EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
COLLEGIATE PACIFIC INC.
BOO MERGER CORP.,
TOMARK, INC.,
XXXXXX X. XXXXX
AND
XXXX X. XXXXXX
DECEMBER 30, 2003
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 THE MERGER................................................................................... 1
Section 1.1. The Merger............................................................................ 1
Section 1.2. Effective Time of the Merger.......................................................... 1
Section 1.3. Closing............................................................................... 1
Section 1.3. Effects of the Merger................................................................. 2
Section 1.5. Certificate of Incorporation and Bylaws of Surviving Corporation; Directors
and Officers.......................................................................... 2
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES.......................................................................... 2
Section 2.1. Effect of Merger on Capital Stock..................................................... 2
Section 2.2. Exchange of Certificates.............................................................. 3
Section 2.5. Further Assurances.................................................................... 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS........................... 5
Section 3.1. Organization and Qualification........................................................ 5
Section 3.2. Capitalization........................................................................ 5
Section 3.3. Authority Relative to this Agreement; Board Approval.................................. 5
Section 3.4. No Conflict; Required Filings and Consents............................................ 6
Section 3.5. Compliance with Laws.................................................................. 7
Section 3.6. SEC Filings; Financial Statements..................................................... 7
Section 3.7. Litigation............................................................................ 7
Section 3.8. Ownership of Shares; Liens............................................................ 8
Section 3.9. Absence of Certain Changes............................................................ 8
Section 3.10. No Undisclosed Material Liabilities................................................... 9
Section 3.11. Environmental......................................................................... 9
Section 3.12. Intellectual Property................................................................. 10
Section 3.13. Employee Benefit Plans................................................................ 11
Section 3.14. Labor Matters......................................................................... 12
Section 3.15. Material Agreements................................................................... 13
Section 3.16. Properties............................................................................ 15
Section 3.17. Product Liability..................................................................... 16
Section 3.18. Taxes................................................................................. 17
Section 3.19. Loans and Advances.................................................................... 18
Section 3.20. Sufficiency of Assets................................................................. 18
Section 3.21. Inventory............................................................................. 18
Section 3.22. Accounts Receivable................................................................... 19
Section 3.23. Insurance............................................................................. 19
Section 3.24. Suppliers............................................................................. 19
Section 3.25. Customers............................................................................. 19
Section 3.26. Non-Arm's-Length Transactions......................................................... 19
Section 3.27. Meeting Minutes....................................................................... 19
Section 3.28. Brokers and Finders................................................................... 19
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Section 3.29. Shareholder Investment Representations................................................ 19
Section 3.30. Continuity of Business Enterprise..................................................... 21
Section 3.31. Title to and Condition of Assets...................................................... 21
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............................................. 21
Section 4.1. Organization and Qualification........................................................ 21
Section 4.2. Capitalization........................................................................ 22
Section 4.3. Authority Relative to this Agreement; Board Approval.................................. 22
Section 4.4. No Conflict; Required Filings and Consents............................................ 23
Section 4.5. Compliance with Laws.................................................................. 23
Section 4.6. SEC Filings; Financial Statements..................................................... 24
Section 4.8. Brokers............................................................................... 24
Section 4.9. Interim Operations of Sub............................................................. 24
Section 4.10. Tax Matters........................................................................... 24
Section 4.11. Litigation............................................................................ 24
ARTICLE 5 CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS...................... 25
Section 5.1. Information and Access................................................................ 25
Section 5.2. Conduct of Business of the Company.................................................... 25
Section 5.3. Conduct of Business of Parent......................................................... 27
Section 5.4. Preparation of Registration Statement; Other Filings.................................. 27
Section 5.5. Resale of Parent Common Stock......................................................... 27
Section 5.6. Registration Obligations of Parent.................................................... 28
Section 5.7. Agreements to Take Reasonable Action.................................................. 30
Section 5.8. Consents.............................................................................. 31
Section 5.9. AMEX Quotation........................................................................ 31
Section 5.10. Notification of Certain Matters....................................................... 31
Section 5.11. Reorganization........................................................................ 31
Section 5.12. Public Announcements.................................................................. 31
Section 5.13. Noncompetition, Nonsolicitation and Confidentiality................................... 31
Section 5.14. Further Assurances.................................................................... 34
Section 5.15. Expenses.............................................................................. 34
Section 5.16. Exclusivity........................................................................... 34
Section 5.17. Brokers............................................................................... 34
Section 5.18. Taxes................................................................................. 34
Section 5.19. Intercompany Transactions............................................................. 35
Section 5.19. Intercompany Transactions............................................................. 35
Section 5.20. Employees............................................................................. 35
Section 5.21. Termination of Benefit Plans.......................................................... 35
Section 5.22. Insurance............................................................................. 35
Section 5.23. Supplements to Schedules.............................................................. 35
Section 5.24. Loss or Threatened Loss of Customer or Supplier....................................... 35
ARTICLE 6 CONDITIONS PRECEDENT......................................................................... 36
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger............................ 36
Section 6.2. Conditions of Obligations of Parent and Sub........................................... 36
Section 6.3. Conditions of Obligations of the Company.............................................. 37
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ARTICLE 7 TERMINATION.................................................................................. 38
Section 7.1. Termination........................................................................... 38
Section 7.2. Effect of Termination................................................................. 39
Section 8.1. Survival.............................................................................. 39
Section 8.2. Indemnification by the Shareholders................................................... 39
Section 8.3. Indemnification by the Parent......................................................... 39
Section 8.4. Procedure for Indemnification for Third Party Claims.................................. 40
Section 8.5. Set-Off Rights; Character of Indemnity Payments....................................... 41
Section 8.6. Limitations on Indemnification........................................................ 41
ARTICLE 9 GENERAL PROVISIONS........................................................................... 41
Section 9.1. Amendment............................................................................. 41
Section 9.2. Extension; Waiver..................................................................... 41
Section 9.3. Entire Agreement...................................................................... 41
Section 9.4. Severability.......................................................................... 41
Section 9.5. Notices............................................................................... 42
Section 9.6. Headings; Interpretation.............................................................. 43
Section 9.7. Counterparts.......................................................................... 43
Section 9.8. Benefits; Assignment.................................................................. 43
Section 9.9. Governing Law......................................................................... 43
Section 9.10. Reliance on Counsel and Other Advisors................................................ 43
Section 9.11. Injunctive Relief..................................................................... 43
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INDEX OF DEFINED TERMS
Term Section
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"Affiliates"..................................................................... Section 3.15(n)
"Affiliated Group"............................................................... Section 3.18(i)(i)
"Agreement"...................................................................... Preamble
"Allegations".................................................................... Section 3.11(b)
"AMEX"........................................................................... Section 2.1(c)
"Ancillary Agreement"............................................................ Section 3.5
"Business Day"................................................................... Section 1.3
"California Statute"............................................................. Recitals
"Cash Consideration"............................................................. Section 2.1(c)
"Certificate of Merger".......................................................... Section 1.2
"Certificates"................................................................... Section 2.2(a)
"Closing"........................................................................ Section 1.3
"Closing Date"................................................................... Section 1.3
"Claim".......................................................................... Section 3.7
"Code"........................................................................... Recitals
"Company"........................................................................ Preamble
"Confidential Information"....................................................... Section 5.13(a)(ii)
"Company Activities"............................................................. Section 5.13(a)(i)
"Company Common Stock"........................................................... Section 2.1(b)
"Company Disclosure Schedule".................................................... Section 3.2
"Company Intellectual Property".................................................. Section 3.12(d)(i)
"Company Material Adverse Effect"................................................ Section 3.1
"Constituent Corporations"....................................................... Section 1.1
"Delaware Statute"............................................................... Recitals
"Effective Time"................................................................. Section 1.2
"Environmental Laws"............................................................. Section 3.11(e)(i)
"Environmental Permits".......................................................... Section 3.11(a)
"ERISA".......................................................................... Section 3.13(a)
"ERISA Affiliate"................................................................ Section 3.13(a)
"Exchange Act"................................................................... Section 3.4(b)
"GAAP"........................................................................... Section 3.6
"Governmental Entity"............................................................ Section 3.4(b)
"Governmental Permits"........................................................... Section 3.5
"Xxxxxx"......................................................................... Preamble
"Hazardous Substances"........................................................... Section 3.11(e)(ii)
"Intellectual Property".......................................................... Section 3.12(d)(ii)
"Insurance Policy"............................................................... Section 3.23
"Knowledge"...................................................................... Section 3.7
"Laws"........................................................................... Section 3.5
"Lease".......................................................................... Section 3.16(f)(i)
"Leased Premises"................................................................ Section 3.16(f)(ii)
"Liens".......................................................................... Section 3.8
"Losses"......................................................................... Section 8.2(c)
"Material Agreements"............................................................ Section 3.15
"Merger"......................................................................... Recitals
"NASD"........................................................................... Section 3.4(b)
"New Matter ".................................................................... Section 5.23
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"Noncompete Period".............................................................. Section 5.13(a)(iii)
"Nonsolicitation Period"......................................................... Section 5.13(a)(iii)
"Note Consideration"............................................................. Section 2.1(c)
"Occurrence"..................................................................... Section 3.17(b)
"Other Filings" ................................................................. Section 5.4
"Order" ......................................................................... Section 3.7
"Owned Real Property"............................................................ Section 3.16(f)(iii)
"Parent"......................................................................... Preamble
"Parent Common Stock"............................................................ Section 2.1(c)
"Parent Disclosure Schedule"..................................................... Section 4.2
"Parent Material Adverse Effect"................................................. Section 4.1
"Parent Proxy Statement"......................................................... Section 4.2
"Parent SEC Reports"............................................................. Section 4.6(a)
"Parent Significant Subsidiaries"................................................ Section 4.1
"Per Share Merger Consideration"................................................. Section 2.1(c)
"Permits"........................................................................ Section 3.16(d)
"Person"......................................................................... Section 3.7
"Plan"........................................................................... Section 3.13(a)
"Protected Area"................................................................. Section 5.13(a)(iv)
"Real Property".................................................................. Section 3.16(f)(iv)
"Recalls"........................................................................ Section 3.17(a)
"Release"........................................................................ Section 3.11(e)(iii)
"Registration Statement"......................................................... Section 5.4
"Repurchase Price"............................................................... Section 5.5(c)
"SEC"............................................................................ Section 4.6(a)
"Securities Act"................................................................. Section 4.6(a)
"Sell-Off Period"................................................................ Section 5.5
"Shareholders"................................................................... Preamble
"Software"....................................................................... Section 3.12(d)(iii)
"Sub"............................................................................ Preamble
"Sub Common Stock"............................................................... Section 2.1(a)
"subsidiary"..................................................................... Section 9.6
"Surviving Corporation".......................................................... Section 1.1
"Taxes".......................................................................... Section 3.18(i)(iv)
"Tax Authority".................................................................. Section 3.18(i)(ii)
"Tax Return"..................................................................... Section 3.18(i)(iii)
"Trade Secrets".................................................................. Section 5.13(a)(v)
"Transactions"................................................................... Section 3.3(a)
"Transfer Agent"................................................................. Section 2.2(a)
"Treasury Regulation"............................................................ Section 3.18(i)(v)
"White".......................................................................... Preamble
"Violation"...................................................................... Section 5.6(c)
"2003 Balance Sheet"............................................................. Section 3.6
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AGREEMENT AND PLAN OF MERGER, dated as of December 30, 2003 (this
"Agreement"), by and among COLLEGIATE PACIFIC INC., a Delaware corporation
("Parent"), BOO MERGER CORP., a Delaware corporation and direct wholly-owned
subsidiary of Parent ("Sub"), TOMARK, INC., a California corporation (the
"Company"), Xxxxxx X. Xxxxx ("White") and Xxxx X. Xxxxxx ("Xxxxxx," and together
with White, the "Shareholders").
The following recitals are true and constitute the basis for this
Agreement:
A. The Boards of Directors of Parent, Sub, and the Company deem
it advisable and in the best interests of their respective
corporations and stockholders that Parent and the Company
enter into a business combination pursuant to which Parent
would acquire all of the issued and outstanding shares of the
Company;
B. To effect such business combination, upon the terms and
subject to the conditions set forth herein and the General
Corporation Law of the State of Delaware (the "Delaware
Statute") and the Corporations Code of the State of California
(the "California Statute"), the Company will merge with and
into Sub with Sub continuing as the surviving corporation and
wholly-owned subsidiary of Parent (the "Merger"); and
C. For U.S. federal income tax purposes, it is intended that the
Merger and the transactions contemplated thereby shall qualify
as a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE 1
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the
conditions of this Agreement and in accordance with the Delaware Statute and the
California Statute, at the Effective Time (as defined below), the Company shall
be merged with and into Sub. Following the Merger, Sub shall continue as the
surviving corporation (the "Surviving Corporation") and the separate corporate
existence of the Company shall cease. Sub and the Company are collectively
referred to as the "Constituent Corporations."
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. Subject to the
provisions of this Agreement, the Merger shall become effective (the "Effective
Time") upon the filing of a properly executed certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware in
accordance with the Delaware Statute and a certified copy of the Certificate of
Merger in accordance with the California Statute, or at such later time as
agreed to by the parties and set forth in the Certificate of Merger.
SECTION 1.3. CLOSING. Unless this Agreement shall have been
terminated pursuant to Section 7.1, the closing of the Merger (the "Closing")
will take place at 10:00 a.m. on a date (the "Closing Date") to be mutually
agreed upon by the parties hereto, which date shall be no later than the third
Business Day (as defined below) after satisfaction of the latest to occur of the
conditions set forth in
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Article 6 (other than those conditions that by their terms are to be satisfied
at the Closing), unless another date is agreed to in writing by the parties
hereto. The Closing shall take place at the offices of Xxxxxx, Lidji & Werbner,
4400 Renaissance Tower, 0000 Xxx Xxxxxx, Xxxxxx, Xxxxx 00000, unless another
place is agreed to in writing by the parties hereto. "Business Day" shall mean
any day, other than a Saturday, Sunday or legal holiday on which banks are
permitted to close in the City of Dallas and State of Texas.
SECTION 1.4. EFFECTS OF THE MERGER. At the Effective Time: (a)
the separate existence of the Company shall cease and the Company shall be
merged with and into Sub, with the result that Sub shall be the Surviving
Corporation, and (b) the Merger shall have all of the effects provided by the
Delaware Statute and the California Statute.
SECTION 1.5. CERTIFICATE OF INCORPORATION AND BYLAWS OF
SURVIVING CORPORATION; DIRECTORS AND OFFICERS. At the Effective Time, (a) the
Certificate of Incorporation of Sub shall become the Certificate of
Incorporation of the Surviving Corporation until altered, amended or repealed as
provided under the Delaware Statute or in the Certificate of Incorporation of
the Surviving Corporation, (b) the Bylaws of Sub shall become the Bylaws of the
Surviving Corporation until altered, amended or repealed as provided under the
Delaware Statute or in the Certificate of Incorporation or Bylaws of the
Surviving Corporation, and (c) the officers and directors of Sub immediately
prior to the Effective Time shall, from and after the Effective Time, be the
initial officers and directors of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified, or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. EFFECT OF MERGER ON CAPITAL STOCK. At the
Effective Time, subject and pursuant to the terms of this Agreement, by virtue
of the Merger and without any action on the part of the Constituent Corporations
or the holders of any SHARES OF CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS:
(a) Capital Stock of Sub. Each issued and outstanding
share of common stock, $0.01 par value per share, of Sub ("Sub Common Stock")
shall remain outstanding and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
(b) Treatment of Certain Company Shares. Each share of
common stock of the Company, no par value ("Company Common Stock"), that is
owned by the Company as treasury stock, shall be cancelled and retired and shall
cease to exist.
(c) Consideration for Company Stock. Each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares of Company Common Stock subject to Section 2.1(b)) shall
be converted into the right to receive (i) an amount in cash equal to $2,500.00
(the "Cash Consideration"), payable to the holder thereof, without any interest
thereon, less any required withholding taxes, upon surrender and exchange of the
certificate representing such share of Company Common Stock pursuant to the
terms hereof, (ii) $250.00 (the "Note Consideration"), in the form of an
unsecured subordinated promissory note bearing interest at the rate of 3% per
annum payable by Parent to the holder thereof in equal installments over a
period of 24 months after the Effective Date and substantially in the form
attached hereto as Exhibit "A" and (iii) the number of shares of fully paid and
nonassessable shares of common stock, $0.01 par value per share, of Parent
("Parent Common Stock" and together with the Cash Consideration and the Note
Consideration, the "Per Share Merger
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Consideration") determined by dividing $2,500,000 by the closing price of
Parent's Common Stock on the American Stock Exchange ("AMEX") on the last
trading day immediately preceding the Closing Date and dividing that amount by
1,000. At the Effective Time, all such shares of Company Common Stock shall no
longer be outstanding, and shall automatically be cancelled and retired and
cease to exist, and each holder of a certificate representing any such shares of
Company Stock shall cease to have any rights with respect thereto, except the
right to receive the Per Share Merger Consideration to be issued in
consideration therefor upon the surrender of such certificate in accordance with
Section 2.2, without interest. No fractional shares of Parent Common Stock shall
be issued; and, in lieu thereof, a cash payment shall be made pursuant to
Section 2.2(d).
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) Issuance and Delivery. Upon surrender of an issued
and outstanding share of Company Common Stock (collectively, the "Certificates")
on the Closing Date for cancellation, together with such other documents as may
be reasonably required by the Company's transfer agent, Continental Stock
Transfer and Trust Company (the "Transfer Agent"), the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Parent Common Stock which such
holder has the right to receive pursuant to the provisions of this Article 2,
any cash in lieu of fractional shares of Parent Common Stock, the other Per
Share Merger Consideration, and the Certificate so surrendered shall forthwith
be cancelled. In the event of a transfer of ownership of shares of Company
Common Stock which is not registered on the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common Stock and
any cash in lieu of fractional shares of Parent Common Stock and the other per
Share Merger Consideration may be issued and paid to a transferee if the
Certificate representing such Company Common Stock is presented to the Transfer
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed, from and after the Effective Time, to represent only the right
to receive upon such surrender the certificate representing shares of Parent
Common Stock, cash in lieu of any fractional shares of Parent Common Stock and
the other Per Share Merger Consideration as contemplated by this Article 2 and
the Delaware Statute.
(b) Distributions with Respect to Unsurrendered
Certificates. No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of fractional shares or other Per Share Merger Consideration
shall be paid to any such holder pursuant to Section 2.2(d) until the holder of
record of such Certificate shall surrender such Certificate. Subject to the
effect, if any, of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing whole
shares of Parent Common Stock issued in exchange therefor or such holder's
transferee pursuant to Section 2.2(d), without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(d)
and the amount of dividends or other distributions on Parent Common Stock with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions on Parent Common Stock with a record
date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock.
(c) No Further Ownership Rights in Company Common Stock.
All shares of Parent Common Stock issued upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms of this Article 2
(plus any cash paid pursuant to Section 2.2(b) or 2.2(d)) shall
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be deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to such shares of Company Common Stock. From and after the Effective
Time, the stock transfer books of the Company shall be closed with respect to
the shares of Company Common Stock that are outstanding immediately prior to the
Effective Time, and there shall be no further registration of transfers on the
stock transfer books of the Company or the Surviving Corporation of the shares
of Company Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided in
this Article 2.
(d) No Issuance of Fractional Shares.
(i) No certificates or scrip for fractional
shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Parent.
(ii) As promptly as practicable following the
Effective Time, the Transfer Agent shall determine the excess of (A)
the number of full shares of Parent Common Stock delivered to the
Transfer Agent pursuant to Section 2.2(a) over (B) the aggregate number
of full shares of Parent Common Stock to be distributed to holders of
Company Common Stock pursuant to Section 2.2(a).
(iii) As soon as practicable after the
determination of the amount of cash, if any, to be paid to the holders
of Company Common Stock in lieu of any fractional share interests and
subject to clause (iv) of this Section 2.2(d), the Transfer Agent shall
make available such amounts to such holders of Company Common Stock.
(iv) Parent or the Transfer Agent shall be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as Parent or the Transfer Agent is required
to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Parent or the Transfer Agent,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which such deduction and withholding was
made by Parent or the Transfer Agent.
(e) No Liability. Subject to applicable law and public
policy, if any Certificate shall not have been surrendered immediately prior to
the date on which any Per Share Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined below), then any Per Share Merger Consideration
payable in respect of such Certificate shall, to the extent permitted by
applicable law and public policy, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(f) Lost, Stolen or Destroyed Certificates. In the event
any Certificates shall have been lost, stolen or destroyed, the holder of such
lost, stolen or destroyed Certificates shall execute an affidavit of that fact
upon request. The holder of any such lost, stolen or destroyed Certificates
shall also deliver a reasonable indemnity against any claim that may be made
against Parent or the Transfer Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed. The affidavit and any indemnity that may be
required hereunder shall be delivered to the Transfer Agent, who shall be
responsible for making payment for such lost, stolen or destroyed
Certificate(s).
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SECTION 2.3. FURTHER ASSURANCES. If, at any time after the
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement, or to vest, perfect or confirm of record or
otherwise establish in the Surviving Corporation full right, title and interest
in, to or under any of the assets, property, rights, privileges, powers and
franchises of the Company and Sub, the officers and directors of the Surviving
Corporation are fully authorized in the name and on behalf of each of the
Constituent Corporations or otherwise to take all such lawful and reasonably
necessary or desirable action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
The Company and each of the Shareholders hereby individually
represent and warrant to Parent and Sub as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION. The Company (i)
is duly organized, validly existing and in good standing under the laws of the
State of California, (ii) has all requisite corporate power to carry on its
business as it is now being conducted, and (iii) is in good standing and duly
qualified to do business in each jurisdiction in which the transaction of its
business makes such qualification necessary, except where the failure to be in
good standing or so qualified would not have a Company Material Adverse Effect
(as defined below). True and complete copies of the Articles of Incorporation
and the Bylaws, as amended to date, of the Company have been made available to
Parent. As used herein, "Company Material Adverse Effect" shall mean any change,
event or effect that is materially adverse to the business, financial condition
or results of operations of the Company and its subsidiaries taken as a whole.
The Company does not directly or indirectly own any equity, capital stock,
partnership, joint venture interests or similar interest in, or any interest
convertible or exchangeable or exercisable for any equity or similar interest
in, any corporation, partnership, limited liability company, joint venture or
other business, association or entity.
SECTION 3.2. CAPITALIZATION. The authorized capital stock of
the Company consists of 50,000 shares of Company Common Stock. As of the date
hereof, 1,000 shares of Company Common Stock are issued and outstanding. All
outstanding shares of Company Common Stock are validly issued in full compliance
with all applicable securities laws and are fully paid and nonassessable and
were not issued in violation of and are not subject to any preemptive rights,
rights of first refusal or other similar rights or options. Except as disclosed
in Section 3.2 of the Company's disclosure schedule delivered to Parent and Sub
in connection with this Agreement (the "Company Disclosure Schedule"), there are
no outstanding subscriptions, options, warrants, calls, rights, commitments or
any other agreement to which the Company is a party or by which the Company is
bound that, directly or indirectly, obligate the Company to issue, deliver or
sell or cause to be issued, delivered or sold any additional shares of Company
Common Stock or any other capital stock of the Company or any other securities
convertible into, or exercisable or exchangeable for, or evidencing the right to
subscribe for any such shares or any other capital stock of the Company. Except
as disclosed in Section 3.2 of the Company Disclosure Schedule, the Company is
not a party to any agreement or understanding regarding the voting or the
registration under federal or state law of any shares of the Company's capital
stock.
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT; BOARD
APPROVAL.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and, subject to obtaining the approval of the stockholders of the
Company, to consummate the transactions contemplated by this Agreement and each
Ancillary Agreement (as defined in Section 3.5) (the "Transactions"). The
execution and delivery of
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this Agreement by the Company and the consummation by the Company of the
Transactions have been duly and validly authorized by all necessary corporate
action on the part of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the approval of this
Agreement by the holders of a majority of the voting power of Company Common
Stock, voting together as a single class, which approval is the only approval
required to consummate the Transactions under the Company's Articles of
Incorporation and the California Statute). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Sub, constitutes the legal
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors rights generally and (ii) the availability of specific performance or
injunctive relief and other equitable remedies.
(b) The Board of Directors of the Company has, prior to
the execution of this Agreement, (i) approved this Agreement and the
Transactions, (ii) determined that the Transactions are fair to and in the best
interests of its stockholders, (iii) declared this Agreement and the
Transactions advisable, and (iv) recommended that the stockholders of the
Company approve this Agreement and the Transactions. This Agreement and the
Transactions have been approved by the unanimous vote of the members of the
Board of Directors of the Company, and by the unanimous vote of the stockholders
of the Company.
SECTION 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the
Company do not, and the performance of its obligations hereunder and the
consummation of the Transactions by the Company will not, (i) conflict with or
violate the Articles of Incorporation, Bylaws or equivalent organizational
documents of the Company; (ii) subject to obtaining the approval of the
Company's stockholders of this Agreement in accordance with the California
Statute and the Company's Articles of Incorporation and Bylaws and compliance
with the requirements set forth in Section 3.4(b), conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or by
which any of its properties is bound or affected; or (iii) except as set forth
in Section 3.4 of the Company Disclosure Schedule, result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or alter the rights or obligations of any third
party or the Company under, or give to others any rights of termination,
amendment, acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any of the properties or assets of
the Company pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company is a party or by which the Company or any of its properties
are bound or affected, in each case having value or requiring payments over the
term thereof equal to or greater than $25,000, except, in the case of clause
(ii) above, for any such conflicts or violations that would not prevent or delay
consummation of the Merger in any material respect, or otherwise prevent the
Company from performing its obligations under this Agreement in any material
respect, and would not have, individually or in the aggregate, a Company
Material Adverse Effect. Section 3.4 of the Company Disclosure Schedule lists
all material consents, waivers and approvals under any agreements, contracts,
licenses or leases required to be obtained by the Company in connection with
entering into of this Agreement or the consummation of the Transactions.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance of its obligations hereunder and the
consummation of the Transactions by the Company will not, require any consent,
approval, authorization or permit of, or registration or filing with or
notification to, any court, administrative agency, commission, governmental or
regulatory authority, domestic or foreign (a "Governmental Entity"), except (i)
the filing of documents to satisfy the applicable
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requirements, if any, of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and state takeover laws, (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, the filing of a the
certified copy of the Certificate of Merger with the Secretary of State of the
State of California and appropriate corresponding documents with the Secretary
of State of other states in which the Company is qualified to transact business
as a foreign corporation, (iii) filings, if any, under the rules and regulations
of AMEX of the National Association of Securities dealers, Inc. ("NASD"), and
(iv) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications (A) would not prevent or delay
consummation of the Merger in any material respect or otherwise prevent or delay
in any material respect the Company from performing its obligations under this
Agreement or (B) would not, individually or in the aggregate, have a Company
Material Adverse Effect.
SECTION 3.5. COMPLIANCE WITH LAWS. Except as set forth in
Section 3.5 of the Company Disclosure Schedule, the Company is not in conflict
with, or in default or violation of (a) any material law, rule, regulation,
order, judgment or decree applicable to the Company or by which any of its
respective properties is bound, or (b) whether after the giving of notice or
passage of time or both, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company is a party or by which the Company or any of its properties
is bound, except for any conflicts, defaults or violations that do not and would
not have, individually or in the aggregate, a Company Material Adverse Effect.
All approvals, consents, authorizations, permits, licenses, registrations,
waivers, exemptions and qualifications by, with or under any Governmental Entity
or Laws (as defined below) (collectively, "Governmental Permits") material to
the Company and required to be obtained by the Company have been obtained, are
valid, are in full force and effect and are being complied with. The Company has
not received written notice that any Governmental Entity intends to cancel or
terminate any such Governmental Permit. No material Governmental Permit will be
terminated or impaired, in whole or in part, as a result of the Transactions or
the execution and delivery of this Agreement or any Ancillary Agreement (as
defined below). "Ancillary Agreement" shall mean each such other agreement and
instrument, other than the Agreement, executed and delivered by a party to this
Agreement on the Closing Date. "Laws" shall mean any laws, statutes, ordinances,
regulations or other requirements of any Governmental Entity in effect on or
prior to the date hereof.
SECTION 3.6. FINANCIAL STATEMENTS. The Company's fiscal year
ends on September 30. Section 3.6 of the Company Disclosure Schedule sets forth
the (a) unaudited balance sheet of the Company as of September 30, 2002, (b)
unaudited balance sheet of the Company as of September 30, 2003 (the "2003
Balance Sheet"), (c) related statements of income and cash flows for each of the
years ended September 30, 2002 and September 30, 2003, and the information set
forth on Section 3.6 of the company Disclosure Schedule for items (a)-(c)
presents fairly, in all material respects, the financial position of the Company
as of the dates thereof and the results of operations and cash flows of the
Company for the periods then ended in conformity with generally accepted
accounting principles applicable in the United States of America ("GAAP") and
applied on a consistent basis throughout the periods covered thereby (subject to
normal year-end adjustments and without footnotes in the case of the unaudited
financial statements that have not been, and are not expected to be, material in
amount).
SECTION 3.7. LITIGATION. Section 3.7 of the Company Disclosure
Schedule sets forth a list as of the date of this Agreement of each pending or,
to the Company's and each Shareholder's Knowledge (as defined below), threatened
suit, claim, action, proceeding, inquiry, investigation, litigation, demand,
charge, complaint, grievance, arbitration, indictment, information or grand jury
subpoena ("Claim") against the Company or any of the Shareholders with respect
to the Company that (a) seeks damages in excess of $10,000, (b) seeks damages
for personal injuries or wrongful death or (c) seeks any injunctive relief,
equitable relief or relief for other than money damages. Except as set forth in
Section 3.7 of the Company Disclosure Schedule, neither the Shareholders nor the
Company is a party or subject to or in default in any material respect under any
judgment or Order (as defined below)
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applicable to the Company or the conduct of its businesses. Except as set forth
in Section 3.7 of the Company Disclosure Schedule, there is no Claim (i) which
challenges the Transactions and would be reasonably expected to prevent or
materially delay the performance of this Agreement, the Ancillary Agreements or
the Transactions by the Shareholders or the Company or (ii) by the Shareholders
or the Company pending, or as to which either the Shareholders or the Company
has sent any letter or other written notice to any Person (as defined below) or
such Person's counsel, to the effect that the Shareholders and/or the Company
intends to initiate any Claim against any other Person, in each case, arising
out of the conduct of the business of the Company or related to the Company and
that (x) seeks material damages or (y) seeks any material injunctive relief. As
used in this Agreement, "Knowledge" of any Person means actual knowledge with
respect to the particular fact or matter in question and all knowledge which
could have been obtained by due inquiry by such Person; provided, that the
Company or the Parent, as the case may be, will be deemed to have "Knowledge" of
a particular fact or matter if that Person or any of its subsidiaries or any of
their officers, members of management or members of the Board of Directors or
similar governing body has or had Knowledge of such fact or matter. As used in
this Agreement, "Person" shall mean a natural person, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Entity or other entity
or organization. "Order" shall mean any judgment, order, writ, injunction or
decree of any Governmental Entity.
SECTION 3.8. OWNERSHIP OF SHARES; LIENS. The Shareholders are
the record and beneficial owners of the Company Common Stock, free and clear of
any Liens (as defined below) and any other limitation or restriction (including
any restriction on the right to vote, sell or otherwise dispose of the Company
Common Stock, other than pursuant to applicable U.S. state and federal
securities Laws), and will transfer and deliver to the Parent at the Closing
valid title to each of the shares of Company Common Stock free and clear of any
Liens and any such limitation or restriction. "Liens" shall mean any liens,
mortgages, security interests, pledges, options, charges, Claims or encumbrances
of any kind (including any agreement to give any of the foregoing).
SECTION 3.9. ABSENCE OF CERTAIN CHANGES. Except as set forth
in Section 3.9 of the Company Disclosure Schedule, since September 30, 2003,
there has not been any Company Material Adverse Effect in the business,
financial condition, operations, results of operations, or future prospects of
the Company taken as a whole. Without limiting the generality of the foregoing
since that date:
(a) no party (including the Company) has accelerated,
terminated, made material modifications to, or canceled any Material Agreement
to which any of the Company or its Affiliates is a party or by which any of them
is bound;
(b) no Lien has been imposed upon any of the Company's
assets, tangible or intangible;
(c) the Company has not granted any license or sublicense
of any material rights under or with respect to any Intellectual Property (as
defined below);
(d) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to any of its assets;
(e) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside of the
ordinary course of business consistent with past custom and practice, including
with respect to quantity and frequency; and
(f) the Company has not committed to do any of the
foregoing.
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SECTION 3.10. NO UNDISCLOSED MATERIAL LIABILITIES. There are
no liabilities of the Company of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and the Company is
not a guarantor or otherwise is responsible for any liability of any other
Person other than:
(a) liabilities reflected or reserved against in the 2003
Balance Sheet;
(b) liabilities disclosed in Section 3.10 of the Company
Disclosure Schedule; and
(c) liabilities incurred since September 30, 2003 in the
ordinary course of business consistent with past practice (and in amounts and on
terms consistent with past practice) which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
SECTION 3.11. ENVIRONMENTAL.
(a) The Company has obtained all material permits,
licenses and other authorizations which are required under the Environmental
Laws (as defined in Section 3.11(e)(i) below) ("Environmental Permits") for the
operation of their businesses and the ownership, use and operation of the Real
Property (as defined in Section 3.16(f)(iv) below), all such permits, licenses
and authorizations are in effect, no appeal nor any other action is pending to
revoke any Environmental Permit and the Company is in material compliance with
all terms and conditions of all such Environmental Permits. The Company and its
subsidiaries have been, and are, in material compliance with all applicable
Environmental Laws.
(b) The Company has not received written notice of any
existing or pending material civil, criminal or administrative Claim, hearing,
notice of violation or demand letter (collectively, "Allegations"), or, to the
Knowledge of the Company or any Shareholder, threatened Allegations, relating to
the Company or any of its subsidiaries, the Real Property or any other property
or facility previously owned, operated or leased by the Company or any of its
subsidiaries, relating in any way to the Environmental Laws. None of the Company
and its subsidiaries is subject to any material administrative or judicial Order
or any other enforceable or voluntary agreement with a Governmental Entity
relating in any way to the Environmental Laws.
(c) The Company has not, and, to the Knowledge of the
Company and each Shareholder, no other Person has, Released, discharged, or
otherwise disposed of any Hazardous Substances (as defined in Section
3.11(e)(ii) below) on, beneath or adjacent to the Real Property or any property
formerly owned, operated or leased by the Company, except for Releases (as
defined in Section 3.11(e)(iii) below) of Hazardous Substances that are not
likely to result in a material Claim against the Company or any of its
subsidiaries.
(d) Neither the execution of this Agreement nor the
consummation of the Transactions will require compliance with any Environmental
Laws relating to the transfer of property or businesses.
(e) For the purpose of this Agreement, the following
defined terms shall have the following meanings:
(i) "Environmental Laws" shall mean all Laws
relating to pollution or protection of the environment or human health
and safety, including, without limitation, Laws relating to Releases or
threatened Releases of Hazardous Substances into the indoor or outdoor
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environment (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous Substances and all Laws
with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances, and all Laws relating to
endangered or threatened species of fish, wildlife and plants and the
management or use of natural resources.
(ii) "Hazardous Substances" shall mean (1) any
petrochemical or petroleum products, radioactive materials, asbestos in
any form that is or could become friable, urea formaldehyde foam
insulation, transformers or other equipment that contain dielectric
fluid containing polychlorinated biphenyls and radon gas; (2) any
chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous
substances," "toxic substances," "contaminants" or "pollutants" or
words of similar meaning and regulatory effect; or (3) any other
chemical, material or substance, exposure to which is prohibited,
limited, or regulated by any applicable Environmental Laws.
(iii) "Release" shall mean any release, spill,
emission, discharge, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any
property, including the movement of Hazardous Substances through or in
the air, soil, surface water, groundwater or property.
SECTION 3.12. INTELLECTUAL PROPERTY.
(a) Section 3.12(a) of the Company Disclosure Schedule
sets forth, a complete list of all United States, foreign, international and
state: (i) patents and patent applications; (ii) trademark or trade name
registrations and applications and material unregistered trademarks; (iii)
domain names; and (iv) copyright registrations and applications and material
unregistered copyrights, that are Company Intellectual Property (as defined in
Section 3.12(d)(i) below). Section 3.12(a)(ii) of the Company Disclosure
Schedule sets forth a complete list of all material Intellectual Property (as
defined in Section 3.12(d)(ii) below) agreements (other than standard
off-the-shelf licenses for commercially available Software (as defined in
Section 3.12(d)(iii) below)).
(b) The Intellectual Property set forth on Sections
3.12(a)(i) and 3.12(a)(ii) of the Company Disclosure Schedule are sufficient for
the continued conduct of the Company after the Closing Date in the same manner
as the Company was conducted prior to the Closing Date. Except as set forth in
Section 3.12(b) of the Company Disclosure Schedule, the Company owns or has the
valid and enforceable right to use all Intellectual Property, free and clear of
all Liens.
(c) Except as set forth in Section 3.12(c) of the Company
Disclosure Schedule, there is no pending or, to the Knowledge of the Company and
the Shareholders, threatened Claim against Company (i) with respect to any
Intellectual Property owned or used by Company, (ii) alleging that the Company
Intellectual Property infringes the rights of any Person or (iii) challenging
the Company's ownership or use of, or the validity, enforceability or
registrability of any Intellectual Property, and, to the Knowledge of the
Company and the Shareholders, there is no reasonable basis for a Claim regarding
any of the foregoing. The Company has not brought or threatened a Claim against
any Person (x) alleging infringement of Intellectual Property rights owned or
used by the Company or (y) challenging any Person's ownership or use of, or the
validity, enforceability or registrability of, any Intellectual Property, and,
to the Knowledge of the Company and the Shareholders, there is no reasonable
basis for a Claim regarding any of the foregoing.
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(d) For the purpose of this Agreement, the following
defined terms shall have the following meanings:
(i) "Company Intellectual Property" means all
Intellectual Property owned, singly or jointly, by the Company or any
of its Subsidiaries;
(ii) "Intellectual Property" means all
copyrights, copyright registrations and applications, patents and
industrial designs, including without limitation any continuations,
divisionals, continuations-in-part, renewals, reissues and applications
for any of the foregoing, trademarks, service marks, trade names,
domain names, designs, logos, emblems, signs or insignia, slogans,
other similar designations of source or origin and general intangibles
of like nature, together with the goodwill of the business symbolized
by any of the foregoing, registrations and applications relating to any
of the foregoing, trade secrets, financing and marketing information,
technology, know-how, inventions, proprietary processes, formulae,
algorithms, models and methodologies, Software, and similar property
anywhere in the world, together with the rights to xxx for past
infringement thereof; and
(iii) "Software" means all computer programs
(whether in source code or object code form), databases, compilations
and data, and all documentation related to any of the foregoing.
SECTION 3.13. EMPLOYEE BENEFIT PLANS.
(a) Section 3.13(a) of the Company Disclosure Schedule
sets forth a true and correct list of: (i) each deferred compensation plan,
incentive compensation plan, equity compensation plan, "welfare" plan, fund or
program (within the meaning of section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); "pension" plan, fund or program
(within the meaning of section 3(2) of ERISA); (ii) each employment, termination
or severance agreement; and (iii) each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by the Company or by any
trade or business, whether or not incorporated, all of which together with the
Company would be deemed a "single employer" within the meaning of Section
4001(b) of ERISA (an "ERISA Affiliate"), for the benefit of any employee or
former employee of the Company or an ERISA Affiliate (collectively (i), (ii) and
(iii) are referred to in this Agreement as the "Plans").
(b) Each Plan that is intended to be qualified under
Section 401(a) of the Code (i) has received a favorable determination letter
from the Internal Revenue Service with respect to such qualification, (ii) has
been submitted to the Internal Revenue Service for a determination letter within
the applicable remedial amendment period under Section 401(b) of the Code, (iii)
has a remedial amendment period that has not yet expired or (iv) is a
standardized prototype plan that is the subject of a favorable opinion letter
from the Internal Revenue Service on which the Company or its ERISA Affiliate
that sponsors the Plan is entitled to rely. None of the Company, any of its
Subsidiaries or any of its ERISA Affiliates is aware of any circumstances likely
to result in revocation of any such favorable opinion or determination letter.
There is no material pending or, to the Knowledge of the Company or any
Shareholder, threatened litigation relating to the Plans (other than routine
claims for benefits). To their Knowledge, neither the Company, any Shareholder,
nor any of its ERISA Affiliates has engaged in a transaction with respect to any
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, could subject the Company or any of its ERISA Affiliates to a tax
or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA
in an amount which would have a Company Material Adverse Effect.
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(c) Neither the Company nor any of its ERISA Affiliates
maintains, or has ever maintained, an ERISA Plan that is subject to Title IV of
ERISA. Neither the Company nor any of its ERISA Affiliates has contributed to a
"multiemployer plan", within the meaning of Section 3(37) of ERISA, at any time
on or after September 26, 1980.
(d) The Company has heretofore made available to Parent
and Sub with respect to each of the Plans true and correct copies of each of the
following documents, if applicable: (i) the Plan document and any amendments
thereto; (ii) any related trust or other funding vehicle; (iii) the most recent
IRS determination letter for such Plans; (iv) the most recent summary plan
description and related summaries of material modifications for each Plan that
is governed by ERISA; (v) for the three most recent plan years, all annual
reports (5500 Series) for each Plan that have been filed with any governmental
agency and (vi) all other material documents relating to any Plan as may
reasonably be requested by the Parent or Sub.
(e) The Company does not have any obligations for retiree
health and life benefits under any Plan. The Company or any of its subsidiaries
may amend or terminate any such Plan at any time without incurring any liability
thereunder.
(f) Except as set forth in Section 3.13(f) of the Company
Disclosure Schedule, neither the execution of this Agreement, nor any Ancillary
Agreement nor the consummation of the Transactions will (i) entitle any
employees of the Company or any of its subsidiaries to severance pay or any
increase in severance pay upon any termination of employment prior to or after
the date hereof, (ii) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Plans, (iii) cause the Company or any of its
subsidiaries to record additional compensation expense on its income statement
with respect to any outstanding stock option or other equity-based award or (iv)
result in any payments under any of the Plans which would not be deductible
under Section 162(m) or Section 280G of the Code.
(g) To the Knowledge of the Shareholders or the Company,
none of the Company any of its ERISA Affiliates, any of the Plans, any trust
created thereunder, nor any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action in connection with which
the Company or any of its ERISA Affiliates could be subject to any material
liability for either a civil penalty assessed pursuant to Section 409 or 502(i)
of ERISA or a tax imposed pursuant to Section 4975, 4976 or 4980B of the Code.
(h) Each of the Plans has been operated and administered
in all material respects in accordance with the terms of each Plan, applicable
Laws, including but not limited to ERISA and the Code.
(i) No "leased employee," as that term is defined in
Section 414(n) of the Code, performs services for the Company or any of its
ERISA Affiliates.
SECTION 3.14. LABOR MATTERS. The Company is not a party to any
collective bargaining or other labor union contract and no collective bargaining
agreement is being negotiated by the Company. To the Knowledge of the Company
and the Shareholders, no union claims to represent the employees of the Company.
None of the employees of the Company is represented by any labor organization,
and the Company and the Shareholders have no Knowledge of any material
activities or proceedings of any labor union to organize any employees of the
Company. There is no material labor dispute, strike or work stoppage against the
Company pending or, to the Knowledge of the Company or the Shareholders,
threatened which may interfere with the respective business activities of the
Company
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or have a Company Material Adverse Effect, and there has not been any such event
during the past two years. Except as set forth in Section 3.14 of the Company
Disclosure Schedule, there are no material unfair labor practice charges,
grievances or complaints pending or threatened, in writing, on behalf of any
employee, officer or director of the Company against the Company. The Company is
in material compliance in respect of the employees of the Company with all
applicable Laws respecting employment, employment practices, the terms and
conditions of employment (including with respect to the termination of
employment and the closing of any facilities of the Company) and wages and
hours. Section 3.14 of the Company Disclosure Schedule sets forth a true and
complete list of: (i) the names, title and current salaries of all officers of
the Company; (ii) the wage rates (or wages if applicable) for each exempt and
nonexempt, salaried and hourly employees of the Company; (iii) all scheduled or
contemplated increases in compensation or bonuses; and (iv) all scheduled or
contemplated employee promotions.
SECTION 3.15. MATERIAL AGREEMENTS. Except as disclosed in
Section 3.15 of the Company Disclosure Schedule, the Company is not a party to
or bound by:
(a) any lease of real property other than the Leased
Premises (as defined in Section 3.16(f)(ii) below);
(b) any agreement for the purchase of materials,
supplies, goods, services, equipment or other assets, including any license for
Software, that provides for either (A) annual payments by the Company of $10,000
or more or (B) aggregate payments by the Company of $25,000 or more;
(c) any limited partnership, joint venture or other
unincorporated business organization or similar arrangement or agreement in
which the Company serves as a general partner or otherwise has unlimited
liability or any other material similar agreement or arrangement;
(d) any agreement relating to the acquisition or
disposition of any business of the Company, or any third Person (whether by
merger, sale of stock, sale of assets or otherwise);
(e) any agreement relating to indebtedness for borrowed
money or any guarantee or similar agreement or arrangement relating thereto;
(f) any license, franchise or similar agreement material
to the Company or any of its subsidiaries, taken as a whole;
(g) any material marketing or other similar agreement and
any agreement under which the Company or any of its subsidiaries has granted any
exclusive marketing or other right to any third Person;
(h) any agreement that restricts or prohibits the Company
from competing with any Person in any line of business or from competing in,
engaging in or entering into any line of business in any area and which would so
restrict or prohibit the Company or any of its subsidiaries after the Closing
Date;
(i) any agreements to which the Company is a party or
otherwise bound (whether between the Company and an independent Person or
inter-corporate) which contain provisions (a) granting to any Person rights in
Company Intellectual Property or any other Intellectual Property used by the
Company or any of its subsidiaries; (b) granting to the Company any rights in
Intellectual Property owned or controlled by any Person; (c) restricting the
Company's use of Intellectual Property that is used by the Company; or (d)
transferring ownership of Intellectual Property rights to the Company;
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(j) any agreement containing "change in control" or
similar provisions relating to a change in control of the Company;
(k) any powers of attorney other than those entered into
in the ordinary course of business;
(l) any agreements material to the Company taken as a
whole pursuant to which the Company is obligated to indemnify any other person;
(m) any agreement with any Governmental Entity;
(n) any agreement with any of the Shareholders or any of
their Affiliates (as defined below) or any Affiliate, current or former officer,
director, stockholder, employee, consultant, agent or other representative of
the Company or with a Person in which any of the foregoing is a controlling
Person. "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
Securities and Exchange Act of 1934, as amended, and the applicable rules and
regulations promulgated thereunder;
(o) any agreement having a duration of six months or more
and not terminable without penalty upon 60 days or less prior notice by the
Company that is a party thereto;
(p) any agreement for management services with any
Person;
(q) any agency, broker, exclusive dealing, distributor,
dealer, manufacturer, representative, reseller, agency and sales promotion
agreements involving payments in excess of $5,000 or any other agreement that
compensates any Person, other than employees or consultants of the Company,
based on any sales by the Company; or
(r) any contract that contemplates or involves (x) the
payment or delivery of cash or other consideration to the Company in an amount
or having a value in excess of $10,000 in the aggregate or (y) the performance
of services or sales of products by the Company having a value in excess of
$10,000 in the aggregate, which in either case is not terminable by the Company
without material penalty on not more than 30 days' or less prior notice;
The contracts, agreements and instruments, each as amended or modified
(including all waivers with respect thereto), set forth in Section 3.15 of the
Company Disclosure Schedule are referred to herein as the "Material Agreements."
The Company has heretofore furnished or made available to the Parent and Sub
complete and correct copies of the Material Agreements. Except as specifically
disclosed on Section 3.15 of the Company Disclosure Schedule: (i) each of the
Material Agreements is in full force and effect and enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar Laws affecting the enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforcement is considered in
a proceeding at Law or in equity); (ii) neither the Shareholders nor the Company
has received any written notice of cancellation or termination of or, to the
Knowledge of the Company, any expression or indication of an intention or desire
to cancel or terminate any of the Material Agreements; (iii) no Material
Agreement is the subject of or, to the Knowledge of the Company and the
Shareholders, has been threatened to be made the subject of, any arbitration,
suit or other legal proceeding; (iv) with respect to any Material Agreement
which by its terms will terminate as of a certain date unless renewed or unless
an option to extend such Material Agreement is exercised, neither the
Shareholders, nor any of the Company has received any written notice, or
otherwise has any Knowledge, that any such Material Agreement will not be so
renewed or that any such extension option will not be exercised; and (v) there
exists no material event of default or occurrence, condition or act on the part
of the Company or, to the Knowledge of the Shareholders or the
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Company, on the part of the other Persons to the Material Agreements, which
constitutes or would constitute (with notice or lapse of time or both) a
material breach of or material default under any of the Material Agreements.
SECTION 3.16. PROPERTIES.
(a) Section 3.16(a) of the Company Disclosure Schedule
contains a true, correct and complete list, as of the date hereof, of the Leased
Premises and the Leases (as defined in Section 3.16(f) below), the lessor and
lessee (or sublessor and sublessee, or licensor or licensee, as the case may be)
and any guarantor under each Lease and the current use (or uses) of such Leased
Premises. Prior to the date hereof, the Parent and Sub have been provided with a
true, correct and complete copy of each Lease and all amendments thereto. The
Company has good, valid and binding license, leasehold or equivalent interest in
all Leased Premises, free and clear of any Liens. Each Lease is the legal, valid
and binding obligation of the Company thereunder and is enforceable and is in
full force and effect. No event has occurred or circumstance exists which, with
the delivery of notice or the passage of time or both, would constitute a breach
or default by the Company, or the lessor or sublessor or licensor or licensee,
or which would permit the termination, modification or acceleration of
performance of the obligations of the Company, or the lessor or sublessor or
licensor or licensee, under any Lease. The Company has not received any notice
that any lessor, sublessor or licensor under any Lease will not consent (where
such consent is necessary) to the consummation of the Transactions, without
requiring any modification of the rights or obligations of the lessee, sublessee
or licensor thereunder.
(b) Section 3.16(b) of the Company Disclosure Schedule
contains a true, correct and complete list of the Owned Real Property (as
defined in Section 3.16(f)(iii) below), including the address of each parcel of
Owned Real Property, the entity which owns such Owned Real Property and the
current use (or uses) of such Owned Real Property. Prior to the date hereof, the
Parent has been provided with a true, correct and complete copy of all deeds,
mortgages, surveys, title insurance policies (including any underlying documents
relating to Liens), if any, or equivalent documentation with respect to the
Owned Real Property and other material documents relating to or affecting the
title to the Owned Real Property. The Company has good, valid and marketable
title in fee simple to each of the Owned Real Property and to all buildings,
structures and other improvements thereon and all fixtures thereto (other than
any equipment leased by the Company), in each case, free and clear of any Liens.
The Company has not granted to any Person any right to use or occupy any of the
applicable Owned Real Property, other than rights or grants which appear of
record.
(c) No options or rights of first offer or rights of
first refusal or similar rights or options have been granted by the Company to
any Person to purchase, lease, license or otherwise acquire any interest in any
of the Real Property. Except as set forth in Section 3.16(c) of the Company
Disclosure Schedule, the Company has not mortgaged, hypothecated, pledged or
otherwise encumbered any of the Real Property or its interest in any Real
Property.
(d) The Company is in possession of all material
franchises, grants, authorizations, Governmental Permits, easements, variances,
exemptions, consents, certificates and Orders (collectively, the "Permits")
necessary to own, lease, license and operate the Real Property and to carry on
its business. Each such Permit is in full force and effect in all material
respects. The Company is not in material conflict with, or in default (or would
be in default with the giving of notice, the passage of time, or both) with, or
in violation of, any of the Permits, which conflict, default or violation would,
individually or in the aggregate, have a Company Material Adverse Effect.
(e) The Company has not received written notice of any
condemnation, expropriation or other proceedings in eminent domain pending,
proposed or threatened with respect to any of the Real Property which has had or
would reasonably be expected to have a Company Material
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Adverse Effect or a material impact on the continued use and operation of any of
the Real Property to which they relate in the conduct of the business of the
Company as presently conducted. All buildings, structures and other improvements
on any of the Real Property and all fixtures thereto are structurally sound with
no known material defects and are in good operating condition and repair, except
for routine wear and tear, and are adequate for the use and operation of the
Real Property to which they relate in the conduct of the business of the Company
as presently conducted and require no maintenance, repairs or replacements,
except for ordinary routine maintenance, repairs or replacements, which are not
material in nature or cost.
(f) For the purpose of this Agreement, the following
defined terms shall have the following meanings:
(i) "Lease" means the lease, sublease, license
or other agreement relating to the use and/or
occupancy of any of the Leased Premises.
(ii) "Leased Premises" means all the real
property that is leased or operated by the Company
and its subsidiaries and used or held for use by the
Company or any of its subsidiaries in the operation
or conduct of their business, which real property is
identified on Section 3.16(a) of the Disclosure
Schedules.
(iii) "Owned Real Property" means all the real
property that is owned and used or held for use by
the Company and its subsidiaries in the operation or
conduct of their business, which real property is
identified on Section 3.16(b) of the Disclosure
Schedules.
(iv) "Real Property" means, collectively, the
Leased Premises under the Leases and the Owned Real
Property.
SECTION 3.17. PRODUCT LIABILITY.
(a) (i) The Company has not received any written notice
(of violation or otherwise), Claim or hearing of a civil, criminal or
administrative nature by or before any Governmental Entity against or involving
the Company (past or present) or concerning any product relating to the
businesses of the Company (past or present) which is pending or, to the
Knowledge of the Shareholders or the Company, threatened, relating to or
resulting from: (x) an alleged defect in design, manufacture, materials or
workmanship of any product manufactured, designed, distributed or sold by, or on
behalf of, the Company or any of its subsidiaries (past or present); (y) any
alleged failure to warn; or (z) from any alleged breach of express or implied
warranties or representations (nor is there any valid basis for any such notice
(of violation or otherwise), Claim or hearing); (ii) there has not been any
Occurrence (as defined in Section 3.17(b) below); (iii) there has not been any
product recall, rework, retrofit or post-sale warning (collectively, "Recalls")
by the Company (past or present) concerning any products relating to the
businesses of the Company (past or present) (nor is there, or has there been,
any investigation or consideration or decision made by any Person concerning
whether to undertake or not to undertake any Recalls); and (iv) there are no
defects in design, manufacturing, materials or workmanship (including, without
limitation, any failure to warn, or any breach of express or implied warranties
or representations), which involve any product relating to the businesses of the
Company (past or present), which are manufactured, designed, distributed, sold
or installed by the businesses of the Company (past or present).
(b) For purposes of this Section 3.17, the term
"Occurrence" shall mean any accident, happening or event which is caused, or
allegedly caused by, any alleged hazard or alleged defect in manufacture,
design, materials or workmanship (including, without limitation, any alleged
failure to
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warn or any breach of express or implied warranties or representations with
respect to), or otherwise involves a product (including any parts or components)
relating to the businesses of the Company (past or present) that has been
manufactured, designed, distributed, sold or installed by, or on behalf of, the
Company (past or present) which results, or is alleged to have resulted in,
injury or death to any Person or damage to or destruction of property or other
consequential damages, at any time.
SECTION 3.18. TAXES. Except as set forth in Section 3.18 of
the Company Disclosure Schedule:
(a) The Company has (i) duly and timely filed (or there
has been duly and timely filed on its behalf) with the appropriate Tax Authority
(as defined in Section 3.18(i)(ii) below) all Tax Returns (as defined in Section
3.18(i)(iii) below) required to be filed by it, and all such Tax Returns are
true, correct and complete and (ii) timely paid (or there has been timely paid
on its behalf) all Taxes due.
(b) The Company has complied in all material respects
with all applicable Laws relating to the payment and withholding of Taxes
(including withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign Laws) and has, within the time and
manner prescribed by Law, withheld and paid over to the proper Governmental
Entities all amounts required to be withheld and paid over under all applicable
Laws.
(c) There are no outstanding waivers or comparable
consents that have not expired regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns of the Company. The Company
has not requested an extension of time within which to file any Tax Return in
respect of any taxable period which Tax Return has not since been filed.
(d) To the Knowledge of the Company and the Shareholders,
no jurisdiction in which the Company did not file a Tax Return has made a Claim
that the Company is required to file a Tax Return for such jurisdiction. To the
Knowledge of the Company and each Shareholder, no federal, state, local or
foreign audits or other administrative proceedings have formally commenced or
are presently pending or have been proposed in writing with respect to (i) any
Taxes due from or with respect to the Company, (ii) any Tax Return filed by or
with respect to the Company. No power of attorney which is currently in force
has been granted by or with respect to the Company with respect to any matter
relating to Taxes. The Company has not changed any method of accounting for
which it will be required to take into account any adjustment under Section 481
of the Code or any similar provision of the Code or any other applicable Laws,
received a ruling from any taxing authority or signed an agreement with any
taxing authority which could affect the Company or the Parent or Sub after the
Closing. No closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of any Laws has been entered
into by or with respect to the Company.
(e) The Company is not a party to, bound by, or has any
obligation under, any Tax sharing agreement, Tax indemnification agreement or
similar contract or arrangement and has no potential liability or obligation to
any Person as a result of, or pursuant to, any such agreement, contract or
arrangement. The Company is not a party to any agreement, plan, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code
by virtue of the transfer of shares to the Parent or Sub pursuant to this
Agreement. The Company has not filed a consent pursuant to Section 341(f) of the
Code (or any predecessor provision) or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as such term is defined
in Section 341(f)(4) of the Code) owned by the Company or any of its
subsidiaries. To the Knowledge of the Company, no Claim has been asserted by any
Tax Authority that the Company is liable for Taxes under or as a result of
Section 482 of the Code or any similar provision of Laws.
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(f) The Company has not been a member of any Affiliated
Group (as defined in Section 3.18(i)(i) below).
(g) None of the federal income Tax Returns of the Company
for all tax years through September 30, 2002, has been examined.
(h) The Company has no liability for the Taxes of any
Person (other than members of the Affiliated Group of which the Company is the
"parent" under Treasury Regulation Section 1.1502-6 (or any similar provision of
any applicable Laws), as a transferee or successor, by contract, or otherwise.
(i) For purposes of this Agreement, the following defined
terms shall have the following meanings:
(i) "Affiliated Group" shall mean any affiliated
group within the meaning of Section 1504(a) of the Code or any unitary,
combined or affiliated group under any similar provisions of any
applicable Laws.
(ii) "Tax Authority" shall mean any Governmental
Entity responsible for the imposition of any Tax.
(iii) "Tax Return" shall mean any return, report,
declaration, information return or other document (including any
related or supporting information) required to be filed with respect to
Taxes, including any amendments thereof.
(iv) "Taxes" shall mean any (x) federal, state,
local and foreign income, gross receipts, property, sales, use,
license, excise, franchise, employment, social security, payroll,
premium, withholding, alternative or added minimum, ad valorem, capital
stock, transfer tax, or any other tax, custom, duty, governmental fee,
levy or other like assessment or charge of any kind, including any
interest, additions to tax, or penalties applicable thereto, imposed by
any Tax Authority or (y) liability for the payment of any amounts
described in clause (x) above as result of transferor or successor
liability.
(v) "Treasury Regulations" shall mean the United
States Tax Regulations, including Temporary Regulations, promulgated
under the Code, as the same may be amended hereafter from time to time
(including corresponding provisions of succeeding United States Tax
Regulations).
SECTION 3.19. LOANS AND ADVANCES. The Company has no agreement
or commitment to make any loan, advance or capital contribution to, or
investment in, any other Person in excess of $5,000.
SECTION 3.20. SUFFICIENCY OF ASSETS. The Company owns, or has
sufficient rights to use, all of the assets and property (i) currently used by
the Company in the conduct of its business and (ii) that are necessary to
operate the business of the Company as it is currently being operated.
SECTION 3.21. INVENTORY. Except inventory items retained by
the Company which have been written-off for accounting purposes, the inventory
of the Company (a) consists of items which are in all material respects free of
any defect, fault, imperfection, impurity or dangerous propensity of any kind,
(b) is of a quality and quantity usable and salable in the ordinary and usual
course of business and (c) is owned by the Company.
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SECTION 3.22. ACCOUNTS RECEIVABLE. The accounts receivable of
the Company are reflected on the accounting records of the Company relating to
the conduct of the business of the Company and represent or will represent as of
the Closing Date valid obligations arising from sales actually made or services
actually performed by the Company in the ordinary course of business. The bad
debt reserves of the Company reflected on the 2003 Balance Sheet and the
accounting records of the Company are adequate in accordance with GAAP and
consistent with the past practice of the Company. To the Knowledge of the
Company and each Shareholder, no contest, claim, defense or right of setoff,
other than returns in the ordinary course of business of the Company, exists
under any contract with any account debtor of an account receivable relating to
the amount or validity of the account receivable.
SECTION 3.23. INSURANCE. Section 3.23 of the Company
Disclosure Schedule sets forth a list of all insurance policies, binders of
insurance or programs of self-insurance held by the Company (collectively, the
"Insurance Policies"). Each of the Insurance Policies is a valid and existing
insurance policy that is current and in full effect and not expired. True and
complete copies of all Insurance Policies have been provided or made available
to Parent and Sub. During the 12-month period immediately preceding the date
hereof, no insurer under any Insurance Policy has canceled or generally
disclaimed liability under any such policy or, to the Knowledge of the Company
and the Shareholders, indicated any intent to do so or not to renew any
Insurance Policy, except as may be required under applicable state insurance
Laws.
SECTION 3.24. SUPPLIERS. Section 3.24 of the Company
Disclosure Schedule sets forth a list of each supplier of the Company that
individually accounted for more than 5% of the operating expenses of the Company
during the twelve month period immediately preceding the date hereof.
SECTION 3.25. CUSTOMERS. Section 3.25 of the Company
Disclosure Schedule sets forth a list of each customer of the Company that
individually accounted for more than 5% of the operating revenue of the Company
during the twelve month period immediately preceding the date hereof.
SECTION 3.26. NON-ARM'S-LENGTH TRANSACTIONS. Other than as an
owner of publicly traded securities, neither the Shareholders nor the Company
has any direct or indirect interest in the business of any customer, supplier,
manufacturer or distributor of the Company or any of its subsidiaries. To the
Knowledge of the Company and the Shareholders, there are no existing or proposed
agreements, arrangements and transactions between any employee, officer or
director of the Company on the one hand, and any material supplier or customer
of the Company, on the other hand.
SECTION 3.27. MEETING MINUTES. The Company has provided the
Parent with true, correct and complete copies of all resolutions passed by the
Company's Board of Directors and stockholders during the past 24 months and
copies of all minutes of the Company's Board of Directors and stockholders
meetings held or written consents of the Company's Board of Directors acting
without a meeting during the past 24 months.
SECTION 3.28. BROKERS AND FINDERS. Neither the Company nor any
of the Shareholders has engaged any agent, broker, investment banker, financial
advisor or other Person that is or will be entitled to any brokers', finder's,
financial advisor's fee or other commission or similar fee in connection with
any of the Transactions.
SECTION 3.29. SHAREHOLDER INVESTMENT REPRESENTATIONS. Each
Shareholder hereby represents and warrants on behalf of himself only and not
jointly that:
(a) Such Shareholder is acquiring the Parent Common Stock
to be acquired hereunder for its own account with the present intention of
holding such securities as provided in this
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Agreement, and he has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws;
(b) The shares of Parent Common Stock to be received in
partial payment of the Per Share Merger Consideration are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being received from the Parent in a transaction not involving a public offering,
are being offered and sold without registration under the Securities Act in a
private placement that is exempt from the registration provisions of the
Securities Act and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act only in
limited circumstances. Except as set forth in this Agreement, each Shareholder
understands that he must bear the economic risk of the acquisition of the shares
of Parent Common Stock made in connection herewith for not more than nine months
or, at the election of each Shareholder, an indefinite period of time because,
among other reasons, the shares of Parent Common Stock have not been registered
under the Securities Act or under the securities laws of certain states and,
therefore, cannot be resold, assigned or otherwise disposed of unless they are
subsequently registered under the Securities Act and under the applicable
securities laws of such states or an exemption from such registration is
available. Each Shareholder further understands that the certificate
representing the shares of Parent Common Stock shall bear a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER AND COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. "
(c) Such Shareholder is an "accredited investor", as
defined under Rule 501(a) promulgated under the Securities Act;
(d) Such Shareholder has all requisite power and
authority to execute and deliver this Agreement and consummate the transactions
contemplated hereby. Such Shareholder has taken all action as and in the manner
required by law to authorize the execution, delivery and performance of this
Agreement and the other Ancillary Documents to which it is a party and the
transactions contemplated hereby and thereby;
(e) The execution and delivery of this Agreement, and the
other Ancillary Agreements to which it is a party, do not, and the consummation
of the transactions contemplated hereby and thereby will not, violate (i) any
material terms of any material contract or commitment of any kind or character
to which such Shareholder is a party or by which it or its property may be
bound, or (iii) any law, regulation, rule, judgment or order applicable to such
Purchaser or its respective property;
(f) This Agreement and the other Ancillary Agreements to
which such Shareholder is a party, each constitute the valid and binding
obligation of such Shareholder, enforceable in accordance with their terms
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally and subject
to the availability of equitable remedies; and
(g) Such Shareholder is not a party to or in any way
obligated to make any payment relating to, any contract or outstanding claim for
the payment of any broker's or finder's fee in connection
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with the origin, negotiation, execution or performance of this Agreement or the
acquisition of shares of the Parent Common Stock hereunder.
SECTION 3.30. CONTINUITY OF BUSINESS ENTERPRISE. The Company
operates at least one significant historic business line, or owns at least a
significant portion of its historic business assets, in each case within the
meaning of Treasury Regulation Section 1.368-1(d).
SECTION 3.31. TITLE TO AND CONDITION OF ASSETS. Except as set
forth in Section 3.31 of the Company Disclosure Schedule, the Company had good
and marketable title to all assets set forth on the 2003 Balance Sheet and all
financial statements after that date and all assets of the Company are free from
material defects (patent and latent), have been maintained in accordance with
normal industry practice, are in good operating condition and repair (subject to
normal wear and tear), and are suitable for the purposes for which it presently
is used and presently is proposed to be used.
SECTION 3.32. DISCLOSURE. This Agreement and the Company
Disclosure Schedule and all other schedules, attachments, written statements,
documents, certificates, or other items prepared or supplied to Parent or Sub by
or on behalf of the Company or any Shareholder with respect to the Transactions
are complete and authentic, and all contracts and other agreements or
instruments included thereunder are valid, subsisting and binding on the parties
thereto in accordance with their terms. Neither this Agreement nor any of the
schedules, including the Company Disclosure Schedule, attachments, written
statements, documents, certificates, or other items prepared or supplied to the
Parent or Sub by or on behalf of the Company or any Shareholder with respect to
the Transactions contemplated in this Agreement contain any untrue statement of
a material fact or omit a material fact necessary to make each statement
contained herein or therein not misleading. Neither the Company, any Shareholder
nor any responsible officer or manager has intentionally concealed any fact
known by such person to have a Company Material Adverse Effect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to
the Company and the Shareholders, as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Each of Parent,
Sub and Parent's "Significant Subsidiaries" (as defined in Regulation S-X
promulgated by the SEC) (the "Parent Significant Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. Each of Parent and the
Parent Significant Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders necessary to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as it is now being conducted,
except where the failure to have such franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders would
not, individually or in the aggregate, have a Parent Material Adverse Effect.
Each of Parent, Sub and the Parent Significant Subsidiaries is duly qualified or
licensed as a foreign corporation to do business and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so duly licensed or
qualified and in good standing that would not, individually or in the aggregate,
have a Parent Material Adverse Effect. "Parent Material Adverse Effect" shall
mean any change, event or effect that is materially adverse to the business,
financial condition or results of operations of Parent and its
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subsidiaries taken as a whole, in each case excluding (i) changes in economic or
regulatory conditions in the industries in which Parent carries on business as
of the date hereof, and changes in general economic, regulatory or political
conditions, including, without limitation, acts of war or terrorism, and (ii)
changes resulting from the announcement of the Transactions and any other public
announcement of the Company during the term of this Agreement.
SECTION 4.2. CAPITALIZATION. As of the date hereof, the
authorized capital stock of Parent consists of 50,000,000 shares of Parent
Common Stock and 1,000,000 shares of preferred stock, par value $0.01 per share
("Parent Preferred Stock"). At the close of business on November 12, 2003, (a)
5,838,392 shares of Parent Common Stock were issued and outstanding, and no
shares of Parent Preferred Stock were issued and outstanding, in each case,
except as disclosed in the Parent's proxy statement dated November 13, 2002 (the
"Parent Proxy Statement"), and (b) 86,026 shares of Parent Common Stock and no
shares of Parent Preferred Stock were held in treasury by Parent or by
subsidiaries of Parent. Other than (a) options to purchase 714,900 shares of
Parent Common Stock issued pursuant to employee benefit plans and agreements of
Parent and (b) 2,789,303 shares of Parent Common Stock issuable upon exercise of
outstanding warrants, except in connection with this Agreement, (y) there were
no options, warrants, rights, puts, calls, commitments or other contracts,
arrangements or understandings issued by or binding upon Parent requiring or
providing for, and (z) there are no outstanding debt or equity securities of
Parent which upon the conversion, exchange or exercise thereof would require or
provide for the issuance by Parent of any new or additional shares of Parent
Common Stock (or any other securities of Parent) which, with or without notice,
lapse of time and/or payment of monies, are or would be convertible into or
exercisable or exchangeable for Parent Common Stock (or any other securities of
Parent). Since September 30, 2003 through the date hereof, Parent has not issued
any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock, other than as disclosed in
Section 4.2 to the Parent Disclosure Schedule to be delivered by the Parent to
the Company in connection with this Agreement (the "Parent Disclosure
Schedule"), pursuant to the exercise of employee stock options and warrants
granted prior to such date. The authorized capital stock of Sub consists of 100
shares of Sub Common Stock, of which, as of the date hereof, 100 shares of Sub
Common Stock are issued and outstanding. The shares of Parent Common Stock to be
issued in the Merger will, upon issuance, be validly issued, fully paid,
nonassessable, not subject to any preemptive rights, and be free and clear of
all security interests, liens, claims, pledges or other encumbrances of any
nature whatsoever (in each case to which Parent is a party).
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT; BOARD
APPROVAL.
(a) Each of Parent and Sub has all necessary corporate
power and authority to execute and deliver this Agreement, and to perform its
obligations hereunder and, subject to obtaining the approval of the stockholders
of Sub, to consummate the Transactions. The execution and delivery of this
Agreement by Parent and Sub and the consummation by Parent and Sub of the
Transactions have been duly and validly authorized by all necessary corporate
action on the part of Parent and Sub and no other corporate proceedings on the
part of Parent or Sub are necessary to authorize this Agreement, or to
consummate the Transactions (other than, with respect to the Merger, the
approval of this Agreement by the holders of a majority of the voting power of
Sub Common Stock, which approval is the only approval of Sub required to
consummate the Transactions under Sub's certificate of incorporation and the
Delaware Statute, and other than the approval of AMEX listing application with
respect to the issuance of shares of Parent Common Stock in the Merger). This
Agreement has been duly and validly executed and delivered by Parent and Sub
and, assuming the due authorization, execution and delivery by the Company,
constitutes the legal and binding obligations of Parent and Sub, enforceable
against Parent and Sub in accordance with its terms, subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors rights generally and (ii) the availability of specific
performance or injunctive relief and other equitable remedies.
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(b) The Board of Directors of Parent has (i) approved
this Agreement and the Transactions and (ii) determined that the Transactions
are fair to and in the best interests of the stockholders of Parent. No vote of
Parent's stockholders is required in connection with the Transactions.
SECTION 4.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by
Parent and Sub do not, and the performance of their respective obligations
hereunder and the consummation of the Transactions by Parent and Sub will not,
(i) conflict with or violate the Certificate of Incorporation, Bylaws or
equivalent organizational documents of Parent or Sub; (ii) subject to compliance
with the requirements set forth in Section 4.4(b), conflict with or violate any
Law, rule, regulation, Order, judgment or decree applicable to Parent or Sub or
by which their respective properties are bound or affected; or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or alter the rights or obligations
of any third party or of Parent or Sub under, or give to others any rights of
termination, amendment, acceleration, increased payments or cancellation of, or
result in the creation of a Lien or other encumbrance on any of the properties
or assets of Parent or Sub pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or Sub is a party or by which Parent or Sub or any of
their respective properties are bound or affected, except in the cases of
clauses (ii) and (iii) above, for any such conflicts, violations, breaches,
defaults or other alterations or occurrences that would not prevent or delay
consummation of the Merger in any material respect, or otherwise prevent Parent
and Sub from performing their respective obligations under this Agreement in any
material respect, and would not have, individually or in the aggregate, a Parent
Material Adverse Effect. There are no material consents, waivers, and approvals
under any agreements, contracts, licenses or leases required to be obtained by
Parent or Sub in connection with entering into of this Agreement and the
consummation of the Transactions.
(b) The execution and delivery of this Agreement by
Parent and Sub do not, and the performance of their respective obligations
hereunder and the consummation of the Transactions by Parent and Sub will not,
require any consent, approval, authorization or permit of, or registration or
filing with or notification to, any Governmental Entity except (i) the filing of
documents to satisfy the applicable requirements, if any, of the Exchange Act
and state takeover laws, (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, a copy thereof with the Secretary
of State of the state of California, and appropriate corresponding documents
with the Secretary of State of other states in which the Company is qualified to
transact business as a foreign corporation, (iv) filings under the rules and
regulations of the AMEX and NASD, (v) filings under state securities laws, and
(vi) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications (A) would not prevent or delay
consummation of the Merger in any material respect or otherwise prevent or delay
in any material respect Parent or Sub from performing their respective
obligations under this Agreement or (B) would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
SECTION 4.5. COMPLIANCE WITH LAWS. Except as set forth in
Section 4.5 of the Parent Disclosure Schedule, neither Parent nor any of its
subsidiaries is in conflict with, or in default or violation of (a) any law,
rule, regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which any of their respective properties is bound, or (b)
whether after the giving of notice or passage of time or both, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or any of its subsidiaries is a
party or by which Parent or any of its subsidiaries or any of their respective
properties is bound, except for any such conflicts, defaults
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or violations which do not and would not have, individually or in the
aggregate, a Parent Material Adverse Effect.
SECTION 4.6. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has made available to the Company and the
Shareholders a correct and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Parent with the Securities and
Exchange Commission (the "SEC") on or after January 1, 2002 and prior to the
date of this Agreement (the "Parent SEC Reports"), which are all the forms,
reports and documents required to be filed by Parent with the SEC since such
date; provided that, if Parent amends any of the Parent SEC Reports, such
amendment shall not mean or imply that any representation or warranty in this
Agreement was not true when made or became untrue thereafter. As of their
respective dates, the Parent SEC Reports and any forms, reports and other
documents filed by Parent and Sub after the date of this Agreement (i) complied
or will comply in all material respects with the requirements of the Securities
Act of 1933, as amended (the "Securities Act") or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable thereto,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing) or
will not at the time they are filed contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading,
provided, however, that no representation is made with respect to information
included in the Parent SEC Reports that was provided in writing by the Company.
(b) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Parent SEC
Reports complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, had been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-QSB or the Exchange Act regulations promulgated by the SEC) and each
fairly presented the consolidated financial position of Parent and its
consolidated subsidiaries in all material respects as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated (subject, in the case of the unaudited interim financial
statements, to normal audit adjustments which were not and are not expected,
individually or in the aggregate, to be material in amount).
SECTION 4.7. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger and the other Transactions based upon arrangements made by or on
behalf of Parent or Sub.
SECTION 4.8. INTERIM OPERATIONS OF SUB. Sub is a direct wholly
owned subsidiary of Parent and was formed solely for the purpose of engaging in
the Merger and the Transactions, has engaged in no other business activities and
has conducted its operations only as contemplated hereby.
SECTION 4.9. CONTINUITY OF BUSINESS ENTERPRISE. It is the
present intention of Parent to continue at least one significant historic
business line of the Company, or to use at least a significant portion of the
Company's historic business assets in a business, in each case within the
meaning of Treasury Regulation Section 1.368-1(d).
SECTION 4.10. LITIGATION. Except as disclosed in the Parent
SEC Reports or Section 4.10 of the Parent Disclosure Schedule, there are no
claims, actions, suits, investigations or proceedings pending or, to the best
knowledge of Parent, threatened against Parent, before any court, arbitrator or
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administrative, governmental or regulatory authority or body, domestic or
foreign, that, individually or in the aggregate, would, or would reasonably be
anticipated to, have a Parent Material Adverse Effect.
SECTION 4.11 DISCLOSURE. This Agreement, the Parent Disclosure
Schedule, the Parent SEC Reports, and all other schedules, attachments, written
statements, documents, certificates, or other items prepared or supplied to the
Company or any Shareholder by or on behalf of Parent or Sub with respect to the
Transactions are complete and authentic, and all contracts and other agreements
or instruments included thereunder are valid, subsisting and binding on the
parties thereto in accordance with their terms. Neither this Agreement nor any
of the schedules, including the Parent Disclosure Schedule, the Parent SEC
Reports, attachments, written statements, documents, certificates, or other
items prepared or supplied to the Company or the Shareholders by or on behalf of
Parent or Sub with respect to the Transactions contemplated in this Agreement
contain any untrue statement of a material fact or omit a material fact
necessary to make each statement contained herein or therein not misleading.
Neither the Parent, nor any responsible officer, director, or manager thereof
has intentionally concealed or failed to the Company any fact known by such
entity or person to have a Parent Material Adverse Effect.
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; ADDITIONAL AGREEMENTS
SECTION 5.1. INFORMATION AND ACCESS. From the date of this
Agreement and continuing until the Effective Time, Parent, as to itself and Sub,
on the one hand, and the Company, as to itself, on the other hand, and the
Shareholders, as to themselves, each agrees that it shall afford and, with
respect to clause (b) below, shall cause its officers and independent
accountants to afford, (a) to the officers, independent auditors, internal
accountants, counsel and other representatives of the other reasonable access,
upon reasonable advance notice, to its (and in the case of Parent, Sub's)
properties, books, records (including tax returns filed and those in
preparation) and executives and personnel in order that the other may have a
full opportunity to make such investigation as it reasonably desires to make of
the other consistent with their rights under this Agreement, and (b) to the
independent auditors and internal accountants of the other, reasonable access to
the audit compilation work papers and other records of its independent auditors
and internal accountants. No investigation pursuant to this Section 5.1 shall
affect or otherwise obviate or diminish any representations and warranties of
any party or conditions to the obligations of any party. No party shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client privilege or the institution in possession or control of
such information or contravene any law, rule, regulations, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date of
this Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
SECTION 5.2. CONDUCT OF BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement (including Section 5.2 of the Company Disclosure
Schedule), during the period from the date of this Agreement and continuing
until the Effective Time or until the termination of this Agreement pursuant to
Section 7.1, (a) the Company shall conduct its business in the ordinary and
usual course consistent with past practice and (b) without limiting the
provisions of clause (a) in this paragraph, the Company shall not without the
prior written consent of Parent (or, to the extent consistent with past practice
with regard to the matter at issue, the prior oral consent of Parent):
(i) declare, set aside or pay any dividends on
or make any other distribution in respect of any of its capital stock;
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(ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance or
authorization of any other securities in respect of, in lieu of, or in
substitution for shares of its capital stock or repurchase, redeem or
otherwise acquire any shares of its capital stock;
(iii) issue, deliver, pledge, encumber or sell, or
authorize or propose the issuance, delivery, pledge, encumbrance or
sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or rights, warrants or
options to acquire, any such shares of capital stock or other
convertible securities (other than the issuance of such capital stock
to the Company, or upon the exercise or conversion of outstanding
options or warrants in accordance with a stock plan in effect on the
date of this Agreement or other convertible or exchangeable securities
outstanding on the date hereof, in each case in accordance with their
present terms), authorize or propose any change in its equity
capitalization, or amend any of the financial or other economic terms
of such securities or the financial or other economic terms of any
agreement relating to such securities;
(iv) amend its Articles of Incorporation, Bylaws
or other organizational documents in any manner;
(v) take any action that would reasonably be
expected to result in any of the conditions to the Transactions set
forth in Article 6 not being satisfied;
(vi) merge or consolidate with any other Person,
or acquire any assets or capital stock of any other Person, other than
acquisitions of assets in the ordinary course of business, such as for
inventory or relating to the ordinary operations of the Company;
(vii) incur any indebtedness for money borrowed or
guarantee any such indebtedness of another Person or increase
indebtedness for money borrowed outstanding under any current agreement
relating to indebtedness for money borrowed, except as disclosed on
Section 5.2 of the Company Disclosure Schedule or in the ordinary
course of business;
(viii) make or authorize any capital expenditures
of the Company, other than capital expenditures permitted pursuant to
Section 5.2 of Company Disclosure Schedule and other than capital
expenditures that are part of the Company's then existing budget, which
has previously been approved by the Company's Board of Directors;
(ix) except as may be required by changes in
applicable law or GAAP, change any method, practice or principle of
accounting, or change in any material respect its method of reporting
income and deductions for United States federal income tax purposes
from those employed in the preparation of its federal income tax
returns for the year ended September 30, 2003, except as required by
changes in law or regulation;
(x) enter into any new employment agreements, or
increase the compensation of any officer or director of the Company or
any senior executive of any of its subsidiaries or operating units
(including entering into any bonus, severance, change of control,
termination, reduction-in-force or consulting agreement or other
employee benefits arrangement or agreement pursuant to which such
person has the right to any form of compensation from the Company or
any of its subsidiaries), other than as required by law or by written
agreements in effect on the date hereof with such person, or otherwise
amend in any material respect any existing agreements with any such
person or use its discretion to amend any Company Benefit Plan or
accelerate the vesting or any payment under any Company Benefit Plan;
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(xi) enter into any transaction with any officer
or director of the Company, other than as provided for in the terms of
any agreement in effect on or prior to the date hereof and described in
Section 5.2 of the Company Disclosure Schedule;
(xii) settle or otherwise compromise any material
litigation, arbitration or other judicial or administrative dispute or
proceeding relating to the Company or any of its subsidiaries; or
(xiii) authorize or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
SECTION 5.3. CONDUCT OF BUSINESS OF PARENT. Except as
contemplated by this Agreement (including the Parent Disclosure Schedule), and
agreements described in any Parent SEC Report, during the period from the date
of this Agreement and continuing until the Effective Time or until the
termination of this Agreement pursuant to Section 7.1, Parent shall not, without
the prior written consent of the Company, take any action that would reasonably
be expected to result in any of the conditions to the Transactions set forth in
Article 6 not being satisfied.
SECTION 5.4. PREPARATION OF REGISTRATION STATEMENT; OTHER
FILINGS. As promptly as practicable after the date of this Agreement, Parent
shall use all commercially reasonable efforts to prepare and file with the SEC,
a registration statement on Form SB-2 or other applicable form (the
"Registration Statement"), which shall permit the resale of the Parent Common
Stock issued to the Shareholders in connection with the Transactions. Parent
shall use commercially reasonable efforts to respond to any comments of the SEC
and to have the Registration Statement declared effective under the Securities
Act as promptly as practicable after such filing. As promptly as practicable
after the date of this Agreement, Parent shall prepare and file any other
filings required under the Exchange Act, the Securities Act or any other Federal
or state laws relating to the Transactions (the "Other Filings"). The
Shareholders agree to provide Parent with any information requested by the SEC
or its staff or any other government officials for amendments or supplements to
the Registration Statement. Parent shall advise the Shareholders, promptly after
it receives notice thereof, of the time when the Registration Statement has been
declared effective, the issuance of any stop order, or the suspension of the
qualification of Parent Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction. If, at any time prior to the Effective
Time, any information relating to the Company or Parent, or any of their
respective affiliates, officers or directors should be discovered by the Company
or Parent which should be set forth in an amendment or supplement to the
Registration Statement or any Other Filing so that any of such documents would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or an event occurs which is required
to be set forth in an amendment or supplement to the Registration Statement, or
any Other Filing, the party that discovers such information shall promptly
notify the other party and an amendment or supplement describing such
information shall be promptly filed by Parent with the SEC.
SECTION 5.5. RESALE OF PARENT COMMON STOCK.
(a) Prior to the effectiveness of the Registration
Statement, shares of the Parent Common Stock may only be sold in transactions
which are exempt from registration under the Securities Act and applicable state
laws, unless Parent at any time prior to the effectiveness of the Registration
Statement, proposes to register any of its securities under the Securities Act
for sale to the public (except with respect to registration statements on Forms
S-8 or another form not available for registering the shares issued in the
Transaction), in which case Parent shall use all commercially reasonable efforts
to cause the shares issued in this Transaction to be included in the securities
to be covered by the registration
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statement proposed to be filed by Parent. As to any sales made in the public
markets, except with the prior consent of Parent, which will not be unreasonably
withheld, neither Shareholder shall sell on any day an amount of shares of
Parent Common Stock in excess of the average daily trading volume in the Parent
Common Stock on AMEX for the 20 consecutive trading days prior to the trading
day in question, nor to sell in any week an amount of shares of Parent Common
Stock in excess of the average weekly trading volume for the four weeks prior to
the trading week in question.
(b) Subject to the foregoing limitations of Section
5.5(a) above, during the 6 month period after the effective date of the
Registration Statement, each Shareholder shall sell on each Business Day, either
in the market or through privately negotiated transactions, at least 1,000
shares of Parent Common Stock and shall not reject any offer to buy shares of
Parent Common Stock at any price that either Shareholder receives from any
Person. If during the 6 month period after the effective date of the
Registration Statement, a Shareholder does not sell at least 1,000 shares of
Parent Common Stock on each Business Day, either in the market or through
privately negotiated transactions, or if during such 6 month period a
Shareholder rejects any offer from any Person to buy any shares of Parent Common
Stock in excess of such 1,000 share Business Day minimum, regardless of price,
the Parent shall be relieved of all obligations to such Shareholder under
Section 5.5(c) below solely with respect to that portion of the 1,000 share
Business Day minimum that is not sold by a Shareholder and any shares of Parent
Common Stock that are the subject of any offer to purchase that is rejected by a
Shareholder.
(c) (i) If upon the earlier to occur of (A) the 6 month
anniversary of the effective date of the Registration Statement or (B) the 9
month anniversary of the Closing (the "Sell-off Period"), each Shareholder has
sold all shares of Parent Common Stock issued to such Shareholder in connection
with the Transactions and the total net sales proceeds received by each such
Shareholder is less than $1,250,000, Parent shall promptly pay each Shareholder
an amount in cash equal to the difference between $1,250,000 and the total net
sales proceeds received by each such Shareholder from the sales of the shares of
Parent Common Stock he received in the Transactions. (ii) On the other hand, if
upon the expiration of the Sell-off Period a Shareholder was unable to sell all
shares of Parent Common Stock issued to such Shareholder in connection with the
Transactions, either in the public markets or through privately negotiated
transactions, then the Shareholder shall promptly sell all such shares of Parent
Common Stock to Parent and Parent shall promptly pay to the applicable
Shareholder an amount equal to the sum of (1) the product of the number of
shares repurchased by Parent and the per share price of the Parent's Common
Stock on AMEX on the last trading day immediately preceding the Closing Date
(the "Repurchase Price") and (2) the difference between $1,250,000 and the sum
of (x) the total net sales proceeds received by such Shareholder from the sales
of shares of Parent Common Stock prior to the expiration of the Sell-off Period
and (y) the Repurchase Price.
(d) Notwithstanding any other term or condition of this
Agreement to the contrary, including, without limitation, the provisions of
Section 5.5(c) above, Parent shall not have any obligation to pay the Repurchase
Price to any Shareholder with respect to any shares of Parent Common Stock that
are either (i) subject to any offer to purchase from any Person that is not
consummated by a Shareholder for any reason during the Sell-off Period or (ii)
not sold as part of each Shareholder's 1,000 share Business Day minimum sales of
Parent Common Stock during the Sell-off Period when such Shareholder was legally
able to sell such shares and a buyer or buyers of such shares had offered to
purchase those shares.
SECTION 5.6. REGISTRATION OBLIGATIONS OF PARENT.
(a) Whenever Parent is required under this Agreement to
effect a registration of the Parent Common Stock, Parent shall, as expeditiously
as reasonably possible:
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(i) prepare and file with the SEC a Registration
Statement with respect to such Parent Common Stock and use all
reasonable efforts to cause such Registration Statement to become
effective, and keep such Registration Statement effective for a period
of not less than one hundred eighty (180) days or, if earlier, until
the distribution contemplated in the Registration Statement has been
completed;
(ii) prepare and file with the SEC such
amendments and supplements to such Registration Statement and the
prospectus used in connection with such Registration Statement as may
be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement;
(iii) furnish to the Shareholders such numbers of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of Parent Common Stock owned by them;
(iv) use all reasonable efforts to register and
qualify the securities covered by such Registration Statement under
such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Shareholders, provided that Parent shall
not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;
(v) in the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter
of such offering; and
(vi) notify each Shareholder covered by such
Registration Statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act or the happening
of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(b) All expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or qualifications
pursuant to this Agreement, including (without limitation) all registration,
filing and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for Parent shall be paid by Parent.
(c) In the event any Parent Common Stock is included in a
Registration Statement under this Agreement, to the extent permitted by law,
Parent will indemnify and hold harmless each Shareholder, his legal counsel and
accountants, any underwriter (as defined in the Securities Act) for such
Shareholder and each person, if any, who controls such Shareholder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or any state
securities laws, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise solely out of or are based solely upon any of
the following statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation by Parent of the Securities Act, the Exchange
Act, any state securities laws or any rule or
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regulation promulgated under the Securities Act, the Exchange Act or any state
securities laws; and Parent will reimburse each such Shareholder, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection 5.6(c) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of Parent (which consent shall not be unreasonably
withheld), nor shall Parent be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Shareholder, underwriter or controlling person; provided further,
however, that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Shareholder or underwriter, or
any person controlling such Shareholder or underwriter, from whom the person
asserting any such losses, claims, damages or liabilities purchased shares in
the offering, if a copy of the prospectus (as then amended or supplemented if
Parent shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Shareholder or underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the shares to such person, and if the prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability.
(d) If the indemnification provided for in this Section
5.6 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of Parent and Shareholders under this
Section 5.6 shall survive the completion of any offering of Parent Common Stock
in a registration statement under this Agreement, and otherwise.
SECTION 5.7. AGREEMENTS TO TAKE REASONABLE ACTION.
(a) The parties shall take, and shall cause their
respective subsidiaries to take, all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on them with respect
to the Merger and shall take all reasonable actions necessary to cooperate
promptly with and furnish information to the other parties in connection with
any such requirements imposed upon them or any of their subsidiaries in
connection with the Merger. Each party shall take, and shall cause its
subsidiaries to take, all reasonable actions necessary (i) to obtain (and will
take all reasonable actions necessary to promptly cooperate with the other
parties in obtaining) any clearance, consent, authorization, order or approval
of, or any exemption by, any Governmental Entity, or other third party, required
to be
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obtained or made by it (or by the other parties or any of their respective
subsidiaries) in connection with the Transactions or the taking of any action
contemplated by this Agreement; (ii) to lift, rescind or mitigate the effect of
any injunction or restraining order or other order adversely affecting its
ability to consummate the Transactions; (iii) to fulfill all conditions
applicable to the parties pursuant to this Agreement; (iv) to prevent, with
respect to a threatened or pending temporary, preliminary or permanent
injunction or other order, decree or ruling or statute, rule, regulation or
executive order, the entry, enactment or promulgation thereof, as the case may
be; (v) to defend any lawsuit or other legal proceeding, whether judicial or
administrative, challenging the Agreement, the consummation of the Transactions
or the terms thereof; and (vi) to execute and deliver any additional agreements
or instruments necessary to consummate the Transactions and fully carry out the
purposes of the Agreement provided, however, that with respect to clauses (i)
through (vi) above, the parties will take only such curative measures (such as
licensing and divestiture) as the parties determine to be reasonable.
(b) Subject to the terms and conditions of this
Agreement, each of the parties shall use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective as promptly as practicable the Merger.
SECTION 5.8. CONSENTS. Parent and the Company shall each use
all reasonable efforts to obtain the consent and approval of, or effect the
notification of or filing with, each person or authority whose consent or
approval is required in order to permit the consummation of the Merger and the
Transactions and to enable Parent and the Surviving Corporation to conduct and
operate the business of Parent and the Company and their respective subsidiaries
substantially as presently conducted and as contemplated to be conducted.
SECTION 5.9. AMEX QUOTATION. Parent shall use commercially
reasonable efforts to cause the shares of Parent Common Stock issuable to the
Shareholders in the Merger to be eligible for quotation on the AMEX (or other
national market or exchange on which Parent Common Stock is then traded or
quoted) prior to the Effective Time.
SECTION 5.10. NOTIFICATION OF CERTAIN MATTERS. Each of the
Company, the Shareholders and Parent shall give prompt notice to the other party
of the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be likely to cause (a) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Effective Time, or (b) any
material failure of the Company, the Shareholders or Parent, as the case may be,
or of any officer, director, employee or agent thereof, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement. Notwithstanding the foregoing, the delivery of any
notice pursuant to this Section 5.10 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 5.11. REORGANIZATION. From and after the date hereof,
each of Parent and the Company and their respective subsidiaries shall not, and
shall use reasonable efforts to cause their affiliates not to, take any action,
or fail to take any action, which action or failure to act would jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code or enter into any contract, agreement, commitment or
arrangement that would have such effect.
SECTION 5.12. PUBLIC ANNOUNCEMENTS. All press releases and
other public announcements respecting the subject matter hereof shall be made
only by the Parent, but in a form reasonably acceptable to the Company and the
Shareholders.
SECTION 5.13. NONCOMPETITION, NONSOLICITATION AND
CONFIDENTIALITY.
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(a) For purposes of this Section 5.13, the following
definitions shall apply:
(i) "Company Activities" shall mean either (i)
manufacturing, distributing, designing, selling or installing sports equipment
and supplies or (ii) engaging in any other business activities which are
conducted, offered or provided by the Company, Parent or any of their respective
subsidiaries or Affiliates of either of them at any time during the 12-month
period prior to the date of this Agreement.
(ii) "Confidential Information" shall mean any
data or information (whether written or not), of the Company, the Parent or any
Affiliate of either of them, other than Trade Secrets (as defined below), which
is valuable to the Company, the Parent or any Affiliate of either of them and
not generally known to competitors;
(iii) "Noncompete Period" and the "Nonsolicitation
Period" shall mean as to each of the Shareholders, the period from the Closing
Date until the expiration of the 12 month period after the termination of such
Shareholder's employment with the Parent, for any reason, except for a
Shareholder's termination by the Company without Cause or a termination by a
Shareholder for Good Reason (as such terms are defined in the form of Employment
Agreement attached hereto as Exhibit "B");
(iv) "Protected Area" shall mean any state in the
United States in which Parent or the Company, or any Affiliate of either of
them, conducted Company Activities at any time during the 12-month period
immediately preceding the Closing Date; and
(v) "Trade Secrets" shall mean information
related to the Company Activities, including, but not limited to, technical or
nontechnical data, formulas, patterns, compilations, or programs, including,
without limitation, computer software and related source codes, devices,
methods, techniques, drawings, processes, financial data, financial plans,
product plans, lists of actual or potential customers or suppliers, or other
information similar to any of the foregoing, which derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use.
(b) Confidentiality. The Parent, the Company and the
Shareholders shall keep confidential the existence of this Agreement, the
transactions described herein and all information concerning the Company
Activities. The provisions of this Section 5.13(b) shall not apply with respect
to any information which (a) was already known by one party when such
information was received from the other party, (b) was available to the general
public at the time of such receipt, (c) subsequently becomes known to the
general public through no fault or omission by a party hereto, (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure, (e) is disclosed by the Parent to potential lenders and
investors who agree to keep such information confidential, (f) is required to be
disclosed by Law or a Governmental Entity, including for income tax reporting
purposes, or (g) is required to be disclosed in order to enforce this Agreement.
(c) Trade Secrets. The Company and the Shareholders, as
well as the officers, directors and employees of the Company shall hold in
confidence at all times after the date hereof all Trade Secrets related to the
Company, the Parent and any of either of their Affiliates and shall not
disclose, publish or make use of those Trade Secrets at any time after the date
hereof, without the prior written consent of the Parent, except (a) any
information or document required to be disclosed by law or (b) information that
becomes public knowledge through means other than an act of the Shareholders.
Nothing in this Agreement shall diminish the rights of the Company or the Parent
regarding the protection of Trade Secrets and other intellectual property
pursuant to applicable law.
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(d) Trade Name and Confidential Information.
(i) The Company and the Shareholders shall not,
directly or by assisting others, own, manage, operate, join, control or
participate in the ownership, management, operation or control of any business
conducted under the corporate or trade name of the Parent or the Company (or any
variation thereof) or any of its Affiliates (other than as an employee of the
Parent or one of its Affiliates) without the prior written consent of the
Parent; and
(ii) The Company and the Shareholders shall hold
in confidence all Confidential Information related to the Company, the Parent or
any of either of their Affiliates and shall not disclose, publish or make use of
that Confidential Information without the prior written consent of the Parent,
except (i) any information or document required to be disclosed by law or (ii)
information that becomes public knowledge through means other than an act of the
Company or the Shareholders.
(e) Non-Competition.
(i) Coverage. The Company and the Shareholders
hereby acknowledge that the Parent, either directly or indirectly through one or
more of its Affiliates, conducts or will conduct Company Activities throughout
the Protected Area, and acknowledges that to protect Parent's investment in the
Surviving Corporation and its interest in the operation of each Person through
which it will engage in Company Activities after the date of this Agreement, it
is essential that any noncompete covenant with respect thereto cover all Company
Activities in the Protected Area except as specifically provided herein.
(ii) Covenant. During the Noncompete Period,
neither Company (or any of its officers or directors) nor the Shareholders shall
in any manner, directly or indirectly, engage in or have an equity or profit
interest in, or render services to any business that conducts any Company
Activities in the Protected Area. Notwithstanding anything herein to the
contrary, nothing in this Agreement shall prevent or prohibit the Shareholders
from owning not more than 5% of a class of equity securities issued by any
entity listed on any national securities exchange or interdealer quotation
system.
(f) Nonsolicitation of and Noninterference with
Employees, Customers and Vendors. During the Nonsolicitation Period, the
Shareholders shall not, in any manner, directly or indirectly:
(i) solicit or attempt to solicit, any business
from any customers of the Parent or any of its Affiliates for purposes of
engaging in any Company Activities in any Protected Area;
(ii) recruit or hire away or attempt to recruit
or hire away, on its behalf or on behalf of any other person, firm or
corporation, any employee of the Parent or any of its Affiliates; or
(iii) interfere with or otherwise attempt to
effect Parent's relationship with any vendor or customer of Parent or any of its
Affiliates.
(g) Acknowledgment. The Company, the Shareholders and the
Parent each acknowledge and agree that the covenants set forth in this Section
5.13 and all subsections thereof are reasonable as to time, scope and territory
given the Parent's need to protect its Trade Secrets, Confidential Information
and its substantial investment in the Company Activities and its customer base,
particularly given the complexity and competitive nature of the Parent's and its
Affiliate's business. The Company and each Shareholder further acknowledges that
(a) it would be difficult to calculate damages to the Parent and its Affiliates
from any breach of the Company's or any Shareholder's obligations under any
subsection of this Section 5.13, (b) that injuries to the Parent and its
Affiliates from any such breach would be irreparable and impossible to measure,
and (c) that the remedy at law for any breach or
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threatened breach of the Company's or any Shareholder's obligations under any
subsection of this Section 5.13 would therefore be an inadequate remedy, and
accordingly, the Parent shall, in addition to all other available remedies
(including without limitation seeking such damages as it can show it and its
Affiliates have sustained by reason of such breach or the exercise of all other
rights it has under this Agreement), be entitled to injunctive and other similar
equitable remedies. Each Shareholder that accepts the Parent's offer of
employment also acknowledges that the Shareholder will be subject to separate
noncompete and nonsolicitation provisions during the term of his employment by
the Parent or one of its Affiliates following the Closing Date.
SECTION 5.14. FURTHER ASSURANCES. Each party hereto from time
to time hereafter at any other party's request and without further consideration
shall execute and deliver to such other party such instruments of transfer,
conveyance and assignment in addition to those delivered pursuant to this
Agreement as shall be reasonably requested to consummate the Transactions, the
costs of which shall be paid by the requesting party.
SECTION 5.15. EXPENSES. Except as otherwise provided herein,
the Parent and the Company shall each be responsible for their own expenses
incurred in connection with the negotiations among the parties, and the
authorization, preparation, execution and performance of this Agreement and the
transactions contemplated hereby, regardless of whether or not the transactions
are consummated. In addition, the Company shall be responsible for all costs
associated with terminating any Plan of the Company (e.g., 401(k), pension,
profit sharing plans) prior to the Closing Date. If, however, the Company or
either Shareholder shall breach the terms and conditions of Section 5.16 below,
the Company and the Shareholders shall jointly and severally be responsible for
paying all fees and expenses incurred by Parent and its Affiliates in connection
with the contemplated Transactions prior to the occurrence of any such breach.
SECTION 5.16. EXCLUSIVITY. The Shareholders and the Company
represent and agree that, from the date hereof until the termination of this
Agreement in accordance with its terms hereof, each will discontinue all
discussions or negotiations with other prospective purchasers of all or any
substantial portion of the Company's business, assets or securities, including
securities of the Company held by any Shareholder, and each will not, and will
not permit any of their respective Affiliates, officers, directors, employees,
agents or representatives to, whether directly or indirectly, solicit or
encourage (including by way of furnishing information) any inquiries or
proposals relating to, or engage in any discussions or negotiations with respect
to, the sale of all or any substantial portion of the Company's business, assets
or securities, including any merger or consolidation, except for inquiries or
proposals from, or discussions or negotiations with, Parent and its authorized
representatives. The Shareholders and the Company will promptly notify Parent of
any such inquiry or proposal received by any of them, including information as
to the identity of the parties involved and the specific terms of any such
inquiry or proposal.
SECTION 5.17. BROKERS. The Parent shall indemnify the Company
and the Shareholders and hold each of them harmless from and against all claims
or demands for commissions or other compensation by any broker, finder, or
similar agent claiming to have been employed by or on behalf of the Parent. The
Company and the Shareholders shall jointly and severally indemnify the Parent
and its Affiliates and hold each of them harmless from and against all claims or
demands for commissions or other compensation by any broker, finder or similar
agent claiming to have been employed by or on behalf of the Company or any
Shareholder.
SECTION 5.18. TAXES. The Parent and each Shareholder agree to
provide assistance to one another and to cooperate fully with one another after
the Closing Date to account for all Taxes that may be imposed on or incurred
with respect to the operations of the Company's business during any
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period prior to the Closing Date. Each of the Shareholders shall pay directly
all income Taxes that may be imposed upon, or payable or collectible or incurred
in connection with the consideration to be paid to each of them under this
Agreement and the transactions contemplated hereby. All obligations under this
Section 5.18 shall survive the Closing Date hereunder and continue until 30 days
following the expiration of the statute of limitations on assessment of the
relevant Tax.
SECTION 5.19. INTERCOMPANY TRANSACTIONS. Prior to the Closing
Date, all intercompany payables and receivables between the Company and each
Shareholder and between the Company and any of its Affiliates that in any way is
related to or otherwise affects the Company shall be released by the Company,
each Shareholder or any Affiliate of either of them, as the case may be, and
each Shareholder hereby releases any claims or other rights he or she may have
in and to any of the assets of the Company.
SECTION 5.20. EMPLOYEES. Other than the Shareholders, the
Parent shall have no obligation to offer employment to any of the Company's
existing employees.
SECTION 5.21. TERMINATION OF BENEFIT PLANS. The Shareholders
shall cause the Company to terminate any Plan of the Company (e.g., 401(k),
pension, profit sharing plans) prior to the Closing Date.
SECTION 5.22. INSURANCE. The Company will keep or cause to be
kept in effect and undiminished the insurance now in effect on its various
properties and assets, and will purchase such additional insurance, at Parent's
cost, as Parent may request.
SECTION 5.23. SUPPLEMENTS TO SCHEDULES. Each of the parties
hereto agrees that, with respect to the representations and warranties of the
Company and each Shareholder contained in Article III hereof, the Company and
the Shareholders shall have the continuing obligation until the Closing to
supplement, modify or amend promptly the Company Disclosure Schedule with
respect to (a) any matter occurring after the date hereof that, if existing or
occurring on or before the date of this Agreement, would have been required to
be set forth or described in the Company Disclosure Schedule (each a "New
Matter") and (b) other matters which are not New Matters but should have been
set forth or described in the Company Disclosure Schedule as of the date hereof.
Any such supplement, modification or amendment shall not qualify or cure any
breach of any of the Company's or any Shareholder's representations or
warranties for any purpose under this Agreement and shall be provided to Parent
and Sub solely for informational purposes. Before the Closing, the Company and
the Shareholders will prepare and deliver to the Parent and Sub a copy of the
Company Disclosure Schedule revised to reflect any supplement, modification or
amendment to the Company Disclosure Schedule required pursuant to this Section
5.23.
SECTION 5.24. LOSS OR THREATENED LOSS OF CUSTOMER OR SUPPLIER.
Prior to the Closing Date, the Company shall promptly notify the Parent in the
event of a loss or threatened loss of any material supplier, customer or
affiliate of the Company, and shall cause employees of the Company to be made
available to call upon such customer, supplier or affiliate, together with the
Parent to assist the Parent in regaining or retaining such customer, supplier or
affiliate
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ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger are
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Governmental Entity Approvals. All material
authorizations, consents, orders or approvals of, or declarations or filings
with, or expiration of waiting periods imposed by, any Governmental Entity, if
any, necessary for the consummation of the Merger shall have been filed, expired
or been obtained, other than those that, individually or in the aggregate, the
failure to be filed, expired or obtained would not be reasonably expected to
have a Parent Material Adverse Effect or a Company Material Adverse Effect.
(b) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by a Governmental Entity be pending which would
reasonably be expected to restrain or prohibit the consummation of the Merger;
and there shall not be any action taken, or any statute, rule, regulation or
order (whether temporary, preliminary or permanent) enacted, entered or enforced
which makes the consummation of the Merger illegal or prevents or prohibits the
Merger.
SECTION 6.2. CONDITIONS OF OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to effect the Merger are subject to the
satisfaction of the following additional conditions, unless waived in writing by
Parent:
(a) Representations and Warranties. (i) The
representations and warranties of the Company and the Shareholders set forth in
Article 3 of this Agreement shall be true and correct as of the Closing Date as
if made on such date, (ii) except to the extent that the failure of the
representations and warranties of the Company and the Shareholders set forth in
this Agreement to be true and correct, in the aggregate, would not have a
Company Material Adverse Effect, the representations and warranties of the
Company and the Shareholders made in this Agreement, without regard to any
materiality or "Material Adverse Effect" qualification therein, shall be true
and correct as of the date hereof, and (iii) Parent shall have received a
certificate signed by a senior executive officer of the Company and each
Shareholder certifying the fulfillment of the conditions set forth in clauses
(i) and (ii) of this Section 6.2(a).
(b) Performance of Obligations of the Company. The
Company and each Shareholder shall have performed in all material respects all
of its obligations and covenants, taken as a whole, required to be performed by
it under this Agreement prior to or as of the Closing Date, and Parent shall
have received a certificate to such effect signed by a senior executive officer
of the Company and each Shareholder.
(c) Resignations. At the Closing, the Company will
deliver to the Parent the resignations of all of the members of the Board of
Directors of the Company and the resignations of the officers of the Company.
(d) Employment Agreements. At the Closing, the Parent and
each Shareholder shall enter into an Employment Agreement substantially in the
form of Exhibit "B" attached hereto, but at a minimum shall provide that the
term of each agreement shall be 3 years and the base salary of each Shareholder
during each of the first 2 years thereof shall not be less than $70,000. Each
Shareholder's
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salary during the third year thereof shall be commensurate with each
Shareholder's then current responsibilities, but in no event less than $70,000.
(e) Certificates; Approvals. The Parent shall have
received, at or prior to the Closing Date, certified resolutions duly adopted by
the Board of Directors of the Company and the Shareholders approving the
Transactions, the execution and delivery of this Agreement and all other
necessary corporate action to enable the Company to respectively comply with the
terms of this Agreement.
(f) Due Diligence. The completion of a due diligence
investigation by Parent of the Company's business, assets and liabilities, the
scope and results of which will be satisfactory to Parent.
(g) Proprietary Information, Nonsolicitation and
Noncompete Agreements. At the Closing, the Parent and each Shareholder shall
enter into a Proprietary Information, Nonsolicitation and Noncompete Agreement
substantially in the form of Exhibit "C" attached hereto.
(h) Subordination Agreements. At the Closing, the Parent
and each Shareholder shall enter into a Subordination Agreement substantially in
the form of Exhibit "D" attached hereto.
(i) Termination and Release. An executed termination and
release letter by each of the Shareholders terminating all agreements, whether
oral or written, by and between the Company and each Shareholder and releasing
the Company from all liabilities and obligations the Company may have to either
of them under any such agreement.
(j) Legal Opinion. At the Closing, the Parent and Sub
shall have received a legal opinion from Xxxxxx Xxxxxx & Xxxxx, legal counsel to
the Company, in form and substance reasonably acceptable to Parent and Sub.
(k) Termination of Benefit Plans. Evidence of the
termination of the Company's 401(k) plan, Flexible Spending Account Plan and
Employee Assistance Plan.
(l) Consent, Approvals and Waivers. The consents
approvals and waivers of all Governmental Waivers and non-governmental Persons
set forth on Section 3.4 of the Company Disclosure Schedule shall have been
obtained and shall be in full force and effect.
(m) Material Adverse Effect. There shall not have
occurred since the date hereof, and there shall not be occurring at the Closing,
any Company Material Adverse Effect.
(n) Other Matters. Such other certificates, documents and
instruments as Parent or its counsel may reasonably request to demonstrate
satisfaction of the conditions and compliance with the agreements set forth in
this Agreement.
SECTION 6.3. CONDITIONS OF OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is subject to the satisfaction of
the following conditions, unless waived in writing by the Company:
(a) Representations and Warranties. (i) The
representations and warranties of Parent set forth in Article 4 of this
Agreement shall be true and correct as of the Closing Date as if made on such
date, (ii) except to the extent that the failure of the representations and
warranties of Parent and Sub set forth in this Agreement to be true and correct,
in the aggregate, would not have a Parent Material Adverse
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Effect, the representations and warranties of Parent and Sub made in this
Agreement, without regard to any materiality or "Material Adverse Effect"
qualification therein, shall be true and correct as of the date hereof, and
(iii) the Company shall have received a certificate signed by a senior executive
officer of Parent certifying the fulfillment of the conditions set forth in
clauses (i) and (ii) of this Section 6.3(a).
(b) Performance of Obligations of Parent and Sub. Each of
Parent and Sub shall have performed in all material respects all of their
respective obligations and covenants, taken as a whole, required to be performed
by such party under this Agreement prior to or as of the Closing Date, and the
Company shall have received a certificate to such effect signed by a senior
executive officer of Parent.
(c) Employment Agreements. At the Closing, the Parent and
each Shareholder shall enter into an employment agreement substantially on terms
set forth in Exhibit "B" attached hereto, but at a minimum shall provide that
the term of each agreement shall be 3 years and the base salary of each
Shareholder during each of the first 2 years thereof shall not be less than
$70,000. Each Shareholder's salary during the third year thereof shall be
commensurate with each Shareholder's then current responsibilities, but in no
event less than $70,000.
(d) Legal Opinion. The Company shall have received a
legal opinion from Xxxxxx, Lidji & Werbner, counsel for Parent and Sub, dated
the date of the Closing and addressed to the Company and each of the
Shareholders in form and substance reasonably acceptable to Company.
ARTICLE 7
TERMINATION
SECTION 7.1. TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time:
(a) by mutual written consent duly authorized by the
Board of Directors of Parent and the Board of Directors of the Company;
(b) by either Parent or the Company if the Merger shall
not have been consummated by January 31, 2004 (provided, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose action or failure to act has been the cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement);
(c) by either Parent or the Company, if a court of
competent jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger, which
order, decree or ruling is final and nonappealable;
(d) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
shall have become incapable of fulfillment and such breach shall not have been
waived by the Company; or
(e) by Parent, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement such that the conditions set forth in Section 6.2(a)
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or Section 6.2(b) shall have become incapable of fulfillment and such breach
shall not have been waived by Parent.
SECTION 7.2. EFFECT OF TERMINATION. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except (a) as set forth in the last sentence
of this Section 7.2 and Article 8 and Article 9, each of which shall survive the
termination of this Agreement, and (b) nothing herein shall relieve any party
from liability for any breach of this Agreement.
ARTICLE 8
INDEMNIFICATION
SECTION 8.1. SURVIVAL. Each covenant or agreement in this
Agreement shall survive the Closing Date without limitation as to time until
fully performed in accordance with its terms and each representation and
warranty in this Agreement or in the Company Disclosure Schedule or the Parent
Disclosure Schedule shall survive the Closing Date until the fifteen month
anniversary of the Closing Date (the "Survival Date"). Notwithstanding the
foregoing, the representations and warranties contained in Sections 3.1, 3.2,
3.3, 3.8, 3.11, 3.12, 3.13, 3.18, 3.32, 4.1, 4.2, 4.3, 4.6 and 4.11 shall
survive the Closing Date until 30 days after the expiration of the statutes of
limitations, if any, applicable to the matters addressed therein. Any claim for
indemnification under Section 8.2 or Section 8.3 must be notified prior to the
termination of the relevant survival period, and the Survival Date shall be
extended for any such notification for the period of time necessary to resolve
such Claim.
SECTION 8.2. INDEMNIFICATION BY THE SHAREHOLDERS. From and
after the date hereof, the Shareholders agree, individually, to indemnify fully,
hold harmless, protect and defend the Parent and its Affiliates, and their
respective directors, officers, agents and employees, successors and assigns
from and against:
(a) any and all Losses (as defined below) incurred by any
of them arising out of, relating to or based upon any inaccuracy in, or breach
of, any of the representations or warranties of any of the Company or the
Shareholders contained in this Agreement or in the Company Disclosure Schedule;
and
(b) any and all Losses incurred by any of them arising
out of, relating to or based upon any failure to perform, or other breach of,
any of the covenants or agreements of any of the Company or the Shareholders
contained in or incorporated into this Agreement, the Company Disclosure
Schedule, the Exhibits attached hereto or any other agreement executed and
delivered by the Shareholders in connection with the transactions contemplated
by this Agreement.
The right of the Parent and its Affiliates (and their respective directors,
officers, agents and employees, successors and assigns) to be indemnified
hereunder shall not be limited or affected by any investigation conducted or
notice or knowledge obtained by or on behalf of any such Persons. "Losses" shall
mean any and all losses, costs, claims, damages, Taxes, liabilities,
obligations, judgments, settlements, awards, demands, offsets, reasonable
out-of-pocket costs, expenses and attorneys' fees (including any such reasonable
costs, expenses and attorneys' fees incurred in enforcing a party's right to
indemnification against any indemnifying party or with respect to any appeal)
and penalties and interest, if any.
SECTION 8.3. INDEMNIFICATION BY THE PARENT. From and after the
date hereof, the Parent agrees to indemnify fully, hold harmless, protect and
defend the Shareholders from and against any
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and all Losses incurred by any of them arising out of, relating to or based upon
(a) any inaccuracy in, or breach of, any of the representations or warranties of
the Parent contained in this Agreement or in the Parent Disclosure Schedule; or
(b) any failure to perform, or other breach of, any of the covenants or
agreements of the Parent contained in this Agreement or in the Parent Disclosure
Schedule. The right of the Shareholders to be indemnified hereunder shall not be
limited or affected by any investigation conducted or notice or knowledge
obtained by or on behalf of any such Persons.
SECTION 8.4. PROCEDURE FOR INDEMNIFICATION FOR THIRD PARTY
CLAIMS.
(a) Promptly after receipt by an indemnified party under
Sections 8.2 and 8.3 of notice of the commencement of any proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any Liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnified party's failure
to give such notice.
(b) If any proceeding referred to in Section 8.4(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
proceeding and provide indemnification with respect to such proceeding), to
assume the defense of such proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Article IX for any fees of other
counsel or any other expenses with respect to the defense of such proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent, which shall not be unreasonably
withheld, unless (A) there is no finding or admission of any violation of law or
any violation of the rights of any Person and no effect on any other claims that
may be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no Liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any proceeding and the indemnifying
party does not, within 10 days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such proceeding, the indemnifying party will be bound by any determination made
in such proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its Affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such proceeding, but
the indemnifying party will not be bound by any determination of a proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
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(d) The Shareholders hereby consent to the non-exclusive
jurisdiction of any court in which a proceeding is brought by a third party
against any indemnified person for purposes of any claim that an indemnified
person may have under this Agreement with respect to such proceeding or the
matters alleged therein, and agree that process may be served on the
Shareholders with respect to such a claim anywhere in the world.
SECTION 8.5. SET-OFF RIGHTS; CHARACTER OF INDEMNITY PAYMENTS.
The indemnifying party shall promptly pay the indemnified party any amount due
under this Article 8. Parent shall have the right, but not the obligation, to
set-off against the Note Consideration any amount to which the Shareholders may
be obligated to pay Parent under the terms of this Agreement.
SECTION 8.6. LIMITATIONS ON INDEMNIFICATION. In no event shall
any indemnifying party be liable for indemnification pursuant to Section 8.2
(except with respect to the representations and warranties set forth in Sections
3.1, 3.2, 3.3, 3.8, 3.11, 3.12, 3.13, 3.18 and 3.32 of this Agreement) unless
and until the aggregate of all Losses which are incurred or suffered by the
indemnified parties exceeds $150,000 (the "Deductible"), in which case the
indemnified parties shall be entitled to indemnification for only such Losses in
excess of the Deductible. In calculating amounts payable to an indemnified
party, the amount of the indemnified Losses shall be computed net of any amounts
actually recovered by such indemnified party under any insurance policy with
respect to such Losses. Anything in this Agreement to the contrary
notwithstanding, in no event shall either Shareholder be liable for
indemnification pursuant to Section 8.2 (except with respect to the
representations and warranties set forth in Section 3.1, 3.2, 3.3, 3.8, 3.11,
3.12, 3.13, 3.18 and 3.32 of this Agreement) for any Damages in excess of
$1,000,000.
ARTICLE 9
GENERAL PROVISIONS
SECTION 9.1. AMENDMENT. This Agreement may be amended prior to
the Effective Time by Parent and the Company, by action taken by the Board of
Directors of Parent and the Board of Directors of the Company. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
SECTION 9.2. EXTENSION; WAIVER. At any time prior to the
Effective Time, Parent and the Company may (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement and (c) waive
compliance with any of the agreements or conditions contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
SECTION 9.3. ENTIRE AGREEMENT. This Agreement (including the
Company Disclosure Schedule and the Parent Disclosure Schedule) contains the
entire agreement among all of the parties with respect to the subject matter
hereof and supersedes all prior arrangements and understandings, both written
and oral, with respect thereto, including that certain letter of intent dated
November 7, 2003, but shall not supersede any agreements among any group of the
parties hereto entered into on or after the date hereof.
SECTION 9.4. SEVERABILITY. It is the desire and intent of the
parties that the provisions of this Agreement be enforced to the fullest extent
permissible under the law and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, in the event that any provision of
this Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason,
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EXECUTION COPY
such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 9.5. NOTICES. All notices and other communications
pursuant to this Agreement shall be in writing and shall be deemed to be
sufficient if contained in a written instrument and shall be deemed given if
delivered personally, telecopied, sent by nationally recognized, overnight
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
if to Parent or Sub, to:
Collegiate Pacific Inc.
00000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
Telecopier: 972.243.8424
Email: xxxxx00@xxx.xxx
with a copy to:
Xxxxxx, Lidji & Werbner
4400 Renaissance Tower
0000 Xxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telecopier: 214.939.8787
Email: xxxxxx@xxx.xxx
if to the Company, to:
Tomark, Inc.
X.X. Xxx 0000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telecopier: 909.278.9976
Email: xxxxx@xxxxxx.xxx
with a copy to:
Xxxxxx Xxxxxx & Xxxxx LLP
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: E. Xxxxxx Xxxxx
Telecopier: 213.488.1178
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Email: xxxxxx@xxxxxx.xxx
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such telecopy shall have confirmed
receipt of the communication, (c) in the case of delivery by nationally
recognized overnight courier, on the Business Day following dispatch and (d) in
the case of mailing, on the third Business Day following such mailing. After any
notice is made hereunder, the party taking such action will use its best efforts
to deliver a copy of such notice to the e-mail address of the intended
recipients as soon as practical but in no event later than 12 hours after such
action has been taken.
SECTION 9.6. HEADINGS; INTERPRETATION. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. As used in this Agreement,
"subsidiary" with respect to any person shall mean any entity which such person
controls the voting power thereof, either through the ownership of equity
interests or otherwise, provided that under no circumstances shall the Company
and its subsidiaries be deemed to be subsidiaries of Parent.
SECTION 9.7. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, by telecopy or
otherwise, it being understood that all parties need not sign the same
counterpart.
SECTION 9.8. BENEFITS; ASSIGNMENT. This Agreement is not
intended to confer upon any person other than the parties any rights or remedies
hereunder and shall not be assigned by operation of law or otherwise.
SECTION 9.9. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed therein, without giving effect to laws
that might otherwise govern under applicable principles of conflicts of law.
SECTION 9.10. RELIANCE ON COUNSEL AND OTHER ADVISORS. Each
party has consulted such legal, financial, technical or other experts as it
deems necessary or desirable before entering into this Agreement. Each party
represents and warrants that it has read, knows, understands and agrees with the
terms and conditions of this Agreement.
SECTION 9.11. INJUNCTIVE RELIEF. The parties to this Agreement
hereby agree that any remedy at law for any breach of the provisions contained
in this Agreement shall be inadequate and that any party, to the extent
permitted by applicable law, shall be entitled to injunction relief in addition
to any other remedy such party might have under this Agreement.
***Remainder Intentionally Left Blank***
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their
respective officers thereunto duly authorized, as of the date first written
above.
COLLEGIATE PACIFIC INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxxxxxx, Chief Executive Officer
TOMARK, INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------------
Xxxxxx X. Xxxxx, Chief Executive Officer
BOO MERGER CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxxxxxx, Chief Executive Officer
THE SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxx
--------------------------------------------------
Xxxxxx X. Xxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------------------------
Xxxx X. Xxxxxx
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
EXHIBIT A
NONNEGOTIABLE, UNSECURED SUBORDINATED PROMISSORY NOTE
$125,000.00 JANUARY __, 2004
COLLEGIATE PACIFIC INC., a Delaware corporation (the "Company"), hereby
promises to pay to ___________________ or his permitted assigns (the "Holder")
in lawful money of the United States of America, the principal sum of ONE
HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($125,000.00), together with
interest in arrears on the unpaid principal balance calculated from the date
hereof in accordance with the provisions of this Note. This Note shall be
nonnegotiable, unsecured and subordinated in accordance with the provisions of
this Note.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Agreement and Plan of Merger dated December
__, 2003, by and among the Company, Holder, Tomark Inc., and BOO Merger Corp.
(the "Merger Agreement"), and is subject to the terms and conditions of the
Merger Agreement, which are, by this reference, incorporated herein and made a
part hereof.
1. Payment of Interest. Interest shall accrue at the rate of
three percent (3%) per annum on the unpaid principal amount of this Note
outstanding from time to time. Subject to the provisions of Sections 2(c) and 3
hereof, the Company shall pay to the holder of this Note monthly, in arrears,
all accrued, but unpaid interest on the principal balance of this Note. Any
accrued interest which for any reason has not theretofore been paid shall be
paid in full on the date on which the remaining principal amount of this Note is
paid.
2. Payment of Principal.
(a) Scheduled Payment. The Company shall repay the
original principal amount of this Note, together with all accrued and unpaid
interest thereon, in twenty-three equal monthly installments of FIVE THOUSAND
TWO HUNDRED AND NO/100 DOLLARS ($5,200.00) and a final installment of FIVE
THOUSAND FOUR HUNDRED AND NO/100 DOLLARS ($5,400.00) due and payable on the
second anniversary of the date hereof. Each installment of principal shall be
accompanied by the payment of all then accrued, but unpaid interest on this Note
calculated in accordance with the terms of Section 1 above.
(b) Optional Prepayments. Subject to the provisions of
Section 3 hereof, the Company may, at any time and from time to time without
premium or penalty, prepay all or a portion of the outstanding principal amount
of this Note.
(c) Time of Payment. If any payment of principal or
interest on this Note shall become due on a Saturday, Sunday, or legal holiday
under the laws of the State of Texas, such payment shall be made on the next
succeeding business day and such extension of time shall in such case be
included in computing interest in connection with such payment.
3. Subordination; Restrictions on Payment. This Note and any
instrument issued in exchange, renewal or substitution of this Note, including
any amendment thereto or modifications of any of the foregoing, are referred to
in this Section 3 collectively as the "Note." Notwithstanding any other
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provision of this Note, the indebtedness of the Company evidenced by the Note is
subordinated pursuant to the terms of that certain Subordination Agreement,
dated as of the date hereof, by and among the Company, Bank of America, N.A. and
the Holder (the "Subordination Agreement"). If at any time the Company makes a
payment to Holder in purported satisfaction of any of its obligations hereunder,
and Holder is required to transfer such payment to Bank of America, N.A.
pursuant to Section 5.1 of the Subordination Agreement, the Company agrees that
such payment shall not be deemed to be applied toward the satisfaction of any of
its obligations hereunder.
4. Events of Default.
(a) Definition. For purposes of this Note, the following
shall be deemed to be an "Event of Default":
(i) The failure of the Company to pay or provide for
payment of any installment of interest hereunder when and as the same shall
become due and payable, which failure shall have continued for a period of seven
(7) business days;
(ii) The institution by the Company of proceedings to
be adjudicated a bankrupt or insolvent, or the consent by it to the institution
of bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking relief under Title 11 of the United States
Code, as now constituted or hereafter in effect, or any other applicable Federal
or State bankruptcy, insolvency or other similar law, or the consent by it to
the institution of proceedings thereunder or the filing of any such petition or
to the appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or of any substantial
part of its property, or the making by the Company of an assignment for the
benefit of creditors, or the admission by the Company in writing of its
inability to pay its debts generally as they become due; or
(iii) The entry of a decree or order by a court
having jurisdiction for relief in respect of the Company, or adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under Title 11 of the United States Code, as now constituted or
hereafter in effect, or any other applicable Federal or State bankruptcy,
insolvency or other similar law, or appointing a receiver, liquidator, assignee,
trustee (or other similar official) of the Company or of any substantial part of
its property, or ordering the winding-up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
sixty (60) consecutive days.
(b) Consequences of Events of Default. The provisions of
this Section 4(b) are expressly subject to Section 3 hereof. Upon the occurrence
of an Event of Default, all principal and accrued, but unpaid interest thereon
shall become immediately due and payable, all unpaid amounts due hereunder shall
bear interest at the rate of fifteen percent (15%) per annum and the Holder
shall have any rights which it may possess pursuant to applicable law or
separate agreement.
5. Immunity of Incorporators, Stockholders, Officers, Directors
and Employees. No recourse shall be had for the payment of the principal or
interest on this Note or for any claim based thereon or otherwise in any manner
in respect thereof, to or against any subsidiary, incorporator, affiliate,
stockholder, officer, director or employee, as such, past, present or future, of
the Company or any respective subsidiary, incorporator, affiliate, stockholder,
officer, director or employees, as such, past, present or future, of any
predecessor or successor corporation, either directly or through the Company or
such predecessor or successor corporation, whether by virtue of any
constitutional provision or statute or
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rule of law, or by the enforcement of any assessment or penalty, or in any other
manner, all such liability being expressly waived and released by the acceptance
of this Note and as part of the consideration for the issue thereof.
6. Unsecured Obligation. This Note evidences an unsecured
obligation of the Company to pay money to the Holder pursuant to the terms
hereof. Nothing contained in this Note shall be deemed to create any security
interest in any goods, equipment, inventory or other collateral of the Company.
Any attempt by the Holder, its successors or assigns to create or perfect a
security interest to secure the payment of this Note or performance of any
obligation contained in this Note shall be void.
7. Amendment and Waiver. Except as otherwise expressly provided
herein, the provisions of this Note may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holder.
8. Cancellation. After all principal and accrued interest at any
time owed on this Note has been paid in full, this Note shall be surrendered to
the Company for cancellation and shall not be reissued.
9. Place of Payment; Notices. Payments of principal and interest
are to be made to the account of Holder as follows:
Bank: __________________________________
Account name: _______________________________
Account Number:______________________________
or to such account as the Holder shall notify the Company in writing. Any notice
hereunder shall be delivered to the party hereto at the address of such party
set forth below or to such other address as specified in a written notice.
Notices sent by either party shall be deemed received when delivered personally
or one (1) day after being sent by overnight carrier or three (3) days after
being sent by certified or registered mail.
If to Company: Collegiate Pacific Inc.
Attn: Xxxxxxx X. Xxxxxxxxxx, CEO
00000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
With a copy to: Xxxxxx, Lidji & Werbner
Attn: Xxxxxxx X. Xxxxx
4400 Renaissance Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
If to Holder: _________________________
_________________________
_________________________
_________________________
_________________________
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With a Copy to: Xxxxxx Xxxxxx & Xxxxx LLP
Attn: Xxxxxx Xxxxx
0000 Xxxx Xxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
10. Governing Laws. The validity, construction, and Interpretation
off this Note shall be governed by and construed in accordance with the laws of
the State of Delaware applicable to contracts and instruments made and to be
performed therein, without giving effect to laws that might otherwise govern
under applicable principles of conflicts of law.
11. No Waiver by Holder. No failure or delay on the part of Holder
in exercising any right, power or privilege hereunder and no course of dealing
between the Company and Holder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights, powers and remedies herein
expressly provided are cumulative and not exclusive of any rights, powers or
remedies which Holder would otherwise have. No notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
Holder to any other or further action in any circumstances without notice or
demand. The acceptance by Holder of any payment hereunder which is less than
payment in full of all amounts due and payable at the time of such payment shall
not, unless otherwise expressly agreed to by Holder in writing at such time,
constitute a waiver of the right to exercise any of Holder's rights, remedies,
recourses or powers at that time, or any subsequent time, or nullify any prior
exercise of any such right, remedy, recourse or power, except as and to the
extent otherwise required by applicable law.
12. Waiver by the Company. The Company agrees that it will be
liable for repayment of amounts due and owing under this Note and hereby waives
presentment, protest, demand, diligence and notice of dishonor and of
nonpayment. To the extent permitted by applicable law, the statute of
limitations is hereby waived by the Company as a defense to any demand on this
Note.
13. Consent to Jurisdiction and Service of Process. ANY AND ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST THE COMPANY OR HOLDER ARISING OUT OF OR
RELATING TO THIS NOTE SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN LOS ANGELES COUNTY IN THE STATE OF CALIFORNIA AND EACH
OF THE COMPANY AND HOLDER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
NOTE. EACH OF THE COMPANY AND HOLDER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM
THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PERSON AND AGREES NOT
TO PLEAD OR CLAIM, IN ANY LEGAL ACTION PROCEEDING WITH RESPECT TO THIS NOTE
BROUGHT IN ANY OF THE AFOREMENTIONED COURTS, THAT SUCH COURTS LACK PERSONAL
JURISDICTION OVER SUCH PERSON. Each of the Company and Holder hereby agrees that
service of all process in any such proceeding in any such court may be made by
registered or certified mail, return receipt requested, to each such person at
its address provided in paragraph 9 above, such service being hereby
acknowledged by each such person to be sufficient for personal jurisdiction in
any action against each such person in any such court and to be otherwise
effective and binding service in every respect. Nothing herein shall affect
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the right to serve process in any other manner permitted by law or shall limit
the right of the Company or Holder to bring proceedings against the other person
in the courts of any other jurisdiction.
14. Waiver of Jury Trial. EACH OF THE COMPANY AND HOLDER HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS NOTE. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Each of the Company and Holder
acknowledges that this waiver is a material inducement for each to enter into a
business relationship, that each of the Company and Holder has already relied on
this waiver in entering into this Note and that each will continue to rely on
this waiver in their related future dealings. The Company and Holder further
represent and warrant that each has reviewed this waiver with its legal counsel,
and that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A WRITTEN AMENDMENT
TO THIS NOTE WHICH MAKES SPECIFIC REFERENCE TO THIS SECTION), AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS NOTE. In the event of litigation, this Note may be filed as a written
consent to a trial by the court.
15. Severability. In case any provision in or obligation under
this Note shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
16. Setoff. Subject to the limitations and other provisions set
forth in Section 8.6 of the Merger Agreement, the Company shall have the right
to setoff any Losses against any amount otherwise due any payable by the Company
to the Holder hereunder.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has executed and delivered
this Note on the date first above written.
COLLEGIATE PACIFIC INC.
By: ______________________________________________
Xxxxxxx X. Xxxxxxxxxx, Chief Executive Officer
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EXHIBIT B
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into this
__st day of January, 2004, (the "Effective Date"), by and between Collegiate
Pacific Inc., a Delaware corporation (the "Company") and ________________
("Employee").
The following recitals are true and constitute the basis for this
Agreement:
A. This Agreement has been executed and delivered pursuant to and in
accordance with the terms and conditions of the Agreement and Plan
of Merger dated December __, 2003 (the "Merger Agreement"), and is
subject to the terms and conditions of the Merger Agreement, which
are, by this reference, incorporated herein and made a part hereof;
B. Company desires to establish its right to the services of Employee
in the capacity described below and on terms and conditions
hereinafter set forth, and Employee is willing to accept such
employment on those same terms and conditions; and
C. Ancillary to this Agreement and as a condition to Company entering
into this Agreement, Company and Employee have agreed to enter into
a Proprietary Information, Nonsolicitation and Noncompete Agreement
of even date herewith (the "PINN Agreement").
NOW THEREFORE, in consideration of the mutual agreements hereinafter
set forth, Employee and Company have agreed and do hereby agree as follows:
1. TERM. This Agreement shall remain in effect for three years
from the Effective Date (the "Term"), unless sooner terminated in accordance
with the provisions of Section 4 of this Agreement.
2. POSITION AND RESPONSIBILITIES. Company agrees to employ
Employee as a senior operating officer of the Company's Corona, California
operations, and Employee accepts and agrees to such employment. During
Employee's employment with Company, Employee shall do and perform all services
and acts necessary or advisable to fulfill the duties and responsibilities as
are commensurate and consistent with Employee's position and shall render such
services on the terms set forth herein. During Employee's employment with
Company, Employee shall report directly to the Company's Chief Executive
Officer. Employee shall have such powers and duties with respect to Company as
may reasonably be assigned to Employee by the Chief Executive Officer, to the
extent consistent with Employee's position and status. Employee agrees to devote
so much of Employee's working time as is necessary or advisable to fulfill the
duties and responsibilities as are commensurate and consistent with Employee's
position.
3. COMPENSATION. As compensation for all services to be performed
by Employee under this Agreement during the Term, Company shall compensate
Employee as follows:
A. SALARY. During each of the first two years of the
Term, Company shall pay to Employee an annual base salary of $70,000 and in the
third year of the Term shall pay to Employee an annual base salary commensurate
with Employee's responsibilities (the "Base Salary"), payable in equal
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biweekly installments payable in arrears or in accordance with Company's payroll
practices as in effect from time to time. Any increase in the Base Salary after
the second year of the Term shall be in the sole discretion of the Company. For
all purposes under this Agreement, the term Base Salary shall refer to Base
Salary, including adjustments thereto, if any, as may be made from time to time.
B. DISCRETIONARY BONUS. During the Term, Employee shall
be eligible to receive a discretionary annual bonus on the same basis as other
peer operating officers of Company.
C. BENEFITS AND PERQUISITES. During the Term, Employee
shall be entitled to participate in any welfare, health and life insurance and
pension benefit and incentive programs as may be adopted from time to time by
Company on the same basis as that provided to other peer operating officers of
Company. Without limiting the generality of the foregoing, Employee shall be
entitled to the following benefits during the Term: (a) 3 weeks paid vacation
during each year of the Term in accordance with the policies of Company in
effect from time to time; and (b) reimbursement of all reasonable and necessary
expenses incurred by Employee in performing Employee's duties for Company, on
the same basis as other peer operating officers and in accordance with Company's
policies as in effect from time to time.
4. TERMINATION OF EMPLOYMENT.
A. DEATH. In the event Employee's employment hereunder
is terminated by reason of Employee's death, Company shall pay Employee's
designated beneficiary or beneficiaries, within thirty (30) days of Employee's
death in a lump sum in cash, Employee's Base Salary through the end of the month
in which death occurs and any Accrued Obligations (as defined below). As used in
this Agreement, the term "Accrued Obligations" shall mean the sum of (i) any
portion of Employee's Base Salary through the date of death or termination of
employment for any reason, as the case may be, which has not yet been paid and
(ii) any compensation previously earned but deferred by Employee (together with
any interest or earnings thereon) that has not yet been paid.
B. DISABILITY. If, as a result of Employee's incapacity
due to physical or mental illness ("Disability"), Employee shall have been
absent from the full-time performance of Employee's duties with Company for a
period of three (3) consecutive months and, within thirty (30) days after
written notice is provided to Employee by the Company in accordance with Section
7 of this Agreement, Employee shall not have returned to the full-time
performance of Employee's duties, Employee's employment under this Agreement may
be terminated by Company for Disability. During any period prior to such
termination during which Employee is absent from the full-time performance of
Employee's duties with Company due to Disability, Company shall continue to pay
Employee's Base Salary at the rate in effect at the commencement of such period
of Disability, offset by any amounts payable to Employee under any disability
insurance plan or policy provided by Company. Upon termination of Employee's
employment due to Disability, Company shall pay Employee within thirty (30) days
of such termination (i) Employee's Base Salary through the end of the month in
which termination occurs in a lump sum in cash, offset by any amounts payable to
Employee under any disability insurance plan or policy provided by Company and
(ii) any Accrued Obligations.
C. TERMINATION FOR CAUSE. Company may terminate
Employee's employment under this Agreement for Cause (as defined below) at any
time prior to the expiration of the Term. As used herein, "Cause" shall mean (i)
the conviction of Employee for the commission of any misdemeanor involving
fraud, misappropriation or embezzlement or the plea of guilty or nolo contendere
to, or indictment for, the commission of any felony offense by Employee; (ii) a
material breach by Employee of a fiduciary duty owed to Company; (iii) a
material breach by Employee of any of the covenants made by
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Employee under the terms of this Agreement, the Merger Agreement or the PINN
Agreement, or the Company's policies and procedures, including its Code of
Ethics; (iv) the willful and gross neglect by Employee of the material duties
required by this Agreement; or (v) the engaging in any act that is intended, or
may reasonably be expected to harm the reputation, business or operations of the
Company or any member of its Board of Directors.
D. TERMINATION BY COMPANY OTHER THAN FOR DEATH,
DISABILITY OR CAUSE. If Employee's employment is terminated by Company for any
reason other than Employee's death, for Disability or Cause during the Term,
Employee shall be immediately paid in cash in one lump sum the full and entire
amount of the Base Salary that would otherwise be due and payable during the
remainder of the Term, together with all Accrued Obligations. In addition,
Employee shall have no obligation to mitigate any damages or otherwise seek
other employment and Employee shall no longer be bound by the non-competition
provisions of the Merger Agreement or the PINN Agreement. The obligations of the
Company to the Employee under this Section 4D are conditioned upon the Employee
signing a release of claims in the form of Exhibit "A" attached hereto (the
"Release") within twenty-eight (28) days of the date on which notice of
termination is given and upon such Release remaining in full force and effect
thereafter. The severance payment under this Section 4D will be payable in
accordance with the normal payroll practices of Company on the next regular
payroll period following the effective date of the Release.
E. TERMINATION BY EMPLOYEE FOR GOOD REASON. The Employee
may terminate Employee's employment under this Agreement for Good Reason at any
time prior to the expiration of the Term by providing written notice to the
Company of such termination and the effective date thereof. As used herein,
"Good Reason" shall mean: the relocation of the Employee's principal place of
employment outside of a 25 mile radius of Corona, California without the
Employee's consent, or the requirement by the Company that Employee have as his
principal location of work any location outside of the 25 mile radius of Corona,
California. In the event of Employee's termination for Good Reason, Employee
shall be immediately paid in cash in one lump sum the full and entire amount of
the Base Salary that would otherwise be due and payable during the remainder of
the Term, together with all Accrued Obligations. In addition, Employee shall no
longer be bound by the non-compete provisions of the Merger Agreement or the
PINN Agreement.
F. TERMINATION BY EMPLOYEE OTHER THAN FOR GOOD REASON.
At any time after the first six (6) months of the Term, Employee may resign from
his position with Company for any reason. Upon Employee's termination of his
employment pursuant to this Section 4E, Company shall pay Employee within thirty
(30) days of such termination (i) Employee's Base Salary through the date on
which the termination occurs in a lump sum in cash, offset by any amounts
payable to Employee under any disability insurance plan or policy provided by
Company and (ii) any Accrued Obligations.
G. NOTICE OF TERMINATION. Any termination by Company or
Employee pursuant to Xxxxxxx 0X, 0X, 0X, 0X xx 0X xxxxx xx communicated by a
Notice of Termination (as defined below). For purposes of this Agreement, a
"Notice of Termination" shall mean a written notice which shall indicate those
specific termination provisions in this Agreement relied upon and which sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Employee's employment under the provision so indicated.
For purposes of this Agreement, no such purported termination by either Company
or Employee shall be effective without such Notice of Termination.
5. SOLE AGREEMENT. Other than with respect to the Merger
Agreement and the PINN Agreement to be entered into by and between Employee and
Company, Employee hereby acknowledges
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the termination of any and all employment or consulting agreements between him
and Company not expressly set forth herein, and any affiliates of Company, and
releases Company and all affiliates of Company from any and all obligations that
it or they might otherwise have had to Employee under any employment or
consulting agreement between Company or any affiliates of Company and Employee,
including, but not by way of limitation, any obligations of Company or its
affiliates to pay Employee accrued but unpaid compensation of any sort
whatsoever.
6. CONFIDENTIALITY. Employee agrees that while employed by the
Company in any capacity and thereafter, Employee shall hold in strictest
confidence, and not to use, except for the benefit of the Company, or to
disclose to any person, firm or corporation without written authorization of the
Board of Directors, any Confidential Information of the Company. The Employee
understands that "Confidential Information" means any Company proprietary
information, technical data, trade secrets or know-how, including, but not
limited to, research, product plans, products, services, customer lists and
customers (including, but not limited to, customers of the Company with whom the
Company deals or with whom Employee became acquainted during the term of the
Employee's employment with the Company), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information disclosed to the Employee by the Company, either directly or
indirectly, in writing, orally or by drawings or observation. The Employee
further understands that Confidential Information does not include any of the
foregoing items which have become publicly known and made generally available
through no wrongful act of the Employee or of others who were under
confidentiality obligations as to the item or items involved or improvements or
new versions thereof.
7. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by first-class mail, certified
or registered with return receipt requested, telecopy (with confirmation of
receipt) or hand delivery acknowledged in writing by the recipient personally
and shall be deemed to have been duly given three days after mailing or
immediately upon duly acknowledged hand delivery or telecopy (with confirmation
of receipt) to the respective persons named below:
If to Company: Collegiate Pacific Inc.
00000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
Telecopy: (000) 000.0000
If to Employee: ________________________
________________________
________________________
8. ASSIGNMENT. This Agreement may not be assigned or transferred
by the Employee, in whole or in part, without the prior written consent of
Company, and any assignment in violation of this Section shall be void. Company
shall have the right to assign this Agreement and any of its rights hereunder to
any of its affiliates or as a part of a sale or transfer of the stock, assets or
business of Company or any substantial portion thereof.
9. INTERPRETATION; SEVERABILITY OF INVALID PROVISIONS. All rights
and restrictions contained hereunder may be exercised and shall be applicable
and binding only to the extent that they do not violate any applicable laws and
are intended to be limited to the extent necessary to render this Agreement
legal,
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valid and enforceable. If any term of this Agreement shall be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, the
remaining terms shall remain in full force and effect. The existence of any
claim by Employee against Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to enforcement by Company of any or
all such provisions or covenants.
10. RELIEF. The parties acknowledge that a breach or threatened
breach of any of the terms of this Agreement by Employee would result in
material and irreparable damage and injury to Company, and that it would be
difficult or impossible to establish the full monetary value of such damage.
Therefore, Company shall be entitled to injunctive relief by a court of
appropriate jurisdiction in the event of Employee's breach or threatened breach
of any of the terms hereunder. Company's right to an injunction will not
prohibit Company from pursuing other remedies, including the recovery of
damages.
11. AGREEMENT BINDING. This Agreement shall inure to the benefit
of Company and its successors, assignees and designees and shall be binding upon
Employee and Employee's heirs, executors, administrators and personal
representatives.
12. NONWAIVER. No failure on the part of either Employee or
Company to exercise, and no delay by either Employee or Company in exercising
any right, power, or remedy under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or remedy
by either Employee or Company preclude any other or further exercise thereof or
the exercise by such party of any other right, power or remedy. No express
waiver or assent by either Employee or Company of any breach of or default in
any term or condition of this Agreement by the other party shall constitute a
waiver of or an assent to any succeeding breach of or default in the same or any
other term or condition hereof.
13. AMENDMENTS AND MODIFICATIONS. This Agreement may be amended or
modified only by a writing signed by the Employee and the President of Company.
14. GOVERNING LAW. The validity and effect of this Agreement shall
be construed under, governed by and enforced in accordance with the laws of the
State of Delaware, without regard to the choice of law provisions, statutes,
regulations or principles of this or any other jurisdiction.
15. NO CONFLICTING AGREEMENT. Employee represents and warrants
that he is not party to any agreement, contract or understanding which would
prohibit him from entering into this Agreement or performing fully his
obligations hereunder.
16. WITHHOLDING. Company shall make such deductions and withhold
such amounts from each payment and benefit made or provided to Employee under
this Agreement, as may be required from time to time by applicable law,
governmental regulation or order.
17. ARBITRATION.
(a) Any and all disputes arising out of or in connection
with the negotiation, execution, interpretation, performance or non-performance
of this Agreement not resolved through mediation, shall be referred to and
solely and finally resolved by arbitration. The place of arbitration shall be
Dallas, Texas if the arbitration is requested by Employee or Corona, California,
if the arbitration is requested by Company, or such other location as the
parties may agree in writing. The arbitration tribunal shall consist of three
arbitrators. The parties shall each nominate one arbitrator and the third
arbitrator shall be appointed, all in accordance with the Rules (as defined
below). The parties hereby renounce all recourse
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to litigation and agree (i) that no reference shall be made to any court on a
point of law and (ii) that the award of the arbitration tribunal shall be final
and subject to no judicial review. The arbitration tribunal shall conduct the
proceedings in accordance with the arbitration rules of the American Arbitration
Association, including all available emergency procedures and requests for
relief (the "Rules), which Rules are deemed to be incorporated by reference to
this clause. The arbitration tribunal shall decide the issues submitted to them
in accordance with (A) the language and commercial purposes of this Agreement,
and (B) what is just and equitable under the circumstances, provided that all
substantive questions of law shall be determined under the laws of the State of
Delaware.
(b) The parties agree to facilitate the arbitration by:
(i) making available to one another and to the arbitration tribunal for
examination, inspection and extraction all documents, books, records and
personnel under their control determined by the arbitration tribunal to be
relevant to the dispute; (ii) conducting arbitration hearings to the greatest
extent possible on successive days; and (iii) observing strictly the time
periods established by the Rules, or by the arbitration tribunal, for submission
of evidence or briefs.
(c) Judgment on the award of the arbitration tribunal may
be entered in any court having jurisdiction over the party against which
enforcement of the award is being sought. All deposits and other costs (other
than fees of counsel) incurred in conducting the arbitration shall be borne
equally by the parties or as otherwise determined by the tribunal. Each party
shall be solely responsible for its own attorneys fees incurred in connection
with the arbitration.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall together
constitute one instrument.
IN WITNESS WHEREOF, Company has caused this Agreement to be executed by
its duly authorized officer, and Employee has executed this Agreement, as of the
date first written above.
COLLEGIATE PACIFIC INC. EMPLOYEE
By:________________________________ __________________________
Xxxxxxx X. Xxxxxxxxxx, Chief Executive Officer __________________________
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EXHIBIT "A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments and benefits to be
provided in connection with the termination of my employment in accordance with
the terms of the Employment Agreement dated as of __________________________ (as
amended and in effect from time to time, the "Employment Agreement") between
Collegiate Pacific Inc. ("Company"), and me, I, on my own behalf and on behalf
of my personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees and all others connected with me,
hereby release and forever discharge Company and each of its respective
affiliates and all of their respective past and present officers, directors,
stockholders, controlling persons, employees, agents, representatives,
successors and assigns and all of others connected with any of its employees,
agents, representatives, successors and assigns and all others connected with
any of them (all collectively, the "Released Parties"), both individually and in
their official capacities, from any and all rights, liabilities, claims,
demands, and causes of action of any type (collectively, "Claims") which I have
had in the past, now have, or might now have, through the date of my signing of
this Release of Claims, in any way resulting from, arising out of or connected
with my employment or its termination or pursuant to any federal, state, foreign
or local employment law, regulation or other requirement (including, without
limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by Company,
each as amended from time to time); provided, however, that the foregoing
release shall not apply to any right explicitly set forth in the Employment
Agreement to special payments and benefits to be provided in connection with the
termination of my employment.
In signing this Release of Claims, I hereby resign from all positions I
held with the Company or any of its subsidiaries under the terms of my
Employment Agreement or otherwise, including as a member of the Company's Board
of Directors, if applicable. Further, I hereby acknowledge that I have had at
least twenty-one (21) days from the date of notice of termination of my
employment to consider the terms of this Release of Claims and that such time
has been sufficient; that I am encouraged by Company to seek the advice of an
attorney prior to signing this Release of Claims; and I am signing this Release
of Claims voluntarily and with a full understanding of its terms.
I understand that I may revoke this Release of Claims at any time
within seven days of the date of my signing by written notice to Company and
that this Release of Claims will take effect only upon the expiration of such
seven-day revocation period and only if I have not timely revoked it.
Intending to be legally bound, I have signed this Release of Claims as
of the date first written above.
Signature: ________________________
________________________
Date Signed: ___________________
EXHIBIT C
COLLEGIATE PACIFIC INC.
PROPRIETARY INFORMATION, NONCOMPETE
AND
NONSOLICITATION AGREEMENT
This agreement has been executed and delivered pursuant to and in
accordance with the terms and conditions of the Agreement and Plan of Merger
(the "Merger Agreement"), and is subject to the terms and conditions of the
Merger Agreement, which are, by this reference, incorporated herein and made a
part hereof. As a condition to my employment with Collegiate Pacific Inc., its
subsidiaries, affiliates, successors or assigns (together the "Company"), and as
an inducement to and in consideration of the Company entering into the Merger
Agreement, my employment with the Company, my receipt of the compensation now
and hereafter paid to me by the Company, and the confidential information and
training to be provided to me as an employee of the Company, I agree to the
following:
1. CONFIDENTIAL INFORMATION.
(a) Company Information. I agree at all times during the
term of my employment and thereafter, to hold in strictest confidence, and not
to use, except for the benefit of the Company, or to disclose to any person,
firm or corporation without written authorization of the Board of Directors of
the Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the Company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
Inventions (as defined below), processes, formulas, technology, designs,
drawings, engineering, hardware configuration information, marketing, finances
or other business information disclosed to me by the Company either directly or
indirectly in writing, orally or by drawings or observation of parts or
equipment. I further understand that Confidential Information does not include
any of the foregoing items which have become publicly known and made generally
available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved or improvements or
new versions thereof.
(b) Former Employer Information. I agree that I will not,
during my employment with the Company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent employer or
other person or entity and that I will not bring onto the premises of the
Company any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by such employer,
person or entity.
(c) Third Party Information. I recognize that the Company
has received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on the Company's part
to maintain the confidentiality of such information and to use it only for
certain limited purposes. I agree to hold all such confidential or proprietary
information in the strictest confidence and not to disclose it to any person,
firm or corporation or to use it except as necessary in carrying out my work for
the Company consistent with the Company's agreement with such third party.
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2. INVENTIONS.
(a) Inventions Retained and Licensed. I have attached
hereto, as Exhibit "A," a list describing all inventions, original works of
authorship, developments, improvements, and trade secrets which were made by me
prior to my employment with the Company (collectively referred to as "Prior
Inventions"), which belong to me, which relate to the Company's proposed
business, products or research and development, and which are not assigned to
the Company hereunder; or, if no such list is attached, I represent that there
are no such Prior Inventions. If in the course of my employment with the
Company, I incorporate into a Company product, process or machine a Prior
Invention owned by me or in which I have an interest, the Company is hereby
granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual,
worldwide license to make, have made, modify, use and sell such Prior Invention
as part of or in connection with such product, process or machine.
(b) Assignment of Inventions. I agree that I will
promptly make full written disclosure to the Company, will hold in trust for the
sole right and benefit of the Company, and hereby assign to the Company, or its
designee, to the full extent permitted by law, all my right, title, and interest
(including patent rights, copyrights, trade secret rights, xxxx work rights, sui
generis database rights and all other intellectual property rights of any sort
throughout the world) in and to any and all inventions, original works of
authorship, developments, concepts, improvements, designs, discoveries, ideas,
trademarks or trade secrets, whether or not patentable or registrable under
copyright or similar laws, which I may solely or jointly conceive or develop or
reduce to practice, or cause to be conceived or developed or reduced to
practice, during the period of time I am in the employ of the Company
(collectively referred to as "Inventions"). I further acknowledge that all
original works of authorship which are made by me (solely or jointly with
others) within the scope of and during the period of my employment with the
Company and which are protectible by copyright are "works made for hire," as
that term is defined in the United States Copyright Act. I understand and agree
that the decision whether or not to commercialize or market any Invention
developed by me solely or jointly with others is within the Company's sole
discretion and for the Company's sole benefit and that no royalty will be due to
me as a result of the Company's efforts to commercialize or market any such
invention.
(c) Inventions Assigned to the United States. I agree to
assign to the United States government all my right, title, and interest in and
to any and all Inventions whenever such full title is required to be in the
United States by a contract between the Company and the United States or any of
its agencies.
(d) Moral Rights. To the extent allowed by law, this
Section 2 includes all rights of paternity, integrity, disclosure and withdrawal
and any other rights that may be known as or referred to as "moral rights,"
"artist's rights," "droit moral," or the like (collectively "Moral Rights"). To
the extent I retain any such Moral Rights under applicable law, I hereby ratify
and consent to any action that may be taken with respect to such Moral Rights by
or authorized by the Company and agree not to assert any Moral Rights with
respect thereto. I will confirm any such ratifications, consents and agreements
from time to time as requested by the Company.
(e) Maintenance of Records. I agree to keep and maintain
adequate and current written records of all Inventions made by me (solely or
jointly with others) during the term of my employment with the Company. The
records will be in the form of notes, sketches, drawings, and any other format
that may be specified by the Company. The records will be available to and
remain the sole property of the Company at all times.
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(f) Patent and Copyright Registrations. I agree to assist
the Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns, and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable
because of my mental or physical incapacity or for any other reason to secure my
signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original works
of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents as
my agent and attorney in fact, with full power of substitution, to act for and
in my behalf and stead to execute and file any such applications and to do all
other lawfully permitted acts to further the prosecution and issuance of letters
patent or copyright registrations thereon with the same legal force and effect
as if executed by me.
3. CONFLICTING EMPLOYMENT. I agree that, during the term of my
employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
4. RETURNING COMPANY DOCUMENTS. I agree that, at the time of
leaving the employ of the Company, I will deliver to the Company (and will not
keep in my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence, specifications,
drawings blueprints, sketches, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by me pursuant
to my employment with the Company or otherwise belonging to the Company, its
successors or assigns, including, without limitation, those records maintained
pursuant to paragraph 2(d).
5. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the
employ of the Company, I hereby grant consent to notification by the Company to
my new employer about my rights and obligations under this Agreement so long as
the Company provides me with prior written notice of its intention to so notify
my new employer.
6. NON-SOLICITATION OF EMPLOYEES. I agree that during my
employment and for a period of 1 year immediately following the termination of
my relationship with the Company for any reason, whether with or without Cause
(as defined below), I shall not, either directly or indirectly, solicit, induce,
recruit or encourage any of the Company's employees to leave their employment
with the Company, or take away such employees, or attempt to solicit, induce,
recruit, encourage or take away employees of the Company, either for myself or
for any other person or entity, or otherwise hire as an employee or a
consultant, for myself or any other person or entity, any such employee of the
Company. For the purposes of this paragraph, an employee of the Company shall be
considered an employee of the Company or any of its affiliates while they are
employed by the Company or any of its affiliates and for a period of 120 days
following the termination of that employee's employment. As used herein, "Cause"
shall mean (a) my conviction for the commission of any misdemeanor involving
fraud, misappropriation or
C-3
embezzlement or the plea of guilty or nolo contendere to, or indictment for, the
commission of any felony offense by me; (ii) a material breach by me of a
fiduciary duty owed to the Company; (iii) a material breach by me of any of the
covenants made by me under the terms of this agreement, the Merger Agreement or
any Employment Agreement by and between me and the Company, or the Company's
policies and procedures, including, without limitation, its Code of Ethics; (iv)
the willful and gross neglect by me of the material duties required by this
Agreement; or (v) the engaging in any act that is intended, or may reasonably be
expected to harm the reputation, business or operations of the Company or any
member of its Board of Directors.
7. NON-SOLICITATION OF SUPPLIERS AND CUSTOMERS. I agree that
during my employment and for a period of 1 year immediately following the
termination of my relationship with the Company for any reason, whether with or
without Cause, I shall not either directly or indirectly solicit, induce,
recruit or encourage any of the suppliers or customers doing business with the
Company, including actively through prospective customers, to limit, curtail, or
stop doing business with the Company or to attempt to divert business directed
by such parties to the Company to any other person or entity.
8. NON-COMPETE PROVISION.
(a) Covenant. I agree that during my employment with the
Company and for a period of 1 year immediately following the termination of my
relationship with the Company for any reason, except by the Company without
Cause or by me for Good Reason (as such terms are defined in my Employment
Agreement), I will not in any manner (other than for the Company), directly or
by assisting others, engage in, have an equity or profit interest in, or render
services of any kind or nature to any business that Competes (as defined below)
with the Company. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall prevent or prohibit me from owning not more than 5% of a
class of equity securities issued by any entity listed on any national
securities exchange or interdealer quotation system.
(b) For purposes of this Section 8, the term "Competes"
with the Company shall mean any one or more of the following activities:
(i) manufacturing, distributing, designing, selling
or installing sports equipment and supplies (the "Sports
Distribution Business") to any Person (as defined below)
within any industry segment for which the Company has either
offered to or actually provided or conducted the Sports
Distribution Business; or
(ii) engaging in any other business activities (other
than those described in (b)(i) above) which are conducted,
offered or provided by the Company during my employment and as
to which I am involved, if those activities are in the same
markets or states as the Company engaged in during the
Determination Period.
(c) Other Definitions. As used herein in this Section 8,
the term "Determination Period" shall mean the six (6) month period immediately
before the start of my employment with the Company. As used in this Section 8,
the term "Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
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(d) Coverage. I acknowledge that the Company conducts the
Sports Distribution Business throughout the United States and I agree that this
non-compete provision is necessary to protect the Company with respect to any
business in which it Competes.
9. REMEDIES. I acknowledges that (a) it would be difficult to
calculate damages to the Company from any breach of my obligations under this
Agreement, (b) that injuries to Company from any such breach would be
irreparable and impossible to measure, and (c) that the remedy at law for any
breach or threatened breach of my obligations under this Agreement would
therefore be an inadequate remedy and, accordingly, Company shall, in addition
to all other available remedies (including without limitation seeking such
damages as it can show it has sustained by reason of such breach or the exercise
of all other rights it has under this Agreement), be entitled to injunctive and
other similar equitable remedies.
10. GENERAL PROVISIONS.
(a) Governing Law; Consent to Personal Jurisdiction. This
agreement will be governed by the laws of the State of Texas, without regard to
the choice of law provisions, statutes, regulations or principles of this or any
other jurisdiction. I hereby expressly consent to the personal jurisdiction of
the state and federal courts located in Los Angeles County, California for any
lawsuit filed there against me by the Company arising from or relating to this
Agreement and the Company agrees that any such lawsuit or other action shall be
brought or filed only in Los Angeles County, California.
(b) Entire Agreement. This Agreement, my Employment
Agreement and the Merger Agreement sets forth the entire agreement and
understanding between the Company and me relating to the subject matter herein
and supersedes all prior discussions and/or agreements between us. To the extent
that any of the terms herein conflict with or otherwise contradict the terms of
the Merger Agreement, the applicable provisions of the Merger Agreement shall
control for all purposes. No modification of or amendment to this agreement, nor
any waiver of any rights under this agreement, will be effective unless in
writing signed by the party to be charged. Any subsequent change or changes in
my duties, salary or compensation will not affect the validity or scope of this
Agreement.
(c) Severability. If one or more of the provisions in
this agreement are deemed void by law, then the remaining provisions will
continue in full force and effect.
(d) Successors and Assigns. This agreement will be
binding upon my heirs, executors, administrators and other legal representatives
and will be for the benefit of the Company, its successors, and its assigns.
(e) Conflict of Interest Guidelines. I agree to
diligently adhere to the Conflict of Interest Guidelines attached as Exhibit "B"
hereto.
____________________________________________________
Name of Employee
Dated: _______________ __, 2003
Accepted and agreed to this the
__st day of ______________, 2003.
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COLLEGIATE PACIFIC INC.
By:_____________________________________________________
Xxxxxxx X. Xxxxxxxxxx, Chief Executive Officer
C-6
EXHIBIT A
COLLEGIATE PACIFIC INC.
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Title Date Identifying Number or Brief Description
--------------------------------------------------------------------------------
No inventions or improvements
Additional Sheets Attached
Signature of Employee: ______________________________
Print Name of Employee: _____________________________
Date: _______________________
EXHIBIT B
COLLEGIATE PACIFIC INC.
CONFLICT OF INTEREST GUIDELINES
It is the policy of Collegiate Pacific Inc., its subsidiaries,
affiliates, successors or assigns (together, the "Company") to conduct its
affairs in strict compliance with the letter and spirit of the law and to adhere
to the highest principles of business ethics. Accordingly, all officers,
employees and independent contractors must avoid activities which are in
conflict, or give the appearance of being in conflict, with these principles and
with the interests of the Company. The following are potentially compromising
situations which must be avoided. Any exceptions must be reported to the Chief
Executive Officer and written approval for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Proprietary Information, Noncompete and
Nonsolicitation Agreement elaborate on this principle and are binding
agreements.)
2. Accepting or offering substantial gifts, excessive
entertainment, favors or payments which may be deemed to constitute undue
influence or otherwise be improper or embarrassing to the Company.
3. Participating in civic or professional organizations that
might involve divulging confidential information of the Company.
4. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
5. Initiating or approving any form of personal or social
harassment of employees.
6. Investing or holding outside directorship in suppliers,
customers, or competing companies, including financial speculations, where such
investment or directorship might influence in any manner a decision or course of
action of the Company.
7. Borrowing from or lending to employees, customers or
suppliers.
8. Acquiring real estate of interest to the Company.
9. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
10. Unlawfully discussing prices, costs, customers, sales or
markets with competing companies or their employees.
11. Making any unlawful agreement with distributors with respect
to prices.
12. Improperly using or authorizing the use of any inventions
which are the subject of patent claims of any other person or entity.
13. Engaging in any conduct which is not in the best interest of
the Company.
Each officer, employee and independent contractor must take every
necessary action to ensure compliance with these guidelines and to bring problem
areas to the attention of higher management for review. Violations of this
conflict of interest policy may result in discharge without warning.
