1
MERGER AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT ("Agreement") made and entered into as of this 10th day
of October, 1997, by and among KJK Marketing, Inc., a Florida corporation
("KJK"), Liteglow Industries, Inc., a Utah corporation ("Liteglow"), Liteglow
Acquisition Corp., a Florida corporation ("LAC"), and Xxxxx and Xxxxxx Xxxxxxx
("Xxxxxxx"), the sole shareholders of KJK.
RECITALS
The Boards of Directors of KJK, Liteglow and LAC deem a merger of KJK
into LAC, a wholly-owned subsidiary of Liteglow ("Merger"), advisable and in the
best interests of the respective shareholders and have authorized the Merger in
accordance with the laws of their various states of organization and adopted a
Plan of Merger in substantially the form of Exhibit "A" attached hereto.
Xxxxx and Xxxxxx Xxxxxxx, the sole shareholders of KJK, are making
certain representations and warranties on behalf of themselves and KJK as a
condition to LAC and its shareholder, Liteglow, entering into this Agreement.
NOW, THEREFORE in consideration of the foregoing and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms of this Agreement and the Plan of
Merger, on the Effective Date (as defined in paragraph 1(b) of the Plan of
Merger) KJK will be merged into LAC and the separate existence of KJK will
cease. In the Merger, shares of KJK common stock issued and outstanding
immediately prior to the Effective Date shall be cancelled and converted into
the right to receive at Closing (as defined in Section 2.1) 450,000 shares of
Liteglow common stock, par value $.01 (the "KJK Shares"), representing
approximately 1.36% of Liteglow's common stock to be outstanding immediately
after the Effective Date, and cash in the amount of One Hundred Thousand Dollars
($100,000). The number of KJK Shares is subject to adjustment in accordance with
Section 3.3 hereof. The cash of $100,000 to be distributed to the shareholders
of KJK shall be paid $50,000 at Closing and the balance of $50,000 shall be
evidenced by LAC's note in the form of Exhibit 1.1.1 (the "Note") payable thirty
(30) days after Closing, without interest, secured by the assets of LAC and
guaranteed by Liteglow. As evidence of the security for the Note, LAC shall
execute and deliver to the shareholders of KJK at Closing a Security Agreement
in the form of Exhibit 1.1.2.
ARTICLE II
CLOSING
2.1 CLOSING DATE. The closing of the Merger shall occur at 10 a.m. on
October 10, 1997 (the "Closing") at Liteglow's office at 0000 XX 00xx Xxxxx
#000, Xxxxxxx Xxxxx, Xxxxxxx 00000, or at such other time or place as the
parties may mutually agree.
- 1 -
2
ARTICLE III
CASH AND STOCK TO BE DELIVERED AT CLOSING
3.1 CERTIFICATES, CASH AND NOTE. As set forth in Article I hereof,
Xxxxxxx shall receive at Closing a certificate or certificates for the KJK
Shares, cash in the amount of $50,000, and the Note.
3.2 KJK STOCK RESTRICTED. The KJK Shares shall be "restricted" shares
within the meaning of Securities and Exchange Commission Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act"), and accordingly the
certificate or certificates representing the KJK Shares shall bear a restrictive
legend in accordance with the requirements of Rule 144.
3.3 MAKE-UP. Liteglow's current stock trading price may not adequately
reflect the value of Liteglow. Accordingly, in the event that the KJK Shares
have a "fair market value" (as hereinafter defined) of less than One Hundred
Fifty Thousand Dollars ($150,000) on the second anniversary of the Closing,
Liteglow shall deliver to Xxxxxxx that number of shares of Liteglow common stock
(or like shares of its successor, if any) of which shall have a fair market
value equal to the difference between the fair market value of the KJK Shares
and $150,000. For purposes of this paragraph 3.3, "fair market value" shall mean
the average daily high bid and low asking price of the Liteglow's common stock
for the five business days immediately preceding the second anniversary date of
the Closing. By their execution of this Agreement, the parties confirm their
understanding that the bid price of the Liteglow's common stock as of the date
of this Agreement is approximately $.08 per share and that the KJK Shares, as
presently constituted, would have to have a fair market value of $.333 per Share
in order to have an aggregate fair market value of $150,000 as determined in
accordance with the terms of this paragraph 3.3. The maximum number of shares
that can be granted to Xxxxxxx under this Section 3.3 shall be 450,000 shares.
The rights provided to Xxxxxxx under this Section 3.3 may not be assigned, sold
or transferred except by operation of law.
3.4 NO REPRESENTATION OF VALUE. KJK and Xxxxxxx hereby confirm that
neither Liteglow or LAC, any officer, director or shareholder of Liteglow or
LAC, or any agent of or professional employed by Liteglow or LAC, has made any
representation to KJK or Xxxxxxx as to the present or future value of the
shares, the KJK Shares, Liteglow, or LAC, nor has Liteglow, LAC or any such
person made any representation with respect to the ability of Xxxxxxx to sell
all or any part of the KJK Shares at the current market price or any other
price. Further, KJK and Xxxxxxx hereby confirm their understanding that the
future bid or asking price of Liteglow's common stock, including the KJK Shares,
may not bear any relationship to the net tangible book value of Liteglow's
common stock and, further, may be unrelated to any other generally accepted
method of valuation of the KJK Shares.
ARTICLE IV
CLOSING
4.1 PERFORMANCE BY KJK AND XXXXXXX. Prior to or at Closing KJK and
Xxxxxxx shall deliver to LAC:
a. All third-party consents, assignments or approvals
otherwise required for
- 2 -
3
LAC's assumption of any contracts, leases and agreements described hereunder.
b. Employment agreements in the form of Exhibit 4.1(b) hereto
executed by Xxxxx Xxxxxxx and Xxxxxx Xxxxxxx.
c. The certificate of KJK and Xxxxxxx that the
representations, warranties, covenants and agreements of KJK in this Agreement
shall be true, accurate and complete both on the date of the Agreement and at
Closing and that KJK has performed and complied with all agreements, covenants
and conditions required by this Agreement on their part to be performed or
complied with prior to or at Closing.
d. The opinion of counsel to KJK and Xxxxxxx to the effect
that:
(1) KJK duly incorporated and a validly existing
corporation in good standing under the laws of the State of Florida and is duly
qualified to carry on its business and is in good standing in Florida.
(2) KJK has the requisite power and authority to
execute and deliver, and has taken all necessary corporate action to authorize
the execution and delivery of, this Agreement and the other documents and
transactions contemplated hereby.
(3) All necessary corporate proceedings, of KJK have
been taken to fully, validly and effectively authorize the Merger.
(4) The execution and delivery by KJK of this
Agreement, the performance by KJK of its obligations hereunder, and the
consummation of the transactions contemplated herein will not result in the
breach of or violate the Articles of Incorporation or ByLaws of KJK.
(5) This Agreement has been duly executed and
delivered by KJK.
(e) The obligation set forth in Section 4.1(a) shall be a
"best efforts" obligation. If KJK and Xxxxxxx are unable to provide any consent,
assignment or approval required by Section 4.1(a), Liteglow and LAC shall have
the right, at their sole election, to complete closing of the Merger or to
terminate this Agreement, in which latter event the parties shall have no
further liability to each other with respect to this Agreement or the
transactions contemplated hereby.
4.2 LAC'S PERFORMANCE. Prior to or at Closing of this Agreement, LAC
shall deliver to KJK or Xxxxxxx, as appropriate:
a. The cash payment, Note and certificate(s) for the KJK
Shares to be delivered at Closing and to be paid as provided in Article 3 above.
b. Employment agreements in the form of Exhibit 4.1(c) hereto
executed by LAC.
- 3 -
4
c. Other Documents. All other documents or instruments
necessary or appropriate for the consummation of this transaction.
After Closing, the parties shall execute such other
instruments and documents and perform such other acts as may be necessary or
appropriate for the full implementation and consummation of this Agreement.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF KJK AND XXXXXXX
KJK, Xxxxx Xxxxxxx and Xxxxxx Xxxxxxx jointly and severally represent,
warrant and covenant as of the date of execution of this Agreement and as of
Closing, as follows:
5.1 EXISTENCE AND POWER. KJK is a Florida corporation duly organized
and validly existing under the laws of the State of Florida with full power
under its Articles of Incorporation and Bylaws to carry on its business as now
being conducted and to enter into and to perform this Agreement.
5.2 BINDING AGREEMENT. The execution, delivery and performance of this
Agreement by KJK has been duly authorized by all necessary action of KJK. This
Agreement has been duly executed and delivered to Liteglow and LAC by KJK and
Xxxxxxx and constitutes a legal, valid and binding agreement of KJK and Xxxxxxx
enforceable in accordance with its terms.
5.3 NO VIOLATION. The execution, delivery and performance of this
Agreement by KJK and Xxxxxxx and the consummation of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time or both, violate, contravene, or conflict with or result in a material
breach of or constitute a default or accelerate the performance required under
(i) any writ, order, judgment or decree of any court, arbitrator or governmental
agency applicable to KJK or Xxxxxxx; (ii) KJK's Articles of Incorporation and
Bylaws; (iii) to the best of KJK and Xxxxxxx'x knowledge, any law, rule or
regulation applicable to KJK or to the operation of its business; or (iv) any
mortgage, deed of trust, lien, lease, restriction or other contract or agreement
to which KJK or Xxxxxxx is a party or to which any of their property is bound.
5.4 CAPITALIZATION OF KJK. The authorized capital stock of KJK consists
of only 1,000 shares of KJK common stock, $1.00 par value, of which, as of the
date hereof, 100 shares are validly issued and outstanding, fully paid and
non-assessable, and were not issued in violation of any preemptive rights. KJK
has no commitment to issue or sell any shares of its capital stock or any
securities or obligations convertible into or exchangeable for, or giving any
person the right to acquire from it, any shares of its capital stock and no such
securities or obligations are issued or outstanding.
5.5 CONSENTS AND APPROVALS. Except for the filing of Articles of Merger
in the office of the Secretary of State of Florida, there is no requirement
applicable to KJK to make any filing with, or to obtain any permit,
authorization, consent or approval of any public body as a condition to the
consummation of the Merger. There is no requirement that any party to any
material contract of KJK, including any lease, license or permit, nor any loan
agreement to which KJK is a party or to which it is bound, consent to the
execution of this Agreement by KJK or to the consummation of the Merger.
- 4 -
5
5.6 COMPLIANCE WITH APPLICABLE LAWS. To the best knowledge of KJK and
Xxxxxxx, (i) KJK is not in default in any material respect under any executive,
legislative, judicial, administrative or private (such as arbitration) ruling,
order, writ, injunction or decree; and (ii) no material permits, licenses or
approvals of any governmental or administrative authorities are required for KJK
to own, lease and operate its properties and to carry on its business as
presently conducted.
5.7 TITLE TO PROPERTY. At Closing, KJK shall have and convey good and
marketable title to all of its property free and clear of all mortgages, liens,
pledges, security interests and encumbrances or other defects in title.
5.8 CONTRACTS. To the knowledge of KJK and Xxxxxxx: (i) each material
contract of KJK is in full force and effect and is unimpaired by any acts or
omissions of KJK or KJK's employees or agents; (ii) there has not occurred as to
any such contract any material default by KJK or any event which, with the lapse
of time or otherwise, will become a material default of KJK; and (iii) to the
best of KJK's knowledge, without investigation, there has not occurred as to any
such contract any material default by the other parties thereto or any event
which, with the lapse of time or the election of any person other than KJK or
Xxxxxxx, will become a default under such contract.
5.9 COPYRIGHTS, TRADEMARKS, PATENTS. To the best knowledge of KJK and
Xxxxxxx all copyrights, trademarks, patents, tradenames, logos, service marks,
and other similar intangible property rights of KJK are in good standing and
uncontested, and neither KJK nor Xxxxxxx has any knowledge of any material
infringement or unlawful or unauthorized use of such property rights. To the
best knowledge of KJK and Xxxxxxx, the operation of KJK's business as presently
conducted by KJK does not infringe, and no one has asserted to KJK or Xxxxxxx
that such operations infringe, any copyright, patent, trademark, tradename,
service xxxx, or other similar right of any other party.
5.10 COMPLIANCE WITH LABOR LAWS. To the best knowledge of KJK and
Xxxxxxx, KJK is in compliance with all applicable laws, rules and regulations
relating to the employment of labor, including those relating to wages, hours,
equal employment opportunity, collective bargaining, pension and welfare benefit
plans, and the payment of Social Security and similar taxes, and is not liable
for any arrears of wages or any tax penalties for failure to comply with any of
the foregoing, except as noted on Exhibit 5.10, attached hereto and made a part
hereof.
5.11 ENVIRONMENTAL MATTERS. KJK has obtained all environmental permits
required to conduct its business as it is presently being conducted including,
without limitation, those relating to (i) emissions, discharges or threatened
discharges of pollutants, contaminants, hazardous or toxic substances or
petroleum into the air, surface water, ground water or the ocean, or on or into
the land, and (ii) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
or toxic substances or petroleum. KJK has not received notice of, or is
otherwise aware of, any facts, events or conditions which (x) interfere with,
prevent, or, with the passage of time, could interfere with continued
substantial compliance with any of the aforementioned environmental laws,
regulations, policies, guidelines, orders, judgments or decrees, (y) may give
rise to any liability (whether based in contract, tort, implied or express
warranty, criminal or civil stature or otherwise) under any law, regulation,
- 5 -
6
policy or guideline relating to hazardous emissions or handling hazardous
substances, or (z) obligate KJK or, with the passage of time, could cause KJK to
be obligated to clean up, remedy or otherwise restore to a former condition, by
itself or jointly with others, any contaminated surface water, ground water,
soil or any natural resource associated therewith.
5.12 EMPLOYEES. None of KJK's employees is represented by a union or
other collective bargaining unit, no application of recognition as a collective
bargaining unit is currently pending before the National Labor Relations Board
with respect to any of KJK's employees, and, to the best of KJK's knowledge, no
concerted effort to unionize any of its employees is currently in progress.
There are no material controversies pending or threatened between KJK and any of
its employees, and KJK and Xxxxxxx are not aware of any facts which would
reasonably result in any such controversy.
5.13 LITIGATION. There is no litigation, action, suit, investigation or
other proceeding pending or threatened that may give rise to any claim against
any of KJK's property or adversely affect KJK's ability to perform in accordance
with the terms of this Agreement, and neither KJK nor Xxxxxxx is aware of any
facts that could reasonably result in any such proceeding.
5.14 LIABILITIES. The financial information referenced in Section 5.17
contains a complete, correct and accurate list of all liabilities of KJK as of
the date noted in such financial information. KJK shall deliver to Liteglow and
LAC at Closing a complete, correct and accurate statement of all of KJK's
liabilities at Closing.
5.15 INVENTORY. The raw materials, work-in-process, and finished goods,
and store supplies and spare parts, which are owned by KJK, wherever they are
located, are hereinafter referred to as the "KJK Inventory." The KJK Inventory
(i) is salable in the ordinary course of business, (ii) is sufficient but not
excessive in kind or amount for the conduct of the business of KJK as it is
presently being operated, and (iii) is carried on the books of KJK at an amount
which reflects valuations not in excess of the lower of cost or market
determined in accordance with generally accepted accounting principals supplied
on a consistent basis.
5.16 ACCOUNTS RECEIVABLE. The accounts receivable for KJK as of October
6, 1997 were $12,000. Such accounts receivable and those acquired by KJK prior
to the Closing (and not collected prior to Closing) have or will have arisen in
the ordinary course of business and will have been collected or be collectible
in amounts not less than the aggregate amount thereof (net of reserves
established in accordance with the prior practice) carried on the books of KJK.
Except as reflected in Schedule 5.16, each of such accounts receivable, and
those acquired prior to the Closing, is not and will not be the subject of a
pledge or assignment, is and will be free of any and all liens, encumbrances and
charges whatsoever, and has not been and will not be placed for collection with
any attorney, collection agency or similar individual firm.
5.17 FINANCIAL STATEMENTS. KJK has previously furnished Liteglow true
and complete copies of unaudited financial statements of KJK for the fiscal year
ended December 31, 1996, and the period ended August 31, 1997, including the
notes thereto (the "KJK Unaudited Financial Statements"), together with the
report on such financial statements of KJK's accountants. The
- 6 -
7
KJK Unaudited Financial Statements fairly represent the financial position of
KJK as of such dates and the results of its operations and changes in financial
position for such periods and have been prepared in accordance with generally
accepted accounting principals applied on a consistent basis.
5.18 TAX MATTERS.
(a) The provision for taxes made by KJK are sufficient for
payment of all taxes of KJK, whether or not disputed, which are properly
accruable. There are no agreements by KJK for the extension of time, or waiver
of any statute of limitations, for the assessment of any taxes, and all taxes
due and payable by KJK on or before the date of this Agreement have been paid or
provided for, and are not delinquent.
(b) KJK has filed all tax returns that it was required to
file. All such tax returns were correct and complete in all respects. No claim
has ever been made by an authority in a jurisdiction where KJK does not file tax
returns that it is or may be subject to taxation by that jurisdiction. There are
no liens on any of the assets of KJK that arose in connection with any failure
(or alleged failure) to pay any tax.
(c) KJK has withheld and paid all taxes required to have been
withheld and paid through August 31, 1997, in connection with the amounts paid
or owing to any employee, independent contractor, creditor, stockholder or other
third party.
(d) There is no dispute or claim concerning any tax liability
of KJK either claimed or raised by any authority in writing or as to which any
of the directors and officers of KJK have knowledge based upon personal contact
with any agent of such authority.
5.19 FULL DISCLOSURE. None of the representations and warranties of KJK
and Xxxxxxx which are made in Article V of this Agreement contains and untrue
statement of material fact or omits to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
5.20 NO BROKERS OR COMMISSIONS. Neither KJK nor Xxxxxxx has engaged any
broker, finder or similar individual in connection with this transaction for
which Liteglow or LAC shall have any liability.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF LITEGLOW AND LAC
Liteglow and LAC hereby jointly and severally represent, warrant and
covenant as of the date of execution of this Agreement and as of the Closing as
follows:
6.1 EXISTENCE AND POWER. Liteglow and LAC are corporations duly
organized, validly existing and in good standing under the laws of their states
of organization, with full power under their articles of incorporation and
bylaws to enter into and to perform this Agreement.
- 7 -
8
6.2 BINDING AGREEMENT. The execution, delivery and performance of this
Agreement and the other instruments contemplated by this Agreement by Liteglow
and LAC have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered to KJK and Xxxxxxx and
constitutes the legal, valid and binding agreement of Liteglow and LAC,
enforceable in accordance with its terms.
6.3 NO VIOLATION. The execution, delivery and performance of this
Agreement by KJK and Xxxxxxx and the consummation of the transaction
contemplated hereby will not, with or without the giving of notice or the lapse
of time or both, violate, contravene or conflict with or result in a breach of
or constitute a default under (i) any writ, order, judgment or decree of any
court arbitrator or governmental agency applicable to Liteglow and LAC; (ii) the
articles of incorporation or bylaws of Liteglow or LAC; (iii) any contract,
lease or other agreement to which Liteglow or LAC is a party or by which
Liteglow or LAC is bound; or (iv) to the best knowledge of Liteglow or LAC, any
law, rule or regulation applicable to Liteglow or LAC.
6.4 NO BROKERS OR COMMISSIONS. Neither Liteglow nor LAC has engaged any
brokers, finders or similar individuals in connection with this transaction for
which KJK or Xxxxxxx shall have any liability.
6.5 LITIGATION. There is no litigation, action, suit, investigation or
other proceeding pending or threatened against Liteglow or LAC that may give
rise to any claim against any of Liteglow or LAC's assets or other property, and
Liteglow or LAC is not aware of any facts that could reasonably result in any
such proceeding.
6.6 COMPLIANCE WITH APPLICABLE LAWS. To the best knowledge of LAC and
Liteglow, (i) neither LAC nor Liteglow is not in default in any material respect
under any executive, legislative, judicial, administrative or private (such as
arbitration) ruling, order, writ, injunction or decree; and (ii) no material
permits, licenses or approvals of any governmental or administrative authorities
are required for Liteglow or LAC to own, lease and operate their properties and
to carry on their business as presently conducted.
6.7 FINANCIAL STATEMENTS. Liteglow has previously furnished KJK and
Xxxxxxx true and complete copies of audited financial statements of Liteglow for
the fiscal year ended December 31, 1996, and unaudited financial statements for
the period ended August 31, 1997 (the "Liteglow Financial Statements"), together
with the report on such audited financial statements of Liteglow's accountants.
The Liteglow Financial Statements fairly represent the financial position of
Liteglow as of such dates and the results of its operations and changes in
financial position for such periods and have been prepared in accordance with
generally accepted accounting principals applied on a consistent basis. KJK and
Xxxxxxx confirm that they have been advised by LAC that LAC is a newly-organized
corporation and accordingly has no assets or liabilities.
- 8 -
9
6.8 TAX MATTERS.
(a) The provision for taxes made by Liteglow are sufficient
for payment of all taxes of Liteglow, whether or not disputed, which are
properly accruable. There are no agreements by Liteglow for the extension of
time, or waiver of any statute of limitations, for the assessment of any taxes,
and all taxes due and payable by Liteglow on or before the date of this
Agreement have been paid or provided for, and are not delinquent.
(b) Liteglow has filed all tax returns that it was required to
file. All such tax returns were correct and complete in all respects. No claim
has ever been made by an authority in a jurisdiction where Liteglow does not
file tax returns that it is or may be subject to taxation by that jurisdiction.
There are no liens on any of the assets of Liteglow that arose in connection
with any failure (or alleged failure) to pay any tax.
(c) Liteglow has withheld and paid all taxes required to have
been withheld and paid through August 31, 1997, in connection with the amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party.
(d) There is no dispute or claim concerning any tax liability
of Liteglow either claimed or raised by any authority in writing or as to which
any of the directors and officers of Liteglow have knowledge based upon personal
contact with any agent of such authority.
ARTICLE VII
CERTAIN REPRESENTATIONS AND WARRANTIES
CONCERNING LITEGLOW AND LAC
KJK and Xxxxxxx hereby jointly and severally represent, warrant,
acknowledge and covenant to Liteglow and LAC, their officers, directors, agents
and professional advisors, as follows:
7.1 OPPORTUNITY TO EXAMINE. KJK and Xxxxxxx have examined or have had
an opportunity to examine, and to ask questions of the management of Liteglow
and LAC about, all applicable documents and such applicable information as are
relevant to the Merger, including the delivery of cash and the KJK Shares in
consideration therefor. Among the documents made available to KJK and Xxxxxxx
are Liteglow's private placement memorandum dated March 25, 1996, Liteglow's
audited financial statements for the year ended December 31, 1996, and the
Liteglow's unaudited profit and loss statement and balance sheet for the period
ended August 31, 1997. With respect to Liteglow's private placement memorandum
dated March 25, 1996, such memorandum has been provided to KJK and Xxxxxxx based
upon their confirmation that KJK and Xxxxxxx understand that such memorandum
describes Liteglow, its business, and its financial condition as of the date of
the memorandum, but does not necessarily reflect the current business or
financial condition of the Liteglow. LAC is recently organized and has no
operating history or assets as of the date of this Agreement.
7.2 AUTHORIZED AND OUTSTANDING SHARES. KJK and Xxxxxxx confirm that (i)
Liteglow has represented to them that Liteglow has authorized 50,000,000 shares
of common stock, par value $.01 per share, of which approximately 32,601,568
shares are issued and outstanding, and
- 9 -
10
that of the issued and outstanding shares an aggregate of approximately
14,000,000 shares are held by Xxxxxxx Xxxxxxxx, who is the President of
Liteglow, and his wife, Xxxxxx Xxxxxxxx, who is Liteglow's secretary; and (ii)
LAC has represented to them that LAC has authorized 1000 shares of common stock,
no par value, all of which are held, or to be held, by Liteglow.
7.3 NO PRESENTATIONS AS TO PROFIT OR LOSS. No representation or
warranty of any kind has been made to KJK or Xxxxxxx with respect to the
percentage of profit and/or amount or type of consideration, profit or loss that
are to be realized, if any, as a result of the acquisition of the KJK Shares
(including any additional shares of Liteglow which may be received by Xxxxxxx
pursuant to this Agreement) including, without limitation, any representation by
KJK or Xxxxxxx, or any agent, professional advisor, employee or affiliate of
them, and that in entering into this transaction KJK and Xxxxxxx are not relying
upon any information other than that derived from the results of their own
independent investigation, or the investigation of their counsel and other
professional advisors, or from information furnished in writing by Liteglow or
LAC to them. KJK and Xxxxxxx have had an opportunity to ask questions of and
receive answers from Liteglow or LAC concerning Liteglow or LAC and the terms
and conditions of the Merger and all such questions have been answered to their
full satisfaction.
7.4 KJK SHARES REGISTERED. KJK and Xxxxxxx understand that the sale of
the KJK Shares has not been registered under the Act nor under the securities
laws of any state in reliance on exemptions therefrom for non-public offerings,
and further understand that the KJK Shares have not been approved or disapproved
by the Securities and Exchange Commission nor has any state securities
administrator or agency passed on the accuracy or adequacy of any written
information provided by Liteglow or LAC to KJK or Xxxxxxx.
7.5 INVESTMENT INTEREST. Xxxxxxx is acquiring the KJK Shares for their
own account for investment purposes only and not with a view to the sale or
other distribution thereof, in whole or in part.
7.6 NO OBLIGATION TO REGISTER KJK SHARES. Xxxxxxx acknowledge that
neither Liteglow nor LAC is under no obligation to them or any assignee of them
to obtain any exemption from the registration requirements of the Act or any
state securities act, and in any event Xxxxxxx shall be responsible for
compliance with all conditions on transfer imposed by any securities
administrator of any state for any expenses incurred by Liteglow for legal or
accounting services in connection with reviewing such a proposed transfer and/or
issuing opinions in connection therewith.
7.7 NO ASSURANCES AS TO TAX CONSEQUENCES. No assurances are or have
been made regarding the federal income tax consequences of the Merger or the
receipt of the KJK Shares or any additional common stock of Liteglow, nor has
any assurance been given that any federal income tax consequences of such
transactions will not be changed through adoption of new laws, amendments to
existing laws or regulations, or changes in the interpretation of existing laws
and regulations; and KJK and Xxxxxxx confirm that it has consulted its own tax
advisor with respect to the tax consequences and aspects of the Merger,
including the payment of cash and the delivery of the KJK Shares.
- 10 -
11
7.8 RELIANCE ON REPRESENTATIONS. KJK and Xxxxxxx acknowledge that KJK
and Xxxxxxx understand the meaning and legal consequences of the
representations, warranties, acknowledgements and covenants in this Article VII
and that Liteglow and LAC have relied and will rely thereon.
ARTICLE VIII
INDEMNIFICATION
8.1 LITEGLOW'S RIGHT TO INDEMNIFICATION. KJK and Xxxxxxx jointly and
severally undertake and agree to hold Liteglow and LAC harmless against any and
all losses, costs, liabilities, claims, obligations and expenses, including
reasonable attorneys' fees, incurred or suffered by Liteglow or LAC arising from
(i) the breach, misrepresentation or other violation of any covenants, warranty
or representation of or by KJK or Xxxxxxx contained in this Agreement, and (ii)
all liabilities of KJK not disclosed in writing to Liteglow and LAC prior to the
execution of this Agreement. This indemnity provision shall survive Closing for
a period of two (2) years.
8.2 XXXXXXX'X RIGHT TO INDEMNIFICATION. Liteglow and LAC jointly and
severally undertake and agree to hold KJK and Xxxxxxx harmless against any and
all losses, costs, liabilities, claims, obligations and expenses, including
reasonable attorneys' fees, incurred or suffered by KJK or Xxxxxxx arising from
(i) the breach, misrepresentation or other violation of any covenants,
warranties and representations of Liteglow or LAC contained in this Agreement,
(ii) all liabilities of KJK or Xxxxxxx which are assumed by LAC pursuant to this
Agreement, and (iii) all liabilities of KJK accruing after Closing. This
indemnity provision shall survive Closing for a period of two (2) years.
8.3 PROCEDURE. If any claim or proceeding covered by the foregoing
agreements to indemnify and hold harmless shall arise, the party who seeks
indemnification (the "Indemnified Party") shall given written notice thereof to
the other party (the "Indemnitor") promptly (but in no event more than ten (10)
days) after it learns of the existence of such claim or proceeding. Any claim
for indemnification hereunder shall be accompanied by evidence demonstrating the
Indemnified Party's right or possible right to indemnification, including a copy
of all supporting documents relevant thereto. The Indemnitor shall have the
right to employ counsel reasonably acceptable to the Indemnified Party to defend
against any such claim or proceeding, or to compromise, settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that no settlement or compromise shall
be effected without the consent of the Indemnified Party, which consent shall
not be unreasonably withheld, and PROVIDED FURTHER that in the event the
Indemnified Party does not consent to a BONA FIDE offer of settlement made by a
third party and the settlement involves only the payment of money, then the
Indemnitor may, in lieu of payment of such settlement to such third party, pay
such amount to the Indemnified Party. After the payment to the Indemnified
Party, the Indemnitor shall have no further liability with respect to such claim
or proceeding and the Indemnified Party shall assume full responsibility to
defend the same. After notice from the Indemnitor to the Indemnified Party of
its election to assume the defense of such claim or proceeding, the Indemnitor
shall not be liable to the Indemnified Party under this paragraph for any legal
or other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof; PROVIDED, HOWEVER, that the Indemnified Party shall
have the right to employ counsel to represent it if, in the Indemnified Party's
sole judgment, it is advisable for the Indemnified Party to be represented by
separate counsel, and in that event the fees and expenses
- 11 -
12
of such separate counsel shall be paid by the Indemnified Party. The parties
will fully cooperate in any such action, making available to each other books or
records for the defense of any such claim or proceeding. If the Indemnitor fails
to acknowledge in writing its obligation to defend against or settle such claim
or proceeding within ten (10) days after receiving notice of the claim or
proceeding from the Indemnified Party (or such shorter time specified in the
notice as the circumstances of the matter may dictate), the Indemnified Party
shall be free to dispose of the matter, at the expense of the Indemnitor (but
subject to the Indemnitor's right subsequently to contest through appropriate
proceedings its obligation to provide indemnification), in any way which the
Indemnified Party deems in its best interest.
8.4 LIMITATIONS ON INDEMNIFICATION RIGHTS. Indemnification shall be due
only to the extent of the loss or damage actually suffered (i.e., reduced by any
offsetting or related asset or service received and by any recovery from any
third party, such as an insurer), net after the amount equal to any reduction in
federal, state or local income, franchise or other taxes occasioned by such loss
or damage (even though the tax return by which such reduction would have been
realized is not yet due), but including an amount equal to any increase in
federal, state and local income, franchise or other taxes occasioned by the
indemnification payment and then only to the extent of the excess over the
Agreed De Minimis Amount (hereinafter defined). In the event that Xxxxxxx is the
Indemnitor, the Indemnified Party shall first apply as a set-off any amount due
Xxxxxxx under Section 3.3. The Indemnitor shall be subrogated to all rights of
the Indemnified Party against any third party with respect to any claim for
which indemnification is paid. Notwithstanding the foregoing, the Indemnitor
shall not be liable to the Indemnified Party for any individual
misrepresentation, breach of warranty or violation of covenant where the
otherwise indemnifiable amount does not exceed $500.00 and, as regards all such
indemnifiable misrepresentations or breaches of warranty that do not exceed
$500, the Indemnitor shall not be liable except to the extent that the aggregate
amount thereof exceeds $1,000 (such sum being herein referred to as the "Agreed
De Minimis Amount"); PROVIDED, HOWEVER, that the Agreed De Minimis Amount shall
not apply with respect to the indemnification otherwise due for any third-party
claims.
ARTICLE IX
GENERAL PROVISIONS
9.1 BULK SALES ACT. The parties agree to waive compliance with any bulk
sales statute that may be applicable to the transactions contemplated by this
Agreement.
9.2 EXPENSES. Except as otherwise provided herein, each party shall pay
its own expenses incident to the negotiation and preparation of this Agreement
and the transaction contemplated hereby. All other recording costs for bills of
sale and other instruments of transfer, and all stamp, sales, use and transfer
taxes shall be paid by LAC.
9.3 NOTICES. All notices, requests, demands and other communications
pertaining to this Agreement shall be in writing and shall be deemed duly given
when delivered personally with a receipt, when delivered by an overnight courier
service or mailed by certified mail, return receipt requested, postage prepaid,
addressed as follows:
- 12 -
13
(a) To: Liteglow or LAC: Liteglow Industries, Inc.
0000 XX 00xx Xxxxx #000
Xxxxxxx Xxxxx, XX 00000
With a copy to: Xxxxxxxx X. Xxxxxxx, Esquire
Siegel, Lipman, Xxxxx & Xxxxxxx
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
(b) To KJK or Xxxxxxx: KJK Marketing, Inc.
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
With a copy to: Xx Xxxxxxxxx, Esquire
Suite I, 0000 Xxxxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Either party may change its address for notices by written notice to the other
given pursuant to this paragraph.
9.4 CERTAIN BREACHES. Neither party shall have any liability to the
other party with respect to a breach by a party of which the other party has
received written notice at or prior to Closing.
9.5 PRIOR NEGOTIATIONS. This Agreement supersedes in all respects all
prior and contemporaneous oral and written negotiations, understandings and
agreements between the parties with respect to the subject matter hereof. All of
said prior and contemporaneous negotiations, understandings and agreements are
merged herein and superseded hereby.
9.6 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Exhibits to
this Agreement set forth the entire understanding between the parties in
connection with the transaction contemplated herein, there being no terms,
conditions, warranties or representations other than those contained herein,
referenced herein or provided for herein. Neither this Agreement nor any term or
provision hereof may be altered or amended in any manner except as an instrument
in writing signed by the party against whom the enforcement of any such change
is sought.
9.7 EXHIBITS. The Exhibits attached hereto or referred to herein are a
material part of this Agreement, as if set forth in full herein. In the event
any Exhibit is not attached hereto at the time of execution of this Agreement,
KJK and Xxxxxxx shall attach such Exhibit as soon as practicable following the
date of execution of this Agreement.
9.8 SEVERABILITY. If any term of this Agreement is illegal or
enforceable at law or in equity, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or
impaired thereby. Any illegal or unenforceable term shall be deemed to be void
and of no force and effect only to the minimum extent necessary to bring such
term within the provisions of any applicable law or laws and such term, as so
modified, and the balance of this Agreement shall then be fully enforceable.
- 13 -
14
9.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Unless otherwise
specifically noted herein, the several representations, warranties and covenants
of the parties contained herein shall survive the closing for a period of two
(2) years from the Closing date. Thereafter neither party shall have any
liability to the other based upon any of the representations, warranties and
covenants set forth herein.
9.10 WAIVER. Unless otherwise specifically agreed in writing to the
contrary: (i) the failure of either party at any time to require performance by
the other of any provision of this Agreement shall not affect such party's right
thereafter to enforce the same, (ii) no waiver by either party of any default by
the other shall be taken or held to be a waiver by such party of any other
preceding or subsequent default, and (iii) no extension of time granted by
either party for the performance of any obligation or act by the other party
shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
9.11 NUMBER AND GENDER. Whenever the context so requires, words used in
the singular shall be construed to mean or include the plural and vice versa,
and pronouns of any gender shall be construed to mean or include any other
gender or genders.
9.12 HEADINGS AND CROSS-REFERENCES. The headings of this Agreement are
included for convenience of reference only, and shall in no way limit or affect
the meaning or interpretation of the specific provisions hereof. All
cross-references to paragraphs herein shall mean the paragraphs of this
Agreement unless otherwise stated or clearly required by the context. All
references to Exhibits herein shall mean the Exhibits to this Agreement. Words
such as "herein" and "hereof" shall be deemed to refer to this Agreement as a
whole and not to any particular provision of this Agreement unless otherwise
stated or clearly required by the context.
9.13 CHOICE OF LAWS. This Agreement is to be construed and governed by
the laws of the State of Florida, except for the choice of law rules utilized in
that jurisdiction.
9.14 ARBITRATION. Any dispute arising under or related to this
Agreement that the parties are unable to resolve by themselves shall be settled
by arbitration in the State of Florida, by a panel of three arbitrators.
Liteglow and LAC shall together designate one disinterested arbitrator and
Xxxxxxx shall designate another disinterested arbitrator, and the two
arbitrators so designated shall select the third arbitrator. The persons
selected as arbitrators need not be professional arbitrators, and persons such
as accountants, appraisers and bankers shall be acceptable. Before undertaking
to resolve the dispute, each arbitrator shall be duly sworn faithfully and
fairly to hear and examine the matters in controversy and to make a just award
according to the best of his or her understanding. The arbitration hearing shall
be conducted in accordance with the rules of the American Arbitration
Association. The written decision of a majority of the arbitrators shall be
final and binding on the parties. Costs and expenses of the arbitration
proceeding shall be assessed between the parties in a manner to be decided by a
majority of the arbitrators, and the assessment shall be set forth in the
decision and award of the arbitrators. No action at law or suit in equity based
upon any claim arising out of or relating to this Agreement shall be instituted
in any court by a party against another except an action to compel arbitration
pursuant to this paragraph, an action to enforce the award of the arbitration
panel rendered in accordance with this paragraph, or a suit for specific
performance as may be specifically provided herein.
- 14 -
15
9.15 SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
9.16 THIRD PARTIES. Nothing in this Agreement, whether expressed or
implied, is intended to (i) confer any rights or remedies on any person other
than the parties and their respective successors and assigns, (ii) relieve or
discharge the obligation or liability of any third party, or (iii) or give any
third party any right of subrogation or action against any party hereto.
9.17 COUNTERPARTS. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were on the same
instrument. Each of the counterparts, when signed, shall be deemed to be an
original, and all of the signed counterparts together shall be deemed to be one
and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written.
ATTEST: KJK Marketing, Inc., a Florida
corporation
By: /s/ Xxxxx Xxxxxxx
----------------------------------- -----------------------------------
Xxxxx Xxxxxxx, President
(Corporate Seal)
Liteglow Industries, Inc., a
Delaware corporation
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------- -----------------------------------
Xxxxxxx Xxxxxxxx, President
(Corporate Seal)
Liteglow Acquisition Corp., a
Florida corporation
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------- -----------------------------------
Xxxxxxx Xxxxxxxx, President
(Corporate Seal)
- 15 -
16
/s/ Xxxxx Xxxxxxx
----------------------------------- -----------------------------------
Xxxxx Xxxxxxx, individually
/s/ Xxxxxx Xxxxxxx
----------------------------------- -----------------------------------
Xxxxxx Xxxxxxx, individually
- 16 -
