EXHIBIT 1.1
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is made and entered into
as of the 1st day of October, 2007, by and among XxxxxXxx Technologies, Inc., a
Delaware corporation (the "Buyer"), Xxxxx Products, Inc., an Iowa corporation
(the "Company"), and the shareholders of the Company (each individually, a
"Seller" and collectively, the "Sellers") who are parties hereto and listed on
Exhibit A to this Agreement.
WHEREAS, the Sellers collectively own 11,738,631 shares of the Voting
Common Stock, Type A, without par value, of the Company (collectively, the
"Xxxxx Shares"), and each Seller owns such number of Xxxxx Shares as is set
forth opposite such Seller's name on Exhibit A;
WHEREAS, the Xxxxx Shares owned by the Sellers constitute, in the
aggregate, not less than 90% of the total issued and outstanding capital stock
of the Company as of the date of this Agreement; and
WHEREAS, the Buyer wishes to buy, and the Sellers wish to sell, all of
the Xxxxx Shares, pursuant to the terms and conditions of this Agreement, in a
transaction intended to qualify as a reorganization under Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements and provisions set forth in this Agreement, the parties hereto agree
as follows:
ARTICLE I
EXCHANGE OF SHARES
Section 1.1 Purchase and Sale of Xxxxx Shares; Consideration. On and
subject to the terms and conditions of this Agreement, the Buyer agrees to
purchase from each Seller, and each Seller agrees to sell to the Buyer, all of
his Xxxxx Shares. In consideration of the purchase of the Xxxxx Shares from
Sellers, Buyer agrees to issue to each Seller 0.6815105 shares of the Buyer's
common stock, par value $0.01 per share (the "XxxxxXxx Shares"). Such XxxxxXxx
Shares shall be issued in such amounts, and shall be registered in such names,
as are set forth opposite such Seller's name on Exhibit A. After the date of
this Agreement, but prior to the Closing (as such term is defined in Section
1.2), additional shareholders of the Company may execute this Agreement and
become parties here to "Sellers." Upon the execution of this Agreement by such
any additional shareholder, Exhibit A shall be amended accordingly. In no event,
however, shall the Buyer be required to issue more than an aggregate of
8,000,000 XxxxxXxx Shares in connection with the transactions contemplated by
this Agreement.
Section 1.2 Closing. The closing of the purchase and sale of the Xxxxx
Shares (the "Closing") shall take place at the offices of Xxxxxx, Xxxxxxx and
Xxxxxx, P.C., the Company's legal counsel, at 2:00 p. m. on October 1, 2007 (the
"Closing Date"), or at another mutually agreed upon time, date and location.
Section 1.3 Closing Deliveries.
(a) Buyer's Closing Deliveries. At the Closing:
(i) The Buyer shall issue and deliver to the transfer agent
for the Buyer's Common Stock irrevocable instructions to issue to the
Sellers the number of XxxxxXxx Shares specified on Exhibit A, to be
registered in the names of the respective Sellers, which shall represent
ninety percent (90.0%) of the XxxxxXxx Shares issuable to each Seller
pursuant to Section 1.1.
(ii) The Buyer shall issue and deliver to the transfer agent
for the Buyer's Common Stock irrevocable instructions to issue to Xxxxxx,
Xxxxxxx and Xxxxxx, P.C. (the "Escrow Agent") a certificate representing
800,000 XxxxxXxx Shares (the "Escrow Shares"), which shall represent ten
percent (10.0%) of the XxxxxXxx Shares issuable to each Seller pursuant to
Section 1.1. The Escrow Shares shall be registered in the name of the
Escrow Agent, and shall be held by the Escrow Agent in escrow pursuant to
an escrow agreement, in substantially the form attached as Exhibit B to
this Agreement (the "Escrow Agreement") to satisfy the indemnification
obligations of the Sellers pursuant to Article VI of this Agreement.
(iii) The Buyer shall execute and deliver a consulting
agreement with Xxxxx X. Xxxxxx, in substantially the form attached as
Exhibit C to this Agreement (the "Xxxxxx Agreement").
(iv) The Buyer shall execute and deliver a consulting
agreement with Xxxx X. Xxxxx, in substantially the form attached as
Exhibit D to this Agreement (the "Xxxxx Agreement").
(v) The Buyer and Laurus Master Fund Ltd. ("Laurus") shall
execute and deliver an agreement, in substantially the form attached as
Exhibit E to this Agreement (the "Laurus Agreement").
(vi) The Buyer shall execute and deliver the Escrow Agreement.
(vii) The Buyer shall execute and deliver to the Sellers such
other certificates and documents as may be called for under this Agreement
or as the Sellers shall reasonably request.
(b) Sellers' Closing Deliveries. At the Closing:
(i) Each Seller shall deliver to the Buyer stock certificates
representing all of his Shares, endorsed in blank or accompanied by duly
executed stock powers and assignment documents and accompanied by a
written certification of such Seller's social security or federal taxpayer
identification number.
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(ii) The Company, each Seller and the Escrow Agent shall
execute and deliver the Escrow Agreement.
(iii) Xxxxx X. Xxxxxx shall execute and deliver the Xxxxxx
Agreement.
(iv) Xxxx X. Xxxxx shall execute and deliver the Xxxxx
Agreement.
(v) The Sellers shall execute and deliver the Laurus
Agreement.
(vi) The Company shall deliver to the Buyer the resignations
of all directors and officers of the Company, effective as of or prior to
the Closing Date.
(vii) The Company shall deliver to the Buyer a certificate of
good standing of the Company issued on or as soon as practicable before
the Closing Date by the Secretary of State (or comparable officer) of the
State of Iowa and of each other jurisdiction in which the Company is
qualified to do business.
(viii) The Company shall deliver to the Buyer all consents of
all other third parties necessary to permit the Sellers consummate the
transactions contemplated by this Agreement.
(ix) The Company shall deliver to the Buyer such evidence as
shall be reasonably requested by the Buyer of the termination of all
Options (as such term is defined in Section 2.2(b), including without
limitation all Options granted to the Company's employees under any stock
option or equity incentive plan.
(x) The Company shall deliver to the Buyer such evidence as
shall be reasonably requested by the Buyer of the termination of the
Voting Trust Agreement dated as of August 7, 2001 among First Continental
Industries, LLC, as trustee, and certain shareholders of the Company (the
"Voting Trust").
(xi) The Sellers and the Company shall execute and deliver to
the Buyer such other certificates and documents as may be called for under
this Agreement or as the Buyer shall reasonably request.
Section 1.4Effectiveness of Agreement. Notwithstanding the execution of
this Agreement by any party or parties, this Agreement shall have no force or
effect unless and until it is executed by (a) the holders of not less than 90%
of the total issued and outstanding capital stock of the Company, (b) the
Company and (c) the Buyer. If this Agreement is not executed by the holders of
not less than 90% of the total issued and outstanding capital stock of the
Company on or before 5:00 p.m. Central Daylight Time on October 1, 2007, then
the Buyer may, by written notice to the Company, declare this Agreement to be
null and void. Upon the giving of such notice, the Buyer shall have no further
obligations hereunder.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Sellers. Each Seller represents
and warrants to the Buyer, severally and not jointly, that:
(a) Authority. The Seller has the full right, power, capacity and
authority to execute, deliver and perform this Agreement (and the other
agreements, documents and certificates executed and delivered by the Seller
pursuant to this Agreement (together, the "Seller Documents") and to consummate
the transactions contemplated hereby and thereby. This Agreement and the Seller
Documents constitute the valid and binding obligations of the Seller,
enforceable against the Seller in accordance with the terms hereof and thereof.
Neither the execution, delivery and performance of this Agreement or of the
Seller Documents, nor the consummation of the transactions contemplated hereby
and thereby will (i) conflict with or result in a violation, breach, termination
or acceleration of, or default under (or would result in a violation, breach,
termination, acceleration or default with the giving of notice or passage of
time, or both) any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which the Seller is a party or by which the Seller, or any of his properties or
assets, may be bound or affected; (ii) result in the violation of any order,
writ, injunction, decree, statute, rule or regulation applicable to the Seller
or his properties or assets; or (iii) result in the imposition or creation of
any Lien (as defined in Section 2.2(d) below) upon or with respect to the Xxxxx
Shares. No consent or approval by, or notification to or filing with, any court,
governmental authority or third party is required in connection with the
execution, delivery and performance of this Agreement or the Seller Documents by
the Seller.
(b) Xxxxx Shares. The Seller holds of record and owns beneficially
the number of Xxxxx Shares set forth next to his name on Exhibit A to this
Agreement, free and clear of any restrictions on transfer (other than
restrictions on transfer imposed by federal or state securities laws), taxes,
Liens, options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. The Seller is not a party to any option, warrant, purchase
right, or other contract or commitment that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock of the Company (other than
this Agreement). The Seller is not a party to any voting trust (except the
Voting Trust to be terminated pursuant to Section 1.3(b)(x)), proxy, or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
(c) Investment Intent. The Seller is acquiring the XxxxxXxx Shares
for investment for his own account and not for the account of any other person),
and not with an immediate intent toward resale or other distribution thereof.
The Seller understands that the XxxxxXxx Shares have not been and (except as
contemplated by this Agreement) will not be registered under the Securities Act
of 1933, as amended (the "Securities Act"), and applicable state securities laws
and, therefore, cannot be resold unless they are subsequently registered under
the Securities Act and applicable state securities laws or unless an exemption
from such registration is available. The Seller acknowledges and agrees to the
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trading restrictions imposed by Section 4.6 of this Agreement. The Seller
further understands and agrees that, until so registered or transferred pursuant
to the provisions of Rule 144 under the Securities Act, all certificates
evidencing any of the XxxxxXxx Shares, whether upon initial issuance or upon any
transfer thereof, shall bear legends, prominently stamped or printed thereon,
reading substantially as follows:
The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") and may not
be sold, transferred or assigned unless registered under the Act or an
opinion of counsel, satisfactory to the corporation, is obtained to the
effect that such sale, transfer or assignment is exempt from the
registration requirements of the Securities Act.
The shares represented by this certificate may not be sold or otherwise
transferred except pursuant to a Share Exchange Agreement dated October 1,
2007, by which the registered holder of this certificate is bound.
(d) Disclosures. The Seller acknowledges that, during the course of
this transaction and prior to the acquisition of the XxxxxXxx Shares, the Buyer
has furnished to the Seller, and the Seller has had the opportunity to read, (i)
the Buyer's Annual Report to Shareholders for the fiscal year ended September
30, 2006, (ii) the Annual Report on Form 10-KSB filed most recently by the Buyer
with the Securities and Exchange Commission (the "Commission"), and (iii) all
reports and filings made by the Buyer with the Commission since the filing of
such Form 10-KSB. The Seller further acknowledges that all such reports and
filings are publicly available through the Commission's Web site. The Seller
confirms and acknowledges that he has not relied on any representations,
warranties or covenants of the Buyer except as set forth in such filings with
the Commission or as specifically set forth in this Agreement, and that the
Seller has agreed to acquire the XxxxxXxx Shares without any such other
representations, warranties or covenants.
(e) Sophistication. The Seller is capable of evaluating the merits
and risks of the acquisition of the XxxxxXxx Shares. The Seller has the capacity
to protect his own interests in connection with the acquisition of the XxxxxXxx
Shares by reason of his business or financial experience. The acquisition of the
XxxxxXxx Shares by the Seller is consistent with his general investment
objectives. The Seller has no present need for liquidity in connection with his
acquisition of the XxxxxXxx Shares. The Seller can bear the economic risks of
this investment and can afford a complete loss of his investment.
(f) Accredited Investor Status. If the Seller is an "accredited
investor," as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act, such Seller has indicated same by placing his or her
initials on the signature page opposite the Seller's signature.
(g) No Broker's or Finder's Fees. No broker, finder or investment
banker is or will be entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Seller.
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(h) Tax Consequences. The Buyer disclaims any representation or
warranty with respect to the tax consequences of the transactions contemplated
by this Agreement to the Seller, including without limitation whether such
transactions will qualify as a reorganization under Section 368(a)(1)(B) of the
Code. In entering into this Agreement, the Seller has relied solely on his own
tax advisors and not on any representations or warranties of the Company or the
Buyer.
Section 2.2 Representations and Warranties of the Company. In this
Agreement, (a) any reference to a "Material Adverse Effect" means any event,
change or effect that, when taken individually or together with all other
adverse changes and effects, is or is reasonably likely to be materially adverse
to the condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of or prospects of the Company and the
Subsidiaries (as such term is defined in Section 2.2(c)), taken together as a
whole, or to prevent or materially delay consummation of the transactions
contemplated under this Agreement or otherwise to prevent the Company or the
Sellers from performing their obligations under this Agreement; and (b) any
reference to a party's "knowledge" means such party's actual knowledge, or what
such party reasonably should have known, including in the case of the Company
and any other party that is not a natural person, the actual knowledge, of
officers, directors and other employees of such party charged with
responsibility for or reasonably believed to have knowledge of such matters.
The Company hereby represents and warrants to the Buyer that, except as
set forth on Schedule 2.2 of this Agreement (the "Disclosure Schedule") (it
being understood by the parties that any matter set forth in any section of the
Disclosure Schedule shall be deemed disclosed with respect to any other section
of this Section 2.2 to which such matter logically relates, so long as the
description of such matter contains sufficient facts to provide reasonable
notice of the relevance of the matter):
(a) Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Iowa and
has all requisite corporate and other power and authority to own, operate and
lease its assets and to carry on its business of developing, manufacturing and
marketing products from recycled rubber (together with the business carried on
by the Subsidiaries, the "Business") as it is now being conducted. Section
2.2(a) of the Disclosure Schedule lists all of the directors and officers of the
Company. The Company has delivered to the Buyer correct and complete copies of
the Articles of Incorporation and By-laws of the Company (as amended to date).
The Company has delivered to the Buyer correct and complete copies of the minute
books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of the Company. All such record books are
correct and complete. The Company is not in default under or in violation of any
provision of its Articles of Incorporation or By-laws, and all actions of the
Company requiring the approval of the Company's board of directors and/or
stockholders have been so approved or ratified in accordance with the
requirements of its Articles of Incorporation and By-laws.
(b) Capitalization. The entire authorized capital stock of the
Company consists of (i) 50,000,000 shares of Voting Common Stock, Type A,
without par value, of which 11,588,631 Xxxxx Shares are issued and outstanding;
(ii) 500,000 shares of Non-Voting Common Stock, Type B, without par value, of
which no (zero) shares are issued and outstanding; and (iii) 2,500,000 shares of
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Preferred Stock, without par value, of which no (zero) shares are issued and
outstanding. All of the issued and outstanding Xxxxx Shares have been duly
authorized, are validly issued, fully paid and nonassessable. There are no
outstanding or authorized options, warrants, purchase rights, contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to issue additional shares of its capital stock or any other
security which may be convertible into, or exercisable or exchangeable for, its
capital stock (collectively "Options"). There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Company. There are no voting trusts (except the Voting Trust to
be terminated pursuant to Section 1.3(b)(x)), proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company.
The Company does not directly or indirectly own or have any right to acquire any
outstanding capital stock of, or other equity interests in, any corporation or
other legal entity other than the Subsidiaries.
(c) Subsidiaries.
(i) The Company owns 100% of the equity interests in National
Safe Surfacing Initiative, L.L.C. ("NSSI"), National Safe Surfacing
Initiative of California, L.L.C. ("NSSI/CA"). (NSSI and NSSI/CA may be
referred to in this Agreement individually as a "Subsidiary" or jointly as
the "Subsidiaries"). The Company owns 100% of the equity interests in
PlayTribe, L.L.C. ("PlayTribe"). Except as may be expressly set forth to
the contrary in this Agreement, the terms Subsidiary and Subsidiaries
shall exclude any reference to PlayTribe.
(ii) Each Subsidiary is a limited liability company duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization as set forth in Section 2.2(c) of
the Disclosure Schedule. Each Subsidiary has all requisite power and
authority to own, operate and lease its assets and to carry on its
respective business as it is now being conducted. Section 2.2(c) of the
Disclosure Schedule lists all of the directors, managers and officers of
each Subsidiary. The Company has delivered to the Buyer correct and
complete copies of the Articles of Organization and Operating Agreement of
each Subsidiary (as amended to date). The Company has delivered to the
Buyer correct and complete copies of the minute books (containing the
records of meetings of the members or equity owners, the board of
directors or managers, and any committees of the board of directors or
managers), the stock or membership certificate books, and the stock or
membership record books of each Subsidiary. All such record books are
correct and complete. Neither Subsidiary is in default under or in
violation of any provision of its Articles of Organization or Operating
Agreement, and all actions of each Subsidiary requiring the approval of
such Subsidiary's board of directors or managers and/or members or equity
owners have been so approved or ratified in accordance with the
requirements of its respective Articles of Organization and Operating
Agreement.
(iii) The Company completed the acquisition of PlayTribe on
September 21, 2007 pursuant to a Unit Purchase Agreement dated effective
August 31, 2007 (the PlayTribe Agreement") by and among the Company (as
buyer), and Quest Capital Alliance II, L.L.C.; Kwai Xxxx Xxx; Xxxxxx X.
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Knight and Xxxxx X. Xxxxx (as sellers; such sellers jointly referred to as
the "PlayTribe Sellers"). The PlayTribe Sellers hereby restate and
reaffirm each of the representations and warranties contained in Section 3
of the PlayTribe Agreement, and each of such representations and
warranties is incorporated in its entirety in this Section 2.2(c), as if
the text thereof were stated herein in full. The PlayTribe Sellers
acknowledge that, in entering into this Agreement, the Buyer has relied on
each of such representations and warranties. Accordingly, the PlayTribe
Sellers expressly agree that the Buyer shall be entitled to rely on, and
to enforce in its own name against the PlayTribe Sellers, each of such
representations and warranties as though the text thereof were stated
herein in full.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, injunction, judgment, order or other
restriction of any government, governmental agency, or court to which the
Company is subject or any provision of its Articles of Incorporation or By-laws,
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Company is a party or by
which it is bound or to which any of its assets is subject, or (iii) result in
the imposition or creation of any Lien upon or with respect to any of its
assets.
(e) Tangible Assets. Section 2.2(e) of the Disclosure Schedule sets
forth a true and correct list of all of the tangible assets of the Company and
the Subsidiaries, including without limitation all machinery, equipment, spare
parts inventory and manufacturing/production tools and supplies. Except as set
forth on Section 2.2(e) of the Disclosure Schedule, the Company (or the
respective Subsidiary) has good and marketable title to, or a valid leasehold
interest in, the properties and assets used by it and/or located on its
premises, in each case free and clear of all mortgages, liens, security
interests, pledges, charges or encumbrances of any nature whatsoever ("Liens").
Each tangible asset is free from material defects (patent and latent), has been
maintained in accordance with normal industry practice, is in an operating
condition (subject to normal wear and tear) that is suitable for the purposes
for which it presently is used. All buildings, structures, fixtures, building
systems and equipment (including without limitation, telecommunications, wiring
and cable installations), and all components thereof, that are part of the
Company's facility at 000 Xxxxx Xxxxxxxx, Xxxxxxxx, Xxxx 00000 or any facilities
owned or occupied by either Subsidiary (collectively, the "Facilities") are in a
condition sufficient for the operation of the Business.
(f) Intangible Assets; Intellectual Property.
(i) Section 2.2(f) of the Disclosure Schedule sets forth a
true and correct list of all of the intangible assets and intellectual
property of the Company and of the Subsidiaries, including without
limitation patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, service marks, copyrights, and any applications
for any of the foregoing, mask works, mask work rights, schematics,
industrial models, inventions, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
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intangible proprietary information or material that are used or proposed
to be used in the Business ("Intellectual Property"), as currently
conducted or as proposed to be conducted by the Company and the
Subsidiaries. The Company or a Subsidiary owns, or is licensed or
otherwise possesses legally enforceable rights to use all such
Intellectual Property, in each case free and clear of all Liens. All
patents, trademarks, service marks and copyrights held by the Company or
the Subsidiaries are valid, existing and enforceable. Neither the Company
nor any Subsidiary is in violation of any license, sublicense or agreement
described in Section 2.2(f) of the Disclosure Schedule. There is no
Intellectual Property that is used in the Business and is material to the
Business, operations or prospects that is not set forth in Section 2.2(f)
of the Disclosure Schedule. To the knowledge of the Company, there is no
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of the Company or the Subsidiaries, any trade
secret material to the Company or either Subsidiary or any Intellectual
Property right of any third party to the extent licensed by or through the
Company or a Subsidiary, by any third party. Neither the Company nor any
Subsidiary has entered into any agreement to indemnify any other person
against any charge of infringement of any intellectual property, of any
kind, other than indemnification provisions contained in purchase orders,
and contracts for sale, license or other disposition of products arising
in the ordinary course of business.
(ii) Neither the Company nor any Subsidiary has been sued in
any suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any
trade secret or other proprietary right of any third party and, to the
Company's knowledge, no such suit, action or proceeding has been
threatened. Neither the conduct of the Business as currently conducted or
contemplated nor the manufacture, sale, licensing or use of any of the
products of the Company or any Subsidiary as now manufactured, sold or
licensed or used, nor the use in any way of the Intellectual Property in
the manufacture, use, sale or licensing by the Company or any Subsidiary
of any products currently proposed, infringes on or will infringe or
conflict with, in any way, any license, trademark, trade name, patent,
industrial model, invention, service xxxx, trade secret, copyright or any
other proprietary right of any third party. To the knowledge of the
Company, no third party is challenging the ownership by or license rights
in the Company or either Subsidiary, or validity or effectiveness of, any
of the Intellectual Property and to the knowledge of the Company, there is
no basis for such challenge. Neither the Company nor any Subsidiary has
brought any action, suit or proceeding for infringement of Intellectual
Property or breach of any license or agreement involving Intellectual
Property against any third party. There are no pending, or to the
knowledge of the Company, threatened interference, re-examinations,
oppositions or nullities involving any patents, patent rights or
applications therefor of the Company or of either Subsidiary, except such
as may have been commenced by the Company or such Subsidiary.
(iii) The Company and the Subsidiaries have secured valid
written assignments from all consultants and employees who contributed to
the creation or development of Intellectual Property of the rights to such
contributions that the Company or the Subsidiaries do not already own by
operation of law.
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(iv) The Company and the Subsidiaries have taken all
reasonable and appropriate steps to protect and preserve the
confidentiality of all Intellectual Property that is intended to remain
confidential and that is not otherwise protected by patents, patent
applications or copyright ("Confidential Information"). The Company and
the Subsidiaries have a policy requiring each of its respective employees,
contractors and agents to execute proprietary information and
confidentiality agreements substantially in the standard forms that were
provided to the Buyer and all current and former employees and contractors
of the Company and of the Subsidiaries have executed such an agreement.
All use, disclosure or appropriation of Confidential Information owned by
the Company or any Subsidiary by or to a third party has been pursuant to
the terms of a written agreement between the Company (or such Subsidiary)
and such third party. Except for such use that would not have a Material
Adverse Effect, all use, disclosure or appropriation of Confidential
Information not owned by the Company or a Subsidiary has been pursuant to
the terms of a written agreement between the Company (or such Subsidiary)
and the owner of such Confidential Information, or is otherwise lawful.
(g) Financial Statements. Section 2.2(g) of the Disclosure Schedule
includes true, correct and complete copies of the Company's consolidated
financial statements for each of the fiscal years ended December 31, 2004, 2005
and 2006, respectively, each of which has been audited by, and is accompanied by
the audit report of, Short & Company (the "Audited Financial Statements").
Section 2.2(g) of the Disclosure Schedule also includes true, correct and
complete copies of the Company's internally prepared interim financial
statements for the seven-month period ended July 31, 2007 (the "Interim
Financial Statements"), which include the Company's unaudited balance sheet as
of July 31, 2007 (the "Balance Sheet"). The Interim Financial Statements have
not been reviewed or audited by Short & Company. The Audited Financial
Statements have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods indicated. The Audited Financial Statements and, to the knowledge of
the Company, the Interim Financial Statements present fairly the financial
condition and operating results of the Company and the Subsidiaries, as of the
dates, and for the periods, indicated therein (in the case of the Interim
Financial Statements, subject to normal year-end audit adjustments, none of
which are reasonably expected to be "material" (as such term is used in
Commission Staff Accounting Bulletin No. 99 - "Materiality")). Short & Company
is properly licensed as a certified public accounting firm in the State of Iowa,
and is "independent" (as such term is used in Rule 2-01 of Regulation S-X of the
Commission) with respect to the Company and the Subsidiaries.
(h) No Undisclosed Liabilities. To the knowledge of the Company,
neither the Company nor the Subsidiaries have any debts, obligations or
liabilities of any nature (matured or unmatured, fixed or contingent),
including, but not limited to, employee vacation, payroll and warranty
obligations (collectively, "Liabilities"), other than (i) those Liabilities set
forth or adequately provided for or reserved in the Balance Sheet; (ii) those
Liabilities identified in notes to the December 31, 2006 Financial Statements,
which are adequately provided or reserved for in the Balance Sheet; (iii) those
incurred in the ordinary course of business and not required to be set forth in
the Balance Sheet under GAAP; and (iv) those incurred in the ordinary course of
business since the date of the Balance Sheet (the "Balance Sheet Date") and
consistent with past practice.
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(i) Contracts. Section 2.2(i) of the Disclosure Schedule lists the
following contracts and other agreements to which the Company or any Subsidiary
is a party:
(i) all agreements with any customers of the Company or such
Subsidiary providing for revenue or payments in excess of $25,000 per
annum;
(ii) all agreements or leases relating to any of the
Facilities;
(iii) all agreements (or groups of related agreements) for the
lease of personal property to or from any person or entity providing for
lease payments in excess of $25,000 per annum;
(iv) all agreements (or groups of related agreements) 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 such Subsidiary, or involve
consideration in excess of $25,000;
(v) all agreements concerning partnerships or joint ventures;
(vi) all agreements (or groups of related agreements) under
which the Company or any Subsidiary has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation, under which it has imposed a Lien on any of its assets,
tangible or intangible;
(vii) all agreements concerning confidentiality or
noncompetition;
(viii) all agreement between the Company (or any Subsidiary)
and any of the Sellers, any of the Sellers' family members and/or any
entity controlled, directly or indirectly by, any of the Sellers or by any
of the Sellers family members ("Affiliates");
(ix) all profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other plans or
arrangements for the benefit of the current or former directors, officers,
and/or employees of the Company or the Subsidiaries;
(x) all collective bargaining agreements;
(xi) all agreements for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing severance benefits;
(xii) all agreements under which the Company or any Subsidiary
has (A) advanced or loaned any amount to any of its or their directors,
officers or employees outside the ordinary course of business or (B)
advanced or loaned any amount to any other person or entity;
11
(xiii) all agreements under which the consequences of a
default or termination could have a Material Adverse Effect);
(xiv) all sales agreements the performance of which involves
consideration in excess of $25,000; and
(xv) all other agreements (or groups of related agreements)
the performance of which involves consideration in excess of $25,000.
The Company has made available to the Buyer a correct and complete copy of each
written agreement (as amended to date) listed in Section 2.2(i) of the
Disclosure Schedule and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 2.2(i) of the Disclosure Schedule.
With respect to each such agreement: (w) the agreement is legal, valid, binding,
enforceable and in full force and effect; (x) the agreement will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (y) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (z) no party has
repudiated any provision of the agreement. No such agreement requires the
consent or authorization of any third party to the consummation of the
transactions contemplated hereby.
(j) Absence of Certain Changes or Events. To the knowledge of the
Company, since January 1, 2007, (i) the Business has been conducted in the
ordinary course, consistent with past practice, (ii) there has not occurred any
event or events which, individually or in the aggregate, has had or would
reasonably be expected to have, a Material Adverse Effect, and (iii) no damage,
destruction or loss (whether or not covered by insurance) to property used in
the Business has occurred which, individually or in the aggregate, has had or
would reasonably be expected to have, a Material Adverse Effect.
(k) Litigation. No litigation, arbitration, investigation or other
proceeding of any governmental authority is pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary; nor does any basis
for any such litigation exist. Neither the Company nor any Subsidiary is subject
to any outstanding injunction, judgment, order, decree or ruling. Neither the
Company nor any Subsidiary has been notified that any of its products contains
any actual or alleged defect of any nature or that any person has suffered any
personal injury or damage to his, her or its property as a result of the sale,
use, distribution or existence of any such product; nor does any basis for any
such claim exist. There is no litigation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the Company
or the Sellers that questions the validity or enforceability of this Agreement.
(l) Environmental Matters.
12
(i) To the knowledge of the Company, except for violations the
existence of which would not, individually or in the aggregate, have a
Material Adverse Effect, the Company and each Subsidiary are and at all
times have been in compliance with all federal, state or local laws,
ordinances, codes, regulations, rules, policies and orders, as each may be
amended from time to time, that are intended to assure the protection of
the environment, or that classify, regulate, call for the remediation of,
require reporting with respect to, or list or define air, water,
groundwater, solid waste, hazardous or toxic substances, materials,
wastes, pollutants or contaminants; which regulate the manufacture,
handling, transport, use, treatment, storage or disposal of Hazardous
Materials (as defined below) or materials containing Hazardous Materials;
or which are intended to assure the protection, safety and good health of
employees, workers or other persons, including the public ("Environmental
and Safety Laws"). Neither the Company nor any Subsidiary has received any
notice (verbal or written) of any noncompliance of any Facility, or of any
other facilities currently or formerly owned, leased or occupied by the
Company or any Subsidiary, or of the Company's or such Subsidiary's past
or present operations, with any Environmental and Safety Laws. To the
knowledge of the Company, all Hazardous Materials generated by the Company
and the Subsidiaries and wastes have been disposed of in accordance with
all Environmental and Safety Laws.
(ii) To the knowledge of the Company, (A) neither the Company
nor any Subsidiary is a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act, or
state analog statute, arising out of events occurring prior to the Closing
Date; (B) there has not been in the past, and there is not now, any
contamination, disposal, spilling, dumping, incineration, discharge,
storage, treatment or handling of Hazardous Materials on, under or
migrating to or from any Facility (including without limitation, soils and
surface and ground waters); (C) there have not been in the past, and are
not now, any underground tanks or underground improvements at, on or under
any Facility; (D) there are no polychlorinated biphenyls ("PCBs")
deposited, stored, disposed of or located at any Facility or any equipment
at any Facility containing PCBs at levels in excess of 50 parts per
million; (E) there is no formaldehyde on or in any Facility, nor any
insulating material containing urea formaldehyde in any Facility; and (F)
neither the Company nor any Subsidiary is liable for any off-site
contamination nor under any Environmental and Safety Laws, except where
such liability would not have a Material Adverse Effect.
(iii) "Hazardous Materials" means any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without
limitation, those substances, materials and wastes defined in or regulated
under any Environmental and Safety Laws; petroleum or petroleum products
including crude oil or any fractions thereof; natural gas, synthetic gas,
or any mixtures thereof; radon; asbestos; or any other pollutant or
contaminant.
(m) Compliance with Laws. To the knowledge of the Company, except
for violations the existence of which would not, individually or in the
aggregate, have a Material Adverse Effect, neither the Company nor any
Subsidiary is in violation of (i) any federal, state, local or other statute,
13
law, ordinance, regulation, rule, code or other requirement of law, or (ii) any
order, writ, judgment, injunction, decree, stipulation, determination or award
entered by or with any or government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal or judicial or arbitral
body.
(n) Permits. Section 2.2(n) of the Disclosure Schedule sets forth a
complete list of all permits, licenses, regulatory approvals and franchises of
or from any national, regional, state or local government or authority granted
to or in the possession of the Company or the Subsidiaries (each, a "Permit").
To the knowledge of the Company, the Permits constitute all of the governmental
qualifications, registrations, filings, privileges, franchises, licenses,
permits, approvals or authorizations material to the operation of the Business
(including all Permits which are required by any Environmental and Safety Laws).
As of the date of this Agreement, all Permits are in full force and effect and
the Company and the Subsidiaries are in compliance with each such Permit, except
as would not have a Material Adverse Effect. Except as set forth in Section
2.2(n) of the Disclosure Schedule, no such Permit requires the consent or
authorization of any governmental authority to the consummation of the
transactions contemplated hereby.
(o) Tax Matters.
(i) The Company and each Subsidiary has timely filed all
returns, declarations, reports, claims for refund, or information returns
or statements (collectively, "Tax Returns") relating to any federal, state
or local income, gross receipts, profits, license, payroll, employment,
unemployment, withholding, social security, disability, real or personal
property, sales, use, excise, franchise, transfer, alternative or add-on
minimum, estimated, and/or other taxes of any kind whatsoever applicable
to the Company, such Subsidiary and/or the Business (each, a "Tax"), that
it has been required to file under applicable laws and regulations. All
such Tax Returns were correct and complete in all respects and have been
prepared in compliance with all applicable laws and regulations. All Taxes
due and owing by the Company or any Subsidiary (whether or not shown on
any Tax Return) have been paid. Neither the Company nor any Subsidiary is
currently the beneficiary of any extension of time within which to file
any Tax Return. No claim has ever been made by an authority in a
jurisdiction where the Company or a Subsidiary does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are
no Liens for Taxes (other than Taxes not yet due and payable) upon any of
the assets of the Company or of any Subsidiary.
(ii) The Company and each Subsidiary have withheld and paid
all Taxes required to have been withheld and paid in connection with any
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party. Neither the Company nor any Subsidiary
has waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(iii) No federal, state or local tax audits or administrative
or judicial Tax proceedings are pending or being conducted with respect to
the Company or any Subsidiary. Neither the Company nor any Subsidiary has
received from any federal, state or local taxing authority any (A) notice
14
indicating an intent to open an audit or other review, (B) request for
information related to Tax matters or (C) notice of deficiency or proposed
adjustment for any amount of Tax proposed, asserted or assessed by any
taxing authority against the Company or such Subsidiary.
(iv) The Company has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company or
by any Subsidiary filed or received since December 31, 2000.
(v) The Company has never filed a consolidated return with any
other company other than NSSI and NSSI/CA.
(vi) All Taxes of the Company or of any Subsidiary
attributable to Tax periods or portions thereof ending on or prior to the
date of this Agreement that have not yet been paid have, in the aggregate,
been adequately reflected as a Liability on the Balance Sheet and on the
books of the Company and the respective Subsidiary in accordance with
GAAP, except as otherwise indicated on the Balance Sheet.
(vii) Neither the Company nor any Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted or would
result, separately or in the aggregate, in connection with this Agreement
or any change of control of the Company, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(viii) Neither the Company nor any Subsidiary has agreed to
make, nor are any of them required to make, any adjustment under Sections
481(a) or 263A of the Code or any comparable provision of state, local or
foreign Tax laws by reason of a change in accounting method or otherwise.
(ix) The Company has not distributed stock of another Person
or had its stock distributed by another Person in a transaction that was
purported or intended to be governed in whole or in part by Sections 355
or 361 of the Code.
(p) Absence of Certain Business Practices. To the knowledge of the
Company, neither the Company nor any Subsidiary nor any of their respective
officers, directors, managers, employees or agents nor any other person acting
on any of their behalf, has, directly or indirectly, given or agreed to give any
gift or similar benefit (other than with respect to bona fide payments for which
adequate consideration has been given) to any customer, supplier, governmental
employee or other person who is or may be in a position to help or hinder the
business of the Company or such Subsidiary (or assist the Company or such
Subsidiary in connection with any actual or proposed transaction): (i) which
will result in the Company or such Subsidiary incurring any damage or penalty in
any civil, criminal or governmental litigation or proceeding; (ii) which, if not
continued in the future, would have a Material Adverse Effect or which will
result in the Company or such Subsidiary paying any penalty in any private or
governmental litigation or proceeding; or (iii) for establishment or maintenance
of any concealed fund or concealed bank account.
15
(q) No Termination of Relationships. The Company has no reason to
believe that any relationship between the Company or any Subsidiary and any
customer, distributor, supplier, lender or employee of, or associated with, the
Company or such Subsidiary may be terminated or adversely affected as a result
of the execution of this Agreement.
(r) No Broker's or Finder's Fees. No broker, finder or investment
banker is or will be entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
(s) Inventory. To the knowledge of the Company, the inventory of the
Company and the Subsidiaries consists of raw materials and supplies,
manufactured and purchased 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 none of which is slow-moving, obsolete, damaged, or defective,
subject only to the reserve for inventory writedown set forth on the Balance
Sheet in accordance with the past custom and practice of the Company and such
Subsidiaries.
(t) Notes and Accounts Receivable. All notes and accounts receivable
of the Company or of the Subsidiaries are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims, are
current and collectible, and will be collected in accordance with their terms at
their recorded amounts.
(u) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company or of any Subsidiary.
(v) Employees.
(i) Section 2.2(v) of the Disclosure Schedule sets forth a
list of (A) the names, titles, location, salaries, bonuses, vacation and
other allowances, and other employment conditions of all present employees
of the Company and the Subsidiaries, including the last date of any
increase in such employee's compensation; (B) any of such employees on
leave of absence or who are currently collecting disability payments; and
(C) all employment, consulting or similar compensation agreements of the
Company or the Subsidiaries which may not be terminated by the Company or
such Subsidiary without penalty within 30 days after the Closing.
(ii) To the knowledge of the Company, no executive, key
employee, or group of employees has any plans to terminate employment with
the Company or with the Subsidiaries. Neither the Company nor any
Subsidiary is a party to or bound by any collective bargaining agreement,
nor have any of them experienced any strikes, grievances, claims of unfair
labor practices or other collective bargaining disputes. Neither the
Company nor any Subsidiary has ever committed any unfair labor practice.
The Company has no knowledge of any organizational effort presently being
made or threatened by or on behalf of any labor union with respect to
employees of the Company or the Subsidiaries.
16
(w) Employee Benefit Plans. Neither the Company nor any Subsidiary
maintains or contributes to, and has not ever maintained or contributed to, any
(i) "pension plan" or "employee pension benefit plan" as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
(ii) "welfare plan" or an "employee welfare benefit plan" as defined in Section
3(1) of ERISA. Neither the Company nor any Subsidiary is presently, and has not
ever been, a participating employer in any "multi-employer plan" as defined
Section 3(37) of ERISA or Section 414(f) of the Code. Except as may be required
by the Consolidated Omnibus Budget Reconciliation Act of 1985, no employee
benefit plan or other arrangement adopted by the Company or any Subsidiary
provides for continuing accrual of benefits or coverage for any participant or
beneficiary of a participant after such participant's termination of employment
with the Company or such Subsidiary.
(x) Statements True and Correct. This Agreement (including the
Disclosure Schedule) and the Seller Documents delivered pursuant hereto do not,
when taken together, contain any untrue statement of a material fact or omit
any material fact required to be stated herein or therein or necessary to make
the statements contained herein or therein, in the light of the circumstances
under which they were made, not misleading.
Section 2.3 Representations and Warranties of the Buyer. The Buyer hereby
represents and warrants to the Sellers that:
(a) Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate and other power and authority to own, operate and lease
its assets and to carry on its business as it is now being conducted.
(b) Authority. The Buyer has the full right, power, capacity and
authority to execute, deliver and perform this Agreement (and the other
agreements, documents and certificates executed and delivered by the Buyer
pursuant to this Agreement (together, the "Buyer Documents") and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Buyer Documents and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement and the Buyer Documents constitute the valid and binding obligations
of the Buyer, enforceable against the Buyer in accordance with the terms hereof
and thereof. Neither the execution, delivery and performance of this Agreement
or of the Buyer Documents, nor the consummation of the transactions contemplated
hereby and thereby will (i) conflict with or result in a violation, breach,
termination or acceleration of, or default under (or would result in a
violation, breach, termination, acceleration or default with the giving of
notice or passage of time, or both) any of the terms, conditions or provisions
of the Certificate of Incorporation or By-laws of the Buyer, each as amended to
date, or of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Buyer is a party or by which the Buyer, or
any of its properties or assets, may be bound or affected; (ii) result in the
violation of any order, writ, injunction, decree, statute, rule or regulation
applicable to the Buyer its properties or assets; or (iii) result in the
imposition of any lien, encumbrance, charge or claim upon any of the assets of
17
the Buyer. No consent or approval by, or notification to or filing with, any
court, governmental authority or third party is required in connection with the
execution, delivery and performance of this Agreement or the Buyer Documents by
the Buyer.
(c) XxxxxXxx Shares. The XxxxxXxx Shares are duly authorized and,
when issued at Closing in accordance with the terms of this Agreement, will be
validly issued shares of the Buyer's common stock, fully paid and nonassessable.
(d) Litigation. There is no litigation, proceeding or investigation
pending or, to the knowledge of the Buyer, threatened against or affecting the
Buyer or any of its subsidiaries that questions the validity or enforceability
of this Agreement or any of the Buyer Documents.
(e) No Broker's or Finder's Fees. No broker, finder or investment
banker is or will be entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Buyer.
(f) Commission Reports. The Buyer's Annual Report on Form 10-KSB for
the fiscal year ended September 30, 2006 and all reports made by the Buyer with
the Commission since the filing of such Form 10-KSB were each prepared in
accordance with the applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder. As of the respective dates they were filed with the Commission, none
of such reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.
(g) Financial Statements. Each of the financial statements
(including, in each case, any notes and schedules thereto) contained in any
report identified or referred to in Section 2.3(f) above complied as to form
with the applicable accounting requirements and rules and regulations of the
Commission and was prepared in accordance with GAAP applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto), and each presented fairly the consolidated financial condition and
operating results of the Company and the its subsidiaries, as of the dates, and
for the periods, indicated therein (in the case of the unaudited financial
statements included in the Buyer's quarterly reports, subject to normal year-end
audit adjustments, none of which are reasonably expected to be "material" (as
such term is used in Commission Staff Accounting Bulletin No. 99 -
"Materiality")).
(h) No Undisclosed Liabilities. Neither the Buyer nor any of its
subsidiaries have any Liabilities other than (i) those Liabilities set forth or
adequately provided for or reserved in the balance sheet as of June 30, 2007,
filed with the Commission as part of the Buyer's Quarterly Report on Form 10-QSB
for the period then ended; (ii) those Liabilities identified in notes to the
Buyer's financial statements as of and for the fiscal year ended September 30,
2006, filed with the Commission as part of the Buyer's Annual Report on Form
10-KSB for the fiscal year then ended; (iii) those Liabilities incurred in the
ordinary course of business and not required to be set forth in a balance sheet
under GAAP; and (iv) those incurred in the ordinary course of business since
June 30, 2007 and consistent with past practice.
18
(i) Statements True and Correct. This Agreement and the Buyer
Documents delivered pursuant hereto do not, when taken together, contain any
untrue statement of a material fact or omit any material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE III
CONDITIONS TO THE PARTIES' OBLIGATIONS
Section 3.1 Conditions to the Buyer's Obligations. The obligations of the
Buyer under this Agreement shall be subject to the satisfaction at or prior to
the Closing of each of the following conditions, any of which may be waived, in
writing, by the Buyer:
(a) Representations and Warranties. Each of the representations and
warranties of the Company and the Sellers in this Agreement that is expressly
qualified by a reference to materiality shall be true in all respects as so
qualified, and each of the representations and warranties of the Company and the
Sellers in this Agreement that is not so qualified shall be true and correct in
all material respects, on and as of the Closing as though such representation or
warranty had been made on and as of the Closing, except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date.
(b) Covenants. The Company and the Sellers shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by them as of the
Closing.
(c) No Material Adverse Changes. There shall not have occurred any
event, change or effect that, when taken individually or together with all other
adverse changes and effects, is or is reasonably likely to be materially adverse
to the condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of or prospects of the Company and the
Subsidiaries, taken together as a whole.
(d) Closing Deliveries. The Company and the Sellers shall have duly
executed and delivered (or shall have caused to be duly executed and delivered)
to the Buyer each of the documents and instruments identified in Section 1.3(b)
of this Agreement. In addition:
(i) the Company shall have delivered a certificate, duly
executed on behalf of the Company by its Chief Executive Officer,
certifying that the conditions set forth in Sections 3.1(a) through 3.1(c)
have been satisfied;
(ii) the Company shall have delivered a certificate, duly
executed on behalf of the Company by its Secretary, certifying the due
adoption of resolutions by the Company's Board of Directors authorizing
the execution of this Agreement and the execution, performance and
delivery of all agreements, documents and transactions contemplated
hereby;
19
(iii) evidence satisfactory to the Buyer that the Company has
obtained those consents, waivers, approvals or authorizations of those
third parties whose consent or approval are required in connection with
this Agreement;
(iv) letters of resignation from each of the directors and
officers of the Company in office immediately prior to the Closing, which
resignations in each case will be effective as of the Closing; and
(v) a certificate from the Secretary of State of the State of
Iowa, dated not more than five business days prior to the Closing,
evidencing that the Company legally exists and is in good standing as a
corporation under the laws of the State of Iowa.
Section 3.2 Conditions to the Company's and the Sellers' Obligations. The
obligations of the Company and the Sellers under this Agreement shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, by the Company:
(a) Representations and Warranties. Each of the representations and
warranties of the Buyer in this Agreement that is expressly qualified by a
reference to materiality shall be true in all respects as so qualified, and each
of the representations and warranties of the Buyer in this Agreement that is not
so qualified shall be true and correct in all material respects, on and as of
the Closing as though such representation or warranty had been made on and as of
the Closing, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date.
(b) Covenants. The Buyer shall have performed and complied in all
material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the Closing.
(c) No Material Adverse Changes. There shall not have occurred any
event, change or effect that, when taken individually or together with all other
adverse changes and effects, is or is reasonably likely to be materially adverse
to the condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of or prospects of the Buyer and its subsidiaries,
taken together as a whole.
(d) Closing Deliveries. The Buyer shall have duly executed and
delivered (or shall have caused to be duly executed and delivered) to the
Company and the Sellers, as the case may be, each of the documents and
instruments identified in Section 1.3(a) of this Agreement. In addition:
20
(i) the Buyer shall have delivered a certificate, duly
executed on behalf of the Company by its Chief Executive Officer,
certifying that the conditions set forth in Sections 3.2(a) through 3.2(c)
have been satisfied;
(ii) the Buyer shall have delivered a certificate, duly
executed on behalf of the Buyer by its Secretary, certifying the due
adoption of resolutions by the Buyer's Board of Directors authorizing the
execution of this Agreement and the execution, performance and delivery of
all agreements, documents and transactions contemplated hereby;
(iii) evidence satisfactory to the Company that the Buyer has
obtained those consents, waivers, approvals or authorizations of those
third parties whose consent or approval are required in connection with
this Agreement; and
(iv) a certificate from the Secretary of State of the State of
Delaware, dated not more than five business days prior to the Closing,
evidencing that the Buyer legally exists and is in good standing as a
corporation under the laws of the State of Delaware.
ARTICLE IV
REGISTRATION RIGHTS
Section 4.1 General. As soon as practicable after the Closing Date, the
Buyer shall prepare and file with the Commission a registration statement under
the Securities Act (the "Registration Statement") covering the resale by the
Sellers of the XxxxxXxx Shares (the "Registrable Securities"). The Buyer shall
use its commercially reasonable efforts to cause the Registration Statement to
be declared effective under the Securities Act as promptly as possible after the
filing thereof. The Company shall use its reasonable commercial efforts to keep
the Registration Statement continuously effective under the Securities Act until
the earlier of (i) the date all of the Registrable Securities covered by the
Registration Statement have been sold or (ii) the date all Registrable
Securities covered by the Registration Statement may be sold immediately without
registration under the Securities Act and without volume restrictions pursuant
to Rule 144, as determined by the counsel to the Buyer pursuant to a written
opinion letter to such effect, addressed and acceptable to the Buyer's transfer
agent and the affected Sellers. The period during which the Buyer is required to
use its reasonable commercial efforts to keep the Registration Statement
continuously effective under the Securities Act is referred to below as the
"Registration Period."
Section 4.2 Registration Obligations of the Buyer. In connection with the
registration of the Registrable Securities for the account of the Sellers
pursuant to Section 4.1, the Buyer shall:
(a) (i) Register or qualify the Registrable Securities covered by
the Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Sellers reasonably request, (ii) prepare and file in such
jurisdictions such amendments (including post-effective amendments) and
21
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
and (iii) take all such other lawful actions as may be necessary to maintain
such registrations and qualifications in effect at all times during the
Registration Period; provided, however, that the Buyer shall not be required in
connection therewith or as a condition thereto to (A) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify, (B)
subject itself to general taxation in any such jurisdiction or (C) file a
general consent to service of process in any such jurisdiction.
(b) As promptly as practicable after becoming aware of such event,
notify each Seller whose Registrable Securities are covered by the Registration
Statement of the occurrence of any event, as a result of which the prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and promptly prepare
an amendment to the Registration Statement and supplement to the prospectus to
correct such untrue statement or omission, and deliver a number of copies of
such supplement and amendment to each Seller as such Seller may reasonably
request.
(c) As promptly as practicable after becoming aware of such event,
notify each Seller whose Registrable Securities are covered by the Registration
Statement of the issuance by the Commission of any stop order or other
suspension of the effectiveness of the registration statement and take all
lawful action to effect the withdrawal, or removal of such stop order or other
suspension.
(d) Use its commercially reasonable efforts to cause all Registrable
Securities covered by the Registration Statement to be listed or qualified for
trading on the principal trading market, if any, on which the Buyer's common
stock is traded or listed on the effective date of the registration statement.
Section 4.3 Obligations and Acknowledgements of the Sellers. In connection
with the registration of the Registrable Securities for the account of the
Sellers pursuant to Section 4.1, the Sellers shall have the following
obligations and hereby make the following acknowledgements:
(a) It shall be a condition precedent to the obligations of the
Buyer to include the Registrable Securities of a particular Seller in the
Registration Statement that such Seller shall furnish to the Buyer, in writing,
(i) such Seller's legal name and address, (ii) a statement describing any
position, office, or other material relationship which such Seller has had
within the past three years with the Company, the Buyer or any of their
respective predecessors or affiliates, (iii) the number of XxxxxXxx Shares held
by such Seller before the Registration Statement is filed (including the
Registrable Securities), and (iv) the number of Registrable Securities to be
offered for such Seller's account in the Registration Statement (the "Requested
Information"). At least 12 business days prior to the anticipated filing date of
the Registration Statement, the Buyer shall notify each Seller of the
anticipated filing date and request each Seller to advise the Buyer of any
changes in the Requested Information previously provided by such Seller. If at
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least two business days prior to the anticipated filing date the Buyer has not
received written notification from a Seller amending and updating such Requested
Information, then the Buyer shall file the Registration Statement relying upon
the accuracy of the Requested Information as provided by such Seller.
(b) Each Seller agrees to cooperate with the Buyer in connection
with the preparation and filing of the Registration Statement under this Article
IV, unless such Seller has notified the Buyer in writing of its election to
exclude all of its Registrable Securities from the Registration Statement.
(c) Each Seller agrees that, upon receipt of any notice from the
Buyer of the occurrence of any event of the kind described in Section 4.2(c) or
4.2(d), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement until such Seller's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
4.2(c) and, if so directed by the Buyer, such Seller shall deliver to the Buyer
(at the expense of the Buyer) or destroy (and deliver to the Buyer a certificate
of destruction) all copies in such Seller's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
(d) Each Seller acknowledges that it may be deemed to be a statutory
underwriter within the meaning of the Securities Act with respect to the
Registrable Securities being registered for resale by him, and each Seller which
includes Registrable Securities for offer and sale within the Registration
Statement pursuant to this Article IV hereby consents to the inclusion in the
Registration Statement of a disclosure to such effect.
Section 4.4 Expenses of Registration. All expenses incurred in connection
with registrations, filings or qualifications pursuant to this Article IV,
including, without limitation, all registration, listing, and qualifications
fees, legal fees, printing and engraving costs, accounting fees (other than
underwriting discounts and commissions and the fees and expenses of counsel to
the Sellers) shall be borne by the Buyer.
Section 4.5 Indemnification and Contribution.
(a) Indemnification by the Buyer. The Buyer shall indemnify and hold
harmless each Seller, and each person who controls such Seller within the
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934 (the "Exchange Act") (each such person being sometimes
hereinafter referred to as an "Indemnified Person") from and against any losses,
claims, damages or liabilities, joint or several, to which such Indemnified
Person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, not misleading, or arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in any prospectus or an omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and the Buyer hereby agrees to reimburse such Indemnified
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Persons for all reasonable legal and other expenses incurred by them in
connection with investigating or defending any such action or claim as and when
such expenses are incurred; provided, however, that the Buyer shall not be
liable to any such Indemnified Person in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon (i) an
untrue statement or alleged untrue statement made in, or an omission or alleged
omission from, the Registration Statement or prospectus in reliance upon and in
conformity with written information furnished to the Buyer by such Indemnified
Person expressly for use therein or (ii) in the case of the occurrence of an
event of the type specified in Section 4.2(c), the use by the Indemnified Person
of an outdated or defective prospectus after the Buyer has provided to such
Indemnified Person an updated prospectus correcting the untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
loss, claim, damage or liability.
(b) Indemnification by the Sellers. Each Seller agrees, severally
and not jointly, as a consequence of the inclusion of any of his Registrable
Securities in the Registration Statement pursuant to this Article IV, (i) to
indemnify and hold harmless the Buyer, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Buyer within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Buyer or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
an omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Buyer by such Seller expressly for use
therein, and (ii) to reimburse the Buyer for any legal or other expenses
incurred by the Buyer in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that no Seller
shall be liable under this Section 4.5(b) for any amount in excess of the net
proceeds paid to such Seller in respect of Registrable Securities sold by him.
(c) Indemnification Procedures. Any claim for indemnification under
this Article IV shall be made in accordance with Article VI of this Agreement.
(d) Contribution. If the indemnification provided for in this
Section 4.5 is unavailable to, or insufficient to hold harmless, an Indemnitee
(as such term is defined in Section 6.4 below) respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to herein, then
each Indemnitor (as such term is defined in Section 6.4 below) shall contribute
to the amount paid or payable by such Indemnitee as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Indemnitor and
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the Indemnitee in connection with the statements or omissions or alleged
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnitor and Indemnitee
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by such Indemnitor or by
such Indemnitee, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.5(d) were determined by pro rata allocation (even if
the Sellers were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in this Section 4.5(d). The amount paid or payable by an Indemnitee
as a result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such Indemnitee in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Sellers in this Section
4.5(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered by them and not joint.
(e) Limitation on Sellers' Obligations. Notwithstanding any other
provision of this Section 4.5, in no event shall any Seller have any liability
under this Section 4.5 for any amounts in excess of the dollar amount of the
proceeds actually received by such Seller from the sale by such Seller of
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to the Registration Statement
Section 4.6 Trading Restrictions. Notwithstanding anything in this Article
IV to the contrary:
(a) Each Seller acknowledges and agrees, severally and not jointly,
that, until the first anniversary of the date on which the Registration
Statement is declared effective, such Seller shall not engage in any sale or
other transfer of Registrable Securities to any third party, whether pursuant to
the Registration Statement or otherwise, at a price of less than $0.28 per share
(giving effect to equitable adjustments for any stock split, stock dividend,
combination of shares or the like based upon the Buyer's common stock).
(b) Each Seller who, immediately prior to the Closing Date, owned
more than 192,500 Xxxxx Shares, acknowledges and agrees, severally and not
jointly, that:
(i) The Seller shall not, until the 180th day after the
Closing Date, sell, pledge, hypothecate, transfer or otherwise dispose of,
by operation of law or otherwise, or grant any option or purchase right
with respect to, any XxxxxXxx Shares or engage in any short sale, hedging
transaction or other derivative security transaction involving the
XxxxxXxx Shares. Any sale or other transfer in violation of this Section
4.6(b) shall be null and void. The Buyer shall not be required (A) to
transfer on its books any of the XxxxxXxx Shares which shall have been
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sold or transferred in violation of this Section 4.6(b) or (ii) to treat
as owner of such XxxxxXxx Shares or to pay dividends to any transferee to
whom any such XxxxxXxx Shares shall have been so sold or transferred.
(ii) From and after the expiration of restrictions referred to
in Section 4.6(b)(i), and until the first anniversary of the date on which
the Registration Statement is declared effective, the Seller shall not, on
any trading day, sell, transfer or otherwise dispose of any XxxxxXxx
Shares in excess of 10% of the aggregate number of shares of the Buyer's
common stock traded on such trading day.
(c) The restrictions set forth in Section 4.6(a) and Section 4.6(b)
shall not apply to (i) transfers of Registrable Shares to or for the benefit of
any spouse, child or grandchild of the Seller, or to a trust, limited liability
company, family limited partnership or similar entity for the benefit of any of
the foregoing, including transfers by will or the laws of descent and
distribution; provided, however, that, it shall be a condition of each such
transfer, that (x) the transferee agrees to be bound by the terms of this
Article IV as though no such transfer had taken place, and that (y) the Seller
has complied with all applicable laws in connection with such transfer, or (ii)
with the prior written approval of the Buyer's chief executive officer, which
approval shall not be unreasonably withheld, other privately negotiated
transfers not involving a broker and which are not otherwise publicly
reportable.
(d) The Buyer shall cause each of the members of its Board of
Directors to be bound by trading restrictions no less restrictive than those set
forth in Sections 4.6(a) and (b), as applicable. At such time as any such
restriction shall cease to be binding upon the Sellers, such restriction shall
cease to be binding upon any member of the Buyer's Board of Directors.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Restriction Against Competition. Each Seller agrees, for a
period of five years after the Closing Date, that such Seller will not engage,
directly or indirectly (whether as an officer, director, employee, consultant,
agent, representative or otherwise) in any business that is competitive to the
Business as it exists on the Closing Date in any county of any State, district,
possession or territory of the United States of America; provided, however, that
no owner of less than 1% of the outstanding stock of any publicly-traded
corporation shall be deemed to engage solely by reason thereof in any of its
business. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 5.1 is invalid or unenforceable, the
parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration or area of
the term or provision, to delete specific words or phrases or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
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Section 5.2 Confidentiality. Each Seller agrees to treat and hold any and
all Confidential Information as confidential and proprietary to the Buyer and
shall refrain from using any of the Confidential Information except in
connection with this Agreement, and deliver promptly to the Buyer or destroy, at
the request and option of the Buyer, all tangible embodiments (and all copies,
summaries and extracts) of the Confidential Information which are in his
possession. In the event that any Seller is requested or required pursuant to
written or oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand or similar
process to disclose any Confidential Information, such Seller will notify the
Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 5.2. If, in the absence of a protective order or the receipt of a waiver
hereunder, any Seller is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, such
Seller may disclose the Confidential Information to the tribunal; provided,
however, that the disclosing Seller shall use his reasonable efforts to obtain,
at the 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 shall designate. The foregoing provisions shall not apply to
any Confidential Information which is generally available to the public
immediately prior to the time of disclosure unless such Confidential Information
is so available due to the actions of a Seller.
Section 5.3 Remedies. The Sellers recognize that irreparable injury, which
could not be adequately compensated by money damages, may result to the Company
and to the Buyer if a Seller breaches the promises such Seller has made in
Sections 5.1 and/or 5.2, and that the Buyer's willingness to enter into the this
Agreement is conditioned in part on such promises. Each Seller therefore agrees
that in the event of his breach or threatened breach of Section 5.1 or Section
5.2, notwithstanding any provision of this Agreement to the contrary, the
Company and the Buyer shall be entitled to injunctive or other equitable relief
restraining such breach or threatened breach, without having to prove (beyond
entering this Agreement into evidence) either the fact of irreparable injury or
the inadequacy of money damages. Such relief shall be without prejudice to any
other remedy to which the Company or the Buyer may be entitled.
Section 5.4 Post-Closing Operations of the Company.
(a) General. Except as provided in this Section 5.4, until such time
as either (x) the Laurus Agreement shall have been terminated or shall have
expired or (y) the Buyer shall have received the consent of the Sellers holding
in the aggregate, immediately after the Closing Date, not fewer than 4,000,001
XxxxxXxx Shares, the Buyer shall operate the Company as a separately
incorporated subsidiary, and shall not (x) merge or consolidate the Company with
or into any other entity (including without limitation the Borrower), (y)
transfer, by operation of law or otherwise, of any equity interests of or in the
Company, or issue any equity interests of or in the Company, to any person or
entity other than a wholly-owned subsidiary of the Buyer; or (z) cause the
Company to sell or otherwise transfer all or any substantial portion of its
assets other than inventory sold in the ordinary course of business.
(b) Right of First Offer. Notwithstanding the provisions of Section
5.4(a), in the event that Laurus notifies the Buyer in writing that the Buyer is
in default under any of the credit agreements between the Buyer and Laurus and
that Laurus intends to accelerate its repayment rights under such credit
27
agreements, the Buyer shall promptly provide notice of such fact (the "Default
Notice") to the Sellers, and the Sellers shall be entitled to negotiate with the
Buyer, on an exclusive basis, the terms under which the Sellers would repurchase
either the capital stock or assets of the Company. The Buyer shall conduct such
negotiations in good faith but on an arms' length basis, without being required
to offer any Seller any favorable treatment due to such Seller's status (if any)
as an employee and/or shareholder of the Buyer.
(c) Right of First Refusal. If the Sellers and the Buyer fail to
execute and deliver a binding letter of intent with respect to the purchase of
such capital stock or assets within five business days after the Default Notice,
then the Buyer shall be free to initiate discussions with third parties
regarding sale of such capital stock or assets. In the event that the Buyer
receives a bona fide written offer (the "Offer"), to purchase such capital stock
(the "Offered Shares") or assets (the "Offered Assets"), then the Buyer shall
deliver to the Sellers written notice (the "Offer Notice") of the Offer,
together with (i) a photocopy of the Offer, (ii) the name and address of the
proposed transferee, and (iii) a written statement of all other facts material
to an understanding of the Offer. The Sellers shall have the right (the "Right
of First Refusal") to purchase all, but not less than all, of the Offered Shares
or the Offered Assets, as the case may be, such right to be exercisable by
giving written notice of acceptance (the "Acceptance Notice") to the Buyer
within five days after receipt of the Offer Notice. If the Sellers elect to
purchase all, but not less than all, of the Offered Shares or the Offered
Assets, as the case may be, they shall be obligated to purchase, and the Buyer
shall be obligated to sell to the Sellers, such Offered Shares (or to cause the
Company to sell to the Sellers, such Offered Assets, as the case may be), at the
price and terms indicated in the Offer Notice within 10 days from the date of
delivery by the Sellers of the Acceptance Notice. The purchase by the Sellers
shall be effected by delivery to the Sellers of either (x) a certificate or
certificates evidencing the Offered Shares to be purchased by the respective
Sellers, duly endorsed for transfer to the Sellers, against payment to the
Buyer, of the purchase price therefor by the Sellers by certified check payable
to the order of the Buyer or by wire transfer of immediately available funds to
such account as may be specified by the Buyer, or (y) a xxxx of sale reasonably
satisfactory to the Sellers sufficient to transfer good title to the Offered
Assets, free of all encumbrances, to the Sellers (as tenants in common), against
payment to the Company of the purchase price therefor by the Sellers by
certified check payable to the order of the Company or by wire transfer of
immediately available funds to such account as may be specified by the Company.
(d) Repayment of Laurus Indebtedness. As a condition to the exercise
by the Sellers of their rights under this Section 5.4, any agreement with the
Sellers to repurchase any of the capital stock or assets of the Company must
include an amount of cash, payable at closing, sufficient to make payment in
full of the principal amount of outstanding indebtedness, together with interest
and fees, owed to Laurus that Laurus had funded against such capital stock or
assets.
(e) Offset Against Purchase Price.
(i) Subject to the provisions of subsection (ii) below, the
Sellers shall be permitted to deliver to the Buyer or the Company, as the
case may be, in partial payment of, and as a credit against, the purchase
price for any purchase made pursuant to Section 5.4(b) or 5.4(c), up to
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8,000,000 shares of the Buyer's common stock registered in the names of
such Sellers, duly endorsed for transfer to the Buyer or the Company, as
the case may be. Any such shares shall be credited against the purchase
price at the rate of $.32 per share, irrespective of the fair market value
of the Buyer's common stock at the time of the purchase.
(ii) Notwithstanding the foregoing, (x) no Seller shall be
entitled any credit against the purchase price pursuant to the provisions
of subsection (i) with respect to any shares of the Buyer's common stock
which are then the subject of a pre-existing claim for damages under
Article VI of this Agreement, and (y) the provisions of subsection (i)
shall be null and void if the Buyer's Board of Directors reasonably
concludes that its operation would be a breach of the fiduciary duties of
such Board of Directors to the Buyer's shareholders and/or creditors other
than Laurus.
(f) Termination of Rights. The Sellers acknowledge and agree that
all of their rights under this Section 5.4 shall immediately terminate upon
delivery by Laurus of a Liquidation Notice, as such term is defined in Section 1
of the Laurus Agreement. Upon the delivery of a Liquidation Notice, the Sellers'
rights with respect to any repurchase of the capital stock or assets of the
Company shall be governed solely by the Laurus Agreement.
Section 5.5 No Changes in Capital Stock. After the date of this Agreement,
but prior to the Closing, the Company shall not issue any additional shares of
its capital stock or any additional Options.
Section 5.6 Responsibility for Filing Tax Returns. The Buyer shall prepare
or caused to be prepared and file or caused to be filed all Tax Returns for the
Company which are filed after the Closing Date.
Section 5.7 Certain Advances. At any time after the execution of this
Agreement by the parties (including by Sellers who collectively own not less
than 90% of the total issued and outstanding capital stock of the Company) and
prior to the Closing, the Buyer, upon the written request of the Company, shall
advance the Company up to an aggregate of $175,000, which amount shall be
available for use by the Company for general corporate purposes, including the
(i) reimbursement of up to $35,000 in travel and business expenses incurred
personally by Xxxxx Xxxxxx and (ii) repayment of up to $52,000 in inventory
advances made to the Company from Xxxxxx Family, L.L.C. Except as set forth in
the preceding sentence, no portion of any such advances may be paid or otherwise
advanced to any Seller or to any director or officer of the Company or to any of
their respective affiliates. Any such advances shall bear interest at the rate
of 8.0% per annum, and the Company shall repay to the Buyer all such advances,
together with such interest, in single lump-sum payment on October 31, 2007. If,
however, the Closing occurs prior to such date, then all interest accrued as of
the Closing shall be forgiven and the outstanding principal balance shall be
deemed to be an intercompany payable. If requested by the Buyer, the Company
shall execute one or more promissory notes evidencing any such advance(s), any
such note or notes to contain terms and conditions (including default provisions
upon any bankruptcy, insolvency or similar event) not inconsistent with this
Section 5.7.
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ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification by the Sellers (Severally and not Jointly).
Each Seller shall, severally and not jointly, indemnify and hold harmless the
Buyer and its successors and assigns, and its and their respective officers,
directors, shareholders, employees and agents, against, and in respect of, any
and all loss, liability, demand, claim, action, cause of action, cost, damage,
deficiency, tax, penalty, fine or expense, including, without limitation,
reasonable legal, accounting, investigatory and any other expenses (collectively
"Claims") which may arise out of any of the following:
(a) The inaccuracy of any of the representations and warranties of
such Seller set forth in Section 2.1;
(b) Any breach or violation by such Seller of the covenants and
agreements contained in this Agreement, the Seller Documents or any Schedule or
Exhibit hereto or thereto; or
(c) as provided in Section 4.5(b).
Section 6.2 Indemnification by the Sellers (Jointly and Severally). The
Sellers shall, jointly and severally, indemnify and hold harmless the Buyer and
its successors and assigns, and its and their respective officers, directors,
shareholders, employees and agents, against, and in respect of Claims which may
arise out of any of the following:
(a) Any actual or alleged Liability of the Company or of any
Subsidiary other than Liabilities disclosed in Section 2.2(h) of the Disclosure
Schedule;
(b) Any misrepresentation or other breach or violation by the
Company of the representations and warranties contained in this Agreement, the
Seller Documents or any Schedule or Exhibit hereto or thereto;
(c) The operation of the Business prior to the Closing (except for
Claims arising from Liabilities disclosed in Section 2.2(h) of the Disclosure
Schedule);
(d) Any claim not covered by insurance that any service performed or
any product manufactured, distributed or sold by the Company or any Subsidiary,
or any of its predecessors, or its or their subsidiaries or Affiliates, was
defective or noncompliant with any express or implied warranty without regard to
the legal theory under which redress may be sought, i.e., tort, breach of
contract or strict liability;
(e) Any of the following conditions or occurrences relating to the
environment: (i) any clean-up, corrective removal or remedial actions, or
property damage arising out of any condition existing on or prior to the Closing
Date; (ii) third party claims for personal injury where the exposure, incident
or occurrence out of which the Claim arises occurred in whole or in part, on or
prior to the Closing Date; (iii) fines or penalties on account of the ownership,
30
use, condition or operation of any of the assets of the Company or of any of its
Affiliates, at any time on or prior to the Closing Date; or (iv) any liability
to modify, restore, change or improve any of the assets of the Company or of any
Subsidiary as they exist on the Closing Date in order to effectuate compliance
with any applicable environmental law or order; or
(f) Any breach or violation by the Company of the covenants and
agreements contained in this Agreement, the Seller Documents or any Schedule or
Exhibit hereto or thereto.
Section 6.3 Indemnification by the PlayTribe Sellers. In addition to the
foregoing, and in addition to any right the Company may have under the PlayTribe
Agreement, the PlayTribe Sellers shall, jointly and severally, indemnify and
hold harmless the Buyer and its successors and assigns, and its and their
respective officers, directors, shareholders, employees and agents, against, and
in respect of Claims which may arise out of any misrepresentation or other
breach or violation by the PlayTribe Sellers of any of the representations and
warranties set forth in the PlayTribe Agreement which are incorporated into this
Agreement by virtue of Section 2.2(c)(iii) hereof.
Section 6.4 Indemnification by the Buyer. The Buyer shall indemnify and
hold harmless the Sellers and their successors and assigns, against and in
respect of, any and all Claims which may arise out of any of the following:
(a) Any actual or alleged failure of the Company to discharge in a
timely manner any of the Liabilities disclosed in Section 2.2(h) of the
Disclosure Schedule;
(b) Any misrepresentation or other breach or violation by the Buyer
of the representations and warranties contained in this Agreement, the Buyer
Documents or any Schedule or Exhibit hereto or thereto;
(c) The operation of the Business from and after the Closing (except
for Claims arising from Liabilities not disclosed in Section 2.2(h) of the
Disclosure Schedule);
(d) Any claim not covered by insurance that any service performed or
any product manufactured, distributed or sold by the Buyer, or any of its
subsidiaries or Affiliates, was defective or noncompliant with any express or
implied warranty without regard to the legal theory under which redress may be
sought, i.e., tort, breach of contract or strict liability;
(e) Any of the following conditions or occurrences relating to the
environment: (i) any clean-up, corrective removal or remedial actions, or
property damage arising out of any condition existing after the Closing Date but
not as of the Closing Date; (ii) third party claims for personal injury where
the exposure, incident or occurrence out of which the Claim arises occurred
after the Closing Date; (iii) fines or penalties on account of the ownership,
use, condition or operation of any of the assets of the Company or any of the
Subsidiaries by the Company or of any of its Affiliates, at any time from and
after the Closing Date; or (iv) any liability to modify, restore, change or
improve any of the assets of the Company or of any Subsidiary as they exist
after the Closing Date in order to effectuate compliance with any applicable
environmental law or order; or
31
(f) Any breach or violation by the Buyer of the covenants and
agreements contained in this Agreement, the Buyer Documents or any Schedule or
Exhibit hereto or thereto.
Section 6.5 Notice of Claim; Defense of Third Party Claims. If any party
becomes aware of or receives notice of any Claim of a third party or the
commencement of any third party action or proceeding with respect to which
another party (singly or collectively, the "Indemnitor") is obligated to provide
indemnification pursuant hereto, the party entitled to indemnification (the
"Indemnitee") shall promptly give the Indemnitor notice thereof. Such notice
shall not be a condition precedent to any liability of the Indemnitor under the
provisions for indemnification contained in this Agreement, unless (and only to
the extent that) failure to give such notice materially prejudices the rights of
the Indemnitor with respect to such claims, actions, or proceedings. The
Indemnitor may compromise or defend, at the Indemnitor's own expense, and by the
Indemnitor's own counsel, any such matter involving the asserted liability of
the Indemnitee; provided, however, that no such compromise or settlement shall
be permitted hereunder unless, as a condition thereof, the Indemnitee is granted
a complete release of any and all liability with respect to such matter by the
person or party asserting such liability. If the Indemnitor elects not to
compromise or defend such matter, then the Indemnitee, at the Indemnitor's
expense and by the Indemnitee's own counsel, may defend such matter. In any
event, the Indemnitee, the Indemnitor and the Indemnitor's counsel (and, if
applicable, the Indemnitee's counsel) shall cooperate in the compromise of, or
the defense against, any such asserted liability. If the Indemnitor chooses to
defend any claim, the Indemnitee shall make available to the Indemnitor any
books, records, or other documents within its control that are reasonably
necessary or appropriate for such defense.
Section 6.6 Limitation on Indemnification Obligations.
(a) Each Seller shall be liable for Claims against such Seller
pursuant to Section 6.1 indefinitely after the Closing Date without limitation.
(b) The Sellers shall be liable for Claims asserted by the Buyer
pursuant to Section 6.2 only if and to the extent that written notice of such
Claims is delivered to the Sellers pursuant to Section 7.3 of this Agreement on
or before the first anniversary of the Closing Date (the "Warranty Termination
Date").
(c) The PlayTribe Sellers shall be liable for Claims asserted by the
Buyer pursuant to Section 6.3 only if and to the extent that written notice of
such Claims is delivered to the PlayTribe Sellers pursuant to Section 7.3 of
this Agreement on or before the Warranty Termination Date.
(d) The Buyer shall be liable for Claims asserted by the Sellers
pursuant to Section 6.4 only if and to the extent that written notice of such
Claims is delivered to the Buyer pursuant to Section 7.3 of this Agreement on or
before the Warranty Termination Date.
32
(e) Notwithstanding the foregoing, no Indemnitee shall be entitled
to indemnification under this Article VI for any Claim or Claims made under
Sections 6.2, 6.3 or 6.4, other than Claims made under Section 6.2(f) or Section
6.4(f), as the case may be, unless and until all Claims for indemnification made
by such Indemnitee shall exceed $50,000 in the aggregate (the "Deductible
Amount"); provided, however, that if and when such Claims on a cumulative basis
equal or exceed the Deductible Amount, the Indemnitee shall be shall be entitled
to indemnification only for the portion of such Claims which exceeds the
Deductible Amount).
Section 6.7 Release of Escrow Shares to the Buyer. Subject only to the
provisions of Section 6.6(d), upon the resolution of any Claim against the
Sellers or the PlayTribe Sellers pursuant to Section 6.2 or 6.3, respectively,
in favor of the Buyer, the Escrow Agent shall release to the Buyer, free and
clear of the escrow created by the Escrow Agreement, and shall cause to be
re-registered in the Buyer's name (or in the name of its assignee), all on the
terms and conditions set forth in the Escrow Agreement, that number of Escrow
Shares which shall equal the value of the Claim (or the portion thereof resolved
in favor of the Buyer), divided by $.32 per share. The balance of the Escrow
Shares Buyer shall continue to be held by the Escrow Agent pursuant to the
Escrow Agreement. Any Escrow Shares released to the Buyer hereunder will be
considered an adjustment to the consideration payable for the Xxxxx Shares.
Section 6.8 Release of Escrow Shares; Sole Source of Recovery. On the
Warranty Termination Date, the Escrow Agent shall release to the Sellers the
balance, if any, of the Escrow Shares not then the subject of any pending Claim,
free and clear of the escrow created by the Escrow Agreement. Notwithstanding
any provision of this Agreement to the contrary, (a) no Seller other than a
PlayTribe Seller shall have any liability with respect to any Claims by the
Buyer made under Section 6.3; (b) the sole source of indemnification and
recovery with respect to any and all Claims made by the Buyer under Section 6.2
and Section 6.3 shall be the Escrow Shares, and no Seller shall have any
liability beyond such Seller's Escrow Shares for any such Claims; and (c) the
Buyer shall have no liability for Claims made by the Sellers under Section 6.4
in an amount in excess of $250,000 in the aggregate; provided, however, that,
notwithstanding the foregoing, (x) nothing herein shall prohibit the Buyer from
exercising any and all remedies which may be available to it under law or in
equity for Claims arising under Section 6.1, regardless of whether such Claim
arises before or after the Warranty Termination Date, and (y) nothing herein
will limit the liability of any party to this Agreement if such party is
determined by a court of competent jurisdiction to have committed fraud or
material and intentional misrepresentation.
Section 6.9 Mitigation. The parties agree to use reasonable efforts to
mitigate claims under the indemnification provisions of Sections 6.2, 6.3 and
6.4.
ARTICLE VII
GENERAL PROVISIONS; ADDITIONAL AGREEMENTS
Section 7.1 Expenses. All costs and expenses incurred by any party hereto
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs. The Company shall not bear, directly
33
or indirectly, any of the costs or expenses of the Sellers in connection with
the preparation or negotiation of this Agreement, or of the consummation of the
transactions contemplated hereby; provided, however, that the Company may pay or
incur up to $3,000 in reasonable fees and expenses for a third party to evaluate
the fairness of the transactions contemplated by this Agreement on behalf of the
Sellers, and the Company may pay or incur up to $50,000 in reasonable
professional fees and expenses in connection with the transactions contemplated
by this Agreement. All such amounts shall be invoiced to the Company on or prior
to the Closing Date and true and correct copies of such invoices shall be
delivered to the Buyer prior to the Closing.
Section 7.2 Survival of Representations, Warranties and Agreements. All
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Closing, regardless of any due
diligence investigations by the parties prior to the Closing, subject only to
the limitations set forth in Section 6.6(b), 6.6(c) or 6.6(c), as the case may
be.
Section 7.3 Notices. All notices, requests, demands, claims and other
communications required or permitted to be given hereunder shall be in writing
and shall be sent by (a) personal delivery (effective upon delivery), (b)
facsimile (effective on the next day after transmission), (c) recognized
overnight delivery (effective on the next day after delivery to the service) or
(d) registered or certified mail, return receipt requested and postage prepaid
(effective on the third day after being so mailed), in each case addressed to
the intended recipient as set forth below:
If to the Buyer:
XxxxxXxx Technologies, Inc.
0 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxx, Xxxxxx-Xxxxx & Xxxxxxxxx, P.C.
Reservoir Place
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to the Sellers:
To their respective addresses set forth on Exhibit A hereto
With a copy (which shall not constitute notice) to:
34
Xxxxxx, Xxxxxxx and Xxxxxx, P.C.
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Any party may change its address for receiving notices by giving written notice
of such change to the other party in accordance with this Section 7.3.
Section 7.4 Press Releases; Public Announcements. Upon the execution of
this Agreement, the Buyer shall issue a press release with respect to the
purchase of the Xxxxx Shares and shall file a Current Report on Form 8-K with
the Commission. The Buyer shall use its reasonable efforts to solicit the views
of the Sellers with respect to the content of such press release and Current
Report. The Sellers acknowledge, however, that such disclosures are required by
law and that no Seller shall have any right to consent to such disclosures or to
control the timing or content thereof. Neither the Company nor the Sellers shall
issue any press release or make any public announcement concerning such matters
without the prior written consent of the Buyer, which consent shall not be
unreasonably withheld or delayed
Section 7.5 Dispute Resolution.
(a) Arbitration. Except as otherwise expressly provided herein, any
dispute or controversy arising under or in connection with this Agreement will
be settled by binding arbitration to be held in Des Moines, Iowa, in accordance
with the expedited procedures of the Commercial Arbitration Rules ("Commercial
Rules") of the American Arbitration Association (the "AAA") then in effect on
the date the arbitration is initiated, by a single arbitrator to be selected by
the AAA for arbitrators meeting the qualifications set forth herein and approved
by the parties. The parties agree that the arbitrator selected must be a person
with extensive knowledge and experience (at least seven years) in commercial
transactions and the issue(s) submitted to arbitration hereunder.
(i) Discovery. Except as hereafter provided, discovery shall
be at the discretion of the arbitrator and allowed only upon a showing of
good cause. The arbitrator shall require the parties to comply with the
requirements of Federal Rule of Civil Procedure 26(a)(1)(A), (B) and (C);
Federal Rule of Civil Procedure 26(a)(2) (A) and (B); and Federal Rule of
Civil Procedure 26(a)(3)(A), (B) and (C). The arbitrator shall permit as a
matter of right the depositions of the parties and any expert witnesses to
be taken. The arbitrator shall not allow more than one set of
interrogatories limited in number to no more than 30, including subparts
thereof.
(ii) Evidence. The formal rules of evidence shall not be
applicable to the arbitration. Any relevant evidence, including hearsay to
the extent it is determined by the arbitrator to be reliable, may be
admitted by the arbitrator if it is the sort evidence upon which
responsible persons are accustomed to rely in the conduct of serious
business affairs, regardless of the admissibility of such evidence in a
court of law.
35
(iii) Time Limits. The award shall be made by the arbitrator
in writing on or before 30 days after final submission of all matters, or
within such extended time, not exceeding an additional 30 days (60 days
total) as the arbitrator may determine is necessary. The arbitrator shall
serve a copy of the award on each party.
(iv) Scope of Arbitrator's Award. The arbitrator may only
grant a remedy or relief that is within the scope of this Agreement. The
arbitrator shall not award punitive, exemplary, incidental, consequential,
indirect or special damages, and each party to this Agreement waives their
respective right to recover such damages under any circumstances. In
making an award, the arbitrator shall apply and follow the substantive
laws of the Commonwealth of Massachusetts applicable to contracts and
agreements made entirely in that State, without regard to conflict of laws
principles, as they exist on the date the demand for arbitration is filed,
and to the extent applicable, the Federal Arbitration Act; provided,
however, that the procedural rules in the Commercial Rules and the
evidentiary and discovery rules set forth in subsection 7.5(a)(i) shall be
applied notwithstanding state or federal law to the contrary. Judgment
upon the award rendered by the arbitrator may be entered in any court of
competent jurisdiction. The fact that the dispute resolution procedures
specified herein shall have been or may be invoked shall not excuse any
party from performing its obligations under this Agreement, and during the
pendency of any such procedure, all parties shall continue to perform
their respective obligations in good faith, subject to any rights to
terminate this Agreement that may be available to any party hereunder.
(b) Relief. In the event litigation is maintained by a party to this
Agreement against any other party to enforce an arbitration award rendered under
Section 7.5(a) or to seek specific performance of injunctive relief under any
provision of this Agreement, then the party prevailing in such litigation shall
be entitled to recover from the non-prevailing party reasonable attorneys' fees
and costs of suit. Additionally, if either party brings any action for judicial
relief (other than injunctive relief) in the first instance without pursuing
arbitration prior thereto, the party bringing such action will be liable for and
will immediately pay to the other party all of the other party's costs and
expenses (including, without limitation, court costs and attorney fees) to stay
or dismiss such judicial action and/or remove it to arbitration. The failure of
any party to exercise any right granted hereunder shall not operate as a waiver
of any of those rights.
(c) Waiver of Jury Trial. If this Agreement is found to be not
subject to arbitration, each party irrevocably agrees that all legal proceedings
will be tried in a court of competent jurisdiction by a judge without a jury.
Each party waives any right to a jury trial in any such proceeding and agrees to
take, or not to take, such action as is appropriate to give effect to this
provision.
(d) Survival. The provisions of this Section 7.5 shall survive
termination of this Agreement and the Closing indefinitely, notwithstanding
anything contained in this Agreement to the contrary.
36
Section 7.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall constitute one in the same instrument.
Section 7.7 Amendment; Waiver. This Agreement may be amended, modified or
supplemented by a writing signed by the parties against whom enforcement of any
amendment is sought. Any party hereto may, by a written signed instrument,
extend the time for or waive the performance of any of the obligations of any
other party hereto or waive compliance by such other party with any of the
covenants or conditions contained herein.
Section 7.8 Entire Agreement. This Agreement constitutes the entire
agreement between the parties, and there are no agreements, understandings,
restrictions, warranties, or representations between the parties other than
those set forth or provided for in this Agreement relating to the subject matter
hereof
Section 7.9 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. Neither party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Sellers; provided, however, that the Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
Section 7.10 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 7.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
Section 7.12 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the internal laws of
the Commonwealth of Massachusetts without regard to principles of conflicts of
laws.
Section 7.13 No Presumption. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
37
Section 7.14 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
[The remainder of this page has intentionally been left blank.]
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal as of the date first written above.
THE BUYER:
XXXXXXXX TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxx
Xxxx Xxxxxx, President and C.E.O.
STATE OF IOWA, POLK COUNTY, SS:
On this 1 day of October, 2007, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared Xxxx Xxxxxx, to be
personally known, who being by me duly sworn, did say that he is the President
and CEO of said corporation; that said instrument was signed on behalf of said
corporation by authority of its Board of Directors; and that the said Xxxx
Xxxxxx as such officer, acknowledged the execution of said instrument to be the
voluntary act and deed of said corporation by it and by them voluntarily
executed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
39
THE COMPANY:
XXXXX PRODUCTS, INC.
By: /s/ Xxxxx Xxxxxx
Xxxxx X. Xxxxxx, President
STATE OF IOWA, POLK COUNTY, SS:
On this 27 day of Sept., 2007, before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Xxxxx X. Xxxxxx, to be
personally known, who being by me duly sworn, did say that he is the President
of said corporation; that said instrument was signed on behalf of said
corporation by authority of its Board of Directors; and that the said Xxxxx X.
Xxxxxx as such officer, acknowledged the execution of said instrument to be the
voluntary act and deed of said corporation by it and by them voluntarily
executed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
40
THE SELLERS:
FIRST CONTINENTAL FINANCIAL, L.L.C.
Initial if
Accredited
Investor
By: /s/ Xxxxx Xxxxxx BB
Xxxxx X. Xxxxxx, Manager
STATE OF IOWA, POLK COUNTY, SS:
On this 27 day of Sept., 2007, before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Xxxxx X. Xxxxxx, to be
personally known, who being by me duly sworn, did say that he is the Manager of
said limited liability company; that said instrument was signed on behalf of
said limited liability company by authority of its Board of Directors; and that
the said Xxxxx X. Xxxxxx as such officer, acknowledged the execution of said
instrument to be the voluntary act and deed of said limited liability company by
it and by them voluntarily executed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
41
Initial if
Accredited
Investor
/s/ Xxxxxx Block __________________
Xxxxxx Block
STATE OF IOWA, POLK COUNTY, SS:
On this 27 day of Sept., 2007, before me, a Notary Public in and for the
State of Iowa, personally appeared Xxxxxx Block, to me known to be the same
person described in and who executed the foregoing instrument, and acknowledged
that he has executed the same as his voluntary act and deed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
42
Initial if
Accredited
Investor
/s/ Xxx Block __________________
Xxx Block
STATE OF IOWA, POLK COUNTY, SS:
On this 27 day of Sept., 2007, before me, a Notary Public in and for the
State of Iowa, personally appeared Xxx Block, to me known to be the same person
described in and who executed the foregoing instrument, and acknowledged that
she has executed the same as her voluntary act and deed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
43
Initial if
Accredited
Investor
/s/ X. X. Xxxxxxx __________________
Xxxxxxx Xxxxxxx
STATE OF IL, XXXXXXX COUNTY, SS:
On this 27 day of Sept., 2007, before me, a Notary Public in and for the
State of IL, personally appeared Xxxxxxx Xxxxxxx, to me known to be the same
person described in and who executed the foregoing instrument, and acknowledged
that he has executed the same as his voluntary act and deed.
/s/ Xxxxx Xxxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IL
[Notarial Seal]
44
Initial if
Accredited
Investor
/s/ Xxxxxxx X Xxxxx __________________
Xxxxxxx X. Xxxxx
STATE OF IOWA, POLK COUNTY, SS:
On this 25 day of September, 2007, before me, a Notary Public in and for
the State of Iowa, personally appeared Xxxxxxx X. Xxxxx, to me known to be the
same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxx Xxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
[Notarial Seal]
45
Initial if
Accredited
Investor
/s/ XxXxxx Xxxxxxx __________________
XxXxxx Xxxxxxx
STATE OF IOWA, POLK COUNTY, SS:
On this 1st day of Oct., 2007, before me, a Notary Public in and for the
State of Iowa, personally appeared XxXxxx Xxxxxxx, to me known to be the same
person described in and who executed the foregoing instrument, and acknowledged
that he has executed the same as his voluntary act and deed.
/s/ Xxxxxxx X. Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
[Notarial Seal]
46
MODERN BUILDERS, INC.
Initial if
Accredited
Investor
By: /s/ Xxxx Xxxxxxxxx __________________
Xxxx Xxxxxxxxx, Its President
STATE OF IOWA, XXXXXX COUNTY, SS:
On this 28th day of September, 2007, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared Xxxxxxx Xxxxxxxxx,
to be personally known, who being by me duly sworn, did say that he is the
President of said corporation; that said instrument was signed on behalf of said
corporation by authority of its Board of Directors; and that the said Xxxxxxx
Xxxxxxxxx as such officer, acknowledged the execution of said instrument to be
the voluntary act and deed of said corporation by it and by them voluntarily
executed.
/s/ Xxx Xxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
[Notarial Seal]
47
OLGLESBY CREATIVE GROUP, L.L.C.
Initial if
Accredited
Investor
By: /s/ Xxxxx X. Xxxxxxx __________________
Xxxxx X. Xxxxxxx, Its President
STATE OF IOWA, POLK COUNTY, SS:
On this 1st day of October, 2007, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared Xxxxx Xxxxxxx, to
be personally known, who being by me duly sworn, did say that he is the Manager
of said limited liability company; that said instrument was signed on behalf of
said company by authority of its Board of Directors; and that the said
___________________ as such officer, acknowledged the execution of said
instrument to be the voluntary act and deed of said company by it and by them
voluntarily executed.
/s/ Xxxxxxx X. Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
[Notarial Seal]
48
XXXXXX FAMILY, L.L.C.
Initial if
Accredited
Investor
By: /s/ Xxxxx X. Xxxxxx __________________
Xxxxx X. Xxxxxx, Manager
STATE OF IOWA, POLK COUNTY, SS:
On this 27 day of Sept., 2007, before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Xxxxx X. Xxxxxx, to be
personally known, who being by me duly sworn, did say that he is the Manager of
said limited liability company; that said instrument was signed on behalf of
said company by authority of its Board of Directors; and that the said Xxxxx X.
Xxxxxx as such officer, acknowledged the execution of said instrument to be the
voluntary act and deed of said company by it and by them voluntarily executed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
XXXXX XX XXXX
00
XXX XXXXXXX, X.X.
Initial if
Accredited
Investor
By: /s/ Xxxxxx X. Xxxxx __________________
Xxxxxx X. Xxxxx, Its Manager
STATE OF MISSOURI, XXXXXX COUNTY, SS:
On this 26th day of September, 2007, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared Xxxxxx X. Xxxxx, to
be personally known, who being by me duly sworn, did say that he is the Manager
of said limited liability company; that said instrument was signed on behalf of
said company by authority of its Board of Directors; and that the said Xxxxxx X.
Xxxxx as such officer, acknowledged the execution of said instrument to be the
voluntary act and deed of said company by it and by them voluntarily executed.
/s/ Xxxx X. X'Xxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
50
XXXXX X. XXXXX TRUST:
Initial if
Accredited
Investor
By: /s/ Xxxxx X. Xxxxx __________________
Xxxxx X. Xxxxx, Trustee
STATE OF MISSOURI, XXXXXX COUNTY, SS:
On this 26th day of September, 2007, before me, a Notary Public in and for
the State of Missouri, personally appeared Xxxxx X. Xxxxx, to me known to be
known to be the identical person named in and who executed the foregoing
instrument, and acknowledged that the person, as the fiduciary, executed the
instrument as the voluntary act and deed of the person and of the fiduciary.
/s/ Xxxx X. X'Xxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
51
Initial if
Accredited
Investor
/s/ Xxxxx Xxxxxx __________________
Xxxxx Xxxxxx
STATE OF IOWA, POLK COUNTY, SS:
On this 27 day of September, 2007, before me, a Notary Public in and for
the State of Iowa, personally appeared Xxxxx Xxxxxx, to me known to be the same
person described in and who executed the foregoing instrument, and acknowledged
that he has executed the same as his voluntary act and deed.
/s/ Xxxxx Xxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
[Notarial Seal]
52
XXXXX X. XXXXXX TRUST:
Initial if
Accredited
Investor
By: /s/ Xxxxx X. Xxxxxx __________________
Xxxxx X. Xxxxxx, Trustee
STATE OF IOWA, POLK COUNTY, SS:
On this 27 day of Sept., 2007, before me, a Notary Public in and for the
State of Iowa, personally appeared Xxxxx X. Xxxxxx, to me known to be known to
be the identical person named in and who executed the foregoing instrument, and
acknowledged that the person, as the fiduciary, executed the instrument as the
voluntary act and deed of the person and of the fiduciary.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
53
XXXXXXX M.E. XXXXXX TRUST:
Initial if
Accredited
Investor
By: /s/ Xxxxxxx M.E. Xxxxxx 9/28/07
Xxxxxxx M.E. Xxxxxx, Trustee
STATE OF IOWA, POLK COUNTY, SS:
On this 28th day of September, 2007, before me, a Notary Public in and for
the State of Iowa, personally appeared Xxxxxxx M.E. Xxxxxx, to me known to be
known to be the identical person named in and who executed the foregoing
instrument, and acknowledged that the person, as the fiduciary, executed the
instrument as the voluntary act and deed of the person and of the fiduciary.
/s/ Xxxxxxx Xxxxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
[Notarial Seal]
54
QTIP TRUST B OF THE
XXXXX FAMILY TRUST DATED
APRIL 5, 1999:
Initial if
Accredited
Investor
By: /s/ Xxxxxxxx X. Xxxxx __________________
Xxxxxxxx X. Xxxxx, Trustee
STATE OF ARIZONA, MARICOPA COUNTY, SS:
On this 27th day of September, 2007, before me, a Notary Public in and for
the State of Iowa, personally appeared Xxxxxxxx X. Xxxxx, to me known to be
known to be the identical person named in and who executed the foregoing
instrument, and acknowledged that the person, as the fiduciary, executed the
instrument as the voluntary act and deed of the person and of the fiduciary.
/s/ Xxxxxxx X. Xxxxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF ARIZONA
[Notarial Seal]
55
Initial if
Accredited
Investor
/s/ Xxxxxxx X. XxXxxxx MCD
Xxxxxxx X. XxXxxxx
STATE OF MISSOURI, XXXXXXX COUNTY, SS:
On this 2nd day of October, 2007, before me, a Notary
Public in and for the State of Missouri, personally appeared Xxxxxxx X.
XxXxxxx, to me known to be the same person described in and who executed the
foregoing instrument, and acknowledged that he has executed the same as his
voluntary act and deed.
/s/ Xx X. Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
56
Initial if
Accredited
Investor
/s/ Xxxxxxx X. Xxxxxx __________________
Xxxxxxx X. Xxxxxx
STATE OF MISSOURI, XXXXXXX COUNTY, SS:
On this 26th day of September, 2007, before me, a Notary Public in and for
the State of MO, personally appeared Xxxxxxx X. Xxxxxx, to me known to be the
same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxxxx X. Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
57
Initial if
Accredited
Investor
/s/ Xxxxxxx Xxxxxxxxxx __________________
Xxxxxxx Xxxxxxxxxx
STATE OF MO, XXXXXXX COUNTY, SS:
On this 25th day of September, 2007, before me, a Notary Public in and for
the State of MO, personally appeared Xxxxxxx Xxxxxxxxxx, to me known to be the
same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxxx Xxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MO
[Notarial Seal]
58
/s/ Xxxxx X. Xxxxxxxxxx
Xxxxx X. Xxxxxxxxxx,
Successor Trustee of the
Xxxxxx X. Xxxxxxxxxx Trust
dated April 30, 1991, as amended
STATE OF MISSOURI, XXXXXXX COUNTY, SS:
On this 4th day of October, 2007, before me, a Notary Public in and for
the State of Missouri, personally appeared Xxxxx X. Xxxxxxxxxx, Successor
Trustee of the Xxxxxx X. Xxxxxxxxxx Trust dated April 30, 1991, as amended, to
me known to be the same person described in and who executed the foregoing
instrument, and acknowledged that he has executed the same as his voluntary act
and deed.
/s/ Xxx X. Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
59
Initial if
Accredited
Investor
/s/ Xxxxxxx X. Xxxxxxxx WFG
Xxxxxxx X. Xxxxxxxx
STATE OF KANSAS, XXXXXXX COUNTY, SS:
On this 25 day of Sept., 2007, before me, a Notary Public in and for the
State of KS, personally appeared Xxxxxxx X. Xxxxxxxx, to me known to be the same
person described in and who executed the foregoing instrument, and acknowledged
that he has executed the same as his voluntary act and deed.
/s/ Xxxxxx X. Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF KS
[Notarial Seal]
60
Initial if
Accredited
Investor
/s/ Xxxxxx X. Xxxxxxx __________________
Xxxxxx X. Xxxxxxx
STATE OF MISSOURI, CLAY COUNTY, SS:
On this 26th day of Sept., 2007, before me, a Notary Public in and for the
State of Missouri, personally appeared Xxxxxx X. Xxxxxxx, to me known to be the
same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxxx X. Xxxxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
61
XXXXXXX FAMILY TRUST:
Initial if
Accredited
Investor
By: /s/ Xxxxxx X. Xxxxxxx, trustee __________________
Xxxxxx X. Xxxxxxx, Trustee
STATE OF MISSOURI, CLAY COUNTY, SS:
On this 26th day of Sept., 2007, before me, a Notary Public in and for the
State of Missouri, personally appeared Xxxxxx X. Xxxxxxx, to me known to be
known to be the identical person named in and who executed the foregoing
instrument, and acknowledged that the person, as the fiduciary, executed the
instrument as the voluntary act and deed of the person and of the fiduciary.
/s/ Xxxxx X. Xxxxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
62
Initial if
Accredited
Investor
/s/ Xxxxxxx Xxxxxxx __________________
Xxxxxxx Xxxxxxx
STATE OF ILLINOIS, XXXXXXX COUNTY, SS:
On this 27th day of September, 2007, before me, a Notary Public in and for
the State of Illinois, personally appeared Xxxxxxx Xxxxxxx, to me known to be
the same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxxxx X. Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF ILLINOIS
[Notarial Seal]
63
Initial if
Accredited
Investor
/s/ Xxxx X. Xxxxx XX
Xxxx X. Xxxxx
STATE OF IOWA, POLK COUNTY, SS:
On this 27 day of Sept., 2007, before me, a Notary Public in and for the
State of Iowa, personally appeared Xxxx X. Xxxxx, to me known to be the same
person described in and who executed the foregoing instrument, and acknowledged
that he has executed the same as his voluntary act and deed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
64
Initial if
Accredited
Investor
/s/ Xxxxx X. Xxxxxx __________________
Xxxxx X. Xxxxxx
STATE OF IOWA, POLK COUNTY, SS:
On this 27 day of Sept., 2007, before me, a Notary Public in and for the
State of Iowa, personally appeared Xxxxx X. Xxxxxx, to me known to be the same
person described in and who executed the foregoing instrument, and acknowledged
that he has executed the same as his voluntary act and deed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
65
XXXXXX X. XXXXX TRUST:
Initial if
Accredited
Investor
By: /s/ Xxxxxx X. Xxxxx __________________
Xxxxxx X. Xxxxx, Trustee
STATE OF MISSOURI, XXXXXX COUNTY, SS:
On this 26th day of September, 2007, before me, a Notary Public in and for
the State of Iowa, personally appeared Xxxxxx X. Xxxxx, to me known to be known
to be the identical person named in and who executed the foregoing instrument,
and acknowledged that the person, as the fiduciary, executed the instrument as
the voluntary act and deed of the person and of the fiduciary.
/s/ Xxxx X. X'Xxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
66
Initial if
Accredited
Investor
/s/ Xxxxxxx Xxxxxxxxx, Xx. __________________
Xxxxxxx Xxxxxxxxx, Xx.
STATE OF IOWA, POLK COUNTY, SS:
On this 26 day of September, 2007, before me, a Notary Public in and for
the State of Iowa, personally appeared Xxxxxxx Xxxxxxxxx, Xx., to me known to be
the same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
67
Initial if
Accredited
Investor
/s/ Xxxxx Xxxxxxx Xxxxxx, Xx. __________________
Xxxxx Xxxxxxx Xxxxxx, Xx.
STATE OF IOWA, POLK COUNTY, SS:
On this 9/28/07 day of Sept., 2007, before me, a Notary Public in and for
the State of Iowa, personally appeared Xxxxx Xxxxxxx Xxxxxx, Xx., to me known to
be the same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxx Xxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
68
Initial if
Accredited
Investor
/s/ Xxxxxx X. Xxxxx __________________
Xxxxxx X. Xxxxx
STATE OF IOWA, POLK COUNTY, SS:
On this 29 day of September, 2007, before me, a Notary Public in and for
the State of Iowa, personally appeared Xxxxxx X. Xxxxx, to me known to be the
same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxxxx X. Xxxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
[Notarial Seal]
69
QUEST CAPITAL ALLIANCE II, L.L.C.
Initial if
Accredited
Investor
By: /s/ Xxxxxx X. Xxx SWF
Xxxxxx X. Xxx, General Manager
STATE OF MISSOURI, XXXXXX COUNTY, SS:
On this 27th day of September, 2007, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared Xxxxxx X. Xxx, to
be personally known, who being by me duly sworn, did say that he is the General
Manager of said limited liability company; that said instrument was signed on
behalf of said limited liability company by authority of its Board of Directors;
and that the said Xxxxxx X. Xxx as such officer, acknowledged the execution of
said instrument to be the voluntary act and deed of said limited liability
company by it and by them voluntarily executed.
/s/ Xxxxx XxXxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
70
Initial if
Accredited
Investor
/s/ Kwai Xxxx Xxx KYK
Kwai Xxxx Xxx
STATE OF IOWA, POLK COUNTY, SS:
On this ___________ day of ___________________, 2007, before me, a Notary
Public in and for the State of Iowa, personally appeared Kwai Xxxx Xxx, to me
known to be the same person described in and who executed the foregoing
instrument, and acknowledged that he has executed the same as his voluntary act
and deed.
__________________________________________
NOTARY PUBLIC IN AND FOR THE
STATE OF IOWA
71
Initial if
Accredited
Investor
/s/ Xxxxxx X. Xxxxxx __________________
Xxxxxx X. Xxxxxx
STATE OF MISSOURI, ST. LOUIS COUNTY, SS:
On this 27th day of September, 2007, before me, a Notary Public in and for
the State of Missouri, personally appeared Xxxxxx X. Xxxxxx, to me known to be
the same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxxxxx X. Xxxxxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
72
Initial if
Accredited
Investor
/s/ Xxxxx X. Xxxxx __________________
Xxxxx X. Xxxxx
STATE OF MISSOURI, TANEY COUNTY, SS:
On this 28th day of September, 2007, before me, a Notary Public in and for
the State of Missouri, personally appeared Xxxxx X. Xxxxx, to me known to be the
same person described in and who executed the foregoing instrument, and
acknowledged that he has executed the same as his voluntary act and deed.
/s/ Xxxxx Xxxxxxxx
NOTARY PUBLIC IN AND FOR THE
STATE OF MISSOURI
[Notarial Seal]
73
