AGREEMENT AND PLAN OF MERGER BY AND AMONG U.S. DRY CLEANING CORPORATION, STEAM PRESS HOLDINGS, INC., USDC CAESARS HAWAII, INC., ROBINSON CORP. D/B/A CAESARS CLEANERS, THURSTON JOHN ROBINSON, AND THERESA PAULETTE WINN October 22, 2007
EXHIBIT
2.1
BY
AND AMONG
U.S.
DRY CLEANING CORPORATION,
STEAM
PRESS HOLDINGS, INC.,
USDC
CAESARS HAWAII, INC.,
XXXXXXXX
CORP. D/B/A CAESARS CLEANERS,
XXXXXXXX
XXXX XXXXXXXX,
AND
XXXXXXX
XXXXXXXX XXXX
October
22, 2007
TABLE
OF CONTENTS
Page
|
||
ARTICLE
I DEFINITIONS
|
1
|
|
Section
1.1
|
Defined
Terms
|
1
|
ARTICLE
II THE MERGER
|
7
|
|
Section
2.1
|
The
Merger
|
7
|
Section
2.2
|
Closing.
|
7
|
Section
2.3
|
Effective
Time
|
7
|
Section
2.4
|
Effect
of the Merger
|
7
|
Section
2.5
|
Articles
of Incorporation; Bylaws
|
8
|
Section
2.6
|
Directors;
Officers
|
8
|
Section
2.7
|
Effect
on Capital Stock
|
8
|
Section
2.8
|
Exchange
of Certificates
|
9
|
Section
2.9
|
No
Further Ownership Rights in Company Common Stock
|
9
|
Section
2.10
|
Lost,
Stolen or Destroyed Certificates
|
9
|
Section
2.11
|
Taking
of Necessary Action; Further Action
|
9
|
Section
2.12
|
Adjustments
|
9
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF COMPANY
|
10
|
|
Section
3.1
|
Organization,
Standing and Power
|
10
|
Section
3.2
|
Subsidiaries
|
10
|
Section
3.3
|
Capitalization;
Title to the Shares
|
11
|
Section
3.4
|
Authority
|
11
|
Section
3.5
|
Financial
Statements
|
12
|
Section
3.6
|
Absence
of Certain Changes
|
12
|
Section
3.7
|
Absence
of Undisclosed Liabilities
|
14
|
i
Section
3.8
|
Litigation
|
14
|
Section
3.9
|
Restrictions
on Business Activities
|
14
|
Section
3.10
|
Governmental
Authorization
|
15
|
Section
3.11
|
Takeover
Statutes
|
15
|
Section
3.12
|
Title
to Property
|
15
|
Section
3.13
|
Intellectual
Property
|
15
|
Section
3.14
|
Environmental
Matters
|
18
|
Section
3.15
|
Taxes
|
19
|
Section
3.16
|
Employee
Benefit Plans
|
22
|
Section
3.17
|
Employee
Matters
|
25
|
Section
3.18
|
Interested
Party Transactions
|
26
|
Section
3.19
|
Leased
Property
|
27
|
Section
3.20
|
Insurance
|
27
|
Section
3.21
|
Compliance
With Laws
|
28
|
Section
3.22
|
Minute
Books
|
28
|
Section
3.23
|
Internal
Controls
|
28
|
Section
3.24
|
Complete
Copies of Materials
|
28
|
Section
3.25
|
Brokers'
and Finders' Fees
|
29
|
Section
3.26
|
Board
Approval
|
29
|
Section
3.27
|
Customers
and Suppliers
|
29
|
Section
3.28
|
Material
Contracts
|
29
|
Section
3.29
|
No
Breach of Material Contracts
|
31
|
Section
3.30
|
Third
Party Consents
|
31
|
Section
3.31
|
Accounts
Receivable and Payable
|
31
|
Section
3.32
|
Inventory
|
31
|
ii
Section
3.33
|
Propriety
of Past Payments
|
32
|
Section
3.34
|
Private
Placement
|
32
|
Section
3.35
|
Representations
Complete
|
34
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
|
34
|
|
Section
4.1
|
Organization,
Standing and Power
|
34
|
Section
4.2
|
Authority
|
34
|
Section
4.3
|
Board
Approval
|
35
|
Section
4.4
|
Litigation
|
35
|
ARTICLE
V CONDUCT PRIOR TO THE CLOSING DATE
|
36
|
|
Section
5.1
|
Conduct
of Business of the Company
|
36
|
Section
5.2
|
Restriction
on Conduct of Business of the Company
|
36
|
Section
5.3
|
No
Solicitation
|
39
|
Section
5.4
|
Further
Information
|
39
|
Section
5.5
|
Updating
the Disclosure Schedules
|
40
|
ARTICLE
VI ADDITIONAL AGREEMENTS
|
40
|
|
Section
6.1
|
Public
Disclosure
|
40
|
Section
6.2
|
Consents;
Cooperation
|
41
|
Section
6.3
|
Legal
Requirements
|
41
|
Section
6.4
|
Best
Efforts and Further Assurances
|
42
|
Section
6.5
|
Termination
of Plans
|
42
|
Section
6.6
|
Tax
Certificate
|
42
|
Section
6.7
|
Withholding
|
42
|
Section
6.8
|
Company
Disclosure Schedule
|
43
|
Section
6.9
|
Inspections
|
43
|
Section
6.11
|
Store
Revenues
|
43
|
iii
Section
6.12
|
Escrow
|
43
|
Section
6.13
|
Company
Debt
|
44
|
ARTICLE
VII CONDITIONS TO THE CLOSING
|
44
|
|
Section
7.1
|
Conditions
to Obligations of Each Party to Effect the Merger
|
44
|
Section
7.2
|
Additional
Conditions to Obligations of the Company
|
44
|
Section
7.3
|
Additional
Conditions to the Obligations of Parent and Merger Sub
|
45
|
Section
7.4
|
Frustration
of Conditions
|
47
|
ARTICLE
VIII TERMINATION, AMENDMENT AND WAIVER
|
47
|
|
Section
8.1
|
Termination
|
47
|
Section
8.2
|
Effect
of Termination
|
48
|
Section
8.3
|
Fees
for Termination
|
48
|
Section
8.4
|
Expenses
|
49
|
Section
8.5
|
Amendment
|
49
|
Section
8.6
|
Extension;
Waiver
|
49
|
ARTICLE
IX INDEMNIFICATION
|
49
|
|
Section
9.1
|
Indemnification
|
49
|
Section
9.2
|
Objections
to Claims; Resolution of Conflicts; Arbitration
|
51
|
Section
9.3
|
Third-Party
Claims
|
52
|
Section
9.4
|
No
Right of Contribution
|
53
|
ARTICLE
X GENERAL PROVISIONS
|
53
|
|
Section
10.1
|
Survival
|
53
|
Section
10.2
|
Notices
|
53
|
Section
10.3
|
Interpretation
|
55
|
Section
10.4
|
Counterparts
|
55
|
Section
10.5
|
Entire
Agreement; Nonassignability; Parties in Interest
|
55
|
iv
Section
10.6
|
Severability
|
55
|
Section
10.7
|
Governing
Law
|
56
|
Section
10.8
|
Rules
of Construction
|
56
|
Section
10.9
|
Specific
Performance
|
56
|
Section
10.10
|
Descriptive
Headings
|
56
|
Section
10.11
|
Force
Majeure
|
56
|
Section
10.12
|
Attorneys’
Fees
|
56
|
EXHIBITS
Exhibit
A
|
Form
of Articles of Merger
|
Exhibit
B
|
Form
of Articles of Incorporation of the Surviving
Corporation
|
Exhibit
C
|
Form
of Bylaws of the Surviving Corporation
|
Exhibit
D
|
Form
of Seller Note
|
Exhibit
E
|
Form
of Registration Rights Agreement
|
Exhibit
F
|
Form
of Company Counsel Legal Opinion
|
Exhibit
G
|
Form
of Non-Compete Agreement
|
Exhibit
H
|
Form
of Escrow Agreement
|
SCHEDULE
1 – EQUIPMENT LEASES
SCHEDULE
3 –
COMPANY DISCLOSURE SCHEDULES
v
This
AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of October 22,
2007, by and among U.S. Dry Cleaning Corporation, a Delaware corporation
(“Parent”), Steam Press Holdings, Inc., a Hawaii corporation and wholly
owned subsidiary of Parent (“SPH”), USDC Caesars Hawaii, Inc., a Hawaii
corporation and a wholly owned subsidiary of SPH (“Merger Sub”), Xxxxxxxx
Corp., a Hawaii corporation d/b/a Caesars Cleaners (the “Company”), and,
solely for the purposes of ARTICLE III, ARTICLE IX and ARTICLE X
of this Agreement, Xxxxxxxx Xxxx Xxxxxxxx (“Xxxxxxxx”) and Xxxxxxx
Xxxxxxxx Xxxx (“Xxxx”), the sole shareholders of the Company (“Sole
Shareholders”).
RECITALS
WHEREAS,
the Board of Directors of each of Parent, SPH, Merger Sub and the Company
has
adopted, and deems it advisable and in the best interests of its respective
shareholders to consummate, the merger (the “Merger”) of the Company with
and into Merger Sub, upon the terms and subject to the conditions set forth
herein; and
WHEREAS,
the Board of Directors of each of Parent, SPH, Merger Sub and the Company
has
unanimously adopted this Agreement and the transactions contemplated hereby,
including the Merger, in accordance with the provisions of the General
Corporation Laws of the State of Hawaii (“Hawaii Law”), and upon the
terms and subject to the conditions set forth herein; and
WHEREAS,
the Board of Directors of the Company has unanimously determined that the
consideration to be paid to the Sole Shareholders is fair to the Sole
Shareholders and has resolved to recommend to the Sole Shareholders the approval
of this Agreement and the Merger and the other transactions contemplated
hereby
upon the terms and subject to the conditions set forth herein; and
WHEREAS,
concurrently with the execution of this Agreement, and as a condition and
inducement to Parent’s willingness to enter into this Agreement, the Sole
Shareholders have approved this Agreement, the Articles of Merger, the Merger
and the other transactions contemplated hereby in accordance with Hawaii
Law.
NOW,
THEREFORE, in consideration of the covenants and representations set forth
herein, and for other good and valuable consideration, the parties hereto
agree
as follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Defined Terms
As
used herein, the terms below shall have the following meanings. Any
of such terms, unless the context otherwise requires, may be used in the
singular or plural, depending upon the reference.
“401(k)
Plan” has the meaning set forth in Section 6.5.
“Acquisition
Transaction” means any transaction or series of related transactions
involving: (i) the sale, license, disposition or acquisition of all or a
material portion of the business or assets of the Company; (ii) the sale,
issuance, grant, disposition or acquisition of (A) the Company Common Stock
or other equity security of the Company, (B) any option, call, warrant or
right (whether or not immediately exercisable) to acquire any Company Common
Stock or other equity security of the Company, or (C) any security,
instrument or obligation that is or may become convertible into or exchangeable
for any Company Common Stock or other equity security of the Company; or
(iii) any merger, consolidation, business combination, tender offer, share
exchange, reorganization or similar transaction involving the Company;
provided, however, the Merger and the other transactions contemplated
by this Agreement will not be deemed an Acquisition Transaction in any
case.
“Agreement”
has the meaning set forth in the preamble.
“Articles
of Merger” has the meaning set forth in Section 2.3.
“Annual
Financial Statements” means the unaudited balance sheet of the Company at
December 31, 2005 and December 31, 2006, together with the related statements
of
income, shareholders’ equity and cash flows, including any notes
thereto.
“Audit”
means any audit, assessment of Taxes, other examination by any Tax Authority,
or
any administrative or judicial proceeding or appeal of such proceeding relating
to Taxes.
“Business
Day” means any day that is not a Saturday, Sunday, or other day on which
banks are required or authorized by Law to be closed in California.
“Cash
Amount” has the meaning set forth in Section 2.7(a).
“Closing”
has the meaning set forth in Section 2.2.
“Closing
Balance Sheet” means the unaudited balance sheet of the Company as at the
close of business on the day prior to the Closing Date, including any notes
thereto.
“Closing
Date” has the meaning set forth in Section 2.2.
“Closing
Statement” has the meaning set forth in Section 2.12(a).
“COBRA”
has the meaning set forth in Section 3.16(d).
“Code”
means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
“Company”
has the meaning set forth in the preamble.
“Company
Articles” means the Articles of Incorporation of the Company as in effect on
the date hereof.
2
“Company
Authorization” has the meaning set forth in Section
3.10.
“Company
Board” has the meaning set forth in Section 2.6.
“Company
Bylaws” means the Bylaws of the Company as in effect on the date
hereof.
“Company
Certificate” means a certificate or certificates representing shares of
Company Common Stock.
“Company Common
Stock” means all shares of common stock, par value $100.00 per share, of the
Company.
“Company
Debt” means all Indebtedness of the Company.
“Company
Disclosure Schedule” has the meaning set forth in ARTICLE
III.
“Company
Employee Plans” has the meaning set forth in Section
3.16(a).
“Company
Intellectual Property” means the Intellectual Property used in or necessary
for the conduct of the business of the Company as currently conducted and
as
currently proposed to be conducted.
“Company
Owned Intellectual Property” means any Company Intellectual Property
(including all of the intellectual property set forth in
Section 3.13(b) of the Company Disclosure Schedule) which the
Company represents herein to Parent is owned by the Company.
“Confidential
Information” has the meaning set forth in Section
3.13(i).
“Damages”
has the meaning set forth in Section 9.1(a).
“Deposit”
means the good faith deposit Parent paid to the Company upon execution of
that
certain Memorandum of Understanding dated January 13, 2007.
“DCCA”
has the meaning set forth in Section 2.3.
“Dollars”
or “$” means the lawful currency of the United States of
America.
“Effective
Time” has the meaning set forth in Section 2.3.
“Environmental
Claim” has the meaning set forth in Section 3.14(g)(1).
“Environmental
Laws” has the meaning set forth in Section 3.14(g)(2).
“ERISA”
has the meaning set forth in Section 3.16(a).
“ERISA
Affiliate” has the meaning set forth in Section 3.16(a).
3
“Escrow
Agent” means an escrow agent mutually agreeable to the parties.
“Final
Date” has the meaning set forth in Section 8.1(b).
“Financial
Statements” means the Annual Financial Statements and the Monthly Financial
Statements.
“Governmental
Entity” means any arbitrator, court, agency, commission, tribunal, nation,
government, any state or other political subdivision thereof and any entity
exercising or entitled to exercise executive, legislative, judicial, regulatory,
taxing or administrative power or authority of any nature whatsoever, in
each
case, whether foreign or domestic.
“Hawaii
Law” has the meaning set forth in the recitals.
“Indebtedness”
means (i) all indebtedness for borrowed money or for the deferred purchase
price
of property or services (other than current liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), (ii)
any
other indebtedness that is evidenced by a note, bond, debenture or similar
instrument, (iii) all obligations under financing leases, (iv) all obligations
in respect of acceptances issued or created, (v) all liabilities secured
by any
Lien on any property and (vi) all guarantee obligations. For purposes of
this
Agreement, Indebtedness shall not included the equipment leases set forth
on
Schedule 1 attached hereto.
“Indemnified
Person” or “Indemnified Persons” has the meaning set forth in
Section 9.1(a).
“Intellectual
Property” means all patents, trademarks, trade names, service marks,
Internet domain names, copyrights, and any applications therefor, trade secrets,
know-how, technology, inventions (whether patentable or unpatentable and
whether
or not reduced to practice), algorithms, processes, computer software programs
or applications (in source code and/or object code form), databases, schematics,
designs and tangible or intangible proprietary information or
material.
“IRS”
means the Internal Revenue Service.
“Knowledge”
means (i) with respect to any natural person, the actual knowledge of such
person after due and diligent inquiry, or (ii) with respect to the Company,
Parent or Merger Sub, the actual knowledge of such party’s directors and
officers or other management-level personnel having responsibility for the
matters represented after due and diligent inquiry.
“Law”
or “Laws” has the meaning set forth in Section 3.21.
“Lease
Agreements” has the meaning set forth in Section 3.19.
“Lien”
means, with respect to any asset (including any security), any mortgage,
lien,
pledge, charge, security interest, encumbrance or restriction of any kind
in
respect of such asset; provided, however, that the term “Lien” shall
not include (i) statutory liens for Taxes, which are not yet due and payable
or
are being contested in good faith by appropriate proceedings and disclosed
in
Section 3.16 of the Company Disclosure Schedule, (ii) statutory or common
law liens to secure landlords, lessors or renters under leases or rental
agreements confined to the premises rented, (iii) deposits or pledges made
in
connection with, or to secure payment of, workers’ compensation, unemployment
insurance, old age pension or other social security programs mandated under
applicable Laws, (iv) statutory or common law liens in favor of carriers,
warehousemen, mechanics to secure claims for labor, materials or supplies
incurred in the ordinary course of business and (x) not yet delinquent or
(y)
being contested in good faith and other like liens, and (v) restrictions
on
transfer of securities imposed by applicable state and federal securities
laws.
4
“Material
Adverse Effect” means, with respect to any entity or group of entities, any
event, change or effect that (x) is, or is reasonably expected to be, materially
adverse to the condition (financial or otherwise), properties, assets (including
intangible assets), prospects, liabilities, business, operations or results
of
operations of such entity and its subsidiaries, taken as a whole; or (y)
would
prevent or materially alter or delay any of the transactions contemplated
by
this Agreement.
“Material
Contracts” has the meaning set forth in Section 3.28.
“Materials
of Environmental Concern” has the meaning set forth in
Section 3.14(g)(3).
“Merger”
has the meaning set forth in the recitals.
“Merger
Sub” has the meaning set forth in the preamble.
“Merger
Shares” has the meaning set forth in Section 2.7(a).
“Monthly
Financial Statements” means the unaudited balance sheets of the Company for
each fiscal month completed prior to the Closing Date, beginning with the
month
ended January 31, 2007 and the related statements of income, shareholders’
equity and cash flows for the monthly periods then ended.
“Net
Working Capital” means the (x) total current assets of the Company less (y)
total current liabilities of the Company, excluding debt, in each case, as
of
the close of business on the day before the Closing Date.
“Officer’s
Certificate” has the meaning set forth in Section
9.3(a).
“Parent”
has the meaning set forth in the preamble.
“Parent
Common Stock” means all shares of common stock, par value $0.001 per share,
of Parent.
“Release”
shall mean any “release” as defined at 42 U.S.C. § 9601(22), “disposal” as
defined at 42 U.S.C. § 6903(3), or human exposure to Materials of Environmental
Concern in violation of Environmental Laws.
5
“Remediate”
or “Remediation” shall mean all removal, remedial, or response action as
defined at 42 U.S.C. 9601(23)-(25), all corrective action, and/or all other
activity to investigate, clean up, detoxify, decontaminate, contain or excavate,
manage, or otherwise remove all Materials of Environmental Concern from the
Environment.
“Seller
Notes” mean promissory notes substantially in the form of Exhibit D
attached hereto.
“Sole
Shareholders” has the meaning set forth in the preamble, referring
collectively to Xxxxxxxx and Xxxx.
“Superior
Offer” means an unsolicited, bona fide written offer made by a third party
to acquire, directly or indirectly, pursuant to a tender offer, exchange
offer,
merger, consolidation or other business combination, all or substantially
all of
the assets of the Company or a majority of the total outstanding voting
securities of the Company, on terms that the Company Board has in good faith
concluded (after the receipt of advice of its outside legal counsel and its
financial adviser), taking into account, among other things, all legal,
financial, regulatory and other aspects of the offer and the person making
the
offer, including the likelihood of consummation, to be more favorable, from
a
financial point of view, to the Sole Shareholder than the terms of the
Merger.
“Surviving
Corporation” has the meaning set forth in Section 2.1.
“Tax”
or “Taxes” means all United States federal, state, local and foreign
taxes, and other assessments of a similar nature including, without limitation:
(i) taxes or other charges on or with respect to income, franchises, windfall
or
other profits, gross receipts, profits, sales, use, capital stock, payroll,
employment, social security, workers’ compensation, unemployment compensation or
net worth; (ii) taxes or other charges in the nature of excise, withholding,
ad valorem, stamp, transfer, value added or gains taxes; (iii)
license, registration and documentation fees; and (iv) customs duties, tariffs
and similar charges, in each case, whether imposed directly or through
withholding, and including any interest, additions to tax, or penalties
applicable thereto.
“Tax
Authority” means the IRS and any other national, regional, state, municipal,
foreign or other governmental or regulatory authority or administrative body
responsible for the administration of any Taxes.
“Tax
Return” means all United States federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns or other documents and any amendments thereto required to be filed
with
a Tax Authority.
“Third
Party Claim” has the meaning set forth in Section 9.3.
“Transaction
Expenses” has the meaning set forth in Section 8.4.
“Treasury
Regulations” has the meaning set forth in Section
3.16(b).
“Voting
Debt” has the meaning set forth in Section 3.3(b).
6
“WARN
Act” means the Federal and any applicable state Worker Adjustment and
Retraining Notification Act.
ARTICLE
II
THE
MERGER
Section
2.1 The
Merger.
At
the
Effective Time and subject to and upon the terms and conditions of this
Agreement and the applicable provisions of Hawaii Law, as applicable, the
Company shall be merged with and into Merger Sub, the separate corporate
existence of the Company shall cease and Merger Sub shall continue as the
surviving corporation and a wholly owned subsidiary of SPH. Merger
Sub, as the surviving corporation after the Merger, is hereinafter referred
to
as the “Surviving Corporation.”
Section
2.2
Closing.
Subject
to the provisions of Section 8.1, the closing of the Merger (the
“Closing”) shall take place at 10:00 a.m. Pacific time, on a date
to be
specified by the parties, which shall be no later than three (3) Business
Days
after satisfaction or waiver of all of the conditions set forth in
ARTICLE VII of this Agreement (other than conditions which can be
satisfied only by the delivery of certificates or other documents at the
Closing) at the offices of Xxxxxxxxx Xxxxxxx, LLP, located at 0000 Xxxxxxxxx
Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxxxx, unless another time, date or place
is
agreed to by the parties hereto. Each of the parties hereto
acknowledges that it is their intention that the Closing occur (subject to
the
terms and conditions of this Agreement) as soon as practicable following
the
satisfaction or waiver of the conditions set forth in ARTICLE
VII.
Section
2.3 Effective
Time.
Upon
the
terms and subject to the conditions set forth in this Agreement, at the Closing,
the parties hereto shall file the articles of merger in the form attached
hereto
as Exhibit A (the “Articles of Merger”), in such form as is
required by Hawaii Law, with the Department of Commerce and Consumer Affairs
of
the State of Hawaii (“DCAA”), whereupon the Company shall be merged with
and into Merger Sub, which shall survive the Merger, pursuant to the provisions
of Hawaii Law. The parties hereto shall make all other filings,
recordings or publications required by Hawaii Law in connection with the
Merger. The Merger shall become effective upon the filing of the
Articles of Merger with the DCAA pursuant to Hawaii Law, or at such later
time
as shall be agreed upon by the parties and specified in the Articles of Merger
(the “Effective Time”).
Section
2.4 Effect of the
Merger.
From
and
after the Effective Time, the effect of the Merger shall be as provided in
this
Agreement and the applicable provisions of Hawaii Law.
7
Section
2.5 Articles of Incorporation;
Bylaws.
(a) Immediately
after the Effective Time, the articles of incorporation of the Surviving
Corporation shall be the articles of incorporation of Merger Sub as in effect
immediately prior to the Effective Time and as set forth in Exhibit B to
this Agreement, and such articles of incorporation shall be the articles
of
incorporation of the Surviving Corporation until thereafter amended as provided
by Law and such articles of incorporation.
(b) Immediately
after the Effective Time, the bylaws of the Surviving Corporation shall be
the
bylaws of Merger Sub as in effect immediately prior to the Effective Time
and as
set forth in Exhibit C to this Agreement, and such bylaws shall be the
bylaws of the Surviving Corporation until thereafter amended as provided
by Law
and such bylaws.
Section
2.6 Directors;
Officers.
(a) Immediately
after the Effective Time, the directors of Merger Sub at the Effective Time
shall be the directors of the Surviving Corporation until the earlier of
their
resignation or removal or until their respective successors are duly elected
and
qualified, as the case may be. In furtherance thereof, the Company
shall secure, effective at the Effective Time, resignations of all of its
incumbent directors (the “Company Board”), and the Company shall take all
actions available to the Company to cause the directors of Merger Sub to
be so
elected or appointed at the Effective Time.
(b) Immediately
after the Effective Time, the officers of Merger Sub at the Effective Time
shall
be the officers of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly
appointed.
Section
2.7 Effect on Capital
Stock.
(a) Conversion
of Stock. All shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be automatically
converted into the right to receive at the Closing: (i) fully paid
and nonassessable shares of Parent Common Stock (collectively, the “Merger
Shares”) in an amount equal to Six Hundred Fifty Eight Thousand Dollars
($658,000) divided by the Average Parent Stock Price (defined below); (ii)
an
amount in cash equal to Eight Hundred Seventy Five Thousand Dollars ($875,000)
less the Deposit (the “Cash Amount”); and (iii) the Seller Notes in the
principal aggregate amount of Five Hundred Thousand Dollars ($500,000.00).
The
Cash Amount is subject to adjustment in accordance with Sections 2.12
and 8.4. For purposes of this Agreement, “Average Parent Stock
Price” means an amount equal to the average of the daily closing sales prices
for the Parent Common Stock for each of the five (5) consecutive trading
days
ending with and including the second (2nd) complete trading day prior to
the
Closing (as adjusted for any reclassification, recapitalization, subdivision,
split-up, combination, exchange of shares or readjustment of, or a stock
dividend on, the Parent Common Stock. The consideration to be paid to the
Shareholders pursuant to this Agreement will be paid pro-rata based on their
percentage ownership of the Company.
(b) Capital
Stock of Merger Sub. As of the Effective Time, by virtue
of the Merger and without any action on the part of any of the parties hereto
or
any holder of securities of Merger Sub, each share of common stock, par value
$0.01 per share, of Merger Sub issued and outstanding immediately prior to
the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares of common stock shall evidence ownership of
such shares of capital stock of the Surviving Corporation.
8
Section
2.8 Exchange of
Certificates.
At
the
Closing, the Sole Shareholders shall surrender the Company Certificates held
by
them, together with duly completed and validly executed letters of transmittal
in such form as Parent may reasonably request, and, as soon as practicable
following the Closing, Parent shall deliver the Merger Shares to the Escrow
Agent pursuant to Section 6.12 hereof, and the Company Certificates so
surrendered shall forthwith be canceled.
Section
2.9 No Further Ownership Rights in Company
Common Stock.
At
the
Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of any shares
of
Company Common Stock on the records of the Company.
Section
2.10 Lost, Stolen or Destroyed
Certificates.
In
the
event that any Company Certificates shall have been lost, stolen or destroyed,
Parent shall cause to be paid in exchange for such lost, stolen or destroyed
Company Certificates, upon the making of an affidavit of that fact by the
Sole
Shareholders, such payment of Merger Consideration as may be required pursuant
to this ARTICLE II; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require
the
Sole Shareholders to deliver a bond in such sum as it may reasonably direct
as
indemnity against any claim that may be made against Parent or the Surviving
Corporation with respect to the Company Certificates alleged to have been
lost,
stolen or destroyed.
Section
2.11 Taking of Necessary Action; Further
Action.
If,
at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company, the officers and
directors of Parent, the Company and the Surviving Corporation are fully
authorized in the name of their respective corporations to take, and will
take,
all such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
Section
2.12
Adjustments.
(a) On
the day prior to the Closing Date, the Company shall deliver to Parent a
statement (the “Closing Statement”) in form and substance reasonably
satisfactory to Parent setting forth the Net Working Capital, Company Revenues
and Company Debt as of the Closing Date. No later than two (2)
Business Days prior to Closing, the Company shall deliver to Parent a draft
Closing Statement setting forth the Company’s best estimate of the Net Working
Capital, Company Revenues and Company Debt as of the Closing Date.
9
(b) In
the event the Net Working Capital as set forth in the Closing Statement is
less
than One Dollar ($1.00), the Cash Amount shall be reduced dollar for dollar
by
which the Net Working Capital is less than One Dollar ($1.00).
(c) In
the event the Company Debt as set forth in the Closing Statement is greater
than
Zero Dollars ($0.00), the Cash Amount shall be reduced dollar for dollar
by
which the Company Debt is greater than said amount.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Any
reference to any event, change, condition or effect being “material” with
respect to any entity or group of entities means any event, change, condition
or
effect which (i) is or would reasonably be expected to be material to the
condition (financial or otherwise), properties, assets (including intangible
assets), prospects, liabilities, business, operations or results of operations
of such entity or group of entities, taken as a whole or (ii) would or would
reasonably be expected to prevent or materially alter or delay any of the
transactions contemplated by this Agreement.
Each
statement contained in any certificate signed by an officer of the Company
and
delivered to Parent pursuant to Section 7.3(b) shall constitute a
representation and warranty hereunder by the Company to Parent as to the
matters
covered thereby.
Except
as
disclosed in that section of the document to be delivered by the Company
to
Parent promptly following the execution and delivery of this Agreement which
may
be modified from time to time prior to the Closing (the “Company Disclosure
Schedule”) corresponding to the Section of this Agreement to which the
following representations or warranties pertain, the Company and the Sole
Shareholders represent and warrant to Parent as of the Closing Date as
follows:
Section
3.1 Organization, Standing and
Power.
The
Company is a corporation duly organized, validly existing and in good standing
under Hawaii Law. The Company has the requisite corporate power to
own its properties and to carry on its business as now being conducted and
as
currently proposed to be conducted and is duly qualified to do business and
is
in good standing in each jurisdiction in which the failure to be so qualified
and in good standing would or would reasonably be expected to have a Material
Adverse Effect on the Company. The Company has delivered a true and
correct copy of the Company Articles and Company Bylaws, each as amended
to date
and as currently in effect, to Parent. The Company is not in
violation of any of the provisions of the Company Articles or Company
Bylaws.
Section
3.2
Subsidiaries.
The
Company does not directly or indirectly own any equity or similar interest
in,
or any interest convertible or exchangeable or exercisable for any equity
or
similar interest in, any corporation, association, partnership, joint venture,
limited liability company, business association or other entity.
10
Section
3.3 Capitalization;
Title to the Shares.
(a) The
authorized capital stock of the Company consists of One Hundred (100) shares
of
Common Stock. Since inception, the Company has never authorized the
issuance of any preferred stock, option plans, warrants or other securities
exercisable or convertible into capital stock of the Company. As of
the date hereof, One Hundred (100) shares of Company Common Stock are issued
and
outstanding and all outstanding shares of Company Common Stock are issued
to the
Sole Shareholders. All of the outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid and
non-assessable.
(b) Except
as set forth above, as of the date hereof and, as of the Closing (i) there
are no shares of capital stock or any other securities of the Company
authorized, issued or outstanding; (ii) there are no existing options, warrants,
calls, preemptive rights, Indebtedness having general voting rights or debt
convertible into securities having such rights (“Voting Debt”) or
subscriptions or other rights, agreements, arrangements or commitments of
any
character (including any shareholder rights plan or similar plan commonly
referred to as a “poison pill”), relating to the issued or unissued capital
stock of the Company obligating the Company to issue, transfer or sell or
cause
to be issued, transferred or sold any shares of capital stock or Voting Debt
of,
or other equity interest in, the Company or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company
to
make any payment linked to the value of the Company Common Stock or the sale
price of the Company, or obligating the Company to grant, extend or enter
into
any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment; and (iii) there are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire the
Common
Stock, or other capital stock of the Company or to provide funds to make
any
investment (in the form of a loan, capital contribution or otherwise) in
any
other entity.
(c) There
are no voting trusts or other agreements or understandings to which the Company
is a party with respect to the voting of the Company Common Stock.
Section
3.4
Authority.
The
Company has the requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been
duly executed and delivered by the Company and constitutes valid and binding
obligations of the Company enforceable against the Company in accordance
with
its terms, except to the extent that enforceability may be limited by the
effect, if any, of any applicable bankruptcy, reorganization, insolvency,
moratorium or other Laws affecting the enforcement of creditors' rights
generally or any general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in
equity. Neither the execution and delivery by the Company of this
Agreement nor the consummation of the transactions contemplated hereby will
conflict with, or result in any breach or violation of, or default under
(with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (i) any provision of the Company Articles or the Company Bylaws,
(ii) any contract, agreement, license or understanding to which the Company
is a
party or to which any of its properties or assets are bound or (iii) any
Law
applicable to the Company, or any of its properties or assets, except, in
the
case of clauses (ii) and (iii) above, any such conflicts, breaches, violations,
defaults, rights or losses which could not, individually or in the aggregate,
have a Material Adverse Effect on the Company. No notice to, filing
with, and no permit, authorization, consent or approval of, any Governmental
Entity, or any other person is necessary for the execution and delivery of
this
Agreement by the Company, except for the filing and recordation of the Articles
of Merger in accordance with the requirements of Hawaii Law, the consummation
of
the transactions contemplated by this Agreement.
11
Section
3.5 Financial
Statements.
Attached
hereto as Section 3.5 of the Company Disclosure Schedule are true and
correct copies of the Financial Statements. The Financial Statements
fairly present in all respects the financial position as at such dates and
the
results of operations and cash flows for such periods of the
Company. As of the Closing, the Closing Balance Sheet fairly presents
in all respects the financial position of the Company as at the day before
the
Closing Date.
Section
3.6 Absence of Certain
Changes.
Except
as
and to the extent set forth in the Financial Statements, from the date of
the
Annual Balance Sheet to the date of this Agreement, the Company has conducted
its business in the ordinary course consistent with past practice and has
not:
(a) suffered
any Material Adverse Effect;
(b) incurred
any liabilities or obligations (absolute, accrued, contingent or otherwise),
except for non-material items incurred in the ordinary course of business,
consistent with past practice or Transaction Expenses, that have been paid
by
the Company or will be deducted from the Closing Amount, or increased, or
experienced any change in any assumptions underlying or methods of calculating,
any bad debt, contingency or other reserves;
(c) paid,
discharged or satisfied any claims, liabilities or obligations (absolute,
accrued, contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business, consistent with past practice,
of liabilities and obligations reflected or reserved against in the Annual
Balance Sheet or incurred in the ordinary course of business, consistent
with
past practice;
(d) initiated
or settled any litigation;
(e) permitted
or allowed any of its properties or assets (real, personal or mixed, tangible
or
intangible) to be subjected to any Liens;
12
(f) written
down the value of any inventory or written off as uncollectible any notes
or
accounts receivable, except for immaterial write-downs and write-offs in
the
ordinary course of business, consistent with past practice;
(g) cancelled
any debts or waived any claims or rights of substantial value;
(h) sold,
transferred, or otherwise disposed of any of its properties or assets (real,
personal or mixed, tangible or intangible), except in the ordinary course
of
business, consistent with past practice;
(i) granted
or acquired, agreed to grant to or acquire from any person or entity any
licenses of Intellectual Property, abandoned, disposed of or permitted to
lapse
any rights to the use of any Intellectual Property, or disposed of or disclosed
to any person other than representatives of Parent any trade secret, formula,
process or know-how or other Intellectual Property not theretofore a matter
of
public knowledge;
(j) increased
in any manner (including acceleration or funding provisions) the compensation
or
benefits of any current or former director, officer, employee or consultant
of
the Company (including any such increase pursuant to any bonus, pension,
profit
sharing, incentive compensation or other plan, policy, program, agreement,
arrangement or commitment) or increased in any manner (including acceleration
or
funding provisions) the compensation or benefits payable or to become payable
to
any current or former director, officer, employee or consultant of
the Company, except, in the case of employees other than officers of the
Company, for such increases in compensation or benefits made in the ordinary
course of business, consistent with past practice;
(k) adopted,
entered into or amended any bonus, pension, profit sharing, incentive
compensation, employment, consulting, severance, termination, deferred
compensation or other plan, program, policy, agreement, arrangement or
commitment, other than as required pursuant to applicable Law, or made any
change in any change in control, severance or termination plan, policy,
practice, program, agreement or arrangement;
(l) entered
into or amended any Material Contract;
(m) entered
into any operating lease or operating license for property or
assets;
(n) made
capital expenditures or commitments or acquired any property, plant and
equipment that would be treated as a capital expenditure in financial statements
that are fairly presented in all respects for a cost in excess of an aggregate
amount of Ten Thousand Dollars ($10,000);
(o) declared,
paid or set aside for payment any dividend or other distribution in respect
of
its capital stock or redeemed, purchased or otherwise acquired, directly
or
indirectly, any shares of capital stock or other securities of the
Company;
(p) made
or changed an election in respect of Taxes, adopted or changed any accounting
method in respect of Taxes, failed to file, on a timely basis, with the
appropriate Tax Authorities, all Tax Returns required to be filed for taxable
periods ending on or before the Closing Date and due on or prior to the Closing
Date, which such Tax Returns shall be true in all material respects, correct
and
complete, or failed to pay or remit, on a timely basis, any Taxes required
to be
paid, amended any Tax Return, entered into any closing agreement, settled
or
consented to any claim or assessment in respect of Taxes, consented to any
extension or waiver of the statutory period of limitations applicable to
any
claim or assessment in respect of Taxes, or other made any Tax payments outside
of the ordinary course of business;
13
(q) paid,
loaned or advanced any amount to, or sold, transferred or leased any properties
or assets (real, personal or mixed, tangible or intangible) to, or entered
into
any agreement or arrangement with, any of its employees, officers, directors
or
shareholders or any affiliate or associate of any of its employees, officers,
directors or shareholders (except for directors' fees and compensation to
officers at rates not inconsistent with the Company's past practice in
connection with business related travel or other expenses incurred on
behalf of the Company) and advances to employees; or
(r) agreed,
whether in writing or otherwise, to take any action described in this Section
3.6.
Section
3.7 Absence of Undisclosed
Liabilities.
Except
(i) as disclosed on the Annual Balance Sheet, (ii) for liabilities and
obligations incurred in the ordinary course of business and consistent with
past
practice since the date of the Annual Balance Sheet, and (iii) Transaction
Expenses that have been paid by the Company or will be deducted from the
Closing
Amount, the Company does not have any liabilities (whether contingent or
absolute, direct or indirect, known or unknown to the Company or matured
or
unmatured or otherwise) that would be required to be reflected on a balance
sheet of the Company (including the notes thereto) that is fairly represented
in
all respects. There are no off balance sheet arrangements to which
the Company is a party or otherwise involving the Company. Except as
set forth in Section 3.7 of the Company Disclosure Schedule, the Company
does not have any Indebtedness.
Section
3.8
Litigation.
Except
as
set forth in Section 3.8 of the Company Disclosure Schedule, there is no
private or governmental action, suit, proceeding, inquiry, claim, arbitration
or
investigation pending before any agency, court or tribunal, foreign or domestic,
or, to the Knowledge of the Company, threatened against the Company, any
of its
properties or any of its officers or directors (in their capacities as such),
or
which questions or challenges the validity of this Agreement or any of the
transactions contemplated hereby; and there is no valid basis for any such
action, suit, proceeding, claim, arbitration or investigation. There
is no judgment, decree or order against the Company, or any of its directors
or
officers (in their capacities as such), that could prevent, enjoin, or
materially alter or delay any of the transactions contemplated by this
Agreement. The Company does not have any litigation pending against
any other party.
Section
3.9 Restrictions on
Business Activities.
There
is
no agreement, judgment, injunction, order or decree binding upon the Company
which has or could reasonably be expected to have the effect of prohibiting
or
impairing any current business practice of the Company, any acquisition of
property by the Company or the conduct of business by the Company as currently
conducted or as currently proposed to be conducted.
14
Section
3.10 Governmental
Authorization.
The
Company has obtained all federal, state, county, local or foreign governmental
consents, licenses, permits, grants, or other authorizations of a Governmental
Entity (i) pursuant to which the Company currently operates or holds (or
currently proposes to operate or hold) any interest in any of its properties
or
(ii) that is required for the operation of the business of the Company or
the
holding of any such interest ((i) and (ii) are herein collectively called
“Company Authorizations”). The Company has complied in all
respects with all such Company Authorizations, and all Company Authorizations
are in full force and effect.
Section
3.11 Takeover
Statutes.
The
Company Board has taken all actions so that any restrictions in any “fair
price,” “control share acquisition” or other similar Law, will not apply to
Parent or Merger Sub with respect to the Merger, including the execution,
delivery or performance of this Agreement and the consummation of the Merger
and
the other transactions contemplated hereby.
Section
3.12 Title to
Property.
The
Company has good and marketable title to all of its properties, interests
in
properties and assets that it purports to own (tangible and intangible),
including all the properties and assets reflected on the Annual Balance Sheet
or
acquired after the date of the Annual Balance Sheet (except for properties,
interests in properties and assets having an aggregate book value not in
excess
of Ten Thousand Dollars ($10,000) sold or otherwise disposed of since the
date
of the Monthly Balance Sheet in the ordinary course of business, consistent
with
past practice), free and clear of all Liens. The property and
equipment of the Company that are used in the operations of business are
in good
operating condition and repair, subject to normal wear and tear, are adequate
for the uses to which they are being put and have been maintained and serviced
in accordance with prudent practice and in compliance with all applicable
Laws. All properties used in the operations of the Company are
reflected in the Annual Balance Sheet which is fairly presented in all
respects. For purposes of this Section 3.12 only, the terms
“property” and “assets” do not include Intellectual Property.
Section
3.13 Intellectual
Property.
(a) The
Company owns or is licensed to use all Company Intellectual
Property. The Company Owned Intellectual Property and the conduct of
the business of the Company has not violated, infringed or misappropriated,
do
not violate, infringe or misappropriate, and, to the Knowledge of the Company,
will not violate, infringe or misappropriate, in the ordinary course of business
as currently conducted and as currently proposed to be conducted, any
Intellectual Property of a third party, any right to privacy or publicity,
or
any applicable Laws regulating unfair competition or trade
practices.
15
(b) Section
3.13(b) of the Company Disclosure Schedule sets forth a complete and
accurate listing of all patents and patent applications, all registered
trademarks, service marks, and trade names and applications therefor, all
registered Internet domain names and applications therefor, and all registered
copyrights and copyright applications owned or purported to be owned by the
Company, including the jurisdictions in which each such Intellectual Property
right subsists, has been issued or registered or in which any application
for
such issuance and registration has been filed. All Company Owned
Intellectual Property is solely owned by the Company free and clear of all
Liens, and the Company is listed in the records of the appropriate United
States, state or foreign agency as the sole owner of record for each issued
patent, and each registered trademark, service xxxx, trade name, Internet
domain
name and copyright, and applications therefor, listed in Section 3.13(b)
of the Company Disclosure Schedule. The Company has not received any
written notice or claim challenging the Company's ownership of any of the
Company Owned Intellectual Property or suggesting that any other person has
any
claim of legal beneficial ownership thereto. There are no extant
forbearances to xxx, consents, settlement agreements, judgments, orders or
similar litigation-related, inter partes or adversarial-related, or
government-imposed obligations to which the Company is a party or is otherwise
bound, that (i) restrict the rights of the Company to use, transfer, license
or
enforce any of its Intellectual Property rights; (ii) restrict the conduct
of
the business of the Company in order to accommodate a third party's Intellectual
Property rights; or (iii) grant any third party any right with respect to
any
Company Intellectual Property rights.
(c) All
issued patents, registered trademarks, registered copyrights, registered
trade
names, registered service marks and registered Internet domain names set
forth
in Section 3.13(b) of the Company Disclosure Schedule are valid and
enforceable, have not expired or been canceled or abandoned, and are not
subject
to any pending or, to the Company's Knowledge, threatened judicial or
administrative proceeding involving the validity, enforceability or scope
thereof. To the Knowledge of the Company, no person is infringing,
misappropriating or otherwise violating any Company Owned Intellectual Property
or Intellectual Property exclusively licensed to the Company. The
Company has not: (i) received any written notice of any claim of
infringement or misappropriation by the Company of any Intellectual Property
right of any person; (ii) been sued in any suit, action or proceeding which
involves a claim of infringement or misappropriation by the Company of any
Intellectual Property right of any person; (iii) brought any action, suit
or
proceeding for infringement or misappropriation of Intellectual Property
or
breach of any license or agreement involving Intellectual Property against
any
person; (iv) delegated, assigned or otherwise transferred any right to bring
a
claim or suit against any person for infringement or misappropriation of
Company
Intellectual Property; or (v) entered into any agreement to indemnify any
person
against any charge of infringement or misappropriation of any Intellectual
Property in response to an actual or suspected threat of infringement or
misappropriation; and, with respect to (ii) and (iii) above, no such suit,
action or proceeding has been threatened.
(d) The
Company is not a party to or bound by any agreement containing any covenant
(i)
limiting the right of the Company to engage or compete in any line of business
or to compete with any person, (ii) granting to any person any exclusive
rights
or sublicensing rights, (iii) providing “most favored nations” clauses to any
person, or (iii) which otherwise adversely affects or would reasonably be
expected to adversely affect the right of the Company to sell, distribute
or
manufacture any Company products or Company Intellectual Property or to purchase
or otherwise obtain any software, components, parts or
subassemblies.
16
(e) Section
3.13(f) of the Company Disclosure Schedule lists all computer software that
is owned, licensed, leased or otherwise used in the business of the Company
(“Company Software”), other than commercially available, off-the-shelf
software with an acquisition cost of less than Five Hundred Dollars ($500),
and
identifies which is owned, licensed, leased or otherwise used, as the case
may
be.
(f) The
Company has taken reasonable measures consistent with industry practice to
protect and preserve the confidentiality of all trade secrets owned, used,
appropriated or disclosed by the Company and not otherwise protected by patents
or copyright (“Confidential Information”). All use, disclosure
or appropriation of Confidential Information owned by the Company by or to
a
third party has been pursuant to the terms of an agreement or other legal
obligation between the Company, on the one hand, and such third party, on
the
other hand, pursuant to which the third party undertakes to protect and not
disclose such Confidential Information. All use, disclosure or
appropriation by the Company of Confidential Information not owned by the
Company has been pursuant to the terms of a written agreement between the
Company and the owner of such Confidential Information, or is otherwise
lawful. Neither the Company or any person under the control of the
Company has materially breached any confidentiality agreements that such
person
is subject to, and, to the Knowledge of the Company, no other party to any
such
confidentiality agreement is in material breach thereof.
(g) No
current or former shareholder, member, partner, director, officer or employee
of
the Company or any of its predecessors in interest will, after the consummation
of the Merger, own or retain any rights in, to, or under any of the Company
Intellectual Property.
(h) The
Company has at all times complied in all material respects with all applicable
legal requirements relating to privacy, data protection and the collection
and
use of personal information gathered or accessed in the course of the operations
of the Company. The Company has at all times complied in all material
respects with all rules, policies and procedures established by the Company
from
time to time with respect to the foregoing. No claims are pending
and, to the Knowledge of the Company, no claims have been asserted or threatened
against the Company or are likely to be asserted or threatened against the
Company by any person or entity alleging a violation of such person's or
entity's privacy, personal or confidentiality rights under any such Laws,
policies or procedures. The consummation of the Merger will not
breach or otherwise cause any violation of any such Laws, policies or
procedures.
(i) With
respect to all personal information described in
Section 3.13(h), the Company has taken all steps reasonably
necessary (including, without limitation, implementing and monitoring compliance
with measures with respect to technical and physical security) to protect
the
information in a manner consistent with the Laws, policies or procedures
referred to in Section 3.13(h). There has been no unauthorized
access to or other misuse of that information.
17
Section
3.14 Environmental
Matters.
(a) The
Company is in full compliance with all Environmental Laws, which compliance
includes, but is not limited to, the possession by the Company of all permits
and other governmental authorizations required under all Environmental Laws,
and
compliance with the terms and conditions thereof. The Company has not
received any communication (written or oral), whether from a Governmental
Entity, citizens group, employee or otherwise, that alleges that the Company
is
not in such full compliance, and there are no circumstances that may prevent
or
interfere with such full compliance in the future. All
permits and other governmental authorizations currently held by the Company
pursuant to all Environmental Laws are identified in Section 3.14 of the
Company Disclosure Schedule.
(b) There
is no Environmental Claim pending or, to the Company's Knowledge, threatened
against the Company or against any person or entity whose liability for any
Environmental Claim the Company has retained or assumed either contractually
or
by operation of law.
(c) There
are no past or present actions, activities, circumstances, conditions, events
or
incidents, including, without limitation, the release, emission, discharge,
presence or disposal of any Material of Environmental Concern, that could
form
the basis of any Environmental Claim against the Company or against any person
or entity whose liability for any Environmental Claim the Company has retained
or assumed either contractually or by operation of law, or otherwise result
in
any costs or liabilities under Environmental Law.
(d) Without
in any way limiting the generality of the foregoing, (i) all on-site and
off-site locations where the Company has stored, disposed or arranged for
the
disposal of Materials of Environmental Concern are identified in Section
3.14(d)(i) of the Company Disclosure Schedule, (ii) all underground storage
tanks, and the capacity and contents of such tanks, located on any property
owned, leased, operated or used by the Company are identified in Section
3.14(d)(ii) of the Company Disclosure Schedule, (iii) except as set forth in
Section 3.14(d)(iii) of the Company Disclosure Schedule, there is no
asbestos contained in or forming part of any building, building component,
structure or office space owned, leased, operated or used by the Company,
and
(iv) except as set forth in Section 3.14(d)(iv) of the Company Disclosure
Schedule, no polychlorinated biphenyls or polychlorinated biphenyl-containing
items are used or stored at any property owned, leased, operated or used
by the
Company.
(e) The
Company has provided to Parent all assessments, reports, data, results of
investigations or Audits, and other information that is in the possession
of or
reasonably available to the Company regarding environmental matters pertaining
to or the environmental condition of the business of the Company or the
compliance (or noncompliance) by the Company with any Environmental
Laws.
(f) The
Company is not required by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the effectiveness of any transactions
contemplated hereby, (i) to perform a site assessment for Materials of
Environmental Concern, (ii) to remove or remediate Materials of
Environmental Concern, (iii) to give notice to or receive approval from any
Governmental Entity pursuant to any Environmental Law, or (iv) to record or
deliver to any person or entity any disclosure document or statement pertaining
to environmental matters.
18
(g) Notwithstanding
anything herein to the contrary, the representations and warranties set forth
in
this Section 3.14 above are made as of the Closing to the best of Sole
Shareholders’ Knowledge with respect to that certain location on Kamehameha
Highway.
For
purposes of this Agreement:
(A) “Environmental
Claim” means any claim, action, cause of action, suit, proceeding,
investigation, order, demand or notice (written or oral) by any person or
entity
alleging potential liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, or release into the
environment, of, or exposure to, any Material of Environmental Concern at
any
location, whether or not owned or operated by the Company or (b) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.
(B) “Environmental
Laws” means all federal, state, local and foreign laws, regulations, ordinances,
requirements of governmental authorities, and common law relating to pollution
or protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata,
and
natural resources), including, without limitation, Laws relating to (i)
emissions, discharges, releases or threatened releases of, or exposure to,
Materials of Environmental Concern, (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern, (iii) recordkeeping, notification,
disclosure and reporting requirements regarding Materials of Environmental
Concern, and (iv) endangered or threatened species of fish, wildlife and
plant
and the management or use of natural resources.
(C) “Materials
of Environmental Concern” means chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum and petroleum products,
asbestos or asbestos-containing materials or products, polychlorinated
biphenyls, lead or lead-based paints or materials, radon, fungus, mold,
mycotoxins or other substances that may have an adverse effect on human health
or the environment.
Section
3.15
Taxes.
(a) The
Company has filed all Tax Returns required to be filed by it, and all such
Tax
Returns were true, complete and correct in all material respects. All
Taxes required to be paid by the Company have been timely paid other than
those
(i) currently payable without penalty or interest, or (ii) being contested
in
good faith by appropriate proceedings and for which, in the case of both
clauses
(i) and (ii), adequate reserves have been established on the books and
records of the Company in accordance with past practice. The Company
does not have any liability for unpaid Taxes accruing after the date of the
Annual Balance Sheets other than unpaid Taxes arising in the ordinary course
of
business.
(b) There
are no Liens for Taxes upon any property or assets of the Company.
19
(c)
The Company has not made any change in accounting methods, received a ruling
from any taxing authority or signed an agreement with respect thereto or
signed
any closing agreement with respect to any Tax year.
(d) The
Company has complied in all respects with all applicable Laws, rules and
regulations relating to the payment and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or similar
provisions under any foreign Laws) and has, within the time and the manner
prescribed by Law, withheld and paid over to the proper taxing authorities
all
amounts required to be so withheld and paid over under applicable
Laws.
(e) The
Company is not required to include in income any adjustment pursuant to Section
481(a) of the Code by reason of any voluntary change in accounting method
(nor
has any Governmental Entity proposed in writing any such adjustment or change
of
accounting method).
(f) No
Audits are presently pending with regard to any Taxes or Tax Returns of the
Company and a list of all Audits commenced or completed with respect to the
Company with respect to taxable periods ending after January 1, 1999 is set
forth in Section 3.15(f) of the Company Disclosure
Schedule. No written notification has been received by the Company
that such an Audit is pending or threatened with respect to any Taxes due
from
or with respect to or attributable to the Company or any Tax Return filed
by or
with respect to the Company.
(g) All
Tax deficiencies that have been claimed, proposed or asserted against the
Company have been fully paid or finally settled, and no issue has been raised
in
any examination by any taxing authority that, by application of similar
principles, could reasonably be expected to result in the proposal or assertion
of a Tax deficiency for another year not so examined.
(h) There
are no outstanding requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment of any Taxes
or
deficiencies against the Company.
(i) No
power of attorney has been granted by or with respect to the Company with
respect to any matter relating to Taxes.
(j) The
Company is not a party to, is not bound by or has any obligation under any
Tax
sharing agreement, Tax indemnification, or Tax allocation agreement or similar
agreement, contract or arrangement, and the Company does not have any potential
liability or obligation to any person as a result of, or pursuant to, any
such
agreement, contract or arrangement.
(k) The
Company is not a party to any agreement, plan, contract or arrangement (whether
oral or in writing) that could result, separately or in the aggregate, in
the
payment of any “excess parachute payments” within the meaning of Section 280G of
the Code.
(l) The
deductibility of compensation paid by the Company will not be limited by
Section 162(m) of the Code.
20
(m) All
transactions that could give rise to an understatement of the federal income
tax
liability of the Company within the meaning of Section 6662(d) of the Code
are adequately disclosed on Tax Returns in accordance with Section 6662(d)(2)(B)
of the Code if there is or was no substantial authority for the treatment
giving
rise to such understatement.
(n) The
Company is not and has not been a U.S. real property holding company (as
defined
in Section 897(c)(2) of the Code) during the applicable period specified
in
Section 897(c)(1)(A)(ii) of the Code.
(o) There
are no unresolved questions or claims concerning Tax liability of the
Company.
(p) Other
than any Tax Returns that have not yet been required to be filed, the Company
has made available to Parent true, correct and complete copies of the United
States federal income Tax Return and any state, local or foreign Tax Return
for
the Company for any jurisdiction for each of the taxable periods ended
December 31, 2001 through December 31, 2006.
(q) The
net operating loss and credit carryovers, if any, available to the Company,
and
their expiration dates, is set forth in the Disclosure Schedule. As
of the date of this Agreement, none of such net operating loss and credit
carryovers are subject to the limitations imposed by Sections 382, 383 or
384 of
the Code (or any predecessor thereto) or otherwise.
(r) Section
3.15(r) of the Disclosure Schedule sets forth (i) all elections with respect
to Taxes made by the Company and (ii) all foreign, state and local jurisdictions
in which the Company is or has been subject to Tax and each type of Tax payable
in such jurisdiction during the taxable year ending December 31,
2006.
(s) The
Company has delivered or made available to Parent complete and accurate copies
of each of (i) all Audit reports, letter rulings, technical advice memoranda
and
similar documents issued by a Governmental Entity relating to the United
States
or foreign Taxes due from or with respect to the Company, (ii) all closing
agreements entered into by the Company with any Taxing Authority existing
on the date hereof and (iii) copies of any correspondence to any Tax
Authority.
(t) The
Company does not have any liability with respect to income, franchise or
similar
Taxes relating to the operation of the Company prior to the date of the Annual
Balance Sheet in excess of the amounts that are accrued with respect thereto
and
are reflected in the Interim Financial Statements, and since the date of
the
Annual Balance Sheets, the Company has not incurred any liability for Taxes,
except with respect to operations in the ordinary course of business after
the
date of the Annual Balance Sheets. All Taxes owed and due by the
Company relating to operations on or prior to the date of the Annual Balance
Sheets (whether or not shown on any Tax Return) have been paid on a timely
basis.
(u) The
Company has not received written notice of any claim made by an authority
in a
jurisdiction where the Company does not file Tax Returns, that the Company
is or
may be subject to taxation by that jurisdiction.
21
(v)
No taxing authority is asserting or, to the Company's Knowledge, threatening
to
assert a claim against the Company under or as a result of Section 482 of
the
Code or any similar provision Law.
(w) The
Company has not been a member of any affiliated group within the meaning
of
Section 1504(a) of the Code, or any similar affiliated or consolidated group
for
tax purposes under state, local or foreign Law (other than a group the common
parent of which is the Company), or has any liability for Taxes of any person
(other than the Company) under Treasury Regulation Section 1.1502-6 or any
similar provision of state, local or foreign Law as a transferee or successor,
by contract or otherwise.
(x) The
Company has not distributed stock of another entity, or has had its stock
distributed by another entity, in a transaction that was purported or intended
to be governed in whole or in part by Section 355 or Section 361 of the
Code.
(y) The
Company has not engaged in any reportable transactions that were required
to be
disclosed pursuant to Section 1.6011-4 of the Code.
(z) The
Company has delivered or made available to Parent a copy of all of the Company's
tax returns and other records and workpapers related to Taxes, which include
information that would allow Parent to determine: (i) a complete list
of the types of Tax Returns being filed by the Company in each taxing
jurisdiction, (ii) the year of the commencement of the filing of each such
type
of Tax Return in each jurisdiction, (iii) all closed years with respect to
each such type of Tax Return filed in each jurisdiction, (iv) all material
Tax
elections filed in each jurisdiction by the Company, (v) the tax basis of
the
assets of the Company, (vi) any deferred intercompany gain with respect to
the
transactions to which the Company has been a party, (vii) the accumulated
earnings and profits and any loss carryovers of the Company and (viii) deferred
income taxes.
(aa) The
Company is registered with the relevant Tax Authority for Tax
purposes.
Section
3.16 Employee Benefit
Plans.
(a) Section
3.16(a) of the Company Disclosure Schedule lists, with respect to the
Company and any trade or business (whether or not incorporated) which is
treated as a single employer with the Company (an “ERISA
Affiliate”) within the meaning of Section 414(b), (c), (m) or (o) of
the Code, (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)),
(ii) each loan to any current or former non-officer employee, officer or
director and any stock option, stock purchase, phantom stock, stock appreciation
right, equity based award, supplemental retirement, severance, termination,
change in control, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code Section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs
or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs, policies, agreements or arrangements,
(iv) other fringe, welfare or employee benefit plans, programs, policies,
agreements or arrangements, and (v) any current or former employment or,
consulting, retention, executive compensation or severance agreements or
arrangements, written or otherwise, for the benefit of, or relating to, any
present or former employee, consultant or director of the Company with respect
to which the Company or any ERISA Affiliate could have any liability (together,
the “Company Employee Plans”).
22
(b) The
Company has made available to Parent a copy of each of the Company Employee
Plans and related material plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions, summary
of
material modifications, prospectuses and other authorizing documents) and
has,
with respect to each Company Employee Plan that is subject to ERISA reporting
requirements, made available copies of the Form 5500 reports (including all
applicable schedules) filed for the last three (3) plan years. Any
Company Employee Plan intended to be qualified under Section 401(a) of the
Code
has either obtained from the IRS a favorable determination letter as to its
qualified status under the Code, or the expiration of the requisite period
under
applicable regulations promulgated by the IRS under the Code (“Treasury
Regulations”) or IRS pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable determination
has not occurred or has been established under a standardized prototype plan
for
which an IRS opinion letter has been obtained by the plan sponsor and is
valid
and sufficient as to the adopting employer. The Company has also
furnished or made available to Parent the most recent IRS determination,
notification, advisory, or opinion letter issued with respect to each such
Company Employee Plan, and, to the Company's Knowledge, nothing has occurred
since the issuance of each such letter that could reasonably be expected
to
cause the loss of the tax-qualified status of any Company Employee Plan subject
to Section 401(a) of the Code.
(c) None
of the Company Employee Plans promises or provides retiree medical or other
retiree welfare benefits to any person, except as required by applicable
Law. There has been no non-exempt “prohibited transaction,” as such
term is defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any Company Employee Plan. Each Company Employee Plan has
been administered in accordance with its terms and in compliance with the
requirements prescribed by any and all applicable statutes, rules and
regulations (including ERISA, the Code and any and all applicable federal
or
state securities laws). Neither the Company nor any of its ERISA
Affiliates is subject to any liability or penalty under Sections 4976 through
4980 of the Code or Title I of ERISA with respect to any of the Company Employee
Plans. All contributions required to be made by the Company or any of
its ERISA Affiliates to any Company Employee Plan have been made on or before
their due dates. With respect to each Company Employee Plan, no
“reportable event” within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred. Each Company
Employee Plan can be amended, terminated or otherwise discontinued after
the
Closing Date in accordance with its terms, without liability to Parent (other
than ordinary administrative expenses typically incurred in a termination
event). With respect to each Company Employee Plan subject to ERISA
as either an employee pension plan within the meaning of Section 3(2) of
ERISA
or an employee welfare benefit plan within the meaning of Section 3(1) of
ERISA,
the Company has prepared in good faith and timely filed all requisite
governmental reports (which, to the Company's Knowledge, were true and correct
as of the date filed). No suit, administrative proceeding, action or
other litigation has been brought or is pending, or, to the Knowledge of
the
Company, is threatened, against or with respect to any such Company Employee
Plan, including any Audit or inquiry by the IRS, United States Department
of
Labor, the United States Securities and Exchange Commission or any other
Governmental Entity, other than requests for payments in the ordinary course
or
requests for qualified domestic relations orders.
23
(d) With
respect to each Company Employee Plan, the Company has complied with (i)
the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the
regulations (including proposed regulations) thereunder, (ii) the applicable
requirements of the Family Medical and Leave Act of 1993 and the regulations
thereunder and (iii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996 and the regulations (including
proposed regulations) thereunder.
(e) Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, by themselves or in conjunction with any
other
agreements, events or occurrences will (i) entitle any current or former
employee, director or other service provider of the Company or any ERISA
Affiliates to severance benefits or any other payment, except as expressly
provided in this Agreement, (ii) increase any benefits otherwise payable
by the Company or (iii) accelerate the time of payment or vesting of Company
Options or any benefit, or increase the amount of compensation due any such
employee, director or service provider.
(f) There
has been no amendment to, written interpretation or announcement (whether
or not
written) by the Company or any ERISA Affiliates relating to, or change in
participation or coverage under, any Company Employee Plan which would increase
the expense of maintaining such Company Employee Plan above the level of
expense
incurred with respect to that Company Employee Plan for the most recent fiscal
year included in the Financial Statements.
(g) The
Company does not maintain, sponsor, participate in or contribute to, nor
has it
ever maintained, established, sponsored, participated in, or contributed
to, any
pension plan (within the meaning of Section 3(2) of ERISA) which is subject
to
Section 302 of ERISA, Title IV of ERISA or Section 412 of the Code.
(h) Neither
the Company nor any of its ERISA Affiliates is a party to, or has made any
contribution to or otherwise incurred any obligation to contribute to, any
“multi-employer plan” as defined in Section 3(37) of ERISA.
(i) Neither
the Company nor any ERISA Affiliate is obligated to make any parachute payments
as such term is defined in Section 280G of the Code, and neither is a party
to
any agreement that under certain circumstances is reasonably likely to obligate
it, or any successor in interest, to make any parachute payments that will
not
be deductible under Section 280G of the Code. Neither the Company nor
any ERISA Affiliate is obligated to make reimbursement or gross-up payments
to
any person in respect to excess parachute payments.
24
(j) No
amounts paid by the Company by any Company Employee Plan would fail to be
deductible under Sections 404 or 404A of the Code.
Section
3.17 Employee
Matters.
(a) The
Company is and has been in compliance with all currently applicable Laws
and regulations respecting employment, discrimination in employment, terms
and
conditions of employment, termination of employment, wages, hours, occupational
safety and health, employee whistle-blowing, immigration, employee privacy,
employment practices and classification of employees, consultants and
independent contractors, and are not engaged in any unfair labor practice,
as
defined in the National Labor Relations Act or other applicable
Law.
(b) The
Company has withheld all amounts required by Law or by agreement to be withheld
from the wages, salaries, and other payments to employees or consultants;
and is
not liable for any arrears of wages or any taxes or any penalty for failure
to
comply with any of the foregoing. The Company is not liable for any
payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for employees (other than routine payments
to
be made in the normal course of business, consistent with past
practice). There are no pending claims against the Company under any
workers compensation plan or policy or for long term disability.
(c) There
are no charges, complaints or controversies pending or, to the Knowledge
of the
Company, threatened, between the Company and any of its employees, former
employees, consultants, independent contractors or applicants which charges,
complaints or controversies have resulted or could reasonably be expected
to
result in an action, suit, proceeding, claim, grievance, arbitration or
investigation before any Governmental Entity. The Company has not
received notice, nor to the Company's Knowledge does any Governmental
Entity responsible for the enforcement of labor or employment Laws intend
to
conduct an investigation with respect to the Company, and no such investigation
is in progress.
(d) Since
the enactment of the WARN Act, (i) the Company has not effectuated a “plant
closing” (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility
of
the Company, (ii) there has not occurred a “mass layoff” (as defined in the WARN
Act) affecting any site of employment or facility of the Company, (iii) the
Company has not been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar Law and (iv) none of the Company's employees has suffered an “employment
loss” (as defined in the WARN Act) during the six (6) month period prior to the
date hereof.
(e) The
Company is not a party to any collective bargaining agreement or similar
agreement with any labor organization or work council, or work rules or
practices agreed to with any labor organization, work council or employee
association applicable to employees of the Company. None of the
employees of the Company are represented by any labor organization or work
council and, to the Company's Knowledge, there have been no union or work
council organizing activities or proceedings among any of its employees,
nor
does any question concerning representation exist concerning such
employees.
25
(f) There
is no labor strike, dispute, corporate campaign, slowdown, stoppage or lockout
actually pending, or to the Knowledge of the Company, threatened against
or
affecting the Company and during the last three (3) years there has not
been any such action.
(g) All
personnel policies and procedures applicable to employees of the Company
are in
writing. There are no personnel manuals, handbooks, policies, rules
or procedures applicable to employees of the Company, other than those set
forth
in Section 3.17(g) of the Company Disclosure Schedule, true and complete
copies of which have heretofore been made available to Parent.
(h) To
the Company's Knowledge, no employees of the Company are in violation of
any term of any employment contract, invention assignment agreement, patent
disclosure agreement, non-competition agreement, non-solicitation agreement,
or
any restrictive covenant to a former employer relating to the right of any
such
employee to be employed by the Company because of the nature of the
business conducted by the Company or to the use of trade secrets or
proprietary information of others.
(i) Section
3.17(i) of the Company Disclosure Schedule sets forth a true and complete
list of (i) the names and current salaries of all employees, directors and
elected and appointed officers of the Company, and the family relationships,
if
any, among such persons and (ii) all group insurance programs in effect for
employees of the Company. The Company is not in default with respect
to any of its obligations referred to in the preceding sentence. No
key employees or officers of the Company have given notice to the Company,
nor
does the Company have Knowledge, that any such key employee or officer intends
to terminate his or her employment with the Company.
(j) The
Company does not have any (i) existing service or other agreements with any
officers or employees of the Company which subject to legal requirements
cannot
be fairly terminated by three (3) months' notice or less without giving rise
to
a claim for damages or compensation; (ii) liability for compensation to
ex-employees; (iii) obligation to re-instate or re-employ any ex-officer
or
ex-employee of the Company; (iv) knowledge of grounds for dismissal of any
employee of the Company; (v) policy, practice or obligation regarding redundancy
payments to employees which is more generous than the applicable award(s)
or
legislation; or (vi) industrial agreement or enterprise agreement (whether
registered or not) or plans to introduce any such agreement, that applies
to any employee or officer of the Company.
(k) Except
as set forth on the Company Disclosure Schedule, no person has any agreement
with the Company under which that person acts as an independent contractor,
consultant, or in a similar capacity for the Company whether on a full time
or a
part time or retainer basis or otherwise.
Section
3.18 Interested Party
Transactions.
The
Company is not indebted to any director, officer, employee, consultant or
shareholder of the Company (except for current amounts due as normal salaries
and bonuses and
26
in
reimbursement of ordinary expenses), and no such person is indebted to the
Company. No officer, director or shareholder of the Company owns or
holds, directly or indirectly, any interest in (excepting holdings solely
for
passive investment purposes of securities of publicly held and traded entities
constituting less than five percent (5%) of the equity of any such entity),
or
is an officer, director, employee or consultant of any person that is, a
competitor, lessor, lessee, customer or supplier of the Company or which
conducts a business similar to any business conducted by the
Company. No officer, director or shareholder of the Company (a)
owns or holds, directly or indirectly, in whole or in part, any Company
Intellectual Property, (b) has any claim, charge, action or cause of action
against the Company, except for claims for reasonable unreimbursed travel
or
entertainment expenses, accrued vacation pay or accrued benefits under any
employee benefit plan existing on the date hereof, (c) has made, on behalf
of
the Company, any payment or commitment to pay any commission, fee or other
amount to, or to purchase or obtain or otherwise contract to purchase or
obtain
any goods or services from, any other person of which any officer, director
or
shareholder of the Company (or, to the Knowledge of the Company, a relative
of
any of the foregoing) is a partner or shareholder (except holdings solely
for
passive investment purposes of securities of publicly held and traded
entities constituting less than five percent (5%) of the equity of any such
entity) or (d) has any material interest in any property, real or personal,
tangible or intangible, used in or pertaining to the business of the
Company.
Section
3.19 Leased
Property.
Section
3.19 of the Company Disclosure Schedule sets forth a complete list of the
real property leased by the Company and a description of the terms of each
lease (the “Lease Agreements”). Each Lease Agreement is valid,
binding and enforceable in accordance with its terms and the Company has
a valid
and binding leasehold interest in, and enjoys peaceful possession of, the
real
property described in Section 3.19 of the Company Disclosure
Schedule. The Company does not lease any real property other than the
real property subject to the Lease Agreements. There are no disputes,
oral agreements, or forbearance programs in effect as to the Lease
Agreements. There are no existing defaults by the Company under any
Lease Agreement, and no event has occurred that (with the giving of notice,
lapse of time or both) would constitute a default by the Company under any
Lease
Agreement. The Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
any
of its rights under any Lease Agreement, and the leasehold estate created
by
each such lease is free and clear of all Liens. The Company is not
engaged in any negotiation for the review of the rent payable under any Lease
Agreement. The Company does not own any real property.
Section
3.20
Insurance.
The
Company has policies of insurance and bonds of the type and in the amounts
customarily carried by persons conducting businesses or owning assets similar
to
those of the Company. Section 3.20(i) of the Company
Disclosure Schedule contains a complete list of the policies and contracts
of
insurance maintained by the Company other than employee benefit plans listed
on
Section 3.16 of the Company Disclosure Schedule. All such
policies and bonds are in full force and effect, all premiums due and payable
to
date under all such policies and bonds have been paid and the Company is
otherwise in compliance with the terms of such policies and
bonds. There is no claim pending under any such policies or bonds as
to which coverage has been questioned, denied or disputed by the underwriters
of
such policies or bonds. The Company has not received any notice of
cancellation or non-renewal of any such policies or bonds from any of its
insurance carriers, nor to the Company's Knowledge, is the termination of
any
such policies or bonds threatened. The Company has not received any
notice from any of its insurance carriers that any insurance premiums will
be
increased in the future or that any insurance coverage presently provided
will
not be available to the Company in the future on substantially the same terms
as
now in effect. Except as disclosed on Section 3.20(ii) of the
Company Disclosure Schedule, none of such policies or bonds provides for
any
retrospective premium adjustment, experience-based liability or loss sharing
arrangement affecting the Company.
27
Section
3.21 Compliance With
Laws.
The
Company has complied in a timely manner and in all material respects with
all
statutes, laws, codes, ordinances, regulations, rules, orders, judgments,
writs,
injunctions, acts, guidelines, policies, directions or decrees of any
Governmental Entity, whether or not having the force of law (“Law” or
“Laws”) that affect the business, properties or assets of the Company,
and no notice, charge, claim, action or assertion has been received by the
Company or to the Company's Knowledge, has been filed, commenced or threatened
against the Company alleging any violation of any of the
foregoing. The Company has not at any time received any notice or
direction from any Governmental Entity challenging or questioning the legal
right of the Company to design, market, offer or sell any of its products
or
services or the use of its assets in the present manner or style
thereof.
Section
3.22 Minute
Books.
The
minute books of the Company made available to Parent contain a complete and
accurate summary of all meetings of directors and shareholders and all actions
by written consent since the time of incorporation of the Company, through
the
date of this Agreement, and reflect all transactions and other corporate
actions
referred to in such minutes accurately in all material respects.
Section
3.23 Internal
Controls.
The
Company (i) makes and keeps accurate books and records that fairly reflect
the
transactions and dispositions of assets of the Company and (ii) maintains
internal accounting controls which provide reasonable assurance that (a)
transactions are recorded as necessary to permit preparation of its financial
statements to be fairly presented in all respects, (b) receipts and expenditures
are made only in accordance with general or specific authorizations of
management and directors of the Company, (c) access to its assets is permitted
only in accordance with general or specific authorizations of management
and
directors of the Company, and (d) the reported accounting for its assets
and
liabilities is compared with existing assets and liabilities at reasonable
intervals.
Section
3.24 Complete Copies of
Materials.
The
Company has delivered to Parent, or made available for Parent to review,
complete copies of each document which has been requested by Parent, its
counsel
and other advisors in connection with their legal and accounting review of
the
Company, including, without limitation, (i) the Company Articles and Company
Bylaws as amended to date and as currently in effect, (ii) all material permits,
orders, and consents issued by any regulatory agency with respect to the
Company, or any securities of the Company, and all applications for such
permits, orders, and consents, (iii) agreements relating to Intellectual
Property, and (iv) the stock transfer books of the Company setting forth
all
transfers of any capital stock, in each case, as currently in
effect.
28
Section
3.25 Brokers' and Finders'
Fees.
The
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or
any
transaction contemplated hereby.
Section
3.26 Board Approval
The
Company Board has unanimously (i) adopted and approved this Agreement and
the
Merger, (ii) determined that the transactions contemplated herein and therein
are advisable and in the best interests of the shareholders of the Company
and
on terms that are fair to such shareholders and (iii) resolved to recommend
that
the shareholders of the Company approve this Agreement and the Merger, and
none
of the aforesaid actions by the Company Board has been amended, rescinded
or
modified.
Section
3.27 Customers and
Suppliers.
No
customer which individually accounted for five percent (5%) or more of the
Company's gross revenues during the twelve (12) month period preceding the
date
hereof, and no supplier of the Company has canceled or otherwise terminated,
or
communicated any threat to the Company to cancel or otherwise terminate its
relationship with the Company, or has decreased materially its services or
supplies to the Company in the case of any such supplier, or its usage of
the
services or products of the Company in the case of any such customer, and
to the
Company's Knowledge, no such supplier or customer intends to cancel or otherwise
terminate its relationship with the Company or to decrease materially its
services or supplies to the Company or its usage of the services or products
of
the Company.
Section
3.28 Material
Contracts.
Except
for the contracts and agreements described in Section 3.28 of the Company
Disclosure Schedule (the “Material Contracts”), the Company is not a
party to or bound by any material contract, including without
limitation:
(a) any
distributor, sales, advertising, agency or manufacturer's representative
contract;
(b) any
continuing contract for the purchase of materials, supplies, equipment or
services involving in the case of any such contract more than Ten Thousand
Dollars ($10,000) over the life of the contract;
29
(c) any
contract, commitment or agreement relating to the acquisition by the Company
of
any assets of a substantial nature, operating business or capital stock of
any
other person, the participation in a joint venture or similar arrangement
with
any other person or the making of any other investment in any other
person;
(d) any
contract or commitment granting exclusive marketing or distribution or other
exclusive rights;
(e) any
contract, commitment, offer or proposal made by or binding upon the Company
to
any customer or potential customer for the sale of products or services having
a
value of more than Ten Thousand Dollars ($10,000);
(f) any
contract that expires or may be renewed at the option of any person other
than
the Company so as to expire more than one (1) year after the date of this
Agreement;
(g) any
contract or commitment requiring the Company to sell or otherwise provide
current or future products or services, or to provide support for any current
or
future products or services, in each case, for any period expiring more than
six
(6) months from the date hereof;
(h) any
trust indenture, mortgage, promissory note, loan agreement or other contract
or
instrument for the borrowing of money, any currency exchange, commodities
or
other hedging arrangement or any leasing transaction of the type required
to be
capitalized in financial statements that are fairly presented in all
respects;
(i) any
contract or commitment for capital expenditures in excess of Ten Thousand
Dollars ($10,000) in the aggregate;
(j) any
contract or commitment limiting the freedom of the Company to engage in any
line
of business or to compete with any other person;
(k) any
contract purporting to impose confidentiality or nondisclosure obligations
on
the Company;
(l) any
contract involving the lease of real property;
(m) any
contract for the lease of any machinery, equipment, motor vehicles, office
furniture, fixtures or other personal property;
(n) any
employment agreement or any other agreement that contains any severance or
termination pay liabilities or obligations;
(o) any
contract with any shareholder, officer, director, affiliate or associate
of the
Company, or any family member thereof except the grant of Company
Options;
(p) any
collective bargaining agreement, labor contract or similar agreement governing
any employee of the Company; or
30
(q) any
agreement of guarantee, support, indemnification, assumption or endorsement
of,
or any similar contract or commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other person.
Section
3.29 No Breach of Material
Contracts.
All
Material Contracts are in written form. The Company has performed its
obligations under and is entitled to all benefits under all Material Contracts,
and to the Knowledge of the Company, is not alleged to be in default in respect
of any Material Contract. Each of the Material Contracts is in full
force and effect, and there exists no default or event of default or event,
occurrence, condition or act, with respect to the Company or, to the Knowledge
of the Company, with respect to the other contracting party, which, with
the
giving of notice, the lapse of time or the happening of any other event or
conditions, would reasonably be expected to become a default or event of
default
under the terms of any Material Contract. True, correct and complete
copies of all Material Contracts have been delivered or made available to
Parent.
Section
3.30 Third Party
Consents.
Section
3.30 of the Company Disclosure Schedule lists all contracts and agreements
to which the Company is a party or by which its properties or assets are
bound
that require a novation, waiver, consent or approval, as the case may be,
in
connection with the consummation of the transactions contemplated by this
Agreement.
Section
3.31 Accounts Receivable
and Payable
Subject
to any reserves set forth in the Annual Balance Sheet, all accounts receivable
of the Company shown on the Annual Balance Sheet and, as of the Closing Date,
all accounts receivable of the Company shown on the Closing Balance Sheet,
are
valid receivables subject to no setoffs or counterclaims, represent and will
represent bona fide claims against debtors for sales and other charges, and
are
not subject to discount except for normal cash and immaterial trade
discounts. The amount carried for doubtful accounts and allowances
disclosed in the Annual Balance Sheet are sufficient to provide for any losses
which may be sustained on realization of the receivables. The amounts
carried as reserves for expenses, including, without limitation, all expenses
for services rendered and goods purchased, and warranty claims on the Annual
Balance Sheets are sufficient for the payment of (i) expenses incurred
prior to the Closing Date, other than Transaction Expenses (ii) current warranty
claims and (iii) warranty claims which arise prior to twelve (12) months
from
the date of the Annual Balance Sheet. There are no unpaid invoices or
bills representing amounts alleged to be owed by the Company, or other alleged
obligations of the Company, which the Company has disputed or determined
to
dispute or refuse to pay.
Section
3.32
Inventory.
The
inventories of the Company, whether shown on the Annual Balance Sheet or
thereafter acquired by the Company, consist of items of a quantity and quality
usable or salable in the ordinary course of business, consistent with past
practice. Since the date of the Annual Balance Sheet, the Company has
continued to replenish inventories in a normal and customary manner consistent
with past practices. The values at which inventories are carried
reflect the inventory valuation policy of the Company, which is in accordance
with past practice. Since the date of the Annual Balance Sheet, due
provision was made on the books of the Company in the ordinary course of
business, consistent with past practice, to provide for all slow-moving,
obsolete, or unusable inventories to their estimated useful values and such
inventory reserves are adequate to provide for such slow-moving, obsolete
or
unusable inventory and inventory shrinkage. As of the date hereof,
the Company’s inventory on hand and commitments to purchase inventory do not
exceed, in the aggregate, an amount greater than Ten Thousand Dollars
($10,000).
31
Section
3.33 Propriety of Past
Payments.
(a) No
unrecorded fund or asset of the Company has been established for any purpose,
(b) no accumulation or use of corporate funds of the Company has been made
without being properly accounted for in the books and records of the Company,
(c) no payment has been made by or on behalf of the Company with the
understanding that any part of such payment is to be used for any purpose
other
than that described in the documents supporting such payment and (d) none
of the
Company, any director, officer, employee or agent of the Company or any other
person associated with or acting for or on behalf of the Company has, directly
or indirectly, made any illegal contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any person, private or public,
regardless of form, whether in money, property or services, (i) to obtain
favorable treatment for any Sole Shareholder, the Company, or any affiliate
of
the Company in securing business, (ii) to pay for favorable treatment for
business secured for any Sole Shareholder, the Company or any affiliate of
the
Company, (iii) to obtain special concessions, or for special concessions
already
obtained, for or in respect of any Company Shareholder, the Company, or any
affiliate of the Company or (iv) otherwise for the benefit of any Sole
Shareholder, the Company, or any affiliate of the Company in violation of
any
federal, state, local, municipal, foreign, international, multinational or
other
administrative order, constitution, Law, ordinance, principle of common law,
regulation, statute, or treaty (including existing site plan approvals, zoning
or subdivision regulations or urban redevelopment plans relating to real
property). None of the Company, or any current director, officer,
agent, employee or other person acting on behalf of the Company, has (i)
used
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to political activity or (ii) accepted or received any unlawful
contribution, payment, gift, kickback, expenditure or other item of
value.
Section
3.34 Private
Placement.
For
purposes of this Section
3.34each Sole Shareholder shall be referred to as the “Investor” and,
each Sole Shareholder hereby represent and warrant as follows:
(a) Purchase
Entirely for Own Account. The Merger Shares to be received by the
Investor are being acquired for investment for the Investor’s own account not as
a nominee or agent, and not with a view to the resale or distribution of
any
part thereof, and that the Investor has no present intention of
selling, granting any participation in, or otherwise distributing the
same. The acquisition by the Investor of any of the Merger Shares
shall constitute confirmation of the representation by the Investor that
the
Investor does not have any contract, undertaking, agreement or arrangement
with
any person to sell, transfer or grant participations to such person or to
any
third person, with respect to any of the Merger Shares.
32
(b) Disclosure
of Information. The Investor believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Merger Shares. The Investor further represents that it
has had an opportunity to ask questions and receive answers from Parent
regarding the terms and conditions of the offering of the Merger Shares and
the
business, properties, prospects and financial condition of Parent.
(c) Restricted
Merger Shares. The Investor understands that the Merger Shares it
is purchasing are characterized as “restricted securities” under the federal
securities laws inasmuch as they are being acquired from Parent in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under the
Securities Act of 1933, as amended (the “Act”) only in certain limited
circumstances. In this connection, the Investor represents that it is
familiar with Rule 144 promulgated under the Act, as presently in effect,
and
understands the resale limitations imposed thereby and by the
Act. THE INVESTOR UNDERSTANDS AND ACKNOWLEDGES HEREIN THAT AN
INVESTMENT IN PARENT’S SECURITIES INVOLVES AN EXTREMELY HIGH DEGREE OF RISK AND
MAY RESULT IN A COMPLETE LOSS OF HIS INVESTMENT. The Investor
understands that the Merger Shares have not been and will not be registered
under the Act and have not been and will not be registered or qualified in
any
state in which they are offered, and thus the Investor will not be able to
resell or otherwise transfer his Merger Shares unless they are registered
under
the Act and registered or qualified under applicable state securities laws,
or
an exemption from such registration or qualification is
available. The Investor has no immediate need for liquidity in
connection with this investment, does not anticipate that the Investor will
be required to sell his Merger Shares in the foreseeable future other than
as
may be required pursuant to the Escrow Agreement.
(d) Further
Limitations on Disposition. Without in any way limiting the
representations set forth above, the Investor further agrees not to make
any
disposition of all or any portion of the Merger Shares unless and
until:
(i) There
is then in effect a registration statement under the Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or
(ii) if
reasonably requested by Parent, the Investor shall have furnished Parent
with an
opinion of counsel reasonably satisfactory to Parent that such disposition
will
not require registration of such shares under the Act. It is agreed
that Parent will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances.
(e) Legends. It
is understood that the certificates evidencing the Merger Stock may bear
the
following legend:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
PARENT
THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144
OF
SUCH ACT.”
33
(f) Reliance
by Company. The Investor understands that the representations,
warranties , covenants and acknowledgements set forth in this Section
3.34(f) constitute a material inducement to Parent and Merger Sub
entering into this Agreement.
(g) No
Reliance on Others. The Investor acknowledges that it is not
relying upon any person, firm or corporation, other than Parent and its officers
and directors, in making its investment or decision to invest in
Parent.
Section
3.35 Representations
Complete.
None
of
the representations or warranties made by the Company herein or in any Schedule
hereto, including the Company Disclosure Schedule, or certificate furnished
by
the Company pursuant to this Agreement, when all such documents are read
together in their entirety, contains or will contain at the Closing Date
any
untrue statement of a material fact, or omits or will omit at the Closing
Date
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. The Company has not failed to disclose to Parent herein
or in the Company Disclosure Schedule any facts material to the business,
results of operations, assets, liabilities, financial condition or prospects
of
the Company.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent
and Merger Sub jointly and severally represent and warrant to the Company
as
follows:
Section
4.1 Organization, Standing and
Power
Each
of
Parent and Merger Sub are a corporation duly organized, validly existing
and in
good standing under Delaware Law and Hawaii Law, respectively. Each
of Parent and Merger Sub have the requisite corporate power to own their
properties and to carry on their business as now being conducted and as
currently proposed to be conducted and are duly qualified to do business
and are
in good standing in each jurisdiction in which the failure to be so qualified
and in good standing would or would reasonably be expected to have a Material
Adverse Effect on Parent or Merger Sub. Neither Parent nor Merger Sub
is in violation of any of the provisions of their respective Articles of
Incorporation or Bylaws.
Section
4.2 Authority
Each
of
Parent and Merger Sub has the requisite corporate power and authority to
enter
into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions
34
contemplated
hereby have been duly authorized by all necessary corporate action on the
part
of Parent and Merger Sub. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the valid and binding
obligations of Parent and Merger Sub enforceable against Parent and Merger
Sub
in accordance with its terms, except to the extent that enforceability may
be
limited by the effect, if any, of any applicable bankruptcy, reorganization,
insolvency, moratorium or other Laws affecting the enforcement of creditors’
rights generally or any general principles of equity, regardless of whether
such
enforceability is considered in a proceeding at law or in
equity. Neither the execution and delivery by Parent or Merger Sub of
this Agreement nor the consummation of the transactions contemplated hereby
will
conflict with, or result in any breach or violation of, or default under
(with
or without notice or lapse of time, or both) or give rise to a right of
termination, cancellation or obligation or loss of any benefit under (i)
any provision of the Articles of Incorporation or Bylaws, or other equivalent
charter documents, as applicable, of Parent or Merger Sub, (ii) any mortgage,
indenture, lease, contract, agreement, instrument or understanding to which
Parent or Merger Sub is a party or to which any of its properties or assets
is
bound or (iii) any Law applicable to either Parent or Merger Sub or any of
their respective properties or assets, except, in the case of clauses (ii)
and
(iii) above, any such conflicts, breaches, violations, defaults, rights or
losses, which would not, individually or in the aggregate, prevent or materially
and adversely delay the consummation by Parent or Merger Sub of the transactions
contemplated by this Agreement. No notice to, filing with, and no permit,
authorization, consent or approval of, any Governmental Entity, or any other
person is necessary for the execution and delivery of this Agreement by Parent
or Merger Sub or, except for the filing and recordation of the Articles of
Merger in accordance with the requirements of Hawaii Law, the consummation
of
the transactions contemplated by this Agreement. No approval by the
shareholders of Parent is required for the transactions contemplated by this
Agreement.
Section
4.3 Board
Approval.
The
Board
of Directors of each of Parent, SPH and Merger Sub have (i) adopted and approved
this Agreement and the transactions contemplated hereby and (ii) determined
that
the transactions contemplated by this Agreement are advisable and in the
best
interests of the respective shareholders of Parent, SPH and Merger Sub, and
none
of the aforesaid actions by the board of directors of Parent, SPH or Merger
Sub
have been amended, rescinded or modified.
Section
4.4
Litigation.
There
is
no material private or governmental action, suit, proceeding, inquiry, claim,
arbitration or, to the Knowledge of Parent or Merger Sub, investigation pending
before any agency, court or tribunal, foreign or domestic, or to the Knowledge
of Parent or Merger Sub, threatened against Parent and Merger Sub as any
of
their properties or any of their officers or directors (in their capacities
as
such), or which questions or challenges the validity of this Agreement or
any of
the transactions contemplated hereby; and there is no valid basis for any
such
action, suit, proceeding, claim, arbitration or investigation. There
is no judgment, decree or order against Parent or Merger Sub, or any of their
directors or officers (in their capacities as such), that could prevent,
enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement. Parent or Merger Sub does not have any material litigation
pending against any other party.
35
ARTICLE
V
CONDUCT
PRIOR TO THE CLOSING DATE
Section
5.1 Conduct of Business of the
Company.
Except
as
contemplated by this Agreement or as set forth in Section 5.2 of the
Company Disclosure Schedule, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or
the
Effective Time, the Company shall, except to the extent expressly contemplated
by this Agreement or as consented to in writing by Parent: (i) carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and (ii) use all reasonable best efforts
consistent with past practice and policies to (x) preserve its present business
organizations, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, (y) preserve
and protect its owned and leased properties and (z) conduct its business
in
compliance with all applicable Laws. The Company shall promptly
notify Parent of any event or occurrence not in the ordinary course of its
business, consistent with past practice, and of any event which could have
a
Material Adverse Effect on the Company.
Section
5.2 Restriction on Conduct of Business of the
Company.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement or the Effective Time, except as set forth
in
Section 5.2 of the Company Disclosure Schedule or except as expressly
contemplated by this Agreement, the Company shall not do or cause any of
the
following, without the prior written consent of Parent which shall not be
unreasonably withheld:
(a) Charter
Documents. Cause any amendments to the Company Articles or the
Company Bylaws or organize any subsidiary or acquire any capital stock or
other
securities, or equity or ownership interest in the business, of any other
person;
(b) Dividends;
Changes in Capital Stock. Declare, set aside or pay any dividends
on or make any other distributions (whether in cash, stock or property) in
respect of any Company Common Stock, or split, combine or reclassify any
Company
Common Stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of Company Common Stock,
or
repurchase or otherwise acquire, directly or indirectly, any shares of Company
Common Stock;
(c) Issuance
of Securities. Issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase of, any
shares of Company Common Stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments
of
any character obligating it to issue any such shares or other convertible
securities, other than the issuance of shares of Company Common Stock pursuant
to the exercise of Company Options outstanding as of the date of this
Agreement;
(d) Intentionally
left blank;
36
(e) Indebtedness. Incur
any Indebtedness, guarantee any such Indebtedness, issue or sell any debt
securities or guarantee any debt securities of others;
(f) Liens. Mortgage,
pledge or encumber any assets;
(g) Acquisitions. Acquire
or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or
any corporation, partnership, association or other business organization
or
division thereof, or otherwise acquire or agree to acquire any assets, except,
in each such case, which are immaterial and are in the ordinary course of
the
Company’s business, consistent with past practice;
(h) Dispositions. Sell,
lease, license or otherwise dispose of or encumber any of its properties
or
assets, individually or in the aggregate, material to its business except
sales
of inventory in the ordinary course of business, consistent with past
practice;
(i) Leases. Terminate,
amend or enter into any lease with respect to real or personal
property;
(j) Payment
of Obligations. Pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise)
arising other than in the ordinary course of business other than the payment,
discharge or satisfaction of liabilities reflected or reserved against in
the
Annual Balance Sheet and other than Transaction Expenses;
(k) Accounts
Payable and Accounts Receivable. Except in the ordinary course of
business, take any action reasonably likely to (i) accelerate the payment
of
customer accounts receivable (including by shortening payment terms, providing
incentives for early payment or otherwise), or (ii) delay the payment on
accounts payable to suppliers, vendors or others;
(l) Capital
Expenditures. Make any capital expenditures, capital additions or
capital improvements in excess of Twenty Five Thousand Dollars ($25,000)
individually or in excess of Fifty Thousand Dollars ($50,000) in the
aggregate;
(m) Termination
or Waiver. Terminate or waive any material right;
(n) Employees;
Employee Benefit Plans; New Hires; Pay Increases. Adopt, amend,
fund or accelerate payment under any employee benefit, incentive compensation,
fringe benefit, retention, stock purchase, option, or other equity based
plan,
program, policy, agreement or arrangement, or hire any new employee, terminate
any key employee, pay any special bonus or special remuneration to any current
or former employee, consultant or director, or increase the salaries, wage
rates
or other benefits or compensation of any of its current or former employees,
consultants or directors or enter into a collective bargaining agreement,
trade
union agreement or similar agreement or arrangement under which any employee
or
consultant would be subject or would otherwise receive any benefit;
(o) Severance
Arrangements. Grant any severance, change in control or
termination pay (i) to any current or former director, consultant or officer
or
(ii) to any other current or former employee;
37
(p) Contracts. Enter
into any contract or commitment (including the issuance or acceptance of
any
purchase order) with a value exceeding Ten Thousand Dollars ($10,000), or
violate, amend or otherwise modify or waive any of the terms of any of its
contracts;
(q) Intellectual
Property. Transfer to any person or entity any rights to Company
Intellectual Property other than pursuant to non-exclusive license arrangements
in the ordinary course of business, consistent with past practice, or abandon,
permit to lapse or otherwise dispose of any Company Intellectual Property
or
make any material change in any Company Intellectual Property;
(r) Exclusive
Rights. Enter into or amend any agreements pursuant to which any
other party is granted exclusive marketing or distribution or other exclusive
rights of any type or scope with respect to any of the Company’s products or
technology;
(s) Litigation. Initiate
or settle any litigation except for the commencement of legal action (i)
in such
cases where the Company in good faith determines that failure to commence
suit
would result in the material impairment of a valuable aspect of its business,
provided that it consults with Parent prior to the commencement of such a
suit,
or (ii) for a breach of this Agreement;
(t) Insurance. Fail
to keep in full force and effect the Company’s current insurance policies or
other comparable insurance affecting the business of the Company, or reduce
the
amount of any insurance coverage provided by existing insurance
policies;
(u) Taxes. Make
or change any material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any material Tax Return other
than
in the ordinary course of business consistent with past practice and other
than
those for which extensions have been received as set forth in the Company
Disclosure Schedule or any amendment to a material Tax Return, enter into
any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the statutory period of limitations
applicable to any claim or assessment in respect of Taxes;
(v) Accounting
Policies and Procedures. Make any change to its accounting
methods, principles, policies, procedures or practices;
(w) Revaluation. Revalue
any of its assets, including writing down the value of inventory or writing
off
notes or accounts receivable other than in the ordinary course of business,
consistent with past practice; or
(x) Other. Agree
in writing or otherwise to take any of the actions described in this Section
5.2.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement or the Effective Time, the Company will
notify
Parent in writing not less than five (5) days prior to making any personnel
changes.
38
Section
5.3 No
Solicitation.
(a) Until
the earlier of the Effective Time or the termination of this Agreement, the
Company and the officers, directors, employees or other agents of the Company
will not, directly or indirectly (i) initiate, solicit or encourage (including,
without limitation, by way of furnishing information), or take any action
to
facilitate any inquiry or the making of, any offer or proposal which constitutes
or is reasonably likely to lead to any Acquisition Transaction,
(ii) propose, enter into or participate in negotiations or discussions
with, or provide any information or data to, any person (other than Parent,
Merger Sub or any of their respective affiliates or representatives) relating
to
any Acquisition Transaction, (iii) make or authorize any statement,
recommendation or solicitation in support of, or approve, any Acquisition
Transaction or (iv) enter into any letter of intent or similar document or
any
contract, agreement or commitment contemplating or otherwise relating to
any
Acquisition Transaction or transaction contemplated thereby. Upon
execution of this Agreement, the Company will immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. The Company will promptly
notify Parent after receipt after the date of this Agreement of any proposal
for
an Acquisition Transaction or any notice that any person is considering an
Acquisition Transaction or any request for information relating to the
Company or for access to the properties, books or records of the Company
by any
person that has advised the Company that it may be considering, or has proposed,
an Acquisition Transaction and will keep Parent timely informed of the status
and details of any such Acquisition Transaction notice, request or any
correspondence or communications related thereto and shall provide Parent
with a
true and complete copy of such Acquisition Transaction notice or request
or
correspondence or communications related thereto, if it is in writing, or a
written summary thereof (which shall include the identity of the person
considering or proposing such Acquisition Transaction and the material terms
thereof), if it is not in writing. Neither the Company Board nor any
committee thereof shall (x) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Merger Sub, the approval or
recommendation by the Company Board or any such committee of this Agreement
or
the Merger, or (y) approve or recommend, or propose to approve or recommend,
any
Acquisition Transaction or (z) enter into any agreement with respect to any
Acquisition Transaction.
Section
5.4 Further
Information.
(a) The
Company shall afford Parent and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Closing to (i) all of the properties, books, contracts,
commitments and records, patent application files and personnel of the Company
and (ii) all other information concerning the business of the Company,
their respective properties and personnel as Parent may reasonably
request.
(b) Subject
to compliance with applicable Laws, from the date hereof until Closing, the
Company shall confer on a regular and frequent basis with one or more
representatives of Parent to report operational matters of materiality and
the
general status of ongoing operations.
(c) No
information or Knowledge obtained in any investigation pursuant to this
Section 5.4 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations
of the
parties to consummate the transactions contemplated hereby.
39
(d) The
Company shall give prompt notice to Parent upon learning of (a) the occurrence
or non-occurrence of any event whose occurrence or non-occurrence, as the
case
may be, would reasonably be likely to cause either (i) any representation
or
warranty of the Company contained in this Agreement to be untrue or inaccurate
in any material respect at the date hereof or at the Closing or (ii) any
condition set forth in ARTICLE VII to be unsatisfied at the Closing Date
(except to the extent it refers to a specific date) and (b) any material
failure
of the Company or 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
5.4(d) shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice or the representations or warranties of
the
parties hereto or the conditions to the obligations of the parties
hereto.
(e) As
soon as such information becomes available, and in any event not later than
thirty (30) days after the end of each fiscal month, the Company shall provide
to Parent an unaudited balance sheet as of the end of such month and the
related
statements of results of operations and statements of cash flows for such
period
together with a list of the ages and amounts of all accounts and notes due
and
uncollected as of the end of such month. Notwithstanding the
foregoing, the Company agrees to provide to Parent and its accountants, counsel
and other representatives copies of the Company’s internal financial statements
promptly upon request.
Section
5.5 Updating the
Disclosure Schedules.
If
any
event, condition, fact or circumstance that is required to be disclosed pursuant
to Section
5.4 would require a change to the Disclosure Schedules if the
Disclosure Schedules were dated as of the date of the occurrence, existence
or
discovery of such event, condition, fact or circumstance, then the Company
shall
promptly deliver to Parent an update to the Disclosure Schedules specifying
such
change and shall use its best efforts to remedy same, as applicable; provided,
however, that no such update shall be deemed to supplement or amend the
Disclosure Schedules for the purpose of (i) determining the accuracy of any
of
the representations and warranties made by the Company in this Agreement
or (ii)
determining whether any of the conditions set forth in Article VII have been
satisfied.
ARTICLE
VI
ADDITIONAL
AGREEMENTS
Section
6.1 Public
Disclosure.
(a) Parent
and the Company shall, prior to Closing, consult with each other before issuing
or authorizing any press release or any other public statement or making
(or
authorizing) any other disclosure to any third party (whether or not in response
to an inquiry) regarding the existence or terms of this Agreement and the
transactions contemplated hereby, and, prior to the Closing, neither shall
(or
permit any of their respective subsidiaries, representatives or advisors
to)
issue any such press release or make any such statement or disclosure without
the prior written approval of the other, except as may be required by applicable
Law or by obligations pursuant to any listing agreement with any national
securities exchange, in which case the disclosing party shall provide to
the
other party such advance notice as is reasonable under the circumstances
prior
to the making of, and shall consult with the other party regarding the form
of,
any such required disclosure. Notwithstanding the foregoing, Parent
and the Company may reveal the existence and terms of this Agreement to their
respective representatives and advisors (a) who need to know the terms of
this Agreement for the purpose of evaluating the Merger, (b) who are informed
of
the confidential nature of the Agreement and (c) who agree to act in accordance
with the terms of this Section 6.1.
40
(b) The
Sole Shareholders shall not, prior to or following the Closing, issue any
press
release, make any other public statement or make any other disclosure to
any
third party (whether or not in response to an inquiry) regarding the existence
and terms of this Agreement and the transactions contemplated hereby without
the
prior written approval of Parent. Notwithstanding the foregoing, the
Sole Shareholders may reveal the existence and terms of this Agreement to
their
respective representatives and advisors (a) who need to know the terms of
this
Agreement for the purpose of evaluating the Merger, (b) who are informed
of the
confidential nature of the Agreement and (c) who agree to act in accordance
with
the terms of this Section 6.1.
Section
6.2 Consents;
Cooperation.
Each
of
Parent and the Company shall promptly apply for or otherwise seek, and use
its
reasonable best efforts to obtain, all consents, waivers and approvals required
to be obtained by it for the consummation of the transactions contemplated
hereby. Parent agrees to split equally with the Company any lease
assignment fees incurred in obtaining the lease assignments up to a maximum
amount of $27,500 to be incurred by Parent. The parties acknowledge
and agree that in the event of any rent payment increase above the current
rent
(or an agreement to increase the rent above the current rent) on or prior
to
Closing, the Sole Shareholders shall pay Parent at the Closing or Parent
shall
offset from the Cash Amount at Closing an amount equal to 50% of any such
increase calculated through the remaining term of the lease.
Section
6.3 Legal
Requirements.
Subject
to the terms and conditions herein provided, each of Parent, Merger Sub and
the
Company will, and Parent will cause its subsidiaries to, take all reasonable
actions necessary to comply in all material respects promptly with all legal
requirements which may be imposed on it with respect to the consummation
of the
transactions contemplated by this Agreement and will take all reasonable
actions
necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made by it in connection with the taking
of
any action contemplated by this Agreement.
41
Section
6.4 Best Efforts and Further
Assurances.
Prior
to
the Closing, upon the terms and subject to the conditions of this Agreement,
Parent, Merger Sub and the Company agree to use best efforts to take, or
cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable (subject to any applicable Laws) to consummate and make
effective the Merger as promptly as practicable including, but not limited
to,
the satisfaction of the other parties’ conditions to Closing.
Section
6.5 Termination of
Plans.
To
the
extent ever maintained by the Company, prior to the Effective Time, the Company
shall adopt resolutions to terminate the Company’s 401(k) plan (the “401(k)
Plan”) immediately prior to the Closing. To the extent ever
maintained by the Company, Parent shall receive from the Company evidence
that
the Company Board has adopted resolutions to terminate the 401(k) Plan (the
form
and substance of which resolutions shall be subject to review and approval
of
Parent, which approval will not be unreasonably withheld or delayed), effective
as of the day immediately preceding the Closing Date but contingent on the
Closing. Parent shall permit each employee of the Company who
participates in Parent’s 401(k) plan following the Effective Time and who has
received an eligible rollover distribution (as defined in Section 402(c)(4)
of
the Code) from the 401(k) Plan to roll such eligible rollover distribution,
into
an account under Parent’s 401(k) plan.
Section
6.6 Tax
Certificate.
The
Company shall, prior to the Closing Date, provide Parent with a properly
executed FIRPTA certificate, substantially in the form agreed to by the parties
hereto, which states that shares of capital stock of the Company do not
constitute “United States real property interests” under Section 897(c) of the
Code, for purposes of satisfying Parent’s obligations under Treasury Regulation
Section 1.1445-2(c)(3). In addition, simultaneously with delivery of
such Notification Letter, the Company shall have provided to Parent, as agent
for the Company, a form of notice to the IRS in accordance with the requirements
of Treasury Regulation Section 1.897-2(h)(2) and in the customary form
along with written authorization for Parent to deliver such notice form to
the
IRS on behalf of the Company upon the Closing of the Merger.
Section
6.7
Withholding.
Notwithstanding
anything herein to the contrary, Parent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
shareholder such amounts as the Company or Parent has determined is required
to
be deducted and withheld with respect to any of the transactions under any
provision of United States federal, state, local or foreign tax
Law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid
to the shareholder in respect of which such deduction and withholding was
made.
42
Section
6.8 Company Disclosure
Schedule.
As
soon
as practicable following the date hereof, the Company shall deliver to Parent
the Company Disclosure Schedule. Prior to the Closing, if any event, condition,
fact or circumstance that is required to be disclosed on the Company Disclosure
Schedule prior to the Closing would require a change to the Company Disclosure
Schedule if the Company Disclosure Schedule were dated as of the date of
the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Parent an update
to the
Company Disclosure Schedule specifying such change and shall use its best
efforts to remedy same, if requested to do so by Parent.
Section
6.9
Inspections.
Following
the date hereof, the Company and the Sole Shareholder agree that Parent may
perform, at its sole discretion and at its sole cost and expense, any
investigation, inspection or site assessment of the Company’s properties,
locations and assets prior to the Closing, including
environmental studies of any of the Company’s locations, and the Company and the
Sole Shareholder shall cooperate fully in such investigations, inspections
and
assessments.
Section
6.10 Maintenance of the Surviving
Corporation.
Following
the Effective Time, until such time as the Seller Notes are paid in full,
including all principal and interest thereon, Parent and the Surviving
Corporation shall use commercially reasonable efforts to maintain and preserve
the assets of the Surviving Corporation.
Section
6.11 Store Revenues.
The
gross
revenues for the Company stores listed on Schedule 6.11 shall be a
minimum of $2,256,000 for the twelve (12) month period prior to the date
of this
Agreement.
Section
6.12
Escrow.
(a) At
the Closing, Parent will deposit with the Escrow Agent the Merger Shares
on
behalf of the Sole Shareholders to be held in accordance with the Escrow
Agreement in partial satisfaction of its obligations to pay the Sole
Shareholders the merger consideration set forth in Section
2.7.
(b) The
Merger Shares shall be retained for payment of the Sole Shareholders’
obligations arising under the indemnification provisions set forth in Section
9.1 of this Agreement, if any, including, without limitation, Remediation
and monitoring costs, legal and consulting fees and costs (including, without
limitation, attorneys’ fees and costs incurred in connection with any action
against any of the Company insurers, all defense costs and fees incurred
in
defending against any Environmental Claim, and Third Party Claims, pursuant
to
the terms of the this Agreement and the Escrow Agreement.
43
(c) In
the event that any such indemnity claim is satisfied from the Escrow Shares
and
is then paid or reimbursed from insurance proceeds, then the amount so paid
or
reimbursed to the extent originally paid from the Escrow Shares shall be
deposited with the Escrow Agent to be held along with the
Escrow Shares.
Section
6.13 Company Debt.
Except
as
otherwise provided in this Agreement, all Company Debt, including, without
limitation, the loans set forth on Schedule 6.13, shall be paid off on or
prior to the Closing and the Company shall provide Parent with pay-off letters
and UCC termination statements, as applicable, for all such
amounts.
ARTICLE
VII
CONDITIONS
TO THE CLOSING
Section
7.1 Conditions to Obligations of Each Party to
Effect the Merger.
The
respective obligations of each party to this Agreement to consummate and
effect
the Merger and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Shareholder
Approval. This Agreement, the Articles of Merger and the Merger
shall have been approved by the requisite vote of the Sole
Shareholders.
(b) No
Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
Governmental Entity or instrumentality, domestic or foreign, seeking any
of the
foregoing be pending; nor shall there be any action taken, or any statute,
rule,
regulation or order enacted, entered or enforced, which makes the consummation
of the Merger illegal. In the event an injunction or other order
shall have been issued, each party agrees to use its reasonable efforts to
have
such injunction or other order lifted.
(c) Governmental
Approval. Parent, the Company and their respective subsidiaries
shall have timely obtained from each Governmental Entity all approvals, waivers
and consents, if any, necessary for consummation of, or in connection with,
the
several transactions contemplated hereby.
Section
7.2 Additional Conditions to Obligations of
the Company.
The
obligations of the Company to consummate and effect the Merger and the
transactions contemplated hereby shall be subject to the satisfaction at
or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by the Company:
44
(a) Representations,
Warranties and Covenants. The representations and warranties of
Parent and Merger Sub in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality or Material Adverse
Effect which representations and warranties as so qualified shall be true
in all
respects) on and as of the Effective Time as though such representations
and
warranties were made on and as of such time (except for such
representations and warranties which speak as of a particular time which
representations and warranties need be true and correct only as of such time)
and Parent and Merger Sub shall each have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them as of the Effective
Time.
(b) Certificate
of Parent. The Company shall have received from Parent an
officer’s certificate certifying to the fulfillment of the conditions specified
in Section 7.2(a).
(c) Seller
Notes. Parent shall have delivered to the Sole Shareholders the
Seller Notes endorsed and effective upon the Closing, together with Uniform
Commercial Code financing statements and/or other document, in form and
substance reasonably acceptable to Sole Shareholders, which, upon filing
pursuant to Hawaii Law, will perfect a first priority and second priority
security interest for Xxxxxxxx and Xxxx, respectively, in the Surviving
Corporation and all assets thereof at Closing.
(d) Registration
Rights Agreement. Parent shall have delivered to the Sole
Shareholders an executed registration rights agreement in the form of Exhibit
E (the “Registration Rights Agreement”) attached to this
Agreement.
(e) Escrow
Agreement. Parent shall have delivered to the Sole Shareholders
an executed escrow agreement in the form of Exhibit H (the “Escrow
Agreement”) attached to this Agreement.
Section
7.3 Additional
Conditions to the Obligations of Parent and Merger
Sub.
The
obligations of Parent and Merger Sub to consummate and effect the Merger
and the
transactions contemplated hereby shall be subject to the satisfaction at
or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Parent or Merger Sub:
(a) Representations,
Warranties and Covenants. The representations and warranties of
the Company in this Agreement shall be true and correct in all material respects
(except for such representations and warranties that are qualified by their
terms by a reference to materiality or Material Adverse Effect which
representations and warranties as so qualified shall be true in all respects)
on
and as of the Closing Date as though such representations and warranties
were
made on and as of such date (except for such representations and warranties
which speak as of a particular time which representations and warranties
need be
true and correct only as of such time) and the Company shall in all material
respects have performed and complied with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by
it as
of the Effective Time.
45
(b) Certificate
of the Company. Parent shall have received a certificate of the
Company executed by an officer certifying fulfillment of the conditions set
forth in Section 7.3(a), Section 7.3(c), Section 7.3(e),
and Sections 7.3(g)-(s).
(c) Third
Party Consents. Parent shall have been furnished with evidence
reasonably satisfactory to Parent of the consent or approval of those persons
whose consent or approval shall be required for the Company (i) to consummate
the transactions contemplated hereby and (ii) to comply with and perform
all of
the Company’s obligations as contemplated hereby.
(d) Legal
Opinion. Parent shall have received a legal opinion from Bays
Deaver Lung Rose & Holma, legal counsel to the Company, in substantially the
form of Exhibit F attached to this Agreement.
(e) No
Material Adverse Changes. There shall not have occurred any
Material Adverse Effect in the condition (financial or otherwise), properties
and assets (including intangible assets), liabilities, business, operations,
results of operations or prospects of the Company; provided, however,
that for purposes of determining whether there shall have been any such Material
Adverse Effect, any adverse change that results from the taking of any action,
or the failure to act, as required by this Agreement shall be
disregarded.
(f) Resignation
of Officers and Directors. The officers and directors of the
Company in office immediately prior to the Effective Time shall have resigned
as
officers and directors of the Company, effective as of the Effective Time,
and
Parent shall have received letters of resignation in form and substance
satisfactory to Parent from such persons.
(g) Dissenting
Shares. Holders of Common Stock representing a minimum of ninety
percent (90%) of the aggregate number of shares of Company Common Stock
outstanding shall have voted in favor of the Merger or waived their appraisal
rights under Hawaii Law.
(h) Closing
Statement. The Company shall have delivered to Parent the
Closing Statement pursuant to Section 2.8(a) hereof in form and substance
reasonably satisfactory to Parent.
(i) Termination
of 401(k) Plan. The 401(k) Plan (to the extent ever maintained by
the Company) shall have been terminated.
(j) Tax
Certificates. The Company shall have provided Parent with the
properly executed certificates pursuant to Section 6.6.
(k) Non-Compete
Agreement. The Sole Shareholders shall have delivered to Buyer an
executed non-compete agreement effective upon the Closing in the form of
Exhibit G attached to this Agreement.
46
(l) Registration
Rights Agreement. The Sole Shareholders shall have delivered to
Buyer an executed Registration Rights Agreement.
(m) Closing
Balance Sheet. The Company shall have delivered to Buyer the
Closing Balance Sheet in form and substance reasonably satisfactory to
Buyer.
(n) Company
Revenues. The gross revenues for the Company stores listed on Schedule 6.11
for the twelve month period prior to the Closing shall be a minimum of Two
Million Two Hundred Fifty Six Thousand and No/100 Dollars
($2,256,000).
(o) Accounts
Payable. The Company Accounts Payable will not be more than
thirty (30) days current.
(p) Rent
Factor. The aggregate rent factor for the Company’s four retail
locations shall be equal to or less than 12%.
(q) Lease
Agreements. Except with respect to the Pearl Highlands lease,
each of the Lease Agreements shall have a minimum term of four (4) years
remaining as of the Closing.
(r) Disclosure
Schedule. The Sole Shareholders shall have provided Buyer with
the Disclosure Schedule.
(s) Escrow
Agreement. The Sole Shareholders shall have delivered to Buyer an
executed Escrow Agreement.
Section
7.4 Frustration of
Conditions.
Neither
Parent nor the Company may rely on the failure of any condition set forth
in
this ARTICLE VII to be satisfied if such failure was caused by such
party’s failure to comply with or perform any of its covenants or obligations
set forth in this Agreement.
ARTICLE
VIII
TERMINATION,
AMENDMENT AND WAIVER
Section
8.1
Termination.
At
any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger to the Sole Shareholders,
this
Agreement may be terminated:
(a) by
mutual consent of Parent and the Company;
(b) by
either Parent or the Company, if the Closing shall not have occurred on or
before November 15, 2007 (the “Final Date”); provided that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose action or failure to act has been the cause
of or
resulted in the failure of the Merger to occur on or before such date and
such
action or failure to act constitutes a breach of this Agreement;
47
(c) by
Parent, if the Company shall breach any representation, warranty, obligation
or
agreement hereunder such that the conditions set forth in Section 7.3(a)
would be incapable of being satisfied by the Final Date, and such breach
shall
not have been cured, or by its nature cannot be cured, within ten (10) days
of
receipt by the Company of written notice of such breach;
provided that Parent has not breached any of its
representations, warranties, obligations or agreements hereunder;
(d) by
the Company, if Parent or Merger Sub shall breach any representation, warranty,
obligation or agreement hereunder, such that the conditions set forth in
Section 7.2(a) would be incapable of being satisfied by the Final Date,
and such breach shall not have been cured, or by its nature cannot be cured,
within ten (10) days following receipt by Parent of written notice of such
breach; provided that the Company has not breached any of its
representations, warranties, obligations or agreements hereunder;
(e) by
Parent, if the Sole Shareholders have not approved and adopted this Agreement
and the transactions contemplated hereby;
(f) by
Parent, Merger Sub or the Company if any permanent injunction or other order
of
a court or other competent authority preventing the consummation of the Merger
shall have become final and nonappealable;
(g) by
Parent, if a Material Adverse Effect on the Company has occurred since the
date
hereof; provided, however, that for purposes of determining whether
there shall have been any such Material Adverse Effect, any adverse change
that
results from the taking of any action, or the failure to act, as required
by
this Agreement shall be disregarded; and
(h) by
Parent, if the Parent is not satisfied with its due diligence investigation,
in
its sole and absolute discretion, or if the Company Disclosure Schedule contains
any event, condition, fact or circumstance that is not satisfactory to Parent,
in its sole and absolute discretion.
Section
8.2 Effect of
Termination.
In
the
event of termination of this Agreement as provided in Section 8.1, this
Agreement shall forthwith become void, and except as provided in Section
8.3, there shall be no liability or obligation on the part of Parent, Merger
Sub or the Company or their respective officers, directors, shareholders,
shareholders or affiliates, except to the extent that such termination results
from fraud; provided that the provisions of Section 6.1 (Public
Disclosure), this Section 8.2, Section 8.3 (Fees For Termination),
Section 8.4 (Expenses) and ARTICLE IX shall remain in full force
and effect and survive any termination of this Agreement.
Section
8.3 Fees for
Termination.
If
Parent
terminates this Agreement pursuant to Section 8.1(c) by reason of the
failure of the Sole Shareholders to satisfy any of the conditions set forth
in
Sections 7.3(n) – (r), the Sole Shareholders shall promptly return the Deposit
to Parent less the Company’s legal fees and costs incurred through the date of
such termination and pay Buyer for all of its out-of-pocket costs and expenses
associated with the transactions contemplated by this Agreement.
48
Section
8.4 Expenses
Subject
to Section 8.3, whether or not the Merger is consummated, all costs and
expenses arising out of, relating to or incidental to the discussion,
evaluation, negotiation and documentation of this Agreement and the transactions
contemplated hereby and thereby (including, without limitation, reasonable
fees
and expenses of legal counsel and financial advisors and accountants, if
any)
(in the aggregate, “Transaction Expenses”), shall be paid by the party
incurring such expense; it being understood that all such costs and expenses
incurred by the Company shall be paid by the Company in cash prior to the
Closing, and shall in no event be borne by Parent, the Surviving Corporation
or
Merger Sub. To the extent that any such costs or expenses of the
Company are not so paid, they shall be deducted from the Merger
Consideration.
Section
8.5 Amendment
The
parties hereto may cause this Agreement to be amended at any time by execution
of an instrument in writing signed on behalf of each of the parties hereto,
except as otherwise required by Law.
Section
8.6 Extension;
Waiver
Any
party
hereto may, subject to Section 8.5 and to the extent legally allowed, (i)
extend the time for the performance of any of the obligations or other acts
of
the other parties hereto, (ii) waive any inaccuracies in the representations
and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any such
extension or waiver by any party hereto shall not operate or be construed
as a
further or continuing extension or waiver. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if
set
forth in an instrument in writing signed on behalf of such party.
ARTICLE
IX
INDEMNIFICATION
Section
9.1 Indemnification
(a) As
and to the extend provided in this section, the Sole Shareholders, jointly
and
severally, will indemnify and hold harmless Parent and its affiliates (including
the Surviving Corporation) and their respective officers, directors, agents
and
employees (hereinafter referred to individually as an “Indemnified
Person” and collectively as “Indemnified Persons”), from and against
any and all losses, costs, damages, liabilities, Taxes and expenses (including,
without limitation, reasonable legal fees and expenses) (collectively,
“Damages”) arising out of or relating to (i) any misrepresentation or
breach of, or default in connection with, any of the representations,
warranties, covenants and agreements given or made by the Company in this
49
Agreement,
as modified by the Company Disclosure Schedule, or in any exhibit or schedule
to, or certificate delivered in connection with, this Agreement, (ii) any
inaccuracy contained in the Closing Statement, (iii) Environmental Claims
(including, inter alia, costs of Remediation, legal and consulting fees and
costs, and Third Party claims) related to or arising from Releases of Materials
of Environmental Concern by the Company and/or environmental conditions
occurring or existing on the Company’s properties on or before the Closing Date,
and (iv) the litigation matter set forth on Section 3.8 of the Company
Disclosure Schedule. Subject to the following sentence, (i) all
obligations of the Sole Shareholders for indemnification pursuant to this
Section
9.1(a) shall be satisfied solely from the Merger Shares, the Seller
Notes and insurance proceeds, if available, in that order, (ii) in no event
shall the obligations of the Sole Shareholders to provide indemnification
pursuant to this Section
9.1(a) exceed an amount equal to the Merger Shares and the Seller
Notes, and (iii) all obligations of the Sole Shareholders for indemnification
pursuant to this Section 9.1(a) shall cease and be terminated upon the
termination of the Escrow Agreement pursuant to the terms thereof (“Release
Date”). On the Release Date, the Merger Shares shall be promptly delivered to
the Sole Shareholders. The right of the Indemnified Persons to obtain
indemnification from the Escrow Shares pursuant to this Section
9.1(a) shall be the exclusive remedy of the Indemnified Persons for any
matters arising under or in connection with this Agreement, including, without
limitation for payment of Parent Damages other than (i) actions for specific
performance pursuant to Section
10.9, (ii) Parent Damages arising out of or related to intentional
fraud or intentional misrepresentation, or (iii) offsets pursuant to Section
2.12. The right to indemnification, payment of Damages or
other remedy will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance
with,
any representation, warranty, covenant or agreement made by the Company or
any
other matter. The waiver of any condition based on the accuracy of
any such representation or warranty, or on the performance of or compliance
with
any such covenant or agreement, will not affect the right to indemnification,
payment of Damages, or any other remedy based on any such representation,
warranty, covenant or agreement.
(b) In
the event that an Indemnified Person seeks to exercise its rights to obtain
indemnification for Damages under Section 9.1(a), Parent shall deliver to
the Sole Shareholders a certificate (an “Officer’s
Certificate”) specifying in reasonable detail the nature of the claim for
which indemnification is being sought and the amount of Damages. Such
amount shall become payable within ten (10) Business Days of receipt of the
Officer’s Certificate.
(c) Parent
shall be entitled to offset an amount equal in value to the full amount of
all
Damages from any and all amounts Parent is obligated to pay the Sole
Shareholders. In determining the amount of any Damages attributable
to such breach, any materiality standard contained in a representation, warranty
or covenant of the Company shall be disregarded.
(d) Any
indemnification payment paid pursuant to this ARTICLE IX shall be treated
as an adjustment to the purchase price.
50
(e) In
the event Merger Sub is evicted from that certain Pohukaina Center property
located at 000/000/000 Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx (the “Xxxx
Property”) prior to 48 months following the Closing (“Eviction”)
pursuant to an exercise by the landlord under the lease thereof of its right
to
terminate on six months’ notice and not by reason of Merger Sub’s default under
the lease, Merger Sub will be entitled to damages for lost revenues during
such
period (“Eviction Damages”); provided, however, Merger Sub will use its
commercially reasonable efforts to prevent such Eviction. Eviction Damages
shall
equal (1) the applicable Store Target Amount less the product of (a) the
applicable Store Target Amount multiplied by (b) a fraction, the numerator
of
which equals the number of months such store continued to operate following
the
Closing prior to the Eviction (up to a maximum of 48 months) and the denominator
of which equals 48, minus (2) the amount of any reimbursement to Merger Sub
by
the landlord of Merger Sub’s share of any lease assignment fees returned to
Merger Sub that were incurred in obtaining the assignment of the lease from
the
Company to Merger Sub. The Store Target Amount shall be 95% of the annual
revenues for the Xxxx Property for the 12 month period prior to the Closing
multiplied by 48 months. For example purposes only, if the applicable
Store Target Amount equals $100,000 and the applicable store operates for
12
months following the Closing prior to the Eviction, the Eviction Damages
shall
equal $75,000 ($100,000 - (12/48 x $100,000). Merger Sub shall be
entitled, in its sole discretion, to offset such Eviction Damages first from
the
Merger Shares and second from the Seller Notes as provided below. If
the Eviction has not occurred by the two-year maturity date of the Seller
Notes,
then the maximum exposure for the remainder of the 48 months will be calculated
and, as to the balloon principal payments then due, one of two alternatives
will
occur. First, if the post-closing environmental conditions have been satisfied
or, if they have not been completed but the cost thereof has been quantified
and
the Merger Shares then held in escrow at then-market value are sufficient
to pay
the cost and the exposure on the remainder of the 48 months, the balloon
will be
paid in full. Second, if the post-closing conditions have not been satisfied
or,
if the reserved stock at value is not sufficient to pay the cost and the
exposure on the remainder of the 48 months, the amount of principal sufficient
to make up the balance will be held back by Parent and the balance will be
paid
to the Sole Shareholders. The computation will be redone every three months
and
the balance of principal no longer required for reserve will be paid to the
Sole
Shareholders. If the Landlord has not given notice of termination by the
end of
the 42nd month (six months in advance of the 48 months), all remaining principal
will be paid to the Sole Shareholders. Interest will continue to be paid
at the
same rate monthly throughout on any held back principal balance. In the
interpretation and application of this section, the rights and obligations
of
the Sole Shareholders shall be applied on a pro rata basis reflecting the
respective amounts owed to Xxxxxxxx and Xxxx, respectively.
Section
9.2 Objections to Claims; Resolution of
Conflicts; Arbitration
(a) The
Sole Shareholders shall have the right to object to one or more of the claims
set forth in any Officer’s Certificate delivered by Parent to the Sole
Shareholders by serving written notice thereof within fifteen (15) Business
Days
following the delivery of such Officer’s Certificate, which notice shall specify
in reasonable detail the basis for such objection. In the event
that the Sole Shareholders do not object to a claim in accordance with the
preceding sentence by the close of business on the fifteenth (15th) Business
Day
following receipt by the Sole Shareholders of the Officer’s Certificate, the
Sole Shareholders shall be deemed to have accepted and agreed to the claim
set
forth in such Officer’s Certificate, and shall be precluded from raising any
objection thereto following such date.
51
(b) In
case the Sole Shareholders shall so object in writing to any claim or claims
by
Parent made in any Officer’s Certificate, Parent shall have fifteen (15) days
after receipt of an objection by the Sole Shareholders to respond thereto
in a
written statement. If after such fifteen (15) day period there
remains a dispute as to any claims, the Sole Shareholders and Parent shall
attempt in good faith for sixty (60) days to agree upon the rights of the
respective parties with respect to each of such claims. If the Sole
Shareholders and Parent should so agree, the claims set forth in such Officer’s
Certificate shall be modified as necessary to reflect such agreement, and
any
offset against the any amount payable to Sole Shareholders in connection
therewith shall be effective as of such time.
(c) If
no such agreement can be reached after good faith negotiation, either Parent
or
the Sole Shareholders may, by written notice to the other, demand arbitration
of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and
in
either such event the matter shall be settled by arbitration conducted by
three
arbitrators. Within twenty (20) days after such written notice is
sent, Parent and the Sole Shareholders shall each select one arbitrator,
and the
two arbitrators so selected shall select a third arbitrator. The
decision of the arbitrators as to the validity and amount of any claim in
such
Officer’s Certificate shall be binding and conclusive upon the parties to this
Agreement, and may be thereupon offset against any amount payable to the
Sole
Shareholders.
(d) Judgment
upon any award rendered by the arbitrators may be entered in any court having
jurisdiction. Any such arbitration shall be held in Honolulu, Hawaii,
under the commercial rules then in effect of the American Arbitration
Association. All costs and expenses (including attorneys’ fees and
expenses) incurred in connection with any such arbitration shall be paid
by the
party incurring such expense. The fees and expenses of each
arbitrator and the administrative fee of the American Arbitration Association
shall be allocated by the arbitrator or arbitrators, as the case may be (or,
if
not so allocated, shall be borne equally by Parent and the Sole
Shareholders).
Section
9.3 Third-Party
Claims
In
the
event that Parent becomes aware of a third-party claim which Parent believes
give rise to indemnification under this ARTICLE IX (a “Third Party
Claim”), Parent shall promptly notify the Sole Shareholders of such Third
Party Claim; provided, however, that the failure to give
prompt notice shall not affect the indemnification provided hereunder except
to
the extent the Sole Shareholders, on behalf of the Sole Shareholders, have
been
actually prejudiced as a result of such failure. The notice of Third
Party Claim shall include, based on the information then available to Parent,
a
summary in reasonable detail of the basis for the claim and a reasonable
estimate of the Damages. The Sole Shareholders shall be entitled, at
their own expense, to participate therein; provided, however,
that Parent shall have full control over the litigation, including settlement
and compromise thereof; provided, further that any such
settlement shall not be determinative of the existence of or amount of Damages
relating to such claim, except with the consent of the Sole Shareholders,
which
consent shall not be unreasonably withheld or delayed and which consent shall
be
deemed to have been given unless the Sole Shareholders shall have objected
within thirty (30) days after a written request for such consent by
Parent. In the event that the Sole Shareholders have consented to any
settlement of a Third Party Claim, the Sole Shareholders shall not have any
power or authority to object under Section 9.5 or any other provision of
this ARTICLE IX to any claim by an Indemnified Person for offset
against the amounts payable to Sole Shareholders or for indemnity in the
amount
of such settlement.
52
Section
9.4 No Right of
Contribution
The
Sole
Shareholders shall not make any claim for contribution from the Company or
the
Surviving Corporation with respect to any indemnity claims arising under
or in
connection with this Agreement to the extent that the Company, Surviving
Corporation or any Indemnified Person is entitled to indemnification hereunder
for such claim, and the Sole Shareholders hereby waive any such right of
contribution from the Company or the Surviving Corporation they have or may
have
in the future.
ARTICLE
X
GENERAL
PROVISIONS
Section
10.1 Survival
The
representations, warranties, covenants and agreements of the Company, Parent
and
Merger Sub contained in this Agreement as modified by the Company Disclosure
Schedule or any exhibit or schedule or certificate delivered pursuant to
this
Agreement shall survive until the twenty-four (24) month anniversary of the
Closing Date, except with respect to the matters set forth in Sections
3.3 (Capitalization, Title to Shares), 3.12 (Title to Property),
3.14 (Environmental Matters) and 3.16 (Taxes), which shall survive
until expiry of the applicable statute of limitations, except for those certain
covenants and agreements (such as those relating to the right to
indemnification) that call for action after the Effective Time, which survive
indefinitely. In no case shall the termination of the
representations, warranties, covenants and agreements affect any claim for
misrepresentation or breach thereof or default thereunder if written notice
of
such misrepresentation, breach or default is given to the Sole Shareholders
(including under Section 9.3) prior to such
termination.
Section
10.2 Notices
All
notices and other communications hereunder shall be in writing and shall
be
deemed received (i) on the date of delivery if delivered personally and/or
by messenger service, (ii) on the date of confirmation of receipt of
transmission by facsimile (or, the first Business Day following such receipt
if
(a) the date is not a Business Day or (b) confirmation of receipt is given
after
5:00 p.m., California Time) or (iii) on the date of confirmation of receipt
if delivered by a nationally recognized courier service (or, the first Business
Day following such receipt if (a) the date is not a Business Day or (b)
confirmation of receipt is given after 5:00 p.m., California Time), to the
parties at the following address or facsimile numbers (or at such other address
or facsimile number for a party as shall be specified by like
notice):
53
(a) if
to Parent, SPH, Merger Sub or the Surviving Corporation, to:
U.S.
Dry
Cleaning Corporation
000
Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx
X. Xxx, Chief Executive Officer
Facsimile
No.: (000) 000-0000
with
a
copy to (not notice):
Xxxxxxxxx
Xxxxxxx, LLP
0000
Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx,
Xxxxxxxxxx 00000
Attention: Xxxx
X. Giovanonne, Esq.
Facsimile
No.: (000) 000-0000
(b) if
to the Company prior to the Closing, to:
Xxxxxxxx
Corp. d/b/a Caesars Cleaners
00-000
Xxxxxxxxxx Xxxxxxx, Xxx. X.
Xxxxxxx,
XX 00000
Attention: Xxxx
Xxxxxxxx
Facsimile
No.: (000) 000-0000
with
a
copy to (not notice):
Bays
Deaver Lung Rose & Holma
0000
Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx,
XX 00000
Attention: Xxxxxx
X. Case
Facsimile
No.: (000) 000-0000
(c) if
to the Sole Shareholders, to:
Xxxx
Xxxxxxxx
0000
Xxx
Xxxxx Xxxxxxxxx, Xxx. 0000
Xxxxxxxx,
XX 00000
Facsimile
No.: (000) 000-0000
with
a
copy to (not notice):
Bays
Deaver Lung Rose & Holma
0000
Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx,
XX 00000
Attention: Xxxxxx
X. Case
Facsimile
No.: (000) 000-0000
54
Xxxxxxx
Xxxx
000
Xxxxxx Xxxxx
Xxxxxx,
XX 00000
Facsimile
No.: [●]
Section
10.3 Interpretation
When
a
reference is made in this Agreement to Exhibits, such reference shall be
to an
Exhibit to this Agreement unless otherwise indicated. The words
“include,” “includes” and “including” when used herein shall be deemed in each
case to be followed by the words “without limitation.” The phrase
“made available” in this Agreement means that the information referred to has
been made available if requested by the party to whom such information is
to be
made available. The phrases “the date of this Agreement”, “the date
hereof”, and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to [●], 2007. The table of contents and
headings contained in this Agreement are for reference purposes only and
shall
not affect in any way the meaning or interpretation of this
Agreement.
Section
10.4 Counterparts
This
Agreement may be executed in one or more counterparts, all of which shall
be
considered one and the same agreement and shall become effective when one
or
more counterparts have been signed by each of the parties and delivered to
the
other parties, it being understood that all parties need not sign the same
counterpart.
Section
10.5 Entire Agreement; Nonassignability;
Parties in Interest
This
Agreement and the certificates, documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the Company Disclosure Schedule (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
(b) except by operation of the Merger, shall not be assigned by operation
of law or otherwise except as otherwise specifically provided, and (c) shall
be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Except with respect to the right to
receive payments by Sole Shareholders in accordance with the terms of this
Agreement, nothing in this Agreement shall create or be deemed to create
any
third party beneficiary rights in any person or entity not a party to this
Agreement.
Section
10.6
Severability
In
the
event that any provision of this Agreement, or the application thereof, becomes
or is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force
and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties
hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
55
Section
10.7 Governing Law
This
Agreement shall be governed by and construed in accordance with the Laws
of the
State of Delaware without reference to such state’s principles of conflicts of
law. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any court located within the State of Delaware, in connection
with any matter based upon or arising out of this Agreement or the matters
contemplated herein, and agrees that process may be served upon them in any
manner authorized by the Laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
Section
10.8 Rules of
Construction
The
parties hereto agree that they have been represented by counsel during the
negotiation, preparation and execution of this Agreement and, therefore,
waive
the application of any law, regulation, holding or rule of construction
providing that ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document.
Section
10.9 Specific
Performance
The
parties hereto agree that if any of the provisions of this Agreement were
not
performed in accordance with their specific terms or were otherwise breached,
irreparable damage would occur, no adequate remedy at law would exist and
damages would be difficult to determine, and that the parties shall be entitled
to specific performance of the terms hereof, in addition to any other remedy
at
law or equity.
Section
10.10 Descriptive
Headings
The
descriptive headings herein are inserted for convenience only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
Section
10.11 Force Majeure
No
party
shall be deemed to fail to perform its obligations or respond to any notice
on a
timely basis if its failure results solely from the following causes beyond
its
reasonable control, specifically: war, terrorism, strikes, natural disaster
or
acts of God. Any delay resulting directly from any of said causes
shall extend accordingly the time to perform or respond by the length of
the
delay. For avoidance of doubt, the foregoing shall in no event
relieve any party of its obligations hereunder or permit a party to fail
to
respond to notice beyond the extension described in the preceding
sentence.
Section
10.12
Attorneys’
Fees
Should
any party hereto institute any action or proceeding in court or otherwise
to
enforce any provision hereof or for damages by reason of alleged breach of
any
provision of this Agreement, the prevailing party shall be entitled to receive
from the non-prevailing party such reasonable out of pocket expenses (including
attorneys’ fees and expenses) incurred by the prevailing party in connection
with any such action or proceeding.
56
[Signature
page follows]
57
IN
WITNESS WHEREOF, the Company, Parent, SPH, Merger Sub, and the Sole Shareholders
have executed and delivered this Agreement or have caused this Agreement
to be
executed and delivered by their respective officers thereunto duly authorized,
all as of the date first written above.
U.S.
Dry Cleaning Corporation
|
Xxxxxxxx
Corp. d/b/a Caesars Cleaners
|
|
By: /s/Xxxxxx
X. Xxx
|
By: /s/
Xxxxxxxx Xxxx Xxxxxxxx
|
|
Name: Xxxxxx
X. Xxx
|
Name:
Xxxxxxxx Xxxx Xxxxxxxx
|
|
Title: Chief
Executive Officer
|
Title:
President
|
|
Steam
Press Holdings, Inc.
|
/s/
Xxxxxxxx Xxxx Xxxxxxxx
|
|
Xxxxxxxx
Xxxx Xxxxxxxx
|
||
By: /s/
Xxxxxxx X. Xxxxx
|
||
Name: Xxxxxxx
X. Xxxxx
|
||
Title: President
|
/s/
Xxxxxxx Xxxxxxxx Xxxx
|
|
Xxxxxxx
Xxxxxxxx Xxxx
|
||
USDC
Caesars Hawaii, Inc.
|
||
By: /s/
Xxxxxxx X. Xxxxx
|
||
Name: Xxxxxxx
X. Xxxxx
|
||
Title: President
|