STOCK PURCHASE AGREEMENT
Execution
Copy
THIS
STOCK PURCHASE AGREEMENT (“Agreement”) is made as of the 21st day of June, 2007
by and among Captech Financial Group, Inc., a Florida corporation (the
“Company”), Xxxx Xxxx, an individual having an address at 0000 Xxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxx 00000 (the “Stockholder”), and Boo Koo Beverages, Inc., a
Texas corporation (“BBI”).
Recitals
A. BBI
wish
to purchase from the Stockholder and the Stockholder wishes to sell to BBI,
upon
the terms and conditions stated in this Agreement, subject to the reduction
described in Section 2 of this Agreement, 1,488,134 shares of the Company’s
Common Stock, no par value (together with any securities into which such shares
may be reclassified, the “Common Stock”) owned by the Stockholder (the
“Shares”), for the consideration set forth in Section 2 of this Agreement; and
B. Immediately
following the consummation of the transactions contemplated by the terms of
this
Agreement, BBI and an entity to be formed as a subsidiary of the Company
(“Merger Sub”) shall consummate a merger (the “Merger”) pursuant to the terms of
an Agreement and Plan of Merger (the “Merger Agreement”) to be entered into
among the Company, BBI and Merger Sub following the date of this
Agreement.
In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
1. Definitions.
In
addition to those terms defined above and elsewhere in this Agreement, for
the
purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate”
shall mean (a) with respect to an individual, any member of such individual’s
family including lineal ancestors and descendents; (b) with respect to an
entity, any officer, director, stockholder, partner, manager, investor or holder
of an ownership interest of or in such entity or of or in any Affiliate of
such
entity; and (c) with respect to a Person, any Person which directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or
is under common control with such Person or entity.
“Agreement”
shall have the meaning set forth in the preamble to this Agreement.
“BBI”
shall have the meaning set forth in the preamble to this Agreement.
“Benefit
Arrangement” means each (i) employee benefit plan, as defined in Section 3(3) of
ERISA, (ii) employment contract and (iii) bonus, deferred compensation,
incentive compensation, performance compensation, stock purchase, stock option,
stock appreciation, restricted stock, phantom stock, savings, profit sharing,
severance, termination pay (other than statutory or common law requirements
for
reasonable notice), health or other medical, salary continuation, cafeteria,
dependent care, vacation, sick leave, holiday pay, fringe benefit,
reimbursement, life insurance, disability or other (whether insured or
self-insured) insurance, supplementary unemployment, pension retirement,
supplementary retirement, welfare or other plan, program, policy or arrangement,
whether written or unwritten, formal or informal, which any current or former
employee, consultant or director of the Company, the Company’s Subsidiaries or
any ERISA Affiliate participated or participates in or was or is covered under,
or was or is otherwise a party, and with respect to which the Company, the
Company’s Subsidiaries or any ERISA Affiliate is or ever was a sponsor or
participating employer, or had or has an obligation to make contributions,
or
was or is otherwise a party.
“Capital
Stock” shall have the meaning set forth in Section 4.6 of this
Agreement.
“Capital
Stock Equivalents” shall have the meaning set forth in Section 4.6 of this
Agreement.
“Closing”
shall have the meaning set forth in Section 3 of this Agreement.
“Closing
Date” shall have the meaning set forth in Section 3 of this
Agreement.
“Code”
shall have the meaning set forth in the recitals of this Agreement.
“Common
Stock” shall have the meaning set forth in the recitals to this
Agreement.
“Company”
shall have the meaning set forth in the preamble to this Agreement.
“Company
Subsidiary” shall have the meaning set forth in Section 4.7 of this
Agreement.
“Contingent
Obligation” as to any Person shall mean the undrawn face amount of any letters
of credit issued for the account of such Person and shall also mean any
obligation of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness, leases, dividends, letters of credit or other
obligations (“Primary Obligations”) of any other Person (the “Primary Obligor”)
in any manner, whether directly or indirectly, including, without limitation,
any obligation of such Person, whether or not contingent, (a) to purchase any
such Primary Obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of
any
such Primary Obligation or (ii) to maintain working capital or equity capital
of
the Primary Obligor or otherwise to maintain the financial condition or solvency
of the Primary Obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the obligee under any such Primary
Obligation of the ability of the Primary Obligor to make payment of such Primary
Obligation, or (d) otherwise to assure or hold harmless the obligee under such
Primary Obligation against loss in respect thereof; provided, however, that
the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business.
“Contracts”
shall mean all contracts, leases, subleases, notes, bonds, mortgages,
indentures, Permits and Licenses, non-competition agreements, joint venture
or
partnership agreements, powers of attorney, purchase orders, and all other
agreements, arrangements and other instruments, in each case whether written
or
oral, to which such Person is a party or by which any of them or any of its
assets are bound.
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“Environmental
Claim” shall mean any summons, citation, directive, information request, notice
of potential responsibility, notice of violation or deficiency, order, claim,
complaint, investigation, proceeding, judgment, letter or other communication,
written or oral, actual or threatened, from the United States Environmental
Protection Agency or other federal, state, local or foreign agency or authority,
or any other entity or individual, public or private, concerning (a) any
intentional or unintentional act or omission which involves Regulated Substances
on or off the property of a Person which might result in such Person incurring
a
liability; (b) the imposition of any Lien on property, including, but not
limited to, Liens asserted by any Government Entity in connection with a
remedial action to the presence or release of Regulated Substances; or (c)
any
alleged violation of or responsibility under Environmental Laws which could
result in a Person incurring a liability.
“Environmental
Law” shall mean any Law relating to the assessment, investigation, remediation,
reduction or control of exposure to or other regulation of pollutants,
contaminants, chemicals, wastes or other material in order to (1) protect human
health and safety and the environment, including ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata and natural resources,
(2) provide for worker safety and health, (3) regulate the emission, discharge,
release or threat thereof of pollutants, contaminants, substances, chemicals,
wastes or other material into the environment, or otherwise relating to the
manufacture, generation, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, substances,
chemicals, wastes or other material.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
“ERISA
Affiliate” shall mean any entity which has ever been considered a single
employer with The Company or BBI, as the case may be, under Section 4001(b)
of
ERISA or Section 414(b), (c), (m) or (o) of the Code.
“Financial
Statements” shall have the meaning set forth in Section 4.10 of this
Agreement.
“Governmental
Approval” shall mean the consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other Governmental Entity, authority or instrumentality, domestic
or foreign.
“Governmental
Entity” means the government of the United States of America, any other nation
or any political subdivision thereof, whether foreign, state or local, and
any
agency, authority, instrumentality, regulatory body, court, tribunal,
arbitrator, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
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“Indebtedness”
shall mean as to any Person and whether recourse is secured by or is otherwise
available against all or only a portion of the assets of such Person and whether
or not contingent, but without duplication: (a) every obligation of such Person
for money borrowed; (b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses; (c) every
reimbursement obligation of such Person with respect to letters of credit,
bankers’ acceptances or similar facilities issued for the account of such
Person; (d) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not more than 120 days overdue
or
which are being contested in good faith by appropriate proceedings and for
which
adequate reserves have been provided in accordance with GAAP); (e) every Capital
Lease Obligation of such Person; (f) any obligation of such Person to pay any
discount, interest, fees, indemnities, penalties, recourse, expenses or other
amounts in connection with any sales by such Person unless such sales are on
a
non-recourse basis (as to collectibility) of (i) accounts or general intangibles
for money due or to become due, (ii) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (iii) other receivables,
whether pursuant to a purchase facility or otherwise, other than in connection
with the disposition of the business operations of such Person relating thereto
or a disposition of defaulted receivables for collection and not as a financing
arrangement; (g) every obligation of such Person under any forward contract,
futures contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar agreements),
the value of which is dependent upon interest rates, currency exchange rates,
commodities or other indices (a “derivative contract”); (h) every obligation in
respect of Indebtedness of any other entity (including any partnership in which
such Person is a general partner) to the extent that such Person is liable
therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent that the terms of such
Indebtedness provide that such Person is not liable therefor and such terms
are
enforceable under applicable law; and (i) every Contingent Obligation of such
Person with respect to Indebtedness of another Person.
“Intellectual
Property” shall mean all trade names, trademarks (whether or not registered),
service marks, patents and copyrights (including any registrations or pending
applications for registration of any of the foregoing), trade secrets,
inventions, processes, formulae, technology, technical data, information,
know-how and other proprietary intellectual property, and all licenses or other
rights relating to any of the foregoing that are attributable to the conduct
of,
used in, or related to, the operations of a Person and its
subsidiaries.
“Inventories”
shall mean shall mean all inventory, merchandise, finished goods, raw materials,
work-in-process, packaging, supplies and similar personal property owned by
the
Company and held or stored by or for the Company or in transit in connection
therewith (including, without limitation, held or stored for the Company at
warehouses owned by third parties), for use in the operation of its business
as
of a particular date, whether or not recorded on its books or financial records,
and any prepaid deposits for any of the same at such date.
“IP
Licenses” shall have the meaning set forth in Section 4.15 of this
Agreement.
“Latest
SEC Document” shall mean the Company’ Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2007, as amended.
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“Laws”
shall mean all foreign, federal, state and local statutes, laws, ordinances,
regulations, rules, resolutions, orders, writs, injunctions, judgments and
decrees applicable to the specified Person and to the businesses and assets
thereof.
“License”
shall mean any franchise, authorization, license, permit, certificate of
occupancy, easement, variance, exemption, certificate, consent or approval
of
any Governmental Entity or other Person.
“Lien”
shall mean any
mortgage, pledge, assessment, security interest, lease, lien, adverse claim,
levy, charge or other encumbrance of any kind.
“Material
Adverse Effect” shall mean an event or change, individually, or in the aggregate
with other events or changes, that could reasonably be expected to have a
material adverse effect on (a) the business, properties, prospects, condition
(financial or otherwise) or results of operations of the entity and its
Subsidiaries taken as a whole (other than those events, changes or effects
resulting from general economic conditions or the industry in which such entity
is engaged generally) or (b) the ability of such party to consummate the
transactions contemplated hereby.
“Material
Contracts” shall have the meaning set forth in Section 4.19 of this
Agreement.
“Merger”
shall have the meaning set forth in the recitals to this Agreement.
“Merger
Agreement” shall have the meaning set forth in the recitals to this
Agreement.
“Merger
Sub” shall have the meaning set forth in the recitals to this
Agreement.
“Permitted
Liens” shall mean (a) easements, restrictions, covenants, rights of way or minor
irregularities of title currently of record against any leased real property
or
that otherwise do not interfere with the use and occupancy thereof; (b) liens
for Taxes not yet due and payable, or for Taxes being contested in good faith
by
appropriate proceedings, provided that in each such case, adequate reserves
are
maintained in accordance with GAAP; (c) warehouse and materialmen’s liens which
do not individually or in the aggregate interfere with the use of the related
assets and (d) a blanket security interest and lien in favor of its
lender.
“Person”
shall mean any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, limited liability company, association,
corporation, institution, entity, party, Governmental Entity or any other
juridical entity of any kind or nature whatsoever.
“Preferred
Stock” shall have the meaning set forth in Section 4.6 of this
Agreement.
“Regulated
Substances” shall mean any pollutant, contaminant, substance, chemical, waste or
other material which is listed, defined, identified or otherwise regulated
under
any Environmental Law, including those materials identified as “hazardous” or
“toxic”, including, without limitation, petroleum or petroleum products,
polychlorinated biphenyls (“PCBs”), flammable materials, explosives, radioactive
materials, urea formaldehyde foam insulation, asbestos or asbestos-containing
materials and “source,” “special nuclear” and “by product” material as defined
in the Atomic Energy Act of 1985, 42 U.S.C. §§3011 et seq.
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“Retiree”
shall mean (a) any retired or former employee, director or officer of the
Company; or (b) any former independent contractor of the Company.
“SEC”
shall mean the Securities and Exchange Commission.
“SEC
Documents” shall have the meaning set forth in Section 4.9 of this
Agreement.
“SEC
Reports” means each report, schedule, registration statement, definitive proxy
statement and other document required to be filed by the Company and its
predecessors and officers and directors under the Exchange Act or the Securities
Act as such documents have been amended since the time of their
filing.
“Shares”
shall have the meaning set forth in the recitals to this Agreement.
“Stockholder”
shall have the meaning set forth in the recitals to this Agreement.
“Subsidiary”
shall mean any Person in which another Person, directly or indirectly, owns
50%
of either the equity interests in or voting control of, such
Person.
“Takeover
Proposal” shall mean any proposal for a tender or exchange offer, merger,
consolidation, sale of all or substantially all of such party’s assets,
including the Shares with respect to the Stockholder, sale of in excess of
fifteen percent of the shares of capital stock or other business combination
involving such party or any proposal or offer to acquire in any manner a
substantial equity interest (including any interest exceeding fifteen percent
of
the equity outstanding) in, or all or substantially all of the assets of, such
party other than the transactions contemplated by this Agreement.
“Taxes”
means all federal, state, county, local, municipal, foreign and other taxes,
assessments, duties or similar charges of any kind whatsoever, including all
corporate franchise, income, gross receipts, occupation, windfall profits,
sales, use, ad valorem, value-added, profits, license, withholding, payroll,
employment, excise, premium, real property, personal property, customs, net
worth, capital gains, transfer, stamp, documentary, social security, disability,
environmental, alternative minimum, recapture and other taxes, and including
all
interest, penalties and additions imposed with respect thereto, whether disputed
or not and including any obligations to indemnify or otherwise assume or succeed
to the Tax liability of any Person, and any liability in respect of any Tax
as a
result of being a member of any affiliated, combined, consolidated, unitary
or
similar group.
“Tax
Return” means any report, return, statement, estimate, informational return,
declaration or other written information required to be supplied to a taxing
authority in connection with Taxes.
“Taxing
Authority” means any domestic, foreign, federal, national, state, county or
municipal or other local government, any subdivision, agency, commission or
authority thereof, or any quasi-governmental body exercising tax regulatory
authority.
“Transaction
Documents” shall mean this Agreement.
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2. Purchase
and Sale of the Shares.
Subject
to the terms and conditions of this Agreement, on the Closing Date, BBI shall
purchase, and the Stockholder shall sell to BBI, the Shares, free and clear
of
any Lien, in exchange for the purchase price as specified below. At the Closing,
the Stockholder shall deliver or cause to be delivered to BBI the certificate(s)
representing the Shares, each properly endorsed for transfer to BBI and BBI
shall deliver to the Stockholder the aggregate sum of $600,000 by wire transfer
of immediately available U.S. funds (the “Purchase Price”). Upon the execution
of this Agreement, BBI shall wire to an account of the Stockholder, the sum
of
$25,000 (the “Initial Deposit”) to be applied to the Purchase Price, which funds
shall be refundable to BBI for a period of five days following the date hereof
and shall be non-refundable unless prior to the end of such five day period,
BBI
provides written notice that the condition to closing set forth in Section
8.1(g) of this Agreement has not been satisfied during the period set forth
in
Section 8.1(g) and in such event, the Stockholder shall deliver the Initial
Deposit back to BBI. In the event BBI does not deliver the notice referenced
above during such five day period, then following such five day period, the
Initial Deposit shall be non-refundable In the event the Closing hereunder
shall
not have been consummated by July 30, 2007, BBI shall have the right to extend
the time for Closing hereunder for an additional 30 days following July 30,
2007
by notifying the Stockholder in writing or email of such extension and wiring
to
the Stockholder the sum of $25,000, which amount shall be non-refundable as
an
“Extension Fee.” Both the Initial Deposit and the Extension Fee shall be
credited against the Purchase Price. Notwithstanding the foregoing, the
Stockholder shall deduct from the Shares being sold and conveyed to BBI pursuant
to the terms of this Agreement, a number of shares equal to 1% of outstanding
shares of Common Stock of the Company immediately following the Merger based
upon the capitalization table (post transaction) attached hereto as Exhibit
A.
In the
event the Closing hereunder is not consummated for any reason, the Stockholder’s
sole remedy shall be to retain the Initial Deposit and the Extension Fee, if
exercised by BBI; provided, however, that in the event the Closing is not
consummated as a result of the failure of the Company or the Stockholder to
satisfy a condition to Closing set forth under Section 8.1, then the Initial
Deposit and the Extension Fee, if any, shall be repaid to BBI.
3. Closing.
Upon
confirmation that the other conditions to closing specified herein have been
satisfied or duly waived by BBI, the Stockholder shall deliver to Xxxxxxxxxx
Xxxxxxx PC, in trust, a certificate or certificates, registered in the name
of
“Boo Koo Beverages, Inc.”, representing the Shares, with instructions that such
certificates are to be held for release to BBI only upon payment in full of
the
Purchase Price (less the Deposit) to the Stockholder by BBI. Upon such receipt
by Xxxxxxxxxx Xxxxxxx PC of the certificates, BBI shall promptly, but no more
than one Business Day thereafter, cause a wire transfer in same day funds to
be
sent to the account of the Stockholder as instructed in writing by the
Stockholder, in an amount representing the cash portion of the Purchase Price
(less the Deposit). On the date (the “Closing Date”) the Stockholder receives
the Purchase Price (less the Deposit), the certificates evidencing the Shares
shall be released to BBI (the “Closing”). The Closing of the purchase and sale
of the Shares shall take place at the offices of Xxxxxxxxxx Xxxxxxx PC, 00
Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000, or at such other location and
on
such other date as the Stockholder and BBI shall mutually agree.
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4. Representations
and Warranties of the Stockholder and the Company.
The
Stockholder and the Company hereby, jointly and severally, represent and warrant
to BBI that, except as set forth in the schedules delivered herewith
(collectively, the “Disclosure Schedules”):
4.1. Authority;
Binding Agreements of the Stockholder.
The
Stockholder has the legal capacity to own the Shares owned by the Stockholder.
The execution and delivery by the Stockholder of this Agreement and the
consummation by the Stockholder of the transactions contemplated hereby has
been
duly and validly authorized by all necessary action of the Stockholder. The
Stockholder has the legal capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and the Stockholder has duly
executed and delivered this Agreement. This Agreement is a legal, valid and
binding obligation of the Stockholder enforceable against the Stockholder in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization and other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity.
4.2. Ownership
of Capital Stock.
The
Stockholder is the record and beneficial owner of the Shares. The Stockholder
has valid and marketable title to the Shares, free and clear of any Liens and
has
the
absolute and unrestricted right, power and capacity to sell, assign and transfer
the Shares to BBI.
The
delivery to BBI of the certificates representing the Shares and the payment
to
the Stockholder in accordance with Section 2 will transfer to BBI record and
beneficial ownership of the Shares free and clear of all Liens. The Shares
are
not subject to any voting trust agreement or other contract, agreement,
arrangement, commitment or understanding, including any such agreement,
arrangement, commitment or understanding restricting or otherwise relating
to
the voting, dividend rights or disposition of such Shares. The Stockholder
does
not own any rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire any shares
of capital stock or other equity securities of BBI.
4.3. No
Breach by Stockholder.
The
execution and delivery of this Agreement by the Stockholder does not, and the
consummation of the transactions contemplated hereby and compliance with the
terms hereof will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation under,
or
result in the creation of any Lien on any of the properties or assets of the
Stockholder under, any provision of (i) any contract or agreement to which
the
Stockholder is a party or by which any of his property or assets are bound,
(ii)
any license, franchise, permit or other similar authorization held by the
Stockholder, or (iii) any judgment, order or decree or statute, law, ordinance,
rule or regulation applicable to the Stockholder or his property or
assets.
4.4. Governmental
Consents.
No
permit, consent, approval, license, order or authorization of, or registration,
declaration or filing with, any court or other Governmental Entity is required
to be obtained or made in connection with the execution, delivery or performance
of this Agreement by the Stockholder or the consummation by the Stockholder
of
any of the transactions contemplated hereby.
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4.5 Organization
of the Company.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida, and has all requisite corporate power
and corporate authority to enter into the Transaction Documents to which it
is a
party, to consummate the transactions contemplated hereby and thereby, to own,
lease and operate its properties and to conduct its business. The Company is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to obtain such qualification
or license would not, individually or in the aggregate, have a Material Adverse
Effect. The Stockholder has heretofore delivered or made available to BBI
complete and correct copies of the certificate of incorporation and by-laws
of
the Company. The Company is not in violation of its organizational
documents.
4.6 Capitalization.
The
authorized capital stock of the Company consists of 200,000,000 shares of Common
Stock, no par value, and no shares of preferred stock (the “Preferred Stock,”
and together with the Common Stock, the “Capital Stock”), of which 1,767,021
shares of Common Stock are issued and outstanding on the date hereof. No other
shares of any other class or series of Capital Stock or securities exercisable
or convertible into or exchangeable for Capital Stock (“Capital Stock
Equivalents”) are authorized, issued or outstanding. The outstanding shares of
Capital Stock have been duly authorized and validly issued and are fully paid
and nonassessable and were not issued in violation of, and are not subject
to,
any preemptive, subscription or similar rights. To the Stockholder’s and the
Company’s knowledge, none of the outstanding Capital Stock was issued in
violation of any Law, including without limitation, federal and state securities
laws. There are no outstanding warrants, options, subscriptions, calls, rights,
agreements, convertible or exchangeable securities or other commitments or
arrangements relating to the issuance, sale, purchase, return or redemption,
and, to the Stockholder’s and the Company’s knowledge, voting or transfer of any
shares, whether issued or unissued, of Capital Stock, Capital Stock Equivalents
or other securities of the Company. The Company does not have outstanding
stockholder purchase rights or “poison pill” or any similar arrangement in
effect giving any Person the right to purchase any equity interest in the
Company upon the occurrence of certain events.
4.7 Subsidiaries.
Section
4.7 of the Disclosure Schedule contains a list of the name of each Subsidiary
of
the Company (each such corporation, partnership or other entity being referred
to herein as a “Company Subsidiary”). Section 4.7 of the Disclosure Schedule
sets forth, with respect to each Company Subsidiary, its type of entity, the
jurisdiction of its organization, its authorized and outstanding capital stock,
partnership interests or equivalent ownership interests and the Company’s
current ownership of such shares or interests. Each of the outstanding shares
of
capital stock of each of the Company Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and owned by the Company or another Company
Subsidiary free and clear of any Liens and were not issued in violation of,
nor
subject to, any preemptive, subscription or similar rights. There are no
outstanding warrants, options, subscriptions, calls, rights, agreements,
convertible or exchangeable securities or other commitments or arrangements
relating to the issuance, sale, purchase, return or redemption, or to the
Stockholder’s and the Company’s knowledge, voting or transfer of any shares,
whether issued or unissued, of any Company Subsidiary. The Company and the
Company Subsidiaries do not own any equity interests in any other Person. Each
Company Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all requisite
power and authority to own, lease and operate its properties and to conduct
its
business. Each Company Subsidiary is duly qualified or licensed to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure
to
obtain such qualification or license would not, individually or in the
aggregate, have Material Adverse Effect.
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4.8 No
Violation; Consents and Approvals.
The
execution and delivery by the Stockholder and the Company of the Transaction
Documents does not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the terms hereof and thereof will not, conflict
with or result in any violation of or default (or an event which, with notice
or
lapse of time or both, would constitute a default) under, (a) the terms and
conditions or provisions of the certificate of incorporation or by-laws of
the
Company or any Company Subsidiary, (b) any Law applicable to the Company or
any
Company Subsidiary or the property or assets of the Company or any Company
Subsidiary, or (c) give rise to any right of termination, cancellation or
acceleration under, or result in the creation of any Lien upon any of the
properties of the Company or any Company Subsidiary under any Contract to which
the Company or any Company Subsidiary is a party or by which the Company or
any
Company Subsidiary or any assets of the Company or any Company Subsidiary may
be
bound, except, in the case of clauses (b) and (c), for such conflicts,
violations or defaults which are set forth in Section 4.8 of the Disclosure
Schedule and as to which requisite waivers or consents will have been obtained
prior to the Closing or which, individually or in the aggregate, would not
have
a Material Adverse Effect. No Governmental Approval is required to be obtained
or made by or with respect to the Company or any Company Subsidiary in
connection with the execution and delivery of this Agreement or the consummation
by the Company or the Stockholder of the transactions contemplated hereby.
The
Company has taken all action necessary to exempt the sale of the Shares to
BBI
and the other transactions contemplated by this Agreement and the Merger
Agreement from the provisions of any stockholder rights plan or other “poison
pill” arrangement, any anti-takeover, business combination or control share law
or statute binding on the Company or to which the Company or any of its assets
and properties may be subject and any provision of the Company’s certificate of
incorporation or bylaws that is or could reasonably be expected to become
applicable to BBI as a result of the transactions contemplated hereby, including
without limitation, the sale of the Shares to BBI and the ownership, disposition
or voting of the Shares by BBI or the exercise of any right granted to BBI
pursuant to this Agreement.
4.9. SEC
Documents.
The
Company has timely filed with the SEC, and has heretofore made available to
BBI
(through reference to documents filed by XXXXX or otherwise), true and complete
copies of, each report, schedule, registration statement, definitive proxy
statement and other document required to be filed by it and its predecessors
since January 1, 2004 under the Securities Exchange Act of 1934, as amended
(the
“Exchange Act”), or the Securities Act (as such documents have been amended
since the time of their filing, collectively, the “SEC Documents”). As of their
respective dates, the SEC Documents, (a) complied in all material respects
with
the applicable requirements of the Securities Act, the Exchange Act and the
rules and regulations thereunder and (b) did not contain any untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
-10-
4.10. Financial
Statements.
(a) The
audited consolidated financial statements and the unaudited consolidated interim
financial statements of the Company included or incorporated by reference in
the
SEC Documents (collectively, the “Financial Statements”), (a) at the time filed,
complied as to form in all material respects with applicable accounting
requirements and published rules and regulations with respect thereto, (b)
fairly present in all material respects the consolidated financial condition
and
the results of operations and cash flows of the Company and the Company
Subsidiaries as of the dates and for the periods indicated (subject, in the
case
of any unaudited interim financial statements, to normal year-end adjustments
and other adjustments described therein) and (c) were prepared in accordance
with the rules and regulations of the SEC and generally accepted accounting
principles (“GAAP”), except as disclosed therein and in the notes thereto, and,
in the case of unaudited statements, as permitted by Form 10-QSB of the SEC.
All
of the Company Subsidiaries have been consolidated in the Financial
Statements.
(b) The
Company has devised and maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management’s general or specific authorization; (ii)
transactions are recorded as necessary, (1) to permit preparation of financial
statements in conformity with GAAP or any other criteria applicable to such
statements and (2) to maintain accountability for assets; (iii) access to assets
is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets compared with
the
existing assets at reasonable intervals and appropriate action is taken with
respect to any difference.
4.11 Absence
of Certain Changes or Events.
Since
December 31, 2006, each of the Company and the Company Subsidiaries has
conducted business only in the ordinary course of business consistent with
past
practice, and, other than as expressly contemplated by this Agreement, since
such date, there has not been with respect to the Company or the Company
Subsidiaries any:
(a) change
or, to the knowledge of the Stockholder and the Company, threatened change
in
the business, assets, operations, condition (financial or otherwise), results
of
operations or prospects of the business of the Company or the Company
Subsidiaries, which has had or could have a Material Adverse
Effect;
(b) transactions
not in the ordinary course of business consistent with past
practice;
(c) damage,
destruction or loss, whether or not insured, materially affecting the Company’
business or assets;
-11-
(d) change
in
accounting principles, methods or practices, investment practices, claims,
payment and processing practices or policies regarding intercompany
transactions;
(e) revaluation
of any assets;
(f) declaration,
setting aside, or payment of a dividend or other distribution in respect of
the
capital stock of the Company or the Company Subsidiaries, or any direct or
indirect redemption, purchase or other acquisition of any shares of such capital
stock;
(g) issuance
or sale of any shares of any equity security or of any security exercisable
or
convertible into or exchangeable for equity securities;
(h) amendment
to the certificate of incorporation, by-laws or similar organizational documents
of the Company or the Company Subsidiaries;
(i) sale,
assignment or transfer of or lapse of any rights with respect to Intellectual
Property, other than in the ordinary course of business consistent with past
practice;
(j) indebtedness
incurred for borrowed money or any commitment to borrow money, any incurrence
of
a contingent liability or any guaranty or commitment to guaranty the
indebtedness of others entered into, by the Company or the Company
Subsidiaries;
(k) capital
expenditure or capital commitment requiring an expenditure of monies in the
future by the Company or the Company Subsidiaries, other than transactions
in
the ordinary course of business consistent with past practice not in excess
of
$1,000 in the aggregate for the Company and the Company
Subsidiaries;
(l) cancellation
of any debt or waiver or release of any contract, right or claim;
(m) amendment,
termination or revocation of, or a failure in any material respect to perform
obligations or the occurrence of any default under (i) any Contract to which
the
Company or the Company Subsidiaries is or, as of December 31, 2006, was a party,
other than in the ordinary course of business consistent with past practice,
or
(ii) any License;
(n) increase
or commitment to increase the salary or other compensation payable or to become
payable to the Company’ or the Company Subsidiaries’ officers, directors,
employees, agents or independent contractors, or the payment of any bonus to
the
foregoing persons except in the ordinary course of business consistent with
past
practice;
(o) execution
of termination, severance or similar agreements with any officer, director,
employee, agent or independent contractor of the Company or the Company
Subsidiaries;
-12-
(p) entering
into any leases of real property or agreement to acquire real
property;
(q) new
or
change of any Tax election;
(r) steps
taken to incorporate any Subsidiary, other than Merger Sub;
(s) acquisition
or disposition of, or incurrence of a Lien (other than a Permitted Lien) on,
any
assets and properties of the Company or any Company Subsidiary;
(t) transaction
by the Company or any Company Subsidiary with any officer, director or Affiliate
thereof or any Affiliate of any such officer, director or Affiliate;
or
(u) any
agreement, or other commitment, whether in writing or otherwise, to take any
of
the actions specified in this Section 4.11, except as expressly contemplated
by
this Agreement.
4.12 Absence
of Undisclosed Liabilities.
Neither
the Company nor any of the Company Subsidiaries has any indebtedness, liability
or obligation, whether or not accrued, absolute, contingent or otherwise, known
or unknown, and whether due or to become due, which was not reflected or
reserved against in the balance sheets and the notes thereto which are part
of
the Latest SEC Document, except for those (i) incurred in connection with this
Agreement or (ii) incurred in the ordinary course of business and in each such
case is fully reflected on the Company’ books of account and, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
4.13 Personal
Property.
(a) Each
of
the Company and the Company Subsidiaries has good, valid and marketable title
to, or a valid leasehold interest in, all assets respectively owned or leased
by
each of them, including, without limitation, all assets reflected in Financial
Statements and all assets acquired by the Company or the Company Subsidiaries
since December 31, 2006 (except for assets which have been sold or otherwise
disposed of in the ordinary course of business consistent with past practice),
free and clear of all Liens, other than Permitted Liens. All personal property
of each of the Company or the Company Subsidiaries is in good operating
condition and repair, ordinary wear and tear excepted, and is suitable and
adequate for the uses for which it is intended or is being used and its use
complies in all material respects with applicable Laws. To the Stockholder’s and
the Company’s knowledge, there are no facts or conditions affecting the Company,
the Company Subsidiaries or their assets or business which could, individually
or in the aggregate, interfere in any material respect with the use, occupancy
or operation thereof as currently (or proposed to be) used, occupied or
operated, or their adequacy for such use, except for facts or conditions
relating solely to general economic, business or political developments
affecting the economy generally.
(b) Following
the consummation of the transactions contemplated by this Agreement, each of
the
Company and the Company Subsidiaries will continue to own, pursuant to good,
valid and marketable title, or lease, under valid and subsisting leases
disclosed in Section 4.13(b) of the Disclosure Schedule, or otherwise retain
its
interest in, the assets of the Company or a Company Subsidiary without incurring
any penalty or other adverse consequences, including, without limitation, any
increase in any respect in rentals, royalties or licenses or other fees imposed
as a result of, or arising from, the consummation of the transactions
contemplated by this Agreement or the other Transaction Documents.
-13-
4.14. Real
Property.
The
Company does not own or lease any real property.
4.15 Intellectual
Property.
(a) Section
4.15(a) of the Disclosure Schedule sets forth (i) all trade name registrations,
trademark registrations, service xxxx registrations, patents and copyright
registrations (and any pending applications for any of the foregoing) that
are
owned by the Company or any of the Company Subsidiaries, and (ii) all
Intellectual Property that is licensed to the Company or any of the Company
Subsidiaries by third parties and material to their business. None of the
Company or the Company Subsidiaries has received any written notice that the
rights of the Company or the Company Subsidiaries in their Intellectual Property
have been declared unenforceable or otherwise invalid by any court or
Governmental Entity. The Company and the Company Subsidiaries have taken
commercially reasonable steps to maintain and protect the rights of the Company
and the Company Subsidiaries in and to each item of their Intellectual Property,
it being understood that the Company has not registered Intellectual Property
which it may have a legal right to register. To the knowledge of the Stockholder
and the Company, there are no rights of any Person that would interfere with
or
prevent the use by the Company of any of the rights of the Company and the
Company Subsidiaries in and to any Intellectual Property that is material to
their business. To the Stockholder’s and the Company’s knowledge, there is no
existing third party infringement, misuse, or misappropriation of the
Intellectual Property of the Company or any of the Company Subsidiaries. With
respect to any agreements by which the Company or the Company Subsidiaries
are
licensed or otherwise are granted the right to use any item of third party
Intellectual Property that is material to the respective businesses of the
Company and the Company Subsidiaries (the “IP Licenses”), the consummation of
the transactions contemplated by this Agreement shall not cause a breach of
such
agreements or cause the licensor under such agreements to be able to terminate
such agreements.
(b) Except
as
would not have a Material Adverse Effect, neither the Company nor any of the
Company Subsidiaries has interfered with, infringed upon, misappropriated or
otherwise violated any Intellectual Property right of any Person.
(c) No
item
of Intellectual Property owned by the Company or any of the Company Subsidiaries
is subject to any outstanding injunction, judgment, order, decree, ruling or
charge to which the Company or any of the Company Subsidiaries is a party or
to
which its assets are bound. No action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand to which the Company or any of the Company
Subsidiaries is a party or to which any of their assets are bound is pending
or,
to the Stockholder’s and the Company’s knowledge, threatened which challenges
the legality, validity, enforceability or ownership of, or the Company’ or the
Company Subsidiaries’ right to use, any items of Intellectual Property.
-14-
(d) Neither
the Company nor any of the Company Subsidiaries has agreed to indemnify any
Person for or against any interference, infringement, misappropriation, or
other
conflict of or with any third party Intellectual Property (other than pursuant
to shrink wrap licenses for commercially available “off the shelf” software).
Except as would not have a Material Adverse Effect, (i) the Company and the
Company Subsidiaries possess the sole and exclusive good, valid and transferable
title in and to all items of Intellectual Property that the Company and the
Company Subsidiaries purport to own, free and clear of all Liens, and (ii)
no
royalties or other payments are required in connection with the use and
enjoyment by the Company or the Company Subsidiaries of any of their respective
items of Intellectual Property (other than royalties or other payments, in
each
case not exceeding $5,000 with respect to licenses of commercially available
software).
4.16 Litigation;
Compliance with Laws.
(a) There
are: (i) no claims, actions, suits, investigations or proceedings pending or,
to
the Stockholder’s and the Company’s knowledge, threatened against, relating to
or affecting the Company or the Company Subsidiaries, the business, the assets,
or any employee, officer, director, stockholder, or independent contractor
of
the Company or the Company Subsidiaries in their capacities as such, and (ii)
no
orders of any Governmental Entity or arbitrator outstanding against the Company
or the Company Subsidiaries, the business, the assets, or any employee, officer,
director, stockholder, or independent contractor of the Company or the Company
Subsidiaries in their capacities as such, or that could prevent or enjoin,
or
delay in any respect, consummation of the transactions contemplated hereby.
Section 4.16 of the Disclosure Schedule includes a description of all pending
or
threatened claims, actions, suits, investigations or proceedings involving
the
Company or the Company Subsidiaries, the business, the assets, or any employee,
officer, director, stockholder or independent contractor of the Company or
the
Company Subsidiaries in their capacities as such.
(b) The
Company and the Company Subsidiaries have complied and are in compliance in
all
material respects with all Laws applicable to the Company, any Subsidiary of
the
Company, its business or its assets, including the Sarbanes Oxley Act of 2002.
Neither the Company nor the Company Subsidiaries has received notice from any
Governmental Entity or other Person of any material violation of Law applicable
to the Company, any of the Company Subsidiaries, their business or their assets.
The Company and the Company Subsidiaries have obtained and hold all required
Licenses (all of which are in full force and effect) from all Government
Entities applicable to the Company, the Company Subsidiaries, their business
or
their assets. No violations are or have been recorded in respect of any such
License and no proceeding is pending, or, to the Stockholder’s and the Company’s
knowledge, threatened to revoke or limit any such License.
4.17 Employee
Benefit Plans.
(a) (i)
Neither the Company nor any of its ERISA Affiliates maintains or sponsors,
or
has any liability, contingent or otherwise, with respect to, any Benefit
Arrangement, (ii) no Benefit Arrangement provides or has ever provided
post-retirement medical or health benefits or severance benefits, except to
the
extent required by Part 6 of Title I of ERISA or similar state laws, and (iii)
no Benefit Arrangement is or has ever been a “welfare benefit fund,” as defined
in Section 419(e) of the Code, or an organization described in Sections
501(c)(9) or 501(c)(20) of the Code. The Company has made available to BBI
true
and complete copies of: (i) each written Benefit Arrangement document and a
description of each unwritten Benefit Arrangement, (ii) each summary plan
description relating to any Benefit Arrangement, (iii) each trust, insurance
or
other funding contract or agreement relating to any Benefit Arrangement, (iv)
each administrative services contract or agreement relating to any Benefit
Arrangement, (v) the three most recent annual reports (Forms 5500) for each
Benefit Arrangement (including all related schedules), if applicable, and (vi)
the most recent Internal Revenue Service determination letter, opinion,
notification or advisory letter (as the case may be) for each Benefit
Arrangement which is intended to constitute a qualified plan under Section
401
of the Code. Neither the Company nor any ERISA Affiliate has any obligation
or
commitment to establish, maintain, operate or administer any new Benefit
Arrangement or to amend any Benefit Arrangement so as to increase benefits
thereunder or otherwise.
-15-
(b) Neither
the Company nor any ERISA Affiliate has or has ever had any liability with
respect to any Benefit Arrangement that is subject to Title IV of ERISA,
including a “multiemployer plan”, as defined in Section 3(37) of ERISA or a
“single employer plan” within the meaning of Section 4001(a)(15) of ERISA.
Neither the Company nor any ERISA Affiliate has terminated a Benefit Arrangement
with respect to which any liability remains outstanding.
(c) Each
Benefit Arrangement conforms in all material respects to, and has been operated
and administered in material compliance with, its terms and all applicable
laws,
including ERISA and the Code, and including, but not limited to the requirements
of ERISA Sections 601 et seq. and 701 et seq. and Sections 4980B, 9801 and
9802
of the Code. Each Benefit Arrangement intended to be qualified under Section
401(a) of the Code is so qualified and is the subject of a currently effective
favorable IRS determination, opinion, notification or advisory letter issued
by
the IRS. Neither the Company nor any ERISA Affiliate has incurred or is subject
to a tax under Section 4979 of the Code. No Benefit Arrangement has assets
that
include securities issued by the Company or any ERISA Affiliate.
(d) There
are
no pending or, to the Stockholder’s and the Company’s knowledge, threatened
actions, suits, claims, trials, arbitrations, investigations or other
proceedings by any Person or Governmental Authority, including any present
or
former participant or beneficiary under any Benefit Arrangement (or any
beneficiary of any such participant or beneficiary) involving any Benefit
Arrangement or any rights or benefits under any Benefit Arrangement other than
ordinary and usual claims for benefits by participants or beneficiaries
thereunder. To the Stockholder’s and the Company’s knowledge, no event has
occurred and no condition exists that could subject the Company or the fund
of
any Benefit Arrangement to the imposition of any tax or penalty with respect
to
any Benefit Arrangement, whether by way of indemnity or otherwise. All
contributions required to have been made or remitted and all expenses required
to have been paid by the Company to or under any Benefit Arrangement under
the
terms of any such plan, any agreement or any applicable law have been paid
within the time prescribed by any such plan, agreement or law. All contributions
to or under any Benefit Arrangement have been currently deductible under the
Code when made. No "prohibited transaction" (as defined in ERISA Section 406)
or
breach of fiduciary responsibility has occurred with respect to any Benefit
Arrangement for which a tax, penalty or other liability of whatever nature
could
be incurred by the Company, whether by way of indemnity or otherwise.
-16-
(e) There
is
no contract, agreement or benefit arrangement covering any current or former
employee or director of the Company or any ERISA Affiliate which, individually
or in the aggregate, could be expected to give rise to the payment of any amount
which would constitute an “excess parachute payment” (as defined in Section 280G
of the Code) or be nondeductible under Section 162(m) of the Code. Neither
the
execution of this Agreement nor the consummation of any of the transactions
contemplated hereby will, either alone or in conjunction with any other event
(including the termination of an employee’s employment) (i) result in any
obligation or liability (with respect to accrued benefits or otherwise) on
the
part of the Company or any ERISA Affiliate under any Benefit Arrangement, or
to
any present or former employee, director, officer, stockholder, contractor
or
consultant of the Company or any ERISA Affiliate, (ii) be a trigger event under
any Benefit Arrangement that will result in any payment (whether of severance
pay or otherwise) becoming due to any such present or former employee, officer,
director, stockholder, contractor, or consultant, or (iii) accelerate the time
of payment or vesting, or increase the amount, of any compensation theretofore
or thereafter due or granted to any employee, officer, director, stockholder,
contractor, or consultant of the Company or any ERISA Affiliate.
(f) No
Benefit Arrangement is required to comply with the provisions of any foreign
law.
(g) Other
than routine claims for benefits under any Benefit Arrangement, there are no
pending, or, to the Stockholder’s and the Company’s knowledge, threatened,
actions or proceedings involving any Benefit Arrangement, or the fiduciaries,
administrators, or trustees of any Benefit Arrangement or the Company or any
of
its ERISA Affiliates as the employer or sponsor under any Benefit Arrangement,
with any of the IRS, the Department of Labor, the Pension Benefit Guaranty
Corporation, any participant in or beneficiary of any Benefit Arrangement or
any
other person whomsoever. The Stockholder knows of no reasonable basis for any
such claim, lawsuit, dispute, action or controversy.
4.18 Taxes.
(a) The
Company has not timely filed but has caused to be filed all Tax Returns required
to be filed under applicable Tax Laws. All such Tax Returns were, when filed,
and continue to be, true, correct and complete in all material respects. The
Company is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by the Taxing Authority
of
any jurisdiction in which the Company does not file Tax Returns or pay Taxes
that it may be subject to taxation by that jurisdiction, nor is there any
meritorious basis for such a claim.
-17-
(b) All
Taxes
due and owing by the Company (whether or not shown on any Tax Return) have
been
timely paid. Any liability of the Company for Taxes not yet due and payable,
or
that are being contested in good faith by appropriate proceedings, have been
provided for on the Financial Statements in accordance with GAAP. There are
no
Liens for Taxes (other than Taxes not yet due and payable) upon any of the
assets of the Company.
(c) The
Company has timely withheld and paid all Taxes required to have been withheld
and paid in connection with any amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party (including
withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the
Code
or any comparable provision of any state, local or foreign Laws, any applicable
Tax convention, or otherwise).
(d) No
foreign, federal, state or local Tax audits or administrative or judicial Tax
proceedings are pending with respect to the Company. The Company has not
received from any Taxing Authority (i) any notice indicating an intent to
commence any audit or other review, (ii) any request for information related
to
Tax matters, or (iii) any notice of deficiency or proposed adjustment for any
amount of Tax proposed, asserted or assessed by any authority against the
Company. Each deficiency resulting from any audit or examination relating to
Taxes of the Company has been timely paid. The Company has not waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) The
Company is not a party to and is not bound by any Tax sharing agreement, Tax
indemnity obligation or similar agreement, arrangement or practice with respect
to Taxes, whether or not in writing (including any advance pricing agreement,
closing agreement or other agreement relating to Taxes with any Taxing
Authority).
(f) The
Company has delivered to BBI (i) complete and correct copies of all its Tax
Returns for all taxable periods and (ii) complete and correct copies of all
private letter rulings, revenue agent reports, information document requests,
notices of proposed deficiencies, deficiency notices, protests, petitions,
closing agreements, settlement agreements, pending ruling requests and any
similar documents, submitted, received or agreed to by or on behalf of the
Company and relating to Taxes for all taxable periods for which the statute
of
limitations has not yet expired.
(g) The
Company has no liability for the Taxes of any other Person under Treasury
Regulation Section 1.1502-6 (or similar provision of state, local or foreign
Law), as a transferee, successor, by contract or otherwise.
(h) The
unpaid Taxes of the Company (i) did not, as of the most recent fiscal month
end,
exceed the reserve for Tax liability (rather than any reserve for deferred
Taxes
established to reflect timing differences between book and Tax income) set
forth
on the Company’ books and records provided to the Company, and (ii) shall not
exceed that reserve as adjusted for the passage of time through the Closing
Date
in accordance with the past custom and practice of the Company. Since its
inception, the Company has not incurred any liability for Taxes arising from
extraordinary gains or losses, as that term is used in GAAP, other than in
the
ordinary course of business consistent with past practice.
-18-
(i) The
Company has not been a “United States real property holding corporation” within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
4.19 Contracts
and Commitments.
Section
4.19 of the Disclosure Schedule sets forth a list of all material agreements,
Contracts and commitments to which the Company or any Company Subsidiary is
a
party or by which the Company, any Company Subsidiary or their respective assets
are bound (each, a “Material Contract”), including, without
limitation:
(a) agreements,
contracts, commitments or arrangements involving Intellectual
Property;
(b) employment
agreements or severance agreements or employee termination arrangements that
are
not terminable at will by the Company or a Company Subsidiary without
penalty;
(c) any
change of control agreements with employees of the Company or any Company
Subsidiary;
(d) agreements,
contracts, commitments or arrangements containing any covenant limiting the
ability of the Company or any Company Subsidiary to engage in any line of
business or to compete with any business or person;
(e) agreements
or contracts with any officer, director or employee of (i) the Company or (ii)
any Company Subsidiary (other than employment, severance and change of control
agreements covered by clause (b) or (c) above);
(f) agreements
or contracts under which the Company or any Company Subsidiary has borrowed
or
loaned money, or any note, bond, indenture, mortgage, installment obligation
or
other evidence of indebtedness for borrowed or loaned money or any guarantee
of
such indebtedness, in each case, relating to amounts in excess of
$5,000;
(g) joint
venture agreements or other agreements involving the sharing of
profits;
(h) leases
pursuant to which personal or real property is leased to or from the Company
or
any Company Subsidiary;
(i) powers
of
attorney from the Company or any Company Subsidiary;
(j) guaranties,
suretyships or other contingent agreements of the Company or any Company
Subsidiary;
-19-
(k) all
agreements, contracts, commitments and arrangements between the Company or
any
Company Subsidiary and any Governmental Entity;
(l) any
agreement, contract, commitment or arrangement relating to capital expenditures
with respect to the Company or any Company Subsidiary and involving future
payments which exceed $5,000 in any 12 month period;
(m) any
agreement, contract, commitment or arrangement relating to the acquisition
of
assets (other than in the ordinary course of business consistent with past
practice) or any capital stock of any business enterprise;
(n) any
investment banking or other professional services agreement;
(o) contracts
(other than those covered by clause (a) through (n) above) pursuant to which
the
Company and the Company Subsidiaries will receive or pay in excess of $5,000
over the life of the contract;
(p) any
other
material agreements, Contracts and commitments whether or not entered into
in
the ordinary course of business; and
(q) all
proposed arrangements or contracts of the Company or the Company Subsidiaries
which the Company reasonably expects to be near consummation and of a type
that
if entered into would be a Contract described in clauses (a) through (o)
above.
Neither
the Company, any Company Subsidiary nor, to the Stockholder’s and the Company’s
knowledge, any other party thereto, is in material breach of or in material
default under any Material Contract. Each such Material Contract is in full
force and effect, and is a legal, valid and binding obligation of the Company
and/or the applicable Company Subsidiaries and, to the Stockholder’s and the
Company’s knowledge, each of the other parties thereto, enforceable in
accordance with its terms.
4.20. Insurance.
(a) Section
4.20 of the Disclosure Schedule contains a complete and accurate list of all
insurance policies currently providing and that have been providing coverage
in
favor of the Company or the Company Subsidiaries (or any predecessor) specifying
the insurer and type of insurance under each. The Company has heretofore
delivered to BBI true, correct and complete copies of all such policies. Each
current policy is in full force and effect, all premiums are currently paid,
no
notice of cancellation or termination has been received with respect to any
such
policy and, to the knowledge of the Stockholder and the Company, there is no
threatened increase in premiums or cancellation or termination of any such
policy. Such policies have been sufficient for compliance with all requirements
of law and any Contracts to which the Company or any of the Company Subsidiaries
is a party. Neither the Company nor the Company Subsidiaries (or any
predecessor) has been refused any insurance with respect to its assets and
operations, nor has its coverage been limited by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance.
Each of the Company and the Company Subsidiaries (or any predecessor) has
insured by reputable insurers the assets used by such company (or any
predecessor) in the conduct of its business that are of an insurable character
against risks of liability, casualty and fire in adequate amounts and consistent
with prudent industry practice, and maintains such insurance against hazards,
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses, similarly situated, and such
insurance has been effective, in full force and effect, without interruption
since the date such company (or any predecessor) commenced business. The
insurance specified in Section 4.20 of the Disclosure Schedule has been
effective, in full force and effect, without interruption since the date
specified in Section 4.20 of the Disclosure Schedule as the initial date of
coverage.
-20-
(b) There
is
no pending claim by the Company or the Company Subsidiaries under any insurance
policy listed in Section 4.20 of the Disclosure Schedule. Section 4.20 of the
Disclosure Schedule sets forth all claims by the Company or the Company
Subsidiaries (whether or not resolved) under any insurance policy, which claims
have been outstanding at any time since January 1, 2006. Neither the business
nor the assets of the Company or the Company Subsidiaries has had any casualty
loss or occurrence which may give rise to any claim of any kind not covered
by
insurance and the Company and the Company Subsidiaries are not aware of any
occurrence which may give rise to any claim not covered by
insurance.
4.21 Labor
Matters.
(a)
The
Company and each of the Company Subsidiaries is in compliance in all material
respects with all federal, state, local and foreign Laws and regulations
respecting employment and employment practices, terms and conditions of
employment, wages, hours, collective bargaining, safety and health, work
authorization, equal employment opportunity, immigration, withholding,
unemployment compensation, worker’s compensation and employee privacy and right
to know; (b) there is no pending, or, to the knowledge of the Stockholder and
the Company, any threatened, charge, complaint, allegation, application or
other
process against the Company or any Company Subsidiaries before the National
Labor Relations Board or any other comparable Governmental Entity; (c) there
is,
and have been, (i) no labor strike, dispute, slowdown or work stoppage or other
job action pending, or to the knowledge of the Stockholder and the Company,
threatened against or otherwise affecting or involving the Company or any
Company Subsidiaries or (ii) no lawsuits (other than grievance proceedings)
pending, or to the knowledge of the Stockholder and the Company, threatened
between the Company or any Company Subsidiaries and any current or former
employee or independent contractor of the Company or any union or other
collective bargaining unit representing any current or former employee of the
Company; (d) no employees of the Company or any Company Subsidiaries are covered
by any collective bargaining agreements and, to the knowledge of the Stockholder
and the Company, no effort is being made by any union to organize any of the
employees of the Company or any Company Subsidiaries; and (e) to its knowledge,
neither the Company nor any Company Subsidiaries has hired any illegal aliens
as
employees or independent contractors.
-21-
4.22. Environmental
Matters.
(a) Each
of
the Company and the Company Subsidiaries have complied in all material respects
at all times with all applicable Environmental Laws and their requirements.
The
Company and each of the Company Subsidiaries has obtained all necessary Licenses
and filed all required reports and notifications pursuant to all Environmental
Laws. All such Licenses are in good standing, and each of the Company and the
Company Subsidiaries has complied at all times with all terms and conditions
of
such Licenses. Neither the Company nor any of the Company Subsidiaries has
received any notice or communications from any Governmental Entity with respect
to any violation of Environmental Law.
(b) No
Environmental Claim has been filed by or against the Company or any of the
Company Subsidiaries, and neither the Company nor any of the Company
Subsidiaries has received any written notice of any investigation, claim or
review which has occurred or is pending or threatened against it by any
Governmental Entity with respect to any Environmental Laws. Neither the Company
nor any of the Company Subsidiaries owns, operates or leases a treatment,
storage or disposal facility requiring a permit under the Resource Conservation
and Recovery Act, as amended, or under any other comparable foreign, state
or
local Law. Neither the Company nor any of the Company Subsidiaries has
transported or arranged for the transport, treatment or disposal of any
Regulated Substances to any location.
(c) Neither
the Company nor any of the Company Subsidiaries has ever generated,
manufactured, used, transported, treated, stored, handled, disposed of,
discharged, released, transferred, produced or processed any Regulated Substance
at, to, under or on any real property owned, operated or leased by the Company
or any of the Company Subsidiaries, or any other location. No written or oral
notification of a discharge or release of Regulated Substances by the Company
or
any of the Company Subsidiaries has been registered or filed by or on behalf
of
the Company or any of the Company Subsidiaries, and no site or facility now
or
previously owned, operated or leased by the Company or any of the Company
Subsidiaries is listed on the United States Environmental Protection Agency’s
National Priorities List of Uncontrolled Hazardous Waste Sites or any similar
list of sites requiring investigation or clean-up.
(d) No
Liens
have arisen under or pursuant to any Environmental Law on any site or facility
now or previously owned, operated or leased by the Company or any of the Company
Subsidiaries, and, to the knowledge of the Stockholder and the Company, no
Governmental Entity has taken, or is in the process of taking, any action that
could subject any such site or facility to such Liens. There are no conditions
existing at any real property ever owned, operated or leased by the Company
or
any of the Company Subsidiaries that will require now or in the future remedial
or corrective action, removal, monitoring or closure pursuant to Environmental
Law.
(e) Neither
the Company nor any of the Company Subsidiaries has contractually, or by
operation of Law, assumed or succeeded to any liabilities related to
Environmental Laws of any predecessors of the Company or the Company
Subsidiaries.
-22-
4.23. Transactions
with Affiliates.
None of
the Company; the Company’s Subsidiaries; the officers, directors, managers or
Affiliates of any of the Company, the Company Subsidiaries, or the Affiliates
of
any such officer, director or manager: (a) has borrowed money from, or loaned
money to, the Company or the Company Subsidiaries, (b) is a party to any
Contract with the Company or the Company Subsidiaries, (c) has asserted or
threatened to assert any claim against the Company or the Company Subsidiaries,
(d) is engaged in any transaction with the Company or the Company Subsidiaries,
(e) has any direct or indirect financial interest in any competitor, supplier,
customer, lessor, lessee, distributor, or sales agent of the Company, the
Company Subsidiaries or the business, or otherwise does business with the
Company or any of the Company Subsidiaries, (f) owns, directly or indirectly,
in
whole or in part, or has any other interest in, any tangible or intangible
property or other assets which the Company or the Company Subsidiaries uses
or
has used or proposes to use in the conduct of its business or otherwise, or
(g)
has any claim whatsoever against, or owes any amount to, the Company or any
of
the Company Subsidiaries. The arrangements listed in Section 4.23 of the
Disclosure Schedule pursuant to clauses (a), (b) or (d) of this Section 4.23
are
on an arms-length basis or on terms at least as favorable to The Company as
available on an arms-length basis.
4.24. Brokers.
No
broker, finder or financial advisor or other person is entitled to any brokerage
fees, commissions, finders’ fees or financial advisory fees in connection with
the transactions contemplated hereby or the Merger by reason of any action
taken
by the Stockholder, the Company or any of their respective directors, officers,
employees, representatives or agents.
4.25. Certain
Agreements.
Neither
the Company nor any Company Subsidiary is a party to any: (a) agreement with
any
director, officer or other employee of the Company or any Company Subsidiary,
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company of the
nature contemplated by this Agreement; or (b) agreement or plan, any of the
benefits of or rights under which will be increased, or the vesting or payment
of the benefits of or rights under which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any
of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
4.26. Absence
of Certain Commercial Practices.
Neither
the Stockholder, the Company nor any Company Subsidiary, nor, to the knowledge
of the Stockholder and the Company, any director, officer, agent, employee
or
other person acting on behalf of the Company or any Company Subsidiary, has:
(i)
given or agreed to give any gift or similar benefit of more than nominal value
to any customer, supplier, or governmental employee or official or any other
person who is or may be in a position to help or hinder the Company or any
Company Subsidiary or assist the Company or any Company Subsidiary in connection
with any proposed transaction, which gift or similar benefit, if not given
in
the past, might have materially and adversely affected the business or prospects
of the Company or any Company Subsidiary, or which, if not continued in the
future, might materially and adversely affect the business or prospects of
the
Company or any Company Subsidiary; or (ii) used any corporate or other funds
for
unlawful contributions, payments, gifts, or entertainment, or made any unlawful
contributions, payments or gifts, or made any unlawful expenditures relating
to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of
the
Exchange Act. Neither the Stockholder, the Company nor any Company Subsidiary,
nor, to the knowledge of the Stockholder and the Company, any director, officer,
agent, employee or other person acting on behalf of the Company or any Company
Subsidiary, has accepted or received any unlawful contributions, payments,
gifts
or expenditures.
-23-
4.27. Bank
Accounts.
Section
4.27 of the Disclosure Schedule sets forth an accurate list of each bank, trust
company, savings institution or other financial institution with which the
Company has an account or safe deposit box and the names and identification
of
all persons authorized to draw thereon or to have access thereto, and sets
forth
the names of each person holding powers of attorney or agency authority from
the
Company, as applicable, and a summary of the terms thereof and the names of
each
person holding credit cards in the name of the Company, with the credit cards
being so held identified.
4.28. Corporate
Names.
Section
4.28 of the Disclosure Schedule sets forth a complete and accurate list of
names
used by the Company and each of the Company Subsidiaries in addition to its
corporate name.
4.29. No
Current Operations.
The
Company and the Company Subsidiaries have no current business operations. The
Company and the Company Subsidiaries have (i) disposed (whether by sale,
liquidation or otherwise) of all of their active business operations and (ii)
neither the Company nor the Company Subsidiaries have any liabilities or
obligations to the acquirors of such business operations, nor did the terms
of
disposition require them to retain any liabilities of such disposed business
operations.
4.30. Books
and Records.
The
books of account, minute books, stock record books and other records of the
Company and the Company Subsidiaries, all of which have been made available
to
BBI, are complete and correct in all material respects and have been maintained
in accordance with sound business practices in all material
respects.
4.31 Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that
the SEC is contemplating terminating such registration. The Company has not,
in
the 12 months preceding the date hereof, received notice from the OTC Bulletin
Board to the effect that the Company is not in compliance with the listing
or
maintenance requirements of such trading market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be,
in
compliance with all such listing and maintenance requirements. Following the
consummation of the Merger, the Common Stock will be eligible for continued
trading on the OTC Bulletin Board.
4.32 Manipulation
of Price.
Neither
the Stockholder nor the Company has, and to their knowledge, no one acting
on
its behalf has, taken, directly or indirectly, any action designed to cause
or
to result in the stabilization or manipulation of the price of any security
of
the Company.
-24-
4.33. Full
Disclosure.
No
representation or warranty, exhibit or schedule furnished by or on behalf of
the
Company or any of the Company Subsidiaries in this Agreement or any other
Transaction Document contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading. None of the Stockholder,
the Company or the Company Subsidiaries has any knowledge of any facts
pertaining to the Stockholder, the Company or the Company Subsidiaries, or
their
business or assets that could have a Material Adverse Effect and that have
not
been disclosed in this Agreement, the schedules and exhibits hereto and the
Transaction Documents, except for any facts relating solely to general economic,
business or political developments affecting the economy generally.
5. Representations
and Warranties of BBI.
BBI
hereby represents and warrants to the Company that:
5.1 Organization
of BBI.
BBI is a
corporation duly organized, validly existing and in good standing under the
laws
of the State of Texas and has all requisite corporate power and corporate
authority to enter into the Transaction Documents, to consummate the
transactions contemplated hereby and thereby, to own, lease and operate its
properties and to conduct its business.
5.2 Authority.
The
execution, delivery and performance by BBI of the Transaction Documents and
the
consummation of the transactions contemplated hereby and thereby have been
duly
authorized by all necessary corporate action on the part of BBI, including,
without limitation, the approval of the board of directors of BBI. The
Transaction Documents have been duly executed and delivered by BBI and, assuming
that the Transaction Documents constitute a valid and binding obligation of
the
Stockholder and the Company, constitute a valid and binding obligation of BBI.
BBI is duly qualified or licensed to do business as a foreign corporation and
is
in good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to obtain such qualification
or license would not, individually or in the aggregate, have a Material Adverse
Effect.
5.3 No
Violation; Consents and Approvals.
The
execution and delivery by BBI of the Transaction Documents does not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the terms hereof and thereof will not conflict with, or result in any
violation of or default (or an event which, with notice or lapse of time or
both, would constitute a default) under, (a) the terms and conditions or
provisions of the articles of incorporation or by-laws of BBI, (b) any Laws
applicable to BBI or the property or assets of BBI, or (c) give rise to any
right of termination, cancellation or acceleration under, or result in the
creation of any Lien upon any of the properties of BBI under, any Contracts
to
which BBI is a party or by which BBI or any of its assets may be bound, except,
(i) BBI is required to obtain the prior consent of Orix Finance Corp. in order
to consummate the transactions contemplated hereby, and (ii) in the case of
clauses (b) and (c), for such conflicts, violations or defaults as to which
requisite waivers or consents will have been obtained prior to the Closing
or
which, individually or in the aggregate, would not have a Material Adverse
Effect. No Governmental Approval is required to be obtained or made by or with
respect to BBI or any BBI Subsidiary in connection with the execution and
delivery of this Agreement or the consummation by BBI of the transactions
contemplated hereby, except where the failure to obtain such Governmental
Approval would not, individually or in the aggregate, have an BBI Material
Adverse Effect.
-25-
5.4 Purchase
Entirely for Own Account.
The
Shares to be received by BBI hereunder will be acquired for its own account,
not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof in violation of the 1933 Act, and BBI has no present intention
of
selling, granting any participation in, or otherwise distributing the same
in
violation of the 1933 Act
without
prejudice, however, to BBI’s right at all times to sell or otherwise dispose of
all or any part of such Shares in compliance with applicable federal and state
securities laws.
Nothing
contained herein shall be deemed a representation or warranty by BBI to hold
the
Shares for any period of time. BBI
is not a
broker-dealer registered with the SEC under the 1934 Act or an entity engaged
in
a business that would require it to be so registered.
5.5 Restricted
Securities.
BBI
understands that the Shares are characterized as “restricted securities” under
the U.S. federal securities laws inasmuch as they are being acquired from the
Stockholder in a transaction not involving a public offering and that under
such
laws and applicable regulations such securities may be resold without
registration under the 1933 Act only in certain limited
circumstances.
5.6 Legends.
It is
understood that, except as provided below, certificates evidencing the Shares
may bear the following or any similar legend:
(a) “The
securities represented hereby have not been registered under the Securities
Act
of 1933, as amended (the ‘Act’) and may not be transferred unless (i) such
securities have been registered for sale pursuant to the Act, (ii) such
securities may be sold pursuant to Rule 144(k), or (iii) the Company has
received an opinion of counsel reasonably satisfactory to it that such transfer
may lawfully be made without registration under the Securities Act of 1933
or
qualification under applicable state securities laws.”
(b) If
required by the authorities of any state in connection with the issuance of
sale
of the Shares, the legend required by such state authority.
-26-
6.
Covenants
Relating to Conduct of Business Pending the Closing
6.1
Conduct
of the Business Pending the Closing.
(a) During
the period from the date of this Agreement and continuing until the Closing,
each of the Stockholder and the Company agrees, that neither the Stockholder
nor
the Company shall, and shall cause the Company Subsidiaries not to, engage
in
any business whatsoever other than in connection with the consummation of the
transactions contemplated by this Agreement and the Merger Agreement, and shall
use commercially reasonable efforts to preserve intact its business and assets,
maintain its assets in good operating condition and repair (ordinary wear and
tear excepted), retain the services of its officers, employees and independent
contractors and use reasonable commercial efforts to keep in full force and
effect liability insurance and bonds comparable in amount and scope of coverage
to that currently maintained with respect to its business, unless, in any case,
BBI consents otherwise in writing.
(b) During
the period from the date of this Agreement and continuing until the Closing,
each of the Stockholder and the Company agrees as to itself and, with respect
to
the Company, the Company Subsidiaries, that except as expressly contemplated
or
permitted by this Agreement, or to the extent that the other party shall
otherwise consent in writing:
(i)
It
shall
not amend or propose to amend its certificate of incorporation or by-laws or
equivalent organizational documents except as contemplated in this
Agreement.
(ii) It
shall
not, nor in the case of the Company shall it permit the Company Subsidiaries
to,
issue, deliver, sell, redeem, acquire, authorize or propose to issue, deliver,
sell, redeem, acquire or authorize, any shares of its capital stock of any
class
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares or convertible securities or other ownership interest
and, in the case of the Stockholder, shall not sell or otherwise transfer the
Shares, provided that the Company shall be permitted to issue the shares of
its
Common Stock to be issued to the stockholders of BBI under the terms of the
Merger Agreement.
(iii) It
shall
not, nor in the case of the Company shall it permit any of the Company
Subsidiaries to, nor shall it propose to: (i) declare, set aside, make or pay
any dividend or other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock or (ii) reclassify, combine,
split, subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock.
(iv) Other
than dispositions in the ordinary course of business consistent with past
practice which would not cause a Material Adverse Effect, individually or in
the
aggregate, to it and its subsidiaries, taken as a whole, it shall not, nor
shall
it permit any of its subsidiaries to, sell, lease, encumber or otherwise dispose
of, or agree to sell, lease (whether such lease is an operating or capital
lease), encumber or otherwise
dispose of its assets.
-27-
(v) It
shall
promptly advise the other party hereto in writing of any change in the condition
(financial or otherwise), operations or properties, businesses or business
prospects of such party or any of its subsidiaries which would result in a
Material Adverse Effect.
(vi) It
shall
not permit to occur any (1) change in accounting principles, methods or
practices, investment practices, claims, payment and processing practices or
policies regarding intercompany transactions, (2) incurrence of Indebtedness
or
any commitment to incur Indebtedness, any incurrence of a contingent liability,
Contingent Obligation or other liability of any type, (3) cancellation of any
debt or waiver or release of any contract, right or claim, except for
cancellations, waivers and releases in the ordinary course of business
consistent with its past practice which do not exceed $10,000 in the aggregate,
(4) amendment, termination or revocation of, or a failure to perform obligations
or the occurrence of any default under, (Y) any contract or agreement
(including, without limitation, leases) to which it is or, as of December 31,
2006, was a party, other than in the ordinary course of business consistent
with
past practice, or (Z) any License, (5) execution of termination, severance
or
similar agreements with any of its officers, directors, employees, agents or
independent contractors or (6) entering into any leases of real property or
agreement to acquire real property.
(vii) It
shall
not, and the Company shall not permit any of the Company Subsidiaries to, take
or agree or commit to take any action, (i) that is reasonably likely to make
any
of its representations or warranties hereunder inaccurate; or (ii) that is
prohibited pursuant to the provisions of this Article VI.
-28-
7. Additional
Agreements.
7.1 Access
to Information.
From the
date hereof until the Closing or the earlier termination of this Agreement,
each
party shall give the other party and its respective counsel, accountants,
representatives and agents full access, upon reasonable notice and during normal
business hours, to such party’s facilities and the financial, legal, accounting
and other representatives of such party with knowledge of the business and
the
assets of such party and, upon reasonable notice, shall be furnished all
relevant documents, records and other information concerning the business,
finances and properties of such party and its subsidiaries that the other party
and its respective counsel, accountants, representatives and agents, may
reasonably request. No investigation pursuant to this Section 7.1 shall affect
or be deemed to modify any of the representations or warranties hereunder or
the
condition to the obligations of the parties to consummate the transactions
contemplated hereby; it being understood that the investigation will be made
for
the purposes among others of the board of directors of each party determining
in
its good faith reasonable business judgment the accuracy of the representations
and warranties of the other party. In the event of the termination of this
Agreement, each party, if so requested by the other party, will return or
destroy promptly every document furnished to it by or on behalf of the other
party in connection with the transactions contemplated hereby, whether so
obtained before or after the execution of this Agreement, and any copies thereof
(except for copies of documents publicly available) which may have been made,
and will use reasonable efforts to cause its representatives and any
representatives of financial institutions and investors and others to whom
such
documents were furnished promptly to return or destroy such documents and any
copies thereof any of them may have made.
7.2 No
Shop; Acquisition Proposals.
From the
date hereof until the Closing or the earlier termination of this Agreement,
neither the Stockholder nor the Company shall, nor shall they authorize or
permit any of their respective officers, directors or employees or Subsidiaries
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it to, solicit, initiate or encourage (including
by
way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably
be
expected to lead to, any Takeover Proposal, or negotiate with respect to, agree
to or endorse any Takeover Proposal. The Stockholder and the Company shall
promptly advise BBI orally and in writing of any such inquiries or proposals
and
shall also promptly advise BBI of any developments or changes regarding such
inquiries or proposals. The Stockholder and the Company shall immediately cease
and cause to be terminated any existing discussions or negotiations with any
persons (other than BBI) conducted heretofore with respect to any Takeover
Proposal. The Stockholder and the Company agree not to release (by waiver or
otherwise) any third party from the provisions of any confidentiality or
standstill agreement to which the Stockholder or the Company is a
party.
7.3 Legal
Conditions to Closing; Reasonable Efforts.
Each of
BBI, the Stockholder and the Company shall take all reasonable actions necessary
to comply promptly with all legal requirements which may be imposed on itself
with respect to the consummation of the transactions contemplated hereby and
will promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their Subsidiaries
in connection with the consummation of the transactions contemplated hereby
and
the Merger pursuant to the terms of the Merger Agreement. Each of BBI, the
Stockholder and the Company will, and the Company will cause the Company
Subsidiaries to, take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party, required to be obtained or made by BBI, the Stockholder
or
the Company or any of the Company Subsidiaries in connection with the Closing
or
the taking of any action contemplated thereby or by this Agreement or the Merger
Agreement.
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7.4 Certain
Filing.
Each
party shall cooperate with the other in (a) determining whether any action
by or
in respect of, or filing with, any governmental body, agency, official or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
the
Merger Agreement and (b) seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers. Each party shall consult with the other in connection
with
the foregoing and shall use all reasonable commercial efforts to take any steps
as may be necessary in order to obtain any consents, approvals, permits or
authorizations required in connection with the transactions contemplated hereby
and the Merger.
7.5 Public
Announcements and Filings.
Each
party shall give the other a reasonable opportunity to comment upon, and, unless
disclosure is required, in the opinion of counsel, by applicable law, approve
(which approval shall not be unreasonably withheld), all press releases or
other
public communications of any sort relating to this Agreement or the transactions
contemplated hereby or the Merger.
7.6 Piggyback
Registration Rights.
BBI
agrees to grant the Stockholder piggyback registration rights and to execute
a
registration rights agreement with the Stockholder at the Closing with respect
to the shares of Common Stock retained by the Stockholder pursuant to the terms
of this Agreement. The registration rights agreement shall provide for the
same
terms and conditions as the BK Holdings LLC registration rights agreement,
provided, however, that the Stockholder shall have the right to have his shares
included in one or more registration statements (only one if all shares are
included is the initial registration statement filed) filed within one year
from
Closing, even if BK Holdings, LLC does not achieve or wish to have its shares
registered, except to the extent limited by financing covenants, cut backs
or
applicable law. In addition, the Stockholder agrees to execute a lock-up
agreement, if requested in connection with any financing, on the same terms
and
conditions as any lock-up agreement executed by BK Holdings, LLC in connection
with any such financing.
8.
Conditions
to Closing.
8.1 Conditions
to BBI’s Obligations.
The
obligation of BBI to purchase the Shares at the Closing is subject to the
fulfillment to BBI’s satisfaction, on or prior to the Closing Date, of the
following conditions, any of which may be waived by such Investor (as to itself
only):
-30-
(a) The
representations and warranties made by the Stockholder and/or the Company in
Section 4 hereof qualified as to materiality shall be true and correct at all
times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which
case
such representation or warranty shall be true and correct as of such earlier
date, and, the representations and warranties made by the Company in Section
4
hereof not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent
any
such representation or warranty expressly speaks as of an earlier date, in
which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all
material respects all obligations and covenants herein required to be performed
by it on or prior to the Closing Date.
(b) The
Stockholder and the Company shall have obtained any and all consents, permits,
approvals, registrations and waivers necessary or appropriate for consummation
of the purchase and sale of the Securities and the consummation of the other
transactions contemplated by the Transaction Documents, all of which shall
be in
full force and effect.
(c) (i)
The
Company and Merger Sub shall have executed and delivered the Merger Agreement
to
BBI, (ii) the Certificates of Merger to be filed with the Secretary of State
for
the State of Florida and the State of Texas shall have been submitted and
approved pursuant to the terms of such state’s applicable laws and delivered to
BBI’s legal counsel and (iii) the other conditions set forth in the Merger
Agreement shall have been satisfied to BBI’s satisfaction.
(d) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby, in
the
other Transaction Documents or in the Merger Agreement.
(e) The
Stockholder and the Company shall have delivered a Certificate, executed on
behalf of the Stockholder and the Company by its Chief Executive Officer or
its
Chief Financial Officer, respectively, dated as of the Closing Date, certifying
to the fulfillment of the conditions specified in subsections (a), (b), (c),
(d), (h) and (i) of this Section 8.1.
(f) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the Merger Agreement,
certifying the current versions of the Articles of Organization and Bylaws
or
other organizational documents of the Company and certifying as to the
signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company.
(g) BBI
shall
have completed its due diligence review of the Company and such diligence review
shall be satisfactory to BBI in all respects, provided, however, that such
due
diligence review shall be completed by BBI within five days after the date
of
this Agreement, unless the inability to complete such due diligence review
is
the result of actions taken or not taken by the Stockholder or the Company
in
response to requests for information regarding the Company or the Stockholder
reasonably requested by BBI and, in such event, such five day period shall
be
tolled until such time as the Stockholder or the Company reasonably responds
to
such request.
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(h) No
stop
order or suspension of trading shall have been imposed by the SEC or any other
governmental or regulatory body with respect to public trading in the Common
Stock.
(i) All
outstanding Indebtedness of the Company shall have been fully paid and BBI
shall
have received evidence of such repayment in form and substance reasonably
satisfactory to BBI.
8.2 Conditions
to Obligations of the Stockholder.
The
Stockholder's obligation to sell the Shares at the Closing is subject to the
fulfillment to the satisfaction of the Stockholder on or prior to the Closing
Date of the following conditions, any of which may be waived by the
Stockholder:
(a) The
representations and warranties made by BBI in Section 5 hereof shall be true
and
correct in all material respects when made, and shall be true and correct in
all
material respects on the Closing Date with the same force and effect as if
they
had been made on and as of said date. BBI shall have performed in all material
respects all obligations and covenants herein required to be performed by them
on or prior to the Closing Date.
(b) BBI
shall
have delivered the Purchase Price to the Stockholder.
8.3 Termination
of Obligations to Effect Closing; Effects.
(a) The
obligations of the Stockholder, on the one hand, and BBI, on the other hand,
to
effect the Closing shall terminate as follows:
(i) Upon
the
mutual written consent of the Stockholder and BBI;
(ii) By
the
Stockholder if any of the conditions set forth in Section 8.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;
(iii) By
BBI if
any of the conditions set forth in Section 8.1 shall have become incapable
of
fulfillment, and shall not have been waived by BBI; or
(iv) By
either
the Stockholder or BBI if the Closing has not occurred on or prior to August
31,
2007;
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provided,
however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach
of
any of its representations, warranties, covenants or agreements contained in
this Agreement or the other Transaction Documents if such breach has resulted
in
the circumstances giving rise to such party’s seeking to terminate its
obligation to effect the Closing.
(b) Nothing
in this Section 8.3 shall be deemed to release any party from any liability
for
any breach by such party of the terms and provisions of this Agreement or the
other Transaction Documents or to impair the right of any party to compel
specific performance by any other party of its obligations under this Agreement
or the other Transaction Documents.
9. Survival
and Indemnification.
9.1 Survival.
The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement for a period of one (1) year from the Closing Date.
9.2 Indemnification.
(a) To
the
extent permitted by law, the Stockholder shall indemnify and hold harmless
BBI
and its Affiliates and their respective directors, officers, employees and
agents from and against any and all losses, claims, damages, liabilities and
expenses (including without limitation reasonable attorney fees and
disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, “Losses”) to which such
Person may become subject as a result of any breach of representation, warranty,
covenant or agreement made by or to be performed on the part of the Company
under the Transaction Documents, and will reimburse any such Person for all
such
amounts as they are incurred by such Person.
(b) To
the
extent permitted by law, BBI shall indemnify and hold harmless the Stockholder
from and against any and all Losses to which the Stockholder may become subject
as a result of any breach of representation, warranty, covenant or agreement
made by or to be performed on the part of BBI under the Transaction Documents,
and will reimburse any such Person for all such amounts as they are incurred
by
such Person.
9.3 Conduct
of Indemnification Proceedings.
Promptly
after receipt by any Person (the “Indemnified
Person”) of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, proceeding or
investigation in respect of which indemnity may be sought pursuant to Section
9.2, such Indemnified Person shall promptly notify the indemnifying party (the
“Indemnifying Party”) in writing and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory
to
such Indemnified Person, and shall assume the payment of all reasonable fees
and
expenses; provided,
however, that
the
failure of any Indemnified Person so to notify the Indemnifying Party shall
not
relieve the Indemnifying Party of its obligations hereunder except to the extent
that the Indemnifying Party is materially prejudiced by such failure to notify.
In any such proceeding, any Indemnified Person shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless: (i) the Indemnifying Party and the
Indemnified Person shall have mutually agreed to the retention of such counsel;
or (ii) in the reasonable judgment of counsel to such Indemnified Person
representation of both parties by the same counsel would be inappropriate due
to
actual or potential differing interests between them. The Indemnifying Party
shall not be liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified Person
from and against any loss or liability (to the extent stated above) by reason
of
such settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the
Indemnifying Party shall not effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been
a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability arising out of such proceeding.
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9.4 Limitations.
Notwithstanding the foregoing, the obligation under this Agreement of an
Indemnifying Party to indemnify any Indemnified Party with respect to Losses
shall not exceed the Purchase Price. The foregoing limitation shall not apply,
however, to (i) any breach of the representations or warranties in Sections
4.1,
4.2, 4.5, 4.6, 4.18, 4.22, 4.24, 5.1 and 5.2, (ii) any breach of representations
or warranties that was made with an intent to mislead or defraud or with
reckless disregard for the accuracy thereof and (iii) any breach of any covenant
or agreement to be performed by a party hereunder.
10. Miscellaneous.
10.1 Successors
and Assigns.
This
Agreement may not be assigned by a party hereto without the prior written
consent of the other party, provided, however, that BBI may assign its rights
and delegate its duties hereunder in whole or in part to an Affiliate without
the prior written consent of the Company or the Stockholder provided, that no
such assignment or obligation shall affect the obligations of BBI hereunder.
The
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties and to successors
by operation of law. Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this
Agreement.
10.2 Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed and transmitted via facsimile
or
by .pdf (portable document format) via electronic mail, each of which shall
be
deemed an original.
10.3 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
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10.4 Notices.
Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the earlier
of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given
by
an internationally recognized overnight air courier, then such notice shall
be
deemed given one Business Day after delivery to such carrier. All notices shall
be addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days’ advance written notice to
the other party:
If
to the
Stockholder:
Xxxx
Xxxx
0000
Xxxxxx Xxxxxx
Xxxxxxxx,
Xxxxxxxx 00000
Fax:
000-000-0000
With
a
copy to (which shall not constitute notice):
M.
A.
Xxxxxxx
0000
Xxxxxxx Xxxx
Xxxxxx,
Xxxxxxxx 00000
Fax:
000-000-0000
If
to
BBI, to:
Boo
Koo
Beverages, Inc.
0000
Xxxxxxx Xxxxxxx
Xxxxx
000
Xxxxxxx,
XX 00000
Attention:
Xxxxxxx Xxxxxxx
Fax:
000-000-0000
With
a
copy to (which shall not constitute notice):
Xxxxxxxxxx
Xxxxxxx PC
00
Xxxxxxxxxx Xxxxxx
Xxxxxxxx,
X.X. 00000
Attention:
Xxxxxx X. Xxxxxxxx
Fax:
000-000-0000
or
such
other address or telex or telecopy number as such party may hereafter specify
for the purpose by notice to the other party hereto.
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10.5 Expenses.
The
parties hereto shall pay their own costs and expenses in connection herewith.
10.6 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the
Stockholder, the Company and BBI.
10.7 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provision hereof prohibited or unenforceable in any
respect.
10.8 Entire
Agreement.
This
Agreement, including the Disclosure Schedules, and the other Transaction
Documents constitute the entire agreement among the parties hereof with respect
to the subject matter hereof and thereof and supersede all prior agreements
and
understandings, both oral and written, between the parties with respect to
the
subject matter hereof and thereof.
10.9 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of Florida without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of Florida located in Dade County and
the United States District Court for the District of Florida for the purpose
of
any suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding
and
to the laying of venue in such court. Each party hereto irrevocably waives
any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action
or
proceeding brought in any such court has been brought in an inconvenient forum.
EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
[signature
page follows]
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IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.
| The Stockholder | ||
| |
|
|
|
/s/
Xxxx
Xxxx
|
||
|
Xxxx Xxxx
|
||
| Captech Financial Group, Inc. | ||
| By: |
/s/
Xxxxxx X. Xxxxxxx
|
|
| Name: |
Xxxxxx
X. Xxxxxxx
|
|
| Title: |
President
|
|
| Boo Koo Beverages, Inc. | ||
| By: |
/s/
Xxxxxxx X. Xxxxxxx
|
|
| Name: |
Xxxxxxx
X. Xxxxxxx
|
|
| Title: |
Chief
Financial Officer
|
|
-37-
