PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made and entered into in
duplicate effective the 5th day of July, 2001 ("Effective Date"), by and among
Fishing Buddy, Inc., a Nevada corporation ("Buyer"); Fishing Buddy LLC, a North
Dakota limited liability company (the "LLC"); and Xxxx Xxxxxx and Xxxxx Xxxxx,
individually. For convenience, Xxxxxx and Xxxxx shall be referred to in this
Agreement, collectively, as the "Sellers" and either of them may be referred to
in this Agreement, individually, as a "Seller".
RECITALS
A. Sellers own 1,500 units of membership interest in the LLC
("Units"), which represents one hundred percent (100%) of the ownership
interest in the LLC.
X. Xxxxxxx, and each of them, desire to sell, assign, transfer,
convey, deliver and set over to Buyer the Units, on the terms and subject to
the conditions specified by the provisions of this Agreement.
C. Buyer desires to acquire from Sellers the Units, on the terms
and subject to the conditions specified by the provisions of this Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT SHALL BE
DEEMED TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE MUTUAL COVENANTS,
PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN
THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED
LEGALLY AND EQUITABLY, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT
AND WARRANT AS FOLLOWS:
ARTICLE I
DEFINITIONS
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For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
"Applicable Contract" -- any Contract (a) pursuant to which a party has
or may acquire any rights, (b) pursuant to which a party has or may become
subject to any obligation or liability, or (c) by which a party or any of the
assets owned or used by such party is or may become obligated.
"Best Efforts" -- the efforts that a prudent Person desiring to
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
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"Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"Buyer"-- Fishing Buddy, Inc., a Nevada corporation, as defined in the
preamble of this Agreement.
"Buyer Common Stock" -- common stock, $.001 par value per share, of
Buyer.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Units by Sellers to Buyer;
(b) the execution, delivery, and performance of the Sellers' Release,
the Employment Agreements, and the Noncompetition Agreement, as executed by the
parties to such agreements;
(c) the performance by Buyer and Seller of their respective covenants
and obligations pursuant to this Agreement; and
(d) Buyer's acquisition and ownership of the Units and exercise of
control of the LLC.
"Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally obligating.
"Employee Benefit Plan" -- any "Employee Pension Benefit Plan" (as
defined in Section 3(2) of ERISA), "Employee Welfare Benefit Plan" (as defined
in Section 3(1) of ERISA), "Multi-employer Plan" (as defined in Section 3(37) of
ERISA), plan of deferred compensation, medical plan, life insurance plan,
long-term disability plan, dental plan or other plan providing for the welfare
of any of employees or former employees of the LLC or beneficiaries thereof (as
applicable), personnel policy (including, but not limited to, vacation time,
holiday pay, bonus programs, moving expense reimbursement programs and sick
leave), excess benefit plan, bonus or incentive plan (including, but not limited
to, stock options, restricted stock, stock bonus and deferred bonus plans),
salary reduction agreement, change-of-control agreement, employment agreement,
consulting agreement or any other benefit, program, agreement or contract.
"Encumbrance" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any nature whatsoever, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
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"Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), ground waters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or pursuant
to Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising pursuant to
Environmental Law or Occupational Safety and Health Law, including consultant
and attorney fees;
(c) financial responsibility pursuant to Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required pursuant to Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities specified by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Sections 9601 et seq., as
amended ("CERCLA").
"Environmental Law" -- any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of Hazardous Materials, violations of discharge
limits, or other prohibitions and of the commencements of activities, such as
resource extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable amounts the release of
Hazardous Materials into the Environment;
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(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that these products do not present unreasonable risks to human health or
the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable amounts the risks inherent in the
transportation of Hazardous Materials;
(g) cleaning up Hazardous Materials that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Facilities" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by a party to this Agreement and any
buildings, plants, structures, or equipment (including motor vehicles, aircraft,
and rolling stock) currently or formerly owned or operated by such party.
"GAAP" -- generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the LLC Balance Sheet and
the other financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or pursuant to the authority of any Governmental Body or pursuant
to any Legal Requirement.
"Governmental Body" -- any:
(a) nation, state, commonwealth, county, city, town, village,
district, xxxx, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
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(c) governmental or quasi-governmental authority of any nature
whatsoever (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature whatsoever.
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, disposal or use
(including any withdrawal or other use of groundwater) of Hazardous Materials
in, on, under, about, or from the Facilities or any part thereof into the
Environment, and any other act, omission, business, operation, or thing that
increases the danger, or risk of danger, or poses an unreasonable risk of harm
to persons or property on or off the Facilities, or that may affect the value of
the Facilities or the LLC.
"Hazardous Materials" -- any waste or other substance that is
regulated, listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant pursuant to any Environmental Law, including any admixture or
solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor, polychlorinated biphenyls ("PCBs")
and asbestos or asbestos-containing materials.
"IRC" -- the Internal Revenue Code of 1986, or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -- the United States Internal Revenue Service, or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual should have been aware of
such fact or other matter, after reasonable investigation thereof.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, partner, manager, executor, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"LLC" -- Fishing Buddy LLC, a North Dakota limited liability company,
as defined in the preamble of this Agreement.
"Occupational Safety and Health Law" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
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"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the Board of
Directors of such Person (or by any Person or group of Persons having similar
authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the Board of Directors of such
Person (or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other Persons that
are in the same business as such Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the Articles of Organization and the operating agreement of a
limited liability company; (e) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (f)
any amendment to any of the foregoing.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
fraternal organization, group, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.
"Plan Affiliate" -- with respect to any Person, any other person or
entity with whom the Person constitutes all or part of a controlled group, or
which would be treated with the Person as under common control or whose
employees would be treated as employed by the Person, pursuant to Section 414 of
the IRC and any regulations, administrative rulings and case law interpreting
the foregoing.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Related Person"
(a) with respect to a particular individual:
(i) each other member of such individual's Family;
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(ii) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(iii) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(iv) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
(b) With respect to a specified Person other than an individual:
(i) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(ii) any Person that holds a Material Interest in such specified
Person;
(iii) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(iv) any Person in which such specified Person holds a Material
Interest;
(v) any Person with respect to which such specified Person serves
as a general partner, manager or a trustee (or in a similar capacity); and
(vi) any Related Person of any individual described in clause (ii)
or (iii) of this Subsection (b).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 pursuant to the Securities Exchange Act of
1934) of voting securities or other voting interests representing at least 10%
of the outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"Release" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative" -- with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Securities Act" -- the Securities Act of 1933, or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
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"Sellers" -- Xxxx Xxxxxx and Xxxxx Xxxxx, as defined in the preamble of
this Agreement.
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's Board of
Directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" -- a substantial probability of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
cause a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter probably will be asserted, commenced, taken, or
otherwise pursued in the future.
"Units" -- as defined in the Recital A of this Agreement.
ARTICLE II
SALE AND TRANSFER OF UNITS
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2.1 Units. On the terms and subject to the conditions of this Agreement,
upon the execution of this Agreement, Sellers will sell, transfer, assign,
convey, deliver and set over the Units to Buyer, and Buyer will purchase the
Units from Sellers.
2.2 Purchase Price. The purchase price for the Units shall be paid as
follows:
(a) on the Effective Date, Buyer shall pay Sellers Twenty-Five
Thousand Dollars ($25,000);
(b) on the first calendar day of each month after the Effective Date,
and continuing for a period of twelve (12) months, Buyer shall pay each Seller
Five Hundred Dollars ($500), for an aggregate to each Seller totaling Six
Thousand Dollars ($6,000);
(c) at a date which is eighteen (18) months after the Effective Date,
Buyer shall pay to Sellers an additional Twenty-Five Thousand Dollars ($25,000);
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(d) on the tenth calendar day of each month after the Effective Date,
and continuing for a period of twenty-four (24) months, Buyer shall pay Sellers
ten percent (10%) of the gross revenues of Buyer; and
2.3 Obligations Upon and After Execution.
(a) Upon execution of this Agreement, Sellers will deliver to Buyer:
(i) certificates representing the Units, duly endorsed for
transfer to Buyer;
(ii) a release in the form of Exhibit 2.3(a)(ii), executed by
Sellers (collectively, "Sellers' Release");
(iii) a noncompetition agreement in the form of Exhibit
2.3(a)(iii), executed by each of the Sellers (the "Noncompetition
Agreement"); and
(iv) Employment Agreements in the form of Exhibit 2.3(a)(iv),
executed by each of the Sellers.
(b) Upon and after execution of this Agreement, Buyer will deliver to
Sellers the purchase price for the Units, on the dates specified in Section 2.2
above.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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OF SELLERS AND THE LLC
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The LLC and Sellers jointly and severally represent and warrant to
Buyer as follows:
3.1 Organization and Good Standing.
(a) The LLC is a limited liability company duly formed, validly
existing, and in good standing pursuant to the laws of its jurisdiction of
formation, with full and complete power and authority to conduct its business as
it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations pursuant to
Applicable Contracts. The LLC is duly qualified to do business as a foreign
limited liability company and is in good standing pursuant to the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
(b) The LLC has delivered to Buyer true and correct copies of the
Organizational Documents of the LLC, as currently in effect.
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3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Upon the execution and delivery by Sellers and the LLC of the Sellers' Release,
the Employment Agreement and the Noncompetition Agreement (collectively, the
"Sellers' Closing Documents"), the Sellers' Closing Documents will constitute
the legal, valid, and binding obligations of Sellers and the LLC, enforceable
against Sellers and the LLC in accordance with their respective terms. Sellers
have the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and to perform their obligations pursuant to
this Agreement, and Sellers and the LLC have the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this Agreement and
to perform their obligations pursuant to the Sellers' Closing Documents.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the LLC, or (B) any resolution
adopted by the manager or the members of the LLC;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any
relief under, any Legal Requirement or any Order to which the LLC or any
Seller, or any of the assets owned or used by the LLC, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the LLC or that otherwise relates to the
business of, or any of the assets owned or used by, the LLC;
(iv) cause Buyer or the LLC to become subject to, or to become
liable for the payment of, any Tax;
(v) cause any of the assets owned by the LLC to be reassessed or
revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the LLC.
(c) Neither the LLC nor any Seller is or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
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3.3 Capitalization. The authorized equity securities of the LLC consist
of ______ Units of membership interest in the LLC, of which ____ Units are
issued and outstanding, all of which issued and outstanding Units constitute the
"the LLC Units." Sellers are the record and beneficial owners and holders of one
hundred percent (100%) of the LLC Units, free and clear of all Encumbrances.
Exhibit A sets forth the ownership of the LLC Units. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of the LLC. All of the outstanding equity securities of the
LLC have been duly authorized and validly issued and are fully paid and
nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the LLC. None of the
outstanding equity securities or other securities of the LLC was issued in
violation of the Securities Act or any other Legal Requirement. The LLC does not
own, or has any Contract to acquire, any equity securities or other securities
of any Person or any direct or indirect equity or ownership interest in any
other business.
3.4 Financial Statements. The LLC has delivered to Buyer (a) unaudited
balance sheets of the LLC as at December 31 in each of the years 1999 and 2000,
inclusive, and the related unaudited statement of income for each of the fiscal
years then ended, (b) an unaudited balance sheet of the LLC as at May 31, 2001
(the "Balance Sheet"), and the related unaudited statement of income for the
five (5) months then ended (the "LLC Interim Balance Sheet") and the related
unaudited statements of income, changes in stockholders' equity, and cash flow
for the five (5) months then ended, including in each case the notes thereto.
Such financial statements and notes fairly present the financial condition and
the results of operations, changes in stockholders' equity, and cash flow of the
LLC as at the respective dates of and for the periods referred to in such
financial statements, subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the absence of
notes; the financial statements referred to in this Section 3.4 present the
consistent application of such accounting principles throughout the periods
involved. No financial statements of any Person other than the LLC are required
by GAAP to be included in the financial statements of the LLC.
3.5 Books and Records. The books of account, minute books, securities
record books, and other records of the LLC, all of which have been delivered to
Buyer, are complete and correct and have been maintained in accordance with
sound business practices, including the maintenance of an adequate system of
internal controls. The minute book of the LLC contains accurate and complete
records of all meetings held of, and actions approved by, the members and the
manager of the LLC, and no such meetings have been held for which minutes have
not been prepared and are not contained in such minute books. Upon the execution
of this Agreement, all of those books and records will be in the possession of
the LLC.
3.6 Title to Properties; Encumbrances. The LLC owns no real property or
any interest therein. The LLC owns all the properties and assets (whether
tangible or intangible) that the LLC purports to own, including all of the
properties and assets specified on Schedule 3.6, attached hereto, and on the LLC
Balance Sheet and the LLC Interim Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in this Agreement
and personal property sold since the date of the LLC Balance Sheet and the LLC
Interim Balance Sheet, as the case may be, in the Ordinary Course of Business),
and all of the properties and assets purchased or otherwise acquired by the LLC
since the date of the LLC Balance Sheet (except for personal property acquired
and sold since the date of the LLC Balance Sheet in the Ordinary Course of
Business and consistent with past practice). All material properties and assets
specified in the LLC Balance Sheet and the LLC Interim Balance Sheet are free
and clear of all Encumbrances.
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3.7 Condition and Sufficiency of Assets. The buildings, plants,
structures, and equipment of the LLC are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The building, plants,
structures, and equipment of the LLC are sufficient for the continued conduct of
the LLC's business after the date of this Agreement in substantially the same
manner as conducted prior to the date of this Agreement.
3.8 Accounts Receivable. All accounts receivable of the LLC that are
specified on the LLC Balance Sheet or the LLC Interim Balance Sheet or on the
accounting records of the LLC as of the date of this Agreement (collectively,
the "LLC Accounts Receivable") represent or will represent valid obligations
arising from sales actually made or services actually performed in the Ordinary
Course of Business. The LLC Accounts Receivable are current and collectible net
of the respective reserves shown on the LLC Balance Sheet or the LLC Interim
Balance Sheet or on the accounting records of the LLC as of the date of this
Agreement (which reserves are adequate and calculated consistent with past
practice and, in the case of the reserve as of the date of this Agreement, will
not represent a greater percentage of the LLC Accounts Receivable as of the date
of this Agreement than the reserve specified in the LLC Balance Sheet
represented of the LLC Accounts Receivable specified therein and will not
represent a material adverse change in the composition of such LLC Accounts
Receivable in terms of aging). Subject to such reserves, each of the LLC
Accounts Receivable either has been or will be collected in full, without any
set-off, within ninety (90) days after the day on which it first becomes due and
payable. There is no contest, claim, or right of set-off, other than returns in
the Ordinary Course of Business, pursuant to any Contract with any obligor of an
LLC Accounts Receivable relating to the amount or validity of such LLC Accounts
Receivable.
3.9 Inventory. All inventory of the LLC, whether or not specified in the
LLC Balance Sheet or the LLC Interim Balance Sheet, consists of a quality and
quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the LLC Balance Sheet or
the LLC Interim Balance Sheet or on the accounting records of the LLC as of the
date of this Agreement, as the case may be. All inventories not written off have
been priced at the lower of cost or market on a first in, first out basis. The
quantities of each item of inventory (whether raw materials, work-in-process, or
finished goods) are not excessive, but are reasonable in the present
circumstances.
3.10 No Undisclosed Liabilities. The LLC has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
specified or reserved against in the LLC Balance Sheet or the LLC Interim
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
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3.11 Taxes.
(a) The LLC has filed or caused to be filed on a timely basis all Tax
Returns that are or were required to be filed by or with respect to any of them,
either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. The LLC has delivered to Buyer copies of all such
Tax Returns filed since January 1, 1999. The LLC has paid, or made provision for
the payment of, all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by Sellers or the
LLC, except such Taxes, if any, are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP) have been provided
in the LLC Balance Sheet and the LLC Interim Balance Sheet.
(b) All deficiencies proposed as a result of such audits have been
paid, reserved against, settled, or are being contested in good faith by
appropriate proceedings. There have been no adjustments to the United States
federal income Tax Returns filed by the LLC for all taxable years since the date
of formation of LLC, and the resulting deficiencies proposed by the IRS. Neither
the LLC or any Seller has given or been requested to give waivers or extensions
(or is or would be subject to a waiver or extension given by any other Person)
of any statute of limitations relating to the payment of Taxes of the LLC or for
which the LLC may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
books of the LLC are adequate (determined in accordance with GAAP) and are at
least equal to the LLC's liability for Taxes. There exists no proposed tax
assessment against the LLC except as disclosed in the LLC Balance Sheet. No
consent to the application of Section 341(f)(2) of the IRC has been filed with
respect to any property or assets held, acquired, or to be acquired by the LLC.
All Taxes that the LLC is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis)
the LLC are true, correct, and complete. There is no tax sharing agreement that
will require any payment by the LLC after the date of this Agreement. During the
consistency period (as defined in Section 338(h)(4) of the IRC with respect to
the sale of the Units to Buyer), neither the LLC nor target affiliate (as
defined in Section 338(h)(6) of the IRC with respect to the sale of the Units to
Buyer) has sold or will sell any property or assets to Buyer or to any member of
the affiliated group (as defined in Section 338(h)(5) of the IRC) that includes
Buyer.
3.12 No Material Adverse Change. Since the date of the LLC Balance Sheet,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the LLC, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
3.13 Employee Benefits. Neither the LLC nor any Plan Affiliate of the LLC
has maintained, sponsored, adopted, made contributions to or obligated itself to
make contributions to or to pay any benefits or grant rights pursuant to or with
respect to any Employee Benefit Plan, whether or not written, which could give
rise to or result in the LLC or such Plan Affiliate having any material debt,
liability, claim or obligation of any kind or nature whatsoever, whether
accrued, absolute, contingent, direct, indirect, known or unknown, perfected or
inchoate or otherwise and whether or not due or to become due. Correct and
complete copies of all Employee Benefit Plans previously have been furnished to
Buyer. The Employee Benefit Plans are in compliance in all material respects
with governing documents and agreements and with applicable laws. There has not
been any act or omission by the LLC pursuant to ERISA or the terms of the
Employee Benefit Plans, or any other applicable law or agreement which could
give rise to any liability of the LLC, whether pursuant to ERISA, the IRC or
other laws or agreements.
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3.14 Compliance with Legal Requirements; Governmental Authorizations.
(a) The LLC is and has been in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets;
(b) no event has occurred or circumstance exists that (with or without
notice or lapse of time) (A) may constitute or result in a violation by the LLC
of, or a failure on the part of the LLC to comply with, any Legal Requirement,
or (B) may give result in any obligation on the part of the LLC to undertake, or
to pay all or any portion of the cost of, any remedial action of any nature,
including pursuant to any Environmental, Health, and Safety Liability;
(c) The LLC has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the LLC to undertake, or to pay
all or any portion of the cost of, any remedial action of any nature, including
pursuant to any Environmental, Health, and Safety Liability;
(d) the LLC is and has been in full compliance with all of the terms
and requirements of each Governmental Authorization held by the LLC or that
otherwise relates to the business of, or to any of the assets owned or used by,
the LLC;
(e) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or indirectly
in a violation of or a failure to comply with any term or requirement of any
Governmental Authorization, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization;
(f) the LLC has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization;
(g) all applications required to have been filed for the renewal of
the Governmental Authorizations have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies; and
(h) such Governmental Authorizations, collectively, constitute all of
the Governmental Authorizations necessary to permit the LLC to conduct and
operate its business lawfully in the manner the LLC currently conducts and
operates such business and to permit the LLC to own and use its assets in the
manner in which the LLC currently owns and uses such assets.
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3.15 Legal Proceedings; Orders.
(a) There is no pending Proceeding:
(i) that has been commenced by or against the LLC or that
otherwise relates to or may affect the business of, or any of the assets
owned or used by, the LLC; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
(iii) to the Knowledge of Sellers and the LLC, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give result in or serve as a basis for the
commencement of any such Proceeding, which will have a material adverse
effect on the business, operations, assets, condition, or prospects of the
LLC.
(b) there is no Order to which the LLC, or any of the assets owned or
used by the LLC, is subject;
(c) no Seller is subject to any Order that relates to the business of,
or any of the assets owned or used by, the LLC;
(d) no officer, director, agent, or employee of the LLC is subject to
any Order that prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice relating to the
business of the LLC;
(e) the LLC is and has been in full compliance with all of the terms
and requirements of each Order to which it, or any of the assets owned or used
by it, is or has been subject;
(f) no event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or failure
to comply with any term or requirement of any Order to which the LLC, or any of
the assets owned or used by the LLC, is subject; and
(g) the LLC has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of, or failure
to comply with, any term or requirement of any Order to which the LLC, or any of
the assets owned or used by the LLC, is or has been subject.
3.16 Absence of Certain Changes and Events. Since the date of the LLC
Balance Sheet, the LLC has conducted its business only in the Ordinary Course of
Business and there has not been any:
(a) change in the LLC's authorized or issued securities; grant of any
right to purchase Units; issuance of any security convertible into Units; grant
of any registration rights; purchase, redemption, retirement, or other
acquisition by the LLC of any Units; or declaration or payment of any cash or
other distribution in respect of Units;
15
(b) amendment to the Organizational Documents of the LLC;
(c) payment or increase by the LLC of any bonuses, salaries, or other
compensation to any manager or officer, or (except in the Ordinary Course of
Business) employee or entry into any employment, severance, or similar Contract
with any manager, officer, or employee;
(d) adoption of, or increase in the payments to or benefits pursuant
to, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
the LLC;
(e) damage to or destruction or loss of any asset or property of the
LLC, whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of the LLC,
taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to the LLC of at least Ten Thousand Dollars
($10,000.00);
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the LLC or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of the LLC, including the sale, lease, or other disposition of
any of the LLC Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to the
LLC in excess of Ten Thousand Dollars ($10,000.00);
(i) material change in the accounting methods used by the LLC; or
(j) agreement, whether oral or written, by the LLC to do any of the
foregoing.
3.17 Contracts; No Defaults.
(a) The LLC has delivered to Buyer true and complete copies, of all
the Contracts with a value of at least Ten Thousand Dollars ($10,000.00) to
which the LLC is a party or pursuant to which the LLC or any of its properties
is obligated.
(b) No Seller (and no Related Person of any Seller) has or may acquire
any rights pursuant to, and no Seller has or may become subject to any
obligation or liability pursuant to, any Contract that relates to the business
of, or any of the assets owned or used by, the LLC.
(c) No officer, director, agent, employee, consultant, or contractor
of the LLC is obligated by any Contract that purports to limit the ability of
such officer, director, agent, employee, consultant, or contractor to (A) engage
in or continue any conduct, activity, or practice relating to the business of
the LLC, or (B) assign to the LLC or to any other Person any rights to any
invention, improvement, or discovery.
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(d) Each such Contract is in full force and effect and is valid and
enforceable in accordance with its terms.
(e) The LLC is and has been in full compliance with all applicable
terms and requirements of each Contract pursuant to which the LLC has or had any
obligation or liability or by which the LLC or any of the assets owned or used
by the LLC is or was obligated.
(f) Each other Person that has or had any obligation or liability
pursuant to any Contract pursuant to which the LLC has or had any rights is and
has been in full compliance with all applicable terms and requirements of such
Contract.
(g) No event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with, or result in a violation
or breach of, or give the LLC or other Person the right to declare a default or
exercise any remedy pursuant to, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Applicable Contract.
(h) The LLC has not given to or received from any other Person any
notice or other communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or default pursuant to,
any Contract.
(i) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
LLC pursuant to current or completed Contracts with any Person and no such
Person has made written demand for such renegotiation.
(j) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the LLC have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.18 Insurance.
(a) The LLC has delivered to Buyer:
(i) true and complete copies of all policies of insurance to which
the LLC is a party, or pursuant to which any manager, officer or employee
of the LLC is or has been covered at any time within the three (3) years
preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance;
(iii) any statement by the auditor of the LLC's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims;
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(iv) any self-insurance arrangement by or affecting the LLC,
including any reserves established pursuant thereto;
(v) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by the LLC;
(vi) all obligations of the LLC to third parties with respect to
insurance (including such obligations under leases and service agreements)
and identifies the policy pursuant to which such coverage is provided;
(vii) a summary of the loss experience pursuant to each policy;
(vii) a statement describing each claim pursuant to an insurance
policy for an amount in excess of Ten Thousand Dollars ($10,000.00), which
sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance, and
period of coverage; and
(C) the amount and a brief description of the claim; and
(ix) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such
claims.
(b) All policies to which the LLC is a party or that provide coverage
to Sellers, the LLC, or any director, officer or employee of the LLC:
(i) are valid, outstanding, and enforceable;
(ii) are issued by an insurer that is financially sound and
reputable;
(iii) taken together, provide adequate insurance coverage for the
assets and the operations of the LLC for all risks normally insured against
by a Person carrying on the same business or businesses as the LLC;
(iv) are sufficient for compliance with all Legal Requirements,
Governmental Authorizations and Contracts to which the LLC is a party or by
which the LLC is obligated;
(v) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(vi) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of the LLC.
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(c) Neither the LLC nor any Seller has received (A) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights, or (B) any notice of cancellation or any other indication that any
insurance policy is not now in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform its obligations
pursuant thereto.
(d) The LLC has paid all premiums due, and have otherwise performed
all of its obligations, pursuant to each policy to which the LLC is a party or
that provides coverage to the LLC or director, officer or employee thereof.
(e) The LLC has given notice to the insurer of all claims that may be
insured thereby.
3.19 Environmental Matters.
(a) The LLC is, and at all times has been, in full compliance with,
and has not been and is not in violation of or liable for Environmental, Health,
and Safety Liabilities pursuant to, any Environmental Law. Neither the LLC nor
any Seller has any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i) any Governmental Body
or private citizen, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential Release of Hazardous Materials from any
Facilities, or any violation or failure to comply with any Environmental Law, or
of any actual or Threatened obligation to undertake or pay the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which any Seller or the LLC has had an interest, or with respect to any
property or Facility (A) at or to which Hazardous Materials were generated,
manufactured, refined, transferred, transported, disposed, imported, used, or
processed by or from any Seller, the LLC, or any other Person for whose conduct
they are or may be held responsible, or (B) to or from which Hazardous Materials
from any Seller, the LLC, or any other Person for whose conduct they are or may
be held responsible have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Sellers and the LLC,
Threatened claims, Encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which any Seller or the LLC has or had an interest.
(c) Neither the LLC nor any Seller has any basis to expect, nor has any
of them or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or pay the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any Seller or the LLC had an
interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, treated,
used, or processed by any Seller, the LLC, or any other Person for whose conduct
they are or may be held responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
19
(d) Neither the LLC nor any Seller, nor any other Person for whose
conduct they are or may be held responsible, has any Environmental, Health, and
Safety Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which any Seller or
the LLC (or any predecessor), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such other
property or assets.
(e) There are no Hazardous Materials present on or in the Environment
at the Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, buildings, equipment (whether
moveable or fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps, or any other part of the Facilities
or such adjoining property, or incorporated into any structure therein or
thereon. Neither the LLC nor any Seller, nor any other Person for whose conduct
they are or may be held responsible, or any other Person, has permitted or
conducted, or is aware of, any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which any Seller or the LLC has or had an interest.
(f) There has been no Release or, to the Knowledge of any Seller and
the LLC, Threat of Release, of any Hazardous Materials at or from the Facilities
or at any other locations where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used, or processed from
or by the Facilities, or from or by any other properties and assets (whether
real, personal, or mixed) in which any Seller or the LLC has or had an interest,
or any geologically or hydrologically adjoining property, whether by any Seller,
the LLC, or any other Person, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, refined, transferred,
imported, treated, used, or processed by any Seller, the LLC, or any other
Person for whose conduct they are or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(g) The LLC has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by any Seller or the LLC pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by any Seller, the LLC, or any other Person for whose conduct they are or may be
held responsible, with Environmental Laws.
3.20 Employees. No manager, officer or employee of the LLC is a party to,
or is otherwise obligated by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
person and any other Person that in any way adversely affects or will affect (i)
the performance of his or her duties as a manager, officer or employee of the
LLC, or (ii) the ability of the LLC to conduct its business.
3.21 Labor Relations; Compliance. The LLC has not been or is a party to
any collective bargaining or other labor Contract. There has not been, there is
not presently pending or existing, and there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting the LLC relating to the alleged violation of any
Legal Requirement pertaining to labor relations or employment matters, including
any charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Body, organizational activity, or other labor or employment dispute
against or affecting the LLC or its premises, or (c) any application for
certification of a collective bargaining agent. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by the LLC, and no such
action is contemplated by the LLC. The LLC has complied in all respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The LLC is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
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3.22 Intellectual Property.
(a) The LLC (i) owns all the licenses, trademarks, trade names,
copyrights, marks, patents and applications for patents (the "LLC Intellectual
Property Assets"), (ii) neither owns nor uses any such items not specified in
the LLC Balance Sheet, (iii) pays no royalties to any Person with respect to any
such items, and (iv) has full, complete, unfettered and lawful right to bring
actions for the infringement thereof. The LLC owns, or possesses adequate and
enforceable rights to use without payment of royalties, all licenses,
trademarks, trade names, copyrights, patents, trade secrets and processes
necessary for the conduct of, or use in, its business as the same is presently
being conducted.
(b) The LLC has no Knowledge nor has received any notice to the effect
that any service or product it provides or sells, or any process, method, part
or material it employees in its business for the use by it or another of any
such service, may infringe, or is in conflict with, any asserted right of
another Person. There is no pending or Threatened claim or litigation action
against the LLC contesting its right to use or the validity of any of the LLC
Intellectual Property Assets or asserting its misuse of any of the foregoing,
which would deprive it of the right to assert its rights pursuant thereto or
which would prevent the sale of any service provided or sold by it.
3.23 Certain Payments. Neither the LLC nor any director, officer,
agent, or employee of the LLC, or to Sellers' Knowledge any other Person
associated with or acting for or on behalf of the LLC, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the LLC or any Affiliate of the LLC, or (iv) in
violation of any Legal Requirement, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the LLC.
3.24 Disclosure.
(a) No representation or warranty of Sellers in this Agreement omits
to specify a material fact necessary to make the information specified herein or
therein, considering the circumstances in which that information was furnished,
not misleading.
(b) There is no fact known to any Seller that has specific application
to any Seller or the LLC (other than general economic or industry conditions)
and that materially adversely affects or, as far as any Seller can reasonably
foresee, materially threatens, the assets, business, prospects, financial
condition, or results of operations of the LLC that has not been set forth in
this Agreement.
3.25 Relationships with Related Persons. No Seller or any Related Person
of Sellers or of the LLC has or has had any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to the LLC's business. No Seller or any Related Person of Sellers or
of the LLC is or has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with the
LLC, or (ii) engaged in competition with the LLC with respect to any line of the
products or services of the LLC (an "LLC Competing Business") in any market
presently served by the LLC. No Seller or any Related Person of Sellers or of
the LLC is a party to any Contract with, or has any claim or right against, the
LLC.
3.26 Brokers or Finders. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
OF BUYER
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Buyer represents and warrants to the LLC and Sellers as follows:
4.1 Organization and Good Standing.
(a) Buyer is a corporation duly organized, validly existing, and in
good standing pursuant to the laws of its jurisdiction of incorporation, with
full and complete corporate power and authority to conduct its business as it is
now being conducted, to own or use the properties and assets that it purports to
own or use, and to perform all its obligations pursuant to Applicable Contracts.
Buyer is duly qualified to do business as a foreign corporation and is in good
standing pursuant to the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
(b) Buyer has delivered to the LLC true and correct copies of the
Organizational Documents of Buyer, as currently in effect.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Buyer has the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and to perform its obligations pursuant to
this Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of Buyer, or (B) any resolution
adopted by the Board of Directors or the stockholders of Buyer;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any
relief pursuant to, any Legal Requirement or any Order to which Buyer, or
any of the assets owned or used by Buyer, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Buyer or that otherwise relates to the
business of, or any of the assets owned or used by, Buyer;
22
(iv) cause Buyer or the LLC to become subject to, or to become
liable for the payment of, any Tax;
(v) cause any of the assets owned by Buyer to be reassessed or
revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy pursuant to, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract; or
(vii) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by Buyer.
Buyer is not or will not be required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Buyer is acquiring the Units for its own account and not with an
intention of distribution within the meaning of Section 2(11) of the Securities
Act. Buyer is an "accredited investor" as such term is defined in Rule 501(a) of
Regulation D promulgated pursuant to the Securities Act.
4.3 Capitalization. The authorized equity securities of Buyer consist of
25,000,000 shares of $.001 par value common stock, of which 6,550,000 shares are
issued and outstanding, and 10,000,000 shares of $.001 par value common stock,
of which no such shares are issued and outstanding. No legend or other reference
to any purported Encumbrance appears upon any certificate representing equity
securities of Buyer. All of the outstanding equity securities of Buyer have been
duly authorized and validly issued and are fully paid and nonassessable. There
are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of Buyer. None of the outstanding equity
securities or other securities of Buyer was issued in violation of the
Securities Act or any other Legal Requirement. Buyer does not own, and except
for this Agreement, Buyer has no Contract to acquire, any equity securities or
other securities of any Person or any direct or indirect equity or ownership
interest in any other business.
4.4 Financial Statements. Buyer has not delivered any financial
statements to the LLC.
4.5 Books and Records. The books of account, minute books, stock record
books, and other records of Buyer, all of which have been available for
inspection by the LLC or its representatives, are complete and correct and have
been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls. The minute book of Buyer
contains accurate and complete records of all meetings held of, and corporate
actions taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of Buyer, and no meeting of any such stockholders, Board
of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute book. Upon the execution of this
Agreement, all of those books and records will be in the possession of Buyer.
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4.6 Title to Properties; Encumbrances. The Buyer owns no real property or
any interest therein. Buyer owns all the properties and assets (whether
personal, or mixed and whether tangible or intangible) that it purports to own.
4.7 Condition and Sufficiency of Assets. The buildings, plants,
structures, and equipment of Buyer are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they are being put,
and none of such buildings, plants, structures, or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The building, plants, structures, and
equipment of Buyer are sufficient for the continued conduct of Buyer's business
after the date of this Agreement in substantially the same manner as conducted
prior to the date of this Agreement.
4.8 No Undisclosed Liabilities. Buyer has no liabilities or obligations
of any nature whatsoever (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities specified in this
Agreement and current liabilities incurred in the Ordinary Course of Business
since the respective dates thereof.
4.9 Taxes.
(a) Buyer has filed or caused to be filed on a timely basis all Tax
Returns that are or were required to be filed by or with respect to it, either
separately or as a member of a group of corporations, pursuant to applicable
Legal Requirements. Buyer has paid, or made provision for the payment of, all
Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Buyer, except such Taxes,
if any, are being contested in good faith.
(b) All Tax Returns filed by (or that include on a consolidated basis)
Buyer are true, correct, and complete. There is no tax sharing agreement that
will require any payment by Buyer after the date of this Agreement.
4.10 No Material Adverse Change. Since the date of formation of the
Buyer, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of Buyer, and no event
has occurred or circumstance exists that may result in such a material adverse
change.
4.11 Employee Benefits. Neither Buyer nor any Plan Affiliate of Buyer has
maintained, sponsored, adopted, made contributions to or obligated itself to
make contributions to or to pay any benefits or grant rights under or with
respect to any Employee Benefit Plan, whether or not written, which could give
rise to or result in Buyer or such Plan Affiliate having any material debt,
liability, claim or obligation of any kind or nature, whether accrued, absolute,
contingent, direct, indirect, known or unknown, perfected or inchoate or
otherwise and whether or not due or to become due. Correct and complete copies
of all Employee Benefit Plans previously have been furnished to the LLC. The
Employee Benefit Plans are in compliance in all material respects with governing
documents and agreements and with applicable laws. There has not been any act or
omission by Buyer pursuant to ERISA or the terms of the Employee Benefit Plans,
or any other applicable law or agreement which could give result in to any
liability to Buyer, whether pursuant to ERISA, the IRC or other laws or
agreements.
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4.12 Compliance with Legal Requirements; Governmental Authorizations.
(a) Buyer is and has been in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets.
(b) No event has occurred or circumstance exists that (with or without
notice or lapse of time) (A) may constitute or result in a violation by Buyer
of, or a failure on the part of Buyer to comply with, any Legal Requirement, or
(B) may result in any obligation on the part of Buyer to undertake, or to pay
all or any portion of the cost of, any remedial action of any nature, including
pursuant to any Environmental, Health, and Safety Liability.
(c) Buyer has not received any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of Buyer to undertake, or to pay all or any portion of
the cost of, any remedial action of any nature, including pursuant to any
Environmental, Health, and Safety Liability.
(d) Buyer is and has been in full compliance with all of the terms and
requirements of each Governmental Authorization.
(e) No event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or indirectly
in a violation of or a failure to comply with any term or requirement of any
Governmental Authorization, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization.
(f) Buyer has not received any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential violation of or failure to comply
with any term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental Authorization.
(g) All applications required to have been filed for the renewal of
such Governmental Authorizations have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
(h) Such Governmental Authorizations, collectively, constitute all of
the Governmental Authorizations necessary to permit Buyer to conduct and operate
its business lawfully in the manner it currently conducts and operates such
business and to permit Buyer to own and use its assets in the manner in which it
currently owns and uses such assets.
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4.13 Legal Proceedings; Orders.
(a) There is no pending Proceeding:
(i) that has been commenced by or against Buyer or that otherwise
relates to or may affect the business of, or any of the assets owned or
used by, Buyer; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Buyer, (1) no such Proceeding has been Threatened, and (2)
no event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding.
(b) There is no Order to which Buyer, or any of the assets owned or
used by Buyer, is subject.
(c) Buyer is not subject to any Order that relates to the business of,
or any of the assets owned or used by, Buyer.
(d) No officer, director, agent, or employee of Buyer is subject to
any Order that prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice relating to the
business of Buyer.
(e) Buyer is and has been in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or used by
it, is or has been subject.
(f) No event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or failure
to comply with any term or requirement of any Order to which Buyer, or any of
the assets owned or used by Buyer, is subject.
(g) Buyer has not received any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of, or failure to comply with,
any term or requirement of any Order to which Buyer, or any of the assets owned
or used by Buyer, is or has been subject.
4.14 Absence of Certain Changes and Events. Buyer has conducted its
business only in the Ordinary Course of Business and there has not been any:
(a) change in Buyer's authorized or issued capital stock; grant of any
stock option or right to purchase Units of capital stock of Buyer; issuance of
any security convertible into such capital stock; grant of any registration
rights; purchase, redemption, retirement, or other acquisition by Buyer of any
Units of any such capital stock; or declaration or payment of any dividend or
other distribution or payment in respect of Units of capital stock;
(b) amendment to the Organizational Documents of Buyer;
(c) payment or increase by Buyer of any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except in the Ordinary
Course of Business) employee or entry into any employment, severance, or similar
Contract with any director, officer, or employee;
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(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of Buyer;
(e) damage to or destruction or loss of any asset or property of
Buyer, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of Buyer,
taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to Buyer of at least Ten Thousand Dollars
($10,000.00);
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of Buyer or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of Buyer, including the sale, lease, or other disposition of
any of the Buyer Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to
Buyer in excess of Ten Thousand Dollars ($10,000.00);
(i) material change in the accounting methods used by Buyer; or
(j) agreement, whether oral or written, by Buyer to do any of the
foregoing.
4.15 Contracts; No Defaults.
(a) Buyer has delivered to the LLC true and complete copies, of all
the Contracts with a value of at least Ten Thousand Dollars ($10,000.00) to
Buyer.
(b) Buyer (and each Related Person of Buyer) has not or may not
acquire any rights pursuant to, and Buyer has or may become subject to any
obligation or liability pursuant to, any Contract that relates to the business
of, or any of the assets owned or used by, Buyer.
(c) No officer, director, agent, employee, consultant, or contractor
of Buyer is obligated by any Contract that purports to limit the ability of such
officer, director, agent, employee, consultant, or contractor to (A) engage in
or continue any conduct, activity, or practice relating to the business of
Buyer, or (B) assign to Buyer or to any other Person any rights to any
invention, improvement, or discovery.
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(d) Each such Contract is in full force and effect and is valid and
enforceable in accordance with its terms.
(e) Buyer is and has been in full compliance with all applicable terms
and requirements of each Contract pursuant to which such Buyer has or had any
obligation or liability or by which Buyer or any of the assets owned or used by
Buyer is or was obligated.
(f) Each other Person that has or had any obligation or liability
pursuant to any Contract pursuant to which Buyer has or had any rights is and
has been in full compliance with all applicable terms and requirements of such
Contract.
(g) No event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with, or result in a violation
or breach of, or give Buyer or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract.
(h) Buyer has not given to or received from any other Person any
notice or other communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or default pursuant to,
any Contract.
(i) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to Buyer
pursuant to current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
(j) The Contracts relating to the sale, design, manufacture, or
provision of products or services by Buyer have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
4.16 Insurance.
(a) Buyer has delivered to the LLC:
(i) true and complete copies of all policies of insurance to which Buyer is a
party or pursuant to which Buyer, or any director of Buyer, is or has been
covered at any time within the three (3) years preceding the date of this
Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance;
(iii) any statement by the auditor of Buyer's financial statements
with regard to the adequacy of such entity's coverage or of the reserves for
claims;
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(iv) any self-insurance arrangement by or affecting Buyer,
including any reserves established pursuant thereto;
(v) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by Buyer;
(vi) all obligations of Buyer to third parties with respect to
insurance (including such obligations pursuant to leases and service
agreements) and identifies the policy under which such coverage is
provided;
(vii) a summary of the loss experience pursuant to each policy;
(vii) a statement describing each claim under an insurance policy
for an amount in excess of Ten Thousand Dollars ($10,000.00), which sets
forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance,
and period of coverage; and
(C) the amount and a brief description of the claim; and
(ix) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such
claims;
(x) All policies to which Buyer is a party or that provide
coverage to Buyer, or any director or officer of Buyer:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for
the assets and the operations of Buyer for all risks normally insured
against by a Person carrying on the same business or businesses as
Buyer;
(D) are sufficient for compliance with all Legal Requirements
and Contracts to which any Buyer is a party or by which Buyer is
obligated;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of Buyer.
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(b) Buyer has not received (A) any refusal of coverage or any notice
that a defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is not now in
full force or effect or will not be renewed or that the issuer of any policy is
not willing or able to perform its obligations thereunder.
(c) Buyer has paid all premiums due, and have otherwise performed all
of their respective obligations, pursuant to each policy to which Buyer is a
party or that provides coverage to Buyer or director or officer thereof.
(d) Buyer has given notice to the insurer of all claims that may be
insured thereby.
4.17 Employees. No employee or director of Buyer is a party to, or is
otherwise obligated by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person that in any way adversely affects or
will affect (i) the performance of his duties as an employee or director of
Buyer, or (ii) the ability of Buyer to conduct its business. To Buyer's
Knowledge, no director, officer, or other key employee of Buyer intends to
terminate his or her employment with Buyer.
4.18 Labor Relations; Compliance. Buyer has not been or is a party to any
collective bargaining or other labor Contract. There has not been, there is not
presently pending or existing, and there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting Buyer relating to the alleged violation of any
Legal Requirement pertaining to labor relations or employment matters, including
any charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Body, organizational activity, or other labor or employment dispute
against or affecting Buyer or Buyer's premises, or (c) any application for
certification of a collective bargaining agent. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by Buyer, and no such action
is contemplated by Buyer. Buyer has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. Buyer is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
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4.19 Intellectual Property.
(a) Buyer (i) owns all the licenses, trademarks, trade names,
copyrights, marks, patents and applications for patents (the "Buyer Intellectual
Property Assets"), (ii) neither owns nor uses any such items which are not
listed on Schedule 2.2, (iii) pays no royalties to anyone with respect to any
such items, and (iv) has full and lawful right to bring actions for the
infringement thereof. Buyer owns, or possesses adequate and enforceable rights
to use without payment of royalties, all licenses, trademarks, trade names,
copyrights, patents, trade secrets and processes necessary for the conduct of,
or use in, its business as the same is presently being conducted.
(b) Buyer has no Knowledge nor has received any notice to the effect
that any service or product it provides or sells, or any process, method, part
or material it employees in its business for the use by it or another of any
such service, may infringe, or is in conflict with, any asserted right of
another. There is no pending or Threatened claim or litigation action against
Buyer contesting its right to use or the validity of any of the Buyer
Intellectual Property Assets or asserting its misuse of any of the foregoing,
which would deprive it of the right to assert its rights pursuant thereto or
which would prevent the sale of any service provided or sold by it.
4.20 Certain Payments. Neither Buyer nor director, officer, agent, or
employee of Buyer or to Buyer's Knowledge any other Person associated with or
acting for or on behalf of Buyer, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of Buyer or any Affiliate of Buyer, or (iv) in violation of any Legal
Requirement, or (b) established or maintained any fund or asset that has not
been recorded in the books and records of Buyer.
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4.21 Disclosure.
(a) No representation or warranty of Buyer in this Agreement omits to
specify a material fact necessary to make the information specified herein or
therein, considering the circumstances in which that information was furnished,
not misleading.
(b) There is no fact known to Buyer that has specific application to
Buyer (other than general economic or industry conditions) and that materially
adversely affects or, as far as Buyer can reasonably foresee, materially
threatens, the assets, business, prospects, financial condition, or results of
operations of Buyer that has not been set forth in this Agreement.
4.22 Relationships with Related Persons. Neither Buyer nor any Related
Person of Buyer has or has had any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
Buyer's business. Neither Buyer nor any Related Person of Buyer is or has owned
(of record or as a beneficial owner) an equity interest or any other financial
or profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with Buyer, or (ii) engaged in competition
with Buyer with respect to any line of the products or services of Buyer (a
"Buyer Competing Business") in any market presently served by Buyer. Neither
Buyer nor any Related Person of Buyer is a party to any Contract with, or has
any claim or right against, Buyer.
4.23 Brokers or Finders. Buyer and Buyer's agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
ARTICLE V
INDEMNIFICATION; REMEDIES
-------------------------
5.1 Survival; Right to Indemnification Not Affected by Knowledge. All
representations, warranties, covenants, and obligations in this Agreement, and
any other certificate or document delivered pursuant to this Agreement will
survive this Agreement. The right to indemnification, payment of Damages or
other remedy based on such representations, warranties, covenants, and
obligations will not be affected by any investigation conducted with respect to,
or any Knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
5.2 Indemnification and Payment of Damages by Sellers. Sellers, jointly
and severally, will indemnify and hold harmless Buyer, and Buyer's respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Buyer Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including reasonable costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
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(a) any Breach of any representation or warranty made by Sellers or
the LLC in this Agreement, or any other certificate or document delivered by
Sellers or the LLC pursuant to this Agreement;
(b) any Breach by any Seller or the LLC of any covenant or obligation
of such Seller or the LLC in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any Seller or the LLC (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 5.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the Buyer Indemnified
Persons.
5.3 Indemnification and Payment of Damages by Sellers and the LLC --
Environmental Matters. In addition to the provisions of Section 5.2, Sellers and
the LLC, jointly and severally, will indemnify and hold harmless Buyer, and the
Buyer Indemnified Persons for, and will pay to Buyer, and the Buyer Indemnified
Persons the amount of, any Damages (including response costs, costs of
indemnification, cleanup, containment, or other remediation) arising, directly
or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of
or relating to: (i) (A) the ownership, operation, or condition at any time on or
prior to the date of this Agreement of the Facilities or any other properties
and assets (whether real, personal, or mixed and whether tangible or intangible)
in which Sellers or the LLC has or had an interest, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the date of this
Agreement; or (ii) (A) any Hazardous Materials or other contaminants, wherever
located, that were, or were allegedly, generated, transported, stored, treated,
Released, dispersed or otherwise handled by Sellers or the LLC or by any other
Person for whose conduct they are or may be held responsible at any time on or
prior to the date of this Agreement, or (B) any Hazardous Activities that were,
or were allegedly, conducted by Sellers or the LLC or by any other Person for
whose conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other damage
of or to any Person, including any employee or former employee of Sellers or the
LLC or any other Person for whose conduct they are or may be held responsible,
in any way arising from or allegedly arising from any Hazardous Activity
conducted or allegedly conducted with respect to the Facilities or the operation
of the LLC prior to the date of this Agreement, or from Hazardous Material that
was (i) present or suspected to be present on or before the date of this
Agreement on or at the Facilities (or present or suspected to be present on any
other property, if such Hazardous Material emanated or allegedly emanated from
any of the Facilities and was present or suspected to be present on any of the
Facilities on or prior to the date of this Agreement) or (ii) Released or
allegedly Released by Sellers or the LLC or any other Person for whose conduct
they are or may be held responsible, at any time on or prior to the date of this
Agreement, whether or not from the Facilities.
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Buyer will be entitled to direct or control any Cleanup, any related
Proceeding, and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought pursuant to this
Section 5.3. The procedure described in Section 6.6 will apply to any claim
solely for monetary damages relating to a matter contemplated by this Section
5.3.
5.4 Indemnification and Payment of Damages by Buyer. Buyer will indemnify
and hold harmless Sellers and the LLC, and Sellers and the LLC's respective
Representatives, members, managers, officers, controlling persons, and
affiliates (collectively, the "Sellers and the LLC Indemnified Persons") for,
and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including reasonable costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by Buyer in this
Agreement, or any other certificate or document delivered by Buyer pursuant to
this Agreement;
(b) any Breach by Buyer of any covenant or obligation of such Buyer in
this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Buyer (or any Person acting on
their behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 5.4 will not be exclusive of or
limit any other remedies that may be available to Sellers and the LLC or the
other Indemnified Persons.
5.5 Procedure for Indemnification -- Third Party Claims.
(a) Promptly after receipt by an indemnified party pursuant to Section
5.2, 5.4, or (to the extent provided in the last sentence of Section 5.3)
Section 5.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
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(b) If any Proceeding referred to in Section 5.6(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party pursuant to this Article V for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
5.6 Procedure for Indemnification-- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
35
ARTICLE VI
GENERAL PROVISIONS
------------------
6.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party shall pay all expenses, costs and fees (including attorneys' fees)
incurred by that party in connection with the Contemplated Transactions,
including the preparation, execution and delivery of this Agreement and the
ancillary agreements related to this Agreement.
6.2 Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer and Sellers shall mutually
agree upon. Sellers and Buyer will consult with each other concerning the means
by which the LLC's employees, customers, and suppliers and others having
dealings with the LLC will be informed of the Contemplated Transactions, and
Buyer will have the right to be present for any such communication.
6.3 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers:
Xxxx Xxxxxx
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: 401.696.8414
Xxxxx Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Facsimile: 401.696.8414
with a copy to:
Xxxxx Law Group
0000 Xxxx Xxxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
Buyer:
Fishing Buddy, Inc.
0000 00xx Xxxxxx XX
Xxxxxx, XX 00000
with a copy to:
------------------------
------------------------
------------------------
36
6.4 Jurisdiction; Service of Process. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of Nevada
or, if it has or can acquire jurisdiction, in the United States District Court
for the District of Nevada, and each of the parties consents to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
6.5 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
6.6 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege pursuant to this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
6.7 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the Agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written Agreement executed by the party to be charged with the amendment.
37
6.8 Assignments, Successors, and No Third-party Rights. No party may
assign any of its rights under this Agreement without the prior written consent
of the other parties, and any such assignment shall be null and void ab initio;
provided, however, that Buyer may assign any of its rights under this Agreement
to any Subsidiary of Buyer. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
6.9 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
6.10 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
6.11 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
6.12 Governing Law. This Agreement will be governed by the laws of the
State of California without regard to conflicts of laws principles.
6.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same Agreement.
38
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
Fishing Buddy, Inc.,
a Nevada corporation
By: /s/ Xxxx Xxxxx
----------------------------------
Xxxx Xxxxx
Its: Shareholder
By: /s/ Xxxx Xxxxxxxxx
----------------------------------
Xxxx Xxxxxxxxx
Its: Secretary
SELLERS:
/s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx
/s/ Xxxxx Xxxxx
------------------------------------
Xxxxx Xxxxx
APPROVED AND AGREED:
Fishing Buddy LLC,
a North Dakota limited liability company
By: /s/ Xxxx Xxxxxx
---------------------------------
Its: Managing Member
39
Exhibit A
LLC Unit Ownership: 750 Units of membership owned by Xxxxx Xxxxx
-----
750 Units of membership owned by Xxxx Xxxxxx
-----
40
Exhibit 2.3(a)(ii)
Seller's Release
------------------
Exhibit 2.3(a)(iii)
Noncompetition Agreement
------------------------
Exhibit 2.3(a)(iv)
Employment Agreements
---------------------
Schedule 3.6
List of Assets
--------------
