AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of April 15, 2003,
among NETVIEW TECHNOLOGIES, INC., a Texas corporation (the "Company"), ELINEAR,
INC., a Delaware corporation (the "Parent"), and NETVIEW ACQUISITION CORP., a
Texas corporation, and a wholly owned subsidiary of Parent ("Merger Sub").
WHEREAS, the respective Boards of Directors of Parent, the Merger Sub and
the Company have duly approved the acquisition of the Merger Sub by means of a
Merger of the Merger Sub with and into the Company pursuant to the terms of this
Agreement, it is therefore agreed as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the Texas Business
Corporation Act (the "Act"), the Merger Sub shall be merged with the Company
(the "Merger") as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Article VI hereof. Following the
Merger, the Company shall continue as the surviving corporation (the "Surviving
Corporation") and continue its existence under the laws of the State of Texas,
and the separate corporate existence of the Merger Sub shall cease.
SECTION 1.2 Effective Time. The Merger shall be consummated by filing
with the Secretary of State of Texas the Articles of Merger in the form attached
hereto as Exhibit "A" (the "Articles of Merger") (the time of such filing being
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the "Effective Time").
SECTION 1.3 Effects of the Merger. The Merger shall have the effects
set forth in Article 5.06 of the Act. As of the Effective Time, the Merger Sub
shall merge with and into the Company, and the Company shall become a direct
wholly owned Subsidiary of Parent. It is the intention of the parties that the
Merger will constitute a tax-free reorganization pursuant to the provisions of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986 (as amended) (the
"Code").
SECTION 1.4 Articles of Incorporation and Bylaws. The Articles of
Incorporation of the Company and the Bylaws of the Company, both as in effect at
the Effective Time, shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation.
SECTION 1.5 Directors. As of the Effective Time, all directors of the
Company shall remain the directors of the Surviving Corporation.
SECTION 1.6 Officers. Upon execution of this Agreement and
satisfaction of all conditions to the Closing of the Merger, the officers of the
Company will remain as the officers of the Surviving Corporation as of the
Effective Time.
SECTION 1.7 Transfer of and Payment for Shares.
(a) Each share of common stock, par value $0.001 ("Shares"), of
the Company issued and outstanding immediately prior to the Effective Time,
shall, by virtue of the Merger and without any action on the part of any holder
thereof, be cancelled and reissued as 12,961.979 newly issued, fully paid, and
non-assessable share of the common stock of the Parent. From and after the
Effective Time, holders of certificates formerly evidencing Shares of the
Company shall cease to have any rights as stockholders of the Company, except as
provided herein or by law.
(b) In exchange for the cancelled shares of the Company, the
shareholders shall be entitled to receive the following (referred to as the
"Merger Consideration"): 12,961,979 shares of the common stock, par value $.02
per share of the Parent, to be issued in the name and denominations set forth in
the Disclosure Schedule.
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SECTION 1.8 Closing. Upon the terms and subject to the conditions
hereof, as soon as practicable after the mutual agreement of the Company, the
Parent and the Merger Sub that all conditions described in Article VI have been
satisfied or waived by the applicable party, the Company and the Merger Sub
shall execute in the manner required by the Act and deliver to the Texas
Secretary of State duly executed and verified Articles of Merger, and the
parties shall forthwith thereafter take such other and further actions as may be
required by law to make the Merger effective. Contemporaneous with the filings
referred to in this Section, a closing (the "Closing") will be held at the
offices of Xxxxxx & Xxxxxxxxx, P.C., Xxxxx Xxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000, for the purpose of implementing all transactions described in this
Agreement.
SECTION 1.9 Excluded Assets. Prior to the Effective Time, the Company
shall take appropriate action to convey to the shareholders any assets and any
liabilities associated with such assets that are listed in the Disclosure
Schedule and agreed to by Parent.
ARTICLE II
APPRAISAL RIGHTS
SECTION 2.1 Stockholders Rights. By virtue of the Act, the
stockholders of the Company are entitled to exercise any appraisal rights in
connection with the Merger. It is a condition to Parent's and Merger Sub's
obligation to complete the Merger and that no stockholder of the Company shall
exercise any dissenter's rights.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Parent and the Merger Sub as
follows:
SECTION 3.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. The Company has no subsidiaries. The Company has all
requisite power and authority to own or operate its properties and conduct its
business as it is now being conducted. The Company is duly qualified and in
good standing as a foreign corporation or entity authorized to do business in
each of the jurisdictions in which the character of the properties owned or held
under lease by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure to qualify would not have a
Material Adverse Effect. The Company has delivered to the Parent and Merger Sub
true and correct copies of the Articles of Incorporation and Bylaws of the
Company.
SECTION 3.2 Capitalization. The authorized capital stock of the
Company consists of 1,000,000 shares of common stock, par value $.001 per share.
As of December 31, 2002, 1,000 shares were issued and outstanding. Except as
described in the Disclosure Schedule, since December 31, 2002, the Company has
not issued any shares or other capital stock, and has not repurchased or
redeemed any shares. All issued and outstanding shares are validly issued,
fully paid, non-assessable and free of preemptive rights.
SECTION 3.3 Authority Relative to this Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby shall, as of the Closing, have been duly and validly authorized by the
Board of Directors and shareholders, and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by the Company and, assuming this Agreement constitutes a
valid and binding obligation of each of Parent and Merger Sub, this Agreement
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with and subject to its terms and conditions.
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SECTION 3.4 Financial Statements. The Company has delivered to Parent
copies of its financial statements as of and for the year ended December 31,
2002, certified by Xxxxxx X. Xxxxxxxxx & Co., P.C., (the "Company Financial
Statements"). Each of the Company Financial Statements fairly presents the
financial position of the entity or entities to which it relates as of its date,
and each of the related statements of operations and retained earnings and cash
flows or equivalent statements in the Company Financial Statements (including
any related notes and schedules) fairly presents the results of operations,
retained earnings and cash flows, as the case may be, of the entity or entities
to which it relates for the period set forth therein in each case in accordance
with generally accepted accounting principles applicable to the particular
entity consistently applied throughout the periods involved, except as may be
noted therein. The accounts receivable, notes receivable and any other
contingent asset reflected on the latest balance sheet of the Company arose from
bona fide transactions in the ordinary course of business, and, to the best of
the Company's knowledge, are not subject to any offset or counterclaim. The
expenses reflected on the latest balance sheet of the Company are related to
Company business.
SECTION 3.5 Consents and Approvals; No Violation. Except as described
in the Disclosure Schedule, neither the execution and delivery of this Agreement
by the Company nor the consummation of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (a) conflict
with or result in any breach of any provision of the Articles of Incorporation,
Bylaws or other organization documents of the Company, (b) require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority (as defined herein), except the filing of the Articles of
Merger pursuant to the Act, or where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not in the aggregate have a Material Adverse Effect (as defined herein), (c)
result in a material default (with or without due notice or lapse of time or
both) (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, Contract (as hereinafter defined), license, agreement or other
instrument or obligation to which the Company is a party or by which the Company
or any of its assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been requested, (d) result in the creation or imposition of any
lien, charge or other encumbrance on the assets of the Company, or (e) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Company or any of its assets, except for violations which would not in the
aggregate have a Material Adverse Effect.
SECTION 3.6 Litigation, etc. Except as described in the Disclosure
Schedule, (a) there is no action, claim, or proceeding pending or, to the
Knowledge of the Company, threatened, to which the Company or its officers or
directors is or would be a party before any court or Governmental Authority
acting in an adjudicative capacity, or any arbitrator or arbitration tribunal;
(b) the Company is not subject to any outstanding order, writ, injunction or
decree; and (c) since December 31, 2002, there have been no claims made or
actions or proceedings brought against any officer or director of the Company
arising out of or pertaining to any action or omission within the scope of his
employment or position with the Company. All litigation and other
administrative, judicial or quasi-judicial proceedings to which the Company or
its officers or directors is a party or to which they have been threatened to
their knowledge to be made a party, are described in the Disclosure Schedule.
SECTION 3.7 Changes. Except as expressly contemplated by this
Agreement or as reflected in the Disclosure Schedule or in the Company Financial
Statements, since December 31, 2002, the Company has conducted its business only
in the ordinary and usual course, and, except as set forth in the Disclosure
Schedule or in the Company Financial Statements, none of the following has
occurred, except as shall have occurred in the ordinary course of its business:
(a) any material adverse change in the condition (financial or
other), results of operations, business, assets, customer, supplier and employee
relations of the Company, taken as a whole;
(b) any change in accounting methods, principles or practices by the
Company materially affecting its assets, liabilities or business, except insofar
as may have been required by a change in generally accepted accounting
principles;
(c) any damage, destruction or loss, whether or not covered by
insurance, resulting in a Material Adverse Effect on the Company;
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(d) any declaration, setting aside or payment of dividends or
distributions in respect of the Shares, or any redemption, purchase or other
acquisition of any of the securities of the Company;
(e) any issuance by the Company of, or commitment of the Company to
issue, any Shares or other capital stock or securities convertible into or
exchangeable or exercisable for Shares or other capital stock;
(f) any entry by the Company into any commitment or transaction
material to the condition (financial or other), business or operations of the
Company, taken as a whole, which is not in the ordinary course of business and
consistent with past practice;
(g) any revaluation by the Company of any of its assets, including
without limitation, writing down the value of assets or writing off notes or
accounts receivable other than in the ordinary course of business and consistent
with past practice;
(h) any agreement by the Company to do any of the things described
in the preceding clauses (a) through (g) other than as expressly contemplated or
provided for herein; or
(i) any waiver by the Company of any rights that, singularly or in
the aggregate, are material to the business, assets, financial condition, or
results of operations of the Company, taken as a whole.
SECTION 3.8 Real Property.
(a) The Disclosure Schedule sets forth the location and legal
description of each parcel of Real Property owned, leased or utilized by the
Company.
(b) The Real Property and the present uses thereof comply in all
material respects with all material laws and regulations (including zoning laws
and ordinances) of each Government having jurisdiction over the Real Property,
and the Company has not received any notice from any Government alleging that
the Real Property or any improvements erected or situated thereon, or the uses
conducted thereon or therein, violate any regulations of any Government having
jurisdiction over the Real Property.
(c) The Company holds all Environmental Permits necessary for
conducting its business and has conducted, and is presently conducting, its
business in material compliance with all applicable Environmental Laws and
Environmental Permits held by it, including, without limitation, all record
keeping and filing requirements. There are no pending, or to the Company's
Knowledge, threatened Actions or Orders against or involving the Company
relating to any alleged past or ongoing violation of any Environmental Laws or
Environmental Permits with respect to the Real Property, nor to the Company's
Knowledge is the Company subject to any liability for any such past or ongoing
violation.
SECTION 3.9 Taxes, Tax Returns.
(a) Except as set forth on the Disclosure Schedule, the Company
has duly and timely filed in correct form all federal, state and local
information returns and tax returns required to be filed by it on or prior to
the date hereof (all such returns to the Knowledge of the Company being accurate
and complete in all material respects) and, to the Knowledge of the Company, has
duly paid or made provision for the payment of all taxes and other governmental
charges which have been incurred or are due or claimed to be due from them by
any Governmental Authority (including, without limitation, those due in respect
of their properties, income, business, capital stock, franchises, licenses,
sales and payrolls) other than taxes or other charges (i) which are not yet
delinquent, (ii) have not been finally determined or (iii) that would not have a
Material Adverse Effect on the Company. The liabilities and reserves for taxes
in the Company Financial Statements are sufficient to the best of the Company's
Knowledge in the aggregate for the payment of all unpaid federal, state and
local taxes (including any interest or penalties thereon), whether or not
disputed or accrued, for the period ended December 31, 2002, or for any year or
period prior thereto, and for which the Company may be liable in its own right
or as transferee of the assets of, or successor to, any corporation, person,
association, partnership, joint venture or other entity.
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(b) To the Knowledge of the Company, (i) proper and accurate
amounts have been withheld by the Company from its employees and others for all
prior periods in compliance in all material respects with the tax withholding
provisions of applicable federal, state and local laws and regulations, and
proper due diligence steps have been taken in connection with back-up
withholding, (ii) federal, state and local returns which are accurate and
complete in all material respects have been filed by the Company for all periods
for which returns were due with respect to income tax withholding, Social
Security and unemployment taxes and (iii) the amounts shown on such returns to
be due and payable have been paid in full, or adequate provision therefore has
been included by the Company in the most recent Company Financial Statements.
SECTION 3.10 Undisclosed Liabilities. The Company is not liable for or
subject to any material Liabilities (as hereinafter defined), except (a)
Liabilities adequately disclosed or reserved for in the most recent Company
Financial Statements and not heretofore paid or discharged, (b) Liabilities
under any contract, commitment or agreement specifically disclosed on the
Disclosure Schedule, or (c) Liabilities incurred, consistent with past practice,
in or as a result of the ordinary course of business of the Company since the
date of the most recent Company Financial Statements. As used in this
Agreement, the term "Liability" or "Liabilities" includes any material direct or
indirect liability, indebtedness, obligation, guarantee or endorsement (other
than endorsements of notes, bills, and checks presented to banks for collection
or deposit in the ordinary course of business), whether known or unknown,
accrued, absolute, contingent or otherwise.
SECTION 3.11 No Default; Compliance.
(a) Except as set forth in the Disclosure Schedule, the Company is
not in material default under, and no condition exists that with notice or lapse
of time or both would constitute a material default under, (i) any mortgage,
loan agreement, indenture, evidence of indebtedness or other instrument
evidencing borrowed money to which the Company is a party or by which the
Company or its properties is bound, (ii) any judgment, order or injunction of
any court, arbitrator or governmental agency or (iii) any other agreement,
contract, lease, license or other instrument, which default or potential default
might reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in the Disclosure Schedule, the Company has
complied in all material respects with all laws, regulations, orders, judgments
or decrees of any federal or state court or Governmental Authority applicable to
its businesses and operations, non-compliance with which might reasonably be
expected to have a Material Adverse Effect.
SECTION 3.12 Representations and Warranties Continuing. The
representations and warranties set forth herein shall be true and correct on the
date hereof and subject to an update of the Disclosure Schedule from time to
time, at all times prior to the Effective Time as if made from time to time,
including, without limitation, at the Effective Time and the Closing.
SECTION 3.13 Contracts and Commitments. Except as listed and described
in the Disclosure Schedule or the Company Financial Statements, the Company is
not a party to, nor is it or its assets bound by any written or oral covenant,
contract, agreement or understanding (a "Contract"), including the following:
(a) any Contract with any present or former stockholder, director,
officer, employee or consultants;
(b) any Contract with any labor union or other representative of
employees;
(c) any Contract for the future purchase of, or payment for,
supplies or products, or for the performance of services by a third party,
involving payment or potential payment by the Company of $10,000 or more under
any one Contract or series of related Contracts;
(d) any Contract, including, without limitation, any outstanding
quotations, bids or proposals, to sell goods or to perform services in an
aggregate amount in excess of $10,000;
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(e) any conditional sale agreement or lease under which the Company
is either the seller or purchaser, lessor or lessee, involving annualized
payments or potential payments by or to the Company that is in excess of
$10,000;
(f) any Contract (including, without limitation, any note,
debenture, bond, conditional sale or equipment trust agreement, letter of credit
agreement or loan agreement) for the borrowing or lending of money more than
$10,000 (including, without limitation, those to or from officers, directors or
stockholders of the Company, or any affiliates or members of their immediate
families, for a line of credit, or for a guarantee, security, indemnitee, pledge
or undertaking of the indebtedness or obligations of any other person);
(g) any Contract for any charitable or political contribution;
(h) any Contract for any capital expenditure involving future
payments, which, together with future payments under all other existing
Contracts for the same capital project, are in excess of $10,000;
(i) any Contract limiting or restraining the Company from engaging
or competing in any lines of business with any person;
(j) any license, franchise, distributorship or other Contract
relating in whole or in part to any ideas, technical assistance or other
know-how of or used by the Company;
(k) any Contract greater than $10,000 which is expected to continue
for more than six months from the date hereof;
(l) any Contract not made in the ordinary course of business;
(m) any guaranty, direct or indirect, of any person of any contract,
lease or agreement in an amount greater than $10,000 entered into by the
Company;
Except as may be disclosed on the Disclosure Schedule: each of the Contracts
listed on the Disclosure Schedule is valid and enforceable in accordance with
its terms; to the best of the Company's Knowledge, the Company and the other
parties thereto are in substantial compliance with the provisions thereof;
except as may be disclosed on the Disclosure Schedule, neither the Company nor
any other party is (or by reason of the consummation of the transactions
contemplated by this Agreement, will be) in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained
therein and no event has occurred or is anticipated to occur (including the
consummation of the transactions contemplated by this Agreement) which with or
without the giving of notice or lapse of time, or both, would constitute a
default or give the right of termination thereunder.
SECTION 3.14 Compliance with Law and Permits. To its Knowledge, the
Company has owned and operated its properties and assets in substantial
compliance with the provisions and requirements of all laws, orders,
regulations, rules and ordinances issued or promulgated by all Governmental
Authorities having jurisdiction with respect thereto, except where the failure
to own and operate such properties and assets in compliance with such provisions
and requirements would not reasonably be expected to have a Material Adverse
Effect. All material governmental certificates, consents, permits, licenses or
other authorizations with regard to the ownership or operation by the Company of
its properties and assets have been obtained, and to the Knowledge of the
Company no violation exists in respect of such licenses, permits or
authorizations, except where the failure to obtain and hold such permits, or any
violation thereof by the Company, would not reasonably be expected to have a
Material Adverse Effect. To the Knowledge of the Company, none of the documents
and materials filed with or furnished to any Governmental Authority with respect
to the properties, assets or businesses of the Company contains any untrue
statement of a material fact or fails to state a material fact necessary to make
the statements therein not misleading.
SECTION 3.15 Title to Property. Except as disclosed on the Disclosure
Schedule, the Company has good and marketable title, insured with respect to
properties and assets which currently are of a type for which insurance is
generally available, free and clear (except as indicated in the Disclosure
Statement or in the most recent Company Financial Statements and liens for
current taxes not yet due and payable), of all security interests, liens,
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encumbrances and encroachments of a material nature, to its real property and
other property and assets that are material to the Company's business on a
consolidated basis.
SECTION 3.16 Insurance and Bank Accounts.
(a) The Disclosure Schedule sets forth a complete and accurate list
and description of all insurance policies in force naming the Company or any
employees of the Company as an insured or beneficiary or as a loss payable payee
or for which the Company has paid or is obligated to pay all or part of the
premiums. The Company has not received notice of any pending or threatened
termination or retroactive premium increase with respect thereto, and the
Company is in compliance in all material respects with all conditions contained
therein. There are no pending material claims against such insurance by the
Company as to which insurers have denied liability, no defenses provided by
insurers under reservations of rights, and no material claim under such
insurance that has not been properly filed by the Company.
(b) The Disclosure Schedule contains a list of all bank and
investment accounts maintained by the Company, including the account numbers,
recent balance, institution, and persons having signing authority.
SECTION 3.17 Trade Names, Trademarks, and Copyrights. The Disclosure
Schedule sets forth all trade names, trademarks, service marks, and copyrights
and their registrations, owned by the Company or in which it has any rights or
licenses, together with a brief description of each. The Company has no
knowledge of any infringement or alleged infringement by others of any trade
name, trademark, service xxxx, or copyright. The Company has not infringed, nor
is now infringing, on any trade name, trademark, service xxxx, or copyright
belonging to any other person, firm, or corporation. Except as set forth in the
Disclosure Schedule, the Company is not a party to any license, agreement, or
arrangement, whether as licensor, licensee, franchisor, franchisee, or
otherwise, with respect to any trade names, trademarks, service marks, or
applications for it, or any copyrights. The Company owns, or holds adequate
licenses or other rights to use, all trade names, trademarks, service marks, and
copyrights necessary for its respective business as now conducted by it, and
that use does not, and will not, conflict with, infringe on, or otherwise
violate any rights of others.
SECTION 3.18 Title to Assets. The Company has good and marketable
title to all of its assets, whether real, personal, mixed, tangible, or
intangible, which constitute all the assets and interests in assets that are
used in its business. All of the assets are free and clear of restrictions on
or conditions to transfer or assignment, and of mortgages, liens, pledges,
charges, encumbrances, equities, claims, easements, rights of way, covenants,
conditions, or restrictions, except for (a) those disclosed in the Financial
Statements or in the Disclosure Schedule; (b) the lien of current taxes not yet
due and payable; and (c) possible minor matters that, in the aggregate, are not
substantial in amount and do not materially detract from or interfere with the
present or intended use of any of these assets or materially impair business
operations. The Company is not in default or in arrears in any material respect
under any lease of property used in its business.
SECTION 3.19 Interests in Customers, Suppliers, Etc. No shareholder,
officer, director or affiliate of the Company possesses, directly or indirectly,
any financial interest in, or is a director, officer, employee or affiliate of,
any corporation, firm, association or business organization that is a client,
supplier, customer, lessor, lessee or competitor of such Company. Ownership of
securities of a corporation whose securities are registered under the Exchange
Act not in excess of five percent (5%) of any class of such securities shall not
be deemed to be a financial interest for purposes of this Section.
SECTION 3.20 Investment Purpose. Each stockholder will execute a
subscription agreement in the form attached as Exhibit B.
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SECTION 3.21 Tax Audits. Except as disclosed in the Disclosure Schedule,
(i) no audit of any material federal, state or local U.S. return of the Company
is currently in progress, nor has the Company been notified that such an audit
is contemplated by any taxing authority, (ii) the Company has not extended any
statute of limitations with respect to the period for assessment of any federal,
state or local U.S. tax, (iii) the Company does not contemplate the filing of an
amendment to any return, which amendment would have a Material Adverse Effect on
the Company, and (iv) the Company has no any actual or potential material
liability for any tax obligation of any
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taxpayer other than the Company. Except as disclosed in the Disclosure Schedule,
there are no material tax claims pending against the Company and there are no
material tax claims to the knowledge of the Company threatened to be asserted
against the Company. For purposes of this section, "tax" and "taxes" shall
include all income, gross receipt, franchise, excise, real and personal
property, sales, ad valorem, employment, withholding and other taxes imposed by
any foreign, federal, state, municipal, local, or other Governmental Authority
including assessments in the nature of taxes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company as follows:
SECTION 4.1 Authority Relative to this Agreement. The Parent and
Merger Sub have all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Boards of Directors of the Parent and Merger Sub, and no other corporate
proceedings on the part of the Parent and Merger Sub are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by the Parent and
Merger Sub and, assuming this Agreement constitutes a valid and binding
obligation of the Company, this Agreement constitutes a valid and binding
agreement of the Parent and Merger Sub, enforceable against the Parent and
Merger Sub in accordance with and subject to its terms and conditions.
SECTION 42 SEC Reports. Since January 1, 2000, to the best of its
Knowledge, the Parent has filed all required forms, reports and documents
("Parent SEC Reports") with the Securities and Exchange Commission (the "SEC")
required to be filed by it pursuant to the federal securities laws and the SEC
rules and regulations thereunder, all of which have complied in all material
respects with all applicable requirements of the Securities Act of 1933
("Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"),
and the rules and interpretive releases promulgated thereunder. None of such
Parent SEC Reports, including without limitation any financial statements,
notes, or schedules included therein, at the time filed, contained, or, if to be
filed in the future will contain, any untrue statement of a material fact, or
omitted, omit or will omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Each of the consolidated balance sheets in or incorporated by reference
into the Parent SEC Reports fairly presents or will fairly present the financial
position of the entity or entities to which it relates as of its date, and each
of the related consolidated statements of operations and retained earnings and
cash flows or equivalent statements in the Parent SEC Reports (including any
related notes and schedules) fairly presents or will fairly present the results
of operations, retained earnings and cash flows, as the case may be, of the
entity or entities to which it relates for the period set forth therein (subject
in the case of unaudited interim statements, to normal year-end audit
adjustments) in each case in accordance with generally accepted accounting
principles applicable to the particular entity consistently applied throughout
the periods involved, except as may be noted therein. The consolidated
financial statements included or to be included in the Parent SEC Reports are
hereinafter sometimes collectively referred to as the "Parent Financial
Statements."
SECTION 4.3 Consents and Approvals; No Violation. Except as described
in the Disclosure Schedule, neither the execution and delivery of this Agreement
by the Parent and Merger Sub nor the consummation of the transactions
contemplated hereby nor compliance by the Parent and Merger Sub with any of the
provisions hereof will conflict with or result in any breach of any provision
of the Articles of Incorporation or By-laws of the Parent or Merger Sub,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except the filing of Articles of
Merger pursuant to the Act, or where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not in the aggregate have a Material Adverse Effect, result in a material
default (with or without due notice or lapse of time or both) (or give rise to
any right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, Contract,
license, agreement or other instrument or obligation to which the Parent or
Merger Sub is a party or by which the Parent, Merger Sub or any of their
respective assets may be bound,
8
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been requested or
which, in the aggregate, would not have a Material Adverse Effect, result in the
creation or imposition of any lien, charge or other encumbrance on the assets of
the Parent or Merger Sub, or violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Parent, Merger Sub or any of their
respective assets, except for violations which would not in the aggregate have a
Material Adverse Effect.
SECTION 4.4 Organization and Qualification. The Parent and Merger Sub
are corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and Texas, respectively. The Parent and Merger
Sub have all requisite power and authority to own or operate their properties
and conduct their business as they are now being conducted. Each of the Parent
and Merger Sub are duly qualified and in good standing as a foreign corporation
or entity authorized to do business in each of the jurisdictions in which the
character of the properties owned or held under lease by them or the nature of
the business transacted by them makes such qualification necessary, except where
the failure to qualify would not have a Material Adverse Effect. The Parent and
Merger Sub have delivered to the Company true and correct copies of the Articles
of Incorporation and Bylaws of the Parent and Merger Sub.
SECTION 4.5 Capitalization. The authorized capital stock of the Parent
consists of 100,000,000 shares of common stock, par value $.02 per share, and
10,000,000 shares of preferred stock, par value $.02 per share. The authorized
capital stock of the Merger Sub consists of 1,000,000 shares. As of December 31,
2002, 1,068,281 shares of the Parent were issued and outstanding, and 1,000
shares of Merger Sub were issued and outstanding. Except as described in the
Disclosure Schedule, since December 31, 2002 neither the Parent nor the Merger
Sub have issued any shares or other capital stock, and have not repurchased or
redeemed any Shares. All issued and outstanding Shares are validly issued,
fully paid, non-assessable and free of preemptive rights.
SECTION 4.6 Litigation, etc. Except as described in the Disclosure
Schedule, (a) there is no action, claim, or proceeding pending or, to the
Knowledge of the Parent or Merger Sub, threatened, to which the Parent or Merger
Sub or its officers or directors are or would be a party before any court or
Governmental Authority acting in an adjudicative capacity, or any arbitrator or
arbitration tribunal; (b) the Parent and Merger Sub are not subject to any
outstanding order, writ, injunction or decree; and (c) since December 31, 2002,
there have been no claims made or actions or proceedings brought against any
officer or director of the Parent or Merger Sub arising out of or pertaining to
any action or omission within the scope of his employment or position with the
Parent or Merger Sub. All litigation and other administrative, judicial or
quasi-judicial proceedings to which the Parent or its officers or directors is a
party or to which it has been threatened to the Parent's or Merger Sub's or its
officers or directors Knowledge to be made a party, are described in the
Disclosure Schedule.
SECTION 4.7 Changes. Except as expressly contemplated by this
Agreement or as reflected in the Disclosure Schedule or in the Parent's
Financial Statements, since December 31, 2002, the Parent and Merger Sub have
conducted their businesses only in the ordinary and usual course, and, except as
set forth in the Disclosure Schedule or in the Parent Financial Statements, none
of the following has occurred, except as shall have occurred in the ordinary
course of its business:
(a) any material adverse change in the condition (financial or
other), results of operations, business, assets, customer, supplier and employee
relations of the Parent, taken as a whole;
(b) any change in accounting methods, principles or practices by the
Parent materially affecting its assets, liabilities or business, except insofar
as may have been required by a change in generally accepted accounting
principles;
(c) any damage, destruction or loss, whether or not covered by
insurance, resulting in a Material Adverse Effect on the Parent;
(d) any declaration, setting aside or payment of dividends or
distributions in respect of the Shares, or any redemption, purchase or other
acquisition of any of the securities of the Parent;
9
(e) any issuance by the Parent of, or commitment of the Parent to
issue, any Shares or other capital stock or securities convertible into or
exchangeable or exercisable for Shares or other capital stock;
(f) any entry by the Parent into any commitment or transaction
material to the condition (financial or other), business or operations of the
Parent, taken as a whole, which is not in the ordinary course of business and
consistent with past practice;
(g) any revaluation by the Parent of any of its assets, including
without limitation, writing down the value of assets or writing off notes or
accounts receivable other than in the ordinary course of business and consistent
with past practice;
(h) any agreement by the Parent to do any of the things described in
the preceding clauses (a) through (g) other than as expressly contemplated or
provided for herein; or
(i) any waiver by the Parent of any rights that, singularly or in
the aggregate, are material to the business, assets, financial condition, or
results of operations of the Parent, taken as a whole.
SECTION 4.8 Real Property .
(a) The Disclosure Schedule sets forth the location and legal
description of each parcel of Real Property owned, leased or utilized by the
Parent or Merger Sub.
(b) The Real Property and the present uses thereof comply in all
material respects with all material laws and regulations (including zoning laws
and ordinances) of each Government having jurisdiction over the Real Property,
and neither the Parent nor Merger Sub have received any notice from any
Government alleging that the Real Property or any improvements erected or
situated thereon, or the uses conducted thereon or therein, violate any
regulations of any Government having jurisdiction over the Real Property.
(c) The Parent holds all Environmental Permits necessary for
conducting its business and has conducted, and is presently conducting, its
Business in material compliance with all applicable Environmental Laws and
Environmental Permits held by it, including, without limitation, all record
keeping and filing requirements. There are no pending, or to the Parent's
Knowledge, threatened Actions or Orders against or involving the Parent or
Merger sub relating to any alleged past or ongoing violation of any
Environmental Laws or Environmental Permits with respect to the Real Property,
nor to the Parent's Knowledge is the Parent subject to any liability for any
such past or ongoing violation.
SECTION 4.9 ERISA Matters. The Parent does not have any "Employee
Benefit Plans" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). The Parent has never contributed to
a "multi-employer plan" as defined in Section 3(37) of ERISA.
SECTION 4.10 Taxes, Tax Returns.
(a) The Parent has delivered to the Company copies of the federal
income tax returns of the Parent for each of the last three fiscal years and all
schedules and exhibits thereto. Except as set forth on the Disclosure Schedule,
the Parent has duly and timely filed in correct form all federal, state and
local information returns and tax returns required to be filed by it on or prior
to the date hereof (all such returns to the Knowledge of the Parent being
accurate and complete in all material respects) and, to the Knowledge of the
Parent, has duly paid or made provision for the payment of all taxes and other
governmental charges which have been incurred or are due or claimed to be due
from them by any Governmental Authority (including, without limitation, those
due in respect of their properties, income, business, capital stock, franchises,
licenses, sales and payrolls) other than taxes or other charges (i) which are
not yet delinquent or are being contested in good faith and set forth in the
Disclosure Schedule, (ii) have not been finally determined or (iii) that would
not have a Material Adverse Effect on the Parent. The liabilities and reserves
for taxes in the Parent Financial Statements are sufficient to the best of the
Parent's Knowledge in the aggregate for the payment of all unpaid federal, state
and local taxes (including any interest or penalties thereon), whether or not
disputed or accrued, for the period ended December 31, 2002, or for any year or
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period prior thereto, and for which the Parent may be liable in its own right or
as transferee of the assets of, or successor to, any corporation, person,
association, partnership, joint venture or other entity.
(b) To the Knowledge of the Parent, (i) proper and accurate amounts
have been withheld by the Parent from its employees and others for all prior
periods in compliance in all material respects with the tax withholding
provisions of applicable federal, state and local laws and regulations, and
proper due diligence steps have been taken in connection with back-up
withholding, (ii) federal, state and local returns which are accurate and
complete in all material respects have been filed by the Parent for all periods
for which returns were due with respect to income tax withholding, Social
Security and unemployment taxes and (iii) the amounts shown on such returns to
be due and payable have been paid in full, or adequate provision therefore has
been included by the Parent in the most recent Parent Financial Statements.
SECTION 4.11 Tax Audits. Except as disclosed in the Disclosure
Schedule, (i) no audit of any material federal, state or local U.S. return of
the Parent is currently in progress, nor has the Parent been notified that such
an audit is contemplated by any taxing authority, (ii) the Parent has not
extended any statute of limitations with respect to the period for assessment of
any federal, state or local U.S. tax, (iii) the Parent does not contemplate the
filing of an amendment to any return, which amendment would have a Material
Adverse Effect on the Parent, and (iv) the Parent has no any actual or potential
material liability for any tax obligation of any taxpayer other than the Parent.
Except as disclosed in the Disclosure Schedule, there are no material tax claims
pending against the Parent and there are no material tax claims to the knowledge
of the Parent threatened to be asserted against the Parent. For purposes of
this section, "tax" and "taxes" shall include all income, gross receipt,
franchise, excise, real and personal property, sales, ad valorem, employment,
withholding and other taxes imposed by any foreign, federal, state, municipal,
local, or other Governmental Authority including assessments in the nature of
taxes.
SECTION 4.12 Undisclosed Liabilities. The Parent is not liable for or
subject to any material Liabilities (as hereinafter defined), except (a)
Liabilities adequately disclosed or reserved for in the most recent Parent
Financial Statements and not heretofore paid or discharged, (b) Liabilities
under any contract, commitment or agreement specifically disclosed on the
Disclosure Schedule, or (c) Liabilities incurred, consistent with past practice,
in or as a result of the ordinary course of business of the Parent since the
date of the most recent Parent Financial Statements. As used in this Agreement,
the term "Liability" or "Liabilities" includes any material direct or indirect
liability, indebtedness, obligation, guarantee or endorsement (other than
endorsements of notes, bills, and checks presented to banks for collection or
deposit in the ordinary course of business), whether known or unknown, accrued,
absolute, contingent or otherwise.
SECTION 4.13 No Default; Compliance.
(a) Except as set forth in the Disclosure Schedule, neither the
Parent nor the Merger Sub is in material default under, and no condition exists
that with notice or lapse of time or both would constitute a material default
under, (i) any mortgage, loan agreement, indenture, evidence of indebtedness or
other instrument evidencing borrowed money to which the Parent or Merger Sub is
a party or by which the Parent or Merger Sub or their properties are bound, (ii)
any judgment, order or injunction of any court, arbitrator or governmental
agency or (iii) any other agreement, contract, lease, license or other
instrument, which default or potential default might reasonably be expected to
have a Material Adverse Effect.
(b) Except as set forth in the Disclosure Schedule, the Parent and
Merger Sub have complied in all material respects with all laws, regulations,
orders, judgments or decrees of any federal or state court or Governmental
Authority applicable to their respective businesses and operations,
non-compliance with which might reasonably be expected to have a Material
Adverse Effect.
(c) All prior issuances of Parent securities have been either: (i)
properly and legally registered with the Securities and Exchange Commission and
the securities commission of any state, as applicable, or (ii) properly and
legally issued in reliance upon an exemption from registration under the
Securities Act.
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SECTION 4.14 Representations and Warranties Continuing. The
representations and warranties set forth herein shall be true and correct on the
date hereof and subject to an update of the Disclosure Schedule from time to
time, at all times prior to the Effective Time as if made from time to time,
including, without limitation, at the Effective Time and the Closing.
SECTION 4.15 Contracts and Commitments. Except as listed and described
in the Disclosure Schedule or the Parent Financial Statements, neither the
Parent nor the Merger Sub is a party to, nor are their assets bound by any
written or oral covenant, contract, agreement or understanding (a "Contract"),
including the following:
(a) any Contract with any present or former stockholder, director,
officer, employee or consultants;
(b) any Contract with any labor union or other representative of
employees;
(c) any Contract for the future purchase of, or payment for,
supplies or products, or for the performance of services by a third party,
involving payment or potential payment by the Parent or Merger Sub of $10,000 or
more under any one Contract or series of related Contracts;
(d) any Contract, including, without limitation, any outstanding
quotations, bids or proposals, to sell goods or to perform services in an
aggregate amount in excess of $10,000;
(e) any conditional sale agreement or lease under which the Parent
or Merger Sub is either the seller or purchaser, lessor or lessee,
involving annualized payments or potential payments by or to the Parent or
Merger Sub that is in excess of $10,000;
(f) any Contract (including, without limitation, any note,
debenture, bond, conditional sale or equipment trust agreement, letter of credit
agreement or loan agreement) for the borrowing or lending of money more than
$10,000 (including, without limitation, those to or from officers, directors or
stockholders of the Parent or Merger sub, or any affiliates or members of their
immediate families, for a line of credit, or for a guarantee, security,
indemnitee, pledge or undertaking of the indebtedness or obligations of any
other person);
(g) any Contract for any charitable or political contribution;
(h) any Contract for any capital expenditure involving future
payments, which, together with future payments under all other existing
Contracts for the same capital project, are in excess of $10,000;
(i) any Contract limiting or restraining the Parent or Merger Sub
from engaging or competing in any lines of business with any person, nor is any
officer or employee of the Parent or Merger Sub subject to any such agreement,
contract or commitment;
(j) any license, franchise, distributorship or other Contract
relating in whole or in part to any ideas, technical assistance or other
know-how of or used by the Parent or Merger Sub;
(k) any Contract greater than $10,000 which is expected to continue
for more than six months from the date hereof;
(1) any Contract not made in the ordinary course of business;
(m) any guaranty, direct or indirect, of any person of any contract,
lease or agreement in an amount greater than $10,000 entered into by the Parent
or Merger Sub;
Except as may be disclosed on the Disclosure Schedule: each of the Contracts
listed on the Disclosure Schedule is valid and enforceable in accordance with
its terms; to the best of the Parent and Merger Sub's Knowledge, the Parent and
the Merger Sub and the other parties thereto are in substantial compliance with
the provisions thereof; except as may be disclosed on the Disclosure Schedule,
neither the Parent, Merger Sub nor any other party is (or by
12
reason of the consummation of the transactions contemplated by this Agreement,
will be) in default in the performance, observance or fulfillment of any
obligation, covenant or condition contained therein and no event has occurred or
is anticipated to occur (including the consummation of the transactions
contemplated by this Agreement) which with or without the giving of notice or
lapse of time, or both, would constitute a default or give the right of
termination thereunder.
SECTION 4.16 Compliance with Law and Permits. To their Knowledge, the
Parent and Merger Sub have owned and operated their properties and assets in
substantial compliance with the provisions and requirements of all laws, orders,
regulations, rules and ordinances issued or promulgated by all Governmental
Authorities having jurisdiction with respect thereto, except where the failure
to own and operate such properties and assets in compliance with such provisions
and requirements would not reasonably be expected to have a Material Adverse
Effect. All material governmental certificates, consents, permits, licenses or
other authorizations with regard to the ownership or operation by the Parent or
Merger Sub of their properties and assets have been obtained, and to the
Knowledge of the Parent and Merger Sub no violation exists in respect of such
licenses, permits or authorizations, except where the failure to obtain and hold
such permits, or any violation thereof by the Parent or Merger Sub, would not
reasonably be expected to have a Material Adverse Effect. To the Knowledge of
the Parent and Merger Sub, none of the documents and materials filed with or
furnished to any Governmental Authority with respect to the properties, assets
or businesses of the Parent or Merger Sub contains any untrue statement of a
material fact or fails to state a material fact necessary to make the statements
therein not misleading.
SECTION 4.17 Title to Property. Except as disclosed on the Disclosure
Schedule, the Parent and Merger Sub have good and marketable title, insured with
respect to properties and assets which currently are of a type for which
insurance is generally available, free and clear (except as indicated in the
Disclosure Statement or in the most recent Parent Financial Statements and liens
for current taxes not yet due and payable), of all security interests, liens,
encumbrances and encroachments of a material nature, to its real property and
other property and assets that are material to the Parent's or Merger Sub's
business on a consolidated basis.
SECTION 4.18 Insurance and Bank Accounts.
(a) The Disclosure Schedule sets forth a complete and accurate list
and description of all insurance policies in force naming the Parent or Merger
Sub or any employees of the Parent or Merger Sub as an insured or beneficiary or
as a loss payable payee or for which the Parent or Merger Sub have paid or is
obligated to pay all or part of the premiums. Neither the Parent nor Merger Sub
have received notice of any pending or threatened termination or retroactive
premium increase with respect thereto, and the Parent and Merger Sub are in
compliance in all material respects with all conditions contained therein. There
are no pending material claims against such insurance by the Parent and Merger
Sub as to which insurers have denied liability, no defenses provided by insurers
under reservations of rights, and no material claim under such insurance that
has not been properly filed by the Parent or Merger Sub.
(b) The Disclosure Schedule contains a list of all bank and
investment accounts maintained by the Parent and Merger Sub, including the
account numbers, recent balance, institution, and persons having signing
authority.
SECTION 4.19 Trade Names, Trademarks, and Copyrights. The Disclosure
Schedule sets forth all trade names, trademarks, service marks, and copyrights
and their registrations, owned by the Parent or Merger Sub or in which it has
any rights or licenses, together with a brief description of each. The Parent
and Merger Sub have no knowledge of any infringement or alleged infringement by
others of any trade name, trademark, service xxxx, or copyright. Neither the
Parent nor the Merger Sub have infringed, nor is now infringing, on any trade
name, trademark, service xxxx, or copyright belonging to any other person, firm,
or corporation. Except as set forth in the Disclosure Schedule, neither the
Parent nor the Merger Sub is a party to any license, agreement, or arrangement,
whether as licensor, licensee, franchisor, franchisee, or otherwise, with
respect to any trade names, trademarks, service marks, or applications for it,
or any copyrights. The Parent and Merger Sub own, or hold adequate licenses or
other rights to use, all trade names, trademarks, service marks, and copyrights
necessary for their respective business as now conducted by them, and that use
does not, and will not, conflict with, infringe on, or otherwise violate any
rights of others.
13
SECTION 4.20 Interests in Customers, Suppliers, Etc. No shareholder,
officer, director or affiliate of the Parent or Merger Sub possesses, directly
or indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association or business organization that
is a client, supplier, customer, lessor, lessee or competitor of such Parent or
Merger Sub. Ownership of securities of a corporation whose securities are
registered under the Exchange Act not in excess of five percent (5%) of any
class of such securities shall not be deemed to be a financial interest for
purposes of this Section.
SECTION 4.21 Registration Rights. Parent has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights) to
have any securities of the Parent registered with the Securities and Exchange
Commission or any other governmental authority.
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business of the Company. Except as contemplated
by this Agreement or disclosed in the Disclosure Schedule, during the period
from the date of this Agreement to the Effective Time, the Company, Parent and
Merger Sub will each conduct their operations according to their ordinary and
usual course of business and consistent with past practice. Without limiting
the generality of the foregoing, and except as otherwise expressly provided in
this Agreement or disclosed in the Disclosure Schedule, neither the Company,
Parent nor Merger Sub will, prior to the Effective Time, without the prior
written consent of the other (a) issue, sell or pledge, or authorize or propose
the issuance, sale or pledge of (i) additional shares of capital stock of any
class, or securities convertible into any such shares, or any rights, warrants
or options to acquire any such shares or other convertible securities, or (ii)
any other securities in respect of, in lieu of or in substitution for, capital
stock outstanding on the date hereof; (b) purchase or otherwise acquire, or
propose to purchase or otherwise acquire, any outstanding securities; (c)
declare or pay any dividend or distribution on any shares of its capital stock;
(d) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into an agreement in principle or an agreement
with respect to, any merger, consolidation or business combination (other than
the Merger), any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities or any material change
in its capitalization, or any entry into a material contract or any release or
relinquishment of any material contract rights, not in the ordinary course of
business; (e) propose or adopt any amendments to its charter or by-laws; (f)
enter into, assign or terminate, or amend in any material respect, any Contract
other than in the ordinary course of business; (g) acquire, dispose of, encumber
or relinquish any material asset (other than sale of real properties at prices
equal to or greater than their carrying values); (h) waive, compromise or settle
any right or claim that would adversely affect the ownership, operation or value
of any asset; (i) make any capital expenditures other than pursuant to existing
capital expenditure programs that are disclosed in the Disclosure Schedule; (j)
allow or permit the expiration, termination or cancellation at any time prior to
the Effective Time of any of the insurance policies or coverages or surety bonds
currently maintained unless replaced with a policy, coverage or bond having
substantially the same coverage and similar terms and conditions; (k) increase,
directly or indirectly, the salary or other compensation of any officer or
member of management, enter into any employment agreement with any person or pay
or enter into any agreement to pay any bonuses or other extraordinary
compensation to any officer or to any member of management or other employees,
or institute any general increase in rates of compensation for its employees, or
increase, directly or indirectly, any provisions or other benefits of any of
such persons; or (l) waive, settle or compromise any material litigation or
other claim on a basis materially adverse.
SECTION 5.2 Board of Directors; Officers. On the Closing Date, the
Board of Directors of Parent will take all actions necessary such that,
effective April 16, 2003, (a) Xxxx X. Xxxxx and Xxxxx Xxxxx shall be appointed
to Parent's Board of Directors and (b) upon such appointment the Board of
Directors of Parent will be comprised of four members. The other members of
Board of Directors are Xxx X. Xxxxxx and J. Xxxxxxx Xxxxx. On the Closing Date,
the Board of Directors shall appoint, effective April 16, 2003, the following
officers of Parent: Xxxxx Xxxxx shall be appointed as president and treasurer;
Xxx X. Xxxxxx shall be appointed as chief executive officer and secretary; Xxxxx
Xxxxx shall be appointed as executive vice president of sales and assistant
treasurer; Xxxxxxx
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Xxxxx shall be appointed as vice president and assistant secretary; and Xxxxx
Xxxxx shall be appointed as vice president and assistant secretary.
SECTION 5.3 Other Agreements.
(a) On the Closing Date, the Parent will enter into the Employment
Agreements set forth as Exhibits C-1, C-2, and C-3with Xxxxx Xxxxx, Xxxxx Xxxxx,
--------------------------
and Xxx X. Xxxxxx, respectively.
(b) On the Closing Date, the Parent will enter into the Lock-Up
Agreements set forth as Xxxxxxxx X-0, X-0, and D-3with Xxxxx Xxxxx, Xxxxx Xxxxx,
--------------------------
and Xxx X. Xxxxxx, respectively.
(c) On the Closing Date, the Parent shall enter into the Agreement
and Release with J. Xxxxxxx Xxxxx and Xxx X. Xxxxxx substantially in the form of
Exhibit E-1 and E-2 hereto, respectively.
SECTION 5.4 Best Efforts. Subject to the terms and conditions herein
provided, and to the fiduciary duties of the Boards of Directors of the parties
under applicable law, each of the parties hereto agrees to use its best 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 to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
SECTION 5.5 Consents. Parent and the Company each will use its best
efforts to obtain such consents of third parties to agreements which would
otherwise be violated by any provisions hereof, to take all actions necessary to
effect the transactions contemplated hereby, and to make such filings with
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement including, without limitation, (a) the vigorous defense of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transaction contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or Governmental Authority vacated or reviewed, and (b) the
execution and delivery of any additional instruments (including any required
supplemental indentures) necessary to consummate the transactions contemplated
by this Agreement.
SECTION 5.6 Public Announcements. Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the existence of this Agreement or the Merger and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
SECTION 5.7 Line of Credit. As of the Closing Date, the Company will
have obtained a line of credit in an amount of $1,000,000.00. Evidence of such
line of credit shall be included in the Disclosure Schedule, and shall be deemed
acceptable to Parent upon its execution of this Agreement.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1 Company's Conditions to the Closing. Immediately prior to
the Effective Time, the Parent and Merger Sub shall have satisfied each of the
following conditions:
(a) A certificate, dated the date of the Effective Time of the chief
executive officer of Parent certifying that all representations and warranties
made in Article IV herein are true and correct as of the date made and as of the
Effective Time and that all agreements or other actions required to be performed
prior to the Effective Time by Parent or Merger Sub as a condition to
consummating the Merger have been performed or taken and such conditions
satisfied in accordance with the terms of this Agreement.
15
(b) No statute, rule, regulation, executive order, decree, or
injunction shall have been enacted, entered, promulgated or enforced by any
court of competent jurisdiction in the United States or domestic Governmental
Authority which prohibits or restricts the consummation of the Merger.
(c) There shall have been no material adverse change in the
business, properties, or financial condition of Parent or Merger Sub to this
Agreement.
(d) All parties shall have delivered all documents, exhibits and
schedules and taken all other actions required by this Agreement.
(e) All representations and warranties of any party shall be true
and effective as of the Effective Time.
(f) At the Closing, the officers and directors of Parent shall have
delivered such resignations as may be necessary to carry out the provisions of
Section 5.2 hereof, a release of all claims they may have against the Parent or
Merger Sub, and a confirmation of their equity ownership in the Parent.
(g) Parent shall have delivered to the Company a certificate, dated
as of a date no later than ten days prior to the Closing Date, duly issued by
the Secretary of State of Delaware that Parent is in good standing and that all
state franchise and/or income tax returns and taxes for each for all periods
prior to the Closing have been filed and paid.
(h) Company shall have received an incumbency certificate or
certificates, dated the Closing Date and signed by the Secretary of Parent
certifying the names, titles and signatures of the officers authorized to
execute the documents referred to in this section and such additional supporting
documentation and other information with respect to the transactions
contemplated hereunder as the Company or their counsel may reasonably request.
(i) The common stock of Parent shall be qualified for trading on the
OTC Bulletin Board and a minimum of two market makers shall be making a market
for such shares.
SECTION 6.2 Parent's Conditions to the Closing. Immediately prior to
the Effective Time, the Company shall have satisfied each of the following
conditions:
(a) A certificate, dated the date of the Effective Time of the chief
executive officer of the Company certifying that all representations and
warranties made in Article III herein are true and correct as of the date made
and as of the Effective Time and that all agreements or other actions required
to be performed prior to the Effective Time by the Company as a condition to
consummating the Merger have been performed or taken and such conditions
satisfied in accordance with the terms of this Agreement.
(b) No statute, rule, regulation, executive order, decree, or
injunction shall have been enacted, entered, promulgated or enforced by any
court of competent jurisdiction in the United States or domestic Governmental
Authority which prohibits or restricts the consummation of the Merger.
(c) There shall have been no material adverse change in the
business, properties, or financial condition of the Company to this Agreement.
(d) All parties shall have delivered all documents, exhibits and
schedules and taken all other actions required by this Agreement.
(e) All representations and warranties of any party shall be true
and effective as of the Effective Time.
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(f) Company shall have delivered to the Parent a certificate, dated
as of a date no later than ten days prior to the Closing Date, duly issued by
the Secretary of State of Texas that Company is in good standing and that all
state franchise and/or income tax returns and taxes for each for all periods
prior to the Closing have been filed and paid.
(g) Parent shall have received an incumbency certificate or
certificates, dated the Closing Date and signed by the Secretary of Company
certifying the names, titles and signatures of the officers authorized to
execute the documents referred to in this section and such additional supporting
documentation and other information with respect to the transactions
contemplated hereunder as the Parent or their counsel may reasonably request.
ARTICLE VII
TERMINATION, AMENDMENTS; WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the Parent and Company, but prior to the Effective Time by mutual
written consent duly authorized by the Boards of Directors of Company, Parent
and Merger Sub.
SECTION 7.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party or its directors, officers, or stockholders, other than the provisions
of Sections 9.9.
SECTION 7.3 Amendment. This Agreement may be amended only by means of
an instrument in writing signed on behalf of all the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company, Parent and Merger Sub, may (a) extend the
time for the performance of any of the obligations or other acts of any other
applicable party hereto, (b) waive any inaccuracies in the representations and
warranties contained herein by any other applicable party or in any document,
certificate or writing delivered pursuant hereto by an other applicable party,
or (c) waive compliance with any of the agreements of any other applicable party
or with any conditions to its own obligations. Any agreement on the part of
any other applicable 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.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Parent and Merger Sub's Right to Indemnification. Company
shall and does hereby indemnify and hold harmless, Parent, Merger Sub, and their
stockholders, directors, officers, employees, agents and representatives from
any and all liabilities, obligations, claims, contingencies, damages, costs and
expenses (including all court costs and reasonable attorneys' fees) that Parent
or any such other indemnified party may suffer or incur as a result of or
relating to the material breach or inaccuracy of any of the representations,
warranties, covenants or agreements made by Company herein or pursuant hereto.
SECTION 8.2 Company's Right to Indemnification. Merger Sub and Parent
shall and do hereby indemnify and hold Company, and its directors, officers,
employees, shareholders, agents and representatives harmless from any and all
liabilities, obligations, claims, contingencies, damages, costs and expenses
(including all court costs and reasonable attorneys' fees) that Company or any
such indemnified party may suffer or incur as a result of or relating to the
breach or inaccuracy, or any alleged breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by Merger Sub and
Parent herein or pursuant hereto.
SECTION 8.3 Notice. The party seeking indemnification hereunder
("Indemnitee") shall promptly, and within 30 days after notice to it (notice to
-----------
Indemnitee being the filing of any action, receipt of any claim in writing or
similar form of actual notice) of any claim as to which it asserts a right to
indemnification, notify the party from
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whom indemnification is sought ("Indemnitor") of such claim. Indemnitee shall
----------
xxxx Indemnitor for any such claims no more frequently than on a monthly basis,
and Indemnitor shall promptly pay (or cause to be paid) Indemnitee upon receipt
of any such xxxx. The failure of Indemnitee to give the notification to
Indemnitor contemplated above in this Section shall not relieve Indemnitor from
any liability or obligation that it may have pursuant to this Agreement unless
the failure to give such notice within such time shall have been materially
prejudicial to it, and in no event shall the failure to give such notification
relieve Indemnitor from any liability it may have other than pursuant to this
Agreement.
SECTION 8.4 Third-Party Claims. If any claim for indemnification by
Indemnitee arises out of an action or claim by a person other than Indemnitee,
Indemnitor may, by written notice to Indemnitee, undertake to conduct the
defense thereof and to take all other steps or proceedings to defeat or
compromise any such action or claim, including the employment of counsel;
provided that Indemnitor shall reasonably consider the advice of Indemnitee as
to the defense or compromise of such actions and claims, and Indemnitee shall
have the right to participate, at its own expense, in such proceedings, but
control of such proceedings shall remain exclusively with Indemnitor.
Indemnitee shall provide all reasonable cooperation to Indemnitor in connection
with such proceedings. Counsel and auditor costs and expenses and court costs
and fees of all proceedings with respect to any such action or claim shall be
borne by Indemnitor. If any such claim is made hereunder and Indemnitor does
not elect to undertake the defense thereof by written notice to Indemnitee
within 10 days of notice of any claim or action, Indemnitee shall be entitled to
control such proceedings and shall be entitled to indemnity with respect thereto
pursuant to the terms of this Article VIII.
SECTION 8.5 Time to Assert Claims. Any claim asserted pursuant to
Section 8.1 or Section 8.2 above must be asserted by written notice given by one
party to the other on or before one (1) year from the date of Closing.
SECTION 8.6 Access to Records. All parties and their agents shall be
afforded reasonable access to the Parent's and Company's books and records
during normal business hours upon reasonable notice for the purpose of verifying
any claim hereunder. Such party or its agents may be required to sign an
appropriate confidentiality agreement prior to any inspection of books and
records hereunder.
SECTION 8.7 Offset Right. Any claims under this Article VIII may be
satisfied by offsetting any obligation owed to such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person or persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 9.2 Brokerage Fees and Commissions. Each party represents that
it has incurred no obligation to any broker or finder in connection with the
transactions described in this Agreement and agrees to indemnify the other
parties and hold them harmless against any liability to any such broker or
finder.
SECTION 9.3 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise.
SECTION 9.4 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full force
and effect.
SECTION 9.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by facsimile telegram or
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telex, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
If to the Company:
Xx. Xxxxx Xxxxx
0000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
If to Parent or Merger Sub:
Xx. Xxx X. Xxxxxx
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.6 Governing Law; Venue. This agreement shall be governed by
and construed in accordance with the laws of the State of Texas, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each of the parties submits to the jurisdiction of any state or
federal court sitting in Xxxxxx County, Texas in any action or proceeding
arising out of or relating to this Agreement and agrees that all claims in
respect of the action or proceeding may be heard and determined only in any such
court. Each party agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the parties waives
any defense of inconvenient forum to the maintenance of any action or proceeding
so brought and waives any bond, surety, or other security that might be required
of any other party with respect thereto
SECTION 9.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same agreement.
SECTION 9.9 Expenses. Except as otherwise provided herein, the Parent,
Merger Sub and Company shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial or other consultants,
investment bankers, accountants and counsel.
SECTION 9.10 Performance by Merger Sub. Parent agrees to cause Merger
Sub to comply with its obligations hereunder and to cause Merger Sub to
consummate the Merger as contemplated herein.
SECTION 9.11 Disclosure Schedule. Upon the execution hereof, the
Company and the Parent shall deliver the Disclosure Schedule to each other. The
Disclosure Schedule shall be updated from time to time and prior to the Closing
to report any changes in the information contained therein. The Disclosure
Schedule shall contain all information required to disclose fully any exception
or qualification to this Agreement and shall cross reference the section of this
Agreement so qualified.
ARTICLE X.
DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set forth below:
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"ACTION" shall mean any action, suit, litigation, complaint, counterclaim,
claim, petition, mediation contest, or administrative proceeding, whether at
law, in equity, in arbitration or otherwise, and whether conducted by or before
any Government or other Person.
"CLOSING" shall have the meaning set forth in Section 1.8 hereof.
"CLOSING DATE" shall mean the time and date that the Closing occurs.
"CODE" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"CONSENTS" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts without
resulting in any default thereunder.
"CONTRACTS" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business.
"DEFAULT" shall mean an event of default as defined in any contract or
other agreement or instrument, or any event which, with the passage of time or
giving of notice or both, would constitute an event of default or other breach
under such document or instrument.
"DISCLOSURE SCHEDULE" shall mean the set of numbered schedules referencing
Sections of this Agreement delivered by Seller and dated of even date herewith,
as supplemented by new or amended schedules delivered by Seller prior to the
Closing.
"EFFECTIVE TIME" shall have the meaning set forth in Section 1.2 hereof.
"ENVIRONMENTAL LAWS" shall mean all federal, state, municipal, and local
laws, statutes, ordinances, rules, regulations, conventions, and decrees
relating to the environment, including without limitation, those relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil, and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all laws, rules, regulations, codes, directives, orders,
decrees, judgments, injunctions, consent agreements, stipulations, provisions,
and conditions of Environmental Permits, licenses, injunctions, consent
agreements, stipulations, certificates of authorization, and other operating
authorizations, entered, promulgated, or approved thereunder.
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Laws, or entered into by agreement of the party to be bound,
relating to activities that affect the environment, including without
limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal.
"FORUM" shall mean any federal, state, local, municipal, or foreign court,
governmental agency, administrative body or agency, tribunal, private
alternative dispute resolution system, or arbitration panel.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.4.
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"GOVERNMENT" shall mean any federal, state, local, municipal, or foreign
government or any department, commission, board, bureau, agency,
instrumentality, unit, or taxing authority thereof.
"HAZARDOUS MATERIAL" shall mean all substances and materials designated as
hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law.
"KNOWLEDGE" when used to qualify a representation, warranty, or other
statement shall mean the actual knowledge after reasonable investigation.
"LIABILITIES" shall have the meaning set forth in Section 3.10.
"MATERIAL ADVERSE EFFECT" shall mean any adverse change in the financial
condition, assets, business or operations of any party and its subsidiaries
which is material to such party taken as a whole.
"MATERIAL CONTRACTS" shall mean all Contracts that involve monetary
obligations of Seller of more than $10,000 per year or that are not cancelable
by Seller upon thirty days notice or less without penalty, a list of which are
set forth in the Disclosure Schedule.
"ORDERS" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"PERSON" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a government, and any other legal entity.
"REAL PROPERTY" shall mean the land and improvements owned or leased by the
Company or its Subsidiaries and all buildings, fixtures, signs, parking
facilities, and other improvements located thereon and appurtenances thereto.
"SCHEDULES" shall mean the numbered sections of the Disclosure Schedule.
"SOLID WASTE" shall mean any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility, and
other discarded material, including solid, liquid, semisolid, or contained
gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"SUBSIDIARY" shall mean, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity. Such term shall also refer to any other
partnership, limited partnership, joint venture, trust, or other business entity
in which a party hereto owns a material interest.
*** SIGNATURES FOLLOW ***
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year set forth above.
ELINEAR, INC.
a Delaware corporation
By: /s/ Xxx. X. Xxxxxx
--------------------------------
Xxx X. Xxxxxx, President
NETVIEW ACQUISITION CORP.
a Texas corporation
By: /s/ Xxx. X. Xxxxxx
--------------------------------
Name: Xxx X. Xxxxxx
Title: President
NETVIEW TECHNOLOGIES, INC.
a Texas corporation
By: /s/ Xxxxx Xxxxx
--------------------------------
Xxxxx Xxxxx, President
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