STOCK PURCHASE AGREEMENT
BETWEEN
GLENBROOK GROUP, LLC
AND
NORTHGATE INNOVATIONS, INC.
DATED: DECEMBER 9, 2003
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS....................................................... 4
ARTICLE II. PURCHASE AND SALE OF STOCK.......................................11
2.1 Purchase and Sale of Stock........................11
2.2 Purchase Price....................................11
2.3 The Closing.......................................11
2.4 Deliveries at the Closing.........................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES CONCERNING THE BUYER.............11
3.1 Entity Status.....................................12
3.2 Power and Authority; Enforceability...............12
3.3 No Violation......................................12
3.4 Brokers' Fees.....................................12
3.5 Knowledge of Investment and its Risks.............12
3.6 Investment Intent.................................12
3.7 Accredited Investor...............................12
3.8 Disclosure........................................12
3.9 No Registration...................................13
3.10 Transfer Restrictions.............................13
ARTICLE IV. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY............13
4.1 Entity Status.....................................13
4.2 Power and Authority; Enforceability...............14
4.3 No Violation......................................14
4.4 Brokers' Fees.....................................14
4.5 Capitalization....................................14
4.6 Records...........................................15
4.7 Financial Statements..............................15
4.8 Subsequent Events.................................16
4.9 Liabilities.......................................17
4.10 Legal Compliance..................................17
4.11 Tax Matters.......................................17
4.12 Title to and Condition of Assets..................18
4.13 Real Property.....................................18
4.14 Intellectual Property.............................18
4.15 Inventory.........................................21
4.16 Contracts.........................................21
4.17 Receivables.......................................22
4.18 Powers of Attorney................................22
4.19 Insurance.........................................22
4.20 Litigation........................................22
4.21 Product Warranty..................................23
4.22 Product Liability.................................23
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4.23 Labor; Employees..................................23
4.24 Employee Benefits.................................23
4.25 Environmental, Health, and Safety Matters.........24
4.26 Customers and Suppliers...........................24
4.27 Permits...........................................24
4.28 Certain Payments..................................24
4.29 Accuracy of Information Furnished.................24
4.30 Offering of the Stock and Warrants................25
4.31 Seller's Obligations With Respect to the
Company's Securities Filings and Financial
Statements........................................25
ARTICLE V. POST-CLOSING COVENANTS............................................26
5.1 General...........................................26
5.2 ESOP Matters......................................26
5.3 Litigation Support................................26
5.4 Transition........................................26
5.5 Confidentiality...................................26
5.6 Release...........................................27
5.7 Board Composition.................................27
ARTICLE VI. CLOSING CONDITIONS...............................................27
6.1 Conditions Precedent to Obligation of Buyer.......27
6.2 Conditions Precedent to Obligation of Seller......28
ARTICLE VII. INDEMNIFICATION.................................................29
7.1 Survival of Representations and Warranties........29
7.2 Indemnification Provisions for Buyer's Benefit....29
7.3 Indemnification Provisions for Seller's Benefit...29
7.4 Indemnification Claim Procedures..................29
7.5 Indemnification If Negligence Of Indemnitee.......31
7.6 Other Indemnification Provisions..................31
7.7 Additional Indemnification........................31
ARTICLE VIII. MISCELLANEOUS..................................................31
8.1 Treatment of Certain Tax Matters Post-Closing.....31
8.2 Schedules.........................................32
8.3 Entire Agreement..................................32
8.4 Successors........................................33
8.5 Assignments.......................................33
8.6 Notices...........................................33
8.7 Specific Performance..............................34
8.8 Submission to Jurisdiction; No Jury Trial.........34
8.9 Time..............................................35
8.10 Counterparts......................................35
8.11 Headings..........................................35
8.12 Governing Law.....................................35
8.13 Amendments and Waivers............................35
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8.14 Severability......................................35
8.15 Construction......................................35
8.16 Incorporation of Exhibits, Annexes, and Schedules.36
8.17 Remedies..........................................36
EXHIBIT A: Registration Rights Agreement
EXHIBIT B: Consulting Agreement
EXHIBIT C: Independent Indemnity Items
Schedule 4 1: Company's Officers and Directors
Schedule 4 7: Financial Statements
Schedule 4 8: Subsequent Events
Schedule 4 9: Liabilities
Schedule 4 10: Legal Compliance
Schedule 4 11(c)(1): Tax Liabilities
Schedule 4 11(c)(2): Tax Returns
Schedule 4 11(c)(3): Financial Audits
Schedule 4 11(i): Tax Basis; Net Operating Loss; Material Elections
Schedule 4 13: Real Property
Schedule 4 14(b): Marks
Schedule 4 14(h): IP Infringement
Schedule 4 14(i): Software Licenses and Contracts
Schedule 4 16: Contracts
Schedule 4 19: Insurance
Schedule 4 20: Litigation
Schedule 4 21: Product Warranty
Schedule 4 24: Employee Benefits
Schedule 4 25: Environmental Health and Safety Matters
Schedule 4 26: Customers and Suppliers
Schedule 4 27: Permits
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT"), dated December 9, 2003, is by
and among Glenbrook Group, LLC, a Delaware corporation ("BUYER") and Northgate
Innovations, Inc. ("SELLER" or the "COMPANY"). The Buyer and Seller are
sometimes referred to herein individually as a "PARTY" and, collectively, as the
"PARTIES."
RECITALS:
A. Seller is a Delaware corporation engaged in the development,
manufacture, and distribution of personal computers, software, and computer
products.
B. Buyer desires to purchase from Seller 4.0 million shares of the
Company's common stock at $.25 per share, and Seller desires to sell to Buyer
4.0 million shares of the Company's common stock (the "STOCK"), in accordance
with this Agreement's terms and conditions.
C. Seller desires to enter into a Consulting Agreement with J & M
Interests, LLC, a Delaware corporation ("J & M INTERESTS") pursuant to which it
shall issue in the aggregate 2.5 million common stock purchase warrants to J & M
Interests, with an exercise price of $.50 per share, a cashless exercise
provision and a term of five (5) years (the "WARRANTS") as consideration
therefor.
D. Buyer and Seller intend for the purchase and sale of the Stock to be
treated as a taxable purchase for tax purposes.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants contained herein, Buyer and Seller agree as follows:
ARTICLE I.
DEFINITIONS
"ACTION" means any action, appeal, petition, plea, charge, complaint,
claim, suit, demand, litigation, arbitration, mediation, hearing, inquiry,
investigation or similar event, occurrence, or proceeding.
"AFFILIATE" or "AFFILIATED" with respect to any specified Person, means
a Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person. For this definition, "control" (and its derivatives) means the
possession, directly or indirectly, or as trustee or executor, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting Equity Interests, as trustee or executor, by
Contract or credit arrangements or otherwise.
"AGREEMENT" is defined in the preamble to this Agreement.
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"ANCILLARY AGREEMENTS" means the Registration Rights Agreement and the
Warrant Form.
"BALANCE SHEET DATE" is defined in SECTION 4.7.
"BASIS" means any past or current fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction about which the relevant Person has
Knowledge that forms or could form the basis for any specified consequence.
"BENEFICIALLY OWN" is defined by Rule 13d-3 of the Securities Exchange
Act.
"BEST EFFORTS" means the efforts, time, and costs that a prudent Person
desirous of achieving a result would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided, however, that no such use, expenditure, or incurrence will
be required if it would have a Material Adverse Effect on such Person calculated
immediately prior to the Closing Date.
"BREACH" means (a) any breach, inaccuracy, failure to perform, failure
to comply, conflict with, failure to notify, default, or violation or (b) any
other act, omission, event, occurrence or condition the existence of which would
(i) permit any Person to accelerate any obligation or terminate, cancel, or
modify any right or obligation or (ii) require the payment of money or other
consideration.
"BUYER" is defined in the preamble to this Agreement.
"BUYER INDEMNIFIED PARTIES" means Seller and its officers, directors,
managers, employees, agents, representatives, controlling Persons, and
stockholders.
"CLOSING" is defined in SECTION 2.3.
"CLOSING DATE" is defined in SECTION 2.3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange
rights, or other Contracts that could require a Person to issue any of its
Equity Interests or to sell any Equity Interests it owns in another Person; (b)
any other securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any Equity Interest of a Person or owned
by a Person; (c) statutory pre-emptive rights or pre-emptive rights granted
under a Person's Organizational Documents; and (d) stock appreciation rights,
phantom stock, profit participation, or other similar rights with respect to a
Person.
"COMPANY" is defined in the preamble to this Agreement.
"COMPANY'S FINANCIAL STATEMENTS" is defined in SECTION 4.31.
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"COMPANY'S SEC DOCUMENTS" is defined in SECTION 4.31.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of Buyer.
"CONSENT" means any consent, approval, notification, waiver, or other
similar action that is necessary or convenient.
"CONSULTING AGREEMENT" means the Consulting Agreement, dated as of the
date hereof, between the Company and J & M Interests, in the form of EXHIBIT B
to be executed and delivered at or before the Closing Date.
"CONTRACT" means any contract, agreement, arrangement, commitment,
letter of intent, memorandum of understanding, heads of agreement, promise,
obligation, right, instrument, document, or other similar understanding, whether
written or oral.
"COPYRIGHTS" means all copyrights, whether registered or unregistered,
in both published works and unpublished works, and pending applications to
register the same.
"DAMAGES" means all damages (including incidental and consequential
damages), losses (including any diminution in value), Liabilities, payments,
amounts paid in settlement, obligations, fines, penalties, costs of burdens
associated with performing injunctive relief, and other costs (including
reasonable fees and expenses of outside attorneys, accountants and other
professional advisors, and of expert witnesses and other costs (including the
allocable portion of the relevant Person's internal costs) of investigation,
preparation and litigation in connection with any Action or Threatened Action)
of any kind or nature whatsoever, whether known or unknown, contingent or
vested, or matured or unmatured.
"EMPLOYEE AGREEMENT" means each management, employment, severance,
consulting, non-compete, confidentiality, or similar Contract between the
Company and any employee, consultant, independent contractor, or other
individuals providing services thereto pursuant to which the Company has or may
have any Liability.
"ENCUMBRANCE" means any Order, Security Interest, Contract, easement,
covenant, community property interest, equitable interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENFORCEABLE" - a Contract is "Enforceable" if it is the legal, valid,
and binding obligation of the applicable Person enforceable against such Person
in accordance with its terms, except as such enforceability may be subject to
the effects of bankruptcy, insolvency, reorganization, moratorium, or other Laws
relating to or affecting the rights of creditors, and general principles of
equity.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" means all Orders,
Contracts, Laws, and programs (including those promulgated or sponsored by
industry associations, insurance companies, and risk management companies)
concerning or relating to public health and safety, worker/occupational health
and safety, and pollution or protection of the environment, including
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those relating to the presence, use, manufacturing, refining, production,
generation, handling, transportation, treatment, recycling, transfer, storage,
disposal, distribution, importing, labeling, testing, processing, discharge,
Release, Threatened Release, control, or other action or failure to act
involving cleanup of any hazardous materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, or
radiation, each as amended and as now or hereafter in effect.
"EQUITY INTEREST" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust or similar Person,
any and all units, interests or other partnership/limited liability company
interests, and any Commitments with respect thereto, and (c) any other direct or
indirect equity ownership or participation in a Person.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ESOP" is defined in SECTION 5.2
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"FINANCIAL STATEMENTS" is defined in SECTION 4.7.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GOVERNMENTAL BODY" means any legislature, agency, bureau, branch,
department, division, commission, court, tribunal, magistrate, justice,
multi-national organization, quasi-governmental body, or other similar
recognized organization or body of any federal, state, county, municipal, local,
or foreign government or other similar recognized organization or body
exercising similar powers or authority.
"INDEMNIFICATION CLAIM" is defined in SECTION 7.4(A).
"INDEMNIFIED PARTIES" means, individually and as a group, the Buyer
Indemnified Parties and the Seller Indemnified Parties.
"INDEMNITOR" means any Party having any Liability to any Indemnified
Party under this Agreement.
"INDEPENDENT INDEMNITY ITEM" is defined in SECTION 7.7.
"INTELLECTUAL PROPERTY" means any rights, licenses, liens, security
interests, charges, encumbrances, equities, and other claims that any Person may
have to claim ownership, authorship or invention, to use, to object to or
prevent the modification of, to withdraw from circulation, or control the
publication or distribution of any Marks, Patents, Copyrights, or Trade Secrets.
"INTERIM BALANCE SHEET" means the balance sheet contained within the
Interim Financial Statements.
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"INTERIM FINANCIAL STATEMENTS" is defined in SECTION 4.7.
"KNOWLEDGE" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (a) such individual is actually aware of such
fact or other matter; (b) such individual should be aware of such fact or
matter; or (c) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
comprehensive investigation concerning the existence of such fact or other
matter. A Person other than an individual will be deemed to have "Knowledge" of
a particular fact or other matter if (i) any individual who is serving, or who
has at any time served, as a director, manager, officer, partner, member,
executor, trustee, or similar position of such Person (or any similar capacity)
or (ii) any employee who is charged with, or who has at any time been charged
with, responsibility for a particular area of the operations of such Person
(i.e. an employee in the environmental section with respect to knowledge of
environmental matters), has, or at any time had, Knowledge of such fact or other
matter.
"LAW" means any law (statutory, common, or otherwise), constitution,
treaty, convention, ordinance, equitable principle, code, rule, regulation,
executive order, or other similar authority enacted, adopted, promulgated, or
applied by any Governmental Body, each as amended and now and hereinafter in
effect.
"LIABILITY" or "LIABLE" means any liability or obligation, whether
known or unknown, asserted or unasserted, absolute or contingent, matured or
unmatured, conditional or unconditional, latent or patent, accrued or unaccrued,
liquidated or unliquidated, or due or to become due.
"MARKS" means all fictitious business names, trading names, corporate
names, registered and unregistered trademarks, service marks, and applications.
"MATERIAL ADVERSE CHANGE (OR EFFECT)" means a change (or effect) in the
condition (financial or otherwise), properties, assets, Liabilities, rights,
obligations, operations, business, or prospects which change (or effect),
individually or in the aggregate, could reasonably be expected to be materially
adverse to such condition, properties, assets, Liabilities, rights, obligations,
operations, business, or prospects.
"ORDER" means any order, ruling, decision, verdict, decree, writ,
subpoena, mandate, precept, command, directive, consent, approval, award,
judgment, injunction, or other similar determination or finding by, before, or
under the supervision of any Governmental Body, arbitrator, or mediator.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
quality and frequency) of the relevant Person and its Subsidiaries.
"ORGANIZATIONAL DOCUMENTS" means the articles of incorporation,
certificate of incorporation, charter, bylaws, articles of formation,
regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
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"PARTY" and "PARTIES" is defined in the preamble to this Agreement.
"PATENTS" means all (a) patents and patent applications, and (b)
business methods, inventions, and discoveries that may be patentable.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMIT" means any permit, license, certificate, approval, consent,
notice, waiver, franchise, registration, filing, accreditation, or other similar
authorization required by any Law, Governmental Body, or Contract.
"PERSON" means any individual, partnership, limited liability company,
corporation, association, joint stock company, trust, entity, joint venture,
labor organization, unincorporated organization, or Governmental Body.
"PRE-CLOSING TAX PERIOD" is defined in SECTION 8.1(A).
"PROHIBITED TRANSACTIONS" is defined in ERISA Section 406 and Code
Section 4975.
"PURCHASE PRICE" is defined in SECTION 2.2.
"RECEIVABLES" means all receivables of the Company, including all
Contracts in transit, manufacturers warranty receivables, notes receivable,
accounts receivable, trade account receivables, and insurance proceeds
receivable.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date hereof, between the Company and Buyer, in the
form of EXHIBIT A to be executed and delivered at or before the Closing Date.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing, or
other release into the Environment.
"RELEASEE" and "RELEASEES" is defined in SECTION 5.6.
"SCHEDULES" means the Schedules to this Agreement.
"SEC" is defined in SECTION 4.31.
"SECURITIES ACT" means the Securities Act of 1933.
"SECURITY INTEREST" means any security interest, deed of trust,
mortgage, pledge, lien, charge, claim, or other similar interest or right,
except for (i) liens for taxes, assessments, governmental charges, or claims
that are being contested in good faith by appropriate Actions promptly
instituted and diligently conducted and only to the extent that a reserve or
other appropriate provision, if any, has been made on the face of the Financial
Statements in an amount equal to the Liability for which the lien is asserted,
(ii) statutory liens of landlords and warehousemen's, carriers', mechanics',
suppliers', materialmen's, repairmen's, or other like liens (including
Contractual landlords' liens) arising in the Ordinary Course of Business and
with respect
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to amounts not yet delinquent and being contested in good faith by appropriate
proceedings, only to the extent that a reserve or other appropriate provision,
if any, has been made on the face of the Financial Statements in an amount equal
to the Liability for which the lien is asserted; and (iii) liens incurred or
deposits made in the Ordinary Course of Business in connection with workers'
compensation, unemployment insurance and other similar types of social security.
"SELLER" is defined in the preamble to this Agreement.
"SELLER INDEMNIFIED PARTIES" means each Buyer and its managers,
members, controlling Persons, and stockholders.
"SOFTWARE" means computer software or middleware
"STOCK" is defined in the recitals to this Agreement.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs, ad valorem, duties, capital stock, franchise, profits,
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes required to be filed with
any Governmental Body, including any schedule or attachment thereto, and
including any amendment thereof.
"THREATENED" means a demand or statement has been made (orally or in
writing) or a notice has been given (orally or in writing), or any other event
has occurred or any other circumstances exist that would lead a prudent Person
to conclude that a cause of Action (a "THREATENED ACTION") or other matter is
likely to be asserted, commenced, taken, or otherwise initiated.
"TRADE SECRETS" means all know-how, trade secrets, confidential
information, customer lists, Software (source code and object code),
documentation, technical information, data, process technology, plans, drawings,
and blue prints.
"TRANSACTION DOCUMENTS" means this Agreement and the Ancillary
Agreements.
"TRANSACTIONS" means (a) the sale of the Stock by Seller to Buyer and
Buyer's delivery of the Purchase Price therefor; (b) the execution, delivery,
and performance of all of the documents, instruments and agreements to be
executed, delivered, and performed in connection herewith, including each
Ancillary Agreement; and (c) the performance by Buyer and Seller of their
respective covenants and obligations (pre- and post-Closing) under this
Agreement.
"TREAS. REG." means the proposed, temporary and final regulations
promulgated under the Code.
"WARRANTS" is defined in the recitals to this Agreement.
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ARTICLE II.
PURCHASE AND SALE OF STOCK
2.1 Purchase and Sale of Stock. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller
agrees to issue and sell to Buyer, 4.0 million shares of the Company's common
stock.
2.2 PURCHASE PRICE. The aggregate consideration to be paid by Buyer to
Seller shall be $1.0 million (the "PURCHASE PRICE").
2.3 THE CLOSING. The closing of the purchase and sale of the Stock (the
"CLOSING") will take place at the offices of Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
in Washington, D.C., commencing at 12:00 p.m., local time, on December 9, 2003,
or on such other date as may be fixed for the Closing by written agreement
between Seller and Buyer (the "CLOSING DATE").
2.4 DELIVERIES AT THE CLOSING. At the Closing:
(a) Seller will deliver to Buyer:
(i) Certificates representing the Stock duly endorsed (or
accompanied by duly executed stock powers) or lost certificate
affidavits in form and substance acceptable to Buyer together with a
copy of the missing certificate(s).
(ii) An Officer's certificate, duly executed on the Company's
behalf, as to whether each condition specified in Sections 6.1(a) -
6.1(f) has been satisfied in all respects.
(iii) The Registration Rights Agreement, duty executed by the
Company.
(iv) The Consulting Agreement, duly executed by the Company.
(b) Buyer will deliver to Seller:
(i) An aggregate of $1,000,000 in cash, via electronic funds
transfer.
(ii) The Registration Rights Agreement, duty executed by
Buyer.
(iii) The Consulting Agreement, duly executed by J & M
Interests.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
CONCERNING THE BUYER
Buyer represents and warrants to Seller that the statements contained
in this ARTICLE III are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then
and, except as expressly provided in a representation or warranty, as though the
Closing Date were substituted for the date of this Agreement throughout this
ARTICLE III.
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3.1 ENTITY STATUS. Buyer is an entity duly created, formed or
organized, validly existing and in good standing under the Laws of the
jurisdiction of its creation, formation or organization. There is no pending or
Threatened Action (or Basis therefor) for the dissolution, liquidation,
insolvency, or rehabilitation of Buyer.
3.2 POWER AND AUTHORITY; ENFORCEABILITY. Buyer has the relevant entity
power and authority to execute and deliver each Transaction Document to which it
is party, and to perform and consummate the Transactions. Buyer has taken all
action necessary to authorize the execution and delivery of each Transaction
Document to which it is party, the performance of its obligations thereunder,
and the consummation of the Transactions. Each Transaction Document to which
Buyer is a party has been duly authorized, executed and delivered by, and is
Enforceable against, Buyer.
3.3 NO VIOLATION. The execution and delivery of the Transaction
Documents to which Buyer is a party and the performance and consummation of the
Transactions by Buyer will not (i) Breach any Law or Order to which Buyer is
subject or any provision of its Organizational Documents; (ii) Breach any
Contract, Order, or Permit to which Buyer is a party or by which it is bound or
to which any of its assets is subject; (iii) require any Consent.
3.4 BROKERS' FEES. Buyer has no Liability to pay any compensation to
any broker, finder, or agent with respect to the Transactions for which the
Seller could become Liable.
3.5 KNOWLEDGE OF INVESTMENT AND ITS RISKS. Buyer has knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of such Buyer's investment in the Stock. Buyer understands that
an investment in the Company represents a high degree of risk and there is no
assurance that the Company's business or operations will be successful. Buyer
has considered carefully the risks attendant to an investment in the Company,
and that, as a consequence of such risks, Buyer could lose its entire investment
in the Company.
3.6 INVESTMENT INTENT. Buyer hereby represents and warrants that (i)
the Stock is being acquired for investment for Buyer's own account, and not as a
nominee or agent and not with a view to the resale or distribution of all or any
part of the Stock, and Buyer has no present intention of selling, granting any
participation in, or otherwise distributing any of the Stock within the meaning
of the Securities Act and (ii) Buyer does not have any contracts,
understandings, agreements, or arrangements with any person and/or entity to
sell, transfer, or grant participations to such person and/or entity, with
respect to any of the Stock.
3.7 ACCREDITED INVESTOR. Buyer is an "Accredited Investor" as that term
is defined by Rule 501 of Regulation D promulgated under the Securities Act.
3.8 DISCLOSURE. Buyer has reviewed information provided by the Company
in connection with the decision to purchase the Stock, consisting of the
Company's publicly available filings with the Securities and Exchange Commission
and the information contained therein. The Company has provided such Buyer with
all the information that Buyer has requested in connection with the decision to
purchase the Stock. Buyer further represents that Buyer has had an opportunity
to ask questions and receive answers from the Company regarding the business,
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properties, prospects, and financial condition of the Company. To Buyer's
knowledge, the Company has not disclosed any material non-public information to
Buyer. All such questions have been answered to the full satisfaction of Buyer.
3.9 NO REGISTRATION. Buyer understands that Buyer may be required to
bear the economic risk of its investment in the Company for an indefinite period
of time. Buyer further understands that (i) neither the offering nor the sale of
the Stock has been registered under the Securities Act or any applicable State
Acts in reliance upon exemptions from the registration requirements of such
laws, (ii) the Stock must be held by he, she or it indefinitely unless the sale
or transfer thereof is subsequently registered under the Securities Act and any
applicable State Acts, or an exemption from such registration requirements is
available, (iii) except as set forth in the Registration Rights Agreement
between the Company and the Buyer, the Company is under no obligation to
register any of the Stock on Buyer's behalf or to assist the Buyer in complying
with any exemption from registration, and (iv) the Company will rely upon the
representations and warranties made by the Buyer in this Agreement in order to
establish such exemptions from the registration requirements of the Securities
Act and any applicable State Acts.
3.10 TRANSFER RESTRICTIONS. Buyer will not transfer any of the Stock
unless such transfer is registered or exempt from registration under the
Securities Act and such State Acts, and, if requested by the Company in the case
of an exempt transaction, the Buyer has furnished an opinion of counsel
reasonably satisfactory to the Company that such transfer is so exempt. Buyer
understands and agrees that (i) the certificates evidencing the Stock will bear
appropriate legends indicating such transfer restrictions placed upon the Stock,
(ii) the Company shall have no obligation to honor transfers of any of the Stock
in violation of such transfer restrictions, and (iii) the Company shall be
entitled to instruct any transfer agent or agents for the securities of the
Company to refuse to honor such transfers.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
Seller represents and warrants to Buyer that the statements contained
in this ARTICLE IV are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and,
except as expressly provided in a representation or warranty, as though the
Closing Date were substituted for the date of this Agreement throughout this
ARTICLE IV), except as set forth in the Schedules the Seller has delivered to
Buyer on the date hereof.
4.1 ENTITY STATUS. The Company is an entity duly created, formed or
organized, validly existing, and in good standing under the Laws of the
jurisdiction of its creation, formation, or organization. The Company is duly
authorized to conduct its business and is in good standing under the laws of
each jurisdiction where such qualification is required. The Company has the
requisite power and authority necessary to own or lease its properties and to
carry on its businesses as currently conducted and any businesses in which it
currently proposes to engage. SCHEDULE 4.1 lists the Company's directors and
officers. Seller has delivered to Buyer correct and complete copies of the
Company's Organizational Documents, as amended to date. The Company is not in
Breach of any provision of its Organizational Documents. There is no pending or
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Threatened Action (or Basis therefor) for the dissolution, liquidation,
insolvency, or rehabilitation of the Company.
4.2 POWER AND AUTHORITY; ENFORCEABILITY. The Company has the relevant
entity power and authority necessary to execute and deliver each Transaction
Document to which it is a party and to perform and consummate the Transactions.
The Company has taken all action necessary to authorize the execution and
delivery of each Transaction Document to which it is a party, the performance of
the Company's obligations thereunder, and the consummation of the Transactions.
Each Transaction Document to which the Company is party has been duly
authorized, executed, and delivered by, and is Enforceable against, the Company.
4.3 NO VIOLATION. The execution and the delivery of the applicable
Transaction Documents by the Company and the performance of its obligations
hereunder and thereunder, and consummation of the Transactions by the Company
will not (a) Breach any Law or Order to which the Company is subject or any
provision of the Organizational Documents of the Company; (b) Breach any
Contract, Order, or Permit to which the Company is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Encumbrance upon any of its assets); (c) require any Consent, except any
notifications or filings to the relevant state or federal regulatory agencies or
as may be required by that certain Amended and Restated Loan and Security
Agreement dated as of July 22, 2003, between Manufacturers Bank and Lan Plus
Corporation; or (d) trigger any rights of first refusal, preferential purchase,
or similar rights.
4.4 BROKERS' FEES. The Company has no Liability to pay any compensation
to any broker, finder, or agent with respect to the Transactions for which Buyer
or the Company could become directly or indirectly Liable.
4.5 CAPITALIZATION.
(a) The Company's authorized Equity Interests consist of (i) 55,000,000
shares of common stock, par value $.03 per share, of the Company, of which
19,165,985 shares are issued and outstanding and 0 shares are held in treasury;
and (ii) 5,000,000 shares of preferred stock, par value $.01 per share, of the
Company, of which 0 shares are issued and outstanding and 0 shares are held in
treasury. All of the issued and outstanding shares: (i) have been duly
authorized and are validly issued, fully paid, and nonassessable, (ii) were
issued in compliance with all applicable state and federal securities Laws,
(iii) were not issued in Breach of any Commitments. No additional Commitments
will arise in connection with the Transactions. There are no Contracts with
respect to the voting or transfer of the Company's Equity Interests. The Company
is not obligated to redeem or otherwise acquire any of its outstanding Equity
Interests.
(b) No stock plan, stock purchase, stock option or other agreement or
understanding between the Company and any holder of any equity securities of the
Company or rights to purchase equity securities of the Company provides for
acceleration or other changes in the vesting provisions or other terms of such
securities, as the result of any merger, sale of stock or assets, change in
control or other similar transaction by the Company.
(c) Except for the Registration Rights Agreement and the Stock Purchase
Agreement between Buyer and Xxxx Xxxx, each dated as of the date hereof, there
are no voting trusts or
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agreements, stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or other similar rights or proxies
relating to any of the Company's securities, or agreements relating to the
issuance, sale, redemption, transfer or other disposition (including
registration rights agreements) of the Company's securities. All of the
outstanding securities of the Company were issued in compliance with all
applicable federal and state securities laws.
(d) The Stock has been duly authorized and, when issued in accordance
with this Agreement, will be duly and validly issued, fully paid and
nonassessable shares of the applicable sort and will be free and clear of all
Liens other than Liens that were created by Buyer and restrictions on transfer
imposed by this Agreement, the Securities Act and applicable state securities
laws. The issuance, sale and delivery of the Stock is not subject to any
preemptive right of the Company's stockholders or to any right of first refusal
or other right in favor of any Person. The consummation of the transactions
contemplated hereunder will not result in any anti-dilution adjustment or other
similar adjustment to any of the Company's outstanding securities. Any Person
with any right (other than the Buyer) to purchase securities of the Company,
which would be triggered as a result of the transactions contemplated under this
Agreement, has waived such rights.
4.6 RECORDS. The copies of the Company's Organizational Documents that
were provided to Buyer are accurate and complete and reflect all amendments made
through the date hereof. The Company's minute books and other records made
available to Buyer for review were correct and complete as of the date of such
review, no further entries have been made through the date of this Agreement,
such minute books and records contain the true signatures of the persons
purporting to have signed them, and such minute books and records contain an
accurate record of all actions of the stockholders, directors, members,
managers, or other such representatives of the Company taken by written consent,
at a meeting, or otherwise since formation.
4.7 FINANCIAL STATEMENTS. Set forth on SCHEDULE 4.7 are the following
financial statements (collectively the "FINANCIAL ------------- STATEMENTS"):
(a) unaudited balance sheets, statements of income and retained
earnings and statements of cash flows as of and for the fiscal year ended
December 31, 2000, December 31, 2001 and December 31, 2002 for the Company; and
(b) unaudited balance sheets, statements of income and retained
earnings and statements of cash flows as of and for the six-month periods ended
June 30, 2000, June 30, 2001 and June 30, 2003 (the "BALANCE SHEET DATE") for
the Company (the "INTERIM FINANCIAL STATEMENTS").
The Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, present
fairly the financial condition of the Company as of such dates and the results
of operations of the Company for such periods, are correct and complete, and are
consistent with the books and records of the Company, except as reflected in the
restatement of the Financial Statements for the 2002 fiscal year to correct an
accounting error. Since the Balance Sheet Date the Company has not effected any
change in any
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method of accounting or accounting practice, except for any such change required
because of a concurrent change in GAAP.
4.8 SUBSEQUENT EVENTS. Except as set forth in SCHEDULE 4.8, since the
Balance Sheet Date the Company has operated in the Ordinary Course of Business
and there have been no events, series of events or the lack of occurrence
thereof which, singularly or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on the Company. Without limiting the foregoing,
since that date, none of the following has occurred:
(a) The Company has not sold, leased, transferred, or assigned any
assets other than for a fair consideration in the Ordinary Course of Business.
(b) The Company has not entered into any Contract (or series of related
Contracts) either involving more than $10,000 or outside the Ordinary Course of
Business.
(c) No Encumbrance has been imposed upon any assets of the Company.
(d) The Company has not made any capital expenditure (or series of
related capital expenditures) involving more than $5,000 individually, $10,000
in the aggregate, or outside the Ordinary Course of Business.
(e) The Company has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other Person.
(f) The Company has not issued any note, bond, or other debt security
or created, incurred, assumed, or guaranteed any Liability for borrowed money or
capitalized lease Contract.
(g) The Company has not delayed or postponed the payment of accounts
payable or other Liabilities outside the Ordinary Course of Business.
(h) The Company has not canceled, compromised, waived, or released any
Action (or series of related Actions) outside the Ordinary Course of Business.
(i) The Company has not granted any Contracts or any rights under or
with respect to any Intellectual Property.
(j) There has been no change made or authorized to be made to the
Organizational Documents of the Company.
(k) The Company has not issued, sold, or otherwise disposed of any of
its Equity Interests.
(l) The Company has not declared, set aside, or paid any dividend or
made any distribution with respect to its Equity Interests (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its Equity
Interests.
(m) The Company has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its properties.
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(n) The Company has not made any loan to, or entered into any other
transaction with, any of its directors, officers, or employees.
(o) The Company has not entered into any employment, collective
bargaining, or similar Contract or modified the terms of any existing such
Contract.
(p) The Company has not committed to pay any bonus or granted any
increase in the base compensation (i) of any director or officer, or (ii)
outside of the Ordinary Course of Business, of any of its other employees.
(q) Other than the actions taken with respect to the Lan Plus, Inc.
Employee Stock Ownership Plan pursuant to the Stock Purchase Agreement, dated as
of the date hereof, among J & M Interests, LLC, the investors listed on the
signature pages thereto, and Xxxx Xxxx, the Company has not adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
similar Contract for the benefit of any of its directors, officers, or employees
(or taken any such action with respect to any other Employee Benefit Plan).
(r) The Company has not made any other change in employment terms
outside of the Ordinary Course of Business, for any of its other directors,
officers, or employees.
(s) The Company has not made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business.
(t) There has not been any other occurrence, event, incident, action,
failure to act, or transaction with respect to the Company outside the Ordinary
Course of Business; and the Company has not committed to any of the foregoing.
4.9 LIABILITIES. Except as disclosed in SCHEDULE 4.9, the Company does
not have any Liability (and there is no Basis for any present or future Action
or Order against the Company giving rise to any Liability), except for (a)
Liabilities quantified on the face of the Interim Financial Statements (rather
than in any notes thereto) and not heretofore paid or discharged, and (b)
Liabilities that have arisen after the Balance Sheet Date in the Ordinary Course
of Business which, individually or in the aggregate, are not material and are of
the same character and nature as the Liabilities quantified on the face of the
Interim Financial Statements none of which results from or relates to any Breach
of Contract, Breach of warranty, tort, infringement, or Breach of Law, or arose
out of any Action or Order.
4.10 LEGAL COMPLIANCE. Except as disclosed in SCHEDULE 4.10, the
Company has complied with all applicable Laws, and no Action is pending or
Threatened (and there is no Basis therefor) against it alleging any failure to
so comply. No material expenditures are, or based on applicable Law, will be
required of the Company for it and its business and operations to remain in
compliance with applicable Law.
4.11 TAX MATTERS. The Company is not subject to any Liabilities for
Taxes, including Taxes relating to prior periods, other than those set forth or
adequately reserved against in the Interim Financial Statements or those
incurred since the Balance Sheet Date in the Ordinary Course of Business. The
Company
-17-
has duly filed when due all Tax reports and returns in connection with and in
respect of its business, assets and employees, and has timely paid and
discharged all amounts shown as due thereon. The Company has made available to
Buyer accurate and complete copies of all of its Tax reports and returns for all
periods, except those periods for which returns are not yet due. The Company has
not received any notice of any Tax deficiency outstanding, proposed or assessed
against or allocable to it, and has not executed any waiver of any statute of
limitations on the assessment or collection of any Tax or executed or filed with
any Governmental Body any Contract now in effect extending the period for
assessment or collection of any Taxes against it. There are no Encumbrances for
Taxes upon, pending against or Threatened against, any asset of the Company. The
Company is not subject to any Tax allocation or sharing Contract. The Company
(i) has not been a member of an Affiliated Group filing a consolidated federal
income Tax Return (other than a group the common parent of which was the
Company) or (ii) has no Liability for the Taxes of any Person (other than the
Company) under Treas. Reg. Section 1.1502-6 or similar Law, as a transferee or
successor, by Contract, or otherwise.
4.12 TITLE TO AND CONDITION OF ASSETS. The Company has good and
marketable title to, or a valid leasehold interest in, all buildings, machinery,
equipment, and other tangible assets (a) located on their premises, shown on the
Interim Balance Sheet, or acquired after the Balance Sheet Date and (b)
necessary for the conduct of their business as currently conducted and as
currently proposed to be conducted, in each case free and clear of all
Encumbrances since the Balance Sheet Date, except for an Encumbrance created by
that certain Amended and Restated Loan and Security Agreement dated as of July
22, 2003, between Manufacturers Bank and Lan Plus Corporation. Each such
tangible asset is free from defects (patent and latent), has been maintained in
accordance with normal industry practice, is in good operating condition
(subject to normal wear and tear), and is suitable for the purposes for which it
is currently used and currently is proposed to be used.
4.13 REAL PROPERTY. The Company owns no real property. SCHEDULE 4.13
lists all real property the Company leases. SCHEDULE 4.13 also contains an
accurate and complete list of all leases and other Contracts in respect of real
property, accurate and complete copies of which have been delivered to Buyer.
Except as set forth on SCHEDULE 4.13, all of such leases and Contracts included
on SCHEDULE 4.13 are Enforceable against the Company and, to the Seller's
Knowledge, the applicable counter-parties (and their successors). To Seller's
Knowledge, all buildings, plants, and structures the Company uses lie wholly
within the boundaries of the real property the Company leases and do not
encroach upon any other Person's property.
4.14 INTELLECTUAL PROPERTY
(a) The Company has no patents.
(b) SCHEDULE 4.14(B) lists the Company's Marks, and specifies whether
each Xxxx has been registered by the Company with the United States Patent and
Trademark Office or with a corresponding state office. The Company owns or has
the right to use pursuant to an Enforceable Contract all Marks used by the
Company in the Ordinary Course of Business. All Marks required to be listed that
have been registered with the United States Patent and Trademark Office or with
a corresponding state office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability
-18-
and renewal applications), are valid and Enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within 90 days after the
Closing Date. To the Seller's Knowledge, no Xxxx required to be listed has been
or is now involved in any opposition, invalidation, or cancellation proceeding
and no such action is Threatened with the respect to any such Xxxx. All products
and materials containing a Xxxx required to be listed bear the proper legal
notice where permitted by Law.
(c) The Company has no registered Copyrights. All of the Company's
Software and the documentation for such Software, as well as the Company's
website have been marked with the proper copyright notice. (d) Neither the
Company nor its agents have developed any Software for use by the Company.
(e) The Company has no Trade Secrets.
(f) The Company owns or has the right to use pursuant to an Enforceable
Contract all Intellectual Property necessary to operate the Company's businesses
as currently conducted and as currently proposed to be conducted. Each item of
Intellectual Property that the Company owned or used immediately prior to the
Closing will be owned or available for use by the Company on identical terms and
conditions immediately subsequent to the Closing. The Company has taken all
necessary action to maintain and protect each item of Intellectual Property that
it owns or uses.
(g) Seller has delivered to Buyer correct and complete copies of all
written documentation evidencing ownership and prosecution (if applicable) of
each item of the Company's Intellectual Property. With respect to each such item
of Intellectual Property:
(i) the Company possesses all right, title, and interest in
and to the item, free and clear of any Encumbrance;
(ii) the item is not subject to any outstanding Order;
(iii) no Action is pending or Threatened (and there is no
Basis therefor) which challenges the Enforceability, use, or ownership
of the item; and
(iv) the Company has never agreed to indemnify any Person for
or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(h) Other than as set forth on SCHEDULE 4.14(H), the Company has not
interfered with, infringed upon, misappropriated, or otherwise violate or come
into conflict with any other Person's Intellectual Property, and neither the
Company nor Seller has ever received any notice alleging any such interference,
infringement, misappropriation, violation, or conflict (including any claim that
the Company must license, or consider licensing, or refrain from using any other
Person's Intellectual Property). To the Seller's Knowledge, (i) no third Person
has any Intellectual Property that interferes or would be likely to interfere
with the Company's use of any of its Intellectual Property; (ii) the Company
will not interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of any other Person as a result
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of the continued operation of its businesses as currently conducted and as
currently proposed to be conducted; and (iii) no other Person has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with the
Company's Intellectual Property.
(i) SCHEDULE 4.14(I)(I) identifies each item of Intellectual Property
from any third party, other than readily available software having a replacement
value of less than $250 per copy, licensed or used by the Company. SCHEDULE
4.14(I)(II) identifies each Contract pursuant to which the Company has granted
to a third party rights under or with respect to any of its Intellectual
Property (together with any exceptions). The Company has made available to Buyer
correct and complete copies of all Contracts with respect to such use as amended
to date. With respect to the Contracts related to each item of Intellectual
Property required to be identified in (1) SCHEDULE 4.14(I)(I), the statements in
clauses (i) - (viii) below are true and correct, and (2) SCHEDULE 4.14(I)(II),
the statements in clauses (i) - (iv) below are true and correct:
(i) the Contract is Enforceable;
(ii) the Contract will continue to be Enforceable on identical
terms following the consummation of the Transaction;
(iii) the Company is not (and no counter-party is) in Breach
of such Contract, and no event has occurred that with notice or lapse
of time would constitute a Breach thereunder;
(iv) no party to the Contract has repudiated any provision
thereof;
(v) with respect to each sublicense Contract, to the Seller's
Knowledge, the representations and warranties set forth in SECTIONS
4.14(C)(I) - (IV) are true and correct with respect to the underlying
license Contract;
(vi) the underlying item of Intellectual Property is not
subject to any outstanding Order;
(vii) no Action is pending or Threatened (and there is no
Basis therefor) which challenges the Enforceability of the underlying
item of Intellectual Property; and
(viii) the Company has not granted any sublicense or similar
Contract with respect to the Contract.
(j) All former and current employees of the Company have executed
written Contracts with the Company that assign to the Company all rights to any
inventions, improvements, discoveries or information relating to the Company's
business. To the Seller's Knowledge, no employee of the Company has entered into
any Contract that restricts or limits in any way the scope or type of work in
which the employee may be engaged or requires the employee to transfer, assign,
or disclose information concerning his or her work to any Person other than the
Company.
(k) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of manufacturing or processing that any competitors or
other Person have developed
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which reasonably could be expected to supersede or make obsolete any, or any
planned, product or process of the Company.
4.15 INVENTORY. The Company's inventory, whether reflected on the
Financial Statements or not, consists of raw materials and supplies,
manufactured and processed parts, goods in process, and finished goods, all of
which is merchantable and fit for the purpose for which it was procured or
manufactured, and, except as has been written down on the face of the Interim
Balance Sheet (rather than the notes thereto), none of which is slow-moving,
obsolete, damaged, or defective. Any inventory that has been written down has
either been written off or written down to its net realizable value. There has
been no change in inventory valuation standards or methods with respect to the
inventory in the prior three years. The quantities of any kind of inventory are
reasonable in the current (and the currently foreseeable) circumstances of the
Company. The Company holds no more than 10 percent of its items of inventory on
consignment from other Persons and no other Person holds any items of inventory
on consignment from the Company.
4.16 CONTRACTS. Except as otherwise disclosed in SCHEDULES 4.13, 4.14,
4.19, AND 4.24, SCHEDULE 4.16 lists the following Contracts to which the Company
is a party:
(a) Any Contract (or group of related Contracts) for the lease of
personal property to or from any Person providing for lease payments in excess
of $5,000 per annum.
(b) Any Contract (or group of related Contracts) for the purchase or
sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of which
will extend over a period of more than one year, result in a loss to the
Company, or involve consideration in excess of $5,000.
(c) Any Contract concerning a limited liability company, partnership,
joint venture or similar arrangement.
(d) Any Contract (or group of related Contracts) under which it has
created, incurred, assumed, or guaranteed any Liability for borrowed money or
any capitalized lease in excess of $5,000, or under which it has imposed or
suffered to exist an Encumbrance on any of its assets.
(e) Any Contract concerning confidentiality or non-competition.
(f) Any Contract with any Seller or any Affiliates of a Seller.
(g) Any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other similar Contract for
the benefit of its current or former directors, officers, and employees.
(h) Any collective bargaining Contract.
(i) Any Contract for the employment of any individual on a full-time,
part-time, consulting, or other basis.
(j) Any Contract under which it has advanced or loaned any amount to
any of its directors or officers or, outside the Ordinary Course of Business, to
its employees.
-21-
(k) Any other Contract (or group of related Contracts) the performance
of which involves receipt or payment of consideration in excess of $5,000.
Seller has delivered to Buyer a correct and complete copy of each
written Contract (as amended to date) listed in SCHEDULE 4.16 and a written
summary setting forth the terms and conditions of each oral Contract referred to
in SCHEDULE 4.16. With respect to each such Contract:
(i) the Contract is Enforceable;
(ii) the Contract will continue to be Enforceable on identical
terms following the consummation of the Transactions;
(iii) the Company is not (and no counter-party is) in Breach
of such Contract, and no event has occurred that, with notice or lapse
of time, would constitute a Breach under the Contract; and
(iv) no party to the Contract has repudiated any provision of
the Contract.
4.17 RECEIVABLES. All of the Receivables are Enforceable, represent
bona fide transactions, and arose in the Ordinary Course of Business of the
Company, and are reflected properly in their books and records. All of the
Receivables are good and collectible receivables, are current, and will be
collected in accordance with past practice and the terms of such Receivables
(and in any event within three months following the Closing Date), without set
off or counterclaims, subject only to the reserve for bad debts set forth on the
face of the Interim Balance Sheet (rather than in any notes thereto) as adjusted
for the passage of time through the Closing Date in accordance with the Ordinary
Course of Business of the Company, consistent with GAAP. No customer or supplier
of the Company has any Basis to believe that it has or would be entitled to any
payment terms other than terms in the Ordinary Course of Business, including any
prior course of conduct.
4.18 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company.
4.19 INSURANCE. SCHEDULE 4.19 contains accurate and complete (i) lists
of all insurance policies currently carried by the Company, (ii) lists of all
insurance loss runs or workers' compensation claims received for the past three
policy years, and (iii) copies of all insurance policies currently in effect.
Such insurance policies evidence all of the insurance that the Company is
required to carry pursuant to its Contracts and Law. Such insurance policies are
currently in full force and effect and will remain in full force and effect
through their current terms. No insurance that the Company has ever carried has
been canceled nor has any such cancellation been Threatened. The Company has
never been denied coverage nor has any such denial been Threatened.
4.20 LITIGATION. SCHEDULE 4.20 sets forth each instance in which the
Company (a) is subject to any outstanding Order or (b) is a party, the subject
of, or is Threatened to be made a party to or the subject of any Action. No
Action required to be set forth in SCHEDULE 4.20 questions the Enforceability of
this Agreement or the Transactions, or could result in any Material
-22-
Adverse Change with respect to the Company, and the Seller has no Basis to
believe that any such Action may be brought or Threatened against the Company.
4.21 PRODUCT WARRANTY. To the Seller's Knowledge, each product
manufactured, sold, leased, or delivered by the Company has been in conformity
with all applicable Law, Contracts, and all express and implied warranties, and
the Company does not have any Liability (and there is no Basis for any present
or future Action against any of them giving rise to any Liability) for
replacement or repair thereof or other Damages in connection therewith, subject
only to the reserve for product warranty claims set forth on the face of the
Interim Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the Ordinary Course
of Business of the Company, consistent with GAAP. No product designed,
manufactured, sold, leased, or delivered by the Company is subject to any
guaranty, warranty, or other indemnity or similar Liability beyond the
applicable standard terms and conditions of sale or lease. SCHEDULE 4.21
includes copies of the standard terms and conditions of sale or lease for the
Company (containing applicable guaranty, warranty, and similar Liability
indemnity provisions).
4.22 PRODUCT LIABILITY. To the Seller's Knowledge, the Company does not
have any Liability (and there is no Basis for any present or future Action
against the Company giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product designed, manufactured, sold, leased, or delivered by the Company.
4.23 LABOR; EMPLOYEES. To the Seller's Knowledge, no executive, key
employee, or group of employees has any plans to terminate employment with the
Company. The Company is not a party to or bound by any collective bargaining
Contract, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. The Company has
not committed any unfair labor practice (as determined under any Law). The
Seller has no Knowledge of any organizational effort currently being made or
Threatened by or on behalf of any labor union with respect to the Company's
employees.
4.24 EMPLOYEE BENEFITS.
(a) SCHEDULE 4.24 lists each non-qualified deferred compensation plan,
qualified defined contribution retirement plan, qualified defined benefit
retirement plan or other material fringe benefit plan or program that the
Company maintains or contributes. Except for the ESOP, with respect to any
employee benefit plan within the meaning of Section 3(3) of ERISA which is
subject to ERISA and which is sponsored, maintained or contributed to, or has
been sponsored, maintained or contributed to, within six years prior to the
Closing Date by the Company or any ERISA Affiliate, (a) no withdrawal Liability,
within the meaning of Section 4201 of ERISA, has been incurred, which withdrawal
Liability has not been satisfied, (b) no Liability to the PBGC has been incurred
by the Company or any ERISA Affiliate, which Liability has not been satisfied,
(c) no accumulated funding deficiency, whether or not waived, within the meaning
of Section 302 of ERISA or Section 412 of the Code has been incurred, and (d)
all contributions (including installments) to such plan required by Section 302
of ERISA and Section 412 of the Code have been timely made. With respect to any
kind of employee benefit plan other than the
-23-
ESOP, such plan has been funded and maintained in compliance with all Laws
applicable thereto and the requirements of such plan's governing documents.
4.25 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. To the Seller's
Knowledge, except as set forth in SCHEDULE 4.25, (a) the Company is in
compliance with all Environmental, Health and Safety Requirements in connection
with owning, using, maintaining, or operating its business or assets; (b) each
location at which the Company operates, or has operated, its business is in
compliance with all Environmental, Health and Safety Requirements; and (c) there
are no pending, or any Threatened allegations by any Person that the Company's
properties or assets is not, or that its business has not been conducted, in
compliance with all Environmental, Health and Safety Requirements.
4.26 CUSTOMERS AND SUPPLIERS. SCHEDULE 4.26 lists the Company's (a) ten
largest customers in terms of sales during the 12-month period ended December
31, 2002 and the ten-month period ended as of October 31, 2003 and states the
approximate total sales by the Company to each such customer during such
periods, and (b) ten largest suppliers during the 12 month period ended as of
December 31, 2002 and the ten-month period ended as of October 31, 2003 and
states the approximate total expenditures by the Company to each such supplier
during such periods. Except as set forth in SCHEDULE 4.26, Seller has not
received notice of termination or an intention to terminate the relationship
with the Company from any customer or supplier.
4.27 PERMITS. The Company possess all Permits required to be obtained
for their businesses and operations. SCHEDULE 4.27 sets forth a list of all such
Permits and specifies with respect to each such Permit:
(a) it is valid, subsisting and in full force and effect;
(b) there are no violations of such Permit that would result in a
termination of such Permit;
(c) the Company has not received notice that such Permit will not be
renewed; and
(d) the Transactions will not adversely affect the validity of such
Permit or cause a cancellation of or otherwise adversely affect such Permit.
4.28 CERTAIN PAYMENTS. Since December 31, 1998, neither the Company nor
any director, officer, agent, or employee of the Company, or any other Person
associated with or acting for or on behalf of the Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Affiliate of the Company, or
(iv) in violation of any Law, or (b) established or maintained any fund or asset
that has not been recorded in the books and records of the Company.
4.29 ACCURACY OF INFORMATION FURNISHED. No representation, statement,
or information contained in this Agreement (including the Schedules) or any
Contract or document executed in connection herewith or delivered pursuant
hereto or thereto or made available or furnished
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to Buyer or its representatives by the Seller contains or will contain any
untrue statement of a material fact or omits or will omit any material fact
necessary to make the information contained therein not misleading. The Seller
has provided Buyer with correct and complete copies of all documents listed or
described in the Schedules. All financial projections and estimates of the
Company's future performance that have been provided to Buyer, at the time of
creation, were reasonably made in good faith based on reasonable assumptions,
given the circumstances at the time such assumptions were made.
4.30 OFFERING OF THE STOCK AND WARRANTS. Assuming the accuracy of the
Buyer's representations and warranties set forth in ARTICLE III, the Company has
complied with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Stock and Warrants. Neither the Company
nor any Person acting on its behalf has taken or will take any other action
(including any offer, issuance or sale of any security of the Company under
circumstances which might require the integration of such security with the
Stock or Warrants under the Securities Act or the rules and regulations of the
Commission promulgated thereunder), in either case so as to subject the
offering, issuance or sale of the Stock and Warrants to the registration
provisions of the Securities Act. Neither the Company nor any Person acting on
its behalf has offered the Stock or Warrants to any Person by means of general
or public solicitation or general or public advertising, such as by newspaper or
magazine advertisements, by broadcast media, or at any seminar or meeting whose
attendees were solicited by such means.
4.31 SELLER'S OBLIGATIONS WITH RESPECT TO THE COMPANY'S SECURITIES
FILINGS AND FINANCIAL STATEMENTS. Seller has furnished or made available to
Buyer true and complete copies of all reports or registration statements the
Company has filed with the Securities and Exchange Commission (the "SEC") under
the Securities Act and the Exchange Act, for all periods subsequent to December
31, 1999, all in the form so filed (collectively, the "COMPANY'S SEC
DOCUMENTS"). Except for matters subject to the restatement of the Financial
Statements for the 2002 fiscal year to correct an accounting error, (a) as of
their respective filing dates, the Company's SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and none of the Company's SEC Documents filed under the
Exchange Act contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed document
with the SEC; (b) none of the Company's SEC Documents filed under the Securities
Act contained an untrue statement of material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading at the time such Company SEC Documents became effective
under the Securities Act; and (c) the Company's financial statements, including
the notes thereto, included in the Company's SEC Documents (the "COMPANY'S
FINANCIAL STATEMENTS") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto) and
present fairly the Company's consolidated financial position at the dates
thereof and of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal audit adjustments).
Since the date of the most recent Company SEC Document, the Company has not
effected any change in any method of accounting or accounting practice, except
for any such change required because of a concurrent change in GAAP.
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ARTICLE V.
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
5.1 GENERAL. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each Party will take
such further action (including executing and delivering such further instruments
and documents) as any other Party reasonably may request, all at the requesting
Party's sole cost and expense (unless the requesting Party is entitled to
indemnification therefor under ARTICLE VII).
5.2 ESOP MATTERS. As promptly as practicable following the Closing
Date, the Company shall have taken all necessary corporate actions to terminate
the Lan Plus, Inc. Employee Stock Ownership Plan ("ESOP") in accordance with its
terms. As soon as administratively feasible thereafter, the Company shall file
for a determination letter with the Internal Revenue Service as to the
tax-qualified status of the ESOP on the termination date and take all necessary
actions required by the IRS to secure a favorable determination. Promptly
following the receipt of such determination letter, the Company shall process
distributions from the ESOP. The Company shall honor put options in distributed
ESOP shares as required by law. The valuation for such shares put to the Company
by ESOP participants shall be the higher of the fair market value determined by
the ESOP's appraiser as of the immediately preceding valuation date, or the
price paid for the Stock pursuant to this Agreement.
5.3 LITIGATION SUPPORT. So long as any Party actively is contesting or
defending against any Action in connection with (a) the Transactions or (b) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each other Party will cooperate with
such Party and such Party's counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as will be necessary in connection with the contest or defense, at the
sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party or one of its Affiliates is entitled to
indemnification therefor under ARTICLE VII).
5.4 TRANSITION. Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company from maintaining at least
as favorable business relationships with the Company after the Closing as it
maintained with the Company prior to the Closing.
5.5 CONFIDENTIALITY. Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to Buyer or
destroy, at the request and option of Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in Seller's possession in each
case, forever. If Seller is ever requested or required (by oral question or
request for information or documents in any Action) to disclose any Confidential
Information, Seller will notify Buyer promptly of the request or requirement so
that Buyer may seek an appropriate protective Order or waive compliance with
this SECTION 6.4. If, in the absence of a protective Order or the receipt of a
waiver hereunder, Seller, on the written advice of counsel, is compelled to
disclose
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any Confidential Information to any Governmental Body, arbitrator, or mediator
or else stand Liable for contempt, Seller may disclose the Confidential
Information to the Governmental Body, arbitrator, or mediator; provided,
however; that Seller will use its Best Efforts to obtain, at the reasonable
request of Buyer, an Order or other assurance that confidential treatment will
be accorded to such portion of the Confidential Information required to be
disclosed as Buyer may designate.
5.6 RELEASE. Seller, on behalf of such Seller and each of such Seller's
representatives, successors, and assigns, hereby releases and forever discharges
Buyer and each of its officers, directors, managers, employees, agents,
stockholders, controlling persons, representatives, Affiliates, successors and
assigns (individually, a "RELEASEE" and collectively, "RELEASEES") from any and
all Actions, Orders, Damages, Liabilities, and, except as expressly contemplated
by this Agreement, Contracts whatsoever, whether known or unknown, suspected or
unsuspected, both at Law and in equity, which such Seller or any of such
Seller's respective heirs, representatives, successors or assigns now has, have
ever had or may hereafter have against the respective Releasees arising
contemporaneously with or prior to the Closing Date or on account of or arising
out of any matter, cause, or event occurring contemporaneously with or prior to
the Closing Date including any rights to indemnification or reimbursement from
the Company, whether pursuant to their respective Organizational Documents,
Contract or otherwise and whether or not relating to Actions pending on, or
asserted after, the Closing Date; provided, however, that nothing contained
herein will operate to release any obligations of Buyer arising under this
Agreement.
Seller hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any cause of Action, or commencing, instituting or causing
to be commenced, any Action, of any kind against any Releasee, based upon any
matter purported to be released hereby.
5.7 BOARD COMPOSITION. The Company shall:
(a) cause the Company's Board of Directors to be fixed at seven (7)
members, including by amending its Organizational Documents if necessary;
(b) allow J & M Interests, within six (6) months of the Closing Date,
to nominate for election to the Company's Board of Directors no fewer than five
(5) board members.
ARTICLE VI.
CLOSING CONDITIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. Buyer's obligation to
consummate the Transactions contemplated to occur in connection with the Closing
and thereafter is subject to the satisfaction of each condition precedent listed
below. Unless expressly waived pursuant to this Agreement, no representation,
warranty, covenant, right or remedy available to Buyer in connection with the
Transactions will be deemed waived by any of the following actions or inactions
by or on behalf of Buyer (regardless of whether Seller is given notice of any
such matter): (i) consummation by Buyer of the Transactions, (ii) any inspection
or investigation, if any, of the Company, (iii) the awareness of any fact or
matter acquired (or capable or reasonably capable of being acquired) with
respect to the Company, or (iv) any other action, in each case at any time,
whether before, on, or after the Closing Date.
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(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each representation and
warranty set forth in ARTICLE IV must be accurate and complete in all material
respects (except with respect to any provisions including the word "material" or
words of similar import, and except with respect to materiality, as reflected
under GAAP, in the representations in SECTION 4.7 related to the Financial
Statements, with respect to which such representations and warranties must have
been accurate and complete) as of the Closing Date, without giving effect to any
supplements to the Schedules.
(b) COMPLIANCE WITH OBLIGATIONS. Seller must have performed and
complied with all of its covenants to be performed or complied with at or prior
to Closing (singularly and in the aggregate) in all material respects.
(c) NO ADVERSE LITIGATION. There must not be pending or Threatened any
Action by or before any Governmental Body, arbitrator, or mediator which will
seek to restrain, prohibit, invalidate, or collect Damages arising out of the
Transactions, or which, in the judgment of Buyer, makes it inadvisable to
proceed with the Transactions.
(d) CONSENTS. The Seller and Buyer must have received Consents to the
Transactions and waivers of rights to terminate or modify any rights or
obligations of Seller from any Person (i) from whom such Consent is required,
including under any Contract listed or required to be listed in SCHEDULES 4.13,
4.14, 4.16, 4.19, AND 4.24 or any Law, or who (ii) as a result of the
Transactions, would have such rights to terminate or modify such Contracts,
either by their terms or as a matter of Law.
(e) LIABILITIES. Prior to the Closing, the Seller must have obtained
and delivered to Buyer full satisfactions or releases of all Liabilities due to
or from the Company which are due to be satisfied or released under this
Agreement to or on behalf of (i) any Affiliate of the Company or (ii) Seller or
any Affiliate of Seller.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the Buyer will have
entered into a Registration Rights Agreement, in the form set forth in EXHIBIT A
attached hereto (the "REGISTRATION RIGHTS AGREEMENT"), and the Registration
Rights Agreement will be in full force and effect as of the Closing Date.
6.2 CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. Seller's obligation
to consummate the Transactions contemplated to occur in connection with the
Closing and thereafter is subject to the satisfaction of each condition
precedent listed below. Unless expressly waived pursuant to this Agreement, no
representation, warranty, covenant, right, or remedy available to any Seller in
connection with the Transactions will be deemed waived by any of the following
actions or inactions by or on behalf of Seller (regardless of whether Buyer is
given notice of any such matter): (i) consummation by Seller of the
Transactions, (ii) any inspection or investigation, if any, of Buyer, (iii) the
awareness of any fact or matter acquired (or capable or reasonably capable of
being acquired) with respect to Buyer, or (iv) any other action, in each case at
any time, whether before, on, or after the Closing Date.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each representation and
warranty set forth in ARTICLE III must be accurate and complete in all material
respects (except
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with respect to any provisions including the word "material" or words of similar
import, with respect to which such representations and warranties must have been
accurate and complete) as of the date of this Agreement.
(b) COMPLIANCE WITH OBLIGATIONS. Buyer must have performed and complied
with all its covenants and obligations required by this Agreement to be
performed or complied with at or prior to Closing (singularly and in the
aggregate) in all material respects.
(c) NO ORDER OR INJUNCTION. There must not be issued and in effect any
Order restraining or prohibiting the Transactions.
ARTICLE VII.
INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each representation,
warranty, covenant and obligation in this Agreement and any certificate or
document delivered pursuant to this Agreement will survive the Closing and Buyer
on the one hand and Seller on the other will be Liable for any Damages resulting
from any Breaches thereof.
7.2 INDEMNIFICATION PROVISIONS FOR BUYER'S BENEFIT. Seller will
indemnify and hold the Seller Indemnified Parties harmless from and pay any and
all Damages, directly or indirectly, resulting from, relating to, arising out
of, or attributable to any one of the following:
(a) Any Breach of any representation or warranty Seller has made in
this Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Schedules.
(b) Any Breach by Seller of any covenant or obligation of Seller in
this Agreement.
(c) Any product shipped or manufactured or service provided by the
Company prior to the Closing Date.
7.3 INDEMNIFICATION PROVISIONS FOR SELLER'S BENEFIT. Buyer will
indemnify and hold the Buyer Indemnified Parties harmless from and pay any and
all Damages, directly or indirectly, resulting from, relating to, arising out
of, or attributable to any of the following:
(a) Any Breach of any representation or warranty Buyer has made in this
Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Schedules.
(b) Any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement.
7.4 INDEMNIFICATION CLAIM PROCEDURES.
(a) If any third party notifies any Indemnified Party with respect to
the commencement of any Action that may give rise to a claim for indemnification
against any Indemnitor under this ARTICLE VII (an "INDEMNIFICATION CLAIM"), then
the Indemnified Party will promptly give notice to the Indemnitor.
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(b) An Indemnitor will have the right to defend against an
Indemnification Claim, other than a Indemnification Claim related to Taxes, with
counsel of its choice reasonably satisfactory to the Indemnified Party if (i)
within 15 days following the receipt of notice of the Indemnification Claim the
Indemnitor notifies the Indemnified Party in writing that the Indemnitor will
indemnify the Indemnified Party from and against the entirety of any Damages the
Indemnified Party may suffer resulting from, relating to, arising out of, or
attributable to the Indemnification Claim, (ii) the Indemnitor provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified Party
that the Indemnitor will have the financial resources to defend against the
Indemnification Claim and pay, in cash, all Damages the Indemnified Party may
suffer resulting from, relating to, arising out of, or attributable to the
Indemnification Claim, (iii) the Indemnification Claim involves only money
Damages and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Indemnification Claim
is not in the good faith judgment of the Indemnified Party likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnitor continuously conducts
the defense of the Indemnification Claim actively and diligently.
(c) So long as the Indemnitor is conducting the defense of the
Indemnification Claim in accordance with SECTION 7.4(B), (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Indemnification Claim, (ii) the Indemnified
Party will not consent to the entry of any Order with respect to the
Indemnification Claim without the prior written Consent of the Indemnitor (not
to be withheld unreasonably), and (iii) the Indemnitor will not Consent to the
entry of any Order with respect to the Indemnification Claim without the prior
written Consent of the Indemnified Party (not to be withheld unreasonably,
provided that it will not be deemed to be unreasonable for an Indemnified Party
to withhold its Consent (A) with respect to any finding of or admission (1) of
any Breach of any Law, Order or Permit, (2) of any violation of the rights of
any Person, or (3) which Indemnified Party believes could have a Material
Adverse Effect on any other Actions to which the Indemnified Party or its
Affiliates are party or to which Indemnified Party has a good faith belief it
may become party, or (B) if any portion of such Order would not remain sealed).
(d) For a period of three (3) years after the expiration of the
applicable statute of limitations, in connection with any Indemnification Claim
for Taxes, or if any condition in SECTION 7.4(B) is or becomes unsatisfied, (i)
the Indemnified Party may defend against, and consent to the entry of any Order
with respect to an Indemnification Claim in any manner it may deem appropriate,
(ii) each Indemnitor will jointly and severally be obligated to reimburse the
Indemnified Party promptly and periodically for the Damages relating to
defending against the Indemnification Claim, and (iii) each Indemnitor will
remain jointly and severally Liable for any Damages the Indemnified Party may
suffer relating to the Indemnification Claim to the fullest extent provided in
this ARTICLE VII.
(e) Each Party hereby consents to the non-exclusive jurisdiction of any
Governmental Body, arbitrator, or mediator in which an Action is brought against
any Indemnified Party for purposes of any Indemnification Claim that an
Indemnified Party may have under this Agreement with respect to such Action or
the matters alleged therein, and agrees that process may be served on such Party
with respect to such claim anywhere in the world.
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7.5 INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE. Each Indemnified
Party's rights and remedies set forth in this Agreement will survive the Closing
and will not be deemed waived by such Indemnified Party's consummation of the
Transactions and will be effective regardless of any inspection or investigation
conducted, or the awareness of any matters acquired (or capable or reasonably
capable of being acquired), by or on behalf of such Indemnified Party or by its
directors, officers, employees or representatives or at any time (regardless of
whether notice of such knowledge has been given to Indemnitor), whether before
or after the Closing Date with respect to any circumstances constituting a
condition under this Agreement, unless any waiver specifically so states.
7.6 OTHER INDEMNIFICATION PROVISIONS.
(a) The foregoing indemnification provisions are in addition to, and
not in derogation of, any remedy at Law or in equity that any Party may have
with respect to the Transactions.
(b) Any Liability of the Company to any Buyer Indemnified Party under
this Agreement will terminate for all purposes upon Closing and have no further
force or effect.
(c) A claim for any matter not involving a third party may be asserted
by notice to the Party from whom indemnification is sought.
7.7 ADDITIONAL INDEMNIFICATION. Seller will indemnify and hold harmless
the Seller Indemnified Parties for any Damages incurred in connection with the
ESOP matter described in SECTION 5.2 and any other matter as described in
EXHIBIT C (collectively, the "INDEPENDENT INDEMNITY ITEM"); provided that such
indemnification will survive indefinitely. The sole recourse of any Seller
Indemnified Party relating to, arising out of or in connection with the
Independent Indemnity Item or any Action in respect thereof will be the
indemnity provided in this SECTION 7.7.
ARTICLE VIII.
MISCELLANEOUS
8.1 TREATMENT OF CERTAIN TAX MATTERS POST-CLOSING. The following
provisions shall govern the allocation of responsibility as between Buyer and
the Company for certain tax matters following the Closing Date:
(a) TAX INDEMNIFICATION. The Company shall indemnify the Buyer and hold
it harmless from and against, any loss, claim, liability, expense, or other
damage attributable to (i) all Taxes (or the non-payment thereof) of the Company
for all taxable periods ending on or before the Closing Date and the portion
through the end of the Closing Date for any taxable period that includes (but
does not end on) the Closing Date ("PRE-CLOSING TAX PERIOD"), and (ii) any and
all Taxes of any Person imposed on Company as a transferee or successor, by
contract or pursuant to any law, rule, or regulation, which Taxes relate to an
event or transaction occurring before the Closing. The Company shall reimburse
Buyer for any Taxes which are the responsibility of the Company pursuant to this
paragraph within fifteen (15) business days after payment of such Taxes by Buyer
or the Company.
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(b) STRADDLE PERIOD. In the case of any taxable period that includes
(but does not end on) the Closing Date (a "STRADDLE Period"), the amount of any
Taxes based on or measured by income or receipts of the Company for the
Pre-Closing Tax Period shall be determined based on an interim closing of the
books as of the close of business on the Closing Date and the amount of other
Taxes of Company for a Straddle Period which relate to the Pre-Closing Tax
Period shall be deemed to be the amount of such Tax for the entire taxable
period multiplied by a fraction the numerator of which is the number of days in
the taxable period ending on the Closing Date and the denominator of which is
the number of days in such Straddle Period.
(c) CERTAIN TAXES AND FEES. All transfer, documentary, sales, use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with consummation of the transactions contemplated by
this Agreement shall be paid by the Company when due, and the Company will, at
their own expense, file all necessary Tax Returns and other documentation with
respect to all such Taxes, fees and charges, and, if required by applicable law,
Buyer will, and will cause its Affiliates to, join in the execution of any such
Tax Returns and other documentation.
8.2 SCHEDULES. The disclosures in the Schedules, and those in any
supplement thereto, relate only to the representations and warranties in the
Section or paragraph of the Agreement to which they expressly relate and not to
any other representation or warranty in this Agreement except to the extent that
the relevance of such representation or warranty is manifest of the face of the
Schedules. If there is any inconsistency between the statements in the body of
this Agreement and those in the Schedules (other than an exception expressly set
forth as in the Schedules with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement will
control. Nothing in the Schedules will be deemed adequate to disclose an
exception to a representation or warranty made herein unless the applicable
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. The mere listing (or inclusion of a
copy) of a document or other item in a Schedule will not be deemed adequate to
disclose an exception to a representation or warranty made in this Agreement
(unless the representation or warranty pertains to the existence of the document
or other item itself).
8.3 ENTIRE AGREEMENT. This Agreement, together with the Exhibits and
Schedules hereto and the certificates, documents, instruments and writings that
are delivered pursuant hereto, constitutes the entire agreement and
understanding of the Parties in respect of its subject matters and supersedes
all 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 or the Transactions. There are no third party beneficiaries having
rights under or with respect to this Agreement.
8.4 SUCCESSORS. All of the terms, agreements, covenants,
representations, warranties, and conditions of this Agreement are binding upon,
and inure to the benefit of and are enforceable by, the Parties and their
respective successors.
8.5 ASSIGNMENTS. No Party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of Buyer and Seller; provided, however, that Buyer may (a) assign any
or all of its rights and interests hereunder to one
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or more of its Affiliates and (b) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases Buyer
nonetheless will remain responsible for the performance of all of its
obligations hereunder).
8.6 NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder will be deemed duly given if (and then three
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Buyer and after Closing to the Company:
Glenbrook Group, LLC
c/o J & M Interests, LLC
Attn: Xxxxxx X. Xxxxxx, Xx.
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Copy to (which will not constitute notice):
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
Attn: Xxxxxx X. Xxxxxx, Esq.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Seller and before Closing to the Company
Northgate Innovations, Inc.
Attn: Xxxx Xxxx
000 Xxxxxxx Xxxxxx
Xxxx xx Xxxxxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Copy to (which will not constitute notice):
Law Firm of Xxxxx X. Xxxxxx, Esq.
Attn: Xxxxx X. Xxxxxx
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
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Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication will be deemed to have
been duly given unless and until it actually is received by the intended
recipient. 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.
8.7 SPECIFIC PERFORMANCE. Each Party acknowledges and agrees that the
other Parties would be damaged irreparably if any provision of this Agreement is
not performed in accordance with its specific terms or is otherwise Breached.
Accordingly, each Party agrees that the other Parties will be entitled to an
injunction or injunctions to prevent Breaches of the provisions of this
Agreement and to enforce specifically this Agreement and its terms and
provisions in any Action instituted in any court of the United States or any
state thereof having jurisdiction over the Parties and the matter, subject to
SECTIONS 8.8 AND 8.12, in addition to any other remedy to which they may be
entitled, at Law or in equity.
8.8 SUBMISSION TO JURISDICTION; NO JURY TRIAL.
(a) SUBMISSION TO JURISDICTION. Each Party submits to the jurisdiction
of any state or federal court sitting in the State of California in any Action
arising out of or relating to this Agreement and agrees that all claims in
respect of the Action may be heard and determined in any such court. Each Party
also agrees not to bring any Action arising out of or relating to this Agreement
in any other court. Each Party agrees that a final judgment in any Action so
brought will be conclusive and may be enforced by Action on the judgment or in
any other manner provided at Law or in equity. Each Party waives any defense of
inconvenient forum to the maintenance of any Action so brought and waives any
bond, surety, or other security that might be required of any other Party with
respect thereto.
(b) WAIVER OF JURY TRIAL. THE PARTIES EACH HEREBY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER AGREEMENTS RELATING HERETO OR ANY DEALINGS AMONG THEM
RELATING TO THE TRANSACTIONS. The scope of this waiver is intended to be all
encompassing of any and all Actions that may be filed in any court and that
relate to the subject matter of the Transactions, including, Contract claims,
tort claims, breach of duty claims, and all other common Law and statutory
claims. The Parties each acknowledge that this waiver is a material inducement
to enter into a business relationship and that they will continue to rely on the
waiver in their related future dealings. Each Party further represents and
warrants that it has reviewed this waiver with its legal counsel, and that each
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER
IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY OR IN WRITING, AND
THE WAIVER WILL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT OR TO ANY
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OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO. In the event of an Action, this
Agreement may be filed as a written consent to trial by a court.
8.9 TIME. Time is of the essence in the performance of this Agreement.
8.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
8.11 HEADINGS. The article and section headings contained in this
Agreement are inserted for convenience only and will not affect in any way the
meaning or interpretation of this Agreement.
8.12 GOVERNING LAW. This Agreement and the performance of the
Transactions and obligations of the Parties hereunder will be governed by and
construed in accordance with the laws of the State of California, without giving
effect to any choice of Law principles.
8.13 AMENDMENTS AND WAIVERS. No amendment, modification, replacement,
termination or cancellation of any provision of this Agreement will be valid,
unless the same will be in writing and signed by Buyer and Seller. No waiver by
any Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, may 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 because of any prior or
subsequent such occurrence.
8.14 SEVERABILITY. The provisions of this Agreement will be deemed
severable and the invalidity or unenforceability of any provision will not
affect the validity or enforceability of the other provisions hereof; provided
that if any provision of this Agreement, as applied to any Party or to any
circumstance, is adjudged by a Governmental Body, arbitrator, or mediator not to
be enforceable in accordance with its terms, the Parties agree that the
Governmental Body, arbitrator, or mediator making such determination will have
the power to modify the provision in a manner consistent with its objectives
such that it is enforceable, and/or to delete specific words or phrases, and in
its reduced form, such provision will then be enforceable and will be enforced.
8.15 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the Parties and no presumption or burden of proof will arise favoring
or disfavoring any Party because of the authorship of any provision of this
Agreement. Any reference to any federal, state, local, or foreign Law will be
deemed also to refer to Law as amended and all rules and regulations promulgated
thereunder, unless the context requires otherwise. words "include," "includes,"
and "including" will be deemed to be followed by "without limitation." Pronouns
in masculine, feminine, and neuter genders will be construed to include any
other gender, and words in the singular form will be construed to include the
plural and vice versa, unless the context otherwise requires. The words "this
Agreement," "herein," "hereof," "hereby," "hereunder," and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. The Parties intend that each representation,
warranty, and covenant contained herein will have independent significance. If
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any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached will not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
8.16 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, Schedules, and other attachments identified in this Agreement are
incorporated herein by reference and made a part hereof.
8.17 REMEDIES. Except as expressly provided herein, the rights,
obligations and remedies created by this Agreement are cumulative and in
addition to any other rights, obligations, or remedies otherwise available at
Law or in equity. Except as expressly provided herein, nothing herein will be
considered an election of remedies.
[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGES FOLLOW.]
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IN WITNESS WHEREOF, the Parties have executed this Agreement on the
date first above written.
GLENBROOK GROUP, LLC
By:
--------------------------------------------------
Name:
Title:
NORTHGATE INNOVATIONS, INC.
By:
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Name: Xxxx Xxxx
Title: Chief Executive Officer
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