, and the name of each covered
insured;
(ii) the policy number and the period of
coverage; and
(iii) the scope (including an indication of
whether the coverage is on a claims made,
occurrence, or other basis) and amount
(including a description of how deductibles and
ceilings are calculate and operate) of
coverage.
(w) Condition and Sufficiency of Assets. The
building, plants, structures, equipment, assets and
other rights of the Target and Halkey constitute all
of the properties, assets and rights necessary for
the conduct of their businesses as presently
conducted in all material respects.
(x) Accounts Receivable. All accounts
receivable of Target and Halkey that are or will be
reflected on the Most Recent Financial Statements or
on the Closing Date Balance Sheet (collectively, the
"Accounts Receivable") represent or will represent
valid obligations arising from sales actually made
or services actually performed in the ordinary
course of business of Halkey. To the knowledge of
Seller, there is no contest, claim, or right of set-off
under any agreement with any obligor of an
Accounts Receivable currently asserted in writing
relating to the amount or validity of such Accounts
Receivable, except with respect to any Accounts
Receivable or any portion of any Accounts Receivable
which has been or will be fully reserved against.
(y) Inventory. The inventory of Halkey, in
the aggregate, consists of a quality and quantity
usable and salable in the ordinary course of
business, except for obsolete items and items of
below-standard quality.
5. PRE-CLOSING COVENANTS. The Parties agree as
follows with respect to the period between the
execution of this Agreement and the Closing.
(a) General. Each of the Parties will use
its reasonable best efforts to take all actions and
to do all things necessary in order that the
conditions are satisfied to the obligation of the
other Party to consummate the transactions to be
performed by such other Party in connection with the
Closing; provided, however, that this sect.5(a) shall
not require the Seller, the Target or Halkey to make
any expenditure or take any action or do any other
thing outside of the ordinary course of business in
order to cure any misrepresentation or breach of
warranty contained in sect.4 above other than any such
misrepresentation or breach arising primarily from
the breach by the Seller of sect.5(c) below.
(b) Notices and Consents. Each of the
Parties will (and the Seller will cause each of the
Target and Halkey to) give any notices required to
be given by such Person to, make any filings
required to be made by such Person with and use such
Person's reasonable best efforts to obtain any
authorizations, consents and approvals required to
be obtained by such Person of, governments,
governmental agencies and other third parties in
connection with the matters referred to in sect.3(a)(ii),
sect.3(b)(ii) and sect. 4(c) above.
(c) Operation of Business. The Seller will
not cause or permit the Target and Halkey to:
(i) sell, lease, transfer or assign any of
its assets, tangible or intangible, other than
(A) sales of inventory in the ordinary course
of business, (B) the transfer of the real
property and improvements thereon that are the
subject of the form of lease agreement attached
hereto as Exhibit C to the Seller or one or
more of its Affiliates and (C) the sale, lease,
transfer or assignment of other assets having a
fair market value of not more than $10,000 in
the aggregate;
(ii) enter into any material agreement,
contract, lease or license other than purchase
and sales orders in the ordinary course of
business;
(iii) accelerate, terminate, make material
modifications to or cancel any material
agreement, contract, lease or license to which
the Target or Halkey is a party or by which
either of them is bound;
(iv) impose any Security Interest upon any
of its assets, tangible or intangible;
(v) make any capital expenditure other
than as contemplated by the capital expenditure
budget attached as Annex A to the Disclosure
Schedule;
(vi) make any capital investment in or any
loan to any other Person;
(vii) create, incur, assume or guarantee
more than $50,000 aggregate indebtedness for
borrowed money and capitalized lease
obligations, except pursuant to the Credit
Agreement;
(viii) grant any license or sublicense of any
material rights under or with respect to any of
its Intellectual Property;
(ix) change or authorize any change to the
charter or bylaws of the Target or Halkey;
(x) issue, sell or otherwise dispose of
any of its capital stock or grant any options,
warrants or other rights to purchase or obtain
(including upon conversion, exchange or
exercise) any of its capital stock;
(xi) declare, set aside or pay any dividend
or make any distribution with respect to its
capital stock (whether in cash or in kind) or
redeem, purchase or otherwise acquire any of
its capital stock; except in connection with
the transfer described in clause (i)(B) of this
Section 5(c);
(xii) make any loan to, or enter into any
other transaction with, any of its directors,
officers and employees, other than travel and
similar advances in the ordinary course of
business;
(xiii) enter into any written employment
contract or collective bargaining agreement or
make any material modification to the terms of
any existing such contract or agreement;
(xiv) grant any increase in the base
compensation of any of its directors, officers
and employees outside the ordinary course of
business;
(xv) adopt, terminate or make any material
modification to any bonus, profit-sharing,
incentive, severance or other plan, contract or
commitment for the benefit of any of its
directors, officers and employees (or take any
such action with respect to any other Employee
Benefit Plan);
(xvi) make any other change in employment
terms for any of its directors, officers and
employees outside the ordinary course of
business;
(xvii) cancel any indebtedness owed to either
Target or Halkey in excess of $25,000 in the
aggregate other than any cancellation for due
consideration;
(xviii) adopt any change in its accounting
practices or procedures;
(xix) operate its business other than in the
ordinary course, except as specified in any
clause of this Section 5(c); and
(xx) commit to do any of the foregoing.
(d) Access. The Seller will permit, and the
Seller will cause each of the Target and Halkey to
permit, representatives of the Buyer to have access
at all reasonable times, and in a manner so as not
to interfere with the normal business operations of
the Target and Halkey, to all premises, properties,
personnel, books, records (including tax records),
contracts and documents of or pertaining to the
Target and Halkey. All information received by the
Buyer in the course of the reviews contemplated by
this sect. 5(d) shall be subject to the letter agreement
regarding confidentiality and other matters dated
January 9, 1996 between the Target and the Buyer (or
one of the Buyer's Affiliates) (the "Confidentiality
Agreement"), and the provisions of the
Confidentiality Agreement are hereby confirmed and
remain in full force and effect.
(e) Notice of Developments.
(i) In the event Seller shall become
actually aware of any development (including
the Seller's obtaining Knowledge after the time
of the execution and delivery of this Agreement
of any circumstances in existence prior to such
time) constituting a breach of any of the
representations and warranties in sect. 4 above,
the Seller shall notify the Buyer of such
development. Unless the Buyer has the right to
terminate this Agreement pursuant to sect.9(a)(ii)
below by reason of the development and
exercises that right within the period of ten
business days referred to in sect. 9(a)(ii) below,
the written notice pursuant to this sect.5(e)(i)
will be deemed to have amended the Disclosure
Schedule, to have qualified the representations
and warranties contained in sect.4 above and to
have cured any misrepresentation or breach of
warranty that otherwise might have existed
hereunder by reason of the development.
(ii) Each Party will give prompt written
notice to the others of any material adverse
development causing a breach of any of its own
representations and warranties in sect. 3 above.
No disclosure by any Party pursuant to this sect.
5(e)(ii), however, shall be deemed to amend
or supplement Annex I, Annex II or the
Disclosure Schedule or to prevent or cure any
misrepresentation or breach of warranty.
(f) Exclusivity. From and after the
execution of this Agreement and until the earlier of
(i) the Closing or (ii) termination of this
Agreement in accordance with Section 9, Seller shall
not, nor shall it permit any of its Affiliates to,
nor shall it permit any directors, officers or
employees of or any investment banker, attorney or
other advisor or representative of, Seller or any of
its Affiliates to (i) sell or offer or agree to sell
(whether directly or indirectly, or by merger of
otherwise) any shares of capital stock or assets
(other than any sale of assets in the ordinary
course of business) of Target or Halkey (an
"Acquisition Transaction") other than to Buyer, (ii)
solicit or initiate the submission of any proposal
for an Acquisition Transaction other than from Buyer
or (iii) participate in any discussions or
negotiations with, or furnish any non-public
information concerning Target or Halkey to any
Person other than Buyer in connection with a
possible Acquisition Transaction.
6. POST-CLOSING COVENANTS. The Parties agree
as follows with respect to the period following the
Closing.
(a) General. In case at any time after the
Closing any further action is necessary to carry out
the purposes of this Agreement, each of the Parties
will take (or cause to be taken) such further action
(including the execution and delivery of such
further instruments and documents) as the other
Party reasonably may request, including, without
limitation, executing and delivering or causing the
execution and delivery of such confirmatory or
replacement deeds, bills of sale, and other
instruments of assignment or conveyance as may be
reasonably necessary to vest fee simple title in HRC
Properties, Inc. to the real property subject to the
lease attached hereto as Exhibit C, all at the sole
cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification
therefor under sect. 8 below).
(b) Litigation Support. In the event and for
so long as any Party actively is contesting or
defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or
demand in connection with any fact, situation,
circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure
to act or transaction on or prior to the Closing
Date involving the Target or Halkey, the other Party
shall cooperate with the contesting or defending
Party and such Party's counsel in the contest or
defense, make available its personnel and provide
such testimony and access to its books and records
as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting
or defending Party is entitled to indemnification
therefor under sect. 8 below).
(c) Covenant Not to Compete. In order to
induce the Buyer to enter into this Agreement and in
consideration of the allocation set forth in the
last sentence of this sec.6(c) and other good and
valuable consideration, for a period of three years
from and after the Closing Date, the Seller will not
engage directly or indirectly in any business that
the Target or Halkey conducts as of the Closing Date
in any geographic area in which the Target or Halkey
conducts that business as of the Closing Date;
provided, however, that no owner of less than 5% of
the outstanding stock of any publicly traded
corporation shall be deemed to engage solely by
reason thereof in any of its businesses. If the
final judgment of a court of competent jurisdiction
declares that any term or provision of this sect.6(c)
is invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or
unenforceability shall have the power to reduce the
scope, duration or area of the term or provision, to
delete specific words or phrases or to replace any
invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and
that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified
after the expiration of the time within which the
judgment may be appealed. The Parties agree that
for all Tax and financial reporting purposes, $1,000
of the Purchase Price shall be allocated to the
covenant contained in this sec.6(c).
(d) Confidentiality. The Seller will treat
and hold as such all of the Confidential
Information, refrain from using any of the
Confidential Information except in connection with
this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the
Confidential Information which are in its possession
(except to the extent Seller shall have a reasonable
need to possess any such tangible embodiment or copy
for use in connection with this Agreement). In the
event that the Seller is requested or required (by
oral question or request for information or
documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information,
the Seller will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance
with the provisions of this sec. 6(d). If, in the
absence of a protective order or the receipt of a
waiver hereunder, the Seller is, on the advice of
counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for
contempt, that Seller may disclose the Confidential
Information to the tribunal; provided, however, that
the Seller shall use its reasonable best efforts to
obtain, at the reasonable request and expense of the
Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the
Confidential Information required to be disclosed as
the Buyer shall designate.
(e) Non-Solicitation. For a period of three
years from the Closing, the Seller will not solicit
to employ any management employee or officer of
Halkey.
(f) 1994 Financial Statements.
(i) As soon as reasonably practicable
following the date hereof and in any event not
later than 30 days after the Closing, Seller
shall cause to be delivered to Buyer audited
consolidated balance sheets and statements of
operations, changes in invested capital and
cash flows of Halkey as of and for the fiscal
year ended September 30, 1994, together with
footnotes (the "1994 Financials").
(ii) The Buyer shall cause Halkey to make
the books, records and financial staff of
Target and Halkey available to the Seller and
its accountants and other representatives, at
reasonable times and upon reasonable notice,
and otherwise to cooperate with the Seller and
its accountants and other representatives, in
order to permit Seller to prepare the 1994
Financials and otherwise to meet its
obligations under Section 6(f)(i) above. In
addition, and subject to a maximum of $45,000,
Buyer agrees to reimburse Seller for costs and
expenses incurred by Seller in connection with
the audit contemplated by sect.6(f)(i) above.
(g) Tax Matters.
(i) Seller agrees to cause Target to make
an election under Section 338(h)(10) of the
Code (and any comparable provisions of state or
local law), on a timely basis, with respect to
Target's acquisition of Halkey in September
1995. The asset allocation made in connection
with such election shall be consistent in all
respects with Exhibit F hereto.
(ii) The Seller shall timely file all
income Tax Returns and pay all income Taxes
other than Excluded Taxes with respect to
Halkey and the Target for all periods ending on
or before the end of the Closing Date ("Seller
Periods") and shall furnish the Buyer with
copies of such income Tax Returns. The Buyer
shall timely file all income Tax Returns and pay all income
Taxes with respect to Halkey and the Target for all periods ending
after the Closing Date ("Buyer Periods") and all Excluded Taxes. For
purposes of determining the income Tax liability of the Target and
Halkey for the final Seller Period, the books of the Target and Halkey
shall be closed as of the end of the Closing Date.
(iii) The Buyer shall cooperate with the Seller, at Seller's
expense, and shall cause its Affiliates, officers, employees, agents,
auditors and representatives to cooperate, at Seller's expense, in
preparing and filing all income Tax Returns. The Buyer agrees, and
agrees to cause the Target and Halkey, (i) to retain and maintain
accounting and Tax records and information relevant to determining
the income Tax liability of the Target and Halkey for Seller Periods
until the expiration of the applicable statue of limitations (giving
effect to any extension thereof), and thereafter not to dispose of such
records without first offering them to the Seller, and (ii) to allow the
Seller and its agents to inspect, review and make copies of such
records, at Seller's expense, as the Seller deems necessary or
appropriate from time to time, such activities to be conducted during
normal business hours.
(iv) Any refunds (or credits in respect thereof) of income
Taxes of the Target or Halkey for any Seller Period shall be for the
account of the Seller. Any refunds (or such credits) of income Taxes
of the Target or Halkey for any Buyer Period shall be for the account
of the Buyer. The Buyer shall, at Seller's expense, if the Seller so
requests, cause the Target or Halkey to file for and obtain any refunds
or credits to which the Seller is entitled under this clause (iv). The
Buyer shall permit the Seller to control the prosecution of any such
refund claim, at Seller's expense, and, where deemed appropriate by
the Seller, shall cause the Target and Halkey to authorize by
appropriate powers of attorney such persons as the Seller shall
designate to represent the Target or Halkey with respect to such
refund claim. The Buyer shall cause the Target and Halkey to forward
to the Seller any such refund within 20 days after the refund is
received (or reimburse the Seller for any such credit within 20 days
after the credit is allowed or applied against other Tax liability).
(v) Seller covenants and agrees that it shall not
apply any of
Halkey's net operating losses in respect of any tax liability for periods
ending on or prior to September 15, 1995.
(h) Success Fees. The parties agree that the actual gross aggregate
amount of the Success Fees payable shall be $175,000 and that the amount of
the Success Fees on an assumed tax-effected basis shall be $113,750. Buyer
agrees to cause Halkey to pay the gross aggregate Success Fees to the
appropriate officers of Halkey within five business days of the Closing Date.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in sec.3(a)
and sect. 4 above shall be true and correct in all material respects
at and
as of the Closing Date;
(ii) the Seller shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) there shall have been no material adverse change in the
assets, operation or financial condition of Target and Halkey;
(v) the Seller shall have delivered to the Buyer a
certificate
to the effect that each of the conditions specified above in
7(a)(i)-(iv) is satisfied in all respects;
(vi) the Parties, the Target and Halkey shall have received
all other material authorizations, consents and approvals of
governments, governmental agencies and other third parties referred
to in sect.3(a)(ii), sect.3(b)(ii) and sect.4(c) above;
(vii) Halkey, as lessee, and HRC Properties, Inc., as lessor,
shall have entered into the lease agreement in form and substance as
set forth in Exhibit C attached hereto and the same shall be in full
force and effect;
(viii) the Buyer shall have received from counsel to the Seller
an opinion in form and substance as set forth in Exhibit D attached
hereto, addressed to the Buyer and dated as of the Closing Date;
(ix) simultaneously with the Closing, Buyer shall have
received releases and UCC-3 termination statements, satisfactory in
form and substance to the Buyer, releasing the Target Shares, the
shares of Halkey and the respective assets of Target and Halkey
from the pledge described in Schedule 4(c) of the Disclosure
Schedule;
(x) Buyer shall have received the resignations of the
respective directors and officers of Target and Halkey as Buyer shall
designate; and
(xi) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby will be satisfactory in
form and substance to the Buyer in its reasonable judgment.
The Buyer may waive any condition specified in this sect.7(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in sect.3(b)
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) the Buyer shall have delivered to the Seller a
certificate
to the effect that each of the conditions specified above in
7(b)(i)-(iii) is satisfied in all respects;
(v) the Parties, the Target and Halkey shall have received
all other material authorizations, consents and approvals of
governments and governmental agencies referred to in sect. 3(a)(ii),
3(b)(ii) and sect.4(c) above;
(vi) Halkey, as lessee, and HRC Properties, Inc., as lessor,
shall have entered into the lease agreement in form and substance as
set forth in Exhibit C attached hereto and the same shall be in full
force and effect;
(vii) Buyer shall have entered into the guaranty in form and
substance as set forth in Exhibit G hereto and the same shall be in
full force and effect;
(viii) the Seller shall have received from counsel to the Buyer
an opinion in form and substance as set forth in Exhibit E attached
hereto, addressed to the Seller and dated as of the Closing Date; and
(ix) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby will be satisfactory in
form and substance to the Seller in its reasonable judgment.
The Seller may waive any condition specified in this sec. 7(b) if it executes a
writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) Survival of Representations, Warranties and Indemnifications.
All claims for indemnification with respect to breaches of the
representations, warranties, covenants and agreements and other matters
subject to indemnification as provided in this sec.8 shall be unaffected by any
investigation undertaken or Knowledge possessed by any Party and shall
survive the Closing as follows:
(i) all claims for indemnification arising out of the
representations and warranties of the Parties contained in sect.3 above
may be made at any time after the Closing (subject to any applicable
statute of limitations);
(ii) all claims for indemnification arising out of the
representations and warranties contained in sec. 4(a), 4(b), 4(f), 4(k)
and 4(r) (but only insofar as the representations and warranties
contained in such sec. 4(r) concern compliance with ERISA) or out of
the matters described in clauses (ii) through (v) of sec. 8(b) below may
be made at any time after the Closing (subject to any applicable
statute of limitations);
(iii) all claims for indemnification arising out of the
representations and warranties contained in sec. 4(t) may be made at
any time on or prior to April 30, 2001;
(iv) all claims for indemnification arising out of any of the
representations and warranties contained in sect.4 hereof (other than
any claims referred to in clauses (ii) and (iii) of this sec.8(a)) may be
made at any time on or prior to April 30, 1998; and
(v) all claims for indemnification under this sec. 8 not
referred to in clauses (i) through (iv) of this sec. 8(a) may be made at
any time (subject to any applicable statute of limitations).
(b) Indemnification Provisions for Benefit of the Buyer. Subject to
the procedures and limitations set forth in this sec. 8, Seller shall
indemnify
and hold the Buyer harmless from and against all Adverse Consequences the
Buyer shall suffer caused proximately by (w) without limiting the
obligations of Buyer under sec.6(a), the breach of any representation or
warranty, or any indemnity in respect of title defects and survey defects,
including without limitation, any boundary disputes or disputes concerning
possession, given by Halkey in the Quit Claim Deed, Bill of Sale, Lien and
Possession Affidavit, Gap Indemnity and Survey Affidavit, each of even
date and delivery herewith, (x) the breach of any of the representations,
warranties and covenants of the Seller contained herein, (y) the matters
described in Sections 8(b)(ii) through 8(b)(v) below and (z) any
infringement or claimed infringement by Halkey prior to the Closing of
U.S. Patent No. 5,464,399 arising out of the sale or marketing of Specified
Products prior to the Closing or any breach or claimed breach by Halkey
prior to the Closing of that certain Disclosure Agreement dated March 2,
1992 between Halkey and St. Francis Research Institute, Inc. arising out of
any acts or omissions of Halkey prior to the Closing; provided, however,
that for purposes of this sec. 8(b) all qualifications as to materiality or
material
adverse effect shall be deemed deleted from all of the representations and
warranties in sec.4 (other than for purposes of identifying the representations
and warranties to which the first proviso of the next succeeding sentence is
applicable, it being understood that all qualifications as to materiality and
material adverse effect shall be deemed deleted from such representations
and warranties for purposes of calculating the amount of Adverse
Consequences referred to in such provisions). Except as set forth below in
the penultimate sentence of this sect.8(b), the Seller shall have no
obligation to
indemnify the Buyer for any Adverse Consequence caused proximately by
the breach of any of the representations and warranties contained in sec.4
hereof or the matters referred to in clause (z) of the immediately preceding
sentence until the Buyer has suffered such Adverse Consequences in excess
of a $400,000 aggregate deductible (and then only to the extent of such
excess), and the Seller shall have no obligation to indemnify the Buyer for
those Adverse Consequences caused proximately by the breach of any of the
representatives and warranties in 4 hereof which exceed a $7,000,000
aggregate ceiling (at which point the Seller will have no obligation to
indemnify the Buyer from and against further such Adverse Consequences);
provided, however, that in any event the Seller shall have no obligation to
indemnify the Buyer for any Adverse Consequence caused by any individual
breach of any of the representations and warranties in sec. 4 hereof which
contain by their terms as written qualifications as to materiality or material
adverse effect (unless such individual beach is part of a series of similar
individual breaches arising out of the same facts or circumstances) or any
such series of individual breaches unless the amount of Adverse
Consequences caused proximately by such breach or series of breaches
exceeds $30,000 (but then Seller shall have the obligation to indemnify the
Buyer for the full amount of such Adverse Consequences, subject to the
procedures and other limitations set forth in this sec.8);
and provided, further,
that any Adverse Consequences for which Buyer is not entitled to
indemnification in accordance with the immediately preceding proviso shall
not be counted in determining whether the deductible or ceiling set forth in
this sentence has been met or exceeded. Notwithstanding the foregoing,
Buyer shall be entitled to indemnification from the Seller for any Adverse
Consequences which Buyer shall suffer caused proximately by any of the
following matters (and any such Adverse Consequences shall not be subject
to the foregoing deductible or ceiling and shall not be taken into account in
determining whether the foregoing deductible or ceiling has been met or
exceeded):
(i) the breach of any representation or warranty contained
in sec. 4(a), 4(b), 4(f), 4(k) (but only insofar as the representations
and warranties contained in such sec. 4(k) relate to income Taxes) or
4(r) (but only insofar as the representations and warranties contained
in such sec. 4(r) concern compliance with ERISA);
(ii) Halkey's participation as a de micromis potentially
responsible party in the Seaboard Group Chemical landfill
restoration;
(iii) the non-payment of any income Taxes due in respect of
the filing of the Section 338(h)(10) election referred to in sec. 6(g)
hereof;
(iv) the claims asserted against Halkey by Hartwell
Medical, Inc. in that certain matter styled Hartwell Medical v.
Halkey-Roberts Corporation, et, al., Case No. 70808, filed in the
Superior Court of the State of California, County of San Diego,
North County Branch; and
(v) any obligation of the Target or Halkey to pay expenses
incurred by the Seller, the Target or Halkey in order to effect the
acquisition of Halkey by the Target and the Seller on September 15,
1995.
All claims for indemnification pursuant to this sec.8(b) shall be made
by giving written notice within the survival periods set forth in sec.8(a)
above
to the Buyer as provided in sec.10(g) below, which notice shall state
the basis
upon which the claim for indemnification is made.
(c) Indemnification Provisions for Benefit of the Seller.
(i) In the event the Buyer breaches any of its
representations, warranties and covenants contained herein, and, if
there is an applicable survival period pursuant to sec. 8(a) above,
provided that the Seller makes a written claim for indemnification
against the Buyer pursuant to sec.10(g) below within such survival
period, then the Buyer agrees to indemnify the Seller from and
against the entirety of any Adverse Consequences the Seller shall
suffer caused proximately by the breach.
(ii) The Buyer agrees to indemnify the Seller and each of
its Affiliates from and against the entirety of any Adverse
Consequences the Seller or any such Affiliate shall suffer arising out
of any matter or circumstance involving the Target or Halkey, other
than any Adverse Consequences for which the Seller has agreed to
indemnify the Buyer under sec.8(b) above.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this sec.8, then the
Indemnified Party shall promptly (and in any event within five
business days after receiving notice of the Third Party Claim) notify
each Indemnifying Party thereof in writing.
(ii) Any Indemnifying Party will have the right to assume
and thereafter conduct the defense of the Third Party Claim with
counsel of his or its choice reasonably satisfactory to the
Indemnified Party; provided, however, that the Indemnifying Party
will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld
unreasonably) unless the judgment or proposed settlement involves
only the payment of money damages and does not impose an
injunction or other equitable relief upon the Indemnified Party.
(iii) Unless and until an Indemnifying Party assumes the
defense of the Third Party Claim as provided in sec. 8(d)(ii) above,
however, the Indemnified Party may defend against the Third Party
Claim in any manner he or it reasonably may deem appropriate and
the Indemnifying Party shall promptly reimburse the Indemnified
Party for the amount of Adverse Consequences suffered or incurred
by the Indemnified Party in conducting such defense, to the extent
the Indemnified Party is entitled under this sec. 8 to be indemnified
for such Adverse Consequences.
(iv) In no event will the Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably).
(e) Determination of Adverse Consequences. The Parties shall
make appropriate adjustments for liabilities accrued on the Closing Date
Balance Sheet, tax benefits and insurance coverage and take into account the
time cost of money (using the Applicable Rate as the discount rate), in
determining Adverse Consequences for purposes of this sec. 8. In addition,
the Buyer shall not be deemed to have suffered any Adverse Consequences
related to any environmental condition, contamination, release of hazardous
substances or any other environmental matter (each, an "Environmental
Condition") unless (i) the Buyer has suffered such Adverse Consequences
by reason of any requirement set forth in any Environmental Law or any
outstanding injunction, judgment, order, decree, ruling or charge or (ii) in
the reasonable judgment of the Buyer, investigation, remediation, cleanup
or related action is required in connection with such Environmental
Condition due to clear and substantial risk to human health or the
environment; provided, however, that the Buyer shall exercise its
reasonable best efforts to (A) limit or reduce any investigation, remediation,
cleanup or other action to the extent reasonable and (B) conduct any
investigation, remediation, cleanup or other action efficiently and taking
into account economic considerations to the same extent as would a prudent
business Person. All indemnification payments under this sec.8 shall be
deemed adjustments to the Purchase Price.
(f) Other Indemnification Provisions. The indemnification
provisions in this sec.8 are in addition to, and not in derogation of, any
statutory, equitable or common law remedy any Party may have for breach
of representation, warranty or covenant; provided, however, that the Buyer
acknowledges and agrees that the foregoing indemnification provisions in
this sec.8 shall be the exclusive remedy of the Buyer for any breach of the
representations and warranties in sec.4 above or any other claim related
to the
ownership or operation of the business or businesses conducted by the
Target or Halkey prior to the Closing or to any state of facts or
condition in
existence at or prior to the Closing involving the Target or Halkey.
9. TERMINATION.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing in the
event (A) the Seller has within the then previous five business days
given the Buyer any notice pursuant to 5(e)(i) above and (B) the
development that is the subject of the notice has had a material
adverse effect upon the assets, operations or financial condition of
the Target and Halkey;
(iii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing (A) in the
event the Seller has breached any representation, warranty or
covenant contained in this Agreement (other than the representations
and warranties in 4 above) in any material respect, the Buyer has
notified the Seller of the breach and the breach has continued
without cure for a period of 15 days after the notice of breach or (B)
if the Closing shall not have occurred on or before June 15, 1996,
by reason of the failure of any condition precedent under 7(a)
hereof (unless the failure results primarily from the Buyer itself
breaching any representation, warranty or covenant contained in this
Agreement); and
(iv) the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in
the event the Buyer has breached any representation, warranty or
covenant contained in this Agreement in any material respect, the
Seller has notified the Buyer of the breach and the breach has
continued without cure for a period of 15 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
June 15, 1996, by reason of the failure of any condition precedent
under 7(b) hereof (unless the failure results primarily from the
Seller itself breaching any representation, warranty or covenant
contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to 9(a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach of Section 5 hereof and arising
out of such breach); provided, however, that the Confidentiality Agreement
shall remain in full force and effect following any termination of this
Agreement.
10. MISCELLANEOUS.
(a) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior
written approval of the other Party; provided, however, that any Party may
make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use
its reasonable
best efforts to advise and obtain the approval of the other Party prior to
making the disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements or representations by or
among the Parties, written or oral, to the extent they have related in any
way to the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign (including
by operation of law) either this Agreement or any of his or its rights,
interests or obligations hereunder without the prior written approval of the
other Party.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request,
demand, claim or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid and addressed to
the intended recipient as set forth below:
If to the Seller:
c/o Fenway Partners, Inc.
152 West 57th Street
59th Floor
New York, New York 10019
Attention: Mr. Russell W. Steenberg
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: John B. Ayer, Esq.
If to the Buyer:
ATRION Corporation
P.O. Box 918
Florence, Alabama 35631
Attention: Mr. Jeffery Strickland
or
ATRION Corporation
100 East Second Street
Sheffield, Alabama 35660
Attention: Mr. Jeffery Strickland
with a copy to:
Berkowitz, Lefkovits, Isom & Kushner
1600 SouthTrust Tower
420 North 20th Street
Birmingham, Alabama, 35203-3204
Attention: B.G. Minisman, Jr., Esq.
Any Party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the address to
which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other Parties notice in the
manner herein set forth.
(h) Jurisdiction and Governing Law. Each of the Parties agrees
that all actions, suits or proceedings arising out of or based upon this
Agreement or the subject matter hereof shall be brought and maintained
exclusively in the Federal and state courts located in the County of New
York in the State of New York. Each of the Parties hereto by execution
hereof (i) hereby irrevocably submits to the jurisdiction of the Federal and
state courts located in the County of New York in the State of New York
for the purpose of any action, suit or proceeding arising out of or based
upon this Agreement or the subject matter hereof and (ii) hereby waives, to
the extent not prohibited by applicable law, and agrees not to assert, by way
of motion, as a defense or otherwise, in any such action, suit or proceeding,
any claim that it is not subject personally to the jurisdiction of the
above-named courts, that it is immune from extraterritorial injunctive relief or
other injunctive relief, that its property is exempt or immune from
attachment or execution, that any such action, suit or proceeding may not be
brought or maintained in one of the above-named courts, that any such
action, suit or proceeding brought or maintained in one of the above-named
courts should be dismissed on grounds of forum non conveniens, should be
transferred to any court other than one of the above-named courts, should
be stayed by virtue of the pendency of any other action, suit or proceeding
in any court other than one of the above-named courts, or that this
Agreement or the subject matter hereof may not be enforced in or by any of
the above-named courts. Each of the Parties hereto hereby consents to
service of process in any such suit, action or proceeding in any manner
permitted by the laws of the State of New York, agrees that service of
process by registered or certified mail, return receipt requested, at the
address specified in or pursuant to Section 10(g) is reasonably calculated to
give actual notice and waives and agrees not to assert by way of motion, as
a defense or otherwise, in any such action, suit or proceeding any claim that
service of process made in accordance with Section 10(g) does not
constitute good and sufficient service of process. The provisions of this
Section 10(h) shall not restrict the ability of any party to enforce in any
court any judgment obtained in a Federal or state court located in the
County of New York in the State of New York. This Agreement shall be
governed by and construed in accordance with the domestic laws of the
State of New York without giving effect to any choice or conflict of law
provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction
other than the State of New York.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed
by the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof
or the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties, the Target and Halkey will bear
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
The Seller agrees that neither the Target nor Halkey has borne or will bear
any of the Seller's costs and expenses (including any of its legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, the modifications and
amendments to the Credit Agreement described in Schedule 4(c) of the
Disclosure Schedule and the transactions contemplated in connection
therewith. In the event that Target or Halkey are charged with any such
costs or expenses and the same are not reflected on the Closing Date
Balance Sheet, then Seller shall promptly reimburse the Buyer for the
amount of such costs or expenses. The obligations of Seller to make such
reimbursement are not subject to any of the limitations of sec. 8 hereof.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal,
state, local or foreign statute or law shall be deemed also to refer to
all rules
and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation.
(m) Incorporation of Exhibits, Annexes and Schedules. The
Exhibits, Annexes and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
FENWAY HOLDINGS, L.L.C.
By:s/s Russell W. Steenberg
Russell W. Steenberg
Title: Vice President
ATRION CORPORATION
By:s/s Jerry A. Howard
Jerry A. Howard
Title: Chairman of the Board,
President & CEO
SCHEDULE I
List of Model Numbers of Current Specified Products
NEEDLELESS VALVE PRODUCTS
PRODUCT # DESCRIPTION STATUS
247021001 Luer lock valve On market
247010021 Luer lock valve On market
247200001 Luer lock valve/male On market
247104001 Luer lock valve/threaded ansi On market
247106001 Luer lock valve/threaded ansi On market
247104021 Luer lock valve/threaded ansi On market
247105001 Luer lock valve/threaded rec tip On market
247601021 Luer lock valve/threaded rec tip On market
247600001 Luer lock valve/T port Proto type
247600021 Luer lock valve/T port Proto type
247900001 Luer lock valve/Y port Proto type
247900021 Luer lock valve/Y port Proto type
HALKEY-ROBERTS CORPORATION
TAX PURCHASE PRICE ALLOCATION
(DOLLAR AMOUNTS IN THOUSANDS)
CASH $ 5
ACCOUNTS RECEIVABLE 1,967
NET INVENTORIES 2,514
OTHER CURRENT ASSETS 150
4,636
LAND 0
BUILDINGS AND IMPROVEMENTS 0
MACHINERY, EQUIPMENT, AND TOOLING 4,728
4,728
DEFERRED FINANCING COSTS 329
GOODWILL 1,474
TOTAL ASSETS $11,167