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Exhibit 2.1
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LIMITED PARTNERSHIP INTEREST
AND STOCK PURCHASE AGREEMENT
dated as of
August 31, 2000
by and among
DATA CRITICAL CORPORATION,
DATACRITICAL.COM INC.,
PACEART ASSOCIATES, L.P.,
THE LIMITED PARTNERS OF PACEART ASSOCIATES, L.P.,
PACEART G.P., INC.
THE STOCKHOLDERS OF PACEART G.P., INC.
and
DR. MICHAEL N. BERGELSON,
in his capacity as representative of the Limited Partnership, the Limited
Partners, the General Partner and the Stockholders
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LIMITED PARTNERSHIP INTEREST AND STOCK PURCHASE AGREEMENT
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THIS LIMITED PARTNERSHIP AND STOCK PURCHASE AGREEMENT (this "Agreement") is
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made and entered into as of the 31st day of August, 2000, by and among DATA
CRITICAL Corporation, a Delaware corporation (the "Parent"), datacritical.com
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inc., a Delaware corporation and wholly owned subsidiary of Parent (the
"Purchaser"), Paceart Associates, L.P., a New Jersey limited partnership (the
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"Limited Partnership"), the limited partners of the Limited Partnership listed
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on Exhibit A (each individually, a "Limited Partner" and collectively, the
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"Limited Partners") by Paceart G.P., Inc. as their attorney-in-fact, Paceart
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G.P., Inc., a New Jersey corporation (the "General Partner"), the stockholders
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of the General Partner listed on Exhibit B (each individually, a "Stockholder"
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and collectively, the "Stockholders") and Michael Bergelson, as representative
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of the Limited Partnership, the Limited Partners, the General Partner and the
Stockholders on the terms and conditions set forth herein (in such capacity, the
"Sellers' Agent").
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RECITALS
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The Limited Partnership is in the business of designing and marketing
pacemaker software technology. The Limited Partners are the sole owners of all
of the Limited Partnership's outstanding limited partnership interests. The
General Partner is the sole owner of all the Limited Partnership's outstanding
general partnership interests. The Stockholders are the sole owners of all of
the General Partner's capital stock. Purchaser (a) wishes to purchase from the
Limited Partners, and the Limited Partners wish to sell to Purchaser, all of the
Limited Partnership's outstanding limited partnership interests, and (b) wishes
to purchase from the Stockholders, and the Stockholders wish to sell to
Purchaser, all outstanding capital stock of the General Partner, in each case on
the terms and conditions set forth herein (the "Purchase").
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AGREEMENT
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In consideration of the mutual promises, agreements, warranties and
provisions contained in this Agreement, the parties agree as follows:
SECTION 1
PURCHASE AND SALE OF INTERESTS
1.1 Intent of the Parties. It is the intent of this Agreement that
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effective upon the Closing (as defined below), Purchaser shall have acquired all
the rights to own and operate the business of the Limited Partnership, whether
pursuant to the acquisition by the Purchaser of the LP Interests and the GP
Shares (as such terms are defined below) ("Equity Purchase Transaction"), or the
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acquisition by the Purchaser of all the assets and liabilities of the Limited
Partnership ("Asset Purchase Transaction"). In the interest of tax, accounting,
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legal or other considerations, Purchaser may elect (and each other party hereto
acknowledges and agrees that Purchaser may so elect), at its option within
forty-five (45) days of the Closing Date by delivery of written notice to the
Sellers' Agent to treat the purchase as either (x) an Asset Purchase Transaction
or (y) an Equity Purchase Transaction. Notwithstanding the right to such
election,
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the purchase of all the rights to own and operate the business of the Limited
Partnership by the Purchaser shall be irrevocable and effective as of the
Closing Date (as defined below). Each party agrees that in the event of a
failure by Purchaser to deliver notice of such election by October 26, 2000, the
Purchaser shall be deemed to have elected to treat the sale as an Asset Purchase
Transaction. Each party agrees to treat the Purchase for all tax and accounting
purposes in the manner elected by the Purchaser pursuant to this Section 1.1.
1.2 Purchase and Sale of Interests. Subject to the terms and conditions of
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this Agreement, the Purchaser agrees to purchase at the Closing (as defined
below), and the Limited Partnership, the General Partner, the Stockholders and
the Limited Partners agree to sell to the Purchaser at the Closing, (a) in the
case of Purchaser's election to consummate an Equity Purchase Transaction, all
of the Limited Partnership's limited partnership interests outstanding as of the
Closing (the "LP Interests") and all outstanding capital stock of the General
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Partner (the "GP Shares"), and (b) in the case of Purchaser's election to
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consummate an Asset Purchase Transaction, all of the Limited Partnership's
rights, title and interest in and to all of the assets, properties, business and
liabilities (other than the rights and liabilities of the Limited Partnership
and General Partner hereunder) owned, held or used in the conduct of such
business by the Limited Partnership as the same shall exist on the Closing Date
(the "Purchased Assets" and, together with the LP Interests and the GP Shares,
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the "Purchased Interests"), in each case in exchange for an aggregate purchase
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price (i) $6,162,000 in cash (the "Cash Consideration"), (ii) 300,000 shares of
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Common Stock of Parent, (such stock of Parent, the "Parent Stock") and (iii) and
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a contingent earn-out payment calculated and payable pursuant to Section 2.4
(the "Earn-Out Payment"). Each Limited Partner and each Stockholder hereby
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acknowledges and agrees that (x) the Limited Partners shall receive solely Cash
Consideration, but no Parent Stock, in exchange for the Purchased Interests
being tendered by them, (y) the Stockholders shall receive a combination of both
Cash Consideration and Parent Stock in exchange for the Purchased Interests
being tendered by them, and (z) such distribution of Cash Consideration and
Parent Stock shall satisfy all distribution and other requirements set forth in
the Certificate of Limited Partnership and Limited Partnership Agreement of the
Limited Partnership and applicable to or triggered by the Purchase.
SECTION 2
CLOSING
2. Closing.
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2.1 Closing Date. The closing of the Purchase (the "Closing") shall
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be held at the offices of Orrick, Herrington & Sutcliffe, L.L.P, 701 Fifth Ave.,
Suite 6500, Seattle, WA 98104 at 9:00 a.m. (Washington time) on the business day
of the satisfaction or waiver of the latest to occur of the conditions set forth
in Section 7 or at such other time and place upon which the parties shall agree
orally or in writing, such time and date being referred to herein as the
"Closing Date." Notwithstanding the Closing Date, all revenues and expenses
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accrued by the Limited Partnership after August 31, 2000 shall be reflected on
the books and records, including the financial statements, of the Purchaser and
Parent, excluding, however, any expenses payable out of the Partnership Cash
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Distribution (as defined below) in accordance with the terms of this Agreement.
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2.2 Actions at the Closing. At the Closing, the parties hereto shall
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take such actions and execute and deliver such agreements and other instruments
and documents as necessary or appropriate to effect the transactions
contemplated by this Agreement in accordance with its terms, including without
limitation the following:
(a) Each of the Limited Partners will deliver to Purchaser a
certificate or certificates representing all of such Limited Partner's
LP Interests, together with limited partnership powers duly endorsed
in blank for transfer of such Interests to Purchaser, and the Limited
Partners shall deliver all other documents required of the Limited
Partners pursuant to the Agreement, including affidavits of loss if
necessary;
(b) Each of the Stockholders will deliver to Purchaser a
certificate or certificates representing all of such Stockholder's GP
Shares, together with stock powers duly endorsed in blank for transfer
of such GP Shares to Purchaser, and the Stockholders shall deliver all
other documents required of the Stockholders pursuant to the
Agreement;
(c) Purchaser will deliver to Sellers' Agent in respect of the
Limited Partners by cashier's check or wire transfer such portion of
the Cash Consideration payable to each Limited Partner as set forth in
the Exhibit C, net of the amounts deposited in escrow as set forth in
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Section 2.3(a) below, and Purchaser will deliver all other documents
required of Purchaser herein; and
(d) Purchaser will deliver to Sellers' Agent in respect of each
Stockholder (i) by cashier's check or wire transfer such portion of
the Cash Consideration payable to each such Stockholder as set forth
on Exhibit D and (ii) certificates representing the number of shares
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of Parent Stock owed to each such Stockholder as set forth in Exhibit
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D, net of the amounts deposited in escrow as set forth in Section
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2.3(a) below, and Purchaser will deliver all other documents required
of Purchaser herein.
Each of the Limited Partnership, the General Partner, each Limited Partner,
each Stockholder and the Sellers' Agent acknowledges and agrees that Purchaser's
sole obligation under this Section 2.2 and in respect of any payment or other
transfer of value to be made by Purchaser or Parent hereunder shall be to make
such payment or transfer to Sellers' Agent and to no other person or entity, and
that neither Purchaser nor Parent shall have any liability for, and none of the
Limited Partnership, the General Partner, any Limited Partner or any Stockholder
shall have any recourse to Purchaser or Parent for, any failure or delay by
Sellers' Agent to deliver such payment or transfer to the beneficial owner and
ultimate party entitled thereto. Any payment or transfer of value made by
Purchaser or Parent hereunder to Sellers' Agent shall be deemed for all purposes
hereunder to be a payment or transfer of value made by Purchaser or Parent to
the beneficial owner thereof.
2.3 Payment. At the Closing, an aggregate of $6,162,000 and 300,000
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shares of Parent Stock (the "Initial Purchase Price" and, together with the
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Earn-Out Payment, if any, the "Purchase Price") shall be paid by Purchaser as
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follows:
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(a) An amount equal to (i) $382,500 of cash and (ii) 75,000 shares of
Parent Stock payable to the Stockholders, each shall be placed in Escrow as
provided in Section 8 below; it being agreed that the Initial Purchase Price
payable to each of the Limited Partners (in respect of the escrowed Cash
Consideration) and each of the Stockholders (in respect of the escrowed Parent
Stock) shall be reduced ratably among the Limited Partners and Stockholders to
establish the Escrow Fund;
(b) The remaining Initial Purchase Price after the payments set forth
in subparagraphs (a) above (the "Remaining Amount") shall be paid:
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(i) to the Sellers' Agent, for the account of each Limited
Partner as their interests may appear under the Limited Partnership
Agreement of the Limited Partnership, an amount equal to the Remaining
Amount consisting of Cash Consideration allocable to all Limited Partners;
(ii) to the Sellers' Agent in respect of each Stockholder, an
amount equal to (A) in respect of Cash Consideration, the Remaining Amount
consisting of Cash Consideration allocable to all Stockholders multiplied
by the quotient of (w) the number of GP Shares being tendered by such
Stockholder at the Closing divided by (x) the aggregate number of GP Shares
being purchased by Purchaser from all Stockholders at the Closing, and (B)
in respect of Parent Stock, an amount of Parent Stock, rounded to the
nearest whole share, equal to the Remaining Amount consisting of Parent
Stock multiplied by the quotient of (y) the number of GP Shares being
tendered by such Stockholder at the Closing divided by (z) the aggregate
number of GP Shares being purchased by Purchaser from all Stockholders at
the Closing.
Each party hereto acknowledges and agrees that the value of the shares of
Parent Stock shall be the last reported sale price on the Nasdaq National Market
for the regular trading day immediately preceding the Closing Date.
2.4 Earn-Out Payment. To the extent sales revenue recognized by
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the Limited Partnership for the fiscal year ending December 31, 2001 is in
excess of $5,000,000 in the aggregate, Purchaser agrees to pay, and Parent
agrees to cause Purchaser to pay, to Sellers' Agent (for the ratable benefit of
the Limited Partners and Stockholders based on their respective interests in the
Limited Partnership and General Partner, as applicable, as of the Closing Date)
an Earn-Out Payment of $400,000 within 45 days after the end of such fiscal
year. The Earn-Out Payment, if due, shall be paid in the same manner as the
Cash Consideration, provided that the Earn-Out Payment shall not be subject to
deposit into the Escrow Fund. For purposes of calculating any Earn-Out Payment
pursuant to this Section 2.4 only, (i) the "Limited Partnership" shall be deemed
to refer to the Limited Partnership as it existed prior to the Closing and as
such Limited Partnership (or successor entity) shall operate as a division of
the Purchaser or Parent after the Closing, and (ii) revenue shall only be deemed
recognized by the Limited Partnership to the extent it satisfies the Parent's
revenue recognition policies for sales to end users as generally in effect from
time to time and as determined and approved by the Parent's accountants. If the
Earn-Out Payment is not due in accordance with this Section 2.4, then Sellers'
Agent shall have the right, at the sole cost and expense of the Limited Partners
and the Stockholders, to an
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accounting and inspection of those books and records of the Parent related to or
necessary for the calculation of the Earn-Out Payment.
SECTION 3
SECURITIES LAW COMPLIANCE
3.1 Securities Act Exemption. Parent Stock to be issued pursuant to
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this Agreement shall not be registered under the Securities Act of 1933, as
amended ("Securities Act"), in reliance upon the exemption contained in Section
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4(2) of the Securities Act and Regulation D promulgated thereunder and in
reliance upon the representations and warranties of the Limited Partners and the
Stockholders contained in Article V below.
3.2 Stock Restrictions. The certificates representing the shares of
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Parent Stock issued pursuant to this Agreement shall bear a restrictive legend
or legends (and stop transfer orders shall be placed against the transfer
thereof with Parent's transfer agent), as set forth in Section 5.9.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE LIMITED PARTNERSHIP AND THE GENERAL
PARTNER
References in this Section 4 to the "Partnership Disclosure Schedule" shall
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mean the schedule attached hereto as Exhibit J as such Partnership Disclosure
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Schedule has been delivered jointly and severally by the Limited Partnership and
the General Partner to Purchaser prior to the execution and delivery of this
Agreement. Each of the Limited Partnership and the General Partner jointly and
severally represents and warrants to Purchaser as follows:
4.1 Organization, Standing and Power.
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(a) The Limited Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. The Limited Partnership has the requisite limited partnership
power and authority and all necessary government approvals to own, lease and
operate its properties and to carry on its business as now being conducted and
as proposed to be conducted, except where the failure to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect on the Limited Partnership or the
General Partner. The Limited Partnership is duly qualified or licensed as a
foreign limited partnership to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect on the Limited Partnership or the General Partner. The Limited
Partnership does not directly or indirectly own any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, limited liability
company, joint venture or other business association or entity. All of the
limited and general partners of the Limited Partnership are residents of the
United States.
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(b) The General Partner is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. The General Partner has the requisite corporate power and
authority and all necessary government approvals to own, lease and operate its
properties and to carry on its business as now being conducted and as proposed
to be conducted, except where the failure to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect on the Limited Partnership or the General Partner. The
General Partner is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect on the Limited Partnership or the
General Partner. The General Partner does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity, excluding, however, its general partnership interest in
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the Limited Partnership. The General Partner conducts no business or operations
of any kind, other than its status as the general partner of the Limited
Partnership. All of the stockholders of the General Partner are residents of the
United States.
4.2 Constituent Documents.
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(a) The Limited Partnership has delivered a true and correct copy of
the Certificate of Limited Partnership and Limited Partnership Agreement or
other charter documents, as applicable, of the Limited Partnership, each as
amended to date, to Purchaser. The Limited Partnership is not in violation of
any of the provisions of its Certificate of Limited Partnership and Limited
Partnership Agreement or equivalent organizational documents.
(b) The General Partner has delivered a true and correct copy of the
Articles of Incorporation and Bylaws of the General Partner, each as amended to
date, to Purchaser. The General Partner is not in violation of any of the
provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents.
4.3 Capital Structure.
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(a) The Limited Partners identified on Exhibit A own all the
authorized and issued limited partnership interests of the Limited Partnership
and the General Partner owns the sole authorized and issued general partnership
interest of the Limited Partnership. The capital balance of each Limited Partner
and the General Partner is as set forth on Section 4.3(a) of the Partnership
Disclosure Schedule. There are no other outstanding limited partnership
interests, general partnership interests or voting securities and no outstanding
commitments to issue any partnership interests or voting securities. All capital
contributions required to have been made by or on behalf of any of the Limited
Partners or the General Partner to the Limited Partnership have been fully paid
as of the Closing Date and no distributions from the Limited Partnership have
been declared, are accrued or are otherwise owing to any of the Limited Partners
or the General Partner as of the Closing Date, except in respect of the
Partnership Cash Distribution (as defined below). All outstanding limited
partnership interests and general partnership interests of
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the Limited Partnership are duly authorized, validly issued, fully paid and non-
assessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof (of which, the
Limited Partnership has received no notices of the existence thereof) and are
not subject to preemptive rights or rights of first refusal created by statute,
the Certificate of Limited Partnership or the Limited Partnership Agreement of
the Limited Partnership or any agreement to which the Limited Partnership is a
party or by which it is bound. All outstanding limited partnership interests and
general partnership interests of the Limited Partnership were issued in
compliance with all applicable federal and state securities laws. The Limited
Partnership has not issued any limited or general partnership interest since
1994. Except for (i) the rights created pursuant to this Agreement and (ii) for
the Limited Partnership's right to repurchase any Interests under the Limited
Partnership's Limited Partnership Agreement, there are no options, warrants,
calls, rights, commitments, agreements or arrangements of any character to which
the Limited Partnership is a party or by which the Limited Partnership is bound
relating to the issued or unissued limited partnership interests or general
partnership interests of the Limited Partnership or obligating the Limited
Partnership to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any limited partnership
interests or general partnership interests of the Limited Partnership or
obligating the Limited Partnership to grant, extend, accelerate the vesting of,
change the price of, or otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. There are no contracts, commitments or
agreements relating to voting, purchase or sale of the Limited Partnership's
limited partnership interests or general partnership interests (i) between or
among the Limited Partnership and any of its limited partners and/or general
partners and (ii) to the best of the Limited Partnership's knowledge, between or
among any of the Limited Partnership's limited partners and/or general partners,
except for the Limited Partnership's Limited Partnership Agreement.
(b) The authorized capital stock of the General Partner consists of
1,000 shares of Common Stock, of which there were issued and outstanding as of
the close of business on August 30, 2000, 1,000 shares of Common Stock. There
are no other outstanding shares of capital stock or voting securities and no
outstanding commitments to issue any shares of capital stock or voting
securities. All outstanding shares of the General Partner Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof (of which, the General Partner has received no notices
of the existence thereof), and are not subject to preemptive rights or rights of
first refusal created by statute, the Articles of Incorporation or Bylaws of the
General Partner or any agreement to which the General Partner is a party or by
which it is bound. All outstanding shares of the General Partner Common Stock
were issued in compliance with all applicable federal and state securities laws.
Section 4.3(b) of the Partnership Disclosure Schedule sets forth the number of
outstanding shares of the General Partner Common Stock and the registered
holders thereof. Except (i) for the rights created pursuant to this Agreement
and (ii) as set forth in this Section 4.3(b), there are no options, warrants,
calls, rights, commitments, agreements or arrangements of any character to which
the General Partner is a party or by which the General Partner is bound relating
to the issued or unissued capital stock of the General Partner or obligating the
General Partner to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of capital stock of
the General Partner or obligating the General Partner to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option,
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warrant, call, right, commitment or agreement. There are no contracts,
commitments or agreements relating to voting, purchase or sale of the General
Partner's capital stock (i) between or among the General Partner and any of its
stockholders and (ii) to the best of the General Partner's knowledge, between or
among the General Partner's stockholders or between or among the General
Partner's stockholders and the Limited Partnership or the Limited Partners.
4.4 Authority.
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(a) The Limited Partnership has all requisite limited partnership
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary limited partnership action on the part of the
Limited Partnership. The General Partner has approved this Agreement and the
Purchase. This Agreement has been duly executed and delivered by the Limited
Partnership and assuming due authorization, execution and delivery by Purchaser,
constitutes the valid and binding obligation of the Limited Partnership
enforceable against the Limited Partnership in accordance with its terms.
(b) The General Partner has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the General Partner. The
General Partner's Board of Directors and the Stockholders have each unanimously
approved this Agreement and the Purchase. This Agreement has been duly executed
and delivered by the General Partner and assuming due authorization, execution
and delivery by Purchaser, constitutes the valid and binding obligation of the
General Partner enforceable against the General Partner in accordance with its
terms.
4.5 No Conflicts; Required Filings and Consents.
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(a) The execution and delivery of this Agreement by each of the
Limited Partnership and the General Partner does not, and the consummation of
the transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the Certificate
of Limited Partnership or Limited Partnership Agreement of the Limited
Partnership or the Articles of Incorporation or Bylaws of the General Partner,
in each case as amended, or (ii) any mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Limited Partnership or the General Partner or any of their properties or assets,
the violation of which (in the case of clause (ii) only) in the aggregate does
not have a Material Adverse Effect on the Limited Partnership or General
Partner. Upon purchase of all the GP Shares, the Purchaser shall succeed to the
general partnership interest of the General Partner and will enjoy all power,
authority and ability to act under the Limited Partnership Agreement of the
Limited Partnership as enjoyed by the General Partner as of and prior to the
Closing Date.
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(b) The execution and delivery of this Agreement by each Stockholder
and the General Partner does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of preemption or first refusal under, the Stockholders Agreement
among the Stockholders. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
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Entity") is required by or with respect to the Limited Partnership or the
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General Partner in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby other than any
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not, in the aggregate, have a Material Adverse Effect on
the Limited Partnership or the General Partner and would not prevent, or
materially alter or delay any of the transactions contemplated by this
Agreement. No filing of notice or other filing (excluding, however, a state tax
filing with the State of New Jersey) is required under the bulk sales law of any
jurisdiction in which the Limited Partnership is doing business.
4.6 Financial Statements.
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(a) Section 4.6(a) of the Partnership Disclosure Schedule includes a
true, correct and complete copy of the Limited Partnership's unaudited financial
statements for each of the fiscal years ended December 31, 1997, 1998, and 1999,
respectively, and its unaudited financial statements, which consist of statement
of assets, liabilities and partner capital-income tax basis, related statements
of revenue and expense-income tax basis, partner's capital-income tax basis and
cash flows-income tax basis (the "LP Financial Statements"). The LP Financial
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Statements have been prepared on the accounting basis used by the Limited
Partnership for income tax purposes, which is a comprehensive and consistently
applied basis of accounting other than generally accepted accounting principles.
The LP Financial Statements accurately set out and describe the financial
condition and operating results of the Limited Partnership as of the dates and
for the periods indicated therein. At the request of the Purchaser, the LP
Financial Statements for the fiscal year ending December 31, 1999 and the six-
month period ending June 30, 2000 (the "Restated LP Financial Statements") were
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restated and prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
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indicated, for the periods indicated therein and with each other. The Restated
LP Financial Statements were restated utilizing the revenue recognition policies
described as follows: Revenue on system sales were recognized upon completed
contract, which is based upon training or installation of the systems rather
than shipment date. For systems not requiring installation or training, or
sales of upgraded software; revenue is recognized based upon shipment date.
Revenue on systems sales were reduced to account for the service contract
component of the system sales which was estimated to be 9% of the system sales
and this revenue will be amortized ratability over a twelve month period
commencing with installation. Costs incurred prior to revenue recognition will
be capitalized as work in progress in accordance with completed contract method.
For new service contracts entered a year or later after installation, the
revenue would be amortized ratability over the life of the contract; usually
twelve months. The upfront payment on the service contracts would be considered
unearned income or deferred income until amortized. Other revenue recognition
policies were consistent with previous policies of the Limited Partner.
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(b) Section 4.6(b) of the Partnership Disclosure Schedule includes a
true, correct and complete copy of the General Partner's tax returns for each of
the fiscal years ended December 31, 1997, 1998 and 1999, respectively
(collectively, the "GP Tax Returns"). The GP Tax Returns have been prepared in
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accordance with generally accepted tax accounting principles applied on a
consistent basis throughout the periods indicated and with each other. The GP
Tax Returns accurately set out and describe the financial condition and
operating results of the General Partner as of the dates, and for the periods,
indicated therein.
4.7 Absence of Undisclosed Liabilities.
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(a) The Limited Partnership has no indebtedness or contingent
obligations for borrowed money. The Limited Partnership has no other material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet of the Limited Partner for the period ended June 30, 2000 (the "LP
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Balance Sheet"), (ii) those incurred by the Limited Partnership in connection
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with the execution of this Agreement, and (iii) those liabilities or obligations
incurred in the ordinary course of business consistent with past practice since
June 30, 2000.
(b) The General Partner has no indebtedness or contingent obligations
for borrowed money. The General Partner has no material obligations or
liabilities of any nature (matured or unmatured, fixed or contingent) other than
(i) the obligations and liabilities of the Limited Partnership, (ii) those
incurred by the General Partner in connection with the execution of this
Agreement and (iii) those liabilities or obligations incurred in the ordinary
course of business consistent with past practice since January 1, 2000 that are
reimbursable to the General Partner by the Limited Partnership.
(c) As of August 31, 2000 and assuming the Partnership Cash
Distribution has been effected, the Limited Partnership has Net Working Capital
of not less than $550,000. "Partnership Cash Distribution" means any cash
-----------------------------
distributions or payments to be made by the Limited Partnership out of Net
Working Capital immediately prior to, on, or promptly after the Closing Date as
disclosed on Section 4.8 of the Partnership Disclosure Schedule, which cash
distributions shall not exceed $450,000. "Net Working Capital" means the sum of
-------------------
the Limited Partnership's (i) cash plus accounts receivable plus inventory plus
---- ---- ----
(without duplication) capitalized costs plus prepaid expenses minus (ii)
---- -----
accounts payable plus accrued expenses plus customer deposits, in each case as
---- ----
determined consistent with GAAP and the LP Balance Sheet and excluding any
unearned income or deferred revenues. All professional and transactional
advisory fees of the Limited Partnership and the General Partner relating to the
transactions contemplated hereby (including but not limited to legal fees and
expenses, accounting fees and fees and expenses in respect of the preparation
and distribution of K-1 statements to each of the partners of the Limited
Partnership in respect of the 2000 fiscal year) incurred by or on behalf of the
Limited Partnership or the General Partner, or otherwise obligated or promised
to be paid by the Limited Partnership or the General Partner on behalf of any
Limited Partner, any Stockholder or any other person, have been, or shall be, on
or prior to the Closing Date, paid from or deducted from the proceeds of the
Partnership Cash Distribution and in no event shall be paid out of any other Net
Working Capital or other assets of the Limited Partnership or the General
Partner, and, after the Closing Date, shall not be liabilities of either the
Limited Partnership or
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<PAGE>
the General Partner as either such entity (or successor entity) shall operate as
a subsidiary or division of the Purchaser or Parent after the Closing Date.
4.8 Absence of Certain Changes. Except as set forth in Section 4.8 of the
--------------------------
Partnership Disclosure Schedule, since June 30, 2000 ( the "LP Balance Sheet
----------------
Date") there has not been, occurred or arisen any:
----
(a) transaction by the Limited Partnership or the General Partner
except in the ordinary course of business as conducted on that date and
consistent with past practices;
(b) amendments or changes to the Certificate of Limited Partnership or
the Limited Partnership Agreement of the Limited Partnership, or the Articles of
Incorporation and Bylaws of the General Partner;
(c) capital expenditure or commitment by the Limited Partnership or
the General Partner except in the ordinary course of business as conducted on
that date and consistent with past practices;
(d) destruction of, damage to, or loss of any assets (including,
without limitation, intangible assets), business or customer of the Limited
Partnership or the General Partner (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates, any change in policies in making
or reversing accruals, or any change in capitalization of software development
costs) by the Limited Partnership or the General Partner, except in respect of
the Restated LP Financial Statements;
(g) revaluation by the Limited Partnership or the General Partner of
any of their respective assets;
(h) (i) declaration, setting aside, or payment of a dividend, capital
account distribution, or other distribution in respect to the limited
partnership interests or general partnership interests of the Limited
Partnership, or any direct or indirect redemption, purchase or other acquisition
by the Limited Partnership of any of such interests, or (ii) declaration,
setting aside, or payment of a dividend or other distribution in respect to the
capital stock of the General Partner, or any direct or indirect redemption,
purchase or other acquisition by the General Partner of any of such interests,
in each case except in respect of the Partnership Cash Distribution;
(i) increase in the salary or other compensation payable or to become
payable by the Limited Partnership or the General Partner to any officers,
directors, employees or consultants of the Limited Partnership or the General
Partner, or, other than as paid from the Partnership Cash Distribution, the
declaration, payment, or commitment or obligation of any kind for the payment by
the Limited Partnership or the General Partner of a bonus or other additional
salary or compensation to any such person except as otherwise contemplated by
this Agreement and except in the ordinary course of business as conducted on
that date and consistent
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<PAGE>
with past practices, or other than as set forth in Section 4.16 below, the
establishment of any bonus, insurance, deferred compensation, pension,
retirement, profit sharing, stock option (including without limitation, the
granting of stock options, stock appreciation rights, performance awards), stock
purchase or other employee benefit plan;
(j) sale, lease, license or other disposition of any of the assets or
properties of the Limited Partnership or the General Partner (other than
inventory);
(k) termination or material amendment of any material contract,
agreement or license (including any distribution agreement) to which the Limited
Partnership or the General Partner is a party or by which it is bound;
(l) loan by the Limited Partnership or the General Partner to any
person or entity, or guaranty by the Limited Partnership or the General Partner
of any loan, except for (i) travel or similar advances made to employees in
connection with their employment duties in the ordinary course of business,
consistent with past practices and (ii) trade payables in the ordinary course of
business and consistent with past practices;
(m) waiver or release of any right or claim of the Limited Partnership
or the General Partner, including any write-off or other compromise of any
account receivable of the Limited Partnership or the General Partner;
(n) notice of any claim of ownership by a third party of the Limited
Partnership's or the General Partner's Intellectual Property (as defined in
Section 4.13 below) or of infringement by the Limited Partnership or the General
Partner of any third party's Intellectual Property rights;
(o) issuance or sale by the Limited Partnership or the General Partner
of any of its limited partnership interests or general partnership interests or
its shares of capital stock, as applicable, or securities exchangeable,
convertible or exercisable therefor, or of any other of its securities;
(p) decrease or other material change in pricing or royalties set or
charged by the Limited Partnership or the General Partner to its customers or
licensees or in pricing or royalties set or charged by persons who have licensed
Intellectual Property to the Limited Partnership or the General Partner;
(q) any event or condition of any character that has or could
reasonably be expected to have a Material Adverse Effect on the Limited
Partnership or the General Partner; or
(r) any agreement by the Limited Partnership, the General Partner or
any officer or employee of either on behalf of such entity to do any of the
things described in the preceding clauses (a) through (r) (other than
negotiations with Purchaser and its representatives regarding the transactions
contemplated by this Agreement).
4.9 Litigation. Section 4.9 of the Partnership Disclosure Schedule sets
----------
forth a complete list of each private or governmental action, suit, proceeding,
claim, arbitration or investigation now pending before any agency, court or
tribunal, foreign or domestic, or, to the
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<PAGE>
Limited Partnership's or General Partner's knowledge, threatened against the
Limited Partnership or the General Partner or any of their respective properties
or any of their respective officers or directors (in their capacities as such).
To the best knowledge of the Limited Partnership and the General Partner, the
litigations identified on Section 4.9 of the Partnership Disclosure Schedule
could not reasonably be expected to have a Material Adverse Effect on the
Limited Partnership. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the Limited Partnership's or General
Partner's knowledge, threatened against the Limited Partnership or the General
Partner or any of their respective properties or any of their respective
officers or directors (in their capacities as such) that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Limited Partnership or the General Partner. There is no judgment, decree or
order against the Limited Partnership or the General Partner or, to the Limited
Partnership's or General Partner's knowledge, any of their respective directors
or officers (in their capacities as such), that could prevent, enjoin, or
materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on the Limited Partnership or the General Partner. All litigation to
which the Limited Partnership or the General Partner is a party (or, to the
knowledge of the Limited Partnership or the General Partner, threatened to
become a party) is disclosed in the Partnership Disclosure Schedule.
4.10 Restrictions on Business Activities. There is no agreement, judgment,
-----------------------------------
injunction, order or decree binding upon the Limited Partnership or the General
Partner which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any current or future business practice of
the Limited Partnership or the General Partner, any acquisition of property by
the Limited Partnership or the General Partner or the overall conduct of
business by the Limited Partnership or the General Partner as currently
conducted or as proposed to be conducted by the Limited Partnership or by the
General Partner. Neither the Limited Partnership nor the General Partner has
entered into any agreement under which the Limited Partnership or the General
Partner is restricted from selling, licensing or otherwise distributing any of
its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market.
4.11 Permits; Limited Partnership Products; Regulation.
-------------------------------------------------
(a) Each of the Limited Partnership and the General Partner is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
necessary for the Limited Partnership or the General Partner, to own, lease and
operate its properties or to carry on its business as it is now being conducted
(the "Limited Partnership Authorizations") and no suspension or cancellation of
----------------------------------
any Limited Partnership Authorization is pending or, to the Limited
Partnership's knowledge, threatened, except where the failure to have, or the
suspension or cancellation of, any Limited Partnership Authorization would not
have a Material Adverse Effect on the Limited Partnership or the General
Partner. Neither the Limited Partnership nor the General Partner is in conflict
with, or in default or violation of, (i) any laws applicable to the Limited
Partnership or the General Partner or by which any property or asset of the
Limited Partnership or the General Partner is bound or affected, (ii) any
Limited Partnership Authorization or (iii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
-13-
<PAGE>
obligation to which the Limited Partnership or the General Partner is a party or
by which the Limited Partnership or the General Partner or any property or asset
of the Limited Partnership or the General Partner is bound or affected, except
for any such conflict, default or violation that would not, individually or in
the aggregate have a Material Adverse Effect on the Limited Partnership or the
General Partner.
(b) Since December 31, 1997, there have been no written notices,
citations or decisions by any governmental or regulatory body that any product
produced, manufactured, marketed or distributed at any time by the Limited
Partnership or the General Partner (the "Products") is defective or fails to
--------
meet any applicable standards promulgated by any such governmental or regulatory
body. The Limited Partnership has complied in all material respects with the
laws, regulations, policies, procedures and specifications with respect to the
design, manufacture, labeling, testing and inspection of the Products and the
operation of manufacturing facilities promulgated by the Food and Drug
Administration ("FDA"). Except as disclosed in Section 4.11(b) of the
---
Partnership Disclosure Schedule, since December 31, 1999, there have been no
recalls, field notifications or seizures ordered or, to the Limited
Partnership's or General Partner's knowledge, threatened by any such
governmental or regulatory body with respect to any of the Products. Neither
the Limited Partnership nor the General Partner has received within the last
five years a warning letter or notice from the FDA regarding its products,
licenses or businesses, including but not limited to pursuant to Title 21,
Section 810.10 of the Code of Federal Regulations.
(c) The Limited Partnership or the General Partner has obtained, in
all countries where either the Limited Partnership or the General Partner is
marketing or has marketed its Products, all applicable licenses, registrations,
approvals, clearances and authorizations required by local, state or federal
agencies (including the FDA) in such countries regulating the safety,
effectiveness and market clearance of the Products currently or previously
marketed by the Limited Partnership or the General Partner in such countries
("Product Approvals"). Section 4.11(c) sets forth all Product Approvals issued
-----------------
to, or applied for by, the Limited Partnership or the General Partner in respect
of any Product. All such Product Approvals have been validly issued and are
enforceable according to their terms. Each Product Approval is freely
transferable by the Limited Partnership or the General Partner, as the case may
be, to Purchaser or Parent or, if not freely transferable, consent to such
transfer has been obtained from the appropriate agency. Each of the Limited
Partnership and the General Partner has made available for examination by
Purchaser all information relating to regulation of its Products, including
licenses, registrations, approvals, permits, device listing, inspections,
recalls and product actions, audits and ongoing field tests and clinical
studies. The Limited Partnership has identified in writing to Purchaser all
international locations where regulatory information and documents are kept.
(d) Section 4.11(d) of the Partnership Disclosure Schedule sets forth
a true, accurate and comprehensive identification and description of all
warranty claims or similar claims made in respect of any Products since December
31, 1997. All such claims have been resolved and neither the Limited
Partnership nor the General Partner has any knowledge of any pending or
threatened claims of such type with regard to the Products.
-14-
<PAGE>
(e) Neither the Limited Partnership nor the General Partner has made
any sales to customers that are contingent upon providing future enhancements of
existing products, to add features not presently available on existing products
or to otherwise enhance the performance of its existing products (other than
beta or similar arrangements pursuant to which the Limited Partnership's
customers from time to time test or evaluate products). The products the
Limited Partnership and the General Partner have delivered to customers
substantially comply with published specifications for such products and neither
the Limited Partnership nor the General Partner has not received material
complaints from customers about its products that remain unresolved. Section
4.11(e) of the Partnership Disclosure Schedule accurately sets forth a complete
list of products in development (exclusive of mere enhancements to and
additional features for existing products).
4.12 Title to Property.
-----------------
(a) Each of the Limited Partnership and the General Partner has good
and marketable title to all of its respective properties, interests in
properties and assets, real and personal, reflected in the LP Balance Sheet or
acquired after the LP Balance Sheet Date (except properties, interests in
properties and assets sold or otherwise disposed of since the LP Balance Sheet
Date in the ordinary course of business), or with respect to leased properties
and assets, valid leasehold interests in, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character, except (i) the
lien of current taxes not yet due and payable, (ii) such imperfections of title,
liens and easements as do not and will not materially detract from or interfere
with the use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties and (iii) liens
securing debt which is reflected on the LP Balance Sheet. The plants, property
and equipment of the Limited Partnership and the General Partner that are used
in the operations of their businesses are in good operating condition and
repair. All properties used in the operations of the Limited Partnership and
the General Partner are reflected in the LP Balance Sheet to the extent GAAP
requires the same to be reflected. Section 4.12(a) of the Partnership
Disclosure Schedule sets forth a true, correct and complete list of all real
property owned or leased by the Limited Partnership and by the General Partner,
or either of them, the name of the lessor, the date of the lease and each
amendment thereto and the aggregate annual rental and other fees payable under
such lease. Such leases are in good standing, are valid and effective in
accordance with their respective terms, and there is not under any such leases
any existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default).
(b) Section 4.12(b) of the Partnership Disclosure Schedule also sets
forth a true, correct and complete list of all equipment (the "Equipment") owned
---------
or leased by the Limited Partnership and the General Partner, or either of them,
and such Equipment is, taken as a whole, (i) adequate for the conduct of the
Limited Partnership's business, consistent with its past practice and (ii) in
good operating condition (except for ordinary wear and tear).
4.13 Intellectual Property.
---------------------
(a) Each of the Limited Partnership and the General Partner
respectively own, or are licensed to or otherwise possess legally enforceable
rights to use all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, domain names, service marks,
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<PAGE>
copyrights, and any applications for any of the foregoing, mask works, mask work
rights, net lists, schematics, industrial models, inventions, technology, know-
how, trade secrets, inventory, ideas, algorithms, processes, computer software
programs or applications (in both source code and object code form), and
tangible or intangible proprietary information or material ("Intellectual
------------
Property") that are used or proposed to be used in the business of the Limited
--------
Partnership or the General Partner, respectively, each as currently conducted or
as currently proposed to be conducted by the Limited Partnership or the General
Partner, as applicable, except to the extent that the failure to have such
rights has not had and would not reasonably be expected to have a Material
Adverse Effect on the Limited Partnership or the General Partner, as applicable.
Each employee and consultant of or for the Limited Partnership and the General
Partner have executed agreements assigning all right, title and interest of any
such employee or consultant in, to or under any Intellectual Property to the
Limited Partnership and the General Partner, as applicable, except where the
failure of such employees or consultant to execute such an agreement has not had
and would not reasonably be expected to have a Material Adverse Effect on either
of the Limited Partnership or the General Partner.
(b) Section 4.13 of the Partnership Disclosure Schedule lists (i) all
patents and patent applications and all registered trademarks, trade names,
domain names, service marks, copyrights, and mask work rights, included in the
Intellectual Property owned by the Limited Partnership, including the
jurisdictions in which each such Intellectual Property right has been issued or
registered or in which any application for such issuance and registration has
been filed, (ii) all licenses, sublicenses and other agreements to which the
Limited Partnership or the General Partner is a party and pursuant to which any
person is authorized to use any Intellectual Property owned by the Limited
Partnership or the General Partner, respectively, and (iii) all licenses,
sublicenses and other agreements as to which the Limited Partnership or the
General Partner is a party and which authorize the Limited Partnership or the
General Partner to use any third party patents, trademarks or copyrights,
including software ("Third Party Intellectual Property Rights") which are
----------------------------------------
incorporated in, are, or form a part of any products of the Limited Partnership
or the General Partner and that are, individually or in the aggregate, material
to the business of the Limited Partnership or the General Partner; provided that
--------
Section 4.12 of the Partnership Disclosure Schedule does not list any shrink
wrap or similar end user licenses in respect of retail office computer software
products. Neither the Limited Partnership nor the General Partner is in
violation of any license, sublicense or agreement listed in Section 4.13 of the
Partnership Disclosure Schedule. The execution and delivery of this Agreement
by the Limited Partnership and the consummation of the transactions contemplated
hereby, will neither cause the Limited Partnership or the General Partner to be
in violation or default under any license, sublicense or agreement listed in
Section 4.13 of the Partnership Disclosure Schedule, nor entitle any other party
to any such license, sublicense or agreement to terminate or modify such
license, sublicense or agreement, in either case, where such waiver, default,
termination right or modification right has not been waived by all necessary
parties. Except as set forth in Section 4.13 of the Partnership Disclosure
Schedule, each of the Limited Partnership and the General Partner respectively
is the sole and exclusive owner of, with all right, title and interest in and to
(free and clear of any liens), the Intellectual Property owned by it, and has
sole and exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use thereof or the
material covered thereby in connection with the services or products in respect
of which such Intellectual Property is being used.
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<PAGE>
(c) To the Limited Partnership's and the General Partner's knowledge,
there is no material unauthorized use, disclosure, infringement or
misappropriation of (i) any Intellectual Property rights of the Limited
Partnership or the General Partner or (ii) any Intellectual Property right of
any third party to the extent licensed by or through the Limited Partnership or
the General Partner, by any third party, including any employee or former
employee of the Limited Partnership or the General Partner, except as noted in
Section 4.13 of the Partnership Disclosure Schedule. Neither the Limited
Partnership nor the General Partner has entered into any agreement to indemnify
any other person against any charge of infringement of any Intellectual
Property, other than indemnification provisions contained in purchase orders
arising in the ordinary course of business.
(d) Neither the Limited Partnership nor the General Partner is or will
be as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to the Intellectual Property or Third
Party Intellectual Property Rights, the breach of which would have a Material
Adverse Effect on the Limited Partnership or the General Partner.
(e) All patents, registered trademarks, registered service marks,
registered domain names and registered copyrights held by the Limited
Partnership or the General Partner are valid and existing and, to the Limited
Partnership's and the General Partner's knowledge, there is no assertion or
claim (or basis therefor) challenging the validity of any Intellectual Property
of the Limited Partnership or the General Partner. The Limited Partnership has
not been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, domain names,
copyrights, other Intellectual Property or violation of any trade secret or
other proprietary right of any third party. To the knowledge of the Limited
Partnership and the General Partner, no third party is challenging the ownership
by the Limited Partnership or the General Partner of, or validity or
effectiveness of, any of the Intellectual Property. Neither the conduct of the
business of the Limited Partnership and the General Partner as currently
conducted or currently contemplated to be conducted nor the manufacture, sale,
licensing or use of any of the products of the Limited Partnership or the
General Partner as now manufactured, sold or licensed or used, nor the use in
any way of the Intellectual Property owned by the Limited Partnership in the
manufacture, use, sale or licensing by the Limited Partnership or the General
Partner of any products currently proposed, infringes on or could reasonably be
expected to infringe or conflict with, in any way, any license, trademark,
trademark right, trade name, trade name right, patent, patent right, industrial
model, invention (to the extent currently protected from infringement by law or
contract applicable to the Limited Partner or the General Partner), service mark
or copyright of any third party that, individually or in the aggregate, where
such infringement would be reasonably likely to have a Material Adverse Effect
on the Limited Partnership or the General Partner. Neither the Limited
Partnership nor the General Partner has brought any action, suit or proceeding
for infringement of Intellectual Property or breach of any license or agreement
involving Intellectual Property against any third party. There are no pending,
or to the Limited Partnership's and General Partner's knowledge, threatened
interference, re-examinations, oppositions or nullities involving any patents,
patent rights or applications therefor of the Limited Partnership or the General
Partner, except such as may have been commenced by the Limited Partnership or
the General Partner.
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<PAGE>
(f) Each of the Limited Partnership and the General Partner has
secured valid written assignments from all consultants and employees who
contributed to the creation or development of the Intellectual Property owned by
the Limited Partnership or the General Partner of the rights to such
contributions that the Limited Partnership or the General Partner does not
already own by operation of law, where such rights are material to the business
of the Limited Partnership or General Partner as currently conducted.
(g) Each of the Limited Partnership and the General Partner has taken
all necessary and appropriate steps to protect and preserve the confidentiality
of all Intellectual Property not otherwise protected by patents, patent
applications or copyright ("Confidential Information"). Each of the Limited
------------------------
Partnership and the General Partner has a policy requiring each of its employees
and contractors to execute proprietary information and confidentiality
agreements substantially in the Limited Partnership's standard forms and all
current and former employees and contractors of the Limited Partnership and the
General Partner have executed such an agreement, except where the failure of
such employees and contractors to execute such an agreement has not had or would
not reasonably be expected to have a Material Adverse Effect on the Limited
Partnership or the General Partner. All use, disclosure or appropriation of
Confidential Information owned by the Limited Partnership or the General Partner
by or to a third party has been pursuant to the terms of a written agreement
between the Limited Partnership or the General Partner and such third party,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect on the Limited Partnership. All use, disclosure or
appropriation of Confidential Information not owned by the Limited Partnership
or the General Partner has been pursuant to the terms of a written agreement
between the Limited Partnership or the General Partner and the owner of such
Confidential Information, or is otherwise lawful.
4.14 Environmental Matters.
---------------------
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal, state
-------------------------------
or local laws, ordinances, codes, regulations, rules, legally binding policies
and applicable orders, as each may be amended from time to time, that are
intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants; which regulate the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Materials (as defined below) or materials containing Hazardous
Materials; or which are intended to assure the protection, safety and good
health of employees, workers or other persons, including the public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
-------------------
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any Environmental
and Safety Laws; petroleum or petroleum products including crude oil or any
fractions thereof; natural gas, synthetic gas, or any mixtures thereof; radon;
asbestos; or any other pollutant or contaminant
-18-
<PAGE>
(iii) "Property" shall mean all real property leased or owned
--------
by the Limited Partnership or the General Partner either currently or in the
past.
(iv) "Facilities" shall mean all buildings and improvements
----------
on the Property of the Limited Partnership or the General Partner.
(b) Each of the Limited Partnership and the General Partner
represents and warrants as follows: (i) to its knowledge, no methylene chloride
or asbestos is contained in or has been used at or released from the Facilities;
(ii) all Hazardous Materials used by the Limited Partnership and/or General
Partner have been disposed of in accordance with all Environmental and Safety
Laws; and (iii) neither the Limited Partnership nor the General Partner has
received any written notice of any noncompliance of the Facilities or of its
past or present operations with Environmental and Safety Laws; (iv) no notices
of noncompliance, administrative actions or suits are pending or threatened
relating to Hazardous Materials or a violation of any Environmental and Safety
Laws; (v) neither the Limited Partnership nor the General Partner has received
notice that it is a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
------
or state analog statute, arising out of events occurring prior to the Closing
Date; (vi) there has not been in the past, and there is not now, any
contamination, disposal, spilling, dumping, incineration, discharge, storage,
treatment or handling of Hazardous Materials by the Limited Partnership or the
General Partner or any of their employees or agents, or, to its knowledge, by
any other person, on, under or migrating to or from the Facilities or Property
(including without limitation, soils and surface and ground waters) which
requires remediation under Environmental and Safety Laws; (vii) there have not
been in the past, and are not now, any underground tanks or underground
improvements at, on or under the Property including without limitation,
treatment or storage tanks, sumps, or water, gas or oil wells; (viii) to its
knowledge, there are no polychlorinated biphenyls ("PCBs") deposited, stored,
----
disposed of or located on the Property or Facilities or any equipment on the
Property containing PCBs at levels in excess of 50 parts per million other than
utility-owned transformers; (ix) to its knowledge, there is no formaldehyde on
the Property or in the Facilities, nor any insulating material containing urea
formaldehyde in the Facilities; (x) the Facilities and the Limited Partnership's
and the General Partner uses and activities therein have at all times complied
with all Environmental and Safety Laws; (xi) the Limited Partnership and the
General Partner have all the permits and licenses required to be issued and are
in full compliance with the terms and conditions of those permits; and (xii)
neither the Limited Partnership nor the General Partner is liable for any off-
site contamination nor under any Environmental and Safety Laws.
(c) For purposes of determining the indemnification obligations of
any person under Section 8.3, any qualification or condition contained in this
Section 4.14 in respect of the knowledge of either the Limited Partnership or
the General Partner shall be disregarded.
4.15 Taxes.
-----
(a) For purposes of this Section 4.15 and other provisions of this
Agreement relating to Taxes, the following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect
-19-
<PAGE>
thereof, (A) imposed by any federal, territorial, state, local or foreign
government or any agency or political subdivision of any such government, which
taxes shall include, without limiting the generality of the foregoing, all
income or profits taxes (including but not limited to, federal, state and
foreign income taxes), payroll and employee withholding taxes, unemployment
insurance contributions, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes, withholding taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers' compensation, Pension
Benefit Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected, (B) any liability for the
payment of amounts referred to in (A) as a result of being a member of any
affiliated, consolidated, combined or unitary group, or (C) any liability for
amounts referred to in (A) or (B) as a result of any obligations to indemnify
another person.
(ii) The term "Returns" shall mean all reports, estimates,
-------
declarations of estimated tax, information statements and returns required to be
filed in connection with any Taxes, including information returns with respect
to backup withholding and other payments to third parties.
(b) All Returns required to be filed by or on behalf of the Limited
Partnership or the General Partner have been duly filed on a timely basis and
such Returns are true, complete and correct. All Taxes shown to be payable on
such Returns or on subsequent assessments with respect thereto, and all payments
of estimated Taxes required to be made by or on behalf of the Limited
Partnership or the General Partner under Section 6655 of the Internal Revenue
Code (the "Code")or comparable provisions of state, local or foreign law, have
been paid in full on a timely basis, and no other Taxes are payable by the
Limited Partnership or the General Partner with respect to items or periods
covered by such Returns (whether or not shown on or reportable on such Returns).
The Limited Partnership and the General Partner have withheld and paid over all
Taxes required to have been withheld and paid over, and complied with all
information reporting and backup withholding in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other third party.
There are no liens on any of the assets of the Limited Partnership or the
General Partner with respect to Taxes, other than liens for Taxes not yet due
and payable or for Taxes that the Limited Partnership or the General Partner is
contesting in good faith through appropriate proceedings and which are
adequately reserved for on its respective books and records. Neither the
Limited Partnership nor the General Partner has any subsidiaries. The General
Partner has not at any time been a member of an affiliated group of corporations
filing consolidated, combined or unitary income or franchise tax returns for a
period for which the statute of limitations for any Tax potentially applicable
as a result of such membership has not expired. The Limited Partnership
qualifies (and has since the date of its formation has qualified) to be treated
as a partnership for federal income tax purposes and not as an association or
publicly traded partnership taxable as a corporation, and neither the Limited
Partnership, the General Partner, any of the Limited Partners, nor any taxing
authority has taken a position inconsistent with such treatment.
(c) The amount of the Limited Partnership's liabilities for unpaid
Taxes for all periods through the date of the LP Financial Statements do not, in
the aggregate, exceed the amount of the current liability accruals for Taxes
reflected on the LP Financial Statements, and
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<PAGE>
the LP Financial Statements properly accrue in accordance with GAAP all
liabilities for Taxes of the Limited Partnership payable after the date of the
LP Financial Statements attributable to transactions and events occurring prior
to such date. The General Partner has no current liability for Taxes. No
liability for Taxes of the Limited Partnership or the General Partner has been
incurred or material amount of taxable income has been realized (or prior to and
including August 31, 2000 will be incurred or realized) since such date other
than in the ordinary course of business.
(d) Purchaser has been furnished by the Limited Partnership and the
General Partner with true and complete copies of (i) all relevant portions of
income tax audit reports, statements of deficiencies, closing or other
agreements received by or on behalf of the Limited Partnership or the General
Partner relating to Taxes, and (ii) all federal, state and foreign income or
franchise tax returns and state sales and use tax Returns for or including the
Limited Partnership and the General Partner for all periods since the Limited
Partnership's and the General Partner's inception.
(e) No audit of the Returns of or including the Limited Partnership
or the General Partner by a government or taxing authority is in process,
threatened in writing or, to the knowledge of the Limited Partnership or the
General Partner, pending. No deficiencies exist or have been asserted in writing
or are expected to be asserted with respect to Taxes of the Limited Partnership
or the General Partner, and the Limited Partnership has not received notice in
writing nor does it expect to receive notice that it or the General Partner has
not filed a Return or paid Taxes required to be filed or paid. Neither the
Limited Partnership nor the General Partner is a party to any action or
proceeding for assessment or collection of Taxes, nor has such event been
asserted or threatened in writing against the Limited Partnership, the General
Partner or any of their respective assets. No waiver or extension of any statute
of limitations is in effect with respect to Taxes or Returns of the Limited
Partnership or the General Partner. The Limited Partnership and the General
Partner have disclosed on their federal and state income and franchise tax
returns all positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Code Section 6662 or comparable
provisions of applicable state tax laws.
(f) The Limited Partnership and the General Partner are not (nor have
they ever been) parties to any tax sharing agreement. Since January 1, 1998,
the General Partner has not been a distributing corporation or a controlled
corporation in a transaction described in Section 355(a) of the Code.
(g) The General Partner is not and has not 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)(1)(A)(ii) of the Code.
The Limited Partnership is not a United States real property interest within the
meaning of section 1.897-7T(a) of the Treasury Regulations. Purchaser shall
have received from each of the Limited Partnership and the General Partner,
pursuant to Section 1445 of the Code, a Foreign Investment in Real Property Tax
Act affidavit satisfying the requirements of Treasury Regulations sections
1.1445-2(c) and 1.1445-11T(d)(2)(i), respectively. The General Partner is not a
"consenting corporation" under Section 341(f) of the Code. Neither the Limited
Partnership nor the General Partner has entered into any compensatory agreements
with respect to the performance of services which payment thereunder
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<PAGE>
would result in a nondeductible expense to the Limited Partnership or to the
General Partner pursuant to Section 280G or 162(m) of the Code or an excise tax
to the recipient of such payment pursuant to Section 4999 of the Code. Neither
the Limited Partnership nor the General Partner has agreed to, nor is it
required to make, other than by reason of the purchase of the Interests by
Purchaser, any adjustment under Code Section 481(a) by reason of, a change in
accounting method, and the Limited Partnership and the General Partner will not
otherwise have any income reportable for a period ending after the Closing Date
attributable to a transaction or other event (e.g., an installment sale)
occurring prior to the Closing Date with respect to which the Limited
Partnership or the General Partner received the economic benefit prior to the
Closing Date. The General Partner is not , nor has it been, a "reporting
corporation" subject to the information reporting and record maintenance
requirements of Section 6038A and the regulations thereunder.
(h) The Partnership Disclosure Schedule contains accurate and
complete information regarding the General Partner's net operating losses for
federal and each state tax purposes. The General Partner has no net operating
losses or credit carryovers or other tax attributes currently subject to
limitation under Sections 382, 383, or 384 of the Code.
4.16 Employee Benefit Plans.
----------------------
(a) Section 4.16 of the Partnership Disclosure Schedule lists,
with respect to the Limited Partnership, the General Partner and any trade or
business (whether or not incorporated) which is treated as a single employer
with the Limited Partnership or the General Partner (an "ERISA Affiliate")
---------------
within the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to a non-
-----
officer employee, loans to officers and directors (other than loans made in
compliance with Section 72(p) of the Code from a retirement plan qualified under
Code Section 401(a)) and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria benefit (Code
Section 125) or dependent care (Code Section 129), life insurance or accident
insurance plans, programs or arrangements, (iii) all contracts and agreements
relating to employment and all severance agreements, with any of the directors,
officers or employees of the Limited Partnership or the General Partner, (iv)
all bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (v) other fringe or employee benefit plans,
programs or arrangements that apply to senior management of the Limited
Partnership or the General Partner and that do not generally apply to all
employees, and (vi) any current or former employment or executive compensation
or severance agreements, written or otherwise, as to which unsatisfied
obligations of the Limited Partnership or the General Partner of greater than
$10,000 remain for the benefit of, or relating to, any present or former
employee, consultant or director of the Limited Partnership or the General
Partner (together, the "Limited Partnership Employee Plans").
----------------------------------
(b) The Limited Partnership and/or the General Partner has
furnished and/or made available to Purchaser a copy of each of the Limited
Partnership Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and, to the extent still in its
possession, any material employee communications relating thereto). Any Limited
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<PAGE>
Partnership Employee Plan intended to be qualified under Section 401(a) of the
Code has either obtained or is the subject of an opinion letter or favorable
determination letter from the Internal Revenue Service as to its initial
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation (to the extent adoption
of such amendment is required by law); or has applied to the Internal Revenue
Service for such a determination letter (or has time remaining to apply for such
a determination letter) prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination with respect to all periods since
the date of adoption of such Limited Partnership Employee Plan. The Limited
Partnership has also furnished Purchaser with the most recent Internal Revenue
Service determination letter issued with respect to each such Limited
Partnership Employee Plan, and nothing has occurred since the issuance of each
such letter which could reasonably be expected to cause the loss of the tax-
qualified status of any Limited Partnership Employee Plan subject to Code
Section 401(a).
(c) Except as set forth in Section 4.16(c) of the Partnership
Disclosure Schedule, (i) none of Limited Partnership Employee Plans promises or
provides retiree medical or other retiree welfare or life insurance benefits to
any person (other than continuation coverage as required by Code Section 4980B);
(ii) there has been no "prohibited transaction," as such term is defined in
----------------------
Section 406 of ERISA and Section 4975 of the Code, and not exempt under Section
408 of ERISA or Section 4975 of the Code, with respect to any Limited
Partnership Employee Plan; (iii) each Limited Partnership Employee Plan has been
administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), and the Limited Partnership and the General
Partner or ERISA Affiliate have performed all obligations required to be
performed by them under, are not in default under or in violation of, and have
no knowledge of any default or violation by any other party to, any of the
Limited Partnership Employee Plans; (iv) neither the Limited Partnership nor the
General Partner or ERISA Affiliate is subject to any liability or penalty under
Sections 4976 through 4980D of the Code or Title I of ERISA with respect to any
of the Limited Partnership Employee Plans; (v) all material contributions
required to be made by the Limited Partnership or the General Partner or ERISA
Affiliate to any Limited Partnership Employee Plan have been made on or before
their due dates and to the extent necessary a reasonable amount has been accrued
for contributions to each Limited Partnership Employee Plan for the current plan
years; (vi) with respect to each Limited Partnership Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
-----------------
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no Limited Partnership
Employee Plan is covered by, and neither the Limited Partnership nor the General
Partner or ERISA Affiliate has incurred or expects to incur any direct or
indirect liability under, arising out of or by operation of Title IV of ERISA in
connection with the termination of, or an employee's withdrawal from, any
Limited Partnership Employee Plan, and no fact or event exists that could give
rise to any such liability, or under Section 412 of the Code; and (viii) no
compensation paid or payable to any employee of the Limited Partnership or the
General Partner has been, or will be, non-deductible by reason of application of
Section 162(m) or 280G of the Code. With respect to each Limited Partnership
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, the Limited
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<PAGE>
Partnership has timely filed all requisite governmental reports (which were true
and correct as of the date filed) and has timely filed and distributed or posted
all notices and reports to employees required to be filed, distributed or posted
with respect to each such Limited Partnership Employee Plan. No suit,
administrative proceeding, action or other litigation has been brought, or to
the best knowledge of the Limited Partnership is threatened, against or with
respect to any such Limited Partnership Employee Plan, including any audit or
inquiry by the IRS or United States Department of Labor. Neither the Limited
Partnership nor the General Partner or other ERISA Affiliate is a party to, or
has made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
------------------
(d) With respect to each Limited Partnership Employee Plan, the
Limited Partnership and the General Partner have complied with (i) the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the regulations
-----
thereunder or any similar applicable state law, (ii) the applicable requirements
of the Health Insurance Portability Amendments Act ("HIPAA") and the regulations
thereunder and (iii) the applicable requirements of the Family Medical Leave Act
of 1993 and the regulations thereunder or any similar applicable state law,
except to the extent that failure to comply would not, in the aggregate, have a
Material Adverse Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of the Limited Partnership, the General Partner or any other ERISA
Affiliate to severance benefits or any other payment (including, without
limitation, unemployment compensation, golden parachute or bonus), except as
expressly provided in this Agreement, the Partnership Disclosure Schedule and in
the other agreements, instruments and documents to be executed in connection
therewith, or (ii) accelerate the time of payment or vesting of any such
benefits, or increase the amount of compensation due any such employee or
service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Limited Partnership, the General
Partner or other ERISA Affiliate relating to, or change in participation or
coverage under, any the Limited Partnership Employee Plan which would materially
increase the expense of maintaining such Plan above the level of expense
incurred with respect to that Plan for the most recent fiscal year included in
the Limited Partnership's financial statements.
(g) Any and all severance payments to Richard Schurig and
Richard Puzo pursuant to those certain Termination Agreements as of even date
herewith have been approved by the Board of Directors of the General Partner and
have been unanimously approved by the shareholders of the General Partner and do
not constitute, and will not be determined to be, nondeductible compensation
expenses pursuant to Section 280(g) of the Internal Revenue Code and the rules
and regulations promulgated thereunder (in each case, as amended).
(h) The General Partner, on behalf of the Limited Partner, has
terminated, effective as of the Closing Date, the Equity Appreciation Rights
Plan of the Limited Partnership in accordance with the terms thereof. Effective
upon such termination, no person shall have any present or future entitlement to
issuance of any units, payment or other rights thereunder, including any claims
for any partnership interest of the Limited Partnership or capital stock of
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<PAGE>
the General Partner. No units have been issued thereunder to any person other
than those persons identified on Section 4.16(h) of the Partnership Disclosure
Schedule, from whom effective acknowledgments of such termination have been
obtained and delivered to the Purchaser.
4.17 Third Party Consents. No consent or approval is needed from any
--------------------
third party in order to effect the purchase of the LP Interests or the Stock by
Purchaser, the consummation of this Agreement or any of the transactions
contemplated hereby.
4.18 Employee Matters. The General Partner has no employees. The
----------------
Limited Partnership and the General Partner are in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices, and is
not engaged in any unfair labor practice. There are no pending claims against
the Limited Partnership or the General Partner under any workers compensation
plan or policy or for long term disability. Neither the Limited Partnership nor
the General Partner has any material obligations under COBRA or any similar
state law with respect to any former employees or qualifying beneficiaries
thereunder. There are no controversies pending or, to the Limited Partnership's
knowledge, threatened, between the Limited Partnership or the General Partner
and any of their respective employees or former employees. Neither the Limited
Partnership nor the General Partner is a party to any collective bargaining
agreement or other labor unions contract nor does the Limited Partnership nor
the General Partner know of any activities or proceedings of any labor union or
organize any such employees. To the extent applicable to the transactions
contemplated by this Agreement, the Limited Partnership and the General Partner
have not incurred any liability under, and have complied in all respects with,
the Worker Adjustment Retraining Notification Act (the "WARN Act"), and no fact
--------
or event exists that could give rise to liability under the WARN Act. Section
4.18 of the Partnership Disclosure Schedule contains a list of all employees who
are currently on a leave of absence (whether paid or unpaid), the reasons
therefor, the expected return date, and whether reemployment of such employee is
guaranteed by contract or statute, and a list of all employees who have
requested a leave of absence to commence at any time after the date of this
Agreement, the reason therefor, the expected length of such leave, and whether
reemployment of such employee is guaranteed by contract or statute. Any
severance payments (other than any payments to be made to Richard Schurig or
Richard Puzo pursuant to those certain Termination Agreements as of even date
herewith) payable to any employee of the Limited Partnership not offered
employment by Purchaser or Parent shall be paid at or prior to Closing by the
Limited Partnership from the Partnership Cash Distribution, and neither the
Purchaser, Parent or the Limited Partnership as operated by the Purchaser after
Closing shall be liable for such severance payments.
4.19 Material Contracts.
------------------
(a) Subsections (i) through (ix) of Section 4.19(a) of the
Partnership Disclosure Schedule contain a list of all contracts and agreements
to which the Limited Partnership or the General Partner is a party and that are
material to the business, results of operations, or condition (financial or
otherwise), of the Limited Partnership or the General Partner (such contracts,
agreements and arrangements as are required to be set forth in Section 4.19(a)
of the Partnership Disclosure Schedule being referred to herein collectively as
the
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<PAGE>
"Material Contracts"). "Material Contracts" shall include, without limitation,
------------------ ------------------
the following and shall be categorized in the Partnership Disclosure Schedule as
follows:
(i) each contract and agreement (other than routine purchase
orders and pricing quotes in the ordinary course of business covering a period
of less than three months) for the purchase of inventory, spare parts, other
materials or personal property with any supplier or for the furnishing of
services to the Limited Partnership or the General Partner under the terms of
which (A) the Limited Partnership or the General Partner paid or otherwise gave
consideration or is obligated to pay or give consideration in excess of $20,000
in the aggregate since December 31, 1999 or (B) cannot be canceled by the
Limited Partnership or the General Partner without penalty or further payment;
(ii) each customer contract and agreement (other than routine
purchase orders, pricing quotes with open acceptance and other tender bids, in
each case, entered into in the ordinary course of business and covering a period
of less than one year) to which the Limited Partnership or the General Partner
is a party and which involve consideration of more than $20,000 in the aggregate
for any single customer;
(iii) (A) all distributor, manufacturer's representative, broker,
franchise, agency and dealer contracts and agreements to which the Limited
Partnership or the General Partner is a party (specifying on a matrix, in the
case of distributor agreements, the name of the distributor, product, territory,
termination date and exclusivity provisions) and (B) all sales promotion, market
research, marketing and advertising contracts and agreements to which the
Limited Partnership or the General Partner under the terms of which (A) the
Limited Partnership or the General Partner paid or otherwise gave consideration
or is obligated to pay or give consideration in excess of $20,000 in the
aggregate since December 31, 1999 or (B) cannot be canceled by the Limited
Partnership or the General Partner without penalty or further payment;
(iv) all management contracts with independent contractors or
consultants (or similar arrangements) to which the Limited Partnership or the
General Partner is a party and which involve consideration or more than $10,000
in the aggregate;
(v) all contracts and agreements (excluding routine checking
account overdraft agreements involving petty cash amounts) under which the
Limited Partnership or the General Partner has created, incurred, assumed or
guaranteed (or may create, incur, assume or guarantee) indebtedness or under
which the Limited Partnership or the General Partner has imposed (or may impose)
a security interest or lien on any of their respective assets, whether tangible
or intangible, to secure indebtedness;
(vi) all contracts and agreements that limit the ability of the
Limited Partnership or the General Partner or, after the Closing Date, Purchaser
or any of its affiliates, to compete in any line of business or with any person
or in any geographic area or during any period of time, or to solicit any
customer or client;
(vii) all contracts and agreements between or among the Limited
Partnership or the General Partner, on the one hand, and any affiliate of the
Limited Partnership or the General Partner (other than a wholly owned
subsidiary), on the other hand:
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<PAGE>
(viii) all contracts and agreements to which the Limited
Partnership or the General Partner is a party (other than routine purchase
orders, pricing quotes with open acceptance and other tender bids, in each case,
entered into in the ordinary course of business and covering a period of less
than one year) under which it has agreed to supply products to a customer at
specified prices, whether directly or through a specific distributor,
manufacturer's representative or dealer; and
(ix) all other contracts or agreements (A) which are material to
the Limited Partnership or the General Partner or the conduct of their
respective businesses or (B) the absence of which would have a Material Adverse
Effect on the Limited Partnership or the General Partner or (C) which are
believed by the Limited Partnership or the General Partner to be of unique value
even though not material to the business of the Limited Partnership or the
General Partner.
(b) Except as would not, individually or in the aggregate, have
a Material Adverse Effect on the Limited Partnership or the General Partner,
each Limited Partnership or General Partner license, each Material Contract and
each other material contract or agreement of the Limited Partnership or the
General Partner which would not have been required to be disclosed in Section
4.19(a) of the Partnership Disclosure Schedule had such contract or agreement
been entered into prior to the date of this Agreement, is a legal, valid and
binding agreement, and none of such licenses or Material Contracts is in default
by its terms or has been canceled by the other party; the Limited Partnership
and the General Partner are not in receipt of any claim of default under any
such agreement; and neither the Limited Partnership nor the General Partner
anticipates any termination of or change to, or receipt of a proposal with
respect to, any such agreement as a result of the purchase of the Interests by
Purchaser or otherwise. The Limited Partnership has furnished Purchaser with
true and complete copies of all such agreements together with all amendments,
waivers or other changes thereto. The execution and delivery of this Agreement
by each of the Limited Partnership and the General Partner does not, and the
consummation of the transactions contemplated hereby, including but not limited
to the dissolution or effective dissolution of the Limited Partnership, will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under any Material Contract.
4.20 Interested Party Transactions. Except as listed on Section 4.20 of
-----------------------------
the Partnership Disclosure Schedule, neither the Limited Partnership nor the
General Partner is indebted to any director, officer, employee or agent of the
Limited Partnership or the General Partner (except for amounts due as normal
salaries and bonuses and in reimbursement of ordinary expenses), and no such
person is indebted to the Limited Partnership or the General Partner.
4.21 Insurance. The Limited Partnership has (and, to the extent such
---------
policies are held by the Limited Partnership, the Stockholders and the General
Partner are named as additional insureds under) policies of insurance and bonds
of the type and in the amounts set forth on Section 4.21 of the Partnership
Disclosure Schedule. There is no material claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies
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<PAGE>
and bonds have been paid and the Limited Partnership is otherwise in compliance
with the terms of such policies and bonds. Neither the Limited Partnership nor
the General Partner has any knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
4.22 Compliance With Laws. Each of the Limited Partnership and the General
--------------------
Partner has complied with, is not in violation of, and has not received any
notices of violation with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its business, except for such violations or failures
to comply as could not reasonably be expected to have a Material Adverse Effect
on the Limited Partnership or the General Partner.
4.23 Minute Books. The minute books of the Limited Partnership and the
------------
General Partner made available to Purchaser contain a complete summary of all
meetings of directors, partners and/or stockholders or actions by written
consent since the time of the formation and/or incorporation of the Limited
Partnership and the General Partner, as applicable, through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects.
4.24 Complete Copies of Materials. Each of the Limited Partnership and the
----------------------------
General Partner has delivered or made available true and complete copies of each
document which, to their knowledge, has been requested by Purchaser or its
counsel in connection with their legal and accounting review of the Limited
Partnership and the General Partner.
4.25 Brokers' and Finders' Fees. Neither the Limited Partnership nor the
--------------------------
General Partner has incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
4.26 Board Approval. The Board of Directors of the General Partner has
--------------
unanimously (i) approved this Agreement and the purchase of the LP Interests and
the GP Shares by Purchaser pursuant to an Equity Purchase Transaction, and the
purchase of the Purchased Assets by Purchaser pursuant to an Asset Purchase
Transaction, and (ii) determined that the purchase of the LP Interests, the GP
Shares and the Purchased Assets by Purchaser pursuant to an Equity Purchase
Transaction or Asset Purchase Transaction, as the case may be, is in the best
interests of the Limited Partners, the Limited Partnership, the General Partner
and the Stockholders and is on terms that are fair to each such person.
4.27 Inventory.
---------
(a) The General Partner has no inventory.
(b) The inventories shown on the LP Financial Statements or
thereafter acquired by the Limited Partnership consist of items of a quantity
and quality usable or salable in the ordinary course of business. Since June 30,
2000, the Limited Partnership has continued to replenish inventories in a normal
and customary manner consistent with past practices. Neither the Limited
Partnership nor the General Partner has received written or oral notice that it
will experience in the foreseeable future any difficulty in obtaining, in the
desired quantity and
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<PAGE>
quality and at a reasonable price and upon reasonable terms and conditions, the
raw materials, supplies or component products required for the manufacture,
assembly or production of its products. The values at which inventories are
carried on the Restated LP Financial Statements reflect the inventory valuation
policy of the Limited Partnership as established in accordance with GAAP applied
on a consistent basis in connection with the preparation of the Restated LP
Statements. Since June 30, 2000, due provision has been made on the books of the
Limited Partnership in the ordinary course of business consistent with past
practices to provide for all slow-moving, obsolete, or unusable inventories at
their estimated useful scrap values and such inventory reserves are adequate to
provide for such slow-moving, obsolete or unusable inventory and inventory
shrinkage.
(c) All of the inventories of the Limited Partnership reflected in
the LP Financial Statements and the Limited Partnership's books and records on
the date hereof were purchased, acquired or produced in the ordinary and regular
course of business and in a manner consistent with the Limited Partnership's
regular inventory practices. None of the inventory of the Limited Partnership
reflected on the LP Financial Statements, the GP Tax Returns or on the Limited
Partnership's books and records as of the date hereof (in either case net of the
reserve therefor) is obsolete, defective or in excess of the needs of the
business of the Limited Partnership reasonably anticipated for the normal
operation of the business consistent with past practices and outstanding
customer contracts. The presentation of inventory on the Restated LP Financial
Statements conforms to GAAP and such inventory is stated at the lower of cost
(determined using the first-in, first-out method) or net realizable value.
4.28 Accounts Receivable.
-------------------
(a) The General Partner has no accounts receivable. The Limited
Partnership has made available to Purchaser a list of all accounts receivable of
the Limited Partnership reflected on the LP Financial Statements and the GP Tax
Returns ("Accounts Receivable") along with a range of days elapsed since
-------------------
invoice.
(b) All Accounts Receivable of the Limited Partnership arose in the
ordinary course of business and are carried on the Restated LP Financial
Statements at values determined in accordance with GAAP consistently applied,
subject to Section 4.6. No person has any lien on any of such Accounts
Receivable and no request or agreement for deduction or discount has been made
with respect to any of such Accounts Receivable.
4.29 Customers and Suppliers. The General Partner has no customers or
-----------------------
suppliers. As of the date hereof, no customer which individually accounted for
more than 10% of the Limited Partnership's gross revenues during the 12 month
period preceding the date hereof, and no supplier of the Limited Partnership,
has canceled or otherwise terminated, or made any written threat to the Limited
Partnership to cancel or otherwise terminate its relationship with the Limited
Partnership, or has at any time on or after June 30, 2000 decreased materially
its services or supplies to the Limited Partnership in the case of any such
supplier, or its usage of the services or products of the Limited Partnership in
the case of such customer, and to the Limited Partnership's knowledge, no such
supplier or customer intends to cancel or otherwise terminate its relationship
with the Limited Partnership or to decrease materially its services or supplies
to the Limited Partnership or its usage of the services or products of the
Limited Partnership, as the
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<PAGE>
case may be. No customer which individually accounted for more than $50,000
individually, or customers which in the aggregate accounted for more than
$100,000, of the Limited Partnership's gross revenues during the 12 month period
preceding the Closing Date, has canceled or otherwise terminated, or made any
written threat to the Limited Partnership to cancel or otherwise terminate, for
any reason, including without limitation the consummation of the transactions
contemplated by this Agreement, its relationship with the Limited Partnership,
and to the Limited Partnership's knowledge, no such customer intends to cancel
or otherwise terminate its relationship with the Limited Partnership or to
decrease materially its usage of the services or products of the Limited
Partnership. The Limited Partnership has not knowingly breached, so as to
provide a benefit to the Limited Partnership that was not intended by the
parties, any agreement with, or engaged in any fraudulent conduct with respect
to, any customer or supplier of the Limited Partnership. The execution and
delivery of this Agreement by each of the Limited Partnership and the General
Partner does not, and the consummation of the transactions contemplated hereby,
including but not limited to the dissolution or effective dissolution of the
Limited Partnership, will not conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under any contract between the Limited Partnership and any
customer or supplier.
4.30 Bank Accounts. Section 4.30 of the Partnership Disclosure Schedule
-------------
sets forth all bank accounts of the Limited Partnership and the General Partner,
their respective balances as of the LP Balance Sheet Date and as of the Closing
Date, and the name of each person authorized to draw upon such account. As of
the Closing Date, there are no unpresented checks or undebited withdrawals in
respect of any account that, in the aggregate, would exceed the Closing Date
balance of such account.
4.31 Representations Complete. None of the representations or warranties
------------------------
made by the Limited Partnership or the General Partner in this Agreement or in
any attachment hereto, including the Partnership Disclosure Schedule, or
certificate furnished by the Limited Partnership or the General Partner pursuant
to this Agreement, when all such documents are read together in their entirety,
contains or will contain at the Closing Date any untrue statement of a material
fact, or omits or will omit at the Closing Date to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF THE LIMITED PARTNERS AND THE STOCKHOLDERS
Except as disclosed in a document of the same date as this Agreement and
delivered jointly and severally by the Limited Partnership and the General
Partner to Purchaser prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Section 5 (the "Investor
--------
Disclosure Schedule"), each Limited Partner (solely as to those representations
-------------------
and warranties contained in Sections 5.1 through 5.4), each Stockholder (as to
every representation and warranty contained in Sections 5.1 through 5.9) (each,
an "Investor"), each Unaccredited Investor (as to each additional representation
--------
and warranty contained in
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<PAGE>
Section 5.10), each Accredited Investor (as to each additional representation
and warranty contained in Section 5.11) and each Affiliated Investor (as to each
additional representation and warranty contained in Section 5.12) hereby
represents and warrants to Purchaser and Parent, as to himself, herself or
itself, as the case may be, and not as to any other person, as follows. An
"Accredited Investor" is an Investor who is identified as such on Exhibit B and
who delivers an Accredited Investor Questionnaire affirming his accredited
status. An "Unaccredited Investor" is an Investor who is not an Accredited
Investor. An "Affiliated Investor" is a Stockholder who is identified as such on
Exhibit B.
5.1 Power, Authorization and Validity. The Investor has all requisite
---------------------------------
legal and, to the extent applicable, corporate power, and authority to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved and authorized by all necessary action,
including, if applicable, corporate action, by or on behalf of such Investor.
This Agreement has been duly executed and delivered by such Investor and
constitutes a valid and binding obligation of the Investor, subject to the laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief and
equitable remedies. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to the Investor in connection with the execution and delivery
of this Agreement by the Investor or the consummation by the Investor of the
transactions contemplated hereby.
5.2 Title to Interests. The Investor is the sole owner of the Purchased
------------------
Interest reflected next to such Investor's name on Exhibit A or Exhibit B, as
--------- ---------
applicable, and has or will have, as of the Closing, good, valid and marketable
title to such Purchased Interest free and clear of all restrictions, claims,
liens, charges, encumbrances and equities whatsoever. The Investor represents
that he, she or it has or will have, as of the Closing, full right, power and
authority to sell, transfer and deliver such Purchased Interest to Purchaser,
and, upon delivery of the certificate or certificates therefor duly endorsed for
transfer to Purchaser and Purchaser's payment for and acceptance thereof, will
transfer to Purchaser good, valid and marketable title thereto free and clear of
any restriction, claim, lien, charge, encumbrance or equity whatsoever. The
Investor is not party to any voting trust, agreement or arrangement affecting
the exercise of the voting rights of the Purchased Interests. There is no
action, proceeding, claim or, to the Investor's knowledge, investigation against
the Investor or the Investor's assets, properties or, as applicable, any of the
Investor's respective officers or directors, pending or, to the Investor's
knowledge, threatened, at law or in equity, or before any court, arbitrator or
other tribunal, or before any administrative law judge, hearing officer or
administrative agency relating to or in any other manner impacting upon the
Purchased Interests held by such Investor.
5.3 No Violation. The execution, delivery and performance of this
------------
Agreement, and the consummation of the Purchase and the other transactions
contemplated by this Agreement do not and will not conflict with or result in a
violation of the Articles of Incorporation, Bylaws, Limited Partnership
Agreement or other applicable charter document of the Investor, or conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, or constitute a default or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the Investor's Purchased Interest under, (a) any
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<PAGE>
instrument, indenture, lease, mortgage or other agreement or contract to which
the Investor is a party or to which such Investor or any of such Investor's
assets or properties may be subject or (b) any federal, state, local or foreign
judgment, writ, decree, order, ordinance, statute, rule or regulation applicable
to the Investor or the Investor's assets or properties. The consummation of the
Purchase and the other transactions contemplated by this Agreement will not
require the consent of any third person with respect to the rights, licenses,
franchises, leases or agreements of the Investor.
5.4 Acknowledgment. The Investor hereby acknowledges that the Investor
--------------
has read this Agreement, the Escrow Agreement and the other documents to be
delivered in connection with the consummation of the transactions contemplated
hereby and has made an independent examination of the transactions contemplated
hereby (including the tax consequences thereof). The Investor acknowledges that
the Investor has had an opportunity to consult with and has relied solely upon
the advice, if any, of the Investor's legal counsel, financial advisors, or
accountants with respect to the transactions contemplated hereby to the extent
the Investor has deemed necessary, and has not been advised or directed by
Purchaser, Parent, the Limited Partnership, the General Partner or their
respective legal counsel or other advisors in respect of any such matters and
has not relied on any such parties in connection with this Agreement and the
transactions contemplated hereby.
5.5 Disclosure of Information. The Investor acknowledges that Parent is a
-------------------------
publicly traded corporation and that the Investor has had the opportunity to
review all publicly filed reports and information on file with respect to Parent
with the SEC. Based on this review and the representations and warranties of
the Purchaser and Parent herein, the Investor represents that it has had
adequate opportunity and has been provided adequate information to evaluate
Parent's business, management, financial affairs and the terms and conditions of
the offering of Parent Stock being acquired by the Investor (the "Securities").
----------
5.6 Purchase Entirely for Own Account. The Investor acknowledges that
---------------------------------
Parent Stock is being given to the Investor in reliance upon the Investor's
representation to the Purchaser and Parent, and the Investor hereby confirms,
that the Securities are being acquired for investment for the Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Investor has no present intention
of selling, granting any participation in, or otherwise distributing the same.
By executing this Agreement, the Investor further represents that the Investor
does not presently have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to such person or to any
third person, with respect to any of the Securities. The Investor represents
that it has full power and authority to enter into this Agreement. The Investor
has not been formed for the specific purpose of acquiring any of the Securities.
5.7 Restricted Securities. The Investor understands that the Securities
---------------------
have not been, and will not be, registered under the Securities Act, by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Investor's representations as expressed herein.
The Investor understands that the Securities are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Investor must hold the Securities indefinitely unless they are
registered with the SEC and qualified by
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<PAGE>
state authorities, or an exemption from such registration and qualification
requirements is available. The Investor acknowledges that Parent has no
obligation to register or qualify the Securities for resale, other than as set
forth in the Registration Rights Agreement of even date herewith between the
Investor and Parent. The Investor further acknowledges that if an exemption from
registration or qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale, the
holding period for the Securities, and on requirements relating to Parent which
are outside of the Investor's control, and which Parent is under no obligation
and may not be able to satisfy.
5.8 No Public Market. The Investor understands that neither the Purchaser
----------------
nor Parent has made no assurances that a public market will continue to exist
for the Securities.
5.9 Legends. The Investor understands that the Securities, and any
-------
securities issued in respect of or exchange for the Securities, may bear one or
all of the following legends:
(i) THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE OR
FOREIGN SECURITIES LAWS, AND NO INTEREST MAY BE SOLD, DISTRIBUTED, ASSIGNED,
OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE OR FOREIGN SECURITIES
LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, (B) THE COMPANY
RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THE SECURITIES
SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION, (C) SUCH TRANSACTION IS IN COMPLIANCE WITH RULE 144 OF THE
SECURITIES ACT OF 1933, OR (D) THE COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION.
(ii) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
(iii) Purchaser shall take such steps as necessary to effect a
removal of any restrictive legend placed upon the Securities pursuant to this
Section 5.9 upon delivery by the Investor to Parent of (x) in the case of a
proposed sale of the Investor's Securities under Rule 144 of Regulation D
promulgated under the Securities Act, a true and accurate certification of the
Investor stating that the Investor has complied in all respects with such rule
in connection with such proposed sale, (y) in the case of a sale by an
Affiliated Investor under Rule 145 of Regulation D promulgated under the
Securities Act, a true and accurate certification of the Affiliated Investor
stating that the Affiliated Investor has complied in all respects with such rule
in connection with such proposed sale, or (z) in the case of any other proposed
sale other than a sale pursuant to an effective registration statement, an
opinion of counsel to the Investor (which opinion and counsel shall be
reasonably satisfactory to Parent) stating that such proposed sale is exempt
from the requirements of registration under the Securities Act.
5.10 Unaccredited Investor. The Investor either alone or with his
---------------------
"purchaser representative(s)" (as defined in relation to Rule 506 of Regulation
D promulgated under the
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<PAGE>
Securities Act) has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the prospective
investment in Parent Stock, as required by Rule 506(b)(2)(ii) of Regulation D
promulgated under the Securities Act.
5.11 Accredited Investor. The Investor is an "accredited investor" as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
5.12 Affiliate Status. The Investor has been advised that as of the date
----------------
hereof he, she or it may be deemed to be an "affiliate" of the General Partner
and/or the Limited Partnership, as the term "affiliate" is (i) defined for
---------
purposes of paragraphs (c) and (d) of Rule 145 promulgated by the SEC under the
Securities Act, and/or (ii) used in and for purposes of Accounting Series,
Releases 130 and 135, as amended, of the SEC. The Investor understands that the
representations, warranties and covenants set forth herein will be relied upon
by Purchaser, Parent, the other Stockholders, the Limited Partnership, the
General Partner and their respective counsel and accounting firms. Accordingly,
the Investor represents and warranties as follows:
(a) The Investor represents and warrants to and agrees with Purchaser
and Parent that the Investor has carefully read this Agreement and discussed
their requirements and other applicable limitations upon his, her or its ability
to sell, transfer or otherwise dispose of Parent Stock to the extent the
Investor felt necessary, with his counsel or counsel for Purchaser.
(b) The Investor represents, warrants and certifies to Purchaser,
Parent, the Limited Partnership and the General Partner as follows:
(i) The Investor currently is the owner of the shares of
General Partner capital stock set forth opposite his name on Exhibit B, and did
not acquire any of such shares in contemplation of the Purchase.
(ii) The Investor has not engaged in a Sale (as defined below)
of any shares of General Partner capital stock in contemplation of the
Acquisition.
(iii) Except to the extent disclosed on the signature page
hereof, the Investor has no present plan or intention to engage in a sale,
exchange, transfer, distribution, redemption or reduction in any way of his, her
or its risk of ownership (by short sale or otherwise), or other disposition,
directly or indirectly (such actions being collectively referred to herein as a
"Sale") of any of the shares of Parent Stock to be received by the Investor in
----
the Purchase. (For purposes of the preceding sentence, shares of General Partner
capital stock (or the portion thereof) (i) with respect to which the Investor
will receive consideration in the Purchase other than shares of Parent Stock
(including cash to be received in lieu of fractional shares of Parent Stock)
and/or (ii) with respect to which a Sale (A) occurred in contemplation of the
Purchase or (B) will occur prior to the Purchase, shall be considered shares of
General Partner capital stock exchanged for shares of Parent Stock in the
Acquisition and then disposed of pursuant to a plan); provided, that this clause
--------
(iii) shall not limit any rights of the Investor under the Registration Rights
Agreement.
(iv) The Investor has no plan or intention to exercise
dissenters' rights in connection with the Purchase.
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<PAGE>
(v) Except to the extent written notification to the contrary is
received by Purchaser and the General Partner from the Investor prior to the
consummation of the Purchase, the representations, warranties and certifications
contained in this Section 5.11 shall be accurate at all times from the date
hereof through the Closing Date.
(vi) The Investor has consulted with such legal counsel and
financial advisors as such Investor has deemed appropriate in connection with
the execution of this Agreement.
(c) The Investor understands that Purchaser, Parent, the Limited
Partnership, the General Partner and the other Stockholders will be relying on
the accuracy of the representations, warranties and certifications contained in
this Section 5.11.
(d) The Investor shall not make any sale, transfer or other
disposition of Parent Stock in violation of the Securities Act or the rules and
regulations promulgated by the SEC thereunder.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
Each of Purchaser and Parent hereby represents and warrants to the Limited
Partnership, the Limited Partners, the General Partner and the Stockholders as
follows:
6.1 Organization, Standing and Power. It is a corporation duly organized,
--------------------------------
validly existing and in good standing under the laws of its jurisdiction of
organization. It has the corporate power to own its properties and to carry on
its business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Material
Adverse Effect on it. It has delivered a true and correct copy of its Articles
of Incorporation and Bylaws or other charter documents, as applicable, each as
amended to date, to the Limited Partnership. It is not in violation of any
material provisions of its Articles of Incorporation or Bylaws.
6.2 Parent Stock. The shares of Parent Stock to be issued pursuant to
------------
this Agreement or pursuant to any stock option (a) contemporaneously granted to
any Stockholder in connection with the transactions contemplated by this
Agreement and (b) exercised in accordance with the terms applicable there, in
each case will be duly authorized, validly issued, fully paid, and non-
assessable .
6.3 Authority. It has all requisite corporate power and authority to
---------
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of it. This Agreement has been duly executed and
delivered by it and constitutes the valid and binding obligation of it
enforceable against it in accordance with its terms.
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<PAGE>
6.4 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Articles of Incorporation or Bylaws of it, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Purchaser or its properties or
assets, the violation of which (in the case of clause (ii) only) in the
aggregate does not have a Material Adverse Effect.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with
respect to it in connection with the execution and delivery of this Agreement by
it or the consummation by it of the transactions contemplated hereby, except for
(i) any filings as may be required under applicable state securities laws, (ii)
if required, the filing by Parent with the Nasdaq National Market of a
Notification Form for Listing of Additional Interests with respect to the shares
of Parent Stock issuable pursuant to this Agreement and (iii) consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on it and would not prevent,
materially alter or delay any the transactions contemplated by this Agreement.
6.5 SEC Documents; Financial Statements.
-----------------------------------
(a) Parent has filed all forms, reports and documents required to be
filed by it with the Securities and Exchange Commission (the "SEC") since
---
December 31, 1999 (collectively, the "Parent SEC Documents"). As of their
--------------------
respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the Securities Act, and none of the Parent SEC
------------
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed Purchaser
SEC Document.
(b) The financial statements of Parent, including the notes thereto,
included in the Parent SEC Documents (the "Parent Financial Statements") were
---------------------------
complete and correct in all material respects as of their respective filing
dates, complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, included in Quarterly Reports on Forms 10-Q). The Parent Financial
Statements fairly present the consolidated financial condition and operating
results of Parent and its subsidiaries at the dates and during the periods
indicated therein (subject, in the case of unaudited statements, to normal,
recurring year-end adjustments). There has been no change in Parent's
accounting policies utilized in preparing the Parent Financial Statements
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<PAGE>
included in the Parent SEC Documents except as described in the notes to the
Parent Financial Statements.
6.6 Absence of Certain Changes. Since June 30, 2000 (the "Parent Balance
-------------------------- --------------
Sheet Date"), Parent has conducted its business in the ordinary course in a
----------
manner consistent with past practice and there has not occurred: (i) any
change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in, a Material Adverse
Effect to Parent; (ii) any material amendment or change to Parent's Articles of
Incorporation or Bylaws; or (iii) any negotiation or agreement by Parent to do
any of the things described in the preceding clauses (i) through (ii) (other
than negotiations with the Limited Partnership and its representatives regarding
the transactions contemplated by this Agreement).
6.7 Representations Complete. None of the representations or warranties
------------------------
made by the Purchaser or the Parent in this Agreement or in any attachment
hereto, or certificate furnished by the Purchaser or the Parent pursuant to this
Agreement, when all such documents are read together in their entirety, contains
or will contain at the Closing Date any statement of a material fact that is
untrue in light of the circumstances under which it was made, or omits or will
omit at the Closing Date to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 7
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Each Party. The consummation of the
---------------------------------------
transactions contemplated by this Agreement by each party hereto shall be
subject to the satisfaction on or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties:
(a) Conditions to Obligations of Each Party. No temporary restraining
---------------------------------------
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transactions contemplated hereby, which makes the
consummation of such transactions illegal.
(b) Governmental and Third-Party Approval. Purchaser, Parent, the
-------------------------------------
Limited Partnership and the General Partner shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the transactions contemplated hereby,
including, without limitation, such approvals, waivers and consents as may be
required under the Securities Act and under any state securities laws.
(c) Escrow Agreement. Purchaser, Parent, the Limited Partnership, the
----------------
General Partner, the Escrow Agent and the Sellers' Agent shall have entered into
an Escrow Agreement substantially in the form attached hereto as Exhibit E.
---------
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7.2 Additional Conditions to Obligations of the Limited Partnership, the
--------------------------------------------------------------------
Limited Partners, the General Partner and the Stockholders. The consummation
-----------------------------------------------------------
of the transactions contemplated by this Agreement by the Limited Partnership,
the Limited Partners, the General Partner and the Stockholders under this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing, by
each of the Limited Partnership and the General Partner and, solely in the case
of Section 7.2(e), the Stockholders:
(a) Representations, Warranties and Covenants (i) Each of the
-----------------------------------------
representations and warranties of Purchaser and Parent in this Agreement that is
expressly qualified by a reference to materiality shall be true in all respects
as so qualified, and each of the representations and warranties of Purchaser and
Parent in this Agreement that is not so qualified shall be true and correct in
all material respects, on and as of the Closing as though such representation or
warranty had been made on and as of the Closing (except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date), and (ii) Purchaser and
Parent shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be performed
and complied with by Purchaser and Parent, as applicable, as of the Closing.
(b) Certificates of Purchaser and Parent.
------------------------------------
(i) Compliance Certificate. The Sellers' Agent shall have been
----------------------
provided with a certificate executed on behalf of each of Purchaser and Parent
by its respective President or its Chief Financial Officer to the effect that,
as of the Closing, each of the conditions set forth in Section 7.2(a) above has
been satisfied with respect to Purchaser and Parent, respectively.
(ii) Certificate of Secretary. The Sellers' Agent shall have been
------------------------
provided with a certificate executed by the Secretary or Assistant Secretary of
each of Purchaser and Parent certifying:
(A) Resolutions duly adopted by the Board of Directors of
Purchaser and Parent, respectively, authorizing the execution of this Agreement
and the execution, performance and delivery of all agreements, documents and
transactions contemplated hereby;
(B) the incumbency of the officers of Purchaser and Parent,
respectively, executing this Agreement and all agreements and documents
contemplated hereby; and
(C) true and correct copies of the Certificate of
Incorporation and Bylaws of Purchaser and Parent, respectively, as in effect on
such date.
(c) Legal Opinion. The Sellers' Agent, on behalf of the Limited
-------------
Partnership and the General Partnership, shall have received a legal opinion
from Purchaser's and Parent's legal counsel substantially in the form of Exhibit
-------
F hereto.
-
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<PAGE>
(d) Good Standing. The Sellers' Agent shall have received a
-------------
certificate or certificates of the Secretary of State of the State of Delaware
certifying as of a date no greater than ten business days prior to the Closing
that each of Purchaser and Parent is, as of such date, in good standing and
authorized to transact business as a domestic corporation.
(e) Registration Rights Agreement. In respect of the Accredited
-----------------------------
Stockholders only, Sellers' Agent shall have received Parent's executed
counterpart of the Registration Rights Agreement between Parent and the
Accredited Stockholders substantially in the form of Exhibit G hereto.
---------
(f) No Material Adverse Effect. There shall not have been any change,
--------------------------
event or condition that has resulted in a Material Adverse Effect to Parent or
Purchaser.
(g) Other Documents. The Limited Partnership shall have received such
---------------
other documents and instruments from Purchaser or Parent as reasonably requested
by it.
7.3 Additional Conditions to the Obligations of Purchaser. The
-----------------------------------------------------
consummation of the transactions contemplated by this Agreement by Purchaser
under this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, by Purchaser:
(a) Representations, Warranties and Covenants. (i) Each of the
-----------------------------------------
representations and warranties of the Limited Partnership, the Limited Partners,
the General Partnership and the Stockholders in this Agreement that is expressly
qualified by a reference to materiality shall be true in all respects as so
qualified, and each of the representations and warranties of the Limited
Partnership, the Limited Partners, the General Partner and the Stockholders in
this Agreement that is not so qualified shall be true and correct in all
material respects, on and as of the Closing as though such representation or
warranty had been made on and as of the Closing (except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date), and (ii) the Limited
Partnership, the Limited Partners, the General Partner and the Stockholders
shall have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Closing.
(b) No Material Adverse Changes. There shall not have occurred any
---------------------------
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations, results
of operations or prospects of the Limited Partnership or the General Partner.
(c) Certificates of the Limited Partnership and the Limited Partners.
----------------------------------------------------------------
(i) Compliance Certificate of the Limited Partnership and General
-------------------------------------------------------------
Partner. Purchaser shall have been provided with a certificate executed on
-------
behalf of the Limited Partnership and the General Partner by the President and
Chief Financial Officer of the General Partner, for itself and for the Limited
Partnership, to the effect that, as of the Closing, each of the conditions set
forth in Section 7.3(a) and (b) above has been satisfied.
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(ii) Accreditation Certificate of Stockholders. Parent shall have
-----------------------------------------
been provided with a certificate executed by each Accredited Investor certifying
as to such Accredited Investor's accredited status. Parent shall have been
provided with an executed certificate of the purchaser representative for each
Unaccredited Investor.
(iii) Certificate of Secretary of the General Partner. Purchaser
-----------------------------------------------
shall have been provided with a certificate executed by the Secretary of the
General Partner certifying:
(A) resolutions duly adopted by the Board of Directors of
the General Partner authorizing the execution of this Agreement and the
execution, performance and delivery of all agreements, documents and
transactions contemplated hereby, in each case by and for itself and by and for
the Limited Partnership;
(B) the Certificate of Partnership and Limited Partnership
Agreement of the Limited Partnership, as in effect immediately prior to the
Closing, including all amendments thereto;
(C) the Articles of Incorporation and Bylaws of the General
Partner, as in effect immediately prior to the Closing, including all amendments
thereto;
(D) the incumbency of the officers of the General Partner
authorized to execute this Agreement and all agreements and documents
contemplated hereby on behalf of the General Partner and the Limited
Partnership; and
(E) a certificate or certificates of the Secretary of State
of the State of New Jersey, certifying as of a date no greater than ten business
days prior to the Closing that each of the Limited Partner and the General
Partner has filed all required reports and is, as of such date, in good standing
and authorized to transact business as a domestic limited partnership and
corporation, respectively.
(d) Third Party Consents. Purchaser shall have been furnished with
--------------------
evidence satisfactory to it that the Limited Partnership and the General Partner
have obtained those consents, waivers, approvals or authorizations of those
Governmental Entities and third parties whose consent or approval are required
in connection with this Agreement.
(e) Letters of Transmittal and Powers of Attorney. Purchaser shall
---------------------------------------------
have been furnished with an originally executed Letter of Transmittal from each
Limited Partner and each Stockholder, in each case in form and substance
satisfactory to Purchaser and accompanied by the certificates and other
documents described in Sections 2.2(a) and 2.2(b), respectively. Purchaser shall
have received originally executed powers of attorney from each Limited Partner,
which power of attorney shall be in form and substance reasonably satisfactory
to Purchaser and shall grant the General Partner full power and authority to
execute this Agreement, and any other agreement necessary to consummate the
Purchase, on behalf of such Limited Partner and to bind such Limited Partner to
the terms and conditions of this Agreement, as negotiated by the General
Partner.
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(f) Legal Opinion. Purchaser shall have received a legal opinion from
-------------
the General Partner's and Limited Partnership's legal counsel, in substantially
the form of Exhibit H.
---------
(g) Bergelson Employment Agreement. Purchaser shall have received an
------------------------------
executed counterpart of an employment contract between Parent and Dr. Michael N.
Bergelson containing terms and conditions satisfactory to Purchaser.
(h) Assignment of Inventions; Assignments of Intellectual Property.
--------------------------------------------------------------
Purchaser shall have received an executed counterpart of an assignment of
inventions in respect of all Products and Intellectual Property from all
employees of the Limited Partnership, including but not limited to Dr. Michael
Bergelson, Nartzis Naydenov and Anthony Marchesini, in each case containing
terms and conditions satisfactory to Purchaser. Purchaser shall have received
executed counterparts of each of an assignment of patents, assignment of
trademarks and assignment of unregistered intellectual property in respect of
all Intellectual Property owned by the Limited Partnership, in each case
containing terms and conditions satisfactory to Purchaser.
(i) Retention Agreements. Purchaser shall have received executed
--------------------
counterparts of a retention and non-competition agreement between Purchaser and
each of Nartzis Naydenov and Anthony Marchesini, each containing terms and
conditions satisfactory to Purchaser.
(j) Offer Letters. Purchaser shall have received executed
-------------
counterparts from no less than eighty-five percent (85%) of the employees of the
Limited Partnership listed on Exhibit I in respect of such employment offer
---------
letters as are sent to them by Purchaser or Parent.
(k) Transition Agreements. Purchaser shall have received an executed
---------------------
counterpart of a Transition Agreement from each of Richard W. Schurig and
Richard Puzo, which Transition Agreements shall contain a written acknowledgment
of termination, non-competition agreement and release of claims in respect of
any prior employment, management or consulting agreements between such
respective individual and the Limited Partnership or the General Partner.
(l) Resignation of Directors and Officers. Purchaser shall have
-------------------------------------
received letters of resignation from each of the directors and officers of the
Limited Partnership and the General Partner in office immediately prior to the
Closing, which resignations in each case shall be effective as of the Closing.
(m) Signature Pages. Purchaser shall have received an original
---------------
executed signature page to this Agreement from each Limited Partner (or from the
Sellers' Agent as such Limited Partner's attorney-in-fact) and each Stockholder.
(n) Release of Bank Liens. Purchaser shall have received (i) a payoff
---------------------
letter from Summit Bank, N.A. (the "Bank") in substance satisfactory to
----
Purchaser in respect of the Bank's loan to the Limited Purchaser and (ii)
originally executed UCC-3 termination statements terminating each UCC-1
financing statement or continuation statement, as the case may be, filed by the
Bank against the Limited Partnership and/or the General Partner (or any
predecessors
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thereto), in all respects complete and in a form appropriate for filing with all
appropriate state and county authorities.
(o) FIRPTA Certificates. Purchaser shall have received from each of
-------------------
the Limited Partnership and the General Partner, pursuant to Section 1445 of the
Code, a Foreign Investment in Real Property Tax Act affidavit satisfying the
requirements of Treasury Regulations sections 1.1445-2(c) and 1.1445-
11T(d)(2)(i), respectively.
(p) Termination of EARP. Purchaser shall have received evidence of an
-------------------
effective termination of the Equity Appreciation Rights Plan of the Limited
Partnership, and an acknowledgement of such termination from each holder of
interests thereunder, in each case in form and substance reasonably satisfactory
to it.
(q) Other Documents. Each of Purchaser and Parent shall have received
---------------
such other documents and instruments as reasonably requested by it.
SECTION 8
ESCROW AND INDEMNIFICATION
8.1 Survival of Representations and Warranties. Except as expressly
------------------------------------------
otherwise provided herein, all covenants to be performed prior to the Closing
Date, and all representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the consummation
of the Purchase and continue until 18 months after the Closing (the "Escrow
------
Termination Date"); provided that if any claims for indemnification have been
---------------- --------
asserted with respect to any such representations and warranties prior to the
Escrow Termination Date, the representations and warranties on which any such
claims are based shall continue in effect until final resolution of any claims
(solely to enable such final resolution). All covenants to be performed after
the Closing Date shall continue indefinitely.
8.2 Escrow Fund. On the Closing Date, a portion of Parent Stock to
-----------
be issued to the Stockholders and a portion of the Cash Consideration to be paid
to the Limited Partners at the Closing shall, without any act of any Limited
Partner, be registered in the name of, and be deposited with, ChaseMellon
Shareholder Services LLC (or other institution selected by Purchaser) as escrow
agent (the "Escrow Agent"), such deposit to constitute the escrow fund (the
------------
"Escrow Fund") and to be governed by the terms set forth herein and in the
-----------
Escrow Agreement attached hereto as Exhibit E (the "Escrow Agreement"). On the
--------- ----------------
Closing Date, $382,500 of the Cash Consideration otherwise payable to the
Limited Partners (the "Initial Escrow Cash" and, together with the Supplemental
-------------------
Cash and the New Cash (each as defined below), the "Escrow Cash") and 75,000
-----------
shares of Parent Stock that the Stockholders are entitled to receive in the
Purchase in exchange for the GP Shares (the "Initial Escrow Shares" and,
---------------------
together with the New Shares (as defined below), the "Escrow Shares") shall be
-------------
deposited by Purchaser into the Escrow Fund. In the event that any Damages (as
defined below) arise, the Escrow Fund shall be available to compensate the
Indemnified Persons (defined below) pursuant to the indemnification obligations
of the Limited Partnership, the General Partner and the Stockholders pursuant to
Section 8.3 and in accordance with the Escrow Agreement, subject to the
limitations of Section 8.3(b) below. At Closing, the Sellers' Agent may direct
that a portion
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of the Partnership Cash Distribution not to exceed $50,000 (the
"Supplemental Cash") be deposited in the Sub-Account Fund (as defined in the
-----------------
Escrow Agreement), which Supplemental Cash shall be available to the Sellers'
Agent (with notice to Purchaser) during the Escrow Period to pay any accrued
legal, accounting or other administrative expenses incurred by the Sellers'
Agent during the Escrow Period. Resort to the Escrow Fund shall be made
proportionately between the Escrow Cash and the Escrow Shares on a 45%-55%
basis, respectively.
8.3 Indemnification.
---------------
(a) Indemnified Damages. Subject to the limitations set forth in this
-------------------
Section 8, from and after the Closing Date, Purchaser and Parent and their
respective affiliates, officers, directors, employees, representatives and
agents (each an "Indemnified Person" and collectively "Indemnified Persons")
------------------ -------------------
shall be entitled to be protected, defended, indemnified and held harmless from
and against any and all losses, costs, damages, liabilities, fees (including
without limitation reasonable attorneys' fees) and expenses (collectively, the
"Damages"), that any of the Indemnified Persons incurs, has been invoiced for or
-------
has agreed to pay, in each case in respect of any of or in connection with any
claim, demand, action or cause of action relating to, arising out of or
connected with any actual or alleged misrepresentation, breach of, or default in
connection with, any of the representations, warranties, covenants or agreements
of the Limited Partnership, the General Partnership, the Limited Partners or the
Stockholders contained in this Agreement or any of the other instruments,
documents or agreements executed and/or delivered by any of the foregoing
pursuant to this Agreement or the transactions contemplated hereby, including
any exhibits or schedules attached hereto or thereto. Each of the Limited
Partnership, the General Partner, the Limited Partners and the Stockholders
acknowledge and agree to the establishment of the Escrow Fund pursuant to
Section 8.2 to compensate the Indemnified Persons for all Damages.
(b) Limitations. The parties hereto agree that, except as set forth
-----------
in the proviso below, the sole and exclusive remedy of the Indemnified Persons
for all Damages under Section 8.3(a) or otherwise in connection with this
Agreement or the transactions contemplated hereby shall be to make one or more
claims against the Escrow Fund deposited in escrow pursuant to the Escrow
Agreement; provided, however, that:
-------- -------
(i) Notwithstanding the occurrence of the Escrow Termination
Date or the termination or depletion of the Escrow Fund and without regard
to the limitations with respect to survivability of the representations and
warranties in Section 8.1 above, the Stockholders shall jointly and
severally indemnify and hold harmless each Indemnified Person for all
Damages arising out of (A) fraud or (B) any reckless or intentional
omission to state or reckless or intentional misstatement by the General
Partner or Limited Partnership of a liability of the General Partner or
Limited Partnership.
(ii) Notwithstanding the occurrence of the Escrow Termination
Date or the termination or depletion of the Escrow Fund and without regard
to the limitations with respect to survivability of the representations and
warranties in Section 8.1 above, each Stockholder shall severally indemnify
and hold harmless each Indemnified Person for all Damages arising out of
any breach of any representation, warranty or covenant
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<PAGE>
made by such Stockholder in respect of such Stockholder's right, title and
interest in and to the GP Shares tendered by such Stockholder at the
Closing.
(iii) Notwithstanding the occurrence of the Escrow Termination
Date or the termination or depletion of the Escrow Fund and without regard
to the limitations with respect to survivability of the representations and
warranties in Section 8.1 above, the Stockholders shall be jointly and
severally liable for any claim for Damages made within four years after the
date of filing of tax returns for the Limited Partnership for the period
through August 31, 2000 arising from income Taxes (including interest and
penalties thereon) resulting from a determination that prior to the Closing
the Limited Partnership should have been taxed as a corporation instead of
as a partnership.
Notwithstanding the foregoing, the total indemnification obligations of any
Stockholder under this Section 8.3(b) or otherwise under this Agreement shall
not exceed the aggregate portion of the Purchase Price received by such
Stockholder in respect of such Stockholder's Purchased Interests net of the
amounts contributed to the Escrow Fund and not returned to such Stockholder.
8.4 Damages Threshold. Notwithstanding the foregoing, the Indemnified
-----------------
Persons shall not be entitled to any indemnification (a) pursuant to Section
8.3(a) in respect of Damages prior to the incurrence by the Indemnified Persons
of Damages in an aggregate amount in excess of $50,000, provided, that any Net
--------
Working Capital (excluding any Partnership Cash Distribution) in excess of
$550,000 as of the Closing Date shall first be available to compensate for any
Damages consisting of undisclosed liabilities otherwise includable in Net
Working Capital and reasonably incurred in the ordinary course of business for
the relevant balance sheet period, and (b) pursuant to Section 8.3(b) in respect
of Damages payable after the Escrow Termination Date under such section, prior
to the incurrence by the Indemnified Persons of Damages payable after the Escrow
Termination Date under Section 8.3(b) in an aggregate amount in excess of
$50,000. In determining the amount of any Damages attributable to a breach, any
materiality standard contained in a representation, warranty or covenant of
Purchaser shall be disregarded.
8.5 Escrow Period. Subject to the following requirements, the Escrow Fund
-------------
shall remain in existence until the Escrow Termination Date (the "Escrow
------
Period"). Upon the expiration of the Escrow Period, the Escrow Fund shall
------
terminate with respect to all Escrow Shares and Escrow Cash; provided, however,
that the amount of Escrow Cash and the number of Escrow Shares, which, in the
reasonable judgment of Purchaser, subject to the objection of the Sellers' Agent
(as defined in Section 8.7 below) and the subsequent dispute resolution of the
claim in the manner provided in the Escrow Agreement, are necessary to satisfy
any unsatisfied claims specified in any certificate signed by an officer of
Purchaser (an "Officer's Certificate") delivered to the Escrow Agent prior to
---------------------
the expiration of such Escrow Period with respect to facts and circumstances
existing on or prior to the Escrow Termination Date shall remain in the Escrow
Fund (and the Escrow Fund shall remain in existence) until such claims have been
resolved. As soon as all such claims have been resolved, the Escrow Agent shall
deliver to Sellers' Agent all Escrow Cash, Escrow Shares and other property
remaining in the Escrow Fund and not required to satisfy such claims for
distribution by the Sellers' Agent to the Limited Partners, in the case of the
Escrowed Cash, in accordance with Section 2.2(c) and/or to the
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Stockholders in the case of the remaining Escrowed Shares in accordance with
Section 2.2(d), as applicable. Such delivery shall be deemed to be delivery to
the Limited Partners and the Stockholders or other beneficial owners of such
Escrow Cash and Escrow Shares, in accordance with Section 2.2.
8.6 Method of Asserting Claims. All claims made for indemnification out
--------------------------
of the Escrow Fund by the any Indemnified Person pursuant to this Section 8
shall be made in accordance with the provisions of the Escrow Agreement.
8.7 Sellers' Agent; Power of Attorney. The Limited Partnership and the
---------------------------------
General Partner (solely for the purposes of receiving notice under this Section
8) and each Limited Partner and each Stockholder (for all purposes hereunder)
hereby appoints Michael Bergelson as his, her or its agent and attorney-in-fact
to act as Sellers' Agent for each such party for and on behalf of such parties,
to receive payment of the Cash Consideration, Parent Stock and Earn-Out Payment,
if any, to give and receive notices and communications hereunder on behalf of
such parties, to enter into and perform the Escrow Agreement, to authorize
delivery to Purchaser of Escrow Shares, Escrow Cash or other property from the
Escrow Fund in satisfaction of claims by Purchaser or any other Indemnified
Person, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and seek judicial relief and comply with orders
and awards of courts with respect to such claims, and to take all actions
necessary or appropriate in the judgment of Sellers' Agent for the
accomplishment of the foregoing. Sellers' Agent may appoint or retain any
attorney licensed in the State of New Jersey or any commercial trustee or trust
department of any federally insured commercial bank (in each case, subject to
Purchaser's reasonable consent) to carry out any obligations or duties of
Sellers' Agent hereunder. Each Limited Partner and each Stockholder hereby agree
to indemnify and hold harmless Sellers' Agent (and/or any subagent appointed
pursuant hereto) from and against any and all losses, costs, damages,
liabilities, fees and expenses, that Sellers' Agent or such subagent or
appointee incurs by reason of or in connection with his performance as Sellers'
Agent hereunder; provided, that in no event shall Sellers' Agent or any subagent
--------
or appointee be indemnified or held harmless for his own gross negligence or
willful misconduct.
8.8 Distributions; Voting.
---------------------
(a) Any shares of Parent Stock or other equity securities issued or
distributed by Purchaser (including shares issued upon a stock split) ("New
---
Shares") in respect of the Escrow Shares that have not been released from the
------
Escrow Fund, and any dividends declared and paid on the Escrow Shares or
interest earned on the Initial Cash ("New Cash"), each shall be added to the
--------
Escrow Fund and become a part thereof. When and if cash dividends on Escrow
Shares in the Escrow Fund shall be declared and paid, they shall be retained in
escrow pending final distribution of the Escrow Fund and will not be immediately
distributed to the beneficial owners of the Escrow Shares. Such New Cash
consisting of dividends will become part of the Escrow Fund and will be
available to satisfy Damages. The beneficial owners of the Escrow Shares shall
pay any taxes on such dividends. When and if interest payable on the Initial
Cash in the Escrow Fund shall be declared and paid, such interest shall be
retained in escrow pending final distribution of the Escrow Fund and will not be
immediately distributed to the beneficial owners of the Initial Escrow Cash.
All New Cash that consists of interest payable on the Initial Cash shall be
owned by the Limited Partners. Such New Cash consisting of interest payable on
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the Initial Cash will become part of the Escrow Fund and will be available to
satisfy Damages. The beneficial owners of the New Cash shall pay any taxes on
such interest.
(b) Each Stockholder shall have voting rights with respect to that
number of Escrow Shares contributed to the Escrow Fund on behalf of such
Stockholder (and on any voting securities added to the Escrow Fund in respect of
such Escrow Shares) so long as such Escrow Shares or other voting securities are
held in the Escrow Fund. As the record holder of such shares, the Escrow Agent
shall vote such shares in accordance with the instructions of the Stockholders
having the beneficial interest therein and shall promptly deliver copies of all
proxy solicitation materials to such Stockholders. Purchaser shall show Parent
Stock contributed to the Escrow Fund as issued and outstanding on its balance
sheet.
SECTION 9
COVENANTS OF PURCHASER
9.1 Blue Sky Laws. Purchaser shall take such steps as may be necessary to
-------------
comply with the securities and Blue Sky Laws of all jurisdictions which are
applicable to the issuance of Parent Stock pursuant hereto, based on and in
reliance upon the representations and warranties of the Stockholders herein.
SECTION 10
COVENANTS OF THE PURCHASER, THE PARENT, THE LIMITED PARTNERSHIP, THE LIMITED
PARTNERS, THE GENERAL PARTNER AND THE STOCKHOLDERS
10.1 Cooperation. Each party hereto will fully cooperate with the other
-----------
parties, their counsel and accountants in connection with any steps required to
be taken as part of its obligations under this Agreement. Each party will use
reasonable efforts to cause all conditions to this Agreement to be satisfied as
promptly as possible and to obtain all consents and approvals necessary for the
due and punctual performance of this Agreement and for the satisfaction of the
conditions hereof. Each Stockholder will cooperate with Purchaser and Parent in
the determination and delivery of a restated LP Balance Sheet utilizing Parent's
revenue recognition policies for sales to end users (specifically, recognizing
sales only upon installation). No party will undertake any course of action
inconsistent with this Agreement or which would make any representations,
warranties or agreements made by such party in this Agreement untrue or any
conditions precedent to this Agreement unable to be satisfied by such party at
or prior to the Closing. The Limited Partnership, each Limited Partner, the
General Partner and each Stockholder take such steps to assist Purchaser as may
be necessary to comply with the securities and blue sky laws of all
jurisdictions that are applicable in connection with the issuance of Parent
Stock pursuant hereto.
10.2 Further Acts.
------------
(a) After the Closing Date, each party hereto, at the request of and
without any further cost or expense to the other parties will take any further
actions necessary or desirable to carry out the purposes of this Agreement and
to vest in Purchaser and/or Parent full title to the Purchased Interests and all
properties, assets and rights of the Limited Partnership and
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the General Partner, and to allow the Purchaser or Parent to effect an election
under Section 754 of the Code to achieve step-up basis in either the Purchased
Interests or the assets of the Limited Partnership and/or the General
Partnership (and each of the Parties hereto acknowledges and consents to such
election). In addition, without in any way limiting the generality of the
foregoing, the Limited Partnership, the General Partner and, to the extent
required, the Limited Partners and the Stockholders hereby agree to take any and
all further actions necessary or desirable to carry out the assignment to
Purchaser of all Intellectual Property. The Stockholders shall take all
necessary steps, at their own cost and expense, to ensure appropriate
preparation and filing of K-1 statements in respect of the Limited Partnership
and distributions therefrom to the Limited Partners and the General Partner for
the fiscal year ending December 31, 2000, and to ensure a valid election under
Section 754 of the Code.
(b) Purchaser, the Limited Partnership and the General Partner
jointly shall, within a reasonable time after Closing, amend Section 7.05 of the
Limited Partnership Agreement of the Limited Partnership to provide an interim
closing of the books for the purposes of an allocation of profit and loss of the
Limited Partnership to the Limited Partners and the General Partner. Thus, in
the event of a sale of the Limited Partnership Interests by the Limited Partners
as of August 31, 2000, all income or loss earned by the Limited Partnership
through such date shall be allocated to the Limited Partners and all income or
loss earned after such date shall be allocated to the new owners of the Limited
Partnership Interests.
(c) In the event Purchaser elects to treat the Purchase as an Asset
Purchase Transaction pursuant to Section 1.1, the parties to this Agreement
agree to allocate the Purchase Price hereunder in accordance with Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code"), including the
Treasury Regulations promulgated thereunder. The Limited Partnership and the
Purchaser shall jointly complete and separately file Form 8594 with their
respective federal income tax returns for the current tax year in accordance
with such allocation schedule. The Purchase Price shall be allocated to the
book value of the assets and the remaining amount of the Purchase Price in
excess of the book value of the assets shall be allocated to goodwill.
(d) Until such time as Purchaser has made its election pursuant to
Section 1.1, each Stockholder agrees in respect of any matter to which the
Stockholders are entitled to vote their GP Shares, to vote such GP Shares as
directed by the Purchaser.
10.3 Certain Waivers.
---------------
(a) Each Limited Partner and the General Partner voluntarily and
knowingly waives any and all rights to (i) any declaration, setting aside, or
payment of a dividend, capital account distribution, or other distribution in
respect to the limited partnership interests or general partnership interests of
the Limited Partnership, as applicable, (ii) any direct or indirect redemption,
purchase or other acquisition by the Limited Partnership of any of such
interests, or any rights of preemption, first refusal, first offer or similar
rights in respect of any sale or transfer of such interests, and (iii)
indemnification, compensation or contribution for any and all losses, costs,
damages, liabilities, fees (including without limitation attorneys' fees) and
expenses attributable to or arising out of any act or omission of the Limited
Partnership or the General Partner.
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(b) Each Stockholder voluntarily and knowingly waives any and all
rights to (i) any declaration, setting aside, or payment of a dividend or other
distribution in respect to the capital stock of the General Partner, or any
direct or indirect redemption, purchase or other acquisition by the General
Partner of any of such interests, (ii) any rights of preemption, first refusal,
first offer or similar rights in respect of any sale or transfer of such
interests, and (iii) indemnification, compensation or contribution for any and
all losses, costs, damages, liabilities, fees (including without limitation
attorneys' fees) and expenses attributable to or arising out of any act or
omission of the Limited Partnership or the General Partner.
10.4 Sales Tax. In the case of an election by Purchaser to characterize
---------
the Purchase as an Asset Purchase Transaction pursuant to Section 1.1, the
Stockholders shall pay all sales tax of any kind (excluding, however, sales
taxes due with respect to inventory of the Limited Partnership included in the
Purchased Assets, payment of which such sales taxes shall be the sole
responsibility of the Purchaser) due and owing by Purchaser or Parent in the
State of New Jersey in respect of Purchaser's acquisition of the Purchased
Assets.
SECTION 11
MISCELLANEOUS
11.1 Survival of Warranties. The representations, warranties and
----------------------
|agreements set forth in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Closing and (except to the extent otherwise
provided in this Agreement) shall terminate on the 18-month anniversary of the
Closing Date.
11.2 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice,
(a) if to Purchaser or Parent, to:
Data Critical Corporation
19820 North Creek Parkway
Bothell, WA 98011
Attention: Chief Financial Officer
Facsimile No.: (425) 482-7000
Telephone No.: (425) 482-7010
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<PAGE>
(b) if to the Limited Partnership, the General Partnership, any
Limited Partner or any General Partner, to:
Michael Bergelson, as Sellers' Agent
750 Kappock Street
Riverdale, New York 10463
Facsimile No.: (718) 601-3512 (must call before faxing)
Telephone No.: (718) 796-1560
11.3 Interpretation. When a reference is made in this Agreement to
--------------
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
------- -------- ---------
herein shall be deemed in each case to be followed by the words "without
-------
limitation." The phrase "made available" in this Agreement shall mean that the
---------- --------------
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
----------------
Agreement", "the date hereof," and terms of similar import, unless the context
--------- ---------------
otherwise requires, shall be deemed to refer to August 31, 2000. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
11.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
11.5 Merger; Nonassignability; Parties in Interest. This Agreement merges
---------------------------------------------
all prior negotiations and drafts of the parties with regard to the transactions
contemplated herein. Any and all other prior written or prior or
contemporaneous oral agreements existing between the parties hereto regarding
such transactions (including but not limited to any confidentiality agreement
executed between or among any of the parties in contemplation of such
transactions): (a) are expressly canceled; (b) are not intended to confer upon
any other person any rights or remedies hereunder; and (c) shall not be assigned
by operation of law or otherwise except as otherwise specifically provided.
11.6 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
11.7 Remedies Cumulative. Except as otherwise provided herein, any and all
-------------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
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11.8 Governing Law; WAIVER OF JURY TRIAL. This Agreement and all acts and
-----------------------------------
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Washington, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the exclusive
jurisdiction and venue of the courts of the state and federal courts of King
County, Washington, subject to Section 9 of the Escrow Agreement. EACH OF
PURCHASER, PARENT, THE LIMITED PARTNERSHIP, THE GENERAL PARTNER, EACH LIMITED
PARTNER, EACH STOCKHOLDER AND SELLERS' AGENT HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION THAT MAY ARISE OUT OF OR IN RESPECT TO THE PURCHASE, THIS
AGREEMENT, ANY RELATED AGREEMENTS AND ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY.
11.9 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
11.10 Waiver of Restrictions. Each of the Limited Partnership, the
----------------------
General Partner, each Limited Partner and each Stockholder hereby consents to
the transfers of Purchased Interests that are the subject of this Agreement and
waives any restrictions on transfer applicable to such Purchased Interests with
respect to the transfers contemplated by this Agreement.
11.11 Public Announcements. All parties hereto agree that Parent will be
--------------------
responsible for any press release or publication with respect to the existence
of this Agreement or the transactions contemplated hereby and further agree to
cooperate in good faith with respect to any such press release or public
statement, and, except as may be required by law, further agree not to issue any
such press release or public statement without the prior written consent of
Parent (in the case of a publication proposed by the Limited Partnership, a
Limited Partner, the General Partner and/or a Stockholder). Parent agrees to
provide any such press release or public statement to Sellers' Agent in advance
of publication and provide Sellers' Agent a reasonable opportunity to review and
comment on such publication.
11.12 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the parties or their respective
successors and assigns. Any amendment or waiver effected in accordance with
this Section 12.12 shall be binding upon the parties and their respective
successors and assigns.
11.13 Material Adverse Effect. In this Agreement, any reference to a
-----------------------
"Material Adverse Effect" with respect to any entity or group of entities means
-----------------------
any event, change or effect that, when taken individually or together with all
other adverse changes and effects, is or is reasonably likely to be materially
adverse to the condition (financial or otherwise), properties, assets,
liabilities, business, operations, or results of such entity and its
subsidiaries, taken as a whole, or to prevent or materially delay consummation
of the transactions contemplated under this Agreement or otherwise to prevent
such entity and its subsidiaries from performing their obligations under this
Agreement.
[Signature Page Follows]
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<PAGE>
The parties have duly executed this Limited Partnership Interest and
Stock Purchase Agreement as of the date first above written.
DATA CRITICAL CORPORATION PACEART ASSOCIATES, L.P.
By: /s/ Michael E. Singer By: PACEART G.P., INC.
---------------------------
Title: CFO Its General Partner
------------------------
By:/s/ Michael N. Bergelson
-------------------------
Title: President
---------------------
DATACRITICAL.COM INC. PACEART G.P., INC.
By: /s/ Michael E. Singer By: /s/ Michael N. Bergelson
--------------------------- ---------------------------
Title: CFO Title: President
------------------------ ------------------------
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<PAGE>
EACH LIMITED PARTNER OF PACEART
ASSOCIATES, L.P. SET FORTH ON
EXHIBIT A HERETO:
By: /s/ Michael N. Bergelson
----------------------------
Name: Dr. Michael N. Bergelson
Title: Attorney-in-Fact
THE STOCKHOLDERS:
/s/ Michael N. Bergelson
----------------------------------
Dr. Michael N. Bergelson
/s/ Wayne Casebolt
----------------------------------
Wayne Casebolt
/s/ Richard Schurig
----------------------------------
Richard Schurig
/s/ Richard Puzo
----------------------------------
Richard Puzo
/s/ Eric Reidman
----------------------------------
Eric Reidman
/s/ Anthony Marchesini
----------------------------------
Anthony Marchesini
-52-
<PAGE>
REPRESENTATIVE
/s/ Michael N. Bergelson
-------------------------------
Dr. Michael N. Bergelson
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<PAGE>
PARTNERSHIP DISCLOSURE SCHEDULE
<PAGE>
EXHIBIT A
Limited Partners of the Limited Partnership
-------------------------------------------
<PAGE>
EXHIBIT B
Stockholders of the General Partner
-----------------------------------
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<PAGE>
EXHIBIT C
Limited Partner Capitalization and Conversion Table
---------------------------------------------------
<PAGE>
EXHIBIT D
Stockholder Capitalization and Conversion Table
-----------------------------------------------
<PAGE>
EXHIBIT E
Form of Escrow Agreement
------------------------
<PAGE>
EXHIBIT F
Form of Opinion of Orrick, Herrington & Sutcliffe
-------------------------------------------------
<PAGE>
EXHIBIT G
Form of Registration Rights Agreement
-------------------------------------
<PAGE>
EXHIBIT H
Form of Opinion of Mintz, Levin
-------------------------------
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