THIS STOCK
PURCHASE AGREEMENT (this “Agreement”) is made as of
March 1, 2005, by and among JOHN W. GREEN IV
(“Green”) and RICHARD M. NORDSKOG
(“Nordskog,” and with Green, each a
“Stockholder,” and together, the
“Stockholders”) and NATIONAL DENTEX CORPORATION, a
Massachusetts corporation (“Buyer”).
WHEREAS ,
Green Dental Laboratories, Inc., an Arkansas corporation (the
“Company”), operates a dental laboratory business (the
“Laboratory”) at 1099 Wilburn Road, Heber Springs, AR
72543;
WHEREAS ,
the Stockholders collectively own of record all of the issued and
outstanding Shares (as defined in Section 4(f)) of the Common
Stock (as defined in Section 4(f)) of the Company, which
Shares represent all of the issued and outstanding capital stock of
the Company; and
WHEREAS ,
the Stockholders desire to sell to Buyer, and Buyer desires to
purchase from the Stockholders, the Shares, upon the terms and
conditions hereinafter set forth.
NOW,
THEREFORE , in consideration of the mutual agreements and
covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1.
Purchase and Sale of the Shares . Subject to the terms and
conditions of this Agreement and in reliance upon the
representations and warranties of the parties set forth herein, the
Stockholders hereby agree to sell to Buyer, and Buyer hereby agrees
to purchase from the Stockholders the Shares, on the Closing Date
(as defined in Section 3), for the consideration set forth in
Section 2.
(a)
Purchase Price . The purchase price shall be up to an
aggregate purchase price of up to Twenty Two Million Two Hundred
Twenty-Four Thousand Dollars ($22,224,000) (the “Purchase
Price”), calculated and payable as follows:
(i)
At the Closing, Buyer shall pay an amount equal to Nineteen Million
Seven Hundred Eighty Thousand Three Hundred Eighty-Two Dollars
($19,780,382) by wire transfer (the “Closing Payment”)
to the Stockholders, and each Stockholder consents and agrees that
the Closing Payments shall be allocated among the Stockholders in
accordance with Schedule 2(a) ; and
(ii)
Buyer shall pay certain of the Stockholders up to Two Million Four
Hundred Forty-Three Thousand Six Hundred Eighteen Dollars
($2,443,618) (without interest, if timely paid) payable, subject to
the provisions of Section 2(e), in three (3) annual
installments, commencing on the first anniversary of the Closing
Date, by check or wire transfer (the “Deferred
Payment”).
(iii)
The Closing Payment shall be adjusted pursuant to
Sections 2(b), (c) and (d).
(b)
Adjustments to the Closing Payment . The Closing Payment
shall be adjusted as of the Closing as follows:
(i)
The Closing Payment shall be increased dollar for dollar for the
amount of the cash balances and cash equivalents (including bank
accounts, deposits in transit with respect to automatic credit card
charges authorized by customers, and certificates of deposit), if
any, of the Company as of the Closing Date, as reflected on the
Closing Balance Sheet, provided, however, cash and cash equivalents
shall exclude cash held by the Company as deposits (which are
reflected on the Closing Balance Sheet as liabilities) from other
third parties.
(ii)
The Closing Payment shall be decreased dollar for dollar for the
amount of any liabilities other than Permitted Liabilities (as
defined herein) as reflected on the Closing Balance Sheet. The term
“Permitted Liabilities” means the following:
(A)
trade payables and accrued expenses incurred in the ordinary course
of business, including, but not limited to, payroll, payroll taxes,
real estate taxes, professional fees, and year 2005 profit-sharing
expense; and
(B)
employee withholding taxes; and
(C)
note payable to Heber Springs State Bank #809132 of $96,019.76
(“Heber Springs Bank Note”).
(iii)
The Closing Payment shall be increased by $103,980.24, representing
the difference between amount of the Heber Springs Bank Note and
$200,000.
(iv)
The preliminary adjustment to the Closing Payment shall be made on
an estimated basis at the Closing in accordance with the Pro Forma
Closing Balance Sheet (as defined in Section 2(c)(i)) and with
any final adjustment and any resulting payment to be made from the
Stockholders on the one hand and the Buyer on the other hand, or
vice versa, shall be made within 15 days after completion of
the Closing Balance Sheet (as defined and prepared in accordance
with the provisions of Section 2(c)(ii)).
(v) Any
adjustments made to the Closing Payment pursuant to
Sections 2(b)(i), (ii) and (iii) shall be allocated to
the Stockholders on a pro rata basis based upon the percentage of
Shares owned by such Stockholders, and such pro rata amounts shall
increase or decrease, as applicable, the amounts payable to the
Stockholders pursuant to Schedule 2(a) .
(vi)
There shall be no adjustment to the Closing Payment for any change
in the value of the Fixed Assets between December 31, 2004 and
the Closing Date.
(c) Closing
Balance Sheets .
(i)
On or prior to the Closing Date, the Stockholders and Buyer shall
jointly prepare a pro forma balance sheet of the Company as of the
Closing Date (the “Pro Forma Closing Balance Sheet”),
determined on an accrual basis in accordance with generally
accepted accounting principles (“GAAP”) consistently
applied and compiled in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of
Certified Public Accountants, (the “Standards”), which
Pro Forma Closing Balance Sheet shall be utilized by the parties to
assist in the calculation of the preliminary adjustments to the
Purchase Price and the preparation of the Closing Balance Sheet as
hereinafter provided.
(ii)
Within 60 days after the Closing Date, Buyer with the
assistance of the Stockholders shall prepare a balance sheet of the
Company as of the Closing Date (the “Closing Balance
Sheet”), in accordance with GAAP and compiled in accordance
with the Standards. If the parties are unable to agree upon the
Closing Balance Sheet, or any portion thereof, within 15 days
after the parties have commenced resolution of the dispute, then
the matter shall be submitted for resolution to a mutually
agreeable certified public accounting firm (the “Independent
Accountants”),
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whose
determination shall be final and binding upon the parties, and
whose fees shall be borne equally by the Stockholders and Buyer
except, however, that if the Independent Accountants determine that
the Closing Balance Sheet proposed by Buyer was correct in its
entirety, then the Stockholders shall be solely responsible for the
fees of the Independent Accountants; if the Independent Accountants
determine that the dispute should be resolved in favor of the
objections raised in the Closing Balance Sheet by the Stockholders
in its entirety, then Buyer shall be solely responsible for the
fees of the Independent Accountants.
(d)
Final Adjustments . To the extent that there are assets or
liabilities other than Permitted Liabilities, which were not
(i) included in the Pro Forma Closing Balance Sheet; or
(ii) reflected in any adjustment made at the Closing to the
Purchase Price, but which are included in the Closing Balance Sheet
or discovered subsequent thereto, and which would, if they had been
included in the Pro Forma Closing Balance Sheet, have resulted in
an adjustment to the Purchase Price, the amount thereof shall be
deemed an adjustment to the Purchase Price and the net amount due,
whether from Buyer or the Stockholders, shall be remitted to the
other party within five (5) days of request therefor from the
party to whom such payment is due.
(e)
Payment of Deferred Payments . The Deferred Payment shall be
determined and payable as follows:
(A)
On the first (1 st )
anniversary of the Closing Date, Buyer shall pay Green $814,540 of
the Deferred Payment;
(B)
on the second (2 nd )
anniversary of the Closing Date, Buyer shall pay Green $814,540 of
the Deferred Payment; and
(C)
on the third (3 rd )
anniversary of the Closing Date, Buyer shall pay Green $814,538 of
the Deferred Payment.
(ii)
Payments Upon Death or Disability . In the event of the
death or disability of Green, any Deferred Payments due Green shall
be paid to Green’s legal representative, heirs or other
beneficiaries, as directed by Green or his legal representative, or
applicable law.
(iii)
Interest and Acceleration . The Deferred Payments shall not
bear interest; provided, however , in the event that a
Deferred Payment is not received by Green within 20 days of
its due date, Buyer agrees to pay Green interest at the then
maximum lawful rate of interest under Arkansas law until paid in
addition to the Deferred Payment; provided further , in the
event that a Deferred Payment is not received by Green within
20 days of its due date, any additional Deferred Payments
shall become immediately due and payable and shall bear interest at
the then maximum lawful rate of interest under Arkansas law until
paid.
3.
Closing . The closing of the purchase and sale of the Shares
(the “Closing”) shall take place and be effective as of
the commencement of business on March 1, 2005 (the
“Closing Date”).
4.
Representations and Warranties of the Stockholders . The
Stockholders, except as otherwise specifically provided for in this
Agreement, jointly and severally, represent and warrant to and
agree with Buyer on and as of the date hereof and as of the Closing
Date, as follows:
(a)
Organization . The Company is a corporation, duly organized,
validly existing and in good standing under the laws of the State
of Arkansas. The Company has all requisite corporate power and
authority to own its property and to carry on its business as
presently conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted by the
Company or its assets located therein requires such qualification,
except where failure to do so would not have a Material Adverse
Effect (meaning any material adverse
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change, event,
circumstance or development with respect to, or material adverse
effect on, the business, assets or properties, liabilities,
capitalization, condition (financial or other), prospects or
results of operations of the Company, taken as a whole. For the
avoidance of doubt, the parties agree that the terms
“material”, “materially” or
“materiality” as used in this Agreement with an initial
lower case “m” shall have their respective customary
and ordinary meanings, without regard to this meaning). Set forth
on Schedule 4(a) is a true, correct and complete list
of all jurisdictions in which the Company is duly qualified as a
foreign corporation to do business and the Company is in good
standing in each of these jurisdictions. The Company has no
subsidiaries. The Company has delivered to Buyer true, complete and
correct copies of minutes of all meetings of its directors
(including committees thereof) and stockholders (or written actions
or consents in lieu of meetings) since January 1,
2000.
(b)
Authority and Binding Effect . Each Stockholder represents
and warrants, for himself or herself, severally and not jointly,
that (i) such Stockholder has full legal right, and complete
and unrestricted power, authority and capacity to execute and
deliver this Agreement and the other agreements executed and
deliver by him or her pursuant hereto, to consummate the
transaction contemplated hereby and perform his or her obligations
under this Agreement and the agreements executed and delivered by
him or her pursuant hereto; and (ii) this Agreement and all
other agreements, documents and instruments have been duly executed
and delivered by such Stockholder and constitute a valid and
binding obligation of the Company and such Stockholders, as the
case may be, enforceable against each of them in accordance with
their respective terms.
(c)
Non-contravention . The execution and delivery by the
Stockholders of this Agreement and all other agreements, documents
and instruments to be executed in connection herewith, and the
consummation of the transactions contemplated and compliance with
the provisions contained hereby and thereby, do not, and will not,
(i) conflict with or violate any of the provisions of the
charter documents, by-laws or other organization documents of the
Company; (ii) to the knowledge of the Stockholders, with or
without the passage of time, constitute a violation of, be a
default (or an event that with notice or lapse of time or both
would become a default) under, give rise to any right of
termination, amendment, cancellation, acceleration or any other
right under, conflict with, modify any obligations under, require
any consent, approval, notice or other action under, or increase
the liability of the Company or any Stockholder under, any
contract, lease, indenture, agreement, deed of trust, license,
order, judgment or decree or other instrument to which the Company
or any Stockholder is a party or by which any of them is bound or
to which any of the Company’s assets are subject, and does
not, and will not, violate or constitute a default (or an event
that with notice or lapse of time or both would become a default)
under any statute, rule, regulation, order, or ordinance of any
governmental, judicial or arbitrary body; (iii) result in the
creation of any encumbrance, lien, mortgage, charge, claim, option,
pledge, license, sublicense, security interest, assignment by way
of security, call, proxy or similar restriction over the Shares or
any assets or properties of the Company; and (iv) conflict
with, contravene or violate any law, statute, ordinance, rule or
regulation, or any order, writ, judgment, injunction, consent,
decree, determination or award of any court or any governmental
agency or authority, currently in effect relating to the Company or
any of its properties or assets.
(d)
Compliance with Laws .
(i)
The Company is currently conducting, and has at all times conducted
its business in compliance in all respects with (A) its
charter documents, by-laws and other organizational documents; and
(B) to the knowledge of the Stockholders, all applicable
Federal, state and local laws, statutes, rules, regulations,
ordinances and orders, judicial or administrative judgments,
decrees, orders, settlements, writs, injunctions or similar
commands. Without limiting the generality of the foregoing, the
Company currently conducts, and has at all times conducted, its
business in compliance with all applicable Federal, state and local
laws, statutes, regulations, ordinances and rules concerning the
collection, use, storage and transmission of patient
information.
(ii)
The Company is not in default with respect to any judgment, order,
writ, injunction, decree, demand or assessment issued by any court
or of any Federal, state, municipal or other governmental agency,
authority, board, commission, bureau, instrumentality or department
relating to any aspect of its business or assets.
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(iii)
The Company has not been charged or, to the knowledge of the
Stockholders threatened with, and is not under investigation with
respect to, any violation of any provision of any Federal, state,
municipal or other law or administrative rule or regulation
relating to its business or assets.
(iv) The
Company currently is, and has at all times been, in compliance with
all requirements of insurance carriers applicable to its business
or assets.
(e)
Governmental Approval; Permits .
(i)
Except as set forth on Schedule 4(e) , no consent,
approval or authorization of, or registration, designation,
declaration or filing with, any governmental agency or authority,
whether domestic, foreign, Federal, state, municipal or other, on
the part of the Company or any Stockholder, is required in
connection with the execution and delivery by the Stockholders of
this Agreement, the consummation of the transactions contemplated
hereby, or the other agreements executed and deliver by any
Stockholder pursuant hereto.
(ii)
Set forth on Schedule 4(e) is a true, correct and
complete list of all licenses and permits which the Company
possesses (the “Licenses”), copies of which have been
delivered previously by the Company to Buyer. The Company has all
licenses, permits and other governmental authorizations required
for the conduct of its business or ownership of its assets, the
consummation of the transactions contemplated hereby and is in
compliance therewith. The Licenses are in full force and effect
without default or notice of default and will not be impaired as a
result of, and will remain in full force and effect after, the
Stockholders’ execution of this Agreement and the
consummation of the transaction contemplated hereby.
(f)
Capitalization . The authorized capital stock of the Company
consists of 1,000,000 shares of voting, common stock, $0.01 par
value per share (“Common Stock”), 235,500 shares of
which are issued and outstanding (the “Shares”). The
Shares, as set forth on Schedule 4(f) , are owned of
record by the Stockholders in the respective amounts set forth on
Schedule 4(f) . No other shares of capital stock of the
Company are issued, outstanding or reserved for issuance. All of
the outstanding shares of Common Stock have been duly authorized,
validly issued, fully paid and non-assessable and were not issued
in violation of any preemptive or other similar rights and are not
subject to preemptive or other similar rights. There are not
authorized, issued or outstanding any commitments for the purchase
or sale of, or any options, warrants or other rights to subscribe
for or purchase any shares of the capital stock or other securities
of the Company, nor is the Company obligated in any other manner to
issue shares of its capital stock or other securities, including
securities convertible into or exchangeable for capital stock.
There are no restrictions on the transfer of shares of the
Company’s capital stock, including the Shares, other than
those imposed by relevant Federal and state securities laws. The
Shares have been offered and sold by the Company to the
Stockholders in compliance with all Federal and state securities
laws. The Company has made available to Buyer true and correct
copies of the Company’s Articles of Incorporation and
by-laws, each in effect as of the date hereof. There are not any
shareholders agreements, voting trusts, proxies or other similar
agreements or understandings with respect to or concerning the
capital stock of the Company. The Company has no outstanding stock
appreciations rights, phantom stock or stock
equivalents.
(g)
Title to Purchased Shares . Each Stockholder, for himself or
herself, severally and not jointly, represents and warrants that:
(i) the Shares set forth next to such Stockholder’s name
on Schedule 4(f) are owned of record and beneficially
by such Stockholder and such Stockholder will transfer such Shares
to Buyer on the Closing Date, free and clear of all liens,
encumbrances, options or other rights of any nature; and
(ii) there are not authorized, issued or outstanding any
agreements, commitments or understandings for the purchase or sale
of, or any options to purchase or other rights relating to, his or
her Shares.
(h)
Financial Statements . The Company has delivered to Buyer,
and there is attached as Schedule 4(h) , a copy of the
audited annual financial statement of the Company for its fiscal
years ended
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December 31, 2001, 2002, 2003 and 2004 and
internally prepared financial statements for the year ended
December 31, 2004 and for the 1-month period ended
January 31, 2005 (the “Financial Statements”). The
Financial Statements are (i) true, correct and complete;
(ii) fairly present the financial condition and results of
operations of the Company as of the date thereof; (iii) were
prepared in accordance with GAAP and in a manner consistent with
past practices; and (iv) were prepared in accordance with the
books, records and accounts of the Company, which books, records
and accounts are correct and complete in all material respects.
Except to the extent reflected or reserved against in the Financial
Statements, the Company as of the date thereof did not have and
will not have any liabilities or obligations of any nature, whether
accrued, absolute, contingent, or otherwise, including, without
limitation, Tax liabilities, due or to become due or arising out of
transactions entered into or any state of facts existing prior
thereto, other than obligations arising after the Closing under the
Contracts, as disclosed to Buyer.
(i)
Absence of Certain Changes or Events . Except as set forth
on Schedule 4(i) , since December 31, 2003, the Company
has operated the business in the ordinary course and the Company
shall not have suffered any Material Adverse Effect and there has
not occurred any event, change or development which has had, or
which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or which would, individually
or in the aggregate, reasonably be expected to prevent or
materially interfere with or delay the consummation of the
transaction contemplated hereby. Without limiting the generality of
the foregoing, except as set forth on Schedule 4(i) ,
since December 31, 2003, the Company has not:
(i)
made any change in its authorized capital or outstanding
securities;
(ii)
issued, sold, delivered or agreed to issue, sell or deliver any
capital stock, bonds or other corporate securities, including
convertible securities, (whether authorized and unissued or held in
the treasury), or granted or agreed to grant any options, warrants
or other rights calling for the issue, sale or delivery
thereof;
(iii)
borrowed or agreed to borrow any funds or incurred, or become
subject to, any obligation or liability (absolute or contingent),
except obligations and liabilities incurred in the ordinary course
of business, consistent with past practices, none of which are,
individually or in the aggregate, materially adverse;
(iv)
declared, set aside, made, or agreed to make distributions of any
assets of any kind whatsoever in respect of its capital stock, or
purchased, redeemed or otherwise acquired, or agreed to purchase,
redeem or otherwise acquire, any of its outstanding capital
stock;
(v)
unless replaced with assets, property or rights of equal or greater
value, sold, transferred or otherwise disposed of, or agreed to
sell, transfer or otherwise dispose of any of its assets, property
or rights, or disposed of any inventory except in the ordinary
course of business consistent with past practices;
(vi)
entered or agreed to enter into any agreement or arrangement
granting any preferential rights to purchase any of its assets,
property or rights, including inventories, or requiring the consent
of any party to the transfer and assignment of any of such assets,
property or rights;
(vii)
other than in the ordinary course of business, consistent with past
practices, made or permitted, or agreed to make or permit, any
amendment or termination of any contract, agreement or license to
which it is a party or by which it or any of its properties are
subject;
(viii)
made, directly or indirectly, any accrual or arrangement for or
payment of bonuses (other than in the normal course of the Company)
or special compensation of any kind or any severance or termination
pay to any present or former officer, director or employee of the
Company;
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(ix)
except for customary raises granted its employees in accordance
with its past practices and disclosed to Buyer, increased the rate
of compensation payable or to become payable by it to any of its
stockholders, officers, directors or employees or adopted any new,
or made any increase in any, profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement or other
employee benefit plan payment or arrangement made to, for or with
any of such stockholders, officers, directors or employees, except
as agreed to by Buyer;
(x)
merged or consolidated, or agreed to merge or consolidate, with any
other corporation or entity, or acquired or agreed to acquire any
corporation, association, partnership, joint venture or other
entity;
(xi)
created, incurred, assumed or guaranteed any indebtedness for money
borrowed, or mortgaged, pledged or subjected to any lien, pledge,
mortgage, security interest, conditional sales contract or other
encumbrance of any nature whatsoever any of its assets or
properties, other than liens, if any, for current Taxes not yet due
and payable;
(xii)
waived any rights of substantial value, whether or not in the
ordinary course of business;
(xiii)
suffered any damage, destruction or loss, whether or not covered by
insurance, which could have a Material Adverse Effect, or suffered
any repeated, recurring or prolonged shortage, cessation or
interruption of inventory shipments, supplies or utility services
required to conduct its business and operations or suffered any
change in its financial condition or in the nature of its business
or operations which has had or might have a Material Adverse
Effect;
(xiv)
amended or modified, or granted any material exception to, its
credit criteria for new or existing customers;
(xv)
materially changed any of the accounting principles followed by it
or the methods of applying such principles, except as required by
GAAP and disclosed in the Financial Statements;
(xvi)
changed its method of billing or collecting accounts
receivable;
(xvii)
entered into any transaction other than in the ordinary course of
business consistent with past practice;
(xviii)
made any commitment to make any capital expenditures that has not
been fully paid prior to the Closing Date in excess of $15,000
individually, or $35,000 in the aggregate;
(xix)
received condemnation proceedings commenced with respect to any
asset or property of the Company, including, without limitation,
any Real Property (as defined in Section 4(q)); or
(xx)
entered into any agreement or commitment to which the Company is a
party, whether oral or in writing, to take any action described in
this Section 4(i).
(j)
Assumptions or Guaranties of Indebtedness of Other Persons .
The Company has not assumed, guaranteed, endorsed or otherwise
become directly or contingently liable on (including without
limitation, liability by way of agreement, contingent or otherwise,
to purchase, to provide funds for payment, to supply funds to or
otherwise invest in any debtor or otherwise to assure any creditor
against loss), any indebtedness of any other person or
entity.
(k)
Inventory and Accounts Receivable .
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(i)
The Company has adequate and sufficient inventories of supplies for
the conduct of its business in the ordinary course, and all
inventories of the Company are in good, usable and merchantable
condition.
(ii)
The accounts receivable (including loans receivable and advances)
of the Company: (A) are lawful and valid; (B) have arisen
out of bona fide transactions in the ordinary course of business;
(C) have sufficient consideration, and (D) are not
subject to any offset, allowance, credit, refund, counterclaim or
similar diminution or discount, whether customary in the trade or
otherwise. To the knowledge of the Stockholders, there are no facts
or circumstances (other than general economic conditions) which
would result in any material increase in the uncollectability of
such receivables, in excess of the reserves set forth on the
Financial Statements.
(i)
Set forth on Schedule 4(l) is a complete list of all
contracts, agreements, leases, instruments, understandings and
arrangements, either oral or in writing, extending beyond the
Closing Date to which the Company is a party or by which the
Company is bound, including, without limitation, all
non-competition agreements with current employees and any employees
whose employment was terminated, for any reason, on or after
January 1, 2003, except for open purchase or sales orders for
less than $5,000 (collectively, the “Contracts”). A
true and correct copy of each of the Contracts, or a description of
any oral Contracts, has been furnished by the Company to
Buyer.
(ii)
Except as set forth on Schedule 4(l), (A) the Company,
and to the knowledge of the Stockholders any other party, to any of
the Contracts, is not in default (and no event has occurred which,
with notice or lapse of time or both, would put the Company or such
other party in default) in the performance of any of their
respective obligations under any of the Contracts, nor has there
occurred any event giving others (with notice or lapse of time or
both) any rights of termination, amendment, acceleration or
cancellation of, any Contract; (B) each Contract is valid,
binding and enforceable and in full force and effect; (C) none
of the Stockholders have any knowledge of any breach or anticipated
breach by any other party to any Contract; (D) no approval or
consent of any person is needed in order that the Contracts may
continue in full force and effect following the Closing Date and
the consummation of the transactions contemplated hereby;
(E) the Contracts will continue to be valid, binding and
enforceable and in full force and effect immediately following the
Closing in accordance with the terms and conditions thereof as in
effect immediately prior to the Closing and the change in ownership
of the Company pursuant to this Agreement will not result in the
termination of, or results in a right of termination under any
Contract; and (F) the Company has not delivered or received
any notice of termination or an intention to terminate or amend in
an adverse manner any Contract.
(m)
Assets and Properties .
(i)
Except as set forth on Schedule 4(m) , (i) the
Company has good, valid and record title to and beneficial
ownership of all of its assets and properties and will retain after
the Closing all of such assets and properties, free and clear of
all liens, charges, claims and encumbrances of any nature, except
only such assets as were eliminated in accordance with the
provisions of Section 2(d); (ii) the Fixed Assets include
all equipment currently used by the Company to conduct its business
in the ordinary course, are sufficient to operate the
Company’s business after the Closing and are in good
condition (ordinary wear and tear excluded); (iii) the Company
as of the Closing Date will not have any liabilities or obligations
of any nature, whether accrued, absolute, contingent, or otherwise,
including without limitation, Tax liabilities, due or to become
due, which shall create, give rise to or result in a lien or
encumbrance in its assets or properties; and (iv) the Company
owns or leases, or has rights to use, all material assets and
properties sufficient for the conduct of the Company’s
business as presently conducted by the Company.
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(ii) (A)
Schedule 4(m) sets forth an accurate and complete list
and description of all of the Intellectual Property (which shall
mean all (1) patent and patent rights, trademarks and trademark
rights, trade names and trade name rights, copyrights and copyright
rights, service marks and service mark rights, and all pending
applications for and registrations of the same; (2) brand
names, trade dress, business and product names, logos and slogans
and all goodwill associated therewith; (3) proprietary
technology, including all know-how, trade secrets, quality control
standards, reports (including test reports), designs, processes,
market research and other data, computer software and programs
(including, source codes and related documentation), formulae,
inventions and other ideas, methodologies, and technical
information; and (4) other intellectual property) of the
Company that is presently owned, held or used by the Company, or
under which the Company owns or holds any licenses, and agreements
relating to technology, know-how and processes that the Company has
licensed or authorized for use by others.
(B) To the
knowledge of the Stockholders, neither the Company, nor any
products or services sold or provided by the Company, has
interfered with, infringed upon, misappropriated, or violated any
rights in Intellectual Property of third parties, and the continued
manufacture and sale of such products and services by Buyer and the
Company after Closing will not interfere with, infringe upon,
misappropriate or violate any right in the Intellectual Property of
third parties. The Company has not received any claim, demand or
notice alleging any such interference, infringement,
misappropriation or violation thereof. To the knowledge of the
Stockholders, no third party has interfered with, infringed upon,
misappropriated or violated any Intellectual Property of the
Company. The Company owns or possesses, and will convey to Buyer on
the Closing Date, adequate assignments, licenses or other valid
rights to own the Intellectual Property of the Company. The
Intellectual Property of the Company constitutes all the
Intellectual Property that is material to the conduct of the
Company’s business as now conducted or proposed to be
conducted. All software used by the Company is used in accordance
with all applicable contracts. The Company has paid all amounts
required to be paid in connection with all software used by the
Company.
(C) None of
the Intellectual Property of the Company is subject to any lien or
encumbrance in favor of any third party and the Company owns all
right, title and interest therein and thereto, except for licenses
or rights of use granted to customers in the ordinary course of
business.
(n)
Litigation; and Claims . Except as set forth on
Schedule 4(n) , there is no suit, action or legal,
administrative, arbitration, mediation, investigation or other
proceedings of any nature pending, or to the knowledge of the
Stockholders threatened, (A) against the Company or any
Stockholder; (B) which affects in any way the Company or any
Stockholder; or (C) which would materially and adversely
affect the legality or validity of this Agreement or the
consummation of the transactions contemplated hereby, or the
continued operations and earnings of the Company.
(i)
The Company has (A) accurately prepared and timely filed with
the appropriate governmental agencies all Tax Returns required to
be filed by it; (B) paid, or accrued as a liability of the Company
all Taxes, which have become due or will become due for the period
or periods ending on or before the Closing, pursuant to said Tax
Returns or pursuant to any assessment against the Company or
pursuant to any Federal, state or local law, including, without
limitation, Federal, state and local income taxes, payroll
withholding and unemployment taxes, and sales, use, excise and
property taxes; and (C) withheld or collected all Taxes, to
the extent required, and such Taxes have
9
been paid to
the proper governmental authority or have been accrued on the books
of the Company as a liability.
(ii)
None of the Federal, state, local or other income, sales or other
Tax Returns of the Company have been audited or investigated by the
Internal Revenue Service or other appropriate taxing authorities,
and to the knowledge of the Stockholders no audit or investigation
is threatened or contemplated. The Stockholders have provided Buyer
with true and complete copies of the Company’s Federal and
state income tax returns for the past three
(3) years.
(iii)
There are no liens in favor of governmental agencies or authorities
upon any of the assets or properties of the Company, other than
with respect to Taxes not yet due and payable
(iv)
The Company has not: (A) received written notice from any
jurisdiction that the jurisdiction believes that the Company was
required to file any Tax Return that was not filed;
(B) received a proposed assessment of Tax against the Company
or any of its assets or properties; (C) waived any statute of
limitations with respect to Taxes or agreed to an extension of time
with respect to a Tax assessment or deficiency; and (D) been a
United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(l)(A)(ii) of the Code.
(v)
The Company is not: (A) a party to, or bound by, or has any
obligation under, any Tax allocation or sharing agreement or
similar contract or arrangement or any agreement that obligates it
to make any payment computed by reference to the Taxes, taxable
income or taxable losses of any other person or entity; and (B) (I)
is or has ever been a member of an affiliated group of corporations
filing a consolidated Federal income tax return (other than a group
the common parent of which was the Company), or (II) has any
liability for the Taxes of any person or entity (other than the
Company) under Treasury Regulations Section 1.1502-6 (or any
similar provision of any state, local, or foreign law), as a
transferee or successor, by contract, or otherwise; and (C) a
“consenting corporation” within the meaning of Section
341(f) of the Code, and none of the assets of the Company is
subject to an election under Section 341(f) of the Code.
(vi)
The Company will not be
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