AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CELTIC INVESTMENT, INC.
a Delaware Corporation
AND
SALT LAKE MORTGAGE CORP.
a Utah Corporation
AND
THE SHAREHOLDERS OF SALT LAKE MORTGAGE CORP.
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS..................................................................1
ARTICLE II
THE MERGER...................................................................4
2.1. The Merger.......................................................4
2.2. Effective Time...................................................4
2.3. Conversion of SLM Securities.....................................4
2.4. Effect of Conversion.............................................4
2.5. Conversion of Capital Stock of Celtic Merger Sub.................4
2.6. Exchange of Shares...............................................5
2.7. Reorganization...................................................5
2.8. Escrow of Shares.................................................5
ARTICLE III
THE SURVIVING CORPORATION AND AFFIRMATIVE COVENANTS..........................5
3.1. Surviving Corporation............................................5
3.2. Articles of Incorporation........................................6
3.3. Bylaws...........................................................6
3.4. Directors and Officers of SLM....................................6
3.5. Effect of Merger.................................................6
3.6. Directors and Officers of Celtic.................................6
3.7. Registration Rights..............................................6
3.8. Amendments to Articles of Incorporation & Bylaws of Celtic & SLM.7
3.9. Access to Information............................................7
3.10. Preemptive Rights................................................7
3.11. Rules 144 and 144A...............................................7
ARTICLE IV
CLOSING......................................................................7
4.1 Closing............................................................7
4.2 Documents at Closing...............................................8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND SLM.......................9
5.1. Shareholders.....................................................9
5.2. Restricted Shares to be Issued...................................9
5.3. Organization.....................................................9
5.4. Capitalization..................................................10
5.5. Reorganization and Securities Related Expenses..................10
5.6. Authority Relative to this Agreement............................11
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5.7. Approvals and Consents; Non-Contravention.......................12
5.8. Articles of Incorporation and Bylaws............................13
5.9. Financial Statements............................................13
5.10. No Undisclosed Material Liabilities............................14
5.11. Absence of Certain Changes or Events...........................14
5.12. Litigation and Proceedings.....................................15
5.13. Compliance with Laws, Rules and Regulations....................15
5.14. Contracts......................................................16
5.15. Material Contract Defaults.....................................16
5.16. Taxes and Tax Returns..........................................16
5.17. Subsidiaries...................................................17
5.18. Title and Related Matters......................................17
5.19. Intellectual Property..........................................17
5.20. Accounts Receivable............................................17
5.21. Insurance......................................................18
5.22. Environmental Matters..........................................18
5.23. Employees......................................................19
5.24. Relationships with Associates and Affiliates...................19
5.25. Brokers........................................................19
5.26. SLM Schedules..................................................19
5.27. Information....................................................21
5.28. Limitation on Liability........................................21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF CELTIC..........................22
6.1. Organization....................................................22
6.2. Capitalization..................................................22
6.3. Authority Relative to this Agreement............................23
6.4. Reorganization and Security Related Representations.............23
6.5. Approvals and Consents; Non-Contravention.......................24
6.6. Certificate of Incorporation and Bylaws.........................25
6.7. Financial Statements............................................25
6.8. No Undisclosed Material Liabilities.............................26
6.9. Absence of Certain Changes of Events............................26
6.10. Litigation and Proceedings.....................................27
6.11. Compliance with Laws, Rules and Regulations....................27
6.12. Contracts......................................................28
6.13. Material Contract Defaults.....................................28
6.14. Taxes and Tax Returns..........................................28
6.15. Subsidiaries..................................................29
6.16. Title and Related Matters......................................29
6.17. Intellectual Properties........................................29
6.18. Accounts Receivable............................................30
6.19. Insurance......................................................30
6.20. Environmental Matters..........................................30
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6.21. Employees......................................................31
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6.22. Relationships with Affiliates and Associates...................31
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6.23. Brokers........................................................32
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6.24. Celtic Schedules...............................................32
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6.25. Information....................................................33
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6.26. Additional Information Available...............................33
--------------------------------
6.27. Limitation on Liability........................................34
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ARTICLE VII
CONDUCT PRIOR TO CLOSING....................................................34
7.1. Conduct of Business.............................................34
7.2. Additional Covenants by SLM and SLM Shareholders and Celtic.....34
7.3. Access..........................................................35
7.4. Compliance with Blue Sky Law....................................36
7.5. Disclosure Supplements, Etc.....................................36
7.6. Reasonable Efforts..............................................36
7.7. Public Announcements............................................36
ARTICLE VIII
CONDITIONS OF SHAREHOLDERS..................................................37
8.1. Representations.................................................37
8.2. Compliance......................................................37
8.3. No Material Adverse Change......................................37
8.4. Certificate of Celtic...........................................37
8.5. Absence of Litigation...........................................37
8.6. Good Standing...................................................37
8.7. Employment Agreements...........................................37
8.8. Consents........................................................37
8.9. Advantage.......................................................38
8.10. Escrow Agreement...............................................38
8.11. Certificate....................................................38
ARTICLE IX
CONDITIONS OF CELTIC........................................................38
9.1. Representations.................................................38
9.2. Compliance......................................................38
9.3. No Material Adverse Change......................................38
9.4. Certificates of Shareholders and SLM............................38
9.5. Absence of Litigation...........................................38
9.6. Good Standing...................................................39
9.7. Investment Letters..............................................39
9.8. Form 8-K Financial Statements...................................39
9.9. Employment Agreements...........................................39
9.10. Consents.......................................................39
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9.11. Advantage......................................................39
9.12. Escrow Agreement...............................................39
9.13. Certificate....................................................39
ARTICLE X
INDEMNIFICATION, SURVIVAL, TERMINATION AND EXPENSES.........................39
10.1. Nature and Survival of Representations.........................39
10.2. Indemnification and Payment of Damages by Shareholders.........39
10.3. Indemnification and Payment of Damages by Celtic...............40
10.4. Limitations on Amount--Shareholder.............................40
10.5. Limitations on Amount--Celtic..................................41
10.6. Procedure for Indemnification--Third Party Claims..............41
10.7. Procedure for Indemnification--Other Claims....................42
10.8. Arbitration....................................................43
10.9. Exclusive Remedies.............................................44
10.10. Termination...................................................44
10.11. Effect of Termination.........................................45
ARTICLE XI
MISCELLANEOUS...............................................................45
11.1. Notices........................................................45
11.2. Entire Agreement...............................................46
11.3. Effect; Assignment.............................................46
11.4. Amendments; Waivers............................................46
11.5. Further Assurances.............................................46
11.6. Headings.......................................................46
11.7. Counterparts...................................................47
11.8. Severability...................................................47
11.9. Governing Law..................................................47
11.10. Legal Fees and Expenses.......................................47
11.11. Schedules, Exhibits and Amendments............................47
Attachments
Exhibit "A"--Articles of Merger
Exhibit "B"--List of SLM Shareholders
Exhibit "C"--Escrow Agreement
Exhibit "D"--Investment Letter
Exhibit "E"--Employment Agreement
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered into this 15th
day of January, 1997, by and between Celtic Investment, Inc., a Delaware
corporation ("Celtic"); Celtic Merger Sub, Inc., a Utah corporation and the
wholly-owned subsidiary of Celtic ("Celtic Merger Sub"); Salt Lake Mortgage
Corp., a Utah corporation, ("SLM"); and Xxxxx Xxxxxx, Xx. and Xxxxx X. Xxxxx,
the Shareholders of SLM ("Shareholders").
RECITALS
The Boards of Directors of Celtic and SLM have each determined that it is
advisable and in the best interests of their respective shareholders to enter
into this Agreement and to engage in the transactions contemplated hereby
pursuant to which Celtic Merger Sub will merge into SLM; and the outstanding
shares of the common stock of SLM will be converted into shares of common stock
of Celtic; and
The Shareholders and SLM have made certain representations to Celtic
concerning the status, operations and condition of SLM, which representations
are contained in this Agreement; and
Celtic has made certain representations to SLM and the Shareholders
concerning the status, operations and condition of Celtic, which representations
are contained in this Agreement;
The Boards of Directors of Celtic, Celtic Merger Sub and SLM have approved
the Merger agreed to herein;
AGREEMENT
In consideration of the mutual agreements, representations, warranties and
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
Article I
Definitions
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Associate"--when used to indicate a relationship with any Person, means
(i) a corporation or organization (other than such Person or a majority-owned
subsidiary of such Person) of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of ten (10) percent or more of any
class of equity securities, (ii) any trust or other estate in which such Person
has a substantial beneficial interest or as to which such Person serves as
trustee or in a similar capacity, and (iii) any Affiliate of such Person.
"Affiliate"--of a Person is a Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, such Person.
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"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district,
or other political subdivision of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or (b) a prudent individual could be expected to discover or
otherwise become aware
of such fact or other matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of such fact or other
matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact
or other matter if any individual who is serving, or who has at any time served,
as a director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter under the foregoing clauses (a) or (b).
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Order"--any award, decision, injunction, judgment, order, ruling or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
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"Ordinary Course of Business"--an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator; provided, however, that any
representation or warranty concerning "Proceedings", shall, with respect to
audits and investigations, be deemed made only to the Knowledge of the party
making such representation or warranty and such party shall not be deemed to be
required to make any inquiry of any Governmental Body concerning the pendency of
any investigation or audit with respect to itself or the subject matter of the
representation
"Prospects" -- shall be limited to the general business expansion plan of
a Person with respect only to potential new markets, potential new operations
and potential new lines of business which such Person is currently considering.
Prospects does not refer to any financial projections. Prospects are by their
very nature speculative and a Person shall not be deemed to represent, warrant
or guarantee that its Prospects will be ever be realized or that its Prospects
will not change from time to time.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Securities Exchange Act "-- the Securities Exchange Act of 1934 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any tax.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing) that
would lead a prudent Person to conclude that such a claim, Proceeding, dispute,
or other matter is likely to be asserted, commenced, taken, or otherwise pursued
in the future.
"Transaction" -- the Merger provided for and agreed to herein and all
employment matters, escrows and other matters and agreements provided for
herein.
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Article II
The Merger
2.1 The Merger. Subject to the terms and conditions of this Agreement and
the Revised Business Corporation Act of the State of Utah ("Utah Statute"), at
the Effective Time (as defined in Section 2.2 of this Agreement), Celtic Merger
Sub will be merged with and into SLM (the "Merger") whereupon the separate
existence of Celtic Merger Sub shall cease and SLM shall be the surviving
corporation ("Surviving Corporation").
2.2. Effective Time. The Merger shall become effective when properly
executed Articles of Merger in the form of those attached hereto as Exhibit A,
are duly filed with the Division of Corporations, Department of Commerce of the
State of Utah pursuant to the Utah Statute. The time at which such Articles of
Merger are filed shall be referred to in this Agreement as the "Effective Time"
and the date on which the Effective Time occurs is referred to in this Agreement
as the "Effective Date".
2.3. Conversion of SLM Securities. At the Effective Time, all shares of
common stock of SLM outstanding ("SLM Common Stock") shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted (
"Converted", "Conversion" or "Exchange") into shares of $.001 par value common
stock of Celtic ("Celtic Common Stock"). Each share of SLM Common Stock
outstanding immediately prior to the Effective Time shall be Converted into
approximately 11.1111 shares of Celtic Common Stock. At the Effective Date,
there will be 99,000 shares of SLM Common Stock issued and outstanding all of
which will be Converted into 1,100,000 shares of Celtic Common Stock. Attached
hereto as Exhibit "B", and by this reference made a part hereof, is a list of
the Shareholders of SLM which sets forth the number of shares of SLM Common
Stock owned by each and the number of shares of Celtic Common Stock to be issued
to each Shareholder in the Conversion. At the Effective Time, there will be
1,000 shares of SLM preferred stock issued and outstanding ("SLM Preferred
Stock"), none of which will be Converted into Celtic Common Stock but instead
all of which shall remain outstanding and unaffected by the Merger. Exhibit "B"
also describes such SLM Preferred Stock and the beneficial owner thereof.
2.4. Effect of Conversion. Each share certificate which immediately prior
to the Effective Time represented SLM Common Stock, shall be deemed for all
purposes at and after the Effective Time to evidence ownership of, and to
represent the number of shares of Celtic Common Stock into which the shares of
SLM Common Stock represented by such certificate immediately prior to the
Effective Time, have been Converted pursuant to Section 2.3 hereof. Each
Shareholder of SLM at the Effective Time shall, until such owner's certificate
for SLM Common Stock has been surrendered for transfer or exchange, be entitled
to exercise any voting and other rights with respect thereto and be entitled to
receive any dividends or other distributions, equivalent to the number of shares
of Celtic Common Stock into which the shares of SLM Common Stock represented by
such certificate have been Converted.
2.5. Conversion of Capital Stock of Celtic Merger Sub. At and as of the
Effective Time, each share of the common stock of Celtic Merger Sub shall be
converted into one share of common stock of the Surviving Corporation.
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2.6. Exchange of Shares. The exchange of share certificates shall be
effected by Celtic. Celtic shall deliver to the Shareholders certificates for
the shares of Celtic Common Stock to be Exchanged for stock certificates
representing all shares of SLM Common Stock pursuant to the terms of this
Agreement. Each holder of an outstanding certificate or certificates
representing SLM Common Stock shall be entitled, upon surrender of such
certificate(s) to Celtic, duly endorsed in blank or accompanied by stock powers
duly endorsed in blank, to receive a certificate representing the number of
shares of Celtic Common Stock into which SLM Common Stock shall have been
Converted pursuant to the Merger. All Celtic stock certificates issued to the
Shareholders at the Effective Time shall contain a legend substantially in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES ACT AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES ACTS; (B) CELTIC HAS BEEN FURNISHED WITH AN
OPINION OF COUNSEL, BOTH OF WHICH OPINION AND COUNSEL SHALL BE REASONABLY
ACCEPTABLE TO CELTIC, TO THE EFFECT THAT NO REGISTRATION IS LEGALLY
REQUIRED FOR SUCH TRANSFER; OR (C) THESE SECURITIES ARE SOLD IN COMPLIANCE
WITH RULE 144 PROMULGATED UNDER THE ACT.
No opinion of counsel shall be required with respect to the transfer of
shares from the Shareholders to the Escrow Agent or from the Escrow Agent to the
Shareholders.
2.7. Reorganization. It is the intent of the parties that the Merger will
qualify as a tax-free reorganization under Section 368(a)(1)(A) of the IRC and
will report the Merger accordingly for federal, state and local income tax
purposes. The parties acknowledge that no Person has obtained a revenue ruling
from the IRS or a legal opinion as to the tax consequences and effect of the
Merger.
2.8. Escrow of Shares. The parties agree that the value of SLM is based, in
part, upon its projected future earnings. Inasmuch as the amount of SLM's future
earnings are unknown, the Shareholders agree to deposit a portion of Celtic
Common Stock issued at the Effective Time into an escrow ("Escrow"). At the
Effective Time, 500,000 of the shares of Celtic Common Stock ("Escrow Shares")
issued to the Shareholders shall be deposited into Escrow and retained therein
and released therefrom pursuant to the Escrow Agreement ("Escrow Agreement")
attached hereto as Exhibit "C" and by this reference made a part hereof. The
Escrow Shares shall be released from the Escrow in accordance with the terms of
the Escrow Agreement.
Article III
The Surviving Corporation and Affirmative Covenants
3.1. Surviving Corporation. In the Merger, Celtic Merger Sub shall merge
into SLM and SLM shall be the Surviving Corporation.
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3.2. Articles of Incorporation. The Articles of Incorporation of SLM in
effect at the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until amended in accordance with applicable law.
3.3. Bylaws. The Bylaws of SLM in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation until amended.
3.4. Directors and Officers of SLM. From and after the Effective Time, the
directors and officers of SLM, the Surviving Corporation shall be as follows:
Directors Officers
Xxxxx Xxxxxx, Xx. Xxxxx Xxxxxx, Xx. - Chairman, CEO
President
Xxxxx Xxxxx Xxxxx Xxxxx - Vice President Sales and
Marketing/Secretary/Treasurer
Xxxxxxx X. Xxxxxx
Such officers and directors shall constitute the directors and officers of
the SLM to serve in accordance with the Bylaws of SLM until their respective
successors have been duly elected or appointed and qualified.
3.5. Effect of Merger. The Merger will have the effects specified in
Section 16-10a-1106 of the Utah Statute.
3.6. Directors and Officers of Celtic. Celtic shall, prior to the
Effective Time, take all action reasonably necessary to insure that the
Directors and Officers of Celtic shall, immediately after the Effective Time, be
as follows:
Directors Officers
Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx - President/CEO
Xxxxxx Talks Xxxxx Xxxxxxxx- Chief Financial Officer
Xxxxx Xxxx Xxxxx Xxxxxx, Xx. - Senior Vice President
Xxxxx Xxxxxx, Xx.
Xxxxxx Xxxxx
Such officers and directors shall constitute the directors and officers of
Celtic to serve in accordance with the Bylaws of Celtic until their respective
successors have been duly elected or appointed and qualified. At the next two
Annual Meetings of Celtic Shareholders, the Celtic Board of Directors shall
nominate Xxxxx Xxxxxx Xx. and Xxxxxx Xxxxx, as two of the nominees of the Celtic
Board of Director's slate of directors and recommend to the Celtic shareholders
such persons election as directors of Celtic.
3.7. Registration Rights. If, after the Effective Time, Celtic grants any
registration rights to any Person other than the Shareholders in connection with
an acquisition, merger or business combination of any type or kind in which any
security of Celtic is issued to such Person, then in
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such event, and at such time, the Shareholders shall be granted registration
rights which are equivalent to the registration rights granted to such other
Person in connection with such acquisition, merger or business combination.
3.8. Amendments to Articles of Incorporation and Bylaws of Celtic and SLM.
Following the Effective Time, the Boards of Directors of each of Celtic and SLM
shall appoint a committee of the Board to study each of such company's Articles
of Incorporation and Bylaws and to make recommendations for changes thereto to
the full Board of Directors of each company. The Boards of Directors of both
Celtic and SLM shall appoint Xxxxxxx X. Xxxxxx and Xxxxx Xxxxxx, Xx. to such
committees.
3.9. Access to Information. If, subsequent to the Effective Time, Celtic
is not required to file, and does not file, with the Securities and Exchange
Commission ("SEC"), the kind of reports ("Reports") it is currently required to
file under the Securities Exchange Act, it shall make available to the
Shareholders the information which would have been available to the Shareholders
if Celtic had filed such Reports with the SEC. However, the obligation to
provide Shareholders such information shall terminate at the time a Shareholder
is no longer a shareholder of Celtic.
3.10. Preemptive Rights. If, after the Effective Time, any Person who is a
Shareholder of Celtic at the Effective Time is granted the preemptive right to
purchase securities of Celtic, the Shareholders shall be granted equivalent
preemptive rights at such time.
3.11. Rules 144 and 144A. Celtic shall timely file the reports required to
be filed by it under the Securities Act and the Securities Exchange Act and the
rules and regulations adopted thereunder and will take such further action as
any Shareholder may reasonably request, all to the extent required from time to
time to enable such Shareholder to sell its Celtic Common Stock without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Securities and Exchange Commission. Upon the request of any Shareholder,
Celtic will deliver to such holder a written statement as to whether it has
complied with the requirements of this Section 3.11. If Celtic shall at any time
not be filing periodic reports under the Securities Exchange Act Celtic shall,
upon the request of any Shareholder, furnish in writing to such Shareholder
Celtic's most recent fiscal year end financial statements and Celtic's most
recent quarterly financial statements, if any, since its last fiscal year end
and a description of the nature of the business of Celtic and the products and
services it offers. The fiscal year end financial statements delivered hereunder
shall be audited.
Article IV
Closing
4.1 Closing. Prior to the Effective Time a closing (the "Closing") of the
Transaction shall take place for the purpose of confirming the satisfaction of,
or if permissible, waiver, of the conditions set forth in Articles VIII and IX
hereof. The Closing shall take place within seven days following the date on
which all conditions to each party's obligations hereunder have been satisfied
or waived and shall be held at such time and place as agreed to by the parties.
However, in no event will the Closing occur subsequent to January 31, 1997.
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4.2. Documents at Closing. At the Closing, the following transactions shall
occur, all of such transactions being deemed to occur simultaneously:
4.2.1. The Shareholders and SLM will deliver, or cause to be delivered, to
Celtic the following:
(a) Stock certificates for all of the issued and outstanding stock of SLM
duly endorsed;
(b) A certificate from the Division of Corporations of the State of
Utah dated at or about the Effective Date to the effect that SLM is in
good standing under the laws of said state and a certificate of good
standing from the appropriate state authorities of the state in which each
subsidiary of SLM is organized to the effect that each of such
subsidiaries is in good standing in the state in which it is organized;
(c) An Investment Letter in the form of Exhibit "D" attached hereto
from each Shareholder representing that he is acquiring the Celtic Common
Stock for investment purposes only and not with a view to further
distribution;
(d) A duly executed Escrow Agreement in the form attached hereto as Exhibit
"C"; and
(e) Such other instruments, documents and certificates as are
required to be delivered pursuant to the provisions of this Agreement or
which may be reasonably requested in furtherance of the provisions of this
Agreement.
4.2.2 Celtic will deliver or cause to be delivered to the Shareholders:
(a) Certificates for the Celtic Shares to be issued to the Shareholders;
(b) A duly executed Escrow Agreement in the form attached hereto as
Exhibit "C".
(c) Duly executed Employment Agreements in the forms attached hereto as
Exhibit "E-1" and "E-2";
(d) Duly executed Option Agreements in the forms attached hereto as Exhibit
"F-1" and "F-2";
(e) A certificate from the Secretary of State of the State of
Delaware dated at or about the Effective Date to the effect that Celtic is
in good standing under the laws of said state and a certificate of good
standing from the appropriate state authorities of the state in which each
subsidiary of Celtic is organized to the effect that each of such
subsidiaries is in good standing in the state in which it is organized;
and
(f) Such other instruments, documents and certificates as are
required to be delivered pursuant to the provisions of this Agreement or
which may be reasonably requested in furtherance of the provisions of this
Agreement.
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Article V
Representations and Warranties of
Shareholders and SLM
SLM and each of the Shareholders, individually and neither jointly nor
severally, represents and warrants to Celtic, except as disclosed in this
Agreement or in the case of any representation qualified by its terms to a
particular schedule ("Schedule") of SLM attached hereto ("SLM Schedule") such
specific SLM Schedule, that the statements made in this Article V will be
correct and complete at the Effective Time provided, however, if there is no
Effective Time, then no party shall be liable for any inaccuracy. For purposes
of this Article V, each and every reference to SLM shall mean and include SLM
and each subsidiary of SLM ("SLM Subsidiary") unless otherwise indicated. Each
representation and warranty made by SLM and the Shareholders relating to SLM,
shall be deemed to be a representation and warranty made by SLM and the
Shareholders for each SLM Subsidiary, except to the extent that a specific
representation or warranty does not relate to the existence, assets, liabilities
or operations of such SLM Subsidiary, and that the term SLM taken as a whole
shall mean SLM and all of its Subsidiaries.
5.1. Shareholders. Each of the Shareholders is the owner of all of the
issued and outstanding shares of the capital stock of SLM attributed to such
Shareholder on Exhibit "B"; each Shareholder has full legal title to all SLM
Shares described in Exhibit "B" as being owned by such Shareholder free from any
and all claims, liens or other encumbrances. Shareholders have the unqualified
right to sell, transfer and dispose of their SLM Shares subject to the laws of
bankruptcy, insolvency and general creditor's rights. Each Shareholder
represents and warrants that, in regards to such Shareholder's shares of SLM,
such Shareholder has the full right and authority to execute this Agreement and
to transfer his shares of SLM to Celtic.
5.2. Restricted Shares to be Issued. Each Shareholder understands and is
aware that the issuance of Celtic Shares at the Effective Time will be made
without registration under the Securities Act or under any state securities laws
and that the Shares may not be sold or transferred without registration under
the Securities Act and under applicable state securities laws or unless an
exemption from such registration is available. Each Shareholder understands that
the investment in the Celtic Shares is speculative and may remain so for an
indefinite period and each Shareholder hereby represents that he is able to bear
the economic risk of his investment in the Celtic Shares. All certificates
evidencing the Celtic Shares shall bear appropriate restrictive legends in
accordance with Section 2.6.
5.3. Organization. SLM is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah and has all requisite
corporate power and authority to own, lease and operate its assets and to carry
on its business as now being conducted, except where the failure to be so
existing and in good standing or to have such power and authority would not in
the aggregate have a material adverse effect on the business, operations or
financial condition of SLM taken as a whole. SLM is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or jurisdiction which requires such qualification. Attached hereto as
Schedule 5.3 are copies of Good Standing Certificates and Letters of SLM and the
SLM Subsidiaries.
9
5.3.1. Each SLM Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the state in which it is
organized and has all requisite corporate power and authority to own, lease and
operate its assets and to carry on its business as now being conducted, except
where the failure to be so existing and in good standing or to have such power
and authority would not in the aggregate have a material adverse effect on the
business, operations or financial condition of such SLM Subsidiary taken as a
whole. Each SLM Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or jurisdiction
which requires such qualification.
5.4. Capitalization. The entire authorized capital stock of SLM consists
of 1,050,000 shares of common stock having no par value, of which 99,000 shares
are currently issued and outstanding and of which not more than 99,000 will be
issued and outstanding at the Effective Time, and 10,000 shares of SLM Preferred
Stock having $100.00 par value, of which 1,000 shares are currently issued and
outstanding and of which not more than 1,000 will be issued and outstanding at
the Effective Time. There are no outstanding convertible securities, warrants,
options, or commitments of any nature which may cause authorized but unissued
shares of SLM Common Stock to be issued to any Person except as disclosed in
Schedule 5.4 attached hereto. At the Effective Time, all issued and outstanding
shares of SLM will have been duly authorized, validly issued, fully paid, and
non-assessable, and not issued in violation of the preemptive or other right of
any Person. None of the outstanding equity securities or other securities of SLM
was issued in violation of the Securities Act or any other Legal Requirement.
5.4.1 Each SLM Subsidiary is a wholly-owned subsidiary of SLM. The
entire authorized and issued capital stock of each SLM Subsidiary is set out on
Schedule 5.4.1. All of the outstanding capital stock reflected on such Schedule
5.4.1 is owned beneficially and of record by SLM. There are no outstanding
convertible securities, warrants, options or commitments of any nature which may
cause authorized but unissued shares of capital stock of any SLM Subsidiary to
be issued to any Person except as disclosed in Schedule 5.4.1.
Each share of outstanding capital stock of each SLM Subsidiary has been
duly authorized and validly issued, been fully paid for, is not assessable and
was not issued in violation of the pre-emptive or other rights of any Person.
5.5. Reorganization and Securities Related Representations.
5.5.1.There is no plan or intention by the Shareholders to sell,
exchange, or otherwise dispose of a number of shares of Celtic Common Stock
received in the Merger that would reduce the Shareholders' ownership of Celtic
stock to a number of shares having a value, as of the date of the Merger, of
less than 50% of the value of all of the formerly outstanding stock of SLM as of
the same date. The SLM Common Stock and shares of Celtic Common Stock held by
the Shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the Merger are considered in making this representation.
5.5.2.Following the Effective Time, SLM will hold at least 90% of
the fair market value of its net assets and at least 70% of the fair market
value of its gross assets, and at least 90% of the fair market value of Celtic
Merger Sub's net assets and at least 70% of the fair market value of Celtic
Merger Sub's gross assets held immediately prior to the Merger. For purposes of
10
this representation, amounts used by SLM or Celtic Merger Sub to pay
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by SLM are included as assets of SLM or Celtic
Merger Sub, respectively, immediately prior to the Merger.
5.5.3.SLM has no plan or intention to issue additional shares of
stock that would result in Celtic losing control of SLM within the meaning of
Section 368(c) of the IRC.
5.5.4.Following the Effective Time, SLM will continue its historic
business or use a significant portion of its historic business assets in its
business.
5.5.5.There is no intercorporate indebtedness existing between
Celtic and SLM, or between Celtic Merger Sub and SLM, which was issued,
acquired, or will be settled at a discount.
0.0.0.Xx the Effective Time, shares of SLM Common Stock representing
control of SLM as defined in Section 368(c) of the IRC, will be Exchanged solely
for voting stock of Celtic.
0.0.0.Xx the Effective Time, SLM will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in SLM that, if exercised or converted,
would affect Celtic's acquisition or retention of control of SLM, as defined in
Section 368(c) of the IRC.
5.5.8.SLM is not an investment company as defined in Section
368(a)(2)(f)(iii) and (iv) of the IRC.
5.5.9.On the Effective Date, the fair market value of the assets of
SLM will exceed the sum of its liabilities plus the amount of liabilities, if
any, to which the assets are subject.
5.5.10. SLM is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the IRC.
5.5.11. None of the compensation received by any
shareholder-employees of SLM will be separate consideration for, or allocable
to, any of their shares of SLM Common Stock; and the compensation paid to any
shareholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arms-length for
similar services.
5.5.12. No Order has been entered revoking or suspending for cause
any license, permit or other authority of any director or officer of SLM, or of
any corporation of which any such Person is an officer or director, to engage in
the securities business or in the sale of a particular security or temporarily
or permanently restraining or enjoining any such Person or any corporation of
which he is an officer or director from engaging in or continuing any conduct,
practice or employment in connection with the purchase or sale of securities, or
convicting such Person of any felony or misdemeanor involving a security or any
aspect of the securities business, or of any felony.
11
5.6. Authority Relative to this Agreement. SLM has full corporate power
and authority to execute and deliver this Agreement and to consummate the
Transaction. The execution and delivery of this Agreement and the consummation
of the Transaction have been duly and validly authorized by the Board of
Directors of SLM and have or will be duly and validly authorized by all of the
Shareholders and no other corporate action on the part of SLM are necessary to
authorize this Agreement or to consummate the Transaction. This Agreement has
been duly and validly executed and delivered by SLM and by each of the
Shareholders and constitutes a valid and binding agreement of SLM and the
Shareholders, enforceable against each of them in accordance with its terms
subject to the laws of bankruptcy, insolvency, general creditor's rights, and
equitable principles.
5.7. Approvals and Consents; Non-Contravention.
5.7.1. Except as set forth in Schedule 5.7.1, no material consent,
material approval, or other material action by, or notice to or material
registration or filing with, any governmental or administrative agency or
authority is required or necessary to be obtained by SLM or either Shareholder
in connection with the execution, delivery or performance of this Agreement by
SLM or either Shareholder or the consummation of the Transaction.
5.7.2. Except as set forth in schedule 5.7.2, no consent, approval,
waiver or other action by any Person under any material Contract or material
instrument, to which SLM or either Shareholder is a party or by which they or
any of their assets are bound, is required or necessary for the execution,
delivery, and performance of this Agreement by SLM or the consummation of the
Transaction. Each Shareholder represents with respect to himself and not with
respect to the other Shareholder, that no consent, approval, waiver or other
action by any Person under any material Contract or material instrument to which
such Shareholder is a party or by which it or any of its assets is bound, is
required or necessary for the execution, delivery, and performance of this
Agreement by SLM and the Shareholders, or the consummation of the Transaction.
5.7.3. Except as set forth in Schedule 5.7.3, the execution,
delivery, or performance of this Agreement by SLM and the Shareholders and the
consummation of the Transaction will not: (i) violate or conflict with the
charter documents or Bylaws of SLM; (ii) violate or conflict with any law,
regulation, Order or administrative interpretation applicable to SLM or any
Shareholder or by which they or any of their assets are bound, or any agreement
or understanding between any Governmental Body, on the one hand, and SLM on the
other hand; or (iii) violate or conflict with, result in a breach of, result in
or permit the acceleration or termination of, or constitute a default under any
material agreement, material instrument or material understanding to which SLM
is a party or by which it or any of its assets are bound excluding from the
foregoing clauses (ii) and (iii) such violations or conflicts which, in the
aggregate, could not reasonably be expected to have a material adverse affect on
the business, operations or financial condition of SLM taken as a whole.
Each Shareholder represents that, as to himself, and not as to any
other Shareholder, the execution, delivery and performance of this Agreement by
such Shareholder will not: (i) violate or conflict with any law, regulation,
Order, or administrative interpretation applicable to such Shareholder or by
which it or any of its assets are bound, or any agreement or understanding
between any Governmental Body on the one hand and such Shareholder on the other
hand or (ii) violate or conflict with, result in a breach of, or result in or
permit the acceleration
12
or termination of, or constitute a default under any material agreement,
material instrument or material understanding to which such Shareholder is a
party or by which it or any of its assets are bound, excluding from the
foregoing clause (i) such violations or conflicts which could not reasonably be
expected to have a material adverse affect on the ability of such Seller to
consummate the Transactions.
5.8. Articles of Incorporation and Bylaws. Attached hereto as Schedule 5.8
are true and correct copies of the Articles of Incorporation and Bylaws of SLM
and each SLM Subsidiary. Such Articles of Incorporation and Bylaws are in full
force and effect and no amendments are pending. SLM is not in violation of any
provision of its Certificate of Incorporation or Bylaws. Schedule 5.8 also
contains all Board of Director minutes and resolutions and all shareholder
minutes and resolutions of SLM and of each SLM Subsidiary from the date of their
inceptions.
5.9. Financial Statements. Attached hereto as Schedule 5.9 are unaudited
financial statements of SLM and each of the SLM Subsidiaries as of November
30,1996 ("SLM Management Reports") and audited financial statements of SLM (but
not the SLM Subsidiaries) for the years ended February 29, 1996 and February 28,
1995, together with the related footnotes and report thereon of Xxxxxxxx,
Xxxxxxxx & Xxxxxx X.X. (the "SLM Audited Financial Statements"). The SLM
Management Reports and the SLM Audited Financial Statements are hereafter
referred to as the "SLM Financial Statements." The parties acknowledge that
Celtic is required to file a Form 8-K with the Securities and Exchange
Commission within 15 days after the Effective Date. Such Form 8-K must contain
audited and other financial statements of SLM and any predecessor of SLM which
meet the requirements of such Form 8-K. The SLM Financial Statements are correct
and complete in all material respects and fairly present, in accordance with
generally accepted accounting principles, consistently applied, the financial
position of SLM as of such dates and the results of operations and changes in
financial position for such periods all in accordance with GAAP, (in the case of
the SLM Management Reports, GAAP as applicable to quarterly financial
statements) subject, in the case of the SLM Management Reports, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of the notes (that if
presented would not differ materially from those included in the SLM Audited
Financial Statements).
5.9.1. SLM (i) keeps books, records and accounts that, in reasonable
detail, accurately and fairly reflect (A) the transactions and dispositions of
assets of such entity and (B) the value of inventory calculated in accordance
with GAAP, and (ii) maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (A) transactions are executed in
accordance with management's general or specific authorization, (B) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets, (C) access to
assets is permitted only in accordance with management's general or specific
authorizations, and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
5.9.2.Neither SLM nor any employee, agent, consultant or
representative of SLM has made any payment of funds of SLM or received or
retained any funds in violation of any applicable law, rule or regulation.
13
5.9.3.Each Shareholder represents as to himself, and not the other
Shareholder, that he has not made any payment of funds of SLM or received or
retained any funds in violation of any applicable law, rule or regulation.
5.10. No Undisclosed Material Liabilities. SLM is not subject to any
material liability ($20,000 or more) of any kind whatsoever (whether accrued,
absolute, contingent, or otherwise) that are, individually or in the aggregate,
material to SLM taken as a whole other than:
(a) liabilities disclosed or provided for in the most recent SLM Financial
Statements;
(b) liabilities incurred in the Ordinary Course of Business since the date
of the Audited Financial Statements;
(c) liabilities contemplated by and arising under this Agreement or in
connection with the Transaction; and
(d) liabilities described in Schedule 5.10 attached hereto.
To the Knowledge of SLM and the Shareholders, there is no basis for the
imposition of any other liabilities which could reasonably be expected to have a
material adverse effect on the business, properties, assets or operations of SLM
taken as a whole.
5.11. Absence of Certain Changes or Events. Except (i) as contemplated by
this Agreement; and (ii) as disclosed in Schedule 5.11, since November 30,1996,
SLM has not:
(a) suffered any change in its business, operations, properties,
condition (financial or otherwise), or Prospects which has had, or to
Knowledge of SLM or the Shareholders, could reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
business, properties, assets or operations of SLM taken as a whole;
(b) suffered any damage, destruction or loss (whether or not covered
by insurance) with respect to any of its properties or assets which has
had, or to the Knowledge of SLM or the Shareholders, could reasonably be
expected to have, individually or in the aggregate, a material adverse
effect on the business, properties, assets or operations of SLM taken as a
whole;
(c) except in the Ordinary Course of Business, incurred any
liability or obligation (absolute, accrued, contingent or otherwise), in
an amount in excess of $20,000;
(d) changed any of its accounting methods, principles or practices;
(e) revalued any asset, other than due to depreciation or amortization;
(f) paid, discharged or satisfied any claim, liability or obligation not
reflected in the SLM Financial Statements in an amount in excess of $20,000;
14
(g) except in the Ordinary Course of Business, entered into any
commitment or transaction material to SLM taken as a whole in an amount in
excess of $20,000;
(h) declared, set aside or paid any dividend or distribution in
respect of any capital stock, or redeemed, purchased or otherwise acquired
any of these securities or modified its capitalization;
(i) increased or established any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards),
stock purchase or other employee benefit plan, or otherwise changed the
compensation payable or to become payable to any officer or key employees
of SLM;
(j) except in the Ordinary Course of Business, canceled or written off any
debts or waived any claims in an amount in excess of $20,000;
(k) except in the Ordinary Course of Business, transferred any
assets in an amount in excess of $20,000 or made capital expenditures and
commitments in an amount in excess of $20,000 in the aggregate;
(l) paid or loaned (other than payment of salaries or benefits or
reimbursement of expenses) any amount to, or sold, transferred or leased
any properties or assets to, or entered into any contract with, any of its
officers or directors, or any Affiliate or Associate of any of its
officers or directors;
(m) increased its reserves for bad debts, guaranteed any obligation, except
in the Ordinary Course of Business, or indemnified any Person; or
(n) agreed (whether or not in writing) to do any of the foregoing.
5.12. Litigation and Proceedings. Except as set forth in the Schedule
5.12, there is no claim or Proceeding pending or, to the Knowledge of any of the
Shareholders or SLM, Threatened against SLM or any Shareholder, or any property
or asset of SLM, by any Person or any Governmental Authority which (i) is
reasonably likely to have, individually and in the aggregate, a material adverse
effect on the business, assets or operations of SLM taken as a whole or (ii)
seeks to delay or prevent the consummation of the Transaction. As of the date
hereof, neither SLM nor any property or asset of SLM, is subject to any Order.
To the Knowledge of SLM and the Shareholders, there is no basis for any claim,
action or Proceeding against SLM which could reasonably be expected to have a
material adverse effect on the business assets, operations or financial
condition of SLM taken as a whole.
5.13. Compliance with Laws, Rules and Regulations. Schedule 5.13 sets
forth all material governmental licenses, material permits and other material
Governmental Authorizations (or requests or applications therefor) pursuant to
which SLM carries on its business. To the Knowledge of SLM and the Shareholders,
SLM complies with all applicable federal laws, rules, regulations and all
applicable state and local laws, rules and regulations relating to the operation
of its business, except to the extent that non-compliance could reasonably be
expected to
15
materially and adversely affect the business, operations, properties, assets or
condition of SLM taken as a whole or except to the extent that non-compliance
would not result in the occurrence of any material liability for SLM taken as a
whole.
5.14. Contracts. Schedule 5.14 sets forth a complete and correct list of
all leases and all material Contracts to which SLM is a party or by which any of
its properties or assets are bound. To the Knowledge of SLM and the
Shareholders, and subject to the laws of bankruptcy, insolvency, general
creditor's rights, and equitable principles, all such leases and Contracts are
valid and enforceable in all material respects. For purposes of this Section
5.14, a "Material" agreement is an agreement which can reasonably be expected to
involve more than $20,000.
5.15. Material Contract Defaults. Except as set forth in Schedule 5.15, to
the Knowledge of SLM and the Shareholders, SLM is not in default under the terms
of any outstanding Contract, license, lease, or other commitment which is
material to the business, operations, assets, or condition of SLM, and no event
has occurred or circumstances exist which, with notice or lapse of time or both,
would constitute a default under any such Contract, license, or other commitment
other than any defaults which could not reasonably be expected to have a
material adverse effect on the business, assets, operations or financial
condition of SLM taken as a whole.
5.16. Taxes and Tax Returns. All Tax Returns with respect to taxes based
upon net income filed by SLM since its inception are set forth in Schedule 5.16
attached hereto. SLM has filed all Tax Returns required to be filed by it and
has paid and discharged all taxes shown as due thereon and has paid all taxes
when due, other than such payments as are being contested in good faith by
appropriate Proceedings and as to which sufficient reserves have been
established. Neither the IRS nor any other taxing authority or agency, domestic
or foreign, is now asserting or, to the Knowledge of SLM and the Shareholders,
has Threatened to assess against SLM, any deficiency or claim for additional
taxes or interest thereon or penalties in connection therewith. SLM has not
granted any waiver of any statute of limitations with respect to, or agreed to
any extension of the period for the assessment of, any tax. SLM has properly
reported on Form 1099 all amounts paid to consultants and no consultant or other
person to whom a payment has been made by SLM should be classified as an
employee under the IRC.
All Tax Returns filed by SLM are true, correct and complete in all
material respects and accurately set forth all items to the extent required to
be reflected or included in such returns by applicable law. SLM is not a party
to any tax sharing agreement.
SLM has not agreed, and is not required, to make any adjustments pursuant
to Section 481(a) of the IRC or any similar provision of state or local law by
reason of a change in accounting method initiated by it or any other relevant
party. To the Knowledge of SLM and each Shareholder, the IRS has not proposed
any such adjustment or change in accounting method. No application is pending
with any taxing authority requesting permission for any changes in accounting
methods that relate to the business or assets of SLM.
5.16.1. The accruals and reserves for taxes reflected in the most
recent balance sheet ("SLM Balance Sheet") included in the SLM Financial
Statements are adequate to cover all taxes accruable through such date
(including interest and penalties, if any, thereon) in accordance with generally
accepted accounting principles consistently applied. The term "tax" or "taxes"
means
00
xxxxxxx xxxxx, xxxxx, xxxxxxx, and other taxes, including without limitation,
income taxes, estimated taxes, alternative minimum taxes, excise taxes, sales
taxes, use taxes, value-added taxes, gross receipts taxes, withholding taxes,
stamp taxes, transfer taxes, windfall profit taxes, environmental taxes and
property taxes, whether or not measured in whole or in part by net income, and
all deficiencies, or other additions to tax, interest, fines and penalties.
5.17. Subsidiaries. Except as set forth in Schedule 5.4.1., SLM has no
Subsidiaries and does not own any capital stock, security, partnership interest,
or other interest of any kind in any corporation, partnership, joint venture,
association, limited liability company or other entity.
5.18. Title and Related Matters. SLM has good and marketable title to all
of its assets which are reflected in the SLM Management Reports or acquired
after that date (except properties, interests in properties, and assets sold or
otherwise disposed of since such date in the Ordinary Course of Business), free
and clear of all mortgages, liens, pledges, charges or encumbrances, except (i)
statutory liens or claims not yet delinquent; (ii) such imperfections of title
and easements as do not and will not materially detract from or interfere with
the present or proposed use of the assets or properties subject thereto or
affected thereby or otherwise materially impair present business operations on
such properties or in connection with such assets; and (iii) such liens as are
described or referred to in the SLM Financial Statements or in the SLM
Schedules. SLM owns, free and clear of any liens, claims, encumbrances, royalty
interests and other restrictions or limitations of any nature whatsoever, or
otherwise has the legal right to use, any and all procedures, techniques,
business plans, methods of management and other information utilized in the
conduct of its business or operations, whether or not the value thereof is
reflected in the SLM Management Reports. The offices and equipment of SLM that
are necessary or used in the operations of its business are in good operating
condition and repair, normal wear and tear excepted.
5.19. Intellectual Property. Schedule 5.19 hereto contains a complete list
and description of all SLM's United States and foreign (a) patents and patent
applications; (b) trademark registrations and applications for trademark
registrations; (c) copyright registrations and applications for copyright
registrations; (d) unregistered trademarks, trade names, service marks and
copyrights; and (e) unpatented trade secrets. SLM wholly owns the exclusive
rights to all of the above-described intellectual property and there are no
existing, or to the Knowledge of SLM and the Shareholders, Threatened claims of
any third party challenging the ownership, scope or validity of any of such
intellectual property; to the Knowledge of SLM and the Shareholders, there is no
infringing use by any Person or entity of any such intellectual property; and,
except as set forth in Schedule 5.19, to the Knowledge of SLM and Shareholders,
there has been no disclosure of any of the trade secrets to any Person other
than Persons who have executed confidentiality/non-competition agreements.
5.20. Accounts Receivable. To the Knowledge of SLM and the Shareholders,
all of SLM's accounts receivable arose in the Ordinary Course of Business, are
"arms length" (other than employee advances which are described in Schedule
5.20), bona fide and correctly reflected in SLM's books and records. To the
Knowledge of SLM and the Shareholders, all of SLM's accounts receivable (net of
reserves for doubtful accounts set forth on SLM's financial records) are
collectible in accordance with their terms. To the Knowledge of SLM and the
Shareholders, none of SLM's accounts receivable is subject to any set off,
counterclaim or adjustment by reason of any product
17
liability, breach of warranty, Contract, accounting error or other claim except
for adjustments resulting from the settlement of escrows, none of which is
material.
5.21. Insurance. SLM currently maintains the insurance policies described
on the attached Schedule 5.21 which sets out the type of insurance, insurer,
policy number, expiration date, whether such insurance is written on a claims
made or occurrence basis, the deductible and policy limit.
5.22. Environmental Matters.
5.22.1. Neither SLM nor any predecessor of SLM (i) has violated or
is in violation of any Environmental Law; (ii) has owned or leased properties
(including, without limitation, soils and surface and ground waters) which are
contaminated with any Hazardous Substance; (iii) is liable for any off-site
contamination; (iv) actually or potentially (other than as a result of a
foreclosure action of a mortgage interest) or, to the Knowledge of SLM and the
Shareholders, liable under any Environmental Law (including, without limitation,
pending or Threatened liens); (v) has failed to obtain all permits, licenses and
other authorization required to be obtained by it under any Environmental Law
("SLM Environmental Permits"); and (vi) has failed to be in compliance with the
SLM Environmental Permits.
5.22.2. To the Knowledge of SLM and the Shareholders, neither SLM
nor any of its predecessors, or their respective subsidiaries or joint ventures
have any material Environmental Liabilities, and none of such entities has had
within the five (5) years preceding the date hereof a material release of
Hazardous Substances into the environment in violation of any Environmental Law
or Environmental Permit.
5.22.3. For the purposes of this Section 5.22, the following terms have the
following meanings:
"Environmental Laws" shall mean any and all Federal, state and local
laws (including case law), regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions relating to
(i) human health, the environment or to emissions, discharges or releases
of pollutants, contaminants, Hazardous Substances or wastes into the
environment; (ii) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof; or (iii) the pollution of the environment or the
protection of human health.
"Environmental Liabilities" shall mean all liabilities, whether
vested or unvested, contingent or fixed, which (i) arise under or relate
to Environmental Laws and (ii) relate to actions occurring or conditions
existing on or prior to the Effective Time.
"Hazardous Substances" shall mean (i) those substances defined in or
regulated under the following federal statutes and their state counterparts, as
each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resources Conservation and Recovery
Act, the Comprehensive Environmental
18
Response, Compensation and Liability Act, the Clean Air Act, the Safe
Drinking Water Act (Clean Water Act), the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act and the Substances Control
Act; (ii) petroleum and petroleum products including crude oil and any
fractions thereof; (iii) natural gas, synthetic gas, natural gas liquids
and any mixtures thereof; (iv) radon; (v) any other contaminant; and (vi)
any substance with respect to which a Governmental Authority requires
environmental investigation, monitoring, reporting or remediation
5.23. Employees. Schedule 5.23 contains a complete and accurate list of
the following information for each employee, consultant, representative
(excluding real estate agents and loan officers) or director of SLM, including
each employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since
December 31, 1995; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under any pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other employee pension benefit plan or employee welfare benefit
plan, or any other employee benefit plan or any director plan.
5.23.1. No employee, consultant, representative or director of SLM
is a party to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, non-competition, or proprietary rights agreement, between
such employee, consultant, representative or director and any other Person
("Proprietary Rights Agreement") that in any way materially adversely affects or
could reasonably be expected to materially adversely affect (i) the performance
of his duties as an employee or director of SLM, or (ii) the ability of SLM to
conduct its business. To the Knowledge of SLM and Shareholders, no director,
officer, or other key employee of SLM intends to terminate his employment with
SLM; provided, however, that for purposes of this Section 5.23.1, neither SLM
nor any Shareholder shall be deemed to be obligated to make any inquiry of any
director, officer or key employee concerning their intention to terminate their
employment with SLM.
5.24. Relationships with Associates and Affiliates. Except as set forth in
Schedule 5.24, no Shareholder nor any Associate or Affiliate of any Shareholder
has, or since January 1, 1994 has had, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to SLM. Except as set forth in Schedule 5.24, no Shareholder nor any
Associate or Affiliate of any Shareholder is, or since January 1, 1994 has owned
(of record or as a beneficial owner) an equity interest or any other financial
or profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with SLM, other than business dealings or
transactions conducted in the Ordinary Course of Business at substantially
prevailing market prices and on substantially prevailing market terms, or (ii)
engaged in competition with SLM with respect to any line of the products or
services of SLM (a "Competing Business") in any market presently served by SLM.
Except as set forth in Schedule 5.24, no Shareholder and no Associate or
Affiliate of any Shareholder is a party to any Contract with, or has any claim
or right against, SLM.
5.25. Brokers. Neither SLM nor any Shareholder, has incurred nor will any
of them incur, any brokerage, finder's, or similar fee in connection with the
Transaction.
19
5.26. SLM Schedules. Prior to Closing, SLM shall deliver to Celtic the
following schedules (collectively "SLM Schedules") which consist of separate
schedules dated as of the date of execution of this Agreement and instruments
and data as of such date, all certified by the chief executive officer of SLM
and by the Shareholders as complete, true, and correct in all material respects:
(a) A Schedule containing copies of Good Standing Certificates and
Letters of SLM and the SLM Subsidiaries (Schedule 5.3).
(b) A Schedule describing any and all options, warrants or other
rights to purchase the securities of SLM, together with copies of any
documents relating thereto (Schedule 5.4);
(c) A Schedule describing the authorized and issued capital stock of
each SLM Subsidiary and the owners thereof, and a description of any
outstanding warrant, option or other right to purchase the securities of
each SLM Subsidiary (Schedule 5.4.1);
(d) A Schedule describing required notifications regarding change of
control (Schedule 5.7.1);
(e) A Schedule describing required notifications regarding change of
control (Schedule 5.7.2);
(f) A Schedule describing required notifications regarding change of
control (Schedule 5.7.3);
(g) A Schedule containing complete and correct copies of the
Articles of Incorporation and Bylaws, as amended, of SLM and each SLM
Subsidiary in effect as of the date of this Agreement and all Board of
Director and Shareholder minutes and resolutions adopted since their
respective incorporations (Schedule 5.8);
(h) A Schedule including SLM Financial Statements (Schedule 5.9);
(i) A Schedule of all liabilities (which are in the amount of
$20,000 or more) included on the SLM Financial Statements or arising
thereafter. This Schedule shall be updated as of the Effective Date and
such updated Schedule shall be delivered to Celtic immediately prior to
the Effective Time (Schedule 5.10);
(j) A Schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or
condition of SLM since the date of SLM Financial Statements (Schedule
5.11);
(k) A Schedule describing any and all litigation or proceeding to
which SLM is a party or Threatened to be party or which may otherwise
affect SLM, its business or assets (Schedule 5.12);
20
(l) A Schedule describing all material governmental licenses,
material permits and other material Governmental Authorizations (or
requests or applications therefor) pursuant to which SLM carries on or
proposes to carry on its business (except those which, in the aggregate,
are immaterial to the present or proposed business of SLM) (Schedule
5.13);
(m) A Schedule containing a description of all leases and all material
Contracts of SLM (Schedule 5.14);
(n) A Schedule relating to Material Contract defaults (Schedule 5.15);
(o) A Schedule containing copies of all Tax Returns of SLM (Schedule 5.16);
(p) A Schedule of all intellectual property owned by SLM (Schedule 5.19);
(q) A Schedule describing all employee advances (Schedule 5.20);
(r) A Schedule of all insurance maintained by SLM (Schedule 5.21);
(s) A Schedule containing copies of employee information (Schedule 5.23);
(t) A Schedule describing transactions with Shareholders, Associates or
Affiliates (Schedule 5.24);
(u) A Schedule of all other documents, disclosures, or representations
required to be disclosed by this Agreement or required to be disclosed in order
to set forth all material facts regarding SLM.
5.26.1. The SLM Schedules delivered pursuant this Agreement are
qualified in their entirety by reference to specific provisions of this
Agreement, and are not intended to constitute, and shall not be construed as
constituting, independent representations and warranties of the Shareholders to
any extent. The SLM Schedules may include items or information which the
Shareholders are not required to disclose under this Agreement; disclosure of
such items or information shall not affect (directly or indirectly) the
interpretation of this Agreement or the scope of the disclosure obligation under
this Agreement, including, without limitation, any assessment of whether any
matter arose or any agreement was entered into in the Ordinary Course of
Business. Inclusion of information herein shall not be construed to establish a
specific definition or level of what is material to the business, assets,
financial position, operations or results of operations of SLM other than what
is provided in the representations or warranties themselves.
5.26.2. SLM may provide additional schedules to qualify one or more
of the representations and warranties of SLM and the Shareholders in whole or in
part and any such Schedule so delivered in accordance with Section 5.26 shall
constitute an SLM Schedule and qualify and limit the representations and
warranties of SLM and the Shareholders for all purposes of this Agreement to the
same extent as if such Schedule were referred to in this Agreement. The
descriptions of the SLM Schedules set out in this Section 5.26 are for
convenience of reference only and not intended to modify, or to constitute
additional, representations or warranties to any
21
extent or for any purpose. In the event of any discrepancy or conflict between
the description of an SLM Schedule as set out in this Section 5.26 and the
actual language of the representation or warranty, the actual language of the
representation or warranty shall control for all purposes and this Section 5.26
shall not be used to interpret their meaning to any extent or for any purpose.
5.27. Information. Each Shareholder represents unto himself and not as to
the other Shareholder that he has not failed to disclose any information known
to such Shareholder relating to SLM that is material to a decision to purchase
the SLM Shares. To the Knowledge of each Shareholder, none of the
representations or warranties contained in Article V of this Agreement contain
any untrue statement of material fact or omits to state a material fact required
to make the statements contained therein not misleading in light of the
circumstances under which they were made.
5.28. Limitation on Liability. Notwithstanding anything to the contrary
contained in this Agreement, neither SLM nor either of the Shareholders shall
have any liability for any misrepresentation or breach of any representation or
warranty contained in this Article V if Celtic has actual knowledge (rather than
Knowledge) of such misrepresentation or breach.
Article VI
Representations And Warranties of Celtic
Celtic represents and warrants to SLM and to each Shareholder except as
disclosed in this Agreement or in the case of any representation qualified by
its terms to a particular schedule ("Schedule") of Celtic ("Celtic Schedule"),
such specific Celtic Schedule, that the statements made in this Article VI will
be correct and complete at the Effective Time provided, however, that if there
is no Effective Time, then no party shall be liable for any inaccuracy. For
purposes of this Article VI, each and every reference to Celtic shall mean and
include Celtic and each subsidiary of Celtic ("Celtic Subsidiary") unless
otherwise indicated. Each representation and warranty made by Celtic relating to
Celtic shall be deemed to be a representation and warranty made by Celtic for
each Celtic Subsidiary, except to the extent that a specific representation or
warranty does not relate to the existence, assets, liabilities or operations of
each Celtic Subsidiary.
6.1. Organization. Celtic is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so existing and in good standing or to have such power and
authority would not in the aggregate have a materially adverse effect on the
business, operations or financial condition of Celtic taken as a whole, and that
the term Celtic taken as a whole shall mean Celtic and all of its Subsidiaries.
Celtic is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or jurisdiction which requires such
qualification. Attached hereto as Schedule 6.1 are copies of Good Standing
Certificates of Celtic and the Celtic Subsidiaries.
6.1.1. Each Celtic Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the state in which it is
organized and has all requisite corporate power and authority to own, lease and
operate its assets and to carry on its business as now being conducted, except
where the failure to be so existing and in good standing or to have such power
22
and authority would not in the aggregate have a material adverse effect on the
business, operations or financial condition of such Celtic Subsidiary taken as a
whole. Each Celtic Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or jurisdiction
which requires such qualification.
6.2. Capitalization. The entire authorized capital stock of Celtic
consists of 25,000,000 shares of common stock, $.001 par value of which
3,306,471 shares are currently issued and outstanding. Celtic also has 7,500,000
shares of Preferred Stock authorized, none of which are issued or outstanding.
There are no outstanding convertible securities, warrants, options, or
commitments of any nature which may cause authorized but unissued shares of
Celtic Common Stock or Preferred Stock to be issued to any Person except as
disclosed in Schedule 6.2 attached hereto. From and at the Effective Time, all
issued and outstanding shares of Celtic will have been duly authorized, validly
issued, fully paid, and non-assessable, and not issued in violation of the
pre-emptive or other right of any Person. None of the outstanding equity
securities or other securities of Celtic was issued in violation of the
Securities Act or any other Legal Requirement.
6.2.1 Each Celtic Subsidiary is a wholly-owned subsidiary of Celtic.
Schedule 6.2 sets out a list of all registration rights and preemptive rights
granted by Celtic to any holder of its capital stock or any convertible
securities, warrants, options or commitments of any nature which may require
Celtic to issue any shares of Celtic Common Stock. Celtic is not obligated to
repurchase or redeem any of its outstanding shares of capital stock or any share
of its capital stock which may become issuable upon exercise of any rights under
any convertible securities, warrants, options or commitments of any nature which
may require Celtic to issue any shares of Celtic Common Stock.
6.3. Authority Relative to this Agreement. Each of Celtic and Celtic
Merger Sub has the full corporate power and authority to execute and deliver
this Agreement and to consummate the Transaction which includes, but is not
limited, the issuance of the Celtic Common Stock to the Shareholders in the
Merger, the execution and delivery of Employment Agreements, the execution and
delivery of Option Agreements and the execution and delivery of an Escrow
Agreement. The execution and delivery of this Agreement and the consummation of
the Transaction have been duly and validly authorized by the Board of Directors
of Celtic and Celtic Merger Sub, and no other corporate action on the part of
Celtic or Celtic Merger Sub are necessary or required to authorize this
Agreement or to consummate the Transaction. This Agreement has been duly and
validly executed and delivered by Celtic and constitutes a valid and binding
agreement of Celtic, enforceable against it in accordance with its terms subject
to the laws of bankruptcy, insolvency, general creditor's rights, and equitable
principles.
6.4. Reorganization and Securities Related Representations.
6.4.1.The fair market value of the Celtic Common Stock received by
each Shareholder of SLM in the Merger will be approximately equal to the fair
market value of the SLM Common Stock surrendered in the Exchange.
6.4.2.Following the Effective Time, SLM will hold at least 90% of
the fair market value of its net assets and at least 70% of the fair market
value of its gross assets, and at least 90% of the fair market value of Celtic
Merger Sub's net assets and at least 70% of the fair market
23
value of Celtic Merger Sub's gross assets held immediately prior to the Merger.
For purposes of this representation, amounts used by SLM or Celtic Merger Sub to
pay reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by SLM are included as assets of SLM or Celtic
Merger Sub, respectively, immediately prior to the Effective Time.
6.4.3.Immediately prior to the Effective Time, Celtic will be in
control of Celtic Merger Sub within the meaning of Section 368(c) of the IRC.
6.4.4 Celtic has no plan or intention to reacquire any of its stock issued
in the Merger.
6.4.5.Celtic has no plan or intention to liquidate SLM, to merge SLM
with or into another corporation; to sell or otherwise dispose of the stock of
SLM except for transfers of stock to corporations controlled by Celtic; or to
cause SLM to sell or otherwise dispose of any of its assets or any of the assets
acquired from Celtic Merger Sub, except for dispositions made in the Ordinary
Course of Business or transfers of assets to a corporation controlled by SLM.
6.4.6.Celtic Merger Sub will have no liabilities assumed by SLM and
will not transfer to SLM any assets subject to liabilities in the Merger.
6.4.7.Following the Effective Time, SLM will continue its historic
business or use a significant portion of its historic business assets in its
business.
6.4.8.There is no intercorporate indebtedness existing between
Celtic and SLM, or between Celtic Merger Sub and SLM, which was issued,
acquired, or will be settled at a discount.
0.0.0.Xx the Merger, shares of SLM stock representing control of SLM
as defined in Section 368(c) of the IRC, will be Exchanged solely for voting
stock of Celtic.
6.4.10. Celtic does not own, nor has it owned during the past five years,
any shares of the stock of SLM.
6.4.11. Celtic is not an investment company as defined in Section
368(a)(2)(f)(iii) and (iv) of the IRC.
6.4.12. None of the compensation received by any
shareholder-employees of SLM will be separate consideration for, or allocable
to, any of their shares of SLM stock; and the compensation paid to any
shareholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arms-length for
similar services.
6.4.13. No Order has been entered revoking or suspending for cause
any license, permit or other authority of any director or officer of Celtic, or
of any corporation of which such Person is an officer or director, to engage in
the securities business or in the sale of a particular security or temporarily
or permanently restraining or enjoining any such Person or any corporation of
which he is an officer or director from engaging in or continuing any conduct,
practice or
24
employment in connection with the purchase or sale of securities, or convicting
such Person of any felony or misdemeanor involving a security or any aspect of
the securities business, or of any felony.
6.5. Approvals and Consents; Non-Contravention.
6.5.1. No material consent, material approval, or other material
action by, or notice to a material registration or filing with, any governmental
or administrative agency or authority is required or necessary to be obtained by
Celtic in connection with the execution, delivery or performance of this
Agreement by Celtic or the consummation of the transactions contemplated by this
Agreement.
6.5.2. No consent, approval, waiver or other action by any Person
under any material Contract or material instrument to which Celtic is a party or
by which it or any of its assets are bound, is required or necessary for the
execution, delivery, and performance of this Agreement by Celtic or the
consummation of the Transaction.
6.5.3. The execution, delivery, or performance of this Agreement by
Celtic and the consummation of the Transactions contemplated by this Agreement
will not: (i) violate or conflict with the charter documents or Bylaws of Celtic
(ii) violate or conflict with any law, regulation, Order or administrative
interpretation applicable to Celtic or by which it or any of its assets are
bound, or any agreement or understanding between any Governmental Body, on the
one hand, and Celtic on the other hand; or (iii) violate or conflict with,
result in a breach of, result in or permit the acceleration or termination of,
or constitute a default under any material agreement, material instrument or
material understanding to which Celtic is a party or by which it or any of its
assets are bound excluding from the foregoing clauses (ii) and (iii) such
violations or conflicts which, in the aggregate, could not reasonably be
expected to have a material adverse affect on the business, operations or
financial condition of Celtic taken as a whole.
6.6. Certificate of Incorporation and Bylaws. Attached hereto as Schedule
6.6 are true and correct copies of the Certificate of Incorporation and Bylaws
of Celtic and each Celtic Subsidiary. Such Certificate of Incorporation and
Bylaws are in full force and effect and no amendments are pending. Celtic is not
in violation of any provision of its Certificate of Incorporation or Bylaws.
Schedule 6.6 also contains all Board of Director minutes and resolutions and all
Shareholder minutes and resolutions of Celtic and of each Celtic Subsidiary from
the date of their inceptions.
6.7 Financial Statements. Attached hereto as Schedule 6.7 are unaudited
consolidated financial statements of Celtic (excluding Celtic Merger Sub which
is recently formed, has no assets and no liabilities) as of September 30, 1996
("Celtic Management Reports") and audited consolidated financial statements for
the years ended June 30, 1996 and June 30, 1995, together with the related
footnotes and report thereon of the auditors rendering such reports (the "Celtic
Audited Financial Statements"). The Celtic Management Reports and the Celtic
Audited Financial Statements are hereafter referred to as the "Celtic Financial
Statements." The Celtic Financial Statements are correct and complete in all
respects and fairly present, in accordance with generally accepted accounting
principles, consistently applied, the consolidated financial position of Celtic
as of such dates and the results of operations and changes in financial position
for such periods all in accordance with GAAP, subject, in the case of the
Management Reports, to normal recurring
25
year end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse) and the absence of the notes (that if
presented would not differ materially from those included in the Celtic Audited
Financial Statements).
6.7.1. Celtic (i) keeps books, records and accounts that, in
reasonable detail, accurately and fairly reflect (A) the transactions and
dispositions of assets of such entity and (B) the value of inventory calculated
in accordance with GAAP, and (ii) maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (A) transactions are
executed in accordance with management's general or specific authorization, (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets,
(C) access to assets is permitted only in accordance with management's general
or specific authorizations, and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
6.7.2.Neither Celtic nor any employee, agent, consultant or
representative of Celtic has made any payment of funds of Celtic or received or
retained any funds in violation of any applicable law, rule or regulation.
6.8. No Undisclosed Material Liabilities. Celtic is not subject to any
material liability ($50,000 or more), whether accrued, absolute, contingent or
otherwise that are, individually or in the aggregate, material to Celtic taken
as a whole other than:
(a) liabilities disclosed or provided for in the most recent Celtic
Financial Statements;
(b) liabilities incurred in the Ordinary Course of Business since the date
of the Audited Financial Statements;
(c) liabilities contemplated by and arising under this Agreement or in
connection with the Transaction; and
(d) liabilities described in Schedule 6.8 attached hereto.
To the Knowledge of Celtic no circumstances exist which would result in
the imposition of any other liabilities.
6.9. Absence of Certain Changes or Events. Except (i) as contemplated by
this Agreement; (ii) as disclosed in Schedule 6.9 since September 30,1996,
Celtic has not:
(a) suffered any change in its business, operations, properties,
condition (financial or otherwise), or Prospects which has had, or to
Knowledge of Celtic could reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the business, properties,
assets or operations of Celtic taken as a whole;
(b) suffered any damage, destruction or loss (whether or not covered
by insurance) with respect to any of its properties or assets which has
had, or to the Knowledge of Celtic,
26
could reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the business, properties, assets or operations
of Celtic taken as a whole;
(c) except in the Ordinary Course of Business, incurred any
liability or obligation (absolute, accrued, contingent or otherwise), in
an amount in excess of $50,000;
(d) changed any of its accounting methods, principles or practices;
(e) revalued any asset, other than due to depreciation or amortization;
(f) paid, discharged or satisfied any claim, liability or obligation not
reflected in the Celtic Financial Statements in an amount in excess of $50,000;
(g) except in the Ordinary Course of Business, entered into any
commitment or transaction material to Celtic taken as a whole in an amount
in excess of $50,000;
(h) declared, set aside or paid any dividend or distribution in
respect of any capital stock, or redeemed, purchased or otherwise acquired
any of these securities or modified its capitalization;
(i) increased or established any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards),
stock purchase or other employee benefit plan, or otherwise changed the
compensation payable or to become payable to any officer or key employees
of Celtic;
(j) except in the Ordinary Course of Business, canceled or written off any
debts or waived any claims in an amount in excess of $50,000;
(k) except in the Ordinary Course of Business, transferred any
assets in an amount in excess of $50,000 or made capital expenditures and
commitments in an amount in excess of $50,000 in the aggregate;
(l) paid or loaned (other than payment of salaries or benefits or
reimbursement of expenses) any amount to, or sold, transferred or leased
any properties or assets to, or entered into any contract with, any of its
officers or directors, or any affiliate or Associate of any of its
officers or directors;
(m) increased its reserves for bad debts, guaranteed any obligation, except
in the Ordinary Course of Business, or indemnified any Person; or
(n) agreed (whether or not in writing) to do any of the foregoing.
6.10. Litigation and Proceedings. Except as set forth in the Schedule
6.10, there is no claim or Proceeding pending or, to the Knowledge of Celtic,
Threatened against Celtic, or any property or asset of Celtic by any Person or
any Governmental Authority which (i) is reasonably likely to have, individually
and in the aggregate, a material adverse effect on the business, assets
27
or operations of Celtic or (ii) seeks to delay or prevent the consummation of
the Transaction. As of the date hereof, neither Celtic nor any property or asset
of Celtic, is subject to any Order. To the Knowledge of Celtic, there is no
basis for any claim, action or Proceeding against Celtic which could reasonably
be expected to have a material adverse effect on the business assets, operations
or financial condition of Celtic. Celtic has never been a party to any
Proceeding involving shareholder litigation nor has it been a party to any
Proceeding initiated by the Securities and Exchange commission or any state
securities agency.
6.11. Compliance with Laws, Rules and Regulations. Schedule 6.11 sets
forth all material, governmental licenses, material permits and other material
Governmental Authorizations (or requests or applications therefore) pursuant to
which Celtic carries on its business. To the Knowledge of Celtic, it complies
with all applicable federal laws, rules, regulations and all applicable state
and local laws, rules and regulations relating to the operation of its business,
except to the extent that non-compliance could reasonably be expected to
materially and adversely affect the business, operations, properties, assets or
condition of Celtic or except to the extent that non-compliance would not result
in the occurrence of any material liability for Celtic.
6.11.1Celtic has made all filings with the United States Securities
and Exchange Commission ("SEC") that it has been required to make under the
Securities Act and the Securities Exchange Act. The documents (including Celtic
Financial Statements contained therein) filed with the SEC, except as amended,
complied in all material respects with the requirements of the Securities Act
and the Securities Exchange Act and to the Knowledge of the Company none of such
documents contained an untrue statement a of material fact or omitted to state a
material fact required to be stated therein to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
Schedule 6.11.1 is a true, correct and complete list of all filings made by or
with respect to Celtic or Celtic Common Stock since January 1, 1994 and a true,
correct and complete copy of all such filings has been provided to SLM.
6.12. Contracts. Schedule 6.12 sets forth a complete and correct list of
all leases and all material Contracts to which Celtic is a party or by which any
of its properties or assets are bound. To the Knowledge of Celtic, and subject
to the laws of bankruptcy, insolvency, general creditor's rights, and equitable
principles, all such leases and Contracts are valid and enforceable in all
material respects. For purposes of this Section 6.12, a "Material" agreement is
an agreement which can reasonably be expected to involve more than $50,000.
6.13. Material Contract Defaults. To the Knowledge of Celtic, it is not in
default under the terms of any outstanding Contract, license, lease, or other
commitment which is material to the business, operations, assets, or condition
of Celtic and no event has occurred or circumstances exist which, with notice or
lapse of time or both, would constitute a default under any such Contract,
license, or other commitment other than any defaults which could not reasonably
be expected to have a material adverse effect on the business, assets,
operations or financial condition of Celtic taken as a whole.
6.14. Taxes and Tax Returns. All Tax Returns with respect to taxes based
upon net income filed by Celtic since January 1, 1994, are set forth in Schedule
6.14 attached hereto. Celtic has filed all Tax Returns required to be filed by
it and has paid and discharged all taxes shown as due thereon and has paid all
taxes when due, other than such payments as are being contested
28
in good faith by appropriate Proceedings and as to which sufficient reserves
have been established. Neither the IRS nor any other taxing authority or agency,
domestic or foreign, is now asserting or, to the Knowledge of Celtic, has
Threatened to assess against Celtic any deficiency or claim for additional taxes
or interest thereon or penalties in connection therewith. Celtic has not been
granted any waiver of any statute of limitations with respect to, or agreed to
any extension of the period for the assessment of, any tax. Celtic has properly
reported on Form 1099 all amounts paid to consultants and no consultant or other
person to whom a payment has been made by Celtic should be classified as an
employee under the IRC.
All Tax Returns filed by Celtic are true, correct and complete in all
material respects and accurately set forth all items to the extent required to
be reflected or included in such returns by applicable law. Celtic is not a
party to any tax sharing agreement.
Celtic has not agreed, and is not required, to make any adjustments
pursuant to Section 481(a) of the IRC or any similar provision of state or local
law by reason of a change in accounting method initiated by it or any other
relevant party. To the Knowledge of Celtic, the IRS has not proposed any such
adjustment or change in accounting method. No application is pending with any
taxing authority requesting permission for any changes in accounting methods
that relate to the business or assets of Celtic.
6.14.1. The accruals and reserves for taxes reflected in the most
recent balance sheet ("Celtic Balance Sheet") included in the Celtic Financial
Statements are adequate to cover all taxes accruable through such date
(including interest and penalties, if any, thereon) in accordance with generally
accepted accounting principles consistently applied. The term "tax" or "taxes"
means federal state, local, foreign, and other taxes, including without
limitation, income taxes, estimated taxes, alternative minimum taxes, excise
taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties.
6.15. Subsidiaries. Except as set forth in Schedule 6.15, Celtic has no
Subsidiaries and does not own any capital stock, security, partnership interest,
or other interest of any kind in any corporation, partnership, joint venture,
association, limited liability company or other entity.
6.16. Title and Related Matters. Celtic has good and marketable title to
all of its assets which are reflected in the Celtic Management Reports or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the Ordinary Course of
Business), free and clear of all mortgages, liens, pledges, charges or
encumbrances, except (i) statutory liens or claims not yet delinquent; (ii) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the assets or properties
subject thereto or affected thereby or otherwise materially impair present
business operations on such properties or in connection with such assets; and
(iii) such liens as are described or referred to in the Celtic Financial
Statements or in the Celtic Schedules. Celtic owns, free and clear of any liens,
claims, encumbrances, royalty interests and other restrictions or limitations of
any nature whatsoever, or otherwise has the legal right to use, any and all
procedures, techniques, business plans, methods of management and other
information utilized in the conduct of its business or operations, whether or
not the value thereof is reflected
29
in the Celtic Management Reports. The offices and equipment of Celtic that are
necessary or used in the operations of its business are in good operating
condition and repair, normal wear and tear excepted.
6.17. Intellectual Property. Schedule 6.17 hereto contains a complete list
and description of all Celtic's United States and foreign (a) patents and patent
applications; (b) trademark registrations and applications for trademark
registrations; (c) copyright registrations and applications for copyright
registrations; (d) unregistered trademarks, trade names, service marks and
copyrights; and (e) unpatented trade secrets. Celtic wholly owns the exclusive
rights to all of the above-described intellectual property and there are no
existing or to the Knowledge of Celtic, Threatened claims of any third party
challenging the ownership, scope or validity of any of the said intellectual
property; to the Knowledge of Celtic, there is no infringing use by any Person
or entity of any of such intellectual property; and, except as set forth in
Schedule 6.17, to the Knowledge of Celtic, there has been no disclosure of any
of the trade secrets to any Person other than Persons who have executed
confidentiality/non-competition agreements.
6.18. Accounts Receivables. To the Knowledge of Celtic, all of its
accounts receivable arose in the Ordinary Course of Business, are "arms length"
(other than employee advances which are described in Schedule 6.18), bona fide
and are correctly reflected in Celtic's books and records. To the Knowledge of
Celtic, all of its accounts receivable (net of reserves for doubtful accounts
set forth on Celtic's financial records) are collectible in accordance with
their terms. To the Knowledge of Celtic, none of Celtic's accounts receivable is
subject to any set off, counterclaim or adjustment by reason of any product
liability, breach of warranty, Contract, accounting error or other claim except
for adjustments in the Ordinary Course of Business, none of which is material.
6.19. Insurance. Celtic currently maintains the insurance policies
described on the attached Schedule 6.19 which sets out the type of insurance,
insurer, policy number, expiration date, whether such insurance is written on a
claims made or occurrence basis, the deductible and policy limit.
6.20. Environmental Matters.
6.20.1. Neither Celtic nor any predecessor of Celtic (i) has
violated or is in violation of any Environmental Law; (ii) has owned or leased
properties (including, without limitation, soils and surface and ground waters)
which are contaminated with any Hazardous Substance; (iii) is liable for any
off-site contamination; (iv) is actually or potentially (other than as a result
of the foreclosure action of a mortgage interest) or, to the Knowledge of
Celtic, liable under any Environmental Law (including, without limitation,
pending or Threatened liens); (v) has failed to obtain all permits, licenses and
other authorization required to be obtained by it under any Environmental Law ("
Celtic Environmental Permits"); and (vi) Celtic has failed to be in compliance
with Celtic Environmental Permits.
6.20.2. To the Knowledge of Celtic neither Celtic nor any of its
predecessors, or their respective subsidiaries or joint ventures have any
material Environmental Liabilities, and none of such entities have had within
the five (5) years preceding the date hereof a material release of Hazardous
Substances into the environment in violation of any Environmental Law or
Environmental Permit.
30
6.20.3. For the purposes of this Section 6.19, the following terms have the
following meanings:
"Environmental Laws" shall mean any and all Federal, state and local
laws (including case law), regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions relating to
(i) human health, the environment or to emissions, discharges or releases
of pollutants, contaminants, Hazardous Substances or wastes into the
environment; (ii) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof; or (iii) the pollution of the environment or the
protection of human health.
"Environmental Liabilities" shall mean all liabilities, whether
vested or unvested, contingent or fixed, which (i) arise under or relate
to Environmental Laws and (ii) relate to actions occurring or conditions
existing on or prior to the Effective Time.
"Hazardous Substances" shall mean (i) those substances defined in or
regulated under the following federal statues and their state
counterparts, as each may be amended from time to time, and all
regulations thereunder: the Hazardous Materials Transportation Act, the
Resources Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Air Act, the Safe
Drinking Water Act (Clean Water Act), the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act and the Substances Control
Act; (ii) petroleum and petroleum products including crude oil and any
fractions thereof; (iii) natural gas, synthetic gas, natural gas liquids
and any mixtures thereof; (iv) radon; (v) any other contaminant; and (vi)
any substance with respect to which a Governmental Authority requires
environmental investigation, monitoring, reporting or remediation.
6.21. Employees. Schedule 6.21 contains a complete and accurate list of
the following information for each employee, consultant, representative
(excluding non-affiliated brokers or agents) or director of Celtic, including
each employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since
December 31, 1995; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under any pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other employee pension benefit plan or employee welfare benefit
plan, or any other employee benefit plan or any director plan.
6.21.1. No employee, consultant, representative or director of
Celtic is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, non-competition, or proprietary rights agreement,
between such employee, consultant, representative or director and any other
Person ("Proprietary Rights Agreement") that in any way materially adversely
affects or could reasonably be expected to materially adversely affect (i) the
performance of his duties as an employee or director of Celtic, or (ii) the
ability of Celtic to conduct its business.
31
To the Knowledge of Celtic, no director, officer, or other key employee of
Celtic intends to terminate his employment with Celtic; provided, however, that
for purposes of this Section 6.21.1, Celtic shall not be deemed to be obligated
to make any inquiry of any director, officer or key employee concerning their
intention to terminate their employment with Celtic.
6.22. Relationships with Affiliates or Associates . Except as set forth in
the Celtic SEC Reports or in Schedule 6.22, no Affiliate or Associate of Celtic
has, or since January 1, 1994 has had, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to Celtic. No Affiliate or Associate of Celtic is, or since January
1, 1994 has owned (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with Celtic, other
than business dealings or transactions conducted in the Ordinary Course of
Business at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with Celtic with respect
to any line of the products or services of Celtic (a "Competing Business") in
any market presently served by Celtic. Except as set forth in Schedule 6.22, no
Affiliate or Associate of Celtic is a party to any Contract with, or has any
claim or right against, Celtic.
6.23. Brokers. Celtic has not incurred nor will it incur any brokerage,
finder's, or similar fee in connection with the Transaction.
6.24. Celtic Schedules. Within seven (7) days from the date hereof, Celtic
shall deliver to the Shareholders the following schedules (collectively "Celtic
Schedules") which consist of separate schedules dated as of the date of
execution of this Agreement and instruments and data as of such date, all
certified by the chief executive officer of Celtic as complete, true, and
correct in all material respects:
(a) A Schedule describing any and all options, warrants or other
rights to purchase the securities of Celtic, together with copies of any
documents relating thereto; and all registration rights and preemptive
rights relating to any security of Celtic (Schedule 6.2);
(b) A Schedule containing complete and correct copies of the
Articles of Incorporation and Bylaws, as amended, of Celtic and each
Celtic Subsidiary in effect as of the date of this Agreement and all Board
of Director and shareholder minutes and resolutions adopted since their
respective incorporations. (Schedule 6.6);
(c) A Schedule including Celtic Financial Statements (Schedule 6.7);
(d) A Schedule of all liabilities (exceeding $50,000) included on
the Celtic Financial Statements or arising thereafter. This Schedule shall
be updated as of Effective Date and such updated Schedule shall be
delivered to Shareholders immediately prior to the Effective Time
(Schedule 6.8);
(e) A Schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or
condition of Celtic since the date of Celtic Financial Statements
(Schedule 6.9);
32
(f) A Schedule containing a description of any litigation pending or
Threatened (Schedule 6.10);
(g) A Schedule containing a description of all leases and Material
Contracts of Celtic (Schedule 6.12);
(h) A Schedule containing copies of all Tax Returns of Celtic (Schedule
6.14);
(i) A Schedule listing all Celtic Subsidiaries and a description of the
capitalization of each Celtic Subsidiary (Schedule 6.15);
(j) A Schedule of all intellectual property owned by Celtic (Schedule
6.17);
(k) A Schedule describing all employee advances (Schedule 6.18);
(l) A Schedule of all insurance maintained by Celtic (Schedule 6.19);
(m) A Schedule containing copies of all contracts for employment of
any officer or employee that is not terminable on 30 days (or less) notice
(Schedule 6.21);
(n) A Schedule describing transactions with Shareholders, Associates or
Affiliates (Schedule 6.22);
(o) A Schedule of all other documents, disclosures, or
representations required to be disclosed by this Agreement or required to
be disclosed in order to set forth all material facts regarding Celtic.
6.24.1. The Celtic Schedules delivered pursuant this Agreement are
qualified in their entirety by reference to specific provisions of this
Agreement, and are not intended to constitute, and shall not be construed as
constituting, independent representations and warranties of Celtic to any
extent. The Celtic Schedules may include items or information which Celtic is
not required to disclose under this Agreement; disclosure of such items or
information shall not affect (directly or indirectly) the interpretation of the
Agreement or the scope of the disclosure obligation under this Agreement,
including, without limitation, any assessment of whether any matter arose or any
agreement was entered into in the Ordinary Course of Business. Inclusion of
information herein shall not be construed to establish a specific definition or
level of what is material to the business, assets, financial position,
operations or results of operations of Celtic other than what is provided in the
representations or warranties themselves.
6.24.2. Celtic may provide additional schedules to qualify one or
more of the representations and warranties of Celtic in whole or in part and any
such Schedule so delivered in accordance with Section 6.24 shall constitute a
Celtic Schedule and qualify and limit the representations and warranties of
Celtic for all purposes of this Agreement to the same extent as if such Schedule
were referred to in this Agreement. The descriptions of the Celtic Schedules set
out in this Section 6.24 are for convenience of reference only and not intended
to modify, or to constitute additional, representations or warranties to any
extent or for any purpose. In the event of any discrepancy or conflict between
the description of a Celtic Schedule as set out in this Section
33
6.24 and the actual language of the representation or warranty, the actual
language of the representation or warranty shall control for all purposes and
this Section 6.24 shall not be used to interpret their meaning to any extent or
for any purpose.
6.25. Information. Celtic represents that it has not failed to disclose
any information known to it relating to it that is material to a decision to
purchase the Celtic Shares. To the Knowledge of Celtic, none of the
representations or warranties contained in Article VI of this Agreement contain
any untrue statement of material fact or omits to state a material fact required
to make the statements contained therein not misleading in light of the
circumstances under which they were made.
6.26. Additional Information Available. Celtic will make available to each
Shareholder the opportunity to ask questions and receive answers concerning the
acquisition of Celtic Common Stock in the Transaction, and to obtain any
additional information which Celtic possesses or can acquire without
unreasonable effort or expense.
6.27. Limitation on Liability. Notwithstanding anything to the contrary
contained in this Agreement, Celtic shall have any liability for any
misrepresentation or breach of any representation or warranty contained in this
Article VI if SLM or either of the Shareholders has actual knowledge (rather
than Knowledge) of such misrepresentation or breach.
Article VII
Conduct Prior to Closing
7.1. Conduct of Business. Prior to the Effective Time, SLM and Celtic shall
conduct their business only in the Ordinary Course of Business.
7.2. Additional Covenants by SLM and SLM Shareholders and Celtic. Between
the date hereof and the Effective Time, except as contemplated by this Agreement
or with the prior written consent of the other parties, which consent shall not
unreasonably be withheld, neither Celtic nor SLM shall:
(a) make any change in its Articles of Incorporation or Bylaws;
(b) make any change in the authorized or issued shares except as
contemplated by this Agreement;
(c) make any payment or distribution to shareholders (with respect to their
stock) or purchase or redeem any shares of capital stock;
(d) except in the Ordinary Course of Business, mortgage, pledge, or subject
to lien or encumbrance any of assets, tangible or intangible;
(e) except in the Ordinary Course of Business, cancel any debts or claims
or waive any rights of value;
34
(f) except in the Ordinary Course of Business, incur any
indebtedness or guarantees or enter into any commitment or make any
material capital expenditures or investments;
(g) make any loan, accrual or arrangement for or payment of bonuses
or special compensation of any kind or any severance or termination pay
to, any of its present or former officers or employees;
(h) make any material change in its method of management, operation, or
accounting;
(i) enter into any other material transactions;
(j) except in the Ordinary Course of Business, hire any Person as an
employee;
(k) adopt any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment,
or arrangement made to, for, or with its officers, directors, or
employees;
(l) grant or agree to grant any options, warrants, or other rights
for its stocks, bonds, or other corporate securities calling for the
issuance thereof;
(m) except in the Ordinary Course of Business, sell or transfer, or
agree to sell or transfer, any of its assets, property, or rights or
cancel or agree to cancel, any debts or claims;
(n) make or permit any amendment or termination (other than in
accordance with its terms) of any material Contract, agreement, or license
to which it is a party; or
(o) agree to do any of the foregoing.
7.3. Access. SLM shall give access to Celtic (and its auditors, counsel
and other authorized representatives), and Celtic shall give access to the
Shareholders (and their accountants, counsel and other authorized
representatives) to (i) their respective premises, books and records, including
minute books and stock transfer records, and (ii) all contracts, agreements and
documents whether or not listed in the Schedules hereto; provided, however, that
any such investigation shall not affect any of the representations and
warranties hereunder or the right of any party hereto to rely thereon; and
provided further, that any such investigation shall be conducted in such a
manner as not to interfere unreasonably with the operation of the business of
SLM and Celtic. In the event of termination of this Agreement for any reason
Celtic, on the one hand, and SLM and the Shareholders, on the other hand, will
promptly return, or cause to be returned, to the other, all non-public documents
obtained from the other party, and any copies of such documents.
7.3.1. Celtic, SLM and Shareholders agree to keep confidential any
information obtained pursuant to their respective inspections under this
Agreement unless (i) such information is ascertainable from public sources or is
or becomes public other than through the inspecting party or its
representatives, or (ii) disclosure of such information is required by
applicable securities or
35
other laws. In the event of the termination of this Agreement, each of Celtic,
SLM, and the Shareholders agree that they will not disclose, utilize or exploit
to their advantage any information obtained from the other pursuant to its
examinations under this Agreement, unless necessary to comply with applicable
law (with prior notice to the other) or to enforce its rights hereunder.
The parties agree that a breach of the provisions of Section 7.3.1 of this
Agreement could cause irreparable damage to the other parties. Consequently,
each agrees that in the event of any breach of any provision of this Section
7.3.1 of this Agreement, a nonbreaching party, at its option, in addition to any
other remedies provided by law or otherwise, may apply to any court of competent
jurisdiction for the entry of an immediate Order to restrain or enjoin the
breach of these provisions and to otherwise specifically enforce the provisions
of Section 7.3.1 of this Agreement. Each party hereby expressly waives the claim
or defense in any such action that the aggrieved party has an adequate remedy at
law or in damages.
7.4. Compliance with Blue Sky Law. The parties shall jointly take such
action, make such filings and pay such filing fees as may be reasonably
necessary to comply with all applicable state blue sky laws, rules and
regulations relating to the issuance of securities in the Transaction.
7.5. Disclosure Supplements, Etc.. Celtic will promptly notify SLM of any
material event or change in the business or operation of Celtic or any Celtic
Subsidiary. From time to time prior to the Effective Time, Celtic will
supplement or amend the Celtic Schedules with respect to any matter hereafter
arising which, if existing or occurring at or prior to the date of this
Agreement would have been required to be set forth or described in a Celtic
Schedule or which is necessary to complete or correct any information in the
Celtic Schedules or in any representation or warranty of Celtic which has been
rendered inaccurate thereby. For purposes of Articles VIII and IX hereof no such
supplement or amendment to the Celtic Schedules or additional schedules shall be
given effect but such supplement, amendment or additional schedule shall be
given effect for purposes of claims with respect to breaches of representations
and warranties pursuant to Article X of this Agreement.
SLM and the Shareholders will promptly notify Celtic of any material
event or change in the business or operation of SLM or any SLM Subsidiary. From
time to time prior to the Effective Time, SLM and the Shareholders will
supplement or amend the SLM Schedules with respect to any matter hereafter
arising which, if existing or occurring at or prior to the date of this
Agreement would have been required to be set forth or described in an SLM
Schedule or which is necessary to complete or correct any information in the SLM
Schedules or in any representation or warranty of SLM which has been rendered
inaccurate thereby. For purposes of Articles VIII and IX hereof no such
supplement or amendment to the SLM Schedules or additional schedules shall be
given effect but such supplement, amendment or additional schedule shall be
given effect for purposes of claims with respect to breaches of representations
and warranties pursuant to Article X of this Agreement.
7.6. Reasonable Efforts. Subject to the provisions hereof, the parties
hereto shall use their reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under the provisions of this Agreement and under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing sentence,
Celtic shall use its
36
reasonable efforts to insure that the conditions set forth in Article VIII
hereof are satisfied insofar as such matters are within the control of Celtic
and SLM and the Shareholders will use their reasonable efforts to insure that
the conditions set forth in Article IX hereof are satisfied, insofar as such
matters are within their control.
7.7. Public Announcements. Prior to the Effective Time, no announcement or
disclosure of the Transaction will be made by any party without the consent of
all other parties, which shall not be unreasonably withheld; provided that
Celtic may make an announcement if, on the advice of counsel and after
reasonable notice to SLM and to the Shareholders it is required to do so under
relevant securities laws or NASDAQ rules.
Article VIII
Conditions of Shareholders
The obligation of SLM and the Shareholders to consummate the Transaction
is subject to the fulfillment by Celtic prior to or as of the Effective Time, of
each of the following conditions, any of which may, at the sole option of SLM
and the Shareholders, be waived:
8.1. Representations. The representations and warranties by or on behalf
of Celtic contained in this Agreement or in any certificate or documents
delivered to the Shareholders or to SLM pursuant to the provisions hereof, shall
be true in all material respects when made and at the Effective Time as though
such representations and warranties were made at and as of such time.
8.2. Compliance. Celtic and Celtic Merger Sub shall have performed and
complied in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it prior to or at
the Effective Time.
8.3. No Material Adverse Change. There shall not have occurred (i) any
material adverse change since November 30, 1996 in the business, Prospects,
properties, results of operations or financial condition of Celtic and the
Celtic Subsidiaries taken as a whole; or (ii) any loss or damage to any of the
Prospects, properties of or assets of Celtic and the Celtic Subsidiaries taken
as a whole which could reasonably be expected to materially adversely affect or
impair their ability to conduct after the Transaction the business now being
conducted by them.
8.4. Certificate of Celtic. Celtic shall have delivered to Shareholders, a
certificate of Celtic, dated the Effective Time, and signed by its President to
the effect that (i) each of the representations and warranties of Celtic
contained herein is true in all material respects as of the Effective Time; and
(ii) Celtic and Celtic Merger Sub have performed, in all material respects, all
obligations and complied with all covenants required by this Agreement to be
performed and complied with by them prior to the Effective Date.
8.5. Absence of Litigation. There shall not be any material litigation,
proceeding or governmental investigation pending, Threatened or reasonably
believed by Shareholders to be in prospect pertaining to Celtic any Celtic
Subsidiary or the Transaction.
37
8.6. Good Standing. Each of Celtic and Celtic Merger Sub will be in good
standing in their states of organization at the Effective Time and each shall
deliver a Certificate of Good Standing to the Shareholders at the Effective
Time.
8.7. Employment Agreements. SLM and Celtic shall have executed and
delivered to Xxxxx Xxxxxx, Xx. and Xxxxx Xxxxx employment agreements in the form
of Exhibits E-1 and E-2 hereto, respectively and Celtic shall have executed and
delivered to Xxxxx Xxxxxx, Xx. and Xxxxx Xxxxx option agreements in the form of
Exhibits F-1 and F-2 respectively.
8.8. Consents. Any notices, filings, consents or approvals identified on
the Celtic Schedules or on the SLM Schedules shall have been filed, made or
obtained and any waiting periods thereunder shall have lapsed. The Shareholders
shall have approved the Merger pursuant to the Utah Revised Business
Corporations Act.
8.9. Advantage. Xxxxx Xxxxxx, Xx. shall have transferred to SLM all of the
outstanding capital stock of SLM Holdings, Inc. as a capital contribution, and
SLM shall have acquired all of the outstanding capital stock of Advantage
Realty, Inc. for consideration consisting solely of shares of SLM Common Stock.
8.10. Escrow Agreement. Celtic shall have executed and delivered to the
Shareholders an Escrow Agreement in the form of Exhibit C hereto.
8.11. Certificate. All of the certificates and documents referred to in
Article IV shall have been delivered to the Shareholders by Celtic.
Article IX
Conditions of Celtic
The obligation of Celtic to consummate the Transaction is subject to the
fulfillment, by Shareholders and SLM, prior to or as of the Effective Time, of
each of the following conditions, any of which may, at the sole option of
Celtic, be waived:
9.1. Representations. The representations and warranties by or on behalf
of SLM and Shareholders contained in this Agreement or in any certificate or
documents delivered pursuant to the provisions hereof shall be true in all
material respects when made and at the Effective Time as though such
representations and warranties were made at and as of such time.
9.2. Compliance. Shareholders and SLM shall have performed and complied in
all material respects with all covenants, agreements, and conditions required by
this Agreement to be performed or complied with by it prior to or at the Closing
at the Effective Time.
9.3. No Material Adverse Change. There shall not have occurred (i) any
material adverse change since August 31, 1996 in the business, Prospects,
properties, results of operations or financial condition of SLM and the SLM
Subsidiaries taken as a whole; or (ii) any loss or damage to any of the
properties of or assets of SLM and the SLM Subsidiaries taken as a whole which
could reasonably be expected to materially adversely affect or impair their
ability to conduct after the Transaction the business now being conducted by
them.
38
9.4 Certificates of Shareholders and SLM. SLM and each Shareholder shall
have delivered to Celtic a certificate of each of them dated the Effective Time,
signed by the President of SLM and by each of the shareholders to the effect
that (i) each of the representations and warranties of shareholders and SLM
contained herein is true in all material respects as of the Effective Time; and
(ii) SLM has in all material respects performed all obligations and complied
with all covenants required by this Agreement to be performed and complied with
by it prior to the Effective Date.
9.5. Absence of Litigation. There shall not be any material litigation,
proceeding or governmental investigation pending, Threatened or reasonably
believed by Celtic to be in prospect pertaining to the Shareholders, SLM, any
SLM Subsidiary or the Transaction except as disclosed in the SLM Schedules.
9.6 Good Standing. SLM will be in good standing in the State of Utah at the
Effective Time and shall deliver a Certificate of Good Standing to Celtic at the
Effective Time.
9.7. Investment Letters. The Shareholders shall deliver to Celtic an
Investment Letter in the Form of Exhibit "D".
9.8. Form 8-K Financial Statements. SLM shall deliver to Celtic its
financial statements which meet the requirements of Form 8-K as promulgated
under the Securities Exchange Act.
9.9. Employment Agreements. Xxxxx Xxxxxx, Xx. and Xxxxx Xxxxx shall have
executed and delivered to Celtic employment agreements in the form of Exhibits
E-1 and E-2 hereto, respectively.
9.10. Consents. Any notices, filings, consents or approvals identified on
the Celtic Schedules or on the SLM Schedules shall have been filed, made or
obtained and any waiting periods thereunder shall have lapsed.
9.11. Advantage. Xxxxx Xxxxxx, Xx. shall have transferred to SLM all of the
outstanding capital stock of SLM Holdings, Inc. as a capital contribution, and
SLM shall have acquired all of the outstanding capital stock of Advantage
Realty, Inc. for consideration consisting solely of shares of SLM Common Stock.
9.12. Escrow Agreement. Xxxxx Xxxxxx, Xx. and Xxxxx Xxxxx shall have
executed and delivered to the Celtic an Escrow Agreement in the form of Exhibit
C hereto.
9.13. Certificate. All of the certificates and documents referred to in
Article IV shall have been delivered to the Celtic by SLM and the Shareholders.
39
Article X
Indemnification, Survival, Termination And Expenses
10.1. Nature and Survival of Representations. All representations and
warranties made by any party to this Agreement shall survive the Effective Time
for three (3) years and the covenants and agreements herein shall survive the
closing. All of the parties hereto are executing and carrying out the provisions
of this Agreement in reliance solely on the representations, warranties, and
covenants and agreements contained in this Agreement and on the information
contained in the Schedules and Exhibits attached hereto and not upon any
investigation which it or he might have made or any representations, warrants,
agreement, promise, or information, written or oral, made by another party or
another Person other than as specifically set forth herein.
10.2. Indemnification and Payment of Damages by Shareholders. Each
Shareholder, individually and not jointly and severally, will indemnify and hold
harmless Celtic and its officers and directors (collectively, the "Indemnified
Persons"), and will pay to the Indemnified Persons the amount of, any loss,
liability, claim, damage (including incidental and consequential damages),
expense (including costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connect(a) any breach of any representation or warranty made by such Shareholder
in this Agreement or in any certificate delivered by such Shareholder pursuant
to this Agreement; or (b) any breach by such Shareholder of any covenant or
obligation of such Shareholder in this Agreement; provided, however, that if any
Shareholder has "Knowledge" of a matter giving rise to a breach of a
representation or warranty and the other Shareholder does not have Knowledge of
such matter, then the Shareholder without such Knowledge shall not be liable to
any extent to any party on account of such breach of representation or warranty.
10.3. Indemnification and Payment of Damages by Celtic. Celtic will
indemnify and hold harmless Shareholders (collectively the "Indemnified
Persons"), and will pay to the Indemnified Persons the amount of any Damages
arising, directly or indirectly, from or in connection with (a) any breach of
any representation or warranty made by Celtic in this Agreement or in any
certificate delivered by Celtic pursuant to this Agreement or (b) any breach by
Celtic of any covenant or obligation of Celtic in this Agreement.
10.4. Limitations on Amount--Shareholder. The Shareholders are
individually, and not jointly or severally, liable for damages with respect to
breaches of representations, warranties or covenants. The breach of a particular
representation, warranty or covenant by one of the Shareholders will not
necessarily be a breach by the other unless the other Shareholder has
independently breached such representation, warranty or covenant. A Shareholder
will not have liability (for indemnification or otherwise) with respect to the
matters described in Section 10.2 until the total of all Damages attributed to a
such Shareholder's breach with respect to such matters exceeds $20,000, and then
only for the amount by which such Damages exceed $20,000; provided, however,
subject to Section 10.4.1, the maximum amount a Shareholder shall be required to
pay hereunder for any and all breaches of representations and warranties under
this Agreement is One Hundred Fifty Thousand Dollars ($150,000.00).
10.4.1. The liability limit of $150,000 agreed to in Section 10.4 shall be
increased to $250,000 with respect to, and only to the extent of, Damages
resulting from breaches of
40
representations and warranties of which a Shareholder had actual knowledge at
the time of Closing (rather than "Knowledge"); provided, however that such limit
of $250,000 shall not be applicable to Damages resulting from breaches of
representations and warranties which constitute fraud as defined at common law
(but with a standard of actual knowledge at the time of Closing).
Notwithstanding the foregoing, in no event shall the aggregate liability of any
Shareholder for all breaches of representations, warranties and covenants and
agreements contained in this Agreement exceed the value of the Celtic Common
Stock received by such Shareholder in connection with the Merger. In the event
of any assessment of Damages against any Shareholder, such Shareholder may
deliver to Celtic shares of Celtic Common Stock owned by such Shareholder in the
amount of such Damages and thereafter shall be released from any and all further
liability in connection with such Damages. For purposes of this Section 10.4.1,
shares of Celtic common stock delivered to Celtic by a Shareholder under this
Section 10.4.1. shall be valued at a price which is seventy five percent (75%)
of the average closing price of Celtic common stock, as reported by NASDAQ (or
the American Stock Exchange or the New York Stock Exchange if the Celtic common
stock is trade on either such Exchanges) for the seven business days immediately
prior to the date such additional Celtic shares are delivered to Shareholders.
In the event of an assessment of Damages against a Shareholder exceeds the value
of the Celtic Common Stock which such Shareholder was issued in the Merger, such
Shareholder may deliver to Celtic all of the Celtic Common Stock acquired by him
pursuant to the Merger and thereafter shall be released from any all further
liability under this Agreement and the Transaction, including to any other
Shareholder for contribution and indemnify.
10.5. Limitations on Amount--Celtic. Celtic will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) or (b) of Section 10.3 until the total of all Damages with respect to such
matters exceeds $20,000, and then only for the amount by which such Damages
exceed $20,000; provided, however, that subject to Section 10.5.1, the maximum
amount Celtic shall be required to pay hereunder is One Hundred Fifty Thousand
Dollars ($150,000.00).
10.5.1. The liability limit of $150,000 agreed to in Section 10.5
shall be increased to $250,000 with respect to, and only to the extent of,
Damages resulting from breaches of representations and warranties of which
Celtic had actual knowledge at the time of Closing (rather than "Knowledge");
provided, however, that such limit of $250,000 shall not be applicable to
Damages resulting from breaches of representations and warranties which
constitute fraud as defined at common law (but with a standard of actual
knowledge at the time of Closing). Notwithstanding the foregoing, in no event
shall the aggregate liability of Celtic for all breaches of representations,
warranties and covenants and agreements contained in this Agreement exceed the
value of the SLM Common Stock received by Celtic in connection with the Merger
(which shall be deemed to be the value of the Celtic Common Stock issued to the
Shareholders in the Merger). In the event of any assessment of Damages against
Celtic, Celtic may deliver to each of the Shareholders additional shares of
Celtic Common Stock in the amount of such Damages and thereafter shall be
released from any and all further liability under this Agreement and the
Transaction. For purposes of this Section 10.5.1, additional shares of Celtic
common stock issued to the Shareholders hereunder, shall be valued at a price
which is seventy five percent (75%) of the average closing price of Celtic
common stock, as reported by NASDAQ (or the American Stock Exchange or the New
York Stock Exchange if the Celtic common stock is trade on either such
41
Exchanges) for the seven business days immediately prior to the date such
additional Celtic shares are delivered to Shareholders.
10.6. Procedure for Indemnification--Third Party Claims.
10.6.1. Promptly after receipt by an Indemnified Person under
Sections 10.2 or 10.3, of notice of the commencement of any Proceeding against
it, such Indemnified Person will, if a claim is to be made by it against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, and with such notice provide a copy of any
demand letter, summons or applicable correspondence, and any information with
respect to insurance which may cover such claim and information with respect to
any third party who may be liable to in connection therewith. The failure to
notify the indemnifying party will not relieve the indemnifying party of any
liability that it may have to any Indemnified Person, except to the extent that
the indemnifying party demonstrates that it is prejudiced by the indemnifying
party's failure to give such notice.
10.6.2. If any Proceeding referred to in Section 10.6.1 is brought
against an Indemnified Person and it or he gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the Indemnified Person determines in good faith
that joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the Indemnified Person of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
reasonably satisfactory to the Indemnified Person and, after notice from the
indemnifying party to the Indemnified Person of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the Indemnified Person under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
Indemnified Person in connection with the defense of such Proceeding, other than
reasonable out of pocket costs of investigation. If the indemnifying party
assumes the defense of a Proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (ii) no compromise or settlement of
such claims may be effected by the indemnifying party without the Indemnified
Person's consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no effect on
any other claims that may be made against the Indemnified Person, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the Indemnified Person will have no liability with
respect to any compromise or settlement of such claims effected without its
consent. If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within ten days after the
Indemnified Person's notice is given, give notice to the Indemnified Person of
its election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any compromise or
settlement effected by the Indemnified Person except that the Indemnified Person
shall give the indemnifying party seven days prior notice of the terms of any
proposed settlement and the Indemnified Person shall not be liable to the extent
that any Proceeding is conducted in, or the compromise or settlement is entered
into in bad faith.
42
10.6.3. Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Proceeding is reasonably likely to materially adversely affect it or its
Affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the Indemnified Person may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will not be
bound by any determination of a Proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld). The Indemnified Person shall give the indemnifying party seven days
prior notice of the terms of any proposed settlement and the Indemnified Person
shall not be liable to the extent that any Proceeding is conducted in, or the
compromise or settlement is entered into in bad faith.
10.6.4. Shareholders hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Shareholders with respect to
such a claim anywhere in the world.
10.7. Procedure for Indemnification--Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice and with such notice provide a copy of any demand letter, summons or
applicable correspondence, and any information with respect to insurance which
may cover such claim and information with respect to any third party who may be
liable to an Indemnified Person in connection therewith. to the party from whom
indemnification is sought.
10.8. Arbitration.
10.8.1. All disputes arising out of this and any other controversy,
claim or dispute arising out of or relating to this Agreement or the breach,
termination, enforceability or validity hereof, including the determination of
the scope or applicability of the Agreement to arbitrate set forth in this
Agreement) shall be submitted to binding arbitration under Section 10.8.2) upon
the written demand of Celtic or either Shareholder.
10.8.2. The Shareholder or Shareholders involved in the arbitration
and Celtic (the "Arbitrating Parties") shall each select one qualified
arbitrator within 10 days of the date of the demand for arbitration. The
arbitration shall be governed by the American Arbitration Association (the
"AAA") under its commercial Arbitration Rules and its Supplementary Procedures
for Large, Complex Disputes, provided that persons eligible to be selected as
arbitrators shall be limited to attorneys-at-law who (a) are on the AAA's Large,
Complex Case Panel or a Center for Public Resources ("CPR") Panel of
Distinguished Neutrals, or who have professional credentials similar to the
attorneys listed on such AAA and CPR Panels, and (b) who have practiced law for
at least 10 years as an attorney specializing in either general commercial
litigation or general corporate and commercial matters. The two arbitrators so
chosen shall select a neutral arbitrator who shall reside in (or be employed
within) the State of Utah. If the named arbitrators cannot agree on a neutral
arbitrator, the arbitrators shall make application to the AAA Office in the
State of Utah with a copy to the Arbitrating Parties, requesting that the AAA
select and appoint the third arbitrator, who shall not reside or work in the
State of Utah. This selection shall be final and binding. Immediately upon
appointment of the third arbitrator, the arbitrating parties shall present in
writing to the panel of
43
three arbitrators (with a copy to the other) their statement of the issues in
dispute. Any questions of whether a dispute should be arbitrated under this
Section shall be decided by the arbitrators. In the event of conflict between
the provisions of this Agreement and the provisions of the commercial
arbitration rules of the AAA, the provisions of this Agreement shall prevail.
The arbitrators, as soon as possible, shall meet in Salt Lake City,
at a time and place reasonably convenient for the participants, after giving
each of the Arbitrating Parties at least 10 days' notice. The failure of an
Arbitrating Party to appear at a hearing shall not operate as a default, and the
attendance of all arbitrators shall not be required at all hearings. Actions of
the arbitrators shall be by majority vote. After the hearing, the Arbitrating
Parties in regard to the matter in dispute, taking such evidence and making such
other investigation as justice requires and as the arbitrators deem necessary,
they shall decide the issues submitted to them as promptly as possible and serve
a written and signed copy of the award upon each of the Arbitrating Parties. To
assure the Arbitrating Parties that disputes and controversies will be resolved
expeditiously, the final arbitration hearing will occur within 60 days after the
arbitration is initiated and there will be limited discovery (including no more
than two depositions per party) prior to the arbitration hearing. If the
participants in the arbitration settle the dispute in the course of the
arbitration, such settlement shall be approved by the arbitrators on request any
of the Arbitrating Parties and become the award.
10.8.3. No provision of, nor the exercise of any rights under, this
Section 10.8, shall limit the right of any party to request and obtain from a
court of competent jurisdiction in the State of Utah (which shall have exclusive
jurisdiction for purposes of this Agreement before, during or after the pendency
of any arbitration) provisional or ancillary remedies and relief including, but
not limited to, injunctive or mandatory relief or the appointment of a receiver.
The institution and maintenance of an action or judicial proceeding for, or
pursuit of, provisional or ancillary remedies shall not constitute a waiver of
the right of any party, even if it is the plaintiff, to submit the dispute to
arbitration if such party would otherwise have such right. Each of the parties
hereby submits unconditionally to the exclusive jurisdiction of the state and
federal courts located in the State of Utah for purposes of this provision,
waives objection to the venue of any proceeding in any such court or that any
such court provides an inconvenient forum and consents to the service of process
upon it in connection with any proceeding instituted under this Section 10.8 in
the same manner as provided for the giving of notice hereunder.
10.8.4. Judgment upon the award rendered may be entered in any court
having jurisdiction. The Arbitrating Parties hereby expressly consent to the
nonexclusive jurisdiction of the state and federal courts situated in the State
of Utah for this purpose and waive objection to the venue of any proceeding in
such court or that such court provides an inconvenient forum.
10.8.5. Each of the parties shall, subject to the award of the
arbitrators, pay an equal share of the arbitrators' fees except the arbitrators
shall have the power to award recovery of all costs (including attorneys' fees,
administrative fees, arbitrators' fees and court costs) to the prevailing party,
as determined by the arbitrators.
10.9. Exclusive Remedies. The indemnification provisions set forth in this
Article 10 are the sole and exclusive remedies that any party may have for
breach of any representation, warranty or covenant.
44
10.10. Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by the mutual consent of the Shareholders and Celtic;
(b) by either the Shareholders or Celtic if the Effective Time has
not occurred by January 31, 1997, or such other date, if any, as the
parties may agree to in writing;
(c) by the Shareholders or Celtic if any other party refuses or
fails to perform any covenant or agreement required to be performed by it
under this Agreement or if any representation or warranty of any other
party proves to have been inaccurate or misleading in any material respect
at the time it was made or at the Effective Time and the other party
refuses or fails after notice to correct or make not misleading any such
misrepresentation or warranty;
(d) by Celtic for any reason within ten (10) days after it has received all
of the SLM Schedules; and
(e) by Shareholders for any reason within ten (10) days after they
has received all of the Celtic Schedules.
10.11. Effect of Termination. If this Agreement is terminated as permitted
by Section 10.10 of this Agreement, such termination will be without liability
of any party (or any shareholder, director, officer, employee, agent,
consultant, or representative of such party) to the other parties to this
Agreement; provided, that if such termination results from the failure of a
party to use its or his best efforts to fulfill a condition to the performance
of the obligations of the other parties or to perform a covenant of this
Agreement or from a breach by any party to this Agreement, such party will be
fully liable up to a maximum of $20,000 for any and all damages, costs, and
expenses (including, but not limited to, reasonable counsel fees) sustained or
incurred by the other parties as a result of such failure or breach.
Article XI
Miscellaneous
11.1. Notices. Any notice provided for by this Agreement and any other
notice, demand, or communication that any party may wish to send another will be
in writing and either delivered in Person, transmitted by telecopier with
receipt appropriately confirmed, or sent by registered or certified United
States mail, first class postage prepaid, return receipt requested, in a
properly sealed envelope, and addressed as follows:
If to Celtic:
Xxxxxxx X. Xxxxxx
000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
45
with a copy to: X. X. Xxxxxxx, Xx.
Cohne, Xxxxxxxxx & Xxxxx
525 East 100 South, Xxxxx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
If to SLM or the Shareholders:
Xxxxx Xxxxxx, Xx.
0000 Xxxx Xxxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Xxxxx Xxxxx and SLM
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
with a copy to: Xxxxxx X. Xxxxx, III
Xxxxxxx, Xxxxx & Xxxxxxx
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, XX 00000
The parties to this Agreement may change their addresses for notice by
notice given in the manner provided above. Any notice, demand, or other
communication will be deemed given and effective as of the date of delivery in
Person or upon receipt as set forth on the return receipt. The inability to
deliver because of changed address of which no notice was given or the rejection
or other refusal to accept any notice, demand, or other communication, will be
deemed to be the receipt of the notice, demand, or other communication as of the
date of such inability to deliver or the rejection or refusal to accept.
11.2. Entire Agreement. This Agreement, together with all Schedules and
Exhibits attached to this Agreement or referenced herein, constitutes the entire
agreement between the parties pertaining to the subject matter of this Agreement
and supersedes all prior agreements, understandings, negotiations, and
discussions, whether oral or written, of the parties, including but not limited
to the Letter of Intent heretofore entered into by the parties and there are no
warranties, representations, or other agreements between the parties in
connection with the subject matter of this Agreement except as specifically set
forth in this Agreement.
11.3. Effect; Assignment. This Agreement and all of the provisions of this
Agreement will be binding and inure to the benefit of the parties to this
Agreement and their respective successors and permitted assigns, but, except as
expressly provided in this Agreement neither this Agreement nor any of the
rights, interests, or obligations under this Agreement will be assigned by
operation of law (excluding mergers, changes of domicile or other corporate
reorganizations) or otherwise, by any party to this Agreement without the prior
written consent of the other party. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the parties to this
Agreement and their respective successors and permitted assigns, any rights,
remedies, or obligations under or by reason of this Agreement. Notwithstanding
anything else contained in this Agreement to the contrary, this Agreement and
the rights, interests or obligations of Celtic, Celtic
46
Merger Sub, SLM and of each Shareholder under this Agreement, shall survive any
merger, change of domicile or other corporate reorganization and this Agreement
shall continue in full force and effect as though such merger, change of
domicile or other corporate reorganization had not occurred, and in such event,
the rights, interests or obligations of Celtic, Celtic Merger Sub, SLM and of
each Shareholder under this Agreement shall be the rights, interests or
obligations of their respective successors.
11.4. Amendments; Waivers. No supplement, modification, or amendment of
this Agreement will be binding unless executed in writing by all parties to this
Agreement. No waiver of any of the provisions of this Agreement will be deemed
or will constitute a waiver of any other provision of this Agreement (regardless
of whether similar), nor will any such waiver constitute a continuing waiver
unless otherwise expressly provided.
11.5. Further Assurances. At any time and from time to time, after the
Effective Date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
11.6. Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8. Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
11.9. Governing Law. This Agreement shall be governed for all purposes by
the laws of the State of Utah applicable to agreements executed and to be
wholly-performed in the State of Utah.
11.10. Legal Fees and Expenses. The prevailing party in any proceeding
brought to enforce or interpret any provision of this Agreement shall be
entitled to recover its reasonable attorney's fees, costs and disbursements
incurred in connection with such proceeding, including, but not limited to the
costs of experts, accountants and consultants and all other costs and services
reasonably related to the proceeding, including those incurred in any bankruptcy
or appeal, from the non-prevailing party or parties.
11.11. Schedules, Exhibits and Amendments. Disclosure in any Schedule of
any allegations with respect to any alleged failure to perform, or breach or
default of a contractual or other duty or obligation shall not be deemed an
admission to any party other than a party hereto that such has in fact occurred,
but shall be effective for the purposes for which such Schedule is intended as
if such had in fact occurred.
11.11.1. Descriptions of agreements, instruments and other matters herein
not required by the Agreement to be included herein are provided for reference
only and are not
47
intended to be complete and are not represented as such and each party is hereby
referred to the actual agreement or instrument for a description thereof.
References to the agreements and instruments herein include the Schedules,
Exhibits and amendments thereto.
11.11.2. Headings have been inserted in the Schedules for
convenience of reference only and shall to no extent have the effect of amending
or changing the express description of the materials to be disclosed thereon as
set forth in the Agreements or other information contained in such Schedules.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
CELTIC INVESTMENT, INC,
a Delaware corporation
Dated: January 15, 1997 By /s/ Xxxxxxx X. Xxxxxx
---------------------
Xxxxxxx X. Xxxxxx, President
SALT LAKE MORTGAGE CORP.
a Utah corporation
Dated: January 15, 1997 By /s/ Xxxxx Xxxxxx, Xx.
-----------------------
Xxxxx Xxxxxx, Xx., President
SLM SHAREHOLDERS
Dated: January 15, 1997 By /s/ Xxxxx Xxxxxx, Xx.
----------------------
Xxxxx Xxxxxx, Xx.
Dated: January 15, 1997 By /s/ Xxxxx X. Xxxxx
----------------------
Xxxxx X. Xxxxx
48
