1
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
HALTER FINANCIAL GROUP, INC.
("HALTER"),
XXXXXXX'X THUNDER KARTS, INC.
(THE "COMPANY")
AND
XXXXXXX XXXXXXX
(THE "SHAREHOLDER")
JANUARY 16, 1996
2
TABLE OF CONTENTS
ARTICLE/
SECTION SUBJECT PAGE
------- ------- ----
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I REPRESENTATIONS OF THE SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Ownership of Xxxxxxx Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Validity of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Financial Statements and No Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Title to Properties; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 Restrictive Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.15 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.17 Intellectual Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.18 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.19 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.20 Employment Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.21 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.22 Interests in Clients, Suppliers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.23 Bank Accounts, Powers of Attorney and Compensation of Employees . . . . . . . . . . . . . . . . 7
1.24 No Changes Prior to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.26 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.27 Agreements, Judgments and Decrees Affecting Shareholder . . . . . . . . . . . . . . . . . . . . 8
1.28 Copies of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.29 Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.30 Investor Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.31 Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.32 Products Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.33 Environmental Site Asses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II REPRESENTATIONS OF HALTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Existence and Good Standing of Halter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Restrictive Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 Issuance of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(i)
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ARTICLE III SALE OF THE XXXXXXX SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Sale of the Xxxxxxx Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Cash Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Promissory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Acquiring Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Consulting and Non-competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 Directors' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV CONDUCT OF BUSINESS; REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Exclusive Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Review of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V CONDITIONS TO HALTER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Opinion of the Company's and the Shareholder's Counsel . . . . . . . . . . . . . . . . . . . 14
5.2 Good Standing and Tax Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Truth of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Performance of Agreements/Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 No Litigation Threatened . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.7 Company's Accountants Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.8 Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.9 Consulting and Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10 Licensing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.11 Real Estate Option and Right of First Refusal Agreement . . . . . . . . . . . . . . . . . . . 17
5.12 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.13 Release of Shareholder Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.15 Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.16 Site Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.17 Amendments to Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI CONDITIONS TO THE SHAREHOLDER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1 Opinion of Halter's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Truth of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII SURVIVAL OF REPRESENTATIONS: INDEMNITY; OFFSET . . . . . . . . . . . . . . . . . . . . . . . 19
7.1 Survival of Representations and Obligations to Indemnify . . . . . . . . . . . . . . . . . . 19
7.2 Indemnification by the Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Indemnification by the Acquiring Company . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4 Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(ii)
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ARTICLE VIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Knowledge of the Company and the Shareholder . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.4 "Person" Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.5 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.8 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.11 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.13 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.14 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.15 Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.16 Separate Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.17 Joinder of Spouse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(iii)
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") dated as of January
16, 1996, is made and entered into by and among Halter Financial Group, Inc., a
Texas corporation ("Halter"), Xxxxxxx'x Thunder Karts, Inc., a Louisiana
corporation (the "Company") and Xxxxxxx Xxxxxxx (the "Shareholder"), the sole
shareholder of the Company.
W I T N E S S E T H:
WHEREAS, the Shareholder is the owner and holder of all of the issued
and outstanding shares of common stock, no par value per share, of the Company
as set forth on Exhibit 1 hereto (the "Xxxxxxx Shares"); and
WHEREAS, the Shareholder desires to sell, and Halter, through a
to-be-named public acquisition corporation (the "Acquiring Company"), desires
to purchase, the Xxxxxxx Shares pursuant to this Agreement.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
REPRESENTATIONS OF THE SHAREHOLDER
As a material inducement to Halter to enter into this Agreement and
perform its obligations hereunder, the Company and the Shareholder jointly and
severally represent, warrant and agree as follows:
1.1 Ownership of Xxxxxxx Shares. The Shareholder is the lawful
owner of the Xxxxxxx Shares, free and clear of all liens, encumbrances,
restrictions and claims of every kind; the Shareholder has full legal right,
power and authority to enter into this Agreement and to sell, assign, transfer
and convey the Xxxxxxx Shares so owned by the Shareholder pursuant to this
Agreement; and the delivery to the Acquiring Company of the Xxxxxxx Shares
pursuant to the provisions of this Agreement will transfer to the Acquiring
Company valid title thereto, free and clear of all liens, encumbrances,
restrictions and claims of every kind.
1.2 Validity of Transaction. This Agreement and each other
agreement contemplated hereby are valid and legally binding obligations of the
Company and the Shareholder, enforceable in accordance with their respective
terms against the Company and the Shareholder, except as limited by bankruptcy,
insolvency and similar laws affecting creditors generally, and by general
principles of equity. When sold, assigned, transferred and conveyed to the
Acquiring Company pursuant to this Agreement, the Xxxxxxx Shares will be duly
authorized, validly issued, fully paid, nonassessable, and free of any
preemptive rights of any present shareholder or any future shareholder of the
Company. The execution, delivery and performance of this Agreement and each
other agreement contemplated hereby have been duly authorized by the Company
and the Shareholder and will not violate any applicable federal or state law,
any order of any court or government agency or the articles or certificate of
incorporation of the Company. The execution, delivery and performance of this
Agreement and each other agreement contemplated hereby will not result in any
breach of or default under, or result in the creation of any encumbrance upon
any of the assets of the Company pursuant to the terms of any agreement by
which the Company or any of its respective assets may be bound. No consent,
approval or authorization of, or
STOCK PURCHASE AGREEMENT - Page 1
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registration or filing with any governmental authority or other regulatory
agency, is required for the validity of the execution and delivery by the
Company and the Shareholder of this Agreement or any documents related thereto.
1.3 Existence and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Louisiana. The Company has the power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and is in good standing in each of the states listed in Schedule
1.3 hereto, which are the only jurisdictions in which the character or location
of the properties owned or leased by the Company or the nature of the business
conducted by the Company makes such qualification necessary. The Company has
all necessary power and authority to conduct the business it proposes to
conduct and enter into and perform its obligations under this Agreement. The
Company will deliver to Halter and the Acquiring Company a Certificate of
Officer dated as of the Closing Date (as hereinafter defined) certifying to the
Company's existence and good standing, the accuracy and completeness of its
articles or certificate of incorporation and its bylaws and the names and
signatures of its officers and agents authorized to execute documents on behalf
of Company.
1.4 Capital Stock. The Company has an authorized capitalization
as set forth in Schedule 1.4 hereto. All such outstanding shares have been
duly authorized and validly issued and are fully paid and nonassessable.
Neither the Shareholder nor the Company are parties to or bound by, nor do they
have any knowledge of, any outstanding options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements
of any character providing for the purchase, issuance or sale of any shares of
the capital stock of the Company, other than as contemplated by this Agreement.
As of the Closing Date, the Company will not be subject to any obligation,
contingent or otherwise, to repurchase or otherwise acquire or redeem any
shares of its capital stock.
1.5 Subsidiaries and Investments. The Company does not own,
directly or indirectly, any of the capital stock of any other corporation or
any equity, profit sharing, participation or other interest in any corporation,
partnership, joint venture or other entity.
1.6 Financial Statements and No Material Changes. The Shareholder
has heretofore furnished Halter with the unaudited balance sheet of the Company
as of December 31, 1993, December 31, 1994, respectively, as well as the
unaudited balance sheet as of November 30, 1995 and the related statements of
income, all compiled by Xxxxxx & Xxxxx, certified public accountants (the
consolidated balance sheet of the Company at November 30, 1995 is hereinafter
referred to as the "Balance Sheet"). Such financial statements, except as
indicated therein, have been prepared in accordance with Statements on
Standards for Accounting and Review issued by the American Institute of
Certified Public Accountants consistently followed throughout the periods
indicated. The Balance Sheet fairly presents the financial condition of the
Company at the date thereof and, except as indicated therein, reflects all
claims against and all debts and liabilities of the Company, fixed or
contingent, as at the date thereof and the related statement of income fairly
presents the results of operations of the Company and the changes in its
financial position for the periods indicated. Such other balance sheets fairly
present the financial condition of the Company at the respective dates thereof
and, except as indicated therein, reflect all claims against and all debts and
liabilities of the Company, fixed or contingent, as at the respective dates
thereof, and the related statements of income fairly present the results of the
operations of the Company and the changes in its financial position for the
periods indicated. Since November 30, 1995 (the "Balance Sheet Date"), there
has been (i) no material adverse change in the assets or liabilities, or in the
business
STOCK PURCHASE AGREEMENT - Page 2
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or condition, financial or otherwise, or in the results of operations, of the
Company, whether as a result of any legislative or regulatory change,
revocation of any license or rights to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm, condemnation or act of
God or other public force or otherwise and (ii) no change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations, or prospects, of the Company except in the ordinary
course of business; and to the best knowledge, information and belief of the
Shareholder and the Company, no fact or condition exists or is contemplated or
threatened which might cause such a change in the future.
1.7 Books and Records. The minute books of the Company, as
heretofore delivered to Halter and its representatives, contain accurate
records of all meetings of and corporate actions or written consents by the
Shareholder and Board of Directors of the Company, respectively. The Company
does not have any of its records, systems, controls, data or information
recorded, stored, maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) that (including all means of access
thereto and therefrom) are not under the exclusive ownership and direct control
of the Company. The Company will make and keep books, records and accounts
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of its assets. The Company will maintain its present system of
internal accounting controls. The Company's present system of internal
accounting controls is 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 to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements and
to maintain accountability for such assets, (iii) access to assets is permitted
only in accordance with management's general or specific authorization and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.
1.8 Title to Properties; Encumbrances. The Company has good and
marketable title to its properties. Except as set forth in Schedule 1.8
hereto, all properties of the Company are free and clear of any and all other
encumbrances.
1.9 Real Property. The Company does not own any real property.
1.10 Leases. Schedule 1.10 contains an accurate and complete list
and description of the terms of all leases to which the Company is a party as
lessee or lessor. Each lease set forth in Schedule 1.10 (or required to be set
forth in Schedule 1.10) is in full force and effect; all rents and additional
rents due to date on each such lease have been paid; in each case, the lessee
has been in peaceable possession since the commencement of the original term of
such lease and is not in default thereunder and no waiver, indulgence or
postponement of the lessee's obligations thereunder has been granted by the
lessor; and there exists no event of default or event, occurrence, condition or
act (including the purchase of the Xxxxxxx Shares hereunder) that, with the
giving of notice, the lapse of time or the happening of any further event or
condition, would become a default under such lease. The Company has not
violated any of the terms or conditions under any such lease in any material
respect, and, to the best knowledge, information and belief of the Shareholder
and the Company, all of the covenants to be performed by any other party under
any such lease have been fully performed. The property leased by the Company
is in a state of good maintenance and repair and is adequate and suitable for
the purposes for which it is presently being used.
STOCK PURCHASE AGREEMENT - Page 3
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1.11 Material Contracts. Except as set forth in Schedule 1.11
hereto, the Company has not been or is not bound by (i) any agreement, contract
or commitment relating to the employment of any person by the Company, or any
bonus, deferred compensation, pension, profit sharing, stock option, employee
stock purchase, retirement or other employee benefit plan, (ii) any agreement,
indenture or other instrument that contains restrictions with respect to
payment of dividends or any other distribution in respect of its capital stock,
(iii) any agreement, contract or commitment relating to capital expenditures,
(iv) any loan or advance to, or investment in, any other Person (as hereinafter
defined) or any agreement, contract or commitment relating to the making of any
such loan, advance or investment, (v) any guarantee or other contingent
liability in respect of any indebtedness or obligation of any other Person
(other than the endorsement of negotiable instruments for collection in the
ordinary course of business), (vi) any management service, consulting or any
other similar type contract, (vii) any agreement, contract or commitment
limiting the freedom of the Company to engage in any line of business or to
compete with any other Person, (viii) any agreement, contract or commitment not
entered into in the ordinary course of business that involves $25,000 or more
and is not cancelable without penalty within 30 days or (ix) any agreement,
contract or commitment that might reasonably be expected to have a potential
adverse impact on the business or operations of the Company. Each contract or
agreement set forth in Schedule 1.11 (or required to be set forth in Schedule
1.11) is in full force and effect, and there exists no default or event of
default or event, occurrence, condition or act (including the purchase of the
Xxxxxxx Shares hereunder) that, with the giving of notice, the lapse of time or
the happening of any other event or condition, would become a default or event
of default thereunder. The Company has not violated any of the terms or
conditions of any contract or agreement set forth in Schedule 1.11 (or required
to be set forth in Schedule 1.11) in any material respect, and, to the best
knowledge, information and belief of the Shareholder and the Company, all of
the covenants to be performed by any other party thereto have been fully
performed. Contracts made in the ordinary course of business involving less
than $25,000 shall be deemed not to be material for purposes of this Section
1.11.
1.12 Restrictive Documents. Neither the Company nor the
Shareholder is subject to, or a party to, any charter, bylaw, mortgage, lien,
lease, license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, that materially adversely affects the business practices, operations
or condition of the Company or any of its assets or property, or that would
prevent consummation of the transactions contemplated by this Agreement,
compliance by the Shareholder or the Company with the terms, conditions and
provisions hereof or the continued operation of the Company's business after
the date hereof or the Closing Date on substantially the same basis as
heretofore operated or that would restrict the ability of the Company to
acquire any property or conduct business in any area.
1.13 Litigation. Except as set forth in Schedule 1.13 hereto,
there are no claims, actions, inquiries, investigations, suits, proceedings or
arbitrations pending or threatened against the Shareholder or the Company, nor
is the Shareholder or the Company aware of any claims, actions, inquiries,
investigations, suits or arbitrations before any governmental agency, court or
tribunal, domestic or foreign, or before any private arbitration tribunal,
threatened or pending against the Shareholder or the Company involving the
Company's properties or business that, if determined adversely to the
Shareholder or the Company, would, individually or in the aggregate, result in
any materially adverse change in the properties, business, management or
business prospects of the Company nor is there any basis for any such action,
suit, proceeding, arbitration, claim, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal naming the Shareholder or the Company and enjoining
STOCK PURCHASE AGREEMENT - Page 4
9
either the Shareholder or the Company from taking, or requiring the Shareholder
or the Company to take, any action, or to which the Shareholder, the Company,
the Company's business or properties are bound or subject. Except as disclosed
in Schedule 1.13, there are no unsatisfied adverse judgments or court or
administrative orders (whether or not on appeal) affecting the business of the
Company and there are no judgment creditors asserting any claims, whether or
not meritorious or material, against the Shareholder or the Company. Upon a
breach of the representations and warranties made in this Section 1.13, Halter
and the Acquiring Company may avail themselves to all rights and remedies
provided for herein, including, but not limited to, all rights to
indemnification and offset as set forth in Article VII hereof.
1.14 Taxes. The Company has filed or caused to be filed, within
the times and within the manner prescribed by law, all federal, state,
provincial and foreign tax returns and tax reports that are required to be
filed by, or with respect to, the Company. Such returns and reports reflect
accurately all liability for taxes of the Company for the periods covered
thereby. All federal, state, local and foreign income, franchise, sales, use,
occupancy, excise and other taxes and assessments (including interest and
penalties) payable by, or due from, the Company have been fully paid or
adequately disclosed and fully provided for in the books and financial
statements of the Company. The federal income tax liability of the Company has
been finally determined for all fiscal years to and including the fiscal year
ended December 31, 1992. Except as set forth and described in Schedule 1.14
hereto, no examination of any tax return of the Company is currently in
progress. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of the Company.
The Company will pay and discharge, when due, (i) all material taxes,
assessments and governmental priority claims and charges imposed upon its
properties or upon the income or profits therefrom (in each case before the
same becomes delinquent and before penalties accrue thereon), and (ii) all
claims for labor, materials or supplies that, if unpaid, might by law become
liens upon any of its properties, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings, and adequate
reserves have been set aside on its books with respect thereto, in accordance
with generally accepted accounting principles. The parties agree that the
liability of the Shareholder under this Agreement for the statements contained
in this Section 1.14 shall be limited in accordance with Section 7.2 hereof.
1.15 Liabilities. The Company has no outstanding claims,
liabilities or indebtedness, contingent or otherwise, except as set forth in
the Balance Sheet, other than liabilities incurred subsequent to the Balance
Sheet Date in the ordinary course of business not involving borrowings by the
Company. The Company is not in default in respect of the terms or conditions
of any indebtedness.
1.16 Insurance. Set forth in Schedule 1.16 hereto is a complete
list of insurance policies that the Company maintains with respect to its
businesses, properties or employees. Such policies are in full force and
effect free from any right of termination on the part of the insurance
carriers. Such policies, with respect to their amounts and types of coverage,
are adequate to insure fully against risks to which the Company, and its
property and assets are normally exposed, in the operation of its businesses,
except that the Company is self-insured with respect to its building
improvements and contents thereof and the Shareholder is self-insured with
respect to the building used by the Company. True, complete and correct copies
of all such policies have been provided to Halter on or prior to the date
hereof.
1.17 Intellectual Properties. Schedule 1.17 hereto contains an
accurate and complete list of all domestic and foreign letters patent, patents,
patent applications, patent licenses, software
STOCK PURCHASE AGREEMENT - Page 5
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licenses and know-how licenses, trade names, trademarks, copyrights, unpatented
inventions, service marks, trademark registrations and applications, service
xxxx registrations and applications and copyright registrations and
applications owned or used by the Company in the operation of its business
(collectively, the "Intellectual Property"). Unless otherwise indicated in
such Schedule 1.17, the Company owns the entire right, title and interest in
and to the Intellectual Property, trade secrets and technology used in the
operation of its business (including, without limitation, the exclusive right
to use and license the same) and each item constituting part of the
Intellectual Property and trade secrets and technology that is owned by the
Company has been, to the extent indicated in Schedule 1.17, duly registered
with, filed in or issued by, as the case may be, the United States Patent and
Trademark Office or such other government entities, domestic or foreign, as are
indicated in Schedule 1.17; and such registrations, filings and issuances
remain in full force and effect. To the best knowledge, information and belief
of the Shareholder and the Company, except as stated in such Schedule 1.17,
there are no pending or threatened proceedings or litigation or other adverse
claims affecting or with respect to the Intellectual Property. Schedule 1.17
lists all notices or claims currently pending or received by either the Company
or the Shareholder during the past two years that claim infringement by the
Company or the Shareholder of any domestic or foreign letters patent, patent
applications, patent licenses and know-how licenses, trade names, trademark
registrations and applications, service marks, copyrights, copyright
registrations or applications, trade secrets or other confidential proprietary
information. Except as set forth in any Schedule hereto, there is, to the best
knowledge, information and belief of the Shareholder and the Company, no
reasonable basis upon which a claim may be asserted against either the Company
or the Shareholder for infringement of any domestic or foreign letters patent,
patents, patent applications, patent licenses and know-how licenses, trade
names, trademark registrations and applications, common law trademarks, service
marks, copyrights, copyright registrations or applications, trade secrets or
other confidential proprietary information. To the best knowledge, information
and belief of the Shareholder and the Company, except as indicated on Schedule
1.17, no Person is infringing the Intellectual Property.
1.18 Compliance with Laws. The Company is in compliance in all
material respects with all applicable laws, regulations, orders, judgments and
decrees.
1.19 Accounts Receivable. The amount of all accounts receivable,
unbilled invoices and other debts due or recorded in the records and books of
account of the Company as being due to the Company at the Closing Date (less
the amount of any provision or reserve therefor made in the records and books
of account of the Company) will be good and collectible in full in the ordinary
course of business and, in any event, not later than 60 days after the Closing
Date; and none of such accounts receivable or other debts is or will at the
Closing Date be subject to any counterclaim or set-off except to the extent of
any such provision or reserve. There has been no material adverse change since
the Balance Sheet Date in the amount of accounts receivable or other debts due
the Company or the allowances with respect thereto, or accounts payable of the
Company, from that reflected in the Balance Sheet.
1.20 Employment Relations. (i) The Company is in substantial
compliance with all federal, state, provincial or other applicable laws,
domestic or foreign, respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is not engaged in
any unfair labor practice, (ii) no unfair labor practice complaint against the
Company is pending before a labor commissioner or other competent authority,
(iii) there is no labor strike, dispute, slowdown or stoppage actually pending
or threatened against or involving the Company, (iv) no representation question
exists respecting the employees of the Company, (v) no grievance that might
have an adverse effect upon the Company or the conduct of its businesses
STOCK PURCHASE AGREEMENT - Page 6
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exists, no arbitration proceeding arising out of or under any collective
bargaining agreement is pending, and no claim therefor has been asserted, (vi)
no collective bargaining agreement is currently being negotiated by the
Company, and (vii) the Company has not experienced any material labor
difficulty during the last three years. There has not been, and to the best
knowledge, information and belief of the Company and the Shareholder, there
will not be, any material adverse change in relations with employees of the
Company as a result of any announcement of the transactions contemplated by
this Agreement. Except as contemplated hereby, no key employee, or group of
employees has any plans to terminate employment with the Company.
1.21 Employee Benefit Plans. The Company has (i) no employee
benefit plans within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not any such
Employee Benefit Plans are otherwise exempt from the provisions of ERISA, or
(ii) no other employee benefit plans or any other foreign pension, welfare or
retirement benefit plans. The Shareholder and the Company have delivered or
caused to be delivered to Halter and its counsel true and complete copies of
(i) all employee benefit plans as in effect, together with all amendments
thereto that will become effective at a later date, as well as the latest
Internal Revenue Service determination letter obtained with respect to any such
employee benefit plan qualified under Section 401 or 501 of the Internal
Revenue Code of 1986, as amended and (ii) Form 5500 for the most recent
completed fiscal year for each employee benefit plan required to file such
form.
1.22 Interests in Clients, Suppliers, Etc. Neither the Shareholder
nor any officer or director of the Company possesses, directly or indirectly,
any financial interest in, or is a director, officer or employee of, any
corporation, firm, association or business organization that is a client,
supplier, customer, or competitor or potential competitor of the Company.
Ownership of securities of a company whose securities are registered under the
Securities Exchange Act of 1934, as amended, not in excess of one percent (1%)
of any class of such securities shall not be deemed to be a financial interest
for purposes of this Section 1.22.
1.23 Bank Accounts, Powers of Attorney and Compensation of
Employees. Set forth in Schedule 1.23 hereto is an accurate and complete list
showing (i) the name and address of each bank in which the Company has an
account or safe deposit box, the number of any such account or any such box and
the names of all persons authorized to draw thereon or to have access thereto,
(ii) the names of all persons, if any, holding powers of attorney from the
Company and a summary statement of the terms thereof and (iii) the names of all
persons whose compensation from the Company on the Balance Sheet Date exceeded
an annualized rate of $25,000, together with a statement of the full amount
paid or payable to each such person for services rendered during such fiscal
year.
1.24 No Changes Prior to Closing Date. During the period from the
Balance Sheet Date to and including the Closing Date, except as expressly
contemplated hereby, the Company will not have (i) incurred any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise),
except in the ordinary course of business, (ii) permitted any of its assets to
be subjected to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, (iii) sold, transferred or otherwise
disposed of any assets except in the ordinary course of business, (iv) made any
capital expenditure or commitment therefor, except in the ordinary course of
business, (v) declared or paid any dividend or made any distribution on any
shares of its capital stock, or redeemed, purchased or otherwise acquired any
shares of its capital stock or any option, warrant or other right to purchase
or acquire any such shares, (vi) made any bonus or
STOCK PURCHASE AGREEMENT - Page 7
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profit sharing distribution or payment of any kind, (vii) increased its
indebtedness for borrowed money, except current borrowings from banks in the
ordinary course of business, or made any loan to any Person, (viii) written off
as uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material to the Company, (ix) granted any
increase in the rate of wages, salaries, bonuses or other remuneration of any
executive employee or other employees, except in the ordinary course of
business, (x) canceled or waived any claims or rights of substantial value,
(xi) made any change in any method of accounting or auditing practice, (xii)
otherwise conducted its business or entered into any transaction, except in the
usual and ordinary manner and in the ordinary course of its business, or (xiii)
agreed, whether or not in writing, to do any of the foregoing. There shall
have been no material adverse change in the financial position, results of
operations, business or prospects of Company since the Balance Sheet Date. The
Company has not consolidated or merged with, nor sold, leased or otherwise
disposed to its properties as an entirety or substantially as an entirety, to
any Person. Notwithstanding the foregoing, the Company may make certain
distributions and/or dividend payments to the Shareholder prior to the Closing
Date; provided, however, such distributions and/or dividends shall not be made
if they should cause the Company to fail to meet the financial performance
criteria set forth in Section 5.8 hereof.
1.25 Disclosure. None of this Agreement, the financial statements
referred to in Section 1.6 above, or any agreement, schedule, exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing that has been supplied by or on behalf of the Shareholder,
or by any of the Company's directors or officers, in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits any statement of a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact known
to the Company or the Shareholder that materially and adversely affects the
business, prospects or financial condition of the Company or their respective
properties or assets, that has not been set forth in this Agreement or in the
schedules, exhibits or certificates or statements in writing furnished in
connection with the transactions contemplated by this Agreement. There has not
come to the attention of the Company or the Shareholder any facts that
reasonably cause Company or the Shareholder to believe that any document
connected with the transactions contemplated hereby contain any untrue
statement or a material fact, or omit to state a material fact required to be
stated herein or necessary in order to make the statements herein, the light of
the circumstances existing on the Closing Date, not misleading.
1.26 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of the Shareholder is, or will be, entitled to any commission
or broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
1.27 Agreements, Judgments and Decrees Affecting Shareholder. The
Shareholder represents and warrants that he is not subject to any agreement,
judgment or decree adversely affecting his ability to act as an employee of the
Company, as the case may be.
1.28 Copies of Documents. The Shareholder and the Company have
caused to be made available for inspection and copying by Halter and its
advisers, true, complete and correct copies of all documents referred to in
this Article I or in any schedule furnished by the Shareholder or the Company
to Halter pursuant to this Agreement. All documents and instruments delivered
to Halter on the Closing Date in connection with this transaction shall be
satisfactory to Halter in its sole discretion.
STOCK PURCHASE AGREEMENT - Page 8
13
1.29 Purchase for Investment. The Shareholder will acquire the
Acquiring Company Shares (as hereinafter defined) for investment and not with a
view to resale or for distributing all or any part thereof in any transaction
which would constitute a "distribution" within the meaning of the Securities
Act of 1933, as amended (the" Securities Act"). The offering of the Acquiring
Company Shares to the Shareholder was made only through direct, personal
communication between the Shareholder and a duly authorized representative of
the Acquiring Company and not through public solicitation or advertising. The
Shareholder acknowledges that the Acquiring Company Shares have not been
registered under the Securities Act and that neither Halter nor the Acquiring
Company is under any obligation to file a registration statement with the
Securities and Exchange Commission with respect to the Acquiring Company
Shares.
1.30 Investor Qualifications. The Shareholder (i) has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of its investment in the Acquiring Company
Shares and has the financial ability to assume the monetary risk associated
therewith, (ii) is able to bear the complete loss of its investment in the
Acquiring Company Shares, (iii) has received such other documents and
information as it has requested and has had the opportunity to ask questions
of, and receive answers from, Halter and the Acquiring Company and their
management concerning the Acquiring Company and the terms and conditions of the
offering of the Acquiring Company Shares and to obtain additional information,
(iv) is an "accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act, (v) is not an entity formed solely to
make this investment, and (vi) is not relying upon any statements or
instruments made or issued by any person other than Halter and the Acquiring
Company and their officers in making its decision to invest in the Acquiring
Company Shares.
1.31 Product Warranty. Each product manufactured, sold, leased, or
delivered by the Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and the Company does not
have any liability (whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) (and there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any such liability) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims set forth on the face of the
Balance Sheet as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company. Except as set
forth in Schedule 1.31 hereto, no product manufactured, sold, leased, or
delivered by the Company is subject to any guaranty, warranty, or other
indemnity.
1.32 Products Liability. Except as set forth in Schedule 1.13
hereto, there is no claim, action, suit, inquiry, proceeding or investigation
by or before any court or governmental or other regulatory or administrative
agency or commission pending or threatened against or involving either the
Shareholder or the Company relating to any product alleged to have been
manufactured or sold by the Company and alleged to have been defective, or
improperly designed or manufactured.
1.33 Environmental Site Assessments. For the purpose of this
Agreement, the Company, the Shareholder and Halter agree that, unless the
context otherwise specifies or requires, the following terms shall have the
meaning herein specified:
(a) "Environmental Laws" shall mean (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund
STOCK PURCHASE AGREEMENT - Page 9
14
Amendments and Reauthorization Act of 1986, 42 U.S.C.A. 9601 et seq.
("CERCLA"), (ii) the Resource Conservation and Recovery Act, as
amended by the Hazardous and Solid Waste Amendment of 1984, 42
U.S.C.A. 6901 et seq. ("RCRA"), (iii) the Clean Air Act, 42 U.S.C.A.
7401 et seq., (iv) the Federal Water Pollution Control Act, as
amended, 33 U.S.C.A. 1251 et seq., (v) the Toxic Substances Control
Act, 15 U.S.C.A. 2601 et seq., (vi) all applicable laws of the State
of Louisiana, and (viii) all other laws and ordinances relating to
municipal waste, solid waste, air pollution, water pollution and/or
the handling, discharge, disposal or recovery of on-site or off-site
hazardous substances or materials, as each of the foregoing has been
or may hereafter be amended from time to time.
(b) "Hazardous Materials" shall mean, among others, (i)
any "hazardous waste" as defined by the RCRA, and regulations
promulgated thereunder; (ii) any "hazardous substance" as defined by
CERCLA, and regulations promulgated thereunder; (iii) any "toxic
pollutant" as defined in the Federal Water Pollution Prevention and
Control Act, as amended, 33 U.S.C. 1251 et seq., (commonly known as
"CWA" for "Clear Water Act"), and any regulations thereunder; (iv) any
"hazardous air pollutant" as defined in the Air Pollution Prevention
and Control Act, as amended, 42 U.S.C. 7401 et seq. (commonly known as
"CAA" for "Clear Air Act") and any regulations thereunder; (v)
asbestos; (vi) polychlorinated biphenyls; (vii) underground storage
tanks, whether empty, filled or partially filled with any substance;
(viii) any substance the presence of which on the Business Location
(as hereinafter defined) is prohibited by any Environmental Laws; and
(ix) any other substance which is regulated by any Environmental Laws.
(c) "Hazardous Materials Contamination" shall mean the
contamination (whether presently existing or hereafter occurring) of
the improvements, facilities, soil, groundwater, air or other elements
on or at the location of the Company at Xxxxxxx 00 Xxxxx, Xxxxxxxx,
Xxxxxxxxx 00000 or at any other location where the Company conducts
business (collectively, the "Business Location") by Hazardous
Materials, or the contamination of the buildings, facilities, soil,
groundwater, air or other elements on or any other specific property
or general area, as a result of Hazardous Materials emanating from the
operations of the Company's business.
Halter may, at its sole and absolute discretion, contract for the
services of persons (the "Site Reviewers") to perform an environmental site
assessment or assessments at the Business Location for the purpose of
determining whether there exists at the Business Location any Hazardous
Materials or Hazardous Materials Contamination which may reasonably be expected
to result in any liability, cost or expense to Halter, the Acquiring Company or
any affiliated party of Halter or the Acquiring Company under any Environmental
Laws relating to Hazardous Materials or Hazardous Materials Contamination (the
"Site Assessments"). The Site Assessments may be performed at any time or
times prior to the Closing Date, upon reasonable notice to and under reasonable
conditions imposed by the Shareholder and the Company which do not materially
impede the performance of the Site Assessments. The Site Reviewers are hereby
authorized to enter upon the Business Location for such purposes. The Site
Reviewers are further authorized to perform both above and below ground testing
for environmental damage or the presence of Hazardous Materials or Hazardous
Materials Contamination at the Business Location and such other tests at the
Business Location as may be reasonably necessary to conduct the Site
Assessments. The Shareholder and the Company will supply to the Site Reviewers
such historical and operational information which has been generated from the
day to day operations of the Company's business regarding the Business Location
and will make available for meetings with the Site Reviewers the appropriate
personnel with knowledge of relevant matters as is necessary
STOCK PURCHASE AGREEMENT - Page 10
15
to facilitate the Site Assessments. The cost of performing such Site
Assessment shall be paid by Halter and/or the Acquiring Company. If Hazardous
Materials Contamination is discovered at the Business Location prior to the
Closing Date, Halter shall have the right, at its sole option, to terminate
this Agreement without liability to the Shareholder or the Company in
accordance with Article VIII of this Agreement. In the event that any party
terminates this Agreement in accordance with Article VIII hereof, Halter agrees
that it will keep confidential, and will cause the Acquiring Company to keep
confidential, the results of the Site Assessments, provided, however, Halter or
the Acquiring Company may disclose such results to their respective counsel,
advisors and investors in connection with the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS OF HALTER
Halter represents, warrants and agrees as follows:
2.1 Existence and Good Standing of Halter. Halter is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. Halter has corporate power and authority to make,
execute, deliver and perform this Agreement, and this Agreement has been duly
authorized and approved by all required corporate action of Halter.
2.2 Restrictive Documents. Halter is not subject to any charter,
by-law, mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree, or any other restriction of any kind or
character, that would prevent consummation of the transactions contemplated by
this Agreement.
2.3 Purchase for Investment. The Acquiring Company will acquire
the Xxxxxxx Shares for its own account for investment and not with a view
toward any resale or distribution thereof.
2.4 Broker's or Finder's Fees. Except for the fee payable by the
Company to Xxxxxxx X. York & Associates at the Closing as previously disclosed
to the Shareholder and the Company, no agent, broker, person or firm acting on
behalf of Halter is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated herein.
2.5 Issuance of the Shares. The delivery to the Shareholder of
the Acquiring Company Shares pursuant to the provisions of this Agreement will
transfer to the Shareholder valid title thereto, free and clear of all liens,
encumbrances, restrictions and claims of every kind, except as acknowledged by
the Shareholder in Section 1.29 hereof.
ARTICLE III
SALE OF THE XXXXXXX SHARES
3.1 Sale of the Xxxxxxx Shares. Subject to the terms and
conditions herein stated, the Shareholder agrees to sell, assign, transfer and
deliver to the Acquiring Company on the Closing Date, and Halter agrees to
cause the Acquiring Company to purchase from the Shareholder on the Closing
Date, the Xxxxxxx Shares. The certificates representing the Xxxxxxx Shares
shall be duly endorsed in blank by the Shareholder transferring the same, with
signatures guaranteed by a domestic commercial bank or trust company, with all
necessary transfer tax and other revenue stamps acquired at the Shareholder's
expense affixed and canceled. The Shareholder agrees to cure
STOCK PURCHASE AGREEMENT - Page 11
16
any deficiencies with respect to the endorsement of the certificates
representing the Xxxxxxx Shares or with respect to the stock power accompanying
any such certificates.
3.2 Cash Payment. In partial consideration for the purchase by
the Acquiring Company of the Xxxxxxx Shares, Halter shall cause the Acquiring
Company to pay to the Shareholder on the Closing Date an aggregate of
$2,000,000 (the "Cash Payment") payable by wire transfer or official bank check
payable to the order of the Shareholder.
Within 30 days following the execution of this Agreement (the "Deposit
Date"), Halter shall cause to be deposited with Xxxxxx & Xxxxx, as escrow
agent, $20,000 of the Cash Payment (the "Escrow Deposit") pursuant to an escrow
agreement to be entered into on the Deposit Date by the Shareholder, Halter and
Xxxxxx & Xxxxx in form and substance mutually satisfactory to the parties and
substantially in accordance with the following terms and conditions:
(a) The Escrow Deposit shall be held by the escrow agent
and disbursed only in accordance with the provisions of the escrow
agreement.
(b) The Escrow Deposit shall be delivered to the
Shareholder at Closing as a portion of the Cash Payment. In the event
that this Agreement is terminated prior to the Closing by Halter in
accordance with Section 8.1(b) or by the Shareholder or the Company in
accordance with Section 8.1(c), the Escrow Deposit shall be returned
to Halter.
(c) Such provisions as are required by the escrow agent
for its protection shall also be included therein.
3.3 Promissory Note. As additional consideration for the purchase
by the Acquiring Company of the Xxxxxxx Shares, Halter shall cause the
Acquiring Company to execute and deliver on the Closing Date a subordinated
promissory note of the Acquiring Company payable to the order of the
Shareholder in the original principal amount of $1,000,000 (the "Note"), in
substantially the same form as Exhibit 2 hereto.
3.4 Acquiring Company Common Stock. As further consideration for
the purchase by Acquiring Company of the Xxxxxxx Shares, Halter shall cause the
Acquiring Company to issue and deliver to the Shareholder shares of its common
stock (the "Acquiring Company Shares") as follows:
(a) On the Closing Date, Halter shall cause the Acquiring
Company to deposit with Securities Transfer Corporation, as escrow
agent, 1,500,000 Acquiring Company Shares (the "Escrow Shares")
pursuant to an escrow agreement to be entered into on the Closing Date
by the Shareholder, Halter, the Acquiring Company and Securities
Transfer Corporation in form and substance mutually satisfactory to
the parties thereto. The Escrow Shares shall be held by the escrow
agent and disbursed only in accordance with the provisions of the
escrow agreement. Such provisions as are required by the escrow agent
for its protection shall also be included therein.
(b) Within 15 days of the Valuation Date (as hereinafter
defined), Halter shall cause the Acquiring Company to deliver to the
Shareholder a number of Acquiring Company Shares having an aggregate
"market value" of $3,100,000. The "Valuation Date" shall be the 30th
day (or the next business day following the 30th day, as the case may
be) following the listing of the common stock of the Acquiring Company
on the OTC
STOCK PURCHASE AGREEMENT - Page 12
17
Bulletin Board, the Nasdaq Stock Market or any national or regional
exchange. In the event that the Escrow Shares have an aggregate
market value of less than $3,100,000, Halter shall cause the Acquiring
Company to issue the number of additional shares of its common stock
necessary to equal an aggregate market value of $3,100,000. In the
event that the Escrow Shares have an aggregate market value in excess
of $3,100,000, all excess Acquiring Company Shares shall be delivered
to Halter.
For the purpose of this Agreement, "market value" shall be computed as
follows: (i) if the common stock of the Acquiring Company is listed on the OTC
Bulletin Board or the Nasdaq Stock Market, the market value shall be the
average of the closing bid and ask prices for the last seven business days
subsequent to the Valuation Date, or (ii) if the common stock of the Acquiring
Company is listed on any national or regional exchange, the market value shall
be the average of the last reported sale prices for the last seven business
days subsequent to the Valuation Date.
3.5 Consulting and Non-competition Agreement. In consideration
for the purchase by Halter of the Xxxxxxx Shares, at the Closing, Halter and
the Shareholder will enter into a Consulting Agreement in substantially the
same form as Exhibit 3 hereto and a Non-Competition Agreement in substantially
the same form as Exhibit 4 hereto.
3.6 Directors' Fees. In consideration for the Shareholder's
agreement to serve as a member of the Acquiring Company's Board of Directors,
Halter agrees to cause the Acquiring Company to pay to the Shareholder $6,000
per annum (plus reimbursement of out-of- pocket expenses) in directors' fees.
3.7 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10 a.m. at the offices of legal
counsel to Halter in Dallas, Texas within 60 days after the delivery of audited
financial statements of the Company for its fiscal year ended December 31,
1995, or at such other time and date as the parties hereto shall designate.
Such time and date are herein referred to as the "Closing Date."
ARTICLE IV
CONDUCT OF BUSINESS; REVIEW
4.1 Conduct of Business of the Company. During the period from
the date of this Agreement to the Closing Date, the Company shall conduct its
operations only according to its ordinary and usual course of business, and the
Shareholder and the Company shall use their best efforts to preserve the
Company's business organizations, keep available the services of the Company's
officers and employees and maintain satisfactory relationships with licensors,
suppliers, distributors, clients and others having business relationships with
them. Notwithstanding the immediately preceding sentence, pending the Closing
Date and except as may be first approved by Halter or as is otherwise permitted
or required by this Agreement, the Shareholder and the Company shall cause (i)
the Company's articles or certificate of incorporation and Bylaws to be
maintained in their form on the date of this Agreement, (ii) the compensation
payable or to become payable by the Company to any officer, employee or agent
being paid $40,000 per year or more on the Balance Sheet Date to be maintained
at their levels on the date of this Agreement, (iii) the Company to refrain
from making any bonus, pension, retirement or insurance payment or arrangement
to or with any such persons except those that may have already been accrued,
(iv) the Company to refrain from entering into any contract or commitment
except contracts in the ordinary course of business and (v) the Company to
refrain from making any change affecting any bank, safe deposit or power of
attorney arrangements of the Company. During the period from the date
STOCK PURCHASE AGREEMENT - Page 13
18
of this Agreement to the Closing Date, the Shareholder shall cause the Company
to confer on a regular and frequent basis with one or more designated
representatives of Halter to report material operational matters and to report
the general status of ongoing operations. The Shareholder and the Company
shall promptly notify Halter of any unexpected emergency or other change in the
normal course of its business or in the operation of its properties and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), adjudicatory proceedings, budget
meetings or submissions involving any material property of the Company, and to
keep Halter fully informed of such events and permit its representatives prompt
access to all materials prepared in connection therewith. Notwithstanding the
foregoing, it is expressly acknowledged and agreed that the Company will pay
the Shareholder an aggregate of $1,000 per week for the period beginning
January 1, 1996 until April 30, 1996 for services to be rendered to the
Company, provided the Shareholder devotes at least 25 hours of service to the
Company per week during said period. In addition, it is expressly acknowledged
that the Shareholder shall have no obligation to train any new employee during
the period between the date hereof and the Closing Date.
4.2 Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, the Shareholder and the Company shall refrain
from taking any action to, directly or indirectly, encourage, initiate or
engage in discussions or negotiations with, or provide any information to, any
corporation, partnership, person, or other entity or group, other than Halter,
concerning any purchase of the Xxxxxxx Shares or any merger, sale of
substantial assets or similar transaction involving the Company.
4.3 Review of the Company. Halter may, prior to the Closing Date,
through its representatives, review the properties, books and records of the
Company and its financial and legal condition as they deem necessary or
advisable to familiarize themselves with such properties and other matters;
such review shall not, however, affect the representations and warranties made
by the Company and the Shareholder hereunder. The Shareholder and the Company
shall permit Halter and its representatives to have, after the date of
execution hereof, full access to the premises and to all the books and records
of the Company and to cause the officers of the Company to furnish Halter with
such financial and operating data and other information with respect to the
business and properties of the Company as Halter shall from time to time
reasonably request. In the event of termination of this Agreement, Halter
shall keep confidential any material information obtained from the Shareholder
or the Company concerning the Company's properties or operations and business
(unless readily ascertainable from public or published information or trade
sources) until the same ceases to be material (or becomes so ascertainable) and
shall return to the Company all copies of any schedules, statements, documents
or other written information obtained in connection therewith. The Shareholder
and the Company shall deliver or cause to be delivered on the Closing Date, and
at such other times and places as shall be reasonably agreed upon, such
additional instruments as Halter may reasonably request for the purpose of
carrying out this Agreement.
ARTICLE V
CONDITIONS TO HALTER'S OBLIGATIONS
The purchase of the Xxxxxxx Shares by Halter on the Closing Date is
conditioned upon receipt by Halter of the legal opinion and other documents
listed in this Article V.
5.1 Opinion of the Company's and the Shareholder's Counsel. The
Company and the Shareholder shall have furnished Halter with an opinion of
Xxxxxxx & Xxxxxxxx, as counsel for
STOCK PURCHASE AGREEMENT - Page 14
19
the Shareholder and the Company, dated the Closing Date, in form and substance
satisfactory to Halter, to the effect that:
(a) the Company (i) is a corporation validly existing and in good
standing under the laws of its state of incorporation, (ii) is duly
qualified and licensed under all applicable laws or regulations to own
its assets and properties as now owned and to carry on its business as
now conducted and (iii) is, to the best knowledge of such counsel,
duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the failure to so qualify
would have a material adverse effect upon its business;
(b) the Company has full corporate power and authority to execute,
deliver and perform this Agreement and the other agreements
contemplated hereby;
(c) the execution, delivery and performance of this Agreement and
the other agreements contemplated hereby by the Company and the
Shareholder have been duly authorized by all necessary corporate
action on the part of the Company and this Agreement and the other
agreements contemplated hereby constitute valid and binding
obligations of the Company and the Shareholder enforceable against the
Company and the Shareholder in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability
of equitable remedies;
(d) the Company's authorized capital stock consists of (i) 1,000
shares of common stock, no par value, of which 1,000 shares are issued
and outstanding and no such shares of capital stock are held in the
treasury of the Company; and all of the Xxxxxxx Shares are duly
authorized, validly issued, fully paid and nonassessable;
(e) to the best knowledge of such counsel, the Shareholder owns
the Xxxxxxx Shares, free and clear of any adverse claims, and has full
power and authority to sell, transfer and deliver the Xxxxxxx Shares
in accordance with the terms of this Agreement;
(f) to the best knowledge of such counsel, there are no existing
options, warrants, subscriptions or other rights to purchase, or
securities convertible into or exchangeable for, the capital stock of
the Company and, to the best knowledge of such counsel, neither the
Company nor the Shareholder are parties to or bound by any agreement,
instrument, arrangement, contract, obligation, commitment or
understanding of any character, whether written or oral, express or
implied, relating to the sale, assignment, conveyance, encumbrance,
transfer or delivery of any capital stock of the Company;
(g) to the best knowledge of such counsel, except as disclosed in
the schedules hereto, there is no action, suit or proceeding at law or
in equity or by or before any governmental instrumentality or other
agency now pending or threatened against the Company or affecting the
Xxxxxxx Shares or the assets or business of the Company, and, to the
best knowledge of such counsel, except as disclosed in the schedules
hereto, the Company is not in default with respect to any judgment,
writ, injunction or decree of any court or governmental
instrumentality or agency or in the performance, observance or
fulfillment of any obligation, covenant or agreement by which it is
bound or to which the Xxxxxxx Shares or any of the assets of the
Company are subject;
(h) to the best knowledge of such counsel, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated
STOCK PURCHASE AGREEMENT - Page 15
20
hereby will conflict with, or result in a breach of the terms,
conditions and provisions of, or constitute a default under, the
certificate or articles of incorporation or bylaws of the Company or,
to the best knowledge of such counsel, any agreement, indenture or
other instrument under which the Company or the Shareholder are bound
or to which the Xxxxxxx Shares or any of the assets of the Company are
subject, or result in the creation or imposition of any security
interest, lien, charge or encumbrance upon the Xxxxxxx Shares or any
of the assets of the Company; and
(i) to the best knowledge of such counsel, no consent of any
person, corporation, association, company, partnership or other
entity, and no consent, license, approval or authorization of, or
registration or declaration with, any governmental body, authority,
bureau or agency or federal, state or local court is required in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, or to the extent
that any such consent or other action may be required, it has been
validly procured or taken.
5.2 Good Standing and Tax Certificates. The Shareholder shall
have delivered to Halter (i) copies of the Company's certificate or articles of
incorporation, including all amendments thereto, certified by the secretary of
state or other appropriate official of its jurisdiction of incorporation, (ii)
certificates from the secretary of state or other appropriate official of the
jurisdiction of incorporation to the effect that the Company is in good
standing or subsisting in such jurisdiction and listing all charter documents
of the Company on file, (iii) a certificate from the appropriate official in
each jurisdiction in which the Company is qualified to do business to the
effect that the Company is in good standing in such jurisdiction and (iv)
certificates as to the tax status of the Company in the jurisdiction of
incorporation and each other jurisdiction in which the Company is qualified to
do business.
5.3 No Material Adverse Change. Prior to the Closing Date, there
shall be no material adverse change in the assets or liabilities, the business
or condition, financial or otherwise, the results of operations, or prospects
of the Company, whether as a result of any legislative or regulatory change,
revocation of any license or rights to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm, condemnation or act of
God or other public force or otherwise, and the Company and the Shareholder
shall have delivered to Halter a certificate, dated the Closing Date, to such
effect.
5.4 Truth of Representations and Warranties. The representations
and warranties of the Company and the Shareholder contained in this Agreement
or in any schedule delivered pursuant hereto shall be true and correct on and
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, and the Company and the
Shareholder shall have delivered to Halter on the Closing Date a certificate,
dated the Closing Date, to such effect.
5.5 Performance of Agreements/Authorization. Each and all of the
agreements of the Company and the Shareholder to be performed on or before the
Closing Date pursuant to the terms hereof shall have been duly performed, and
the Company and the Shareholder shall have delivered to Halter a certificate,
dated the Closing Date, to such effect. Halter shall have also received (i) a
copy of resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement and all related documents
and agreements, each certified by the Secretary of the Company as being true
and correct copies of the originals thereof subject to no modifications or
amendments, and (ii) a certificate of the President of the Company and of the
STOCK PURCHASE AGREEMENT - Page 16
21
Shareholder, dated the Closing Date, as to the performance of and compliance by
the Company and the Shareholder with all covenants contained herein on and as
of the Closing Date and certifying that all conditions precedent of the Company
and the Shareholder to the Closing Date have been satisfied.
5.6 No Litigation Threatened. No action or proceedings shall have
been instituted or, to the best knowledge, information and belief of the
Shareholder and the Company, shall have been threatened before a court or other
government body or by any public authority to restrain or prohibit any of the
transactions contemplated hereby, and the Shareholder and the Company shall
have delivered to Halter a certificate, dated the Closing Date, to such effect.
5.7 Company's Accountants Letter. Halter shall have received a
letter, dated the Closing Date, of Xxxxx Xxxxxxxx + Associates, independent
certified public accountants of the Company, in form and substance satisfactory
to Halter in its sole discretion.
5.8 Financial Performance. The balance sheets of the Company for
fiscal 1995, and the related statements of income, shareholders' equity and
changes in financial position for the year then ended, all certified by Xxxxx
Xxxxxxxx + Associates and prepared in accordance with Generally Accepted
Accounting Principles consistently followed throughout the periods indicated,
must reflect results of the operations of the Company and the financial
condition of the Company at December 31, 1995 and at the Closing Date as
follows:
(a) Net sales must be in excess of $7,000,000.
(b) The sum of (i) salaries paid to the Shareholder, and
(ii) earnings before depreciation and taxes, must be in excess of
$1,200,000.
(c) The shareholders' equity must be in excess of
$1,500,000.
5.9 Consulting and Non-Competition Agreements. The Company shall
have entered into a Consulting Agreement with the Shareholder substantially in
the form of Exhibit 3 hereto and a Non-Competition Agreement with the
Shareholder substantially in the form of Exhibit 4 hereto.
5.10 Licensing Agreement. The Company shall have entered into a
licensing agreement with the Shareholder in form satisfactory to the parties
hereto. Such licensing agreement shall provide that the Shareholder will (i)
license to the Company all of the existing Intellectual Property owned by the
Shareholder identified in Schedule 1.17 on terms at least as favorable as the
Shareholder has received, or could have received, in arms-length transactions
with third parties and (ii) for a period of five years following the date of
execution of such licensing agreement, agree to license to the Company, at the
Company's sole option, all Intellectual Property developed and/or owned by the
Shareholder at any time subsequent to the Closing Date. The license referred
to in Section 5.10 (ii) shall be exclusive and free of charge for a period of
one year from the date of invention. Such license shall thereafter be at such
prices and on such other terms that are at least as favorable as the
Shareholder would receive in an arms-length transaction with any third party.
5.11 Real Estate Option and Right of First Refusal Agreement. The
Company shall have entered into a real estate option and right of first refusal
agreement with the Shareholder in form satisfactory to the parties hereto.
Such real estate option agreement shall provide that the Company may, at its
sole option, purchase the real property and improvements identified on Exhibit
5 hereto
STOCK PURCHASE AGREEMENT - Page 17
22
for an aggregate purchase price of $550,000. Such option can first be
exercised after December 31, 1997 and shall terminate on December 31, 2000.
5.12 Governmental Approvals. All governmental and other consents
and approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received.
5.13 Release of Shareholder Claims. Halter shall have received
duly executed documents in form satisfactory to Halter pursuant to which the
Shareholder releases, relinquishes and waives any and all claims, demands,
causes of action, suits, judgments or controversies of any kind whatsoever,
whether known or unknown, that the Shareholder may have against the Company as
of the Closing Date, for any reason whatsoever, including without limitation
claims by such Shareholder against the Company with respect to dividends,
repayment of loans, violation of preemptive rights, or payment of salaries or
other compensation.
5.14 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto shall be satisfactory in form and substance to Halter in its sole
discretion, and Halter shall have received copies of all such documents and
other evidences as Halter or its counsel may reasonably request in order to
establish the consummation or such transactions and the taking of all
proceedings in connection therewith.
5.15 Due Diligence Review. Halter and its representatives and
advisors shall have completed a due diligence review of the business,
operations and financial statements of the Company, the results of which shall
be satisfactory to Halter in its sole discretion.
5.16 Site Assessments. In the event Halter contracts to perform
Site Assessments as set forth in Section 1.33, such Site Assessments shall be
completed, the results of which shall be satisfactory to Halter in its sole
discretion.
5.17 Amendments to Lease. The Company, if required by Halter,
shall have amended that Lease of Commercial Property by and between the Company
and the Shareholder dated September 27, 1995, as amended on November 28, 1995
in form satisfactory to the parties thereto, provided, however, that the
monthly rental payment shall be $6,025 (net of any payments for any insurance
policy for the Company paid by the Shareholder) for the term stated therein.
In addition, Halter shall have received a certificate of the Shareholder, dated
the Closing Date, acknowledging that the Company has not violated any terms and
conditions of such lease in any material respect as of the Closing Date.
ARTICLE VI
CONDITIONS TO THE SHAREHOLDER'S OBLIGATIONS
The sale of the Xxxxxxx Shares by the Shareholder on the Closing Date
is conditioned upon receipt by the Shareholder of the legal opinion and other
documents listed in this Article VI.
6.1 Opinion of Halter's Counsel. Halter shall have furnished the
Shareholder with an opinion, dated the Closing Date, of legal counsel to Halter
regarding the validity of the Acquiring Company Shares.
6.2 Truth of Representations and Warranties. The representations
and warranties of Halter contained in this Agreement shall be true and correct
on and as of the Closing Date with
STOCK PURCHASE AGREEMENT - Page 18
23
the same effect as though such representations and warranties had been made on
and as of such date; and Halter shall have delivered to the Shareholder on the
Closing Date a certificate, dated the Closing Date, to such effect.
6.3 Governmental Approvals. All governmental consents and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received.
6.4 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto shall be reasonably satisfactory in form and substance to the
Shareholder and its counsel.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS: INDEMNITY; OFFSET
7.1 Survival of Representations and Obligations to Indemnify. The
respective representations and warranties of the Shareholder and Halter
contained in this Agreement or in any schedule delivered pursuant hereto shall
survive the purchase and sale of the Xxxxxxx Shares contemplated hereby. The
obligations to indemnify and hold harmless pursuant to this Article VII shall
survive the consummation of the transactions contemplated by this Agreement.
7.2 Indemnification by the Shareholder. The Shareholder hereby
agrees that notwithstanding any investigation which may have been made by or on
behalf of Halter prior to the Closing, the Shareholder shall indemnify, defend
and hold harmless Halter and the Acquiring Company (and any affiliated party of
Halter and the Acquiring Company) at any time after consummation of the
Closing, from and against all demands, claims, actions, or causes of action,
assessments, losses, damages, liabilities, costs and expenses including,
subject to Section 7.4 below, interest, penalties, court costs, and reasonable
attorneys' fees and expenses asserted against, resulting to, imposed upon or
incurred by Halter, the Acquiring Company or any affiliated party of Halter or
the Acquiring Company, directly or indirectly, caused by reason of or resulting
from or arising out of (i) a claim of products liability which results in
either a settlement or award of damages in excess of stated insurance policy
limits or (ii) any misrepresentation or any breach or nonfulfillment of any
representation, covenant, warranty or agreement of the Company and/or the
Shareholder contained in this Agreement, in any exhibit, schedule, certificate
or financial statement delivered under this Agreement, or in any agreement made
or executed in connection with the transactions contemplated by this Agreement.
Notwithstanding the foregoing, the Shareholder shall not be liable under this
Section 7.2 for any claims of products liability related to any suit or
proceeding filed against the Company during the period between the date hereof
and the Closing Date.
The liability of the Shareholder under this Section 7.2 shall be
limited to the Offset Period (as hereinafter defined) and to the value of the
Offset Shares (as hereinafter defined) at such time as Halter or the Acquiring
Company gives notice to the Shareholder of any claim or commencement of any
action or proceeding in accordance with Sections 7.4 and 7.5 below.
7.3 Indemnification by the Acquiring Company. Halter agrees to
cause the Acquiring Company to indemnify, defend and hold harmless the
Shareholder (and any affiliated party of the Shareholder), at any time after
consummation of the Closing, from and against all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs and
expenses, including, subject to Section 7.4 below, interest, penalties, court
costs and reasonable attorneys'
STOCK PURCHASE AGREEMENT - Page 19
24
fees and expenses asserted against, resulting to, imposed upon or incurred by
the Shareholder, directly or indirectly, caused by reason of or resulting from
or arising out of any misrepresentation or any breach or nonfulfillment of any
representation, warranty, covenant and/or agreement of Halter contained in this
Agreement, in any exhibit, schedule, certificate or financial statement
delivered under this Agreement, or in any agreement made or executed in
connection with the transactions contemplated by this Agreement. The liability
of the Acquiring Company under this Section 7.3 shall be limited to an
aggregate of $100,000.
7.4 Defense.
(a) Promptly after the receipt by any person entitled to
indemnification under Section 7.2 and 7.3 herein of notice of (i) any
claim or (ii) the commencement of any action or proceeding, such party
(the "Aggrieved Party") will, if claim with respect thereto is made
against any party obligated to provide indemnification pursuant to
Section 7.2 and 7.3 herein (the "Indemnifying Party"), give such
Indemnifying Party written notice of such claim or the commencement of
such action or proceeding and shall permit the Indemnifying Party to
assume the defense of any such claim or any proceeding or litigation
resulting from such claim, unless the action or proceeding seeks an
injunction or other similar relief against the Aggrieved Party or
there is a conflict of interest between it and the Indemnifying Party
in the conduct of the defense of such action. Failure by the
Indemnifying Party to notify the Aggrieved Party of its election to
defend any such proceeding or action within a reasonable time, but in
no event more than 15 days after written notice thereof shall have
been given to the Indemnifying Party, shall be deemed a waiver by the
Indemnifying Party of its right to defend such action.
(b) If the Indemnifying Party assumes the defense of any
such claim or litigation resulting therefrom with counsel reasonably
acceptable to the Aggrieved Party, the obligations of the Indemnifying
Party as to such claim shall be limited to taking all steps necessary
in the defense or settlement of such claim or litigation resulting
therefrom and to holding the Aggrieved Party harmless from and against
any losses, damages and liabilities caused by or arising out of any
settlement or any judgment in connection with such claim or litigation
resulting therefrom. The Aggrieved Party may participate, at its
expense, in the defense of such claim or litigation provided that the
Indemnifying Party shall direct and control the defense of such claim
or litigation. The Aggrieved Party shall cooperate and make available
all books and records reasonably necessary and useful in connection
with the defense. The Indemnifying Party shall not, in the defense of
such claim or any litigation resulting therefrom, consent to entry of
any judgment, except with the written consent of the Aggrieved Party,
or enter into any settlement, except with the written consent of the
Aggrieved Party.
(c) If the Indemnifying Party shall not assume the
defense of any such claim or litigation resulting therefrom, the
Aggrieved Party may defend against such claim or litigation in such
manner as it may deem appropriate and reasonably satisfactory to the
Aggrieved Party. The Indemnifying Party shall promptly reimburse the
Aggrieved Party for the amount of all expenses, legal or otherwise, as
incurred by the Aggrieved Party in connection with the defense against
or settlement of such claim or litigation. No settlement of claim or
litigation shall be made without the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. If no
settlement of the claim or litigation is made, the Indemnifying Party
shall promptly reimburse the Aggrieved Party for the amount of any
judgment rendered with respect to such claim or in such litigation and
of all
STOCK PURCHASE AGREEMENT - Page 20
25
expenses, legal or otherwise, as incurred by the Aggrieved Party in
the defense against such claim or litigation.
(d) Subject to Section 7.5 hereof, the rights to
indemnification hereunder (i) shall apply only to claims of any amount
made by the Aggrieved Party from and after the point at which a single
claim or an aggregate of several claims equals $5,000.00; and (ii)
apply to claims made by either party against the other whereby written
notice of the claim has been made and delivered within the period of
the applicable statute of limitations.
7.5 Offset. The Shareholder agrees that the number of Acquiring
Company Shares having an aggregate market value of $500,000 on the Valuation
Date (the "Offset Shares") shall be held in escrow for a period of two years
(the "Offset Period") from the Valuation Date, the terms of which to be set
forth in an escrow agreement to be entered into on the Valuation Date, or as
soon thereafter as reasonably practicable, by the Shareholder, Halter, the
Acquiring Company and Securities Transfer Corporation, to be used to offset any
amounts that may be owing at any time by the Shareholder to Halter or the
Acquiring Company (including any affiliated party of Halter and the Acquiring
Company) in respect of (i) a claim of products liability which results in
either a settlement or award of damages in excess of stated insurance policy
limits (provided, however, the Shareholder shall have no liability for the
stated deductible amount under the applicable insurance policy), or (ii) any
failure or breach of any representation, warranty, agreement or covenant of the
Company or the Shareholder under or in connection with this Agreement or any
other agreement with Halter or any transaction contemplated hereby or thereby.
If Halter determines that such offset is appropriate, notice shall be given to
the Shareholder of such determination at least 10 days prior to a disposition
of any of the Offset Shares for the purpose of satisfying any liability imposed
upon either Halter or the Acquiring Company (the "Notice Period"). If the
conditions upon which the offset is based are cured by the Shareholder during
the Notice Period, as determined by Halter, no offset shall be undertaken.
Upon an event of offset, Halter and the Acquiring Company shall have sole
discretion in selling or otherwise disposing of that number of the Offset
Shares necessary to satisfy any outstanding liability or obligation imposed
upon Halter or the Acquiring Company. All Offset Shares remaining at the
expiration of the Offset Period shall be returned to the Shareholder.
ARTICLE VIII
TERMINATION
8.1 Termination Events. This Agreement may be terminated on
written notice, on or before the Closing Date:
(a) By mutual written consent of Halter, the Company and
the Shareholder;
(b) By Halter, if the conditions set forth in Article V
are not satisfied (or are incapable of being satisfied) in the
discretion of Halter before the close of business on the Closing Date;
or
(c) By the Shareholder and the Company if the conditions
set forth in Article VI are not satisfied (or are incapable of being
satisfied) in their discretion before the close of business on the
Closing Date.
8.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 8.1 hereof, this Agreement shall forthwith
become null and void, and there shall be no
STOCK PURCHASE AGREEMENT - Page 21
26
liability on the part of the parties hereof (or any of their respective
officers, directors, employees, agents, consultants or other representatives).
ARTICLE IX
MISCELLANEOUS
9.1 Knowledge of the Company and the Shareholder. Where any
representation or warranty contained in this Agreement is expressly qualified
by reference to the knowledge, information and belief of the Shareholder and
the Company, the Shareholder and the Company confirm that they have made due
and diligent inquiry as to the matters that are the subject of such
representations and warranties.
9.2 Expenses. The parties hereto shall pay all of their own
expenses relating to the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses of their respective
counsel and financial advisers; provided, however, notwithstanding anything to
the contrary herein, if the Shareholder or the Company terminates this
Agreement, other than in accordance with Section 8.1(c), the Shareholder agrees
to reimburse Halter of its out of pocket expenses not to exceed $100,000.
9.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of
the State of Texas.
9.4 "Person" Defined. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or other department or agency
thereof.
9.5 Captions. The Article and Section captions used herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
9.6 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue any press release or make any other public
statement, in each case relating to or connected with or arising out of this
Agreement or the matters contained herein, without obtaining the prior approval
of all parties hereto to the contents and the manner of presentation and
publication thereof.
9.7 Notices. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in person or sent
by telex or by registered or certified mail, postage prepaid, addressed as
follows: If to Halter, to Halter Financial Group, Inc., 0000 XXX Xxxxxxx, Xxxxx
000, Xxxxxx, Xxxxx 00000, Attention: Xxx Xxxxxx, with a copy to its counsel,
True & Xxxxxx, Eighty-Eighty Xxxxxxx Xxxxx Xxxxx, Xxxxxx, Xxxxx 00000-0000,
Telephone: (000)000-0000, Fax: (000)000-0000; and if to the Shareholder or the
Company, to Xxxxxxx Xxxxxxx, Xxxxxxx 00 Xxxxx, Xxxxxxxx, Xxxxxxxxx 00000, with
a copy to his counsel, Xxxxxxx & Xxxxxxxx, 000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx,
Xxxxxxxxx 00000, Telephone: (000) 000-0000, Fax: (000) 000-0000 or such other
address as shall be furnished in writing by any such party, and such notice or
communication shall be deemed to have been given as of the date so delivered,
sent by fax or mailed.
9.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be
STOCK PURCHASE AGREEMENT - Page 22
27
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
9.9 Counterparts. This Agreement may be executed in two (2) or
more counterparts, all of which taken together shall constitute one instrument.
9.10 Entire Agreement. This Agreement, including the other
documents referred to herein that form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
9.11 Amendments. This Agreement can be waived, amended,
supplemented or modified by written agreement of the parties.
9.12 Severability. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
9.13 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or
on behalf of any Person other than the parties hereto.
9.14 Time of Essence. The mere lapse of time shall have the effect
to constitute of the parties hereto in default to perform any of its
obligations under this Agreement.
9.15 Negotiation. Each party hereto declares that the provisions
of this Agreement and of all documents annexed thereto or referred to therein,
have been negotiated and declares having read this Agreement and those
documents and having understood their scope and nature.
9.16 Separate Counsel. The Shareholder and the Company hereby
expressly acknowledge that each of them have been advised that neither of them
have been represented by Halter Financial Group, Inc.'s or the Company's
attorneys in this matter and have been advised and urged to seek separate legal
counsel for advice in this matter. Halter hereby expressly acknowledges that
it has been advised that it has not been represented by the Shareholder's or
the Company's counsel on this matter and has been advised and urged to seek
separate legal counsel for advice in this matter.
9.17 Joinder of Spouse. The spouse of the Shareholder has joined
in the execution and delivery of this Agreement for the express purpose of
binding her community property interests, if any, in the Xxxxxxx Shares.
STOCK PURCHASE AGREEMENT - Page 23
28
IN WITNESS WHEREOF, Halter has caused its corporate name to be
hereunto subscribed by its officer thereunto duly authorized, and the
Shareholder has executed this Agreement, all as of the date first above
written.
HALTER FINANCIAL GROUP, INC.
By: /s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx, President
XXXXXXX'X THUNDER KARTS, INC.
By: /s/ XXXXXXX XXXXXXX
-------------------------------------
Xxxxxxx Xxxxxxx, President
SHAREHOLDER
By: /s/ XXXXXXX XXXXXXX
-------------------------------------
Xxxxxxx Xxxxxxx
By: /s/ XXX. XXXXXXX XXXXXXX
-------------------------------------
Xxx. Xxxxxxx Xxxxxxx
STOCK PURCHASE AGREEMENT - Page 24
29
EXHIBIT 1
Xxxxxxx Xxxxxxx 1,000 shares of common stock, no
par value, of Xxxxxxx'x Thunder
Karts, Inc., a Louisiana corporation
STOCK PURCHASE AGREEMENT - Page 25
