Exhibit 99.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 1, 2005
BY AND AMONG
TEJAS INCORPORATED,
TEJAS ACQUISITION CORP.
AND
CAPITAL & TECHNOLOGY ADVISORS, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER........................................................1
Section 1.01. The Merger.................................................1
Section 1.02. Closing....................................................1
Section 1.03. Effective Time.............................................2
Section 1.04. Effects of the Merger......................................2
Section 1.05. Certificate of Incorporation and By-laws...................2
Section 1.06. Board of Directors and Officers............................2
ARTICLE II MERGER CONSIDERATION; CONVERSION OF SECURITIES; EXCHANGE
OF CERTIFICATES...................................................2
Section 2.01. Effect on Capital Stock....................................2
Section 2.02. Delivery of Merger Consideration...........................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................5
Section 3.01. Organization; Authority....................................5
Section 3.02. Subsidiaries...............................................6
Section 3.03. Capitalization.............................................6
Section 3.04. No Conflicts...............................................6
Section 3.05. Condition and Sufficiency of Assets........................7
Section 3.06. Consents; Governmental Approvals...........................7
Section 3.07. Brokers....................................................8
Section 3.08. ERISA and Related Matters..................................8
Section 3.09. Labor Matters..............................................9
Section 3.10. Compliance with Employment Laws...........................10
Section 3.11. Taxes.....................................................10
Section 3.12. Financial Statements; No Material Adverse Effect..........11
Section 3.13. No Undisclosed Liabilities................................12
Section 3.14. Contracts.................................................12
Section 3.15. Intellectual Property.....................................14
Section 3.16. Environmental Matters.....................................15
Section 3.17. Litigation................................................16
Section 3.18. Compliance with Laws, etc.................................16
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TABLE OF CONTENTS
(continued)
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Section 3.19. Affiliate Transactions....................................17
Section 3.20. Insurance.................................................17
Section 3.21. Conduct of the Business...................................17
Section 3.22. Competitive Restrictions..................................17
Section 3.23. Accounts Receivables; Escheat Property....................17
Section 3.24. Third Parties' Business Operations........................18
Section 3.25. Corrupt Practices.........................................18
Section 3.26. Corporate Records.........................................19
Section 3.27. Offices...................................................19
Section 3.28. Safe Deposit Boxes and Bank Accounts......................19
Section 3.29. Power of Attorney.........................................19
Section 3.30. Omitted...................................................19
Section 3.31. Indemnification...........................................19
Section 3.32. Real Property.............................................19
Section 3.33. Corporate Governance......................................20
Section 3.34. Disclosure................................................20
Section 3.35. Industry Specific Representations and Warranties..........21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS...............21
Section 4.01. Organization; Authority...................................21
Section 4.02. Agreement Binds the Stockholders..........................21
Section 4.03. No Conflicts..............................................21
Section 4.04. Consents; Governmental Approvals..........................22
Section 4.05. Title of Company Stock....................................22
Section 4.06. Investment Representations................................22
Section 4.07. Acknowledgement of Stockholders...........................22
Section 4.08. Brokers...................................................23
Section 4.09. Disclosure................................................23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.................23
Section 5.01. Organization; Authority...................................23
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TABLE OF CONTENTS
(continued)
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Section 5.02. Sub.......................................................24
Section 5.03. No Conflicts..............................................24
Section 5.04. Consents; Governmental Approvals..........................25
Section 5.05. Disclosure................................................25
Section 5.06. SEC Filings; Financial Statements.........................25
Section 5.07. Availability of Merger Consideration......................26
Section 5.08. No Undisclosed Liabilities................................26
Section 5.09. Brokers...................................................26
Section 5.10. Compliance with Laws, etc.................................26
Section 5.11. No Material Adverse Effect................................26
Section 5.12. Capitalization............................................26
ARTICLE VI ADDITIONAL AGREEMENTS............................................27
Section 6.01. Commercially Reasonable Efforts...........................27
Section 6.02. Consents and Approvals....................................27
Section 6.03. Resignation of the Company Board of Directors.............27
Section 6.04. Board of Directors........................................27
Section 6.05. Directors and Officers Insurance Continuation.............28
Section 6.06. Key Man Insurance.........................................28
ARTICLE VII CONDITIONS PRECEDENT.............................................28
Section 7.01. Conditions to Each Party's Obligation To Effect
the Merger................................................28
Section 7.02. Conditions to Obligations of Parent and Sub...............28
Section 7.03. Conditions to Obligations of the Company..................30
ARTICLE VIII INDEMNIFICATION..................................................31
Section 8.01. Indemnification of Parties................................31
Section 8.02. Survival of Representations and Warranties................32
Section 8.03. Procedures for Indemnification............................32
Section 8.04. Escrow Amount.............................................33
Section 8.05. Limitations on Indemnification............................33
Section 8.06. Contribution..............................................33
Section 8.07. Reduction for Insurance Coverage and Tax Benefits.........33
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TABLE OF CONTENTS
(continued)
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Section 8.08. Sole Remedy...............................................34
ARTICLE IX DEFINITIONS......................................................34
Section 9.01. Definitions...............................................34
ARTICLE X GENERAL PROVISIONS...............................................37
Section 10.01. Dispute Resolution........................................37
Section 10.02. Expenses..................................................38
Section 10.03. No Third-Party Beneficiaries..............................38
Section 10.04. Entire Agreement..........................................38
Section 10.05. Incorporation of Exhibits and Schedules...................38
Section 10.06. Succession and Assignment.................................39
Section 10.07. Counterparts and Facsimile Signatures.....................39
Section 10.08. Headings..................................................39
Section 10.09. Notices...................................................39
Section 10.10. Governing Law and Jurisdiction............................40
Section 10.11. Amendments and Waivers....................................40
Section 10.12. Severability..............................................40
Section 10.13. Construction..............................................40
Section 10.14. Specific Performance......................................41
SCHEDULE 2.02 DELIVERY OF MERGER CONSIDERATION................................1
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AGREEMENT AND PLAN OF MERGER (this "Agreement") dated July 1, 2005, among
TEJAS INCORPORATED, a Delaware corporation ("Parent"), TEJAS ACQUISITION CORP.,
a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), Capital
& Technology Advisors, Inc., a Delaware corporation (the "Company") and all of
the stockholders of the Company, who are named on the signature pages hereto
(each, a "Stockholder" and, collectively, the "Stockholders"). Certain terms
used herein as defined terms are defined in Article IX hereof.
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable this Agreement and the merger of Sub with
and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $.01 per share, of the Company (the "Company
Common Stock"), other than shares owned by Parent, Sub or the Company, will be
converted into the right to receive the Merger Consideration (as defined in
Section 2.01(d)); and
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each determined that the Merger and the other transactions contemplated
hereby are consistent with, and in furtherance of, their respective business
strategies and goals; and
WHEREAS, (a) the Stockholders and (b) Parent, as the sole stockholder of
Sub, have each approved the Merger; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, for U.S. federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement constitutes a plan of reorganization.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law, as in effect on the date hereof (the "DGCL"), Sub shall be merged with and
into the Company at the Effective Time (as defined in Section 1.03). Following
the Effective Time, the Company shall be the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
SECTION 1.02. Closing. The closing of the Merger (the "Closing") will take
place on the same date as the date of this Agreement (the "Closing Date"). The
Closing will be held at the offices of Xxxxxxxx & Xxxxxxxx LLP, 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
SECTION 1.03. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Delaware Secretary of State or at such subsequent date or
time as Parent and the Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL, with Sub merging into the Company and the
Company being the Surviving Corporation.
SECTION 1.05. Certificate of Incorporation and By-laws.
(a) The certificate of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by Applicable Law.
(b) The by-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by Applicable Law.
SECTION 1.06. Board of Directors and Officers.
(a) At the Effective Time, the Board of Directors of the Surviving
Corporation shall be comprised of Xxxxx Xxxx, Xx., Xxxx Xxxxxxx and Xxxx Xxxxxx.
(b) At the Effective Time, the following persons shall be the officers
of the Surviving Corporation, until the earlier of their resignation or removal
or their respective successors are duly elected and qualified, as the case may
be: President and CEO, Xxxxx Xxxx, Xx.; Treasurer, Xxxx Xxxxxx; Secretary, Xxxx
X. Xxxxxxx.
ARTICLE II
Merger Consideration; Conversion of Securities; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
the Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into one share of common stock of the Surviving
Corporation.
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(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of the Company Common Stock that is owned by the Company, Sub or Parent shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Cash Merger Consideration Paid. On the date of the acceptance of
the letter of intent between Parent and the Company dated May 9, 2005 (the
"Letter of Intent"), Parent paid to the Company two million dollars ($2,000,000)
in cash (the "Option Payment"), in the Company's capacity as paying agent for
the Stockholders. In such capacity, the Company shall pay over the Option
Payment to the Stockholders immediately prior to the Effective Time in the
manner set forth for the cash payment to be made in Section 2.01(d)(i).
(d) Conversion of the Company Common Stock. Subject to the proviso
contained in Section 2.02(a), each share of the Company Common Stock issued and
outstanding immediately prior to the Effective Time, other than shares of common
stock cancelled pursuant to Section 2.01(b), shall be converted into the right
to receive (subject to the provisions of Section 2.02(d)) the following
(collectively, the "Merger Consideration"):
(i) Cash in an amount equal to the fraction (x) the numerator of
which shall be three million dollars ($3,000,000) and (y) the denominator of
which shall be the total number of shares of Company Common Stock outstanding at
the Effective Time (giving effect to the exercise of all options to purchase
Company Common Stock) ("Total Outstanding Company Shares"); and
(ii) Such number of shares of common stock, $.001 par value per
share, of Parent ("Parent Common Stock") as is equal to the quotient obtained by
dividing: (x) (A) sixty million by (B) the Parent Common Stock Closing Price (as
defined below), by (y) the Total Outstanding Company Shares (the "Share Merger
Consideration").
(e) "Parent Common Stock Closing Price" shall mean:
(i) If the average per share closing price (the "Average Per
Share Closing Price") of the Parent Common Stock as reported by the OTC Bulletin
Board for the ten (10) Business Days on which the Parent Common Stock has traded
prior to the date three (3) trading days before the Closing Date is:
(1) less than or equal to nineteen dollars ($19.00), then
the "Parent Common Stock Closing Price" shall be nineteen dollars ($19.00);
(2) greater than nineteen dollars ($19.00) but less than
nineteen dollars and thirty-five cents ($19.35), then the "Parent Common Stock
Closing Price" shall be set at the Average Per Share Closing Price;
(3) equal to or greater than nineteen dollars and
thirty-five cents ($19.35), then the "Parent Common Stock Closing Price" shall
be nineteen dollars and thirty-five cents ($19.35).
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As of the Effective Time, all such shares of the Company Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
the Company Common Stock (each, a "Certificate") shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration.
(f) Appraisal Rights. All of the owners of capital stock of the
Company are executing this Agreement and agreeing to the terms and conditions
set forth herein. As a result, no Stockholder is either entitled to or will and
hereby agrees not to, exercise and perfect appraisal rights pursuant to Section
262 of the DGCL.
SECTION 2.02. Delivery of Merger Consideration.
(a) Share Exchange. At the Effective Time, Parent shall deliver to
each Stockholder (or shall have instructed its transfer agent, with respect to
any common stock to be delivered, to deliver such shares of common stock to the
Stockholders) in the amounts set forth in Schedule 2.02 hereto to the addresses
hereinbefore provided to the Parent by such Stockholders in exchange for the
shares of Company Common Stock owned of record by such holder, the Merger
Consideration to which such Stockholder is entitled based on the number of
shares of Company Common Stock so owned, and the Certificate representing such
Company Common Stock delivered pursuant to Section 7.02(j) shall forthwith be
canceled; PROVIDED, HOWEVER, that Parent shall deliver to HSBC Bank USA,
National Association (the "Escrow Agent") ten percent (10%) of the Parent Common
Stock (the "Escrow Shares") otherwise deliverable to Niskayuna Development LLC
and Xxxxx Xxxx, Xx. (each, a "Holder" and collectively the "Holders") pursuant
to this Section 2.02(a), which is equal to 309,316 shares (collectively, the
"Escrow Amount"), which Escrow Amount shall be held in escrow (the "Escrow") in
accordance with the terms of the Escrow Agreement (as defined below).
(b) Cash Delivery. At the Effective Time and subject to the terms and
conditions set forth in this Agreement, the portion of the Merger Consideration
which consists of cash shall be wire transferred to the Stockholders, in
accordance with the Stockholders' duly authorized payment instructions notified
to Parent prior to the Closing Date.
(c) No Fractional Shares. Each Stockholder who would have been
entitled to receive a fractional share of Parent Common Stock as part of his or
her Share Merger Consideration shall, upon proper surrender of his or her
Certificates, receive such whole number of shares of Parent Common Stock as is
equal to the precise number of shares of Parent Common Stock constituting Share
Merger Consideration to which such person would be entitled, rounded up or down
to the nearest whole number (with a fractional interest equal to .5 rounded to
the nearest odd number).
(d) Escrow. On the Closing Date, Parent, the Escrow Agent and the
Holders shall enter into an escrow agreement in substantially the form of
Exhibit B hereto (the "Escrow Agreement"). On the Closing Date, Parent shall
deliver to the Escrow Agent a certificate (issued in the name of the Escrow
Agent) representing the Escrow Shares, as described in Section 2.02(a), for the
purpose of securing the indemnification obligations set forth in this Agreement.
The Escrow Shares shall be held by the Escrow Agent under the Escrow Agreement
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pursuant to the terms thereof. The Escrow Shares shall be held as a trust fund
and shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party, and shall be held and disbursed
solely for the purposes and in accordance with the terms of the Escrow
Agreement.
(e) No Liability. Parent shall not be liable to any Stockholder in
respect of any Merger Consideration delivered to a public official as required
by and pursuant to any applicable abandoned property, escheat or similar
Applicable Law.
ARTICLE III
Representations and Warranties of the Company
Except as set forth in the disclosure schedules delivered by the Company to
Parent on the date hereof (the "Company Disclosure Schedules"), the Company and
the Holders hereby, jointly and severally, represent and warrant to Parent as
follows:
SECTION 3.01. Organization; Authority.
(a) Power to Enter into the Agreement. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has the power and authority to execute and
deliver this Agreement and each other document to be executed and delivered by
it under this Agreement, to perform its obligations under such documents, and to
consummate the Merger and any other transactions contemplated by or pursuant to
this Agreement and any ancillary documents (the "Transactions"). Prior to the
date of this Agreement, the Company has delivered to Parent a complete and
correct copy of the organizational documents of the Company, as amended to such
date, and such organizational documents are in full force and effect.
(b) Authorization of the Agreement. The Company has, by requisite
action, authorized the execution, delivery and performance of this Agreement and
each other document to be executed and delivered by it under this Agreement, and
the consummation of the Transactions to which it is a party in accordance with
Applicable Law and the organizational documents. The Company has given Parent
evidence of such approval in a form reasonably satisfactory to Parent.
(c) Execution of the Agreement. The Company has duly executed and
delivered this Agreement and each other document to be executed and delivered by
it under this Agreement.
(d) Agreement Binds the Company. This Agreement and each other
document to be delivered by the Company under this Agreement constitutes the
valid and legally binding obligation of the Company, enforceable against it in
accordance with its terms (subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights generally and to
general principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law).
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(e) Power to Carry on Business. The Company is the sole successor in
interest to the business of Capital & Technology Advisors LLC and Communication
Technology Advisors LLC (each, an "LLC" and collectively, the "LLCs") and has
the power and authority and possess the rights, licenses, authorizations and
approvals, governmental or otherwise, necessary to entitle it to own, lease or
otherwise hold its material properties and assets, and to carry on its business
as currently conducted. The Company is duly qualified, licensed or registered to
transact business, and is in good standing in each jurisdiction in which it owns
or leases properties.
SECTION 3.02. Subsidiaries. The Company does not own, directly or
indirectly, any shares of capital stock or other equity or ownership interests
in, any other Person ("Third Party Interest"), nor does the Company have any
rights to, nor is the Company bound by any commitment or obligation to, acquire
by any means, directly or indirectly, any Third Party Interests or to make any
investment in, or contribution or advance to, any person.
SECTION 3.03. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 30,000 shares of Company Common Stock, of which
there are 200 shares of Company Common Stock issued and outstanding. All
outstanding shares of Company Common Stock of the Company are duly authorized,
validly issued, fully paid and nonassessable. The Company does not have any
outstanding bonds, debentures, notes or other obligations, the holders of which
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the Stockholders on any matter, and
there are no options, warrants or other rights (including preemptive rights) or
agreements, arrangements or commitments of any character, whether or not
contingent, relating to issued or unissued Company Common Stock or obligating
the Company to issue, redeem, repurchase or otherwise acquire any share of
Company Common Stock or any other equity interest in, the Company. Schedule 3.03
of the Company Disclosure Schedules sets forth, as of the date hereof, each of
the Stockholders as indicated on the stock transfer books of the Company and the
number of shares of Company Common Stock owned by, and the number of shares of
Company Common Stock subject to options and warrants owned by, such Stockholder
and the exercise price per share of any such options or warrants. The Company is
not under any obligation, contingent or otherwise, to register any of its
securities under the Securities Act of 1933, as amended (the "Securities Act").
Each Stockholder of the Company is an "Accredited Investor" within the
definition set forth in Rule 501(a) promulgated under the Securities Act.
SECTION 3.04. No Conflicts. The Company's execution, delivery and
performance of this Agreement, and of each other document to be delivered by it
under this Agreement, and the consummation of the Transactions, will not:
(a) conflict with, or result in a breach of, a provision of the
Company's organizational documents;
(b) conflict with, or result in a breach of (whether immediately or
through the passage of time or otherwise), a provision of a contract, agreement
or undertaking to which the Company is a party, or by which it or any of its
assets or properties is bound, except where the conflict or breach would not
have a Material Adverse Effect;
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(c) give rise to a right of termination, cancellation, amendment or
acceleration of an obligation or loss of a benefit affecting, or result in the
imposition of any Liens on, any of its assets; or
(d) violate Applicable Law.
SECTION 3.05. Condition and Sufficiency of Assets.
(a) The Company has good and marketable title to, or a valid leasehold
interest in, its assets, in each case free and clear of Liens except:
(i) Liens for Taxes or other governmental obligations not yet due
or being contested in good faith for which appropriate reserves have been made
in accordance with generally accepted accounting principles ("GAAP") in the
Financial Statements that the Company delivered to Parent;
(ii) deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance or similar programs
mandated by Applicable Law;
(iii) statutory Liens arising in the ordinary course of business
which, in each case, do not interfere with the use of the assets to which they
relate for the purposes for which those assets were acquired; and
(iv) the ownership interests of the lessor or licensor of leased
assets or licensed Intellectual Property (collectively, "Permitted Liens").
(b) The Company's assets include all assets used in, necessary for the
conduct of, or otherwise material to, the business as currently conducted, or as
currently contemplated to be conducted, by the Company.
(c) The leasehold improvements, furniture, fixtures, equipment and
other tangible personal property used in the business, taken as a whole, are in
suitable working condition for the Company's current use of them.
SECTION 3.06. Consents; Governmental Approvals. Except for any Consents
listed in Schedule 3.06, the Company does not need any Consent or Governmental
Approval in connection with the Company:
(a) executing and delivering this Agreement and each other document to
be executed and delivered by it under this Agreement;
(b) performing its obligations under this Agreement and each other
document to be executed and delivered by it under this Agreement; and
(c) consummating the Transactions.
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SECTION 3.07. Brokers. Neither the Company nor any of its Affiliates has
incurred or will incur any Liability for a fee or commission to a broker,
finder, investment banker or other intermediary in connection with the
Transactions.
SECTION 3.08. ERISA and Related Matters.
(a) The Company's Employee Benefit Plans.
(i) Schedule 3.08(a) lists each "employee benefit plan" (as
defined in section 3(3) of ERISA) whether or not subject to ERISA, and each
employment, consulting, bonus, incentive or deferred compensation, vacation,
tuition reimbursement, employee discount, expense reimbursement, allowance,
severance, termination, retention, change of control, stock option or other
equity-based, performance or other employee or retiree benefit or compensation
plan, program, arrangement, agreement or policy, whether written or unwritten,
under which any current or former employee or consultant (an "Employee")
employed or engaged by the Company or the beneficiaries or dependents of such a
Person (collectively, the "Plan Employees") is or may become eligible to
participate or derive a benefit, and that is or has been maintained or
established by the Company, or to which the Company contributes or is or has
been obligated or required to contribute, or with respect to which the Company
has or may have any Liability (collectively, the "Plans"). The Company, its
ERISA Affiliates, and the LLCs have not ever maintained, established,
contributed to, or been required to contribute to any "employee pension plan" as
defined in Section 3(2)(A) of ERISA or a plan intended to be qualified under
Section 401(a) of the Code or a "multiemployer plan" as defined in Section 3(37)
of ERISA.
(ii) Each Plan can be terminated by the Company within a period
of thirty (30) days following the Closing Date, without payment of any
additional compensation or amount or the additional vesting or acceleration of
any such benefits.
(iii) The Company has given Parent complete and correct copies of
the written Plans in effect and descriptions of the unwritten Plans in effect
and, with respect to each Plan: any trust agreements, insurance contracts or
other funding arrangements in effect; the two most recent actuarial and trust
reports, if any exist; any material communications received from or sent to the
IRS or the Department of Labor; the two most recent IRS Forms 5500 and the
related schedules to them, if any have been required; the current summary plan
descriptions, if any have been required; the most recent actuarial report
regarding any post-employment life or medical benefits provided under the Plans;
and any amendments and modifications to any such document.
(iv) The consummation of the Transactions will not (x) entitle
any current or former Plan Employee, director or officer of the Company to
severance pay, unemployment compensation or any other payment (except as
expressly provided in this Agreement) or (y) accelerate the time of payment or
vesting, or increase the amount, of compensation or benefits due any such Plan
Employee, director or officer.
(v) No Plan provides benefits, including death or medical
benefits (whether or not insured), with respect to Plan Employees after
retirement or other termination of service except:
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(1) coverage mandated by Applicable Law; or
(2) deferred compensation benefits accrued as liabilities
and reflected on the Financial Statements.
(vi) No material Liability has been or is expected to be incurred
by the Company under or pursuant to ERISA or the penalty, excise Tax or joint
and several Liability provisions of the Code relating to employee benefit plans.
No event, transaction or condition has occurred or exists that reasonably could
be expected to result in such Liability or obligation to the Company. No
transaction prohibited by Code section 4975 or ERISA section 406 for which no
applicable exemption exists (a "Prohibited Transaction") has occurred with
respect to any Plan that would subject the Company to a Tax or penalty imposed
by section 4975 of the Code or section 502 of ERISA. The consummation of the
Transactions will not result in a Prohibited Transaction or the imposition of
any Liability, penalty or Taxes with respect to any Plan. No Plan contains any
security issued by the Company or Affiliate. Schedule 3.08(a)(vi) lists every
trade or business, whether or not incorporated, which is (or would have been at
any date of determination within six years before the date of this Agreement)
treated as a single employer under section 414 of the Code together with the
Company.
(vii) Each of the Plans has been operated and administered in all
respects in compliance with its terms, Applicable Law (including ERISA and the
Code) and all applicable collective bargaining agreements. There are no material
pending or, to the Company's knowledge, threatened claims, actions,
investigations or proceedings by or on behalf of a Plan, a Governmental Entity,
a Plan Employee or otherwise involving a Plan or its assets (except routine
claims for benefits). There are no facts or circumstances that could result in
any such claims, actions, investigations or proceedings.
(b) Disqualification. To the Company's knowledge, no basis exists such
that the Company or any of their current or former Employees would become
subject to disqualification from serving in any capacity described in section
411(a) of ERISA by virtue of section 411 of ERISA or a similar provision of
other Applicable Law. The Transactions will not cause the Parent or any of its
Affiliates to become subject to such a disqualification.
(c) Employees and Consultants. Schedule 3.08(c) lists the current
Employees of the Company and each Company Subsidiary, their respective base and
total salaries or wages and other compensation, and their dates of employment,
positions, vacation entitlement and accrued vacation time.
SECTION 3.09. Labor Matters. The Company is not a party to or bound by any
collective bargaining or similar agreements or work rules or practices agreed to
with any labor unions or Employee associations. There are no labor unions or
other organizations representing (or purporting or attempting to represent) any
Employees of the Company. Since May 29, 2001, the date of formation of the
earliest formed LLCs, there has not occurred (or, to the Company's knowledge,
been threatened) any strike, slowdown, picketing, work stoppage, concerted
refusal to work overtime or other similar labor activity with respect to any
Employees of the Company. There is no representation petition pending (or, to
the Company's knowledge, threatened) with respect to any Employee of the
Company.
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SECTION 3.10. Compliance with Employment Laws. The Company has complied in
all material respects with Applicable Law regarding the employment or
termination of employment of Employees and independent contractors (including
Applicable Laws relating to labor relations, equal employment, fair employment
practices, entitlements, prohibited discrimination or distinction, immigration
status, employment Taxes or other similar employment practices or acts).
SECTION 3.11. Taxes.
(a) The Company has timely filed all Tax Returns required to be filed
by it (and all such Tax Returns are true, complete and correct in all material
respects or all requests for extensions to file such Tax Returns have been
timely filed, granted and have not expired). The Company has paid all Taxes
(shown as due on such Tax Returns or otherwise due or payable by the Company,
and the most recent Financial Statements contained an adequate reserve for all
Taxes payable by the Company for all taxable periods and portions thereof
accrued through the date of such Financial Statements). As of the Closing Date,
the Company will have (i) paid all installments that are due and payable at such
time on account of Taxes payable by the Company for the current year; (ii)
properly withheld by the Company and remitted to the proper taxing authority all
Taxes required to be withheld with respect to amounts paid or credited, or owed
to or for the account or benefit of, any person, including any Employee,
independent contractor, member, stockholder, non-resident person or other third
party; and (iii) collected all sales, transfer and use Taxes (including goods
and services sales taxes) required to be collected by the Company, and has
remitted, or will remit on a timely basis, such amounts to the appropriate
Governmental Entity and has furnished properly completed exemption certificates
for all exempt transactions.
(b) Neither LLC has ever made an election to be treated as a
corporation for Tax purposes, and each LLC has been taxed as a partnership for
federal tax purposes from its respective formation date. For purposes of this
Section 3.11, "the Company" shall also mean the LLCs.
(c) No deficiency for any Taxes has been proposed, asserted or
assessed against the Company that is not adequately reserved for.
(d) The Company is not a party to any benefit Plan or other Company
Employee compensation arrangements in effect as of the date of this Agreement
that would result in the disallowance of a material deduction under Section
162(m) of the Code for any amounts paid or payable by the Company under any such
plan or arrangement and, to the knowledge of the Company, no fact or
circumstance exists that is reasonably likely to cause such disallowance to
apply to any such amounts. The Company has never been a party to any contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any Employee of the Company that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Section 280G of the Code by the Company or Parent as an
expense under Applicable Law.
(e) The Company does not constitute either a "distributing
corporation" or a "controlled corporation" in a distribution of stock qualifying
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for Tax-free treatment under Section 355 of the Code (x) in the two years prior
to the date of this Agreement or (y) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.
(f) The Company has not executed any waiver or extension of any
statute of limitations on the assessment or collection of any Taxes or with
respect to any Liability arising therefrom. The Company has no Liability for the
Taxes of any other person or entity as a transferee or successor, or by contract
or otherwise. The Company has no Liability for the Taxes of any Person pursuant
to Section 1.1502-6 of the Treasury Regulations promulgated under the Code or
comparable provisions of any taxing authority in respect of any consolidated,
combined or unitary Tax Return. There are no Tax Liens on any assets of the
Company, other than Liens for current Taxes not yet due and payable and Liens
for Taxes that are being contested in good faith by appropriate proceedings. No
claim has ever been made by a Governmental Entity in a jurisdiction where the
Company does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction.
(g) No consent under Section 341(f) of the Code has been filed with
respect to the Company.
(h) There are no Tax sharing agreements or similar arrangements with
respect to or involving the Company. The Company is in compliance with the terms
and conditions of any applicable Tax exemptions, Tax agreements or Tax orders of
any government to which it may be subject or which it may have claimed, and the
Transactions will not have any adverse effect on such compliance.
(i) The Company has not been, and will not be, required to include any
adjustment in taxable income for any Tax period (or portion thereof) pursuant to
any Tax laws as a result of transactions or events occurring, or accounting
methods employed by the Company, prior to the Closing.
(j) The Company is not and has never been a United States Real
Property Holding Corporation within the meaning of Section 897(c)(2) of the Code
during the applicable periods specified in Section 897(c)(1)(A)(ii) of the Code.
(k) The Company has not entered into any transactions that are
"reportable" under Section 6011, 6111 or 6112 of the Code or similar provision
of state or local law.
SECTION 3.12. Financial Statements; No Material Adverse Effect.
(a) The Company has delivered to Parent copies of its consolidated
balance sheet as of December 31, 2003 and 2004 and statements of income and cash
flow for the financial years ended December 31, 2002, 2003 and 2004, together
with the corresponding auditor's reports to the Company prepared by Bollani,
Xxxxxx, Torani & Co. LLP/McGladrey. The Company has also delivered to Parent
copies of its unaudited consolidated financial statements as of, and for the
quarter ended March 31, 2005 (including a statement of income, balance sheet and
statement of cash flows). These annual financial statements and interim
financial statements (the "Financial Statements") have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
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indicated and present fairly in all material respects the Company's consolidated
financial position as of the specified date and results of the Company's
consolidated operations and cash flows, and comply with accounting and
regulatory requirements and Applicable Law subject, in the case of the interim
financial statements, to normal recurring year-end audit adjustments and the
absence of footnotes.
(b) Since December 31, 2004, there has not been any Material Adverse
Effect.
(c) The Company maintains a system of internal accounting and other
controls sufficient to provide reasonable assurance that (i) material
transactions are executed in accordance with management's general or specific
authorizations, (ii) material transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets, (iii) access to material assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accounting for material assets is compared with the existing material
assets at reasonable intervals and appropriate action is taken with respect to
any material differences.
SECTION 3.13. No Undisclosed Liabilities. To the Company's knowledge: (i)
the Company does not have any liabilities or obligations of any nature, whether
known or unknown, absolute, accrued, contingent or otherwise and whether due or
to become due, and (ii) there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such liabilities
or obligations, except for liabilities and obligations that:
(a) were specifically disclosed or reserved against on the balance
sheet included in the Financial Statements for the financial year ended December
31, 2004, or specifically disclosed in the notes to that balance sheet (but, in
either case, only to the extent so disclosed or reserved against); or
(b) were incurred after December 31, 2004, in the ordinary course of
business consistent with past practice, and individually or in the aggregate
have not had, and could not reasonably be expected to have, a Material Adverse
Effect.
SECTION 3.14. Contracts. Schedule 3.14 lists the effective agreements,
contracts and commitments (and any subsequent renewal and/or amendment) to which
the Company is a party or by which any of its properties is bound of the
following types (collectively, "Contracts"):
(a) agreements and arrangements for performing services (including
current fee schedules);
(b) employment, consulting, severance, agency and other compensation
agreements and arrangements;
(c) bonus, profit-sharing, stock option, pension, retirement, deferred
compensation or other plans, trusts, funds, agreements or arrangements for the
benefit of Plan Employees, officers, directors, managers, sales representatives
or agents;
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(d) mortgages, indentures, security agreements, letters of credit,
loan agreements and other agreements, guarantees and instruments relating to
borrowing money or extending credit, or which create or authorize a Lien;
(e) licenses and arrangements under which (x) the Company is permitted
by any Person to use Intellectual Property ("Licensed Intellectual Property"),
other than ordinary course off-the-shelf licenses that are not material to the
Company, or (y) the Company permits a Person to use the Company's Intellectual
Property;
(f) agreements or arrangements involving payments based on the
Company's profits or revenues;
(g) joint venture, partnership and similar agreements;
(h) stock purchase agreements, asset purchase agreements and other
acquisition or divestiture agreements;
(i) agreements or legally binding commitments between the Company on
the one hand and any Affiliate of the Company on the other hand, not otherwise
covered by Section 3.19;
(j) any restrictive covenant contained in any leased real property
leased by the Company that materially restricts the use, transferability or
value of such property;
(k) any restrictive covenant contained in any deed to real property
owned by the Company;
(l) leases of real property and other leases involving annual rental
payments in excess of $25,000;
(m) service agreements material to the Company's business, including
agreements (A) to develop proprietary software and (B) for duplication, document
production and other office services; in each case, with annual payments in
excess of $25,000;
(n) agreements for the sharing or capping of fees or other payments
the Company receives from another person, or the sharing of another person's
expenses;
(o) any contract or agreement that restricts the Company or would
restrict the Company, following the consummation of the Transactions, from
competing in any line of business with any person or using or employing the
services of any person;
(p) any agreement to acquire equipment or any commitment to make
capital expenditures of $10,000 or more;
(q) any indemnification agreement;
(r) any other agreements, contracts and commitments that (A) involve
payment obligations of more than $25,000 or are not cancelable at will without
penalty, or (B) are material to the business, operations, results of operations,
condition (financial or otherwise), assets or properties of the Company; and
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(s) any fee applications submitted to any United States Bankruptcy
Court and any objections filed to such fee applications.
The Company has delivered to the Parent a copy of each written Contract, and a
summary of the material provisions of each other Contract. Each Contract has
been duly authorized, executed and delivered by the Company and, to the
Company's knowledge, each other party to it. Each Contract is in full force and
effect and constitutes the valid and legally binding obligation of the Company
and, to the Company's knowledge, each other party to it, enforceable against the
Company and, to the Company's knowledge, each other party to it in accordance
with its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights generally and to
general principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law). There is no event of default or event or
condition that, after notice or lapse of time or both, would constitute an event
of default under a Contract on the part of the Company or, to the Company's
knowledge, on the part of any other party to it. No party to a Contract has
advised the Company, either orally or in writing, that it intends to terminate,
or, where applicable, not renew, the Contract.
SECTION 3.15. Intellectual Property.
(a) Schedule 3.15(a) lists the Intellectual Property owned by the
Company ("Owned Intellectual Property"). The Owned Intellectual Property and the
Licensed Intellectual Property (collectively, the "Company Intellectual
Property") constitute all Intellectual Property used or held for use by the
Company in connection with, necessary for the conduct of, or otherwise material
to the Company's business as currently conducted or as contemplated to be
conducted. The Owned Intellectual Property and the licenses and arrangements
described in Section 3.14(e) have been duly registered with, filed in or issued
by, as the case may be, the United States Patent and Trademark Office and the
United States Copyright Office or other filing offices, domestic or foreign, to
the extent necessary to ensure full protection under Applicable Law. Such
registrations, filings or issuances remain in full force and effect.
(b) The Company owns, or has a valid license to use, the Company
Intellectual Property, free from Liens and free from requirements of past,
present or future royalty payments, license fees, charges or other payments, or
conditions or restrictions (except for Permitted Liens).
(c) The use of the Company Intellectual Property in the Company's
business as currently conducted does not infringe or misappropriate any third
party's right, and no claim or demand has been made or threatened to that
effect. No third party is infringing the Company's rights with respect to the
Company Intellectual Property. The consummation of the Transactions will not
impair the Company's right to use the Company Intellectual Property on the same
terms and conditions as in effect before the Closing.
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(d) To the knowledge of the Company, there are no defects or Viruses
in the Company's proprietary software that prevent or would prevent such
software from performing in all material respects the tasks and functions that
it is intended to perform. For purposes of this Section 3.15, "Viruses" means
any (i) program code or programming instruction or set of instructions
intentionally designed to disrupt, disable, harm, interfere with, or otherwise
adversely affect computer programs, data files or operations; or (ii) other
software typically described as a virus, information gathering program or by
similar terms, including Trojan horse, worm, time bomb, bot or back door.
(e) The Company has established and maintains a commercially
reasonable security program, including the use of technology, practices,
procedures and processes meeting or exceeding industry standards that are
designed to protect the integrity of the data, communications and transactions
(i) processed by and executed through its systems and (ii) stored on its
systems, including using encryption and/or other security protocols and
techniques when appropriate.
(f) To the Company's knowledge, there has been no material violation
of the trade secrets contained within the Owned Intellectual Property. There
have been no unauthorized disclosures of such trade secrets and all disclosures
of trade secrets have been made pursuant to confidentiality agreements
commercially reasonable in form and substance and effective to protect the
proprietary nature of such trade secrets. There have been no breaches of any
such confidentiality agreements. All Employees of the Company (whether or not
presently employed by the Company) have agreed in writing to confidentiality and
intellectual property provisions substantially in the form included in Schedule
3.15(f).
(g) All Employees of the Company who have contributed to or
participated in the conception and development of any Owned Intellectual
Property constituting software, or any documentation related thereto, on behalf
of the Company are bound by a "work-for-hire" arrangement or agreement with the
Company, in accordance with applicable federal and state law, that has accorded
and/or assigned the Company full, effective, exclusive, and original ownership
of all tangible and intangible property thereby arising, and have executed all
instruments of assignment in favor of the Company necessary to convey to the
Company full, effective, and exclusive ownership of all tangible and intangible
property thereby arising. Schedule 3.15(g) identifies all such agreements or
instruments referenced in the preceding sentence as well as all employment,
consulting or other agreements with any individuals who have contributed to or
participated in the conception and development of such Intellectual Property
rights of the Company.
(h) None of the Owned Intellectual Property constitutes software.
SECTION 3.16. Environmental Matters.
(a) The Company is in compliance and has at all times complied with
the Environmental Laws relating to its business and to its properties and assets
(including properties and assets currently or formerly owned, leased or used)
and the use and ownership of those properties and assets, except where the
failure to so comply would not have a Material Adverse Effect. No violation of
such Environmental Laws by the Company has been alleged or, to the Company's
knowledge, threatened by a Governmental Entity or other Person.
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(b) To the Company's knowledge, neither the Company nor any other
Person has caused or taken any action that will result in, and the Company is
not subject to, any Liability or obligation (including indemnification
obligations) in connection with environmental conditions relating to the
Company's business, its properties and assets (including those currently or
formerly owned, leased or used), use of those properties and assets, or in
connection with Hazardous Substances or any violation of Environmental Law.
(c) The Company has given Parent copies of all information (including
any environmental site assessments, compliance audits, studies, allegations of
noncompliance or Liability) in its (or a representative's) possession, custody
or control relating to environmental conditions relating to its business,
properties and assets (including those currently or formerly owned, leased or
used), use of those properties and assets, or relating to Hazardous Substances.
SECTION 3.17. Litigation.
(a) Except as stated in Schedule 3.17, there is, and within the past
five years has been, no judicial, arbitral or administrative action, suit,
proceeding or investigation pending, or to the Company's knowledge threatened,
against the Company, any of its respective Affiliates, directors, officers or
Employees relating to the performance of their duties in such capacities or
against or affecting the properties of the Company. There are, and within the
past five years have been, no outstanding judgments, decrees, stipulations or
orders in favor of or naming any Person relating to the Company, any of its
respective Affiliates, directors, officers or Employees relating to the
performance of their duties in such capacities or against or affecting their
properties. There are no consent decrees or similar arrangements entered into
with a Governmental Entity or other Person by, or relating to, the Company, any
of its respective Affiliates, directors, officers or Employees relating to the
performance of their duties in such capacities or against or affecting their
properties, that are still in effect, or were in effect within the past five
years.
(b) There are no controversies pending or threatened between the
Company and, to the Company's knowledge, any of the Employees.
SECTION 3.18. Compliance with Laws, etc.
(a) The Company is not or has not been in violation of Applicable Law
applying to it or any of its properties or business, except where such violation
would not have a Material Adverse Effect. To the Company's knowledge, it has
been in compliance with, and has not received written notice of a material
violation of, the laws, regulations, ordinances and rules (including those of
any non-governmental self-regulatory agencies) applying to it or its respective
operations.
(b) The Company is not or has not been in default under its bylaws,
certificate of incorporation or other organizational documents.
(c) The Governmental Approvals needed to conduct the Company's
business has been duly obtained and is in full force and effect. The Company has
received no written notice of the commencement of any formal proceedings (and,
to the Company's knowledge, no such proceedings are threatened) that would
reasonably be expected to result in the revocation, cancellation or suspension,
or any adverse modification, of a Governmental Approval which the Company has
received.
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(d) The information provided by the Company in any filing or
submission to obtain a Governmental Approval in connection with the Transactions
is accurate and complete in all material respects and does not contain any
untrue statement of a material fact or omit to state any material fact required
to make the statements in the filing, submission or notice, in light of the
circumstances under which they were made, not misleading.
SECTION 3.19. Affiliate Transactions. Except as stated in Schedule 3.19,
the Company:
(a) is not a party to an agreement, arrangement, understanding,
transfer or other commitment or transaction, whether or not in the ordinary
course of business, with or for the benefit of an Affiliate, or of an Associated
Person of the Company or an Affiliate; or
(b) does not otherwise receive any services from any Affiliate, or
from any Associated Person of the Company or an Affiliate, whether or not for
compensation.
SECTION 3.20. Insurance.
(a) Schedule 3.20 lists the Liability, property and casualty, workers'
compensation, directors' and officers' Liability, key man, surety bonds, and
other insurance contracts ("Policies") that insure the Company's business or the
managers, officers, Employees, trustees or directors of the Company.
(b) Since May 29, 2001, the Company has not made any insurance claim
under any Policies (or other insurance contracts or bonds in effect at the
time).
(c) The Policies are valid and binding, in full force and effect, and
enforceable according to their terms, and no material default has been committed
under any of the Policies. All premiums due and payable under the Policies have
been paid, the policyholders are otherwise in compliance with the terms and
conditions of those Policies, and the policyholders have no reason to believe
that any insurer would not renew a Policy on substantially the same terms and
conditions (or would not do so if it knew of an event known to the Company but
not to the insurer).
SECTION 3.21. Conduct of the Business. Since December 31, 2004, the
Company, including the LLC, has carried on its business in the usual, regular
and ordinary course, consistent with past practice.
SECTION 3.22. Competitive Restrictions. Neither the Company, nor, to the
Company's knowledge, any of its directors, officers or Employees, is restricted
under an agreement or understanding from competing with any person in any
respect related to the Company's business, from carrying out the business of the
Company or otherwise providing advisory services of the type provided by the
Company.
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SECTION 3.23. Accounts Receivables; Escheat Property.
(a) Accounts Receivable. Subject to any reserves in the Financial
Statements for the financial year ended 2004, the accounts receivable shown on
those Financial Statements and all accounts receivable arising subsequent to
such date:
(i) are valid;
(ii) have arisen solely out of bona fide performance of services
and other business transactions in the ordinary course of business consistent
with past practice; and
(iii) to the knowledge of the Company, (a) are not subject to any
prior Lien and are not subject to valid defenses, set-offs or counterclaims, and
(b) there are no refunds, discounts or other adjustments payable in respect of
such accounts receivable.
(iv) The accounts receivable are collectable in accordance with
their terms at their recorded amounts, subject only to any reserve for doubtful
accounts on the Financial Statements. All accounts receivable which are thirty
(30) days or more past due as of the Closing Date are identified on Schedule
3.23.
(b) Escheat Property. The Company has no Liability under any
Applicable Law pertaining to abandoned property, escheat or other similar laws
with respect to return of fees, outstanding payables, unclaimed checks or other
similar matters.
SECTION 3.24. Third Parties' Business Operations. The Company has not
allowed any other person to use its assets, properties or other resources to
conduct any type of business.
SECTION 3.25. Corrupt Practices.
(a) Neither the Company, nor, to the knowledge of the Company, any of
the senior managers of the Company, has been convicted of any criminal offense
or found guilty of any civil offense in either case involving fraud,
misrepresentation, dishonesty, breach of fiduciary duty, substantive violation
of banking or corporate Tax laws, embezzlement or other fraudulent conversion or
misappropriation of property.
(b) The Company has not made any contribution or expenditure, whether
in the form of money, products, services or facilities, in connection with any
election for political office or to any public official, except to the extent
permitted by Applicable Law. The Company has not offered or provided any
unlawful remuneration, entertainment or gifts to any Person, including any
official of a Governmental Entity or any fiduciary of a client.
(c) Since December 31, 2001, the Company (including, for this purpose,
the LLC) has been in compliance in all material respects with all requirements
applicable to it regarding anti-money laundering and anti-terrorist rules and
regulations, and the Company maintains documentation adequate to verify the
accurate contact information, including identity and street address, for all its
customers as required by the USA Patriot Act, formerly known as the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, as amended from time to time, and the rules and
regulations promulgated thereunder (the "Patriot Act").
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(d) The Company has supplied or made available to Parent all
identification and basic background information with respect to clients and
customers in its possession, including any information describing the client's
source of wealth and line of business or regarding references, referrals or
potential "red-flags" or suspicious transactions.
SECTION 3.26. Corporate Records. The minute books of the Company accurately
reflect all material actions taken to the date hereof by the respective members,
managers, shareholders, board of directors and committees of the Company
(including, for this purpose, the LLCs; provided that such records reflect only
those actions that the operating agreement of the respective LLC or Applicable
Law requires to be taken by a meeting or written action of the managers or
members of such entity).
SECTION 3.27. Offices. Schedule 3.27 lists the headquarters location of the
Company and the location of each of the other offices maintained and operated by
the Company. Except as stated in Schedule 3.27, the Company does not maintain
any other office or conduct business at any other location, and the Company has
not applied for or received permission to open any additional offices or operate
at any other location.
SECTION 3.28. Safe Deposit Boxes and Bank Accounts. Schedule 3.28 lists the
names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which the Company maintains safe deposit
boxes or lock boxes or bank accounts and the names of all persons authorized to
have access to such boxes and accounts.
SECTION 3.29. Power of Attorney. The Company has not granted any person a
power of attorney or similar authorization that is presently in effect or
outstanding.
SECTION 3.30. Omitted.
SECTION 3.31. Indemnification. Other than pursuant to the provisions of its
certificate of incorporation or bylaws, the Company is not a party to any
indemnification agreement with any of its present managers, officers, directors,
Employees, agents or other Persons who serve or served in any other capacity
with any other enterprise at the request of the Company (a "Covered Person"),
and there are no claims for which any Covered Person would be entitled to
indemnification by the Company if such provisions were deemed in effect.
SECTION 3.32. Real Property. Schedule 3.32 includes a detailed list of all
Real Property owned or leased by the Company or whose lease is guaranteed by the
Company (collectively, the "Company Real Property"), indicating: (a) in the case
of owned Company Real Property, (i) the name of the owner and (ii) location and
(b) in the case of leased Company Real Property, (i) the name of the tenant (and
guarantor, if any); (ii) location; (iii) term; (iv) monthly base rent as of June
1, 2005 and (v) landlord. Schedule 3.32 also includes a list of all of the
Company's branch offices. The Company does not own any Company Real Property.
The Company has good and marketable leasehold title to all of the Company Real
Property leased by it, free and clear of any Lien, except Permitted Liens. None
of the Company Real Property, nor the possession, occupancy, maintenance or use
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thereof, is (or will be after giving effect to the Merger) in violation of, or
breach or default under, any Contract to which the Company is a party or any
Applicable Law relating to the Company's ownership, possession, occupancy,
maintenance or use of the Company Real Property, except for any such violation,
breach or default, other than violations of Applicable Law, which would not have
a Material Adverse Effect. The consummation of the Merger will not result in any
transfer tax becoming due with respect to any Company Real Property. No notice
or threat from any lessor, Governmental Entity or other Person has been received
by the Company relating to the condemnation or expropriation of any Company Real
Property claiming any violation of, or breach, default or Liability under, any
Contract to which the Company is a party or any Applicable Law, including
Environmental Laws, relating to the Company's ownership, possession, occupancy,
maintenance or use of the Company Real Property, or requiring or calling
attention to the need for any work, repairs, construction, alterations,
installations or environmental remediation by the Company.
SECTION 3.33. Corporate Governance.
(a) The Company has disclosed to the Company's outside auditors any
fraud, whether or not material, that involves management or other Employees who
have a significant role in the Company's internal control over financial
reporting. A summary of any of those disclosures made by management to the
Company's auditors has been made available to Parent.
(b) Since December 31, 2003, (x) neither the Company nor, to the
knowledge of the officers of the Company, any director, officer, Employee,
auditor, accountant or representative of the Company has received or otherwise
had or obtained knowledge of any material complaint, allegation, assertion or
claim, whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or its respective internal
accounting controls, including any material complaint, allegation, assertion or
claim that the Company has engaged in questionable accounting or auditing
practices, and (y) no attorney representing the Company, whether or not employed
by the Company, has reported evidence of a material violation of securities
laws, breach of fiduciary duty or similar violation by the Company or any of its
officers, directors, Employees or agents to the Board of Directors of the
Company or any committee thereof or to any director or officer of the Company.
SECTION 3.34. Disclosure. No representation or warranty by the Company, nor
any statement or certificate furnished or to be furnished by or on behalf of the
Company, or any Person acting on behalf of such a Person, to Parent or its
representatives in this Agreement or in any schedule or attachment hereto,
contains any untrue statement of a material fact, or omits to state any material
fact required to make the statements therein, in light of the circumstances
under which they were made, not misleading. The following documents provided to
Parent or its representatives in connection with the Transactions are true,
complete and correct in all material respects: (i) the annotated due diligence
checklist and accompanying package of materials provided by the Company to
Parent and its counsel by letter dated May 16, 2005, as supplemented by (A) the
May 27, 2005 email from Soph Sophocles to Xxxx Xxxxxx, (B) the June 1, 2005
email from Soph Sophocles to Amarah Sedreddine, (C) the June 2, 2005 email from
Xxx Xxxxxxxxx to Xxxx Xxxxxx, (D) the June 6, 2005 email from Soph Sophocles to
Xxxx Xxxxxxx, (E) the June 8, 2005 email from Soph Sophocles to Xxxxxxx Xxxx,
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(G) the June 17, 2005 email from Soph Sophocles to Amarah Sedreddine, (H) the
June 20, 2005 email from Soph Sophocles to Amarah Sedreddine, and (I) the June
21, 2005 email from Soph Sophocles to Amarah Sedreddine; and (ii) the Financial
Statements.
SECTION 3.35. Industry Specific Representations and Warranties. Neither the
Company nor any of its Employees has conducted any business on behalf of the
Company which would have required it to be registered as a broker/dealer or an
investment advisor under applicable laws and regulations.
ARTICLE IV
Representations and Warranties of the Stockholders
Each Stockholder hereby, severally, represents, warrants, and agrees that:
SECTION 4.01. Organization; Authority.
(a) Power to Enter into the Agreement. Each Stockholder has the power
and authority, and with respect to individuals, the competency, to execute and
deliver this Agreement and each other document to be executed and delivered by
it under this Agreement, to perform its obligations under such documents, and to
consummate the Merger and any other Transactions contemplated by or pursuant to
this Agreement.
(b) Authorization of the Agreement. Each Stockholder has, by requisite
action, authorized the execution, delivery and performance of this Agreement and
each other document to be executed and delivered by it under this Agreement, and
the consummation of the Transactions to which it is a party in accordance with
Applicable Law. Each Stockholder has given Parent evidence of such approval in a
form reasonably satisfactory to Parent.
(c) Execution of the Agreement. Each Stockholder has duly executed and
delivered this Agreement and each other document to be executed and delivered by
it under this Agreement.
SECTION 4.02. Agreement Binds the Stockholders. This Agreement and each
other document to be executed and delivered by each Stockholder under this
Agreement constitutes the valid and legally binding obligation of the
Stockholder, enforceable against it in accordance with its terms (subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights generally and to general principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at
law).
SECTION 4.03. No Conflicts. Each Stockholder's execution, delivery and
performance of this Agreement, and of each other document to be executed and
delivered by it under this Agreement, and the consummation of the Transactions,
will not:
(a) conflict with, or result in a breach of, a provision of a
contract, agreement or undertaking to which the Stockholder is a party, or by
which it or any of its assets or properties is bound;
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(b) give rise to a right of termination, cancellation, amendment or
acceleration of an obligation or loss of a benefit affecting, or result in the
imposition of any Liens on, any of its assets; or
(c) violate Applicable Law.
SECTION 4.04. Consents; Governmental Approvals. The Stockholders do not
need any Consent or Governmental Approval in connection with:
(a) executing and delivering this Agreement and each other document to
be executed and delivered by them under this Agreement;
(b) performing any of their obligations under this Agreement and each
other document to be executed and delivered by them under this Agreement; and
(c) consummating the Transactions.
SECTION 4.05. Title of Company Stock. Each Stockholder is the record and
beneficial owner of the Company Common Stock being conveyed, and each
Stockholder holds title to the common stock free and clear of all Encumbrances.
SECTION 4.06. Investment Representations.
(a) Each Stockholder is an Accredited Investor.
(b) Each Stockholder, by reason of his or her business and financial
experience has such knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this type that he/she is
capable of (i) evaluating the merits and risks of an investment in the Parent
Common Stock and making an informed investment decision, (ii) protecting his or
her own interest and (iii) bearing the economic risk of such investment. No
Stockholder has retained a purchaser's representative with respect to the
investment in Parent Common Stock.
(c) Each Stockholder is acquiring Parent Common Stock for investment
for the Stockholder's own account, not as a nominee or agent and not with the
view to, or any intention of, a resale or distribution thereof, in whole or in
part.
(d) Each Stockholder understands that the Parent Common Stock will be
characterized as "restricted securities" under U.S. federal and state securities
laws and that under such laws and applicable regulations the Parent Common Stock
cannot be sold or otherwise disposed of without registration under the
Securities Act and applicable state laws, except pursuant to an applicable
exemption under the Securities Act and applicable state laws and that
stop-transfer instructions may be issued for securities of the Parent Common
Stock.
SECTION 4.07. Acknowledgement of Stockholders. Each Stockholder
acknowledges that:
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(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Parent Common Stock;
(b) there are risks associated with acquiring the Parent Common Stock;
(c) there are restrictions on the Stockholder's ability to resell the
Parent Common Stock; and
(d) no Person has made to the Stockholders any written or oral
representations: (i) that any Person will resell or repurchase the Parent Common
Stock, (ii) that any Person will refund the consideration paid for the Parent
Common Stock, (iii) as to the future price or value of the Parent Common Stock,
(iv) that application has been made to list the Parent Common Stock on any stock
exchange, or (v) that Rule 144 promulgated under the Securities Act ("Rule 144")
or any other Securities Act or U.S. state securities law exemption is or will be
available for resale of the Parent Common Stock.
(e) Securities and Exchange Commission Restrictions. The Stockholders
will not offer to sell, exchange, transfer, pledge or otherwise dispose of any
of the Parent Common Stock unless at such time the Parent Common Stock is
registered for resale pursuant to the registration rights agreement between the
Stockholders and Parent in substantially the form of Exhibit C (the
"Registration Rights Agreement"), or pursuant to a valid exemption from the
relevant registration requirements (which may include Rule 144 of the Securities
Act), which in the case of any such exempt transaction (other than a transaction
pursuant to Rule 144), shall be subject to the reasonable approval of and
reasonable conditions imposed by Parent.
SECTION 4.08. Brokers. No Broker is entitled to any brokerage, finder's or
other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of any Stockholder.
SECTION 4.09. Disclosure. No representation or warranty by any of the
Stockholders, nor any statement or certificate furnished or to be furnished by
or on behalf of the Stockholders, or any Person acting on their behalf, to
Parent or its representatives in this Agreement or in any attachment or schedule
hereto, contains any untrue statement of a material fact, or omits to state any
material fact required to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE V
Representations and Warranties of Parent and Sub
Except as set forth in the disclosure schedules delivered by Parent to the
Company on the date hereof (the "Parent Disclosure Schedule") or as disclosed in
the Parent SEC Reports (as defined in Section 5.06), with such disclosure being
specifically referenced in the Parent Disclosure Schedules, Parent and Sub
represent and warrant to the Company as follows:
SECTION 5.01. Organization; Authority.
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(a) Power to Enter into the Agreement. Each of Parent and Sub and
their Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Parent and Sub has the
power and authority to execute and deliver this Agreement and each other
document to be executed and delivered by them under this Agreement, to perform
their obligations under such documents, and to consummate the Merger and any
other transactions contemplated by it pursuant to this Agreement. Prior to the
date of this Agreement, each of Parent and Sub has delivered to the Company a
complete and correct copy of the organizational documents of Parent and Sub, as
amended to such date, and such organizational documents are in full force and
effect.
(b) Authorization of Agreement. Each of Parent and Sub and their
Subsidiaries, by requisite corporate action, authorized the execution and
delivery of this Agreement and each other document to be executed and delivered
by them under this Agreement, and the consummation of the Transactions to which
they are a party in accordance with Applicable Law. Each of Parent and Sub has
given the Company evidence of such approval in a form reasonably satisfactory to
the Company.
(c) Execution of Agreement. Each of Parent and Sub has duly executed
and delivered this Agreement and each other document to be executed and
delivered by it under this Agreement.
(d) Agreement Binds the Parent and Sub. This Agreement and each other
document to be executed and delivered by each of Parent and Sub under this
Agreement constitutes (or, when executed and delivered, will constitute) the
valid and legally binding obligations of each of Parent and Sub and their
Subsidiaries, enforceable against them in accordance with their terms (subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors' rights generally and to general principles of
equity, regardless of whether enforcement is sought in a proceeding in equity or
at law).
SECTION 5.02. Sub.
(a) Since the date of its incorporation, Sub has not carried on any
business or conducted any operations other than the execution of this Agreement,
the performance of its obligations hereunder and matters ancillary thereto.
(b) The authorized capital stock of Sub consists of 300 shares of
common stock, par value $.01 per share, 300 of which have been validly issued,
are fully paid and nonassessable and are owned directly by Parent free and clear
of any Lien.
SECTION 5.03. No Conflicts. Except as stated in Schedule 5.03, each of
Parent and Sub's execution, delivery and performance of this Agreement, and of
each other document to be executed and delivered by them under this Agreement,
and the consummation of the Transactions, will not:
(a) conflict with, or result in a breach of, a provision of each
Parent and Sub's organizational documents;
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(b) conflict with, or result in a breach of, a provision of a
contract, agreement or undertaking to which the Parent or Sub is a party, or by
which it or any of its assets or properties is bound;
(c) give rise to a right of termination, cancellation, amendment or
acceleration of an obligation or loss of a benefit affecting, or result in the
imposition of any Liens on, any of its assets; or
(d) violate Applicable Law.
SECTION 5.04. Consents; Governmental Approvals. Except for any Consents
listed in Schedule 5.04, Parent and Sub do not need any Consent or Governmental
Approval in connection with the Parent and Sub:
(a) executing and delivering this Agreement and each other document to
be executed and delivered by them under this Agreement;
(b) performing their obligations under this Agreement and each other
document to be executed and delivered by them under this Agreement; and
(c) consummating the Transactions.
SECTION 5.05. Disclosure. No representation or warranty by Parent or Sub,
nor any statement or certificate furnished or to be furnished by or on behalf of
the Parent, Sub, or any Person acting on their behalf, to the Company, the
Stockholders or their representatives in connection with or under this
Agreement, contains any untrue statement of a material fact, or omits to state
any material fact required to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.06. SEC Filings; Financial Statements.
(a) Parent has timely filed or otherwise transmitted all forms,
reports, statements, certifications and other documents (including all exhibits,
amendments and supplements thereto) required to be filed by it with the SEC
since June 1, 2004 (all such forms, reports, statements, certificates and other
documents filed by Parent with the SEC, whether or not required to be filed,
collectively, the "Parent SEC Reports"). Each of Parent's SEC Reports, as
amended, complied as to form in all material respects with the applicable
requirements of the Securities Act, the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder (the "Exchange Act"), each as in
effect on the date so filed and with then applicable accounting standards. None
of Parent SEC Reports, when filed as amended, contained any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements of Parent and its
Subsidiaries (including the related notes and schedules) included in Parent SEC
Reports comply as to form in all material respect with the published rules and
regulations of the SEC applicable thereto and have been prepared in accordance
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with GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto). Each of the consolidated balance
sheets of Parent and its Subsidiaries included in Parent SEC Reports (including
the related notes and schedules) fairly presents, in all material respects, the
consolidated financial position of Parent and its Subsidiaries at the respective
dates thereof and each of the related consolidated statements of operations,
cash flows and changes in stockholders' equity included in Parent SEC Reports
(including any related notes and schedules) fairly presents, in all material
respects, the results of operations and cash flows of Parent and its
Subsidiaries for the periods indicated (subject, in the case of unaudited
statements, to normal period-end adjustments).
SECTION 5.07. Availability of Merger Consideration. Shares of Parent Common
Stock shall have been duly authorized and, when issued at Closing, will be
validly issued, fully paid and nonassesable. Parent shall have sufficient funds
to enable it to consummate the Transactions.
SECTION 5.08. No Undisclosed Liabilities. Except as specifically disclosed
in Schedule 5.08, to Parent's knowledge: (i) Parent (including, without
limitation by reason of any activities of, or relating to, any of its
Subsidiaries) and Sub do not have any liabilities or obligations of any nature,
whether known or unknown, absolute, accrued, contingent or otherwise and whether
due or to become due, and (ii) there is no existing condition, situation or set
of circumstances which could reasonably be expected to result in such
liabilities or obligations, except for liabilities and obligations that:
(a) were specifically disclosed or reserved against on the balance
sheet included in the financial statements of Parent for the financial year
ended December 31, 2004 or specifically disclosed in the notes to that balance
sheet (but, in either case, only to the extent so disclosed or reserved
against); or
(b) were incurred after December 31, 2004, in the ordinary course of
business consistent with past practice, and individually or in the aggregate
have not had, and could not reasonably be expected to have, a Material Adverse
Effect on Parent.
SECTION 5.09. Brokers. No Broker is entitled to any brokerage, finder's or
other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of Parent.
SECTION 5.10. Compliance with Laws, etc.
(a) None of Parent or any of its Subsidiaries is or has been in
violation of Applicable Law applying to it or any of its properties or business,
except where such violation would not have a Material Adverse Effect. Except as
disclosed in the Parent SEC Reports, to Parent's knowledge, each of Parent and
each of its Subsidiaries has been in compliance with, and has not received
written notice of a material violation of, the laws, regulations, ordinances and
rules (including those of any non-governmental self-regulatory agencies)
relating to broker-dealer activities.
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(b) The Governmental Approvals needed to conduct Parent's and its
Subsidiaries' business has been duly obtained and is in full force and effect.
Parent has received no written notice of the commencement of any formal
proceedings (and, to Parent's knowledge, no such proceedings are threatened)
that would reasonably be expected to result in the revocation, cancellation or
suspension, or any adverse modification, of a Governmental Approval which Parent
or any if its Subsidiaries has received.
SECTION 5.11. No Material Adverse Effect. Since March 31, 2005, Parent has
not experienced any Material Adverse Effect.
SECTION 5.12. Capitalization. As of the date hereof, the authorized capital
stock of Parent consists of 30,000,000 shares of Parent Common Stock, of which
there are 4,700,713 shares of Parent Common Stock issued and outstanding. There
are 1,808,835 shares of Parent Common Stock issuable upon the exercise of
outstanding options, and 200,000 shares of Parent Common Stock are issuable in
conjunction with convertible debt outstanding. All outstanding shares of Parent
Common Stock are duly authorized, validly issued, fully paid and nonassessable.
ARTICLE VI
Additional Agreements
SECTION 6.01. Commercially Reasonable Efforts. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use all commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other Transactions contemplated by this Agreement, including (i)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed, and (iv) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
SECTION 6.02. Consents and Approvals. The Company and the Stockholders
shall use all commercially reasonable efforts to cause to be delivered to Parent
all consents and approvals necessary from the independent certified public
accountants of the Company to allow Parent to incorporate, utilize, publish or
otherwise disclose the Company Financial Statements in order to facilitate
Parent's reporting requirements with any Governmental Entity in accordance with
Applicable Law, including the SEC.
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SECTION 6.03. Resignation of the Company Board of Directors. The Company
shall obtain written letters of resignation from each of the current members of
the Company Board of Directors, in each case effective immediately upon the
Effective Time, and the successor directors listed in Section 1.06(a) hereof
shall be elected to the Company's Board of Directors on the Closing Date.
SECTION 6.04. Board of Directors. On the closing date, the Board of
Directors of Parent shall consist of the following seven (7) directors: Xxxx
Xxxxxx, Chairman of the Board; Xxxxxxx Xxxxxxxxx, Director; Xxxxxxx Xxxxx,
Director; Xxxxxx Punches, Director; Xxxxx Xxxxxxxxxx, Director; Xxxxx X. Xxxxxx,
Director; and Xxxxx X. Xxxxxxxxxx, Xx., Vice Chairman of the Board.
SECTION 6.05. Directors and Officers Insurance Continuation. Parent shall
use all commercially reasonable efforts to maintain directors and officers
liability insurance in amounts and on terms at least as favorable as are
presently provided to the Board of Directors of Parent.
SECTION 6.06. Key Man Insurance. Promptly after the Closing Date, the
Company shall use all commercially reasonable efforts to obtain, in favor of
Parent, life, disability, accident and other insurance covering Xxxxx X.
Xxxxxxxxxx, Xx. and Xxxxx Xxxx, Xx. in an amount equivalent to forty five
million dollars ($45 million) and five million dollars ($5 million),
respectively. Xxxxx X. Xxxxxxxxxx, Xx. and Xxxxx Xxxx, Xx. shall have no right,
title or interest in or to such insurance.
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to effect the Merger and the
Transactions related thereto shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions, any or all of which may be
waived in writing by a party with respect only to itself, in whole or in part,
to the extent permitted by Applicable Law:
(a) No Litigation. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued
by any court or other Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints") shall be in effect,
and there shall not be pending any suit, action or proceeding by any
Governmental Entity (i) preventing the consummation of the Merger or (ii) which
otherwise is reasonably likely to have a Material Adverse Effect on the Company
or Parent, as applicable; PROVIDED, HOWEVER, that each of the parties shall have
used its reasonable efforts to prevent the entry of any such Restraints and to
appeal as promptly as possible any such Restraints that may be entered.
(b) Government Approvals. All necessary Government Approvals shall
have been obtained.
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(c) Certificate of Merger. The Company and Sub shall have executed and
delivered the Certificate of Merger in accordance with Section 1.03.
SECTION 7.02. Conditions to Obligations of Parent and Sub. The obligation
of Parent and Sub to effect the Merger is further subject to satisfaction or
waiver of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company and the Stockholders set forth herein shall be true and correct.
(b) Agreements and Covenants. The Company and each Stockholder shall
have performed and complied with all of their covenants hereunder in all
material respects through the Closing.
(c) Consents and Approvals. All Consents, waivers, notices,
authorizations and approvals set forth on Schedules 3.06 and 4.04 shall have
been duly obtained in form and substance reasonably satisfactory to the Parent
and shall be in full force and effect on the Closing Date.
(d) Employment Agreements. The Company shall have caused Xxxxx X.
Xxxxxxxxxx, Xx. to enter into an employment arrangement, and shall have caused
Xxxxx Xxxx, Xx. and Xxxxx X'Xxxxxxx to enter into an employment agreement with
Parent (collectively, the "Employment Agreements" ) at or before the Effective
Time. Xxxxx Xxxx, Xx.'s and Xxxxx X'Xxxxxxx'x Employment Agreements shall be
substantially in the form of Exhibits D-1 and D-2 hereto.
(e) Affiliate Letters. The Company shall have prepared and caused to
be delivered to Parent, prior to the Effective Time, a list identifying all
Stockholders of the Company who the Company deems to be Affiliates and shall
have caused each such Stockholder to execute and deliver to Parent an agreement
substantially in the form of Exhibit E hereto (the "Affiliate Letters").
(f) Escrow Agreement. Parent shall have received the Escrow Agreement
executed and delivered by Parent, the Escrow Agent and the Holders, prior to the
Effective Time.
(g) Opinion of Counsel. Parent shall have received an opinion,
addressed to it and dated the Closing Date, of Day, Xxxxx & Xxxxxx LLP, special
counsel to the Company and the Holders, in the form of Exhibit F hereto.
(h) Opinion of Financial Advisor. Parent shall have received an
opinion of X.X. Xxxxxxxxx, Towbin, dated the Closing Date, to the effect that,
as of such date, the Merger Consideration to be paid by Parent is fair from a
financial point of view.
(i) Resignation of the Company Board of Directors. Parent shall have
received written letters of resignation from each of the current members of the
Company Board of Directors, in each case effective immediately upon the
Effective Time.
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(j) Delivery of Shareholder Shares. Shareholders shall have delivered
to Parent the Certificates representing the Total Outstanding Company Shares at
or prior to the Effective Time.
(k) Registered Investment Adviser. The Company shall be duly
registered as an investment adviser with the Investment Advisor Registration
Depository sponsored by the SEC with the states of Virginia and New York.
(l) Xxxxxxx Xxxxxxx Policy. Each Employee of the Company shall have
executed Parent's xxxxxxx xxxxxxx and blackout period policy, in each case at or
before the Effective Time.
(m) Non-Compete Agreements. Each of Xxxx Xxxxxx, Xxxxx Xxxx, Xx. and
Xxxxx X. Xxxxxxxxxx, Xx (collectively, the "Non-Compete Parties") shall have
entered a non-compete and non-solicit agreement with Parent substantially in the
form attached hereto as Exhibit G (the "Non-Compete").
(n) Stockholder Spousal Consent. Any Stockholder whose interest in the
Company Common Stock may be subject to community or marital property at the
Effective Time shall obtain and deliver to Parent an executed consent of spouse
in the form of Exhibit H hereto, in each case effective at or before the
Effective Time.
(o) Good Standing Certificates. The Company shall deliver to Parent
certificates of good standing or existence from the Secretaries of State of
Delaware and every other state of the United States in which the conduct of its
business or the ownership of its properties and assets requires it to be so
qualified dated as of the Closing Date.
SECTION 7.03. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Sub set forth herein shall be true and correct.
(b) Agreements and Covenants. The Parent and Sub shall have performed
and complied with all of their covenants hereunder in all material respects
through the Closing.
(c) Consents and Approvals. All Consents, waivers, notices,
authorizations and approvals set forth on Schedule 5.04 shall have been duly
obtained in form and substance reasonably satisfactory to Parent and shall be in
full force and effect on the Closing Date.
(d) Registration Rights Agreement. Parent shall have, prior to the
Effective Time, prepared and caused to be delivered to the Stockholders the
Registration Rights Agreements in connection with the resale of the Parent
Common Stock.
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(e) Closing Payments. Parent shall have delivered to the Stockholders
the Merger Consideration required to be paid in exchange for the Total
Outstanding Company Shares pursuant to Article II.
(f) Employment Agreements. Parent shall have entered into an
Employment Agreement with each of Xxxxx X. Xxxxxxxxxx, Xx., Xxxxx Xxxx, Xx. and
Xxxxx X'Xxxxxxx at or before the Effective Time.
(g) Board of Directors. The board of directors of Parent shall be
constituted as specified in Section 6.05 hereof, and the board of directors of
the Surviving Company shall be constituted as specified in Section 1.06(a)
hereof.
(h) Stockholder Approval of Increased Authorized Capital. The
stockholders of Parent shall have approved the amendment to the certificate of
incorporation of Parent increasing the authorized capital stock of Parent, as
specified in the definitive proxy statement of Parent filed with the SEC on May
2, 2005.
(i) Non-Compete. Each of the Non-Compete Parties shall have signed the
Non-Compete.
ARTICLE VIII
Indemnification
SECTION 8.01. Indemnification of Parties.
(a) Subject to the limitations set forth in this Article VIII, the
Holders shall, jointly and severally, indemnify, defend and hold harmless
Parent, Sub, the Company and their respective officers, directors, Employees,
Affiliates, and agents (the "Tejas Indemnified Parties") from any and all
losses, costs, expenses (including, without limitation, reasonable attorneys'
and independent accountants' fees and disbursements), liabilities, damages
(excluding incidental, consequential or punitive damages), fines, penalties,
charges, assessments, judgments, settlements, claims, causes of action and other
obligations of any nature whatsoever (individually, a "Loss" and collectively,
"Losses") that the Tejas Indemnified Parties suffer related to, arising out of,
or in connection with:
(i) Any breach of any representation, warranty or covenant of the
Company;
(ii) Any Liability related to the operation of the Company's
business and the LLCs' business up to and including the Closing Date;
(iii) Any Liability to any other Stockholder or member of the
LLCs;
(iv) Any Liability for Taxes (and all damages arising from such
Liability) owed in any jurisdiction relating to transaction effected or
activities conducted by the Company (including the LLCs) at or prior to the
Effective Time;
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(v) Any Liability incurred in connection with the making or
performance of this Agreement and the Transactions; and
(vi) Any Liability arising as a result of any legal or equitable
action or judicial or administrative proceeding initiated at any time, to the
extent related to any matter covered by subsections (i) through (v) above;
PROVIDED, HOWEVER, that subject to any shorter survival period set forth in
Section 8.02 hereof and subject to the exception stated in Section 8.02 for
fraud or willful malfeasance, no claim may be brought under this Section 8.01
after the fourth anniversary from the Closing Date.
(b) Subject to the limitations set forth in this Article VIII, the
Holders, severally and not jointly, shall indemnify, defend and hold harmless
the Tejas Indemnified Parties from any and all Losses that Tejas Indemnified
Parties suffer related to, arising out of, or in connection with any breach of
any representation, warranty or covenant of such Stockholder.
SECTION 8.02. Survival of Representations and Warranties. All
representations and warranties of the Company and of the Stockholders in this
Agreement or any other Transaction agreement shall survive the Closing until the
second anniversary of the Closing Date, PROVIDED, HOWEVER, that (a) all the
Company representations and warranties relating to Taxes and Environmental
matters shall survive for the period of the statute of limitations with respect
to the respective claim and those in Section 3.01, Section 3.03, Section 3.06,
Section 3.13, Section 3.18, Section 4.01, Section 4.04, Section 4.05 through
Section 4.07 shall survive the Closing until the fourth anniversary of the
Closing Date (provided that notwithstanding anything to the contrary contained
in this Agreement, a claim for indemnity which is related to a Liability which
results from intentional fraud or willful malfeasance shall not have the benefit
of any of the limitations set forth herein); and (b) all covenants of the
Company and the Stockholders in this Agreement or any other Transaction
agreement shall survive for the life of such covenant. The right to
indemnification, payment or other remedy based on the representations,
warranties, covenants or obligations contained in this Agreement (and any right
to indemnification for breach thereof) shall not be affected by any
investigation, verification or examination conducted by any party hereto or by
any representative of any such party, or by any such party's knowledge acquired
(or capable of being acquired) at any time, whether before or after the
Effective Time, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation.
SECTION 8.03. Procedures for Indemnification. Promptly after receipt by a
Tejas Indemnified Party of written notice of the assertion or the commencement
of any proceeding by a third-party with respect to any matter referred to in
Section 8.01, the Tejas Indemnified Party shall give written notice thereof to
the Holders, and thereafter shall keep the Holders reasonably informed with
respect thereto; PROVIDED, HOWEVER, that failure of the Tejas Indemnified Party
to give the Holders notice as provided herein shall not relieve the Holders of
their obligations hereunder, except to the extent that the Holders are
prejudiced thereby. A claim for indemnification for any matter not involving a
third-party proceeding may be asserted by notice to the Holders and shall be
paid promptly after such notice.
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If the facts pertaining to a Loss arise out of the claim of any third
party, or if there is any claim against a third party available by virtue of the
circumstances of the Loss, the Holders may assume the defense or the prosecution
thereof by prompt written notice to the Tejas Indemnified Party, including the
employment of counsel or accountants, at its sole cost and expense. In
connection therewith, the Holders shall acknowledge that such claim is the
proper subject of indemnification under Section 8.01; provided, however, that
the foregoing shall not foreclose the Holders from taking the position that the
Loss is governed by Section 8.06 hereof. The Tejas Indemnified Party shall have
the right to employ counsel separate from counsel employed by the Holders in any
such action and to participate therein, but the fees and expenses of such
counsel employed by the Tejas Indemnified Party shall be at its sole cost and
expense. Neither the Holders nor the Tejas Indemnified Party shall be liable for
any settlement of any such claim effected without their respective prior written
consent, which shall not be unreasonably withheld; PROVIDED that if the Holders
do not assume the defense or prosecution of a claim as provided above within
thirty (30) days after notice thereof from the Tejas Indemnified Party, the
Tejas Indemnified Party may settle such claim without the Holders' consent.
Whether or not the Holders choose to so defend or prosecute such claim, all the
parties hereto shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals, as may be reasonably
requested in connection therewith.
SECTION 8.04. Escrow Amount. To secure the Holders' obligations pursuant to
the provisions of this Article VIII, and notwithstanding each Holder's several
and not joint liability in Section 8.01(b), the Holders have agreed, as
described in Section 2.02(a) and Section 2.02(d), to place the Escrow Amount in
escrow with the Escrow Agent, pursuant to the terms and conditions of the Escrow
Agreement. Nothing in this Section 8.04 shall be construed as limiting the
Holders' Liability to the Tejas Indemnified Parties to the Escrow Amount, nor
shall payments from the Escrow Amount be considered as liquidated damages for
any breach under this Agreement or any other Transaction agreement.
SECTION 8.05. Limitations on Indemnification. Notwithstanding anything
herein to the contrary;
(a) the Holders shall not be obligated to indemnify the Tejas
Indemnified Parties under this Article VIII unless the aggregate of all the
Tejas Indemnified Parties' Losses exceeds Two Hundred Thousand Dollars
($200,000) (the "Holders' Basket"), in which case the Tejas Indemnified Party
shall be entitled to recover all Tejas Indemnified Parties' Losses, including
the amount equal to the Holders' Basket. Each Holder's obligations under this
Article VIII shall not exceed the Share Merger Consideration held by such Holder
as of the date of the claim brought by the Tejas Indemnified Party (such
amounts, the "Holder's Shares"), and any indemnification payable pursuant to
this Article VIII shall be paid only in Holder's Shares, based on their Fair
Market Value. Indemnity obligations hereunder shall first be satisfied through
the release of the Parent Common Stock pursuant to the Escrow Agreement and then
directly against the Holders in an amount limited to each Holder's Shares.
SECTION 8.06. Contribution. Notwithstanding anything in this Agreement to
the contrary, the following provisions shall govern the obligations of the
parties hereto relating to Losses arising out of any transaction that is the
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subject of any agreements (individually, a "Prior Agreement" and, collectively,
the "Prior Agreements") executed between the Company and either Parent or any
Subsidiary of Parent (the "Parent Entities"), other than this Agreement, the
Letter of Intent dated May 9, 2005 between the Company and Parent, as amended on
June 16, 2005, or any of the Transaction agreements. Parent and the Holders
shall contribute to the amount paid or payable in respect of any such Loss
relating to any transaction that is the subject of a Prior Agreement in
proportion to the amount paid to the Parent Entities under or relating to such
Prior Agreement and the amount paid to the Company (including, for such
purposes, the LLCs and any Affiliate of the Company or the LLCs) (collectively,
the "Seller Parties") under or relating to such Prior Agreement; provided,
however, that in the event it is found by a court of final determination that
such Loss resulted from the fault (either partial or entire) of any of the
Parent Entities or Seller Parties, then such contribution shall be in proportion
as is appropriate under equitable considerations to reflect the relative fault
of each such party, determined by reference to, among other considerations, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such Loss from occurring.
SECTION 8.07. Reduction for Insurance Coverage and Tax Benefits. Each Tejas
Indemnified Party shall take all reasonable steps to mitigate any Losses for
which such person may be entitled to indemnification hereunder, including by
submitting to the applicable insurance carrier any claim eligible for coverage
under any insurance policy available to such Indemnified Party. The amount of
Losses shall be reduced by the amount of insurance benefits and proceeds
received by the Tejas Indemnified Party in respect of the Losses, if any.
Further, the amount of Losses shall be reduced (retroactively, if necessary) by
any tax benefits actually recovered by or on behalf of such Indemnified Party in
relation to the claim giving rise to such Losses.
SECTION 8.08. Sole Remedy. After the Closing, (x) the rights and remedies
set forth in this Article VIII shall constitute the sole and exclusive rights
and remedies of the Tejas Indemnified Parties hereto following the Closing under
or with respect to any breach of a representation and warranty, covenant or
other obligation of this Agreement, except that Parent shall be entitled to seek
remedies outside of this Article VIII for breaches by Stockholders, other than
the Holders, of any of their representations, warranties or covenants, up to the
value of the Merger Consideration such Stockholder received pursuant to the
Merger valued, in the case of Share Merger Consideration, on the Fair Market
Value thereof, and (y) the rights and remedies set forth in Section 8.06 shall
constitute the sole and exclusive rights and remedies of any Party to this
Agreement following the Closing under or with respect to a Prior Agreement
between one or more Parent Entities and one or more Seller Parties, except for
Losses attributable to fraud or intentional malfeasance, in which case the
aggrieved party shall have recourse to all remedies at law or in equity,
including but not limited to the Escrow Amount. If it shall be judicially
determined by final judgment of a court of competent jurisdiction that any claim
of indemnification pursuant to the terms of this Agreement is unenforceable or
is otherwise to be limited, then the Tejas Indemnified Party shall be entitled
to contribution from the Holders under just and equitable principles, which
shall in no event exceed the amount they would have been entitled to pursuant to
the indemnification provisions of this Agreement.
-34-
ARTICLE IX
Definitions
SECTION 9.01. Definitions. For purposes of this Agreement:
(a) "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, control, is controlled by, or is
under common control with, such first Person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership
of voting securities, by contract, as trustee or executor, or otherwise;
(b) "Applicable Law" means all provisions applying to a Person or its
property of (i) constitutions, treaties, statutes, laws (including the common
law), rules, regulations, ordinances or orders of a Governmental Entity
(including the SEC) having jurisdiction over the Person; (ii) Governmental
Approvals; (iii) orders, decisions, injunctions, judgments, awards and decrees
of or agreements with a Governmental Entity having jurisdiction over the Person;
(iv) Applicable Securities Law; and (v) GAAP.
(c) "Applicable Securities Law" means the Investment Advisers Act of
1940, the Investment Company Act of 1940, the Exchange Act, the Securities Act,
ERISA, applicable blue sky laws and securities regulations and the other
Applicable Laws relating to securities, investment companies, investment
advisers or employee benefits.
(d) "Associated Person" of a Person means (i) his or her Affiliate;
(ii) his or her immediate family member; (iii) an Affiliate of his or her
immediate family member; and (iv) a trust which is solely or primarily for the
benefit of that Person or his or her Associated Persons.
(e) "Business Day" means any day other than (i) a Saturday or a Sunday
or (ii) a day on which banking and savings and loan institutions are authorized
or required by law to be closed in New York.
(f) "Consent" means any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license, exemption or order of,
registration, declaration or filing with, or report or notice to, a Person.
(g) "Encumbrances" means any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, charge, adverse claim, preferential
arrangement, order, condition or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
(h) "Environmental Law" means an Applicable Law or related requirement
regulating or relating to human health or safety or the protection of natural
resources or the indoor or outdoor environment (including Applicable Laws
relating to pollution, contamination or the handling, release or disposal of
Hazardous Substances).
-35-
(i) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations of the DOL and the
IRS promulgated under it.
(j) "ERISA Affiliate" means any entity that is, or at any relevant
time was, required to be treated with the Company as a single employer under
Code Section 414 or ERISA Section 4001 or the regulations under such sections.
(k) "Fair Market Value" means the average of the closing prices of a
share of Parent Common Stock for (x) the fifteen trading days preceding the date
of claim by the Tejas Indemnified Party, (y) the date of such claim (if a
trading day) and (z) the fourteen or fifteen (if the date of the claim under
this Article VIII is not a trading day) trading days after the date of such
claim on the principal national securities exchange on which the Parent Common
Stock is listed at such time or, if not so listed or quoted, the mean between
the closing bid and asked prices of publicly traded shares of Parent Common
Stock in the over-the counter market or, if such bid and asked prices shall not
be available, as reported by any nationally recognized quotation service
selected by the Parent or if not so reported, the Closing Price.
(l) "Governmental Approval" means a Consent of, with or to a
Governmental Entity (including the expiration of any waiting or other time
period required to pass before governmental consent or acquiescence may be
assumed or relied on).
(m) "Governmental Entity" means any federal, state, local or foreign
government, any court, administrative, regulatory or other governmental agency,
commission or authority or any non-governmental self-regulatory, commission or
authority.
(n) "Hazardous Substances" means substances, materials, chemicals,
compounds, products, pollutants or contaminants that (i) are or contain
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum, petroleum products or petroleum-derived substances or wastes, radon
gas or related materials; or (ii) may require remedial action or preventative
action (including performing studies, monitoring or testing) under an
Environmental Law, or are defined, listed or identified as a "hazardous waste"
or "hazardous substance" or words of similar import under an Environmental Law;
or (iii) are toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and are regulated by any
Governmental Entity or Environmental Law.
(o) "Intellectual Property" means (i) registered and unregistered
United States and foreign trademarks, service marks, trade names, trade dress,
copyrights, Internet domain names, web sites, email addresses, telephone numbers
(including 800/888 or similar numbers) and similar rights (including
registrations and applications to register, or renew the registration of, any of
these); (ii) United States and foreign patents and patent applications; (iii)
inventions, processes, designs, formulae, trade secrets, know-how, and
confidential information; (iv) computer software, data and documentation; (v)
similar intellectual property rights; (vi) all rights to xxx for and remedies
against past, present and future infringements of any of the above, and rights
of priority and protection of interests in any of the above under Applicable
Law; (vii) tangible embodiments of any of the above (in any medium including
electronic media); and (ix) licenses of any of the above.
-36-
(p) "Liability" means any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability), regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet prepared
in accordance with GAAP and regardless of whether such debt, obligation, duty or
liability is immediately due and payable.
(q) "Lien" means a mortgage, pledge, hypothecation, right of others,
claim, security interest, encumbrance, title defect, title retention agreement,
voting trust agreement, interest, equity, option, lien, charge, restriction on
transfer or assignment, or other restriction or limitation of any nature.
(r) "Material Adverse Effect" means, when used in connection with the
Company (including, for purposes of this definition, the LLCs) or Parent, any
change, effect, circumstance, development, event, occurrence or state of facts
that, individually or in the aggregate, (a) is or could reasonably be expected
to be, materially adverse to the business, prospects, Employee relations,
properties (including intangible properties), assets, profits, liabilities
(contingent or otherwise), condition (financial or otherwise) or results of
operations, taken as a whole, except to the extent that any such change, event,
condition or effect directly results from: (A) changes in general economic
conditions (provided that such changes do not affect such entity
disproportionately as compared to such entity's competitors); or (B) changes
affecting the industry generally in which such entity operates (provided that
such changes do not affect such entity disproportionately as compared to such
entity's competitors), or (b) that could impair the ability to perform its
obligations hereunder.
(s) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(t) a "Subsidiary" of any Person means another Person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, fifty percent
(50%) or more of the equity interests of which) which is owned directly or
indirectly by such first Person;
(u) "Taxes" means taxes, levies or other like assessments, charges or
fees (including estimated taxes, charges and fees), including income,
corporation, add-on minimum, AD VALOREM, advance corporation, gross receipts,
transfer, excise, property, sales, use, value-added, license, payroll,
employment, severance, withholding, social security and franchise or other
governmental taxes, imposed by the United States or any state, local or foreign
government or subdivision or agency of any of these, and also including interest
and penalties attributable to any of these, and additions to them and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any Liability for taxes of a predecessor
entity.
(v) "Tax Return" means a report, return, statement or other written
information required to be supplied to a Tax authority in connection with Taxes.
-37-
ARTICLE X
General Provisions
SECTION 10.01. Dispute Resolution. Resolution of any dispute arising from
or in connection with this Agreement, including but not limited to any disputes
relating to indemnification pursuant to Article VIII, shall be exclusively
governed by and settled in accordance with the provisions of this Section 10.01.
The parties shall make a good faith attempt to resolve any dispute arising out
of or relating to this Agreement through informal negotiation between
appropriate representatives of the Stockholders and Parent. If at any time
either party contends that such negotiations are not leading to a resolution of
the dispute, such party may request a meeting of the senior executives from each
party. Within ten (10) business days after such notice of a dispute is given,
each party shall select appropriate senior executives of each party who shall
have the authority to resolve the matter and shall meet to attempt in good faith
to negotiate a resolution of the dispute prior to pursuing other available
remedies. Discussions and correspondence among the senior executives for
purposes of these negotiations shall be treated as confidential information and
may not be disclosed without the prior written consent of both parties. In the
event that any dispute arising out of or related to this Agreement is not
settled by the parties within thirty (30) days after the first meeting of the
negotiating senior executives, the dispute will be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") then in effect, and judgment upon the award rendered by the
arbitrator may be entered in any court of competent jurisdiction. Any such
arbitration shall be conducted in New York City. Unless otherwise agreed, the
arbitration will be presided over by a single arbitrator. The arbitrator shall
control the scheduling so as to process the matter expeditiously. The arbitrator
may not make any ruling, finding or award that does not conform to the terms and
conditions of this Agreement. Either party, before or during any arbitration,
may apply to a court of competent jurisdiction for a temporary restraining order
or preliminary injunction where such relief is necessary to protect its
interests pending completion of the arbitration proceedings. Neither party nor
the arbitrators may disclose the evidence or result of any arbitration hereunder
without the prior written consent of both parties. Before arbitration or any
other form of legal or equitable proceeding, the aggrieved party shall give the
other party written notice describing the dispute and amount as to which it
intends to initiate action and the prior effort it has made to resolve such
dispute. The parties agree that this Agreement involves interstate commerce and,
notwithstanding any choice of law provisions in this Agreement, any arbitration
hereunder shall be governed by the Federal Arbitration Act (or any successor
thereto). A party seeking discovery shall reimburse the responding party the
cost of production of documents. The arbitrator shall award attorney's fees, the
fees of the arbitration and the fees of the arbitrator to the party prevailing
in the arbitration. If no party has clearly prevailed, fees and expenses shall
be allocated in accordance with the arbitrator's determination based on
equitable considerations. In no event shall either party be liable to the other
party for any punitive damages.
SECTION 10.02. Expenses. Except as set forth in the Escrow Agreement, each
of the parties shall bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the Transactions
contemplated hereby. The Stockholders shall bear all such costs of the Company.
-38-
SECTION 10.03. No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
SECTION 10.04. Entire Agreement. This Agreement, including the Company
Disclosure Schedules, Parent Disclosure Schedules and Exhibits attached hereto,
constitute the entire agreement among the parties and supersedes any prior
understandings, agreements, or representations by or among the parties, written
or oral, to the extent they relate in any way to the subject matter hereof.
SECTION 10.05. Incorporation of Exhibits and Schedules. The Company
Disclosure Schedules and Parent Disclosure Schedules and the Exhibits attached
hereto are incorporated herein by reference and made a part hereof. Any
information or matter disclosed in any schedule of the Company Disclosure
Schedules or Parent Disclosure Schedules shall be deemed disclosed in each and
every other schedule of such disclosure schedules, if, by the nature of the
disclosure, a reasonable Person would believe that such disclosure should be
repeated, regardless of whether a specific cross reference is made.
SECTION 10.06. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of Parent and the Company.
SECTION 10.07. Counterparts and Facsimile Signatures. This Agreement may be
executed in two (2) or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
The counterparts of this Agreement may be executed and delivered by facsimile
signature by any of the parties to any other party and the receiving party may
rely on the receipt of such document so executed and delivered by facsimile as
if the original had been received.
SECTION 10.08. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.09. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed properly delivered, given and
received when delivered (by hand, by registered mail, by courier or express
delivery services or by facsimile); PROVIDED that if delivered on a date that is
not a Business Day or after 5:00 p.m. on a Business Day (in each case at the
place of delivery), such notice, request, demand, claim or other communication
shall be deemed delivered on the next succeeding Business Day; PROVIDED, FURTHER
that such notice, request, demand, claim or other communication is delivered to
the applicable party at the party's address or facsimile number as set forth
below,
-39-
(a) If to Parent, addressed to it at:
Tejas Incorporated
0000 Xxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Fax: 000-000-0000
With a copy to:
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
(b) If to the Company prior to the Effective Time, addressed to it at:
Capital & Technology Advisors, Inc.
00 Xxxxxxxxx Xxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxx, Xx.
with a copy to:
Day, Xxxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxx Xxxxxxxxx III, Esq.
Fax: 000-000-0000
Any party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
SECTION 10.10. Governing Law and Jurisdiction. This Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
New York without giving effect to any choice or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York. Each party hereby consents to the exclusive jurisdiction of any New
York state or United States Federal court sitting in the City of New York with
respect to all disputes between the parties that are permitted to be brought in
a court of law pursuant to Section 10.01 above.
-40-
SECTION 10.11. Amendments and Waivers. This Agreement may be amended by the
parties. No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by the parties. No waiver by any party
of any provision of this Agreement or any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be valid
unless the same shall be in writing and signed by the party making such waiver,
nor shall such waiver be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
SECTION 10.12. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
SECTION 10.13. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The words "including," "include" or "includes"
shall mean "including without limitation." The parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. Any reference in this Agreement to a statute shall be to such
statute, as amended from time to time, and to the rules and regulations
promulgated thereunder.
SECTION 10.14. Specific Performance. The parties hereto agree that if, on
or prior to the Closing Date, any of the provisions of this Agreement or any
other document contemplated by this Agreement were not performed in accordance
with their specific terms or were otherwise breached, irreparable damage would
occur, no adequate remedy at law would exist and damages would be difficult to
determine, and, therefore, prior to the Closing Date, the parties shall be
entitled to specific performance of the terms hereof and thereof, in addition to
any other remedy at law or in equity.
[SIGNATURE PAGE FOLLOWS]
-41-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
CAPITAL & TECHNOLOGY ADVISORS, INC.:
By: /s/ Xxxxx Xxxx, Xx.
------------------------------------
Name: Xxxxx Xxxx, Xx
----------------------------------
Title: Authorized Signatory
---------------------------------
TEJAS INCORPORATED:
By: /s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
----------------------------------
Title: Authorized Signatory
---------------------------------
TEJAS ACQUISITION CORP.:
By: /s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
----------------------------------
Title: Authorized Signatory
---------------------------------
STOCKHOLDERS:
NISKAYUNA DEVELOPMENT LLC
By: /s/ Xxxxx X.Xxxxxxxxx, Xx.
------------------------------------
Name: Xxxxx X.Xxxxxxxxx, Xx.
----------------------------------
Title: Authorized Signatory
---------------------------------
-00-
XXXXX XXXX, XX.
/s/ Xxxxx Xxxx, Xx.
----------------------------------------
XXXXX X'XXXXXXX
/s/ Xxxxx X'Xxxxxxx
----------------------------------------
XXXXXXX XXXXX
/s/ Xxxxxxx Xxxxx
----------------------------------------
XXXX X. XXXX
/s/ Xxxx X. Xxxx
----------------------------------------
-43-
Index of Defined Terms
Accredited Investor.................................6
Affiliate..........................................35
Affiliate Letters..................................29
Agreement...........................................1
Applicable Law.....................................35
Applicable Securities Law..........................35
Associated Person..................................35
Average Per Share Closing Price.....................3
Business Day.......................................35
Certificate.........................................4
Certificate of Merger...............................2
Closing.............................................2
Closing Date........................................2
Code................................................1
Company.............................................1
Company Common Stock................................1
Company Disclosure Schedules........................5
Company Intellectual Property......................14
Company Real Property..............................20
Consent............................................35
Contracts..........................................13
Covered Person.....................................19
DGCL................................................1
Effective Time......................................2
Employee............................................8
Employment Agreements..............................29
Encumbrances.......................................36
Environmental Law..................................36
ERISA..............................................36
ERISA Affiliate....................................36
Escrow..............................................4
Escrow Agent........................................4
Escrow Amount.......................................4
Escrow Shares.......................................4
Exchange Act.......................................26
Fair Market Value..................................36
Financial Statements...............................12
GAAP................................................7
Governmental Approval..............................36
Governmental Entity................................36
Hazardous Substances...............................36
Holders.............................................4
Holders' Basket....................................33
Intellectual Property..............................37
Liability..........................................37
Licensed Intellectual Property.....................13
Lien...............................................37
LLC.................................................6
LLCs................................................6
Loss...............................................31
Losses.............................................31
Material Adverse Effect............................37
Merger..............................................1
Merger Consideration................................3
Non-Compete........................................30
Non-Compete Parties................................30
Option Payment......................................3
Owned Intellectual Property........................14
Parent..............................................1
Parent Common Stock Closing Price...................3
Parent Disclosure Schedule.........................24
Parent Entities....................................34
Parent SEC Reports.................................26
Patriot Act........................................19
Person.............................................37
Policies...........................................17
Prior Agreements...................................34
Prohibited Transaction..............................9
Registration Rights Agreement......................23
Restraints.........................................29
Rule 144...........................................23
Securities Act......................................6
Seller Parties.....................................34
Share Merger Consideration..........................3
Stockholder.........................................1
Sub.................................................1
Subsidiary.........................................38
Surviving Corporation...............................1
Tax Return.........................................38
Taxes..............................................38
Tejas Indemnified Parties..........................31
Third Party Interest................................6
Total Outstanding Company Shares....................3
Transactions........................................5
Viruses............................................15
SCHEDULE 2.02
DELIVERY OF MERGER CONSIDERATION
--------------------------------------------------------------------------------
SHAREHOLDER NUMBER OF SHARES OF PARENT COMMON STOCK
--------------------------------------------------------------------------------
Niskayuna Development LLC 2,366,026
--------------------------------------------------------------------------------
Xxxxx Xxxx, Xx. 417,814
--------------------------------------------------------------------------------
Xxxxx X'Xxxxxxx 24,947
--------------------------------------------------------------------------------
Xxxxxxx Xxxxx 19,896
--------------------------------------------------------------------------------
Xxxx X. Xxxx 19,896
--------------------------------------------------------------------------------
HSBC Bank USA, National Association 309,316
--------------------------------------------------------------------------------
