STOCK PURCHASE AGREEMENT
This
STOCK PURCHASE AGREEMENT (“Agreement”)
dated
as of August 17, 2007, is entered into by and among Xxxxxxx Industries, Inc.,
a
Delaware corporation (the “Buyer”),
Sunbelt Machine Works Corporation, a Texas corporation (the “Company”),
and
each of the stockholders set forth on Schedule
1
hereto
(collectively, the “Stockholders”).
Capitalized terms used in this Agreement shall have the meanings set forth
or
referenced in Exhibit
A.
W
I T N E S S E T H :
WHEREAS,
the Stockholders own all of the issued and outstanding shares of common stock,
par value $1.00 per share, of the Company (the “Shares”),
with
each Stockholder owning the number of Shares set forth, opposite each
Stockholder’s name on Schedule
1;
WHEREAS,
the Buyer is willing to buy from the Stockholders, and the Stockholders are
willing to sell to the Buyers, the Shares at Closing on the terms and conditions
and in reliance on the representations and warranties and mutual covenants
herein set forth;
NOW,
THEREFORE, in consideration of the premises and the mutual agreements and
covenants hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE
1
PURCHASE
AND SALE OF THE SHARES
(a) Cash
in
the amount of $9,000,000 (which amount may be adjusted pursuant to the Working
Capital Adjustment set forth under Section 7.8(b) hereof), payable in
immediately available funds by wire transfer at the Closing to the Stockholders
(to each, per their respective Pro Rata Portion), to be notified in writing
or
email to Buyer reasonably in advance (the “Cash
Consideration”);
(b) To
each
Stockholder a Pro Rata Portion of a promissory note, in the form attached
hereto
as Exhibit
B,
such
promissory notes (each, a “Note”
and
collectively, the “Notes”)
having
a aggregate value of $2,500,000 (the “Note
Consideration”);
(c) To
each
Stockholders a Pro Rata Portion of shares of Buyer’s common stock, $0.001 par
value per share (“Buyer
Common Stock”)
having
an aggregate value of Two Million Five Hundred Thousand Dollars ($2,500,000),
such number of shares to be determined by taking the average of the closing
prices of the Buyer Common Stock on the Over the Counter Bulletin Board (the
“Average
Price”)
during
the thirty (30) trading days immediately preceding the earlier of (i) the
filing
of a current report on Form 8-K with the Securities and Exchange Commission
announcing the execution of this Agreement (the “Announcing
8-K”)
or
(ii) Closing Date and dividing such Average Price into $2,500,000 (the
“Stock
Consideration”);
and
(d) the
assumption of approximately $500,000 of Liabilities of the Company (the
“Liability
Assumption”),
The
Cash Consideration, the Note Consideration, the Stock Consideration and the
Liability Assumption are hereinafter sometimes referred to as the “Total
Consideration”.
1
Section
1.3 Surrender
of Certificates.
(a) The
Corporate Secretary of Buyer, or an institution selected by Buyer, shall
serve
as the exchange agent (the “Exchange
Agent”)
for
the Stock Purchase.
(b) Prior
to
the Closing Date, Buyer shall make available to the Exchange Agent for exchange
in accordance with this Article 1, all of the Cash Consideration, Note
Consideration and Stock Consideration (other than additional cash, if any,
due
to the Working Capital Adjustment) payable pursuant to Section 1.2 hereof
in
exchange for the Shares; provided,
however,
that,
on behalf of the Stockholders, Buyer shall deposit into the Escrow Fund (as
defined in Section 7. hereof) the Stock Consideration, otherwise payable
to the
Stockholders pursuant to Section 1.2 hereof. Each Stockholder shall be deemed
to
have contributed his or her Pro Rata Portion of the Escrow Amount to the
Escrow
Fund.
(c) On
or
after the date hereof, Buyer shall or shall cause the Exchange Agent to,
mail a
letter of transmittal, in the form attached hereto as Exhibit
C
(the
“Letter
of Transmittal”),
to
each Stockholder at the address set forth below each Stockholders’ name in
Schedule
1.
After
receipt of such Letter of Transmittal, the Stockholders will deliver the
certificates representing their Shares to the Exchange Agent for assignment
to
Buyer together with a duly completed and validly executed Letter of Transmittal.
Upon delivery of a stock certificate representing Shares for assignment to
Buyer
to the Exchange Agent pending Closing, or such other agent or agents as may
be
appointed by Buyer, together with such Letter of Transmittal, duly completed
and
validly executed in accordance with the instructions thereto, the holder
of such
stock certificate shall be entitled to receive from the Exchange Agent in
exchange therefor, all of the Cash Consideration, Note Consideration and
Stock
Consideration (less the Stock Consideration to be deposited in the Escrow
Fund
on such Stockholder’s behalf pursuant to Section 1.3(b) and Article 7 hereof) to
which such holder is entitled pursuant to Section 1.2 hereof, and all stock
certificates so delivered shall be assigned to Buyer. Until so delivered,
each
stock certificate representing Shares outstanding after the Closing Date
will be
deemed from and for all corporate purposes thereafter, to evidence only the
right to receive the portion of the Total Consideration for which such shares
of
Company Stock shall have been so exchanged. Should the Agreement fail to
close,
Exchange Agent will deliver the Shares back to each of the Stockholders,
and the
preceding sentence shall no longer apply. No payments of any portion of the
Total Consideration will be made until the holder of such Shares surrenders
his,
her or its stock certificate(s) pursuant hereto.
(d) Notwithstanding
anything to the contrary in this Section 1.3,
neither
the Exchange Agent, the Buyer, nor any party hereto shall be liable to a
holder
of shares of Company Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section
1.4 Lost,
Stolen or Destroyed Certificates.
In the
event any certificates evidencing Shares shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen
or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such amount, if any, as may be required pursuant to Section
1.1
hereof; provided,
however,
that
Buyer may, in its discretion and as a condition precedent to the issuance
thereof, require the Stockholder who is the owner of such lost, stolen or
destroyed certificates to either (i) deliver a bond in such amount as it
may
reasonably direct or (ii) provide an indemnification agreement in a form
and
substance acceptable to Stockholder, against any claim that may be made against
Buyer or the Exchange Agent with respect to the certificates alleged to have
been lost, stolen or destroyed.
Section
1.5 Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall
take place at the offices of Xxxxxxx & Associates, Ltd, L.L.P., 00000 Xxxxx
Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, at 10:00 a.m. local time within 48
hours
of satisfaction or waiver of all closing conditions set forth in Article
6, or
such later date or time as the parties hereto may agree in writing (the
“Closing
Date”).
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND
THE
STOCKHOLDERS
Except
as
specifically set forth in the disclosure schedule delivered by the Company
and
the Stockholders to Buyer at or prior to the execution of this Agreement
(the
“Company
to its knowledge Disclosure Schedule”),
the
parts
of
which are numbered to correspond to the Section numbers of this Agreement,
the
Company and, severally and not jointly to his or its knowledge, each of the
Stockholders, hereby represent and warrant to Buyer:
2
Section
2.1 Due
Organization; Good Standing; Authority; Binding Nature of
Agreements.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas, and has all necessary corporate power
and
authority: (i) to conduct its business in the manner in which its business
is
currently being conducted; (ii) to own and use its assets in the manner in
which
its assets are currently owned and used; (iii) to perform its obligations
under
all Company Contracts; and (iv) to enter into and perform all of its obligations
under the Transactional Agreements to which it is a party.
(b) Except
as
set forth on Section 2.1(b) of the Company Disclosure Schedule, the Company
has
never conducted any business under or otherwise used, for any purpose or
in any
jurisdiction, any fictitious name, assumed name, trade name or name other
than
the name set forth in its articles of incorporation, as amended.
(c)
The
Company is not qualified as a foreign corporation in any jurisdictions and
the
nature of its business or the ownership or leasing of its properties does
not
requires any such qualification, except where the failure to so qualify and
be
in good standing would not have a Company Material Adverse Effect.
(d) Neither
the Company nor any of the Stockholders has approved, or commenced any
proceeding or made any election contemplating, the dissolution or liquidation
of
the Company or the winding up or cessation of the Company’s business or affairs.
(e) Except
as
set forth on Section 2.1(e) of the Company Disclosure Schedule, the Company
has
no subsidiaries, and the Company does not own, beneficially or otherwise,
any
shares or other securities of, or any direct or indirect equity interest
in, any
Entity.
(f) Each
of
the Transactional Agreements to which the Company is a party constitutes
the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms and conditions, subject to (i) bankruptcy,
insolvency, reorganization, arrangement, moratorium and other similar laws
of
general applicability relating to or affecting creditors’ rights generally; and
(ii) general principles of equity.
Section
2.2 Articles
of Incorporation and Bylaws; Records.
(a) The
Company has delivered to Buyer true and complete copies of: (i) the Company’s
articles of incorporation and bylaws, including all amendments thereto; (ii)
the
stock records of the Company; and (iii) the minutes and other records of
the
meetings and other proceedings (including any actions taken by written consent
or otherwise without a meeting) of the Stockholders, and any predecessor
thereto, and the board of directors of the Company, and any predecessor thereto.
There have been no meetings or other proceedings of the Stockholders, or
any
predecessor thereto, or the board of directors of the Company, or any
predecessor thereto which required board or shareholder action, that are
not
reflected in such minutes or other records.
(b) Except
as
set forth on Section 2.2(b) of the Company Disclosure Schedule, there
has
not been any violation of any of the provisions of the Company’s articles of
incorporation or bylaws or of any resolution adopted by the Stockholders
or the
Company’s board of directors, and to the knowledge of the Company no event has
occurred, and no condition or circumstance exists, that likely would (with
or
without notice or lapse of time) constitute or result directly or indirectly
in
such a violation except where such violation would not constitute a Company
Material Adverse Effect.
(c) Except
as
set forth on Section 2.2 of the Company Disclosure Schedule, the minute books
of
the Company (copies of which have been provided to Buyer) are accurate, up
to
date and complete in all respects, and such minute books of the Company and
any
predecessor thereto are in the actual possession and direct control of the
Company.
Section
2.3 Capitalization;
Ownership of Stock.
As of
the date of this Agreement:
(a) The
authorized capital stock of the Company consists of 2,000,000 shares of Company
Common Stock. As of the date of this Agreement, the outstanding capital of
the
Company consists of 1,000 shares of Company Common Stock. All of such Company
Stock are owned of record by the Stockholders, free and clear of any
Encumbrances imposed by the Company. Section 2.3(a) of the Company Disclosure
Schedule includes a list of all Stockholders and the number of shares of
Company
Common Stock held thereby, in each case indicating which of such stock is
restricted stock. The Company has no Company Stock Options or Company Warrants
issued or outstanding
3
(b) All
of
the shares of Company Common Stock currently outstanding (i) have been duly
authorized and validly issued, (ii) are fully paid and nonassessable, and
(iii)
have been issued in full compliance with all applicable securities laws and
other applicable Legal Requirements, except where such noncompliance would
not
result in a Company Material Adverse Effect.
(c) Except
as
described in Section 2.3(a) of the Company Disclosure Schedule, there is
no (i)
outstanding preemptive right, subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of the Company; (ii) outstanding security, instrument
or obligation that is or may become convertible into or exchangeable for
any
shares of the capital stock or other securities of the Company; (iii) Contract
under which the Company is or may become obligated to sell or otherwise issue
any shares of its capital stock or any other securities; or (iv) condition
or
circumstance that likely would directly or indirectly give rise to or provide
a
basis for the assertion of a claim by any Person to the effect that such
Person
is entitled to acquire or receive any shares of capital stock or other
securities of the Company.
(d) Since
December 31, 2006, the Company has neither repurchased, redeemed or otherwise
reacquired, and has not agreed, committed or offered (in writing or otherwise)
to reacquire, any shares of its capital stock or other securities. Any
securities reacquired by the Company were (or will have been) reacquired
in full
compliance with the applicable provisions of all applicable Legal Requirements.
Section
2.4 Financial
Statements.
(a) The
Company is currently having an accounting firm authorized to practice before
the
Securities and Exchange Commission conduct an audit of the balance sheet
of the
Company, as of December 31, 2006 and the related statements of operations,
shareholders’ equity and cash flows for the two years then ended (the
“Company
Audited Financial Statements”),
and
such audit shall be completed prior to Closing. The Company Audited Financial
Statements will be true and accurate, in accordance with the books and records
of Company in all material respects. Except as disclosed therein, the Company
Audited Financial Statements (i) will be in accordance with the books and
records of the Company and will be prepared in conformity with generally
accepted accounting principles as
in
effect in the United States.
(“GAAP”)
consistently applied for all periods, and (ii) will present fairly the
financial position of the Company as of the respective dates thereof, and
the
results of operations, and changes in shareholders’ equity and changes in cash
flow for the periods then ended, all in accordance with GAAP consistently
applied for all periods.
(b) The
Company has delivered to Buyer the unaudited balance sheets of Xxxxxxxx Machine
Works Ltd. as of January 31, 2007 (the “Unaudited
Interim Balance Sheet”)
and
related unaudited statements of operations for the one month then ended,
a copy
of which is attached hereto as Exhibit
D.
(c) Except
as
set forth on Section 2.4(c) of the Company Disclosure Schedule,
at the
date of the Unaudited Interim Balance Sheet, (i) the Company and Xxxxxxxx
Machine Works Ltd. on a consolidated basis had no Liabilities of any nature
required by GAAP to be provided for in such Unaudited Interim Balance Sheet
which were not provided for, (ii) the Company and Xxxxxxxx Machine Works
Ltd. on
a consolidated basis had no Liabilities of any nature which were not required
by
GAAP to be provided for in the Unaudited Interim Balance Sheet, and (iii)
all
reserves established by the Company and Xxxxxxxx Machine Works Ltd. on a
consolidated basis and set forth in the Unaudited Interim Balance Sheet were
adequate in all material respects for the purposes for which they were
established.
(d) Except
as
set forth in Section 2.4(d) of the Company Disclosure Schedule, since the
date
of the Unaudited Interim Balance Sheet, the Company has no (and Xxxxxxxx
Machine
Works Ltd. had no) Liabilities in excess of $15,000 individually or $35,000
in
the aggregate, except for (i) Liabilities identified as such in the
“liabilities” column of the Unaudited Interim Balance Sheet; (ii) accounts
payable incurred and accrued by the Company in the Ordinary Course of Business
since the date of the Unaudited Interim Balance Sheet; and (iii) fees
and
expenses associated with the transactions contemplated hereby (such fees
and
expenses to be subject to Article 9 hereof).
4
Section
2.5 Absence
of Changes.
Except
as set forth in Section 2.5 of the Company Disclosure Schedule, from the
date of
the Unaudited Interim Balance Sheet to the date of this Agreement:
(a) there
has
not been any Company Material Adverse Effect, and no event has occurred that
likely would have a Company Material Adverse Effect;
(b) there
has
not been any material loss, damage or destruction to any of the Company’s assets
not covered by insurance;
(c) the
Company has not (i) declared, accrued, set aside or paid any dividend or
made
any other distribution in respect of any shares of capital stock, or (ii)
repurchased, redeemed or otherwise reacquired any shares of capital stock
or
other securities, except for the repurchase of shares of Common Stock from
employees, officers, directors, consultants or other persons performing services
for the Company pursuant to agreements under which the Company has the option
to
repurchase such shares at cost upon the occurrence of certain events, such
as
the termination of employment, which repurchases are reflected in the Company
Disclosure Schedules delivered in accordance with Section 2.3(d) hereof;
(d) the
Company has not sold or otherwise issued any shares of capital stock or any
other securities, except pursuant to the Company Stock Option Plan or upon
exercise or conversion of exercisable or convertible securities which exercises
and conversions are reflected in the Company Disclosure Schedules delivered
in
accordance with Section 2.3 hereof;
(e) the
Company has not amended its articles of incorporation or bylaws and has not
effected or been a party to any recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(f) the
Company has not purchased or otherwise acquired any asset from any other
Person,
except for assets acquired by the Company in the Ordinary Course of Business;
(g) the
Company has not leased or licensed any asset from any other Person, except
for
assets leased or licensed in the Ordinary Course of Business;
(h) the
Company has not made any individual capital expenditure, measured by invoice
amount, in excess of $15,000;
(i) the
Company has not sold or otherwise transferred, and has not leased or licensed,
any asset to any other Person except in the Ordinary Course of Business;
(j) the
Company has not written off as uncollectible, or established any reserve
with
respect to, any account receivable or other indebtedness of $25,000 or more;
(k) the
Company has not pledged or hypothecated any of its assets or otherwise permitted
any of its assets to become subject to any Encumbrance;
(l) the
Company has not made any loan or advance to any other Person, including without
limitation, any shareholder (excluding routine advances to employees and
consultants for expenses not exceeding $3,000 in any individual case or $15,000
in the aggregate);
(m) the
Company has not (i) established or adopted any Plan or (ii) paid any bonus
or
made any profit sharing or similar payment to, or increased the amount of
the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees other
than
salary increases for non-officer employees in the Ordinary Course of Business
and consistent with the Company’s review and compensation practices then in
force and the Company has not adopted any review or compensation policies;
(n) the
Company has not entered into, and neither the Company nor any of the assets
owned or used by the Company has become bound by, any Contract, except in
the
Ordinary Course of Business;
5
(o) no
Contract by which the Company or any of the assets owned or used by the Company
is or was bound, or under which the Company has or had any rights or interest,
has been amended or terminated, except in the Ordinary Course of Business;
(p) there
has
been no borrowing or agreement to borrow by the Company or change in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, or otherwise or grant of a mortgage or security interest in any
property of the Company (other than endorsements of checks and indemnities
and
warranties entered into in the Ordinary Course of Business), and the Company
has
not incurred, assumed or otherwise become subject to any Liabilities, other
than
Liabilities incurred by the Company in the Ordinary Course of Business;
(q) the
Company has not discharged any Encumbrance or discharged or paid any
indebtedness or other Liability, except any that (i) are reflected as current
liabilities in the Unaudited Interim Balance Sheet or have been incurred
by the
Company since the date thereof in the Ordinary Course of Business, and (ii)
have
been discharged or paid in the Ordinary Course of Business;
(r) the
Company has not forgiven any debt or otherwise released or waived any right
or
claim in excess of $15,000;
(s) the
Company has not changed any of its methods of accounting or accounting practices
in any respect (except as required by GAAP);
(t) the
Company has not entered into any material transaction or taken any other
action
outside the Ordinary Course of Business; and
(u) the
Company has not agreed or committed (in writing or otherwise) to take any
of the
actions referred to in clauses (c) through (t) above.
Section
2.6 Title
to Assets; Equipment; Real Property, Leases.
(a) Except
as
set forth in Section 2.6 to the Company Disclosure Schedule, the Company
owns,
and has good, valid and marketable title to, all assets it purports to own,
including (i) all assets reflected on the Unaudited Interim Balance Sheet;
(ii)
all assets acquired by the Company since the date of the Unaudited Interim
Balance Sheet; and (iii) all other assets reflected in the Company’s books and
records as being owned by the Company. Except as set forth in Section 2.6
to the
Company Disclosure Schedule, all of said assets are owned by the Company
free
and clear of any Encumbrances, except liens for current taxes and assessments
not delinquent and minor Encumbrances that have arisen in the Ordinary Course
of
Business that do not (individually or in the aggregate) materially detract
from
the value of the assets subject thereto or materially impair the operations
of
the Company.
(b) Section
2.6(b) of the Company Disclosure Schedule identifies all equipment, furniture,
fixtures, improvements and other tangible owned by or leased to the Company.
(c) To
the
knowledge of the Company, each asset identified in Section 2.6(b) of the
Company
Disclosure Schedule (i) is free of defects and deficiencies and in good
condition and repair, consistent with its age and intended use (ordinary
wear
and tear excepted); (ii) complies in all material respects, and is being
operated and otherwise used in full compliance, with all applicable Legal
Requirements; and (iii) is adequate in all material respects for the uses
to
which it is being put.
(d) The
Company does not own any real property or any interest in real property,
except
for the leaseholds created under the real property leases identified in Section
2.6(d) of the Company Disclosure Schedule (the “Leased
Premises”).
Section 2.6(d) of the Company Disclosure Schedule provides an accurate and
complete summary description of the premises covered by said leases and the
facilities located on such premises. The Company enjoys peaceful and undisturbed
possession of such premises. The Company has delivered to Buyer complete
copies
of all such leases. The Company has no further obligations or liabilities
to any
Persons in connection with or arising from its occupancy of the Leased Premises,
including any lease payments or restoration obligations.
(e) Except
as
set forth on Section 2.6(e) of the Company Disclosure Schedule, the Company
does
not have any tangible personal property assets that are being leased or licensed
to the Company with respect to which annual lease or license payments exceed
$10,000.
6
(f) Except
as
set forth on Section 2.6(f) of the Company Disclosure Schedule, all leases
pursuant to which the Company leases real property are valid and effective
in
accordance with their respective terms and, to the Company’s knowledge, there
exists no default thereunder or occurrence or condition (other than the passage
of time) which could result in a default by the Company thereunder or
termination thereof.
Section
2.7 Bank
Accounts.
Section
2.7 of the Company Disclosure Schedule accurately sets forth, with respect
to
each account maintained by or for the benefit of the Company at any bank
or
other financial institution:
(a) the
name
and location of the institution at which such account is maintained;
(b) the
name
in which such account is maintained and the account number of such account;
(c) a
description of such account and the purpose for which such account is used;
(d) the
balance in such account as of July 31, 2007; and
(e) the
names
of all individuals authorized to draw on or make withdrawals from such account.
There are no safe deposit boxes or similar arrangements maintained by or
for the
benefit of the Company.
Section
2.8 Receivables;
Customers.
(a) The
Company has made available to Buyer a list of all accounts receivable of
the
Company as of the Unaudited Interim Balance Sheet Date, together with an
aging
schedule indicating a range of days elapsed since invoice.
(b) Except
as
set forth on Section 2.8(b) of the Company Disclosure Schedule, all of the
Company’s accounts receivable arose in the Ordinary Course of Business, are
carried at values determined in accordance with GAAP consistently applied,
and
are collectible except to the extent of reserves therefor set forth in the
Unaudited Interim Balance Sheet or, for receivables arising subsequent to
December 31, 2006, as reflected on the books and records of the Company (which
are prepared in accordance with GAAP consistently applied). Except as set
forth
on Section 2.8(b) of the Company Disclosure Schedule, no person has any Lien
on
any of the Company’s accounts receivable and no request or agreement for
deduction or discount has been made with respect to any of the Company’s
accounts receivable.
Section
2.9 Accounts
Payable.
Section
2.9 of the Company Disclosure Schedule (i) provides an accurate and complete
breakdown and aging of the Company’s accounts payable as of May 1, 2007 and (ii)
provides an accurate and complete breakdown of the Company’s long term debt as
of the date of this Agreement.
Section
2.10 Proprietary
Assets.
(a) Section
2.10(a) of the Company Disclosure Schedule sets forth each of the following
Proprietary Assets owned by or licensed to the Company or otherwise used
in
connection with the Company’s business: all United States and foreign (i) patent
and patent applications; (ii) registered trademarks and trademark applications;
(iii) registered copyrights and applications for copyright registration;
and
(iv) any other such Proprietary Asset that is the subject of an application
to,
or certificate or registration issued by, any state, government or other
public
legal authority.
(b) The
Company has taken reasonable measures and precautions necessary to protect
the
confidentiality and value of each Proprietary Asset that is owned by or licensed
to the Company or that is otherwise used in connection with the Company’s
business.
(c) Except
as
set forth on Section 2.10(c)(i) of the Company Disclosure Schedule, the Company
has not granted any third party any right to manufacture, reproduce, license,
use, distribute, market or exploit any of its Proprietary Assets or any
adaptations, translations, or derivative works based on the Proprietary Assets
or any portion thereof. Except as set forth on Section 2.10(c)(ii) of the
Company Disclosure Schedule, no Company Proprietary Asset is a “derivative work”
of any original work currently owned by a third party as the term “derivative
work” is defined in the United States Copyright Act, Title 17, U.S.C. Section
101.
7
(d) The
Proprietary Assets owned by or licensed to the Company include all Proprietary
Assets necessary to conduct the Company’s business to the same extent and in the
same manner as currently conducted. Such ownership or right to use, and to
license others to use, are free and clear of, and without liability under,
all
claims and right of third parties (other than the licensor, and, to the
Company’s knowledge, any claims and rights of third parties against such
licensors).
Section
2.11 Contracts.
(a) Section
2.11(a) of the Company Disclosure Schedule lists each of the following Company
Contracts:
(i)
any
Company Contract or series of related Company Contracts requiring in the
aggregate payments after the date hereof by or to the Company of more than
$50,000;
(ii)
any
Company Contract with or for the benefit of any current or former officer,
director, shareholder, employee or consultant of the Company or, to the
Company’s knowledge, a relative of any of the foregoing;
(iii)
any
Company Contract with any labor union or association representing any employee
of the Company;
(iv)
any
Company Contract for the purchase or sale of materials, supplies, equipment,
merchandise or services that contain an escalation, renegotiation or
redetermination clause or that obligate the Company to purchase all or
substantially all of its requirements of a particular product from a supplier,
or for periodic minimum purchases of a particular product from a supplier
in
excess of $25,000;
(v)
any
Company Contract for sale of any of the assets or properties of the Company
other than in the Ordinary Course of Business or for the grant to any Person
of
any options, rights of first refusal, or preferential or similar rights to
purchase any such assets or properties and other than any of the Transaction
Documents;
(vi)
any
agreement of surety, guarantee or indemnification, other than agreements
in the
Ordinary Course of Business with respect to obligations in an aggregate amount
not in excess of $50,000;
(vii)
any
Company Contract containing covenants of the Company or any employee not
to
compete in any line of business, in any geographic area or with any Person
or
covenants of any other Person not to compete with the Company or in any line
of
business of the Company;
(viii)
any Company Contract with customers or suppliers for the sharing of fees,
the
rebating of charges or other similar arrangements in excess of $25,000;
(ix)
any
Company Contract with any holder of securities of the Company as such
(including, without limitation, any Company Contract containing an obligation
to
register any of such securities under any federal or state securities laws);
(x)
any
Company Contract obligating the Company to deliver services or product
enhancements or containing a “most favored nation” pricing clause;
(xi)
any
Company Contract relating to the acquisition by the Company of any operating
business or the capital stock of any other person other than as related to
the
Company’s merger with Xxxxxxxx Machine Works Ltd.;
(xii)
any
Company Contract requiring the payment to any Person of a brokerage or sales
commission or a finder’s or referral fee (other than arrangements to pay
commission or fees to employees in the Ordinary Course of Business) in excess
of
$25,000;
(xiii)
any Company Contract or note relating to or evidencing outstanding indebtedness
for borrowed money, including, without limitation, credit cards, open lines
of
credit and equipment leases in excess of $25,000;
8
(xiv)
any
lease, sublease or other Company Contract under which the Company is lessor
or
lessee of any real property or equipment or other tangible property with
respect
to obligations in excess of $50,000;
(xv)
any
Company Contract relating to the employment of any employee, and any Company
Contract pursuant to which the Company is or may become obligated to make
any
severance, termination, bonus or relocation payment or any other payment
(other
than payments in respect of salary) in excess of $50,000, to any current
or
former employee or director; and
(xvii)
any other material Company Contract whether or not made in the Ordinary Course
of Business in excess of $50,000.
(b) Except
as
set forth on Section 2.11(b) of the Company Disclosure Schedule, each Company
Contract is valid and in full force and effect, and is enforceable by the
Company in accordance with its material terms, except as enforceability may
be
limited by bankruptcy and other similar laws and general principles of equity.
(c) Except
as
set forth on Section 2.11(c) of the Company Disclosure Schedule, neither
the
Company nor, to the Company’s knowledge, any other party to a Company Contract
is in default under any Company Contract. No event has occurred, and, to
the
Company’s knowledge, no circumstance or condition exists, that likely would
(with or without notice or lapse of time) (i) result in a violation or breach
of
any of the provisions of any Company Contract except where such violation
of
breach would not result in a Company Material Adverse Effect, (ii) give any
Person the right to declare a default or exercise any remedy or hinder any
Company Contract, (iii) give any Person the right to accelerate the maturity
or
performance of any Company Contract, or (iv) give any Person the right to
cancel, terminate or modify any Company Contract except for the passage of
time.
The Company has not waived any of its rights under any Company Contract,
except
in the Ordinary Course of Business.
(d) (i)
The
Company is not a guarantor of and has not otherwise agreed to cause, insure
or
become liable for, and has not pledged any of its assets to secure, the
performance or payment of any obligation or other Liability of any other
Person
except in the Ordinary Course of Business; and (ii) except as set forth on
Section 2.6(d)(ii) of the Company Disclosure Schedule, the Company has never
been a party to or bound by any joint venture agreement, partnership agreement,
profit sharing agreement, cost sharing agreement, loss sharing agreement
or
similar Contract.
(e) To
the
knowledge of the Company, the performance of the Company Contracts will not
result in any violation of or failure to comply with any Legal Requirement.
(f) There
is
no proposed Contract as to which any bid, offer, written proposal, term sheet
or
similar document has been submitted or received by the Company that would
commit
the Company to deliver goods or provide services with a value in excess of
$50,000 and is outstanding.
(g) No
party
to any Company Contract has notified the Company or made a claim to the effect
that the Company has failed to perform a material obligation thereunder.
In
addition, to the knowledge of the Company, there is no plan, intention or
indication of any contracting party to any Company Contract to cause the
termination, cancellation or modification of such Contract or to reduce or
otherwise change its activity thereunder so as to adversely affect the benefits
derived or expected to be derived therefrom by the Company.
Section
2.12 Compliance
With Legal Requirements.
(a) Except
as
set forth on Section 2.12(a) of the Company Disclosure Schedule, the Company
is
in compliance with each material Legal Requirement that is applicable to
it or
to the conduct of its business or the ownership or use of any of its assets.
(b) To
the
knowledge of the Company, no event has occurred, and no condition or
circumstance exists, that likely would (with or without notice or lapse of
time)
constitute or result directly or indirectly in a violation by the Company
of, or
a failure on the part of the Company to comply with, any Legal Requirement,
except such failures as would not have a Company Material Adverse Effect.
(c) Except
as
set forth on Section 2.12(a) of the Company Disclosure Schedule, the Company
has
not received any notice or other communication (in writing or otherwise)
from
any Governmental Body, or any other Person, regarding (i) any actual, alleged,
possible or potential violation of, or failure to comply with, any Legal
Requirement
or (ii) any actual, alleged, possible or potential obligation on the part
of the
Company to undertake, or to bear all or any portion of the cost of, any cleanup
or any remedial, corrective or response action of any nature.
9
Section
2.13 Governmental
Authorizations.
(a) Except
as
set forth on Section 2.13(a) of the Company Disclosure Schedule, the Company
has
all licenses, permits, franchises, orders or approvals of any federal, state,
local or foreign governmental or regulatory body required for the conduct
of the
business of the Company, except where not having such license, permit,
franchise, order or approval would not result in a Company Material Adverse
Effect; and all are in full force and effect; and no proceeding is pending
or,
to the knowledge of the Company, threatened to revoke or limit any of the
foregoing.
Section
2.14 Tax
Matters.
(a) Except
as
set forth on Section 2.14(a) of the Company Disclosure Schedule, since January
1, 2002 each Tax required to have been paid, or claimed by any Governmental
Body
to be payable, by the Company (whether pursuant to any Tax Return or otherwise)
has been duly paid in full on a timely basis. Any Tax required to have been
withheld or collected by the Company has been duly withheld and collected,
and
(to the extent required) each such Tax has been paid to the appropriate
Governmental Body.
(b) Since
January 1, 2000, all Tax Returns required to be filed by or on behalf of
the
Company (“Company
Returns”)
(i)
have been or will be filed when due, and (ii) have been, or will be when
filed,
accurately and completely prepared in material compliance with all applicable
Legal Requirements. All amounts shown on the Company Returns to be due on
or
before the date hereof, and all amounts otherwise payable in connection with
the
Company Returns on or before the date hereof, have been paid. The Company
has
made available to Buyer accurate and complete copies of Company Returns filed
by
the Company.
(c) The
Company’s liability for unpaid Taxes for all periods ending on or before the
date of the Financial Statements does not, in the aggregate, exceed the amount
of the current liability accruals for Taxes (excluding reserves for deferred
taxes) reported in the Financial Statements. The Company has established
in the
Ordinary Course of Business reserves for the payment of all Taxes for the
period
from the date of the Financial Statements through the date hereof and has
disclosed the dollar amount of such reserves to the Buyer.
(d) Section
2.14(d) of the Company Disclosure Schedule accurately identifies each
examination or audit of any Company Return that has been conducted by any
Governmental Body since January 1, 2002. The Company has delivered to Buyer
accurate and complete copies of all audit reports and similar documents relating
to Company Returns. No extension or waiver of the limitation period applicable
to any of the Company Returns has been granted (by the Company or any other
Person) that are still in effect, and no such extension or waiver has been
requested from the Company.
(e) Except
as
set forth on Section 2.14(e) of the Company Disclosure Schedule, no claim
or
other Proceeding is pending or to the Company’s knowledge has been threatened
against or with respect to Company in respect of any Tax. There are no
unsatisfied Liabilities for Taxes with respect to any notice of deficiency
or
similar document received by the Company. The Company has not entered into
or
become bound by any agreement or consent pursuant to Section 341(f) of the
Code.
The Company has not been, and will not be, required to include any adjustment
in
taxable income for any tax period prior to Closing (or portion thereof) pursuant
to Section 481 or 263A of the Code or any comparable provision under state
or
foreign Tax laws as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing. The Company is in compliance with
the
terms and conditions of any applicable Tax exemptions, Tax agreements or
Tax
orders of any Governmental Body to which it may be subject or which it may
have
claimed, and the transactions contemplated by this Agreement will not have
any
adverse effect on such compliance.
(f) There
is
no agreement, plan, arrangement or other Contract covering any employee or
independent contractor or former employee or independent contractor of the
Company that, individually or collectively, could give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant
to
Section 280G or Section 162(m) of the Code.
10
(g) Except
as
set forth on Section 2.14(g) of the Company Disclosure Schedule, the Company
is
not liable for Taxes incurred by any individual, trust, corporation, partnership
or other entity other than Company, either as a transferee or pursuant to
Treasury Regulations Section 1.1502-6, or pursuant to any other provision
of
federal, state or local law or regulation. Except as set forth on Section
2.14(f) of the Company Disclosure Schedule, the Company is not, and has never
been, a party to or bound by any tax indemnity agreement, tax sharing agreement,
tax allocation agreement or similar Contract.
(h) The
Company is not a party to any joint venture, partnership or other arrangement
or
contract which could be treated as a partnership for United States federal
income tax purposes.
(i) The
Company is not a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code and has not been a United States
real
property holding corporation within the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(j) The
Company has not been the “distributing corporation” (within the meaning of
Section 355(c)(2) of the Code) with respect to a transaction described in
Section 355 of the Code within the 3-year period ending as of the date of
this
Agreement.
Section
2.15 Employee
and Labor Matters.
(a) Section
2.15(a) of the Company Disclosure Schedule accurately sets forth, with respect
to each employee of the Company as of the date of this Agreement (including
any
employee of the Company who is on a leave of absence or on layoff status)
(i)
the name of such employee and the date as of which such employee was originally
hired by the Company; (ii) such employee’s title; (iii) such employee’s
annualized compensation as of the date of this Agreement (which will include
the
employee’s base salary and whether such employee is a bonus or commission
employee, an approximate calculation of any bonus payable to such employee
as of
the date of this Agreement, and any commission schedule applicable to such
employee); (iv) each Plan in which such employee participates or is eligible
to
participate; (v) accrued paid time off payable to such employee as of July
31,
2007; (vi) any severance that would be due upon termination with or without
cause of such employee. and (vii) any Governmental Authorization that is
held by
such employee and that is used in connection with the Company’s business. Copies
of all loans and commission plans have been made available to
Buyer;
(b) Section
2.15(b) of the Company Disclosure Schedule contains a list of individuals
who
are currently performing services for the Company and are classified as
“consultants” or “independent contractors,” and the respective compensation of
each such “consultant” or “independent contractor.”
(c) Except
as
set forth on Section 2.15(c) of the Company Disclosure Schedule There is
no
former employee of the Company who is receiving or is scheduled to receive
(or
whose spouse or other dependent is receiving or is scheduled to receive)
any
benefits (whether from the Company or otherwise) relating to such former
employee’s employment with the Company except as is required under Section 4980B
of the Code or similar applicable state law.
(d) Except
as
set forth on Schedule 2.15(d) of the Company Disclosure Schedule, the Company
is
not a party to or bound by any employment agreement or any union contract,
collective bargaining agreement or similar Contract.
(e) Except
as
set forth on Section 2.15(e) of the Company Disclosure Schedule, the Company
has
never been a party to or bound by any Contract that creates or grants to
any
Person, or provides for the creation or grant of, any stock appreciation
right,
phantom stock right or similar right or interest.
(f) Except
as
set forth on Section 2.15(f) of the Company Disclosure Schedule, the employment
of each of the Company’s employees is terminable by the Company at will. The
Company has delivered to Buyer accurate and complete copies of all employee
manuals and handbooks, policy statements and employment agreements relating
to
the employment of the current employees of the Company.
(g) To
the
knowledge of the Company (i) no employee of the Company intends to terminate
his
or her employment with the Company and the Company does not have a present
intention to terminate the employment of any employee; (ii) to the Company’s
knowledge, no employee of the Company has received since December 31, 2006,
nor
is currently considering, an offer to join a business that likely would be
competitive with the Company’s business;
and (iii) no employee of the Company is a party to or is bound by any
confidentiality agreement, noncompetition agreement or other Contract (with
any
Person) that likely would have an adverse effect on (A) the performance by
such
employee of any of his or her duties or responsibilities as an employee of
the
Company, or (B) the Company’s business or operations.
11
(h) To
the
Company’s knowledge, no employee who is a party to any proprietary information,
confidentiality, noncompetition, employment or similar agreement with any
third
party is in breach of such agreement.
(i) To
its
knowledge, the Company is not engaged, and has never been engaged, in any
unfair
labor practice (as defined under the National Labor Relations Act). Since
January 1, 2004, there has never been any slowdown, work stoppage, labor
dispute
or union organizing activity, or any similar activity or dispute, affecting
the
Company or any of its employees while employed by the Company. There is not
now
pending, and to the knowledge of the Company no Person has threatened to
commence, any such slowdown, work stoppage, labor dispute or union organizing
activity or any similar activity or dispute, nor has any event occurred,
nor
does any condition or circumstance exist, that likely would directly or
indirectly give rise to or provide a basis for the commencement of any such
slowdown, work stoppage, labor dispute or union organizing activity or any
similar activity or dispute.
(j) Each
employee of the Company is in compliance with all applicable visa and work
permit requirements. Except as set forth on Section 2.15(j) of the Company
Disclosure Schedule, no visa or work permit held by an employee of the Company
will expire during the six month period beginning at the date of this Agreement.
Section
2.16 Benefit
Plans; ERISA.
(a) Section
2.16(a) of the Company Disclosure Schedule lists all written (i) Employee
Benefit Plans, (ii) employment agreements, including, but not limited to,
any
individual benefit arrangement, policy or practice with respect to any current
or former employee or director of the Company or any ERISA Affiliate, and
(iii)
other employee benefit, bonus or other incentive compensation, stock option,
stock purchase, stock appreciation, severance pay, lay-off or reduction in
force, change in control, sick pay, vacation pay, salary continuation, retainer,
leave of absence, educational assistance, service award, employee discount,
fringe benefit plans, arrangements, policies or practices, whether legally
binding or not, and including a specific identification of those which contain
severance pay or change of control provisions or pending change of control
provisions, which the Company or any ERISA Affiliate maintains, contributes
to
or has any obligation to or liability for (collectively, the “Plans”).
Except as set forth on Section 2.16(a) of the Company Disclosure Schedule,
the
Company is not party to any agreements regarding the payment of severance.
(b) Except
as
set forth in Section 2.16(b) of the Company Disclosure Schedule, none of
the
Plans is a Defined Benefit Plan, and neither the Company nor any ERISA Affiliate
has ever sponsored, maintained or contributed to, or ever been obligated
to
contribute to, a Defined Benefit Plan.
(c) Except
as
set forth in Section 2.16(b) of the Company Disclosure Schedule, none of
the
Plans is a Multiemployer Plan, and neither the Company nor any ERISA Affiliate
has ever contributed to, or ever been obligated to contribute to, a
Multiemployer Plan.
(d) The
Company does not maintain or contribute to any welfare benefit plan that
provides health benefits to an employee after the employee’s termination of
employment or retirement except as required under Section 4980B of the Code
and
Sections 601 through 608 of ERISA or similar applicable state law.
(e) Each
Plan
that is an Employee Benefit Plan is in material compliance with its terms
and in
operation with the requirements provided by any and all statutes, orders
or
governmental rules or regulations currently in effect and applicable to the
Plan, including but not limited to ERISA and the Code.
(f) All
reports, forms and other documents required to be filed with any Governmental
Body or furnished to employees with respect to any Plan (including without
limitation, summary plan descriptions, Forms 5500 and summary annual reports)
have been timely filed or furnished and are materially accurate.
(g) Each
Plan
intended to qualify under Section 401(a) of the Code is the subject of a
favorable determination letter (or opinion letter, if applicable) issued
by the
Internal Revenue Service that provides that it so qualifies
through the last day of the “TRA 86 Remedial Amendment Period,” as such term is
defined in Section 3.02 of Revenue Procedure 96-55 issued by the Internal
Revenue Service and that its related trust is exempt from taxation under
Section
501 of the Code or there is time remaining to apply for such determination
letter under Section 401(b) of the Code and the Internal Revenue Service
pronouncements thereunder. Nothing has occurred since the date of the Internal
Revenue Service’s favorable determination letter that could adversely affect the
qualification of such Plan or the tax exempt status of its related trust.
12
(h) All
contributions for all periods ending prior to the Closing (including periods
from the first day of the current plan year to the Closing) have been made
prior
to the Closing by the Company or the applicable ERISA Affiliate, except
contributions for the payroll periods ending during the month in which the
Closing occurs.
(i) All
insurance premiums have been paid in full, subject only to normal retrospective
adjustments in the ordinary course, with regard to the Plans for coverage
months
ending on or before the Closing.
(j) With
respect to each Plan:
(i) no
prohibited transactions (as defined in Section 406 or 407 of ERISA or Section
4975 of the Code) have occurred for which a statutory exemption is not
available;
(ii) no
action
or claims (other than routine claims for benefits made in the ordinary course
of
Plan administration for which Plan administrative review procedures have
not
been exhausted) are pending, or to the Company’s knowledge, threatened or
imminent against or with respect to the Plan, any employer who is participating
(or who has participated) in any Plan or any fiduciary (as defined in Section
3(21) of ERISA) of the Plan which would have a Company Material Adverse Effect;
(iii) neither
the Company nor, to the Company’s knowledge, any fiduciary has any knowledge of
any facts which could give rise to any such action or claim; and
(iv) except
as
set forth on Section 2.16(j)(iv) of the Company Disclosure Schedule, it
provides that it may be amended or terminated at any time and, except for
benefits protected under Section 411(d) of the Code and benefits to be provided
in connection with termination of employment under contract or plan terms,
all
benefits payable to current, terminated employees or any beneficiary may
be
amended or terminated by the Company at any time without liability.
(v) there
are
no audits, inquiries, investigations, or proceedings pending or, to the
knowledge of the Company or any ERISA Affiliate, threatened by any Governmental
Body with respect to any Plan.
(k) Neither
the Company nor any ERISA Affiliate has any liability or to its knowledge
is
threatened with any liability (whether joint or several) (i) for any excise
tax
imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or (ii) for
a
fine under Section 502 of ERISA.
(l) All
of
the Plans listed in the Company Disclosure Schedule, to the extent applicable,
are in compliance with the continuation of group health coverage provisions
contained in Section 4980B of the Code and Sections 601 through 608 of ERISA.
(m) True,
correct and complete copies of all documents creating or evidencing any Plan
listed in the Company Disclosure Schedule including (without limitation)
(i) all
amendments thereto and all related trust documents, administrative service
agreements, group annuity contracts, group insurance contracts, and policies
pertaining to fiduciary liability insurance covering the fiduciaries for
each
Plan; (ii) all IRS determination, opinion, notification and advisory letters,
and all applications and correspondence to or from the IRS or the DOL with
respect to any such application or letter; (iii) all written communications
to
any Employee or Employees relating to any Plan and any proposed Plans, in
each
case, relating to any amendments, terminations, establishments, increases
or
decreases in benefits, acceleration of payments or vesting schedules or other
events which would result in any material liability to the Company received
by
Employees in the last two (2) years; (iv) all correspondence to or from any
governmental agency relating to any Plan since January 1, 2005; (v) all COBRA
forms and related notices provided since January 1, 2005 (or such forms and
notices as required under comparable law); (vi) nondiscrimination test reports
for each applicable Plan for the last three (3) years; (vii) all registration
statements, annual reports and prospectuses prepared in connection with each
Plan for the last three (3) years; and (viii) all reports, forms and other
documents required to be filed with any Governmental Body in the last two
(2)
years (including,
without limitation, summary plan descriptions, Forms 5500 and summary annual
reports for all plans subject to ERISA) have been delivered to Buyer.
13
(n) All
expenses and liabilities relating to all of the Plans described in the Company
Disclosure Schedule have been, and will on the Closing be fully and properly
accrued on the Company’s books and records and disclosed in accordance with GAAP
and in Plan financial statements.
(o) Neither
the Company nor any ERISA Affiliate has, prior to the Closing Date and in
any
material respect, violated any of the health care continuation requirements
of
COBRA, the requirements of FMLA, the requirements of the Health Insurance
Portability and Accountability Act of 1996, the requirements of the Women’s
Health and Cancer Rights Act of 1998, the requirements of the Newborns’ and
Mothers’ Health Protection Act of 1996, or any amendment to each such act, or
any similar provisions of state law applicable to its employees.
Section
2.17 Environmental
Matters.
Except
as set forth on Section 2.17 of the Company Disclosure Schedule, the Company
is
and has been at all times in compliance in all material respects with all
Environmental Laws. The Company has now and at all times has had all the
necessary permits required under Environmental Laws for the operation of
its
business, and is not and has not been in violation of any of the terms and
conditions of any of its permits. The Company has not received any notice
or
other communication (in writing or otherwise) that alleges that the Company
is
not in compliance with any Environmental Law. The Company has not generated,
manufactured, produced, transported, imported, used, treated, refined,
processed, handled, stored, discharged, released, or disposed of any Hazardous
Materials (whether lawfully or unlawfully) at any of the Leased Premises
occupied or controlled by the Company on or at any time prior to the date
hereof
other than common household and office products in de
minimis
quantities. There are not and have not been any releases or threatened releases
of any Hazardous Materials in any quantity (other than common household and
office products in de
minimis
quantities) at, on, or from the Leased Premises, and to the knowledge of
the
Company (a) there are no circumstances that may prevent or interfere with
the
Company’s compliance with any Environmental Law and (b) no former owner or user
of the Leased Premises engaged in any type of manufacturing or commercial
activity which might be reasonably expected to generate, manufacture, produce,
transport, import, use, treat, refine, process, handle, store, discharge,
release, or dispose of any Hazardous Materials (whether lawfully or unlawfully)
on the Leased Premises.
Section
2.18 Sale
of Products; Performance of Services.
Section
2.18 of the Company Disclosure lists all Contracts pursuant to which the
Company
has made an express written warranty or guaranty (the “Warranty
Contracts”).
Except for the Warranty Contracts, the Company has not made any express
warranties or guarantees relating to its products or services that are in
effect
as of the date hereof. Except as set forth on Section 2.18 of the Company
Disclosure Schedule, no customer or other Person has ever asserted or threatened
to assert any material claim against the Company (i) under or based upon
any
warranty provided by or on behalf of the Company, or (ii) under or based
upon
any other warranty relating to any product sold by the Company or any services
performed by the Company. To the knowledge of the Company, no event has
occurred, and no condition or circumstance exists, that likely would (with
or
without notice or lapse of time) directly or indirectly give rise to or serve
as
a basis for the assertion of any such claim.
Section
2.19 Insurance.
(a) Section
2.19(a) of the Company Disclosure Schedule accurately sets forth, with respect
to each insurance policy maintained by or at the expense of, or for the direct
or, to the Company’s knowledge, indirect benefit of, the Company: (i) the name
of the insurance carrier and the policy number of such policy; (ii) whether
such
policy is a “claims made” or an “occurrences” policy; (iii) a description of the
coverage provided by such policy ; (iv) the annual premium payable with respect
to such policy, and the cash value (if any) of such policy; and (v) a
description of any claims pending, and any claims that have been asserted
in the
past, with respect to such policy. The Company has delivered to Buyer accurate
and complete copies of all of the insurance policies identified in Section
2.19(a) of the Company Disclosure Schedule (including all renewals thereof
and
endorsements thereto) and binders relating thereto indicating that such policies
are in full force and effect as of the date hereof.
(b) Each
of
the policies identified in Section 2.19(a) of the Company Disclosure Schedule
is
valid, enforceable and in full force and effect. The nature, scope and dollar
amounts of the insurance coverage provided by said policies comply with all
insurance coverage requirements of the Company Contracts.
14
(c) There
is
no pending claim under or based upon any of the policies identified in Section
2.19(a) of the Company Disclosure Schedule, and to the Company’s knowledge, no
event has occurred, and no condition or circumstance exists, that likely
would
(with or without notice or lapse of time) directly or indirectly give rise
to or
serve as a basis for any such claim.
Section
2.20 Related
Party Transactions.
Since
January 1, 2004:
(a) To
the
Company’s knowledge, except as set forth in Section 2.20(a) of the Company
Disclosure Schedule, no Related Party has, and no Related Party has at any
time
had, any direct or, except as a shareholder of the Company, indirect interest
of
any nature in any asset used in or otherwise relating to the business of
the
Company;
(b) No
Related Party is, or has been indebted to the Company;
(c) To
the
Company’s knowledge, no Related Party has entered into, or has had any direct or
indirect financial interest in, any Contract, transaction or business dealing
of
any nature involving the Company and no such Contract, transaction or business
dealing of any nature is necessary to operate the business of the Company
as it
is currently conducted;
(d) To
the
Company’s knowledge, no Related Party is competing, or has at any time competed,
directly or indirectly, with the Company in any market served by the Company;
(e) To
the
Company’s knowledge, no Related Party has any claim or right against the
Company; and
(f) To
the
Company’s knowledge, no event has occurred, and no condition or circumstance
exists, that likely would (with or without notice or lapse of time) directly
or
indirectly give rise to or serve as a basis for any claim or right in favor
of
any Related Party against the Company.
Section
2.21 Proceedings;
Orders.
(a) Except
as
set forth on Section 2.21 of the Company Disclosure Schedule, there is no
pending Proceeding, and to the knowledge of the Company, no Person has
threatened to commence any Proceeding (i) that involves the Company or that
otherwise relates to or likely would affect the Company’s business or any of the
assets owned or used by the Company (whether or not the Company is named
as a
party thereto); or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of
the
Transactions. To the knowledge of the Company, no event has occurred, and
no
claim, dispute or other condition or circumstance exists, that likely would
directly or indirectly give rise to or serve as a basis for the commencement
of
any such Proceeding.
(b) Except
as
set forth on Section 2.21 of the Company Disclosure Schedule, since January
1,
2004 no Proceeding has been commenced by or against the Company, and no
Proceeding otherwise involving or relating to the Company has been pending
or,
to the Company’s knowledge, threatened at any time.
(c) The
Company has delivered to Buyer complete copies of all pleadings, correspondence
and other written materials to which the Company has access that relate to
the
Proceedings identified in Section 2.21 (a) or (b) of the Company Disclosure
Schedule.
(d) There
is
no Order to which the Company, or any of the assets owned or used by the
Company, is subject.
(e) To
the
knowledge of the Company, no officer or employee of the Company is subject
to
any Order that prohibits such officer or employee from engaging in or continuing
any conduct, activity or practice relating to the Company’s business.
(f) There
is
no Order, or to the knowledge of the Company, proposed Order (other than
any
proposed Order that would be applicable generally to the contract machine
shop
industry) that, if issued or otherwise put into effect, (i) likely would
have a
material adverse effect on the ability of the Company to comply with or perform
any covenant or obligation under this Agreement or any of the other
Transactional Agreements or (ii) may have the effect of preventing, delaying,
making legal or otherwise interfering with any of the Transactions.
15
Section
2.22 Non-Contravention;
Consents.
Except
as set forth on Section 2.22 of the Company Disclosure Schedule, neither
the
execution and delivery of this Agreement or the other Transactional Agreements
to which the Company, a Stockholder, or a Key Employee is a party, nor the
consummation or performance of any of the Transactions, will directly or
indirectly (with or without notice or lapse of time):
(a) contravene,
conflict with or result in a violation of (i) any of the provisions of the
Company’s certificate of incorporation or bylaws, or (ii) any resolution adopted
by the Stockholders, the Company’s board of directors or any committee of the
Company’s board of directors, if any;
(b) to
the
knowledge of the Company, contravene, conflict with or result in a violation
of,
or give any Governmental Body or other Person the right to challenge any
of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Company, or any of the assets owned
or
used by the Company, is subject;
(c) cause
the
Company to become subject to, or to become liable for the payment of, any
Tax;
(d) cause
any
of the assets owned or used by the Company to be reassessed or revalued by
any
taxing authority or other Governmental Body;
(e) contravene,
conflict with or result in a violation of any of the terms or requirements
of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by the Company
or any of its employees or that otherwise relates to the Company’s business or
to any of the assets owned or used by the Company;
(f) contravene,
conflict with or result in a violation or breach of, or result in a default
under, any provision of any of the Company Contracts;
(g) give
any
Person the right to (i) declare a default or exercise any remedy under any
Company Contract, (ii) accelerate the maturity or performance of any Company
Contract, or (iii) cancel, terminate or modify any Company Contract;
(h) give
any
Person the right to any payment by the Company or give rise to any acceleration
or change in the award, grant, vesting or determination of options, warrants,
rights, severance payments or other contingent obligations of any nature
whatsoever of the Company in favor of any Person, in any such case as a result
of the change in control of the Company or otherwise resulting from the
Transactions; or
(i) result
in
the imposition or creation of any Encumbrance upon or with respect to any
asset
owned or used by the Company.
Except
as
set forth in Section 2.22 of the Company Disclosure Schedule, the Company
will
not be required to make any filing with or give any notice to, or obtain
any
Consent from, any Person in connection with the execution and delivery of
this
Agreement and the other Transactional Agreements or the consummation or
performance of any of the Transactions. As of the Closing Date, all such
filings, notices and Consents will have been duly made, given or obtained
and
are in full force and effect, other than those which by their nature are
required to be made, given or obtained after the execution of this Agreement,
all of which shall be made, given or obtained within the time required therefor.
Section
2.23 Brokers.
Except
as set forth in Section 2.23 of the Company Disclosure Schedule, neither
the
Company nor any Stockholder has agreed or become obligated to pay, or taken
any
action that likely would result in any Person claiming to be entitled to
receive, any brokerage commission, finder’s fee or similar commission or fee in
connection with any of the Transactions.
Section
2.24 Powers
of Attorney.
The
Company has not given a power of attorney to any Person.
Section
2.25 Voting
Arrangements.
Except
as set forth on Section 2.25 of the Company Disclosure Schedule, to the
Company’s knowledge, there are no outstanding shareholder agreements, voting
trusts, proxies or other arrangements or understandings relating to the voting
of any shares of the capital stock of the Company, except as contemplated
by
this Agreement.
16
Section
2.26 Full
Disclosure.
No
statement contained in any representation or warranty contained herein or
any
statement contained in any certificate or schedule furnished or to be furnished
by the Company to Buyer in, or pursuant to the provisions of, this Agreement
contains or shall contain any untrue statement of a material fact or omits
or
will omit to state any material fact necessary, in the light of the
circumstances under which it was made, in order to make the statements herein
or
therein not misleading.
Section
2.27 Complete
Copies of Materials.
Except
as set forth in Section 2.27 of the Company Disclosure Schedule, the Company
has
delivered or made available true and complete copies of each document (or
summaries of same) that has been requested by Buyer or its counsel.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
OF
THE STOCKHOLDERS
Except
as
specifically set forth in the disclosure schedule delivered by the Stockholders
to the Buyer at or prior to the execution of this Agreement (the “Stockholders
Disclosure Schedule”),
the
parts of which are numbered to correspond to the Section numbers of this
Agreement, each of the Stockholders hereby severally represents and warrants
to
Buyer, as to himself or herself only, as of the date hereof and as of the
Closing Date, as follows:
17
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF BUYER
The
Buyer
hereby represents and warrants, as of the date hereof, to the Company and
the
Stockholders as follows:
Section
4.3 Non-Contravention;
Consents.
Neither the execution and delivery of this Agreement or the Transactional
Agreements to which the Buyer is a party, nor the consummation or performance
of
any of the Transactions, will (with or without notice or lapse of time)
contravene, conflict with or result in a violation of (i) any of the provisions
of the Buyer’s certificate of incorporation or bylaws, or (ii) any resolution
adopted by the Buyer’s board of directors or any committee of the Buyer’s board
of directors, or the Buyer’s stockholders. With the exception of any necessary
filings pursuant to federal and state securities laws or the rules of other
Governmental Bodies, Buyer will not be required to make any filing with or
give
any notice to, or to obtain any Consent from, any Person
in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Transactions.
18
Section
4.4 Validity
of Shares to be Issued.
The
issuance of shares of Buyer Common Stock to the Stockholders under
this
Agreement have been duly authorized by all necessary corporate action, and
upon
issuance in accordance with the
terms of
this Agreement, will be validly issued, fully paid and nonassessable and
issued
free of pre-emptive rights.
Section
4.5 SEC
Reports.
The
Buyer has delivered or made available to the Company and the Stockholders
true
and complete copies (excluding copies of exhibits) of each report, registration
statement, and definitive proxy statement filed by the Company with the United
States Securities and Exchange Commission (“SEC”)
since
January 1, 2005 (collectively, with all information incorporated by reference
therein or deemed to be incorporated by reference therein, the “SEC
Reports”).
The
information in the SEC Reports was, to the Buyer’s knowledge, true and correct
in all material respects at the time the SEC Reports were filed and did not
contain any untrue statement of a material fact or omit to state a material
fact
necessary in order to make the statements therein, in light of the circumstances
under which
they
were made, not misleading at the time the SEC Reports were filed.
Section
4.9 Full
Disclosure.
No
statement contained in any representation or warranty contained herein or
any
statement contained in any certificate or schedule furnished or to be furnished
by the Buyer to the Company or the Stockholder in, or pursuant to the provisions
of, this Agreement contains or shall contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in the light
of
the circumstances under which it was made, in order to make the statements
herein or therein not misleading.
Section
4.10 Complete
Copies of Materials.
The
Buyer has delivered or made available true and complete copies of each document
(or summaries of same) that has been requested by the Company or its counsel.
Section
4.11 No
Known Breaches or Exceptions to Company’s and Stockholders’ Representations and
Warranties.
Except
as set forth on Section 4.11 of the Buyer’s disclosure Schedule, as of the
Closing Date, to the knowledge of Buyer, there are no breaches of any of
the
representations and warranties of the Company or the Stockholders under Article
2 or Article 3, or of any of the covenants hereto.
19
ARTICLE
5
ADDITIONAL
AGREEMENTS
Section
5.1 Additional
Agreements.
In case
at any time after the Closing Date any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of Buyer and the Company are authorized to take all such necessary action.
Section
5.2 Conduct
of Business by the Company Pending the Stock Purchase.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement or the Closing Date, the Company covenants
and
agrees that, unless Buyer shall otherwise agree in writing or as required or
permitted under this Agreement, the Company shall conduct its business only
in,
and the Company shall not take any action except in the Ordinary Course of
Business; and the Company shall use its commercially reasonable efforts to
preserve substantially intact the business organization of the Company, to
keep
available the services of the present officers, employees and consultants of
the
Company and its subsidiaries and to preserve the present relationships of the
Company with customers, suppliers and other persons with which the Company
has
significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement the Company shall not, during the
period from the date of this Agreement and continuing until the earlier of
the
termination of this Agreement or the Closing Date, directly or indirectly do,
or
propose to do, any of the following without the prior written consent of Buyer
(not to be unreasonably withheld):
(a) amend
or
otherwise change the Company’s articles of incorporation or bylaws;
(b) issue,
sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge,
disposition or encumbrance of, any shares of Company Stock of any class, or
any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of Company Stock, or any other ownership interest (including, without
limitation, any phantom interest) of the Company, any subsidiary or any of
its
Affiliates (except the exercise of currently outstanding options and warrants
in
accordance with their terms);
(c) except
as
otherwise set forth in Section 6.2(n) hereof, sell, pledge, dispose of or
encumber any assets or inventory of the Company or of any subsidiary in excess
of $25,000 or take any action that would reasonably be expected to result in
any
damage to, destruction or loss of any material asset of the Company (whether
or
not covered by insurance);
(d) except
as
is contemplated by this Agreement, or the applicable award agreement or Employee
Plan or pursuant to a written contractual agreement with an award recipient
set
forth on Section 5.2(d) of the Company Disclosure Schedule, accelerate, amend
or
change the period (or permit any acceleration, amendment or change) of
exercisability of options or restricted stock granted under the Plans (including
the Company Stock Option Plan) or authorize cash payments in exchange for any
options granted under any of such plans;
(e) [(i)
declare, set aside, make or pay any dividend or other distribution (whether
in
cash, stock or property or any combination thereof) in respect of any of its
common stock,] (ii) split, combine or reclassify any of its common stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its common stock, (iii) amend
the terms of, repurchase, redeem or otherwise acquire, or permit any subsidiary
to repurchase, redeem or otherwise acquire, any of its securities or any
securities of a subsidiary, except in accordance with preexisting commitments
as
of the date hereof, or propose to do any of the foregoing;
(f) (i)
acquire (by merger, consolidation, or acquisition of stock or assets) any
company, corporation, partnership or other business organization or division
thereof, or enter into or amend any contract, agreement, commitment or
arrangement to effect any such acquisition, (ii) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or endorse
(other than checks in the Ordinary Course of Business) or otherwise as an
accommodation become responsible for, the obligations of any person, or make
any
loans or advances; (iii) to provide funds to or make any investment (in the
form
of a loan, capital contribution or otherwise) in any Entity; (iv) to enter
into
or amend any material agreement or contract which provides for the sale,
license, or purchase by the Company or any of its subsidiaries of assets; (v)
authorize any capital expenditures or purchase of fixed assets which are
individually in excess of $25,000 or, in the aggregate, in excess of $100,000;
or (vi) enter into or amend any contract, agreement, commitment or arrangement
to effect any of the matters prohibited by this Section 5.2(f);
20
(g) increase
the compensation or fringe benefits payable or to become payable to its officers
or employees, or grant any severance or termination pay to, or enter into any
employment or severance agreement with any director, officer, or, establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any current
or
former directors, officers or employees, except, in each case, as may be
required by law or as expressly contemplated by this Agreement, or terminate
any
employee of the Company;
(h) take
any
action to change accounting policies or procedures (including, without
limitation, procedures with respect to revenue recognition, payments of accounts
payable and collection of accounts receivable) (except as required by GAAP);
(i) make
any
material Tax election inconsistent with past practices or settle or compromise
any material federal, state, local or foreign Tax liability or agree to an
extension of a statute of limitations;
(j) pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than payment, discharge
or satisfaction in the Ordinary Course of Business;
(k) enter
into discussions regarding material customer contracts in excess of $100,000;
(l) engage
in
any action or enter into any transaction or permit any action to be taken or
transaction to be entered into that could reasonably be expected to delay the
consummation of, or otherwise adversely affect, any of the Transactions;
(m) undertake
any revaluation of any of the Company’s or any subsidiary’s assets, including,
without limitation, writing down the value of inventory or writing off notes
or
accounts receivable other than in the Ordinary Course of Business or in
accordance with GAAP; and
(n) take,
or
agree in writing or otherwise to take, any of the actions described in Sections
5.2(a) through (m).
For
the
purpose of obtaining written consent under this Section, the Company shall
submit requests for written consent to Xxxxx Xxxxxxx, and written consent may
be
evidenced by facsimile or email. For consents relating to subparagraph (k),
above, Buyer shall respond to any request for consent within two, (2) business
days of the request, including the day of the request, or consent shall be
deemed granted.
Section
5.3 No
Solicitation.
(a) Until
the
later of Closing Date, the termination of this Agreement pursuant to Article
8
or August 22, 2007, neither the Company or any Stockholder shall, and shall
not
permit or authorize its respective officers, directors, employees, affiliates,
agents or other representatives (including without limitation any investment
banker, financial advisor, attorney or accountant retained by it) to initiate,
solicit or encourage (including by way of furnishing information or assistance)
or take any other action to facilitate, any inquiries or the making of any
proposal relating to, or that may reasonably be expected to lead to, any
Alternative Transaction, or enter into discussions (except as to the existence
of these provisions) or negotiate with any person or entity in furtherance
of
such inquiries or to obtain an Alternative Transaction, or agree to, or endorse,
any Alternative Transaction, or authorize or permit any of the officers,
directors, employees or agents of the Company or any investment banker,
financial advisor, attorney, accountant or other representative retained by
the
Company to take any such action and the Company shall promptly (and in any
event, within 24 hours) notify Buyer of all relevant terms of any such inquiries
or proposals received by the Company or by any such officer, director, employee,
agent, investment banker, financial advisor, attorney, accountant or other
representative relating to any of such matters and if such inquiry or proposal
is in writing, the Company shall promptly (and in any event, within 24 hours)
deliver or cause to be delivered to Buyer a copy of such inquiry or proposal
and
promptly (and in any event, within 24 hours) update Buyer as to any material
changes with respect to such inquiry or proposal; provided,
however,
that
nothing contained in this subsection (a) shall prohibit the Company or its
Board
of Directors from making such disclosure to the Stockholders as, in the good
faith judgment of the Company’s Board of Directors after consultation with its
outside legal counsel, is required by its fiduciary duties under applicable
law.
21
(b) The
Company and each Stockholder shall immediately cease and cause to be terminated
any existing discussions or negotiations with any parties (other than Buyer)
conducted heretofore with respect to any Alternative Transaction. The Company
and each Stockholder agrees not to release any third party from any
confidentiality or standstill agreement to which the Company and each
Stockholder is a party.
(c) The
Company shall inform its officers, directors and employees of the Company and
any investment banker or other advisor or representative retained by the Company
who are aware of, and require such person to agree to abide by, the restrictions
described in this Section 5.3.
Section
5.4 Consents;
Approvals.
The
Company and Buyer shall coordinate and cooperate with one another and shall
each
use their reasonable best efforts to obtain (and shall each refrain from taking
any willful action that would impede obtaining) all consents, waivers,
approvals, authorizations or orders (including, without limitation, all rulings,
decisions or approvals by any Governmental Body), and the Company and Buyer
shall make all filings (including, without limitation, all filings with
governmental bodies) required in connection with the authorization, execution
and delivery of this Agreement by the Company and Buyer and the consummation
by
them of the Transactions, excepting only those merger notification filings
with
foreign jurisdictions for which the failure to file would not have a Company
Material Adverse Effect or a material adverse effect on the transactions
contemplated hereby. The Company and Buyer shall furnish all information
required to be included in any application or other filing to be made pursuant
to the rules and regulations of any Governmental Body in connection with the
Transactions. Except where prohibited by applicable statutes and regulations,
and subject to the Confidentiality Agreement, each party shall coordinate with
one another in preparing and exchanging such information, and shall promptly
provide the other (or its counsel) with copies of all filings, presentations
or
submissions made by such party with any Governmental Body in connection with
this Agreement or the Transactions.
Section
5.5 Notification
of Certain Matters.
The
Company and each Stockholder shall give prompt notice to Buyer, and Buyer shall
give prompt notice to the Company, of (i) the occurrence or non-occurrence
of
any event the occurrence or non-occurrence of which would be likely to cause
any
representation or warranty contained in this Agreement to be materially untrue
or inaccurate such that the conditions to closing set forth in Section 6.2(a)
and 6.3(a), as the case may be, shall not be met and (ii) any failure of the
Company, a Stockholder, or the Buyer, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by
it hereunder such that the conditions to closing set forth in Section 6.2(a)
and
6.3(a), as the case may be, shall not be met; provided,
however,
that
the delivery of any notice pursuant to this Section 5.5 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section
5.6 Public
Announcements.
No
party will issue or make or cause the publication of, any press release or
other
public announcement with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the other parties
hereto; provided, however, that for the purposes of this Section, the Company
shall be entitled to give such prior written consent on behalf of the
Stockholders. Buyer may elect at any time after the Closing Date issue a press
release or make a public statement with respect to the Stock Purchase or this
Agreement; provided, further, that the Buyer may issue a press release or make
a
public statement with respect to the Stock Purchase or this Agreement prior
to
the Closing Date. It is understood and agreed that Buyer will disclose the
terms
of this Agreement in connection the Announcing 8-K and with procurement of
the
Financing referred to in Section 6.2(i) hereto. If required under applicable
securities laws and the rules of the Over-the-Counter Bulletin Board; Buyer
and
the Company shall make all necessary filings with governmental bodies and shall
promptly provide the other party with copies of filings made by such party
between the date hereof and the Closing Date.
Section
5.7 Conveyance
Taxes.
Buyer
and the Company shall cooperate in the preparation, execution and filing of
all
returns, questionnaires, applications, or other documents regarding any real
property transfer or gains, sales, use, transfer, value added, stock transfer
and stamp taxes, any transfer, recording, registration and other fees, and
any
similar taxes which become payable in connection with the transactions
contemplated hereby that are required or permitted to be filed on or before
the
Closing Date.
22
Section
5.8 Non
Competition Agreement.
Concurrently herewith, the Company will use commercially reasonable efforts
to
have C. Xxxxx Xxxxxxxx execute and deliver to Buyer a Noncompetition Agreement
in the form attached hereto as Exhibit
E
(the
“Non
Competition Agreement”)).
Section
5.9 Employment
Agreements.
Concurrently herewith, the Company will use commercially reasonable efforts
to
have Xxxxx Xxxxxxxx and Xxxxx Xxxxxxxx execute and deliver to Buyer an
Employment and Noncompetition Agreement in the form attached hereto as
Exhibit
F
(the
“Employment
Agreement”).
Section
5.10 Access
to Information.
(a) Subject
to currently existing contractual and legal restrictions applicable to the
Company or any of its subsidiaries, the Company shall, and shall cause each
of
its subsidiaries to, afford to the accountants, counsel, financial advisors
and
other representatives of Buyer reasonable access to, and permit them to make
such inspections as they may reasonably require of, during the period from
the
date of this Agreement through the Closing Date, all of their respective
properties, books, contracts, commitments and records (including accounting
records and Tax Returns and the work papers of independent accountants, if
available and subject to the consent of such independent accountants). During
such period, the Company shall (i) furnish promptly to Buyer a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of federal or state securities laws,
(ii) furnish promptly to Buyer all other information within its possession
concerning its business, properties and personnel as Buyer may reasonably
request and (iii) promptly make reasonably available to Buyer all personnel
of
the Company and its subsidiaries knowledgeable about matters relevant to such
inspections. No investigation pursuant to this Section 5.10(a) shall affect
any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
(b) All
information obtained by Buyer pursuant to this Section 5.10 shall be kept
confidential in accordance with the Confidentiality Agreement.
Section
5.11 Lease
Agreements.
Buyer
agrees to lease the properties located at (i) 00000 Xxxxxxx Xxxx, Xxxxxxxx
Xxxxx
00000 and (ii) 00000 Xxxxxxx Xxxx, Xxxxxxxx Xxxxx 00000, on the terms on and
conditions set forth in the lease agreement attached hereto as Exhibit
G
(the
“Lease
Agreements”).
Section
5.12 Satisfaction
of Conditions Precedent.
The
parties hereto shall use all commercially reasonable efforts to satisfy or
cause
to be satisfied all of the conditions precedent which are set forth in Article
6, and shall use all commercially reasonable efforts to cause the Stock Purchase
and other transactions contemplated by this Agreement to be consummated in
accordance with the terms of this Agreement.
Section
5.13 Exclusivity
of Remedies.
The
parties hereto have voluntarily agreed to define their rights, liabilities
and
obligations respecting the subject matter of this Agreement exclusively in
contract pursuant to the express terms and provisions of this Agreement.
Furthermore, the parties each hereby acknowledge that this Agreement embodies
the justifiable expectations of sophisticated parties derived from arm’s length
negotiations; all parties to this Agreement specifically acknowledge that no
party has any special relationship with another party that would justify any
expectations beyond that of any ordinary buyer and an ordinary seller in an
arm’s length transaction. The remedies for any breach of the terms and
provisions of this Agreement (including any representations and warranties
ser
forth herein) shall be those remedies available at law or in equity for breach
of contract.
Section
5.14 No
Third Party Liability.
This
Agreement may only be enforced against the named parties hereto. All claims
or
causes or action (whether in contract or tort) that may be based upon, arise
out
of or relate to this Agreement, or the negotiation, execution or performance
of
this Agreement (including any representation or warranty made in or in
connection with this Agreement or as an inducement to enter into this
Agreement), may be made only against the entities that are expressly identified
as parties hereto; and no officer, director, shareholder, employee or affiliate
of any party hereto (including any person negotiating or executing this
Agreement on behalf of a party hereto) shall have any liability or obligation
with respect to this Agreement or with respect to any claim or cause of action
(whether in contract or tort) that may arise out of or relate to this Agreement,
or the negotiation, execution or performance of this Agreement (including a
representation or warranty made in or in connection with this Agreement or
as an
inducement to enter into this Agreement).
23
Section
5.15 SEC
Reports.
From
and after the date of this agreement Buyer shall, so long as any Stockholder
owns any of the Buyer Common Stock, use its reasonable best efforts
to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the Securities Act;
(b) file
with
the Securities and Exchange Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act;
and
(c) furnish
to each holder of Buyer Common Stock forthwith upon request a written statement
by the Buyer as to its compliance with the reporting requirements of such Rule
144 and of the Securities Act and the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”),
a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Buyer as such holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
such holder to sell any Buyer Common Stock with out registration.
(d) the
Buyer
shall, at all times during which it is neither subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, nor exempt from
reporting pursuant to Rule 12g3-2(b) under the Exchange Act, use reasonable
efforts to provide in writing, upon the written request of any Stockholder,
all
information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act (“Rule 144A
Information”). The Buyer also shall, upon the written request of any
Stockholder, use reasonable efforts to cooperate with and assist such
Stockholder or any member of the National Association of Securities Dealers,
Inc. PORTAL system in applying to designate and thereafter maintain the
eligibility of the shares of Buyer Common Stock, as the case may be, for trading
through PORTAL. The Buyer’s obligations under this Section 5.15 shall at all
times be contingent upon the relevant Stockholder’s obtaining from the
prospective buyer of shares of Buyer Common Stock, a written agreement to take
all reasonable precautions to safeguard the Rule 144A Information from
disclosure to anyone other than a person who will assist such buyer in
evaluating the purchase of any shares of Buyer Common Stock.
Section
5.16 Piggy-Back
Registration Rights.
(a) If
Buyer
determines to register any of its securities, either for its own account or
the
account of a security holder or holders, other than (i) a registration relating
solely to employee benefit plans on Form S-8 (or any successor form) or (ii)
a
registration relating solely to a Commission Rule 145 transaction on Form S-4
(or any successor form), the Company will: include in such registration (and
any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Buyer Common Stock delivered pursuant
to
this Agreement, subject to any reductions in the Buyer Common Stock to be
registered made at the request of the Placement Agent or any other reductions
required due to the Securities and Exchange Commission’s (the “SEC”) recent
interpretation of Rule 415 of the Securities Act. The Sellers understand that
the SEC is currently taking the position that Rule 415 is not available to
an
issuer that attempts to register on behalf of security holders approximately
30%
or more of the number of issued and outstanding shares held by non-affiliates
of
that issuer. Accordingly, the Sellers agree that such rights are subordinate
to
the registration rights of investors in the Financing described in Section
6.2(g). Sellers agree, if requested by the Placement Agent for the Financing,
to
execute a lock up agreement in connection with any such registration for a
period of the date of filing of such registration statement and ending 90 days
after effectiveness of said registration statement.
(b) If,
in
connection with the underwritten public offering by the Buyer the managing
underwriter(s) advise the Buyer in writing that in their opinion the number
of
securities requested to be included in such registration exceeds the number
that
can be sold in an orderly manner in such offering within a price range
acceptable to the Buyer, the Buyer will include in such registration (i) first,
the securities proposed to be sold by the Buyer; and (ii) second, the common
stock requested to be included in such registration, pro rata among the
Stockholders and the other selling stockholders based on the ratio of the number
of shares of common stock that each such selling stockholder has requested
that
the Buyer include in such registration over the total number of shares of common
stock requested to be included in such registration.
24
ARTICLE 6
CONDITIONS
TO CONSUMMATION OF THE STOCK PURCHASE
Section
6.1 Conditions
to Obligations of Each Party to Effect the Stock
Purchase.
The
respective obligations of each party to effect the Stock Purchase shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Stock Purchase shall be in
effect; and there shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Stock
Purchase, which makes the consummation of the Stock Purchase illegal.
Section
6.2 Additional
Conditions to Buyer’s Obligation to Consummate the Stock
Purchase.
Buyer’s
obligations to consummate the Stock Purchase and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction
of
each of the following conditions (any of which may be waived by Buyer, in whole
or in part):
(a) the
Exchange Agent shall have received the certificates representing the Shares
duly
endorsed for transfer (or accompanied by a duly executed stock power) together
with the Letter of Transmittal;
(b) Buyer
shall have received the following documents:
(i)
the
opinion letter from Xxxxxx Law Firm, counsel to the Company, in substantially
the form attached hereto as Exhibit
H;
(ii)
a
certificate, duly executed by the Company, certifying that (A) each of the
representations and warranties made by the Company in this Agreement and in
the
other Transactional Agreements is accurate in all respects as if made as of
the
date of Closing, (provided
that
such representations and warranties which are by their express provisions made
as of a specific date need to be accurate only as of such specific date), except
to the extent that any failures of such representations and warranties to be
accurate, in the aggregate, would not have, or reasonably be expected to have,
a
Company Material Adverse Effect (disregarding for these purposes any materiality
or material adverse effect qualifications therein contained), (B) each of the
covenants and obligations that the Company is required to have complied with
or
performed pursuant to this Agreement or any of the other Transactional
Agreements at or prior to the Closing has been duly complied with and performed
in all material respects, and (C) each of the conditions set forth in this
Section 6.2 has been satisfied in all respects; and
(iii)
a
certificate, duly executed by the Stockholders’ Agent, certifying that each of
the representations and warranties made by the Stockholders in this Agreement
and in the other Transactional Agreements is accurate in all respects as if
made
as of the date of Closing, (provided
that
such representations and warranties which are by their express provisions made
as of a specific date need to be accurate only as of such specific date);
(iv)
copies of resolutions of the board of directors of the Company, certified by
the
Secretary of the Company, authorizing the execution, delivery and performance
of
the Transactional Agreements to which the Company is a party and the
Transactions;
(v)
a
certificate of good standing of the Company from the State of Texas as of the
most recent practicable date: and
(vi)
written resignations of Xxxxx Xxxxxxxx as Secretary and Xxxxx Xxxxxxxx as
Treasurer of the Company effective as of the Closing Date in form satisfactory
to the Buyer;
(vii)
written resignations of C. Xxxxx Xxxxxxxx and Xxxxx Xxxxxxxx as directors of
the
Company, effective as of the Closing Date in form satisfactory to the
Buyer
25
(viii)
resolutions of the board of directors of the Company appointing Xxxxx X. Xxxxxxx
and Xxxxxxx X. Xxxxxxxx to the board of directors to fill the vacancies created
by the resignations of C. Xxxxx Xxxxxxxx and Xxxxx Xxxxxxxx
(ix)
such
other documents as Buyer may reasonably request in good faith for the purpose
of
(i) evidencing the accuracy of any representation or warranty made by the
Company or the Stockholders, (ii) evidencing the compliance by the Company,
or
the performance by the Company of, any covenant or obligation set forth in
this
Agreement, (iii) evidencing the satisfaction of any condition set forth in
Section 6.1 or this Section 6.2, or (iv) otherwise facilitating the consummation
or performance of any of the Transactions.
(c) Since
the
date of this Agreement, there shall not have occurred a Company Material Adverse
Effect.
(d) The
consents identified on Section 2.22 of the Company Disclosure Schedule
(“Material
Consents”)
for
the authorization, execution and delivery of this Agreement and the consummation
by it of the transactions contemplated hereby shall have been obtained and
made
by the Company and copies thereof shall have been delivered to
Buyer.
(e) Each
of
the representations and warranties made by the Company and the Stockholders
in
the Agreement are true and accurate in all respects as of the Closing
(provided
that
such representations and warranties which are by their express provisions made
as of a specific date need be accurate only as of such specific date), except
to
the extent that any failures of such representations and warranties to be
accurate, on the aggregate, would not have, or reasonably be expected to have,
a
Company Material Adverse Effect (disregarding for these purposes any materiality
or material adverse effect qualifications therein contained); and all covenants
and obligations that the Company is required to have complied with or performed
pursuant to this Agreement or any of the Transaction Documents at or prior
to
Closing have been duly complied with or performed in all material respects.
(f) The
Company shall have executed and delivered all Transactional Agreements to which
the Company it is a party.
(g) Buyer
shall
have
completed the sale of
its debt
and/or equity securities in a private placement which is exempt from
registration under the Securities Act in which the gross proceeds to Buyer
equal
or exceed fourteen million dollars ($14,000,000.00) (the “Financing”);
(h) The
Escrow Agent and the Stockholders Agent (as define in Section 7.4) shall have
executed and delivered the Escrow Agreement in substantially the form attached
hereto as Exhibit
I
(the
“Escrow
Agreement”);
(i) Xxxxx
Xxxxxxxx and Xxxxx Xxxxxxxx shall have entered into an Employment Agreement
with
Buyer.
(j)
C. Xxxxx
Xxxxxxxx shall have entered into a Non Competition Agreement with
Buyer
(k)
Each
Employment and Noncompetition Agreement and the Escrow Agreement shall be in
full force and effect.
(l)
Buyer’s
due diligence investigation of the Company shall have been completed to Buyer's
sole satisfaction; provided, however, that if Buyer has not notified the Company
of the failure of this condition within fifty (50) days after the date of this
Agreement, the condition set forth in this section shall be deemed to have
been
satisfied.
(m) The
Company Audited Financial Statements shall have been completed;
(n) The
business of the Company shall have been conducted in all material respects
only
in the Ordinary Course of Business consistent with past practice and the Company
shall not have taken any of the actions set forth in Section 5.2 hereof except
as contemplated by this Agreement or with the prior written consent of the
Buyer.
(o) The
Company shall have delivered the Closing Date Balance Sheet (as defined in
Exhibit
A
hereto).
(p)
The
Company shall have provided evidence satisfactory to Buyer that it has
distributed and disposed of the assets set forth on Section 6.2(p) of the
Company Disclosure Schedule.
26
Section
6.3 Additional
Conditions to the Company’s Obligation to Consummate the Stock
Purchase.
The
Company’s and the Stockholders’ obligation to consummate the Stock Purchase and
to take the other actions required to be taken by the Company and the
Stockholders at the Closing shall be subject to the satisfaction, at or prior
to
the Closing, of each of the following conditions (any of which may be waived
by
the Company and the Stockholders, in whole or in part):
(a) The
Exchange Agent shall have received the Cash Consideration, the Note
Consideration and the Stock Consideration;
(b) The
Company and the Stockholders shall have received the following documents:
(i)
a
certificate, duly executed by Buyer, certifying that (A) each of the
representations and warranties made by Buyer in this Agreement and in the other
Transactional Agreements is accurate in all respects as if made as of the date
of the Closing (provided
that
such representations and warranties which are by their express provisions made
as of a specific date need to be accurate only as of such date specific date),
except to the extent that any failures of such representations and warranties
to
be accurate, in the aggregate, would not have, or reasonably be expected to
have
a material adverse effect on Buyer (disregarding for these purposes any
materiality or material adverse effect qualifications therein contained), (B)
each of the covenants and obligations that Buyer is required to have complied
with or performed pursuant to this Agreement or any of the other Transactional
Agreements at or prior to the Closing has been duly complied with and performed
in all material respects, and (C) each of the conditions set forth in Section
6.3 has been satisfied in all respects;
(ii)
a
certificate of good standing of the Buyer from the State of Delaware as of
the
most recent practicable date: and
(iii)
such other documents as the Company and the Stockholders may request in good
faith for the purpose of (A) evidencing the accuracy of any representation
or
warranty made by Buyer (B) evidencing the compliance by Buyer with, or the
performance by Buyer, any covenant or obligation set forth in this Agreement
or
any of the other Transactional Agreements, (C) evidencing the satisfaction
of
any condition set forth in Section 6.1 or this Section 6.3, or (D) otherwise
facilitating the consummation or performance of any of the Transactions.
(c) All
material consents, waivers, approvals, authorizations or orders required to
be
obtained, and all filings required to be made, by the Buyer for the
authorization, execution and delivery of this Agreement and the consummation
by
each of them respectively of the transactions contemplated hereby shall have
been obtained and made by the Buyer.
(d) Each
of
the representations and warranties made by Buyer in the Agreement are true
and
accurate in all respects as of the Closing (provided
that
such representations and warranties which are by their express provisions made
as of a specific date need to be accurate only as of such date specific date),
except to the extent that any failures of such representations and warranties
to
be accurate, in the aggregate, would not have, or reasonably be expected to
have
a material adverse effect on Buyer (disregarding for these purposes any
materiality or material adverse effect qualifications therein contained), and
all covenants and obligations that the Buyer is required to have complied with
or performed pursuant to this Agreement or any of the Transaction Documents
at
or prior to Closing have been duly complied with or performed in all material
respects;
(e) Buyer
shall have executed and delivered the Lease Agreements; and
(f) Buyer
shall have executed and delivered the consent to Closing the Books election
for
the S. corporation tax return provided in Section 9.3 and Exhibit
9.3.
ARTICLE
7
ESCROW
AND INDEMNIFICATION
Section
7.1 Indemnification.
From
and after the Closing Date and subject to the limitations contained in Sections
7.2, each of the Stockholders (the “Indemnifying
Parties”)
shall,
jointly and severally, indemnify and hold Buyer harmless against any loss,
expense, liability or other damage, including reasonable attorneys’ fees, to the
extent of the amount of such loss, expense, liability or other damage
(collectively, “Damages”)
that
Buyer has incurred by reason of the breach or alleged breach by the Company
of
any representation, warranty, covenant or agreement of the Company contained
in
this Agreement or in any document, schedule or certificate delivered by the
Company pursuant hereto but in no event shall any Damages be payable by the
Indemnifying Parties under this sentence in excess of $1,250,000 (the
“Damages
Cap”
except
as follows: (i) with respect to damages that Buyer has incurred by reason of
the
breach or alleged breach by the Company of the representations and warranties
set out in Section 2.3 (Capitalization; Ownership of Stock) or Section 2.14
(Tax
Matters) the Damages Cap shall be $3,000,000). In addition, each Indemnifying
Party shall be fully liable to the Buyer for any actual Damages incurred by
Buyer relating to such Indemnifying Party’s willful misconduct or fraud in
connection with the representations and warranties set forth herein or in any
document delivered by such Indemnifying Party to the Buyer, and the transactions
contemplated under this Agreement and in connection with the Stock Purchase
without limitation to the Damages Cap; provided,
however,
in no
event shall any Indemnifying Party be liable for such willful misconduct or
fraud of another Indemnifying Party.
27
Section
7.2 Damage
Threshold.
Notwithstanding the foregoing, the Indemnifying Parties shall have no liability
under Section 7.1 unless the amount for any individual claim for Damages exceeds
$5,000 (the “Individual
Threshold”) and
until
the aggregate amount of Damages for all such claims in excess of $250,000 has
been incurred (the “Damages
Threshold”);
provided,
however,
that
after the Damage Threshold has been reached, Buyer shall be entitled to
indemnification for any and all Damages incurred since the Closing
Date.
Section
7.3 Indemnification
Procedures.
Upon
Buyer becoming aware of a fact, condition or event that constitutes a claim
for
Damages under Section 7.1 above, if such a claim is to be made, Buyer will
with
reasonable promptness and specificity notify the Stockholders’ Agent (as defined
below) in writing of such fact, condition or event. The failure to notify the
Stockholders’ Agent under this Section 7.3 shall not relieve any of the
Stockholders of any liability that it may have to Buyer except and to the extend
that such failure to notify shall have resulted in a waiver of any lawful and
valid affirmative defense to any third-party claim or otherwise materially
prejudices the Stockholders in connection with the administration or defense
of
such third-party claim
Section
7.4 Stockholders’
Agent.
(a) Xxxxx
Xxxxxxxx is constituted and appointed as agent (the “Stockholders’
Agent”)
for
and on behalf of the Stockholders to give and receive notices and
communications, to object to such deliveries, to agree to, negotiate, enter
into
settlements and compromises of, and demand arbitration and comply with orders
of
courts and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of the Stockholders’ Agent for
the accomplishment of the foregoing. Such agency may be changed by the holders
of a majority in interest of the Company Stock from time to time upon not less
than ten (10) days’ prior written notice to Buyer. No bond shall be required of
the Stockholders’ Agent, and the Stockholders’ Agent shall receive reasonable
compensation for services, fees and expenses incurred in good faith arising
out
of or in connection with the acceptance or administration of his duties under
this Agreement, such compensation, fees and expenses due from the other
Stockholders. Notices or communications to or from the Stockholders’ Agent shall
constitute notice to or from each of the Stockholders. If the Stockholders’
Agent shall die, become disabled or otherwise be unable to fulfill his
responsibilities as agent of Stockholders, then Stockholders shall, within
ten
days after such death or disability, appoint a successor agent and, promptly
thereafter, shall notify Buyer of the identity of such successor. Any such
successor shall become the “Stockholders’ Agent” for purposes of this Agreement.
If for any reason there is no Stockholders’ Agent at any time, all references
herein to the Stockholders’ Agent shall be deemed to refer to the Stockholders.
(b) The
Stockholders’ Agent shall not be liable for any act done or omitted hereunder as
Stockholders’ Agent while acting in good faith, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Stockholders shall jointly and severally indemnify the Stockholders’
Agent and hold him harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Stockholders’ Agent and
arising out of or in connection with the acceptance or administration of his
duties under this Agreement.
(c) The
Stockholders’ Agent shall have reasonable access to information about Company
and Buyer and the reasonable assistance of Company’s and Buyer’s officers and
employees for purposes of performing its duties and exercising its rights under
this Article 7, provided
that the
Stockholders’ Agent shall treat confidentially and not disclose any nonpublic
information from or about Company or Buyer to anyone (except on a need to know
basis to individuals who agree to treat such information confidentially).
28
Section
7.5 Actions
of the Stockholders’ Agent.
A
decision, act, consent or instruction of the Stockholders’ Agent shall
constitute a decision of all of the Stockholders and shall be final, binding
and
conclusive upon each such Stockholder, and Buyer may rely upon any decision,
act, consent or instruction of the Stockholders’ Agent as being the decision,
act, consent or instruction of each and every such Stockholder. The Buyer is
hereby relieved from any liability to any person for any acts done by them
in
accordance with such decision, act, consent or instruction of the Stockholders’
Agent.
Section
7.6 Escrow
Fund.
As
partial security for the indemnities in Section 7.1, the Stock Consideration
shall be deposited with the Escrow Agent within ten days of the Closing, such
deposit to constitute an escrow fund (the “Escrow
Fund”)
to be
governed by the terms set forth in this Article 7 and in the Escrow Agreement.
All claims upon the Escrow Fund, objections thereto and resolution of any
conflicts related to claims upon to the Escrow Fund shall be governed by and
conduction in accordance with Section 4 of the Escrow Agreement
Section
7.7 Claims.
In the
event Buyer becomes aware of a third-party claim which Buyer believes may result
in a demand against the Stockholders, Buyer shall notify the Stockholders’ Agent
of such claim, and the Stockholders’ Agent and the Stockholders shall be
entitled, at their expense, to participate in any defense of such claim. Buyer
shall have the right in its sole discretion to settle any such claim;
provided,
however,
that
Buyer may not effect the settlement of any such claim without the consent of
the
Stockholders’ Agent, which consent shall not be unreasonably withheld. In the
event that the Stockholders’ Agent has consented to any such settlement, the
Stockholders’ Agent shall have no power or authority to object to the amount of
any claim by Buyer against the Stockholders for indemnity with respect to such
settlement, unless such claim is in an amount in excess of any amount consented
to by the Stockholders’ Agent.
Section
7.8 Working
Capital Adjustment.
(a) Immediately
prior to the Closing Date, the Stockholders’ Agent shall cause to be prepared
and delivered to the Buyer and the Buyer shall have reviewed a statement (the
“Working
Capital Statement”)
setting forth the calculation of the Closing Date Net Working Capital (as
defined below). The “Closing
Date Net Working Capital”
shall
mean: (A) the sum of (i) cash and cash equivalents, (ii) prepaid expenses (iii)
the Eligible Accounts Receivable (as defined below) of the Company earned prior
to the Closing Date and collectible on or after the Closing Date, and (iv)
inventory all as reflected on the Closing Date Balance Sheet, (B) with deduction
for (i) the accounts payable and (ii) accrued expenses. The Closing Date Net
Working Capital shall include adjustments increases or decreases on a dollar
for
dollar basis, as follows: (a) if the equipment leases and equipment notes
designated on Section 2.6(b) of the Company Disclosure Schedule are more or
less
than $563,000 on the day immediately preceding the Closing Date and (b) to
the
extent of equipment purchased since January 31, 2007 less cash proceeds on
equipment disposed of since January 31, 2007, without regard to excluded assets.
The “Elibigle
Accounts Receivable”
shall
mean all receivables due and outstanding 90 days or less from the Closing Date.
The Working Capital Target shall mean $3,700,000.
(b) In
the
event that it is determined that the Closing Date Net Working Capital is greater
than the Working Capital Target (as defined above), the excess shall be paid
to
Stockholders on a Pro Rata Basis (the “Stockholder
Working Capital Adjustment”).
If
the Closing Date Net Working Capital is less than the Working Capital Target,
then the amount shall be subtracted from the Cash Consideration due Stockholders
(the “Buyer Working Capital Adjustment”).
(c) It
is
understood and agreed that with respect to any Working Capital Adjustment
discussed in Section (b) above, only 80% of such Adjustment shall be realized
by
Buyer or Stockholders, as applicable at Closing with the remaining 20% to be
realized (i.e. paid by such party which owes a net adjustment to the other
party) 60 days after Closing (the “Final
Adjustment Date”).
Buyer
and the Stockholders Agent will jointly determine whether any adjustments are
required to the Working Capital Statement resulting in adjustments to the
Working Capital Adjustments in Section (b) above.
(d) Collections
after the Closing Date of all accounts receivable of the Company earned prior
to
the Closing Date which are not Eligible Accounts Receivable shall be paid to
Stockholders on a Pro Rata Basis, monthly, as collections are received by the
Company. The Company shall diligently pursue collection of any such accounts
receivable after the Closing Date, and shall not write off, forgive, or
otherwise reduce or offset any such accounts receivable without the consent
of
the Stockholders. The Company, at its option, may assign any such accounts
receivable that remain uncollected after the first anniversary of the Closing
Date to the Stockholders with full right of collection.
29
ARTICLE
8
TERMINATION
Section
8.1 Termination.
This
Agreement may be terminated at any time prior to the Closing Date, as follows:
(a) by
mutual
written consent of Buyer and the Company;
(b) by
either
Buyer or the Company if the Stock Purchase shall not have been consummated
by
October 16, 2007 (the “Termination
Date”),
provided
that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been a principal cause of or resulted in the failure of the Stock
Purchase to occur on or before such date and such action or failure to act
constitutes a material breach of this Agreement;
(c) by
either
Buyer or the Company if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued a
non-appealable final order, decree or ruling or taken any other action, in
each
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Stock Purchase, except if the party relying on such order,
decree or ruling or other action has not complied with its obligations under
Section 5.5;
(d) by
Buyer
or the Company, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company or Buyer, respectively, set forth in this
Agreement such that the conditions set forth in Section 6.2(e) or Section
6.3(d), respectively, would not be satisfied, provided,
that if
such breach is curable through the exercise of commercially reasonable efforts,
then the other party may not terminate pursuant to this Section 8.1(d) in
respect of such breach if such breach is curable and shall have been cured
within 30 days following notice by the other party of such breach, provided
the
breaching party continues to use commercially reasonable efforts to cure such
breach during the 30 day period (it being understood that (i) the other party
may not terminate this Agreement pursuant to this Section 8.1(d) after notice
of
such breach if such breach shall have been cured within 30 days or the party
seeking to terminate shall then be in material breach of this Agreement and
(ii)
no cure period shall be required for a breach which by its nature cannot be
cured).
(e) In
the
event that the Company directly or indirectly, through any officer, employee,
director, representative, parent, affiliate, broker, advisor or agent (i) seeks,
solicits, initiates or encourages the submission of any inquiry, proposal or
offer from any corporation, or any lender, partnership, person or other entity
or group relating to any acquisition or purchase of the assets of the Company,
or exchange offer, merger, reverse merger, consolidation, business combination,
recapitalization, spin-off, liquidation, dissolution, or similar transaction
involving, directly or indirectly, Company (each an "Acquisition
Proposal");
or
(ii) participates or cooperates in or pursues any discussions or negotiations
regarding any Acquisition Proposal or furnishes to any person or entity
information concerning the Company for any Acquisition Proposal; the Company
shall be obligated to reimburse Buyer for all reasonable out-of-pocket costs
and
expenses incurred in connection with this transaction up to a maximum of
$150,000.
Section
8.2 Effect
of Termination.
In the
event of the termination of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void and there shall be no liability on the
part of any party hereto or any of its affiliates, directors, officers or
Stockholders except (i) as set forth in Section 8.1 (e) and Section 8.3, and
(ii) nothing herein shall relieve any party from liability for any willful
breach hereof or willful or intentional misrepresentations.
Section
8.3 Fees
and Expenses.
Except
as
other in set forth in Section 8.1(e) above,
whether
or
not the Stock Purchase is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses;
provided, however, that 50% of the fees charged by the Company’s auditor in
connection with the preparation of the Company Audited Financial Statements
shall be paid for by Buyer and provided further that if the Closing Date of
the
Stock Purchase occurs after August 22, 2007 then Buyer shall be responsible
for
100% of the fees charged by the Company’s auditor in connection with preparation
of the Company Audited Financial Statements. Further, Sellers and Company agrees
that all professional fees and expenses related to the Stock Purchase shall
be
paid on or before the Closing Date.
30
Section
8.4 Termination
Fee.
(a) In
the
event the
Stock
Purchase is not consummated within 61 days of the date of this Agreement for
any
reason other than (i) termination
of this Agreement pursuant to Section 8.1(a), or (ii) termination of this
Agreement by Buyer pursuant to Section 8.1(c), Section 8.1(d) or Section 8.1(e),
Buyer shall pay the Company a termination fee of $150,000,
provided the Company is not material
breach of this Agreement and the Company has exercised its right of termination
under this Agreement pursuant to Section 8.1(b). Such termination fee shall
be
paid in four equal installments of $37,500, with the first installment due
and
payable within 4 business days of termination of the Agreement and the remaining
installments to be paid on the four, eight and twelve month anniversary of
the
termination date.
(b) In
the
event the
Stock
Purchase is not consummated within 61 days of the date of this Agreement for
any
reason other than (i) termination
of this Agreement pursuant to Section 8.1(a), or (ii) termination of this
Agreement by the Company pursuant to Section 8.1(c), the Company shall pay
Buyer
a termination fee of $150,000,
provided the Buyer is not in material
breach of this Agreement and Buyer has exercised its right of termination under
this Agreement pursuant to Section 8.1(b). Such termination fee shall be paid
in
four equal installments of $37,500, with the first installment due and payable
within 4 business days of termination of the Agreement and the remaining
installments to be paid on the four, eight and twelve month anniversary of
the
termination date.
ARTICLE
9
MISCELLANEOUS
PROVISIONS
Section
9.1 Survival
of Representations and Covenants.
All
representations, warranties, covenants and agreements of the Company and the
Stockholders contained in this Agreement shall survive the Closing and any
investigation at any time made by or on behalf of Buyer until the end of the
[twelfth] month following the Closing Date (the “Expiration
Date”),
except for fraud provided that such survival for fraud shall be specific to
each
incident and shall otherwise vitiate the Expiration Date, and provided further
that the representations and warranties set out in Section 2.14 (Tax matters)
shall survive until the expiration of the statute of limitations applicable
thereto. All representations, warranties, covenants and agreements of Buyer
contained in this Agreement shall survive until the Closing Date, except for
covenants and agreements which by their terms must be performed after the
Closing Date.
Section
9.2 Transfer
Taxes.
Each
Stockholder shall be individually responsible for his, her or its respective
sales, use and transfer taxes, including but not limited to any value added,
stock transfer, gross receipts, stamp duty and real, personal or intangible
property transfer taxes, due by reason of the consummation of the Transactions,
including but not limited to any interest or penalties in respect thereof.
Section
9.3 Tax
Returns.
Each
Stockholder and Buyer shall cooperate in connection with the preparation,
execution and filing of all Tax Returns and shall make themselves available
in a
timely manner to execute such Tax Returns. Stockholders and Buyer agree to
consent to and join in filing an Election To Close Books Upon S-Corporation
Termination pursuant to Code §1362(e)(3) and Regs. §1.1362-6(b)(1),
substantially in the form set out as Exhibit 9.3, for the federal income tax
returns of the Company for 2007 which shall consist of a an S-corporation tax
return for the period from January 1, 2007 to the Closing Date and a
C-corporation tax return for the period from the Closing Date to the end of
the
tax year. Stockholders shall prepare the S corporation tax return at their
expense and Buyer shall prepare the C corporation tax return at Buyer’s
expense.
31
Section
9.4 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed given when delivered personally, one day after being delivered to an
overnight courier or when telecopied (with a confirmatory copy sent by overnight
courier) to the parties at the following addresses (or at such other address
for
a party as shall be specified by like notice):
if
to the
Company:
Sunbelt
Machine Works Corporation
00000
Xxxxxxx Xxxx
Xxxxxxxx,
Xxxxx
Attention:
President
Telefax:
(000) 000-0000
with
a
copy to:
The
Xxxxxx Law Firm
0000
Xxxxxxxx Xx., Xxxxx 000
Xxxxxxx,
Xxxxx 00000-0000
Attention:
Xxxx Xxxxxx, Esq
Telefax:
(000) 000-0000
And
Xxxxxxx
& Associates, Ltd., L.L.P.
00000
Xxxxx Xxxx, Xxxxx 000
Xxxxxxx,
XX 00000-0000
Attention:
Xxxxx Xxxxxxx, Esq.
Telefax:
(000) 000-0000
if
to
Buyer:
Xxxxxxx
Machine Works, Inc.
00000
XX
0000
Xxxxxx,
Xxxxx 00000
Attention:
Chief Executive Officer
Telefax:
(000)
000-0000
with
a
copy to:
Spectrum
Law Group LLP
0000
Xxxx
Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxx 00000
Attention:
Xxxx Xxxxxxxx, Esq.
Telefax:
(000) 000-0000
if
to the
Stockholders:
at
each
of their addresses set forth in Schedule
1.
Section
9.5 Time
of the Essence.
Time is
of the essence in the performance of each of the terms hereof with respect
to
the obligations and rights of each party hereto.
Section
9.6 Headings.
The
headings contained in this Agreement are for convenience of reference only,
shall not be deemed to be a part of this Agreement and shall not be referred
to
in connection with the construction or interpretation of this Agreement.
Section
9.7 Counterparts.
This
Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
32
Section
9.8 Governing
Law.
This
Agreement shall be construed in accordance with and governed by the internal
laws of the State of Texas without giving effect to any choice of law rule
that
would cause the application of the laws of any jurisdiction other than the
internal laws of the State of Texas to the rights and duties of the parties.
Section
9.9. Arbitration.
The
parties agree that any dispute, controversy or claim, whether based on contract,
tort, statute, discrimination, retaliation, or otherwise, relating to, arising
from or connected in any manner to this Agreement, or to the alleged breach
of
this Agreement, shall, upon timely written request of either party be submitted
to and resolved by binding arbitration. The arbitration shall be conducted
in
Houston, Texas. The arbitration shall proceed in accordance with the National
Rules of the American Arbitration Association ("AAA") in effect at the time
the
claim or dispute arose, unless other rules are agreed upon by the parties.
Unless otherwise agreed to by the parties in writing, the arbitration shall
be
conducted by one arbitrator who is a member of the AAA and who is selected
pursuant to the methods set out in the National Rules of the AAA. Any claims
received after the applicable/relevant statute of limitations period has passed
shall be deemed null and void. The award of the arbitrator shall be a reasoned
award with findings of fact and conclusions of law. Either party may bring
an
action in any court of competent jurisdiction to compel arbitration under this
Agreement, to enforce an arbitration award, and to vacate an arbitration award.
However, in actions seeking to vacate an award, the standard of review to be
applied by said court to the arbitrator's findings of fact and conclusions
of
law will be the same as that applied by an appellate court reviewing a decision
of a trial court sitting without a jury. Each party will pay its own attorneys
fees and other costs incurred by their respective attorneys.
Section
9.10 Waiver.
(a) No
failure on the part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single
or
partial exercise or waiver of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No
Person
shall be deemed to have waived any claim arising out of this Agreement, or
any
power, right, privilege or remedy under this Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such Person; and
any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
Section
9.11 Amendments.
This
Agreement may not be amended, modified, altered or supplemented other than
by
means of a written instrument duly executed and delivered on behalf of Buyer,
the Company and the Stockholders.
Section
9.12 Severability.
In the
event that any provision of this Agreement, or the application of any such
provision to any Person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to Persons or circumstances
other than those as to which it is determined to be invalid, unlawful, void
or
unenforceable, shall not be impaired or otherwise affected and shall continue
to
be valid and enforceable to the fullest extent permitted by law.
Section
9.13 Entire
Agreement.
The
Transactional Agreements (including Schedules and Exhibits thereto) set forth
the entire understanding of the parties relating to the subject matter thereof
and supersede all prior agreements and understandings among or between any
of
the parties relating to the subject matter thereof.
Section
9.14 Indemnification
of Officers and Directors.
All
rights to indemnification existing in favor of those Persons who are officers
and directors of the Company as of the date of this Agreement (the “Indemnified
Officers and Directors”) for their acts and omissions occurring prior to the
Closing Date (other than any obligations arising in connection with the Stock
Purchase and this Agreement), as provided in the articles of incorporation
or
bylaws of the Company and as provided in the indemnification agreements between
the Company and the Indemnified Officers and Directors (as in effect as of
the
Closing Date) in the forms disclosed by the Company to the Buyer, or adopted
by
agreement between the Company and the Buyer prior to Closing, shall survive
the
Closing and shall be observed by the Company, and the Buyer to the fullest
extent available under Texas law for a period of twelve months from the Closing
Date.
33
Section
9.15 Construction.
(a) For
purposes of this Agreement, whenever the context requires: the singular number
shall include the plural, and vice versa; the masculine gender shall include
the
feminine and neuter genders; the feminine gender shall include the masculine
and
neuter genders; and the neuter gender shall include the masculine and feminine
genders.
(b) The
parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As
used
in this Agreement, the words “include” and “including,” and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to
be
followed by the words “without limitation.”
(d) Except
as
otherwise indicated, all references in this Agreement to “Sections,” “Exhibits”
and “Schedules” are intended to refer to Sections of this Agreement and Exhibits
and Schedules to this Agreement.
[Signature
page follows]
34
IN
WITNESS WHEREOF, each of the parties to this Agreement has executed or caused
this Agreement to be executed as of the date first above written.
|
“BUYER”
|
||
|
XXXXXXX
INDUSTRIES, INC.,
|
||
|
a
Delaware corporation
|
||
|
By:
|
||
|
|
||
|
“COMPANY”
|
“STOCKHOLDERS”
|
|
|
SUNBELT
MACHINE WORKS CORPORATION,
|
Signatures
Appear on Schedule
1
|
|
|
a
Texas corporation
|
||
|
By:
|
||
|
|
||
|
Solely
with respect to Section 9.14:
|
||
|
|
||
|
C.
Xxxxx Xxxxxxxx, director
|
||
|
|
||
|
Xxxxx
Xxxxxxxx, President, Secretary, director
|
||
|
|
||
|
J.
Xxxxx Xxxxxxxx, Vice President ,Treasurer, director
|
||
35
SCHEDULE
1
STOCKHOLDERS
|
Signature
of Stockholder
|
Shares
Owned
|
|
|
|
||
|
C.
Xxxxx Xxxxxxxx
Address:
|
437.5
|
|
|
C.
Xxxxx Xxxxxxxx
2001
Investment Trust
|
299.7
|
|
|
By:
|
||
|
|
||
|
Name:
C. Xxxxx Xxxxxxxx
Title:
Trustee
Address:
|
||
|
J.
Xxxxx Xxxxxxxx
2001
Investment Trust
|
174.8
|
|
|
By:
|
||
|
|
||
|
Name:
J. Xxxxx Xxxxxxxx
Title:
Trustee
Address:
|
||
|
Xxxxx
Xxxxxxxx Xxxxxxx
2001
Investment Trust
|
88.0
|
|
|
By:
|
||
|
|
||
|
Name:
Xxxxx Xxxxxxxx Xxxxxxx
Title:
Trustee
Address:
|
||
36
INDEX
OF EXHIBITS AND SCHEDULES
Exhibits:
|
A.
|
Certain
Definitions
|
|
B.
|
Form
of Note
|
|
C.
|
Form
of Letter of Transmittal
|
|
D.
|
Unaudited
Interim Balance Sheet of the Company
|
|
E.
|
Form
of Non-Competition Agreement
|
|
F.
|
Form
of Employment Agreement
|
|
G.
|
Form
of Lease
|
|
H.
|
Form
of Opinion of Company Counsel
|
|
I.
|
Form
of Escrow Agreement
|
|
J.
|
Working
Capital Statement
|
Schedules:
37
EXHIBIT
A
CERTAIN
DEFINITIONS
For
purposes of the Agreement (including this Exhibit
A):
Agreement.
“Agreement”
shall mean the Stock Purchase Agreement to which this Exhibit
A
is
attached (including the Company Disclosure Schedule and all Exhibits), as it
may
be amended from time to time.
Alternative
Transaction.
means
any of the following: (i) a transaction pursuant to which any person (or group
of persons) other than Buyer or its affiliates (a “Third
Party”)
seeks
to acquire, directly or indirectly, more than ten percent (10%) of the
outstanding shares of capital stock of the Company, whether from the Company
or
pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or
other business combination involving the Company pursuant to which any Third
Party acquires more than ten percent (10%) of the outstanding equity securities
of the Company or the entity surviving such merger or business combination,
(iii) any other transaction pursuant to which any Third Party acquires control
of all or substantially all of the assets of the Company (including for this
purpose the outstanding equity securities of the Company’s subsidiaries), (iv)
the adoption by the Company of a plan of liquidation, the declaration or payment
by the Company of an extraordinary dividend on any of its shares of capital
stock or the effectuation by the Company of a recapitalization or other type
of
transaction that would involve either a change in the Company’s outstanding
capital stock or a distribution of assets of any kind to the holders of such
capital stock, (v) the issuance by the Company of shares of capital stock to
the
public or (vi) the repurchase by the Company or any of its subsidiaries of
shares of the Company’s capital stock representing at least ten percent (10%) or
more of the aggregate voting power of all voting securities of the Company;
provided, however, that the definition of “Alternative Transaction” shall not
include a transaction completed for equity financing purposes.
Buyer.“Buyer”
shall have the meaning specified in the first paragraph of the Agreement.
Closing.“Closing”
shall have the meaning specified in Section 1.5 of the Agreement.
Closing
Date.“Closing
Date” shall have the meaning specified in Section 1.5 of the Agreement.
Closing
Date Balance Sheet.“Closing
Date Balance Sheet” shall mean the unaudited balance sheet of the Company dated
as of the Closing Date, that has been prepared in accordance with GAAP (except
that the Closing Date Balance Sheet may omit footnotes and other presentation
items that may be required by GAAP consistently applied on a basis consistent
with the Company Audited Financial Statements (as defined in Section 2.4(a)
hereof)) and shall be calculated in a manner consistent with the Working Capital
Statement.
Code.
The
Internal Revenue Code of 1986, as amended.
Company.
The
“Company” shall have the meaning specified in the first paragraph of the
Agreement and shall also be deemed to include all predecessor entities,
including, without limitation, Xxxxxxxx Machine Works, Ltd. which was merged
with and into Sunbelt Machine Works Corporation on April 18, 2007.
Company
Common Stock.“Company
Common Stock” shall mean shares of Class A common stock, $1.00 par value per
share, of the Company.
Company
Contract.“Company
Contract” shall mean any Contract:
(a)
to
which Company is a party;
(b)
by
which the Company or any of its assets is or may become bound or under which
the
Company has, or may become subject to, any obligation; or
(c)
under
which the Company has or may acquire any right or interest.
38
Company
Disclosure Schedule. “Company
Disclosure Schedule” shall have the meaning specified in Article 2 of the
Agreement.
Company
Material Adverse Effect.
shall
mean any change, event or effect that is materially adverse to the business,
assets (whether tangible or intangible), liabilities, operations, results of
operations, condition (financial or otherwise), or capitalization of the
Company; provided, however, that any adverse change directly attributable to
conditions affecting the industry in which the Company has material operations
as a whole or the U.S. economy as a whole shall not be deemed a Company Material
Adverse Effect so long as such conditions do not adversely affect the Company
in
a manner disproportionate to other companies in the same industry.
Company
Returns. “Company
Returns” shall have the meaning specified in Section 2.14(b) of the Agreement.
Company
Stock Options.
shall
mean all issued and outstanding options (including commitments to grant options,
but excluding Company Warrants) to purchase or otherwise acquire Company Common
Stock (whether or not vested) held by any person or entity.
Company
Warrants.
shall
mean any issued and outstanding warrants to purchase Company Common Stock that
are not exercised or cancelled prior to the Closing Date.
Confidentiality
Agreement.“Confidentiality
Agreement” means Section 12 of that certain Letter of Intent dated April 24,
2007 executed between Buyer and the Company.
Consent.
“Consent”
shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
Contract.
“Contract”
shall mean, with respect to any Person, any legally binding written, oral,
implied or other agreement, contract, understanding, arrangement, instrument,
note, guaranty, indemnity, representation, warranty, deed, assignment, power
of
attorney, certificate, purchase order, work order, insurance policy, benefit
plan, commitment, covenant, assurance, obligation, promise or undertaking of
any
nature to which such Person is a party or by which its properties or assets
maybe bound or affected or under which it or its business, properties or assets
receive benefits.
Damages.
“Damages”
shall have the meaning specified in Section 7.1 of the Agreement.
Damages
Cap. “Damages
Cap” shall have the meaning specified in Section 7.1 of the Agreement.
Damages
Threshold. “Damages
Threshold” shall have the meaning specified in Section 7.2 of the Agreement.
Defined
Benefit Plan. “Defined
Benefit Plan” shall mean either a plan described in Section 3(35) of ERISA or a
plan subject to the minimum funding standards set forth in Section 302 of ERISA
and Section 412 of the Code.
Employee
Benefit Plan. “Employee
Benefit Plan” shall have the meaning specified in Section 3(3) of ERISA.
Employment
and Noncompetition Agreement.“Employment
and Noncompetition Agreement” shall have the meaning specified in Section 5.9 of
the Agreement.
Encumbrance.
“Encumbrance”
shall mean any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, equity, trust, equitable interest, claim, preference, right of
possession, lease, tenancy, licensee, encroachment, covenant, infringement,
interference, Order, proxy, option, right of first refusal, preemptive right,
community property interest, legend, defect, impediment, exception, reservation,
limitation, impairment, imperfection of title, condition or restriction of
any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
39
Entity.
“Entity”
shall mean any corporation (including any non profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, cooperative, foundation, society, political party, union, company
(including any limited liability company or joint stock company), firm or other
enterprise, association, organization or entity.
Environmental
Law. “Environmental
Law” shall mean any federal, state, local or foreign Legal Requirement relating
to pollution or protection of human health or the environment.
ERISA.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974.
ERISA
Affiliate. “ERISA
Affiliate” shall mean any Person that is, was or would be treated as a single
employer with the Company under Section 4001 of ERISA or Section 414(b), (c),
(m) or (o) of the Code.
Escrow
Agent.
shall
mean Signature Bank, or another institution acceptable to Buyer and the
Stockholders’ Agent
Escrow
Agreement. “Escrow
Agreement” shall have the meaning specified in Section 6.2(h) of the Agreement.
Escrow
Fund. “Escrow
Fund” shall have the meaning specified in Section 7.6 of the Agreement.
Exchange
Agent. “Exchange
Agent” shall have the meaning specified in Section 1.3(a) of the Agreement.
Expiration
Date.“Expiration
Date” shall have the meaning specified in Section 9.1 of the Agreement.
GAAP.
shall
mean United States generally accepted accounting principles.
Governmental
Authorization. “Governmental
Authorization” shall mean any:
(a)
permit, license, certificate, franchise, concession, approval, consent,
ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
that is issued, granted, given or otherwise delivered by or under the authority
of any Governmental Body or pursuant to any Legal Requirement; or
(b)
right
under any Contract with any Governmental Body.
Governmental
Body.“Governmental
Body” shall mean any:
(a)
nation, principality, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature;
(b)
federal, state, local, municipal, foreign or other government;
(c)
governmental or quasi governmental authority of any nature (including any
governmental division, subdivision, department, agency, bureau, branch, office,
commission, council, board, instrumentality, officer, official, representative,
organization, unit, body or Entity and any court or other tribunal);
(d)
multinational organization or body; or
(e)
individual, Entity or body exercising, or entitled to exercise, any executive,
legislative, Judicial, administrative, regulatory, police, military or taxing
authority or power of any nature.
Hazardous
Material. “Hazardous
Material” shall mean any substance, chemical, waste or other material which is
listed, defined or otherwise identified as hazardous, toxic or dangerous under
any applicable law; as well as any petroleum, petroleum product or by-product,
crude oil, natural gas, natural gas liquids, liquefied natural gas, or synthetic
gas useable for fuel, and “source,” “special nuclear,” and “by-product” material
as defined in the Atomic Energy Act of 1954, 42 U.S.C. §§ 2011 et
seq.
40
Leased
Premises. “Leased
Premises” shall have the meaning specified in Section 2.6(d) of the Agreement.
Legal
Requirement.“Legal
Requirement” shall mean any federal, state, local, municipal, foreign or other
law, statute, legislation, constitution, principle of common law, resolution,
ordinance, code, edict, decree, proclamation, treaty, convention, rule,
regulation, ruling, directive, pronouncement, requirement, specification,
determination, decision, opinion or interpretation that is or has been issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
Letter
of Transmittal.“Letter
of Transmittal” shall have the meaning specified in Section 1.3(c) of the
Agreement.
Liability.
“Liability”
shall mean any debt, obligation, duty or liability of any nature including
any
unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary
liability, regardless of whether such debt, obligation, duty or liability would
be required to be disclosed on a balance sheet prepared in accordance with
GAAP
and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
Lien.
shall
mean any lien, pledge, charge, claim, mortgage, security interest or other
encumbrance of any sort.
Material
Consents. “Material
Consents” shall have the meaning specified in Section 6.2(c) of the Agreement.
Multiemployer
Plan. shall
mean any Pension Plan (as defined herein) that is a “multiemployer plan,” as
defined in Section 3(37) of ERISA.
Order.
“Order”
shall mean any:
(a)
order, judgment, injunction, edict, decree, ruling, pronouncement,
determination, decision, opinion, verdict, sentence, subpoena, writ or award
that is issued, made, entered, rendered or otherwise put into effect by or
under
the authority of any court, administrative agency or other Governmental Body
or
any arbitrator or arbitration panel; or
(b)
Contract with any Governmental Body that is entered into in connection with
any
Proceeding.
Ordinary
Course of Business. An
action
taken by or on behalf of the Company shall not be deemed to have been taken
in
the “Ordinary Course of Business” unless:
(a)
such
type of action is recurring in nature, consistent with the Company’s past
practices and taken in the ordinary course of the Company’s normal day to day
operations;
(b)
such
action is not required to be authorized by the Company’s Stockholders, the
Company’s board of directors or any committee of the Company’s board of
directors and does not require any other separate or special authorization
of
any nature; and
Person.
“Person”
shall mean any individual, Entity or Governmental Body.
Plans.“Plans”
shall have the meaning specified in Section 2.16(a) of the Agreement.
Proceeding.
“Proceeding”
shall mean any action, suit, litigation, arbitration, proceeding (including
any
civil, criminal, administrative, investigative or appellate proceeding and
any
informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination or investigation, commenced, brought, conducted or heard by or
before, or otherwise has involved, any Governmental Body or any arbitrator
or
arbitration panel.
41
Proprietary
Asset. “Proprietary
Asset” shall mean any patent, patent application, trademark (whether registered
or unregistered and whether or not relating to a published work), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, trade secret, know how,
franchise, system, computer software, invention, design, blueprint, proprietary
product, technology, proprietary right or other intellectual property right.
Pro
Rata Portion. shall
mean, with respect to each Stockholder, the quotient obtained by dividing (i)
the number of shares held by such Stockholder set forth opposite such
Stockholder’s name on Schedule
1
hereto,
by (ii) the total number of Shares.
Related
Party. Each
of
the following shall be deemed to be a “Related Party”:
(a)
each
individual who is, or who has at any time been, an officer of the Company or
a
predecessor thereto;
(b)
each
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law,
or
sister-in-law of each of the individuals referred to in clause “(a)” above,
including adoptive relationships;
(c)
any
Entity (other than the Company) in which any one of the Persons referred to
in
clauses “(a)” or “(b)” above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.
Representatives.
“Representatives”
of a specified party shall mean officers, directors, employees, attorneys,
accountants, advisors and representatives of such party. The Related Parties
shall be deemed to be “Representatives” of Company.
Stockholder.
shall
have the meaning specified in the first paragraph of the Agreement.
Stockholders’
Agent. “Stockholders’
Agent” shall have the meaning specified in Section 7.4(a) of the Agreement.
Tax.
“Tax”
shall mean any tax (including any income tax, franchise tax, capital gains
tax,
estimated tax, gross receipts tax, value added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, occupation tax, inventory tax, occupancy tax, withholding tax or payroll
tax), levy, assessment, tariff, impost, imposition, toll, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), (a) imposed, assessed or collected by or under
the authority of any Governmental Body, or (b) payable pursuant to any tax
sharing agreement or similar Contract.
Tax
Return. “Tax
Return” shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or
may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
Termination
Date.“Termination
Date” shall have the meaning specified in Section 8.1(b) of the Agreement.
Total
Consideration. “Total
Consideration” shall have the meaning specified in Section 1.2(c) of the
Agreement.
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Transactional
Agreements. “Transactional
Agreements” shall mean:
(a)
the
Agreement;
(b)
the
Note;
(c)
the
Letter of Transmittal;
(d)
the
Employment Agreements;
(e)
the
Lease;
(f)
the
Escrow Agreement and
(g)
the
Non Competition Agreement.
Transactions.
“Transactions”
shall mean (a) the execution and delivery of the respective Transactional
Agreements, and (b) all of the transactions contemplated by the respective
Transactional Agreements, including, without limitation, the Stock Purchase,
and
the performance by Company, Buyer, the Stockholders, and the other parties
to
the Transactional Agreements of their respective obligations under the
Transactional Agreements.
Unaudited
Interim Balance Sheet. “Unaudited
Interim Balance Sheet” shall have the meaning specified in Section 2.4(b) of the
Agreement.
Working
Capital Statement.
“Working Capital Statement” shall have the meaning specified in Section 7.8 of
the Agreement.
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