AGREEMENT AND PLAN OF MERGER BY AND AMONG IEC Electronics Corp., VUT Merger Corp. and Val-U-Tech Corp. Dated as of May 23, 2008
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
VUT
Merger Corp.
and
Val-U-Tech
Corp.
Dated
as of May 23, 2008
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT
AND PLAN OF MERGER,
dated
as of May 23, 2008 (this “Agreement”),
is
entered into by and among IEC Electronics Corp., a corporation organized under
the laws of the State of Delaware (“Parent”),
VUT
Merger Corp., a corporation organized under the laws of the State of New York
(“Merger
Sub”),
Val-U-Tech Corp., a corporation organized under the laws of the State of New
York (“Company”)
and
Xxxxxxxx Xxxxxx, Xxxxxxx Xxxxxx and Xxxxxxxx Xxxxxxx (each, a “Company
Shareholder”
and,
together, the “Company
Shareholders”)
(“Parent,” “Merger Sub”, “Company” and the “Company Shareholders” individually
hereinafter referred to as “Party”
and
collectively hereinafter referred to as the “Parties”);
WHEREAS,
Merger
Sub, upon the terms and subject to the conditions of this Agreement and in
accordance with the New York Business Corporation Law (“NYBCL”),
will
merge with and into Company (the “Merger”);
WHEREAS,
the
board of directors of Company has (i) determined that the Merger is
advisable and fair to the holders of Company Common Stock (as defined in
Section 3.04) and is in the best interests of such shareholders,
(ii) advised, authorized, approved and adopted this Agreement and the
transactions contemplated hereby and (iii) recommended approval and
adoption of this Agreement by the shareholders of Company (the “Company
Shareholders”);
WHEREAS,
Company
Shareholders have advised, authorized, approved and adopted this Agreement
and
the transactions contemplated hereby; and
WHEREAS,
the
Board of Directors of Parent has determined that the Merger is advisable and
in
the best interests of Parent and its shareholders and the boards of directors
of
Parent and Merger Sub and the sole shareholder of Merger Sub have advised,
authorized, approved and adopted this Agreement and the transactions
contemplated hereby.
NOW,
THEREFORE,
in
consideration of the foregoing and the respective representations, warranties,
covenants and agreements set forth in this Agreement, and intending to be
legally bound hereby, the Parties agree as follows.
ARTICLE
I
THE
MERGER
SECTION
1.01 The Merger
Upon
the
terms and subject to the conditions set forth in this Agreement, and in
accordance with the NYBCL, at the Effective Time (as defined in
Section 1.02) Merger Sub shall be merged with and into Company, with
Company being the surviving corporation (hereinafter sometimes called
“Surviving
Corporation”)
in the
Merger. Upon consummation of the Merger, the separate corporate existence of
Merger Sub shall cease, and Surviving Corporation shall continue to exist as
a
New York corporation.
SECTION
1.02 Closing Date; Effective Time
(a) Subject
to the terms and conditions of this Agreement, including the satisfaction or,
if
permissible, waiver of the conditions set forth in Article VII of this
Agreement, the closing of the Merger (the “Closing”
and
the
date of such Closing, the “Closing
Date”)
will
take place on May 29, 2008, at 10:00 a.m. local time at the offices of Boylan,
Brown, Code, Xxxxxx & Xxxxxx, LLP, 2400 Chase Square, Rochester, New York,
unless another date or place is agreed to in writing by the Parties
(b) The
Parties shall cause the Merger to be consummated on the Closing Date by filing
the Certificate of Merger, in the form attached hereto as Exhibit
A
(the
“Certificate
of Merger”)
and
any other appropriate documents with the New York Department of State, in such
form as required by, and executed in accordance with the relevant provisions
of,
the NYBCL (the date and time of such filing being the “Effective
Time”).
SECTION
1.03 Effect of the Merger
At
the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of the NYBCL. Without limiting the generality of the foregoing,
and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of Company and Merger Sub shall vest in Surviving
Corporation, and all debts, liabilities and duties of Company and Merger Sub
shall become the debts, liabilities and duties of Surviving
Corporation.
SECTION
1.04 Certificate of Incorporation; Bylaws
(a) Unless
otherwise determined by Parent prior to the Effective Time, at the Effective
Time, the certificate of incorporation of Company shall be the certificate
of
incorporation of Surviving Corporation until thereafter amended as provided
by
Law and such certificate of incorporation, except that Company’s certificate of
incorporation shall be amended and restated at the Effective Time to have the
same form and substance as the certificate of incorporation of Merger Sub except
that the name of the Surviving Corporation shall be Val-U-Tech
Corp.
(b) Unless
otherwise determined by Parent prior to the Effective Time, at the Effective
Time, the bylaws of Merger Sub shall continue unchanged and shall be the bylaws
of Surviving Corporation until thereafter amended as provided by Law, the
certificate of incorporation of Surviving Corporation and such
bylaws.
SECTION
1.05 Directors and Officers
At
the
Effective Time, the initial officers and directors of Surviving Corporation
shall be the persons listed on Exhibit
B,
each to
hold office in accordance with the certificate of incorporation and bylaws
of
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
2
SECTION
1.06 Classes and Series
As
to
Company and Merger Sub, the designation and number of outstanding shares of
each
class and series, the specification of the classes and series entitled to vote
on this Agreement, and the specification of each class and series entitled
to
vote as a class on this Agreement, is as follows:
(a) Company:
|
Designation of
|
Number of
|
Designation
|
Classes and
|
|
each outstand-
|
outstanding
|
of class and
|
series enti-
|
|
ing class and
|
shares of
|
series enti-
|
tled to vote
|
|
series of shares
|
each class
|
tled to vote
|
as a class
|
|
Common Stock
|
100
|
Common
Stock
|
Common Stock
|
(b) Merger Sub:
|
Designation of
|
Number of
|
Designation
|
Classes and
|
|
each outstand-
|
outstanding
|
of class and
|
series enti-
|
|
shares of
|
series enti-
|
tled to vote
|
|
|
series of shares
|
each class
|
tled to vote
|
as a class
|
|
Common Stock
|
100
|
Common Stock
|
Common Stock
|
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF
CERTIFICATES
SECTION
2.01 The Merger
At
the
Effective Time, by virtue of the Merger and without any action on the part
of
Parent, Merger Sub, Company or the holders of any of the securities referred
to
in this Section 2.01:
(a) Common
Stock.
(i) Subject
to Section 2.01(a)(ii), each share of Company Common Stock (excluding any shares
described in Section 2.01(b)) issued and outstanding immediately prior to
the Effective Time shall cease to be outstanding and shall be converted into
and
exchanged for the right to receive the same proportion of (a) (1) Five Million
Five Hundred Thousand Dollars (US$5,500,000) (the “Cash
Purchase Price”),
(2)
Five Hundred Thousand (500,000) shares of common stock, par value $0.01, of
Parent, (“Parent
Common Stock”),
and
(3) "Purchase Notes" (as that term is hereinafter defined) that is (b) in the
same as proportion as such share of Company Common Stock is of all shares of
Company Common Stock outstanding on the Closing Date. The Purchase Notes shall
be in the form of Exhibit 2.01(a)(i) (hereinafter collectively referred to
as
"Purchase Notes" and individually referred to as "Purchase Note") and shall
be
in an aggregate principal amount equal to (x) 4,500,000, less (y) $1,050,000,
(c) subject to adjustment as provided herein. The shares of Parent Common Stock
issuable to the holders of Company Common Stock pursuant hereto, the Cash
Purchase Price and the Purchase Notes, together with the amount of cash in
lieu
of fractional shares of Parent Common Stock payable pursuant to
Section 2.01(e), are sometimes referred to herein, collectively, as the
“Merger
Consideration”.
All
such shares of Company Common Stock shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such shares shall thereafter represent
only the right to receive the Merger Consideration. Except as otherwise provided
herein or by applicable law, the holders of certificates previously evidencing
such shares of Company Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock. Each such certificate previously evidencing such shares
of
Company Common Stock shall be exchanged for the Merger Consideration applicable
thereto.
3
(ii) The
Purchase Price and the Purchase Notes shall be increased or decreased, as the
case may be, in accordance with the following
(a) The
Purchase Price and the Purchase Notes will be increased by one-half of the
amount by which, as of the Closing Date, the following are greater than, or
decreased by one-half of the amount by which the following are less than (as
the
case may be), the amounts shown on the Balance Sheet of the Company as of
December 31, 2007 as audited by Xxxxxxxxx & Co. attached to this Agreement
as Exhibit 2.01(a)(ii) (the “Company
Balance Sheet”):
i. cash
and
cash equivalents;
ii. net
inventory, which shall not include any inventory that is (x) more than one
(1)
year old, (y) damaged or (z) not useable or saleable in the ordinary course
of
the Company’s business within one (1) year after the Closing Date;
and
iii. accounts
receivable, which shall not include any account receivable as to which the
Company has received any notice of dispute, whether verbal or written, or which
is more than ninety (90) days old as of the Closing Date;
(b) The
Purchase Price and the Purchase Notes will be decreased by one-half of the
amount by which, as of the Closing Date, the following are greater than, or
increased by one-half of the amount by which the following are less than (as
the
case may be), the amounts shown on the Company Balance Sheet:
i. accounts
payable;
ii. accrued
payroll and vacation; and
iii. other
current liabilities.
4
(c) The
Purchase Price and the Purchase Notes will be decreased by the amount of any
liabilities as of the Closing Date that are not shown on the Company Balance
Sheet.
(iii) The
Purchase Price and the Purchase Notes shall be increased by one-half of the
amount by which the Company’s revenues from sales of its products and services
in the ordinary course of its business for the calendar year 2008 (determined
in
accordance with Subsection 2.01(a)(vii)) exceed $18,000,000.
(iv) The
Purchase Price and the Purchase Notes shall be decreased (but not by more than
the amount of the Purchase Notes, after adjustment as provided elsewhere in
this
Agreement) by the amount, if any, by which the Company’s revenues from sales of
its products and services in the ordinary course of its business for the
calendar year 2008 (determined in accordance with Subsection 2.01(a) (vii))
are
less than $14,000,000.
(v) If
sales
by the Company to Xxxxxx Corporation of products and services for the calendar
year 2009 are less than $5,500,000, then the Purchase Price and the Purchase
Notes shall be reduced by one-half of (a) $5,500,000 less sales of products
and
services to Xxxxxx Corporation during the calendar year 2009, less (b) the
amount, if any, by which all of the Company’s revenues from sales of its
products and services in the ordinary course of its business for the calendar
year 2009 (excluding the amount of its sales to Xxxxxx Corporation, ASML, ViaSat
and Telephonics) exceed $7,100,000.
As
an
example of the application of the foregoing formula, assume:
|
|
(x)
the Company’s sales to Xxxxxx Corporation for the calendar year 2009 are
$4,000,000 and
|
(y)
the
Company’ total sales for the calendar year 2009 (other than sales to Xxxxxx
Corporation, ASML, ViaSat and Telephonics) are $8,100,000
Applying
the foregoing, the Purchase Price and the Purchase Notes will be reduced by
one-half of
(xx)
$1,500,000 (the excess of $5,500,000 over $4,000,000) less
(yy)
$1,000,000 (the excess of $8,100,000 over $7,100,000)
5
The
reduction in the Purchase Price and the Purchase Notes will be ½ x ($1,500,000 -
$1,000,000), or $250,000.
(vi) Promptly,
but in no event more than forty-five (45) days, after the Closing Date, the
Parent shall cause its regularly engaged firm of independent certified public
accountants to conduct an audit the Company’s books and records as of the
Closing Date, and shall cause them to prepare a balance sheet of the Company
as
of the Closing Date in accordance with GAAP (subject to the specific definitions
contained in Subsection 2.01(a)(ii)). Such balance sheet, shall be used in
determining the adjustments, if any, that the Parent believes to be required
by
subsection 2.01(a)(ii). Parent shall deliver a copy of such balance sheet
together with a statement of the adjustments, if any, that the Parent believes
should be made to the Purchase Price and the Purchase Notes to the Shareholder
Representative (the “Parent
Notice”),
promptly after Parent has received such balance sheet from its accountants.
Following the delivery of the Parent Notice to the Shareholder Representative,
the Parent shall give and shall cause the Company to give the Shareholder
Representative and its representatives reasonable access to all of the books
and
records of the Company, on reasonable notice and during normal business hours,
for so long and so often as reasonably required by them, so that the Shareholder
Representative can determine whether or not the balance sheet and the proposed
adjustments as set forth in the Parent Notice are accurate. If the Shareholder
Representative determines that the Parent Notice (and the adjustments indicated
thereon) was inaccurate, it shall give notice (the “Shareholder
Notice”)
of
such finding to the Parent no later than thirty (30) days after delivery to
the
Shareholder Representative of the Parent Notice. Such Shareholder Notice shall
specify any items or amounts as to which the Shareholder Representative
disagrees and a detailed statement of the basis of each of the Shareholder
Representative’s objections. If no such Shareholder Notice is given in
accordance with this Subsection 2.01(a)(vi), the Parent Notice (and the
adjustments indicated thereon) shall be conclusive and binding upon the
parties.
If
a
Shareholder Notice is given and the parties are unable to resolve any
disagreements as to the adjustments required to the Purchase Price and the
Purchase Notes within thirty (30) days after the Shareholder Notice has been
given, the items or amounts in dispute shall be referred for resolution to
the
Independent Accountants. Promptly, but no later than 20 days after acceptance
of
the appointment as Independent Accountants, the Independent Accountants shall
determine, based primarily on written submissions by Parent and the Shareholder
Representative, which may be confirmed by independent review if the Independent
Accountants deem such review to be necessary, only those issues in dispute
and
shall render a written report as to the resolution of the dispute and the
resulting adjustments to the Purchase Price and the Purchase Notes, which shall
be conclusive and binding on the parties. Parent shall permit the Independent
Accountants to review the books and records of the Company that relate to the
items in dispute, during normal business hours and upon reasonable notice.
In
resolving any disputed item, the Independent Accountants (x) shall be bound
by the provisions of this Section 2.01 and (y) may not assign a value to
any item greater than the greatest value for such items claimed by either party
or less than the smallest value for such items claimed by either party. Parent
and the Shareholders (in the aggregate) shall each be responsible for one-half
(½) of the fees and expenses charged by the Independent Accountants for their
services.
6
No
later
than the third (3rd) business day following the date of final determination
of
the adjustments, if any, required to the Purchase Notes in accordance with
this
Subsection 2.01(a)(vi), the Shareholder Representative shall deliver to the
Parent the Purchase Notes delivered at the Closing and the Parent shall deliver
to the Shareholder Representative replacement Purchase Notes, identical to
the
original Purchase Notes but adjusted as to principal amount as provided
herein.
(vii) In
connection with the audit of the Parent’s financial statements for its fiscal
year ended November 30, 2008, the Parent shall cause its auditors to determine
and certify the Company’s revenues from sales of its products and services in
the ordinary course of its business for the calendar year 2008, net of
allowances, discounts, returns, shipping charges and similar costs, in
accordance with GAAP, and shall deliver a copy of such determination to the
Shareholder Representative. For purposes of making such determination, (A)
except as provided in the immediately following subsection (B), all revenues
from the performance of cable harness work from and after the Closing Date
by
either Parent or the Company shall be included in determining the sales of
the
Company, it being the intention of the Parties that all such work shall be
performed by the Company and not by Parent from and after the Closing Date,
and
(B) notwithstanding the foregoing, no revenues from the performance of cable
harness work by either Parent or the Company for ASML, ViaSat and Telephonics
shall be included in determining the gross sales of the Company.
Parent
shall deliver a copy of such auditor’s determination with a statement of the
adjustments, if any, that the Parent believes should be made to the Purchase
Price and the Purchase Notes pursuant to Subsection 2(a)(iv) to the Shareholder
Representative (the “Second Parent
Notice”),
promptly after Parent has received such determination from its accountants.
Following the delivery of the Second Parent Notice to the Shareholder
Representative, the Parent shall give and shall cause the Company to give the
Shareholder Representative and its representatives reasonable access to such
of
the books and records of the Company, on reasonable notice and during normal
business hours, for so long and so often as reasonably required by them, to
the
extent necessary to verify such determination and the proposed adjustments
as
set forth in the Second Parent Notice are accurate. If the Shareholder
Representative determines that Second Parent Notice (and the adjustments
indicated thereon) was inaccurate, it shall give notice (the “Second
Shareholder
Notice”)
of
such finding to the Parent no later than thirty (30) days after delivery to
the
Shareholder Representative of the Second Parent Notice. Such Second Shareholder
Notice shall specify any items or amounts as to which the Shareholder
Representative disagrees and a detailed statement of the basis of each of the
Shareholder Representative’s objections. If no such Second Shareholder Notice is
given in accordance with this Subsection 2.01(a)(viii), the Second Parent Notice
(and the adjustments indicated thereon) shall be conclusive and binding upon
the
parties.
If
a
Second Shareholder Notice is given and the parties are unable to resolve any
disagreements as to the adjustments required to the Purchase Price and the
Purchase Notes within thirty (30) days after the Second Shareholder Notice
has
been given, the items or amounts in dispute shall be referred for resolution
to
the Independent Accountants. Promptly, but no later than 20 days after
acceptance of the appointment as Independent Accountants, the Independent
Accountants shall determine, based primarily on written submissions by Parent
and the Shareholder Representative, which may be confirmed by independent review
if the Independent Accountants deem such review to be necessary, only those
issues in dispute and shall render a written report as to the resolution of
the
dispute and the resulting adjustments to the Purchase Price and the Purchase
Notes, which shall be conclusive and binding on the parties. Parent shall permit
the Independent Accountants to review the books and records of the Company
that
relate to the items in dispute, during normal business hours and upon reasonable
notice. In resolving any disputed item, the Independent Accountants
(x) shall be bound by the provisions of this Section 2.01 and (y) may
not assign a value to any item greater than the greatest value for such items
claimed by either party or less than the smallest value for such items claimed
by either party. Parent and the Shareholders (in the aggregate) shall each
be
responsible for one-half (½) of the fees and expenses charged by the Independent
Accountants for their services.
7
No
later
than the third (3rd) business day following the date of final determination
of
the adjustments, if any, required to the Purchase Notes in accordance with
this
Subsection 2.01(a)(vii), the Shareholder Representative shall deliver to the
Parent the Purchase Notes previously delivered to the Shareholders and the
Parent shall deliver to the Shareholder Representative replacement Purchase
Notes, identical to the original Purchase Notes but adjusted as to principal
amount as provided herein.
(vii) On
or
before January 31, 2010, the Parent shall deliver to the Shareholder
Representative its calculation of any adjustments required to be made to the
Purchase Price and the Purchase Notes pursuant to Subsection 2.01(a) (v) (the
“Third Parent
Notice”).
Following the delivery of the Third Parent Notice to the Shareholder
Representative, the Parent shall give and shall cause the Company to give the
Shareholder Representative and its representatives reasonable access to such
of
the books and records of the Company, on reasonable notice and during normal
business hours, for so long and so often as reasonably required by them, to
the
extent necessary to verify such calculation and the data upon which it is
based.. If the Shareholder Representative determines that Third Parent Notice
(and the adjustments indicated thereon) was inaccurate, it shall give notice
(the “Third Shareholder
Notice”)
of
such finding to the Parent no later than thirty (30) days after delivery to
the
Third Representative of the Third Parent Notice. Such Third Shareholder Notice
shall specify any items or amounts as to which the Shareholder Representative
disagrees and a detailed statement of the basis of each of the Shareholder
Representative’s objections. If no such Third Shareholder Notice is given in
accordance with this Subsection 2.01(a)(viii), the Third Parent Notice (and
the
adjustments indicated thereon) shall be conclusive and binding upon the
parties.
If
a
Third Shareholder Notice is given and the parties are unable to resolve any
disagreements as to the adjustments required to the Purchase Price and the
Purchase Notes within thirty (30) days after the Third Shareholder Notice has
been given, the items or amounts in dispute shall be referred for resolution
to
the Independent Accountants. Promptly, but no later than 20 days after
acceptance of the appointment as Independent Accountants, the Independent
Accountants shall determine, based primarily on written submissions by Parent
and the Shareholder Representative, which may be confirmed by independent review
if the Independent Accountants deem such review to be necessary, only those
issues in dispute and shall render a written report as to the resolution of
the
dispute and the resulting adjustments to the Purchase Price and the Purchase
Notes, which shall be conclusive and binding on the parties. Parent shall permit
the Independent Accountants to review the books and records of the Company
that
relate to the items in dispute, during normal business hours and upon reasonable
notice. In resolving any disputed item, the Independent Accountants
(x) shall be bound by the provisions of this Section 2.01 and (y) may
not assign a value to any item greater than the greatest value for such items
claimed by either party or less than the smallest value for such items claimed
by either party. Parent and the Shareholders (in the aggregate) shall each
be
responsible for one-half (½) of the fees and expenses charged by the Independent
Accountants for their services.
8
No
later
than the third (3rd) business day following the date of final determination
of
the adjustments, if any, required to the Purchase Notes in accordance with
this
Subsection 2.01(a)(viii), the Shareholder Representative shall deliver to the
Parent the Purchase Notes previously delivered to the Shareholders and the
Parent shall deliver to the Shareholder Representative replacement Purchase
Notes, identical to the original Purchase Notes but adjusted as to principal
amount as provided herein.
(b) Treasury
Stock.
All
shares of capital stock of Company held in the treasury of Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof and no amount shall be delivered or deliverable in exchange
therefor.
(c) Merger
Sub Stock.
Each
share of common stock, par value $.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time (“Merger
Sub Stock”)
shall
be converted into and exchanged for one (1) duly and validly issued, fully
paid
and non-assessable share of common stock of the Surviving
Corporation.
(d) No
Fractional Shares.
No
certificate or scrip representing any fractional shares of Parent Common Stock
shall be issued pursuant to Section 2.01(a), and other than the right to
receive the cash payment pursuant to this Section 2.01(d) any such
fractional interests shall not entitle the owner thereof to any rights as a
security holder of Parent. Notwithstanding any other provision hereof, all
holders of Company Common Stock otherwise entitled to receive fractional shares
of Parent Common Stock pursuant to Section 2.01(a) shall be entitled to
receive, in lieu thereof, cash (without interest) in an amount equal to the
product of (i) such fractional part of a share of Parent Common Stock to
which the holder of Company Common Stock would otherwise be entitled under
Sections 2.01(a) multiplied by the Average Parent Trading Price as of the
Closing Date. As promptly as possible after the determination of the amount
of
cash to be paid to holders of fractional interests, Parent shall forward
payments to holders of such fractional interests subject to and in accordance
with the terms hereof.
SECTION
2.02 Exchange of Certificates
and Merger Consideration
(a) Payment
Procedures.
At the
Closing, upon surrender to Parent by each Company Shareholder of the certificate
or certificates (each a “Certificate”
and
collectively, the “Certificates”)
representing all of the shares of Company Common Stock owned by such Company
Shareholder immediately prior to the Effective Time, together with any other
documents required by Parent, Parent shall issue and deliver to each such
Company Shareholder his, her or its pro rata share of the Merger Consideration,
which shall consist of (i) a certificate for Parent Common Stock which shall
be
registered in the name of such Company Shareholder which shall bear legends
as
set forth on Exhibit 2.02(a), (ii) a Purchase Note payable to such Company
Shareholder; and (iii) the Cash Purchase Price payable to such Company
Shareholder, which together shall represent the entire Merger Consideration.
Until surrendered in accordance with the provisions of this Section 2.02,
each Certificate shall represent for all purposes only the right to receive
the
applicable consideration set forth in Section 2.01, without any interest
thereon.
9
(b) No
Further Rights in Stock.
All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of Sections 2.01 and 2.02
(including any cash paid pursuant to this Article II) shall be deemed to
have been issued (and paid) in full satisfaction of all rights pertaining to
the
shares of Company Common Stock theretofore represented by such Certificates,
and
there shall be no further registration of transfer on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock represented
by such Certificates which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, any such Certificates are presented to
Parent or the Surviving Corporation for any reason, they shall be canceled
and
exchanged as provided in this Article II, except as otherwise provided by
Law.
(c) Withholding
of Tax.
Parent
shall be entitled to deduct and withhold from the applicable amount of the
Merger Consideration otherwise issuable to, and any cash payment in lieu of
fractional shares otherwise payable pursuant to this Agreement to, any former
holder of Company Common Stock such amounts as Parent (or any Affiliate thereof)
is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign Tax Law. To the
extent that amounts are so withheld by Parent (or any Affiliate thereof), such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the former holder of Company Common Stock in respect of whom such
deduction and withholding was made by Parent (or any Affiliate
thereof).
(d) Lost,
Stolen or Destroyed Certificates.
In the
event any Certificate evidencing shares of Company Common Stock shall have
been
lost, stolen or destroyed, upon the making of an affidavit setting forth that
fact by the Person claiming such lost, stolen or destroyed Certificate and,
if
required by Parent, the posting by such Person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against Parent or the Surviving Corporation with respect to such Certificate,
Parent shall pay to such Person the applicable Merger Consideration and any
cash
in lieu of fractional shares with respect to such lost, stolen or destroyed
Certificate.
(e) Distributions
With Respect to Unexchanged Shares of Parent Common Stock.
No
dividends or other distributions declared or made after the Effective Time
with
respect to Parent Common Stock with a record date after the Effective Time
shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock evidenced thereby until the holder of such
Certificate shall properly surrender such Certificate in accordance with the
requirements of Section 2.02(a). Subject to the effect of escheat, tax or other
applicable Laws, following surrender of any such Certificate, there shall be
paid to the holder of the Certificates evidencing whole shares of Parent Common
Stock issued in exchange therefor, without interest, (i) promptly, the amount
of
dividends or other distributions with a record date after the Effective Time
and
theretofore paid with respect to such whole shares of Parent Common Stock,
and
(ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect
to
such whole shares of Parent Common Stock.
10
SECTION
2.03 Certain Adjustments
If
between the date hereof and the Effective Time, the outstanding shares of
Company Common Stock or of Parent Common Stock shall be changed into a different
number of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period,
the
Merger Consideration per share of Company Common Stock shall be adjusted
accordingly to provide the same economic effect as contemplated by this
Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend.
SECTION
2.04 Shareholders’ Representative
The
Shareholder Representative shall, by virtue of the Merger, be appointed
attorney-in-fact and authorized and empowered to act, for and on behalf of
any
or all of Company Shareholders (with full power of substitution in the
premises), in connection with the provisions of Article IX as they relate to
Company and Company Shareholders generally, and such other matters as are
reasonably necessary for the consummation of the transactions contemplated
hereby including, without limitation, (i) to compromise on their behalf
with Parent any claims asserted thereunder, (ii) to execute and deliver on
behalf of Company Shareholders any documents or agreements contemplated by
or
necessary or desirable in connection with this Agreement, (iii) to administer
and resolve any disputes with respect to the computation of any adjustments
to
the Purchase Price and the Purchase Notes and (iv) to take such further
actions including coordinating and administering post-closing matters related
to
the rights and obligations of Company Shareholders (including exchanges of
the
Purchase Notes) as are authorized in this Agreement (the above named
representative, as well as any subsequent representative of Company Shareholders
appointed by Company Shareholders being referred to herein as the “Shareholders’
Representative”).
The
Shareholders’ Representative shall not be liable to any Company Shareholder,
Parent, the Surviving Corporation or their respective Affiliates or any other
Person with respect to any action taken or omitted to be taken by the
Shareholders’ Representative in his role as Shareholders’ Representative under
or in connection with this Agreement unless such action or omission results
from
or arises out of fraud, gross negligence, willful misconduct or bad faith on
the
part of the Shareholders’ Representative. Parent, Merger Sub and the Surviving
Corporation shall be entitled to rely on such appointment and treat such
Shareholders’ Representative as the duly appointed attorney-in-fact of each
Company Shareholder. Each Company Shareholder who votes in favor of the Merger
pursuant to the terms hereof, by such vote and without any further action,
and
each Company Shareholder who receives Merger Consideration in connection with
the Merger, by acceptance thereof and without any further action, confirms
such
appointment and authority.
11
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF COMPANY
AND
COMPANY SHAREHOLDERS
Except
as
specifically set forth in this Agreement, Company and each of the Company
Shareholders hereby jointly and severally represents, warrants to and agrees
with Parent and Merger Sub as follows, in each case as of the date of this
Agreement and as of the Closing Date:
SECTION
3.01 Organization and Qualification
Company
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of New York, and has the full and unrestricted corporate
power
and authority to own, operate and lease its Assets, to carry on its business
as
currently conducted, to execute and deliver this Agreement and to carry out
the
transactions contemplated hereby. Company is duly qualified to conduct business
as a foreign corporation and is in good standing in the states, countries and
territories listed in Schedule 3.01, which are the only jurisdictions where
the
nature of its business or the ownership, operation or leasing of its Assets
makes such qualification necessary.
SECTION
3.02 No Subsidiaries;
Other Interests
Company
has no Subsidiaries. Company has no equity investment or other interest in,
nor
has Company made advances or loans to, any Person.
SECTION
3.03 Certificate of Incorporation and Bylaws
Company
has furnished to Parent a true and complete copy of the certificate of
incorporation of Company, as currently in effect on the date of this Agreement,
and a true and correct copy of Company’s bylaws, as currently in effect on the
date of this Agreement, in each case certified by the corporate secretary of
Company. Company is not in violation of any of the provisions of its certificate
of incorporation or bylaws.
SECTION
3.04 Capitalization
The
authorized capital stock of Company consists of two hundred (200) shares of
common stock, no par value per share, of which one hundred (100) shares of
common stock (the “Company
Common Stock”)
are
issued and outstanding, all of which are duly authorized, validly issued, fully
paid and non-assessable except as provided in Section 630 of the NYBCL. No
shares of common stock are held in the treasury of Company. Schedule 3.04 sets
forth the names and addresses of all holders of record of Company Common Stock
and the number and class of shares held by each such shareholder. No other
shares of Company Common Stock have been reserved for any purpose. There are
no
outstanding securities convertible into or exchangeable for Company Common
Stock, any other securities of any Company and no outstanding options, rights
(preemptive or otherwise), or warrants to purchase or to subscribe for any
shares of such stock or other securities of Company. There are no outstanding
Agreements affecting or relating to the voting, issuance, purchase, redemption,
registration, repurchase or transfer of Company Common Stock or any other
securities of Company. Each of the outstanding shares of Company Common Stock
was issued in compliance with all applicable federal and state Laws concerning
the issuance of securities. There are no obligations, contingent or otherwise,
of Company to provide funds to, make any investment (in the form of a loan,
capital contribution or otherwise) in, or provide any guarantee with respect
to,
any Person. There are no Agreements pursuant to which any Person (other than
Company) is or may be entitled to receive any of the revenues or earnings,
or
any payment based thereon or calculated in accordance therewith, of
Company.
12
SECTION
3.05 Authority; Binding Obligation
The
execution and delivery by Company of this Agreement, the execution and delivery
by Company of all other Agreements, documents, certificates or other instruments
contemplated hereby, and the consummation by Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action, and no other corporate proceedings on the part of Company
are
necessary to authorize this Agreement and the other Agreements, documents,
certificates or other instruments contemplated hereby, or to consummate the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by Company and the Company Shareholder and constitutes
the legal, valid and binding obligation of Company and the Company Shareholder,
enforceable against each of them in accordance with its terms, except as such
enforceability may be subject to the effects of any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws
affecting creditors’ rights generally and subject to the effects of general
equitable principles (whether considered in a proceeding in equity or at
law).
SECTION
3.06 No Conflict; Required Filings and Consents
(a) The
execution, delivery and performance by Company and the Company Shareholders
of
this Agreement and all other Agreements, documents, certificates or other
instruments contemplated hereby, the fulfillment of and compliance with the
respective terms and provisions hereof and thereof, and the consummation by
Company and the Company Shareholders of the transactions contemplated hereby
and
thereby, do not and will not: (i) conflict with, or violate any provision
of, the certificate of incorporation or bylaws of Company; (ii) conflict
with or violate any Law applicable to Company, its Assets or the Company
Shareholders; (iii) conflict with, result in any breach of, or constitute a
default (or an event that with notice or lapse of time or both would become
a
default) or result in the termination or acceleration, or create in another
Person, a put right, purchase obligation or similar right under any Agreement
to
which Company or the Company Shareholders is a party or by which any of them,
or
any of the Company’s Assets, may be bound; or (iv) result in or require the
creation or imposition of, or result in the acceleration of, any indebtedness
or
any Encumbrance of any nature upon, or with respect to, Company or any of the
Assets now owned or hereafter acquired by Company.
13
(b) Except
as
set forth on Schedule 3.06, the execution, delivery and performance by Company
and the Company Shareholders of this Agreement and all other Agreements,
documents, certificates or other instruments contemplated hereby, the
fulfillment of and compliance with the respective terms and provisions hereof
and thereof, and the consummation by Company of the transactions contemplated
hereby and thereby, do not and will not: (i) require any consent, approval,
authorization or permit of, or filing with or notification to, any Person not
party to this Agreement, except (A) the filing and recordation of the
Certificate of Merger as required by the NYBCL and (B) where the failure to
obtain any consent, approval, authorization or permit or to make any filing
or
notification otherwise required to be disclosed hereunder would not have a
Company Material Adverse Effect; or (ii) result in or give rise to any penalty,
forfeiture, Agreement termination, right of termination, amendment or
cancellation, or restriction on business operations of Company that would have
a
Company Material Adverse Effect.
(c) All
returns, reports, statements and other documents required to be filed by Company
with any Governmental Entity have been filed in a timely manner and complied
with and are true, correct and complete in all material respects (and any
related fees required to be paid have been paid in full). All material records
of every type and nature relating to the business, operations or Assets of
Company have been maintained in all material respects in accordance with good
business practices and the rules of any Governmental Entity and are maintained
at Company.
(d) No
Governmental Entity or any other Person has notified Company that such
Governmental Entity or other Person intends to object to the transactions
contemplated hereunder which shall include for this purpose any objection to
the
operations of the business of Company as part of Parent. Company is not aware
of
any fact or circumstance related to it that would reasonably be expected to
(i) cause the filing of any objection to any application for any
Governmental consent required hereunder, (ii) lead to any delay in processing
such application or (iii) require any waiver of any Governmental rule,
policy or other applicable law.
SECTION
3.07 Intellectual Property
(a) Schedule
3.07 identifies each item of Intellectual Property (i) owned by Company, (ii)
owned by any third party and used by Company pursuant to license, sublicense
or
other Agreement or (iii) otherwise used by Company and not otherwise
generally used by Persons similarly situated (including, in each case,
specification of whether each such item is owned, licensed or used by Company).
In addition, Company has not licensed (as licensor), sublicensed (as
sublicensor) or entered into any other agreement with respect to the use of
any
Intellectual Property.
(b) Company
either owns or has adequate rights to use all of the Intellectual Property
that
is necessary to, and currently used for, its business as now conducted or
currently proposed to be conducted, and such Intellectual Property is free
and
clear of Encumbrances. Company has previously furnished to Parent evidence
of
either ownership by Company of or license rights to use its Intellectual
Property.
14
(c) There
are
no pending or, to Company’s knowledge, threatened claims against Company
alleging that the conduct of its business infringes any Intellectual Property
rights of others that would have a Company Material Adverse Effect. The business
of Company as now conducted or proposed to be conducted does not infringe any
third-party Intellectual Property rights.
(d) To
Company’s knowledge, no third party is infringing upon any of Company’s
Intellectual Property, and Company has not notified any third party that it
believes such third party is interfering with, infringing, or misappropriating
any of Company’s Intellectual Property or engaging in any act of unfair
competition. Company has the right to bring an action for the infringement
of
all of its Intellectual Property that is owned by Company.
(e) Except
as
set forth in the next sentence, Company has taken all steps that are customary
in its industry to protect Company’s rights in confidential information and
trade secrets of Company or provided by any other Person to Company. Company
does not require each employee, director, consultant or contractor to execute
a
confidentiality and non-disclosure agreement. The names of those of its present
and former employees who have executed such agreements are listed on Schedule
3.07, and copies of such agreements have been provided to Parent.
(f) To
Company's Knowledge, the operation of the business of Company as it currently
is
conducted or currently proposed to be conducted by Company does not and will
not
and will not when conducted by Parent or the Surviving Corporation in
substantially the same manner following the Closing, infringe or misappropriate
any Intellectual Property right of any person, violate any right of any person
(including any right to privacy or publicity), or constitute unfair competition
or trade practices under the laws of any jurisdiction.
(g) Neither
this Agreement nor the transactions contemplated by this Agreement, will result
in (i) either Parent or the Surviving Corporation granting to any third
party any right to or with respect to any Intellectual Property right owned
by,
or licensed to, either of them, (ii) either Parent’s or the Surviving
Corporation’s being
bound by, or subject to, any non-compete or other restriction on the operation
or scope of their respective businesses, or (iii) either Parent’s or the
Surviving Corporation’s being
obligated to pay any royalties or other amounts to any third party in excess
of
those payable by Parent or the Surviving Corporation, respectively, prior to
the
Closing.
SECTION 3.08
Financial Statements
and Condition
(a) Company
has prepared (i) the balance sheets of Company as of the end of the fiscal
year
ending on December 31, 2005 and the statements of income, equity and changes
in
financial position for fiscal year, compiled by Davie, Kaplan, Xxxxxxx &
Xxxxxxxxx, PC, (ii) the balance sheet of Company as of the end of the fiscal
year ending on December 31, 2006 and the statements of income, equity and
changes in financial position for such fiscal year, audited by Xxxxxxxxx &
Co., (iii) the balance sheet of Company as of October 31, 2007 and the
statements of income, equity and changes in financial position for the period
of
the fiscal year then ended, reviewed by Davie, Kaplan, Xxxxxxx & Xxxxxxxxx,
PC, (iv) the balance sheet of Company as of the end of the fiscal year ending
on
December 31, 2007 and the statements of income, equity and changes in financial
position for such fiscal year, audited by Xxxxxxxxx & Co., accompanied by
the related report of Xxxxxxxxx & Co. dated April 18, 2008 ("Xxxxxxxxx
Management Letter"), (iii) the unaudited balance sheet of the Company as of
March 31, 2008, and the unaudited statements of income, Company’s equity and
changes in financial position for the three-month period ended March 31, 2008
(collectively, the “Company
Financial Statements”).
A
true and complete copy of Company Financial Statement has been delivered to
Parent and is attached as Schedule 3.08.
15
(b) Company
Financial Statements, including, without limitation, the notes thereto, (i)
have
been prepared in accordance with the books and records of Company and
(ii) present fairly the financial position of Company and its results of
operations and cash flows in accordance with GAAP applied on a basis consistent
with prior accounting periods, subject in the case of unaudited statements,
to
normal year-end adjustments.
(c) Company
does not expect any year-end audit adjustments for the current fiscal year
ending December 31, 2008. To the knowledge of Company, there are no anticipated
material charges or write-offs of a non-recurring nature for the fiscal year
ending December 31, 2008.
(d) Except
as
set forth in the Xxxxxxxxx Management Letter, Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(e) Schedule
3.08 lists all of the changes in the methods of accounting or accounting
practices or policies of Company since its inception.
SECTION
3.09 Absence
of Certain Developments
Since
December 31, 2007:
(a) the
business of Company has been conducted in all material respects only in the
Ordinary Course of Business;
(b) Company
has not become liable in respect of any guarantee nor has it incurred or
otherwise become liable in respect of any debt, except for borrowings, letters
of credit and bankers’ acceptances in the Ordinary Course of Business under
credit facilities in existence on December 31, 2007;
(c) Company
has not mortgaged, pledged or subjected to any lien any of its property,
business or assets, except for purchase money or similar security interests
granted in connection with the purchase of equipment or supplies in the Ordinary
Course of Business in an amount not exceeding $10,000 in the
aggregate;
16
(d) Company
has not made any declaration, setting aside or payment of any dividend or other
distribution with respect to, or repurchase of, any of its capital stock or
other equity interests;
(e) Company
has not (i) acquired or leased from any other Person any material assets, or
sold or leased to any other Person or otherwise disposed of any material assets
(in each case except for assets acquired or sold in the Ordinary Course of
Business in connection with goods and services provided to customers); (ii)
entered into any contractual obligation relating to (A) the purchase or sale
of
any capital stock, partnership interest or other equity interest in any Person,
(B) the purchase of assets constituting a business or (C) any merger,
consolidation or other business combination; (iii) entered into or amended
any
lease of real property or material personal property (whether as lessor or
lessee); (iv) canceled or compromised any debt or claim other than accounts
receivable in the Ordinary Course of Business; (v) sold, transferred, licensed
or otherwise disposed of any material intangible assets other than in the
Ordinary Course of Business; (vi) waived or released any right of substantial
value; (vii) instituted, settled or agreed to settle any material action; or
(viii) entered into or consummated any transaction with any
Affiliate;
(f) there
has
been no loss, destruction or damage to any material item of property of Company,
whether or not insured, which has had or could reasonably be expected to have
a
Company Material Adverse Effect;
(g) other
than in the Ordinary Course of Business and consistent with past practices,
Company has not made any changes in the rate of compensation payable or paid,
or
agreed or orally promised to pay, conditionally or otherwise, any extra
compensation, or severance or vacation pay, to any director, officer, employee,
consultant or agent of Company;
(h) there
has
been no material labor trouble (including any work slowdown, stoppage or strike)
involving Company or any material change in any of its personnel or the terms
and conditions of the employment of such personnel;
(i) Company
has not made any change in (x) its methods of accounting or accounting
practices, except as required by GAAP, or (y) its pricing policies or payment
or
credit practices or failed to pay any creditor any amount owed to such creditor
when due or granted any extensions or credit other than in the Ordinary Course
of Business;
(j) Company
has not made any loan, advance or capital contributions to, or any other
investment in, any Person;
(k) Company
has not adopted or increased any benefits under any Plan in any material
manner;
(l) Company
has not written up or written down any of its material Assets;
17
(m) Company
has not terminated or amended, or failed in any material respect to perform
obligations or suffered the occurrence of any default under any material
contractual obligation; and
(n) Company
has not entered into any contractual obligation to do any of the things referred
to elsewhere in this Section 3.09.
SECTION
3.10 Absence of Undisclosed Liabilities
There
are
no material liabilities or obligations (whether absolute or contingent, matured
or unmatured, known or unknown) of Company, including but not limited to
liabilities for Taxes and that are not reflected, or reserved against, in the
audited balance sheet of Company as of December 31, 2007, except for those
that
may have been incurred after December 31, 2007 in the Ordinary Course of
Business or that are not material in amount either individually or collectively.
Since December 31, 2007, Company has not incurred any material liabilities
or
obligations (whether absolute or contingent, matured or unmatured, known or
unknown) other than in the Ordinary Course of Business. All bonuses and
incentive compensation (including, without limitation, all compensation-related
expenses) have been accrued on Company Financial Statements based on GAAP and
consistent with past practices.
SECTION
3.11 Litigation;
Disputes
(a) Company
has not received notice of, and there is no pending, or, to the knowledge of
Company or the Company Shareholders, threatened, action, suit, claim,
arbitration, proceeding or investigation against, affecting or involving Company
or its business or Assets, or the transactions contemplated by this Agreement,
at law or in equity, or before or by any domestic or foreign court, arbitrator
or Governmental Entity. Company is not (i) operating under or subject to
any order, award, writ, injunction, decree or judgment of any court, arbitrator
or Governmental Entity or (ii) in default with respect to any order, award,
writ, injunction, decree or judgment of any court, arbitrator or Governmental
Entity.
(b) Company
has complied and is in compliance in all material respects with all Laws,
awards, orders, judgments, decrees and injunctions applicable to Company and
its
business or Assets, including all federal, state and local Laws and orders
pertaining to employment or labor, safety, health, zoning and other matters.
Company has obtained and holds all permits, licenses and approvals (none of
which has been materially modified or rescinded and all of which are in full
force and effect) from all government authorities necessary in order to own,
use
and maintain its Assets and to conduct its business as presently conducted.
None
of such permits, licenses or approvals will be terminated or modified as a
result of the consummation of the merger.
SECTION
3.12 Real Property
(a) Schedule
3.12
lists each real property lease under which Company is the lessee or lessor.
Company is the owner and holder of the leasehold estates purported to be granted
to it by the leases listed in Schedule
3.12.
Each such lease is in full force and effect and, to the knowledge of Company,
constitutes a legal, valid and binding obligation of, and is legally enforceable
in all material respects against, the respective parties thereto. Company has
in
all material respects performed all material obligations thereunder required
to
be performed by any of them to date. To the knowledge of Company and the Company
Shareholders, no party is in default in any material respect under any of the
foregoing, and there has not occurred any event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute such a material default.
18
(b) Company
does not own or hold interests (other than leasehold interests) in any Real
Property.
SECTION
3.13 Other Agreements; No Default
Schedules
3.12 and 3.13 list each Agreement to which Company is a party or by which
Company, or any of its Assets, is bound, and which (i) involves expenditures
or
receipts by Company (other than contracts, commitments or Agreements which
do
not require payments or yield receipts of more than $10,000 in any twelve (12)
month period or more than $25,000 in the aggregate); or (ii) contain covenants
that limit the freedom of Company to engage in a line of business or to compete
with any third party (Agreements listed pursuant to clauses (i) and (ii) above,
collectively the “Company
Contracts”).
Each
Company Contract is in full force and effect, constitutes a valid and binding
obligation of and is legally enforceable in accordance with its terms against
Company and, to the knowledge of Company and the Company Shareholders, all
Company Contracts are valid, binding and enforceable obligations of the other
parties thereto, except as such enforceability may be subject to the effects
of
any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar Laws affecting creditors’ rights generally or subject to
the effects of general equitable principles (whether considered in a proceeding
in equity or at law). Company has complied with all of the provisions of such
Company Contracts and is not in default thereunder, and there has not occurred
any event which (whether with or without notice, lapse of time, or the happening
or occurrence of any other event) would constitute such a default, and the
execution of this Agreement by Company and its performance hereunder will not
cause, or result in, a breach or default under any Company Contract. There
has
not been (A) any failure by Company or, to the knowledge of Company and the
Company Shareholders, any other party to any such Company Contract to comply
with all material provisions thereof, (B) any default by Company or, to the
knowledge of Company and the Company Shareholders, any other party thereunder,
or (C) to the knowledge of Company and the Company Shareholders (X) any
threatened cancellation thereof or (Y) any outstanding dispute thereunder.
Company is not a guarantor or otherwise liable for any liability or obligation
(including indebtedness) of any other Person.
SECTION
3.14 Labor Relations
There
are
no collective bargaining or other labor union Agreements to which Company is
a
party. There are, and for the past two (2) years have been, no strikes, work
stoppages, union organization efforts or lawsuits (other than grievance
proceedings) pending or, to the knowledge of Company and the Company
Shareholders, threatened or reasonably anticipated between Company and
(a) any current or former employees of Company or (b) any union or
other collective bargaining unit representing such employees. There is no unfair
labor practice charge or complaint, or other proceeding, against the Company
pending, or to the knowledge of the Company and the Company Shareholders,
threatened before the National Labor Relations Board or any similar state or
foreign agency. Company has complied and is in compliance with all Laws relating
to employment, labor, or the workplace, including, without limitation, Laws
relating to wages, hours, collective bargaining, safety and health, work
authorization, equal employment opportunity, immigration, withholding,
unemployment compensation, worker’s compensation, employee privacy and right to
know, except where the failure so to comply would not have a Company Material
Adverse Effect. Company has not incurred any liability under, and has complied
in all respects with, the Worker Adjustment Retraining Notification Act and
the
regulations promulgated thereunder and does not reasonably expect to incur
any
such liability as a result of actions taken or not taken prior to the
consummation of the transactions contemplated hereunder.
19
SECTION
3.15 Pension and Benefit Plans
(a) Company
has delivered to Parent prior to the execution of this Agreement true and
complete copies of the plan documents, summary plan descriptions, summaries
of
material modification, all related trust agreements, insurance contracts, or
other funding arrangements, all related service provider agreements, annual
financial or actuarial valuation reports, the three most recent Forms 5500
or
5500C/R (with accompanying schedules), registration statements, and prospectuses
for all pension, retirement, profit-sharing, deferred compensation, stock option
(including accompanying form agreements), employee stock ownership, severance
pay, vacation, bonus or other incentive plans, employment or change in control
agreements, medical, vision, dental or other health plans, life insurance plans
and other employee benefit plans or fringe benefit plans, programs, arrangements
or Agreements, including, without limitation, all Company Benefit Plans. No
Company Benefit Plan is or has been a multiemployer plan within the meaning
of
Section 3(37) of ERISA or has any withdrawal liability pursuant to ERISA
Sections 4201 through 4225 with respect to any such multiemployer plan. Company
has set forth in Schedule 3.15 (i) a list of all of Company Benefit Plans,
(ii)
a list of Company Benefit Plans that are Company Pension Plans, (iii) a list
of
Company Benefit Plans that are Company Stock Plans, and (iv) a list of the
number of shares covered by, exercise prices for, and holders of, all stock
options granted and available for grant under Company Stock Plans.
(b) From
their inception, all Company Benefit Plans have been and are in material
compliance (in form and in operation) with the applicable terms of ERISA and
the
Code and any other applicable Laws, including the terms of such plans. All
required reports, returns, and descriptions (including annual reports (Forms
5500), summary annual reports, and summary plan descriptions have been timely
filed and/or distributed in accordance with the applicable requirements of
ERISA
and the Code with respect to each Company Benefit Plan.
(c) All
liabilities (contingent or otherwise) under any Company Benefit Plan are fully
accrued or reserved against in Company Financial Statement in accordance with
GAAP. Each Company Pension Plan that is subject to Title IV of ERISA or Section
412 of the Code satisfies the minimum funding standards (without regard to
any
waiver) provided for in Section 412 of the Code.
20
(d) Company
has no obligations for retiree health or other welfare benefits under any
Company Benefit Plan or otherwise (other than continuation coverage to the
extent required by Law), and there are no restrictions on the rights of Company
to unilaterally amend or terminate any such Company Benefit Plan at any time
without incurring any material liability thereunder.
(e) Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, golden parachute or otherwise) becoming due
to
any person under any Company Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any Company Benefit Plan or (iii) result in
any
acceleration of the time of payment or vesting of any such benefits. No Company
Benefit Plan, individually or collectively, provides for any payment by Company
any employee or independent contractor that is not deductible under Section
162(a)(1) or 404 of the Code or that is an "excess parachute payment" pursuant
to Section 280G of the Code.
(f) Each
Company Benefit Plan which is intended to be qualified under Section 401(a)
of
the Code and exempt from taxation under Section 501(a) of the Code has received
a favorable determination letter from the IRS that it is so qualified and so
exempt, the Company has delivered to Parent true and complete copies of all
such
determination letters, and no fact or event has occurred that could adversely
affect such qualified or exempt status.
(g) No
Company Benefit Plan is a Voluntary Employees’ Beneficiary Association
(“VEBA”)
within
the meaning of Section 501(c)(9) of the Code.
(h) Company
has made or reserved all contributions (including employer contributions and
employee salary reduction contributions) and other payments and paid all
premiums required to be made or paid for each Company Benefit Plan within the
time periods prescribed by ERISA.
(i) Company
is not now or has ever been a “substantial employer” as defined in Section
4001(a)(2) of ERISA and no Company Benefit Plan has subjected or does subject
the Company to any liability under ERISA Sections 4063 or 4064.
(j)
There
have been no “prohibited transactions” (as such term is defined in ERISA Section
406 and Code Section 4975) with respect to any Company Benefit Plan. No
fiduciary of any Company Benefit Plan has breached any of the responsibilities
or obligations imposed upon fiduciaries under Title I of ERISA which shall
subject Company, directly or indirectly, to any penalty or liability for breach
of fiduciary duty.
(k) No
Company Benefit Plan has experienced a "reportable event" (as such term is
defined in Section 4043(b) of ERISA) that is not subject to an
administrative or statutory waiver from the reporting requirement.
21
SECTION
3.16 Taxes and Tax Matters
(a) Company
has paid all Taxes due and payable by it for or with respect to all periods
up
to and including the date hereof (without regard to whether or not such Taxes
are or were disputed), whether or not shown on any Tax Return.
(b) Company
has filed on a timely basis all Company Tax Returns that it was required to
file. All such Company Tax Returns were accurate and complete in all material
respects. Company is not the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where Company does not file Company Tax Returns that any one of
them is or may be subject to taxation by that jurisdiction. Company has not
given any currently effective waiver of any statute of limitations in respect
of
Taxes or agreed to any currently effective extension of time with respect to
a
Tax assessment or deficiency. There are no security interests on any of the
assets of Company that arose in connection with any failure (or alleged failure)
to pay any Tax.
(c) Company
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party.
(d) Company
and the Company Shareholders have no knowledge of any facts or circumstances
which could give rise to a reasonable expectation that any authority may assess
any additional Taxes for any period for which Company Tax Returns have been
filed. There is no dispute or claim concerning any liability for taxes of
Company either (i) claimed or raised by any authority in writing or
(ii) as to which Company or any Company Shareholders has knowledge based
upon personal contact with any agent of such authority. Company has delivered
to
Parent copies of, and Schedule 3.16 sets forth a complete and accurate list
of,
Company Tax Returns filed with respect to the taxable periods of Company ended
on or after December 31, 2005; indicates those Company Tax Returns that have
been audited; and indicates those Company Tax Returns that currently are the
subject of an audit.
(e) Except
as
set forth on Schedule 3.16(e), the unpaid Taxes of Company (i) did not, as
of the date of any financial statements of Company furnished to Parent pursuant
to Section 3.08, exceed the reserve for any Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the such financial statements
(rather than in any notes thereto) and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with
the
past custom and practice of Company in filing their Company Tax
Returns.
(f) Company
has not filed a consent under Section 341(f) of the Code, concerning
collapsible corporations. Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. Except as set forth on Schedule 3.16(e), the Company has disclosed on
its
federal income Company Tax Returns all positions taken therein that could
reasonably be expected to give rise to a substantial understatement of federal
income Tax within the meaning of Section 6662 of the Code. Company is not a
party to any Tax allocation or sharing agreement. Company (A) has not been
a member of an “affiliated group,” as defined in Section 1504(a) of the
Code, filing a consolidated federal income Tax Return (other than a group the
common parent of which was Company) and (B) does not have any Liability for
the
Taxes of any Person (other than any of Company) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract or otherwise.
22
(g) Schedule
3.16 sets forth the following information with respect to Company as of the
date
hereof: (i) the tax basis of Company in its assets; (ii) the amount of any
net
operating loss, net capital loss, unused investment, foreign tax or other
credit, or excess charitable contribution allocable to Company; and (iii) the
amount of any deferred gain or loss allocable to Company arising out of any
“deferred intercompany transaction” as defined in Treas. Reg. Section
1.1502-13(a)(2).
(h) Company
(and any predecessor of Company) has been a validly electing S corporation
within the meaning of Code §§ 1361 and 1362 at all times during its
existence and Company will be an S corporation up to and including the day
before the Closing Date.
(j) Company
shall not be liable for any Tax under Code §1374 in connection with the deemed
sale of Company’s assets caused by the §338(h)(10) Election. Company has not, in
the past 10 years (A) acquired assets from another corporation in a transaction
in which Company’s Tax basis for the acquired assets was determined, in whole or
in part, by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (B) acquired the stock of any
corporation which is a qualified subchapter S subsidiary.
SECTION
3.17 Insurance
Schedule
3.17 lists all policies of title, asset, fire, hazard, casualty, liability,
life, worker’s compensation and other forms of insurance of any kind owned or
held by Company. All such policies: (a) are with insurance companies
reasonably believed by Company to be financially sound and reputable;
(b) are in full force and effect; (c) are sufficient for compliance by
Company with all requirements of Law and of all Agreements to which Company
is a
party; (d) are valid and outstanding policies enforceable against the
insurer; (e) insure against risks of the kind customarily insured against
and in amounts customarily carried by companies similarly situated and by
companies engaged in similar businesses and owning similar Assets; and
(f) have the policy expiration dates set forth in
Schedule 3.17.
SECTION
3.18 Arrangements With Related Parties
No
present or former officer, director, shareholder or Person known by Company
or
any Company Shareholder to be an Affiliate of Company, nor any Person known
by
them to be an Affiliate of such Person, is currently a party to any transaction
or agreement with Company, including any agreement providing for any loans,
advances, the employment of, furnishing of services by, rental of its Assets
from or to, or otherwise requiring payments to, any such officer, director,
shareholder or Affiliate; provided, however that Xxxxxxx Xxxxxx and Xxxxxxxx
Xxxxxxx, who are Company Shareholders, are employees of the
Company.
23
SECTION
3.19 Books and Records
Except
as
set forth in the Xxxxxxxxx Management Letter, the books of account, stock
records, minute books and other corporate and financial records of Company
are
complete and correct and have been maintained in accordance with reasonable
business practices for companies similar to Company, and Company will have
prior
to Closing prepared and made available to Parent the minutes for all meetings,
and all written consents in lieu of such meetings, of the Board of Directors
and/or shareholders of Company held as of the date thereof.
SECTION
3.20 Assets
Company
has good, valid and marketable title to all Assets owned by it, including,
without limitation, all material Assets reflected in Company Financial Statement
and all Assets acquired by Company since December 31, 2007 (except for Assets
reflected in Company Financial Statement or acquired since such date which
have
been sold or otherwise disposed of in the Ordinary Course of Business), free
and
clear of all Encumbrances other than Permitted Encumbrances. All personal
property of Company is in operating condition and repair and is suitable and
adequate for the uses for which it is intended or is being used. All Inventory
of Company (i) consists of items which are good and merchantable and of a
quality and quantity presently usable and salable in the Ordinary Course of
Business within one (1) year from the Closing Date; and (ii) has been reflected
in Company Financial Statement in accordance with GAAP.
SECTION
3.21 Board Recommendation; Shareholder Approval
The
Board
of Directors of Company has unanimously adopted, in compliance with the NYBCL,
a
resolution advising, authorizing, approving and adopting this Agreement and
the
transactions contemplated hereby, and recommending approval and adoption of
this
Agreement and the transactions contemplated hereby by Company Shareholders.
Company Shareholders have unanimously adopted by written consent, in compliance
with the NYBCL, a resolution authorizing, approving and adopting this Agreement
and the transactions contemplated hereby.
SECTION
3.22 Directors and Officers
Schedule
3.22
lists all current directors and officers of Company, showing each such person’s
name, positions, and annual remuneration, bonuses and fringe benefits paid
by
Company for the current fiscal year and the most recently completed fiscal
year.
SECTION
3.23 State Takeover Statutes
No
state
takeover statute or similar statute or regulation of the State of New York
(and,
to the knowledge of Company and the Company Shareholders after due inquiry,
of
any other state or jurisdiction) applies or purports to apply to this Agreement
or the transactions contemplated hereby and no provision of the certificate
of
incorporation, bylaws or other governing instruments of Company or the terms
of
any rights plan or agreement of Company would, directly or indirectly, restrict
or impair the ability of Parent to vote, or otherwise to exercise the rights
of
a shareholder with respect to, securities of Company that may be acquired or
controlled by Parent or permit any shareholder to acquire securities of Company
or of Parent or any of its Subsidiaries on a basis not available to Parent
in
the event that Parent were to acquire securities of Company
24
SECTION
3.24 Environmental Matters
Company
is in material compliance with all Environmental Laws. Company has no material
liability under any Environmental Law and to its Knowledge the Company is not
responsible for any liability of any other person under any Environmental Law.
There are no pending or, to the knowledge of Company and the Company
Shareholders, threatened actions, suits, claims, legal proceedings or other
proceedings based on, and Company has not directly or indirectly received any
notice of any complaint, order, directive, citation, notice of responsibility,
notice of potential responsibility, or information request from any Governmental
Entity or any other person arising out of or attributable to: (i) the
current or past presence at any part of the real property owned or leased by
Company (the “Real
Property”)
of
Hazardous Materials or any substances that pose a hazard to human health or
an
impediment to working conditions; (ii) the current or past release or
threatened release into the environment from the Real Property (including,
without limitation, into any storm drain, sewer, septic system or publicly
owned
treatment works) of any Hazardous Materials or any substances that pose a hazard
to human health or an impediment to working conditions; (iii) the off-site
disposal of Hazardous Materials originating on or from the Real Property; or
(iv) any violation of Environmental Laws at any part of the Real Property
or otherwise arising from Company’s activities involving Hazardous
Materials.
SECTION
3.25 Government Contracts and Other Commitments
The
Company has no contracts or subcontracts (at any tier) under prime contracts
with Governmental Entities, None of the Company’s Business activities require
that it or any of its employees obtain a security clearance from .any
Governmental Entity.
SECTION
3.26 Relations with Governments
Neither
Company, nor to the knowledge of Company and the Company Shareholders, any
of
Company’s officers, directors, employees or agents (or shareholders,
distributors, representatives or other persons acting on the express, implied
or
apparent authority of Company) have paid, given or received or have offered
or
promised to pay, give or receive, any bribe or other unlawful payment of money
or other thing of value, any unlawful discount, or any other unlawful
inducement, to or from any person or Governmental Entity in the United States
or
elsewhere in connection with or in furtherance of the business of Company
(including, without limitation, any offer, payment or promise to pay money
or
other thing of value (a) to any foreign official, political party (or
official thereof) or candidate for political office for the purposes of
influencing any act, decision or omission in order to assist Company in
obtaining business for or with, or directing business to, any person, or
(b) to any person, while knowing that all or a portion of such money or
other thing of value will be offered, given or promised to any such official
or
party for such purposes). The business of Company is not in any manner dependent
upon the making or receipt of such payments, discounts or other inducements.
Company has not otherwise taken any action that would cause Company to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended, or any
applicable Laws of similar effect.
25
SECTION 3.27
Broker’s Fees
Company
has no any liability or obligation to pay any fees or commissions to any broker,
finder, or similar agent with respect to the transactions contemplated by this
Agreement.
SECTION
3.28 Product Warranties
All
products and services provided by Company are sold, licensed or otherwise
provided pursuant to the terms contained in the form of Quotation set forth
on
Schedule 3.28. The name of any person or firm to which any additional or
different terms have been provided, together with a copy of such terms, are
set
forth on Schedule 3.28.
SECTION
3.29 Investment Representations
(a)
Each
Company Shareholder is an “accredited investor” within the meaning of Rule 501
promulgated under the Securities Act. By reason of such Company Shareholder’s
business and financial experience, and the business and financial experience
of
those persons retained by such Company Shareholder to advise such Company
Shareholder with respect to such Company Shareholder’s investment in the shares
of Parent Common Stock to be received by such Company Shareholder in the Merger,
such Company Shareholder, together with such advisors, has such knowledge,
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risks of the prospective investment, and is able
to
bear the economic risk of such investment and is able to afford a complete
loss
of such investment. Such Company Shareholder acknowledges that such Company
Shareholder has been granted the opportunity to ask questions of, and receive
answers from, representatives of Parent concerning Parent and the Parent Common
Stock that such Company Shareholder is receiving in the Merger and to obtain
any
additional information that such Company Shareholder deems necessary to verify
the accuracy of the answers such Company Shareholder received from such
representatives.
(b) Each
Company Shareholder acknowledges that the shares of Parent Common Stock to
be
received in the Merger have not been registered under the Act. Such Company
Shareholder is familiar with the provisions of Rule 144 and understands that
in
the event all of the applicable requirements of Rule 144 are not satisfied,
registration under the Act or some other exemption from the registration
requirements of the Act will be required in order to dispose of the Parent
Common Stock to be received in the Merger, and that such Company Shareholder
may
be required to hold such shares of Parent Common Stock for a significant period
of time prior to reselling them.
26
(c) Each
Company Shareholder is acquiring the shares of Parent Common Stock to be
received in the Merger for such Company Shareholder’s own account and not with a
view to distribution in violation of any securities laws. Such Company
Shareholder has no present intention to sell such Parent Common Stock in
violation of federal or state securities laws and such Company Shareholder
has
no present arrangement (whether or not legally binding) to sell such shares
of
Parent Common Stock to or through any person or entity; provided,
however, that by making the representations herein, such Company Shareholder
does not agree to hold such shares of Parent Common Stock for any minimum or
other specific term and reserves the right to dispose of such shares of Parent
Common Stock at any time in accordance with federal and state securities laws
applicable to such disposition.
(d) Each
Company Shareholder acknowledges and understands that the terms of issuance
have
not been reviewed by the SEC or by any state securities authorities and that
the
shares of Parent Common Stock to be issued in the Merger will be issued in
reliance on the certain exemptions for non-public offerings under the Act,
which
exemptions depend upon, among other things, the representations made and
information furnished by such Investor, including the bona fide nature of such
Investor’s investment intent as expressed above.
(e) Each
Company Shareholder understands that the shares of Parent Common Stock to be
issued in the Merger will be offered and sold in reliance on a transactional
exemptions from the registration requirements of federal and state securities
laws and Parent is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Company
Shareholder set forth herein in order to determine the applicability of such
exemptions and the suitability of such Investor to acquire the shares of Parent
Common Stock to be issued in the Merger.
SECTION
3.30 Disclosure
Neither
this Agreement nor any written statement, report or other document furnished
or
to be furnished by Company or Company Shareholders pursuant to this Agreement
or
in connection with the transactions contemplated hereby contains, or will
contain, any statement which is false or misleading with respect to any material
fact or omits to state a material fact necessary to make the statements herein
or therein, in light of the circumstances in which they were made, not false
or
misleading. There is no fact known to Company or Company Shareholders which
has
not been disclosed to Parent in this Agreement or the Schedules hereto that
could reasonably be expected to have a Company Material Adverse Effect.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES
OF
PARENT AND MERGER SUB
SECTION
4.01 Organization and Qualification
Parent
is
a corporation duly organized, validly existing and in good standing under the
Laws of the State of Delaware, and has the full and unrestricted corporate
power
and authority to own, operate and lease its Assets, to carry on its business
as
currently conducted, to execute and deliver this Agreement and to carry out
the
transactions contemplated hereby. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
and has full and unrestricted corporate power and authority to own, operate
and
lease its Assets, to carry on its business as currently conducted, to execute
and deliver this Agreement and to carry out the transactions contemplated
hereby. Each of Parent and Merger Sub is duly qualified to conduct business
as a
foreign corporation and is in good standing in the states, countries and
territories in which the nature of the business conducted by it or the character
of the Assets owned, leased or otherwise held by it makes such qualification
necessary, except where the failure to be so qualified would not have a Parent
Material Adverse Effect.
27
SECTION
4.02 Authority; Binding Obligation
Each
of
Parent and Merger Sub has the full and unrestricted corporate power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. The execution and delivery by Parent and
Merger Sub of this Agreement and all other Agreements, documents, certificates
or other instruments contemplated hereby, and the consummation by Parent and
Merger Sub of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement
and the other Agreements, documents, certificates or other instruments
contemplated hereby, or to consummate the transactions contemplated hereby
and
thereby. This Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes a legal, valid and binding obligation of Parent
and
Merger Sub, enforceable in accordance with its terms, except as such
enforceability may be subject to the effect of any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws
affecting creditors’ rights generally and subject to the effect of general
equitable principles (whether considered in a proceeding in equity or at
law).
SECTION
4.03 No Conflict; Required Filings and Consents
(a) The
execution, delivery and performance by Parent and Merger Sub of this Agreement
and all other Agreements, documents, certificates or other instruments
contemplated hereby, the fulfillment of and compliance with the respective
terms
and provisions hereof and thereof, and the consummation by Parent and Merger
Sub
of the transactions contemplated hereby and thereby, do not and will not:
(i) conflict with, or violate any provision of, the certificate of
incorporation or the bylaws of Parent, or the certificate of incorporation
or
the bylaws of Merger Sub; (ii) subject to the filing and recordation of the
Certificate of Merger as required by the NYBCL, conflict with or violate any
Law
applicable to Parent or Merger Sub or any of their respective Assets;
(iii) conflict with, result in any breach of, constitute a default (or an
event that with notice or lapse of time or both would become a default) under
any Agreement to which Parent or Merger Sub is a party or by which Parent or
Merger Sub or any of their respective Assets may be bound; or (iv) result
in or require the creation or imposition of, or result in the acceleration
of,
any indebtedness or any Encumbrance of any nature upon, or with respect to,
Parent or Merger Sub; except for any such conflict or violation described in
clause (ii) above, any such conflict, breach or default described in clause
(iii) above, or any such creation, imposition or acceleration described in
clause (iv) above that would not have a Parent Material Adverse Effect and
that would not prevent Parent or Merger Sub from consummating the Merger on
a
timely basis.
28
(b) The
execution, delivery and performance by Parent and Merger Sub of this Agreement
and all other Agreements, documents, certificates or other instruments
contemplated hereby, the fulfillment of and compliance with the respective
terms
and provisions hereof and thereof, and the consummation by Parent and Merger
Sub
of the transactions contemplated hereby and thereby, do not and will not:
(i) require any consent, approval, authorization or permit of, or filing
with or notification to, any Person not party to this Agreement, except
(A) the filing and recordation of the Certificate of Merger as required by
the NYBCL; and (B) where the failure to obtain any consent, approval,
authorization or permit or to make any filing or notification otherwise required
to be disclosed hereunder would not have a Parent Material Adverse Effect;
or
(ii) result in or give rise to any penalty, forfeiture, Agreement
termination, right of termination, amendment or cancellation, or restriction
on
business operations of Parent or Surviving Corporation that would have a Parent
Material Adverse Effect.
(c) Subject
to the filing and recordation of the Certificate of Merger as required by the
NYBCL, all returns, reports, statements and other documents required to be
filed
by Parent and Merger Sub with any Governmental Entity with respect to this
agreement and the transaction contemplated hereby have been or will be filed
in
a timely manner and are or will be, as the case may be, true, correct and
complete in all material respects (and any related fees required to be paid
have
been paid or will be in full). All material records of every type and nature
relating to the business, operations or assets of Parent and Merger Sub have
been maintained in all material respects in accordance with good business
practices and are maintained at Parent.
(d) No
Governmental Entity or any other Person has notified Parent or Merger Sub that
such Governmental Entity or other Person intends to object to the transactions
contemplated hereunder which shall include for this purpose any objection to
the
operations of the business of Company as part of Parent. Neither Parent nor
Merger Sub are aware of any fact or circumstance related to them with respect
to
this Agreement and the transactions contemplated hereby that would reasonably
be
expected to (i) cause the filing of any objection to any application for
any Governmental consent required hereunder, (ii) lead to any delay in
processing such application or (iii) require any waiver of any Governmental
rule, policy or other applicable law.
SECTION
4.04 No Prior Activities of Merger Sub
Merger
Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
29
SECTION
4.05 SEC Filings; Financial Statements
(a) All
statements, reports, schedules, forms and other documents required to have
been
filed by Parent with the SEC since December 31, 2006 (the “Parent
SEC Documents”)
have
been so filed. As of their respective dates (or, if amended or superseded by
a
filing prior to the date of this Agreement, then on the date of such amendment
or superseding filing): (i) each of the Parent SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or
the
Exchange Act (as the case may be); and (ii) none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The
financial statements (including any related notes) contained in the Parent
SEC
Documents (the “Parent
Financial Statements”):
(i)
complied as to form in all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were prepared in accordance
with
GAAP applied on a consistent basis throughout the periods covered (except as
may
be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC, and except that
the
unaudited financial statements may not have contained footnotes and were subject
to normal and recurring year-end adjustments which were not, or are not
reasonably expected to be, individually or in the aggregate, material in
amount), and (iii) fairly presented in all material respects the consolidated
financial position of Parent and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows of Parent and its consolidated subsidiaries for the periods covered
thereby.
SECTION
4.06 Brokers
Except
for any investment banking firm engaged by Parent to deliver a fairness opinion
as contemplated by Section 7.02, no broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent.
ARTICLE
V
PRE-CLOSING
COVENANTS
SECTION
5.01 Conduct of Business of Company Until Effective Time
Company
and the Company Shareholders hereby covenant and agree that, from the date
of
this Agreement until the Effective Time, Company, unless otherwise expressly
contemplated by this Agreement or consented to in writing by Parent, will carry
on its businesses only in the Ordinary Course of Business, use its best efforts
to preserve intact its business organizations and Assets, maintain its rights
and franchises, retain the services of its officers and employees and maintain
its relationships with customers, suppliers, licensors, licensees and others
having business dealings with it, and use its best efforts to keep in full
force
and effect liability insurance and bonds comparable in amount and scope of
coverage to that currently maintained. Without limiting the generality of the
foregoing, Company will not:
30
(a) (i) increase
in any manner the compensation or fringe benefits of, or pay any bonus to,
any
director, officer or employee; (ii) grant any severance or termination pay
(other than pursuant to the normal severance practices or existing agreements
of
Company in effect on the date of this Agreement) to, or enter into any severance
agreement with, any director, officer or employee, or enter into any employment
agreement with any director, officer or employee or otherwise without the prior
written consent of Parent; (iii) establish, adopt, enter into or amend any
Company Benefit Plan or other arrangement, except as may be required to comply
with applicable Law; (iv) pay any benefit not provided for under any
Company Benefit Plan or other arrangement; (v) grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement or
Company Benefit Plan or other arrangement (including the grant of stock options,
stock appreciation rights, stock-based or stock-related awards, performance
units or restricted stock, or the removal of existing restrictions in any
Company Benefit Plan or other arrangement or agreement or awards made
thereunder), (vi) take any action to fund or in any other way secure the
payment of compensation or benefits under any agreement or (vii) promote or
fire
any director, officer or employee;
(b) declare,
set aside or pay any dividend on, or make any other distribution in respect
of,
outstanding shares of capital stock;
(c) (i) redeem,
purchase or otherwise acquire any shares of capital stock of Company or any
securities or obligations convertible into or exchangeable for any shares of
capital stock of Company, or any options, warrants or conversion or other rights
to acquire any shares of capital stock of Company or any such securities or
obligations, or any other securities thereof; (ii) effect any
reorganization, recapitalization, merger or share exchange; or (iii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock;
(d) issue,
deliver, award, grant or sell, or authorize the issuance, delivery, award,
grant
or sale (including the grant of any limitations in voting rights or other
Encumbrances) of, any shares of any class of its capital stock (including shares
held in treasury but excluding shares issuable upon the exercise of options
outstanding on the date hereof in accordance with their terms as of the date
hereof), any securities convertible into or exercisable or exchangeable for
any
such shares, or any rights, warrants or options to acquire, any such shares,
or
amend or otherwise modify the terms of any such rights, warrants or options
the
effect of which shall be to make such terms more favorable to the holders
thereof;
(e) acquire
or agree to acquire, by merging or consolidating with, by purchasing an equity
interest in or a portion of the Assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or
division thereof, or otherwise acquire or agree to acquire any Assets of any
other person (other than the purchase of assets from suppliers or vendors in
the
Ordinary Course of Business);
31
(f) sell,
lease, exchange, mortgage, pledge, transfer or otherwise subject to any
Encumbrance or dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise subject to any Encumbrance or dispose of, any of its
Assets, except for sales, dispositions or transfers in the Ordinary Course
of
Business;
(g) propose
or adopt any amendments to its certificate of incorporation, bylaws or other
comparable charter or organizational documents;
(h) make
or
rescind any express or deemed election relating to Taxes, settle or compromise
any claim, action, suit, litigation, proceeding, arbitration, investigation,
audit or controversy relating to Taxes which would reasonably be expected to
result in a Company Material Adverse Effect, or change any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns;
(i) make
or
agree to make any new capital expenditures;
(j) (i) incur
any indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other rights
to
acquire any debt securities of Company, guarantee any debt securities of another
person, enter into any “keep well” or other agreement to maintain any financial
statement condition of another person or enter into any agreement having the
economic effect of any of the foregoing, except for borrowings incurred in
the
Ordinary Course of Business, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person other than travel and
payroll advances made to employees in the Ordinary Course of
Business;
(k) pay,
discharge, settle or satisfy any claims, liabilities or obligations (whether
absolute or contingent, matured or unmatured, known or unknown), other than
the
payments, discharges or satisfactions, in the Ordinary Course of Business which
are materially in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, Company Financial Statement or waive
any material benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which Company is a
party;
(l) waive,
release or assign any rights or claims, or modify, amend or terminate any
agreement to which Company is a party;
(m) make
any
change in any method of accounting or accounting practice or policy other than
those required by GAAP or a Governmental Entity;
(n) take
any
action or fail to take any action that would have a Company Material Adverse
Effect prior to or after the Effective Time or a material adverse effect after
the Effective Time, or that would adversely affect the ability of Company prior
to the Effective Time, or Parent or any of its Subsidiaries after the Effective
Time, to obtain consents of third parties or approvals of Government Entities
required to consummate the transactions contemplated in this Agreement;
or
32
(o) authorize,
or commit or agree to do any of the foregoing.
SECTION
5.02 Efforts to Satisfy Conditions
Parent
and Company shall use their respective reasonable efforts to cause all
conditions to the obligations of Parent and Company set forth in Article VII
to
be satisfied on or before the Closing Date.
SECTION
5.03 Other Actions
Parent
and Company shall not, and shall not permit any of their respective Affiliates
to, take any action that would, or that could reasonably be expected to, result
in (a) any of the representations and warranties of such Party set forth in
this Agreement becoming untrue, or (b) any of the conditions to the Merger
set forth in Article VII not being satisfied.
SECTION
5.04 Certain Tax Matters
From
the
date hereof until the Effective Time, Company (a) will prepare and timely
file with the relevant Taxing authority all Company Tax Returns required to
be
filed during such period (“Post-Signing
Returns”),
which
Post-Signing Returns shall be accurate in all material respects, or permitted
extensions with respect thereto, (b) will timely pay all Taxes due and
payable with respect to such Post-Signing Returns, (c) will pay or
otherwise make adequate provision for all Taxes payable by Company for which
no
Post-Signing Return is due prior to the Effective Time, and (d) will
promptly notify Parent of any action, suit, proceeding, claim or audit pending
against or with respect to Company in respect of any Taxes.
SECTION
5.05 Access and Information
For
so
long as this Agreement is in effect, and subject to applicable Laws, Company
shall (a) afford to Parent and its officers, employees, accountants,
consultants, legal counsel and other representatives reasonable access during
normal business hours, subject to reasonable advance notice, to all of their
respective properties, Agreements, books, records and personnel and
(b) furnish promptly to Parent (i) a copy of each Agreement, document,
certificate or other instrument filed with, or received from any Governmental
Entity and (ii) all other information concerning its respective business,
operations, prospects, conditions (financial or otherwise), Assets, liabilities
and personnel as Parent may reasonably request.
SECTION
5.06 Access to Company Information
From
the
date hereof and through the Closing Date, Company shall, and shall cause its
accountants, counsel, investment bankers, financial advisors, consultants and
other representatives, to provide Parent and Parent’s accountants, counsel,
investment bankers, financial advisors, consultants and other representatives,
upon reasonable notice, access to, and make available, all books, contracts,
records, reports, properties and commitments of Company, including, without
limitation, Company’s Tax Returns and financial statements, for Parent’s use in
connection with Parent’s financing.
33
SECTION
5.7 No Solicitation.
From
the
date of this Agreement until the Effective Time or the termination of this
Agreement pursuant to the terms of this Agreement, Company and the Company
Shareholders shall not and shall not permit any of their Affiliates, directors,
officers, employees, agents or representatives, including, without limitation,
any investment banker, attorney or accountant of Company (collectively,
“Representatives”)
directly or indirectly, to (i) initiate, solicit, encourage or otherwise
facilitate (including by way of furnishing information), any inquiries or the
making of any proposal or offer that constitutes, or may reasonably be expected
to lead to, an Acquisition Proposal, (ii) enter into or maintain or
continue discussions or negotiate with any Person in furtherance of such
inquiries or to obtain an Acquisition Proposal, (iii) agree to, approve,
recommend, or endorse any Acquisition Proposal, (iv) disclose any non-public
information relating to Company or afford access to the properties, books or
records of Company to any person that has made or may reasonably be expected
to
make a proposal regarding a Acquisition Proposal or that has advised Company
that it is or may be interested in making a proposal regarding a Acquisition
Proposal, or (v) authorize or permit any of its or their Subsidiaries or
Representatives to take any such action and Company and Company Shareholders
shall promptly notify Parent of any such inquiries and proposals received by
any
of them or their Representatives, relating to any of such matters
SECTION
5.8 Tax Matters
(a) It
is
intended by the parties hereto that the Merger shall constitute a taxable
transaction and shall not constitute a tax-free reorganization within the
meaning of Section 368 of the Code. Each Party hereto and each Company
Shareholder agrees not to take any position contrary to such intention with
any
Government Entity, including, without limitation, on any Tax returns or other
filings.
(b) At
Parent’s option, Company and each Company Shareholder shall join with Parent in
making an election under Code § 338(h)(10) (and any corresponding election
under state, local, and foreign tax law) with respect to the purchase and sale
of Company Common Stock pursuant to the Merger hereunder (collectively, a
“338(h)(10)
Election”).
Company Shareholders shall include any income, gain, loss, deduction, or other
tax items resulting from the § 338(h)(10) Election on their Tax Returns to
the extent required by applicable law. Company Shareholders shall also pay
any
Tax imposed on Company attributable to the making of the § 338(h)(10)
Election, including (i) any Tax imposed under Code § 1374, (ii) any tax
imposed under Code § 338 and the regulations thereunder, or (iii) any
state, local or foreign Tax imposed on Company’s gain, and Company Shareholders
shall indemnify Parent and the Surviving Corporation against any Loss arising
out of any failure to pay any such Taxes.
(c) Parent,
Company and Company Shareholders agree that the Merger Consideration and the
liabilities of Company (plus other relevant items) will be allocated to the
assets of Company for all purposes (including Tax and financial accounting)
in a
manner consistent with Code §§ 338 and 1060 and the regulations thereunder.
Parent, Company and Company Shareholders shall file all Tax Returns (including
amended returns and claims for refund) and information reports in a manner
consistent with such allocation.
34
ARTICLE
VI
ADDITIONAL
AGREEMENTS
SECTION
6.01 Appropriate Action; Consents; Filings
(a) Upon
the
terms and subject to the conditions set forth in this Agreement, the Parties
shall use their reasonable best efforts to take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper
or
advisable under applicable Law or otherwise to consummate and make effective
the
transactions contemplated by this Agreement as promptly as practicable,
including without limitation (i) executing and delivering any additional
instruments necessary, proper or advisable to consummate the transactions
contemplated by, and to carry out fully the purposes of, this Agreement,
(ii) obtaining from any Governmental Entities any material Licenses
required to be obtained or made by Parent, or Company, in connection with the
authorization, execution and delivery of this Agreement and the consummation
of
the transactions contemplated herein, including, without limitation, the Merger,
and (iii) making all necessary filings, and thereafter making any other
required submissions, with respect to this Agreement and the Merger required
any
applicable Law; provided
that
Parent and Company shall cooperate with each other in connection with the making
of all such filings, including providing copies of all such documents to the
non-filing Party and its advisors prior to filing and discussing all reasonable
additions, deletions or changes suggested in connection therewith. Company
and
Parent shall furnish to each other all information required for any application
or other filing to be made pursuant to the rules and regulations of any
applicable Law in connection with the transactions contemplated by this
Agreement.
(b) (i) Except
as
the Parties may otherwise agree, Company, any Company Shareholder and Parent
shall each give any notices to third parties, and use their reasonable best
efforts to obtain any third-party consents, approvals or waivers
(A) necessary, proper or advisable to consummate the transactions
contemplated in this Agreement; or (B) required to prevent a Company
Material Adverse Effect or a Parent Material Adverse Effect.
(ii) In
the
event that any of Company, any Company Shareholder or Parent shall fail to
obtain any third-party consent, approval or waiver described in Section
6.01(b)(i) of this Agreement, such Party shall use its reasonable best efforts,
and shall take any such actions reasonably requested by the other Parties,
to
minimize any adverse effect upon Company and Parent and their respective
businesses resulting, or which could reasonably be expected to result after
the
Effective Time, from the failure to obtain such consent, approval or
waiver.
(c) From
the
date of this Agreement until the Effective Time, Company and Parent shall
promptly notify each other in writing of any pending or, to the knowledge of
Company, Company Shareholders or Parent, threatened action, proceeding or
investigation by any Governmental Entity or any other Person
(i) challenging or seeking damages in connection with the Merger or the
conversion of Company Common Stock into the Merger Consideration pursuant to
the
Merger or the transactions contemplated hereunder or (ii) seeking to
restrain or prohibit the consummation of the Merger or the transactions
contemplated hereunder or otherwise limit the right of Parent to own or operate
all or any portion of the business or Assets of Company. Company and Parent
shall cooperate with each other in defending any such action, proceeding or
investigation, including seeking to have any stay or temporary restraining
order
entered by any court or other Governmental Entity vacated or
reversed.
35
SECTION
6.02 Disclosure
Prior
to
the Effective Time, each Party shall notify the other Parties in writing of
(i) any representation or warranty made by it in connection with this
Agreement becoming untrue or inaccurate, (ii) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which would
be
likely to cause any condition to the obligations of any Party to effect the
Merger and the other transactions contemplated by this Agreement not to be
satisfied or (iii) the failure of Company, Parent or Merger Sub, as the
case may be, to comply with or satisfy any covenant, condition or Agreement
to
be complied with or satisfied by it pursuant to this Agreement which would
be
likely to result in any condition to the obligations of any Party to effect
the
Merger and the other transactions contemplated by this Agreement not to be
satisfied; provided,
however,
the
delivery of any notice pursuant to this Section 6.02(a) shall not cure any
breach of any representation or warranty requiring disclosure of such matter
as
of the date of this Agreement or otherwise limit or affect the rights and
remedies available hereunder to the Party receiving such notice.
SECTION
6.03 Public Announcements
Parent,
Merger Sub and Company shall consult with each other before issuing or making,
and shall give each other the opportunity to review and comment upon, any press
release or other public statement with respect to the Merger and the other
transactions contemplated in this Agreement, 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
6.04 Obligations of Merger Sub
Parent
shall take all action necessary to cause Merger Sub to perform its obligations
under this Agreement and to consummate the Merger on the terms and conditions
set forth in this Agreement.
SECTION
6.05 Transaction Expenses
Each
Party to this Agreement shall bear their own expenses in connection herewith,
including, without limitation, the fees of each Party’s respective legal
counsel, financial advisors, accountants, brokers, finders or investment
bankers, but in no event shall such fees and expenses (including, without
limitation, the fees and expenses described in Section 3.27) incurred by or
on
behalf of Company. Company shall make a good faith effort to pay all of its
expenses in connection with the Agreement and the transactions contemplated
hereby prior to Closing. In the event any of the foregoing expenses are not
paid
prior to Closing or have not reduced the Transaction Value, Parent shall be
entitled to offset such excess expenses against the Purchase Notes (as if such
excess expenses were a Loss).
36
SECTION
6.06 Director Resignations
Company
shall deliver to Parent prior to the Closing the resignation of each director
and officer of Company, effective as of the Effective Time.
SECTION
6.07 Tax Advance
Within
fifteen (15) days after filing the tax return of the Company for the period
January 1, 2008 through the Effective Time, Parent shall, or shall cause the
Surviving Company to, pay to the Company Shareholders (pro rata to the number
of
shares of Company Stock owned by them as of the Closing Date) and amount equal
to forty-two percent (42%) of (a) the taxable income to be allocated to each
of
them on Forms K-1 to be provided to them by the Surviving Corporation with
respect to such period, less (b) Four Hundred Forty-Eight Thousand Two Hundred
Thirty-six Dollars (448,236). The amount of such payments shall be applied
against the payments next becoming due under the Purchase Notes after the date
such payments are made to the Company Shareholders.
ARTICLE
VII
CONDITIONS
PRECEDENT
SECTION
7.01 Conditions to Obligations of Each Party Under This
Agreement
The
respective obligations of each Party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which
may
be waived by agreement of Parent and Company, in whole or in part, to the extent
permitted by applicable Law:
(a) No
Order.
No
Governmental Entity or federal or state court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, judgment, injunction or other order
(whether temporary, preliminary or permanent), in any case which is in effect
and which prevents or prohibits consummation of the Merger; provided,
however,
that
the Parties shall use their reasonable best efforts to cause any such decree,
judgment, injunction or other order to be vacated or lifted; provided,
further,
that
the failure to obtain a required consent or approval of a Governmental Entity
shall not form the basis for an assertion that this condition is not
satisfied.
37
SECTION
7.02 Additional Conditions to Obligations of Parent and Merger
Sub
The
obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived by Parent, in whole or in part, to the extent permitted
by
applicable Law:
(a) Representations
and Warranties.
Each of
the representations and warranties of Company and the Company Shareholders
contained in this Agreement shall be true and correct as of the date of this
Agreement and shall be true and correct (except that where any statement in
a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving effect to such
standard) as of the Effective Time as though made as of the Effective Time,
except for (i) representations and warranties which address matters only as
of a
particular date, which representations and warranties shall be true and correct
in all material respects (except that where any statement in a representation
or
warranty expressly includes a standard of materiality, such statement shall
be
true and correct in all respects giving effect to such standard) as of such
date
and (ii) changes permitted by or consistent with this
Agreement.
(b) Agreements
and Covenants.
Company
shall have performed or complied in all respects with all Agreements and
covenants required by this Agreement to be performed or complied with by Company
on or prior to the Effective Time.
(c) Opinion
of Counsel.
Parent
shall have received from Xxxxx Xxxxx LLP, counsel to Company, an opinion dated
the Closing Date, which is reasonable and customary for transactions of the
type
contemplated by this Agreement.
(d) No
Challenge.
There
shall not be pending any enforcement action or similar proceeding by any state
or federal Governmental Entity that is likely to have a Company Material Adverse
Effect or, if such action arises in connection with the transactions
contemplated hereby, a Parent Material Adverse Effect.
(e) Company
Material Adverse Effect.
There
shall not have occurred a Company Material Adverse Effect (or any development
that, insofar as reasonably can be foreseen, is reasonably likely to result
in
any Company Material Adverse Effect).
(f) No
Litigation.
There
shall be no pending or threatened suit, action, proceeding or investigation:
(i)
challenging or seeking to restrain or prohibit the consummation of the Merger
or
any of the other transactions contemplated by this Agreement, (ii) relating
to
the Merger and seeking to obtain from Parent or Merger Sub any damages that
may
be material to Parent, (iii) seeking to prohibit or limit in any respect
Parent's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation; (iv) which would materially and adversely affect the right of
the
Surviving Corporation to own the assets or operate the business of Company;
or
(v) which, if adversely determined, could have a Company Material Adverse Effect
or Parent Adverse Effect.
38
(g) Consents.
Company
shall have procured all consents of third-parties and Governmental Entities
specified in Schedule 3.06. Parent
shall have received the approval of its primary lender to the consummation
of
the Merger and the transactions contemplated by this Agreement.
(h) Bank
Financing. Parent shall have entered into a loan agreement with a commercial
lender reasonably acceptable to Parent including, among other things, the
agreement of such lender to provide Parent with funds sufficient to pay or
cause
to be paid the Cash Purchase Price and the Company Shareholders shall have
agreed to subordinate the Purchase Notes to the obligations of the Parent to
such lender on terms and conditions satisfactory to such lender, in its sole
discretion.
(i) Benefit
Plans Termination.
Company
shall have terminated each of the Benefit Plans on terms reasonably satisfactory
to Parent, shall have provided evidence reasonably satisfactory to Parent to
ensure that no employee or former employee of Company has any right under such
plans and that all Liabilities of Company under the Benefits Plans (including
any Liabilities relating to services performed prior to the Closing) are fully
extinguished at no cost, and with no Liability, to Company except for funding
of
retirement plans for fiscal 2008 and for termination or rollover payments
incident to termination of the Benefit Plans.
(j) Dissenting
Shareholders.
There
shall be no Dissenting Shareholders.
(k) Non-competition
Agreements.
Each of
Company Shareholders shall have executed and delivered to Parent a
non-competition agreement in the form attached hereto as Exhibit
F.
(l) Employment
Agreements.
Each of
Xxxxxxx Xxxxxx and Xxxxxxxx Xxxxxxx shall have executed and delivered to Parent
an employment agreement in the form attached hereto as Exhibit
G.
(m) Lease.
Parent
or the Surviving Corporation (at the option of Parent) having entered into
a
lease agreement for the premises in which the Company currently conducts its
business, on terms (including term and rental payments) and conditions
satisfactory to Parent.
(n) Due
Diligence Investigation.
Parent
shall not have identified anything during its continuing business and legal
due
diligence investigation of Company that has or in the reasonable judgment of
Parent could be expected to have a Company Material Adverse Effect.
(o) Fairness
Opinion.
If
Parent elects, it shall have received an opinion from a reputable investment
banking firm selected by Parent as to the fairness, from a financial point
of
view, to Parent of the aggregate Merger Consideration to be paid to Company
Shareholders pursuant to this Agreement.
(p) Officer’s
Certificate.
Parent
shall have received a certificate, dated as of the Closing Date, signed on
behalf of Company by the its chief executive officer and by each of the Company
Shareholders (i) representing and warranting after reasonable investigation
that
the conditions set forth in Section 7.02(a) and Section 7.02(b) have
been duly satisfied, (ii) certifying that Company Financial Statement have
been
prepared in accordance with GAAP and fairly present, in all material respects,
the financial condition and results of operation of Company.
39
(q) Secretary’s
Certificate.
Parent
shall have received a certificate, dated as of the Closing Date, signed by
the
Secretary of Company (i) attaching copies of Company’s certificate of
incorporation and bylaws, and any amendments thereto, (ii) attaching a good
standing certificate of Company, duly certified by the New York Department
of
State, (iii) certifying that attached thereto are true and correct copies
of action by written consent or resolutions duly adopted by the board of
directors and shareholders of Company which authorize and approve the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated thereby, (iv) certifying that there are no
proceedings for the dissolution or liquidation of Company and
(v) certifying the incumbency, signature and authority of the officers of
Company authorized to execute, deliver and perform this Agreement and all other
documents, instruments or agreements related thereto executed or to be executed
by Company.
SECTION
7.03 Additional Conditions to Obligations of Company
The
obligations of Company to effect the Merger and the other transactions
contemplated by this Agreement are also subject to the satisfaction at or prior
to the Effective Time of the following conditions, any or all of which may
be
waived by Company, in whole or in part, to the extent permitted by applicable
Law:
(a) Representations
and Warranties.
Each of
the representations and warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct as of the date of this Agreement and shall
be true and correct (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall
be
true and correct in all respects giving effect to such standard) as of the
Effective Time as though made as of the Effective Time, except for
(i) representations and warranties which address matters only as of a
particular date, which representations and warranties shall be true and correct
in all material respects (except that where any statement in a representation
or
warranty expressly includes a standard of materiality, such statement shall
be
true and correct in all respects giving effect to such standard) as of such
date
and (ii) changes permitted by or consistent with this Agreement. Company
shall have received a certificate of the chief executive officer or chief
financial officer of Parent to the foregoing effect.
(b) Guarantees.
Parent
and Merger Sub shall have obtained the release of each of the Company
Shareholders from all personal guarantees of obligations of the Company
included, but not limited to, the lease by the Company of the premises occupied
by the Company for the conduct of its business.
(c) Agreements
and Covenants.
Parent
and Merger Sub shall have performed or complied in all respects with all
Agreements and covenants required by this Agreement to be performed or complied
with by them on or prior to the Effective Time except for such noncompliance
that does not have a Parent Material Adverse Effect. Company shall have received
a certificate of the chief executive officer or chief financial officer of
Parent and Merger Sub to that effect.
40
(d) Opinion
of Counsel.
Company
and Shareholders shall have received from Boylan, Brown, Code, Xxxxxx &
Xxxxxx, LLP, counsel to Parent and Merger Sub, an opinion dated the Closing
Date, which is reasonable and customary for transactions of the type
contemplated by this Agreement.
(e) No
Challenge.
There
shall not be pending any enforcement action or similar proceeding by any state
or federal Governmental Entity that is likely to have a Parent Material Adverse
Effect.
(f) Parent
Material Adverse Effect.
There
shall not have occurred a Parent Material Adverse Effect (or any development
that, insofar as reasonably can be foreseen, is reasonably likely to result
in
any Parent Material Adverse Effect).
(g) No
Litigation.
There
shall be no pending or threatened suit, action, proceeding or investigation:
(i)
challenging or seeking to restrain or prohibit the consummation of the Merger
or
any of the other transactions contemplated by this Agreement or (ii) which,
if
adversely determined, could have a Parent Material Adverse Effect.
(h) Consents.
Parent
shall have received the approval of its primary lender to the consummation
of
the Merger and the transactions contemplated by this Agreement.
(i) Secretary’s
Certificate.
Company
and Shareholders shall have received a certificate, dated as of the Closing
Date, signed by the Secretary of Parent and Merger Sub (i) attaching copies
of Parent’s and Merger Sub's certificate of incorporation and bylaws, and any
amendments thereto, (ii) attaching a good standing certificate of Parent
and Merger Sub, duly certified by the Delaware Secretary of State and New York
Department of State, respectively (iii) certifying that attached thereto
are true and correct copies of action by written consent or resolutions duly
adopted by the board of directors of Parent and Merger Sub which authorize
and
approve the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated thereby, and (iv) certifying
the incumbency, signature and authority of the officers of Parent and Merger
Sub
authorized to execute, deliver and perform this Agreement and all other
documents, instruments or agreements related thereto executed or to be executed
by Parent and Merger Sub.
41
ARTICLE
VIII
TERMINATION,
AMENDMENT AND WAIVER
SECTION
8.01 Termination
This
Agreement may be terminated at any time (except where otherwise indicated)
prior
to the Effective Time, whether before or after approval of this Agreement and
the Merger by Company Shareholders:
(a) by
mutual
written consent of Parent and Company;
(b) (i) by
Parent, if any of the conditions provided in Section 7.02 have not been met
as
of July 31, 2008 and such failure has not been cured within twenty (20) business
days following receipt by Company of written notice of such failure describing
the extent and nature thereof in reasonable detail, or to the extent permitted
by applicable Law, such conditions have not been waived in writing by
Parent;
(ii) by
Company, if any of the conditions provided in Section 7.03 have not been met
as
of the July 31, 2008 and such failure has not been cured within twenty (20)
business days following receipt by Parent of written notice of such failure
describing the extent and nature thereof in reasonable detail, or, to the extent
permitted by applicable law, such conditions have not been waived in writing
by
Company.
(c) by
either
Parent or Company if any decree, permanent injunction, judgment, order or other
action by any court of competent jurisdiction or any other federal or state
(but
not county or municipal) Governmental Entity preventing or prohibiting
consummation of the Merger shall have been filed or in effect;
(d) by
either
Parent or Company if the Merger shall not have been consummated by July 31,
2008; provided however,
that
the right to terminate this Agreement under this Section 8.01(e) shall not
be available to (i) Parent, where Parent’s failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date, or
(ii) Company, where Company’s failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(e) by
either
Parent or Company if any of the conditions provided in Section 7.01 have not
been met as of July 31, 2008, or to the extent permitted by applicable law,
have
not been waived by both Parties; and
(f) by
Parent, if Company or the Company Shareholders breach their obligations under
Section 5.7.
42
SECTION
8.02 Effect of Termination
In
the
event of termination of this Agreement by either Parent or Company as provided
in Section 8.01, this Agreement shall forthwith become void and there shall
be no liability or obligation on the part of Parent, Merger Sub or Company
or
any of their respective directors or officers except (i) nothing herein
shall relieve any Party from liability for any breach hereof, (ii) each
Party shall be entitled to any remedies at law or in equity for such breach
and
(iii) Sections 8.02 and 8.03 and Article IX shall remain in full force and
effect and survive any termination of this Agreement.
SECTION
8.03 Expenses; Termination Fees
Except
as
otherwise set forth in this Agreement, all costs and expenses incurred by the
parties hereto shall be borne solely and entirely by the party that has incurred
such costs and expenses, whether or not the Merger is consummated.
SECTION
8.04 Amendment
Subject
to applicable Law, this Agreement may be amended by the Parties at any time
prior to the Effective Time. This Agreement may not be amended except by an
instrument in writing signed by the Parties.
SECTION
8.05 Extension; Waiver
At
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 the other Parties,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any Agreements, documents, certificates or other instruments
delivered pursuant hereto and (c) waive compliance with any of the
Agreements or conditions contained in this Agreement. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
Party or Parties to be bound thereby. The failure of any Party to assert any
of
its rights under this Agreement or otherwise shall not constitute a waiver
of
such rights.
ARTICLE
IX
SURVIVAL
OF REPRESENTATIONS; REMEDIES
SECTION
9.01 Survival of Representations
All
representations, warranties, covenants, indemnities and other agreements made
by
any party to this Agreement herein, shall be deemed made on and as of the
Effective Time as though such representations, warranties, covenants,
indemnities and other agreements were made on and as of such date, and all
such
representations, warranties, covenants, indemnities and other agreements shall
survive the two-year anniversary of the Closing Date; provided,
however,
that
(a) the representations set forth in Section 3.05 (Authority; Binding
Obligation) shall survive in perpetuity, (b) the representations set forth
in
Section 3.01 (Organization and Qualification), Section 3.02 (No
Subsidiaries), Section 3.04 (Capitalization), Section 3.15 (Pension
and Benefit Matters), Section 3.16 (Tax and Tax Matters) and
Section 3.24 (Environmental Matters) shall survive until the expiration of
the applicable statute of limitations. Notwithstanding
anything herein to the contrary, any representation, warranty, covenant,
agreement or indemnity which is the subject of a claim which is asserted in
writing prior to the expiration of the applicable period set forth above shall
survive solely with respect to such claim until the final resolution
thereof.
43
SECTION
9.02 Indemnification by Company Shareholders
(a) Company
Shareholders hereby agree to severally indemnify, defend and hold Parent, the
Surviving Corporation and their respective officers and directors, and each
person, if any, who controls or may control Parent or the Surviving Corporation
within the meaning of the Securities Act (all such persons hereinafter are
referred to individually as a “Parent
Indemnified Person”
and
collectively as “Parent
Indemnified Persons,”
but
in
no event shall any Company Shareholder prior to the Effective Time be such
a
Parent Indemnified Person) harmless against all Losses resulting from, imposed
upon or incurred by any Parent Indemnified Person, directly or indirectly,
as a
result of any of the following, anything in this Agreement to the contrary
notwithstanding:
(i) any
inaccuracy or breach of a representation or warranty of Company or the Company
Shareholder given or made by Company or the Company Shareholder in this
Agreement, in the Certificate of Merger, in any of the schedules to this
Agreement or in any certificate, document or agreement delivered by or on behalf
of Company or the Company Shareholders pursuant hereto; and
(ii) any
failure by Company or the Company Shareholders to perform or comply with any
covenant or agreement contained in this Agreement, in the Certificate of Merger
or in any certificate, document or agreement delivered by or on behalf of
Company or the Company Shareholder pursuant hereto.
(b) Notwithstanding
anything in this Agreement to the contrary, Company Shareholders shall not
be
responsible for any Loss pursuant to this Section 9.02 unless and until the
aggregate amount of all of such Losses shall exceed $100,000 in
which
case Company Shareholders jointly and severally shall be liable for the amount
by which the entire Loss exceeds $100,000.
SECTION
9.03 Procedure for Offset
(a) In
the
event, from time to time, any Parent Indemnified Person determines that it
has
suffered a Loss for which indemnification is available pursuant to this
Agreement, the following procedure shall be followed:
(i) Parent
Indemnified Person shall give written notice of any such claim (a “Loss
Notice”)
to the
Shareholders’ Representative specifying in reasonable detail the amount of the
claimed Loss (the “Loss
Amount”)
and
the basis for such Loss and whether the Parent intends to offset against the
Purchase Notes.
44
(ii) Within
twenty (20) days after delivery of a Loss Notice, the Shareholders’
Representative shall provide to Parent and the Parent Indemnified Person (if
not
the same Person), a written response (a “Response
Notice”)
in
which the Shareholders’ Representative will (i) agree that an offset in the
full Loss Amount may be made against the Purchase Notes, (ii) agree that an
offset in an amount equal to part, but not all, of the Loss Amount (the
“Agreed
Amount”)
may be
made against the Purchase Notes or (iii) contest making any offset against
the Purchase Notes. The Shareholders’ Representative may contest an offset
against the Purchase Notes upon a good faith belief that all or such portion
of
such offset does not constitute a Loss for which the Parent Indemnified Person
is entitled to indemnification under this Agreement. If no Response Notice
is
delivered by the Shareholders’ Representative within such twenty (20) day
period, the Shareholders’ Representative shall be deemed to have agreed that an
offset in the full Loss Amount may be made against the Purchase
Notes.
(iii) If
the
Shareholders’ Representative in the Response Notice agree (or are deemed to have
agreed pursuant to clause (ii) above) that an offset may be made against the
Purchase Notes in an amount equal to the Loss Amount, the Purchase Note of
each
Company Shareholder shall be reduced proportionately in the same percentage
that
each Company Shareholder’s Purchase Note bears to all Purchase
Notes.
(iv) If
the
Shareholders’ Representative in the Response Notice agrees that an offset in an
Agreed Amount may be made against the Purchase Notes, the Purchase Note of
each
Company Shareholder shall be reduced proportionately in the same percentage
that
such Company Shareholder’s Purchase Note bears to all Purchase
Notes.
(v) If
the
Shareholders’ Representative in the Response Notice contests an offset against
the Purchase
Notes
equal to
all or any part of the Loss Amount (the “Contested
Amount”),
the
Parent Indemnified Person and the Shareholders’ Representative shall negotiate
in good faith to resolve any such dispute. During the period of such
negotiation, and thereafter until the resolution of such dispute, Parent shall
make any payments due on the Purchase Notes, up to the Contested Amount, to
the
Escrow Agent named in Subsection 9.03(a)(vi), to be held and disbursed in
accordance with the provisions of that Subsection.. The Purchase
Note of
each
Company Shareholder shall be reduced proportionately in the same percentage
that
such Company Shareholder’s Purchase
Note
bears to
all Purchase
Notes
by an
amount equal to the dollar amount of the award set forth in such
determination.
(vi) If
the
Parent claims that it is entitled to offset any Contested Sum against the
Purchase Notes, it shall make each of the payments due with respect to the
Purchase Notes coming due after the date of the Response Notice (up to, but
not
in excess of, the Contested Sum) (together, the “Escrow
Sum”)
to
Xxxxx Xxxxx, LLP and Boylan, Brown, Code, Xxxxxx & Xxxxxx, LLP, as Escrow
Agent, to be held and disbursed in accordance with the following:
(a) Retention
of Escrow Sum.
The
Escrow Agent shall hold the Escrow Sum in an interest bearing account of its
choosing in accordance with the provisions of this Subsection 9.03(a)(vi).
Interest accumulated in such account shall be paid to Parent and the Company
Shareholders in the same proportion as each of them shall become entitled to
receive distribution of the Escrow Sum.
45
(b) Distribution
of Escrow Sum.
Escrow
Agent shall retain the Escrow Sum until the resolution of dispute with respect
to the Contested Sum in accordance with the provisions of Subsection 9.03(a)(v).
The Escrow Agent shall distribute the Escrow Sum in accordance with the
determination of a court of competent jurisdiction with respect to the disputes
giving rise to the deposit in escrow of the Escrow Sum; provided, however,
that
if the Parent and the Shareholders Representative shall instruct the Escrow
Agent in writing as to the manner in which it shall distribute the Escrow Sum,
the Escrow Sum shall be distributed in accordance with such
instructions.
(c) Escrow
Agent's Responsibility.
The
Escrow Agent may rely and shall be protected in acting upon any documents which
may be submitted to them in connection with its duties hereunder and which
it
believes to be genuine and to have been signed or presented by the proper party
or parties, and the Escrow Agent shall have no liability or responsibility
with
respect to the form, execution or validity thereof. The Escrow Agent shall
not
be responsible for any act or failure to act on their part except in the case
of
their own bad faith or gross negligence
(d) Action
By Escrow Agent.
The
Escrow Agent may act only jointly and not severally with respect to any matters
relating to the Escrow Sum. The action by the Escrow Agent shall not preclude
either of them from representing or continuing to represent its client is
connection with this Agreement and the transactions contemplated hereby. The
fees of Xxxxx Xxxxx, LLP for acting as Escrow Agent shall be paid by the Company
Shareholders and the fees of Boylan, Brown, Code, Xxxxxx & Xxxxxx, LLP for
acting as Escrow Agent shall be paid by Parent.
(b) The
indemnity and other obligations of each Company Shareholder under this Agreement
shall first be satisfied through the exercise by Parent of the right of offset
against the aggregate outstanding amount of the Purchase Notes. Following its
exhaustion of its offset rights as set forth above, Parent shall have the right
to enforce the remaining indemnity obligations of Company Shareholders pursuant
to Section 9.02 hereof against each Company Shareholder.
(c) Provided
that Parent makes payments of Contested Amounts to the Escrow Agent identified
in Subsection 9.03(vi) in accordance with that Subsection, the exercise of
any
such right of offset or reimbursement by Parent in good faith, whether or not
ultimately determined to be justified, will not constitute a breach of this
Agreement or a default under any Purchase Note. Neither the exercise of nor
the
failure to exercise such right of offset or reimbursement will constitute an
election of remedies or limit Parent in any manner in the enforcement of any
other remedies available to Parent except as otherwise expressly set forth
in
this Agreement.
46
SECTION
9.04 Third Party Claims.
The
obligations and liabilities of Company Shareholders with respect to their
respective indemnities pursuant to this Article IX, resulting from any
Third Party Claim shall be subject to the following terms and
conditions:
(a) The
party
seeking indemnification (the “Indemnified
Party”)
must
give the party obligated to indemnify (the “Indemnifying
Party”),
notice of any Third Party Claim which is asserted against, resulting to, imposed
upon or incurred by the Indemnified Party and which may give rise to liability
of the Indemnifying Party pursuant to this Article IX, stating (to the
extent known or reasonably anticipated) the nature and basis of such Third
Party
Claim and the amount thereof; provided
that the
failure to give such notice shall not affect the rights of the Indemnified
Party
hereunder except to the extent (i) that the Indemnifying Party shall have
suffered actual damage by reason of such failure, or (ii) such failure or
delay materially adversely affects the ability of the Indemnifying Party to
defend, settle or compromise such Third Party Claim.
(b) Subject
to Section 9.04(c) below, if the Indemnifying Party assumes responsibility
for Losses arising out of such Third Party Claim, then the Indemnifying Party
shall have the right to undertake, by counsel or other representatives of its
own choosing, the defense of such Third Party Claim at the Indemnifying Party’s
risk and expense.
(c) In
the
event that (i) the Indemnifying Party shall elect not to undertake such defense,
(ii) within a reasonable time after notice from the Indemnified Party of any
such Third Party Claim, the Indemnifying Party shall fail to undertake to defend
such Third Party Claim, or (iii) there is a reasonable probability that such
Third Party Claim may materially and adversely affect the Indemnified Party
other than as a result of money damages or other money payments, then the
Indemnified Party (upon further written notice to the Indemnifying Party) shall
have the right to undertake the defense, compromise or settlement of such Third
Party Claim, by counsel or other representatives of its own choosing, on behalf
of and for the account and risk of the Indemnifying Party. In the event that
the
Indemnified Party undertakes the defense of a Third Party Claim under this
Section 9.04, the Indemnifying Party shall pay to the Indemnified Party, in
addition to the other sums required to be paid hereunder, the reasonable costs
and expenses incurred by the Indemnified Party in connection with such defense,
compromise or settlement as and when such costs and expenses are so
incurred.
(d) Anything
in this Section 9.04 to the contrary notwithstanding, (i) neither the
Indemnified Party nor the Indemnifying Party shall, without the other party’s
written consent (which consent shall not be unreasonably withheld or delayed),
settle or compromise such Third Party Claim or consent to entry of any judgment
which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such Third Party Claim in form and substance
satisfactory to the Indemnified Party; (ii) in the event that a party
hereto undertakes defense of such Third Party Claim in accordance with this
Section 9.04, the other parties, by counsel or other representative of
their own choosing and at their sole cost and expense, shall have the right
to
participate in the defense, compromise or settlement thereof and each party
and
its counsel and other representatives shall cooperate with the other party
and
its counsel and representatives in connection therewith; and (iii) the
party that undertakes the defense of such Third Party Claim in accordance with
this Section 9.04 shall have an obligation to keep the other parties
informed of the status of the defense of such Third Party Claim and furnish
the
other parties with all documents, instruments and information that the other
parties shall reasonably request in connection therewith.
47
SECTION
9.05 No
Recourse Against Company
Company
Shareholders hereby irrevocably waive any and all right to recourse against
Company and the Surviving Corporation with respect to any misrepresentation
or
breach of any representation, warranty or indemnity, or noncompliance with
any
conditions or covenants, given or made by Company in this Agreement or any
other
agreements and documents executed or to be executed by the Parties hereto in
order to consummate the transactions contemplated by this Agreement. No Company
Shareholder shall be entitled to contribution from, subrogation to or recovery
against Company or the Surviving Corporation with respect to any liability
of
any Company Shareholder that may arise under or pursuant to this Agreement
or
any of the other agreements and documents executed or to be executed by the
Parties hereto in order to consummate the transactions contemplated by this
Agreement or such other agreements and documents contemplated
hereby.
SECTION
9.06 Specific Performance
(a) In
addition to any other remedies which Parent or Merger Sub may have at law or
in
equity, Company and the Company Shareholders hereby acknowledge that Company
and
the transactions contemplated under this Agreement are unique, and that the
harm
to Parent or Merger Sub resulting from breaches by Company or the Company
Shareholders of their obligation cannot be adequately compensated by damages.
Accordingly, Company and the Company Shareholders agree that Parent and Merger
Sub shall have the right to have all obligations, undertakings, agreements,
covenants and other provisions of this Agreement specifically performed by
Company and the Company Shareholders and that Parent and Merger Sub shall have
the right to obtain an order or decree of such specific performance in any
of
the courts of the United States of America or any state or other political
subdivision thereof.
(b) In
addition to any other remedies which Company Shareholders may have at law or
in
equity, Parent and Merger Sub hereby acknowledge that the transactions
contemplated under this Agreement are unique, and that the harm to Company
Shareholders resulting from breaches by Parent or Merger Sub of their obligation
cannot be adequately compensated by damages. Accordingly, Parent and Merger
Sub
agree that Company Shareholders shall have the right to have all obligations,
undertakings, agreements, covenants and other provisions of this Agreement
specifically performed by Parent and Merger Sub and that Company Shareholders
shall have the right to obtain an order or decree of such specific performance
in any of the courts of the United States of America or any state or other
political subdivision thereof.
SECTION
9.07 Remedies Cumulative
Subject
to the limitations and qualifications set forth in this Article IX, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by the parties hereto of any other rights or the seeking of any other
remedies against the other parties, or their respective successors or
assigns.
48
SECTION
9.08 Indemnity by Parent
Parent
hereby agrees to indemnify, defend and hold Company Shareholders (“Company
Shareholder
Indemnified Person”
and
collectively “Company Shareholder Indemnified
Persons,”
but
in
no event shall any Company Shareholder prior to the Effective Time be such
a
Company Shareholder Indemnified Person) harmless against all Losses resulting
from, imposed upon or incurred by any Company Shareholder Indemnified Person,
directly or indirectly, as a result of any of the following, anything in this
Agreement to the contrary notwithstanding:
(a) any
inaccuracy or breach of a representation or warranty of Parent or Merger Sub
given or made by Parent or Merger Sub in this Agreement, in the Certificate
of
Merger, or in any certificate or agreement delivered by or on behalf of Parent
or Merger Sub pursuant hereto; and
(b) any
failure by Parent or Merger Sub to perform or comply with any covenant or
agreement contained in this Agreement, in the Certificate of Merger or in any
certificate or agreement delivered by or on behalf of Parent or Merger Sub
pursuant hereto.
ARTICLE
X
GENERAL
PROVISIONS
SECTION
10.01 Notices
All
notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) or sent by
overnight courier (providing proof of delivery) to the Parties at the following
addresses or sent by electronic transmission to the following facsimile numbers
(or at such other address or facsimile number for a Party as shall be specified
by like notice):
|
(a)
|
If
to Parent or Merger Sub:
|
000
Xxxxxx Xxxxxx
|
Xxxxxx,
Xxx Xxxx 00000
|
Facsimile: (000)000-0000
Attention: Chief
Executive Officer
49
|
With
a copy (which shall not constitute notice)
to:
|
Boylan,
Brown, Code, Xxxxxx & Xxxxxx, L.L.P.
0000
Xxxxx Xxxxxx
Xxxxxxxxx,
Xxx Xxxx 00000
|
Facsimile:
|
(000)
000-0000
|
|
Attention:
|
Xxxxxx
X. Xxxxxx, Esq.
|
|
(b)
|
If
to Company prior to the Closing
Date:
|
Val-
U-Tech Corp.
000
X
Xxxxxx Xxxxxxx Xxxxxxx
|
Xxxxxx,
Xxx Xxxx 00000
|
Facsimile: (000)
000-0000
|
Attention:
|
Xxxxxxx
Xxxxxx, President
|
With
a
copy (which shall not constitute notice) to:
Xxxxx
Xxxxx LLP
Xxxxx
Village Office Park
000
Xxxxxx Xxxx Xxx
Xxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
If
to
Shareholders’ Representative:
Xxxxxxx
Xxxxxx
000
Xxxxx
Xxxx
Xxxxxxx
Xxxxx, Xxx Xxxx 00000
With
a
copy (which shall not constitute notice) to:
Xxxxx
Xxxxx LLP
Xxxxx
Village Office Park
000
Xxxxxx Xxxx Xxx
Xxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
SECTION
10.02 Jurisdiction, Venue and Attorneys’ Fees
(a) In
the
event that any legal proceedings are commenced in any court with respect to
any
matter arising under this Agreement, the Parties hereto specifically consent
and
agree that:
50
(i) the
courts of the State of New York and/or the United States Federal Courts located
in the State of New York shall have exclusive jurisdiction over each of the
Parties and such proceedings; and
(ii) the
venue
of any such action shall be in Monroe County, New York and/or the United States
District Court for the Western District of New York
(b) In
the
event that any legal proceedings are commenced in any court with respect to
any
matter arising under or relating to this Agreement or any of the agreements
executed in connection herewith, the prevailing party in such proceeding shall
be entitled to recover from the other party or parties its reasonable attorneys’
fees, disbursement and expenses incurred in connection with the investigation
and prosecution or defense (as the case may be) in connection with such
proceeding.
SECTION
10.02 Headings
The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
SECTION
10.03 Severability
If
any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of Law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any Party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the Parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
SECTION
10.04 Entire Agreement
This
Agreement (together with the Exhibits, Schedules and the other documents
delivered pursuant hereto) constitute the entire agreement of the Parties and
supersede all prior agreements and undertakings, both written and oral, among
the Parties, or any of them, with respect to the subject matter
hereof.
SECTION
10.05 Assignment
Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the Parties hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Parties; provided,
however,
that
Parent and Merger Sub shall have the right to assign this Agreement without
the
prior written consent of Company to a direct or indirect Subsidiary of the
Parent, but no such assignment shall relieve Parent or Merger Sub, as the case
may be, of its obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable
by
the Parties and their respective successors and assigns.
51
SECTION
10.06 Parties in Interest
This
Agreement shall be binding upon and inure solely to the benefit of each Party,
and nothing in this Agreement, express or implied, other than the right to
receive the Merger Consideration pursuant to Article II and the rights of
the Parent Indemnified Person pursuant to Article IX, is intended to or shall
confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION
10.07 Mutual Drafting
Each
Party has participated in the drafting of this Agreement, which each Party
acknowledges is the result of extensive negotiations between the Parties.
Consequently, this Agreement shall be interpreted without reference to any
rule
or precept of law that states that any ambiguity in a document be construed
against the drafter.
SECTION
10.08 Governing Law
This
Agreement shall be governed by, and construed in accordance with, the Laws
of
the State of New York, regardless of the Laws that might otherwise govern under
applicable principles of conflicts of law.
SECTION
10.09 Counterparts
This
Agreement may be executed and delivered in one or more counterparts, and by
the
different Parties in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION
10.10 Singular and Plural
Any
reference in this Agreement to the singular includes a reference to the plural
and vice
versa.
ARTICLE
XI
DEFINITIONS
For
purposes of this Agreement, the following terms, and the singular and plural
thereof, shall have the meanings set forth below:
“Acquisition
Proposal” shall mean any offer, proposal, letter of intent, inquiry or
expression or indication of interest (other than an offer, proposal, letter
of
intent, inquiry or expression or indication of interest by Parent) contemplating
or otherwise relating to any Acquisition Transaction.
52
“Acquisition
Transaction” shall mean any transaction or series of related transactions
involving:
(a)
any
merger, consolidation, share exchange, business combination, issuance of
securities, direct or indirect acquisition of securities, tender offer, exchange
offer or other similar transaction in which (i) Company is a constituent
corporation, (ii) a Person or “Group” (as defined in the Exchange Act and the
rules promulgated thereunder) of Persons directly or indirectly acquires
beneficial or record ownership of securities representing more than 10% of
the
outstanding securities of any class of voting securities of Company, or (iii)
Company issues securities representing more than 10% of the outstanding
securities of any class of voting securities of Company;
(b)
any
direct or indirect sale, lease, exchange, transfer, license, acquisition or
disposition of any business or businesses or of assets or rights that constitute
or account for 10% or more of the net revenues, net income or assets of Company;
or
(c)
any
liquidation or dissolution of Company.
“Act”
means the Securities Act of 1933, as amended.
“Affiliate”
means: (a) with respect to an individual, any member of such individual’s
family; (b) with respect to an entity, any officer, director, shareholder,
partner or investor of or in such entity or of or in any Affiliate of such
entity; and (c) with respect to a Person, any Person which directly or
indirectly, through one or more intermediaries, Controls, is Controlled by,
or
is under common Control with such Person or entity.
“Agreement”
means any agreement between or among two or more Persons with respect to their
relative rights and/or obligations or with respect to a thing done or to be
done, including, without limitation, agreements denominated as contracts,
leases, promissory notes, covenants, easements, rights of way, commitments,
arrangements and understandings.
“Assets”
means assets of every kind and everything that is or may be available for the
payment of liabilities (whether inchoate, tangible or intangible), including,
without limitation, real and personal property.
“Average
Parent Trading Price” for any date shall mean the average closing sales price on
The Over the Counter Bulletin Board (as reported in The Wall Street Journal,
or,
if not reported therein, any other authoritative source) for the five (5)
trading-day period ending on trading day that is immediately prior to such
date.
“business
day” means a day other than a Saturday, a Sunday or any other day on which
commercial banks in the City of New York are authorized or obligated to be
closed.
“Certificate”
is defined in Section 2.02(a).
“Certificate
of Merger” is defined in Section 1.02.
“Closing”
is defined in Section 1.02.
53
“Closing
Date” is defined in Section 1.02.
“Code”
means the United States Internal Revenue Code of 1986, as amended.
“Company”
is defined in the Preamble to this Agreement.
“Company
Balance Sheet” is defined in Section 2.01(a)(ii)(a).
“Company
Benefit Plans” means all “employee benefit plans” as that term is defined in
Section 3(3) of ERISA, whether or not terminated, and trust agreements and
insurance contracts under or with respect to which Company has or could have
any
liability, contingent, secondary or otherwise, and any other benefit plan,
program, practice, arrangement, or agreement (including without limitation
employment agreements) providing benefits of any kind to employees, officers,
directors, or independent contractors.
“Company
Common Stock” is defined in Section 3.04.
“Company
Contracts” is defined in Section 3.13.
“Company
Financial Statement” is defined in Section 3.08(a).
“Company
Material Adverse Effect” means any event, change or effect that, individually or
when taken together with any related events, is or is reasonably likely to
be
materially adverse to the business, prospects, operations, condition (financial
or otherwise), Assets or liabilities of Company.
“Company
Pension Plan” means any Company Benefit Plans that is an “employee pension
benefit plan,” as that term is defined in Section 3(2) of ERISA.
“Company
Share Amount” means the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (including any such shares
that are subject to a repurchase option or risk of forfeiture under any
restricted stock purchase agreement or other agreement).
“Company
Shareholders” has the meaning set forth in the Preamble to this
Agreement.
“Company
Stock Plan” means any Company Benefit Plan pursuant to which Company is or may
become obligated to, or obligated to cause any other Person to, issue, deliver
or sell shares of capital stock of Company, or grant, extend or enter into
any
option, warrant, call, right, commitment or agreement to issue, deliver or
sell
shares, or any other interest in respect of capital stock of
Company.
“Company
Tax Returns” means all Tax Returns required to be filed by Company (without
regard to extensions of time permitted by law or otherwise).
“Control”
(including the terms “Controlled by” and “under common Control with”) means, as
used with respect to any Person, possession of power (directly or indirectly
or
as a trustee or executor) to direct or cause the direction of management or
policies of such Person (whether through ownership of voting securities, as
trustee or executor, by Agreement or otherwise).
54
“Debt”
shall mean without duplication (a) all outstanding indebtedness for borrowed
money of Company to any Person (including all interest accrued thereon), (b)
all
obligations of Company arising from or incurred in connection with the
acquisition or purchase of capital assets (including the deferred purchase
price
for such capital assets and all Capital Lease Obligations), (c) any amounts
that
are required to be accrued on the balance sheet of Company for bonuses payable
to any employee, and (d) all accounts payable by Company other than those
incurred by Company in the Ordinary Course of Business of Company. Normal
accounts payables and accrued expenses incurred in the Ordinary Course of
Business of Company shall be excluded from the definition of Debt.
“Dissenting
Shareholder” shall mean a shareholder of the Company who shall have duly
demanded appraisal of his shares of Company Common stock pursuant to Section
623
of the NYBCL, complied with the provisions of such Section and not withdrawn,
failed to perfect or otherwise lost his right to such appraisal..
“Effective
Time” is defined in Section 1.02.
“Encumbrance”
means any mortgage, lien, pledge, encumbrance, security interest, deed of trust,
option, encroachment, reservation, order, decree, judgment, condition,
restriction, charge, Agreement, claim or equity of any kind.
“Environmental
Laws” means any federal, state or local Law relating to public health or safety,
worker health or safety, or pollution, damage to or protection of the
environment including, without limitation, Laws relating to emissions,
discharges, releases or threatened release of Hazardous Materials into the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, generation,
disposal, transport or handling of any Hazardous Material.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and
all
Laws promulgated pursuant thereto or in connection therewith.
“GAAP”
means United States generally accepted accounting principles, consistently
applied.
“Government
Property” means property or equipment in the possession of or directly acquired
by a Governmental Entity and subsequently made available to Company or any
other
property or equipment otherwise acquired by Company to which a Governmental
Entity has title.
“Governmental
Entities” (including the term “Governmental”) means any governmental,
quasi-governmental or regulatory authority, whether domestic or
foreign.
“Hazardous
Material” means (i) any “hazardous substance” as now defined pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§9601(14); (ii) any “pollutant or contaminant” as defined in 42 U.S.C.
§9601(33); (iii) any material now defined as “hazardous waste” pursuant to 40
C.F.R. Part 261; (iv) any petroleum, including crude oil and any fraction
thereof; (v) natural or synthetic gas usable for fuel; (vi) any “hazardous
chemical” as defined pursuant to 29 C.F.R. Part 1910; and (vii) any asbestos,
polychlorinated biphenyl (“PCB”), radium, or isomer of dioxin, or any material
or thing containing or composed of such substance or substances.
55
“Independent
Accountants” means the firm of Xxxxxx Xxxxxxx Xxxx & Co., LLP. In the event
that such firm declines or is unable to serve, “Independent Accountants means
the firm of Xxxxxxxx, Fox & Porretti, LLP.
“Intellectual
Property” means (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, all patent
disclosures, industrial designs, utility models and all patents and patent
applications, together with all reissuances, continuations,
continuations-in-part, divisions, revisions, extensions, renewals and
reexaminations thereof, (b) all trademarks, service marks, trade dress,
domain names, web site addresses, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all registered and
unregistered copyrights, all rights to database information, and all
applications, registrations, and renewals in connection therewith, (d) all
mask works and all applications, registrations, and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, software,
databases, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all rights, including rights of privacy and publicity, to use the names,
likenesses and other personal characteristics of any individual, and
(g) other proprietary rights and (h) all copies and tangible
embodiments thereof (in whatever form or medium) existing in any part of the
world (including all computer software and related data and
documentation).
“Inventory”
means all new materials, work in progress, finished goods and inventoriable
supplies.
“Knowledge”
will be deemed to be present with respect to Company when the matter in question
is known, or upon reasonable investigation, should have been known, to Company.
If the Company or any Company Shareholder has received written or oral notice
of
any event circumstance or claim, the Company shall be deemed to have Knowledge
of such event circumstance or claim.
“Laws”
means all foreign, federal, state and local statutes, laws, ordinances,
regulations, rules, resolutions, orders, tariffs, determinations, writs,
injunctions, awards (including, without limitation, awards of any arbitrator),
judgments and decrees applicable to the specified Person and to the businesses
and Assets thereof (including, without limitation, Laws relating to the
protection of classified information; the sale, leasing, ownership or management
of real property; employment practices, terms and conditions, and wages and
hours; building standards, land use and zoning; safety, health and fire
prevention; and environmental protection, including Environmental
Laws).
56
“License”
means any franchise, grant, authorization, license, tariff, permit, easement,
variance, exemption, consent, certificate, approval or order of any Governmental
Entity.
“Losses”
means all demands, losses, claims, actions or causes of action, assessments,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys’ fees and
disbursements.
“Merger”
is defined in the Preamble to this Agreement.
“Merger
Consideration” is defined in Section 2.01(a)(i).
“Merger
Sub” is defined in the Preamble to this Agreement.
“Merger
Sub Stock” is defined in Section 2.01(d).
“Multiemployer
Plan” means any “multiemployer plan” within the meaning of Section 4001(a)(3) of
ERISA to which Company contributes, has an obligation to contribute, or has
at
any time since September 2, 1974, contributed or been obligated to
contribute.
“NYBCL”
is defined in the Preamble to this Agreement.
“Ordinary
Course of Business” means ordinary course of business consistent with past
practices and reasonable business operations.
“Parent”
is defined in the Preamble to this Agreement.
“Parent
Common Stock” is defined in Section 2.01(a).
“Parent
Material Adverse Effect” means any event, change or effect that, individually or
when taken together with any related events, is or is reasonably likely to
be
materially adverse to the business, prospects, operations, condition (financial
or otherwise), Assets or liabilities of Parent and its Subsidiaries, taken
as a
whole.
“Parent
Notice” is defined in Section 2.01(a)(v)).
“Parent
SEC Documents” is defined in Section 4.05.
“Party”
and “Parties” are defined in the Preamble to this Agreement.
“Permitted
Encumbrance” means (i) easements, rights of way, minor irregularities of title,
and liens for taxes not yet due and payable, (ii) landlord, warehouse and
materialmen’s liens and (ii) other Encumbrances similar to clauses (i) and (ii);
provided, however, that any or all of the foregoing do not materially affect
the
utility or value of the Assets or other matters to which they
relate.
57
“Person”
means an individual, corporation, partnership, limited liability company, joint
venture, trust, unincorporated organization or other entity, or a Governmental
Entity.
“Plan”
means any plan, program or arrangement, whether or not written, that is or
was
an “employee benefit plan” as such term is defined in Section 3(3) of ERISA
and (a) which was or is established or maintained by Company; (b) to
which Company contributed or was obligated to contribute or to fund or provide
benefits; or (c) which provides or promises benefits to any person who
performs or who has performed services for Company and because of those services
is or has been (i) a participant therein or (ii) entitled to benefits
thereunder.
“Post-Signing
Returns” is defined in Section 5.04.
“Representatives”
is defined in Section 5.7.
“Scheduled
Closing Date” is defined in Section 2.04.
“Shareholder
Notice” is defined in Section 2.01(a)(v)).
“Shareholders’
Representative” means Xxxxxxx Xxxxxx. If Xxxxxxx Xxxxxx is unable or unwilling
to serve as the Shareholders’ Representative, “Shareholders’ Representative”
means Xxxxxxxx Xxxxxx. If both Xxxxxxx Xxxxxx and Xxxxxxxx Xxxxxx are unable
or
unwilling to serve as the Shareholders’ Representative, “Shareholders’
Representative” means Xxxxxxxx Xxxxxxx.
“Subsidiary”
means a corporation, partnership, joint venture or other entity of which any
Person owns, directly or indirectly, at least fifty percent (50%) of the
outstanding securities or other interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body or otherwise exercise Control of such entity.
“Surviving
Corporation” is defined in Section 1.01.
“Taxes”
(including the terms “Tax” and “Taxing”) means all federal, state, local and
foreign taxes (including, without limitation, income, profit, franchise, sales,
use, real property, personal property, ad
valorem,
excise,
employment, social security and wage withholding taxes) and installments of
estimated taxes, assessments, deficiencies, levies, imports, duties, license
fees, registration fees, withholdings, or other similar charges of every kind,
character or description imposed by any Governmental Entity, and any interest,
penalties or additions to tax imposed thereon or in connection
therewith.
“Tax
Liabilities” means any action, suit, proceeding, audit, investigation or claim
pending or threatened in respect of any Taxes for which Company is or may become
liable, or any deficiency or claim for any such Taxes that has been to Company’s
knowledge proposed, asserted or threatened.
“Tax
Returns” means all federal, state, local, foreign and other applicable returns,
declarations, reports and information statements with respect to Taxes required
to be filed with the United States Internal Revenue Service, and its successors,
or any other Governmental Entity or Tax authority or agency, including, without
limitation, consolidated, combined and unitary tax returns.
58
“Third
Party Claim” means any claim or other assertion of liability by any third
party.
“Withdrawal
Liability” means liability to a Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan, as those terms are defined
in
Part I of Subtitle E of Title IV of ERISA.
[Remainder
of Page Intentionally Left Blank; Signature Page Follows.]
59
IN
WITNESS WHEREOF, the parties hereto have executed and delivered, this Agreement
or have caused this Agreement to be duly executed and delivered, as of the
date
first set forth hereinabove.
|
By:
|
|
|
Name:
W. Xxxxx Xxxxxxx
|
|
|
Title:
Chief Executive Officer
|
|
|
VUT
MERGER CORP.
|
|
|
By:
|
|
|
Name:
W. Xxxxx Xxxxxxx
|
|
|
Title:
President
|
|
|
VAL-U-TECH
CORP.
|
|
|
By:
|
|
|
Name:
Xxxxxxx Xxxxxx
|
|
|
Title:
President
|
|
|
COMPANY
SHAREHOLDERS:
|
|
|
Name:
Xxxxxxxx Xxxxxx
|
|
|
Name:
Xxxxxxx Xxxxxx
|
|
|
Name:
Xxxxxxxx Xxxxxxx
|
|
60
The
undersigned hereby acknowledges his appointment as the Shareholders’
Representative hereunder and his willingness to fulfill the duties of the
Shareholders’ Representative as contemplated by this Agreement.
|
Xxxxxxx
Xxxxxx
|
The
undersigned hereby acknowledges her appointment as the Shareholders’
Representative hereunder if Xxxxxxx Xxxxxx is unable or unwilling to serve
as
the Shareholders’ Representative and her willingness to fulfill the duties of
the Shareholders’ Representative as contemplated by this Agreement.
|
Xxxxxxxx
Xxxxxx
|
The
undersigned hereby acknowledges his appointment as the Shareholders’
Representative hereunder if both Xxxxxxx Xxxxxx and Xxxxxxxx Xxxxxx are unable
or unwilling to serve as the Shareholders’ Representative and his willingness to
fulfill the duties of the Shareholders’ Representative as contemplated by this
Agreement.
|
Xxxxxxxx
Xxxxxxx
|
61
EXHIBIT
A
FORM
OF
CERTIFICATE
OF MERGER
EXHIBIT
B
INITIAL
OFFICERS AND DIRECTORS
OF
SURVIVING
CORPORATION
Initial
Officers
|
Office
|
Officer
|
|
|
Chairman
|
W.
Xxxxx Xxxxxxx
|
|
|
President
|
Xxxxxxx
Xxxxxx
|
|
|
Secretary
|
Xxxxxx
X. Xxxxxx
|
Initial
Directors
EXHIBIT
F
FORM
OF
NON-COMPETITION
AGREEMENT
EXHIBIT
G
FORM
OF
EMPLOYMENT
AGREEMENT
