EXHIBIT 2.1
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of
the 28th day of January 2003 between Basic Energy, Inc., a Utah corporation
("Company") and Skyframes, Inc., a Texas corporation ("Acquiree").
WHEREAS, the Boards of Directors of Company and Acquiree deem it advisable
and in the best interests of Company and Acquiree and their respective
shareholders that Company and Acquiree combine; and
WHEREAS, the outstanding shares of Acquiree, being 85,000 shares of Common
Stock, are held by the persons listed on Exhibit 1 hereto; and
WHEREAS, the Boards of Directors of Company, Shareholder and Acquiree deem
it advisable that the acquisition by Company of Acquiree be effected through the
issuance of shares of Common Stock of Company (the "Company Shares") (the
"Exchange") of Company pursuant to this Agreement; and
WHEREAS, the Boards of Directors of Company and Acquiree intend that the
Exchange constitute a "reorganization" under Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations of the Internal Revenue Service (the "IRS") promulgated thereunder,
have approved and adopted this Agreement as a "plan of reorganization" within
the meaning of Section 368 of the Code, and the rules and regulations of the IRS
promulgated thereunder, and intend that the Exchange be treated as a tax free
merger under the Code and the rules and regulations of the IRS promulgated
thereunder.
NOW THEREFORE, in consideration of the mutual agreements hereinafter set
forth, the parties hereto, intending to be legally bound, hereby agree as
follows:
Section 1. DEFINITIONS. Certain words and terms as used in this Agreement
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shall have the meanings given to them by the definitions and descriptions in
this Section, and such definitions shall be equally applicable to both the
singular and plural forms of any of the words and terms defined below. All
accounting terms not specifically defined shall be construed in accordance with
generally accepted accounting principles.
"Acquiree Group" means Acquiree and each of its Subsidiaries.
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"Affiliate" of any specified Person means (i) any other Person directly or
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indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, or (ii) any trust of which such Person is
the settlor. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings relative to the foregoing.
"Acquiree Common Stock" means the common stock, of Acquiree.
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"Closing" has the definition set forth in Section 3.
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"Closing Date" means the date on which the Closing shall take place
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pursuant to Section 3 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as now in effect or
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hereafter amended, and as now or hereafter construed, interpreted and applied
by regulations, rulings and cases.
"Commission" means the Securities and Exchange Commission.
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"Company" has the meaning set forth in the opening paragraph of this
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Agreement and includes, unless the context otherwise requires, its Subsidiaries.
"Company 10-KSB" has the meaning assigned to that term in Section 6.28 of
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this Agreement.
"Company Common Stock" means the common stock of Company, $.10 par value.
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"Contractual Obligation" means for any Person any evidence of indebtedness
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or any agreement or instrument under or pursuant to which any evidence of
Indebtedness has been issued, or any other agreement, instrument or Guaranty,
whether written or oral, to which such Person is a party or by which such Person
or any of its assets or properties are bound.
"Disclosure Schedules" means those certain schedules of even date herewith
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delivered in response to the List of Requested Documents delivered by Company
to Acquiree, consisting of a Schedule of Financial Statements, a Schedule of
Capitalization, a Schedule of Subsidiaries, a Schedule of Changes, a Schedule of
Personal Property, a Schedule of Real Property, a Schedule of Contracts, a
Schedule of Litigation, a Schedule of Patents and Trademarks, a Schedule of
Compliance, a Schedule of Consents, a Schedule of Employees, a Schedule of
Enforceability, a Schedule of Transactions with Interest-ed Persons, a Schedule
of Insurance, a Schedule of Permitted Affiliate Transactions, a Schedule of
Taxes, and a Schedule of Bank Accounts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"Exchange" has the meaning assigned to that term in Section 2 of this
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Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Government" means the government of the United States of America, the
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government of any other nation, any political subdivision of the United States
of America or any such other nation (including, without limitation, any state,
commonwealth, territory, federal district, municipality or possession) and any
department, agency, or instrumentality thereof; and "Governmental" means of, by
or pertaining to, any Government.
"Guaranty" means, at any date, for any Person, all obligations of such
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Person guaranteeing or in effect guaranteeing any Indebtedness, Leases,
dividends or other obligations of any other Person (the "primary obligor") in
any manner, whether directly or indirectly; provided, however, that Guaranty
does not include endorsements for collection in the ordinary course.
"Indebtedness" means all items which, in accordance with generally accepted
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accounting principles, would be included in determining total liabilities as
shown on the liabilities side of a balance sheet of such Person as at the date
on which Indebtedness is to be determined.
"IRS" means the Internal Revenue Service.
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"Lease" means any lease or other agreement (however denominated) providing
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for the use by one Person or real or personal property owned by another Person
(or, the entering into such a lease or agreement).
"Lien" means any mortgage, lien, charge, security interest or encumbrance
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of any kind upon, option to acquire, equity in, or pledge of, any property or
asset, whether now owned or hereafter acquired, and includes the acquisition of,
or agreement to acquire any property or asset subject to any conditional sale
agreement or other title retention agreement, including a Lease on terms
tantamount thereto or on terms otherwise substantially equivalent to a purchase.
"Marks" means any trademarks, trade names, copyrights, service marks, label
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filings or patents including, without limitation, all marks, trade names,
copyrights, service marks and label filings, or application or filing therefor.
"Material" when capitalized and used in this Agreement in relation to any
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Person means material in relation to the business, financial condition, or
results of operations of such Person and its Subsidiaries, if any, taken as a
whole.
"Permitted Lien" means (a) Liens for current taxes not yet due and payable,
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(b) such imperfections of title and easements, if any, which are not known and
which are not material in character, amount or extent and do not materially
detract from the value or interfere with the use, of the assets subject thereto
or affected thereby or otherwise impair business operations, (c) statutory Liens
of landlords and Liens of carriers, warehousemen, mechanics, workmen and
materialmen incurred in the ordinary course of business for sums not yet due or
being contested in good faith and disclosed on the Schedule of Real Property or
Personal Property, and (d) Liens (other than any Lien created by Section 4068 of
ERISA) incurred on deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security.
"Person" means any individual, corporation, partnership, joint venture,
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association, joint-stock company, trust, unincorporated organization or
Government.
"Plan" means any employee benefit plan, as defined in ERISA, and any other
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plan, benefit or program of benefits or perquisites (other than a Governmental
plan, benefit or program) provided to one or more employees, which is or has
been established, maintained, participated in or contributed to by a Person or a
predecessor or successor of a person within the meaning of Section 414 of the
Code.
"Related Party" of any specified Person means any Affiliate of such Person.
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"Reporting Act Documents" means the documents filed by Company with the
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Commission pursuant to the Exchange Act since the date their reporting
obligations arose under Section 13 or 15(d) of the Exchange Act (including
without limitation, each Annual Report on Form 10-KSB, Quarterly Report on Form
10-QSB, and all proxy material) and all press releases distributed or
disseminated by Company.
"Requirement of Law" means, for any Person, any law, rule, judgment,
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regulation, order, writ, injunction or decree of any court or Government and any
decision or ruling of any arbitrator to which such Person is a party or by which
such Person or any of its assets or property is bound or affected or from which
such Person derives benefits, including without limitation, those relating to
the discharge of materials into the environment and environmental protection,
and if such Person is a corporation, its charter documents and bylaws.
"Securities Act" means the Securities Act of 1933, as amended.
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"Subsidiary" of a Person means any corporation of which at least a majority
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of the outstanding stock having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation, irrespective of whether
or not at the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency,
is at the time directly or indirectly owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more Subsidiaries.
Section 2. EXCHANGE. Company shall acquire Acquiree, at the Closing, by
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the issuance of 8,500,000 shares of Company Common Stock, in exchange for all of
the Acquiree Shares (the "Exchange"). The Exchange shall be effective upon
execution of this Agreement.
Section 3. TIME, DATE AND PLACE OF CLOSING. The closing of the
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transactions contem-plated by this Agreement (the "Closing") shall take place
upon execution of this Agreement. At the Closing, the documents set forth in
Section 4 shall be delivered by the respective parties.
Section 4. DELIVERIES AT CLOSING. The following documents shall be
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delivered at or prior to Closing:
4.1 Company shall cause its transfer agent to issue the Company Common
Stock required to be issued pursuant to Sections 2 and 7.2 hereof;
4.2 The Shareholders of Acquiree shall transmit to the Company the
Acquiree Shares.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIREE.
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Acquiree represents, warrants and covenants as follows:
5.1 ORGANIZATION, ETC. Each member of the Acquiree Group is a corporation
duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Each member of the Acquiree
Group has the corporate power to own its properties and carry on its
business as now being conducted, execute and deliver this Agreement
and consummate the trans-actions contemplated hereby and thereby. The
copies of the charter documents of each member of the Acquiree Group
provided to Company shall reflect all amendments made thereto at any
time prior to and as of the Closing and are correct and complete.
5.2 CAPITAL STOCK AND RELATED MATTERS. The authorized capital stock of
Acquiree consists of 100,000 shares of common stock, no par value per
share, of which 85,000 shares are issued and outstanding, and no
shares of preferred stock are authorized. The authorized capital stock
of each Subsidiary is as set forth in its respective charter documents
and the all of the outstanding capital stock of each Subsidiary is
owned by Acquiree, except as set forth in the Schedule of Compliance
(all of which capital stock is validly issued, fully paid and
nonassessable in full compliance with all applicable securities
laws). Except as set forth in the Schedule of Compliance, (i) each of
member of the Acquiree Group will not have outstanding any stock or
securities convertible or exchangeable for any shares of capital
stock, nor will there be outstanding any rights or options to
subscribe for or to purchase any capital stock or any stock or
securities convertible into or exchangeable for any capital stock of
any member of the Acquiree Group, (ii) no member of the Acquiree Group
will be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital
stock, except as contemplated by this Agreement, and (iii) to the best
of the knowledge of the officers of the Acquiree-, there are no
shareholder agreements, proxies, voting trust agreements or similar
agreements or options executed by any share-holders of Acquiree.
5.3 SUBSIDIARIES. Except as set forth in the Schedule of Compliance,
Acquiree owns no securities of any Person and to the best of
Acquiree's knowledge, no officer, director or controlling shareholder
of Acquiree or its Subsidiary owns, directly or indirectly, any
security or financial interest in any other Person which competes with
or does business with Acquiree or its Subsidiary.
5.4 AUTHORIZATION; NO BREACH. The execution and delivery by Acquiree of
this Agreement and each of the other agreements and transactions
contemplated hereby have been duly authorized by all necessary
proceedings of the Board of Directors of Acquiree and, upon the
requisite adoption and approval by the shareholders of Acquiree, all
corporate action of Acquiree necessary for the authorization and
consummation of the transactions contemplated by this Agreement shall
have been taken. This Agreement and each of the other agreements
contemplated hereby constitute the valid and binding obligations of
Acquiree enforceable against it in accordance with their respective
terms. The execution, delivery and compliance with and performance by
Acquiree of this Agreement and each of the other agreements
contemplated hereby, does not and will not (i) conflict with or result
in a breach of the terms, conditions or provisions of, (ii) constitute
a default under, (iii) result in the creation of any material lien,
security interest, charge or encumbrance upon either Acquiree's or any
Subsidiary's capital stock or assets pursuant to, (iv) give any third
party the right to accelerate any material obligation under, (v)
result in a material violation of, or (vi) require any authorization,
consent, approval, permit, exemption or other action by or notice to
any court or Governmental body, pursuant to the charter documents of
Acquiree- or its Subsidiary or any Requirement of Law to which
Acquiree or its Subsidiary is subject or any Contractual Obligation
or other instrument, order, judgment or decree to which Acquiree or
its Subsidiary is subject.
5.5 CHANGES SINCE JULY 31, 2002. Except as set forth in the Schedule of
Changes or as contemplated hereby, since July 31, 2002, Acquiree has
not:
5.5.1 Incurred any obligations or liabilities, whether absolute,
accrued, contingent or otherwise, including, without
limitation, liabilities as guarantor under any Guaranty, other
than obligations and liabilities (a) incurred under this
Agreement or (b) incurred in the ordinary course of its business
or (c) incurred under the Contractual Obligations referred to in
the Schedule of Contracts;
5.5.2 Suffered any adverse change in its business, condition, sales,
income, assets or liabilities, other than changes in the ordinary
course of business, none of which has been, in any case or in
the aggregate, Materially adverse to Acquiree;
5.5.3 Suffered any strike, or to the knowledge of Acquiree and its
Subsidiaries after due inquiry, any threatened strike, work
stoppage, organizational attempts, boycotts, or informational or
direct picketing or leafletting with regard to labor matters;
5.5.4 Made any loans or advances or entered into any Contractual
Obligations therefor, other than (a) those not exceeding $5,000
in the aggregate or (b) those made in the ordinary course of
business which have been properly reflected as "receivables" or
"prepaid expenses" on the books of account and records of
Acquiree and its Subsidiaries;
5.5.5 Changed any of the accounting principles, methods of applying
such principles or estimates used to prepare the Financial
Statements;
5.5.6 Mortgaged, pledged or subjected to any Lien or Lease any assets,
tangible or intangible, except for Permitted Liens;
5.5.7 Acquired or disposed of any assets or properties, by sale,
merger or otherwise, or entered into any Contractual Obligation
for any such acquisition or disposition, except in the ordinary
course of business or except for such acquisitions or
dispositions which do not, in any case or in the aggregate,
exceed $100,000;
5.5.8 Forgiven or canceled any Indebtedness or Contractual Obligation
or waived any rights of value, in any case of in the aggregate,
involving amounts exceeding $100,000;
5.5.9 Entered into any transaction involving the expenditure of more
than $100,000 other than in the ordinary course of business,
except with respect to the Contractual Obligations referred to
in the Schedule of Contracts;
5.5.10 Granted any rights or licenses under any Marks, or entered into
any licensing or distributorship arrangement;
5.5.11 Suffered any damage, destruction or loss in any amount
exceeding $100,000 (whether or not covered by insurance)
adversely affecting, in any case or in the aggregate, its
business, condition, operations, prospects, properties or
assets;
5.5.12 Modified, altered, amended, terminated, adopted, commenced or
withdrawn from participation in any Plan or any Contractual
Obligation relating to any Plan, in whole or in part, or caused
or permitted any such modification, alteration, amendment,
termination, adoption, commencement or withdrawal from
participation;
5.5.13 Caused or permitted any Material change in the manner in which
it conducts its business;
5.5.14 Caused or suffered any amendment or termination (other than by
its terms) of any Contractual Obligation referred to in the
Schedule of Contracts or Schedule of Capitalization;
5.5.15 Discharged or satisfied any Lien or paid any liability
exceeding $100,000 other than (a) with respect to the Contractual
Obligations referred to in the Schedule of Contracts or Schedule
of Capitalization, (b) those adequately and specifically
disclosed or reserved against on the Financial Statements, or (c)
those incurred in the ordinary course of its business consistent
with past practices;
5.5.16 Failed to discharge or satisfy when due any liability and such
failure has caused or will cause actual damages or risk of loss
in any amount exceeding $100,000 over and above amounts actually
due which appear on the Financial Statements;
5.5.17 Issued, sold, or delivered or agreed to issue, sell or deliver
any additional shares of its capital stock or any options,
warrants or rights to acquire any such capital stock or
securities convertible into or exchangeable for such capital
stock;
5.5.18 Declared, made, paid or set apart any sum or property for any
dividend or other distribution to its shareholders or purchased
or redeemed any shares of its capital stock or any option,
warrant or right to purchase any such capital stock, or
reclassified its capital stock;
5.5.19 Increased the wages, salaries, compensation, pension or other
benefits payable or to become payable by Acquiree or any of its
Subsidiaries to any officer, employee or agent, other than merit,
cost-of-living and other normal increases;
5.6 TAXES.
5.6.1 Each member of the Acquiree Group has timely filed (within the
applicable extension periods) with the appropriate Governmental
agencies all Governmental tax returns, information returns, tax
reports and declarations which are required to be filed by any
member of the Acquiree Group, except for late filings which did
not result in the imposition of any substantial monetary
liabilities. All Governmental tax returns, information returns,
tax reports and declarations filed by any member of the Acquiree
Group for years for which the statute of limitations has not run
(the "Tax Returns") are correct in all Material respects. Each
member of the Acquiree Group has timely paid (or has collected
and paid over in the case of sales, use or similar taxes) all
taxes, additions to tax, penalties, interest, assessments,
deposits, and other Governmental charges imposed by law upon it
or any of its properties, tangible or intangible assets, income,
receipts, payrolls, transactions, capital, net worth, franchises,
or upon the sale, use or delivery of any item sold by any member
of the Acquiree Group, other than as may be disclosed in the
Schedule of Taxes. Except as set forth in the Schedule of Taxes,
no Tax Returns have been examined by any Governmental authority.
Except as may be disclosed in the Schedule of Taxes or in any
document delivered to Acquiree therewith, no member of the
Acquiree Group (i) is currently being audited with respect to any
tax, assessment or other Governmental charge, (ii) has received
formal or informal notice from any Government that an audit or
investigation with respect to any tax, assessment or other
Governmental charge is to be initiated, (iii) is formal or
informally discussing Material pending ruling requests or other
Material tax or assessment issued with any other Governmental
taxing authority in connection with any matter concerning any
member of the Acquiree Group, or (iv) has been formally or
informally notified of any potential tax or assessment issued
which any Governmental taxing authority intends to raise in
connection with any matter concerning any member of the Acquiree
Group. Except (i) as may be disclosed in the Schedule of Taxes or
(ii) in connection with any pending audit or investigation, no
member of the Acquiree Group has granted or proposed any waiver
of any statue of limitations with respect to, or any extension of
a period for the assessment or collection of, or any offer in
compromise of any Governmental tax. The accruals and reserves for
taxes reflected on the Financial Statements are adequate to cover
substantially all taxes (including additions to tax, interest,
penalties, and other charges or assessments, if any) which
become due and payable or accruable by reason of business
conducted by any member of the Acquiree Group through July 31,
2002. No Person has ever been a "consenting corporation" within
the meaning of Section 341(f) of the Code. No member of the
Acquiree Group is now or has ever been a "personal holding
company" within the meaning of Section 542(a) of the Code nor is
now nor has ever been a corporation which meets the tests of
Section 542(b)(2) of the Code. No member of the Acquiree Group
has participated in, or is required to participate in for any
period prior to the date of this Agreement, the filing of any
consolidated Tax Return, other than (i) as set forth in the
Schedule of Taxes or (ii) as a member of an affiliated group of
which Acquiree is the common parent.
5.7 CONTRACTUAL OBLIGATIONS.
5.7.1 Except as may be set forth in the Schedule of Contracts, there
are no Contractual Obligations of the following types to which
Acquiree or any of its Subsidiaries or any Plan is a party or by
which Acquiree or any of its Subsidiaries or any of their
properties are bound as of the date hereof:
(a) Mortgages, indentures, loan agreements, security agreements,
conditional sales contracts, forms of consumer credit
agreements or other Contractual Obligations relating to
Indebtedness, the extension of credit to Acquiree or any of
its Subsidiaries or by Acquiree or any of its Subsidiaries
to their customers or the obtaining or issuance of letters
of credit.
(b) Partnership or joint venture agreements.
(c) Employment, consulting or management service agreements.
(d) Collective bargaining agreements.
(e) Plans or Contractual Obligations, trusts, funds or
arrangements for the benefit of employees (whether or not
legally binding).
(f) License, sales agency, franchise, or distributorship
agreements.
(g) Contractual Obligations for the assignment by Acquiree or
any of its Subsidiaries or accounts receivable.
(h) Contractual Obligations for the sale or Lease by Acquiree or
any of its Subsidiaries or any assets for a sales price or
aggregate rentals exceeding $10,000 in the aggregate to any
one Person.
(i) Licenses of Marks or other intellectual property rights.
(j) Contractual Obligations for capital expenditures in excess
of $100,000 for a single project.
(k) Brokerage or finder's agreements.
(l) Agreements or other documents creating Liens relating to any
real or personal property owned or Leased.
(m) Leases of, commitments to Lease, and other agreements
relating to the Lease of, real or personal property.
(n) Contractual Obligations containing covenants limiting the
freedom of Acquiree or any of its Subsidiaries to compete in
any line of business with any Person or in any area.
(o) Contractual Obligations containing in any case a specific
clause or affected by a Requirement of Law giving any Person
who is a party to such Contractual Obligation the right to
renegotiate or require a reduction in price or the repayment
of any amount previously paid because the profit resulting
to Acquiree or any of its Subsidiaries from such Contractual
Obligation is directly related to a specific factor or
factors including, but not limited to sales, cost, assets or
invested capital.
(p) Guaranties.
(q) Any registration rights or preemptive rights to any holder
or prospective holder of its securities.
(r) Other Contractual Obligations which in any case involve
payments or receipts thereunder of more than $100,000 in
the aggregate with any one Person or which cannot be
terminated without any payment on notice of 30 days or
less.
5.7.2 Except as may be set forth in the Schedule of Contracts:
(a) Each Contractual Obligation therein listed in is full force
and effect;
(b) Acquiree and each of its Subsidiaries and, to the knowledge
of Acquiree and each of its Subsidiaries, all other parties
to such Contractual Obligations have performed all
obligations required to be performed by them to date and no
party to any such Contractual Obligation is in default
thereunder;
(c) No such Contractual Obligation contains any provision which
is unusually burdensome, restrictive or unfavorable to
Acquiree or any of its Subsidiaries or which has a
Materially adverse effect, or is likely to have a Materially
adverse effect in the future, on Acquiree, and no event or
condition exists which constitutes, or after notice or
lapse of time or both, would constitute, a default on the
part of Acquiree or any of its Subsidiaries, would
constitute a default on the part of any of the other parties
thereto.
(d) There has been no expressly or impliedly irrevocable
termination or cancellation of the business relationship of
Acquiree or any of its Subsidiaries with (i) any supplier or
affiliated group of suppliers whose sales, individually or
in the aggregate, constituted more than $100,000 or gross
purchases made by Acquiree and its Subsidiaries for the past
12 months or (ii) any customer or affiliated group of
customers whose purchases, individually or in the aggregate,
constituted more than $100,000 of gross sales made by
Acquiree and its Subsidiaries for the past 12 months.
(e) Neither Acquiree nor any of its Subsidiaries has outstanding
any powers of attorney.
5.7.3 The Schedule of Contracts accurately sets forth the aggregate
amount of open purchases orders and sales orders outstanding on
the date hereof.
5.8 LITIGATION.
5.8.1 Except as may be disclosed in the Schedule of Litigation, there
are no:
(a) pending, or to the knowledge of Acquiree or any of its
Subsidiaries, contemplated, administrative or judicial
proceedings against Acquiree or any of its Subsidiaries
arising under any Governmental provisions regulating the
discharge or materials into the environment or otherwise
relating to the protection of the environment or
occupational and safety laws relating to job conditions or
safety;
(b) pending or, to the knowledge of Acquiree or any of its
Subsidiaries, contemplated, administrative or judicial
proceedings against Acquiree or any of its Subsidiaries
arising out of the Foreign Corrupt Practices Act; nor
(c) claims, actions, suits, proceedings, arbitrations,
investigations or inquiries pending before any court or
Governmental body or agency, or any private arbitration
tribunal, or, to the knowledge of Acquiree or any of its
Subsidiaries, threatened against or relating to Acquiree,
any of its Subsidiaries, any Plan, any assets, properties,
or business of Acquiree or any of its Subsidiaries, or the
transactions contemplated by this Agreement nor to the
knowledge of Acquiree or any of its Subsidiaries its there
any basis for any such claim, action, suit, proceeding,
arbitration, investigation or inquiry.
5.8.2 Except as set forth in the Schedule of Litigation, neither
Acquiree or any of its Subsidiaries, nor any officer, director,
partner, or employee of Acquiree or any of its Subsidiaries, has
been permanently or temporarily enjoined by order, judgment or
decree of any court or other tribunal or any Governmental agency
from engaging in or continuing in the conduct or practice of its
business. There is not in existence any judgment, order, writ,
injunction or decree to take action of any kind or to which
Acquiree or any of its Subsidiaries or their business, properties
or assets are subject or bound.
5.9 PRODUCT LIABILITY. Except as set forth on the Schedule of Litigation,
there is no existing or threatened claim, or facts upon which a claim
could be based, against Acquiree or any of its Subsidiaries for any
product sold or Leased or service performed by Acquiree or any of its
Subsidiaries prior to the date of this Agreement which is defective or
fails or has failed to meet any product warranties.
5.10 CLAIMS FOR INJURIES. Except as set forth on the Schedule of
Litigation, there are no claims seeking damages for personal or other
injuries resulting from the Lease, sale or use of any of the assets,
products, services, or goods of Acquiree or any of its assets,
products, services, or goods of Acquiree or any of its Subsidiaries
which Acquiree has placed in the hands of insurance carriers.
5.11 TRADEMARKS, TRADE NAMES, PATENTS, ETC.
5.11.1 Except as may be listed in the Schedule of Patents and
Trademarks, (a) there are no Marks owned, licensed, used by or
registered in the name of Acquiree or any of its Subsidiaries and
no applications for Marks made by Acquiree or any of its
Subsidiaries or by their employees for the benefit of Acquiree
or any of its Subsidiaries; (b) Acquiree or one of its
Subsidiaries is the registered and beneficial owned or the
Marks listed in the Schedule of Patents and Trademarks as owned
by it, free and clear of any royalty or Lien; (c) all of such
Marks are freely assignable by Acquiree or any of its
Subsidiaries; (d) neither Acquiree nor any of its Subsidiaries
has any knowledge of any notice or claim or other reason to
believe that any xxxx is not valid or enforceable by the owner
thereof or of any infringement upon or conflict with any Xxxx or
proprietary right of any third Person by the owner thereof or any
claim of a third Person alleging such infringement or conflict;
(e) neither Acquiree nor any of its Subsidiaries has any
knowledge of any infringement by any third Person upon any Xxxx
listed in the Schedule of Patents and Trademarks; and (f)
neither Acquiree nor any of its Subsidiaries has taken or omitted
to take any action which would have the effect of waiving any of
the rights of Acquiree or its Subsidiaries under any Xxxx.
5.11.2 The Schedule of Patents and Trademarks sets forth a complete
and correct list of all inventions, formulae, trade secrets,
manufacturing processes, know-how or other intellectual property
rights which have been reduced to writing and which are necessary
or useful in the operation of the business of Acquiree or its
Subsidiaries in the manner presently operated by Acquiree or any
of its Subsidiaries or in the marketing of the products presently
marketed by Acquiree or any of its Subsidiaries. Except as set
forth in the Schedule of Patents and Trademarks, (a) Acquiree or
any of its Subsidiaries has the right to use, free and clear of
any know royalties, claims or rights of others, all such
inventions, formulae, trade secrets, manufacturing processes,
know-how or other intellectual property rights (whether or not
reduced to writing) necessary or useful in the operation of the
business of Acquiree and its Subsidiaries in the manner
presently operated by Acquiree and Subsidiaries or in the
marketing of the products presently marketed by Acquiree or any
of its Subsidiaries, including, without limitation (subject to
licensor's rights under Contractual Obligations which are listed
in the Schedule of Contracts), any product licensed from others;
and (b) the record and beneficial ownership of all Marks,
inventions, formulae, trade secrets, know-how and other
intellectual property rights used in the business of Acquiree and
each of its Subsidiaries has been duly and effectively
transferred to Acquiree or one or more of its Subsidiaries.
5.12 EMPLOYEE MATTERS.
5.12.1 Except as may be set forth in the Schedule of Employees, (a)
Acquiree and its Subsidiaries are in compliance with Requirements
of Law respecting employment and employment practices, terms and
conditions of employment, and wages and hours and are not engaged
in any unfair labor practice; (b) there is no unfair labor
practice complaint pending or, to the knowledge of Acquiree or
any of its Subsidiaries, threatened against Acquiree or any of
its Subsidiaries before the National Labor Relations Board or
any Governmental agency; (c) there is not now nor has there been
during the last four years any labor strike, dispute, grievance,
controversy or other labor trouble; (d) no union representation
question exists respecting the employees of Acquiree or any of
its Subsidiaries; (e) there are no collective bargaining
agreements binding upon Acquiree or any of its Subsidiaries; and
(f) there is no pending arbitration or judicial proceeding
arising out of or under collective bargaining agreements or other
employment agreements or the employer-employee relationship.
5.12.2 Except as set forth in the Schedule of Employees, no employee
of Acquiree or any of its Subsidiaries is now due a bonus, or
would be due a bonus at the end of the current fiscal year, upon
the occurrence of a contingency or otherwise, under agreements
currently in effect. Except as may be set forth in the Schedule
of Employees, all accrued obligations of Acquiree or any of its
Subsidiaries, whether arising by operation of law, by Contractual
Obligation or by past custom, for payments to trusts or other
funds or to any Governmental agency, with respect to unemployment
compensation, social security, workers' compensation, disability
programs, accrued vacation, accrued sick pay, pension or any
other benefits for employees as of the date hereof have been paid
or adequate accruals therefor on the books of account of Acquiree
or any of its Subsidiaries have been provided, and none of the
foregoing has been rendered not due by reason of any extension of
waiver.
5.12.3 The data printout attached to the Schedule of Employees
correctly and accurately sets forth each employee, consultant or
commission agent of the Acquiree Group who is employed by the
Acquiree Group as of the date of such printout and with respect
to each such employee presently employed, such Person's rate of
compensation (including any commissions) for the period specified
and such Person's year to date compensation as of the end of
such period. The Schedule of Employees correctly and accurately
lists with respect to each employee, consultant or commission
agent of the Acquiree Group who, during the last fiscal year
earned or who, during the current fiscal year would earn (based
on current practices) $100,000 or more on an annualized basis,
and with respect to each such Person, the positions held as of
the date hereof and held since April 1, 1990, and the date on
which the compensation of such Person was last changed,
including the amount of such change.
5.12.4 Except as set forth in the Schedule of Employees, Acquiree- is
not a party to or bound by any employment or commission
agreements in excess of one year or which could require
compensation and benefits, collective employment contracts,
deferred compensation agreements, bonus plans, profit sharing
plans, pension plans or any other Plans. There have been no
material labor difficulties.
5.13 EMPLOYEE BENEFIT PLANS.
5.13.1 All Plans comply with all Requirements of Law. No liabilities
to any Government for taxes, penalties, interest, premiums,
contributions, or any other items have been incurred with respect
to any Plan other than in the ordinary course of business for
current items paid or items set forth or reserved against on the
Financial Statements.
5.13.2 The Schedule of Employees sets forth a complete list of all
Plans covering any employee of Acquiree or any of its
Subsidiaries, the identity of each funding agency holding assets
of any such Plan, the identity of any insurance company issuing
any contract or policy under any such Plan, and the identity of
any actuarial adviser or service provider retained by, or who
provided services to, any Plan during the past 18 months.
5.13.3 No Plan has incurred any liability other than pursuant to the
terms of the Plan in the ordinary course of business of the Plan.
No assets of any Plan have suffered any material adverse change
since the last valuation report.
5.13.4 Each Plan has good and marketable title to all of the assets it
purports to own free and clear of all Liens. No Plan is a party
to any (a) Contractual Obligation other than one entered into in
the ordinary course of business, (b) partnership or joint venture
agreements, or (c) employment, consulting, or management
agreements except as may be set forth on the Schedule of
Contracts.
5.13.5 The Schedule of Transactions with Interest Persons completely
and accurately describes (a) all Indebtedness outstanding on
March 31, 2002 or thereafter incurred and (b) all sales of
property or performances of services for which payment has been
incurred or accrued on or after March 31, 2002, between any Plan
on the one hand, and any officer, director, or partner of
Acquiree or any of its Subsidiaries, or any Affiliate of any of
them, on the other.
5.14 COMPLIANCE WITH LAWS. Except as set forth in the Schedule of
Compliance, no member of the Acquiree Group is in Material violation
of any Material applicable Requirement of Law.
5.15 CONSENTS. Except as may be set forth in the Schedule of Consents:
5.15.1 There is no consent, approval, order, or authorization of, or
registration, declaration or filing with, any Governmental
authority on the part of Acquiree or any of its Subsidiaries
required in connection with the valid execution, delivery and
performance by Acquiree or any of its Subsidiaries of this
Agreement and the consummation of the transactions contemplated
herein by Acquiree or any of its Subsidiaries.
5.15.2 All permits, concessions, grants, franchises, licenses and
other Governmental authorizations and approvals necessary for
the conduct of the business of Acquiree and its Subsidiaries have
been duly obtained and are in full force and effect, and there
are no proceedings pending or, to the knowledge of Acquiree or
any of its Subsidiaries, threatened which may result in the
revocation, cancellation or suspension, or any materially adverse
modification of any thereof.
5.15.3 There is no consent, approval or authorization of any landlord
under any Lease of any member of the Acquiree Group required in
order to prevent such landlord from having the right to take
action (or refrain from taking action).
5.15.4 There is no consent, approval or authorization of any other
Person (a) whose consent is required under any agreement set
forth in the Schedule of Contracts in order to permit Acquiree
to consummate the transaction contemplated hereby, (b) who in the
absence of such consent, would have the right to (i) declare such
agreement in default, (ii) terminate or modify such agreement, or
(iii) accelerate the time within which, or the terms under which
any member of the Acquiree Group is to perform any act or receive
any rights or benefits under such agreement, or (c) which, if not
received, would result in (i) a default under such agreement,
(ii) the termination or modification of such agreement, or (iii)
the acceleration of the time within which, or the terms under
which, any member of the Acquiree Group is to perform any act or
receive any rights or benefits under such agreement.
5.16 EFFECT OF AGREEMENT. Except as disclosed in the Schedule of
Enforceability, the execution, delivery and performance of this
Agreement by Acquiree or any of its Subsidiaries and the consummation
of the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both:
5.16.1 Violate any Requirement of Law applicable to Acquiree or any of
its Subsidiaries.
5.16.2 Result in the breach of or conflict with any term, covenant,
condition, or provision of, result in the modification or
termination of, constitute a default under, or result in the
creation or imposition of any Lien upon any of the properties or
assets of Acquiree or any of its Subsidiaries under, any
Contractual Obligation to which Acquiree or any of its
Subsidiaries is a party or by which any of their property is
bound.
5.17 TRANSACTIONS WITH INTERESTED PERSONS.
5.17.1 Except as may be set forth in the Schedule of Transactions with
Interested Persons, no officer, director, or partner of Acquiree
or any of its Subsidiaries or any Affiliate of the foregoing
owns, directly or indirectly, on an individual or joint basis,
any Material interest in, or serves as an officer, director or
employee of, any customer, competitor or supplier of Acquiree or
any of its Subsidiaries, or any Person which has a Material
contract or arrangement with Acquiree or any of its Subsidiaries
or any Related Party.
5.17.2 The Schedule of Transactions with Interested Persons correctly
and accurately describes all Indebtedness, all sales of property
and performances of services and any other transaction between
Acquiree or any of its Subsidiaries, on the one hand, and any
Related Party or officer, director or partner of Acquiree or any
of its Subsidiaries or any Affiliate of the foregoing, on the
other, which (a) was outstanding on Xxxxx 00, 0000 (x) was
incurred or took place after March 31, 1993, or (c) was
outstanding on the date hereof other than for personal services
performed by an officer for Acquiree or any of its Subsidiaries
within the past 30 days.
5.17.3 The Schedule of Transactions with Interested Persons correctly
and accurately sets forth with respect to the sale of any
property or the performance of any services between Acquiree or
any of its Subsidiaries, on the one hand, and any Related Party
or officer, director, or partner of Acquiree or any of its
Subsidiaries or any Affiliates of the foregoing, on the other,
which is described in response to Section 5.17.2, (a) whether
such transaction was on terms comparable to those that would have
resulted from dealing between unrelated parties, and, (b) if any
such transaction was not on terms which would have resulted from
dealings between unrelated parties, the terms comparable to those
that would have resulted from dealings between unrelated parties.
5.17.4 The Schedule of Transactions with Interested Persons correctly
and accurately describes all items of personal property, other
than expendable supplies, physically removed from the possession
of Acquiree or any of its Subsidiaries or retired from the books
of accounts of Acquiree or any of its Subsidiaries by any Related
Party or officer, director, or partner of Acquiree or any of its
Subsidiaries or any Affiliate of the foregoing since July 31,
1992.
5.18 BOOKS AND RECORDS. The books of account and other financial and
corporate records of Acquiree and its Subsidiaries and of each Plan
are in all Material respects complete and correct, are maintained in
accordance with usual business practices and comply with all Material
applicable Requirements of Law. Such books and records reflect only
valid transactions and all valid transactions involving Acquiree or
any of its Subsidiaries of a kind required to be reflected on such
books and records are reflected on such books and records. The
corporate minute books of each member of the Acquiree Group contain
accurate records of all meetings and consents of all of the directors
and shareholders since the incorporation of each member. The stock
books and ledgers of each member of the Acquiree Group contain
accurate records of all issuances, retirements and transfers of record
of capital stock.
5.19 PROPERTY.
5.19.1 The Schedule of Real Property or the Schedule of Leases
completely and accurately describes all real property and
interests in real property owned or Leased by the Acquiree Group
including, without limitation, for each Lease, the address of the
real property, the name and address of the landlord, the term of
the Lease, the amount of rent payable under the Lease and, as to
any option to renew, for each option, the number of years covered
by such option. Acquiree and its Subsidiaries have good and
marketable title to all real properties which they purport to own
and valid leasehold interests in all real properties which they
purport to Lease, in each case free and clear of all Liens,
except Permitted Liens or Liens set forth in the Schedule of Real
Property. Except as set forth in the Schedule of Real Property,
(i) each Lease of real property to which Acquiree or any of its
Subsidiaries is a party is in full force and effect in accordance
with its terms, (ii) all rents and other amounts required to be
paid to date under such Leases have been paid, (iii) no event or
condition exists which constitutes, or after notice or lapse of
time or both would constitute, a default on the part of Acquiree
or any of its Subsidiaries under any Lease of real property to
which Acquiree or any of its Subsidiaries is a party and, to the
knowledge of Acquiree or any of its Subsidiaries, there exists no
such event or condition which constitutes or would constitute
such a default on the part of any of the other parties thereto.
Except as set forth in the Schedule of Real Property, no property
owned by Acquiree or any of its Subsidiaries is subject to any
sublease, concession or license which entitles any Person (other
than employees of Acquiree or any of its Subsidiaries) to
transact business on any such property.
5.19.2 Acquiree and its Subsidiaries have valid Leases respecting all
personal property they purport to Lease. The rights of Acquiree
and its Subsidiaries as lessee under such Leases are free and
clear of all Liens, except Permitted Liens. Except as set forth
in the Schedule of Personal Property, (i) each Lease of personal
property to which Acquiree or any of its Subsidiaries is a party
is in full force and effect in accordance with its terms, (ii)
all rents and other amounts required to be paid to date under
such Leases have been paid, (iii) no event or condition exists
which constitutes, or after notice or lapse of time or both would
constitute, a default on the part of Acquiree or any of its
Subsidiaries under any such Lease, and (iv) to the knowledge of
Acquiree or any of its Subsidiaries, there exists no such event
or condition which constitutes or would constitute such a default
on the part of any of the other parties thereto.
5.20 REPORTING ACT DOCUMENTS. Except as set forth in the Schedule of
Compliance, Acquiree has, in all Reporting Act Documents, complied in
all material respects with the reporting and proxy requirements of the
Exchange Act and the rules and regulations of the Commission
promulgated thereunder. The information contained in each Reporting
Act Document of Acquiree is true and correct in all Material respects
as of the date thereof, and no Reporting Act Document contains any
untrue statement of a Material fact or omits to state a Material fact
required to be stated therein or necessary to make the statements
therein not misleading as of the date thereof.
5.21 FINANCIAL STATEMENTS. Except as set forth on the Schedule of Financial
Statements, the consolidated financial statements of Acquiree (for
purposes of this Article V, the "Financial Statements) present fairly
the consolidated financial position and results or operations and
changes in the consolidated financial position of Acquiree and its
Subsidiaries at the respective dates and for the respective periods
indicated in accordance with generally accepted accounting principles
applied on a consistent basis.
5.22 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected or
reserved against on the Financial Statements or as set forth in the
Disclosure Schedules, no member of the Acquiree Group has any
liability, whether absolute, accrued, known or unknown, contingent or
otherwise, whether due or to be come due, including without
limitation, liabilities as guarantor under any Guaranty and any
liabilities for taxes or other Governmental charges, for any period
prior to July 1, 2002, or arising out of any transaction any member of
the Acquiree Group entered into prior to such date or arising out of
any state of facts arising prior to such date, other than those
incurred in the ordinary course of business, none of which has had, or
may be reasonably expected to have, a Material adverse effect on
Acquiree.
5.23 INSURANCE. Except as set forth in the Schedule of Insurance:
5.23.1 (a) Acquiree and each of its Subsidiaries has maintained
insurance with respect to its properties and business against
loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or
similar business and similarly situated, including insurance with
respect to product liability and warranty claims of such types
and in such amounts as are customary under the circumstances, (b)
Acquiree and each of its Subsidiaries has maintained such
insurance with financially sound and reputable insurers, and (c)
each insurance policy maintained by Acquiree and its Subsidiaries
is in full force and effect, all premiums due thereon having been
paid and all provisions of such policy having been complied with.
5.23.2 Neither Acquiree nor any of its Subsidiaries has received any
notice of any pending or threatened terminations or premium
increases with respect to such insurance policies.
5.23.3 Neither Acquiree nor any Subsidiary of Acquiree has failed to
give any notice or present any claim under any insurance policy
in a due and timely fashion.
5.23.4 There are no outstanding requirements or recommendations by or
mad eon behalf of any insurance company that issued a policy with
respect to any of the properties, assets or business of Acquiree
or any of its Subsidiaries requiring or recommending any
equipment or facilities to be installed on or in connection with
any of the properties or assets owned or leased by Acquiree or
any of its Subsidiaries.
5.24 DISCLOSURE. Neither this Agreement nor any written document,
statement, list, schedule, certificate or other instrument referred
to herein or delivered by or on behalf of Acquiree or any of its
Subsidiaries in connection with the transactions contemplated hereby
contains any untrue statement of a Material fact or omits to state a
Material fact necessary to make the statements herein and therein, in
light of the circumstances under which they were made, not misleading.
There is no fact known to Acquiree or any of its Subsidiaries which
Materially adversely affects, or in the future is likely to (so far as
Acquiree or any of its Subsidiaries can now reasonably foresee)
Materially adversely affect Acquiree or any Plan, other than (a)
general economic or business conditions or (b) facts set forth herein
or which may be set forth in the Disclosure Schedules referred to
herein.
5.25 BROKERS. Neither Acquiree nor any Subsidiary of Acquiree has incurred
or become liable for any commission, fee or other similar payment to
any broker, agent, finder or other intermediary in connection with the
negotiation of this Agreement or the consummation of the transactions
contemplated hereby.
5.26 RECORDS OF THE BUSINESS. The books of account and other financial
records of Acquiree and Subsidiary are complete and correct, are
maintained in accordance with usual business practices and comply with
all Requirements of Law. Such books and records reflect only valid
transactions and all valid transactions required to be reflected on
such books and records are reflected upon such books and records.
Section 6. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company hereby
represents and warrants to Acquiree as follows:
6.1 ORGANIZATION, ETC. Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah.
Company has the corporate power to own its properties and carry on its
business as now being conducted, execute and deliver this Agreement
and consummate the transactions contemplated hereby and thereby. The
copies of the articles of incorporation and bylaws of Company provided
to Acquiree shall reflect all amendments made thereto at any time
prior to and as of the Closing and are correct and complete.
6.2 CAPITAL STOCK AND RELATED MATTERS. The authorized capital stock of
Company consists of 20,000,000 shares of common stock, par value $.001
per share, of which 8,454,134 shares are issued and outstanding, and
no shares of preferred stock. Except as set forth in Exhibit 6.2, (i)
Company will not have outstanding any stock or securities convertible
or exchangeable for any shares of capital stock, nor will there be
outstanding any rights or options to subscribe for or to purchase any
capital stock or any stock or securities convertible into or
exchangeable for any capital stock of Company (ii) Company is not
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock, except as
contemplated by this Agreement, and (iii) to the best of the knowledge
of the officers of the Company-, there are no shareholder agreements,
proxies, voting trust agreements or similar agreements or options
executed by any shareholders of Company.
6.3 SUBSIDIARIES. Except as set forth in the Schedule of Compliance,
Company owns no securities of any Person and to the best of Company's
knowledge, no officer, director or controlling shareholder of Company
owns, directly or indirectly, any security or financial interest in
any other Person which competes with or does business with Company.
6.4 AUTHORIZATION; NO BREACH. The execution and delivery by Company of
this Agreement and each of the other agreements and transactions
contemplated hereby have been duly authorized by all necessary
proceedings of the Board of Directors of Company and all corporate
action of Company necessary for the authorization and consummation of
the transactions contemplated by this Agreement shall have been taken.
This Agreement and each of the other agreements contemplated hereby
constitute the valid and binding obligations of Company enforceable
against it in accordance with their respective terms. The execution,
delivery and compliance with and performance by Company of this
Agreement and each of the other agreements contemplated hereby, does
not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any material lien, security interest, charge
or encumbrance upon either Company's or any Subsidiary's capital stock
or assets pursuant to, (iv) give any third party the right to
accelerate any material obligation under, (v) result in a material
violation of, or (vi) require any authorization, consent, approval,
permit, exemption or other action by or notice to any court or
Governmental body, pursuant to the articles of incorporation or bylaws
of Company- or its Subsidiary or any Requirement of Law to which
Company or its Subsidiary is subject or any Contractual Obligation or
other instrument, order, judgment or decree to which Company or its
Subsidiary is subject.
6.5 CHANGES SINCE SEPTEMBER 30, 2002. Except as set forth in the Schedule
of Changes or as contemplated hereby, since September 30, 2002,
Company has not:
6.5.1 Incurred any obligations or liabilities, whether absolute,
accrued, contingent or otherwise, including, without
limitation, liabilities as guarantor under any Guaranty, other
than obligations and liabilities (a) incurred under this
Agreement or (b) incurred in the ordinary course of its business
or (c) incurred under the Contractual Obligations referred to in
the Schedule of Contracts;
6.5.2 Suffered any adverse change in its business, condition, sales,
income, assets or liabilities, other than changes in the ordinary
course of business, none of which has been, in any case or in
the aggregate, Materially adverse to Company;
6.5.3 Suffered any strike, or to the knowledge of Company after due
inquiry, any threatened strike, work stoppage, organizational
attempts, boycotts, or informational or direct picketing or
leafletting with regard to labor matters;
6.5.4 Made any loans or advances or entered into any Contractual
Obligations therefor, other than (a) those not exceeding $10,000
in the aggregate or (b) those made in the ordinary course of
business which have been properly reflected as "receivables" or
"prepaid expenses" on the books of account and records of
Company;
6.5.6 Changed any of the accounting principles, methods of applying
such principles or estimates used to prepare the Financial
Statements;
6.5.6 Mortgaged, pledged or subjected to any Lien or Lease any assets,
tangible or intangible, except for Permitted Liens;
6.5.7 Acquired or disposed of any assets or properties, by sale,
merger or otherwise, or entered into any Contractual Obligation
for any such acquisition or disposition, except in the ordinary
course of business or except for such acquisitions or
dispositions which do not, in any case or in the aggregate,
exceed $100,000;
6.5.8 Forgiven or canceled any Indebtedness or Contractual Obligation
or waived any rights of value, in any case of in the aggregate,
involving amounts exceeding $100,000;
6.5.9 Entered into any transaction involving the expenditure of more
than $100,000 other than in the ordinary course of business,
except with respect to the Contractual Obligations referred to
in the Schedule of Contracts;
6.5.10 Granted any rights or licenses under any Marks, or entered into
any licensing or distributorship arrangement;
6.5.11 Suffered any damage, destruction or loss in any amount
exceeding $100,000 (whether or not covered by insurance)
adversely affecting, in any case or in the aggregate, its
business, condition, operations, prospects, properties or
assets;
6.5.12 Modified, altered, amended, terminated, adopted, commenced or
withdrawn from participation in any Plan or any Contractual
Obligation relating to any Plan, in whole or in part, or caused
or permitted any such modification, alteration, amendment,
termination, adoption, commencement or withdrawal from
participation;
6.5.13 Caused or permitted any Material change in the manner in which
it conducts its business;
6.5.14 Caused or suffered any amendment or termination (other than by
its terms) of any Contractual Obligation referred to in the
Schedule of Contracts or Schedule of Capitalization;
6.5.15 Discharged or satisfied any Lien or paid any liability
exceeding $100,000 other than (a) with respect to the Contractual
Obligations referred to in the Schedule of Contracts or Schedule
of Capitalization, (b) those adequately and specifically
disclosed or reserved against on the Financial Statements, or (c)
those incurred in the ordinary course of its business consistent
with past practices;
6.5.16 Failed to discharge or satisfy when due any liability and such
failure has caused or will cause actual damages or risk of loss
in any amount exceeding $100,000 over and above amounts actually
due which appear on the Closing Balance Sheet;
6.5.17 Issued, sold, or delivered or agreed to issue, sell or deliver
any additional shares of its capital stock or any options,
warrants or rights to acquire any such capital stock or
securities convertible into or exchangeable for such capital
stock;
6.5.18 Declared, made, paid or set apart any sum or property for any
dividend or other distribution to its shareholders or purchased
or redeemed any shares of its capital stock or any option,
warrant or right to purchase any such capital stock, or
reclassified its capital stock;
6.5.19 Increased the wages, salaries, compensation, pension or other
benefits payable or to become payable by Company to any officer,
employee or agent, other than merit, cost-of-living and other
normal increases;
6.6 TAXES.
6.6.1 Company has timely filed (within the applicable extension
periods) with the appropriate Governmental agencies all
Governmental tax returns, information returns, tax reports and
declarations which are required to be filed by the Company,
except for late filings which did not result in the imposition of
any substantial monetary liabilities. All Governmental tax
returns, information returns, tax reports and declarations filed
by the Company for years for which the statute of limitations has
not run (the "Tax Returns") are correct in all Material respects.
Company has timely paid (or has collected and paid over in the
case of sales, use or similar taxes) all taxes, additions to tax,
penalties, interest, assessments, deposits, and other
Governmental charges imposed by law upon it or any of its
properties, tangible or intangible assets, income, receipts,
payrolls, transactions, capital, net worth, franchises, or upon
the sale, use or delivery of any item sold by the Company, other
than as may be disclosed in the Schedule of Taxes. Except as set
forth in the Schedule of Taxes, no Tax Returns have been examined
by the IRS or any other Governmental authority. Except as may be
disclosed in the Schedule of Taxes or in any document delivered
to Company therewith, the Company (i) is not currently being
audited with respect to any tax, assessment or other Governmental
charge, (ii) has not received formal or informal notice from any
Government that an audit or investigation with respect to any
tax, assessment or other Governmental charge is to be initiated,
(iii) is not formal or informally discussing Material pending
ruling requests or other Material tax or assessment issued with
the IRS or any other Governmental taxing authority in connection
with any matter concerning any member of the Company Group, or
(iv) has not been formally or informally notified of any
potential tax or assessment issued which the IRS or any other
Governmental taxing authority intends to raise in connection with
any matter concerning any member of the Company Group. Except (i)
as may be disclosed in the Schedule of Taxes or (ii) in
connection with any pending audit or investigation, Company has
not granted or proposed any waiver of any statue of limitations
with respect to, or any extension of a period for the assessment
or collection of, or any offer in compromise of any Governmental
tax. The accruals and reserves for taxes reflected on the
Financial Statements are adequate to cover substantially all
taxes (including additions to tax, interest, penalties, and
other charges or assessments, if any) which become due and
payable or accruable by reason of business conducted by the
Company through September 30, 1993. No Person has ever been a
"consenting corporation" within the meaning of Section 341(f) of
the Code. The Company is not now or has ever been a "personal
holding company" within the meaning of Section 542(a) of the Code
nor is now nor has ever been a corporation which meets the tests
of Section 542(b)(2) of the Code. The Company has not
participated in, or is required to participate in for any period
prior to the date of this Agreement, the filing of any
consolidated Tax Return, other than (i) as set forth in the
Schedule of Taxes or (ii) as a member of an affiliated group of
which Company is the common parent.
6.7 CONTRACTUAL OBLIGATIONS.
6.7.1 Except as may be set forth in the Schedule of Contracts, there
are no Contractual Obligations of the following types to which
Company or any Plan is a party or by which Company or any of
their properties are bound as of the date hereof:
(a) Mortgages, indentures, loan agreements, security agreements,
conditional sales contracts, forms of consumer credit
agreements or other Contractual Obligations relating to
Indebtedness, the extension of credit to Company or by
Company or to their customers or the obtaining or issuance
of letters of credit.
(b) Partnership or joint venture agreements.
(c) Employment, consulting or management service agreements.
(d) Collective bargaining agreements.
(e) Plans or Contractual Obligations, trusts, funds or
arrangements for the benefit of employees (whether or not
legally binding).
(f) License, sales agency, franchise, or distributorship
agreements.
(g) Contractual Obligations for the assignment by Company of
accounts receivable.
(h) Contractual Obligations for the sale or Lease by Company or
any assets for a sales price or aggregate rentals exceeding
$10,000 in the aggregate to any one Person.
(i) Licenses of Marks or other intellectual property rights.
(j) Contractual Obligations for capital expenditures in excess
of $100,000 for a single project.
(k) Brokerage or finder's agreements.
(l) Agreements or other documents creating Liens relating to any
real or personal property owned or Leased.
(m) Leases of, commitments to Lease, and other agreements
relating to the Lease of, real or personal property.
(n) Contractual Obligations containing covenants limiting the
freedom of Company to compete in any line of business with
any Person or in any area.
(o) Contractual Obligations containing in any case a specific
clause or affected by a Requirement of Law giving any Person
who is a party to such Contractual Obligation the right to
renegotiate or require a reduction in price or the repayment
of any amount previously paid because the profit resulting
to Company from such Contractual Obligation is directly
related to a specific factor or factors including, but not
limited to sales, cost, assets or invested capital.
(p) Guaranties.
(q) Any registration rights or preemptive rights to any holder
or prospective holder of its securities.
(r) Other Contractual Obligations which in any case involve
payments or receipts thereunder of more than $100,000 in
the aggregate with any one Person or which cannot be
terminated without any payment on notice of 30 days or
less.
6.7.2 Except as may be set forth in the Schedule of Contracts:
(a) Each Contractual Obligation therein listed in is full force
and effect;
(b) Company and, to the knowledge of Company, all other parties
to such Contractual Obligations have performed all
obligations required to be performed by them to date and no
party to any such Contractual Obligation is in default
thereunder;
(c) No such Contractual Obligation contains any provision which
is unusually burdensome, restrictive or unfavorable to
Company or which has a Materially adverse effect, or is
likely to have a Materially adverse effect in the future, on
Company, and no event or condition exists which
constitutes, or after notice or lapse of time or both,
would constitute, a default on the part of Company or would
constitute a default on the part of any of the other parties
thereto.
(d) There has been no expressly or impliedly irrevocable
termination or cancellation of the business relationship of
Company with (i) any supplier or affiliated group of
suppliers whose sales, individually or in the aggregate,
constituted more than $100,000 or gross purchases made by
Company for the past 12 months or (ii) any customer or
affiliated group of customers whose purchases, individually
or in the aggregate, constituted more than $100,000 of gross
sales made by Company for the past 12 months.
(e) Company has no outstanding powers of attorney.
6.7.3 The Schedule of Contracts accurately sets forth the aggregate
amount of open purchases orders and sales orders outstanding on
the date hereof.
6.8 LITIGATION.
6.8.1 Except as may be disclosed in the Schedule of Litigation, there
are no:
(a) pending, or to the knowledge of Company, contemplated,
administrative or judicial proceedings against Company
arising under any Governmental provisions regulating the
discharge or materials into the environment or otherwise
relating to the protection of the environment or
occupational and safety laws relating to job conditions or
safety;
(b) pending or, to the knowledge of Company , contemplated,
administrative or judicial proceedings against Company
arising out of the Foreign Corrupt Practices Act; nor
(c) claims, actions, suits, proceedings, arbitrations,
investigations or inquiries pending before any court or
Governmental body or agency, or any private arbitration
tribunal, or, to the knowledge of Company, threatened
against or relating to Company, any Plan, any assets,
properties, or business of Company, or the transactions
contemplated by this Agreement nor to the knowledge of
Company is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry.
6.8.2 Except as set forth in the Schedule of Litigation, neither
Company, nor any officer, director, partner, or employee of
Company has been permanently or temporarily enjoined by order,
judgment or decree of any court or other tribunal or any
Governmental agency from engaging in or continuing in the conduct
or practice of its business. There is not in existence any
judgment, order, writ, injunction or decree to take action of
any kind or to which Company or their business, properties or
assets are subject or bound.
6.9 PRODUCT LIABILITY. Except as set forth on the Schedule of Litigation,
there is no existing or threatened claim, or facts upon which a claim
could be based, against Company for any product sold or Leased or
service performed by Company prior to the date of this Agreement
which is defective or fails or has failed to meet any product
warranties.
6.10 CLAIMS FOR INJURIES. Except as set forth on the Schedule of
Litigation, there are no claims seeking damages for personal or other
injuries resulting from the Lease, sale or use of any of the assets,
products, services, or goods of Company or any of its assets,
products, services, or goods of Company which Company has placed in
the hands of insurance carriers.
6.11 TRADEMARKS, TRADE NAMES, PATENTS, ETC.
6.11.1 Except as may be listed in the Schedule of Patents and
Trademarks, (a) there are no Marks owned, licensed, used by or
registered in the name of Company and no applications for Marks
made by Company or by their employees for the benefit of Company;
(b) Company is the registered and beneficial owned or the Marks
listed in the Schedule of Patents and Trademarks as owned by it,
free and clear of any royalty or Lien; (c) all of such Marks are
freely assignable by Company; (d) Company has no knowledge of any
notice or claim or other reason to believe that any xxxx is not
valid or enforceable by the owner thereof or of any infringement
upon or conflict with any Xxxx or proprietary right of any third
Person by the owner thereof or any claim of a third Person
alleging such infringement or conflict; (e) Company has no
knowledge of any infringement by any third Person upon any Xxxx
listed in the Schedule of Patents and Trademarks; and (f)
neither Company has not taken or omitted to take any action which
would have the effect of waiving any of the rights of Company
under any Xxxx.
6.11.2 The Schedule of Patents and Trademarks sets forth a complete
and correct list of all inventions, formulae, trade secrets,
manufacturing processes, know-how or other intellectual property
rights which have been reduced to writing and which are necessary
or useful in the operation of the business of Company in the
manner presently operated by Company or in the marketing of the
products presently marketed by Company. Except as set forth in
the Schedule of Patents and Trademarks, (a) Company has the right
to use, free and clear of any know royalties, claims or rights of
others, all such inventions, formulae, trade secrets,
manufacturing processes, know-how or other intellectual property
rights (whether or not reduced to writing) necessary or useful
in the operation of the business of Company in the manner
presently operated by Company or in the marketing of the products
presently marketed by Company, including, without limitation
(subject to licensor's rights under Contractual Obligations which
are listed in the Schedule of Contracts), any product licensed
from others; and (b) the record and beneficial ownership of all
Marks, inventions, formulae, trade secrets, know-how and other
intellectual property rights used in the business of Company has
been duly and effectively transferred to Company.
6.12 EMPLOYEE MATTERS.
6.12.1 Except as may be set forth in the Schedule of Employees, (a)
Company is in compliance with Requirements of Law respecting
employment and employment practices, terms and conditions of
employment, and wages and hours and are not engaged in any
unfair labor practice; (b) there is no unfair labor practice
complaint pending or, to the knowledge of Company, threatened
against Company before the National Labor Relations Board or any
Governmental agency; (c) there is not now nor has there been
during the last four years any labor strike, dispute, grievance,
controversy or other labor trouble; (d) no union representation
question exists respecting the employees of Company; (e) there
are no collective bargaining agreements binding upon Company; and
(f) there is no pending arbitration or judicial proceeding
arising out of or under collective bargaining agreements or other
employment agreements or the employer-employee relationship.
6.12.2 Except as set forth in the Schedule of Employees, no employee
of Company is now due a bonus, or would be due a bonus at the end
of the current fiscal year, upon the occurrence of a contingency
or otherwise, under agreements currently in effect. Except as may
be set forth in the Schedule of Employees, all accrued
obligations of Company, whether arising by operation of law, by
Contractual Obligation or by past custom, for payments to trusts
or other funds or to any Governmental agency, with respect to
unemployment compensation, social security, workers'
compensation, disability programs, accrued vacation, accrued sick
pay, pension or any other benefits for employees as of the date
hereof have been paid or adequate accruals therefor on the books
of account of Company have been provided, and none of the
foregoing has been rendered not due by reason of any extension of
waiver.
6.12.3 The data printout attached to the Schedule of Employees
correctly and accurately sets forth each employee, consultant or
commission agent of the Company who is employed by the Company as
of the date of such printout and with respect to each such
employee presently employed, such Person's rate of compensation
(including any commissions) for the period specified and such
Person's year to date compensation as of the end of such period.
The Schedule of Employees correctly and accurately lists with
respect to each employee, consultant or commission agent of the
Company who, during the last fiscal year earned or who, during
the current fiscal year would earn (based on current practices)
$100,000 or more on an annualized basis, and with respect to each
such Person, the positions held as of the date hereof and held
since September 30, 1992, and the date on which the compensation
of such Person was last changed, including the amount of such
change.
6.12.4 Except as set forth in the Schedule of Employees, Company- is
not a party to or bound by any employment or commission
agreements in excess of one year or which could require
compensation and benefits, collective employment contracts,
deferred compensation agreements, bonus plans, profit sharing
plans, pension plans or any other Plans. There have been no
material labor difficulties.
6.13 EMPLOYEE BENEFIT PLANS.
6.13.1 All Plans comply with all Requirements of Law (including,
without limitation, requirements of the Code for status as a
qualified plan under Section 401 of the Code) and all material
obligations applicable thereto. Company has not, with respect to
any Plan, incurred any liability on account of any accumulated
funding deficiency under ERISA or the Code or on account of any
failure to make any payments under any Contractual Obligation
relating to any Plan. Each Plan has sufficient assets held in a
trust, insurance or annuity contract, or other funding vehicle to
provide for the payment of all benefits accrued or currently
obligated to be paid if the Plan were terminated now or in the
future or adequate accruals therefor have been made on the
Financial Statements. Neither Company nor any other Person has
engaged in any prohibited transaction, determined without regard
to the applicability of any exemptions, within the meaning or
ERISA or the Code with respect to any Plan or otherwise violated
any statutory, contractual or fiduciary duty to any such Plan or
its participants. No reportable event within the meaning of ERISA
has occurred with respect to any Plan. Company has no existing or
potential withdrawal liability to any multiemployer pension plan
for any unfunded vested benefits, and Company has no, is not a
party to, nor makes contributions to any multiemployer plan which
is being reorganized or terminated by the Pension Benefit
Guaranty Corporation, all within the meaning of ERISA. Neither
Company nor any other Person has incurred any liability on
account of any Plan to any Person or Government which might, by
law or otherwise, be imposed on or assessed against Company or
result in the imposition of any Lien upon any assets of Company.
No Plan is in a financial or other condition which would permit
any Government to terminate such Plan, to impose on the Plan or
Company any change in the benefits of the Plan or to impose or
accelerate any liability of the Plan or to the Plan. No
Contractual Obligation relation to any Plan exists which might
Materially and adversely restrict or affect the ability of the
employer under the Plan to modify, alter, amend, or terminate
the Plan. No liabilities to any Government for taxes, penalties,
interest, premiums, contributions, or any other items have been
incurred with respect to any Plan other than in the ordinary
course of business for current items paid or items set forth or
reserved against on the Financial Statements.
6.13.2 The Schedule of Employees sets forth a complete list of all
Plans covering any employee of Company, the identity of each
funding agency holding assets of any such Plan, the identity of
any insurance company issuing any contract or policy under any
such Plan, and the identity of any actuarial adviser or service
provider retained by, or who provided services to, any Plan
during the past 18 months.
6.13.3 No Plan has incurred any liability other than pursuant to the
terms of the Plan in the ordinary course of business of the Plan.
No assets of any Plan have suffered any material adverse change
since the last valuation report.
6.13.4 Each Plan has good and marketable title to all of the assets it
purports to own free and clear of all Liens. No Plan is a party
to any (a) Contractual Obligation other than one entered into in
the ordinary course of business, (b) partnership or joint venture
agreements, or (c) employment, consulting, or management
agreements except as may be set forth on the Schedule of
Contracts.
6.13.5 The Schedule of Transactions with Interest Persons completely
and accurately describes (a) all Indebtedness outstanding on
September 30, 2002 or thereafter incurred and (b) all sales of
property or performances of services for which payment has been
incurred or accrued on or after September 30, 2002, between any
Plan on the one hand, and any officer, director, or partner of
Company, or any Affiliate of any of them, on the other.
6.14 COMPLIANCE WITH LAWS. Except as set forth in the Schedule of
Compliance, the Company is not in Material violation of any Material
applicable Requirement of Law.
6.15 CONSENTS. Except as may be set forth in the Schedule of Consents:
6.15.1 There is no consent, approval, order, or authorization of, or
registration, declaration or filing with, any Governmental
authority on the part of Company required in connection with the
valid execution, delivery and performance by Company of this
Agreement and the consummation of the transactions contemplated
herein by Company.
6.15.2 All permits, concessions, grants, franchises, licenses and
other Governmental authorizations and approvals necessary for
the conduct of the business of Company have been duly obtained
and are in full force and effect, and there are no proceedings
pending or, to the knowledge of Company, threatened which may
result in the revocation, cancellation or suspension, or any
materially adverse modification of any thereof.
6.15.3 There is no consent, approval or authorization of any landlord
under any Lease of the Company required in order to prevent such
landlord from having the right to take action (or refrain from
taking action).
6.15.4 There is no consent, approval or authorization of any other
Person (a) whose consent is required under any agreement set
forth in the Schedule of Contracts in order to permit Company to
consummate the transaction contemplated hereby, (b) who in the
absence of such consent, would have the right to (i) declare such
agreement in default, (ii) terminate or modify such agreement, or
(iii) accelerate the time within which, or the terms under which
the Company is to perform any act or receive any rights or
benefits under such agreement, or (c) which, if not received,
would result in (i) a default under such agreement, (ii) the
termination or modification of such agreement, or (iii) the
acceleration of the time within which, or the terms under which,
the Company is to perform any act or receive any rights or
benefits under such agreement.
6.16 EFFECT OF AGREEMENT. Except as disclosed in the Schedule of
Enforceability, the execution, delivery and performance of this
Agreement by Company and the consummation of the transactions
contemplated hereby will not, with or without the giving of notice or
the lapse of time, or both:
6.16.1 Violate any Requirement of Law applicable to Company.
6.16.2 Result in the breach of or conflict with any term, covenant,
condition, or provision of, result in the modification or
termination of, constitute a default under, or result in the
creation or imposition of any Lien upon any of the properties or
assets of Company under, any Contractual Obligation to which
Company is a party or by which any of their property is bound.
6.17 TRANSACTIONS WITH INTERESTED PERSONS.
6.17.1 Except as may be set forth in the Schedule of Transactions with
Interested Persons, no officer, director, or partner of Company
or any Affiliate of the foregoing owns, directly or indirectly,
on an individual or joint basis, any Material interest in, or
serves as an officer, director or employee of, any customer,
competitor or supplier of Company, or any Person which has a
Material contract or arrangement with Company- or any Related
Party.
6.17.2 The Schedule of Transactions with Interested Persons correctly
and accurately describes all Indebtedness, all sales of property
and performances of services and any other transaction between
Company, on the one hand, and any Related Party or officer,
director or partner of Company or any Affiliate of the foregoing,
on the other, which (a) was outstanding on September 30, 2002 (b)
was incurred or took place after September 30, 2002, or (c) was
outstanding on the date hereof other than for personal services
performed by an officer for Company within the past 30 days.
6.17.3 The Schedule of Transactions with Interested Persons correctly
and accurately sets forth with respect to the sale of any
property or the performance of any services between Company, on
the one hand, and any Related Party or officer, director, or
partner of Company or any Affiliates of the foregoing, on the
other, which is described in response to Section 6.17.2, (a)
whether such transaction was on terms comparable to those that
would have resulted from dealing between unrelated parties, and,
(b) if any such transaction was not on terms which would have
resulted from dealings between unrelated parties, the terms
comparable to those that would have resulted from dealings
between unrelated parties.
6.17.4 The Schedule of Transactions with Interested Persons correctly
and accurately describes all items of personal property, other
than expendable supplies, physically removed from the possession
of Company or retired from the books of accounts of Company by
any Related Party or officer, director, or partner of Company or
any Affiliate of the foregoing since September 30, 2002.
6.18 BOOKS AND RECORDS. The books of account and other financial and
corporate records of Company and of each Plan are in all Material
respects complete and correct, are maintained in accordance with usual
business practices and comply with all Material applicable
Requirements of Law. Such books and records reflect only valid
transactions and all valid transactions involving Company of a kind
required to be reflected on such books and records are reflected on
such books and records. The corporate minute books of Company contain
accurate records of all meetings and consents of all of the directors
and shareholders since the incorporation of the Company. The stock
books and ledgers of Company contain accurate records of all
issuances, retirements and transfers of record of capital stock.
6.19 PROPERTY.
6.19.1 The Schedule of Real Property or the Schedule of Leases
completely and accurately describes all real property and
interests in real property owned or Leased by the Company
including, without limitation, for each Lease, the address of the
real property, the name and address of the landlord, the term of
the Lease, the amount of rent payable under the Lease and, as to
any option to renew, for each option, the number of years covered
by such option. Company has good and marketable title to all real
properties which they purport to own and valid leasehold
interests in all real properties which they purport to Lease, in
each case free and clear of all Liens, except Permitted Liens or
Liens set forth in the Schedule of Real Property. Except as set
forth in the Schedule of Real Property, (i) each Lease of real
property to which Company is a party is in full force and effect
in accordance with its terms, (ii) all rents and other amounts
required to be paid to date under such Leases have been paid,
(iii) no event or condition exists which constitutes, or after
notice or lapse of time or both would constitute, a default on
the part of Company under any Lease of real property to which
Company is a party and, to the knowledge of Company, there exists
no such event or condition which constitutes or would constitute
such a default on the part of any of the other parties thereto.
Except as set forth in the Schedule of Real Property, no property
owned by Company is subject to any sublease, concession or
license which entitles any Person (other than employees of
Company) to transact business on any such property.
6.19.2 Company has valid Leases respecting all personal property they
purport to Lease. The rights of Company as lessee under such
Leases are free and clear of all Liens, except Permitted Liens.
Except as set forth in the Schedule of Personal Property, (i)
each Lease of personal property to which Company is a party is in
full force and effect in accordance with its terms, (ii) all
rents and other amounts required to be paid to date under such
Leases have been paid, (iii) no event or condition exists which
constitutes, or after notice or lapse of time or both would
constitute, a default on the part of Company under any such
Lease, and (iv) to the knowledge of Company, there exists no such
event or condition which constitutes or would constitute such a
default on the part of any of the other parties thereto.
6.20 REPORTING ACT DOCUMENTS. Except as set forth in the Schedule of
Compliance, Company has, in all Reporting Act Documents, complied in
all material respects with the reporting and proxy requirements of the
Exchange Act and the rules and regulations of the Commission
promulgated thereunder. The information contained in each Reporting
Act Document of Company is true and correct in all Material respects
as of the date thereof, and no Reporting Act Document contains any
untrue statement of a Material fact or omits to state a Material fact
required to be stated therein or necessary to make the statements
therein not misleading as of the date thereof.
6.21 FINANCIAL STATEMENTS. Except as set forth on the Schedule of Financial
Statements, the Financial Statements present fairly the consolidated
financial position and results or operations and changes in the
consolidated financial position of Company at the respective dates and
for the respective periods indicated in accordance with generally
accepted accounting principles applied on a consistent basis.
6.22 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected or
reserved against on the Financial Statements or as set forth in the
Disclosure Schedules, the Company has no liability, whether absolute,
accrued, known or unknown, contingent or otherwise, whether due or to
be come due, including without limitation, liabilities as guarantor
under any Guaranty and any liabilities for taxes or other Governmental
charges, for any period prior to September 30, 2002, or arising out of
any transaction the Company entered into prior to such date or arising
out of any state of facts arising prior to such date, other than those
incurred in the ordinary course of business, none of which has had, or
may be reasonably expected to have, a Material adverse effect on
Company.
6.23 INSURANCE. Except as set forth in the Schedule of Insurance:
6.23.1 (a) Company has maintained insurance with respect to its
properties and business against loss or damage of the kinds
customarily insured against by corporations of established
reputation engaged in the same or similar business and similarly
situated, including insurance with respect to product liability
and warranty claims of such types and in such amounts as are
customary under the circumstances, (b) Company has maintained
such insurance with financially sound and reputable insurers, and
(c) each insurance policy maintained by Company is in full force
and effect, all premiums due thereon having been paid and all
provisions of such policy having been complied with.
6.23.2 Company has not received any notice of any pending or
threatened terminations or premium increases with respect to such
insurance policies.
6.23.3 Neither Company nor any Subsidiary of Company has failed to
give any notice or present any claim under any insurance policy
in a due and timely fashion.
6.23.4 There are no outstanding requirements or recommendations by or
mad eon behalf of any insurance company that issued a policy with
respect to any of the properties, assets or business of Company-
requiring or recommending any equipment or facilities to be
installed on or in connection with any of the properties or
assets owned or leased by Company.
6.24 DISCLOSURE. Neither this Agreement nor any written document,
statement, list, schedule, certificate or other instrument referred to
herein or delivered by or on behalf of Company in connection with the
transactions contemplated hereby contains any untrue statement of a
Material fact or omits to state a Material fact necessary to make the
statements herein and therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to
Company which Materially adversely affects, or in the future is likely
to (so far as Company can now reasonably foresee) Materially adversely
affect Company or any Plan, other than (a) general economic or
business conditions or (b) facts set forth herein or which may be set
forth in the Disclosure Schedules referred to herein.
6.25 BROKERS. Company has not incurred or become liable for any commission,
fee or other similar payment to any broker, agent, finder or other
intermediary in connection with the negotiation of this Agreement or
the consummation of the transactions contemplated hereby, except as
set forth herein.
6.26 BANK ACCOUNTS. Except as set forth in the Schedule of Bank Accounts,
there are no bank accounts or safe deposit boxes maintained by the
Company or in which its property is held at the date hereof, and (b)
there are no Persons authorized to draw thereon or have access
thereto.
6.27 RECORDS OF THE BUSINESS. The books of account and other financial
records of Company are complete and correct, are maintained in
accordance with usual business practices and comply with all
Requirements of Law. Such books and records reflect only valid
transactions and all valid transactions required to be reflected on
such books and records are reflected upon such books and records.
6.28 FINANCIAL. Company has previously furnished Acquiree a true and
complete copy of its Annual Report on Form 10-KSB for the year ended
June 30, 2002 and its Quarterly Report on Form 10-QSB for the quarter
ended September 30, 2002 (the "Company Financials). The financial
statements contained in the Company Financials have been prepared in
conformity with generally accepted accounting principles consistently
applied. The balance sheets of Company contained in the Company
Financials fairly present the financial condition of Company as at the
dates thereof, and the related statements of operations of Company
contained in the Company Financials fairly present the results of
operations of Company for the period ended.
6.29 STATUS OF COMPANY COMMON STOCK. The shares of Company Common Stock to
be issued pursuant to this Agreement, when so issued, will be duly
authorized, validly issued and outstanding, fully paid and
non-assessable.
Section 7. CERTAIN UNDERSTANDINGS AND AGREEMENTS.
----------------------------------------
7.1 FORM 8-K. Company shall file a current report on Form 8-K within 15
days of the Closing in compliance with the Exchange Act, with the
audited financial statements of Acquiree (the "Audit") and the pro
forma statements required by the Exchange Act via amendment of the
Form 8-K within 75 days of the Closing, and will otherwise comply with
the reporting requirements of the Exchange Act and all material
requirements of NASDAQ following the Closing.
7.2 REVERSE STOCK SPLIT. Immediately prior to closing the Company shall
give notice to the NASD of a 100-for-1 reverse stock split.
7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representations or
warranties of the parties hereto contained in this Agreement, in any
exhibit hereto, in the Disclosure Schedules, or in any certificate or
document delivered in connection herewith or pursuant hereto, shall
survive after the third anniversary of the date of the Closing except
(a) as to any matters with respect to which an action at law or in
equity shall have been commenced before such date, in which event such
survival shall continue until the resolution of such action, or (b) as
to any claim by any Person (other than a party to this Agreement, or
an Affiliate of any such party) the existence of which breaches a
representation or warranty of a party to this Agreement, in which
event such survival shall continue until the running of the applicable
statute of limitations and any extensions thereof.
Section 8. GENERAL.
8.1 SUCCESSORS. Each and all of the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto, and their
respective heirs, legal representatives, successors and assigns.
Neither this Agreement, nor any rights herein granted may be assigned,
transferred or encumbered by any party.
8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of Company and Acquiree contained
herein shall survive for three years following the Closing.
8.3 GOVERNING LAW. Except where the laws of another jurisdiction are
mandatorily applicable, this Agreement and the legal relations among
the parties hereto shall be governed by and construed in accordance
with the laws of the State of Colorado.
8.4 HEADINGS. The descriptive headings of the sections and subsections of
this Agreement are inserted for convenience only and do not
constitute a part of this Agreement. They do not define, limit,
construe or describe the scope or intent of the provision of this
Agreement.
8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which, when executed by a party hereto, shall be
deemed an original and all of which together shall be deemed one and
the same agreement.
8.6 RELIANCE UPON REPRESENTATIONS AND WARRANTIES. Notwithstanding any
right of any party hereto fully to investigate the affairs of any
other party, the parties hereto may rely upon the representations,
warranties and covenants made to it in this Agreement and on the
accuracy of any certificate, any schedule attached hereto
(collectively, the "Disclosure Schedules"), exhibit or other document
given or delivered to it pursuant to this Agreement. Further,
knowledge by an agent of any party hereto of any facts not otherwise
disclosed in this Agreement the Disclosure Schedules shall not
constitute a defense to any claim for misrepresentation, breach of
any warranty, agreement, or covenant under this Agreement, or the
Disclosure Schedules. No representations or warranties have been made
by or on behalf of any person to induce any party to enter into this
Agreement or to abide by or consummate the transactions contemplated
by this Agreement, except representations and warranties expressly
set forth herein or in the Disclosure Schedules or in any certificate,
exhibit or other document delivered in connection with or pursuant to
this Agreement.
8.7 WAIVER. No purported waiver by any party of any default by any other
party of any term, covenant or condition contained herein shall be
deemed to be a waiver of such term, covenant or condition unless the
waiver is in writing and signed by the waiving party. No such waiver
shall in any event be deemed a waiver of any subsequent default under
the same or any other term, covenant or condition contained herein.
8.8 NOTICES. Any consent, waiver, notice, demand, request or other
instrument required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been properly given
when delivered in person or sent by certified or registered United
States mail, return receipt requested, postage prepaid, addressed:
If to Company: Basic Energy, Inc.
0000 Xxxxx Xxxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
If to Acquiree: Skyframes, Inc.
0000 Xxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
8.9 ENTIRE AGREEMENT. This Agreement, as from time to time amended,
together with the schedules attached hereto and any certificate,
exhibit or other document given or delivered pursuant hereto, sets
forth the entire understanding among the parties concerning the
subject matter of this Agreement and incorporates all prior
negotiations and understandings. There are no covenants, promises,
agreements, conditions or understandings, either oral or written,
between them relating to the subject matter of this Agreement other
than those set forth herein. No alteration, amendment, change or
addition to this Agreement shall be binding upon any party unless in
writing and signed by the party to be charged.
8.10 NO PARTNERSHIP. Nothing contained in this Agreement will be deemed or
construed by the parties hereto or by any third person to create the
relationship of principal and agent or partnership or joint venture.
8.11 PARTIAL INVALIDITY. If any term, covenant or condition in this
Agreement or the application thereof to any Person or circumstance
shall be invalid or unenforceable, the remainder of this Agreement or
the application of such term, covenant or condition to Persons or
circumstances, other than those as to which it is held invalid, shall
be unaffected thereby and each term, covenant or condition of this
Agreement shall be valid and enforced to the fullest extent permitted
by law.
8.12 JOINT PREPARATION. This Agreement is to be deemed to have been
prepared jointly by the parties hereto and any uncertainty or
ambiguity existing herein, if any, shall not be interpreted against
any party, but shall be interpreted according to the application of
the rules of interpretation for arm's length agreements.
8.13 DISCLOSURE. Until the Closing, no press releases or other disclosures
(except those required by law) shall be made with respect to the
transactions contemplated hereunder by either Company or Acquiree
without the approval of both parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their authorized officers as of the date and year first above
written.
SKYFRAMES, INC. BASIC ENERGY, INC.
By: ------------------------------ By: ------------------------------
Name: ------------------------------ Name: ------------------------------
Title: ------------------------------ Title: ------------------------------
