AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of the ____ day of April, 2005, by and among Cycle
Country Accessories Corp., a Nevada corporation (the "Purchaser"), its
wholly owned Cycle Country Accessories Corporation, an Iowa corporation
("Subsidiary Corp."), Xxxxxxxx Iron Works, Inc., an Iowa corporation
("Xxxxxxxx"), and Xxxxxxxx'x stockholders listed on the signature page
attached hereto (the "Stockholders").
RECITALS
A. The boards of directors of Purchaser, Subsidiary Corp., and
Xxxxxxxx have each determined that the transactions described in this
agreement are in their and their shareholders' respective best interests
and, accordingly, have agreed to effect the merger provided for in this
agreement upon the terms and subject to the conditions set forth in this
agreement; and
B. This agreement provides for the merger (the "Merger") of
Xxxxxxxx with and into Subsidiary Corp. so that Subsidiary Corp. will be
the surviving entity, and for the Stockholders to receive cash and shares
of common stock of Purchaser in exchange for their shares of capital
stock of Xxxxxxxx, and that, as a result, the Stockholders shall become
stockholders of Purchaser, and Subsidiary Corp. shall continue to conduct
the business and operations formally conducted by Xxxxxxxx as a wholly-
owned subsidiary of Purchaser; and
C. Purchaser, Subsidiary Corp., Xxxxxxxx and the Stockholders
desire to make certain representations, warranties and agreements in
connection with the Merger; and
D. The parties intend that the Merger shall qualify as a
reorganization within the meaning of Section 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
"Applicable Law" or "Applicable Laws" means any statute, law,
ordinance, decree, order, rule, regulation, franchise, permit or
license of any Governmental Body.
"Average Closing Price" means the average of the closing prices for
Purchaser Shares as reported by the American Stock Exchange for each
of the 30 consecutive trading days beginning on the 31st calendar day
after the Closing Date and ending on the 30th trading day thereafter
("Pricing Period").
"Cash Consideration" means the $7,000,000 cash consideration to be
paid by Purchaser to the Stockholders pursuant to this Agreement.
When referring to an individual Stockholder, "Cash Consideration"
means the pro-rata portion of the $7,000,000 such Stockholder shall be
entitled to receive at the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Closing" has the meaning set forth in Section 2.2(a).
"Closing Date" has the meaning set forth in Section 2.2(a).
"Effective Date" has the meaning set forth in Section 2.2(b).
"Effective Time" has the meaning set forth in Section 2.2(b).
"Environmental Laws" has the meaning set forth in Section 3.17.
"Encumbrance" means any mortgage, lien, interests, right-of-way,
claim, pledge, option, restriction, security interest, contingent or
conditional sale, or other similar claim against title.
"Exchange Act" means the Security Exchange Act of 1934, as amended.
"Governmental Body" means any nation, province, state, county, city,
town, village, district, watershed district, or other jurisdiction of
any nature; federal, state, local, municipal, foreign or other
government; governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, board, commission,
department and court or other tribunal); and/or any body exercising,
or entitled or purporting to exercise, any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power
of any nature.
"IBCA" means the Iowa Business Corporation Act.
"Iowa Secretary" has the meaning set forth in Section 2.2(b).
"Material Adverse Effect" means, in connection with any entity, any
event, change or effect that is materially adverse, individually or in
the aggregate, to the condition (financial or otherwise), properties,
assets, liabilities, revenues, income, business, operations, results
of operations, or prospects of such entity.
"Merger" means the merger of Xxxxxxxx with and into Subsidiary Corp.
as contemplated by this Agreement.
"Pricing Period" means 30 consecutive trading days beginning on the
31st calendar day after the Closing Date and ending on the 30th trading
day thereafter.
"Permitted Encumbrances" means municipal zoning ordinances, public
easements and general real estate taxes and installments of special
assessments payable in the year of Closing.
"Purchaser" means Cycle Country Accessories Corp., a Nevada
corporation.
"Purchaser SEC Filings" has the meaning set forth in Section 5.7(a).
"Purchaser Shares" means Purchaser's issued and outstanding common
stock.
"Real Property" means land, buildings and improvements.
"Registration Rights Agreement" means the Registration Rights
Agreement attached hereto as Exhibit C.
"Securities Act" means the Securities Act of 1933, as amended.
"Xxxxxxxx" means Xxxxxxxx Iron Works, Inc., an Iowa corporation.
"Xxxxxxxx Certificates" means the share certificates that evidence
Stockholder's ownership interests in the Xxxxxxxx Shares.
"Xxxxxxxx Shares" means the issued and outstanding common stock of
Xxxxxxxx.
"Stock Consideration" means the newly issued Purchaser Shares that
will be paid to each of the Stockholders at the Closing upon
conversion of their Xxxxxxxx Shares as further described in Section
2.6(c). The total Stock Consideration to be paid all the Stockholders
equals that number of Purchaser Shares equal to the greater of: (i)
$8,000,000 divided by the Average Closing Price, or (ii) $8,000,000
divided by $6.65. When referring to an individual Stockholder, "Stock
Consideration" means the Purchaser Shares that such Stockholder will
be receiving at the Closing.
"Stockholders" means the shareholders of Xxxxxxxx listed on Exhibit B
hereto.
"Subsidiary Corp." means Cycle Country Accessories Corporation,
Purchaser's wholly owned subsidiary, an Iowa corporation, into which
Xxxxxxxx will be merged.
"Surviving Corporation" means, after the Effective Time, Subsidiary
Corp., i.e., Cycle Country Accessories Corporation.
"Taxes" has the meaning set forth in Section 3.20(a).
SECTION 2. THE MERGER
2.1 The Merger
(a) Upon the terms and subject to the conditions hereof and in
accordance with the Iowa Business Corporation Act "IBCA," Xxxxxxxx
shall be merged with and into Subsidiary Corp. at the Effective Time
of the Merger. Following the Merger, the separate corporate
existence of Xxxxxxxx shall cease and Subsidiary Corp. shall
continue as the surviving corporation (the "Surviving Corporation")
and shall succeed to and assume all the rights and obligations of
Xxxxxxxx in accordance with the IBCA.
(b) The Merger shall have the effects set forth herein and in
Section 490.1107 of the IBCA. If at any time after the Effective
Time, Subsidiary Corp. as the Surviving Corporation shall consider
or be advised that any further assignments or assurances in law or
otherwise are necessary or desirable to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, all rights, title
and interests in all real estate and other property and all
privileges, powers and franchises of Xxxxxxxx and Subsidiary Corp.,
the Surviving Corporation and its proper officers and directors, in
the name and on behalf of Xxxxxxxx and Subsidiary Corp., shall
execute and deliver all such proper deeds, assignments and
assurances in law and do all things necessary and proper to vest,
perfect or confirm title to such property or rights in the Surviving
Corporation and otherwise to carry out the purpose of this
Agreement, and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of Xxxxxxxx and
Subsidiary Corp. or otherwise to take any and all such action.
(c) Except as otherwise required by the IRS pursuant to a
determination (as defined in Section 1313 of the Code) or otherwise,
or by applicable law, the Parties shall not take a position on any
Tax Returns inconsistent with the treatment of the Merger for Tax
purposes with respect to the Corporations as a reorganization within
the meaning of Section 368(a)(2)(D) of the Code.
2.2 Closing; Effective Date and Time
(a) Closing. Subject to the terms and conditions of this
Agreement, the consummation of the Merger (the "Closing") shall take
place at the offices of the Purchaser, 0000 Xxxxxxx 00, Xxxxxxx,
Xxxx, xx the 30th day of April, 2005, or such other date upon which
the Purchaser and the Stockholders may mutually agree in writing
(the "Closing Date").
(b) Effective Date and Time. On the Closing Date and subject to
the terms and conditions hereof, articles of merger substantially in
the form of Exhibit A (the "Articles of Merger") complying with the
applicable provisions of the IBCA and in such form and executed in
such manner as required by the Secretary of State of the State of
Iowa (the "Iowa Secretary") shall be filed with the Iowa Secretary.
The Merger shall become effective on the date (the "Effective
Date") and at the time (the "Effective Time") that the Articles of
Merger shall have been accepted for filing by the Iowa Secretary, or
at such other time as may be specified in the Articles of Merger as
filed. If the Iowa Secretary requires any changes in the Articles
of Merger as a condition to the filing of the Articles of Merger or
the issuance of a certificate to the effect that the Merger is
effective, the parties will execute any necessary revisions
incorporating such changes, provided such changes are not
inconsistent with and do not result in any material change in the
terms of this Agreement.
2.3 Articles of Incorporation of the Surviving Corporation
At the Effective Time, the articles of incorporation of Subsidiary
Corp. as in effect immediately prior to the Effective Time shall be the
articles of incorporation of the Surviving Corporation. Thereafter, the
articles of incorporation may be amended or repealed in accordance with
their terms and as provided by Law.
2.4 Bylaws of the Surviving Corporation
At the Effective Time, the bylaws of Subsidiary Corp. as in effect
immediately prior to the Effective Time shall be the bylaws of the
Surviving Corporation. Thereafter, the bylaws may be amended or repealed
in accordance with their terms and the articles of incorporation of the
Surviving Corporation and as provided by Applicable Law.
2.5 Directors and Officers
At the Effective Time, the directors and officers of Subsidiary
Corp. shall continue in office as the directors and officers of the
Surviving Corporation, and such directors and officers shall hold office
in accordance with and subject to the articles of incorporation and
bylaws of the Surviving Corporation.
2.6 Conversion of Shares
As of the Effective Time, by virtue of the Merger and without any
action on the part of Purchaser, Subsidiary Corp., Xxxxxxxx or the
Stockholders:
(a) Each share of common stock, par value $1.00 per share, of
Subsidiary Corp. that is issued and outstanding immediately prior to
the Effective Time shall remain outstanding, unchanged by the reason
of the Merger, as one fully paid and nonassessable share of common
stock, par value $1.00 per share of the Surviving Corporation.
(b) All shares of any class of capital stock of Xxxxxxxx held in
the treasury of Xxxxxxxx immediately prior to the Effective Time, if
any, shall be cancelled and extinguished as of the Effective Time,
without any conversion thereof and no amount or other consideration
shall be delivered or deliverable in exchange therefor.
(c) The outstanding Xxxxxxxx Shares shall be converted into a
right to receive a pro-rata portion of: (i) the Cash Consideration,
and (ii) the Stock Consideration. At the Closing, Purchaser shall
pay to each of the Stockholders the Cash Consideration and Stock
Consideration as follows:
(i) Xxxxx Xxxxxx owns eleven (11) Xxxxxxxx Shares of the
forty (40) Xxxxxxxx Shares outstanding and will be paid
at Closing: (1) One Million Nine Hundred Twenty-five
Thousand Dollars ($1,925,000.00) in Cash Consideration
plus (2) Three hundred thirty thousand eight hundred
twenty-seven (330,827) Purchaser Shares.
(ii) Xxxx Xxxxxx owns eleven (11) Xxxxxxxx Shares of the
forty (40) Xxxxxxxx Shares outstanding and will be paid
at Closing: (1) One Million Nine Hundred Twenty-five
Thousand Dollars ($1,925,000.00) in Cash Consideration
plus (2) Three hundred thirty thousand eight hundred
twenty-seven (330,827) Purchaser Shares.
(iii) Xxxx Xxxxxx owns twelve (12) Xxxxxxxx Shares of the
forty (40) Xxxxxxxx Shares outstanding and will be paid
at Closing: (1) Two Million One Hundred Thousand Dollars
($2,100,000.00) in Cash Consideration plus (2) Three
hundred sixty thousand nine hundred three (360,903)
Purchaser Shares.
(iv) Xxxx Xxxxxx owns six (6) Xxxxxxxx Shares of the forty
(40) Xxxxxxxx Shares outstanding and will be paid at
Closing: (1) One Million Fifty Thousand Dollars
($1,050,000.00) in Cash Consideration plus (2) One
hundred eighty thousand four hundred fifty-one (180,451)
Purchaser Shares.
(d) Purchaser shall deliver its calculation of the Average Closing
Price to each of the Stockholders within 3 business days following
the last day of the Pricing Period. The Stockholders shall review
such calculation and, in the event of any dispute concerning the
calculation, the parties will promptly meet and attempt to resolve
such dispute. If they fail to resolve such dispute prior to the
10th day following the end of the Pricing Period, the parties shall
mutually agree upon an independent certified public accountant to
calculate the Average Closing Price according to the terms set forth
herein and such accountant's calculation shall be final and binding.
If the Average Closing Price is equal to or greater than $6.65 per
share, no additional Purchaser Shares will be issued to the
Stockholders. If the Average Closing Price is less than $6.65 per
share, Purchaser shall, on or before the 20th day following the end
of the Pricing Period, deliver to each Stockholder the remaining
Stock Consideration as follows:
(i) Xxxxx Xxxxxx shall additionally receive that number of
shares of Common Stock of the Purchaser, par value
$0.001 (rounded in the aggregate to the nearest whole
share) that is equal to $2,200,000.00 divided by the
Average Closing Price, minus 330,827.
(ii) Xxxx Xxxxxx shall additionally receive that number of
shares of Common Stock of the Purchaser, par value
$0.001 (rounded in the aggregate to the nearest whole
share) that is equal to $2,200,000.00 divided by the
Average Closing Price, minus 330,827.
(iii) Xxxx Xxxxxx shall additionally receive that number of
shares of Common Stock of the Purchaser, par value
$0.001 (rounded in the aggregate to the nearest whole
share) that is equal to $2,400,000.00 divided by the
Average Closing Price, minus 360,903.
(iv) Xxxx Xxxxxx shall additionally receive that number of
shares of Common Stock of the Purchaser, par value
$0.001 (rounded in the aggregate to the nearest whole
share) that is equal to $1,200,000.00 divided by the
Average Closing Price, minus 180,451.
(e) When allocating the Cash Consideration and the Stock
Consideration to the Xxxxxxxx Shares that are to be converted
hereunder, each Stockholder first shall allocate the Cash
Consideration he or she receives hereunder to his or her Xxxxxxxx
Shares on a first-in, first-out (FIFO) basis until such Cash
Consideration is fully allocated, and the Stock Consideration shall
then be allocated to the remaining Xxxxxxxx Shares held by such
Stockholder. In the event that any allocation under this paragraph
causes the Merger to not qualify as a "reorganization" under Section
368(a)(2)(D) of the IRC, such allocation shall be null and void and
the Stockholders will be deemed to have allocated their Cash and
Stock Consideration in a manner that causes the Merger to qualify as
a "reorganization" under Section 368(a)(2)(D).
2.7 Issuance of Purchaser Shares; Exchange of Certificates
(a) The Purchaser Shares that each Stockholder shall be entitled
to receive pursuant to the Merger in exchange for Xxxxxxxx Shares
shall be deemed to have been issued and outstanding at the Effective
Time.
(b) At the Closing, each Stockholder shall deliver to Purchaser
the Xxxxxxxx Certificates representing all of the Xxxxxxxx Shares
owned by such Stockholder. Each Xxxxxxxx Certificate shall be duly
endorsed for transfer by Stockholder or accompanied by stock powers
or assignments in blank duly executed by such Stockholder. The
failure by any Stockholder to comply with this Section 2.7(b) shall
not affect the Closing or the effectiveness of the Merger.
(c) Immediately following the Effective Time, Purchaser shall pay
or deliver to each Stockholder who has fully complied with Section
2.7(b), one or more certificates representing the number of whole
shares of Purchaser Shares into which the Xxxxxxxx Shares owned by
such Stockholder shall have been converted pursuant to Section
2.6(c) and (d), (ii) the amount of Cash Consideration as specified
in Section 2.6(c), and (iii) any dividends or other distributions to
which such holder is entitled pursuant to Section 2.8(e) with
respect to Purchaser Shares. Any Stockholder who has not fully
complied with Section 2.7(b) shall not be entitled to receive the
certificates representing Purchaser Shares, until such Stockholder
has so complied.
(d) No fractional shares of Purchaser Shares and no certificates
or scrip therefor, or other evidence of ownership thereof, shall be
issued in connection with the Merger. The Stock Consideration due
each Stockholder shall be rounded upward or downward to the nearest
whole number.
(e) The Stockholder will be entitled to dividends or other
distributions pertaining to the Purchaser Shares into which their
Xxxxxxxx Shares have been converted pursuant to Section 2.6 that
become payable to persons who are holders of record of Purchaser
Shares as of a record date on or after the Effective Date, but only
after they have surrendered their Xxxxxxxx Certificates. The
Stockholders will not be entitled, however, to dividends or other
distributions that become payable before or after the Effective Date
to persons who were holders of record of Purchaser Shares as of a
record date that is prior to the Effective Date.
(f) In the event that any Xxxxxxxx Certificates shall have been
lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Stockholder claiming such certificate to be lost, stolen
or destroyed, Purchaser shall issue in exchange for such lost,
stolen or destroyed certificate the shares of Purchaser Shares that
such Stockholder is entitled to receive pursuant to Section 2.6(c).
(g) All certificates evidencing Purchaser Shares that are issued
in exchange for Xxxxxxxx Shares in accordance with the terms of this
Agreement, together with the Cash Consideration paid for such shares
shall be deemed to have been issued in full satisfaction of all
rights pertaining to the Xxxxxxxx Shares represented by the
surrendered Xxxxxxxx Certificates.
(h) If purchaser changes the number of Purchaser Shares issued and
outstanding prior to the Effective Time as a result of a stock
split, stock dividend, recapitalization, reclassification, or any
action by Purchaser similar to any of the foregoing, the Stock
Consideration to be paid to Stockholders hereunder shall be
appropriately adjusted.
2.8 Stock Legend. Each of the Purchaser Share Certificates issued
as part of this transaction will bear the following legend until such
time as they are not required as set forth below:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
Certificates evidencing the Purchaser Shares shall not contain any
legend (including the legend set forth above): (i) following a sale
of such Purchaser Shares pursuant to an effective registration
statement (including the Registration Statement) covering such
Purchaser Shares, or (ii) following a sale of such shares pursuant
to Rule 144 (assuming the transferor is not an affiliate of the
Purchaser), or (iii) while such shares are eligible for sale under
Rule 144(k). The Purchaser may not make any notation on its records
or give instructions to any transfer agent of the Purchaser that
enlarge the restrictions on transfer set forth in this Section. The
Purchaser agrees that it shall, within five business days following
such time as restrictive legends would not then be required under
this Section, issue and deliver to such Stockholder certificates
that are free of restrictive legends representing Purchaser Shares
in replacement of Purchaser Shares previously issued with
restrictive legends.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
REGARDING COMPANY
The Stockholders hereby jointly and severally represent and warrant
to the Purchaser, as of the date hereof and as of the Closing Date, as
follows:
3.1 Organization and Standing of the Company. Xxxxxxxx is a
corporation which is duly organized, validly existing and in good
standing under the laws of the State of Iowa. Complete and correct
copies of the Articles of Incorporation and By-laws, as amended, of
Xxxxxxxx will be delivered to Purchaser before the Closing Date.
Xxxxxxxx has all necessary corporate power and authority to engage in the
business in which it is presently engaged, to own all property now owned
by it, and to lease all of the property used by it under lease. A true
and correct copy of the corporate minutes and stock transfer records of
Xxxxxxxx will have been delivered to the Purchaser before the Closing
Date, and the same constitute a complete and accurate record of the
proceedings taken by its stockholders and directors, and a complete and
accurate record of all issuances and transfer of shares of its capital
stock. Schedule 3.1.2 contains a complete and accurate list of the
officers and directors of Xxxxxxxx.
3.2 Capital Structure of the Company. The authorized capital
stock of Xxxxxxxx consists solely of one thousand (1,000) shares of
common stock, with One Hundred Dollars ($100.00) par value, of which
forty (40) shares are duly authorized, validly issued and outstanding,
and fully paid and non-assessable. No other class or series of capital
stock of Xxxxxxxx is or has been authorized. There is no obligation
which is or may be binding upon Xxxxxxxx to issue, sell, redeem, purchase
or exchange any of its capital stock or any right relating thereto. The
Stockholders are the sole shareholders of record of Xxxxxxxx on the date
of this Agreement.
3.3 No Restrictions. Xxxxxxxx is subject to no restriction,
agreement, law, judgment or decree which would (a) prohibit or be
violated by the execution and delivery hereof or the consummation of the
transactions contemplated hereby, (b) result in the acceleration of any
indebtedness of Xxxxxxxx, or (c) prohibit or be violated by a merger with
or into any other company.
3.4 No Subsidiaries. Xxxxxxxx has no subsidiaries, nor does it
own any capital stock or other equity or ownership interest in any
corporation, partnership, limited liability company, association, trust,
joint venture or other entity.
3.5 Financial Statements. Schedule 3.5 will contain at Closing a
true copy of Xxxxxxxx'x audited financial statements, including the
balance sheet, the statement of income and retained earnings and the
statement of cash flows, and all notes thereto, for the periods ending
December 31, 2004 as prepared by Xxxxxxxx'x certified public accountants
(hereinafter "Financial Statements"). The Financial Statements have been
prepared from Xxxxxxxx'x books and records, and fairly represent
Xxxxxxxx'x financial position as of the date thereon and results of
Xxxxxxxx'x operations for the period then ended and each of the Financial
Statements were prepared in accordance with generally accepted accounting
principles.
3.6 Events Subsequent to December 31, 2004. Except to the extent
set forth in Schedule 3.6, there has not been since December 31, 2004:
(a) Any damage, destruction, loss, forfeiture or other event or
events (whether or not covered by insurance) adversely affecting (i)
any property or asset of Xxxxxxxx, or (ii) the business or condition
(financial or other) of Xxxxxxxx, or (iii) the results of operations
or prospects of Xxxxxxxx;
(b) Any direct or indirect redemption, purchase or other
acquisition by Xxxxxxxx of any capital stock of Xxxxxxxx, or any
declaration, setting aside or payment of any dividend or
distribution on any capital stock of Xxxxxxxx other than dividends
or distributions which would not violate Section 3.29 hereof;
(c) Except for transfer of a 2001 Chrysler Town and Country van to
Xxxxx Xxxxxx as additional compensation, there has been no increase
in the compensation or benefits payable or to become payable by
Xxxxxxxx to any of its directors, officers, employees or agents,
other than increases in commission compensation to employees
compensated solely on a commission basis (provided that the method,
basis and rate of commission compensation has not changed since
December 31, 2004);
(d) Any incurrence by Xxxxxxxx of any indebtedness for borrowed
money or of any other indebtedness or of any liability in respect
thereof, or any commitment by Xxxxxxxx for such incurrence, except
for the incurrence of indebtedness in the ordinary course of
business;
(e) Any contractual commitment by Xxxxxxxx to any third party,
other than as provided in this Agreement or arising in the ordinary
course of Xxxxxxxx'x business, relating to (i) the property, assets
or business of Xxxxxxxx, or (ii) the acquisition or disposition of
property or assets of Xxxxxxxx;
(f) Any transaction, other than at arm's length in the ordinary
course of business, between Xxxxxxxx and any shareholder, director,
officer or affiliate of Xxxxxxxx or any waiver or surrender by
Xxxxxxxx of any valuable right or property other than for fair
consideration;
(g) Any unusual or novel method of transacting Xxxxxxxx'x business
which has had or may reasonably be expected to have an adverse
effect on the assets or properties, liabilities, business prospects,
condition (financial or other) or results of operations of Xxxxxxxx;
(h) Any change in any accounting policies and procedures or
practices by Xxxxxxxx; or
(i) Any adverse change, actual or threatened, in the assets or
properties, liabilities, business prospects, condition (financial or
other) or results of operations of Xxxxxxxx, whether or not covered
by insurance.
3.7 Liabilities. Except as expressly disclosed in Schedule 3.7 or
in the Financial Statements, Xxxxxxxx has no liabilities of any kind
whatsoever that have a Material Adverse Effect, whether absolute or
contingent and whether or not currently determinable, nor has any
condition existed or any event occurred which could reasonably be
expected to give rise to any such liability.
3.8 Guarantees. Except as disclosed in Schedule 3.8 Xxxxxxxx is
not a guarantor or indemnitor or otherwise liable for or in respect of
any indebtedness of any person except as an endorser of checks received
by it and deposited in the ordinary course of business.
3.9 Accounts and Notes Receivable. Except as set forth on
Schedule 3.9 all accounts receivable and notes receivable of Xxxxxxxx are
owed to Xxxxxxxx by current or former customers of Xxxxxxxx and arose in
the ordinary course of Xxxxxxxx'x business. The allowance for doubtful
accounts reflected on the Financial Statements was calculated
consistently with past practice.
3.10 Inventories. Except as set forth on Schedule 3.10 hereto, the
inventories set forth in the Financial Statements are stated therein at
the lower of cost or market value using the first-in, first-out (FIFO)
method. All items of inventory acquired or manufactured by Xxxxxxxx have
been acquired or manufactured in the ordinary course of business. Except
for inventory having a book-value not in excess of $25,000.00 in the
aggregate, to the knowledge of the Stockholders, all inventories of
Xxxxxxxx (i) consisting of raw materials and work in progress are in good
and usable condition, are not in excess of current requirements and are
convertible into finished goods which are salable to existing customers
of Xxxxxxxx, and (ii) consisting of finished goods are salable to
existing customers of Xxxxxxxx and do not exceed in quantity the total
quantity of such goods sold by Xxxxxxxx in Xxxxxxxx'x previous calendar
year. Except as set forth on Schedule 3.10 hereto, all items of
Xxxxxxxx'x inventory are property accounted for in its books and records.
3.11 Real Property.
(a) Fee Ownership. Attached as Schedule 3.11(a) are complete and
accurate descriptions of all real property owned by Xxxxxxxx which
include the name of the record title holder and a legal description
of the property. There are no liens, mortgages, deeds of trust or
any other encumbrance on the Real Property. Except for Permitted
Encumbrances or as otherwise disclosed in Schedule 3.11(a), Xxxxxxxx
has good and marketable title in fee simple to all Real Property
owned by Xxxxxxxx, free of all liens, claims, encumbrances, charges
or other restrictions of any kind or character.
(b) Development Restrictions. To the knowledge of the
Stockholders, there are no matters affecting the Real Property which
might curtail or interfere with the use of any of the Real Property
for the purposes for which such Real Property is now used by
Xxxxxxxx.
(c) Insurance Notices. Neither Xxxxxxxx nor the Stockholders has
received any notice from any insurance carrier regarding defects or
inadequacies in the Real Property which, if not corrected, would
result in termination of Xxxxxxxx'x insurance coverage or
increase in the cost thereof, and the Stockholders have no knowledge
of any such defects or inadequacies.
(d) Compliance. Each parcel of Real Property is zoned in a manner
which permits its present use. There are no pending or, to
Stockholders' knowledge, threatened requests, applications or
proceedings to alter or restrict the zoning or other use
restrictions applicable to any of Real Property. Neither Xxxxxxxx
nor the Stockholders have received any notice from any municipal,
state, federal or other governmental authority regarding zoning,
building, fire, water, use, health, environmental, ordinance, code
or regulatory violations issued with respect to any of the Real
Property, and, to the knowledge of the Stockholders, no such
violations exist. The buildings, improvements and fixtures upon the
Real Property are permitted, conforming structures under applicable
zoning, subdivision and building laws and ordinances, and Xxxxxxxx'x
present uses of such buildings, improvements and fixtures are
permitted, conforming uses under such zoning, subdivision and
building laws and ordinances. The Real Property includes all rights
to any off-site facilities necessary to ensure compliance with all
zoning, building, health, fire, water, use or similar statutes,
laws, regulations and orders. No charges or violations have been
filed, served, made or, to the knowledge of the Stockholders,
threatened relating to the Real Property or any of Xxxxxxxx'x
operations conducted thereon as a result of any violation or alleged
violation of any applicable ordinances, requirements, regulations,
zoning, subdivision and building laws or restrictive covenants
(including, without limitation, those relating to health, safety or
environmental protection).
(e) Pending and Threatened Litigation. There are no pending or,
to the knowledge of the Stockholders, threatened matters of
litigation, administrative action or examination, claim or demand
whatsoever relating to the Real Property.
(f) Eminent Domain. There is no pending or, to the knowledge of
the Stockholders, threatened (i) condemnation of any part of the
Real Property by any governmental authority; (ii) special assessment
against the Real Property; or (iii) action against Xxxxxxxx for
breach of any restrictive covenant affecting the Real Property.
(g) Access to Real Property; Utilities. To the knowledge of the
Stockholders, no fact or condition exists which would result in the
termination or impairment of access to the Real Property from
adjoining public or private Streets or ways or which could result in
discontinuation of presently available or otherwise necessary sewer,
water, electric, gas, telephone or other utilities or services.
(h) Condition. No representations are made with respect to the
condition of the Real Property.
(i) Mechanic's Liens. No labor, material or services have been
furnished by or at the direction of Xxxxxxxx, or to the knowledge of
the Stockholders, by any Lessor on or about the Real Property or any
part thereof, as a result of which any mechanic's, laborer's or
materialman's liens or claims thereof might arise.
(j) Government Obligations. To the knowledge of the Stockholders,
there are no unperformed obligations relative to the Real Property
outstanding to any governmental or quasi-governmental body or
authority.
(k) Rights in the Real Property. There are no purchase contracts,
subleases, options or any other agreements of any kind, written or
oral, formal or informal, xxxxxx or inchoate, recorded or
unrecorded, whereby any person or entity other than Xxxxxxxx has
acquired or has any basis to assert any right, title or interest in,
or right to possession, use, enjoyment or proceeds of all or any
portion of the Real Property. Xxxxxxxx does not have any interest
in, or any right or obligation to acquire any interest in, any other
real property.
(l) Foreign Investments. None of the Stockholders is a "foreign
person" within the meaning of Section 1445 of the Internal Revenue
Code of 1986, as amended (the "Code").
(m) Public Improvements. All public and quasi-public improvements
upon or adjacent to the Real Property are, to the knowledge of the
Stockholders, adequate to service the requirements of the Real
Property therefor and are fully paid for and neither the Real
Property nor the owner thereof has any obligation to pay any charge
for such public or quasi-public improvements except general real
estate taxes.
3.12 Title to Personal Property.
(a) Except as set forth in Schedule 3.12 Xxxxxxxx has or at
Closing will have good and marketable title to the equipment,
computer hardware, furniture, vehicles and other tangible or
intangible personal property reflected as owned by Xxxxxxxx on the
Financial Statements (except for personal property disposed of in
the ordinary course of business after the date thereon, or used by
Xxxxxxxx in the conduct of its business (whether or not reflected on
the Financial Statements), free and clear of any liens, claims,
security interests, options, leases, restrictions or encumbrances
which adversely affect the marketability of title thereto other than
those created by the Purchaser. No representation is made as to the
condition of the personal property. Except as set forth in Schedule
3.12 Xxxxxxxx does not hold any property on consignment, nor does
Xxxxxxxx hold title to any property in the possession of others.
(b) All of the computer software used by or for Xxxxxxxx in the
conduct of its business (the "Software") is either (i) owned by
Xxxxxxxx free and clear of any and all liens, claims, equities,
security interests and encumbrances whatsoever, or (ii) used by
Xxxxxxxx pursuant to a license granted to Xxxxxxxx by the third
party which, to the knowledge of the Stockholders, owns such
Software free and clear of any and all liens, claims, equities,
security interests and encumbrances whatsoever. No such computer
software license shall terminate or become terminable as a result of
the transactions contemplated by this Agreement. There are no
infringement suits pending or, to the knowledge of the Stockholders,
threatened against Xxxxxxxx with respect to any of the Software, and
no fact or condition exists which could give rise to any such
infringement suit.
3.13 Contracts. Except as set forth in Schedule 3.13 Xxxxxxxx is
not a party to, or bound by, any oral or written contracts, agreements,
commitments, arrangements or understandings (the "Contracts"): (a) for
any indebtedness, except those incurred in the ordinary course of
business; (b) involving leasing personal property (including, without
limitation, leases for machinery and office equipment, furniture,
fixtures, vehicles, tools and dies) which require an annual payment in
excess of $5,000 or the current term of which exceeds two years; (c)
involving the payment or receipt of in excess of $10,000 per annum by
Xxxxxxxx or the current term of which exceeds six months (including,
without limitation, vendor supply contracts or customer "blanket"
purchase orders), except those incurred in the ordinary course of
business; (d) providing for the services of dealers, distributors, sales
representatives or similar representatives; (e) relating to the
ownership, use or licensing of any patents, trademarks, trade names,
brand names, copyrights, inventions, processes, know-how, formulae,
technology, trade secrets or other proprietary rights; (f) relating to
oral or written and currently effective, warranties or representations
expressly or impliedly made by Xxxxxxxx in respect of any products
manufactured or sold by Xxxxxxxx in conduct of Xxxxxxxx'x business and
any other liability or obligation of Xxxxxxxx to service, repair,
maintain, take back or otherwise do or refrain from doing anything in
respect to any products or inventory that has been delivered by Xxxxxxxx;
(g) any covenants by or binding on Xxxxxxxx not to compete or to abide by
any confidentiality agreement; (h) for the sale of goods or services to
any governmental authority, including any open purchase order issued by
such entities; (i) with any manufacturer, jobber, supplier or customer
with respect to discounts, allowances or payment terms beyond 60 days;
(j) relating to any joint venture or partnership contract or agreement;
(k) for the incurrence of any capital expenditure in excess of $10,000;
(l) for or with respect to any advertising; (m) limiting the freedom of
Xxxxxxxx, or any of its officers, directors, employees or agents to
engage in or compete in any line of business or with any person or in any
area or to use or disclose any information; (n) giving any party the
right to renegotiate or require a reduction in price or the refund of any
amount previously paid to Xxxxxxxx by such person; that is material to
Xxxxxxxx'x business.
All of the Contracts constitute legal, valid and binding obligations
of the respective parties thereto, are in full force and effect, and
neither Xxxxxxxx or, to the knowledge of the Stockholders, any other
party thereto has violated any provision of, or committed or failed to
perform any act which with notice, lapse of time or both would constitute
a default under the provisions of any such Contract, the termination of
which could have a material adverse effect upon the properties, assets to
be purchased or liabilities to be assumed. Correct and complete copies
of all written Contracts disclosed on Schedule 3.13 and all written
amendments thereto will be delivered to the Purchaser prior to the
Closing Date.
3.14 Intellectual Property. Xxxxxxxx has no domestic or foreign
patents, patent applications pending, patent applications in process,
written employee invention disclosures, trademarks, trademark
registrations, trademark registration applications, copyrights, copyright
registrations, copyright registration applications, service marks,
service xxxx registrations, service xxxx registration applications, know-
how agreements, licenses, rights acquired through litigation, logos,
trade names, and slogans used in the conduct of Xxxxxxxx'x business, as
presently conducted or as presently planned to be conducted.
3.15 Foreign Assets. Except as described in Schedule 3.15 Xxxxxxxx
does not have any interest in any real property or tangible or intangible
personal property or other asset located outside the continental limits
of the United States of America, including stock, securities or
investments in, claims against, or receivables from any person
substantially all the property or business of which is located outside of
such continental limits.
3.16 Compliance with Law. Except as disclosed in Schedule 3.16
hereto, to the knowledge of the Stockholders, Xxxxxxxx is not in default
under or in violation of any applicable statute, law, ordinance, decree,
order, rule, regulation, franchise, permit or license of any governmental
body, which may result in a material adverse effect upon any property or
asset of Xxxxxxxx or upon Xxxxxxxx'x business, condition (financial or
other), results of operations or prospects.
3.17 Environmental Matters.
(a) Except as set forth in Schedule 3.17, to the knowledge of the
Stockholders, Xxxxxxxx has not violated, and has received no notice
of any violation of the Environmental Laws, whether on property
owned, leased or controlled by Xxxxxxxx or on property of others, or
otherwise, and there is no known condition with respect to Xxxxxxxx
or its assets or its prior actions which with the passage of time is
reasonably likely to lead to a material violation of any of the
Environmental Laws.
(b) Except as set forth on Schedule 3.17 hereto, Xxxxxxxx has
obtained and maintained in good standing all permits, inspections
licenses and other authorizations which are required under the
Environmental Laws for the operation of Xxxxxxxx'x business,
complete copies (or, if oral, a written summary) of which have been
provided to the Purchaser.
(c) Except as set forth on Schedule 3.17 hereto, to the knowledge
of the Stockholders, Xxxxxxxx is in compliance with all terms and
conditions of such required permits, licenses and authorizations,
and it and its properties are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, timetables and other
provisions contained in the Environmental Laws.
(d) Except as set forth in Schedule 3.17 hereto, there is no
civil, criminal or administrative action, suit, demand, claim,
hearing, notice of violation, notice of investigation, proceeding
notice or demand letter pending or, to the knowledge of the
Stockholders, threatened against Xxxxxxxx relating in any way to the
Environmental Laws.
(e) Except as set forth in Schedule 3.17, there are no orders from
or agreements with any governmental or any private party relating to
violations of or compliance with the Environmental Laws.
(f) Except as disclosed in Schedule 3.17, (i) to the knowledge of
the Stockholders, there has been no storage, treatment, generation,
discharge, incineration, transportation or disposal of industrial,
toxic or hazardous substances or solid or hazardous waste by
Xxxxxxxx (or, to the knowledge of the Stockholders, its predecessors
in interest) at the Real Property in violation of any federal, state
or local law, statute, rule or regulation or the common law or any
decree, order, arbitration award or agreement with, or any license
or permit from, any federal, State or local governmental authority;
and (ii) there has been no spill, discharge, leak, emission,
injection, escape, dumping, or release by Xxxxxxxx (or, to the
knowledge of the Stockholders, by others) of any kind onto the Real
Property or into the environment surrounding the Real Property of
any industrial, toxic or hazardous substance or solid or hazardous
waste as defined under any federal, state or local law, statute,
rule or regulation other than those releases permissible under such
law, statute, rule or regulation or allowable under applicable
permits.
(g) The term "Environmental Law" shall mean and include all
federal, state and local statutes, ordinances, regulations and rules
presently in force or hereafter enacted (up to and including the
Closing Date) relating to environmental quality, contamination, and
clean up of Hazardous Substances, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. 6090 et seq., as amended by the Superfund
Amendments and Reauthorization Act of 1986; the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. 6091 et seq., as
amended by the Hazardous and Solid Waste Amendments of 1984; and all
state superlien and environmental clean up statutes and all rules
and regulations promulgated under said statutes, as amended. The
term "Hazardous Substance" shall mean and include all hazardous and
toxic substances, waste or materials, and any pollutant or
contaminant, including, without limitation, PCBs, asbestos, asbestos
containing material, petroleum products, and all other materials
that are included under or regulated by any Environmental Law.
3.18 Litigation.
(a) Except as disclosed in Schedule 3.18(a), there is no suit,
arbitration, claim, investigation, action or proceeding, in law or
in equity, now pending or, to the knowledge of the Stockholders,
threatened before any court, arbitrator, commission, administrative
or regulatory body, or any governmental agency to which Xxxxxxxx is
a party or which may result in any judgment, award, order, decree,
liability or other determination which will or could have an adverse
effect upon any of the property, personnel or assets of Xxxxxxxx, or
upon Xxxxxxxx'x business, condition (financial or other), results of
operations or prospects, or which will or could prevent or interfere
with the consummation of any transactions contemplated hereby, nor
to the knowledge of the Stockholders is there any reasonable basis
therefor. No such judgment, order, award or decree has been
entered, nor has any such determination been made or liability been
incurred, which has, or could have, such an effect.
(b) Except as disclosed in Schedule 3.18(b), to the knowledge of
the Stockholders, there are no facts which, if known by a potential
claimant or governmental authority, would give rise to a claim or
proceeding which, if asserted or conducted with results unfavorable
to Xxxxxxxx, would have a material adverse effect on the business or
financial condition of Xxxxxxxx, or the consummation of the
transaction herein contemplated, or the use of Xxxxxxxx'x assets
(whether by the Purchaser or Xxxxxxxx after the Closing or by
Xxxxxxxx prior thereto ).
3.19 Consents. Except as disclosed on Schedule 3.19, neither
Xxxxxxxx nor the Stockholders is required to obtain any consents or other
approvals from any governmental agency or other person (including,
without limitation, any lessor, lender, insurance company or financial
institution) as a result of the transactions contemplated hereby.
3.20 Tax Matters.
(a) As used herein, the term "Taxes" means any federal, state,
local or foreign income, corporation, gross receipts, profits,
gains, capital duty, franchise, withholding, social security,
unemployment, disability, property, wealth, welfare, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum,
estimated or similar tax, together with any interest, penalties or
additions in respect of the foregoing, and including any transferee
or secondary liability in respect of such taxes.
(b) Except as set forth on Schedule 3.20:
(i) Xxxxxxxx has timely filed with the appropriate taxing
authorities all returns or extensions (including without
limitation information returns and other material
information) in respect of Taxes required to be filed
through the date hereof and shall timely file any such
returns required to be filed on or prior to the Closing
Date. The returns and other information filed are
complete and accurate in all material respects. The
Stockholders will make available to the Purchaser, prior
to the Closing Date, complete and accurate copies of
Xxxxxxxx'x federal, and state and local tax returns for
the past six years together with all examination reports
and statements of deficiencies assessed against or
agreed to by Xxxxxxxx for any taxable period ended on or
after January 1, 1999. Schedule 3.20 indicates those
Tax returns of Xxxxxxxx filed since January 1, 1999 that
have been audited and indicates those Tax returns that
currently are the subject of audit;
(ii) All Taxes due to be paid before the Closing Date
(whether or not shown on an Tax return filed by
Xxxxxxxx) have been timely paid, or shall be timely
paid, or an adequate reserve has been established
therefor, as set forth on Schedule 3.20 or Xxxxxxxx'x
Financial Statements heretofore delivered to the
Purchaser;
(iii) There are no pending or, to the knowledge of the
Stockholders, threatened audits, investigations or
claims for or relating to any material additional
liability in respect of Taxes, and there are no matters
under discussion with any governmental authorities with
respect to Taxes that in the reasonable judgment of
Xxxxxxxx or such Company's attorneys or
accountants, is likely to result in a material
additional liability for Taxes. Except as set forth on
Schedule 3.20, no extension of a statute of limitations
relating to Taxes is in effect with respect to Xxxxxxxx;
(iv) There are no liens for Taxes (other than for current
Taxes not yet due and payable) on any Company's assets;
(v) No claim with respect to Xxxxxxxx has been made on or
after January 1, 1999 by an authority in a jurisdiction
where such Company does not file Tax returns that
Xxxxxxxx is or may be subject to taxation by that
jurisdiction;
(vi) Xxxxxxxx has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor,
creditor, stockholder or other party, and has complied
in all material respects with all laws relating to Tax
withholding;
(vii) There is no unresolved dispute or claim concerning any
Tax liability of Xxxxxxxx either claimed or raised by
any Tax authority in writing. There are no outstanding
rulings of, or requests for rulings with, any Tax
authority addressed to Xxxxxxxx that are, or if issued
would be, binding on Xxxxxxxx;
(viii) Xxxxxxxx is not a party to any joint venture,
partnership or other arrangement or contract which could
be treated as a partnership for federal income Tax
purposes.
3.21 Compensation. Schedule 3.21 correctly identifies each officer
and director of Xxxxxxxx and each other persons if such other persons had
compensation (salaries, commissions, bonuses, benefits or in any other
form) in 2004 in excess of $50,000 from Xxxxxxxx, each such individual's
present base salary on an annualized basis, the type and amount of
commissions, bonuses or other compensation each such employee is
presently eligible to receive.
3.22 Labor Relations. There is neither pending nor, to the
knowledge of the Stockholders, threatened any labor dispute, labor
organizing activity, election petition or proceeding, proceeding
preparatory thereto, strike, slow down or work stoppage which affects or
which may affect Xxxxxxxx'x business, or which may interfere with its
continued operations, and neither Xxxxxxxx nor any officer, director,
employee or agent of Xxxxxxxx has committed any unfair labor practice as
defined in the National Labor Relations Act of 1947, as amended.
Xxxxxxxx is not a party to or bound by any collective bargaining
agreement. Xxxxxxxx'x relations with its employees are satisfactory and
no employee paid other than on an hourly wage basis has announced or
threatened his or her intention to leave Xxxxxxxx'x employ.
3.23 Employee Benefit Plans; ERISA. All "employee benefit plans,"
as defined in Section 3(3) of ERISA, sponsored, maintained or contributed
to by Xxxxxxxx are listed on Schedule 3.23 hereto, and complete and
accurate copies of the plans (or related insurance policies) will be
furnished to Purchaser prior to Closing. Except as disclosed in Schedule
3.23, Xxxxxxxx is not a party to, does not have in effect or to become
effective after the date of this Agreement any bonus, cash or deferred
compensation, severance, medical, health or hospitalization, pension,
profit sharing or thrift, retirement, stock option, employee stock
ownership, life or group insurance, death benefit, welfare, salesmen
incentive, vacation, sick leave, disability or trust agreement or
arrangement.
(i) Each employee benefit plan required to be listed in
Schedule 3.23 hereto has been administered, without
material exception, in compliance with applicable
provisions of ERISA and the Code.
(ii) All reporting and disclosure requirements under ERISA
and the Code for the plans listed in Schedule 3.23
hereto have been complied with, except for such non-
compliance which could not result in a termination or
fine or have a materially adverse affect upon such
plans.
(iii) Xxxxxxxx does not contribute to and is not required to
contribute to any "multiemployer plan," as defined in
Section 414(f) of the Code and Section 3(37) of ERISA,
and Xxxxxxxx has not incurred or does not reasonably
expect to incur any "withdrawal liability" under Section
4201 et seq. of ERISA.
(iv) Neither Purchaser, Xxxxxxxx, nor any trade or business
under common control with Purchaser (within the meaning
of Sections 414(b) and 414(c) of the Code) or any
officers, directors, employees or affiliates of the same
shall, from and after the Closing Date, have any
liability, obligation or responsibility with respect to
any employee benefit plan maintained or provided by
Xxxxxxxx, or any affiliate thereof, before the Closing
Date (including but not limited to liability for
contributions to or the benefits payable under any such
employee benefit plan), except for the continuation of
insurance plans, the continuation of insurance
protection to employees as mandated by applicable law or
such benefits as Purchaser, in its sole discretion, may
determine to provide to Xxxxxxxx'x employees after the
Closing Date.
3.24 Insurance.
(a) Schedule 3.24(a) correctly identifies all insurance policies
and bonds covering Xxxxxxxx or its assets, properties, operations or
personnel and the amounts, basis of premiums and nature of coverage
with respect to each such policy. Such policies and bonds are in
full force and effect, without interruption of coverage since the
date specified for each such policy in Schedule 3.24 and, to the
knowledge of the Stockholders, are carried by financially
responsible insurance carriers, and are in such amounts and against
such risks and losses as are ordinarily and customarily maintained
with respect to comparable businesses, assets, properties,
operations or personnel. With exceptions which are not in the
aggregate material, Xxxxxxxx has not received any notice
of cancellation, termination or non-renewal or denial of liability
with respect to any policy or bond.
(b) Schedule 3.24(b) lists all claims in excess of Ten Thousand
Dollars ($10,000.00) made since January 1, 2004 in regard to any
insurance policies and bonds covering Xxxxxxxx or its assets,
properties, operations or personnel and correctly describes the
nature and current status of each such claim and, where applicable,
the final outcome.
3.25 Product Warranties. The absence of a reserve on Xxxxxxxx'x
balance sheet as at December 31, 2004 for the cost of honoring product
warranties with respect to products manufactured or sold by Xxxxxxxx is
in accordance with generally accepted accounting principles, and is
reasonable in light of Xxxxxxxx'x warranty claim experience as at such
date. Except to the extent disclosed in Schedule 3.25 no person
(including, without limitation, any governmental agency) has asserted any
claim or, to the knowledge of the Stockholders, has any reasonable basis
for any claim, and there is neither pending nor, to the knowledge of the
Stockholders, threatened any action or proceeding against Xxxxxxxx under
any federal, state or local laws or regulations relating to product
safety, warranties or guarantees.
3.26 Product Safety.
(a) Xxxxxxxx has not been required to file any notification or
other report with, or provide information to, the United States
Consumer Product Safety Commission or any other product safety
agency, commission, board, or other governmental authority of any
jurisdiction concerning actual or potential hazards with respect to
any product manufactured or sold by Xxxxxxxx.
(b) Xxxxxxxx has not made any misrepresentation or furnished any
information containing any material omission to any product safety
testing laboratory or similar organization. Xxxxxxxx has not failed
to obtain approval of any product, component or process which is
used, manufactured or sold by Xxxxxxxx, and which is required by law
or trade practice to be approved by any independent or government
sponsored testing laboratory, industry trade association or similar
agencies, bodies or associations.
3.27 Sales. All sales made by Xxxxxxxx on or before the Closing
Date have been sales made in the ordinary course of business, and not on
a consignment or sale-or-return basis.
3.28 Accounts. Schedule 3.28 hereto correctly identifies each
bank, securities, commodities or other brokerage or similar account and
safe deposit box or other depository maintained by, or on behalf of, or
for the benefit of, Xxxxxxxx, and the name of each person with any power
or authority to act with respect thereto.
3.29 Dividends. All dividends for the year ended December 31, 2004
are reflected on the Financial Statements. Xxxxxxxx will declare and pay
distributions to the Stockholders in an amount equal to forty percent
(40%) of Xxxxxxxx'x tax basis profit for the period beginning January 1,
2005 and ending on the Closing Date. The payment will be made within
seventy-five (75) days of the Closing Date.
3.30 Brokers and Finders. Neither the Stockholders nor Xxxxxxxx
has engaged or authorized any broker or investment banker to act on its
behalf, either directly or indirectly, as a broker or finder in
connection with the sale of the Shares pursuant to this Agreement or the
transactions provided for herein.
3.31 Disclosure. To the knowledge of Stockholders, none of this
Agreement, the Financial Statements referred to in Section 3.5 hereof
(including the footnotes thereto), any Schedule or certificate attached
hereto or delivered in accordance with the terms hereof contains any
untrue statement of a material fact, or omits any statement of a material
fact necessary in order to make the statements contained herein or
therein not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EACH OF THE
STOCKHOLDERS REGARDING SHARES.
Each of the Stockholders hereby represents severally and not
jointly, as of the date hereof and as of the Closing Date, as follows:
4.1 Ownership of Stock. Each Stockholder is the lawful owner of
the number of Shares listed opposite the name of such Stockholder in
Exhibit B attached hereto, free and clear of all liens, encumbrances,
restrictions and claims of every kind; each Stockholder has full legal
right, power and authority to enter into this Agreement and to sell,
assign, transfer and convey such Stockholder's Shares pursuant to this
Agreement; and the delivery to Purchaser of such Stockholder's Shares
pursuant to the provisions of this Agreement will transfer to Purchaser
valid title thereto, free and clear of all liens, encumbrances,
restrictions and claims of every kind.
4.2 No Restrictions Upon the Stockholders. Such Stockholder is
not subject to any restriction, agreement, law, judgment or levy, which
would prohibit or be violated by the execution and delivery hereof or the
consummation of the Merger. This Agreement is the valid and binding
agreement of such Stockholder, enforceable in accordance with its terms.
4.3 Brokers and Finders. Such Stockholder has not engaged or
authorized any broker, investment banker or other third party to act on
such Stockholder's behalf, either directly or indirectly, as a broker,
finder or advisor in connection with the transfer of such Stockholder's
Xxxxxxxx Shares pursuant to this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
The Purchaser hereby represents and warrants to the Stockholders, as
of the date hereof and as of the Closing Date, as follows:
5.1 Organization, Standing and Corporate Authority. The Purchaser
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, and has full corporate power and
authority to enter into and perform this Agreement and consummate the
transactions contemplated hereby. The execution, delivery and
performance hereof and the consummation of the transactions contemplated
hereby by the Purchaser have been duly authorized by all necessary
corporate action and this Agreement is a valid and binding agreement of
the Purchaser, enforceable in accordance with its terms. Subsidiary
Corp. is a corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa, and has full corporation
power and authority to enter into and perform this Agreement and
consummate the transactions contemplated hereby. Execution, delivery and
performance hereof, and the consummation of the transactions contemplated
hereby by Subsidiary Corp. have been duly authorized by all necessary
corporate action, and this Agreement is a valid and binding agreement of
Subsidiary Corp. enforceable in accordance with its terms.
5.2 Brokers and Finders. The Purchaser has not engaged or
authorized any broker, investment banker or other third party to act on
Purchaser's behalf, either directly or indirectly, as a broker, finder or
advisor in connection with this Agreement.
5.3 Capitalization.
(a) Authorized Capital.
(i) The authorized capital stock of Purchaser consists of
one hundred million (100,000,000) shares of Purchaser
Common Stock, of which there are five million ninety-
seven thousand one hundred seventy-two (5,097,172)
shares issued and outstanding. The Authorized Preferred
Stock of the Purchaser consists of twenty million
(20,000,000) shares, of which there are zero shares
issued and outstanding. In addition, there were two
million forty thousand (2,040,000) warrants issued that
are convertible into one (1) share of Common Stock per
warrant at a price of Four Dollars ($4.00). Five
hundred thirty-seven thousand seven hundred fifty
(537,750) warrants have been exercised leaving one
million five hundred and two thousand two hundred and
fifty (1,502,250) warrants outstanding. These warrants
expire August 2005 unless extended by the Board of
Directors. Upon consummation of the Merger, the
Purchaser Shares delivered to the Stockholders shall not
be less than 15 % (assumes average closing price =
$6.65/share) of the total issued and outstanding
Purchaser Shares. The number of warrants outstanding
could change prior to Closing Date.
(ii) The authorized capital stock of Subsidiary Corp.
consists of twenty thousand (20,000) shares of common
stock, par value One Dollar ($1.00) per share
("Subsidiary Corp. Common Stock"), five thousand six
hundred (5,600) of which are issued and outstanding and
owned by Purchaser.
(iii) All issued and outstanding shares of Purchaser Common
Stock and Subsidiary Corp. Common Stock are validly
issued, fully paid, nonassessable and free of preemptive
rights.
(b) Other Rights
Except as set forth in Section 5.3(a), no shares of capital stock or
other equity or voting securities of Purchaser are reserved for issuance
or are outstanding. All shares of Purchaser Common Stock were offered and
sold in compliance with all applicable state and federal securities laws,
rules and regulations. There are no outstanding or authorized securities,
options, warrants, calls, rights, commitments, preemptive rights, rights
of first refusal or rights of first offer, agreements, arrangements or
undertakings of any kind to which Purchaser is a party, or by which it is
bound, obligating Purchaser to issue, deliver or sell, or cause to be
issued, delivered or sold, any shares of capital stock or other equity or
voting securities of Purchaser or obligating Purchaser to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are not, as of
the date of this Agreement, any registration rights agreements,
shareholder agreements, buy-sell agreements, voting trusts or proxies or
other agreements or understandings to which Purchaser or its Shareholders
are a party or by which they are bound relating to the voting of any
shares of the capital stock of Purchaser or obligating (contingently or
otherwise) Purchaser to purchase, redeem or otherwise acquire any of its
capital stock or to pay any dividend or make any other distribution in
respect thereof.
5.4 Authorization and Enforceability.
(a) Purchaser has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by
Purchaser of this Agreement, and the consummation by Purchaser of
the transactions contemplated hereby have been duly and validly
authorized and approved by the board of directors of Purchaser, and,
if necessary, its shareholders, and no other action of the board of
directors or shareholders of Purchaser, or other corporate
proceeding on the part of Purchaser, is necessary to authorize this
Agreement and consummate the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and
delivered by Purchaser and, assuming due execution and delivery by
the other Parties hereto, constitutes the valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, subject to laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and rules of law
governing specific performance, injunctive relief, or other
equitable remedies.
(c) Subsidiary Corp. has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery by
Subsidiary Corp. of this Agreement, and the consummation by
Subsidiary Corp. of the transactions contemplated hereby, have been
duly and validly authorized and approved by the board of directors
of Subsidiary Corp. and by Purchaser as the sole shareholder of
Subsidiary Corp., and no other action of board of directors or
shareholders of Subsidiary Corp., or other corporate proceeding on
the part of Subsidiary Corp., is necessary to authorize this
Agreement and consummate the transactions contemplated hereby.
(d) This Agreement has been duly and validly executed and
delivered by Subsidiary Corp. and, assuming due execution and
delivery by the other Parties hereto, constitutes the valid and
binding obligation of Subsidiary Corp., enforceable against
Subsidiary Corp. in accordance with its terms, subject to laws of
general application relating to
bankruptcy, insolvency, and the relief of debtors and rules of law
governing specific performance, injunctive relief, or other
equitable remedies.
5.5 Issuance of Purchaser Common Stock.
The Purchaser Shares to be issued and delivered in the Merger
pursuant to Section 2.6(c), (a) have been duly authorized and, when
issued and delivered to the Stockholders in connection with the Merger,
will be validly issued, fully paid and nonassessable and free of any
preemptive or similar rights, and (b) shall be duly listed for trading on
the American Stock Exchange, subject only to official notice of issuance.
5.6 Consents; Noncontravention.
Except for (a) any applicable requirements of the Securities Act,
the Exchange Act, and state securities laws and the American Stock
Exchange and (b) the filing and recordation of the Articles of Merger as
required by applicable law, the authorization, execution and delivery by
Purchaser and Subsidiary Corp. of this Agreement, and the consummation of
the transactions contemplated hereby will not: (i) violate any provision
of the articles of incorporation or bylaws of Purchaser or Subsidiary
Corp.; (ii) violate any law or order of any Governmental Body or any
nongovernmental self-regulatory agency to which Purchaser or any of its
subsidiaries or any of their respective properties or assets may be
subject; (iii) require any filing with or permit, consent, or approval to
be obtained from any Governmental Entity or any nongovernmental self-
regulatory agency to which Purchaser or any of its subsidiaries or any of
their respective properties or assets may be subject; or (iv) result in
any violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default under, result in the loss of any benefit
under, or give rise to any right of termination, cancellation, increased
payments, or acceleration under, or result in the creation of any
Encumbrance on any of the properties or assets of Purchaser or any of its
subsidiaries under, any of the terms, conditions, or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement,
or other instrument or obligation to which Purchaser or any of its
subsidiaries is a party, or by which any of them or any of their
respective properties or assets may be bound.
5.7 Purchaser SEC Filings; Financial Statements; Liabilities.
(a) Purchaser has timely filed all forms, reports, registration
statements, prospectuses and documents required to be filed by it
with the SEC under the Securities Act or the Exchange Act since
January 1, 2001 (such forms, reports, registration statements,
prospectuses and documents, together with any amendments thereto,
are referred to as the "Purchaser SEC Filings"). As of their
respective dates, the Purchaser SEC Filings (i) were prepared in
accordance with and complied as to form in all material respects
with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were
made, not misleading. The audited financial statements and unaudited
interim financial statements included or incorporated by reference
in the Purchaser SEC Filings (i) were prepared in accordance with
GAAP applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto or, in
the case of unaudited statements, as permitted by Form 10-Q of the
SEC), subject, in the case of unaudited interim financial
statements, to the absence of notes and to year-end adjustments,
(ii) complied as of their respective dates in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, and (iii) fairly
present the consolidated financial position of Purchaser and its
consolidated subsidiaries as of the dates thereof and the results of
operations, cash flows, and changes in shareholders' equity for the
periods set forth therein, except as otherwise noted therein.
(b) Except as and to the extent set forth on the balance sheet of
Purchaser as of December 31, 2004, including the notes thereto,
Purchaser has no indebtedness, liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise, and whether due
or to become due) except for indebtedness, liabilities and
obligations (i) incurred since December 31, 2004 in the ordinary
course of business and which would not, individually or in the
aggregate, have a material adverse effect or (ii) incurred pursuant
to this Agreement.
5.8 Absence of Changes
Since December 31, 2004:
(a) Purchaser has conducted its business in the ordinary course of
business, consistent with past practice, and there has not been: (i)
any changes, events or conditions with respect to Purchaser that has
had a Material Adverse Effect; (ii) any amendment of any material
term of any outstanding equity security of Purchaser; (iii) any
losses to the properties or assets of Purchaser or its subsidiaries
whether or not covered by insurance, which would result in a
Material Adverse Effect; or (iv) any change in accounting methods,
principles or practices by Purchaser affecting its assets,
liabilities or business.
(b) To the knowledge of Purchaser, Purchaser has not had any
material change in its relations with its employees, vendors or
tenants, in each case considered as a whole.
5.9 Real Property Improvements. To the knowledge of Purchaser,
other than amounts for maintenance and capital expenditures described in
the Purchaser SEC Filings, (i) all of the improvements on the Purchaser's
real property, including signs located on or adjacent to such Purchaser
Real Property, are in good condition and repair (subject only to ordinary
wear and tear), free of infestation and free of physical, mechanical,
structural, design and construction defects, (ii) all water, electric,
sewer, plumbing, heating, ventilating, gas and air conditioning servicing
such improvements are in good condition and repair (subject only to
ordinary wear and tear) and are free of defects, except as would not have
a Material Adverse Effect.
5.10 Intellectual Property. To the knowledge of Purchaser,
Purchaser and its subsidiaries own or have a valid right to use all
patents, trademarks, trademark registrations, service marks, service xxxx
registrations, trade names, copyrights, licenses, inventions, trade
secrets and other intellectual property rights owned by Purchaser (or its
subsidiaries) or otherwise used by Purchaser (or its subsidiaries) in the
operation of its businesses (the "Purchaser Intellectual Property"). To
the knowledge of Purchaser, there are no claims to the effect that the
use of the Purchaser Intellectual Property by Purchaser or its
subsidiaries infringes on the intellectual property rights of any other
Person, or that any of the Purchaser Intellectual Property is invalid.
To the knowledge of Purchaser, Purchaser has taken reasonable measures to
protect the value (and to the extent applicable, the confidentiality of)
all Purchaser Intellectual Property.
5.11 Environmental Matters.
(a) To the knowledge of Purchaser, there has not been any
Hazardous Activity on, in, under or affecting any real property
currently or formerly leased or owned or by any means controlled by
Purchaser or its subsidiaries (the "Purchaser Real Property"),
except as in compliance with Environmental Law or as would not have
a Material Adverse Effect.
(b) To the knowledge of Purchaser, the Purchaser Real Property and
the operations of Purchaser and its subsidiaries with respect to the
Purchaser Real Property are in compliance with applicable
Environmental Law, and Purchaser and its subsidiaries have, and are
in compliance with, all Authorizations necessary to operate under
all applicable Environmental Law, except as would not have a
Material Adverse Effect.
(c) To the knowledge of Purchaser, except as set forth in the
environmental site assessments obtained by Purchaser in the ordinary
course of business, neither Purchaser nor its subsidiaries has
received any written or oral notice from any Governmental Entity or
any other Person and, there is no pending or threatened proceeding
that (i) alleges a violation of any Environmental Law by Purchaser
or its subsidiaries (ii) alleges that Purchaser or its subsidiaries
is a liable party or a potentially responsible party under CERCLA,
or any other Environmental Law, (iii) has resulted in or could
result in the attachment of an environmental lien on any of the
Purchaser Real Property, or (iv) alleges that Purchaser or its
subsidiaries are liable for any contamination of or damage to the
Environment, contamination of the Purchaser Real Property, property
damage, or personal injury based on their activities or the
activities of their predecessors or third parties (whether at the
Purchaser Real Property or elsewhere) involving Hazardous Materials,
whether arising under the Environmental Law, common law principles,
or other legal standards.
(d) To the knowledge of Purchaser, neither Purchaser nor its
subsidiaries is currently subject to or has not incurred in the last
three (3) years, any Environmental, Health and Safety Liabilities,
including without limitation, liabilities with regard to any real
property currently lease or owned or any real property formerly
leased or owned by Purchaser, except as would not have a Material
Adverse Effect.
5.12 Taxes. Purchaser has timely filed with the appropriate taxing
authorities all returns (including without limitation information returns
and other material information) in respect of Taxes required to be filed
through the date hereof and shall timely file any such returns required
to be filed on or prior to the Closing Date. The returns and other
information filed are complete and accurate in all material respects.
There are no pending or, to the knowledge of the Purchaser, threatened
audits, investigations or claims for or relating to any material
additional liability in respect of Taxes, and there are no matters under
discussion with any Governmental Body with respect to Taxes that in the
reasonable judgment of Purchaser or its attorneys or accountants, is
likely to result in a material additional liability for Taxes. Purchaser
and each of its subsidiaries has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder or other
party, and has complied in all material respects with all laws relating
to Tax withholding;
5.13 Compliance with Laws. To the knowledge of Purchaser,
Purchaser is not in default under or in violation of any Applicable Law
which may result in a Material Adverse Effect upon any property or asset
of Purchaser or its subsidiaries or upon Purchaser's, or any of its
subsidiaries', business, condition (financial or other), results of
operations or prospects.
5.14 Certain Payments. To the knowledge of Purchaser, neither
Purchaser, nor any director, officer, agent, or employee of Purchaser or
its subsidiaries, nor any other person or entity associated with or
acting for or on behalf of Purchaser has directly or indirectly made any
contribution, gift, bribe, rebate, payoff, influence payment, kick-back,
or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (a) to obtain favorable treatment
in securing business, (b) to pay for favorable treatment for business
secured, or (c) to obtain special concessions or for special concessions
already obtained, for or in respect of Purchaser.
5.15 Legal Proceedings.
(a) There are no Proceedings pending against Purchaser or its
subsidiaries, or to which Purchaser, its subsidiaries or any of
their respective properties is subject, that (i) are required to be
described in the Purchaser SEC Filings but are not described as
required or (ii) challenge, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated by this Agreement. To the knowledge of
Purchaser, (A) no such Proceeding has been threatened, and (B) no
event has occurred or circumstance exists that is reasonably likely
to give rise to or serve as a basis for the commencement of any such
Proceeding.
(b) Neither Purchaser or its subsidiaries is subject to any order
that relates to the business of Purchaser or its subsidiaries, or
any of the assets owned or used by Purchaser or its subsidiaries and
that, in any case, would have a Material Adverse Effect.
5.16 Continuity of Business. Purchaser intends to continue the
historic business of Xxxxxxxx within the meaning of IRS regulation
Section 1.368-1(d).
SECTION 6. COVENANTS OF STOCKHOLDERS.
The Stockholders and Xxxxxxxx hereby covenant and agree with the
Purchaser as follows:
6.1 Conduct of Xxxxxxxx Pending Closing. From the date hereof to
and including the Closing Date, the Stockholders shall cause Xxxxxxxx to
operate its business only in the usual and ordinary course, consistent
with past practice, and in connection therewith, the Stockholders will
not permit Xxxxxxxx to undertake (or enter into any agreement to
undertake), and Xxxxxxxx shall not, and shall agree not to:
(a) incur any indebtedness for borrowed money or assume,
guarantee, endorse except as an endorser of checks received by it
and deposited in the ordinary course of business or otherwise become
responsible for the obligations of any other individual, firm or
corporation, or make any loans or advances to any individual, firm
or corporation;
(b) except for dividends or distributions which would not violate
Section 3.29 hereof, make, declare or pay any dividend, or declare
or make any distribution on, or redeem, purchase or otherwise
acquire, any shares of its outstanding capital stock or authorize
the creation or issuance of any additional shares of its capital
stock or any options, calls or commitments relating to its capital
stock or any securities or obligations convertible into or
exchangeable for or giving any person any right to subscribe for or
acquire any shares of its capital stock;
(c) mortgage, pledge or otherwise encumber any of its properties
or assets;
(d) sell or transfer any of its properties or assets or cancel,
release or assign any indebtedness owed to them or any claims held
by it, other than in the ordinary course of its business;
(e) close any plants or any other material facilities; except for
the east facility, which is closed.
(f) make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfer or
otherwise, or by the purchase or lease of any property or assets of
any other individual, firm or corporation;
(g) enter into any joint venture, partnership or other similar
arrangement or form any other new arrangement for the conduct of its
business;
(h) enter into, amend or terminate any material contract,
including material leases and licenses, other than entering into the
employment agreements provided for in Section 8.7;
(i) increase in any manner the compensation or fringe benefits
(other than compensation or fringe benefits increases as may be
required by law or in accordance with its customary compensation
practices and related changes in fringe benefits) of any of its
officers or employees or pay or agree to pay any pension or
retirement allowance not required by any existing plan or agreement
to such officers or employees, commit itself to any pension,
retirement or profit-sharing plan or agreement or employment
agreement (except for retainer or consulting agreements entered into
in the ordinary course of its business) with or for the benefit of
any officer, employee or other person or, except as required by law,
alter, amend, terminate in whole or in part, or curtail or
permanently discontinue distributions to, any employee pension
benefit plan;
(j) permit, to the extent within its control, any insurance policy
naming Xxxxxxxx as a beneficiary or a loss payable payee to be
canceled or terminated or any of the coverage thereunder to lapse,
unless simultaneously with such termination or cancellation
replacement policies providing substantially similar coverage are in
full force and effect;
(k) make any amendments to its Articles of Incorporation or By-
laws; or
(l) take or omit to take any action the effect of which could or
will render inaccurate any of the Stockholders' representations and
warranties set forth herein.
6.2 Access Pending Closing. From the date hereof to and including
the Closing Date, the Stockholders shall cause the Purchaser and its
accountants and other representatives to have the right to access to the
books, records, offices and other facilities of Xxxxxxxx, during normal
business hours, for the sole purpose of making such investigation of the
financial condition and operations of Xxxxxxxx as the Purchaser may
reasonably deem necessary to evaluate the transaction contemplated
herein. Any action taken by the Purchaser or its representatives shall
be done in a manner that will least disrupt the ongoing business of
Xxxxxxxx.
6.3 Consents of Third Parties. Prior to the Closing, the
Stockholders shall obtain, at their sole expense, all consents and other
approvals from any governmental agency, bureau or authority, or any other
person (including any lender or lessor), which are required of Xxxxxxxx
as a result of or to effectuate the transactions contemplated by this
Agreement.
6.4 Restrictive Covenants.
(a) For the Restricted Period (as hereinafter defined), neither
the Stockholders nor any affiliate of the Stockholders shall, within
the Restricted Area (as hereinafter defined), engage directly or
indirectly, either as principal, partner, joint venturer,
consultant, agent, proprietor or more than five percent stockholder
of a public company, or in any other manner participate in the
ownership, management, operation or control of any person, firm,
partnership, corporation or other entity, other than Subsidiary
Corp., Purchaser or a subsidiary of Purchaser, which engages in the
business now conducted by Xxxxxxxx.
(b) For the purposes of this Agreement, "affiliate" shall mean any
person or entity (i) that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under
common control with, one or more Controlling Stockholder, or (ii) 5%
or more of whose voting stock (or in the case of a person or entity
which is not a corporation, 5% or more of any equity interest) is
owned directly or indirectly by one or more Controlling Stockholder.
(c) For the purpose of this Section 6.4 the Restricted Period
shall mean the period from the Closing Date until the five-year
anniversary of the Closing Date.
(d) For the purposes of this Section 6.4 the Restricted Area shall
mean the United States of America and Canada.
(e) The Stockholders agree that the period of time provided in the
definition of Restricted Period above, and the territorial
restrictions set forth in the definition of Restricted Area and
other provisions and restrictions set forth above, are necessary to
protect the Purchaser and its successors and assigns in the use and
employment of the good will of the business conducted by Xxxxxxxx
and will not unduly restrict the ability of the Stockholders to
conduct their business affairs or adversely affect their livelihood.
(f) The Stockholders agree that damages cannot compensate the
Purchaser in the event of a violation of the above restrictive
covenants, and that in such event injunctive relief shall be
essential for the protection of the Purchaser and its successors and
assigns. Accordingly, the Stockholders agree and consent that, in
the event any of said restrictive covenants shall be violated or
breached, the Purchaser shall be entitled to obtain injunctive
relief upon proper showing against the party or parties violating
such covenants, upon due notice, in addition to such further or
other relief as may appertain at equity or law. Obtainment of such
an injunction by the Purchaser shall not be considered an election
of remedies or a waiver of any right to assert any other remedies
which the Purchaser has at law or in equity. No waiver of any
breach of violation hereof shall be implied from forbearance or
failure by the Purchaser to take action thereon. The Stockholders
agree that, if any provision hereof shall be adjudicated to be
invalid or unenforceable, such provision shall be deleted from this
Agreement, but such deletion is to apply only with respect to the
operation of such provision in the particular jurisdiction in which
such adjudication is made; provided, further, that to the extent any
provision hereof is deemed enforceable by virtue of its scope in
terms of area or length of time, but may be made enforceable by
limitations thereon, the Stockholders agree that the same shall be
enforceable to the fullest extent permissible under the laws and
public policies applied in such jurisdiction in which the
enforcement is sought.
(g) The restrictive covenants of the Stockholders and their
affiliates contained in this Section 6.4 shall be construed as
agreements which are independent of any other provision of this
Agreement or any other understanding or agreement between the
parties hereto, and the existence of any claim or cause of action of
the Stockholders against the Purchaser, of whatever nature, shall
not constitute a defense to the enforcement by the Purchaser of the
covenants contained herein. The provisions of this Section 6.4 may
be severed and/or modified by a court if necessary to render the
provisions of this Section 6.4 enforceable.
(h) The restrictive covenants contained in this Section 6.4 are
regarded by the Purchaser as an essential inducement to the
transactions contemplated hereby, without which the Purchaser would
not be willing to enter into this Agreement.
6.5 Survey; Title Guaranty.
(a) Prior to the Closing Date, the Stockholders and the
Purchaser shall cooperate with each other in obtaining a current
plat of survey of the Real Property dated subsequent to the date
hereof and prepared by a licensed Iowa land surveyor reasonably
acceptable to the Purchaser and to the Title Guaranty Division of
the Iowa Finance Authority, for purposes of its issuance of an
extended coverage owner's guaranty as set forth in Section 6.5(b)
hereof. The survey shall be certified to the Purchaser and the
Title Guaranty Division of the Iowa Finance Authority and shall
comply with the American Land Title Association ("ATLA") standards.
(b) Prior to the Closing Date, the Stockholders and the
Purchaser shall cooperate with each other in obtaining a commitment
for an owner's policy issued by the Title Guaranty Division of the
Iowa Finance Authority. Such commitment shall be in the amount of
Two Million Five Hundred Thousand Dollars ($2,500,000.00) and shall
be on Xxxxxxxx'x main facility and shall show Xxxxxxxx'x as holding
the owner's interest in the Real Property together with such
endorsements as are available from the Title Guaranty Division of
the Iowa Finance Authority for an owner's policy.
(c) If the Plat of Survey and title guaranty commitment
required to be furnished by the Stockholders discloses any surveyor
or title defects, the Stockholders shall prior to the Closing Date
cause such defects to be cured. If such survey or title defects are
not cured prior to the Closing Date, the Purchaser may, at its
election, terminate this Agreement, in which event this Agreement
shall become null and void, accept title to such defects, or by
mutual agreement extend the date within which the Stockholders shall
be allowed to cure such survey or title defects.
6.6 Confidentiality. From and after the Closing, the Stockholders
will not use any of the Confidential Information of Xxxxxxxx (as
defined below) for himself or herself or for any other person, firm,
corporation, partnership or other entity (except on behalf of
Purchaser and its subsidiaries), or disclose any Confidential
Information of Xxxxxxxx to any person, firm, corporation,
partnership or other entity. As used herein, the term "Confidential
Information of Xxxxxxxx" shall mean all trade secrets and other
confidential information of or about Xxxxxxxx, including, without
limitation, any such information regarding the business of Xxxxxxxx,
methods of operation, products, financial data, customers, exclusive
of any such information which (a) is or becomes publicly known
through no act of the Stockholders, (b) is rightfully received by
the Stockholders from a third party without similar restrictions and
without breach of its or a similar agreement, (c) is approved in
advance for such use or disclosure by the Purchaser in writing, or
(d) is used or disclosed pursuant to the order of any court of
competent jurisdiction. In the event the Stockholders become
legally required to disclose any Confidential Information of
Xxxxxxxx in a manner other than expressly permitted by this
Agreement, the Stockholders shall provide the Purchaser with prompt
notice so that the Purchaser may seek a protective order or other
appropriate remedy. The Stockholders will cooperate with the
Purchaser, at the expense of the Purchaser, in seeking any such
order or other remedy and the Stockholders shall disclose only that
portion of the Confidential Information of Xxxxxxxx which they are
legally required to disclose.
6.7 No Shop Clause. For the period commencing on the date hereof,
and ending on the date, if any, this Agreement is terminated
pursuant to Section 10, neither the Stockholders nor Xxxxxxxx,
through any of their employees, officers, agents or representatives
or otherwise, shall solicit, contact or have any discussion, or
shall permit Xxxxxxxx to solicit, contact or have and discussion,
with any person or entity with a view to (i) the acquisition of any
assets of Xxxxxxxx, (ii) the acquisition of any capital stock of
Xxxxxxxx, (iii) the merger or consolidation of Xxxxxxxx, or (iv) the
acquisition by Xxxxxxxx of the stock or assets of any other person
or entity. The Stockholders shall give the Purchaser immediate
telephonic notice regarding all details of any attempt by any third
party to solicit, contract or discuss the matters set forth in
clauses (i)-(iv) above.
6.8 Closing. The Stockholders shall use their best efforts to
cause the conditions specified in Section 8 hereof to be satisfied
at or as soon as practical after the date hereof.
SECTION 7. COVENANTS OF PURCHASER
The Purchaser hereby covenants and agrees with the Stockholders as
follows:
7.1 Books and Records. In connection with any tax audit of the
Stockholders, or the preparation of any tax return of the Stockholders,
or the defense of any claim brought against the Stockholders, or any
other proper purpose, the Purchaser will cause Xxxxxxxx to make available
to the Stockholders, at the Stockholders' request and expense from time
to time, all books and records of Xxxxxxxx either existing on or relating
to any transaction on or prior to the Closing Date, for inspection or
copying by the Stockholders at any reasonable time for a six year period
after the Closing Date.
7.2 Closing. The Purchaser will use its best efforts to cause the
conditions specified in Section 9 to be satisfied at or as soon as
practicable after the closing date hereof.
7.3 Furnishing of Information. As long as any Stockholder owns
Purchaser Shares, the Purchaser covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Purchaser after the date
hereof pursuant to the Exchange Act. As long as any Stockholder owns the
Purchaser Shares, if the Purchaser is not required to file reports
pursuant to such law, it will prepare and furnish to the Stockholders and
make publicly available in accordance with Rule 144(c) such information
as is required for the Stockholders to sell the Purchaser Shares under
Rule 144.
7.4 Listing of Securities. The Purchaser agrees that it will (i)
take such action as is necessary or desirable to cause the Purchaser
Shares to be listed on the trading market for the Purchaser's common
stock as promptly as possible, (ii) take all action reasonably necessary
to continue the listing and trading of this common stock on such trading
market, and (iii) comply in all material respects with the Purchaser's
reporting, filing and other obligations under the bylaws or rules of such
trading market.
7.5 Conduct of Business. Except as contemplated by this
Agreement, from the date of this Agreement until the Effective Time,
Purchaser will continue to operate its business in the normal course
consistent with mass practice and use its commercially reasonable efforts
to preserve substantially intact its business organization, to keep
available the services of its key employees and to maintain satisfactory
relationships with licensors, licensees, suppliers, contractors,
distributors, customers, and others having material business
relationships with it. From the date of this Agreement until the
Effective Time, Purchaser shall not amend its Articles of Incorporation,
issue shares of its common stock (excepts as contemplated herein), adopt
a plan of complete or partial liquidation, dissolution, merger,
consolidation or other reorganization or sell all or substantially all of
its assets or knowingly take any action that would result in a failure to
maintain the trading of its common stock on the American Stock Exchange.
7.6 Tax Free Reorganization. Prior to the Effective Time, each
party shall use its reasonable best efforts to cause the Merger of
Xxxxxxxx into Subsidiary Corp. to qualify as a reorganization within the
meaning of the provisions of Section 368 of the Code and shall not
knowingly take any action that would cause the Merger not to so qualify.
Purchaser shall not knowingly take or knowingly cause Subsidiary Corp.
to take any action following the Effective Time that would cause the
Merger not to qualify as a reorganization under Section 368 of the Code.
7.7 Purchaser Non-Compete. In the event that the Closing under
this Agreement shall not occur, Purchaser shall not, prior to December
31, 2006, hire any of the employees of Xxxxxxxx.
SECTION 8. CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of the Purchaser hereunder to proceed with the
Closing is subject to the satisfaction on or before the Closing Date of
each of the following conditions, unless otherwise waived in writing by
the Purchaser. All documents, instruments and opinions to be furnished
by the Stockholders pursuant hereto shall be in form and substance
reasonably satisfactory to the Purchaser and its counsel.
8.1 Representations and Warranties. The representations and
warranties of the Stockholders contained herein, and in any certificate
or other writing delivered pursuant hereto or in connection herewith,
shall be true and correct in all respects on and as of the Closing Date.
8.2 Performance. The Stockholders shall have duly performed or
complied with all of the covenants, acts and obligations to be performed
or complied with by them hereunder at or prior to the Closing.
8.3 Liabilities. Except for liabilities reflected on the
Financial Statements or on the Schedules hereto, and except for trade
account payables incurred by Xxxxxxxx in the normal and ordinary course
of Xxxxxxxx'x business and normal accruals for current compensation since
the last payroll date, on the Closing Date there shall not be any
liabilities of Xxxxxxxx of any kind whatsoever that have a Material
Adverse Effect, whether or not accrued or fixed, absolute or contingent,
known or unknown, determinated or determinable, nor shall there be any
condition or circumstances existing or which has existed, and no event
shall have occurred which could reasonably be expected to result in any
such liability, which liabilities in any such case could, individually or
in the aggregate, have a Material Adverse Effect (for financial or other
reasons) on the ability of Xxxxxxxx to continue to conduct its business
(as presently conducted) on or after the Closing Date.
8.4 Shares. Each of the Stockholders shall have delivered to the
Purchaser a certificate or certificates representing all of his or her
Xxxxxxxx Shares, duly endorsed by such Stockholder for transfer to the
Purchaser or accompanied by an assignment of such Xxxxxxxx Shares to the
Purchaser duly executed by each such Stockholder, and with any applicable
Shareholder transfer taxes paid by such Stockholder.
8.5 Corporate Books. The Stockholders shall have delivered to the
Purchaser the corporate seal, corporate minute books and stock transfer
records of Xxxxxxxx.
8.6 Resignations. The Stockholders shall have delivered to the
Purchaser the written resignations of all of the officers and directors
of Xxxxxxxx, effective as of the Closing on the Closing Date.
8.7 Employment Agreement. Employment Agreements for Xxxx Xxxxxx
and Xxxx Xxxxxx are attached as Exhibits D and E and made a part of this
Agreement. Without the Employment Agreements the Stockholders would not
be willing to enter into this transaction.
8.8 Proof of Good Standing. The Stockholders shall have delivered
to the Purchaser (i) a certified copy of the Articles of Incorporation of
Xxxxxxxx, and all amendments thereto, of Xxxxxxxx; and (ii) a Certificate
of Good Standing with respect to Xxxxxxxx, dated within fifteen days of
the Closing Date, from the State of Iowa.
8.9 Events Subsequent to Contract Date. Since the date of the
signing of this Contract, and except as set forth on Schedule 8.9 or
otherwise agreed to by the Purchaser in writing, (a) there shall have
been no adverse change in the financial condition, assets, liabilities or
business of Xxxxxxxx; (b) Xxxxxxxx shall have kept its business and
organization intact, shall have maintained the good will of its customers
and insurance carriers with which it does business and shall have
conducted its business in the same manner as at such date; (c) Xxxxxxxx
shall not have received notice from any of its customers or insurance
carriers with which it does business indicating a termination of business
relations, the effect of which is adverse to its business; (d) there
shall not have been any liabilities or obligations incurred by Xxxxxxxx
other than in the ordinary course of business; (e) except for dividends
or distributions which would not violate Section 3.29 hereof, no
dividends, stock split or other distributions in respect of the capital
stock of Xxxxxxxx shall have been declared, set side or paid, and no
interest in its capital stock shall have been purchased, redeemed or
otherwise acquired by Xxxxxxxx; (f) there shall not have been any sale or
transfer of any assets of Xxxxxxxx or other transaction entered into
other than in the ordinary course of business; (g) no loss, damage or
destruction of property of a nature which would interfere with the
conduct of the business of Xxxxxxxx (whether or not covered by insurance)
shall have been suffered; (h) other than in the ordinary course of its
business, there shall not have been any increases in salaries or other
compensation payable to any officers, directors or employees of Xxxxxxxx,
and there shall not have been any bonuses except the van set forth in
Section 3.7(c), termination or severance pay, or other like payments made
to or authorized for any officers, directors or employees of Xxxxxxxx;
(i) no indebtedness shall have been incurred except in the ordinary
course of business; and (j) there shall not have been any loan of funds
or other assets of Xxxxxxxx to any person, firm, corporation, trust or
other entity.
8.10 Opinion of Counsel. The Purchaser shall have received from
the law firm of Xxxxxxxxxx, Xxxxx & Xxxxx, of Spencer, Iowa, counsel to
the Stockholders and Xxxxxxxx, an opinion of such counsel, dated the
Closing Date, in form and substance reasonably acceptable to the
Purchaser and its counsel, to the effect that:
(a) Xxxxxxxx is a corporation, which is duly organized; validly
existing and in good standing under the laws of the State of Iowa.
(b) Except as disclosed in any Schedule hereto, such counsel has
no knowledge of any facts which would have a material adverse effect
upon the good and marketable title of Xxxxxxxx to its assets, or
which would evidence or create any lien, security interest,
restriction, mortgage or encumbrance thereon.
(c) Such counsel has no knowledge of any facts which might
indicate that the Stockholders have not duly performed and complied
with all of the agreements and obligations hereunder which are to be
performed or complied with by the Stockholders, respectively, at or
prior to the Closing, or that conditions to the obligations of the
Purchaser hereunder have not been fulfilled.
8.11 Permits. The Stockholders shall deliver to the Purchaser the
original copies of all licenses and permits affecting or relating to the
Real Property.
8.12 Articles of Merger. The Articles of Merger, in a form
substantially the same as Exhibit A, shall have been filed with the Iowa
Secretary of State.
8.13 Xxxxxxxx Approval. Xxxxxxxx shall deliver to the purchaser
copies of resolutions evidencing approval of the Merger by Xxxxxxxx'x
board of directors and shareholders.
8.14 Due Diligence. The Purchaser will be satisfied, in its
sole discretion, with the outcome of its due diligence investigation of
the Company, including, without limitation, the Company's ability to meet
its projected financial performance.
8.15 Further Assurances. The Stockholders shall deliver to the
Purchaser such other documents and instruments as may be reasonably
required to consummate the transactions contemplated hereby.
SECTION 9. CONDITIONS TO OBLIGATION OF STOCKHOLDERS TO CLOSE.
The obligation of the Stockholders and Xxxxxxxx to proceed with the
Closing is subject to the satisfaction on or before the Closing Date of
each of the following conditions, unless waived in writing by the
Stockholders and Xxxxxxxx.
9.1 Representations and Warranties. The representations and
warranties of the Purchaser contained herein and in any certificate or
other writing delivered pursuant hereto or in connection herewith shall
be true and correct in all respects on and as of the Closing Date as
though such representations and warranties were made at such time. At
the Closing, the Purchaser shall deliver to the Stockholders a
certificate signed by an officer of Purchaser confirming the accuracy of
the preceding sentence.
9.2 Performance. The Purchaser shall have duly performed or
complied with all of the covenants, acts and obligations to be performed
or complied with by the Purchaser hereunder on or prior to the Closing
Date as though such representations and warranties were made at such
time. At the Closing, the Purchaser shall deliver to the Stockholders a
certificate signed by an officer of Purchaser confirming the accuracy of
the preceding sentence.
9.3 Articles of Merger. The Articles of Merger, in the form
substantially the same as the form attached hereto as Exhibit A, shall
have been filed with the Iowa Secretary of State.
9.4 Employment Agreements. The Purchaser shall have executed and
delivered to Xxxx Xxxxxx and Xxxx Xxxxxx, Employment Agreements in
substantially the same form attached hereto as Exhibits D and E
respectively.
9.5 Consents. All third party consents necessary to consummate
the transactions contemplated by this Agreement shall have been received
by the parties.
9.6 Registration Rights Agreement. The Stockholders shall have
received the Registration Rights Agreement duly executed by Purchaser.
9.7 Good Standing. Purchaser shall have delivered to Xxxxxxxx a
certificate of good standing with respect to purchaser, dated within 15
days of the closing date, from the states of Nevada and Iowa, and a
certificate of good standing with respect to Subsidiary Corp., dated
within 15 days of the closing date, from the state of Iowa.
9.8 Purchaser Approval. Purchaser shall have delivered to
Xxxxxxxx copies of resolutions evidencing the approval by purchaser and
Subsidiary Corp.'s board of directors and, if necessary, their
shareholders.
9.9 Purchaser Shares. Each of the Stockholders shall have
received from the Purchaser a certificate or certificates representing
all of his or her Purchaser Shares as provided for in Section 2.6.
9.10 Cash Consideration. Purchaser shall have paid to each
Stockholder, by wire transfer in immediately available funds, the Cash
Consideration described in Section 2.6(c).
SECTION 10. TERMINATION.
10.1 Mutual Termination; Termination For Non-satisfaction of
Conditions. This Agreement may be terminated and abandoned, without
limiting or waiving any other rights and remedies any party may have at
law or in equity, at any time prior to the consummation of the Closing on
the Closing Date under the following described circumstances:
(a) Upon the mutual written consent of the Purchaser, the
Stockholders and Xxxxxxxx.
(b) By the Purchaser, if the Stockholders fail to timely cure or
remove defects from the surveyor title commitment as set forth in
Section 6.5, by delivering written notice of such termination to the
Stockholders.
(c) By the Purchaser, if the conditions set forth in Section 8
hereof shall not be fully satisfied or waived by the Purchaser, or
if the Closing shall not have occurred on or before April 30, 2005.
(d) By the Stockholders or Xxxxxxxx, if the conditions set forth
in Section 9 hereof shall not be fully satisfied or waived by the
Stockholders and Xxxxxxxx, or if the Closing shall not have occurred
on or before April 30, 2005.
(e) By either party, in the event that the other party fails to
perform or observe any of the covenants or obligations to be
performed or observed by the other party under this Agreement, or in
the event that the other party shall breach any of their
representations or warranties contained in this Agreement. In such
case, the non-breaching party shall be entitled to any and all
rights and remedies available at law or in equity, including,
without limitation, specific performance and injunctive relief, all
of which shall be cumulative.
10.2 Environmental Inspections; Termination. Upon reasonable
notice to Xxxxxxxx, from the date hereof until the Closing, the Purchaser
and its representatives shall have the right to enter Xxxxxxxx'x Real
Property and to make such environmental studies of Xxxxxxxx'x Real
Property as the Purchaser deems reasonable, including, without
limitation, soil tests and asbestos inspections (the "Environmental
Studies"). If the Purchaser, in its sole discretion, finds the results
of any of the Environmental Studies to be objectionable for any reason,
the Purchaser may terminate this Agreement by sending written notice
thereof to the Stockholders prior to the Closing, in which event this
Agreement shall be null and void. Upon reasonable notice to Purchaser,
from the date hereof until the Closing, the Xxxxxxxx and its
representatives shall have the right to enter Purchaser's Real Property
and to make such environmental studies of Purchaser Real Property as
Xxxxxxxx deems reasonable, including, without limitation, Environmental
Studies. If Xxxxxxxx, in its sole discretion, finds the results of any
of the Environmental Studies to be objectionable for any reason, Xxxxxxxx
or the Stockholders may terminate this Agreement by sending written
notice thereof to the Purchaser prior to the Closing, in which event this
Agreement shall be null and void.
SECTION 11. INDEMNIFICATION AND SURVIVAL.
11.1 Indemnification of the Purchaser by the Stockholders. The
Stockholders agree to jointly and severally indemnify, defend, and hold
the Purchaser, Subsidiary Corp. and their respective officers, directors
and shareholders, and their respective heirs, executors, personal
representatives, successors and assigns (each, a "Purchaser Indemnified
Party"), harmless from and against any and all costs, expenses, losses,
damages, fines, penalties or liabilities (including, without limitation,
interest which may be imposed in connection therewith, court costs,
litigation expenses, reasonable attorneys' fees and accounting fees)
("Losses") incurred by any Purchaser Indemnified Party with respect to,
in connection with, arising from, or alleged to result from, arise out
of, or in connection with:
(a) A breach of any representation or warranty made by the
Stockholders and contained in this Agreement or in any certificate
or other document delivered by such Stockholder to the Purchaser
hereunder; and
(b) A breach of any covenant, restriction or agreement made by or
applicable to the Stockholders and contained in this Agreement or in
any certificate or other document delivered by the Stockholders to
the Purchaser hereunder.
11.2 Indemnification of the Stockholders. The Purchaser shall
indemnify, defend and hold the Stockholders and their respective heirs,
executors, personal representatives, successors and assigns, harmless
from and against any and all costs, expenses, losses, damages, fines,
penalties or liabilities (including, without limitation, interest that
may be imposed in connection therewith, court costs, litigation expenses,
reasonable attorneys' fees and accounting fees) incurred by any of such
parties with respect to, in connection with, arising from, or alleged to
result from, arise out of, or in connection with:
(a) A breach by the Purchaser of any representation or warranty
made by the Purchaser and contained in this Agreement or in any
certificate or other document delivered by the Purchaser to the
Stockholders hereunder; and
(b) A breach by the Purchaser of any covenant, restriction or
agreement made by the Purchaser or applicable to the Purchaser and
contained in this Agreement or in any certificate or other document
delivered by the Purchaser to the Stockholders hereunder.
11.3 Procedure for Indemnification.
(a) The party which is entitled to be indemnified hereunder (the
"Indemnified Party") shall promptly give notice hereunder to the
indemnifying party after obtaining written notice of any claim as to
which recovery may be sought against the indemnifying party because
of the terms of this Section 11 and, if such indemnity shall arise
from the claim of a third party, shall permit the indemnifying party
to assume the defense of any such claim and any litigation resulting
from such claim. Notwithstanding the foregoing, the right to
indemnification hereunder shall not be affected by any failure of an
Indemnified Party to give such notice or delay by an Indemnified
Party in giving such notice unless, and then only to the extent
that, the rights and remedies of the indemnifying party shall have
been prejudiced as a result of the failure to give, or delay in
giving, such notice. Failure by an indemnifying party to notify an
Indemnified Party of its election to defend any such claim or action
by a third party within twenty-one days after notice thereof shall
have been given to the indemnifying party shall be deemed a waiver
by the indemnifying party of its right to defend such claim or
action.
(b) If the indemnifying party assumes the defense of such claim or
litigation resulting therefrom, the obligations of the indemnifying
party hereunder as to such claim shall include taking all steps
necessary in the defense or settlement of such claim or litigation
and holding the Indemnified Party harmless from and against any and
all damages caused by or arising out of any settlement approved by
the indemnifying party or any judgment in connection with such claim
or litigation. The indemnifying party shall not, in the defense of
such claim or any litigation resulting therefrom, consent to entry
of any judgment (other than a judgment of dismissal on the merits
without costs) except with the written consent of the Indemnified
Party or enter into any settlement (except with the written consent
of the Indemnified Party) which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of such
claim or litigation. Anything herein to the contrary
notwithstanding, the Indemnified Party may, with counsel of its
choice and at its expense, participate in the defense of any such
claim or litigation.
(c) If the indemnifying party shall not assume the defense of any
such claim by a third party or litigation resulting therefrom after
receipt of notice from such Indemnified Party, the Indemnified Party
may defend against such claims or litigation in such manner as it
deems appropriate, and unless the indemnifying party shall deposit
with the Indemnified Party a sum equivalent to the total amount
demanded in such claim or litigation plus the Indemnified Party's
estimate of the costs of defending the same, the Indemnified party
may settle such claim or litigation on such terms as it may deem
appropriate and the indemnifying party shall promptly reimburse the
Indemnified party for the amount of such settlement and for all
damage incurred by the Indemnified party in connection with the
defense against or settlement of such claim, or litigation.
(d) The indemnifying party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered with
respect to any claim by a third party in such litigation and for all
damage incurred by the Indemnified Party in connection with the
defense against such claim or litigation, whether or not resulting
from, arising out of, or incurred with respect to, the act of a
third party.
11.4 Survival. All covenants and agreements of any party hereto
set forth herein shall survive the Closing. Further, all representations
and warranties in this Agreement or pursuant hereto or in any certificate
or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing and shall remain in effect for a period of two
years after the Closing provided that, (i) any representations or
warranties made pursuant to Section 3.20 shall remain in effect for a
period of five years after the Closing, (ii) any representations and
warranties made pursuant to Section 3.17 shall remain in effect for a
period of five years after the Closing, and (iii) any representation or
warranty which is not true when made and which is made fraudulently or
with intent to defraud or mislead shall survive such periods. The
indemnification obligations contained in this Section 11 shall terminate
on the expiration of the applicable survival periods set forth in this
Section 11.4; provided, however, that such indemnification obligations
shall not terminate with respect to a particular matter as to which,
before the expiration of such survival period, the party seeking
indemnification has made a claim by delivering written notice of such
claim to the other party or parties. The parties agree that,
notwithstanding any right of the parties to fully investigate the affairs
of the other party and notwithstanding any knowledge of facts determined
or determinable pursuant to such investigation or right of investigation,
each party has the right to rely fully upon the representations,
warranties, indemnities, covenants and agreements of the other party
contained in this Agreement and on the accuracy of any document,
certificate or exhibit given or delivered to such party pursuant to the
provisions of this Agreement.
11.5 Limitations on Amount. The Purchaser Indemnified Parties
shall not be entitled to receive any indemnification payment with respect
to any claims for indemnification under Section 11 until the aggregate
Losses for which such Purchaser Indemnified Parties would be otherwise
entitled to receive indemnification exceed $300,000 (the "Deductible"),
and then only to the extent that such aggregate Losses exceed the
Deductible.
11.6 Tax Effect. The indemnification obligations under this
Agreement of an indemnifying party shall be adjusted so as to give effect
to the present value of the amount of tax benefits actually received (or
to be received as the result of a loss carry forward) by the Indemnified
Party with respect to the event giving rise to the claim.
11.7 Insurance Effect. The indemnification obligations under this
Agreement of an indemnifying party shall be adjusted so as to give effect
to any amounts actually and irrevocably recovered by the Indemnified
Party under then applicable existing policies of insurance for the
benefit of the Indemnified Party that provide insurance coverage against
such claims; provided, however, that the indemnifying party shall be
liable to the Indemnified Party for (i) reasonable attorneys' fees and
expenses and other out-of-pocket costs of the Indemnified Party incurred
in connection with the Indemnified Party's collection of such coverage,
which are not otherwise actually recovered by the Indemnified Party; (ii)
the cost to the Indemnified Party of any deductible, retention, or co-
payment amount with respect to such coverage; and (iii) amounts in excess
of applicable policy coverages.
11.8 Exclusive Remedy. Except in a case of actual fraud, the
rights of indemnification under this Section 11 shall be the sole remedy
of the parties with respect to any breach of a representation or warranty
set forth in this Agreement.
SECTION 12. MISCELLANEOUS.
12.1 Disclosure. Each matter disclosed by the Stockholders in the
Schedules hereto shall be deemed a disclosure for that matter and all
other matters in this Agreement. No representation or warranty by the
Stockholders or Purchaser herein or any statement by the Stockholders or
Purchaser in the Exhibits or Schedules hereto or in any other document
furnished or to be furnished to the other party pursuant hereto, or in
connection with the transactions contemplated by this Agreement, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements contained
herein and therein not misleading.
12.2 Written Agreement to Govern. This Agreement sets forth the
entire understanding and supersedes all prior and contemporaneous oral or
written agreements among the parties hereto relating to the subject
matter contained herein, and merges all prior and contemporaneous
discussions among them. No party hereto shall be bound by any
definition, condition, representation, warranty, covenant or provision
other than as expressly stated in this Agreement or as hereafter set
forth in a written instrument executed by such party or by a duly
authorized representative of such party.
12.3 Tax Advice. The parties hereto expressly agree and affirm
that they have not relied on tax advice from the other and each party has
had independent counsel and independent tax advice with respect to the
tax consequences of this transaction.
12.4 Severability. The parties hereto expressly agree that it is
not the intention of any party hereto to violate any public policy,
statutory or common laws rules, regulations, treaties or decisions of any
government or agency thereof. If any provision of this Agreement is
judicially or administratively interpreted or construed as being in
violation of any such provision as applied to any fact or circumstance,
such articles, sections, sentences, words, clauses or combinations
thereof shall be modified to the minimum extent necessary to render it
valid, and it shall not affect any other provision of this Agreement or
the same provisions applied to any other fact or circumstance, and the
remainder of this Agreement shall remain binding upon the parties hereto.
12.5 Notices. Any and all notices and other communications
necessary or desirable to be served hereunder shall be either personally
delivered or sent by telecopy, prepaid same-day or overnight delivery
service, proof of delivery requested, or United States certified or
registered mail, postage prepaid, return receipt requested, addressed as
follows:
(a) If to the Stockholders: to such address listed beneath such
Stockholder's name on Exhibit B attached hereto.
With a copy to:
Attn: Xxxxxxx X. Xxxxx
Xxxxxxxxxx, Xxxxx & Xxxxx
X.X. Xxx 000
Xxxxxxx, Xxxx 00000
Facsimile: 000-000-0000
If to the Purchaser:
Attn: Xxxxxx Xxxxxxx
Cycle Country Accessories Corp.
0000 Xxx 00
X.X. Xxx 000
Xxxxxxx, Xxxx
Facsimile: 000-000-0000
With a copy to:
Attn: Xxxxxxx X. Xxxxxxxxx
Xxxxxxxxx Law Xxxxxx
000 - 0xx Xxx. X.
Xxxxxxxxxxx, Xxxx 00000
Facsimile: 000-000-0000
or to such other address or addresses as any party hereto may designate
for itself from time to time in a written notice served upon the other
parties hereto in accordance herewith. Any notice sent as herein above
provided shall be deemed delivered upon receipt or refusal of delivery,
except in the case of certified or registered United States mail which
shall be deemed delivered on the fifth business day next following the
postmark date which it bears.
12.6 Currency. All monetary amounts expressed in this Agreement
and all payments required by this Agreement are and shall be in United
States dollars.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original
instrument, but all such separate counterparts shall constitute one and
the same agreement.
12.8 Law to Govern. The validity, construction and enforceability
of this Agreement shall be governed in all respects by the laws of the
State of Iowa without regard to its conflict of laws rules.
12.9 Arbitration. With regards to any and all actions, suits,
proceedings, claims, demands arising out of this Agreement the following
procedure shall govern any such claims. The party seeking recourse shall
promptly give written notice to the party from whom recourse is being
sought of their claim. The written notice shall specify to the extent
known the factual basis for the claim and the amount of the claim. The
parties agree that during the thirty (30) day period following the date
of the notice, they will attempt in good faith to resolve any claim and
in the event they are unable to resolve the claim they agree to submit
said claim to binding arbitration. The parties shall jointly appoint an
arbitrator mutually acceptable to the parties and the arbitrator thus
appointed shall settle the dispute. If the parties are unwilling or
unable to concur in our agree upon the appointment of an arbitrator for
any reason, application may be made by any party to a court of competent
jurisdiction in the State of Iowa for the appointment of an arbitrator.
The arbitration shall be conducted in Spirit Lake, Iowa, pursuant to the
local rules of the American Arbitration Association. The decision of the
arbitrator shall be final and binding upon all parties. The expense of
such arbitration including, without limitation, the fee of the
arbitrator, shall be paid in proportion to the parties' obligations as
determined by the arbitrator. Enforcement of such arbitrator's decision
shall be pursuant to Chapter 679A, Code of Iowa.
12.10 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
12.11 Further Assurances. At any time on or after the Closing, the
parties hereto shall each perform such acts, execute and deliver such
instruments, assignments, endorsements and other documents and do all
such other things consistent with the terms of this Agreement as may be
reasonably necessary to accomplish the transaction contemplated by this
Agreement or otherwise to carry out the purpose of this Agreement.
12.12 Gender, Number and Headings. The masculine, feminine or
neuter, pronouns used herein shall be interpreted without regard to
gender, and the use of the singular or plural shall be deemed to include
the other whenever the context so requires. References to the
Stockholders shall also be a reference to each such Controlling
Stockholder individually. The headings in this Agreement are inserted
for convenience or reference only and are not apart of this Agreement.
12.13 Schedules and Exhibits. The Schedules and Exhibits referred
to herein and attached hereto are incorporated herein by such references
as if fully set forth in the text hereof.
12.14 Waiver of Provisions. The terms, covenants, representations,
warranties and conditions of this Agreement may be waived only by a
written instrument executed by the party waiving compliance. The failure
of any party at any time to require performance of any provisions hereof
shall, in no manner, affect the right at a later date to enforce the
same. No waiver by any party of any condition, or breach of any
provision, term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in anyone or more instances,
shall be deemed to be or construed as a further or continuing waiver of
any such condition or of the breach of .any other provision, term,
covenant, representation or warranty of this Agreement.
12.15 Expenses. Except as otherwise expressly provided herein, the
Purchaser and Xxxxxxxx shall bear their own expenses incident to this
Agreement and the transactions contemplated hereby, including without
limitation, all fees of counsel, accountants and consultants
("Professional Fees"). Purchaser and Xxxxxxxx shall each pay their
respective Professional Fees at or prior to the Closing.
12.16 Recitals. The recitals set forth above on the initial page of
this Agreement are incorporated herein by this reference, and this
Agreement shall be construed in light thereof.
12.17 Knowledge of the Stockholders. For purposes of this
Agreement, the knowledge of the Stockholders shall be deemed to include
the actual knowledge of each of the Stockholders or any of them. The
knowledge of Purchaser shall mean the actual knowledge of any officer or
director of Purchaser.
12.18 No Third Party Beneficiaries. This Agreement is made solely
for the benefit of the parties hereto and shall not give rise to any
rights of any kind to third parties.
12.19 Tax Matters. The following provisions shall govern the
allocation of responsibility as between the Stockholders and the
Purchaser for certain Tax matters following the Closing. Stockholders
and Purchaser agree to execute all documents necessary to effectively
elect to allocate the income earned by Xxxxxxxx from January 1, 2005 to
the Closing in this manner.
(a) The parties acknowledge that the subchapter S election
currently in effect for Xxxxxxxx will be terminated as of the
consummation of the Merger. The income of Xxxxxxxx for the period
commencing January 1, 2005 and ending as of the date of the Closing
will be included in the tax returns of the Stockholders. The income
generated by Surviving Corporation following the date of Closing
will be included in the Purchaser's tax returns.
(b) The Stockholders shall prepare or cause to be prepared and
file or cause to be filed all tax returns for Xxxxxxxx for all
periods ending on or prior to the Closing Date which are filed after
the Closing Date and shall pay all Taxes due with respect to such
tax returns. The Stockholders shall permit the Purchaser to review
and comment on each such Tax Return described in the preceding
sentence prior to filing. To the extent required by applicable law,
the Stockholders shall include any income, gain, loss, deduction or
other tax items for such periods on their tax returns in a manner
consistent with the Schedule K-1s prepared for the Stockholders for
such periods.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of the date and year first above written.
CYCLE COUNTRY ACCESSORIES CORP.
By:
Its:
CYCLE COUNTRY ACCESSORIES
CORPORATION, an Iowa Corporation
/s/ Xxxxxx X. Xxxxxxx
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By: Xxxxxx X. Xxxxxxx
Its: Principal Executive Officer,
President and Director
XXXXXXXX IRON WORKS, INC.
/s/ Xxxxx Xxxxxx
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By: Xxxxx Xxxxxx
Its: CEO
*STOCKHOLDERS*
/s/ Xxxxx Xxxxxx
-----------------
Xxxxx Xxxxxx
/s/ Xxxx Xxxxxx
-----------------
Xxxx Xxxxxx
/s/ Xxxx Xxxxxx
-----------------
Xxxx Xxxxxx
/s/ Xxxx Xxxxxx
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Xxxx Xxxxxx
Exhibit A Articles of Merger
Xxxxxxxx Iron Works, Inc.(an Iowa corporation)with and intoCycle
Country Accessories Corporation(an Iowa corporation)
Pursuant to Section 490.1104 of the Iowa Business Corporation Act
(the "Act"), the undersigned corporations, Xxxxxxxx Iron Works, Inc., an
Iowa corporation (the "Merging Corporation") and Cycle Country
Accessories Corporation, an Iowa corporation (the "Surviving Corporation"
and together with the Merging Corporation, the "Constituent
Corporations"), hereby adopt the following Articles of Merger.
FIRST: The names of the corporations participating in the merger
are as follows:
Name of Corporation
Cycle Country Accessories Corporation
Xxxxxxxx Iron Works, Inc.
SECOND: The surviving corporation of the merger is Cycle Country
Accessories Corporation and such corporation is to be governed by the
laws of the State of Iowa.
THIRD: The plan of merger was duly approved by the shareholders
of both of the Constituent Corporations in the manner required by the Act
and the Articles of Incorporation of each of the Constituent
Corporations.
FOURTH: The merger is to be effective upon the filing of these
Articles with the Iowa Secretary of State.
IN WITNESS WHEREOF, these Articles of Merger have been executed by
each Constituent Corporation this _______________, 2005.
Cycle Country Accessories Corporation Xxxxxxxx Iron Works, Inc.
By: By:
Its: Its:
THE SURVIVING CORPORATION
Exhibit B
Xxxxxxxx Stockholder Share Ownership
Name Shares Owned % Ownership
Xxxxx Xxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000 11 27.5%
Xxxx Xxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000 11 27.5%
Xxxx Xxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000 12 30.0%
Xxxx Xxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000 6 15.0%
Total: 40 100%