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PLAN AND AGREEMENT OF MERGER
of
ALBARA CORPORATION
LEAPFROG MERGER, INC.
and
LEAPFROG SMART PRODUCTS, INC.
Dated hereof as October 22, 1999
PLAN AND AGREEMENT OF MERGER
This PLAN AND AGREEMENT OF MERGER, dated hereof as October 21, 1999, by and
among Albara Corporation, a Colorado corporation ("ALBARA"), Leapfrog Merger,
Inc., a Florida corporation and wholly-owned subsidiary of ALBARA ("Albara
Subsidiary" or "Merger Surviving Corporation") and Leapfrog Smart Products,
Inc., a Florida corporation ("LEAPFROG"), and Real Xxxxxxxxxx ("Xxxxxxxxxx"),
who joins in the execution of this Agreement for the limited purpose of making
certain covenants regarding the transaction contemplated herein. Albara
Subsidiary and LEAPFROG are hereinafter collectively referred to as the
"LEAPFROG Merging Corporations."
WITNESSETH:
WHEREAS, ALBARA is a corporation duly organized and validly existing under the
laws of the state of Colorado, with its registered office at 0000 Xxxxxxxx,
Xxxxxx, Xxxxxxxx 00000 and its principal executive office at 000 Xxxxx Xxxxxxx,
Xxxxxx, Xxxxx 00000; and
WHEREAS, Albara Subsidiary is a corporation duly organized and validly existing
under the laws of the State of Florida, with its registered office located in
the city of Orlando, County of Dade, State of Florida, and its principal
executive office at 000 Xxxxxxx Xxxxxx, Xxxx. 0, Xxxxxxx, Xxxxxxx 00000; and
WHEREAS, LEAPFROG is a corporation duly organized and validly existing under
the laws of the state of Florida, with its registered office located in the
city of Orlando, County of Dade, State of Florida, and its principal executive
office at 000 Xxxxxxx Xxxxxx, Xxxx. 0, Xxxxxxx, Xxxxxxx 00000; and
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WHEREAS, the respective boards of directors of ALBARA, Albara Subsidiary and
LEAPFROG deem it desirable and in the best interests of their respective
corporations, for ALBARA to acquire the outstanding capital stock of LEAPFROG
by merging LEAPFROG into Albara Subsidiary in exchange for the issuance of
shares of the common stock of ALBARA (together with other consideration
provided for herein) and have proposed, declared advisable and approved such
merger (the "LEAPFROG Merger") pursuant to this Agreement, which Agreement
has been duly approved by resolutions of the respective boards of directors of
ALBARA, Albara Subsidiary and LEAPFROG;
WHEREAS, this Agreement shall require that a shareholders' meeting be called
by ALBARA for the purposes of approving the LEAPFROG Merger prior to closing.
Upon execution of this Agreement, ALBARA shall file a PRESCH14C, Information
Statement and accompanying shareholders' meeting notice, with the Office of
Small Business Policy, Securities and Exchange Commission ("SEC"). Albara
will schedule the Shareholders' meeting for the purposes of: (i) approving
the contemplated LEAPFROG Merger; (ii) reverse splitting the existing shares
1 for 10; (iii) increasing the number of common shares authorized; (iv)
approving the selection of auditors; (v) changing the name of the corporation;
(vi) electing the Board of Directors; (vii) approving all past transactions
conducted by the past officers and directors; and (viii) approving the
formation of a qualified employee stock option program; and
WHEREAS, this Agreement shall require a shareholders' meeting be called by
Albara Subsidiary and LEAPFROG for the purposes of approving the LEAPFROG
Merger prior to closing.
Upon the successful completion of these shareholder meetings, and the filing
of a Articles of Merger with the Florida Secretary of State, the LEAPFROG
Merger shall be considered closed (the "Closing Date")
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements herein contained, and to prescribe the terms and conditions of
the LEAPFROG Merger, the mode of carrying the same into effect, the manner and
basis of converting the LEAPFROG Shares into shares of common stock of ALBARA
(together with other consideration provided for herein) and such other details
and provisions as are deemed necessary or proper, the parties hereto also
hereby agree as follows:
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ARTICLE 1
LEAPFROG MERGER
1:1 LEAPFROG Merger.
1:1:1 Surviving Corporation.
Subject to the terms and conditions of this Agreement, LEAPFROG and Albara
Subsidiary shall be, upon the "Effective Date" as defined in Section 1:1:3
hereof, merged into a single surviving corporation, which shall be Albara
Subsidiary, which shall continue its corporate existence and remain a Florida
corporation governed by and subject to the laws of that state.
1:1:2 Stockholder Approval.
This Agreement will be submitted for approval by the stockholders of ALBARA
and each of the LEAPFROG Merging Corporations in accordance with the
applicable laws of the State of Colorado and Florida.
1:1:3 Effective Date and Closing Date.
The LEAPFROG Merger shall become effective on the "Effective Date", such date
being the later upon which (i) Articles of Merger, attached hereto as Appendix
A, are filed with the Secretary of State of Colorado and (ii) a Certificate
of Merger is filed with the Secretary of State of Florida.
The "Closing Date" will be on or within one (1) business day of the date this
Agreement is approved by the stockholders of Albara.
1:2 Effect of LEAPFROG Merger.
In all other respects, the identity, existence, purposes, powers, objects,
franchises, rights, and immunities of the Merger Surviving Corporation shall
continue unaffected and unimpaired by the LEAPFROG Merger, and the corporate
identity, existence, purposes, powers, objects, franchises, rights, and
immunities of LEAPFROG shall be wholly merged with and into the Merger
Surviving Corporation, and the Merger Surviving Corporation shall be fully
vested therewith. Accordingly, on the Effective Date, the separate existence
of LEAPFROG, except in so far as continued by statute, shall cease.
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1:3 Governing Law and Articles of Incorporation of Merger Surviving
Corporation.
1:3:1 Florida Law Governs; Merger Surviving Corporation's
Articles of Incorporations, Amended and Restated, Survive.
The laws of Florida shall continue to govern the Merger Surviving
Corporation. On and after the Effective Date, the articles of incorporation
of LEAPFROG shall be the articles of incorporation of the Merger Surviving
Corporation until further amended in the manner provided by law and in such
articles of incorporation (the "Articles").
1:4 Bylaws of Surviving Corporation.
1:4:1 Merger Surviving Corporation's Bylaws, as Amended and
Restated, Survive.
On the Effective Date, the bylaws of LEAPFROG shall be the bylaws of the
Merger Surviving Corporation (the "Restated Bylaws") until altered, amended,
or repealed, or until new bylaws shall be adopted in accordance with the
provisions of law, the Articles, and the Restated Bylaws.
1:5 Directors and Officers of Albara and Merger Surviving Corporation.
1:5:1 Directors of Albara.
The names and addresses of the persons who, upon the Effective Date, shall
constitute the board of directors of Albara, and who shall hold office until
the first annual meeting of stockholders of Albara following the Effective
Date, are as follows:
Name Address
Xxx Xxxxxxx Washington, D.C.
Xx. Xxxxxxx Xxxxxxx El Paso, Texas
Xxx Xxxxxx Orlando, Florida
Xxxx Xxxxxx Orlando, Florida
Xxx Xxxxxxxx Orlando, Florida
Xxxxxx XxxXxx Maitland, Florida
Xxxxxxx Xxxxxxxx Philadelphia, Pennsylvania
Xxxxx Xxxxxxxx Orlando, Florida
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Xxx Xxxxxx Xxxxx, Xxxxxxx
Xxxxxx Xxxxxx
Orlando, Florida
Xxxxxxxx Xxxxxx Orlando, Florida
1:5:2 Officers of Albara.
The names and addresses of the persons who, upon the Effective Date, shall
constitute the officers of Albara, and who shall hold office, subject to the
Restated Articles of Incorporation until the first meeting of directors
following the next annual meeting of stockholders thereof, are as follows:
Name Title Address
Xxxxxxxx Xxxxxx CEO/Secretary and Orlando, Florida
Treasurer
Xxxxx Xxxxxxxx Chairman Orlando, Florida
Xxxx Xxxxxx President Orlando, Florida
Xxx Xxxxxx Executive Vice President Orlando, Florida
1:5:3 Directors of Merger Surviving Corporation.
The names and addresses of the persons who, upon the Effective Date, shall
constitute the board of directors of the Merger Surviving Corporation, and
who shall hold office until the first annual meeting of stockholders of the
Merger Surviving Corporation following the Effective Date, are as follows:
Name Address
Xxxx Xxxxxx Orlando, Florida
Xxxxxxxx Xxxxxx Orlando, Florida
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1:5:4 Officers of Merger Surviving Corporation.
The names and addresses of the persons who, upon the Effective Date, shall
constitute the officers of the Merger Surviving Corporation, and who shall
hold office, subject to the Restated Bylaws, until the first meeting of
directors following the next annual meeting of stockholders thereof, are as
follows:
Name Title Address
Xxxxxxxx Xxxxxx CEO/Secretary and Orlando, Florida
Treasurer
Xxxx Xxxxxx President Orlando, Florida
1:5:5 Vacancies.
On or after the Effective Date, if a vacancy shall for any reason exist in the
board of directors or in any of the offices of Albara or the Merger Surviving
Corporation, such vacancy shall be filled in the manner provided in the
Articles and/or Restated Bylaws.
1:6 Capital Stock of Merging Surviving Corporation.
1:6:1 Capital Stock as in Merger Surviving Corporation's
Articles of Incorporation.
The authorized number of shares of capital stock of the Merger Surviving
Corporation, and the par value, designations, preferences, rights, and
limitations thereof, and the express terms thereof, shall be as set forth in
the Articles.
1:7 Conversion of Securities on LEAPFROG Merger.
1:7:1 General.
The manner and basis of converting the LEAPFROG Shares into shares of the
capital stock of ALBARA or the other consideration herein provided for shall
be as hereinafter set forth in this Section 1:7 as follows.
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1:7:2 Conversion of LEAPFROG's Stock.
On the Effective Date, by virtue of the LEAPFROG Merger, without any action
on the part of any party, each share of LEAPFROG Common Stock issued and
outstanding immediately prior to the Effective Date shall be converted into
the right to receive from ALBARA the following consideration (in the aggregate,
the "LEAPFROG Consideration"):
(i) One (1) share, no par value, of duly authorized, validly
issued, fully paid and nonassessable common stock of ALBARA
("ALBARA Common Stock");
(ii) ALBARA Common Stock. None of the currently issued and
outstanding shares of Albara Common Stock, no par value,
issued and outstanding at the effective time of the LEAPFROG
Merger shall be converted as a result of the LEAPFROG Merger;
(iii) Issuance of Shares Subsequent to LEAPFROG Merger. As soon
as practicable after the LEAPFROG Merger becomes effective,
Albara shall cause its transfer agent (the "Transfer Agent")
to issue to the shareholders of LEAPFROG, on a pro rata basis,
an aggregate of four million seven hundred seventeen thousand
five hundred fifty-nine (4,717,559) Shares of common stock in
ALBARA and one million five hundred eleven nine hundred fifty
(1,511,950) shall be reserved for future issuance of options,
warrants and consulting fees.
(iv) Fractional Interests. No fractional shares of common stock
of ALBARA or certificate or scrip representing the same shall
be issued. In lieu thereof each holder of LEAPFROG Shares
having a fractional interest arising upon such conversion will
be rounded up into one full additional share of common stock
of ALBARA;
(v) Status of Common Stock. All Shares of common stock of ALBARA
into which Leapfrog Shares are converted as herein provided
shall be fully paid and non-assessable and shall be issued in
full satisfaction of all rights pertaining to such Shares;
(vi) Independent Appraisal, Right to Dissent and Obtain Payment
for Shares; Procedures for Protection of Dissenter's Rights.
In order to establish a "fair value" for the LEAPFROG Shares
which are paid in cash in lieu of conversion into the Shares
of ALBARA, as provided in this Article VI, the Board of
Directors of LEAPFROG shall establish the value of LEAPFROG'S
Shares prior to the LEAPFROG Merger, and shall afford to such
shareholders of LEAPFROG all of the rights, and implement the
procedures for protection of dissenters' rights, pursuant to
the provisions of the Florida General Corporation Law, Section
10.22 et seq., as amended, the terms and provisions of which
are hereby incorporated by reference and made a part hereof.
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1:7:3 Surrender of LEAPFROG's Certificates.
On the Effective Date, all holders of LEAPFROG Shares (the "LEAPFROG
Shareholders") will surrender each outstanding certificate or certificates
theretofore representing LEAPFROG Shares to ALBARA and receive in exchange
therefor certificates representing the number of whole shares of ALBARA
Common Stock into which the LEAPFROG Shares therefor represented by
the certificate so surrendered shall have been converted as aforesaid.
1:8 Closing of LEAPFROG's Transfer Books.
At the Effective Date, holders of certificates representing LEAPFROG Shares
that were outstanding immediately prior to the Effective Date shall cease to
have any rights as stockholders of LEAPFROG, and the stock transfer books of
LEAPFROG shall be closed with respect to all shares of such common stock
outstanding immediately prior to the Effective Date. As of the date of
execution of this Agreement, no further transfer of any such LEAPFROG Shares
shall be made on such stock transfer books after the Effective Date. If,
after the Effective Date, a valid certificate previously representing any of
LEAPFROG's Shares (a "LEAPFROG Stock Certificate") is presented to ALBARA,
such LEAPFROG Stock Certificate shall be canceled and shall be exchanged as
provided in Section 1:7:3.
1:9 Exchange of Certificates.
(a) Upon surrender of a LEAPFROG Stock Certificate to the Transfer Agent for
exchange, together with such other documents as may be reasonably required by
ALBARA, the holder of such LEAPFROG Stock Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
ALBARA Shares that such holder has the right to receive pursuant to the
provisions of Section 1:7, and LEAPFROG Stock Certificate so surrendered
shall be canceled. Until surrendered as contemplated by this Section 1:10,
each LEAPFROG Stock Certificate shall be deemed, from and after the Effective
Date, to represent only the right to receive upon such surrender a certificate
representing shares of ALBARA Common Stock as contemplated by Section 1:7.
If any LEAPFROG Stock Certificate shall have been lost, stolen or destroyed,
ALBARA may, in its discretion and as a condition precedent to the issuance of
any certificate representing ALBARA Common Stock, require the owner of such
lost, stolen or destroyed LEAPFROG Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as ALBARA may reasonably direct)
as indemnity against any claim that may be made against ALBARA with respect
to such LEAPFROG Stock Certificate.
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(b) No dividends or other distributions declared or made with respect to
ALBARA Common Stock with a record date after the Effective Date shall be paid
to the holder of any un-surrendered LEAPFROG Stock Certificate with respect
to the shares of ALBARA Common Stock represented thereby until such holder
surrenders such LEAPFROG Stock Certificate in accordance with this Section
1:7:3 (at which time such holder shall be entitled to receive all such
dividends and distributions).
(c) ALBARA shall not be liable to any holder or former holder of common
stock of LEAPFROG for any shares of ALBARA Common Stock (or dividends or
distributions with respect thereto), or for any cash amounts, delivered to
any public official pursuant to any applicable abandoned property, escheat
or similar law.
1:10 LEAPFROG Shareholder Approval; Dissenting Shares.
Based upon their approval of the LEAPFROG Merger, each of the shareholders of
LEAPFROG (the "Leapfrog Shareholders") hereby agrees and acknowledges the
following:
(a) that the terms of the LEAPFROG Merger, this Agreement, and all other
agreements contemplated herein are hereby approved, ratified and confirmed
and the officers of LEAPFROG are, and each of them hereby is, authorized and
directed, in the name and on behalf of LEAPFROG, to consummate the
transactions contemplated by this Agreement, on the terms set forth in such
documents and such other agreements, and any amendments thereto, as the
officers executing such agreements may in their discretion deem reasonable
and appropriate; and
(b) that he or she hereby agrees to waive any "appraisal rights" within the
meaning of Section 10.22 et seq of the Florida General Corporation Law with
respect to the LEAPFROG Merger.
1:11 Accounting and Tax Treatment.
1:11:1 GAAP Treatment.
The assets and liabilities of LEAPFROG shall be taken up on the books of the
Merger Surviving Corporation in accordance with generally accepted accounting
principles, and the capital surplus and retained earnings accounts of the
Merger Surviving Corporation shall be determined, in accordance with
generally accepted accounting principles, by the board of directors of the
Merger Surviving Corporation. Nothing herein shall prevent the board of
directors of the Merger Surviving Corporation from making any future changes
in its accounts in accordance with law.
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1:11:2 Federal Income Tax Treatment of LEAPFROG Merger.
The LEAPFROG Merger is intended to qualify as a forward triangular merger
transaction described in Sec. 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended (the "Code").
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LEAPFROG
2:1 Representations and Warranties of LEAPFROG.
Representations and warranties shall be made by LEAPFROG and shall survive
the Effective Date of the LEAPFROG Merger for one (1) year, subject to
mutually satisfactory exceptions, claims and caveats:
2:1:1 Disclosure Schedule.
Except as set forth in the schedule of disclosure attached hereto as Appendix
IV (the "Disclosure Schedule"), LEAPFROG hereby represents and warrants as
follows:
2:1:2 Organization, Standing and Qualification.
LEAPFROG and all of its subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of the State of Florida, and
have all requisite corporate powers and authority to own, to lease or to
operate their properties and to carry on their business as it is now being
conducted.
2:1:3 Authority.
The execution and delivery of this Agreement has been authorized by the Board
of Directors of LEAPFROG, and the completion of these transactions have been
duly and validly authorized by all necessary corporate and shareholder action
on the part of LEAPFROG. This Agreement has been duly executed and delivered
by LEAPFROG and, assuming the due and valid execution and delivery of this
Agreement by the other parties hereto, constitutes the legal, valid and
binding obligation of LEAPFROG, to the extent applicable, enforceable in
accordance with its terms, all as may be subject to or affected by any
bankruptcy, reorganization, insolvency, moratorium or similar laws of general
application from time to time in effect and relating to or affecting the
rights or remedies of creditors generally.
2:1:4 No Conflict, Breach, Default or Violation.
Except as set forth in Section 2:1:4 of the Disclosure Schedule, the execution
and delivery of this Agreement does not, and the completion of transactions
contemplated by this Agreement will not conflict with, result in a breach of
or the acceleration of any obligation under, or constitute a default or event
of default (or event which with notice or lapse of time or both would
constitute a default)
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under, any provision of any charter, bylaw, indenture, mortgage, lien, lease,
license, agreement, contract, permit, order, judgment, or, to the best of the
LEAPFROG's knowledge, any judicial or administrative decree, ordinance or
regulation, or any restriction to which any property of LEAPFROG is subject
or by which LEAPFROG is bound, the result of which would have a material
adverse effect on the business of LEAPFROG.
2:1:5 Approvals.
No consent, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or other
governmental agency or instrumentality, domestic or foreign (a "Governmental
Entity"), or third party is required by or with respect to LEAPFROG or any
LEAPFROG Shareholder in connection with the execution and delivery by
LEAPFROG or any LEAPFROG Shareholder of this Agreement, or the completion of
the transactions contemplated hereby, the absence of which would have a
material adverse effect on LEAPFROG.
2:1:6 Capitalization of LEAPFROG and Subsidiaries.
(a) The authorized capital stock of LEAPFROG consists of five
million (5,000,000) shares of LEAPFROG common stock, $0.01
par value per share, of which four million seven hundred
seventeen thousand five hundred fifty-nine (4,717,559) are
issued and outstanding. The LEAPFROG Shares are validly
issued, fully paid and non-assessable and not subject to
preemptive rights. Section 2:1:6 of the Disclosure Schedule
sets forth a true, complete and correct list of the holders
of record of the issued and outstanding LEAPFROG Shares, and
all claims, commitments or agreements to which LEAPFROG is
a party or by which it is bound, obligating LEAPFROG to issue,
deliver or sell, or to cause to be issued, delivered or sold,
additional shares of capital stock of LEAPFROG or obligating
LEAPFROG to grant, extend or enter into any such option,
warrant, call, right or agreement with respect to its capital
stock. There are no agreements obligating LEAPFROG to redeem,
repurchase or otherwise acquire the capital stock of LEAPFROG,
or any other securities issued by it, or to register the sale
of the capital stock of LEAPFROG under applicable securities
laws. There are no agreements or arrangements prohibiting or
otherwise restricting the payment of dividends or
distributions to the LEAPFROG Shareholders by LEAPFROG.
(b) The authorized capital stock of Leapfrog Health Care Products
("LHCP") consists of five million (5,000,000) shares of common
stock, no par value per share, of which one million
(1,000,000) shares are issued and outstanding and owned by
LEAPFROG and 42,200 are issued and owned by Xxxxx XxXxxxxxxx
Xxxxx. The LHCP Shares are validly issued, fully paid and
non-assessable and not subject to preemptive rights. Section
2:1:6 of the Disclosure Schedule sets forth a true, complete
and correct list of the holders of record of the issued and
outstanding LHCP Shares, and all claims, commitments or
agreements to which LHCP is a party or by which it is bound,
obligating LHCP to issue, deliver or sell, or to cause to be
issued, delivered or sold, additional shares of capital stock
of LHCP or obligating LHCP to grant, extend or enter into any
such option, Warrant, call, right or agreement with
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respect to its capital stock. Except as set forth in Section
2:1:6 of the Disclosure Schedule, there are no agreements
obligating LHCP to redeem, repurchase or otherwise acquire the
capital stock of LHCP, or any other securities issued by it,
or to register the sale of the capital stock of LHCP under
applicable securities laws. Except as set forth in Section
2:1:6 of the Disclosure Schedule, there are no agreements or
arrangements prohibiting or otherwise restricting the payment
of dividends or distributions to the LHCP Shareholders by LHCP.
(c) The authorized capital stock of Leapfrog Global IC Products,
Inc. ("LGIC") consists of five million (5,000,000) shares of
common stock, no par value per share, of which one million
(1,000,000) shares are issued and outstanding and owned by
LEAPFROG. The LGIC Shares are validly issued, fully paid and
non-assessable and not subject to preemptive rights. Section
2:1:6 of the Disclosure Schedule sets forth a true, complete
and correct list of the holders of record of the issued and
outstanding LGIC Shares, and all claims, commitments or
agreements to which LGIC is a party or by which it is bound,
obligating LGIC to issue, deliver or sell, or to cause to be
issued, delivered or sold, additional shares of capital stock
of LGIC or obligating LGIC to grant, extend or enter into any
such option, warrant, call, right or agreement with respect
to its capital stock. Except as set forth in Section 2:1:6 of
the Disclosure Schedule, there are no agreements obligating
LGIC to redeem, repurchase or otherwise acquire the capital
stock of LGIC, or any other securities issued by it, or to
register the sale of the capital stock of LGIC under
applicable securities laws. Except as set forth in Section
2:1:6 of the Disclosure Schedule, there are no agreements or
arrangements prohibiting or otherwise restricting the payment
of dividends or distributions to the LGIC Shareholders by
LGIC.
2:1:7 Information Supplied.
To the best knowledge of LEAPFROG or any of its subsidiaries, no written
statement, certificate, schedule, list or other written information furnished
by or on behalf of LEAPFROG or any of its subsidiaries on or prior to the
date hereof in connection herewith contains (after giving effect to
any correction thereof furnished to LEAPFROG or any of its subsidiaries in
writing prior to the date hereof) any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
2:1:7 Financial Statements.
LEAPFROG has furnished to ALBARA true, complete and correct copies of the
audited balance sheet at December 31, 1998 and the related audited income
statement, and statements of operations, cash flows and changes in
stockholders equity for the same year ended, and an unaudited balance sheet
at September 30, 1999 and the related unaudited income statement, and
statements of operations, cash flows and changes in stockholders equity for
the same period ended (all of these financial statements being collectively
referred to herein as the "LEAPFROG Financials"). The LEAPFROG Financials
are consistent in all material respects with the books and records of
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LEAPFROG, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present the financial position of LEAPFROG as at the date thereof.
2:1:8 Liabilities.
To the best of LEAPFROG's knowledge, LEAPFROG has no liabilities or
obligations, either accrued, absolute, contingent, or otherwise, required
to be but not reflected or reserved against in the LEAPFROG Financials in
accordance with generally accepted accounting principles, except
those incurred in the ordinary course of business, or those that are not
material, and LEAPFROG knows of no potential liability that would result
in material adverse effect on the business of LEAPFROG, other than those
(a) reflected or reserved against in the LEAPFROG Financials, (b)incurred
in the ordinary course of business since December 31, 1998 or (c) set forth
in Section 2:1:8 of the Disclosure Schedule.
2:1:9 Additional Information.
Section 2:1:9 of the Disclosure Schedule sets forth a true, complete and
correct list, or references the attachment as an appendix thereto, of the
following items:
2:1:9:1 Real Property.
Section 2:1:9:1 of the Disclosure Schedule sets forth a true, complete and
correct list of all real property and structures thereon, presently (i) owned
by, or subject to a contract of purchase and sale or option agreement
involving LEAPFROG (collectively, the "Real Property"), (ii) leased by, or
subject to a lease commitment involving, LEAPFROG (collectively, the "Leased
Property"), with a description of: (x) the general use to which such real
property is or was put; (y) the general nature and amount of any Encumbrances
thereon; and (z) if leased the name of the lessor and a true, complete and
correct copy of any written agreement pursuant to which such real property
is leased.
2:1:9:2 Machinery and Equipment.
Section 2:1:9:1 of the Disclosure Schedule sets forth a true, complete and
correct list of all machinery, work product, tools, equipment, furnishings,
and fixtures (excluding such items that had a cost basis of $20,000 or less
at the date hereof) owned, leased or subject to a contract of purchase and
sale or lease commitment, by LEAPFROG with, to the extent practical, a
description with respect to each such of: (i) the serial number of such item;
(ii) the general location at which such item is kept; (ii) whether such item
is owned or leased; (iv) if owned, a general description of the nature and
amount of any Encumbrances thereon; and (v) if leased, the name of the
lessor and a true, complete and correct copy of any written agreement
pursuant to which such item is leased.
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2:1:9:3 Receivables.
Section 2:1:9:3 of the Disclosure Schedule sets forth a true, complete and
correct list of all accounts and notes receivable presently owned by LEAPFROG,
together with an appropriate aging schedule, as of December 31, 1998, which
list separately all amounts receivable from the LEAPFROG Shareholders,
director, officer, employee, or agent of LEAPFROG, from or from any of their
respective affiliates. All accounts and notes receivable of LEAPFROG
represent bona fide claims against debtors for services performed or other
charges arising in the ordinary course of business and are subject to no
material defenses, counterclaims or rights of set-off.
2:1:9:4 Payables.
Section 2:1:9:1 of the Disclosure Schedule sets forth a true, complete and
correct list of all accounts and notes payable owed by LEAPFROG, together
with an appropriate aging schedule, as of December 31, 1998, which list
separately all such amounts payable to any LEAPFROG Shareholder, director,
officer, employee, or agent of LEAPFROG, to LEAPFROG Shareholders or to any
of the irrespective affiliates. To the best of LEAPFROG's knowledge, all
accounts and notes payable of LEAPFROG represent bona fide claims against
LEAPFROG for services performed or other charges arising in the ordinary
course of business.
2:1:9:5 Contracts.
Section 2:1:9:5 of the Disclosure Schedule sets forth a true, complete and
correct list of all contracts, agreements and commitments of LEAPFROG,
whether or not made in the ordinary course of business, including leases
under which LEAPFROG is lessor or lessee, which are to be performed in whole
or in part after the Effective Date, and which (i)involve or may involve
aggregate payments by or to LEAPFROG of $20,000 or more after the Effective
Date, (ii) are not terminable by LEAPFROG without premium or penalty on 60
(or fewer) days' notice, (iii)purport to prohibit or restrict the ability of
LEAPFROG to participate or compete in any material line of business or with
any person, (iv) purport to prohibit or restrict another person's
ability to be in the line of business of LEAPFROG or to compete with LEAPFROG
or (v) are otherwise material to the business or properties of LEAPFROG. To
the best of LEAPFROG'S knowledge, except as set forth on Schedule 2:1:9:5 of
the Disclosure Schedule, LEAPFROG has complied in all material respects with
all commitments, contracts, agreements and obligations pertaining to it
listed on Section 2:1:9:5 of the Disclosure Schedule and is not in material
default under any such contracts and agreements and no notice of material
default has been received, in each case which would have a material adverse
effect on the business of LEAPFROG.
16
2:1:9:6 Licenses; Permits.
All approvals, authorizations, consents, licenses, orders, franchises, rights,
registrations and permits of any type held by LEAPFROG, which together
constitute all material approvals, authorizations, consents, licenses,
orders, franchises, rights, registrations and permits (the "Permits")
required to operate its business as presently conducted. To the best of
LEAPFROG'S knowledge, all such Permits are currently in full force and effect
and LEAPFROG is in compliance therewith, except to the extent noncompliance
would not have a material adverse effect on the business of LEAPFROG. The
execution and delivery of this Agreement and the completion of the transactions
contemplated hereby will not result in any revocation,cancellation,suspension
or modification of any such approval, authorization, consent, license,order,
franchise, right, registration or permit, which revocation, cancellation,
suspension or modification would have a material adverse effect on the
business of LEAPFROG.
2:1:9:7 Employment Agreements.
Except for the Employment Agreements substantially in the form attached hereto
as Appendix V (the "Employment Agreements"), there are no oral or written
employment or consulting agreements to which LEAPFROG is a party or by which
LEAPFROG is bound, including,without limitation, all oral or written employment
or consulting agreements or any other arrangements with any person which
provide for the payment of any consideration by LEAPFROG to such person as a
result of the termination of such person's employment with LEAPFROG, or on
the completion of the transactions contemplated hereby.
2:1:9:8 Insurance Policies.
Section 2:1:9:8 of the Disclosure Schedule sets forth a true, complete and
correct list of all (i) policies of property, fire and casualty, product
liability, worker's compensation, professional liability and title insurance
and other forms of insurance, under which LEAPFROG is insured,and (ii) bonds
issued or posted by any person which respect to any operation or other
activities of LEAPFROG.
2:1:9:9 Transactions with Management.
Section 2:1:9:1 of the Disclosure Schedule sets forth a true, complete and
correct list of all material contracts, leases and commitments by and between
LEAPFROG and any of its officers,directors, stockholders, employees, or
agents, or any affiliate of any such person. None of the officers,
directors, stockholders, or employees of LEAPFROG owns, leases or licenses any
interest in any asset used by LEAPFROG in its business, other than solely by
and through ownership of the capital stock of LEAPFROG.
17
2:1:9:10 Assumed Names.
All assumed or fictitious names under which LEAPFROG engages in or conducts
any business.
2:1:9:11 Personnel.
With respect to LEAPFROG, section 2:1:9:11 of the Disclosure Schedule sets
forth a true, complete and correct list of: (i) the name, current salary or
wage rate of each employee; (ii) the current bonus arrangements applicable to
each employee; (iii) any other material compensation arrangements (excluding
employee insurance or benefit plans) with each employee; and (iv) a
description of any licenses or permits held by an employee that are material
and germane to the business of LEAPFROG.
2:1:9:12 Bank Accounts and Powers of Attorney.
Section 2:1:9:12 of the Disclosure Schedule sets forth the name and address of
each bank or other financial institution in which LEAPFROG has an account or
safe deposit box, the account number, the account name and type of account,
the names of all persons authorized to draw thereon and have access thereto,
and the name of all persons, if any, holding powers of attorney to act for
LEAPFROG, and the name and address of al persons, other than officers and
full-time employees, authorized to bind LEAPFROG contractually, including,
without limitation,independent marketing agents or independent contractors.
2:1:10 Litigation.
Except as set forth in Section 2:1:10 of the Disclosure Schedule, there is no
each suit, action,proceeding or investigation pending or, to the best
knowledge of LEAPFROG, threatened against or affecting LEAPFROG (or any of
its officers or directors in connection with the business of LEAPFROG), nor is
there any outstanding judgment, order, writ, injunction or decree against
LEAPFROG.
2:1:11 Absence of Certain Changes.
To the best of LEAPFROG's knowledge, since the interim period of September 30,
1999, there has not been: (i) any material adverse change in the financial
condition, assets, liabilities (contingent or otherwise), income or business of
LEAPFROG; (ii) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties or business of
LEAPFROG; (iii) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of LEAPFROG; (iv) any increase
in the compensation, bonus, sales commissions or fee arrangement payable or to
become payable by LEAPFROG to any of its officers, directors, employees,
consultants or agents other than raises or increases in compensation
consistent with prior policy that are not in excess of five percent of the
individual's annual compensation or hourly rate; (v) the creation of any
18
material Encumbrance on any of the assets of LEAPFROG, or the amendment,
modification or extension of any existing material Encumbrance on any such
asset other than any such creation, amendment, modification or extension
effected (A) in the ordinary course of business, (B) as required in
connection with the LEAPFROG Merger, or (C) for current taxes or assessments
which are not yet due, or being contemplated in good faith by appropriate
proceedings; (vi) any sale, assignment, transfer, conveyance, lease,
hypothecation, abandonment or other disposition of or agreement to sell,
assign, transfer, convey, lease, hypothecate, abandon or otherwise dispose of,
any of the material assets of LEAPFROG, other that (A) assets sold in the
ordinary course of business, or; (B) any assets which are scrapped as
obsolete in conformance with customary procedure.
2:1:12 Title to Assets; Encumbrances.
2:1:12:1 Except as set forth in Section 2:1:12 of the Disclosure
Schedule, to the best of LEAPFROG'S knowledge, LEAPFROG owns its material
assets, whether real, personal or intangible, free and clear of all
Encumbrances, except for (i) liens for current taxes and assessments not yet
due, or being contested in good faith by appropriate proceedings, (ii)
mechanic's liens arising under the operation of law or for actions contested
in good faith or for which payment arrangements have been made, (iii) liens
granted or incurred by LEAPFROG in the ordinary course of its business or in
connection with the financing of office space, furniture and equipment in the
ordinary course of its business, (iv) easements, covenants, restrictions and
other exception to title of record (which do not materially and adversely
affect the operation of LEAPFROG), (v) Encumbrances reflected on the balance
sheet at December 31, 1998 of LEAPFROG;
2:1:12:2 To the best of LEAPFROG'S knowledge, there are no parties
in possession of any of the material assets of LEAPFROG other than LEAPFROG,
other than personal property held by third parties in the reasonable and
ordinary course of business. Subject to the Encumbrances set forth in Section
2:1:12 of the Disclosure Schedule or described in Section 2:1:12:1, LEAPFROG
enjoys full, free and exclusive use and quiet enjoyment of its material
assets and its rights pertaining thereto. To the best of LEAPFROG'S
knowledge,LEAPFROG enjoys peaceful and undisturbed possession under all leases
under which it is lessee.
2:1:13 Condition of Assets.
2:1:13:1 To the best of LEAPFROG'S knowledge, each of the buildings,
structures, equipment or other items of tangible personal property of
LEAPFROG with a cost basis of at least $20,000 is in working order and repair,
ordinary wear and tear excepted.
2:1:14 Taxes and Returns.
2:1:14:1 To the best of LEAPFROG'S knowledge, LEAPFROG has (i)
filed all tax returns and reports required to be filed by it and (ii) paid all
taxes, assessments and governmental charges and penalties which it has incurred
and which have become due and payable, except such as are being or may be
contested in good faith by appropriate proceedings or relate to the fiscal year
19
ended December 31, 1998. To the best of LEAPFROG'S knowledge, LEAPFROG is
not delinquent in the payment of any material tax, assessment or governmental
charge, and no deficiencies for any taxes have been proposed, asserted, or
formally assessed against LEAPFROG, and no requests for waivers of the time to
assess any such tax are pending. The LEAPFROG Financials reflect an adequate
accrual, based on the facts and circumstances existing as of the date hereof,
for all material taxes payable by LEAPFROG (whether or not shown in any
return) through the date thereof.
2:1:15 Employment Practices.
To the best of LEAPFROG'S knowledge, LEAPFROG has complied with the Occupational
Safety and Health Act and all other laws relating to equal employment of labor
including, without limitation, laws relating to equal employment opportunity
and employment discriminations, employment of illegal aliens, wages, hours and
collective bargaining, the violation or failure to comply with which would have
a material adverse effect on the business of LEAPFROG. Notwithstanding anything
here into the contrary, LEAPFROG has complied with all laws relating to the
collection and payment of social security and withholding taxes, or both, and
similar taxes except where the failure to comply with such laws would not
have a material adverse effect on the business of LEAPFROG. To the best of
LEAPFROG'S knowledge, LEAPFROG is not liable for any arrear age of wages or any
taxes or penalties for failure to comply with any of the foregoing, which would
have a material adverse effect on the business of LEAPFROG. To the best
knowledge of LEAPFROG, there are no organizational efforts presently being
made or threatened by or on behalf of any labor union with respect to any
employees of LEAPFROG, which would have a material adverse effect on the
business of LEAPFROG.
2:1:16 Compliance with Law.
To the best knowledge of LEAPFROG, LEAPFROG is in compliance with and is not
in violation of or in default with respect to, or in alleged violation of or
alleged default with respect to: (a) any applicable law, rule, regulation or
statute applicable to the operations of LEAPFROG, or (b) any order, permit,
certificate, writ, judgment, injunction, decree, determination, award or other
decision of any court or any Government Entity to which LEAPFROG is a party or
by which LEAPFROG is bound, which violation or default or alleged violation or
default would materially and adversely affect the business, operations,
properties, assets, profits or condition of LEAPFROG.
2:1:17 Environmental Requirements and Health and Safety Requirements.
To the best of LEAPFROG'S knowledge, there are no material claims and
complaints, or reports or other documents related to such material claims or
complaints, in the files of LEAPFROG made by or against LEAPFROG during the
past three years pursuant to Environmental Requirements or Health or Safety
Requirements (other than those documents which LEAPFROG has determined, in good
faith and after consultation with counsel, should remain protected by the
attorney-client
20
privilege). At present, to the best of LEAPFROG'S knowledge, none of the
operations of LEAPFROG is subject to any judicial or administrative
proceeding, order, judgment, decree or settlement alleging or addressing a
material violation of or a material liability under any Environmental
Requirement or any Health and Safety Requirement.
2:1:18 Books and Records.
To the best of LEAPFROG'S knowledge, all the records and stock minute books of
LEAPFROG have been delivered to or made available upon request for inspection
by ALBARA. To the best of LEAPFROG'S knowledge, such books and stock minute
books are true and correct in all material respects.
2:1:19 Compliance with ERISA.
Except as set forth in Section 2:1:19 LEAPFROG has no other benefit plans (the
"Benefit Plans") within the meaning of the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code
and other applicable laws to the best of LEAPFROG'S knowledge.
2:1:19:1 Prohibited Transactions.
To the knowledge of LEAPFROG and all its subsidiaries, LEAPFROG or any of its
subsidiaries have not engaged in a transaction in connection with which it
could be subject (either directly or indirectly) to a material liability for
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code.
2:1:19:2 Plan Termination; Material Liabilities.
To the best of LEAPFROG'S knowledge, there has been no termination of an
"employee pension benefit plan" as defined in ERISA which is subject to Title
IV of ERISA (a "Statutory Plan") or trust created under any Statutory Plan that
would give rise to a material liability to the Pension Benefit Guaranty
Corporation ("PBGC") on the part of LEAPFROG or any of its subsidiaries. To
the best knowledge of LEAPFROG and all of its subsidiaries, all statutory
Plans intended to be tax-qualified under Section 401(a) or 403(a) of the Code
have complied in the past, both in form and operation, with every provision
of the Code, regulation promulgated pursuant thereto, and every ruling,
notice or announcement issued by the Internal Revenue Service necessary to
maintain the qualified status of such Statutory Plans, except where non
compliance would not have a material adverse effect on LEAPFROG or any of its
subsidiaries. No material liability to the PBGC has been or is expected to be
incurred with respect to any Statutory Plan. The PBGC has not instituted
proceedings to terminate any Statutory Plan. To the best knowledge of
LEAPFROG and all of its subsidiaries, there exists no condition or set of
circumstances which presents a material risk of termination or partial
termination of any Statutory Plan by the PBGC.
21
2:1:19:3 Accumulated Funding Deficiency.
To the best of LEAPFROG'S knowledge, full payment has been made of all
amounts, if any,which are required under the terms of each statutory plan,
ERISA or other applicable laws to have been paid as contributions to such
Statutory Plan, and no accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Statutory Plan.
2:1:19:4 Relationship of Benefits to Pension Plan Assets.
To the best of LEAPFROG'S knowledge, the current value of all accrued
benefits, both vested and unvested, under all Statutory Plans does not exceed
the current value of the assets of such Statutory Plans allocable to such
accrued benefits, except as disclosed in the financial statements described
in Section 2:1:19. For purposes of the representation in this Section
2:1:19:4, the term "current value" has the meaning specified in Section
4062(b)(1)(A) of ERISA, the term "accrued benefit" has the meaning specified in
Section 3 of ERISA and "current value" is based upon the same actuarial
assumptions used by ALBARA.
2:1:19:5 Execution of Agreements.
To the best of LEAPFROG'S knowledge, the execution and delivery of this
Agreement and the Transaction Documents, and the consummation of the
transaction contemplated hereby will not involve any transaction which is
subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax could be imposed pursuant to Section 4975 of the Code.
2:1:19:6 Fiduciary Liability.
To the best of LEAPFROG and its subsidiaries' knowledge, there have been no
acts, failures to act, omissions or transactions involving a Statutory Plan
or the assets thereof which could result in imposition on LEAPFROG or its
subsidiaries (whether direct or indirect) of material damages or liability in
actions brought under Section 502 or Sections 404 through 409 of ERISA.
2:1:19:7 Pending Claims.
To the best of LEAPFROG and its subsidiaries' knowledge, there are no claims,
pending or overtly threatened, involving any of the Benefit Plans by any
current or former employee (or beneficiary thereof) of LEAPFROG which allege
any material violation of ERISA or the terms of the Benefit Plans, nor is
there any reasonable basis to anticipate any such claims involving such
Benefit Plans which would likely be successfully maintained against LEAPFROG
or any of it subsidiaries.
22
2:1:19:8 Multiemployer Plans.
To the best of LEAPFROG'S knowledge, neither LEAPFROG nor any trade or
business (whether or not incorporated) which together with LEAPFROG or any its
subsidiaries would be deemed to be a "single employer" within the meaning of
Section 400(b) of ERISA or Subsections 414(b), (c), (m) or (o) of the Code
sponsors, maintains, or contributes to, or has at any time in the six year
period proceeding the date of this Agreement sponsored, maintained or
contributed to, any place (not exempt from the provisions of ERISA),
including, but not limited to, any plan which is a "multiemployer plan" as such
term is defined in Section 3(37) or 4001(a)(3) of ERISA.
2:1:19:9 No Reportable Event.
To the best of LEAPFROG or any of its subsidiaries' knowledge, there has been
no "reportable event" (within the meaning of Section 4043(b) of ERISA with
respect to a Statutory Plan) or any "prohibited transaction" (as such term is
defined in Section 406 of ERISA and Section 4975(c) of the Code) with respect
to any of the Employee Plans. All reporting and disclosure requirements under
Title I of ERISA have been met.
2:1:20 No Undisclosed Defaults.
To the best knowledge of LEAPFROG and any of its subsidiaries, neither
LEAPFROG or any of its subsidiaries is not in material default with respect to
any obligation, agreement or covenant to be performed by it under any
contract or arrangement of any kind, which default would have a material
adverse effect on LEAPFROG or any of its subsidiaries.
23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ALBARA AND ALBARA SUBSIDIARY
Representations and warranties shall be made by ALBARA and Albara Subsidiary
and shall survive the Effective Date of the LEAPFROG Merger for a period of one
(1) year, subject to mutually satisfactory exceptions, claims and caveats:
3:1 Representations and Warranties of ALBARA and Albara Subsidiary.
ALBARA and Albara Subsidiary, jointly and severally, represent and warrant to
LEAPFROG as follows:
3:1:1 Organization and Standing.
ALBARA and Albara Subsidiary are corporations duly organized, validly existing
and in good standing under the laws of the States of Colorado and Florida,
respectively, and are duly authorized, qualified and in good standing under all
applicable laws, regulations, ordinances and orders of public authorities and
have all requisite corporate power and authority to own, lease and operate
their properties and to carry on their businesses as they are now being
conducted, except where the failure to be so authorized, qualified or licensed
would not have a material adverse effect on the business of ALBARA and its
subsidiaries, taken as a whole. ALBARA and Albara Subsidiary are duly
licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the character of their properties, owned or leased, or
the nature of their activities, makes such licensing or qualification
necessary, except for where the failure to be so licensed and qualified would
not have a material adverse effect on the business of ALBARA or Albara
Subsidiary.
True and correct copies of the Articles of Incorporation (certified by the
Secretary of State of the States of Colorado and Florida) and the Bylaws, as
amended, of ALBARA and Albara Subsidiary (certified by the Secretary of the
respective corporations) are attached hereto as Section 3:1:1 of the
Disclosure Schedule.
3:1:2 Authority.
ALBARA and Albara Subsidiary have the necessary corporate power and authority
to enter into this Agreement, as well as the Transaction Documents more fully
defined in Section 6:4, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Transaction Documents, and the completion of the transactions contemplated
hereby and thereby have been duly authorized by corporate action of the part
of the Board of Directors of each of ALBARA and Albara Subsidiary, and subject
to the convening of a shareholder's meeting pursuant to Article 7-111-101-109
of the Colorado Business Corporation Act in order to approve this Agreement and
the Transaction Documents, no further corporate proceedings
24
on the part of ALBARA or Albara Subsidiary will be necessary. When issued
pursuant to this Agreement, the Shares of ALBARA common stock to
be issued to Leapfrog Shareholders on the Effective Date will be duly
authorized, validly issued, fully paid and non-assessable, and the ALBARA
Shares to be issued to Leapfrog Shareholders on the Effective Date shall be
legally equivalent in all respects to the ALBARA Common Stock issued and
outstanding as of the date hereof. This Agreement has been executed and
delivered by ALBARA and Albara Subsidiary and constitutes the legal, valid and
binding obligation of ALBARA, enforceable in accordance with its terms. As
of the Effective Date, each of the Transaction Documents will constitute a
legal, valid and binding obligation of ALBARA and Albara Subsidiary, each
enforceable in accordance with its terms.
3:1:3 No Conflict, Default, Breach or Violation.
The execution and delivery of this Agreement does not, and the completion of
the transactions contemplated hereby and thereby will not, conflict with or
result in a breach of or the acceleration of any obligation under, or
constitute a default or event of default (or event which with notice or
lapse of time or both would constitute a default) under, any provision of any
charter, bylaw, indenture, mortgage, lien, lease, agreement, contract, order,
judgment, or, to the best knowledge of ALBARA, any judicial or administrative
decree, ordinance or regulation, permit, license, franchise or any restriction
to which any property of ALBARA or any of its subsidiaries is subject or by
which ALBARA or any of its subsidiaries is bound, the effect of which would be
materially adverse to ALBARA and its subsidiaries taken as a whole. Neither
ALBARA nor any of its subsidiaries is alleged to be in violation or default or
under any applicable law, statute, order, rule or regulation promulgated or
judgment entered by any Governmental Entity, relating to or affecting the
Operation, conduct or ownership of the property or business of ALBARA or
such subsidiaries, which violation or default or alleged violation or default
would have a material, adverse effect, on ALBARA and its subsidiaries taken as
a whole.
3:1:4 Approvals.
Except for usual and customary compliance with the Securities Act, the
securities or blue sky laws of various states as set forth in Section 3:1:4 of
the Disclosure Schedule, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental agency or instrumentality, domestic or
foreign (a "Governmental Entity"), or third party is required by or with
respect to ALBARA or Albara Subsidiary in connection with the execution and
delivery by ALBARA and Albara Subsidiary of this Agreement, or the completion
of the transactions contemplated hereby, the absence of which would have a
material adverse effect on ALBARA or Albara Subsidiary.
25
3:1:5 SEC Documents; Filings; Financial Statements.
(a) Albara has delivered to Leapfrog accurate and complete copies
(excluding copies of exhibits) of each report, registration
statement (on a form other than Form S-8) and definitive proxy
statement filed by Albara with the SEC between January 1, 1998
and the date of this Agreement (the "Albara SEC Documents"). As
of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then
on the date of such filing): (i) each of the Albara SEC
Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the
case may be); and (ii) none of the Albara SEC Documents contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The consolidated financial statements contained in the
Albara SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC
Applicable thereto; (ii) were prepared in accordance with GAAP
Applied on a consistent basis throughout the periods covered,
except as may be indicated in the notes to such financial
statements and (in the case of unaudited statements) as permitted
by Form 10-QSB of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end
audit adjustments; and (iii) fairly present the consolidated
financial position of Albara and its subsidiaries as of the
respective dates thereof and the consolidated results of operations
of Albara and its subsidiaries for the periods covered thereby.
3:1:6 Capitalization of Albara Subsidiary.
The authorized capital stock of Albara Subsidiary consists of fifty million
(50,000,000) shares of no par value Common Stock, of which one thousand shares
(1,000) shares are outstanding and owned by ALBARA, and ten thousand (10,000)
shares of Preferred Stock, no par value, of which no shares are outstanding.
3:1:7 Information Supplied.
To the best knowledge of ALBARA and Albara Subsidiary, no written statement,
certificate, schedule, list or other written information furnished by or on
behalf of ALBARA or Albara Subsidiary to LEAPFROG on or prior to the date
hereof in connection herewith contains (after giving effect to any correction
thereof furnished to LEAPFROG in writing prior to the date hereof) any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated herein or therein or necessary to make the statements
herein or therein, in light of the circumstances under which they were made,
not misleading.
26
3:1:8 Capitalization of ALBARA.
As of the date hereof, the authorized capital stock of ALBARA consists of six
hundred sixty-six thousand six hundred sixty-seven (666,667) shares of ALBARA
Common Stock, of which (i) 397,671 shares of common stock are issued and
outstanding after giving effect to a proposed 10:1 reverse stock split and a
conversion of Series C Preferred Stock to ALBARA Common Stock; (ii) warrants
providing for the sale of a total of 3,335 shares of common stock at $5 per
share are outstanding to a former director, issued in 1995, expiring at year
end 2005; and (iii) 195 shares of Series F Preferred are issued and
outstanding, convertible to 1,950 common shares in the aggregate at the option
of the holders. All of the issued and outstanding shares of capital stock of
ALBARA have been duly and validly authorized and validly issued and are fully
paid and non-assessable. As of the date hereof, except as disclosed herein,
there are no authorized or outstanding subscriptions, options, conversion
rights, warrants or other agreements, securities or commitments of any nature
whatsoever (whether oral or written and whether firm or conditional)
obligating ALBARA or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, to any person any shares of ALBARA
Common Stock or any other shares of the capital stock of ALBARA or any shares
of the capital stock of any of its subsidiaries, or any securities convertible
into or exchangeable for any such shares, or obligating any such person to
grant, extend or enter into any such agreement or commitment. Except as set
forth in Section 3:1:8 of the Disclosure Schedule, there are no agreements
obligating ALBARA to redeem, repurchase or otherwise acquire the capital stock
of ALBARA, or any other securities issued by it, or to register the sale of the
capital stock of ALBARA under applicable securities laws. Except as set forth
in Section 3:1:8 of the Disclosure Schedule, there are no agreements or
arrangements prohibiting or otherwise restricting the payment of dividends or
distributions to the ALBARA Shareholders by ALBARA.
3:1:9 Title to Assets; Encumbrances.
3:1:9:1 Except as set forth in Section 3:1:9 of the Disclosure
Schedule, ALBARA and its subsidiaries own their respective assets, whether real,
personal or intangible, free and clear of all Encumbrances, except (i) liens
for current taxes and assessments not yet due or being contested in good
faith by appropriate proceedings, (ii) mechanic's liens arising under the
operation of law or for actions contested in good faith or for which payment
arrangements have been made, (iii) liens granted or incurred by ALBARA or any
of its subsidiaries in the ordinary course of its business or in connection
with the financing of office space, furniture and equipment in the ordinary
course of its business, (iv) easements, covenants, restrictions and other
exceptions to title of record which do not materially and adversely affect the
operations of ALBARA and its subsidiaries, (v) such Encumbrances as do not
secure indebtedness in excess of $10,000, which in the aggregate (meaning as
to ALBARA and all of its subsidiaries) do not secure indebtedness in excess of
$10,000, or are otherwise described in Section 3:1:9 of the Disclosure
Schedule, or (vi) Encumbrances reflected in the SEC Documents;
27
3:1:9:2 Except as set forth in the 10-KSB for the period ended
December 31, 1998 ("10-K") or Section 3:1:9 of the Disclosure Schedule, there
are no parties in possession of any of the assets of ALBARA or its subsidiaries
other than ALBARA or such subsidiaries, other than personal property held by
third parties in the reasonable and ordinary course of business. Except as
set forth in the 10-K or Section 3:1:9 of the Disclosure Schedule, ALBARA and
each of its subsidiaries enjoy full, free and exclusive use and quiet
enjoyment of their respective assets and all rights pertaining thereto, and
ALBARA and its subsidiaries enjoy peaceful and undisturbed possession under all
leases under which any of them is lessee.
3:1:10 Subsidiaries.
Section 3:1:10 of the Disclosure Schedule sets forth a complete and correct
list of each subsidiary of ALBARA, together with the jurisdiction of
incorporation or organization of such subsidiary and the percentage of each
such subsidiary's outstanding capital stock or other equity interest owned by
ALBARA or another subsidiary of ALBARA.
Except as set forth in the 10-K or Section 3:1:10 of the Disclosure Schedule,
ALBARA owns all of the securities of each of its operating subsidiaries, free
and clear of all Encumbrances, and all capital stock of such subsidiaries has
been duly authorized and validly issued and is fully paid and nonassessable.
None of the subsidiaries has any commitment to issue or sell any shares of its
capital stock, or any securities or obligations convertible into or
exchangeable for, or to give any person other than ALBARA any right to
acquire from it, any shares of its capital stock. Each subsidiary is a
corporation duly organized validly existing and in good standing under the
laws of its jurisdiction of incorporation, has the corporate power and all
necessary authorizations to own all of its properties and assets and to carry
on its business as it is now being conducted, and, to the extent required by
law, is duly qualified to do business and is in good standing in each
jurisdiction in which it owns property or conducts business, except where the
failure to have such authorization or to be so qualified would not have a
material adverse effect on the business or operations of ALBARA and its
subsidiaries as a whole.
3:1:11 Litigation.
Except as set forth in the 10-K or Section 3:1:11 of the Disclosure Schedule,
there is no suit, action, proceeding or investigation pending or, to the best
knowledge of ALBARA, threatened against or affecting ALBARA or any of its
subsidiaries (or any of its officers or directors in connection with the
business of ALBARA or any of its subsidiaries), nor is there any outstanding
judgment, order, writ, injunction or decree against ALBARA or any of its
subsidiaries, which suit, action, proceeding or investigation had or could
reasonably be expected to have a material adverse effect on ALBARA and its
subsidiaries, taken as a whole. Except as set forth in the SEC Documents or
Section 3:1:11 of the Disclosure Schedule, to the best knowledge of ALBARA:
(i) there are no facts upon which
28
any action, suit or proceeding could be brought against ALBARA or any of
its subsidiaries that would have a material adverse effect on ALBARA; and
(ii) neither ALBARA nor any of its subsidiaries is subject to any court
order, writ, injunction, decree, settlement agreement or judgment that
contains or orders any ongoing obligations, whether prohibitory or
mandatory in nature, on the part of ALBARA or its subsidiaries.
3:1:12 Environmental Requirements and Health and Safety Requirements.
To the best of ALBARA'S and Albara Subsidiary's knowledge, Section 3:1:12 of
the Disclosure Schedule sets forth true, correct and complete copies of all
material claims and complaints, or reports or other documents related to such
material claims or complaints, in the files of ALBARA or Albara Subsidiary
made by or against ALBARA or Albara Subsidiary during the past three years
pursuant to Environmental Requirements or Health or Safety Requirements
(other than those documents which ALBARA and Albara Subsidiary have
determined, in good faith and after consultation with counsel, should remain
protected by the attorney-client privilege). At present, to the best of
ALBARA's and Albara Subsidiary's knowledge, none of the operations of ALBARA
or Albara Subsidiary is subject to any judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a material
violation of or a material liability under any Environmental Requirement or
any Health and Safety Requirement, except as set forth in Section 3:1:12 of
the Disclosure Schedule.
3:1:13 Absence of Undisclosed Liabilities.
To the best of ALBARA and Albara Subsidiary's knowledge, except as set forth
in Section 3:1:13 of the Disclosure Schedule, ALBARA or Albara Subsidiary
have no liabilities or obligations, either accrued, absolute, contingent, or
otherwise, required to be but not reflected or reserved against in the ALBARA
or Albara Subsidiary Financials in accordance with generally accepted
accounting principles, except those incurred in the ordinary course of
business, and ALBARA or Albara Subsidiary know of no potential liability that
would result in material adverse effect on the value or business of ALBARA or
Albara Subsidiary other than those (a) reflected or reserved against in the
ALBARA Financials, (b)incurred in the ordinary course of business since
December 31, 1998 or (c) set forth in Section 3:1:13 of the Disclosure
Schedule.
3:1:14 Financial Statements.
ALBARA has furnished to LEAPFROG true, complete and correct copies of the
financial statements of ALBARA, at and for the fiscal year ended December 31,
1998 and for the interim period ended June 30, 1999 (which financial
statements consist of at least a balance sheet, income statement, and
statements of operations, cash flows and changes in stockholders equity, and
which interim unaudited financial statements consist of at least a balance
sheet, income statement, and statement of operations, and will deliver an
interim unaudited balance sheet as of June 30, 1999 (all of these financial
statements being collectively referred to herein as the "ALBARA Financials").
The ALBARA Financials will be in accordance with the books and records of
ALBARA, comply as to
29
form in all material respects with applicable accounting requirements, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the financial position of
ALBARA as at the date thereof. Since December 31, 1998, there has not been,
occurred or arisen (a) any material adverse change in the business or the
consolidated financial condition of ALBARA and its subsidiaries, considered
as a whole, from that shown on the aforementioned balance sheet as of December
31, 1998, or (b) any event, condition or state of facts of any character
which, to the best of the knowledge of ALBARA, materially and adversely
affects, or threatens to materially and adversely affect, the business or
results of operations or financial condition of ALBARA and its subsidiaries,
considered as a whole.
3:1:15 Contracts.
All contracts, agreements and commitments of ALBARA, whether or not made in
the ordinary course of business, including leases under which ALBARA is
lessor or lessee, which are to be performed in whole or in part after the
Effective Date, and which (i)involve or may involve aggregate payments by or
to ALBARA of $10,000 or more after the Effective Date, (ii) are not
terminable by ALBARA without premium or penalty on 60 (or fewer) days' notice,
(iii) purport to prohibit or restrict the ability of ALBARA or Albara
Subsidiary to participate or compete in any material line of business or with
any person, (iv) purport to prohibit or restrict another person's ability to be
in the line of business of ALBARA or to compete with ALBARA or (v) are
otherwise material to the business or properties of ALBARA. To the best of
ALBARA'S knowledge, except as set forth on Schedule 3:1:15 of the Disclosure
Schedule, ALBARA and the Albara Subsidiary have complied with all
commitments, contracts, agreements and obligations pertaining to it listed on
Section 3:1:15 of the Disclosure Schedule and is not in material default
under any such contracts and agreements and no notice of material default has be
received.
3:1:16 Insurance Policies.
All (i) policies of property, fire and casualty, product liability, worker's
compensation, professional liability and title insurance and other forms of
insurance, under which ALBARA or Albara Subsidiary is insured, and (ii) bonds
issued or posted by any person which respect to any operation or other
activities of ALBARA are in full force and effect on the date hereof.
3:1:17 Transactions with Management.
All material contracts, leases and commitments by and between ALBARA and
Albara Subsidiary and any of its officers, directors, stockholders,
employees, or agents, or any affiliate of any such person are set forth in
Section 3:1:17 of the Disclosure Schedule, and none of the officers,
directors, stockholders, or employees of ALBARA or Albara Subsidiary owns,
leases or licenses any interest in any asset used by ALBARA or Albara
Subsidiary in its business, other than solely by and through ownership of the
capital stock of ALBARA.
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3:1:18 Compliance with ERISA.
Each benefit plan set forth in Section 3:1:18 of the Disclosure Schedule
(collectively the "Benefit Plans") substantially complies with the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code and other applicable laws. Except as provided in Section
3:1:18 of the Disclosure Schedule, all contributions required to be made to
each Benefit Plan under the terms of such Benefit Plans, ERISA or other
applicable laws have been timely made. Except as provided in Section 3:1:18
of the Disclosure Schedule.
3:1:18:1 Prohibited Transactions.
To the knowledge of ALBARA and Albara Subsidiary, ALBARA or Albara Subsidiary
has not engaged in a transaction in connection with which it could be subject
(either directly or indirectly) to a material liability for either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code.
3:1:18:2 Plan Termination; Material Liabilities.
There has been no termination of an "employee pension benefit plan" as
defined in ERISA which is subject to Title IV of ERISA (a "Statutory Plan")
or trust created under any Statutory Plan that would give rise to a material
liability to the Pension Benefit Guaranty Corporation ("PBGC") on the part of
ALBARA or Albara Subsidiary. To the best knowledge of ALBARA and Albara
Subsidiary, all ALBARA statutory Plans intended to be tax-qualified under
Section 401(a) or 403(a) of the Code have complied in the past, both in form
and operation, with every provision of the Code, regulation promulgated
pursuant thereto, and every ruling, notice or announcement issued by the
Internal Revenue Service necessary to maintain the qualified status of such
Statutory Plans, except where non-compliance would not have a material
adverse effect on ALBARA or Albara Subsidiary. No material liability to the
PBGC has been or is expected to be incurred with respect to any Statutory
Plan. The PBGC has not instituted proceedings to terminate any Statutory
Plan. To the best knowledge of ALBARA and Albara Subsidiary, there exists no
condition or set of circumstances which presents a material risk of
termination or partial termination of any Statutory Plan by the PBGC.
3:1:18:3 Accumulated Funding Deficiency.
Except as provided in Section 3:1:18:3 of the Disclosure Schedule, full
payment has been made of all amounts which are required under the terms of
each statutory plan, ERISA or other applicable laws to have been paid as
contributions to such Statutory Plan, and no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether
or not waived, exists with respect to any Statutory Plan.
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3:1:18:4 Relationship of Benefits to Pension Plan Assets.
The current value of all accrued benefits, both vested and unvested, under all
Statutory Plans does not exceed the current value of the assets of such
Statutory Plans allocable to such accrued benefits, except as disclosed in
the financial statements described in Section 3:1:18. For purposes of the
representation in this Section 3:1:18:4, the term "current value" has the
meaning specified in Section 4062(b)(1)(A) of ERISA, the term "accrued
benefit" has the meaning specified in Section 3 of ERISA and "current value"
is based upon the same actuarial assumptions used by ALBARA.
3:1:18:5 Execution of Agreements.
The execution and delivery of this Agreement and the Transaction Documents,
and the consummation of the transaction contemplated hereby will not involve
any transaction which is subject to the prohibitions of Section 406 of ERISA
or in connection with which a tax could be imposed pursuant to Section 4975
of the Code.
3:1:18:6 Fiduciary Liability.
To the best of ALBARA or Albara Subsidiary's knowledge, there have been no
acts, failures to act, omissions or transactions involving a Statutory Plan
or the assets thereof which could result in imposition on ALBARA or Albara
Subsidiary (whether direct or indirect) of material damages or liability in
actions brought under Section 502 or Sections 404 through 409 of ERISA.
3:1:18:7 Pending Claims.
To the best of ALBARA or Albara Subsidiary's knowledge, there are no claims,
pending or overtly threatened, involving any of the Benefit Plans by any
current or former employee (or beneficiary thereof) of ALBARA which allege
any material violation of ERISA or the terms of the Benefit Plans, nor is
there any reasonable basis to anticipate any such claims involving such
Benefit Plans which would likely be successfully maintained against ALBARA or
Albara Subsidiary.
3:1:18:8 Multiemployer Plans.
Except as may be set forth in Schedule 3:1:18 of the Disclosure Schedule,
neither ALBARA nor any trade or business (whether or not incorporated) which
together with ALBARA or Albara Subsidiary would be deemed to be a "single
employer" within the meaning of Section 400(b) of ERISA or Subsections
414(b), (c), (m) or (o) of the Code sponsors, maintains, or contributes to,
or has at any time in the six year period proceeding the date of this
Agreement sponsored, maintained or contributed to, any place (not exempt
from the provisions of ERISA), including, but not limited to, any plan which
is a "multiemployer plan" as such term is defined in Section 3(37) or
4001(a)(3) of ERISA.
32
3:1:18:9 No Reportable Event.
To the best of ALBARA or Albara Subsidiary's knowledge, there has been no
"reportable event" (within the meaning of Section 4043(b) of ERISA with
respect to a Statutory Plan) or any "prohibited transaction" (as such term is
defined in Section 406 of ERISA and Section 4975(c) of the Code) with respect
to any of the Employee Plans. All reporting and disclosure requirements under
Title I of ERISA have been met.
3:1:19 No Undisclosed Defaults.
Except as set forth in Section 3:1:19 of the Disclosure Schedule, to the best
knowledge of ALBARA or Albara Subsidiary, ALBARA or Albara Subsidiary is not in
material default with respect to any obligation, agreement or covenant to be
performed by it under any contract or arrangement of any kind, including,
without limitation, those described in Section 3:1:19 of the Disclosure
Schedule, which default would have a material adverse effect on ALBARA or Albara
Subsidiary.
3:1:20 Taxes and Returns.
3:1:20:1 Except as set forth on Section 3:1:20 of the Disclosure
Schedule,ALBARA has (i) filed all tax returns and reports required to be filed
by it and (ii) paid all taxes, assessments and governmental charges and
penalties which it has incurred and which have become due and payable, except
such as are being or may be contested in good faith by appropriate
proceedings or relate to the fiscal year ended December 31, 1998. Except as
set forth on Section 3:1:20 of the Disclosure Schedule, ALBARA is not
delinquent in the payment of any material tax, assessment or governmental
charge, and no deficiencies for any taxes have been proposed, asserted, or
formally assessed against ALBARA, and no requests for waivers of the time to
assess any such tax are pending, the ALBARA Financials reflect an adequate
accrual, based on the facts and circumstances existing as of the date hereof,
for all material taxes payable by ALBARA (whether or not shown in any
return) through the date thereof. Except as set forth in Section 3:1:20 of
the Disclosure Schedule, all tax returns and taxes for periods after December
31, 1998 have or will be filed and paid by ALBARA on a timely basis, unless
said taxes are being contested in good faith by appropriate proceedings.
3:1:21 Compliance with Law.
Except as set forth in Section 3:1:21 or any other Section of the Disclosure
Schedule, to the best knowledge of ALBARA and Albara Subsidiary, ALBARA and
Albara Subsidiary is in compliance with and is not in violation of or in
default with respect to, or in alleged violation of or alleged default with
respect to: (a) any applicable law, rule, regulation or statute applicable to
the operations of ALBARA or Albara Subsidiary, or (b) any order, permit,
certificate, writ, judgment, injunction, decree, determination, award or
other decision of any court or any Government Entity to which ALBARA or
Albara Subsidiary is a party or by which ALBARA or Albara Subsidiary is
bound, which violation or default or alleged violation or default would
materially and adversely affect the
33
business, operations, affairs, prospects, properties, assets, profits or
condition of ALBARA or Albara Subsidiary. To the best knowledge of ALBARA
and Albara Subsidiary, ALBARA is not delinquent with respect to (a) any
report required to be filed with any Governmental Entity or (b) the
preparation and delivery of any reports required by private agreements to
which ALBARA or Albara Subsidiary is a party, which delinquency might
materially and adversely affect the business, operations, affairs,
prospects,properties, assets, profits, conditions of ALBARA or Albara
Subsidiary.
3:1:22 Environmental Requirements and Health and Safety Requirements.
To the best of ALBARA and Albara Subsidiary's knowledge, Section 3:1:22 of the
Disclosure Schedule sets forth true, correct and complete copies of all
material claims and complaints, or reports or other documents related to such
Material claims or complaints, in the files of ALBARA made by or against
ALBARA during the past three years pursuant to Environmental Requirements or
Health or Safety Requirements (other than those documents which ALBARA has
determined, in good faith and after consultation with counsel, should remain
protected by the attorney-client privilege). At present, to the best of
ALBARA's knowledge, none of the operations of ALBARA or Albara Subsidiary is
subject to any judicial or administrative proceeding, order, judgment, decree
or settlement alleging or addressing a material violation of or a material
liability under any Environmental Requirement or any Health and Safety
Requirement, except as set forth in Section 3:1:22 of the Disclosure Schedule.
3:1:23 Agreements, Contracts and Commitments.
Except as set forth in Section 3:1:23 of the Disclosure Schedule, ALBARA or
Albara Subsidiary are not parties to (a) any collective bargaining agreement,
(b) any bonus, deferred compensation, pension, profit-sharing, or retirement
plan or other arrangement, (c) any employment or other agreement, contract,
or commitment requiring ALBARA or Albara Subsidiary to pay any employee more
than $100,000 a year or any severance pay in excess of four weeks' salary,
(d) any agreement of guarantee or indemnification which involves, singly or
together with other such agreements, a potential material liability, (e) any
agreement, contract, or commitment which, to the best of the knowledge of
ALBARA or Albara Subsidiary, might reasonably be expected to have a potential
material adverse impact on the business, financial condition or earnings of
ALBARA or Albara Subsidiary, (f) any agreement, contract, or commitment
containing any covenant limiting the freedom of ALBARA or Albara Subsidiary
to engage in any line of business in any area of the world or to compete with
any person, (g) any agreement, contract, or commitment relating to capital
expenditures and involving future payments which, together with future
payments under all other agreements, contracts, or commitments relating to
the same capital project, exceed $500,000, (h) any agreement, contract, or
commitment (other than leases of real property) relating to the acquisition
of assets or capital stock of any business enterprise, (i) any agreement,
contract, or commitment which involves $500,000 or more, or which has a
remaining term (including options of renewal or extension to the extent
exercisable by a person other than ALBARA or Albara Subsidiary) of three
years or more from the date hereof, or which is not cancelable without
penalty of less than $25,000,
34
or (j) any other agreement or contract which ALBARA or Albara Subsidiary
would be required to file with the Securities and Exchange Commission
("SEC") as an exhibit were ALBARA or Albara Subsidiary to file with the SEC
on the date hereof a registration statement on Form SB-1 or SB-2 covering
securities to be offered by ALBARA or Albara Subsidiary to the
public. To the best of the knowledge of ALBARA or Albara Subsidiary, neither
party has not in any material respect breached, nor to the best of the
knowledge of them is there any pending or threatened claim or any legal basis
for a claim that they have breached, any of the terms or conditions of (1)
any agreement contract or commitment set forth in any of the schedules
heretofore delivered by ALBARA or Albara Subsidiary to LEAPFROG pursuant to
this agreement or (2) any other agreement, contract or commitment, the
breach or breaches of which singly or in the aggregate could result in the
imposition of damages in an amount material to ALBARA or Albara Subsidiary.
3:1:24 Intellectual Property
Section 3:1:24 of the Disclosure Schedule furnished by ALBARA to LEAPFROG
correctly sets forth a list of all letters patent, patent applications,
inventions upon which patent applications have not yet been filed, trade
names, trademarks, trademark registrations and applications, copyrights,
copyright registrations and applications, both domestic and foreign,
presently owned, possessed, used or held by ALBARA and Albara Subsidiary.
Unless otherwise indicated in such schedule, ALBARA and Albara Subsidiary own
the entire right, title and interest in and to the same. Such schedule also
correctly sets forth a list of all licenses granted/software sales to others
by ALBARA and Albara Subsidiary. All letters patent, patent applications,
trade names, trademarks, trademark registrations and applications,
copyrights, copyright registrations, and applications, and grants of licenses
set forth in such schedule are subject to no pending or, to the best of the
knowledge of ALBARA and Albara Subsidiary threatened challenge except as set
forth in said schedule, and neither the execution and delivery of this
agreement or of the Articles of Share Exchange not the consummation of this
agreement will give any licensor or licensee of ALBARA or Albara Subsidiary
any right to change the terms or provisions of, or terminate or cancel, any
license to which is a party. ALBARA and Albara Subsidiary have not agreed to
indemnify any person for or against any infringement of any patent, trademark,
or copyright except as shown on Section 3:1:24 of the Disclosure Schedule.
3:1:25 Brokers' or Finders' Fees
Zenith Holdings Limited will be entitled to a consulting fee of thirty
thousand (30,000) Shares in Albara. No additional agent, broker, person or
firm acting on behalf of ALBARA or Albara Subsidiary or under its authority
is or will be entitled to any commission, broker, finder, or financial
advisory fees from any of the parties hereto in connection with any of the
transactions contemplated herein.
35
ARTICLE IV
OBLIGATIONS PENDING EFFECTIVE DATE
4:1 Agreements of LEAPFROG.
LEAPFROG agrees that from the date hereof to and through the Effective Date,
LEAPFROG will:
4:1:1 Corporate Approvals.
Use its best efforts for the purpose of authorizing and obtaining the consent
of the LEAPFROG Shareholders to this Agreement and the merger contemplated
hereby.
4:1:2 Maintenance of Present Business.
Except as contemplated by this Agreement, operate its business only in the
usual, regular, and ordinary manner so as to maintain the goodwill it now
enjoys and, to the extent consistent with such operation, use all reasonable
efforts to preserve intact its present business organization, keep available
the services of its present officers and employees, and preserve its
relationship with all material customers, suppliers, jobbers, distributors,
and others having business dealings with it. If LEAPFROG proposes to secure
a waiver of this covenant from ALBARA with respect to a particular
transaction, LEAPFROG shall be deemed in compliance with this covenant if the
President of ALBARA or his successor does not deliver to LEAPFROG his
objection in writing to any action described in such waiver request within 72
hours of receiving notice of such waiver request from LEAPFROG.
4:1:3 Maintenance of Properties.
At its expense, maintain all of its property and assets in customary (for
LEAPFROG) repair, order, and condition, reasonable wear and use and damage by
fire or unavoidable casualty excepted.
4:1:4 Maintenance of Books and Records.
Maintain its books of account and records in the usual, regular, and ordinary
manner, in accordance with generally accepted accounting principles applied
on a consistent basis.
4:1:5 Compliance with Law.
Continue to conduct its activities in a manner consistent with its current
understanding of the laws applicable to it, unless and until it receives
written notice from a Governmental Entity that it is not in compliance with a
particular law or laws, at which time LEAPFROG will modify its conduct to
comply with such law or laws.
36
4:1:6 Inspection.
Allow ALBARA and Albara Subsidiary, and their directors, officers and
authorized representatives, during normal business hours, to inspect its
records and to consult with its officers, employees, attorneys, and agents
for the purpose of determining the accuracy of the representations and
warranties made, and the compliance with covenants contained, in this
Agreement. ALBARA and Albara Subsidiary agree that they and their officers
and representatives shall hold all data and information obtained with respect
to the other parties hereto in strict confidence, and each further agrees
that it will not use such data or information or disclose the same to others,
except to the extent such date or information either is, or becomes,
published or a matter of public knowledge.
ALBARA, Albara Subsidiary and LEAPFROG agree that they will not issue any
press release or other disclosure of this Agreement without the prior approval
of the other, which shall not be unreasonably withheld, unless, in the good
faith opinion of counsel, such disclosure is required by law and time does
not permit the obtaining of such consent, or such consent is withheld.
In the event of a breach or threatened breach by ALBARA or Albara Subsidiary
or their officers or representatives of the provision of this Section,
LEAPFROG shall be entitled, in addition to any other available remedy, to an
injunction restraining any disclosure by ALBARA, Albara Subsidiary or their
officers or representatives of any of such confidential information.
4:1:7 Prohibition of Certain Contracts.
Not enter into any contracts outside of the ordinary course of business
without the prior written consent of ALBARA, which consent will not be
unreasonably withheld. If LEAPFROG proposes to secure a waiver of this
covenant from ALBARA with respect to a particular transaction, LEAPFROG shall
be deemed in compliance with this covenant if the President of ALBARA or
his successor does not deliver to LEAPFROG his objection in writing to any
action described in such waiver request within 72 hours of receiving notice of
such waiver request from LEAPFROG.
4:1:8 Prohibition of Loans.
Not incur any borrowings, except in the usual and ordinary course of business,
without the prior written consent of ALBARA, which consent will not be
unreasonably withheld.
4:1:9 Prohibition of Certain Commitments.
Not enter into a commitment for expenditures or incur any liability exceeding
$25,000, in the aggregate, except (i) as may be necessary or desirable for the
maintenance of existing facilities, machinery and equipment in the ordinary
course of business or in connection with measures taken to effect the Merger,
as described herein, (ii) as in otherwise consented to in writing by ALBARA,
or (iii) as may otherwise be in the ordinary course of business.
37
4:1:10 Disposal of Assets.
The company shall not sell, dispose of, or encumber, any property or assets,
except (i) in the usual and ordinary course of business; or (ii) as is
otherwise consented to in writing by ALBARA or authorized hereunder.
4:1:11 Maintenance of Insurance.
Keep in full force and effect present insurance policies or other comparable
coverage on all its properties.
4:1:12 No Amendment to Articles of Incorporation.
Not amend its certificate of incorporation or merge or consolidate with or
into any other corporation or change in any manner the rights of its capital
stock or the character of its business.
4:1:13 No Issuance, Sale, or Purchase of Securities.
Except as contemplated by this Agreement, not issue or sell, or issue options
or rights to subscribe to, or enter into any contract or commitment to issue
or sell (upon conversion or otherwise), any shares of its capital stock, or
subdivide or in any way reclassify any shares of its capital stock, or
acquire, or agree to acquire, any shares of its capital stock.
4:1:14 Prohibition of Dividends.
Not declare or pay any dividend on shares of its capital stock or make any
other distribution of assets to the holders thereof.
4:1:15 Notice of Material Developments.
Promptly notify ALBARA in writing of any material adverse change in, or any
changes which in the aggregate would likely result in a material adverse change
in, the business, properties, condition(financial or otherwise) or results of
operations of LEAPFROG, whether or not occurring in the usual and ordinary
course of its business, but only to the extent LEAPFROG has actual knowledge
of any such changes.
4:2 Agreements of ALBARA and Albara Subsidiary.
Each of ALBARA and Albara Subsidiary agrees that from the date hereof to the
Effective Date, it will:
4:2:1 Corporate Approvals.
Call and hold a meeting of its shareholders to approve the Transaction
contemplated herein, and its board of directors for the purpose of
authorizing and obtaining the consent of ALBARA as sole stockholder of
Albara Subsidiary to this Agreement and the merger contemplated hereby.
38
4:2:2 Maintenance of Present Business.
Except as contemplated by this Agreement, operate its business and the
businesses of its subsidiaries only in the usual, regular, and ordinary manner
so as to maintain the goodwill they now enjoy and, to the extent consistent
with such operation, use all reasonable efforts to preserve intact their
present business organization, keep available the services of their present
officers and employees, and preserve their relationships with customers,
suppliers, jobbers, distributors, and others having business dealings with
them.
4:2:3 Maintenance of Books and Records.
Maintain the books of account and records of ALBARA and each of its
subsidiaries in the usual, regular, and ordinary manner, in accordance with
generally accepted accounting principles applied on a consistent basis.
4:2:4 Compliance with Law.
Continue, and cause its subsidiaries to continue, to conduct its and their
activities in a manner consistent with ALBARA's current understanding of the
laws applicable to said entities, unless and until ALBARA receives written
notice from a Government Entity that said entities are not in compliance with a
particular law or laws, at which time ALBARA will cause said entity or
entities to comply with such law or laws.
4:2:5 Inspection.
Allow LEAPFROG and its directors officers and authorized representatives,
during normal business hours, to inspect its and each of its subsidiaries'
records and to consult with its and each of its subsidiaries' officers,
employees, attorneys, and agents for the purpose of determining the accuracy
of the representations and warranties made, and the compliance with covenants
contained, in this Agreement. LEAPFROG agrees that it and its officers and
representatives shall hold all data and information obtained with respect to
the other parties hereto in strict confidence, and each further agrees that
it will not use such data or information or disclose the same to others,
except to the extent such data or information either is, or becomes,
published or a matter of public knowledge. In the event of a breach or
threatened breach by LEAPFROG or its officers or representatives of the
provisions of this Section, ALBARA and Albara Subsidiary shall be entitled,
in addition to any other available remedy, to an injunction restraining any
disclosure by LEAPFROG or its officers or representatives of any of such
confidential information.
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4:2:6 Prohibition of Certain Contracts.
Give prompt written notice to LEAPFROG of any material contracts of ALBARA or
any of its subsidiaries, except those entered into in the ordinary course of
business. In any event, ALBARA shall promptly give written notice to LEAPFROG
of any stock or asset acquisition by ALBARA or any of its subsidiaries.
4:2:7 Prohibition of Loans.
Give prompt written notice to LEAPFROG of any borrowings of ALBARA or any of
its subsidiaries, except those made in the usual and ordinary course of
business.
4:2:8 Disposal of Assets.
Give prompt written notice to LEAPFROG of any sale, disposal of, or
Encumbrance on, any property or assets of ALBARA or any of its subsidiaries,
except in the usual and ordinary course of business.
4:2:9 Maintenance of Insurance.
Keep in full force and effect present insurance policies or other comparable
coverage on all of the assets of ALBARA and all of its subsidiaries.
4:2:10 No Amendments to Articles of Incorporation.
Not amend its Articles of Incorporation, or merge into any other corporation.
4:2:11 Notice of Material Developments.
Promptly notify LEAPFROG in writing of any material adverse change in, or any
changes which in the aggregate would likely result in a material adverse change
in, the business, properties, condition (financial or otherwise), results of
operations or prospects of ALBARA or any of its subsidiaries, whether or not
occurring in the usual and ordinary course of business, but only to the
extent ALBARA or any of such subsidiaries has actual knowledge of any such
changes.
4:2:12 Performance of Contracts.
Perform and/or cause to be performed all material obligations of ALBARA or any
of its subsidiaries under agreements relating to or affecting their respective
assets, properties or rights.
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ARTICLE V
ADDITIONAL COVENANTS OF THE PARTIES
5:1 Filings and Consents.
As promptly as practicable after the execution of this Agreement, each party
to this Agreement (a) shall make all filings (if any) and give all notices (if
any) required to be made and given by such party in connection with the
LEAPFROG Merger and the other transactions contemplated by this Agreement,
and (b) shall use all commercially reasonable efforts to obtain all Consents
(if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
LEAPFROG Merger and the other transactions contemplated by this Agreement,
other than those Consents identified on Section 2.25 of the Disclosure
Schedule. LEAPFROG shall (upon request) promptly deliver to ALBARA a copy of
each such filing made, each such notice given and each such Consent obtained
by LEAPFROG during the Pre-Closing Period.
5:2 Public Announcements.
After the date hereof, (a) LEAPFROG shall not (and LEAPFROG shall not permit
any of its Representatives to) issue any press release or make any public
statement regarding this Agreement or the Merger, or regarding any of the
other transactions contemplated by this Agreement, without ALBARA's prior
written consent, and (b) ALBARA will use reasonable efforts to consult with
LEAPFROG prior to issuing any press release or making any public statement
regarding the Merger.
5:3 Best Efforts.
During the Pre-Closing Period, ALBARA, Albara Subsidiary and LEAPFROG shall
use their best efforts to cause the conditions set forth in Section 6 to be
satisfied on a timely basis.
5:4 Employment and Consulting Agreements.
At or prior to the Closing, Xxxxxxxxxx, Xxxxxxxx Xxxxxx, Xxxx Xxxxxx and Xxx
Xxxxxx shall execute and deliver employment and/or consulting agreements in
the forms attached hereto at Appendix V (the "Employment Agreements").
41
5:5 FIRPTA Matters.
At the Closing, (a) LEAPFROG shall deliver to ALBARA a statement (in such form
as may be reasonably requested by counsel to ALBARA) conforming to the
requirements of Xxxxxxx 0.000 - 0(x)(0)(x) xx xxx Xxxxxx Xxxxxx Treasury
Regulations, and (b) LEAPFROG shall deliver to the IRS the notification
required under Xxxxxxx 0.000 - 0(x)(0) xx xxx Xxxxxx Xxxxxx Treasury
Regulations.
5:6 Investment Representation Letter.
At the Closing, each of the LEAPFROG Shareholders shall execute and deliver to
LEAPFROG an investment representation letter in the form attached hereto at
Appendix VI (an "Investment Representation Letter").
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF
ALBARA, ALBARA SUBSIDIARY AND LEAPFROG
The obligations of ALBARA, Albara Subsidiary and LEAPFROG to effect the
LEAPFROG Merger and otherwise consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions:
6:1 Accuracy of Representations.
Each of the representations and warranties made by ALBARA, Albara Subsidiary
and LEAPFROG in this Agreement and in each of the Transaction Documents and
instruments delivered to ALBARA, Albara Subsidiary and LEAPFROG in connection
with the transactions contemplated by this Agreement shall have been accurate
in all material respects as of the date of this Agreement (without giving
effect to any Material Adverse Effect or other materiality qualifications, or
any similar qualifications, contained or incorporated directly or indirectly in
such representations and warranties), and shall be accurate in all material
respects as of the Closing Date as if made at the Closing Date (without
giving effect to any update to the Disclosure Schedule, and without giving
effect to any Material Adverse Effect or other materiality qualifications, or
any similar qualifications, contained or incorporated directly or indirectly
in such representations and warranties).
6:2 Performance of Covenants.
All of the covenants and obligations that ALBARA, Albara Subsidiary and
LEAPFROG are required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all respects.
6:3 Consents.
All Consents required to be obtained in connection with the LEAPFROG Merger
and the other transactions contemplated by this Agreement (other than the
Consents identified in Part 2.25 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
6:4 Agreements and Documents.
ALBARA and LEAPFROG shall have received the following agreements and
documents, each of which will be in full force and effect as of the Effective
Date:
(i) Articles of Merger
(ii) a "Bleed-Out" Letter executed by Xxxxxxxxxx, a copy of which is
attached hereto as Appendix II;
(iii) a Registration Rights Agreement executed between ALBARA and
Xxxxxxxxxx, a copy of which is attached hereto as Appendix III;
43
(iv) a Disclosure Schedule executed by ALBARA and LEAPFROG;
(v) Employment Agreements executed by Xxxxxxxx Xxxxxx, Xxxx Xxxxxx
and an extension of Xxx Xxxxxx'x existing contract; and a
Consulting and Warrant Agreement executed between ALBARA and
Xxxxxxxxxx;
(vi) Investment Representation Letters executed by each of the LEAPFROG
Shareholders;
(vii) Legal Opinions of Xxxxxx & Xxxxxxx, P.C. and Xxxxxx and Xxxxx, LLP,
dated as of the Closing Date, outstanding in the forms attached
hereto at Appendix VIII;
(viii) a certificate executed by both parties and containing the
representation and warranty of each party that each of the
representations and warranties set forth in Section 2 and 3 is
accurate in all respects as of the Closing Date as if made on the
Closing Date and that the conditions set forth in Section 6 have
been duly satisfied (the "Closing Certificate"); and
(ix) written resignations of all officers and directors of ALBARA,
effective as of the Effective Date.
(x) The options for LHLP and LGIC shall represent on a fully diluted
basis no more than 15% of the common stock of each such
subsidiary of LEAPFROG.
6:5 FIRPTA Compliance.
LEAPFROG shall have filed with the IRS the notification referred to in Section
5.5(b).
6:6 No Restraints.
No temporary restraining order, preliminary or permanent injunction or other
order preventing the consummation of the LEAPFROG Merger shall have been
issued by any court of competent jurisdiction and remain in effect, and there
shall not be any Legal Requirement enacted or deemed applicable to the
LEAPFROG Merger that makes consummation of the LEAPFROG Merger illegal.
6:7 No Legal Proceedings.
No Person shall have commenced or threatened to commence any Legal Proceeding
challenging or seeking the recovery of a material amount of damages in
connection with the LEAPFROG Merger or seeking to prohibit or limit the
exercise by ALBARA of any material right pertaining to its ownership of the
assets of LEAPFROG.
6:8 Employees.
No more than one of the individuals identified on Appendix X shall have ceased
to be employed by, or expressed an intention to terminate their employment
with, LEAPFROG.
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ARTICLE VII
TERMINATION
7:1 Termination Events.
This Agreement may be terminated prior to the Closing:
(a) by ALBARA if ALBARA reasonably determines that the timely satisfaction of
any condition set forth in Section 6 has become impossible (other than as a
result of any failure on the part of ALBARA to comply with or perform any
covenant or obligation of ALBARA set forth in this Agreement);
(b) by LEAPFROG if LEAPFROG reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of LEAPFROG to comply with
or perform any covenant or obligation set forth in this Agreement or in any
other agreement or instrument delivered to ALBARA);
(c) by ALBARA at or after the Scheduled Closing Time if any condition set
forth in Section 6 has not been satisfied by the Scheduled Closing Time;
(d) by LEAPFROG at or after the Scheduled Closing Time if any condition set
forth in Section 6 has not been satisfied by the Scheduled Closing Time;
(e) by ALBARA if the Closing has not taken place on or before December 31,
1999 (other than as a result of any failure on the part of ALBARA to comply
with or perform any covenant or obligation of ALBARA set forth in this
Agreement);
(f) by LEAPFROG if the Closing has not taken place on or before December 31,
1999 (other than as a result of the failure on the part of LEAPFROG to comply
with or perform any covenant or obligation set forth in this Agreement or in
any other agreement or instrument delivered to ALBARA); or
(g) by the mutual consent of ALBARA and LEAPFROG.
7:2 Termination Procedures.
If ALBARA wishes to terminate this Agreement pursuant to Section 7:1(a),
Section 7:1(c) or Section 7:1(e), ALBARA shall deliver to LEAPFROG a written
notice stating that ALBARA is terminating this Agreement and setting forth a
brief description of the basis on which ALBARA is terminating this Agreement.
If LEAPFROG wishes to terminate this Agreement pursuant to Section 7:1(b),
45
Section 7:1(d) or Section 7:1(f), LEAPFROG shall deliver to ALBARA a written
notice stating that LEAPFROG is terminating this Agreement and setting forth a
brief description of the basis on which LEAPFROG is terminating this Agreement.
7:3 Effect of Termination.
If this Agreement is terminated pursuant to Section 7:1, all further
obligations of the parties under this Agreement shall terminate; provided,
however, that: (a) neither LEAPFROG nor ALBARA shall be relieved of any
obligation or liability arising from any prior breach by such party of any
provision of this Agreement; (b) the parties shall, in all events, remain
bound by and continue to be subject to the provisions set forth in Section 9;
and (c) ALBARA and LEAPFROG shall, in all events, remain bound by and
continue to be subject to Section 5:2.
46
ARTICLE VIII
INDEMNIFICATION, ETC.
8:1 Survival of Representations, Etc.
(a) The representations and warranties made by ALBARA, Albara Subsidiary and
LEAPFROG (including the representations and warranties set forth in Sections 2
and 3, shall survive the Effective Date for a period of one (1) year,
provided, however, that if, at any time prior to the first anniversary of the
Closing Date, any Indemnitee (acting in good faith) delivers to either party
a written notice alleging the existence of an inaccuracy in or a breach of
any of the representations and warranties made by either party (and setting
forth in reasonable detail the basis for such Indemnitee's belief that such
an inaccuracy or breach may exist) and asserting a claim for recovery under
Section 8.2 based on such alleged inaccuracy or breach, then the claim
asserted in such notice shall survive the first anniversary of the Closing
until such time as such claim is fully and finally resolved. Notwithstanding
the foregoing, the representations and warranties set forth in Section 2.14
shall survive until the expiration of the applicable statutes of limitations,
including extensions thereof.
(b) The representations, warranties, covenants and obligations of ALBARA,
Albara Subsidiary and LEAPFROG, and the rights and remedies that may be
exercised by either party, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or
knowledge of either party or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made
by ALBARA, Albara Subsidiary or LEAPFROG in this Agreement.
8:2 Cross Indemnification.
From and after the Effective Time (but subject to Section 8.1(a)), ALBARA and
the Albara Subsidiary and Leapfrog shall hold harmless and indemnify each
other from and against, and shall compensate and reimburse the other party
for, any Damages which are directly or indirectly suffered or incurred by
either party or to which either party may otherwise become subject
(regardless of whether or not such Damages relate to any third-party claim)
and which arise from or as a result of, or are directly or indirectly
connected with: (i) any inaccuracy in or breach of any representation or
warranty set forth in Sections 2 or 3 (without giving effect to any Material
Adverse Effect or other materiality qualification or any similar qualification
contained or incorporated directly or indirectly in such representation or
warranty, but giving effect to any update to the Disclosure Schedule
47
delivered by ALBARA and LEAPFROG prior to the Closing); (ii) any breach of any
covenant or obligation of ALBARA, Albara Subsidiary or LEAPFROG (including the
covenants set forth in Sections 4 and 5); or (iii) any Legal Proceeding
relating to any inaccuracy or breach of the type referred to in clause "(i)"
or "(ii)" above (including any Legal Proceeding commenced by any Indemnitee
for the purpose of enforcing any of its rights under this Section 8).
8:3 Threshold; Ceiling.
(a) ALBARA, Albara Subsidiary or LEAPFROG shall not be required to make any
indemnification payment pursuant to Section 8.2(a) for any inaccuracy in or
breach of any of their representations and warranties set forth in Sections 2
and 3 until such time as the total amount of all Damages (including the
Damages arising from such inaccuracy or breach and all other Damages arising
from any other inaccuracies in or breaches of any representations or
warranties) that have been directly or indirectly suffered or incurred by the
other party, exceeds $100,000 in the aggregate. (If the total amount of such
Damages exceeds $100,000, then the Indemnitee shall be entitled to be
indemnified against and compensated and reimbursed for all of such Damages,
including claims for Damages included in the initial $100,000.
8:4 Satisfaction of Indemnification Claim.
In the event either party had any liability (for indemnification or otherwise)
to the other party under this Section 8, the indemnifying party shall satisfy
such liability first, by delivering to such Indemnitee the number of shares
of Albara determined by dividing (a) the aggregate dollar amount of such
liability by (b) the average closing price of Albara as reported for the ten
trading days preceding the date such liability is satisfied, and second, to
the extent shares of Albara are not available to satisfy in full such
liability, then such difference in cash.
8:5 No Contribution.
ALBARA, Albara Subsidiary and LEAPFROG waive, acknowledge and agree that they
shall not have and shall not exercise or assert (or attempt to exercise or
assert), any right of contribution, right of indemnity or other right or
remedy against each other in connection with any third party indemnification
obligation or any other liability to which either party may become subject under
or in connection with this Agreement.
8:6 Interest.
Any party who is required to hold harmless, indemnify, compensate or reimburse
any Indemnitee pursuant to this Section 8 with respect to any Damages shall
also be liable to such Indemnitee for interest on the amount of such Damages
(for the period commencing as of the date on which
48
indemnifying party first received notice of a claim for recovery by such
Indemnitee and ending on the date on which the liability of such indemnifying
party to such Indemnitee is fully satisfied by such indemnifying party) at a
floating rate equal to the rate of interest publicly announced by Bank of
America, N.T. & S.A. from time to time as its prime, base or reference rate.
8:7 Defense of Third Party Claims.
In the event of the assertion or commencement by any Person of any claim or
Legal Proceeding (whether against ALBARA, Albara Subsidiary or LEAPFROG) with
respect to which either party may become obligated to hold harmless,
indemnify, compensate or reimburse any third party Indemnitee pursuant to
this Section 8, such party shall have the right, at its election, to proceed
with the defense of such claim or Legal Proceeding on its own.
49
ARTICLE IX
MISCELLANEOUS PROVISIONS
9:1 Further Assurances.
Each party hereto shall execute and cause to be delivered to each other party
hereto such instruments and other documents, and shall take such other
actions, as such other party may reasonably request (prior to, at or after
the Closing) for the purpose of carrying out or evidencing any of the
transactions contemplated by this Agreement.
9:2 Fees and Expenses.
If the LEAPFROG Merger is not consummated for any reason whatsoever, each
party to this Agreement shall bear and pay all fees, costs and expenses
(including legal fees and accounting fees) ("Fees and Expenses") that have
been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement. If the LEAPFROG Merger is
consummated, LEAPFROG shall pay all Fees and Expenses of ALBARA.
9:3 Attorneys' Fees.
If any action or proceeding relating to this Agreement or the enforcement of
any provision of this Agreement is brought against any party hereto, the
prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the
prevailing party may be entitled).
9:4 Notices.
All notices and other communications required or permitted under this
Agreement and the transactions contemplated hereby shall be in writing and
shall be deemed to have been duly given, made and received on the date when
delivered by hand delivery with receipt acknowledged, or upon the next
Business Day following receipt of facsimile transmission, or upon the fifth day
after deposit in the United States mail, registered or certified with postage
prepaid, return receipt requested, addressed as set forth below:
50
(a) If to ALBARA:
000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
Attention: Real Xxxxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy (not constituting notice) to:
Xxxxxx and Xxxxx, LLP
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
(b) If to LEAPFROG:
000 Xxxxxxx Xxxxxx, Xxxx. 0
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy (not constituting notice) to:
Xxxxxx & Xxxxxxx, P.C.
0000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxxxx Xxxx & Company, LLC
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
51
9:5 Confidentiality.
Without limiting the generality of anything contained in Section 5.2, on and
at all times after the Closing Date, each party shall keep confidential, and
shall not use or disclose to any other Person, any non-public document or other
non-public information in such party's possession that relates to the
business of LEAPFROG or ALBARA.
9:6 Time of the Essence.
Time is of the essence of this Agreement.
9:7 Headings.
The bolded 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.
9:8 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.
9:9 Governing Law.
This Agreement shall be construed in accordance with, and governed in all
respects by, the internal laws of the State of Colorado and Florida (without
giving effect to principles of conflicts of laws).
9:10 Successors and Assigns.
The rights and obligations of ALBARA, Albara Subsidiary or LEAPFROG may not be
assigned without the prior written consent of both parties. Subject to the
foregoing, the provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
9:11 Remedies Cumulative; Specific Performance.
The rights and remedies of the parties hereto shall be cumulative (and not
alternative). The parties to this Agreement agree that, in the event of any
breach or threatened breach by any party to this Agreement of any covenant,
obligation or other provision set forth in this Agreement for the benefit
52
of any other party to this Agreement, such other party shall be entitled (in
addition to any other remedy that may be available to it) to (a) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision, and (b) an
injunction restraining such breach or threatened breach.
9:12 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 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.
9:13 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
all of the parties hereto.
9:14 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.
9:15 Entire Agreement.
This Agreement and the other agreements referred to herein set forth the
entire understanding of the parties hereto relating to the subject matter
hereof and thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter hereof and
thereof.
53
9:16 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" and "Appendix" are intended to refer to Sections of this Agreement
and Appendices to this Agreement.
IN WITNESS WHEREOF, ALBARA, Albara Subsidiary and LEAPFROG have signed this
Agreement as of the date first written above.
ALBARA CORPORATION
a Colorado Corporation
/s/ Real Xxxxxxxxxx
By: _____________________________________
Real Xxxxxxxxxx, Chief Executive Officer
LEAPFROG SMART PRODUCTS, INC.
a Florida Corporation
/s/ Xxxx Xxxxxx
By: _____________________________________
Xxxx Xxxxxx, President
LEAPFROG MERGER, INC.
a Florida Corporation
/s/ Real Xxxxxxxxxx
By: _____________________________________
Real Xxxxxxxxxx, President
54
Exhibit A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
"Acquisition Transaction" means any transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of Albara or Leapfrog's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of Albara or Leapfrog, (ii) any option,
call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of Albara or
Leapfrog, or (iii) any security, instrument or obligation that is
or may become convertible into or exchangeable for any capital
stock or other equity security of Albara or Leapfrog; or
(c) any merger, consolidation, business combination, reorganization or
similar transaction involving Albara or Leapfrog.
"Affiliate" means, with respect to any specified Person, any other Person in
which the specified Person has a direct or indirect interest (except through
ownership of less than 5% of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in the
national over-the-counter market).
"Agreement" shall have the meaning specified in the preamble to the Agreement.
"Albara" shall have the meaning specified in the preamble to the Agreement.
"Albara Common Stock" shall have the meaning specified in Section 1:7:2(i) of
the Agreement.
"Albara SEC Documents" shall have the meaning specified in Section 3:1:5(a)
of the Agreement.
"Balance Sheet" shall have the meaning specified in Section 2:1:7 of the
Agreement.
"Business Day" means a day, other than a Saturday or a Sunday, or a federal
holiday upon which offices of the federal government are not open for business.
"Closing" and "Closing Date" shall have the meanings specified in Section
1:1:3 of the Agreement.
"Code" shall have the meaning specified in the recitals to the Agreement.
"Leapfrog" shall have the meaning specified in the preamble to the Agreement.
55
"Leapfrog Common Stock" shall have the meaning specified in the recitals to the
Agreement.
"Leapfrog Contract" means any Contract: (a) to which Leapfrog is a party;
(b) by which Leapfrog or any of its assets is or may become bound or under
which Leapfrog has, or may become subject to, any obligation; or (c) under
which Leapfrog has or may acquire any right or interest.
"Leapfrog Financials" shall have the meaning specified in Section 2:1:7 of the
Agreement.
"Leapfrog Proprietary Asset" means any Proprietary Asset owned by or licensed to
Leapfrog or otherwise used by Leapfrog.
"Leapfrog Returns" shall have the meaning specified in Section 2:1:7 of the
Agreement.
"Leapfrog Stock Certificate" shall have the meaning specified in Section 1:8
of the Agreement.
"Consent" means any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
"Contract" means any written, oral or other agreement, contract, subcontract,
lease, understanding, instrument, note, warranty, insurance policy, benefit
plan or legally binding commitment or undertaking of any nature.
"Damages" shall include any loss, damage, injury, decline in value, lost
opportunity, liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
"Disclosure Schedule" means the schedule (dated as of the date of the
Agreement) delivered to Albara on behalf of Leapfrog and the Stockholders.
"Effective Date" shall have the meaning specified in Section 1:1:3
of the Agreement.
"Employment Agreements" shall have the meaning specified in Section
2:1:9:7 of the Agreement.
"Encumbrance" means any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, claim, infringement, interference, option,
right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on
56
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).
"Entity" means any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership,
joint venture, estate, trust, Leapfrog (including any limited liability
Leapfrog or joint stock Leapfrog), firm or other enterprise, association,
organization or entity.
"Environmental Law" means any federal, state, local or foreign Legal
Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
"ERISA" shall have the meaning specified in Section 2:1:19 of the
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fees and Expenses" shall have the meaning specified in Section 9:2
of the Agreement.
"First Anniversary" shall have the meaning specified in Section 8:1
of the Agreement.
"GAAP" means generally accepted accounting principles.
"Governmental Authorization" means any: (a) permit, license, certificate,
franchise, permission, clearance, registration, qualification or authorization
issued, granted, given or otherwise made available 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" means any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
"Indemnitees" means the following Persons: (a) Albara or Leapfrog;
(b) Albara or Leapfrog's current and future affiliates; (c) the respective
Representatives of the Persons referred to in clauses "(a)" and "(b)" above;
and (d) the respective successors and assigns of the Persons referred to in
clauses "(a)", "(b)" and "(c)" above; provided, however, that the
Stockholders shall not be deemed to be "Indemnitees."
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"Investment Representation Letter" shall have the meaning specified
in Section 5.6 of the Agreement.
"IRS" means the Internal Revenue Service.
"Legal Proceeding" means any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative
or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or
otherwise involving, any court or other Governmental Body or any arbitrator
or arbitration panel.
"Legal Requirement" means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise put into
effect by or under the authority of any Governmental Body.
"Material Adverse Effect" means a violation or other matter will be deemed
to have a "Material Adverse Effect" on Leapfrog if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement
but for the presence of "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, in such representations and
warranties) would have a material adverse effect on Leapfrog's
business, condition, assets, liabilities, operations, financial performance
or prospects.
"Material Contracts" shall have the meaning specified in Section
2:1:9:9 of the Agreement.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products
and any other substance that is now or hereafter regulated by any
Environmental Law or that is otherwise a danger to health, reproduction
or the environment.
"Merger" shall have the meaning specified in the recitals to the Agreement.
"Person" means any individual, Entity or Governmental Body.
"Pre-Closing Period" shall have the meaning specified in Section 5:1
of the Agreement.
"Proprietary Asset" means any: (a) patent, patent application,
trademark (whether registered or unregistered), trademark application,
trade name, fictitious business name, service xxxx (whether registered or
unregistered), service xxxx application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork
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application, trade secret, know-how, client list, franchise, system,
computer software, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right
or other intellectual property right or intangible asset; or (b) right
to use or exploit any of the foregoing.
"Registration Statement" shall have the meaning specified in Section
3:1:5 of the Agreement.
"Related Party" means: (i) the Stockholders; (ii) each individual
who is, or who has at any time since October 15, 1997 been, an officer
of Leapfrog; (iii) each member of the immediate family of each of the
individuals referred to in clauses "(i)" and "(ii)" above; and (iv) any
trust or other entity (other than Leapfrog) in which any one of the
individuals referred to in clauses "(i)", "(ii)" and "(iii)" above holds
(or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or equity
interest).
"Representatives" means officers, directors, employees, agents, attorneys,
accountants, advisors and representatives.
"Scheduled Closing Time" shall have the meaning specified in Section
7:1(c) of the Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" shall have the meaning specified in Section 1:6:1 of the
Agreement.
"Stockholders" shall have the meaning specified in the preamble to
the Agreement.
"Tax" means any tax (including any income tax, franchise tax, capital
gains 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, withholding tax or payroll tax), levy, assessment, tariff,
duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), imposed,
assessed or collected by or under the authority of any Governmental Body.
"Tax Return" means any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification,
form, election, certificate or other document or information filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection or
payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to
any Tax.
59
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
among:
Albara Corporation,
a Colorado corporation;
Leapfrog Smart Products, Inc.,
a Florida corporation;
___________________________
Dated as of October 22, 1999
___________________________
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EXHIBITS
Exhibit Document
(I) Articles of Merger
(II) a "Bleed-Out" Letter to be executed by Xxxxxxxxxx; at closing
(III) a Registration Rights Agreement to be executed between Albara
and Xxxxxxxxxx; at closing
(IV) a Disclosure Schedule to be executed by Albara and Leapfrog;
at closing
(V) Employment Agreements to be executed by Xxxxxxxx Xxxxxx,
Xxxx Xxxxxx and an extension of Xxx Xxxxxx'x existing contract;
at closing and a Consulting Agreement and Warrant to be
executed between Albara and Xxxxxxxxxx; at closing
(VI) Investment Representation Letters to be executed
by each of the LEAPFROG Shareholders; at closing
(VII) Legal Opinions of Xxxxxx & Xxxxxxx, P.C. and Xxxxx and
Xxxxx, LLP dated as of the Closing Date, substantially in the
forms attached hereto at Exhibit I;
61
Table of Contents
SECTION 1. Description of Transaction 1
1.1 Merger of Leapfrog into Albara 1
1.2 Effect of the Merger 1
1.3 Closing; Effective Time 1
1.4 Conversion of Shares 2
1.5 Piggy Back Registration Rights 4
1.6 Closing of Leapfrog's Transfer Books 5
1.7 Exchange of Certificates 6
1.8 Stockholder Approval; Dissenting Shares 7
1.10 Tax Consequences 7
1.11 Accounting Treatment 7
1.12 Further Action 7
SECTION 2. Representations and Warranties of Leapfrog 7
2.1 Due Organization; Good Standing; No Subsidiaries 7
2.2 Certificate of Incorporation and Bylaws; Records 8
2.3 Capitalization; Title to Shares 8
2.4 Financial Statements 8
2.5 Absence of Changes 9
2.6 Title to Assets 10
2.7 Bank Accounts; Receivables 11
2.8 Equipment; Leasehold 11
2.9 Proprietary Assets 11
2.10 Contracts 13
2.11 Liabilities 15
2.12 Compliance with Legal Requirements 15
2.13 Governmental Authorizations 15
2.14 Tax Matters 15
2.15 Employee and Labor Matters; Benefit Plans 16
2.16 Environmental Matters 18
2.17 Insurance 18
2.18 Related Party Transactions 19
2.19 Legal Proceedings; Orders 19
2.20 Clients 19
2.21 Material Relationships 20
2.22 Sales Policies; Warranties 20
2.23 Brokers and Finders 20
2.24 Authority; Binding Nature of Agreement 20
2.25 Non-Contravention; Consents 20
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2.26 Database Backup 21
2.27 Full Disclosure 21
SECTION 3. Representations and Warranties of Albara 21
3.1 SEC Filings; Financial Statements 21
3.2 Authority; Binding Nature of Agreement 22
3.3 Valid Issuance 22
SECTION 4. Certain Covenants of Leapfrog and the
Stockholders 22
4.1 Access and Investigation 22
4.2 Operation of Leapfrog's Business 22
4.3 Notification; Updates to Disclosure Schedule 24
4.4 No Negotiation 25
SECTION 5. Additional Covenants of the Parties 25
5.1 Filings and Consents 25
5.2 Public Announcements 25
5.3 Best Efforts 26
5.4 Employment and Noncompetition Agreements 26
5.5 FIRPTA Matters 26
5.6 Release 26
5.7 Investment Representation Letter 26
5.8 Proprietary Information Agreement 26
SECTION 6. Conditions Precedent to Obligations
of Albara 27
6.1 Accuracy of Representations 27
6.2 Performance of Covenants 27
6.3 Consents 27
6.4 Agreements and Documents 27
6.5 FIRPTA Compliance 28
6.6 No Restraints 28
6.7 No Legal Proceedings 28
6.8 Employees 28
6.9 Stockholder Approval 28
SECTION 7. Termination 29
7.1 Termination Events 29
7.2 Termination Procedures 30
7.3 Effect of Termination 30
7.4 Termination Fee 30
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SECTION 8. Indemnification, Etc. 30
8.1 Survival of Representations, Etc. 30
8.2 Indemnification by Principal Stockholders 31
8.3 Threshold; Ceiling 31
8.4 Satisfaction of Indemnification Claim 32
8.5 No Contribution 32
8.6 Interest 32
8.7 Defense of Third Party Claims 32
8.8 Exercise of Remedies by Indemnitees
Other Than Albara 33
SECTION 9. Miscellaneous Provisions 33
9.1 Stockholders' Agent 33
9.2 Further Assurances 33
9.3 Fees and Expenses 33
9.4 Attorneys' Fees 33
9.5 Notices 34
9.6 Confidentiality 35
9.7 Time of the Essence 35
9.8 Headings 35
9.9 Counterparts 35
9.10 Governing Law 35
9.11 Successors and Assigns 35
9.12 Remedies Cumulative; Specific Performance 35
9.13 Waiver 36
9.14 Amendments 36
9.15 Severability 36
9.16 Entire Agreement 36
9.17 Construction 36
