EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
by and among
Chartwell International, Inc.,
E-Rail Acquisition Corp.,
and
E-Rail Logistics, Inc.
dated as of September 8, 2005
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TABLE OF CONTENTS
Page
ARTICLE 1 The Merger 1
1.1 The Merger 1
1.2 Closing 1
1.3 Effective Time of the Merger 2
1.4 Effects of the Merger 2
1.5 Certificate of Incorporation and Bylaws of the Surviving Corporation 2
1.6 Directors and Officers 2
ARTICLE 2 Effect of the Merger on the Capital Stock of Company and Merger Sub 2
2.1 Effect of Capital Stock 2
2.2 Issuance 3
2.3 Dissenting Shares 4
2.4 Stock Options and Purchase Plans 4
2.5 Contingent Earn-Out Consideration After the Closing 4
2.6 Additional Actions 5
ARTICLE 3 Representations and Warrants of the Company 5
3.1 Corporate Existence and Power 5
3.2 Subsidiaries 5
3.3 Corporate Authorization 5
3.4 Governmental Authorization 6
3.5 Non-Contravention 6
3.6 Compliance with Law and Other Instruments 6
3.7 Capitalization 7
3.8 Company Financial Statements; Absence of Undisclosed Liabilities 7
3.9 Absence of Certain Changes 8
3.10 Litigation 9
3.11 Taxes 10
3.12 The Company Employee Benefit Plans 12
3.13 Banking and Finders' Fees 13
3.14 Environmental Compliance 13
3.15 Collective Bargaining Arrangements 15
3.16 Accounts Receivable; Deferred Revenue 15
3.17 Leases 15
3.18 Interests in Real Property 15
3.19 Personal Property 16
3.20 Employees, Directors and Officers 16
3.21 Patents, Intellectual Property; Software 16
3.22 Contracts 18
3.23 Affiliate Transactions 19
3.24 Insurance and Banking Facilities 19
3.25 Powers of Attorney and Suretyships 20
3.26 Minutes and Stock Records 20
3.27 Customers; Payors 20
3.28 Full Disclosure 20
3.29 New York Takeover Statutes 20
3.30 Xxxxxxx Matter 20
3.31 Xxxxxxxx Mining Matter 21
3.32 No Registration of Securities 21
3.33 Parent Information 21
ARTICLE 4 Representations and Warranties of Parent and Merger Sub 21
4.1 Corporate Existence and Power 21
4.2 Corporate Authorization 22
4.3 Consents and Approvals; No Violations 22
4.4 No Prior Activities 22
4.5 Banking and Finders' Fees 23
4.6 Legal Proceedings 23
ARTICLE 5 Covenants of the Company 23
5.1 Conduct of the Company Business 23
5.2 Shareholder Approval 24
5.3 Satisfaction of Conditions Precedent 25
5.4 No Other Negotiations 25
5.5 Access 25
5.6 Company Employees 26
5.7 Notification of Certain Matters 26
ARTICLE 6 Covenants of Parent 26
6.1 Obligations of Merger Sub 26
6.2 Company Employees 26
6.3 Notification of Certain Matters 26
6.4 Satisfaction of Conditions Precedent 27
ARTICLE 7 Covenants of Parent and the Company 27
7.1 Notices of Certain Events 27
7.2 Public Announcements 27
7.3 Transfer Taxes 27
7.4 Reasonable Efforts 27
7.5 Fees and Expenses 28
7.6 Regulatory Matters and Approvals 28
7.7 Transfer Restrictions 28
ARTICLE 8 Indemnification 29
8.1 Indemnification of Parent and Merger Sub 29
8.2 Indemnification of the Company 29
8.3 Limitation on Liability 29
8.4 Claims Procedure 29
8.5 Exclusive Remedy 30
8.6 Set-Off Against Post-Closing Consideration 30
ARTICLE 9 Conditions to Merger 31
9.1 Condition to Obligation of Each Party to Effect the Merger 31
9.2 Additional Conditions to Obligations of Parent and Merger Sub 31
ARTICLE 10 Termination 32
10.1 Termination 32
10.2 Notice of Termination 33
10.3 Effect of Termination 33
ARTICLE 11 Survival of Representations, Warrants and Covenants 33
ARTICLE 12 General Provisions 33
12.1 Notices 33
12.2 Amendment 34
12.3 Waiver 34
12.4 Failure or Indulgence Not Waiver; Remedies Cumulative 35
12.5 Headings 35
12.6 Severability 35
12.7 Entire Agreement 35
12.8 Assignment 35
12.9 Parties In Interest 35
12.10 Governing Law 35
12.11 Counterparts 36
12.12 Attorney Fees 36
12.13 Tax Advice 36
12.14 Representation 36
12.15 Drafting 36
12.16 Gender 36
Signatures 37
Exhibit A A-1
Exhibit B B-1
Exhibit B-2
Exhibit C
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and
entered into as of September 8, 2005, by and among Chartwell International,
Inc., a Nevada corporation ("Parent"), E-Rail Acquisition Corp., a Nevada
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and E-Rail
Logistics, Inc., a New York corporation (the "Company") and wholly owned
subsidiary of Rail Waste Holdings, LLC ("RWH"). Certain other capitalized terms
used in this Agreement are defined in Exhibit A attached hereto.
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Merger Sub, and
the Company believe it is in the best interest of each company and their
respective stockholders to consummate the business combination transaction
provided for herein in which Merger Sub would merge with and into the Company
(the "Merger");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub, and
the Company have approved this Agreement and the Merger, upon the terms and
subject to the conditions set forth in this Agreement in accordance with the
Nevada Revised Statutes ("NRS"), the New York Business Corporation Law ("NYBCL")
and their respective charter documents; and
WHEREAS, each of Parent, Merger Sub, and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the consummation thereof.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the NRS and the NYBCL, Merger Sub shall be
merged with and into the Company at the Effective Time of the Merger (as defined
in Section 1.3). Following the Merger, the separate corporate existence of
Merger Sub shall cease, and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights, properties, liabilities and obligations of Merger Sub in accordance
with the NRS and NYBCL.
1.2. Closing. The closing of the Merger (the "Closing") shall take place at the
offices of Xxxxxx, Eng & Xxxxxxxx at 0000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxxx,
Xxxxxxxxxx at the date and time on which the conditions to Closing set forth in
Article 9 of this Agreement shall have been satisfied or waived by the
appropriate party or at such time as the parties hereto agree. The date on which
the Closing actually occurs and the transactions contemplated hereby become
effective is hereinafter referred to as the "Closing Date." At the time of the
Closing, Parent, Merger Sub and the Company shall deliver the certificates and
other documents and instruments required to be delivered hereunder.
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1.3. Effective Time of the Merger. At the Closing, the parties hereto shall (a)
cause an articles of merger substantially in the form of Exhibit B-1 (the
"Nevada Articles of Merger") to be executed and filed with the Secretary of
State of the State of Nevada, as provided in Section 92A.200 of the NRS, (b)
cause a certificate of merger in substantially the form of Exhibit B-2 (the "New
York Certificate of Merger") to be executed and filed with the Department of
State of the State of New York, as provided in Section 907 of the NYBCL and (c)
take all such other and further actions as may be required by the NRS, the NYBCL
or other applicable Law to make the Merger effective. The Merger shall become
effective as of the date and time of the filing of the Nevada Articles of Merger
and the New York Certificate of Merger. The date and time of such effectiveness
are referred to herein as the "Effective Time."
1.4. Effects of the Merger. Subject to the foregoing, the effects of the Merger
shall be as provided in the applicable provisions of the NRS and the NYBCL.
1.5. Certificate of Incorporation and Bylaws of the Surviving Corporation. The
Certificate of Incorporation of the Company as in effect immediately prior to
the Effective Time and as amended by the New York Certificate of Merger shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or in accordance with applicable Law. The
Bylaws of the Company as in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation until thereafter changed or amended
as provided therein or in accordance with applicable law.
1.6. Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation until their successors shall have been duly elected or
appointed and qualified in accordance with applicable Law or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF COMPANY AND MERGER SUB
2.1. Effect on Capital Stock. At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Merger Sub or the Company:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of capital
stock of Merger Sub shall by virtue of the Merger and without any action on the
part of any holder thereof, be converted into one share of the Company's common
stock. Such newly issued share shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
(b) Conversion of the Company Stock. Subject to other provisions of this Article
2:
(i) The issued and outstanding shares of the Company Stock immediately prior to
the Effective Time (individually a "Share" and collectively the "Shares"), other
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than (i) Shares held by the Company, and (ii) Shares held by Parent, Merger Sub
or any other Subsidiary or parent of Parent or Merger Sub, if any, and (iii)
Dissenting Shares, shall, by virtue of the Merger, be converted automatically
into the right to receive (i) subject to Parent's right of set-off pursuant to
Section 8.6, twelve (12) months after the Closing Date, Parent shall issue to
the Company 300,000 shares of Common Stock of the Parent less any amounts
set-off in accordance with Section 8.6 (the "Post-Closing Consideration"); and
(ii) 2,600,000 shares of Common Stock of the Parent (the "Equity Consideration")
upon surrender of the Shares (collectively, the "Merger Consideration"). The
Merger Consideration shall be distributed by the Company according to the
liquidation preferences set forth in the Company's Certificate of Incorporation
filed with the Secretary of State of the State of New York on March 11, 2004 or
in the absence of such provisions, by law.
(ii) The issued and outstanding shares of Company Stock on the Closing Date,
applicable liquidation preferences and the holders shall be set forth on a
Merger Consideration certificate to be delivered by the Company to the Parent at
Closing (the "Merger Consideration Certificate"). Parent and the Surviving
Corporation shall be entitled to rely on the Merger Consideration Certificate in
connection with issuance of the Merger Consideration pursuant to Section 2.2.
(iii) At the Effective Time, all such Shares shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive, upon the surrender of
any such certificates, the Merger Consideration to be issued in consideration
therefor upon the surrender of such certificate .
(iv) At the Effective Time, each Share held by the Company as treasury stock or
held by Parent, Merger Sub or any Subsidiary or parent of Parent, Merger Sub or
the Company immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of Parent, Merger Sub, the Company or
the holder thereof, be canceled, retired and cease to exist, and no
consideration shall be delivered with respect thereto.
2.2. Issuance.
(a) Promptly after the Effective Time, the Surviving Corporation shall
distribute the Merger Consideration to holders of Shares by issuance of
certificates in accordance with the Merger Consideration Certificate.
(b) If any portion of the Merger Consideration is to be issued to a Person other
than the registered holder of the Shares represented by the Certificates
surrendered in exchange therefor, it shall be a condition to such issuance that
the Certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such issuance shall pay
to the Parent any transfer or other taxes required as a result of such issuance
to a Person other than the registered holder of such Shares or establish to the
satisfaction of the Parent that such tax has been paid or is not payable.
(c) Notwithstanding anything to the contrary in this Section 2.2, Parent shall
not be liable to any holder of Shares for any amount paid to a public official
pursuant to and in accordance with the requirements of applicable abandoned
property, escheat or similar Laws.
2.3. Dissenting Shares.
(a) Notwithstanding Section 2.1, Shares outstanding immediately prior to the
Effective Time and held by a holder who is entitled to an appraisal of the fair
market value for such shares and who does not vote in favor of or consent in
writing to the Merger and who otherwise complies with the provisions of Section
623 of the NYBCL (the "Dissenting Shares") shall not be converted into the right
to receive any portion of the Merger Consideration as provided in Section 2.1(b)
of this Agreement, unless and until such holder fails to perfect or withdraws or
otherwise loses his right to an appraisal of the fair market value of his
Dissenting Shares. If, after the Effective Time, any such holder fails to
perfect or withdraws or loses his right to an appraisal of the fair market value
of his Dissenting Shares under the NYBCL, such Dissenting Shares shall thereupon
be treated as if they had been converted as of the Effective Time into the right
to receive the Merger Consideration to which such holder is entitled.
(b) The Company shall give Parent prompt notice of any demands received by the
Company for the payment of fair market value for Shares, and Parent shall have
the right to direct all negotiations and proceedings with respect to such
demands. The Company shall not make any such payment without Parent's prior
written consent.
2.4. Stock Options and Purchase Plans.
The Parent, Merger Sub and the Company hereby acknowledge and agree that the
Surviving Corporation shall not assume or continue any stock option or employee
stock purchase plans, or substitute any additional options or similar rights for
such options.
2.5. Additional Actions. If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Merger Sub or the Company or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Merger Sub and
the Company, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of Merger Sub or the Company, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise carry out the
transactions contemplated by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that,
except as set forth in the disclosure schedules delivered by the Company to
Parent and Merger Sub (the "Company Disclosure Schedule") which have been
provided to Parent prior to the date hereof:
3.1. Corporate Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York, and has all corporate powers and authority and all governmental
licenses, authorizations, permits, consents and approvals required to own, lease
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and operate its properties and to carry on its business as now conducted, except
for those licenses, authorizations, permits, consents and approvals the absence
of which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company has heretofore delivered to Parent
true and complete copies of the Company's Certificate of Incorporation and
Bylaws as currently in effect.
3.2. Subsidiaries. The Company does not own, directly or indirectly, any equity
or other ownership interest in any corporation, partnership, joint venture or
other entity or enterprise.
3.3. Corporate Authorization.
(a) The execution, delivery and performance by the Company of this Agreement and
the consummation of the transactions contemplated hereby are within the
Company's corporate powers and have been duly authorized by all necessary
corporate action, except for the required approval of the holders of the
Company's capital stock in connection with the consummation of the Merger. This
Agreement and the Merger have been duly authorized by all necessary corporate
action of the Company in accordance with the NYBCL.
(b) The Company's Board of Directors, at a meeting duly called and held, has
unanimously (i) determined that this Agreement and the transactions contemplated
hereby (including the Merger) are fair to, and in the best interests of, its
shareholders, and (ii) approved and adopted this Agreement and the transactions
contemplated hereby (including the Merger), which approval satisfies in full any
applicable requirements of the NYBCL.
(c) This Agreement has been duly executed and delivered by the Company. This
Agreement constitutes, and the Transaction Documents to be executed and
delivered by the Company will constitute, legal, valid and binding obligations
of the Company, enforceable against the Company and its shareholders, as
applicable, in accordance with their respective terms, except to the extent that
its enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors
rights generally or by general equitable principles.
3.4. Governmental Authorization. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any governmental body, agency, official or authority, other than
(a) the filing of the Nevada Articles of Merger and other documents in
accordance with the NRS, (b) the filing of the New York Certificate of Merger
and other documents in accordance with the NYBCL, (c) any filings under the
Securities Act or Securities Exchange Act, and (d) any other filings, approvals
or authorizations which, if not obtained, would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or Materially impair
the ability of the Company to consummate the transactions contemplated by this
Agreement.
3.5. Non-Contravention. The execution, delivery and performance by the Company
of this Agreement and the consummation by the Company of the transactions
contemplated hereby do not and will not (i) contravene or conflict with the
Certificate of Incorporation or Bylaws of the Company, (ii) assuming compliance
with the matters referred to in Section 3.4, contravene or conflict with or
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constitute a violation of any provision of any Law, judgment, injunction, order
or decree binding upon or applicable to the Company, (iii) require the consent
or other action of any Person under, constitute a Default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company or to a loss of any benefit to which the Company is
entitled under any provision of any Material agreement or other instrument
binding upon the Company or any Material license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating in
any way to, the assets or business of the Company, (iv) result in the creation
or imposition of any Material Lien on any asset of the Company, except, in the
case of clause (ii), for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or Materially impair
the ability of the Company to consummate the transactions contemplated by this
Agreement.
3.6. Compliance with Law and Other Instruments.
(a) The Company holds all Material licenses, permits and authorizations
necessary for the lawful conduct of its business as now being conducted pursuant
to all applicable Laws of all governmental bodies, agencies and other
authorities having jurisdiction over the Company or any part of its operations,
and there are no violations or claimed violations by the Company, or action or
proceeding pending against the Company of any such license, permit or
authorization or any such Law. Section 3.6 of the Company Disclosure Schedule
sets forth all such required licenses, permits and authorizations.
(b) The business of the Company has been and is being conducted in compliance
with all applicable Laws, except for violations or failures to so comply that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. No investigation or review by any Regulatory Authority with respect
to the Company is pending or threatened in writing. The Company has not received
any written communication in the past five (5) years from a Regulatory Authority
that alleges that the Company is not in compliance with any applicable Law.
3.7. Capitalization.
(a) The authorized capital stock of the Company consists of 200 shares of common
stock. As of August 31, 2005, there were outstanding 100 shares of common
stock.,
(b) All outstanding shares of Company Stock have been duly authorized and
validly issued and are fully paid and nonassessable and free of preemptive
rights. Except as set forth in this Section 3.7, there are no outstanding (i)
shares of capital stock or other voting securities of the Company, (ii)
securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities of the Company, or (iii) options, restricted stock,
stock appreciation rights, other stock based compensation awards or other rights
to acquire from the Company, or other obligation of the Company to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company. There are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
securities referred to in clauses (i), (ii) or (iii) above.
(c) As of the date hereof, there are no outstanding bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into
or exercisable for Company Stock having the right to vote) on any matters on
which shareholders of the Company may vote.
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(d) All of the Company Stock was issued or granted in compliance with all
applicable federal and state securities laws.
(e) To the Knowledge of the Company, there are no voting agreements or voting
trusts between or among any Person or Persons relating to the Company or the
Company Stock. The Company is not obligated to issue or repurchase any shares of
Company Stock for any purpose and no Person has entered into any Contract
(whether preemptive or contractual) for the purchase, subscription or issuance
of any unissued shares or other securities of the Company, whether now or in the
future.
3.8. Company Financial Statements; Absence of Undisclosed Liabilities.
(a) Schedule 3.8(a) of the Company Disclosure Schedule contains the Company's
audited balance sheets as of December 31, 2004 and the related audited
statements of income and cash flows for the fiscal year then ended, together
with the report thereon of Xxxxxx Accounting, P.C., independent certified public
accountants and the Company's audited proforma balance sheet as of the Closing
Date and the related audited proforma statements of income and cash flows for
the period then ended (collectively, the "Company Financial Statements"). The
Company Financial Statements present fairly the financial condition, results of
operation and cash flows of the Company as of the respective dates and for the
respective periods referred to in such financial statements, subject to normal
year-end adjustments to unaudited financial statements.
(b) The Company Financial Statements, including the notes thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied consistently throughout the periods involved. No
financial statements of any Person other than the Company is required to be
included in the Company Financial Statements.
(c) Schedule 3.8(c) lists all of the Company's liabilities as of the Closing
Date.
(d) Schedule 3.8(d) lists all of the Company's assets as of the Closing Date.
(e) Except as set forth in the Company Financial Statements and Schedule 3.8(c)
attached hereto, the Company does not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise).
3.9. Absence of Certain Changes. Since January 1, 2005, the business of the
Company has been conducted in the ordinary course consistent with past practice
and there has not been any:
(a) event, occurrence or development of a state of circumstances or facts which
would, individually or in the aggregate, have a Material Adverse Effect on the
Company (other than adverse effects arising from the execution and performance
of this Agreement, changes in general economic conditions or changes applicable
generally to the industry) or any event, occurrence or development which would
have a Material Adverse Effect on the ability of the Company to consummate the
Merger;
(b) declaration, setting aside or payment of any dividend or other distribution
with respect to any shares of capital stock of the Company, or any repurchase,
redemption or other acquisition by the Company of any outstanding shares of
capital stock or other securities of, or other ownership interests in the
Company;
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(c) split, combination, re-classification of any Company Stock or any amendment
of any term of any outstanding security of the Company;
(d) incurrence, assumption or guarantee by the Company of any indebtedness for
borrowed money other than in the ordinary course and in amounts and on terms
consistent with past practices;
(e) creation or other incurrence by the Company of any Lien on any asset other
than in the ordinary course consistent with past practices;
(f) transaction or commitment made, or any contract or agreement entered into,
by the Company relating to their assets or business (including the acquisition
or disposition of any assets) or any relinquishment by the Company of any
contract or other right, in either case, Material to the Company, other than
transactions and commitments in the ordinary course consistent with past
practices and those contemplated by this Agreement;
(g) change in any method of accounting, method of tax accounting or accounting
practice by the Company, except for any such change that is consistent with GAAP
or required by reason of a concurrent change in GAAP;
(h) (i) grant of any severance or termination pay to any current or former
director, officer or employee of the Company, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any current or former director, officer or
employee of the Company, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements, (iv) increase in
compensation, bonus or other benefits payable or otherwise made available to
current or former directors, officers or employees of the Company (other than in
the ordinary course of business salary increases for employees other than
officers and directors), (v) the declaration or payment of any bonuses or
year-end payments to any current or former directors, officers or employees of
the Company, or (vi) establishment, adoption, or amendment (except as required
by applicable Law), of any collective bargaining, bonus, profit sharing, thrift,
pension, retirement, deferred compensation, compensation, stock option,
restricted stock or other benefit plan or arrangement covering any current or
former director, officer or employee of the Company;
(i) labor dispute, other than routine individual grievances, or, to the
Knowledge of the Company, any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to such
employees;
(j) tax election or any settlement of tax liability, in either case that is
Material to the Company;
(k) asset acquisition or expenditure in excess of $5,000 individually or $20,000
in the aggregate;
(l) payment, prepayment or discharge of liability other than in the ordinary
course of business or any failure to pay any liability when due;
(m) write-offs or write-downs of any assets of the Company;
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(n) creation, termination or amendment of, or waiver of any right under, any
Material Contract of the Company;
(o) damage, destruction or loss having, or reasonably expected to have, a
Material Adverse Effect on the Company;
(p) event that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 5.1 hereof; or
(q) agreement or commitment to do any of the foregoing.
3.10. Litigation. There is no action, suit, investigation, audit or proceeding
pending against, or to the Knowledge of the Company threatened against or
affecting, the Company, its Affiliates, officers or directors or any of its
properties before any court or arbitrator or any governmental body, agency or
official. No former shareholder, employee, officer or director of the Company or
its Affiliates has any claim pending or to the Knowledge of the Company
threatened against the Company, its Affiliates, officers or directors or any of
its properties relating to sales of Company Stock by the Company or any of the
Company's current or former shareholders. The Company nor any of its Affiliates,
officers and directors nor any of its properties are subject to any order, writ,
judgment, decree or injunction of any court or arbitrator or any governmental
body, agency or official. Section 3.10 of the Company Disclosure Schedule
contains a complete list of all claims brought against the Company or its
Affiliates, or pending, since incorporation or formation, together with a brief
statement of the nature and amount of the claim, the court and jurisdiction in
which the claim was brought, the resolution (if resolved), and the availability
of insurance to cover the claim. To the Knowledge of the Company, there are no
facts or circumstances that could reasonably be expected to give rise to any
actions set forth in this Section 3.10.
3.11. Taxes.
(a) Except as set forth in (or resulting from matters set forth in) Section 3.11
of the Company Disclosure Schedule or as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company:
(i) the Company has prepared and timely filed with the appropriate governmental
agencies all franchise, income and all other Tax returns and reports required to
be filed on or before the Effective Time (collectively the "Returns"), taking
into account any extension of time to file granted to or obtained on behalf of
the Company;
(ii) all Taxes of the Company shown on such Returns or otherwise known by the
Company to be due or payable have been timely paid in full to the proper
authorities, other than such Taxes as are adequately reserved for in accordance
with GAAP;
(iii) all deficiencies resulting from Tax examinations of income, sales and
franchise and all other Returns filed by the Company in any jurisdiction in
which such Returns are required to be so filed have been paid and no claim has
been made by an authority in a jurisdiction where the Company does not file
Returns that is or may be subject to the taxation by that jurisdiction;
(iv) no deficiency has been asserted or assessed against the Company which has
not been satisfied or otherwise resolved, and no examination of the Company is
9
pending or, to the Knowledge of the Company, threatened for any Material amount
of Tax by any taxing authority and there is no dispute or claim concerning any
Tax liability of the Company either claimed by any authority in writing, or to
the Knowledge of the Company, reasonably expected to be claimed;
(v) no extension of the period for assessment or collection of any Material Tax
is currently in effect and no extension of time within which to file any
Material Return has been requested;
(vi) all Returns filed by the Company are correct and complete in all respects
or adequate reserves have been established with respect to any additional Taxes
that may be due (or may become due) as a result of such Returns not being
correct or complete;
(vii) to the Knowledge of the Company, no Tax liens have been filed with respect
to any Taxes;
(viii) the Company has not: (A) filed a consent under Code Section 341(f)
concerning collapsible corporations; (B) executed, become subject to, or entered
into any closing agreement pursuant to Section 7121 of the Code or any similar
or predecessor provision thereof under the Code or other Tax Law, (C) received
approval to make or agreed to a change in accounting method, or (D) incurred or
assumed any liability for the Taxes of any Person. The Company has disclosed on
its federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code;
(ix) no Company asset is property that is required to treat as being owned by
any other Person pursuant to the so-called "safe harbor lease" provisions of
former Section 168(f)(8) of the Code; the Company has not agreed to make, nor
are they required to make, any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise; the transaction
contemplated herein is not subject to the Tax withholding provisions of Code
Section 3406, or of subchapter A of Chapter 3, of the Code or of any other
provision of Law; and the Company is not a party to any joint venture,
partnership, or other arrangement or contract which could be treated as a
partnership for federal income Tax purposes;
(x) the Company has not entered, nor does it plan to enter into, any agreement,
arrangement, plan or similar circumstance with any Person that could result in a
distribution, apportionment or reallocation under Section 482 of the Code or
other similar provision of the Tax Law;
(xi) the Company has not made since January 1, 2005, and will not make, any
voluntary adjustment by reason of a change in its accounting methods for any
pre-Merger period;
(xii) the Company has made timely payments of the Taxes required to be deducted
and withheld in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other third party;
(xiii) the Company is not a party to any Tax sharing or Tax matters agreement;
(xiv) to the Knowledge of the Company, the Company is not liable to suffer any
recapture, clawback or withdrawal of any relief or exemption from Tax howsoever
10
arising (including the entering into and the consummation of the Merger), and
whether by virtue of any act or omission by the Company or by any other Person
or Persons;
(xv) to the Knowledge of the Company, the Company is not liable to be assessed
for or made accountable for any Tax for which any other Person or Persons may be
liable to be assessed or made accountable whether by virtue of the entering into
or the consummation of the Merger or by virtue of any act or acts done by or
which may be done by or any circumstance or circumstances involving or which may
involve any other Person or Persons; and
(xvi) The Company has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(b) The Company is not a party to any agreement, contract, or arrangement that
would, as a result of the transactions contemplated hereby, result, separately
or in the aggregate, in (i) the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code by reason of the Merger, (ii) the
payment of any form of compensation or reimbursement for any Tax incurred by any
Person arising under Section 280G of the Code, or (iii) the payment of any
amounts not deductible by the Company, in whole or in part, by reason of Section
162(m) of the Code.
3.12. The Company Employee Benefit Plans.
(a) Section 3.12(a) of the Company Disclosure Schedule sets forth a list of all
of the Company's employee benefit plans, as defined in Section 3(3) of ERISA;
and
(b) Section 3.12(b) of the Company Disclosure Schedule sets forth a true and
complete list of all other profit-sharing, deferred compensation (including a
list of participants therein), bonus, stock option, stock purchase, stock bonus,
phantom stock, vacation pay, holiday pay, severance, dependent care assistance,
excess benefit, incentive compensation, salary continuation, medical, life or
other insurance, employment, severance, termination, golden parachute,
consulting, supplemental retirement plan or agreement, supplemental unemployment
and other employee benefit plans, programs, agreements or arrangements,
including all unwritten employee benefit plans, programs, agreements and
arrangements, if any, maintained or contributed to by the Company for the
benefit of the Company's Employees (or former employees) or independent
contractors and/or their beneficiaries. The plans identified in Sections 3.12(a)
and 3.12(b) are collectively referred to herein as "Benefit Plans." An
arrangement will not fail to be a Benefit Plan simply because it only covers one
individual, or because the Company's obligations under the plan arise by reason
of its being a "successor employer" under applicable Law.
(c) The Company has delivered or made available to Parent a true and complete
copy of each Benefit Plan and any related funding agreements (e.g., trust
agreements or insurance contracts), including all amendments (and Section
3.12(b) of the Company Disclosure Schedule includes a description of any such
amendment that is not in writing);
(d) Except as set forth in Section 3.12(d) of the Company Disclosure Schedule,
the Company does not maintain or contribute to, nor has maintained or
contributed to, any Benefit Plan that is subject to Section 302 of ERISA or
Section 412 of the Code.
11
(e) No Benefit Plan is a "multi-employer plan," as defined in Section 3(37) of
ERISA, nor is a plan described in Section 4063(a) of ERISA.
(f) All costs of administering, and contributions required to be made by the
Company to, each Benefit Plan under the terms of that Benefit Plan, ERISA, the
Code or any other applicable Law have been timely made, and are fully
deductible. All amounts properly accrued to date as liabilities of the Company
under, or with respect to, each Benefit Plan (including administrative expenses
and incurred but not reported claims) for the current plan year of the Benefit
Plan have been recorded on the appropriate books, to the extent required by Law
or GAAP.
(g) Except as set forth in Section 3.12(g) of the Company Disclosure Schedule,
each Benefit Plan has been maintained and operated in accordance with, and
complies currently with, in all Material respects, all applicable Laws,
including but not limited to ERISA and the Code. Each Benefit Plan has been
operated in all Material respects in accordance with its terms. Furthermore, the
Internal Revenue Service has issued a favorable determination letter with
respect to each Benefit Plan that is intended to qualify under Section 401(a) of
the Code, and, to the Knowledge of the Company, no event has occurred (either
before or after the date of the letter) that would disqualify the plan.
(h) No Benefit Plan is intended to provide benefits which might require
compliance with Sections 419 or 419A of the Code.
(i) To the Knowledge of the Company, (i) no prohibited transaction has occurred
with respect to any of the Benefit Plans which is not exempt under Section 4975
of the Code and Section 406 of ERISA, and (ii) the Company has not engaged in
any transaction with respect to any Benefit Plan which could subject it to
either a Material civil penalty assessed pursuant to Section 409, 502(i) or
502(l) of ERISA, or a Material tax imposed pursuant to Section 4975 or 4976 of
the Code.
(j) Except as set forth in Section 3.12(j) of the Company Disclosure Schedule,
the Company does not maintain any plan that provides (or will provide) medical
or death benefits to one or more, current or future former employees (including
retirees) beyond their retirement or other termination of service, other than
benefits that are required to be provided pursuant to Section 4980B of the Code
or state Law continuation coverage or conversion rights.
(k) Except as set forth in Section 3.12(k) of the Company Disclosure Schedule,
there are no proceedings or lawsuits, pending or, to the Knowledge of the
Company, threatened, and, to the Knowledge of the Company, are no
investigations, either currently in progress or expected to be instituted in the
future, relating to any Benefit Plan, by any administrative agency, whether
local, state or federal or by any fiduciary, participant or beneficiary of such
plan.
(l) Except as set forth in Section 3.12(l) of the Company Disclosure Schedule,
none of the Benefit Plans or any other employment agreement or arrangement
entered into by the Company will entitle any current or former employee to any
benefits or other compensation that become payable solely as a result of the
consummation of this transaction.
(m) None of the Benefit Plans are subject to the tax on unrelated business
taxable income or unrelated debt-financed income under Section 511 of the Code.
12
(n) Except as set forth in Section 3.12(n) of the Company Disclosure Schedule,
to the Knowledge of the Company, no Benefit Plan has any interest in any annuity
contract or other investment or insurance contract issued by an insurance
company that is the subject of bankruptcy, conservatorship, rehabilitation or
similar proceeding.
(o) Section 3.12(o) of the Company Disclosure Schedule lists each individual who
(i) has elected to continue participating in a group health plan of the Company
pursuant to an election under COBRA, or (ii) has not made an election under
COBRA but who is still eligible to make such election.
3.13. Banking and Finders' Fees. There is no investment banker, broker, finder
or other intermediary, which has been retained by or is authorized to act on
behalf of the Company who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
3.14. Environmental Compliance.
(a) The Company and its Affiliates are in compliance with all Environmental Laws
and all Environmental Permits.
(b) The Company and its Affiliates have not received any written notice
regarding any violation of any Environmental Laws, or any Company Environmental
Liabilities, including any investigatory, remedial or corrective obligations,
relating to the Company, its Affiliates or its facilities arising under
Environmental Laws.
(c) Except as set forth in Section 3.14 of the Company Disclosure Schedule:
(i) The Company and to the Knowledge of the Company, its Affiliates, have not
caused, or are not causing or threatening to cause, any disposals or releases of
any Hazardous Material on or under any properties which they (A) lease, occupy
or operate or (B) previously owned, leased, occupied or operated and, to the
Knowledge of the Company, no such disposals or releases occurred prior to the
Company having taken title to, or possession or operation of, any of such
properties; and to the Knowledge of the Company no such disposals or releases
are migrating or have migrated off of such properties in subsurface soils,
groundwater or surface waters after the Company has taken title to, or
possession or operation of any such properties and, to the Knowledge of the
Company, no such disposals or releases are migrating or have migrated off of
such properties in subsurface soils, groundwater or surface water prior to such
time;
(ii) The Company and to the Knowledge of the Company, its Affiliates, have not
(A) arranged for the disposal or treatment of Hazardous Material at any facility
owned or operated by another Person, or (B) accepted any Hazardous Material for
transport to disposal or treatment facilities or other sites selected by the
Company from which facilities or sites there has been a release or there is a
release or threatened release of a Hazardous Material; any facility identified
in Section 3.14(c)(ii)(A) was duly licensed in accordance with Law and has not
been listed in connection with the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) by the United States Environmental
Protection Agency's Comprehensive Environmental Response, Compensation, and
Liability Information System (CERCLIS) or National Priorities List (NPL) or any
equivalent or like listing of sites under state or local Law (whether for
potential releases of substances listed in CERCLA or other substances);
13
(iii) The Company does not have any reason to believe or suspect that, and to
the Knowledge of the Company, there is no release or threatened release of, any
Hazardous Material originating from a property other than those leased or
operated by the Company has come to be (or may come to be) located on or under
properties leased, occupied or operated by the Company;
(iv) The Company and to the Knowledge of the Company, its Affiliates, have not
ever installed, used, buried or removed any surface impoundment or underground
tank or vessel on properties owned, leased, occupied or operated by the Company
or any of the Company Subsidiaries or Affiliates;
(v) The Company and to the Knowledge of the Company, its Affliliates, are and
have been in compliance in all Material respects with all federal, state, local
or foreign Laws, permits, approvals and authorizations relating to air, water,
industrial hygiene and worker health and safety, anti-pollution, hazardous or
toxic wastes, materials or substances, pollutants or contaminants, and no
condition exists on any of the real property owned by or used in the business of
the Company that would constitute a violation of any such Law or that
constitutes or threatens to constitute a public or private nuisance; and
(vi) There has been no litigation, administrative proceedings or investigations
or any other actions, claims, demands notices of potential responsibility or
requests for information brought or threatened against the Company or its
Affiliates or any settlement reached by them with any Person or Persons alleging
the presence, disposal, release or threatened release of any Hazardous Material
on, from or under any of such properties or as otherwise relating to potential
environmental liabilities or the actual or alleged injury to human health or the
environment by reason of the current conditions or operation of the Company
facilities or past condition and operations or activities of the Company or its
Affiliates' facilities.
3.15. Collective Bargaining Arrangements. The Company is not a party to or bound
by any employee collective bargaining agreement, nor is the Company a party to
or affected by or, to the Knowledge of the Company, threatened with, any dispute
or controversy with a union or with respect to unionization or collective
bargaining involving the employees of the Company.
3.16. Accounts Receivable; Deferred Revenue.
(a) The accounts receivable reflected in the balance sheet of the Company
Financial Statements are owned free and clear by the Company and are based on
the Company's reasonable judgment and its normal credit review procedures,
business practices and GAAP, and are fully collectible in accordance with their
terms in an amount not less than their aggregate book value. "Aggregate book
value", for this purpose, shall mean the recorded amounts of such accounts
receivable, less any recorded allowance for doubtful accounts, trade allowances
and return allowances, all as established in accordance with GAAP consistently
applied. Any such allowances for doubtful accounts, trade allowances and return
allowances are established in accordance with past practices and are consistent
with past collectibility results and returns. To the Knowledge of the Company,
there are no facts or circumstances which may indicate that any recorded
allowances are inadequate. Except as set forth in Section 3.16(a) of the Company
Disclosure Schedule, all accounts receivable for customer collections and
xxxxxxxx prior to the Closing Date have been properly recorded on the Company's
books and records on a timely basis and in the month in which the Company's
efforts and activities generating such income were expended.
14
(b) The deferred revenue reflected in the balance sheet of the Company Financial
Statement is based on the Company's reasonable judgment and business practices,
as established in accordance with GAAP consistently applied. Except as set forth
in Section 3.16(b) of the Company Disclosure Schedule, all deferred revenue
relating to contracts executed prior to the Closing Date have been properly
recorded on the Company's books and records on a timely basis and in the month
in which the Company received the cash payment.
3.17. Leases. Section 3.17 of the Company Disclosure Schedule is the complete
and correct list and brief description of all real property leased by the
Company on the Closing Date. All real property leases to which the Company is a
party are valid and in full force and effect and are valid and binding on the
parties thereto, assuming enforceability as to the parties other than the
Company, and the Company is not in Default of any Material provision thereof.
All improvements and fixtures made by or at the direction of the Company on real
properties leased by the Company conform in all Material respects to all
applicable health, fire, safety, environmental, zoning and building laws and
ordinances; and all materials, buildings, structures (or the space used by the
Company in such buildings or structures) and fixtures used by the Company in the
conduct of its business are in good operating condition and repair, ordinary
wear and tear excepted, and are sufficient for the type and magnitude of their
respective operations.
3.18. Interests in Real Property. Section 3.18 of the Company Disclosure
Schedule is the complete and correct list and brief description of all real
property owned by the Company on the Closing Date. The Company has good and
marketable title, free and clear of all title defects, security interests,
pledges, options, claims, liens, encumbrances and restrictions of any nature
whatsoever to all real property reflected on the balance sheet of the Company
Financial Statements or used in the business by the Company (regardless of
whether reflected on the balance sheet of the Company Financial Statements). All
the real property used in the business by the Company is in good operating
condition and repair, normal wear and tear excepted. At the Closing Date, the
Company will possess all of the real property wherever located required to
conduct its respective business as conducted prior to the Closing.
3.19. Personal Property. The Company has good and marketable title, free and
clear of all title defects, security interests, pledges, options, claims, liens,
encumbrances and restrictions of any nature whatsoever to all inventory and
receivables and to any item of machinery, equipment, or tangible personal
property reflected on the balance sheet of the Company Financial Statements or
used in the business by the Company (regardless of whether reflected on the
balance sheet of the Company Financial Statements). All the machinery, equipment
and other tangible personal property used in the business by the Company is in
good operating condition and repair, normal wear and tear excepted. At the
Closing Date, the Company will possess all of the personal property wherever
located required to conduct its respective business as conducted prior to the
Closing.
3.20. Employees, Directors and Officers. Section 3.20 of the Company Disclosure
Schedule comprises a complete and correct list of all of the present employees,
officers and directors of the Company (the "Employees"), including the direct
compensation (including wages, salaries and actual or anticipated bonuses) to be
paid in the current fiscal year to such Persons. Except as disclosed in Section
3.20 of the Company Disclosure Schedules, no unpaid salary or bonuses, other
than for the immediately preceding pay period and other than pursuant to the
existing deferred compensation plans of the Company is now payable to any of
such officers, directors or employees.
15
3.21. Patents, Intellectual Property; Software.
(a) The Company owns or possesses legally enforceable rights to use, all
Intellectual Property Material to the operation of the business of the Company
as currently conducted, or to products or services currently under development
by the Company (collectively, "Material Intellectual Property"), and has the
right to use, license, sublicense or assign the same without Material liability
to, or any requirement of consent from, any other Person or party. Such
Intellectual Property constitutes all Intellectual Property necessary for the
conduct of the business of the Company in the manner conducted immediately prior
to the Closing. All Material Intellectual Property is either owned by the
Company free and clear of all Liens or is used pursuant to a license agreement;
each such license agreement is valid and enforceable and in full force and
effect; the Company is not in Material Default thereunder; and to the Knowledge
of the Company, no corresponding licensor is in Material Default thereunder.
None of the Material Intellectual Property infringes or otherwise conflicts with
any Intellectual Property or other right of any Person; there is no pending or
threatened (in writing) litigation, adversarial proceeding, administrative
action or other challenge or claim relating to any Material Intellectual
Property; there is no outstanding Order relating to any Material Intellectual
Property; and to the Knowledge of the Company, there is currently no
infringement by any Person of any Material Intellectual Property.
(b) No Material confidential or trade secret information of the Company has been
provided to any Person except subject to written confidentiality agreements,
except for any such disclosure which has not resulted and could not reasonably
be expected to result in a Material Adverse Effect on the Company.
(c) The Company has valid copyrights in all Material copyrightable material
necessary for the conduct of its respective business as being conducted on the
date hereof, whether or not registered with the U.S. copyright office, including
all copyrights in the Products containing Material copyrightable material.
Consummation of the transactions contemplated hereby will not alter or impair
the validity of any copyrights or copyright registrations.
(d) (A) No third party (including any original equipment manufacturer or site
license customer) has any right to manufacture, reproduce, distribute, sell,
sublicense, market or exploit any of the Products or any adaptations,
translations, or derivative works based on the Products, or any portion thereof;
(B) the Company has not granted to any third party any exclusive rights of any
kind with respect to any of the Products, including territorial exclusivity or
exclusivity with respect to particular versions, implementations or translations
of any of the Products; and (C) the Company has not granted any third party any
right to market any product utilizing any Product under any "private label"
arrangements pursuant to which the Company is not identified as the source of
such goods. Each document or instrument identified pursuant to this Section is
listed in Section 3.21 of the Company Disclosure Schedule and true and correct
copies of such documents or instruments have been furnished to Parent. No third
party has any right to manufacture, reproduce, distribute, sublicense, market or
exploit any works or materials of which any of the Products is a derivative
work.
(e) Each of the Products: (A) substantially complies with all specifications set
forth therefor in any contract, agreement, advertisement or other promotional
material for such products and with all other warranty requirements, other than
fixes required or expected in the ordinary course of business and not otherwise
Material to the Company's business; and (B) can be recreated from documentation
by reasonably experienced technical personnel without undue burden.
16
(f) The Company has furnished Parent with all end user documentation relating to
the use, maintenance or operation of each of the Products, all of which is true
and accurate in all Material respects.
(g) To the Knowledge of the Company, no employee of the Company is in violation
of any term of any employment contract, patent disclosure agreement or any other
contract or agreement relating to the relationship of any such employee with the
Company or any other party because of the nature of the business conducted by,
or proposed to be conducted by the Company.
(h) The Company has secured valid written assignments from all consultants and
employees who contributed to the creation or development of Intellectual
Property of the Company of the rights to such contributions that the Company
does not own by operation of law.
(i) Section 3.21(i) of the Company Disclosure Schedule sets forth a list of all
issued and pending patents, all registered copyrights and all applications
therefor and all trademarks and service marks whether or not registered
currently used in the business conducted by the Company, including, without
limitation, products and services currently under development by the Company.
3.22. Contracts.
(a) Except as set forth in Section 3.22(a) of the Company Disclosure Schedule,
the Company is not a party to any:
(i) Contract that involves performance of services or delivery of goods or
materials by or to the Company of an amount or value in excess of $10,000;
(ii) Contract that was not entered into in the ordinary course of business and
that involves expenditures or receipts of the Company in excess of $10,000;
(iii) lease, rental or occupancy agreement, license, installment and conditional
sale agreement, and other Contract affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real or personal
property;
(iv) licensing agreement or other Contract with respect or relating to Material
Intellectual Property;
(v) collective bargaining agreement and other Contract to or with any labor
union or other representative of a group of employees;
(vi) joint venture, partnership, and other Contract (however named) involving a
sharing of profits, losses, costs, or liabilities by the Company with any other
Person;
(vii) Contract containing covenants that in any way purport to restrict in any
material respect the business activity of the Company or any current or future
Affiliate of the Company or limit the freedom of the Company or any current or
future Affiliate of the Company to engage in any line of business or to compete
with any Person anywhere in the world;
(viii) Contract providing for payments to or by any Person based on sales,
purchases, or profits, other than direct payments for goods;
17
(ix) Contract between the Company, on the one hand, and any Affiliate of the
Company, on the other hand;
(x) Contract regarding indebtedness for borrowed money (including guaranties of
the obligations of others with respect thereto) or any capitalized lease
obligation or similar arrangement, or under which a Lien on any tangible or
intangible asset of the Company or any of their respective capital stock or
equity securities is imposed;
(xi) Contract under which the Company has advanced or loaned money to any of its
Employees other than advancement of expenses in the ordinary course of business;
(xii) Contract covering the employment, compensation or severance, of or
otherwise relating to, any Employee;
(xiii) Contract for joint, collaborative or shared research, development or
research and development;
(xiv) Contract that obligates the Company to act as a guarantor or surety, or to
otherwise provide credit support for any Person, irrespective of the amount
involved or type of underlying liability or obligation;
(xv) Contract that contains obligations of the Company to indemnify third
parties against any type of liability, whether known, unknown, fixed, contingent
or otherwise; and
(xvi) amendment, supplement and modification (whether oral or written) in
respect of any of the foregoing or any Contract, agreement or commitment to
enter into amend, supplement or modify any of the foregoing.
(b) The Company has allowed Parent to inspect, and to the extent requested by
Parent has delivered or caused to be delivered to Parent, a true and correct
copy of, each written Contract listed in Schedule 3.22(a) of the Company
Disclosure Schedule, and a written summary setting forth the terms and
conditions of each oral Contract referred to therein, in each case, as in effect
on, and as amended through the date hereof. With respect to each such Contract:
(i) the Company is not in breach or Default, and no event has occurred or
circumstances exist which (with or without notice or lapse of time or both)
could reasonably be expected to constitute a material breach or Default of, or
permit termination, modification or acceleration under, the Contract; (ii) no
party has repudiated any provision of the Contract; (iii) the Contract is
legally valid and binding and is enforceable in accordance with its terms
against the Company and, to the Knowledge of the Company, any other parties
thereto, except that (A) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other Laws, now
or hereafter in effect, relating to or limiting creditors' rights generally and
(B) the remedy of specific performance and injunctive and other forms of
equitable relief, may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought; and (iv) the
Company has not given to, or received from any other Person, any notice or other
communication regarding any actual or alleged violation or breach thereof or
Default thereunder. The Contracts relating to the design, sale, manufacture or
provisions of the Products or services by the Company thereof have been entered
into in the ordinary course of business and have been entered into without the
commission of any action 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 Law.
18
3.23. Affiliate Transactions. There are no Material Contracts or other Material
transactions between the Company and any Affiliate of the Company.
3.24. Insurance and Banking Facilities. The Company has in full force and effect
all insurance and indemnity policies that are customary in coverage and amount
for a company of its size and industry. Section 3.24 of the Company Disclosure
Schedule comprises a complete and correct list of (i) all contracts of insurance
and indemnity of or relating to the Company (except insurance related to
employee benefits) in force at the date of this Agreement (including name of
insurer or indemnitor, agent, annual charge, coverage and expiration date); (ii)
the names and locations of all banks or depository organizations in which the
Company has accounts; and (iii) the names of all Persons authorized to draw on
such accounts. All premiums and other payments due with respect to all contracts
of insurance or indemnity in force at the date hereof have been or will be paid,
and the Company knows of no circumstance (including without limitation the
consummation of the transactions contemplated by this Agreement), which has
caused, or might cause, any such contract to be canceled or terminated. There
are no Material claims by the Company under any insurance policies of the
Company as to which coverage has been questioned, denied or disputed by the
underwriters of such policies.
3.25. Powers of Attorney and Suretyships. The Company does not have any powers
of attorney outstanding, and, except for obligations as an endorser of
negotiable instruments incurred in the ordinary course of business, the Company
does not have any obligations or liabilities (absolute or contingent) as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise
respecting the obligation of any other Person.
3.26. Minutes and Stock Records. The Company has provided Parent with complete
and correct copies of the minute books and stock records of the Company. Such
items contain a complete and correct record in all Material respects of all
proceedings and actions taken at all meetings of, and all actions taken by
written consent by, the holders of capital stock of the Company and its Board of
Directors, and all original issuances and subsequent transfers and repurchases
of their respective capital stock.
3.27. Customers; Payors. Section 3.27 of the Company Disclosure Schedule lists
(i) the top 20 customers by xxxxxxxx for the Company (collectively, the
"Customers"), during the fiscal quarter ended June 30, 2005. There are no oral
or written notice or other indication from any of the Customers or payors
stating that such Customer or payor intends to terminate its business
relationship with the Company, or Materially reduce the volume of business it
does with the Company.
3.28. Full Disclosure. All of the representations and warranties made by the
Company in this Agreement, and all statements set forth in the certificates
delivered by the Company at the Closing pursuant to this Agreement, are true,
correct and complete in all Material respects and do not contain any untrue
statement of a Material fact or omit to state any Material fact necessary in
order to make such representations, warranties or statements, in light of the
circumstances under which they were made, misleading. The copies of all
documents furnished by the Company pursuant to the terms of this Agreement are
complete and accurate copies of the original documents. The schedules,
certificates, and any and all other statements and information, whether
furnished in written or electronic form, to the Parent or their representatives
by or on behalf of any of the Company, RWH or their Affiliates in connection
with the negotiation of this Agreement and the transactions contemplated hereby
do not contain any material misstatement of fact or omit to state a material
fact or any fact necessary to make the statements contained therein not
misleading.
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3.29 New York Takeover Statutes. Neither the entering into of this Agreement nor
the consummation of the transactions contemplated hereby will, after receiving
the requisite stockholder approval, be impeded by or subject to any "fair
price," "merger moratorium," "control share acquisition" or other anti-takeover
provisions of New York Law.
3.30 Xxxxxxx Matter. Company does not own any right, title or interest in
certain (i) secured promissory note issued by Xxxxxxx Enterprises, Inc., an Ohio
corporation ("Xxxxxxx") to Rail Waste Holdings, LLC, a New York limited
liability company ("RWC") in the principal amount of $600,187.58 dated as of
January 10, 2005 (the "Xxxxxxx Note"); (ii) open end mortgage on real property
owned by Xxxxxxx, granted to RWC by Xxxxxxx for $1,000,000 filed in the Xxxxx
County Recorder's office on January 10, 2005 as Instrument No. 200501100001743
securing the Xxxxxxx Note (the "Xxxxxxx Xxxx"); and (iii) real property subject
to the Xxxxxxx Xxxx.
3.31 Xxxxxxxx Mining Matter. Company has met all its obligations, material or
otherwise under a certain Redemption and Stock Purchase Agreement by and amongst
Xxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxxx, the Company and Xxxxxxxx Mining
Company, Inc., an Ohio corporation dated as of July 11, 2005.
3.32 No Registration of Securities. Company understands and acknowledges that
the offering, exchange and issuance of Merger Consideration pursuant to this
Agreement will not be registered under the Securities Act on the grounds that
the offering, sale, exchange and issuance of securities contemplated by this
Agreement are exempt from registration pursuant to Section 4(2) and/or Section
3(b) of the Securities Act, and that the Parent's reliance upon such exemption
is predicated upon Company's representations as set forth in this Agreement.
3.33 Parent Information. The Company acknowledges that it has had access to the
documents filed by Parent under the Exchange Act, since the end of its most
recently completed fiscal year to the date hereof, including the Registration
Statement on Form 10-SB dated June 3, 2005, as amended, and has carefully
reviewed the same ("Exchange Act Documents"). The Company further acknowledges
that Parent has made available to it the opportunity to ask questions of and
receive answers from Parent's officers and directors concerning the terms and
conditions of this Agreement and the business and financial condition of Parent,
and the Company has received to its satisfaction, such information about the
business and financial condition of Parent and the terms and conditions of the
Agreement as it has requested. The Company has carefully considered the
potential risks relating to Parent and investing in the Merger Consideration,
and fully understands that such securities are speculative investments, which
involve a high degree of risk of loss of the Company and its shareholders'
entire investment. Among others, the Company has carefully considered each of
the risks identified under the caption "Risk Factors" in the Exchange Act
Documents, which are incorporated herein by reference. The Company has made
available all such information to its shareholders in considering the terms and
conditions of the Merger.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to
the Company that, except as set forth in Parent Disclosure Schedule:
4.1. Corporate Existence and Power. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. Each of Parent and Merger Sub has all
requisite corporate powers and authority and all governmental licenses,
authorizations, permits, consents and approvals required to own, lease and
operate its properties and to carry on its business as now conducted, except for
those licenses, authorizations, permits, consents and approvals the absence of
which would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Parent is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. Parent has heretofore delivered to the Company true
and complete copies of the Articles of Incorporation and Bylaws, as currently in
effect, for each of Parent and Merger Sub.
4.2. Corporate Authorization.
(a) The execution, delivery and performance by each of Parent and Merger Sub of
this Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby are within the corporate powers of
each of Parent and Merger Sub, and have been duly authorized by all necessary
corporate action. This Agreement and the Merger have been duly authorized by all
necessary corporate action of the Parent and Merger Sub in accordance with the
NRS.
(b) The board of directors of each of Parent and Merger Sub, at a meeting duly
called and held, have each (i) determined that this Agreement and the
Transaction Documents and the transactions contemplated hereby and thereby
(including the Merger) are in the best interests of their respective
stockholders, and (ii) approved and adopted this Agreement and the Transaction
Documents and the transactions contemplated hereby and thereby (including the
Merger), which approval satisfies in full any applicable requirements of the
NRS.
(c) This Agreement has been duly executed and delivered by Parent and Merger
Sub. This Agreement constitutes, and the Transaction Documents to be executed
and delivered will constitute legal, valid and binding obligations of Parent and
Merger Sub, enforceable against Parent and Merger Sub, as applicable, in
accordance with their respective terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws affecting the enforcement of creditors
rights generally or by general equitable principles.
4.3. Consents and Approvals; No Violations. Assuming the truth and accuracy of
the Company's representations and warranties contained in Section 3.4, except
for the filing of the Certificate of Merger with the Department of State of the
State of New York, and any filings or notices under the NRS, Securities Act or
Securities Exchange Act, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by Parent or Merger Sub of this Agreement or the
21
consummation by Parent or Merger Sub of the transactions contemplated hereby,
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice would not have a Material
Adverse Effect on the ability of Parent or Merger Sub to consummate the Merger.
Neither the execution, delivery and performance of this Agreement by Parent or
Merger Sub nor the consummation by Parent or Merger Sub of the transactions
contemplated hereby will (a) conflict with or result in any breach of any
provision of the respective Articles of Incorporation or Bylaws (or similar
governing documents) of Parent or Merger Sub, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
Default under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or Merger Sub is a party or by which any of them or
any of their respective properties or assets may be bound or (c) violate any
order, writ, injunction, decree or Law applicable to Parent or Merger Sub or any
of Parent's subsidiaries or any of their respective properties or assets, except
in the case of (b) or (c) for violations, breaches or Defaults which would not
have a Material Adverse Effect on the ability of Parent or Merger Sub to
consummate the Merger.
4.4. No Prior Activities. Except for obligations incurred in connection with its
incorporation or the negotiation and consummation of this Agreement and the
transactions contemplated hereby, Merger Sub has neither incurred any obligation
or liability or engaged in any business or activity of any type or kind
whatsoever or entered into any agreement or arrangement with any person or
entity, and has no employees, liabilities or assets.
4.5. Banking and Finders' Fees. There is and will be no investment banker,
broker, finder or other intermediary retained by or authorized to act on behalf
of Parent or any of the Parent Subsidiaries who might be entitled to any fee or
commission from Parent or any of the Parent Subsidiaries upon consummation of
the transactions contemplated by this Agreement.
4.6. Legal Proceedings. No claim, action, proceeding or investigation is pending
before any court, arbitrator or administrative, governmental or regulatory
authority or body which seeks to delay or prevent the consummation of the
transactions contemplated hereby or which would reasonably be likely to
Materially and adversely affect or restrict Parent's or Merger Sub's ability to
consummate the transactions contemplated hereby.
ARTICLE 5
COVENANTS OF THE COMPANY
5.1. Conduct of the Company Business. Except with the prior written consent of
Parent, prior to the Closing Date, the Company shall cease all operations and
activities including as set forth below:
(a) refrain from entering into any transaction or Contract; and not make any
Material change in its methods of management, marketing, accounting, or
operations;
(b) undertaking any Material new business opportunity;
(c) (i) grant of any severance or termination pay to any current or former
director, officer or employee of the Company, (ii) enter into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
22
existing agreement) with any current or former director, officer or employee of
the Company, (iii) increase in benefits payable under any existing severance or
termination pay policies or employment agreements, (iv) increase in
compensation, bonus or other benefits payable or otherwise made available to
current or former directors, officers or employees of the Company, (v) declare
or pay of any bonuses or year-end payments to any current or former directors,
officers or employees of the Company, or (vi) establish, adopt, or amend (except
as required by applicable Law), any collective bargaining, bonus, profit
sharing, thrift, pension, retirement, deferred compensation, compensation, stock
option, restricted stock or other benefit plan or arrangement covering any
current or former director, officer or employee of the Company;
(d) create or incur any indebtedness, or (ii) release or create any Liens of any
nature;
(e) make or commit to make any capital expenditure, or enter into any lease of
capital equipment as lessee or lessor;
(f) pay, prepay or discharge any liability or fail to pay any liability when
due;
(g) write-off or write-down any assets of the Company;
(h) amend the Certificate of Incorporation, Bylaws or other governing
instruments of the Company, except as contemplated by this Agreement;
(i) make any changes in its accounting methods or practices or revalue its
Assets, except for (i) those changes required by GAAP, and (ii) changes in its
tax accounting methods or practices that may be necessitated by changes in
applicable Tax Laws;
(j) issue, sell, pledge, encumber, authorize the issuance of, enter into any
Contract to issue, sell, pledge, encumber, or authorize the issuance of, or
otherwise permit to become outstanding, any additional shares of the Company
Stock, or any stock appreciation rights, or any option, warrant, conversion, or
other right to acquire any such stock, or any security convertible into any such
stock, or pay or declare or agree to pay or declare any dividend or other
distribution with respect to any the Company Stock;
(k) make any loan or otherwise arrange for the extension of credit to any
Employee or increase the aggregate amount of any loan currently outstanding to
any Employee;
(l) sell or otherwise dispose of any Material Asset or make any Material
commitment relating to its Assets or enter into or terminate any lease of real
property;
(m) purchase or redeem, or agree to purchase or redeem, any security of the
Company (including any share of Company Stock);
(n) waive any stock repurchase rights, accelerate, amend or change the period of
exercisability of options or restricted stock, reprice options granted under any
employee, consultant, director, or other stock plans or authorize cash payments
in exchange for any options granted under any of such plans;
(o) transfer or license to any Person or otherwise extend, amend or modify any
rights to the Intellectual Property of the Company;
23
(p) (i) enter into any new Material Contract, or (ii) Materially modify, amend
or terminate any Material Contract to which the Company is a party or waive,
release, or assign any Material rights or claims thereunder, in any such case in
a manner Materially adverse to Parent;
(q) take any actions that would make any representation and warranty of the
Company hereunder inaccurate in any Material respect at the Effective Time; or
(r) authorize any, or commit or agree to take any of, the foregoing actions.
5.2. Shareholder Approval. The Company will, as promptly as practicable in
accordance with applicable Law and its Certificate of Incorporation and Bylaws,
submit this Agreement, the Merger and related matters for the consideration and
approval by the Company's shareholders. In connection with soliciting
shareholder approval, the Company shall prepare and distribute to holders of
Shares a disclosure statement which summarizes the material terms and conditions
of the Merger, this Agreement and the Transaction Documents, which disclosure
statement shall include the unanimous recommendation of the Company's Board of
Directors. Such approval by written consent or shareholder vote will be
solicited, in compliance with applicable laws. If approval is obtained by
written consent, the Company shall give, in a timely manner (and shall provide
Parent true and correct copies of) all notices required to be given under
Sections 615 and 903 of the NYBCL. The information distributed to the holders of
shares shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
5.3. Satisfaction of Conditions Precedent. During the term of this Agreement,
the Company will use its commercially reasonable best efforts to satisfy or
cause to be satisfied all the conditions precedent that are set forth in Article
9, and the Company will use its commercially reasonable best efforts to cause
the Merger and the other transactions contemplated by this Agreement to be
consummated.
5.4. No Other Negotiations. As of the date of this Agreement, the Company has
not entered into any agreement or understanding with, and is not engaging in any
discussions with any third party concerning an Alternative Acquisition (as
defined below) including, without limitation, any agreement or understanding
that would require the Company to notify any third party of the terms of this
Agreement. From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, the Company shall not, directly or indirectly, (a) initiate, solicit,
encourage, negotiate, accept or discuss any transaction or series of
transactions with any Person, other than Parent and its Affiliates involving any
recapitalization, restructuring, financing, merger, consolidation, sale, license
or encumbrance or other business combination transaction or extraordinary
corporate transaction of the Company which would or could reasonably be expected
to impede, interfere with, prevent or materially delay the merger (any such
efforts by any such Person, including a firm proposal to make such an
acquisition, to be referred to as an "Alternative Acquisition"), (b) provide
information with respect to the Company to any Person, other than Parent and its
Affiliates, relating to a possible Alternative Acquisition by any Person, other
than Parent and its Affiliates, (c) enter into an agreement with any Person,
other than Parent and its Affiliates, providing for a possible Alternative
Acquisition, or (d) make or authorize any statement, recommendation or
solicitation in support of any possible Alternative Acquisition by any Person,
other than by Parent and its Affiliates.
24
If the Company receives any unsolicited offer, inquiry or proposal to
enter into discussions or negotiations relating to an Alternative Acquisition,
or that could reasonably expected to lead to an Alternative Acquisition, or any
request for nonpublic information relating to the Company, the Company shall
promptly notify Parent thereof, including information as to the identity of the
party making any such offer, inquiry or proposal and the specific terms of such
offer, inquiry or proposal, as the case may be, and shall keep Parent promptly
informed of any developments with respect to same.
5.5. Access. The Company shall afford to Parent, and to the officers, employees,
accountants, counsel, financial advisors and other representatives of Parent,
reasonable access during normal business hours during the period prior to the
Effective Time or the termination of this Agreement to all of the Company's
properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall furnish promptly to Parent, (a) a copy of each
report, schedule, registration statement and other documents filed by it during
such period pursuant to the requirements of federal or state securities laws and
(b) all other information concerning its business, properties and personnel as
Parent or its representatives may reasonably request. Except to the extent
otherwise required by Law, Parent will hold any confidential information
obtained pursuant to this Section 5.5 in accordance with the Confidentiality
Agreement entered into between the Chartwell International, Inc. and RWH dated
April 19, 2005 (the "Confidentiality Agreement").
5.6. Company Employees. The Company shall use commercially reasonable efforts to
cooperate with Parent to ensure that employees selected by Parent will become
employees of Surviving Corporation.
5.7. Notification of Certain Matters. The Company shall give prompt notice to
Parent of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any the Company representation or warranty
contained in this Agreement to be untrue or inaccurate at or prior to the
Effective Time and (ii) any failure of the Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.7 shall not limit or otherwise affect the remedies available hereunder
to Parent.
ARTICLE 6
COVENANTS OF PARENT
6.1. Obligations of Merger Sub. Parent shall take all action necessary to cause
Merger Sub to perform its obligations under this Agreement and to consummate the
Merger on the terms and conditions set forth in this Agreement.
6.2. Company Employees.
(a) Concurrently with the execution of this Agreement, the Parent or an
Affiliate of Parent shall offer employment to such employees of the Company
employed as of the Closing (individually a "Company Employee" and collectively,
the "Company Employees") as the Parent shall determine in its sole discretion.
Any such offer of employment shall be on such terms and conditions as the Parent
and such employees shall agree and shall be conditioned on the Closing of the
Merger.
25
(b) Nothing in this Section 6.2 shall be construed to impose upon Parent and its
Affiliates any obligation to continue the employment of any Company Employee
following the Effective Time.
6.3. Notification of Certain Matters. Parent shall give prompt notice to the
Company of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any Parent representation or warranty
contained in this Agreement to be untrue or inaccurate at or prior to the
Effective Time and (ii) any failure of Parent to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.4 shall not limit or otherwise affect the remedies available hereunder
to the Company.
6.4. Satisfaction of Conditions Precedent. During the term of this Agreement,
Parent will use its commercially reasonable best efforts to satisfy or cause to
be satisfied all the conditions precedent that are set forth in Article 9, and
Parent will use its commercially reasonable best efforts to cause the Merger and
the other transactions contemplated by this Agreement to be consummated.
ARTICLE 7
COVENANTS OF PARENT AND THE COMPANY
7.1. Notices of Certain Events. The Company and Parent shall promptly notify the
other party of:
(a) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory agency
in connection with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced or, to
its knowledge, threatened against, relating to or involving or otherwise
affecting such party that, if pending on the date of this Agreement, would have
been required to be disclosed pursuant to Articles 3 or 4 or that relate to the
consummation of the transactions contemplated by this Agreement or any other
development causing a breach of any representation or warranty made by a party
hereunder. Delivery of notice pursuant to this Section 7.1 shall not limit or
otherwise affect remedies available to either party hereunder.
7.2. Public Announcements. Only Parent shall have the right to issue any press
release or other public statement with respect to this Agreement or the
transactions contemplated herein.
7.3. Transfer Taxes. Parent and the Company shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time. Parent, Merger Sub and
the Company agree that the Company (prior to the Merger) and the Surviving
Corporation (following the Merger) will pay any real property, transfer or gains
26
tax, stamp tax, stock transfer tax, or other similar tax imposed on the Merger
or the surrender of the Shares pursuant to the Merger (collectively, "Transfer
Taxes"), excluding any Transfer Taxes as may result from the transfer of
beneficial interests in the Shares other than as a result of the Merger, and any
penalties or interest with respect to the Transfer Taxes. The Company agrees to
cooperate with Parent in the filing of any returns with respect to the Transfer
Taxes.
7.4. Reasonable Efforts. The parties further agree to use commercially
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (A) the obtaining of all
other necessary actions or nonactions, waivers, consents, licenses, permits,
authorizations, orders and approvals from governmental authorities and the
making of all other necessary registrations and filings, (B) the obtaining of
all consents, approvals or waivers from third parties related to or required in
connection with the Merger that are necessary to consummate the Merger and the
transactions contemplated by this Agreement or required to prevent a Material
Adverse Effect on the Company from occurring prior to or after the Effective
Time, (C) the satisfaction of all conditions precedent to the parties'
obligations hereunder, and (D) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. Notwithstanding the foregoing
or any other provision of this Agreement, nothing in this Section 7.4 shall
limit a party's right to terminate this Agreement pursuant to Section 10.1, so
long as such party has up to then complied with its obligations under this
Section 7.4.
7.5. Fees and Expenses. All fees and expenses incurred by the Company in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Company, whether or not the Merger is consummated; provided that, in
the event the Merger is consummated, in no event shall the fees and expenses
paid by the Company exceed $5,000.00, and any fees and expenses in excess of
such amount shall be paid by RWH. All fees and expenses incurred by the Parent
and Merger Sub in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Parent. Fees and expenses incurred by
any party in connection with the transactions contemplated by this Agreement
shall include, without limitation, fees and expenses incurred for legal,
financial, accounting and other advisors.
7.6. Regulatory Matters and Approvals. Each of the Parties will give any notices
to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Sections 3.4 and 4.3 above.
7.7. Transfer Restrictions.
(a) The Company realizes that the Merger Consideration is not registered under
the Securities Act, or any foreign or state securities laws. The Company agrees
that the Merger Consideration will and may not be sold, offered for sale,
pledged, hypothecated, or otherwise transferred (collectively, a "Transfer")
except in compliance with the Securities Act, if applicable, and applicable
foreign and state securities laws, and with an opinion of Parent's counsel. The
Company understands that the Merger Consideration can only be Transferred
pursuant to registration under the Securities Act or pursuant to an exemption
therefrom. The Company understands that to Transfer the Merger Consideration may
require in some jurisdictions specific approval by the appropriate governmental
agency or commission in such jurisdiction.
27
(b) To enable Parent to enforce the transfer restrictions contained in Section
7.7(a), the Company hereby consents to the placing of legends upon, and
stop-transfer orders with the transfer agent of the Common Stock with respect to
the Merger Consideration, including, without limitation, the following:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. THESE SECURITIES MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, MORTGAGED,
HYPOTHECATED, OR OTHERWISE DISPOSED OF, EXCEPT (I) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
THE ACT, OR (II) IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER
THE ACT, OR (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION
OF CHARTWELL INTERNATIONAL, INC. AND ITS COUNSEL."
ARTICLE 8
INDEMNIFICATION
8.1. Indemnification of Parent and Merger Sub.
(a) Subject to the limitations contained in this Article 8, the Company shall
defend, indemnify and hold harmless Parent and Merger Sub and their respective
officers, directors, stockholders, employees and agents from and against any and
all losses, claims, judgments, liabilities, demands, charges, suits, penalties,
costs or expenses, including court costs and attorneys' fees ("Claims and
Liabilities") with respect to or arising from (i) the breach of any warranty or
any inaccuracy of any representation made by the Company in this Agreement (as
each such representation or warranty would read if all qualifications as to
Material Adverse Effect were deleted therefrom), or (ii) the breach of any
covenant or agreement made by the Company in this Agreement.
(b) In addition the obligations set forth in Section 8.1(a) above, the Company
shall defend, indemnify and hold harmless Parent and Merger Sub and their
respective officers, directors, stockholders, employees and agents against any
and all Claims and Liabilities with respect to or arising from any claims for
any right to receive Merger Consideration made by any Person who is not a holder
of Company Stock at the Effective Time or is a holder of Company Stock and
claiming a right to Merger Consideration inconsistent with the Merger
Consideration Certificate.
8.2. Indemnification of the Company. Parent shall defend, indemnify and hold
harmless the Company, and its officers, directors, shareholders, employees and
agents from and against any and all Claims and Liabilities with respect to or
arising from (i) breach of any warranty or any inaccuracy of any representation
made by Parent or Merger Sub, or (ii) breach of any covenant or agreement made
by Parent or Merger Sub in this Agreement.
28
8.3. Limitation on Liability. Notwithstanding anything to the contrary, the
Company's aggregate liability under Section 8.1(a) and Parent's and Merger Sub's
aggregate liability under Section 8.2 (other than with respect to any fraud,
intentional misrepresentation or willful breach) shall be limited to the sum of
$500,000.
8.4. Claims Procedure. Promptly after the receipt by any indemnified party (the
"Indemnitee") of notice of the commencement of any action or proceeding against
such Indemnitee, such Indemnitee shall, if a claim with respect thereto is or
may be made against any indemnifying party (the "Indemnifying Party") pursuant
to this Article 8, give such Indemnifying Party written notice of the
commencement of such action or proceeding and give such Indemnifying Party a
copy of such claim and/or process and all legal pleadings in connection
therewith. The failure to give such notice shall not relieve any Indemnifying
Party of any of its indemnification obligations contained in this Article 8,
except where, and solely to the extent that, such failure actually and
Materially prejudices the rights of such Indemnifying Party. Such Indemnifying
Party shall have, upon request within thirty (30) days after receipt of such
notice, but not in any event after the settlement or compromise of such claim,
the right to defend, at its own expense and by its own counsel reasonably
acceptable to the Indemnitee, any such matter involving the asserted liability
of the Indemnitee; provided, however, that if the Indemnitee determines that
there is a reasonable probability that a claim may Materially and adversely
affect it, other than solely as a result of money payments required to be
reimbursed in full by such Indemnifying Party under this Article 8 or if a
conflict of interest exists between Indemnitee and the Indemnifying Party, the
Indemnitee shall have the right to defend, compromise or settle such claim or
suit; and, provided, further, that such settlement or compromise shall not,
unless consented to in writing by such Indemnifying Party, which shall not be
unreasonably withheld, be conclusive as to the liability of such Indemnifying
Party to the Indemnitee. In any event, the Indemnitee, such Indemnifying Party
and its counsel shall cooperate in the defense against, or compromise of, any
such asserted liability, and in cases where the Indemnifying Party shall have
assumed the defense, the Indemnitee shall have the right to participate in the
defense of such asserted liability at the Indemnitee's own expense. In the event
that such Indemnifying Party shall decline to participate in or assume the
defense of such action, prior to paying or settling any claim against which such
Indemnifying Party is, or may be, obligated under this Article 8 to indemnify an
Indemnitee, the Indemnitee shall first supply such Indemnifying Party with a
copy of a final court judgment or decree holding the Indemnitee liable on such
claim or, failing such judgment or decree, the terms and conditions of the
settlement or compromise of such claim. An Indemnitee's failure to supply such
final court judgment or decree or the terms and conditions of a settlement or
compromise to such Indemnifying Party shall not relieve such Indemnifying Party
of any of its indemnification obligations contained in this Article 8, except
where, and solely to the extent that, such failure actually and Materially
prejudices the rights of such Indemnifying Party. If the Indemnifying Party is
defending the claim as set forth above, the Indemnifying Party shall have the
right to settle the claim only with the consent of the Indemnitee.
8.5. Exclusive Remedy. Each of the parties hereto acknowledges and agrees that,
from and after the Closing Date, its sole and exclusive monetary remedy with
respect to any and all claims relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions set forth in this Article 8,
except that nothing in this Agreement shall be deemed to constitute a waiver of
any injunctive or other equitable remedies or any tort claims of, or causes of
action arising from, intentionally fraudulent misrepresentation, willful breach
or deceit.
8.6. Set-Off Against Post-Closing Consideration. At any time prior to the
issuance of the Post-Closing Consideration, Parent shall have the right to
set-off against the Post-Closing Consideration any amounts that are or may
29
become payable to Parent under the terms of Section 8.1; provided, however,
Parent shall have no right to set-off for any claims relating to Section 3.31.
Such set-off shall be based upon the average Fair Market Value of the
Post-Closing Consideration for the thirty (30) days prior to the date on which
Parent delivers a notice pursuant to Section 8.4. In the event that Parent has
delivered a notice pursuant to Section 8.4 that Parent is seeking
indemnification with respect to a claim covered by Section 8.1, Parent shall
have the right to retain that portion of such Post-Closing Consideration which
would otherwise be issuable to holders of the Shares that Parent reasonably
determines would be required to satisfy such claim until a final determination
with respect to such claim has been made in accordance with this Article 8. Upon
a final determination with respect to any such claim, Parent shall retain that
portion of the Post-Closing Consideration as is finally determined to be payable
to Parent in accordance with this Article 8. "Fair Market Value" shall be the
cash value and as applicable, the closing bid or sale price (whichever is
applicable) of the Company's securities on the applicable date.
ARTICLE 9
CONDITIONS TO MERGER
9.1. Condition to Obligation of Each Party to Effect the Merger. The respective
obligations of Parent, Merger Sub and the Company to consummate the transactions
contemplated herein are subject to the satisfaction or waiver in writing at or
prior to the Effective Time of the following conditions.
(a) No Injunctions. No temporary restraining order, preliminary or permanent
injunction issued by any court of competent jurisdiction preventing the
consummation of the transactions contemplated herein shall be in effect;
provided, however, that each party shall have used its commercially reasonable
best efforts to prevent the entry of such orders or injunctions and to appeal as
promptly as possible any such orders or injunctions and to appeal as promptly as
possible any such orders or injunctions that may be entered.
(b) Company Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the Company and the Company's
shareholders in accordance with the Company's Certificate of Incorporation and
the NYBCL.
9.2. Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and the Merger Sub to consummate the transactions
contemplated herein are also subject to the satisfaction or waiver in writing at
or prior to the Effective Time of the following conditions.
(a) Representations and Warranties. The representations and warranties of the
Company contained in this Agreement and in any certificate or other writing
delivered to Parent pursuant hereto shall be true and correct on and as of the
Effective Time with the same force and effect as if made on and as of the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by the President and the Chief Executive Officer of the
Company.
(b) Agreements and Covenants. The Company shall have performed or complied with
all agreements and covenants required by this Agreement to be performed or
complied with by them on or prior to the Effective Time, and Parent shall have
received a certificate to such effect signed by the President and Chief
Executive Officer of the Company.
30
(c) Certificate of Secretary. The Company shall have delivered to Parent a
certificate executed by the Secretary of the Company certifying: (i) resolutions
duly adopted by the Board of Directors and shareholders of the Company
authorizing this Agreement and the Merger; (ii) the Certificate of Incorporation
and Bylaws of the Company as in effect immediately prior to the Effective Time,
including all amendments thereto; (iii) the Merger Consideration Certificate;
and (iv) the incumbency of the officers of the Company executing this Agreement
and all agreements and documents contemplated hereby.
(d) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by the
Company for the authorization, execution and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby shall have been
obtained and made by the Company including, without limitation, those set forth
on Schedule 9.2(d), except for such consents, waivers, approvals, authorizations
and orders, which if not listed in Schedule 9.2(d) and not obtained, and such
filings, which if not listed in Schedule 9.2(d) and not made, would not be
reasonably likely to have a Material Adverse Effect on the Company or the
Surviving Corporation.
(e) Absence of Material Adverse Effect. Since the date of the this Agreement,
there shall not have been any Material Adverse Effect on the Company, other than
any change that shall result from general economic conditions or conditions
generally affecting the industry in which the Company conducts operations.
(f) Employment Agreements. The Surviving Corporation shall have entered into
employment agreements, in the form approved by Parent, with certain Company
Employees to be determined by Parent.
(g) Merger Consideration Certificate. Parent shall have received the Merger
Consideration Certificate from the Company.
(h) Dissenting Shares. Holders of any of the outstanding Shares shall not have
exercised, nor shall they have any continued right to exercise, appraisal,
dissenters' or similar rights under applicable Law with respect to their Shares
by virtue of the Merger.
(i) Resignation of Officers and Directors. Parent shall have received letters of
resignation from each of the officers and directors of the Company immediately
prior to the Effective Time, which resignations in each case shall be effective
as of the Effective Time.
(j) Termination of Employee Benefit Plans. If the Company maintains or sponsors
any Benefit Plans, the Company's Board of Directors shall have adopted a
resolution terminating each such Benefit Plan contingent upon the Closing and
effective at least one calendar day prior to the Effective Time.
(k) Audited Financial Statements. Parent shall have received from the Company,
audited Company financial statements for the most recent fiscal year ended
December 31, 2004, the interim quarters ending March 31 and June 30, 2005 and
proforma financial statements as of the day prior to the Closing Date.
31
ARTICLE 10
TERMINATION
10.1. Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger by the
shareholders of the Company:
(a) by mutual written agreement duly authorized by the Boards of Directors of
the Company and Parent;
(b) by either party, if the other party has breached any representation,
warranty, covenant or agreement of such other party set forth in this Agreement
and such breach has resulted or can reasonably be expected to result in a
Material Adverse Effect on the Company or would prevent or materially delay the
consummation of the Merger;
(c) by either party if the required approval of the shareholders of the Company
shall not have been obtained by reason of the failure to obtain the required
vote;
(d) by either party, if all the conditions to the obligations of such party for
Closing the Merger shall not have been satisfied or waived on or before the
Final Date (as defined below) other than as a result of a breach of this
Agreement by the terminating party; or
(e) by either party, if a permanent injunction or other order by any Federal or
state court which would make illegal or otherwise restrain or prohibit the
consummation of the Merger shall have been issued and shall have become final
and nonappealable.
As used herein, the "Final Date" shall be September 9, 2005.
10.2. Notice of Termination. Any termination of this Agreement under Section
10.1 above will be effective by the delivery of written notice of the
terminating party to the other party hereto.
10.3. Effect of Termination. In the case of any termination of this Agreement as
provided in this Section 10, this Agreement shall be of no further force and
effect (except as provided in Section 10.4) and nothing herein shall relieve any
party from liability for any breach of this Agreement. No termination of this
Agreement shall affect the obligations contained in the Confidentiality
Agreement which shall survive termination of this Agreement in accordance with
its terms.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants of the parties contained
in this Agreement will remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the parties to this Agreement,
until the date that is the first anniversary of the Closing Date, whereupon such
representations, warranties and covenants will expire (except for covenants that
by their terms survive for a longer period).
32
ARTICLE 12
GENERAL PROVISIONS
12.1. Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party
to be notified; (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day; (c) five
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) two days after deposit with a nationally
recognized overnight courier, specifying two day delivery, with written
verification of receipt. All communications shall be sent to the parties at the
following addresses or facsimile numbers specified below (or at such other
address or facsimile number for a party as shall be designated by ten days
advance written notice to the other parties hereto):
(a) If to Parent or Merger Sub:
Chartwell International, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx Xxxxxxx
Ph: (000) 000-0000
Fax: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxx, Eng & Xxxxxxxx
0000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Ph: (000) 000-0000
Fax: (000) 000-0000
(b) If to the Company:
E-Rail Logistics, Inc.
000 Xxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
Ph: (000) 000-0000
Fax: (000) 000-0000
with a copy to (which shall not constitute notice):
Rail Waste Holdings, LLC
0 Xxxxx Xxxxxx Xx., Xxxxx 0
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Ph: (000) 000-0000
Fax: (000) 000-0000
33
12.2. Amendment. To the extent permitted by Law, this Agreement may be amended
by a subsequent writing signed by each of the parties upon the approval of the
Boards of Directors of each of the parties, whether before or after any
shareholder approval of the issuance of the Merger Consideration has been
obtained; provided, that after any such approval by the holders of Shares, there
shall be made no amendment that pursuant to the NYBCL requires further approval
by such shareholders without the further approval of such shareholders.
12.3. Waiver. At any time prior to the Closing, any party hereto may with
respect to any other party hereto (a) extend the time for performance of any of
the obligations or other acts, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto, or
(c) waive compliance with any of the agreements or conditions contained herein.
Any such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
12.4. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other rights. Except as otherwise provided hereunder, all rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
12.5. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
12.6. Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of Law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible, in a mutually acceptable manner, to the end that
transactions contemplated hereby are fulfilled to the extent possible.
12.7. Entire Agreement. This Agreement (including the Company Disclosure
Schedule and the Parent Disclosure Schedule together with the Transaction
Documents and the exhibits and schedules attached hereto and thereto and the
certificates referenced herein) constitutes the entire agreement and supersedes
all prior agreements and undertakings both oral and written, among the parties,
or any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein.
12.8. Assignment. No party may assign this Agreement or assign its respective
rights or delegate their duties (by operation of Law or otherwise), without the
prior written consent of the other party. This Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
12.9. Parties In Interest. This Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and nothing in this Agreement, express or
34
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement,
including, without limitation, by way of subrogation.
12.10. Governing Law. This Agreement will be governed by, and construed and
enforced in accordance with the laws of the State of Nevada as applied to
contracts that are executed and performed in Nevada, without regard to the
principles of conflicts of law thereof. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in Kanawha
County, West Virginia, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
12.11. Counterparts. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. This Agreement shall become effective
when counterparts have been signed by each of the parties and delivered by
facsimile or other means to the other party. Any party who delivers a signature
page via facsimile agrees to later deliver an original counterpart to all other
parties.
12.12. Attorneys Fees. If any action or proceeding relating to this Agreement,
or the enforcement of any provision of this Agreement is brought by a party
hereto against any party hereto, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition to any
other relief to which the prevailing party may be entitled).
12.13. Tax Advice. The Company acknowledges that the Company has not relied and
will not rely upon the Parent or Merger Sub, or the Parent or Merger Sub's
counsel with respect to any tax consequences related to the ownership, purchase,
or disposition of the Merger Consideration. The Company assumes full
responsibility for all such consequences and for the preparation and filing of
all tax returns and elections which may or must be filed in connection with such
Merger Consideration.
12.14. Representation. The parties to this Agreement, and each of them,
acknowledge, agree, and represent that it: (a) has been represented in
connection with the negotiation and preparation of this Agreement by counsel of
that party's choosing; (b) has read the Agreement and has had it fully explained
by its counsel; (c) it is fully aware of the contents and legal affect of this
Agreement; (d) has authority to enter into and sign the Agreement; and (e)
enters into and signs the same by its own free will.
12.15. Drafting. The parties to this Agreement acknowledge that each of them
have participated in the drafting and negotiation of this Agreement. For
purposes of interpreting this Agreement, each provision, paragraph, sentence and
35
word herein shall be deemed to have been jointly drafted by both parties. The
parties intend for this Agreement to be construed and interpreted neutrally in
accordance with the plain meaning of the language contained herein, and not
presumptively construed against any actual or purported drafter of any specific
language contained herein.
12.16. Gender. For purposes of this Agreement, references to the masculine
gender shall include feminine and neuter genders and entities.
[Remainder of Page Intentionally Left Blank; Signature Page to Follow]
36
IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CHARTWELL INTERNATIONAL, INC., a Nevada corporation
By:-------------------------------
Name:-----------------------------
Title:----------------------------
E-RAIL ACQUISITION CORP., a Nevada corporation
By:-------------------------------
Name:-----------------------------
Title:----------------------------
E-RAIL LOGISTICS, INC., a New York corporation
By:-------------------------------
Name:-----------------------------
Title:----------------------------
37
EXHIBIT A
CERTAIN DEFINITIONS
The following terms, as used in the Purchase Agreement, have the
following meanings:
"Affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Alternative Acquisition" shall have the meaning as set forth in
Section 5.4 of the Agreement.
"Agreement" shall have the meaning as set forth in the Preamble.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"Benefit Plans" shall have the meaning as set forth in Section 3.12(b)
of the Agreement.
"Claims and Liabilities" shall have the meaning as set forth in
Section 8.1(a) of the Agreement.
"Closing" shall have the meaning as set forth in Section 1.2 of the
Agreement.
"Closing Date" shall have the meaning as set forth in Section 1.2 of
the Agreement.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning as set forth in the Preamble.
"Company Disclosure Schedule" shall mean the written disclosure
schedule delivered on or prior to the date hereof by the Company to Parent that
is arranged in paragraphs corresponding to the numbered and lettered paragraphs
corresponding to the numbered and lettered paragraphs contained in the
Agreement.
"Company Employees" shall have the meaning as set forth in Section
6.2(a) of the Agreement.
"Company Environmental Liabilities" mean any and all liabilities of or
relating to the Company, whether contingent or fixed, actual or potential, known
or unknown, which (i) arise under or relate to matters covered by Environmental
Laws and (ii) relate to actions occurring or conditions existing on or prior to
the Closing Date.
A-1
"Company's Financial Statements" shall have the meaning as set forth in
Section 3.8 of the Agreement.
"Company Stock" shall mean the total outstanding capital stock of the
Company as of the Closing Date.
"Confidentiality Agreement" shall have the meaning as set forth in
Section 5.5 of the Agreement.
"Contract" means any written or oral agreement, arrangement,
commitment, contract, indenture, instrument, lease, obligation, plan,
restriction, understanding or undertaking of any kind or character, or other
document to which any Person is a party or by which such Person is bound or
affecting such Person's capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"Dissenting Shares" shall have the meaning as set forth in Section 2.3
of the Agreement.
"Effective Time" shall have the meaning as set forth in Section 1.3 of
the Agreement.
"Employees" shall have the meaning as set forth in Section 3.20 of the
Agreement.
"Environmental Laws" mean any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions, relating to
human health, the environment or to emissions, discharges or releases of
pollutants, contaminants or other Hazardous Substances or wastes into the
environment, including without limitation ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or other Hazardous Substances or wastes or the clean-up
or other remediation thereof.
"Environmental Permits" means, with respect to any Person, all permits,
licenses, franchises, certificates, approvals and other similar authorizations
of governmental authorities relating to or required by Environmental Laws and
affecting, or relating in any way to, the business of such Person as currently
conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act Documents" has the meaning set forth in Section 3.33 of
the Agreement.
"Fair Market Value" has the meaning set forth in Section 8.3 of the
Agreement.
"Final Date" shall have the meaning as set forth in Section 10.1 of the
Agreement.
A-2
"GAAP" shall have the meaning as set forth in Section 3.8(b) of the
Agreement.
"Governmental Entity" shall mean any government or any agency, bureau,
board, directorate, commission, court, department, official, political
subdivision, tribunal, or other instrumentality of any government, whether
federal, state or local, domestic or foreign.
"Hazardous Material" means any toxic, radioactive, corrosive or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics, which in any event is regulated
under any Environmental Law.
"Indemnified Party" shall have the meaning as set forth in Section
6.3(b) of the Agreement.
"Indemnifying Party" shall have the meaning as set forth in Section 8.3
of the Agreement.
"Indemnitee" shall have the meaning as set forth in Section 8.3 of the
Agreement.
"Intellectual Property" shall mean all rights, privileges and
priorities provided under applicable Law relating to intellectual property,
whether registered or unregistered, including without limitation all (i) (a)
inventions, discoveries, processes, formulae, designs, methods, techniques,
procedures, concepts, developments, technology, mask works, new and useful
improvements thereof and know-how relating thereto, whether or not patented or
eligible for patent protection; (b) copyrights and copyrightable works,
including computer applications, programs, products, software, databases and
related items; (c) trademarks, service marks, trade names, brand names, product
names, corporate names, logos and trade dress, the goodwill of any business
symbolized thereby, and all common-law rights relating thereto; and (d) trade
secrets, proprietary data and other confidential information; and (ii) all
registrations, applications, recordings, and licenses or other similar
agreements related to the foregoing.
"Knowledge" means the actual knowledge of the officers of a party, and
knowledge that a reasonable person in such capacity should have after due
inquiry.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
liabilities or business, including those promulgated, interpreted or enforced by
any Regulatory Authority.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect to such asset.
"Material" and "Materially" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter in question;
provided that any specific monetary amount stated in this Agreement shall
determine materiality in that instance.
"Material Adverse Effect" means, with respect to any Person, a Material
adverse effect on the condition (financial or otherwise), business, assets,
liabilities or the reported or future results or prospects of such Person and
its Subsidiaries taken as a whole.
"Material Intellectual Property" shall have the meaning as set forth in
Section 3.21(a) of the Agreement.
A-3
"Merger" shall have the meaning as set forth in the Recitals.
"Merger Consideration" shall have the meaning as set forth in Section
2.1(b)(i) of the Agreement.
"Merger Consideration Certificate" shall have the meaning as set forth
in Section 2.1(b)(ii) of the Agreement.
"Merger Sub" shall have the meaning as set forth in the Preamble.
"NASD" means National Association of Securities Dealers, Inc.
----
"NRS" shall have the meaning as set forth in the Recitals of the
Agreement.
"Nevada Articles of Merger" shall have the meaning as set forth in
Section 1.3 of the Agreement.
"New York Certificate of Merger" shall have the meaning as set forth in
Section 1.3 of the Agreement.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Parent" shall have the meaning as set forth in the Preamble."Parent
Disclosure Schedule" shall mean the written disclosure schedule delivered on or
prior to the date hereof by Parent to the Company that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs corresponding to the
numbered and lettered paragraphs contained in the Agreement.
"Person" means an individual, a corporation, a partnership, an
association, a trust, a limited liability company or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, consent, easement, filing, franchise,
letter of good standing, license, notice, permit, qualification, registration or
right of or from any Governmental Entity (or any extension, modification,
amendment or waiver of any of these) to which any Person is a party or that is
or may be binding upon or inure to the benefit of any Person or its securities,
Assets or business, or any notice, statement, filing or other communication to
be filed with or delivered to any Governmental Entity.
"Permitted Liens" shall mean (a) Liens for taxes and assessments or
governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings; (b) Liens in respect of pledges or deposits under workers'
compensation laws or similar legislation, carriers', warehousemen's, mechanics',
laborers' and materialmen's and similar Liens, if the obligations secured by
such Liens are not then delinquent or are being contested in good faith by
appropriate proceedings; and (c) Liens incidental to the conduct of the business
of the Company which were not incurred in connection with the borrowing of money
or the obtaining of advances or credits and which do not in the aggregate
Materially detract from the value of its property or Materially impair the use
thereof in the operation of its business.
A-4
"Products" means the equipment created, developed or owned by the
Company and all related products, including any Intellectual Property related
thereto.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, United States Department of
Transportation, Federal Railroad Administration, United States Environmental
Protection Agency, and all foreign, federal, state and local regulatory agencies
and other Governmental Entities or bodies having jurisdiction over the parties
and their respective Assets, employees, businesses and/or Subsidiaries,
including the NASD and the SEC.
"Returns" shall have the meaning as set forth in Section 3.11(a)(i) of
the Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange act of 1934, as
amended.
"Share" or "Shares" shall have the meaning as set forth in Section
2.1(b)(i) of the Agreement.
"Subsidiary" means, with respect to any Person, (i) any corporation,
limited liability company, association or other business entity of which more
than 50% of the total voting power of shares of capital stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Surviving Corporation" shall have the meaning as set forth in Section
1.1 of the Agreement.
"Tax" or "Taxes" shall mean all United States federal, state,
provincial, local or foreign taxes and any other applicable duties, levies,
fees, charges and assessments that are in the nature of a tax, including income,
gross receipts, property, sales, use, license, excise, franchise, ad valorem,
value-added, transfer, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs, capital
stock, real property, personal property, alternative or add-on minimum,
estimated, social security payments, and health taxes and any deductibles
relating to wages, salaries and benefits and payments to subcontractors,
together with all interest, penalties and additions imposed with respect to such
amounts.
"Transaction Documents" means the Agreement, the Confidentiality
Agreement and any other document executed and delivered pursuant hereto together
with any exhibits or schedules to such documents.
"Transfer Taxes" shall have the meaning as set forth in Section 7.3 of
this Agreement.
A-5
