STOCK PURCHASE AGREEMENT
This
Stock Purchase Agreement (this “ Agreement
”), dated as of February 13, 2007 to be effective as of
January 1, 2007 (the “ Effective Date ”),
is by and among Lithotripters, Inc., a North Carolina corporation
(“ Buyer ”), HealthTronics, Inc., a
Georgia corporation (“ HTRN ”), as to
Sections 2.2 and 12.14 only, Keystone ABG Inc., a
Pennsylvania corporation (the “ General Partner
”), Keystone Kidney Associates, PC, a Pennsylvania
professional corporation (the “ PC ”),
and David Arsht, D.O. (“ Arsht ”), P.
Kenneth Brownstein, M.D. (“ Brownstein
”), Larry E. Goldstein, M.D. (“Goldstein
”) and Michael Dernoga (“ Dernoga
”, and each such natural person, individually, a “
Seller ” and, collectively, “
Sellers ” and, together with the General
Partner and the PC, the “ Seller Parties
” and, together with Buyer, the “ Parties
”).
RECITALS
Sellers
desire to sell to Buyer, and Buyer desires to purchase from
Sellers, all of the outstanding capital stock of the General
Partner (the “ Stock ”) and all of the
outstanding capital stock of the PC (the “ PC
Stock ”).
On
the date hereof, Buyer, HTRN, and Sellers have entered into an
interest purchase agreement (the “Interest Purchase
Agreement ”) pursuant to which, subject to the terms
and conditions thereof, Buyer will acquire all of the limited
partner interests in Keystone Mobile Partners, L.P. (the “
Partnership ”) owned by Sellers (the “
Interests ”).
AGREEMENT
NOW,
THEREFORE, in consideration of the premises, the respective
representations, warranties, covenants and agreements contained in
this Agreement, and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the Parties agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK;
PURCHASE PRICE ALLOCATION
1.1 Purchase and Sale of Stock . On and subject to
the terms and conditions of this Agreement, on the Closing Date (as
defined in Article 8 ), Buyer will purchase from Sellers,
and Sellers will sell to Buyer (or, with respect to the PC Stock,
its designee), the Stock and the PC Stock for the consideration
specified in Section 1.2 , the amount of which Stock and PC
Stock shall be sold by each Seller as set forth in Schedule
1.1 .
1.2 Purchase Price . Buyer will pay to Sellers an
aggregate purchase price (the “ Purchase Price
”) equal to $6,878,000 (subject to reduction as set forth in
Section 4.5 ), all of which will be paid at the Closing (as
defined in Article 8 ) in cash by wire transfer of
immediately available funds in accordance with wire transfer
instructions given by Sellers in writing to Buyer at least two (2)
business days prior to the Closing Date, which such Purchase Price
will be apportioned among Sellers as set forth on Schedule
1.2 . The Parties acknowledge that the Purchase Price and any
consideration paid pursuant to Section 1.4 is the
consideration for the purchased and sold Stock and PC Stock as well
as the non-competition provisions set forth herein.
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1.3 Allocation of Purchase Price . The Purchase Price
will be allocated in the manner set forth in Schedule 1.3 to
be attached hereto prior to Closing (the “ Purchase
Price Allocation ”). Each of the Parties, when
reporting the transactions consummated hereunder in their
respective tax returns, shall allocate the Purchase Price paid or
received, as the case may be, in a manner that is consistent with
the Purchase Price Allocation set forth in Schedule 1.3
hereto. Additionally, each of the Parties will comply with, and
furnish the information required by Section 1060 of the
Internal Revenue Code of 1986, as amended (the “
Code ”), and any regulations
thereunder.
1.4 Earnout
Payment.
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(a)
As additional consideration for the Stock, the PC Stock, and the
non-competition provisions set forth herein, Buyer will pay to each
Seller, based on such Seller’s percentage as set forth on
Schedule 1.2 , such Seller’s proportionate share of
the Earnout Amounts, if any. Any Earnout Amount will be paid in
cash in immediately available funds in accordance with wire
transfer instructions given by Sellers in writing to
Buyer.
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(b)
Within 30 days after the Year One Collection Date (as defined
below), Buyer will deliver to Sellers a schedule setting forth in
reasonable detail Buyer’s calculation of the Year One Earnout
Amount. Such calculation will be subject to Sellers’ review.
In reviewing such calculation, Sellers will have the right to
communicate with, and to review the work papers, schedules,
memoranda, and other documents Buyer or its representatives
prepared or reviewed in performing such calculation and thereafter
will have access to all relevant books and records, all to the
extent Sellers reasonably require to complete their review of such
calculation. Within thirty (30) days after their receipt of
Buyer’s calculation of the Year One Earnout Amount, Sellers
will advise Buyer whether, based on such review, they have any
exception to such calculation. Unless Sellers deliver to Buyer
within such thirty-day period a letter describing their exceptions
to Buyer’s calculation of the Year One Earnout Amount as set
forth in the schedule delivered by Buyer to Sellers described in
this Section 1.4(b) or a letter describing Buyer’s
failure to comply with its obligations under this Section
1.4(b) that has resulted in Sellers’ inability to
determine exceptions to the schedule Buyer delivers, Buyer’s
calculation of the Year One Earnout Amount for calendar year 2007
will be conclusive and binding on Buyer and Sellers as the Year One
Earnout Amount. If Sellers deliver such letter, the Parties will
follow the procedures for resolution of disputes set forth in
Section 1.4(f) .
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(c)
Within 30 days after the Year Two Collection Date (as defined
below), Buyer will deliver to Sellers a schedule setting forth in
reasonable detail Buyer’s calculation of the Year Two Earnout
Amount. Such calculation will be subject to Sellers’ review.
In reviewing such calculation, Sellers will have the right to
communicate with, and to review the work papers, schedules,
memoranda, and other documents Buyer or its representatives
prepared or reviewed in performing such calculation and thereafter
will have access to all relevant books and records, all to the
extent Sellers reasonably require to complete their review of such
calculation. Within thirty (30) days after their receipt of
Buyer’s calculation of the Year Two Earnout Amount, Sellers
will advise Buyer whether, based on such review, they have any
exception to such calculation. Unless Sellers deliver to Buyer
within such thirty-day period a letter describing their exceptions
to Buyer’s calculation of the Year Two Earnout Amount as set
forth in the schedule delivered by Buyer to Sellers described in
this Section 1.4(c) or a letter describing Buyer’s
failure to comply with its obligations under this Section
1.4(c) that has resulted in Sellers’ inability to
determine exceptions to the schedule Buyer delivers, Buyer’s
calculation of the Year Two Earnout Amount for calendar year 2008
will be conclusive and binding on Buyer and Sellers as the Year Two
Earnout Amount. If Sellers deliver such letter, the Parties will
follow the procedures for resolution of disputes set forth in
Section 1.4(f) .
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(d)
Within three business days of the final determination of the
applicable Earnout Amount under Sections 1.4(b) and 1.4(c) ,
or, if applicable, Section 1.4(f) , Buyer will pay to
Sellers an amount equal to the applicable Earnout Amount in
accordance with Section 1.4(a) .
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(i) “ Earnout
Amounts ” shall mean the Year One Earnout Amount and
the Year Two Earnout Amount.
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(ii) “Year
One Earnout Amount” shall mean an amount equal to the
sum of all Year One Incremental Charges; provided that (x) if
Revenues of the PC for the year ended December 31, 2007 is less
than 90% of Revenues of the PC for the year ended December 31,
2006, the Year One Earnout Amount shall be zero and (y) if the PC
or the Partnership is required to return or refund all or a portion
of any Year One Incremental Charge, the Year One Earnout Amount
shall be reduced by the aggregate amount of such returns or
refunds.
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(iii)
“ Year Two Earnout Amount ” shall mean an
amount equal to the sum of all Year Two Incremental Charges;
provided that (x) if Revenues of the PC for the year ended December
31, 2008 is less than 90% of Revenues of the PC for the year ended
December 31, 2006, the Year Two Earnout Amount shall be zero and
(y) if the PC or the Partnership is required to return or refund
all or a portion of any Year Two Incremental Charge, the Year Two
Earnout Amount shall be reduced by the aggregate amount of such
returns or refunds.
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(iv)
A “Year One Incremental Charge” shall
mean, with respect to a lithotripsy procedure performed during 2007
with equipment owned or leased by the Partnership (unless such
procedure is performed on behalf of or for the benefit of DSL
rather than the Partnership), an amount equal to (but only to the
extent the PC has been actually reimbursed under the Aetna Contract
for the full case rate amount set forth in the Aetna Contract on or
before the Year One Collection Date with respect to such procedure)
(x) $1,870, multiplied by (y) the sum (the “ Acquired
Percentage ”) of 21% plus the percentage of limited
partner interests in the Partnership acquired by Buyer
hereunder.
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(v) A “ Year
Two Incremental Charge ” shall mean, with respect to
a lithotripsy procedure performed during 2008 with equipment owned
or leased by the Partnership (unless such procedure is performed on
behalf of or for the benefit of DSL rather than the Partnership),
an amount equal to (but only to the extent the PC has been actually
reimbursed under the Aetna Contract for the full case rate amount
set forth in the Aetna Contract on or before the Year Two
Collection Date with respect to such procedure) (x) $1,683
multiplied by (y) the Acquired Percentage.
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(vi) “Aetna
Contract” shall mean that certain Facility Agreement,
effective on May 1, 1996, by and between United States Health Care
Systems of Pennsylvania, Inc. d/b/a Aetna U.S. Healthcare and
Keystone Kidney Center, as amended by that certain Amendment,
effective as of October 15, 2001, that certain Amendment, dated as
of September 15, 2003, and that certain Amendment, dated as of
January 1, 2007.
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(vii)
“Revenues” shall mean for the applicable
period (x) the revenues on the financial statements of the PC as
determined in accordance with GAAP (as defined in Section
3.6) and on a basis consistent with and utilizing the same
principles and policies as those used in preparing the Interim
Financial Statements (unless GAAP requires a change in such
principles or policies), less (y) revenues on the financial
statements of the PC that relate to managing, billing for,
providing technical or other services to, or otherwise relating to
the operations of, Diamond State Lithotripsy, LLC
(“DSL ”).
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(viii)
“Earnout Period” shall mean the period
commencing on January 1, 2007 and ending December 31,
2008.
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(ix)
“Year One Collection Date” shall mean
March 1, 2008.
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(x)
“Year Two Collection Date” shall mean
March 1, 2009.
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(f)
If Buyer and Sellers are unable to agree on an Earnout Amount or
the calculation of Revenues, then (i) for thirty (30) days after
the date Buyer receives a letter describing exceptions to
Buyer’s calculation of the applicable Earnout Amount or
Revenues, Sellers and Buyer will use their commercially reasonable
efforts to agree on the calculation of such Earnout Amount or
Revenues, as applicable, and (ii) lacking such agreement, the
matter will be referred to an independent “Big 4”,
national, or regional accounting firm, to be agreed upon by Buyer
and Sellers, which will determine the correct applicable Earnout
Amount or Revenues within forty-five (45) days of such referral,
which determination will be final and binding on Buyer and Sellers
for all purposes.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES CONCERNING SELLERS AND
BUYER
2.1 Representations and Warranties of Sellers . Each
Seller, severally and not jointly, represents and warrants to Buyer
that the statements contained in this Section 2.1 as relates
to such Seller are true, correct and complete as of the date hereof
and as of the Closing Date.
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(a)
Power and Authority; Enforceability . Each Seller has the
requisite competence and authority to execute and deliver each
Contract (as defined in Section 2.1(b) ) or writing
executed or delivered as required under this Agreement and the
Interest Purchase Agreement and each amendment or supplement to any
of the foregoing (including this Agreement and the Interest
Purchase Agreement, the “ Transaction Documents
”) to which he is a party, and to perform and to consummate
the transactions contemplated hereby and thereby (the “
Transactions ”). Each Seller has taken all
action necessary to authorize the execution and delivery by such
Seller of each Transaction Document to which such Seller is party,
the performance of such Seller’s obligations hereunder and
thereunder, and the consummation by such Seller of the
Transactions. With respect to each Seller, this Agreement and the
Interest Purchase Agreement have been, and as of the Closing each
other Transaction Document to which such Seller is a party will
have been, duly authorized, executed and delivered by such Seller,
and, assuming the due authorization, execution and delivery by the
other Parties hereto and thereto, this Agreement and the Interest
Purchase Agreement are, and as of the Closing each other
Transaction Document to which such Seller is a party will be,
enforceable against such Seller in accordance with its terms except
as such enforceability may be subject to the effects of bankruptcy,
insolvency, reorganization, moratorium or other Laws (as defined in
Section 2.1(b) ) relating to or affecting the rights of
creditors and general principles of equity (the “
Enforceability Exception ”).
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(b)
No Violation; Necessary Approvals . Except as set forth in
Schedule 2.1(b) , the execution and the delivery by each
Seller of this Agreement and the other Transaction Documents to
which such Seller is a party, the performance by such Seller of
such Seller’s obligations hereunder and thereunder, and
consummation of the Transactions by such Seller will not (i) with
or without notice or lapse of time, constitute, create or result in
a breach or violation of, default under, loss of benefit or right
under or acceleration of performance of any obligation required
under any (A) law (statutory, common or otherwise), constitution,
ordinance, rule, regulation, executive order or other similar
authority (“ Law ”) enacted, adopted,
promulgated or applied by any legislature, agency, bureau, branch,
department, division, commission, court, tribunal or other similar
recognized organization or body of any federal, state, county,
municipal, local or foreign government or other similar recognized
organization or body exercising similar powers or authority (a
“ Governmental Body ”), (B) order,
ruling, decision, award, judgment, injunction or other similar
determination or finding by, before or under the supervision of any
Governmental Body or arbitrator (an “ Order
”), (C) contract, agreement, arrangement, commitment,
instrument, document or similar understanding (whether written or
oral), including a lease, sublease and rights thereunder (“
Contract ”) or permit, license, certificate,
waiver, notice and similar authorization (“
Permit ”) to which, in the case of (A), (B) or
(C), such Seller or any Company (as defined in Section 3.1 )
is a party or by which any of them is bound or any of their
respective assets are subject, or (D) any provision of the
organizational documents of such Seller or any Company as in effect
on the Closing Date; (ii) result in the imposition of any lien,
claim or encumbrance (an “ Encumbrance ”)
upon any assets (including the Stock and Interests) owned by such
Seller or any Company; (iii) require any consent, approval,
notification, waiver, or similar action that is necessary (“
Consent ”) under any Contract or organizational
document to which such Seller or any Company is a party or by which
any of them is bound or any of their respective assets are subject;
(iv) require any Permit or Consent under any Law or Order other
than required filings, if any, with the Securities and Exchange
Commission (“ SEC ”); or (v) trigger any
rights of first refusal, preferential purchase or similar rights
with respect to any of the Stock, Interests or PC Stock.
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(c)
Brokers’ Fees . No Seller has any liability or
obligation to pay any compensation to any broker, finder or agent
with respect to the Transactions for which Buyer or a Company could
become directly or indirectly liable.
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(d)
Stock and Interests; Seller Information . Each Seller holds
of record and owns beneficially the capital stock of the General
Partner, the limited partner interests in the Partnership and the
capital stock of the PC as set forth next to such Seller’s
name in Schedule 1.1 , free and clear of any Encumbrances
(other than any restrictions on transfer under the Securities Act
of 1933, as amended (the “ Securities Act
”), and state securities Laws). No Seller is a party to any
Contract (other than this Agreement) that could require such Seller
to sell, transfer, or otherwise dispose of any equity interests of
the General Partner, the Partnership or the PC. No Seller is a
party to any other Contract with respect to any equity interests of
the General Partner, the Partnership (other than the partnership
agreement of the Partnership as described in Schedule 3.14
(the “Partnership Agreement ”)) or the
PC. Immediately following consummation of the Transactions, Buyer
shall own the Stock, the Interests, and the PC Stock, free and
clear of any Encumbrances (other than any restrictions on transfer
under the Securities Act and state securities Laws and Encumbrances
created by Buyer).
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(e)
Litigation . No Action is pending against a Seller or, to
the knowledge of such Seller, threatened against such Seller
seeking to prohibit the consummation of the
Transactions.
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2.2 Representations and Warranties of Buyer and HTRN
. Each of Buyer and HTRN represents and warrants to Sellers that
the statements contained in this Section 2.2 are true,
correct and complete as of the date hereof and as of the Closing
Date.
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(a)
Organization of Buyer and HTRN . Each of Buyer and HTRN is
an entity duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its incorporation.
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(b)
Power and Authority; Enforceability . Each of Buyer and HTRN
has the power and authority necessary to execute and deliver each
Transaction Document to which it is a party and to perform and
consummate the Transactions. Each of Buyer and HTRN has taken all
action necessary to authorize its execution and delivery of each
Transaction Document to which Buyer or HTRN, as applicable, is a
party, the performance of its obligations hereunder and thereunder
and its consummation of the Transactions. This Agreement and the
Interest Purchase Agreement have been, and as of the Closing each
other Transaction Document to which Buyer or HTRN is a party will
have been, duly authorized, executed and delivered by Buyer or
HTRN, as applicable, and, assuming the due authorization, execution
and delivery by the other Parties hereto and thereto, this
Agreement and the Interest Purchase Agreement are, and as of the
Closing each other Transaction document to which Buyer or HTRN is a
party will be, enforceable against Buyer or HTRN, as applicable, in
accordance with its terms, subject to the Enforceability
Exception.
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(c)
No Violation; Necessary Approvals . The execution and the
delivery by Buyer and HTRN of this Agreement and the other
Transaction Documents to which Buyer or HTRN is a party, the
performance by Buyer or HTRN of its obligations hereunder and
thereunder and the consummation of the Transactions by Buyer or
HTRN will not (i) with or without notice or lapse of time,
constitute, create or result in a breach or violation of, default
under, loss of benefit or right under or acceleration of
performance of any obligation required under any Law, Order,
Contract or Permit to which Buyer or HTRN is a party or by which it
is bound or any of its assets are subject, or any provision of
Buyer’s or HTRN’s organizational documents as in effect
on the Closing Date, other than such breaches, violations,
defaults, losses or accelerations that would not prevent the
consummation of the Transactions; (ii) require any Consent under
any Contract or organizational document to which Buyer or HTRN is a
party or by which it is bound, other than such Consents that would
not prevent the consummation of the Transactions; or (iii) require
any Permit under any Law or Order other than (A) required filings,
if any, with the SEC, and (B) such Permits that would not prevent
the consummation of the Transactions.
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(d)
Litigation . No Action is pending against Buyer or HTRN or,
to the knowledge of Buyer or HTRN, threatened against Buyer or HTRN
seeking to prohibit the consummation of the
Transactions.
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(e)
Brokers’ Fees . Neither Buyer nor HTRN has any
liability or obligation to pay any compensation to any broker,
finder or agent with respect to the transactions for which any
Seller Party could become directly or indirectly liable.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES
Each
Seller Party other than Dernoga, jointly and severally, and
Dernoga, severally and not jointly, represents and warrants to
Buyer that the statements contained in this Article 3 are
true, correct and complete as of the date hereof and as of the
Closing Date.
3.1 Organization of Companies . Each of the
Partnership, the General Partner, the PC, Keystone Mobile Services,
L.P., a Pennsylvania limited partnership that is wholly owned by
the Partnership (“ KMS ”), Keystone ABG
LLC, a Pennsylvania limited liability company that is wholly owned
by the GP (“ KABG ”), Keystone Lehigh
Valley Mobile Partners, LP, a Pennsylvania limited partnership
(“ Keystone Lehigh ”), and Keystone
Mobile Services, P.C., a Pennsylvania professional corporation that
is wholly owned by the PC (“ KMSPC ”)
(each a “ Company ” and collectively the
“ Companies ”) (a) is an entity duly
organized, validly existing and in good standing under the Laws of
the jurisdiction of its incorporation or formation, (b) is duly
qualified to do business as a foreign corporation or entity and is
in good standing under the Laws of each jurisdiction in which
either the ownership or use of the properties owned or used by it,
or the nature of the activities conducted by it, requires such
qualification, except where the failure to qualify would not have a
material adverse effect on such Company’s business,
operations, condition (financial or otherwise), properties, assets,
liabilities, rights or obligations, (c) has the power and authority
necessary to own or lease its properties and to carry on its
businesses as currently conducted and (d) is not in breach or
violation of, or default under, any provision of its organizational
documents. No Company has ever approved or taken any action, nor is
there any pending or (to any Seller Party’s knowledge)
threatened claim, action, suit, arbitration, mediation,
investigation or similar proceeding (an “
Action ”), seeking or otherwise contemplating
any Company’s dissolution, liquidation, insolvency or
rehabilitation.
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3.2 Power and Authority; Enforceability . Each
Company has the relevant entity power and authority necessary to
execute and deliver each Transaction Document to which such Company
is a party and to perform and consummate the Transactions. Each
Company has taken all action necessary to authorize the execution
and delivery by such Company of each Transaction Document to which
it is a party, the performance of its obligations hereunder and
thereunder, and the consummation by such Company of the
Transactions. With respect to each Company, this Agreement and the
Interest Purchase Agreement have been, and as of the Closing each
other Transaction Document to which such Company is a party will
have been, duly authorized, executed and delivered by such Company
and, assuming the due authorization, execution and delivery by the
other Parties hereto and thereto, this Agreement and the Interest
Purchase Agreement are, and as of the Closing each other
Transaction Document to which such Company is a party will be,
enforceable against such Company in accordance with its terms,
subject to the Enforceability Exception.
3.3 No Violation; Necessary Approvals . Except as set
forth on Schedule 3.3 , the execution and delivery by each
Company of this Agreement and the other Transaction Documents to
which such Company is a party, the performance by such Company of
its obligations hereunder and thereunder and the consummation of
the Transactions by such Company will not (a) with or without
notice or lapse of time, constitute, create or result in a breach
or violation of, default under, loss of benefit or right under or
acceleration of performance of any obligation required under any
Law, Order, Contract or Permit to which any Company is a party or
by which any Company is bound or any assets of any Company are
subject, or under any provision of any Company’s
organizational documents as in effect on the Closing Date, (b)
require any Consent under any Contract or organizational document
to which any Company is a party or by which any Company is bound or
any assets of any Company are subject, (c) require any Permit under
any Law or Order other than required filings, if any, with the SEC,
(d) trigger any rights of first refusal, preferential purchase or
similar rights or (e) cause the recognition of gain or loss for tax
purposes with respect to any Company or subject any Company or
assets of any Company to any Tax (as defined in Section 3.10
).
3.4
Capitalization.
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(a)
Schedule 3.4(a) sets forth (i) the number of shares of
authorized capital stock of each class of capital stock of the
General Partner, (ii) the number of issued and outstanding
shares of each class of capital stock of the General Partner, and
(iii) the name, address, and number of shares of capital stock
of the General Partner owned by each Seller. As of the date hereof,
Sellers are the record and beneficial owners of all shares of
capital stock of the General Partner. Except for the shares of
authorized capital stock issued and outstanding as set forth on
Schedule 3.4(a) , there are no shares of capital stock or
other securities of the General Partner issued, reserved for
issuance, or outstanding. All of the issued and outstanding capital
stock of the General Partner: (i) have been duly authorized
and are validly issued, fully paid and nonassessable,
(ii) were issued in compliance with all applicable state and
federal securities Laws, and (iii) were not issued in breach
or violation of, or did not cause as a result of the issuance
thereof a default under, any Contract with or right granted to any
individual, partnership, limited liability company, corporation,
association, trust, or other entity (“ Person
”). The General Partner has no outstanding options, warrants,
exchangeable or convertible securities, subscription rights,
exchange rights, statutory pre-emptive rights, pre-emptive rights
granted under the General Partner’s organizational documents,
stock appreciation rights, phantom stock, profit participation or
similar rights, or any other right or instrument pursuant to which
any Person may be entitled to purchase any security of the General
Partner, and has no obligation to issue any securities, rights or
instruments. There are no Contracts with respect to the voting or
transfer of any capital stock of the General Partner. The General
Partner is not obligated to redeem or otherwise acquire any of its
outstanding capital stock. The General Partner is not a party to
any Contract that obligates it to, and does not otherwise have any
obligation to, acquire directly or indirectly any capital stock,
membership interest, partnership interest, or joint venture
interest in, or any security issued by, any other
Person.
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(b)
Schedule 3.4(b) sets forth (i) the number of shares of
authorized capital stock of each class of all capital stock of the
PC, (ii) the number of issued and outstanding shares of each
class of capital stock of the PC, and (iii) the name, address,
and number of shares of capital stock of the PC owned by each
Seller. As of the date hereof, Sellers are the record and
beneficial owners of all the shares of capital stock of the PC.
Except for the shares of authorized capital stock issued and
outstanding as set forth on Schedule 3.4(b) , there are no
shares of capital stock or other securities of the PC issued,
reserved for issuance, or outstanding. All of the issued and
outstanding capital stock of the PC: (i) have been duly
authorized and are validly issued, fully paid and nonassessable,
(ii) were issued in compliance with all applicable state and
federal securities Laws, and (iii) were not issued in breach
or violation of, or did not cause as a result of the issuance
thereof a default under, any Contract with or right granted to any
Person. The PC has no outstanding options, warrants, exchangeable
or convertible securities, subscription rights, exchange rights,
statutory pre-emptive rights, pre-emptive rights granted under the
PC’s organizational documents, stock appreciation rights,
phantom stock, profit participation or similar rights, or any other
right or instrument pursuant to which any Person may be entitled to
purchase any security of the PC, and has no obligation to issue any
securities, rights or instruments. There are no Contracts with
respect to the voting or transfer of any capital stock of the PC.
The PC is not obligated to redeem or otherwise acquire any of its
outstanding capital stock. The PC is not a party to any Contract
that obligates it to, and does not otherwise have any obligation
to, acquire directly or indirectly any capital stock, membership
interest, partnership interest, or joint venture interest in, or
any security issued by, any other Person.
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(c)
The total outstanding partnership interests of the Partnership as
of the date hereof consist solely of the partnership interests in
the Partnership set forth, by partner, in Schedule 3.4(c).
The General Partner holds of record and owns beneficially a
twenty-one (21) percent general partner interest in the
Partnership, free and clear of any Encumbrances (other than
restrictions on transfer under the Securities Act and state
securities Laws and under the terms of the Partnership Agreement).
All of the issued and outstanding partnership interests in the
Partnership: (a) have been duly authorized and are validly issued,
fully paid, and nonassessable, (b) were issued in compliance with
all applicable state and federal securities Laws, (c) were not
issued in breach or violation of, or did not cause as a result of
the issuance thereof a default under, any Contract with or right
granted to any Person and (d) are held of record and owned
beneficially by the respective partners as set forth in Schedule
3.4(c) . The Partnership has no outstanding options, warrants,
exchangeable or convertible securities, subscription rights,
exchange rights, statutory pre-emptive rights, preemptive rights
granted under the Partnership’s organizational documents,
stock appreciation rights, phantom stock, profit participation or
similar rights, or any other right or instrument pursuant to which
any Person may be entitled to purchase any security of the
Partnership (other than under Section 8.05 of the Partnership
Agreement), and has no obligation to issue any rights or
instruments. Except as set forth in the Partnership Agreement as in
effect on the date hereof, there are no Contracts with respect to
the voting or transfer of any of the Partnership’s
partnership interests. The Partnership is not obligated to redeem
or otherwise acquire any of its outstanding partnership interests.
The Partnership is not a party to any Contract that obligates it
to, and does not otherwise have any obligation to, acquire directly
or indirectly any capital stock, membership interest, partnership
interest, or joint venture interest in, or any security issued by,
any other Person. No Seller is a 2005 Limited Partner (as defined
in the Partnership Agreement) and, immediately following
consummation of the Transactions, Buyer will not be a 2005 Limited
Partner (as defined in the Partnership Agreement).
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(d)
The total outstanding partnership interests of KMS as of the date
hereof consist solely of the partnership interests in KMS set
forth, by partner, on Schedule 3.4(d) . Except for the
partnership interests issued and outstanding as set forth on
Schedule 3.4(d) , there are no partnership interests or
other securities of KMS issued, reserved for issuance, or
outstanding. All of the issued and outstanding partnership
interests in KMS: (i) have been duly authorized and are
validly issued, fully paid and nonassessable, (ii) were issued
in compliance with all applicable state and federal securities
Laws, (iii) were not issued in breach or violation of, or did
not cause as a result of the issuance thereof a default under, any
Contract with or right granted to any Person, and (iv) are held of
record and beneficially by the partners as set forth on Schedule
3.4(d) . KMS has no outstanding options, warrants, exchangeable
or convertible securities, subscription rights, exchange rights,
statutory pre-emptive rights, pre-emptive rights granted under
KMS’s organizational documents, stock appreciation rights,
phantom stock, profit participation or similar rights, or any other
right or instrument pursuant to which any Person may be entitled to
purchase any security of KMS, and has no obligation to issue any
securities, rights or instruments. There are no Contracts with
respect to the voting or transfer of any partnership interests in
KMS. KMS is not obligated to redeem or otherwise acquire any of its
outstanding partnership interests. KMS is not a party to any
Contract that obligates it to, and does not otherwise have any
obligation to, acquire directly or indirectly any capital stock,
membership interest, partnership interest, or joint venture
interest in, or any security issued by, any other
Person.
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(e)
The total outstanding membership interests of KABG as of the date
hereof consist solely of the membership interests in KABG set
forth, by member, on Schedule 3.4(d) . Except for the
membership interests issued and outstanding as set forth on
Schedule 3.4(d) , there are no membership interests or other
securities of KABG issued, reserved for issuance, or outstanding.
All of the issued and outstanding membership interests in KABG:
(i) have been duly authorized and are validly issued, fully
paid and nonassessable, (ii) were issued in compliance with
all applicable state and federal securities Laws, (iii) were
not issued in breach or violation of, or did not cause as a result
of the issuance thereof a default under, any Contract with or right
granted to any Person, and (iv) are held of record and beneficially
by the members as set forth on Schedule 3.4(d) . KABG has no
outstanding options, warrants, exchangeable or convertible
securities, subscription rights, exchange rights, statutory
pre-emptive rights, pre-emptive rights granted under KABG’s
organizational documents, stock appreciation rights, phantom stock,
profit participation or similar rights, or any other right or
instrument pursuant to which any Person may be entitled to purchase
any security of KABG, and has no obligation to issue any
securities, rights or instruments. There are no Contracts with
respect to the voting or transfer of any membership interests in
KABG. KABG is not obligated to redeem or otherwise acquire any of
its outstanding membership interests. KABG is not a party to any
Contract that obligates it to, and does not otherwise have any
obligation to, acquire directly or indirectly any capital stock,
membership interest, partnership interest, or joint venture
interest in, or any security issued by, any other
Person.
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(f)
The total outstanding partnership interests of Keystone Lehigh as
of the date hereof consist solely of the partnership interests in
Keystone Lehigh set forth, by partner, on Schedule 3.4(f).
Except for the partnership interests issued and outstanding as set
forth on Schedule 3.4(f) , there are no partnership
interests or other securities of Keystone Lehigh issued, reserved
for issuance, or outstanding. All of the issued and outstanding
partnership interests in Keystone Lehigh: (i) have been duly
authorized and are validly issued, fully paid and nonassessable,
(ii) were issued in compliance with all applicable state and
federal securities Laws, (iii) were not issued in breach or
violation of, or did not cause as a result of the issuance thereof
a default under, any Contract with or right granted to any Person,
and (iv) are held of record and beneficially by the partners as set
forth on Schedule 3.4(f) . Keystone Lehigh has no
outstanding options, warrants, exchangeable or convertible
securities, subscription rights, exchange rights, statutory
pre-emptive rights, pre-emptive rights granted under Keystone
Lehigh’s organizational documents, stock appreciation rights,
phantom stock, profit participation or similar rights, or any other
right or instrument pursuant to which any Person may be entitled to
purchase any security of Keystone Lehigh, and has no obligation to
issue any securities, rights or instruments. There are no Contracts
with respect to the voting or transfer of any partnership interests
in Keystone Lehigh. Keystone Lehigh is not obligated to redeem or
otherwise acquire any of its outstanding partnership interests.
Keystone Lehigh is not a party to any Contract that obligates it
to, and does not otherwise have any obligation to, acquire directly
or indirectly any capital stock, membership interest, partnership
interest, or joint venture interest in, or any security issued by,
any other Person.
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(g)
Schedule 3.4(g) sets forth (i) the number of shares of
authorized capital stock of each class of all capital stock of
KMSPC, (ii) the number of issued and outstanding shares of
each class of capital stock of KMSPC, and (iii) the name,
address, and number of shares of capital stock of KMSPC owned by
each Seller. As of the date hereof, the PC is the record and
beneficial owner of all the shares of capital stock of KMSPC.
Except for the shares of authorized capital stock issued and
outstanding as set forth on Schedule 3.4(g) , there are no
shares of capital stock or other securities of KMSPC issued,
reserved for issuance, or outstanding. All of the issued and
outstanding capital stock of KMSPC: (i) have been duly
authorized and are validly issued, fully paid and nonassessable,
(ii) were issued in compliance with all applicable state and
federal securities Laws, and (iii) were not issued in breach
or violation of, or did not cause as a result of the issuance
thereof a default under, any Contract with or right granted to any
Person. KMSPC has no outstanding options, warrants, exchangeable or
convertible securities, subscription rights, exchange rights,
statutory pre-emptive rights, pre-emptive rights granted under
KMSPC’s organizational documents, stock appreciation rights,
phantom stock, profit participation or similar rights, or any other
right or instrument pursuant to which any Person may be entitled to
purchase any security of KMSPC, and has no obligation to issue any
securities, rights or instruments. There are no Contracts with
respect to the voting or transfer of any capital stock of KMSPC.
KMSPC is not obligated to redeem or otherwise acquire any of its
outstanding capital stock. KMSPC is not a party to any Contract
that obligates it to, and does not otherwise have any obligation
to, acquire directly or indirectly any capital stock, membership
interest, partnership interest, or joint venture interest in, or
any security issued by, any other Person.
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(h)
Except as set forth on Schedule 3.4(h) , none of the
Companies owns of record or beneficially any equity interest in any
other Person.
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3.5 Records . The copies of each Company’s
organizational documents that were provided to Buyer are accurate
and complete and reflect all amendments made through the date
hereof. Each Company’s minute books and other records made
available to Buyer for review were true, correct and complete as of
the date of such review, no further entries have been made through
the date of this Agreement, and such minute books and records
contain an accurate record of all actions of the owners,
stockholders, partners, members, directors, managers and committees
thereof taken by written consent, at a meeting, or otherwise since
formation.
3.6 Financial Statements . Set forth on
Schedule 3.6 are the following financial statements
(the “ Financial Statements ”) of the
Companies: (a) (i) the General Partner’s unaudited balance
sheets and statements of income, changes in stockholders’
equity and cash flow as of and for the fiscal years ended December
31, 2005, 2004 and, 2003, and (ii) the General Partner’s
unaudited balance sheet (the “ Most Recent GP Balance
Sheet ”) and statements of income, changes in
stockholders’ equity and cash flow (the “ Interim
GP Financial Statements ”) as of and for the eleven
months ended November 30, 2006 (the “Balance Sheet
Date ”); (b) (i) the PC’s audited balance
sheets and statements of income, changes in stockholders’
equity and cash flow as of and for the fiscal years ended December
31, 2005, 2004 and 2003, and (ii) the PC’s unaudited balance
sheet (the “ Most Recent PC Balance Sheet
”) and statements of income, changes in stockholders’
equity and cash flow (the “ Interim PC Financial
Statements ”) as of and for the eleven months ended
November 30, 2006; and (c)(i) the Partnership’s audited
consolidated balance sheets and consolidated statements of income
and cash flow as of and for the fiscal years ended December 31,
2005, 2004 and 2003, and (ii) the Partnership’s unaudited
consolidated balance sheet (the “ Most Recent
Partnership Balance Sheet ” and, along with the Most
Recent GP Balance Sheet and the Most Recent PC Balance Sheet, the
“ Most Recent Balance Sheets ”) and
consolidated statements of income, changes in partners’
equity and cash flow (the “ Interim Partnership
Financial Statements ” and, along with the Interim GP
Financial Statements and Interim PC Financial Statements, the
“ Interim Financial Statements”) as of
and for the eleven months ended November 30, 2006. The Financial
Statements have been prepared in accordance with United States
generally accepted accounting principles (“
GAAP ”) applied on a consistent basis
throughout the periods covered thereby, present fairly in all
material respects the financial condition of the applicable Company
as of such dates and the results of operations and cash flow of the
applicable Company for such periods and are consistent with the
books and records of the applicable Company; provided ,
however, that the Interim Financial Statements are subject
to normal year-end adjustments and lack footnotes and other
presentation items (none of which will be material, individually or
in the aggregate).
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3.7 Subsequent Events . Since the Balance Sheet Date,
each Company has operated in the ordinary course of business
consistent with its past practices (“ Ordinary Course
of Business ”). From the Balance Sheet Date to the
Closing Date, there has been no event or series of events that,
singularly or in the aggregate, has had, or would reasonably be
expected to have, a material adverse effect, either individually or
in the aggregate, on any Company’s business, operations,
condition (financial or otherwise), properties, assets,
liabilities, rights, or obligations.
3.8 No Undisclosed Liabilities . None of the
Companies has any liability or obligation (and, to each Seller
Party’s knowledge, there is no basis for any present or
future Action or Order against any Company giving rise to any
liability or obligation), except for (a) liabilities reflected or
reserved against on the Most Recent Balance Sheets and not paid or
discharged prior to Closing, (b) liabilities arising after the
Balance Sheet Date in the Ordinary Course of Business of the
Companies which, individually or in the aggregate, are not material
and are of the same character and nature as the liabilities and
obligations reflected or reserved against on the Most Recent
Balance Sheets and which do not (i) result from or relate to any
tort, infringement, breach, violation of or default under any Law,
Order, Permit or Contract or (ii) arise out of any Action or Order,
and (c) liabilities set forth on Schedule 3.8 . None of the
Companies has any liability or obligation to pay any compensation
to any broker, finder or agent with respect to the Transactions for
which Buyer or any of the Companies could become directly or
indirectly responsible.
3.9 Legal Compliance . Each Company and each
Company’s predecessors has complied with all Laws and Orders,
and no Action is pending or, to each Seller Party’s
knowledge, threatened against any of them alleging any failure to
so comply. No material expenditures are, or based on any Law, Order
or Permit will be, required of any of the Companies or Buyer for
the Companies and their respective businesses and operations to
remain in compliance with all Laws, Orders and Permits immediately
following the Closing.
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3.10 Taxes . None of the Companies is subject to any
liability or obligation for any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
occupation, customs, ad valorem, duties, franchise, withholding,
social security, unemployment, real property, personal property,
sales, use, transfer, registration, estimated or other tax of any
kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not (“ Tax ”
or “ Taxes ”), including Taxes relating
to prior periods, other than those reflected or reserved against on
the Most Recent Balance Sheets or those incurred since the Balance
Sheet Date in the Ordinary Course of Business of the Companies.
Each Company has filed when due all required Tax reports and
returns in connection with and in respect of its business, assets
and employees, and has timely paid and discharged all amounts shown
as due thereon. All such Tax returns are true, correct and complete
in all material respects. Each Company has made available to Buyer
accurate and complete copies of all of such Company’s Tax
reports and returns for all periods, except those periods for which
returns are not yet due. There are no pending or, to any Seller
Party’s knowledge, threatened claims, assessments, notices,
deficiencies or audits with respect to any Taxes owed or allegedly
owed by any Company, and to each Seller Party’s knowledge
there is no basis for any such claims, assessments, notices,
deficiencies, or audits. None of the Companies has received any
written notice of any Tax deficiency outstanding, proposed or
assessed against or allocable to it, or has executed any waiver of
any statute of limitations on the assessment or collection of any
Tax or executed or filed with any Governmental Body any Contract
now in effect extending the period for assessment or collection of
any Taxes against it. Except for Permitted Encumbrances (as defined
in Section 3.11), there are no Encumbrances for Taxes upon,
or pending or, to any Seller Party’s knowledge, threatened
against, any Company. None of the Companies is subject to any Tax
allocation or sharing Contract. None of the Companies (i) has been
a member of an “affiliated group” filing a consolidated
federal income Tax return or (ii) has any liability or obligation
for the Taxes of any other Person under the Internal Revenue Code
of 1986, as amended (the “ Code ”), or
any regulations promulgated thereunder, as a transferee or
successor, by Contract, or otherwise.
3.11 Title to, Sufficiency and Condition of Assets .
Except as set forth on Schedule 3.11 , (a) the assets and
properties shown on the Most Recent Balance Sheets and acquired
after the Balance Sheet Date in the Ordinary Course of Business of
the Companies (together with leased assets as described on
Schedule 3.12 , collectively, the “
Companies’ Assets ”) constitute and
include all the assets necessary for the conduct of the business of
the Companies as currently conducted, (b) there are no material
assets used in or relied upon for the conduct of the business of
the Companies other than the Companies’ Assets, (c) the
Companies have good, marketable and indefeasible title to, or a
valid leasehold interest in, all of the Companies’ Assets, in
each case free and clear of any Encumbrances other than (i)
statutory, mechanics’ or other liens that were incurred in
Ordinary Course of Business of the Companies, (ii) Encumbrances
that are being contested in good faith and for which adequate
reserve has been made on the Most Recent Balance Sheets, (iii)
liens for Taxes incurred but not yet due and (iv) Encumbrances set
forth on Schedule 3.11 (collectively, “
Permitted Encumbrances ”), (d) all tangible
assets included as part of the Companies’ Assets, whether
owned or leased, have been maintained in accordance with normal
industry practice, are in good operating condition (subject to
normal wear and tear) and are suitable for the purposes for which
they are currently used and (e) other than rights under Contracts
set forth on Schedule 3.14 and to which the PC is a party,
the PC has no ownership of or interest in any of the
Companies’ Assets.
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3.12 Real Property . None of the Companies
now
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