EXHIBIT 10(k)
AGREEMENT AND PLAN OF ACQUISITION
BETWEEN
XXXXXX-XXXXXXXXX TECHNOLOGIES, L.L.C.
AND
CLEARWORKS TECHNOLOGIES, INC.
Dated: 5-14-99
TABLE OF CONTENTS
ARTICLE I: ACQUISITION OF COMPANY BY BUYER AND RELATED MATTERS...............1
1.1 THE ACQUISITION........................................................1
1.2 CONVERSION OF STOCK; ACQUISITION CONSIDERATION.........................3
1.3 ADDITIONAL RIGHTS; TAKING OF NECESSARY ACTION; FURTHER ACTION..........3
1.4 NO FURTHER RIGHTS OR TRANSFERS.........................................4
ARTICLE II: THE CLOSING.....................................................4
2.1 CLOSING DATE...........................................................4
2.2 CLOSING TRANSACTIONS...................................................4
ARTICLE III: CERTAIN CORPORATE ACTION.......................................5
3.1 COMPANY SPECIAL MEMBER MEETING.........................................5
3.2 BUYER SPECIAL SHAREHOLDER MEETING......................................6
4............................................................................6
ARTICLE IV: REPRESENTATIONS AND WARRANTIES..................................6
4.1 REPRESENTATIONS AND WARRANTIES OF COMPANY..............................6
4.2 REPRESENTATIONS AND WARRANTIES OF BUYER...............................17
5...........................................................................20
ARTICLE V: AGREEMENTS OF THE PARTIES.......................................20
5.1 ISSUANCE OF MEMBERSHIP INTEREST CERTIFICATES OF COMPANY...............20
5.2 DISCLOSURE DOCUMENTS..................................................21
5.3 ACCESS TO INFORMATION.................................................21
5.4 CONFIDENTIALITY; NO SOLICITATION......................................22
5.5 INTERIM OPERATIONS....................................................24
5.6 CONSENTS..............................................................26
5.7 FILINGS...............................................................26
5.8 ALL REASONABLE EFFORTS................................................27
5.9 PUBLIC ANNOUNCEMENTS..................................................27
5.10 NOTIFICATION OF CERTAIN MATTERS.....................................27
5.11 EXPENSES............................................................27
5.12 DELIVERY OF PROXY BY COMPANY MEMBER.................................28
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER.......................28
6.1 CONDITIONS TO COMPANY'S OBLIGATIONS...................................28
6.2 CONDITIONS TO BUYER'S OBLIGATIONS.....................................29
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ARTICLE VII: TERMINATION...................................................30
7.1 TERMINATION...........................................................30
7.2 NOTICE AND EFFECT OF TERMINATION......................................30
7.3 EXTENSION; WAIVER.....................................................31
7.4 AMENDMENT AND MODIFICATION............................................31
ARTICLE VIII: MISCELLANEOUS................................................31
8.1 INDEMNITY OBLIGATIONS.................................................31
8.2 SURVIVAL..............................................................32
9...........................................................................33
ARTICLE VIII: MISCELLANEOUS................................................33
9.1 NOTICES...............................................................33
9.2 ENTIRE AGREEMENT; ASSIGNMENT..........................................33
9.3 BINDING EFFECT; BENEFIT...............................................34
9.4 HEADINGS..............................................................34
9.5 COUNTERPARTS..........................................................34
9.6 GOVERNING LAW.........................................................34
9.7 ARBITRATION...........................................................34
9.8 LIMITATION ON INTEREST................................................35
9.9 TITLE AND RISK OF LOSS................................................35
9.10 SEVERABILITY........................................................35
9.11 REMEDIES CUMULATIVE.................................................35
9.12 CERTAIN DEFINITIONS.................................................35
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EXHIBITS AND SCHEDULES
EXHIBITS SCHEDULES
-------- ---------
2.2(B) Shareholder Agreement
1.2(a) Loans to be Paid at Closing
4.1(a) Articles of Organization and
Regulations of Company
4.1(e) Financial Statements
4.1(f)(i) Location of Leased Property
4.1(f)(ii) Written Notice
4.1(h) Litigation
4.1(j)(i) Employee Benefit Plan
4.1(j)(ii) Employee Benefit Plan
4.1(j)(iv) Material Employment Arrangements,
Contracts, etc.
4.1(m) Investment Banking Fees
4.1(n) Personal Property
4.1(o) Intellectual Property
4.1(p-1) Accounts Receivable
4.1(p-2) Accounts Payable
4.1(q) Material Contracts
4.1(r)(i) Labor Relations; Employees
4.1(r)(ii) List of Employees
4.1(r)(v) Strikes, grievance proceedings,
arbitrations, etc.
4.1(r)(ix) Workers Compensation Reports
4.1(s) Suppliers and Customers
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4.1(t) Conflicts of Interest
4.1(v) Absence of Certain Changes
4.2(a) Articles of Incorporation and Bylaws
of Buyer
4.2(d) Authorized Capital Stock
4.2(g) No Violations
4.2(i) Litigation
4.2(l) Investment Banking Fees
iv
AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT AND PLAN OF ACQUISITION (the "Agreement"), is made and
entered into as of _____________, 1999, by and among CLEARWORKS TECHNOLOGIES,
INC., a Delaware corporation ("Buyer") and XXXXXX-XXXXXXXXX TECHNOLOGIES,
L.L.C., a Texas limited liability company ("Company") and Xxxxxx Xxxxxx, the
sole membership interest holder of Company (sometimes referred to as the
"Member").
RECITALS
WHEREAS, Buyer and Company have determined that it is in the best
interests of their respective Shareholders and member for Buyer to acquire all
the membership interest of Company so Company may be a wholly owned subsidiary
of Buyer upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Board of Directors of Buyer and the sole member of Company
has approved this Agreement and the consummation of the transactions
contemplated hereby and approved the execution and delivery of this Agreement;
and
WHEREAS, for federal income tax purposes, it is intended that this
acquisition of membership interest shall qualify as a tax-free reorganization
under the provisions of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
ACQUISITION OF COMPANY BY BUYER AND RELATED MATTERS
1.1 THE ACQUISITION.
(a) Upon the terms and conditions of this Agreement, at the
"Effective Time" (as defined herein), COMPANY'S membership interest shall be
acquired by BUYER and COMPANY shall become a wholly owned subsidiary of BUYER
(the "Acquisition") in accordance with the provisions of the Texas Business
Corporation Act (the "TBCA") and the Delaware General Corporation Law ("DGCL").
The COMPANY shall continue as a wholly owned subsidiary of BUYER, and shall
change its business form to that of a corporation and its name to "CLEARWORKS
INTERGRATION SERVICES, INC." in accordance with the provisions of the TBCA.
(b) The Acquisition shall become effective as of the date of
Closing when consideration is paid to the principals of COMPANY and COMPANY
delivers COMPANY membership interests to Buyer. The date and time when the
Acquisition shall become effective is referred to herein as the "Effective
Time."
(c) At the Effective Time:
(i) the effect of the Acquisition shall be as provided in
the applicable provisions of the TBCA.
(ii) the COMPANY shall continue its existence under the
laws of the State of Texas and its identity, existence, purposes, powers,
objects, franchises, privileges, rights and immunities shall continue unaffected
and unimpaired by the Acquisition until COMPANY'S business form is changed to
that of a corporation and COMPANY'S name is changed to "ClearWorks Integration
Services, Inc.";
(iii) the existence and rights of COMPANY shall continue
unaffected and unimpaired by the Acquisition until COMPANY'S business form is
changed to that of a corporation and COMPANY'S name is changed to "ClearWorks
Integration Services, Inc.";
(iv) all rights, privileges, immunities, franchises, title
and interests to all assets, whether tangible or intangible and any real,
personal and mixed property or property rights owned by COMPANY shall continue
unaffected and unimpaired by the Acquisition until COMPANY'S business form is
changed to that of a corporation and COMPANY'S name is changed to "ClearWorks
Integration Services, Inc.";
(v) the Articles of Organization of COMPANY as in effect
immediately prior to the consummation of the Acquisition, shall continue
unaffected and unimpaired by the Acquisition, until COMPANY'S business form is
changed to that of a corporation and COMPANY'S name is changed to "ClearWorks
Integration Services, Inc.";
(vi) the Bylaws of the BUYER, as in effect immediately
prior to the consummation of the Acquisition, shall continue unaffected and
unimpaired by the Acquisition until thereafter amended as provided by law and
such Bylaws; and
(vii) the Board of Directors and officers of the Surviving
Corporation shall hold office subject to the provisions of the laws of the State
of Texas.
(viii) COMPANY shall pay any and all sales, use, transfer
or similar taxes payable in connection with the sale, transfer and assignment of
the COMPANY Membership Interest to Buyer.
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1.2 CONVERSION OF STOCK; ACQUISITION CONSIDERATION.
At the Effective Time, and without any action on the part of the
parties hereto, the sole member of COMPANY or any other party,:
(a) All of the shares of membership interest of COMPANY ("COMPANY
Membership Interest") that are issued and outstanding as of the Effective Time
shall, by virtue of the Acquisition and without any action on the part of any
holder thereof, be converted into and represent the right to receive, and shall
be exchangeable for, $50,000.00 on the date of Closing and 75,000 shares of
Buyer Common Stock ("BUYER Common Stock") paid at Closing to Xxxxxx Xxxxxx, sole
member of the Company. Also, BUYER shall discharge existing COMPANY loans in the
amount not to exceed $6,000.00 at the time of closing. Each share of BUYER
Common Stock shall be free of any "Encumbrance" (as defined herein), with all
transfer and stamp taxes, if any, paid thereon by Buyer, and such shares will,
upon their appropriate delivery date, appear as issued and outstanding on the
books and records of BUYER;
(b) Each certificate of capital membership interest of COMPANY
held in treasury as of the Effective Time shall, by virtue of the Acquisition,
be canceled without payment of any consideration therefor and without any
conversion thereof;
(c) BUYER shall pay all charges and expenses, including those of
any exchange agent and the National Association of Securities Dealers, Inc., if
any, in connection with the issuance or exchange of the shares of BUYER Common
Stock for COMPANY Membership Interest;
(d) From and after the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of shares of COMPANY
capital membership interest certificates (or any warrants or other rights to
acquire any of the same) that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates of COMPANY capital
membership interest (or any warrants or other rights to acquire any of the same)
that were outstanding immediately prior to the Effective Time and represented to
the Surviving Corporation, shall be canceled and exchanged for the consideration
to be received therefor in connection with the Acquisition as provided in this
Agreement; and
(e) No fractional shares of BUYER Membership Interest shall be
issued in the Acquisition, and each holder of COMPANY Membership Interest
entitled to receive as part of the Acquisition Consideration fractional shares
shall receive that number of shares of BUYER Common Stock rounded to the nearest
whole number.
1.3 ADDITIONAL RIGHTS; TAKING OF NECESSARY ACTION; FURTHER ACTION.
The BUYER and COMPANY, respectively, shall each use its best efforts
to take all such action as may be necessary and appropriate to effect the
Acquisition under the TBCA as promptly as possible. If at any time after the
Effective Time, any further action is necessary or
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desirable to carry out the purposes of this Agreement, the officers of BUYER and
COMPANY are fully authorized in the name of their corporations or otherwise, and
notwithstanding the Acquisition, to take, and shall take, all lawful and
necessary action.
1.4 NO FURTHER RIGHTS OR TRANSFERS.
At and after the Effective Time, the certificates of membership
interest of COMPANY outstanding immediately prior to the Effective Time shall
cease to provide the holders thereof any rights as a member of COMPANY, except
for the right to surrender the certificate or certificates representing such
shares and to receive the consideration to be received in the Acquisition as
provided in this Agreement.
ARTICLE II
THE CLOSING
2.1 CLOSING DATE.
Subject to satisfaction or waiver of all conditions precedent set
forth in Section 6 of this Agreement, the closing of the Acquisition (the
"Closing") shall take place (a) at the offices of Xxxxxx & Fleschler, 0000
Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, at 10:00 a.m., local time, on May 14,
1999, or (b) at such other time and place and on such other date as BUYER and
COMPANY shall agree. The date of the Closing is referred to herein as the
"Closing Date."
Following Closing, Buyer may receive and open all mail addressed to
COMPANY and, to the extent that such mail and the contents thereof relate to the
COMPANY, deal with the contents thereof in its discretion. Buyer shall notify
COMPANY of (and provide the COMPANY copies of) any mail that on its face obliges
COMPANY to take action.
2.2 CLOSING TRANSACTIONS.
At the Closing:
(a) the holder of COMPANY Membership Interests shall surrender and
deliver to the Buyer, as the parent company, all of such membership interests of
COMPANY.
(b) the holder of COMPANY membership interests shall, to the
extent necessary to comply with applicable federal and state securities laws
(including, if applicable, Rule 145 promulgated under the Securities Act of
1933, as amended), execute and deliver at the
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Closing a copy of a Shareholder Agreement in a form to be mutually agreed by the
parties at that time and attached to this Agreement as Exhibit 2.2(b)
("Shareholder Agreement");
(c) Any outstanding membership agreements relating to COMPANY
capital membership interest other than as contemplated by Section 6.2(c) shall
have been terminated and evidence of such termination satisfactory to BUYER
shall have been delivered to BUYER;
(d) BUYER shall deliver or shall cause to be delivered to the
holder of COMPANY Membership Interest a certificate or certificates representing
the number of shares of BUYER Common Stock as such holder is entitled to receive
in connection with the Acquisition
(e) BUYER shall deliver a check in the amount of $50,000.00,
payable to the order of Xxxxxx X. Xxxxxx;
(f) BUYER shall deliver three checks to Xxxxxx X. Xxxxxx drawn in
the following amounts and payable to the order of the following payees in
discharge of existing COMPANY loans:
$2,440.06 payable to the order of Xxxxxxx X. Xxxxxx,
Address: 0000 Xxxxxxxxx, Xxxxxxx, Xxxxx 00000
$1,243.60 payable to the order of Xxxxxx X. Xxxxxx,
Address: 000 Xxxxxx Xxxx Xx., Xxxxxxxxx, Xxxxx 00000.
$1,865.40 payable to the order of Xxxxxx X. Xxxxxxx
Address: 000 X. Xxxx Xxx Xxxx #000, Xxxxxxx, Xxxxx 00000.
ARTICLE III
CERTAIN COMPANY ACTION
3.1 COMPANY SPECIAL MEMBER MEETING.
COMPANY, acting through its sole Member, shall, in accordance with
applicable Texas law, its Articles of Organization and Regulations:
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(a) duly call, give notice of, convene and hold a special meeting
(the "Special Meeting") of its Member as soon as practicable, but in no event
later than thirty (30) days, following the date of this Agreement for the
purpose of considering and approving this Agreement (which shall constitute the
plan of Acquisition under the TBCA with respect to the Acquisition) and at which
COMPANY'S member shall vote all shares of COMPANY owned by him or her in favor
of the Acquisition and in opposition to all other contrary proposals; and
(b) subject to its fiduciary duties to its Member under applicable
law as advised by counsel, include in an information statement with respect to,
the Special Meeting the unanimous recommendation of its that this Agreement be
approved by the COMPANY'S sole member.
3.2 BUYER SPECIAL SHAREHOLDER MEETING.
BUYER, acting through its Board of Directors or by the Unanimous
Consent of the Shareholders, shall, in accordance with applicable DGCL, its
Certificate of Incorporation and Bylaws:
(a) duly call, give notice of, convene and hold a special meeting
of its shareholders as soon as practicable, but in no event later than thirty
(30) days following the date of Closing, for the purpose of considering and
approving this Agreement; and
(b)subject to its fiduciary duties to its shareholders under
applicable law as advised by counsel, include in a proxy statement for, or any
information statement with respect to, the meeting the unanimous recommendation
of its board of directors that this Agreement be approved by the shareholders of
BUYER.
4.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF COMPANY.
As a material inducement to BUYER to execute this Agreement and
consummate the Acquisition and other transactions contemplated hereby, COMPANY
hereby makes the following representations and warranties to BUYER. For purposes
of the representations and warranties set forth in 4.1 below, COMPANY shall be
deemed to make the following representations and warranties with respect to
COMPANY.
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(A) COMPANY EXISTENCE AND POWER.
(i) COMPANY is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Texas, and has all
company powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have any of the foregoing would not have a Material Adverse Effect.
True, correct and complete copies of the Articles of Organization and
Certificate of Good Standing are attached hereto as Schedule 4.1(a) and are made
a part hereof.
(ii) COMPANY does not have any subsidiary and does not have any
interest in a corporation, partnership, joint venture or other business
association or entity.
(B) COMPANY AUTHORIZATION. The execution, delivery and performance by
COMPANY of the Agreement and the consummation by COMPANY of the transactions
contemplated hereby are within COMPANY'S company powers and have been duly
authorized by all necessary company action. The Agreement constitutes a valid
and binding agreement of COMPANY, enforceable in accordance with its terms. As
of the Effective Time all company action on the part of COMPANY required under
applicable law in order to consummate the Acquisition will have occurred.
(C) NO CONTRAVENTION. The execution and delivery of the Agreement does
not, and the consummation of the transactions contemplated thereby will not: (i)
conflict with or result in any violation of any provision of the Articles of
Organization or Regulations of COMPANY or (ii) conflict with or result in any
violation or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of a right
or obligation or to loss or a benefit under, or any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, incense, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to COMPANY or its properties or assets,
or result in the creation or imposition of any mortgage, lien, pledge, charge or
security interest of any kind ("ENCUMBRANCE") on any asset of COMPANY, except,
only as to clause (ii) above, such as is not reasonably likely to have a
Material Adverse Effect or prevent COMPANY from consummating the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required by or with respect to COMPANY in connection with the
execution and delivery of this Agreement by COMPANY or the consummation by
COMPANY of the transactions contemplated hereby. The Member owns 100% of the
outstanding voting membership interest of the COMPANY. Assuming the accuracy of
the representations in the attached financial statements, no filing under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (the "HRS Act") is required
in connection with the transactions contemplated by this Agreement.
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(D) CAPITALIZATION. Except as set forth in this Section 4.1(d), there are
outstanding (A) no membership interest certificates or other voting securities
of COMPANY, (B ) no securities of COMPANY convertible into or exchangeable for
membership interest certificates or voting securities of COMPANY and (C) no
options, warrants or other rights to acquire from COMPANY, and no obligation of
COMPANY to issue, any membership interest certificates, voting securities or
securities convertible into or exchangeable for membership interest certificates
or voting securities of COMPANY, and there are no agreements or commitments to
do any of the foregoing. There are no voting trusts or voting agreements
applicable to any membership interest certificates of COMPANY.
(E) FINANCIAL STATEMENTS. Attached as Schedule 4.1(e) are copies
of the following unaudited financial statements of COMPANY and accompanying
notes, which were compiled by Xxxxxx X. Xxxxxx and which have previously been
delivered to BUYER on or before the date hereof: Balance Sheet and Income
Statement of COMPANY at and for the year ended December 31, 1998, and the
Balance Sheet and Income Statement of COMPANY at and for the period ended April
30, 1999 (the April 30, 1999 Balance Sheet is hereinafter called the "Warranted
Balance Sheet"). Such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods reported upon and fairly present in all material respects the financial
position of COMPANY as of the date thereof and the results of operations for the
periods then ended (subject to normal year-end adjustments).
(F) REAL PROPERTIES.
(i) COMPANY currently leases real property at those
locations identified on Schedule 4.1(f)(i) hereto pursuant to the true, correct
and complete copies of the lease agreements attached to Schedule 4.1(f)(i).
COMPANY owns or leases no other real estate. None of the leasehold interests
held by COMPANY is subject to any Encumbrance, except (a) liens for ad valorem
taxes not yet due or being contested in good faith; and (b) contractual or
statutory mechanics or materialmen's liens or other statutory or common law
Encumbrances relating to obligations of COMPANY that are not delinquent or are
being contested in good faith. There are no Encumbrances which materially
interfere with the present use of such leasehold.
(ii) Except as described on Schedule 4.1(f)(ii) hereto,
COMPANY has not received any written notice from any governmental entity having
jurisdiction over COMPANY or over any of the real property leased by COMPANY of
any violation by COMPANY of any law, regulation or ordinance relating to zoning,
environmental matters, local building or fire codes or similar matters relating
to any of the real property leased by COMPANY or of any condemnation or eminent
domain proceeding.
(iii) Except such as has not had and is not reasonably
likely to have a Material Adverse Effect, all of the buildings leased by COMPANY
and all plumbing, HVAC, electrical, mechanical and similar systems are in good
repair and adequate for their current use, ordinary wear and tear excepted.
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(iv) COMPANY is not a party to any lease, sublease, lease
assignment or other agreement for the use or occupancy of any of the leasehold
premises wherein COMPANY is the landlord, sub-landlord or assignor, whether by
name, as successor-in-interest or otherwise. There are no outstanding agreements
with any party to acquire the leasehold premises or any portion thereof or any
interest therein.
(v) All certificates of occupancy and all other licenses,
permits, authorizations, consents, certificates and approvals required by all
governmental authorities having jurisdiction over the leasehold premises
occupied by COMPANY have been issued, are fully paid for and are in full force
and effect, will survive the Effective Time and will not be invalidated,
violated or otherwise adversely affected by the Acquisition or the other
transactions contemplated by this Agreement.
(G) NO CONTINGENT LIABILITIES. Except as set forth in the
financial statements referred to in Section 4.1(e) above, at the Effective Time,
COMPANY shall have no liabilities, whether related to tax or non-tax matters,
known or unknown, due or not yet due, liquidated or unliquidated, fixed or
contingent, determined or determinable in amount or otherwise and, to the
knowledge of COMPANY after due inquiry, there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, except as and to the extent reflected on: (i) the Warranted
Balance Sheet; (ii) this Agreement or any Schedule or Exhibit hereto; or (iii)
liabilities incurred since the date of the Warranted Balance Sheet solely in the
ordinary course of business and as accurately reflected on the books and records
of COMPANY; provided, however, that no liability shall be incurred from and
after the date hereof which is in contravention of any negative covenant
contained herein and applicable to COMPANY. Although the following costs and
fees will be incurred in COMPANY'S ordinary course of business, for the purpose
of clarity, COMPANY will incur, as the result of the Acquisition, costs and
expenses for legal, accounting and professional services rendered to COMPANY
incident to the Acquisition, the relocation of Xxxxxx Lithographic, Inc.'s
telephone system (currently housed on COMPANY'S leased premises), the relocation
and cabling of Xxxxxx Lithographic, Inc.'s file server (currently housed on
COMPANY'S leased premises), and the removal of the door between COMPANY'S leased
premises and Xxxxxx Lithographic, Inc. and its replacement with a suitable wall.
(H) LITIGATION. Except as described on Schedule 4.1(h) hereto
there is no action, suit, claim, investigation or proceeding (or, to the
knowledge of COMPANY, any basis therefor) pending against, or to the knowledge
of COMPANY threatened, against or affecting COMPANY or any of its properties
before any court or arbitrator or any governmental body, agency or official that
(i) if adversely determined against COMPANY, would have a Material Adverse
Effect or (ii) in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Acquisition or any of the other transactions contemplated
by the Agreement.
(I) TAXES. COMPANY has timely filed all tax returns required to be
filed by it, or will timely file when due all tax returns required to be filed
by it between the date hereof and the Effective Time. COMPANY has paid in a
timely fashion or will pay when due in a timely fashion, all taxes required to
be paid in respect of the periods covered by such returns, and
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the books and the financial statements of COMPANY reflect, or will reflect,
adequate reserves for all taxes payable by COMPANY which have been, or will be,
accrued but are not yet due. COMPANY is not delinquent in the payment of any
material tax, assessment or governmental charge. No deficiencies for any taxes
have been proposed, asserted or assessed against COMPANY, COMPANY is not aware
of any facts which would constitute the basis for the proposal or assertion of
any such deficiency and there is no action, suit, proceeding, audit or claim now
pending, or to COMPANY'S knowledge, threatened against COMPANY. All taxes which
COMPANY is required by law to withhold and collect have been duly withheld and
collected, and have been timely paid over to the proper authorities to the
extent due and payable. For the purposes of this Agreement, the term "tax" shall
include all federal, state, local and foreign income, payroll, property, sales,
franchise, excise and other taxes of any nature whatsoever. COMPANY has not
granted any extension or waiver of the limitation period applicable to any tax
returns. There are no Encumbrances for taxes upon the assets of COMPANY, except
Encumbrances for current taxes not yet due. There are no tax sharing or tax
allocation agreements to which COMPANY is now or ever has been a party. COMPANY
(A) has not been a member of an affiliated group filing a consolidated federal
income tax return and (B) has no liability for the taxes of any person (other
than COMPANY) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(J) HEALTH BENEFITS. (i) Schedule 4.1(j)
(i) identifies the Group Insurance provided by the COMPANY,
which includes Life Insurance, Long Term Disability and Major Medical issued by
Fortis Benefits. All of such policies are in full force and effect and all
premiums payable have been paid in full and COMPANY is in full compliance with
the terms and conditions of such policies. COMPANY has not received any notice
from any issuer of such policies of its intention to cancel or refusal to renew
any policy issued by it or of its intention to renew any such policy based on a
material increase in premium rates other than in the ordinary course of
business. None of such policies are subject to cancellation by virtue of the
Acquisition or the consummation of the other transactions contemplated by this
Agreement.
(K) INSURANCE COVERAGE. COMPANY maintains insurance covering its
assets, business, equipment, properties, operations, employees, officers and
directors with such coverage, in such amounts, and with such deductibles and
premiums as are consistent with insurance coverage provided for other companies
of comparable size and in comparable industries. All of such policies are in
full force and effect and all premiums payable have been paid in full and
COMPANY is in full compliance with the terms and conditions of such policies.
COMPANY has not received any notice from any issuer of such policies of its
intention to cancel or refusal to renew any policy issued by it or of its
intention to renew any such policy based on a material increase in premium rates
other than in the ordinary course of business. Some of such policies,
specifically, the premises liability insurance, may be subject to cancellation
by virtue of the Acquisition or the consummation of the other transactions
contemplated by this Agreement. There is no claim by COMPANY pending under any
of such policies as to which coverage has been questioned or denied.
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(L) COMPLIANCE WITH LAWS. To the best of the knowledge of COMPANY,
COMPANY is not in violation of, and has not violated, any applicable provisions
of any laws, statutes, ordinances or regulations, other than as would not be
reasonably likely to have a Material Adverse Effect or constitute a felony. To
the best of the knowledge of COMPANY, no such laws, statutes, ordinances or
regulations require or are reasonably expected to require capital expenditures
by COMPANY that are reasonably likely to have a Material Adverse Effect. Without
limiting the generality of the foregoing, COMPANY has all licenses, permits,
certificates and authorizations needed or required for the conduct of COMPANY'S
business as presently conducted and for the use of its properties and premises
occupied by it, except where the failure to obtain a license, permit,
certificate or authorization would not have a Material Adverse Effect.
(M) INVESTMENT BANKING FEES. Except as disclosed on Schedule
4.1(m), there is no investment banker, broker, finder or other similar
intermediary which has been retained by, or is authorized by, COMPANY to act on
its behalf who might be entitled to any fee or commission from COMPANY or BUYER
or any of their respective affiliates upon consummation of the transactions
contemplated by this Agreement.
(N) PERSONAL PROPERTY. COMPANY has good and valid title to all of
its personal property, tangible and intangible, reflected on the Warranted
Balance Sheet and to all other personal property owned by it, free and clear of
any Encumbrance, except that certain file server which is to be relocated and
recabled at Xxxxxx Lithographic, Inc.'s leased premises. COMPANY is the owner of
all of its personal property now located in or upon its leased premises and of
all personal property which is used in the operation of its business. All such
equipment, furniture and fixtures and other tangible personal property are in
good operating condition and repair and do not require any repairs other than
normal routine maintenance to maintain such property in good operating condition
and repair. All inventory as reflected on the Warranted Balance Sheet is useable
in the ordinary course of business free from material defects.
(O) INTELLECTUAL PROPERTY; INTANGIBLE PROPERTY. The names of
COMPANY listed on Schedule 4.1(o) are the only names and trademarks which are
used by COMPANY in the operation of its business . Since its organization,
COMPANY has not done business and has not been known by any other name other
than by its Name. COMPANY owns and has the exclusive right to use all
intellectual property presently in use by it and necessary for the operation of
its business as now being conducted, which intellectual property includes trade
secrets, customer lists and other proprietary information. There are no
outstanding licenses or consents granting third parties the right to use any
intellectual property owned by COMPANY. No royalties or fees are payable by
COMPANY to any third party by reason of the use of any of its intellectual
property. All computer software used by COMPANY in the operation of its business
is readily available in a retail purchase pursuant to a "shrink wrap" license.
COMPANY has received no notice of any adversely held patent, invention, trade
xxxx, copyright, service xxxx or trade name of any person, or any claims of any
other person relating to any of the intellectual property subject hereto, and to
the knowledge of COMPANY, there is no reasonable basis for any such charge or
claim. There is no presently known threatened use or encroachment of any such
intellectual property.
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(P) ACCOUNTS RECEIVABLE. Schedule 4.1(p-1) sets forth a complete
listing of all accounts receivable and notes payable ("Accounts Receivable").
Each of the Accounts Receivable of COMPANY constitutes a valid claim in the full
amount thereof against the debtor charged therewith on the books of COMPANY to
which each such account is payable and has been acquired in the ordinary course
of business. Each Account Receivable is fully collectible to the extent of the
face value thereof (less the amount of the allowance for the doubtful accounts
reflected on the Warranted Balance Sheet) not later than thirty (30) days after
such account receivable is due, except that a verbal agreement exists between
COMPANY and Houston Cutting Tools which provides that Houston Cutting Tools may,
at its option, choose to pay its invoices within 60 days without penalty. To
COMPANY'S knowledge, no account debtor has any valid setoff, deduction or
defense with respect thereto, and no account debtor has asserted any such
setoff, deduction or defense. No Account Receivable arises pursuant to an
agreement with the United States Government or any agency or instrumentality
thereof. The COMPANY shall also provide BUYER with an accurate list of all
accounts receivable obtained subsequent to the Warranted Balance Sheet Date. The
COMPANY shall provide BUYER with an aging of all accounts and notes receivable
showing amounts due in 30 day aging categories upon the execution of this
Agreement and an updated aging within 5 days prior to the Closing Date. All of
the Accounts Receivable shall be owned by BUYER, free and clear of all liens,
subsequent to the execution of this Agreement Also attached hereto and made a
part hereof as Schedule 4.1(p-2) is a complete listing of all accounts payable
and/or notes payable by Company. ("Accounts Payable"). The Accounts Payable list
contains a complete description of debts validly owed by the Company. ANY
ACCOUNTS PAYABLE AND/OR NOTES PAYABLE, EXCEPT THOSE WHICH HAVE BEEN INCURRED OR
WILL BE INCURRED IN THE ORDINARY COURSE OF BUSINESS SINCE APRIL 30, 1999, WHICH
ARE NOT SPECIFICALLY LISTED ON SCHEDULE 4.1(P-2) SHALL BECOME THE SOLE PERSONAL
LIABILITY OF THE SOLE MEMBER OF THE COMPANY, AND BUYER WILL NOT ASSUME SAME.
(Q) CONTRACTS, LEASES, AGREEMENTS AND OTHER COMMITMENTS. COMPANY
is not a party to or bound by any oral, written or implied contracts,
agreements, leases, powers of attorney, guaranties, surety arrangements or other
commitments excluding equipment and furniture leases entered into in the
ordinary course of business (which do not exceed $30,000 in liabilities or
commitments in the aggregate), except for the following (which are hereinafter
collectively called the "Company Agreements"):
(i) The leases and agreements described on Schedules
4.1(f), 4.1(j)(i) and (ii) and 4.1(r)(i);
(ii) Agreements involving a maximum possible liability or
obligation on the part of COMPANY of less than Twenty-Five Thousand Dollars
($25,000) separately or less than One Hundred Thousand Dollars ($100,000) in the
aggregate; and
(iii) The agreements listed on Schedule 4.1(q).
The Company Agreements constitute all of the agreements and instruments
which are necessary and desirable to operate the business as currently conducted
by COMPANY. True, correct and complete copies of each Company Agreement
described and listed under subsections
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4.1(q)(i) and 4.1(q)(iii) have been made available to BUYER within ten (10)
business days prior to the date hereof. The term " Company Agreement" excludes
purchase orders entered into in the ordinary course for personalty or inventory
which may be returned to the vendor without penalty. All of the Company
Agreements are valid, binding and enforceable against the respective parties
thereto in accordance with their respective terms. All parties to all of the
Company Agreements have performed all obligations required to be performed to
date under such Company Agreements, and no party is in default or in arrears
under the terms thereof, and no condition exists or event has occurred which,
with the giving of notice or lapse of time or both, would constitute a default
thereunder. The consummation of this Agreement and the Acquisition will not
result in an impairment or termination of any of the rights of COMPANY under any
Company Agreement, except that COMPANY'S current casualty and liability
insurance may be cancelled as a result of the Acquisition. None of the terms or
provisions of any Company Agreement materially adversely affects the business,
prospects, financial condition or results of operations of COMPANY.
(R) LABOR RELATIONS; EMPLOYEES.
(i) Set forth on Schedule 4.1(r)(i) is a list of:
(A) All collective bargaining agreements and other
agreements requiring arbitration of employment disputes, and any written
amendments thereto, as well as all arbitration awards decided under any such
agreements, and all oral assurances or modifications, past practices, and/or
arrangements made in relation thereto, to which COMPANY is a party or by which
it is bound; and
(B) All employment agreements, and all severance
agreements which have not been fully performed, to which COMPANY is party or by
which it is bound.
(ii) Set forth on Schedule 4.1(r)(ii) is a list of all
employees of COMPANY, broken down by location, together with their rate of
compensation and title.
(iii) COMPANY has delivered to BUYER at least ten (10)
business days prior to the date hereof or such shorter period as has been agreed
to by BUYER, true and correct copies of all of the documents referred to on
Schedule 4.1(r)(i) hereof and all of the personnel policies, employee and/or
supervisor handbooks, procedures and forms of employment applications relating
to the employees of COMPANY.
(iv) There is no union representing or purporting to
represent any of the employees of COMPANY, and COMPANY is not subject to or
currently negotiating any collective bargaining agreements with any union
representing or purporting to represent the employees of any of the foregoing.
(v) Except as set forth on Schedule 4.1(r)(v) :
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(A) There are no strikes, slow downs or other work
stoppages, grievance proceedings, arbitrations, labor disputes or representation
questions pending or, to the best knowledge of COMPANY, threatened;
(B) COMPANY has, to COMPANY'S knowledge, complied
in all material respects with all laws relating to labor, employment and
employment practices, including without limitation, any provisions thereof
relating to wages, hours and other terms of employment, collective bargaining,
nondiscrimination and the payment of social security, unemployment compensation
and similar taxes, and COMPANY is not (1) liable for any arrearages of wages or
any taxes or penalties for failure to comply with any of the foregoing or (2)
delinquent in the payment of any severance, salary, bonus, commission, expenses
or other direct or indirect compensation for services performed by any employee
to the date hereof, or any amount required to be reimbursed to any employee or
former employee. At the time of closing, if Company is liable for any arrearages
of wages or any taxes or penalties for failure to comply with the foregoing,
such shall be the personal liability of the sole member of Company; and
(C) There are no charges, suits, actions,
administrative proceedings, investigations and/or claims pending or, to the
knowledge of COMPANY, threatened against COMPANY, whether domestic or foreign,
before any court, governmental agency, department, board or instrumentality, or
before any arbitrator (collectively "Actions"), concerning or in any way
relating to the employees or employment practices of COMPANY, including, without
limitation, Actions involving unfair labor practices, wrongful discharge and/or
any other restrictions on the right of COMPANY to terminate its respective
employees, employment discrimination, occupational safety and health, and
workers' compensation.
(vi) There are no express or implied agreements, policies,
practices, or procedures, whether written or oral, pursuant to which any
employee of COMPANY is not terminable at will and except as required by law, no
employee is entitled to any benefit or to participate in any employee benefit
plan of COMPANY following such termination of employment.
(vii) COMPANY is not a party to any oral or written (A)
agreement with any executive officer or other key employee of COMPANY (1) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving COMPANY of the nature of the
transactions contemplated by this Agreement, (2) providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (3) providing severance benefits or other benefits after the
termination of employment of such executive officer or key employee regardless
of the reason for such termination of employment; or (B) agreement or plan which
will remain in effect after the Closing, including, without limitation, any
stock option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions
14
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
(viii) COMPANY has not taken any action which requires or,
taken together with the transactions contemplated hereby, would require the
giving of any notice under the Worker Adjustment Retraining and Notification Act
or any comparable state or local law or regulation.
(ix) Set forth on Schedule 4.1(r)(ix) is a complete listing
of all injury reports, worker's compensation reports and claims, safety
citations and reports, OSHA reports and all documents relating to any of the
foregoing.
(S) SUPPLIERS AND CUSTOMERS. Schedule 4.1(s) sets forth a complete
listing of COMPANY'S suppliers and customers. Except as noted on Schedule
4.1(s), the relationship of COMPANY with its suppliers and clients are good
commercial working relationships and no supplier or client of COMPANY has
canceled, curtailed or otherwise terminated or, to the knowledge of COMPANY,
threatened to cancel or otherwise terminate, his or its relationship with
COMPANY.
(T) CONFLICTING INTERESTS. Except as set forth on Schedule 4.1(t),
no director, officer, employee or shareholder of COMPANY, and no relative or
affiliate of any of the foregoing (i) sells or purchases goods or services from
COMPANY or has any pecuniary interest in any supplier or customer of any of the
foregoing or in any other business enterprise with which COMPANY conducts
business or with which any of the foregoing is in competition, or (ii) is
indebted to COMPANY except for money borrowed and as set forth on the Warranted
Balance Sheet. With regard to (ii) above, there exist on the books of COMPANY a
certain two loans from COMPANY to Xxxxxx X. Xxxxxx (in the current amount of
$2,007.83) and to Xxxxx X. Xxxxxxxxx (in the current amount of $139.96). At or
before the effective time, these loans are to be forgiven in full by COMPANY;
provided that, any and all tax liabilities that arise from or in connection to
such loans shall be the personally tax liability of Xxxxxx X. Xxxxxx and Xxxxx
X. Xxxxxxxxx, respectively.
(U) ENVIRONMENTAL PROTECTION. COMPANY has not been notified by any
governmental authority, agency or third party, and COMPANY has no knowledge, of
any violation by COMPANY of any Environmental Statute (as defined below). All
registrations by COMPANY with, licenses from or permits issued by governmental
agencies pursuant to environmental, health and safety laws are in full force and
effect. The term "Environmental Statutes" means all statutes, ordinances,
regulations, orders and requirements of common law concerning discharges to the
air, soil, surface water or groundwater and concerning the storage, treatment or
disposal of any waste or hazardous substance. To COMPANY'S knowledge, there is
no hazardous substance at any premises currently or previously occupied by
COMPANY. COMPANY has not received any notice or any request for information,
notice of claim, demand or other notification that it may be potentially
responsible with respect to any investigation or clean-up of any threatened or
actual release of hazardous substances. To the knowledge of COMPANY, all
hazardous wastes and substances have been stored, treated, disposed of and
15
transported in conformance with all requirements applicable to such hazardous
substances and wastes.
(V) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and to the
extent set forth on the Warranted Balance Sheet or on Schedule 4.1(v), there has
not been (i) any material adverse change in the business, assets, properties,
results of operations, financial condition or prospects of COMPANY; (ii) any
entry by COMPANY into any material commitment or transaction which is not in the
ordinary course of business; (iii) any change by COMPANY in accounting
principles or methods except insofar as may be required by a change in generally
accepted accounting principles; (iv) any declaration, payment or setting aside
for payment of any dividends or other distributions (whether in cash, stock or
property) in respect of capital membership interest of COMPANY or any
Subsidiary, or any direct or indirect redemption, purchase or any other type of
acquisition by COMPANY of any membership interest or any other securities for an
aggregate sum not in excess of $5,000; (v) any agreement by COMPANY, whether in
writing or otherwise, to take any action which, if taken prior to the date of
this Agreement, would have made any representation or warranty in this Section
4.1 untrue or incorrect; (vi) any acquisition of the assets of COMPANY, other
than in the ordinary course of business and consistent with past practice and
not in excess of $5,000 in the aggregate; or (vii) any execution of any
agreement with any executive officer of COMPANY providing for his or her
employment, or any increase in the compensation or in severance or termination
benefits payable or to become payable by COMPANY to its officers or key
employees, or any material increase in benefits under any collective bargaining
agreement or in benefits under any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan or arrangement or
understanding (whether or not legally binding) providing benefits to any present
or former employee of COMPANY. Since the date of the Warranted Balance Sheet,
there has not been and, to the knowledge of COMPANY, there is not threatened,
any material adverse change in financial condition, business, results of
operations or prospects of the business or any material physical damage or loss
to any of the properties or assets of the business or to the premises occupied
in connection with the business, whether or not such loss is covered by
insurance.
(W) STATEMENTS AND OTHER DOCUMENTS NOT MISLEADING. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by COMPANY to in connection with the Acquisition or the
other transactions contemplated hereby, or any information furnished by COMPANY
contains or will contain any untrue statement of any material fact or omit or
will omit to state any material fact required to be stated in order to make such
statement, information, document or other instruments, in light of the
circumstances in which they are made, not misleading. There is no fact known to
COMPANY which may have a Material Adverse Effect on the business, prospects,
financial condition or results of operations of COMPANY or of any of its
properties or assets which has not been set forth in this Agreement as an
exhibit or schedule hereto.
16
4.2 REPRESENTATIONS AND WARRANTIES OF BUYER.
As a material inducement to COMPANY to execute this Agreement and
to consummate the Acquisition and the other transactions contemplated hereby,
BUYER covenants and agrees to make the following representations and warranties
to COMPANY at the Effective Time: Material Adverse Effect as used herein shall
be deemed to apply to COMPANY and its Subsidiaries taken as a whole.
(A) CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The BUYER has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where the failure to have any of the foregoing would not have
a Material Adverse Effect. BUYER is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws of BUYER as amended to date are attached hereto as
Schedule 4.2(a) and are made a part hereof.
(B) CORPORATE AUTHORIZATION. The execution, delivery and
performance by the BUYER of the Agreement and the consummation by it of the
transactions contemplated hereby are within such organization's corporate powers
and, except for any required approval by BUYER shareholders in connection with
the consummation of the Acquisition, have been duly authorized by all necessary
corporate action. The Agreement constitutes a valid and binding agreement of
BUYER, enforceable in accordance with its terms. As of the Effective Time all
corporate action on the part of BUYER required under applicable law in order to
consummate the Acquisition will have occurred.
(C) NO CONTRAVENTION. The execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated thereby will not
(i) conflict with or result in any violation of any provision of the Certificate
of Incorporation or Bylaws of BUYER or (ii) conflict with or result in any
violation or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of an right
or obligation or to loss or a benefit under, any provision of the charter or
Bylaws of BUYER or any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
incense, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to BUYER or its properties or assets, or result in the creation or
imposition of any Encumbrance on any asset of BUYER, except, only as to clause
(ii) above, such as is not reasonably likely to have a Material Adverse Effect
or prevent BUYER from consummating the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, is
required by or with respect to BUYER in connection with the execution and
delivery of this Agreement by either of them or the consummation by either of
them of the transactions contemplated hereby.
17
(D) CAPITALIZATION.
(i) At the Effective Date, the authorized capital stock of
the BUYER is as set forth on Schedule 4.2(d) hereto. All outstanding shares of
capital stock of BUYER have been duly authorized and validly issued and are
fully paid and nonassessable and free of preemptive rights, and upon the
issuance of the shares of BUYER Common Stock to be issued in the Acquisition,
such shares will be duly authorized, validly issued, fully paid and
nonassessable shares of BUYER Common Stock.
(ii) BUYER has a sufficient number of its authorized but
unissued shares of BUYER Common Stock to permit it to issue the number of shares
of BUYER Common Stock due in connection with the Acquisition and the related
transactions, as well as all of BUYER'S other obligations to issue shares of
BUYER Common Stock upon exercise of any option, warrant or other right to
acquire the same.
(E) FINANCIAL STATEMENTS. The financial statements contained
within the SEC Documents, if any, fairly present in all material respects the
results of operations, retained earnings and changes in financial position, as
the case may be, of the BUYER at and for the periods set forth therein (subject,
in the case of unaudited statements, to normal year-end audit adjustments which
will not be material to the BUYER, taken as a whole, in amount or effect), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein. The books and records, financial and other, of the BUYER are, to the
knowledge of the BUYER, in all material respects complete and correct and have
been maintained in accordance with good business and accounting practices.
(F) NO VIOLATIONS. Except as described on Schedule 4.2(g) hereto,
neither BUYER or any of its subsidiaries has received any written notice from
any governmental entity having jurisdiction over it or over any of the real
property leased by it of any violation by BUYER or any of its subsidiaries of
any law, regulation or ordinance relating to zoning, environmental matters,
local building or fire codes or similar matters relating to any of the real
property leased by BUYER or any of its subsidiaries.
(G) NO CONTINGENT LIABILITIES. Except as set forth in the
financial statements referred to in Section 4.2(e) above, at the Effective Time,
BUYER and each of its subsidiaries shall have no liabilities, whether related to
tax or non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise and, to the knowledge of BUYER after due inquiry, there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability except as and to the extent reflected on: (i) this
Agreement or any Schedule or Exhibit thereto; or (iii) liabilities incurred
since the last quarter solely in the ordinary course of business (or in
connection with the transactions contemplated hereby) and as accurately
reflected on the books and records of BUYER; provided however, that no liability
shall be incurred from and after the date hereof which is in contravention of
any negative covenant contained herein and applicable to BUYER.
18
(H) LITIGATION. Except as set forth in Schedule 4.2(i), there is
no action, suit, investigation or proceeding (or, to the knowledge of BUYER, any
basis therefor) pending against, or to the knowledge of BUYER threatened,
against or affecting BUYER, any of its subsidiaries or any of their properties
before any court or arbitrator or any governmental body, agency or official that
(i) if adversely determined against BUYER, would have a Material Adverse Effect
on BUYER or COMPANY, taken as a whole, or (ii) in any manner challenges or seeks
to prevent, enjoin, alter or materially delay the Acquisition or any of the
other transactions contemplated by the Agreement.
(I) TAXES. BUYER and each of its subsidiaries have timely filed
all tax returns required to be filed by them, or will timely file when due all
tax returns required to be filed by them between the date hereof and the
Effective Time. BUYER and each of its subsidiaries have paid in a timely fashion
or will pay when due in a timely fashion, all taxes required to be paid in
respect of the periods covered by such returns, and the books and the financial
statements of BUYER and each of its subsidiaries reflect, or will reflect,
adequate reserves for all taxes payable by BUYER and each of its subsidiaries
which have been, or will be, accrued but are not yet due. BUYER and each of its
subsidiaries are not delinquent in the payment of any material tax, assessment
or governmental charge. No deficiencies for any taxes have been proposed,
asserted or assessed against BUYER and each of its subsidiaries, BUYER and each
of its subsidiaries are not aware of any facts which would constitute the basis
for the proposal or assertion of any such deficiency and there is no action,
suit, proceeding, audit or claim now pending, or to BUYER'S knowledge,
threatened against BUYER and each of its subsidiaries. All taxes which BUYER and
each of its subsidiaries are required by law to withhold and collect have been
duly withheld and collected, and have been timely paid over to the proper
authorities to the extent due and payable. For the purposes of this Agreement,
the term "tax" shall include all federal state, local and foreign income,
property, sales, excise and other taxes of any nature whatsoever. Neither BUYER
or any of its subsidiaries nor any member of any affiliated or combined group of
which BUYER is or has been a member has granted any extension or waiver of the
limitation period applicable to any tax returns. There are no Encumbrances for
taxes upon the assets of BUYER or any of its subsidiaries, except Encumbrances
for current taxes not yet due. There are no tax sharing or tax allocation
agreements to which BUYER or any of its subsidiaries is now or ever has been a
party. BUYER will not be required under Section 481(c) of the Internal Revenue
Code of 1986, as amended (the "Code"), to include any material adjustment in
taxable income for any period subsequent to the Acquisition. Neither the BUYER
or its subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent of
which was BUYER or a subsidiary of BUYER) and (b) has no liability for the taxes
of any person (other than BUYER or any of its subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(J) COMPLIANCE WITH LAWS. To the best knowledge of BUYER, neither
BUYER nor any of its subsidiaries is in violation of, and has not violated, any
applicable provisions of any laws, statutes, ordinances or regulations, other
than as would not be reasonably likely to have a Material Adverse Effect on
COMPANY or BUYER and its subsidiaries, taken as a whole, or constitute a felony.
No such laws, statutes, ordinances or regulations require or are
19
reasonably expected to require capital expenditures that are reasonably likely
to have a Material Adverse Effect on COMPANY or BUYER and its subsidiaries,
taken as a whole. Without limiting the generality of the foregoing, BUYER have
all licenses, permits, certificates and authorizations needed or required for
the conduct of BUYER business as presently conducted and for the use of its
properties and premises occupied by it, except where the failure to obtain a
license, permit, certificate or authorization would not have a Material Adverse
Effect.
(K) INVESTMENT BANKING FEES. Except as disclosed on Schedule
4.2(l), there is no investment banker, broker, finder or other similar
intermediary which has been retained by, or is authorized by, BUYER to act on
its behalf who might be entitled to any fee or commission from COMPANY or BUYER
or any of their respective affiliates upon consummation of the transactions
contemplated by this Agreement.
(L) STATEMENTS AND OTHER DOCUMENTS NOT MISLEADING. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by BUYER to COMPANY in connection with the Acquisition or
the other transactions contemplated hereby, or any information furnished by
BUYER taken as a whole contains or will contain any untrue statement of any
material fact or omit or will omit to state any material fact required to be
stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to BUYER taken as a whole which may have a
Material Adverse Effect on the business, prospects, financial condition or
results of operations of COMPANY or BUYER taken as a whole or of any of its
properties or assets which has not been set forth in this Agreement as an
exhibit or schedule hereto.
5.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 ISSUANCE OF MEMBERSHIP INTEREST CERTIFICATES OF COMPANY.
(a) Between the date hereof and the Effective Time, COMPANY
contemplates that it will issue the following membership interest certificates
all in a manner in compliance with its Articles of Organization, Regulations and
the TBCA and in compliance with applicable federal and state securities laws:
additional membership interest certificates of COMPANY Membership Interest to
its existing Members (and upon the exercise of outstanding options referred to
at subsection (b) hereof) so that upon the Effective Time such existing Members
shall beneficially own no more than the maximum number of authorized outstanding
certificates of COMPANY Membership Interest;
20
(b) Prior to the Effective Time, COMPANY shall cause each holder
of a then outstanding option, warrant, or other convertible security to purchase
certificates of COMPANY membership interest to receive notice of the proposed
Acquisition, and COMPANY shall take whatever other action as may be necessary to
cancel such options and warrants on or prior to the Effective Time. At the
Effective Time, any such options, warrants and other convertible securities with
respect to which the holder thereof has not consented to cancellation or has not
otherwise exercised to purchase membership interest certificates of COMPANY will
be canceled. Immediately following the Effective Time, each employee membership
interest option, membership interest bonus, membership interest award plan or
membership interest appreciation right of COMPANY which provides for the
issuance of COMPANY membership interest certificates, and no further membership
interest awards, membership interest bonuses, membership interest options or
membership interest appreciation rights shall be granted thereunder subsequent
to the Effective Time.
5.2 DISCLOSURE DOCUMENTS.
(a) BUYER shall supply to COMPANY the necessary information in
writing, or cause the necessary information to be supplied in writing, relating
to BUYER for inclusion in any document(s) to be prepared in connection with any
documents to be delivered by COMPANY to its Members in connection with the
Acquisition and the member vote with respect to this Agreement as contemplated
by Section 3.1.
(b) COMPANY shall supply to BUYER the necessary information in
writing, or cause the necessary information to be supplied in writing, relating
to or in connection with the transactions contemplated by this Agreement and any
documents to be delivered by BUYER to its shareholders in connection with the
special meeting to be convened to approve the transactions contemplated by this
Agreement.
5.3 ACCESS TO INFORMATION.
At all times prior to the Effective Time or the earlier
termination of this Agreement in accordance with the provisions of Section 7,
and in each case subject to Section 5.8 below each of the parties hereto shall
provide to the other parties (and the other parties' authorized representatives)
full access during normal business hours and upon reasonable prior notice to the
premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of or
relating to such party (including without limitation all written proprietary and
trade secret information and documents, and other written information and
documents relating to intellectual property rights and matters), and will
cooperate with the other party in conducting its due diligence investigation of
such party.
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5.4 CONFIDENTIALITY; NO SOLICITATION.
(A) CONFIDENTIALITY OF BUYER-RELATED INFORMATION. With respect to
information concerning BUYER that is made available to COMPANY pursuant to the
provisions of Sections 5.5 and 5.6, COMPANY agrees that it shall hold such
information in strict confidence, shall not use such information except for the
sole purpose of evaluating the Acquisition and related transactions and shall
not disseminate or disclose any of such information other than to it directors,
officers, employees, shareholders, affiliates, agents and representatives who
need to know such information for the sole purpose of evaluating the Acquisition
and the related transactions (each of whom shall be informed in writing by
COMPANY of the confidential nature of such information and directed by COMPANY
in writing to treat such information confidentially). If this Agreement is
terminated pursuant to the provisions of Section 7, COMPANY shall immediately
return all such information, all copies thereof and all information, all copies
thereof and all information prepared by COMPANY based upon the same, upon
BUYER'S request; provided, however, that one copy of all such material may be
retained by COMPANY'S outside legal counsel for purposes only of resolving any
disputes under this Agreement. The above limitations on use, dissemination and
disclosure shall not apply to information that (i) is learned by COMPANY from a
third party entitled to disclose it; (ii) become known publicly other than
through COMPANY or any party who received the same through COMPANY provided that
COMPANY has no knowledge that the disclosing party was subject to an obligation
of confidentiality; (iii) is required by law or court order to be disclosed by
COMPANY; or (iv) is disclosed with the express prior written consent thereto of
BUYER. COMPANY shall undertake all necessary steps to ensure that the secrecy
and confidentiality of such information will be maintained in accordance with
the provisions of this paragraph (a). Notwithstanding any thing contained herein
to the contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party, at the
expense of the non-disclosing party, in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(B) CONFIDENTIALITY OF COMPANY-RELATED INFORMATION. With respect
to information concerning COMPANY that is made available to BUYER pursuant to
the provisions of Sections 5.5 and 5.6, BUYER agrees that they shall hold such
information in strict confidence, shall not use such information except for the
sole purpose of evaluating the Acquisition and the related transactions and
shall not disseminate or disclose any of such information other than to their
directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Acquisition and the related transactions (each of whom shall be
informed in writing by BUYER, as appropriate, of the confidential nature of such
information and directed by such party in writing to treat such information
confidentially). If this Agreement is terminated pursuant to the provisions of
Section 7, BUYER agrees to return immediately all such information, all copies
thereof and all information prepared by either of them based upon the same, upon
COMPANY'S request;
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provided, however, that one copy of all such material may be retained by BUYER'S
general counsel for purposes only of resolving any disputes under this
Agreement. The above limitations on use, dissemination and disclosure shall not
apply to information that (i) is learned by BUYER from a third party entitled to
disclose it; (ii) becomes known publicly other than through BUYER or any party
who received the same through either of them provided that BUYER has no
knowledge that the disclosing party was subject to an obligation of
confidentiality; (iii) is required by law or court order to be disclosed by
BUYER; or (iv) is disclosed with the express prior written consent thereto of
COMPANY. BUYER agrees to undertake all necessary steps to ensure that the
secrecy and confidentiality of such information will be maintained in accordance
with the Provisions of this paragraph (b). Notwithstanding any thing contained
herein to the contrary, in the event a party is required by court order or
subpoena to disclose information which is otherwise deemed to be confidential or
subject to the confidentiality obligations hereunder, prior to such disclosure,
the disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party, at the
expense of the non-disclosing party, in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(C) NONDISCLOSURE. Neither BUYER or COMPANY shall disclose to the
public or to any third party the existence of this Agreement or the transactions
contemplated hereby or any other material non-public information concerning or
relating to the other party hereto, other than with the express prior written
consent of the other party hereto, except as may be required by law or court
order or to enforce the rights of such disclosing party under this Agreement, in
which event the contents of any proposed disclosure shall be discussed with the
other party before release; provided, however, that notwithstanding anything to
the contrary contained in this Agreement, any party hereto may disclose this
Agreement to any of its directors, officers, employees, shareholders,
affiliates, agents and representative who need to know such information for the
sole purpose of evaluating the Acquisition, and to any party whose consent is
required in connection with the Acquisition or this Agreement. The parties
anticipate issuing a mutually acceptable, joint press release announcing the
execution of this Agreement and the consummation of the Acquisition.
(D) NO SOLICITATION. At all times prior to the Effective Time or
the earlier termination of this Agreement in accordance with the provisions of
Section 7, COMPANY will not, directly or indirectly, through any officer,
director, agent or otherwise: (i) solicit, initiate or encourage the submission
of inquiries, proposals or offers from any person or entity relating to any
acquisition or purchase of assets of or any equity interest in COMPANY or any
tender offer (including a self-tender offer), exchange offer, merger,
consolidation, business combination, sale of a substantial amount of assets or
sale of securities, liquidation, dissolution or similar transaction involving
COMPANY (a "Transaction Proposal"); (b) enter into or participate in any
discussions or negotiations regarding a Transaction Proposal, or furnish to any
other person or entity any information with respect to the business, properties
or assets of COMPANY in connection with a Transaction Proposal; or (c) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage
any effort or attempt by any other person to do or seek a
23
Transaction Proposal. COMPANY shall promptly notify BUYER if any such proposal
or offer, or any inquiry or contact with any person or entity with respect
thereto is made.
5.5 INTERIM OPERATIONS.
During the period from the date of this Agreement and continuing
until the Effective Time:
(A) INTERIM OPERATIONS OF COMPANY. COMPANY agrees (except as
expressly contemplated by this Agreement, including any Exhibits and Schedules
hereto, or to the extent that BUYER shall otherwise consent in writing) that as
to COMPANY:
(I) ORDINARY COURSE. COMPANY shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it;
(II) DIVIDENDS; CHANGES IN MEMBERSHIP INTEREST. COMPANY
shall not and shall not propose to (a) declare, set aside or pay any dividend,
on, or make other distributions in respect of, any of its capital membership
interest, (b) split, combine or reclassify any of its capital membership
interest or issue, authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for certificates of its membership
interest (c) redeem, repurchase or otherwise acquire any certificates of its
capital membership interest or (d) otherwise change its capitalization.
(III) ISSUANCE OF MEMBERSHIP INTEREST. Except as
contemplated by this Agreement, COMPANY shall not sell, issue, pledge, authorize
or propose the sale or issuance of, pledge or purchase or propose the purchase
of, any membership interest of any class or securities convertible into, or
rights, warrants or options to acquire, any such membership interest
certificates or other convertible securities (other than the issuance of
certificates of COMPANY Membership Interest upon the exercise or conversion, if
any, of currently outstanding COMPANY membership interest options).
(IV) GOVERNING DOCUMENTS. COMPANY shall not amend its
articles of organization or its Regulations.
(V) NO DISPOSITIONS. COMPANY shall not, except for that
certain file server which is to be relocated and recabled at Xxxxxx
Lithographic, Inc.'s leased premises, sell, lease, pledge, encumber or otherwise
dispose of or agree to sell, lease, pledge, encumber or otherwise dispose of,
any of its assets that are material or any other assets except in the ordinary
course of business consistent with prior practice.
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(VI) INDEBTEDNESS. COMPANY shall not incur any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell any debt
securities of COMPANY or guarantee any debt securities of others other than in
the ordinary course of business consistent with prior practice provided that in
no event shall COMPANY incur or otherwise guaranty any indebtedness in any
aggregate amount in excess of $20,000.
(VII) BENEFIT PLANS; ETC. COMPANY shall not adopt or amend
in any material respect any collective bargaining agreement or Employee Benefit
Plan (as defined herein).
(VIII) EXECUTIVE COMPENSATION. COMPANY shall not grant to
any executive officer any increase in compensation or in severance or
termination pay, or enter into any employment agreement with any executive
officer. With regard to (viii) above, there exist on the books of COMPANY a
certain two loans from COMPANY to Xxxxxx X. Xxxxxx (in the current amount of
$2,007.83) and to Xxxxx X. Xxxxxxxxx (in the current amount of $139.96). At or
before the effective time, these loans are to be forgiven in full by COMPANY;
provided that any and all tax liabilities that arise from such loans shall be
the personal liability of Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxxxxxx, respectively.
(IX) ACQUISITIONS. COMPANY shall not acquire (by merger,
consolidation or acquisition of membership interest or assets or otherwise) any
corporation, partnership or other business organization or subdivision thereof,
or make any investment by either purchase of stock or securities, contributions
to capital, property transfer or, except in the ordinary course of business,
purchase of any property or assets, of any other individual or entity;
(X) TAX ELECTIONS. COMPANY shall not make any material tax
election or settle or compromise any material federal, state, local or foreign
tax liability;
(XI) WAIVERS AND RELEASES. COMPANY shall not waive,
release, grant or transfer any rights of material value or modify or change in
any material respect any Company Agreement other than in the ordinary course of
business and consistent with past practice.
(XII) OTHER ACTIONS. COMPANY shall not enter into any
agreement or arrangement to do any of the foregoing. COMPANY shall not take any
action, or fail to take any action, that is reasonably likely to result in any
of the representations and warranties of COMPANY set forth in this Agreement
becoming untrue in any material respect.
(B) INTERIM OPERATIONS OF BUYER. BUYER agrees (except as expressly
contemplated by this Agreement, including any Exhibits and Schedules hereto or
to the extent that COMPANY shall otherwise consent in writing) that:
(I) ORDINARY COURSE. BUYER shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present
25
business organization (provided that such obligation shall not relate to the
officers and employees of BUYER or any of its subsidiaries) and preserve its
relationships with customers, suppliers and others having business dealings with
it.
(II) DIVIDENDS; CHANGES IN STOCK. BUYER shall not (and
shall not propose to) (a) declare or pay any dividend, on, or make other
distributions in respect of, any of its capital stock, (b) split, combine or
reclassify any of its capital stock or issue, authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock, (c) repurchase or otherwise acquire any shares of its
capital stock or (d) otherwise change its capitalization.
(iii) NO DISPOSITIONS. BUYER shall not sell, lease, pledge,
encumber or otherwise dispose of, or agree to sell, lease, pledge, encumber or
otherwise dispose of, any of its assets that are material, or any other assets
except in the ordinary course of business consistent with prior practice.
(IV) INDEBTEDNESS. BUYER shall not incur any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others other than in the ordinary
course of business consistent with prior practice.
(V) OTHER ACTIONS. BUYER shall not enter into any agreement
or arrangement to do any of the foregoing. BUYER shall not take any action, or
fail to take any action, that is reasonably likely to result in any of their
representations and warranties set forth in this Agreement becoming untrue in
any material respect.
5.6 CONSENTS.
BUYER and COMPANY shall cooperate and use their best efforts to
obtain, prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts as are necessary for the consummation of the transactions
contemplated by this Agreement; provided, however, that no loan agreement or
contract for borrowed monies shall be repaid and no contract shall be amended
materially to increase the amount payable thereunder or otherwise to be
materially more burdensome in order to obtain any such consent, approval or
authorization without first obtaining the written approval of the other parties
hereto. After the Closing, the sole Member and COMPANY will use their best
efforts to obtain any consents required in connection with the transaction
contemplated hereby that are requested by BUYER and that have not been
previously obtained.
5.7 FILINGS.
BUYER and COMPANY shall, as promptly as practicable, make any
required filing, and any other required submissions, under any law, statute,
order rule or regulation with
26
respect to the Acquisition and the related transactions and shall cooperate with
each other with respect to the foregoing.
5.8 ALL REASONABLE EFFORTS.
Subject to the terms and conditions of this Agreement and to the
fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective shareholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate the Acquisition and the other transactions
contemplated by this Agreement.
5.9 PUBLIC ANNOUNCEMENTS.
BUYER and COMPANY shall consult with each other before issuing any
press release or otherwise making any public statements with respect to the
Acquisition, this Agreement or the other transactions contemplated by this
Agreement and shall not issue any other press release or make any other public
statement without prior consultation with the other parties, except as may be
required by law or, with respect to BUYER, by obligations pursuant to any
listing agreement with an national securities exchange.
5.10 NOTIFICATION OF CERTAIN MATTERS.
COMPANY shall give prompt notice to BUYER, and BUYER shall give
prompt notice to COMPANY, of (a) the occurrence or non-occurrence of any event,
the occurrence or non-occurrence of which would cause any of its representations
or warranties in this Agreement to be untrue or inaccurate in any material
respect, as to COMPANY, at or prior to the Effective Time, and, as to BUYER, at
or prior to the Effective Time and (b) any material failure of COMPANY, on the
one hand, or BUYER, on the other hand, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, the delivery of any notice pursuant
to this Section shall not limit or otherwise affect the remedies available to
the party receiving such notice under this Agreement as expressly provided in
this Agreement.
5.11 EXPENSES.
Except as otherwise expressly provided herein, all costs and
expenses incurred in connection with the Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Acquisition is consummated.
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5.12 DELIVERY OF PROXY BY COMPANY MEMBER.
The sole Member of COMPANY shall deliver to BUYER or to BUYER'S duly
authorized representative a proxy which shall entitle BUYER or its duly
authorized representative to vote the membership interest certificates of
COMPANY owned by the COMPANY members meeting referred to in Section 3.1 herein,
in favor of the Agreement and in opposition to any other Transaction Proposal,
and which proxy shall be in form and substance reasonably acceptable to the
parties hereto.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE ACQUISITION
6.1 CONDITIONS TO COMPANY'S OBLIGATIONS.
The obligations of COMPANY to consummate the Acquisition and the
other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by COMPANY) at or prior to the Effective
Time (or at such other time prior thereto as may be expressly provided in this
Agreement) of each of the following conditions:
(a) The representations and warranties of BUYER set out in this
Agreement shall be true and correct in all material respects at and prior to the
Effective Time.
(b) BUYER shall have complied in a timely manner and in all
material respects with the respective covenants and agreements set out in this
Agreement.
(c) The shareholders of BUYER shall have approved the Acquisition
in accordance with the provisions of the DGCL.
(d) At the Effective Time the officers of COMPANY shall tender
their immediate resignations from office.
(e) COMPANY shall be reasonably satisfied that the Acquisition
results in a tax-free reorganization under the Code.
(f) Members shall forgive all indebtedness to the COMPANY.
(g) All members, lender, lessor and other parties' consents and
approvals, as well as all filings with, and all necessary consents or approvals
of, all federal, state and local governmental authorities and agencies, as are
required under this Agreement, applicable law or any applicable contract or
agreement (other than as contemplated by this Agreement) to complete the
Acquisition shall have been secured.
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(h) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Acquisition or the related
transactions.
(i) In the event any condition precedent set forth in this Section
6.1 shall not have been met, the sole remedy of COMPANY shall be either to waive
such failure and proceed to close hereunder, or to terminate this Agreement in
which event neither COMPANY nor BUYER shall have any claim or action against the
other.
6.2 CONDITIONS TO BUYER'S OBLIGATIONS.
The obligations of BUYER to consummate the Acquisition and the
other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by BUYER) at or prior to the Effective
Time (or at such other time prior thereto as may be expressly provided in this
Agreement) of each of the following conditions:
(a) Holders of not more than five percent (5%) of the outstanding
COMPANY Membership Interest shall have filed with COMPANY, prior to the COMPANY
members meeting at which a vote is to be taken with respect to a proposal to
approve this Agreement, a written objection to such proposed action, as required
by Article 5.12A(l)(a) of the TBCA in order for such member to perfect the right
to dissent from such proposed action.
(b) The representations and warranties of COMPANY set out in this
Agreement shall be true and correct in all material respects at and as of the
Effective Time.
(c) Between the date hereof and the Effective Time, the COMPANY
Options shall be exercised and the appropriate membership interest certificates
of COMPANY Membership Interest shall be issued. In the event any COMPANY Options
remain outstanding, prior to the Effective Time, then COMPANY shall take any and
all actions necessary to cancel such COMPANY Options.
(d) To the extent practicable under the circumstances and time
constraints of this Acquisition, COMPANY shall have complied in a timely manner
and in all material respects with its covenants and agreements set out in this
Agreement.
(e) All managers, members, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Acquisition shall have been secured.
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(f) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Acquisition or the related
transactions.
(g) COMPANY shall have approved the Acquisition in accordance with
the TBCA and each of the other proposals set forth in the Proxy Statement which
are a condition precedent to the consummation of the Acquisition.
ARTICLE VII
TERMINATION
7.1 TERMINATION.
This Agreement may be terminated and the Acquisition may be
abandoned at any time prior to the Effective Time, whether before or after the
vote of the sole member of COMPANY and the shareholders of BUYER:
(a) by mutual written consent of the board of directors of BUYER
and sole member of COMPANY:
(b) by BUYER or COMPANY:
(i) if any court of competent jurisdiction, or any
governmental body, regulatory or administrative agency or commission having
appropriate jurisdiction shall have issued an order, decree or filing or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable;
(c) by COMPANY if any of the conditions specified in Section 6.1
have not been met or waived by COMPANY at such time as such condition can no
longer be satisfied; or
(d) by BUYER if any of the conditions specified in Section 6.2
have not been met or waived by at such time as such condition can no longer be
satisfied.
7.2 NOTICE AND EFFECT OF TERMINATION.
In the event of the termination and abandonment of this Agreement
pursuant to Section 7.1, written notice thereof shall forthwith be given to the
other party or parties specifying
30
the provision pursuant to which such termination is made, and this Agreement
shall forthwith become void and have no effect without any liability on the part
of any party or its directors, managers, officers, members or shareholders.
Nothing contained in this Section 7.2 shall relieve any party from any liability
for any breach of this Agreement.
7.3 EXTENSION; WAIVER.
Any time prior to the Effective Time, the parties may (a) extend the
time for the performance of any of the obligations or other acts of any other
party under or relating to this Agreement; (b) waive any inaccuracies in the
representations or warranties by any other party or (c) waive compliance with
any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any other party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
7.4 AMENDMENT AND MODIFICATION.
This Agreement may be amended, whether before or after the vote of
the sole member of COMPANY or shareholders of BUYER, by written agreement of
BUYER and COMPANY; provided, however, that after the approval, if any, of this
Agreement by the sole member of COMPANY, no such amendment shall reduce or
change the consideration to be received by the sole member of COMPANY in
connection with the Acquisition as set out in Section 1.3 hereof or shall
otherwise adversely affect the rights under this Agreement of the sole member of
COMPANY without the approval of such adversely affected member. This Agreement
may not be amended except by an instrument in writing signed on behalf of BUYER
and COMPANY.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNITY OBLIGATIONS.
COMPANY'S agrees to indemnify and hold the BUYER (including its
officers, directors, employees and agents) harmless from and against any and all
claims, actions, causes of action, arbitrations, proceedings, losses, damages,
liabilities, judgments and expenses (including, without limitation, reasonable
attorneys' fees) ("Indemnified Amounts") incurred by the BUYER as a result of
(a) any error, inaccuracy, breach or misrepresentation in any of the
representations and warranties made by or on behalf of COMPANY in this
Agreement, (b) any violation or breach by COMPANY of or default by COMPANY under
the terms of this Agreement, (c) any act or omission occurring, or condition or
circumstances existing, prior to the Closing Date, or any condition or
circumstances caused by any act or omission occurring prior to the Closing Date,
COMPANY or with respect to the Company Membership Interest or the COMPANY
business not fully covered by a specific accrual liability or reserve on the
unaudited financial
31
statements, including the items set forth in the attached Schedules (d) any
product liability or other claims concerning services provided or products sold
by the COMPANY prior to the Closing Date not fully covered by a specific accrual
liability or reserve on the audited financial statements and (e) any debts,
liabilities or obligations of COMPANY, direct or indirect, fixed, contingent or
otherwise, that are not expressly assumed by BUYER in this Agreement and not
expressly listed on the Warranted Balance Sheet and Schedule 4.1(p-2)(Accounts
Payable). The foregoing is not an exclusive remedy, and BUYER shall be entitled
to recover its reasonable and necessary attorneys' fees and litigation costs and
expenses incurred in connection with successful enforcement of its rights under
this Section.
BUYER agrees to indemnify and hold COMPANY and MEMBER harmless from
and against any and all claims, actions, causes of action, arbitrations,
proceedings, losses, damages, liabilities, judgments and expenses (including,
without limitation, reasonable attorney's fees) ("Indemnified Amounts") incurred
by the COMPANY or Member as a result of (a) any error, inaccuracy, breach or
misrepresentation in any of the representations and warranties made by BUYER in
this Agreement, (b) any violation or breach by BUYER of or default by BUYER
under the terms of this Agreement, (c) any act or omission occurring, or
condition or circumstances existing, prior to the Closing Date, or any condition
or circumstances caused by any act or omission occurring prior to the Closing
Date, by BUYER or with respect to BUYER business not fully covered by a specific
accrual liability or reserve on the unaudited financial statements, including
the items set forth in the attached Schedules. BUYER agrees to indemnify and
hold COMPANY and Member harmless from any failure by BUYER to discharge fully or
otherwise perform its obligation with regard to all debts, liabilities or
obligations of COMPANY, direct or indirect, fixed, contingent or otherwise, that
are expressly assumed by BUYER in this Agreement. Such debts, liabilities or
obligations of COMPANY include, in addition to those listed on the Warranted
Balance Sheet and Schedule 4.1 (p-2) (Accounts Payable), the COMPANY'S accounts
with or vendor/creditor customer relationships with the following entities:
Intertel (lease purchase of COMPANY telephone system; Xxxxxx Group
(Landlord/Property Manager of COMPANY'S leased premises); Houston, Lighting and
Power; Southwestern Xxxx (telephone service including ISDN line); Fortis (Group
Insurance, including Life Insurance Provider); Insync (companies internet
service provider); Sparkletts (Water machine and delivery service). The
foregoing is not an exclusive remedy, and COMPANY and/or Member shall be
entitled to recover his reasonable and necessary attorney's fees and litigation
costs and expenses incurred in connection with successful enforcement of their
rights under this Section.
8.2 SURVIVAL
The representations, warranties and indemnities set forth in this
Agreement and in any certificate or instrument delivered in connection herewith
shall be continuing and shall survive the Closing. The covenants and agreements
entered into pursuant to this Agreement to be performed after the Closing shall
survive the Closing without limitation.
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9.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES.
All notices requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date delivered, if delivered
personally, or upon the second business day after it shall have been deposited
by certified or registered mail with postage prepaid, or sent by telex, telegram
or telecopier, as follows (or at such other address or facsimile number for a
party as shall be specified by like notice):
if to COMPANY, to it at:
Xxxxxx-Xxxxxxxxx Technologies, L.L.C.
0000 Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
if to BUYER to it at:
ClearWorks Technologies, Inc.
0000 Xxxxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. XxXxxxx, President
Fax (000) 000-0000
9.2 ENTIRE AGREEMENT; ASSIGNMENT.
This Agreement, including all Exhibits and Schedules hereto, (a)
constitutes the entire agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
(b) shall not be assigned by operation of law or otherwise, provided that,
subject to any approvals required by applicable law, BUYER may assign its
respective rights and obligations to any majority-owning or owned, direct or
indirect, parent, subsidiary or subsidiaries of BUYER, but no such assignment
shall relieve BUYER of its obligations under this Agreement.
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9.3 BINDING EFFECT; BENEFIT.
This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and assigns. Nothing in this
Agreement is intended to confer on any person other than the parties to this
Agreement or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.4 HEADINGS.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
9.5 COUNTERPARTS.
This Agreement may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
9.6 GOVERNING LAW.
This agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without regard to the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
9.7 ARBITRATION.
If a dispute arises as to the interpretation of this Agreement, it
shall be decided finally by three arbitrators in an arbitration proceeding
conforming to the Rules of the American Arbitration Association applicable to
commercial arbitration. The arbitrators shall be appointed as follows: one by
COMPANY, one by the BUYER and the third by the said two arbitrators, or, if they
cannot agree, then the third arbitrator shall be appointed by the American
Arbitration Association. The third arbitrator shall be chairman of the panel and
shall be impartial. The arbitration shall take place in Houston, Texas. The
decision of a majority of the Arbitrators shall be conclusively binding upon the
parties and final, and such decision shall be enforceable as a judgment in any
court of competent jurisdiction. Each party shall pay the fees and expenses of
the arbitrator appointed by it, its counsel and its witnesses. The parties shall
share equally the fees and expenses of the impartial arbitrator.
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COPY DOES NOT MATCH FROM HERE TO END OF FILE.
9.8 LIMITATION ON INTEREST.
Regardless of any provision contained herein or any other document
executed in connection with this Agreement, the parties hereto shall not be
obliged to pay, and the parties hereto shall never be entitled to charge,
reserve, receive, collect or apply, as interest (it being understood that
interest shall be calculated as the aggregate of all charges that are contracted
for, charged, reserved, received, collected, applied or paid that constitute
interest under applicable law) payable hereunder any amount in excess of the
maximum nonusurious contract rate of interest allowed from time to time by
applicable law, and in the event any of the parties hereto ever charges,
reserves, receives, collects or applies, as interest, any such excess, at the
option of the payor of such interest, such amount shall be deemed a partial
prepayment of the amount payable hereunder or promptly refunded to the payor of
such interest.
9.9 TITLE AND RISK OF LOSS.
Title to, liability for and in connection with, and risk of loss of
COMPANY Membership Interest shall remain with the Member in every instance until
the Closing.
9.10 SEVERABILITY.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, the remainder of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
9.11 REMEDIES CUMULATIVE.
No right or election given by any term of this Agreement shall be deemed
exclusive but each shall be cumulative with all other rights, remedies and
elections available at law or equity.
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9.12 CERTAIN DEFINITIONS.
As used herein:
(A) "AFFILIATE" shall have the meanings ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended to date (the "Exchange Act");
(B) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which federally chartered financial institutions are not open
for business in the City of Houston, Texas;
(C) "KNOWLEDGE" shall mean the actual current knowledge of the
executive management of the party to this Agreement to whom knowledge is
ascribed together with the knowledge such executive management should reasonably
be expected to have in the performance of its duties and responsibilities.
(D) "MATERIAL ADVERSE EFFECT" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(E) "PERSON" means any individual, corporation, partnership,
association, trust or other entity or organization, including a governmental or
political subdivision or any agency or institution thereof; and
(F) "SUBSIDIARY" shall mean, when used with reference to an
entity, any corporation, a majority of the outstanding voting securities of
which is owned directly or indirectly, or a majority of the board of directors
of which may be elected, by such entity.
IN WITNESS WHEREOF, BUYER and COMPANY have caused this Agreement to
be signed by their respective officers hereunto duly authorized, all as of the
date first written above.
CLEARWORKS TECHNOLOGIES, INC.
By: ______________________________
Name: _______________________
Title: _______________________
XXXXXX-XXXXXXXXX TECHNOLOGIES, L.L.C.
By: ______________________________
Name: _______________________
Title: _______________________
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