EXHIBIT 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") as of June 2, 1997, among
XX. XXXXXXXX X. XXXXXXXXX and his Related Trusts and Family Members listed on
the signature page hereto (collectively the "Sellers", and individually, a
"Seller"); and PUBLIC SERVICE COMPANY OF OKLAHOMA, an Oklahoma corporation ("the
Purchaser").
WITNESSETH:
WHEREAS, Sellers own, in the aggregate, 1,018,329 shares of the Common
Stock, par value, $0.01 per share, of SCIENTECH, Inc., an Idaho Corporation (the
"Company"), all of which will be (upon the effectiveness of the amendment to the
Company's Articles of Incorporation described herein) Class A Voting Common
Stock; and
WHEREAS, the Sellers wish to sell to Purchaser, and Purchaser wishes to
purchase from Sellers, an aggregate of 506,000 shares of Common Stock of the
Company, of which amount 70,000 shares shall be Class A Voting Common Stock, and
436,000 shares shall be of Class B Nonvoting Common Stock; and
WHEREAS, Purchaser wishes to receive from Sellers, and Sellers wish to
grant to Purchaser, an option to purchase 206,000 shares of Common Stock from
Sellers, not later than September 2, 1998, certain additional shares of the
Common Stock of the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Agreement the following terms shall have the
meanings set forth in this Article I:
"Affiliate" means, as applied to the Company or any other specified
Person, any Person directly or indirectly controlling, controlled by or under
direct or indirect common control with the Company (or other specified Person)
and shall also include (a) any Person who is a director or beneficial owner of
at least 5% of the then outstanding equity securities of the Company (or other
specified Person) and Family Members of any such Person, (b) any Person of which
the Company (or other specified Person) or an Affiliate (as defined in clause
(a) above) of the Company (or other specified Person) shall, directly or
indirectly, either beneficially own at least 10% of the then outstanding equity
securities or constitute at least a 10% equity participant, and (c) in the case
of a specified Person who is an individual, any Family Member of such Person.
"Articles of Incorporation" means the Amended and Restated Articles of
Incorporation of the Company in the form of Exhibit A.
"Balance Sheet" means the balance sheet referred to in the definition
of "Financial Statements".
"Balance Sheet Date" means the date of the latest Balance Sheet.
"Broker Costs" means any and all costs, fees and expenses of any
broker, finder or placement agent incurred by the Sellers or the Purchaser in
connection with the transactions contemplated herein.
"Capital Stock" means, as to any Person that is a corporation, the
authorized shares of such Person's capital stock, including all classes of
common, preferred, voting and nonvoting capital stock, and, as to any Person
that is not a corporation or an individual, the ownership interests in such
Person, including, without limitation, the right to share in profits and losses,
the right to receive distributions of cash and property, and the right to
receive allocations of items of income, gain, loss, deduction and credit and
similar items from such Person, whether or not such interests include voting or
similar rights entitling the holder thereof to exercise control over such
Person.
"Class A Stock" means the Class A Voting Common Stock, par value $0.01
per share, of the Company.
"Class B Stock" means the Class B Nonvoting Common Stock, par value
$0.01 per share, of the Company.
"Closing" has the meaning given such term in Section 2.2 of this
Agreement.
"Closing Date" has the meaning given such term in Section 2.2 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Class A Stock and the Class B Stock.
"Company" means SCIENTECH, Inc., an Idaho corporation. It shall also
include its predecessor companies and any Subsidiaries which may now exist or be
established in the future.
"Contracts" has the meaning set forth in Section 3.15 of this Agreement.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of ss.3(3) of ERISA maintained or contributed to by the Company or any
ERISA Affiliate, other than a Multiemployer Plan.
"Environmental Laws" has the meaning given such term in Section 3.22(c)
of this Agreement.
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"ERISA" means the Employee Retirement Income Security Act of 1974, any
successor statute of similar import, and the rules and regulations thereunder,
collectively, and from time to time amended and in effect.
"ERISA Affiliate" means any Person which is treated as a single
employer with the Company under ss. 414 of the Code.
"Escrow Agent" Shall mean that individual identified as Escrow Agent in
the Escrow Agreement.
"Escrow Agreement" means that Escrow Agreement among Sellers, Purchaser
and the Escrow Agent in the form of Exhibit B hereof.
"Escrow Shares" means 506,000 shares of Common Stock deposited by
Sellers with the Escrow Agent pursuant to the Escrow Agreement and Section 2.3
hereof.
"Family Member" means, as applied to any individual, such individual's
spouse, or such individual's child, and each trust created for the exclusive
benefit of one or more of them.
"Financial Statements" means the audited balance sheet and statement of
income of the Company for the fiscal year ended January 31, 1996 and the
unaudited related balance sheet as of March 28, 1997 (the "Balance Sheet") and
statement of income for the period then ended for the Company.
"Founder" means Xx. Xxxxxxxx X. Xxxxxxxxx or any of his Family Members.
"Generally accepted accounting principles" or "GAAP" means accounting
principles which are (a) consistent with the principles promulgated or adopted
by the Financial Accounting Standards Board and its predecessors and other
recognized principle setting bodies, in effect from time to time, (b) applied on
a basis consistent with prior periods, and (c) such that a certified public
accountant would, insofar as the use of accounting principles is pertinent, be
in a position to base an opinion as to financial statements in which such
principles have been properly applied.
"Guaranteed Pension Plan" means any employee pension benefit plan
within the meaning of ss.3(2) of ERISA maintained or contributed to by the
Company or any ERISA Affiliate, the benefits of which are guaranteed on
termination in full or in part by the Pension Benefit Guaranty Corporation
pursuant to Title IV of ERISA, other than a Multiemployer Plan.
"Hazardous Substance" has the meaning given such term in Section
3.22(b) of this Agreement.
"Indebtedness" means all obligations, contingent and otherwise, which
in accordance with GAAP should be classified on the obligor's balance sheet as
liabilities, or to which reference should be made by footnotes thereto,
including without limitation, in any event and
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whether or not so classified: (i) all debt and similar monetary obligations,
whether direct or indirect; (ii) all liabilities secured by any mortgage,
pledge, security interest, lien, charge or other encumbrance existing on
property owned or acquired subject thereto, whether or not the liability secured
thereby shall have been assumed; (iii) all guaranties, endorsements and other
contingent obligations whether direct or indirect in respect of Indebtedness or
performance of others, including any obligation to supply funds to or in any
manner to invest in, directly or indirectly, the debtor, to purchase
Indebtedness, or to assure the owner of Indebtedness against loss, through an
agreement to purchase goods, supplies or services for the purpose of enabling
the debtor to make payment of the Indebtedness held by such owner or otherwise,
and (iv) obligations to reimburse issuers of any letters of credit.
"Intangible Property" has the meaning given such term in Section 3.18
hereof.
"Licenses" has meaning given such term in Section 3.20 hereof.
"Lien" means (a) any encumbrance, mortgage, pledge, lien, charge or
other security interest of any kind upon any property or assets of any
character, or upon the income or profits therefrom; (b) any acquisition of or
agreement to have an option to acquire any property or assets upon conditional
sale or other title retention agreement, device or arrangement (including a
capitalized lease); or (c) any sale, assignment, pledge or other transfer for
security of any accounts, general intangibles or chattel paper, with or without
recourse.
"Material Adverse Effect" has the meaning given such term in Section
3.24 hereof.
"Multiemployer Plan" means a multiemployer plan within the meaning of
Section 3(37) of ERISA.
"Option Securities" means those shares of Common Stock of the Company
owned by Sellers which the Purchaser has an option to buy, pursuant to Article
VII of this Agreement.
"Per Share Price" has the meaning given such term in Section 2.1
hereof.
"Person" means an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization, and any government,
governmental department or agency or political subdivision thereof.
"Purchased Securities" means an aggregate of 70,000 shares of Class A
Stock and 436,000 shares of Class B Stock to be purchased pursuant to this
Agreement.
"Purchase Price" has the meaning given such term in Section 2.1.
"Purchaser" means Public Service Company of Oklahoma, an Oklahoma
corporation.
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"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the date hereof among the Company, the Purchaser, and certain
shareholders of the Company in the form of Exhibit D hereto.
"Related Agreements" means the Articles of Incorporation, Escrow
Agreement, Shareholders' Agreement, and Registration Rights Agreement.
"Related Trusts" shall mean, collectively, the Xxxxxxxxx Family Trust
B, the Xxxxxxxxx Family Trust C-1, and the Xxxxxxxxx Family Trust C-2, each
with Xx. X.X.Xxxxxxxxx as Trustee.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect at the time.
"Sellers" shall mean the persons listed on Schedule 2.1.
"Shareholders' Agreement" means the Shareholders' Agreement dated as of
the date hereof among the Sellers, certain additional shareholders of the
Company, the Company and Purchaser, in the form of Exhibit C hereto.
"Subsidiary" means any Person which the Company now or hereafter shall
at the time own, directly or indirectly through a subsidiary, at least a
majority of the outstanding capital stock (or other beneficial interest)
entitled to vote generally; and the term "Subsidiaries" shall mean all of such
Persons collectively.
"Taxes" means (A) all net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or windfall
profits taxes, or other taxes of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) upon the Company with respect to all periods or
portions thereof ending on or before the date hereof and/or (B) any liability of
the Company for the payment of any amounts of the type described in the
immediately preceding clause (A) as a result of being a member of an affiliated
or combined group.
ARTICLE II
PURCHASE AND SALE OF PURCHASED SECURITIES
2.1 Purchase and Sale of Purchased Securities. Subject to all of the
terms and conditions hereof and in reliance on the representations and
warranties set forth or referred to herein, at the Closing the Purchaser agrees
to purchase and the Sellers agree to sell the number of shares of Purchased
Securities set forth opposite each Seller's name in Schedule 2.1, at the price
of Six Dollars ($6.00) per share (the "Per Share Price"), or an aggregate price
of Three Million Thirty Six Thousand Dollars ($3,036,000) (the "Purchase
Price").
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2.2 Closing. The closing of the purchase and sale of the Purchased
Securities (the "Closing") will take place at the offices of the Company, at
8:00 a.m. Mountain Time on Monday, June 2, 1997, or at such other place, time
and date as the parties hereto may agree upon (the "Closing Date"). At the
Closing, the Sellers shall deliver to the Escrow Agent, the certificates
representing the Purchased Securities, properly endorsed in the name of
Purchaser, and the Purchaser shall deliver to the Escrow Agent the Purchase
Price by wire transfer, both to be held by the Escrow Agent, as provided in the
Escrow Agreement in the form of Exhibit B hereto.
2.3 Escrow. The obligation of the Purchaser to consummate the purchase
and the sale of the Purchased Securities is subject to and contingent upon
approval by the Securities and Exchange Commission ("SEC") under the Public
Utility Holding Company Act, of 1935, as amended, of the transactions provided
for in this Agreement without the imposition of any additional requirements or
conditions deemed to be material and adverse by the Purchaser in its sole
discretion. Pending consideration by the SEC of an application for such
approval, Purchaser and Sellers agree to deposit the Purchase Price and the
Escrow Shares with the Escrow Agent pursuant to the terms of the Escrow
Agreement. During the term of the Escrow Agreement, Sellers shall retain all
voting, dividend and distribution or other rights as a shareholder of the
Company with respect to the Escrow Shares.
(a) In the event the SEC disapproves of the purchase and sale
hereunder and the transactions contemplated hereby, or in the event no approval,
meeting the requirements set forth above in this Section 2.3, or denial is
received from the SEC within 75 days from the date hereof (or such later date as
may be agreed to in writing by Purchaser and Xx. X.X. Xxxxxxxxx and communicated
to the Escrow Agent), (i) the Escrow Shares shall be returned to Sellers, (ii)
the Purchase Price shall be returned to Purchaser, (iii) this Agreement and all
Related Agreements shall be rescinded, and (iv) neither Purchaser nor Sellers
shall have any liability to the other whatsoever, except as otherwise provided
in Section 9.16.
(b) In the event of SEC approval, meeting the requirements set
forth above in this Section 2.3, of the purchase and sale hereunder and the
transactions contemplated hereby is completed within the time period described
above (i) Escrow Agent shall cause the Escrow Shares to be converted to
Purchased Securities in the name of the Purchaser, (ii) the Purchased Securities
shall be delivered to the Purchaser, (iii) the Purchase Price shall be paid to
Sellers, and (iv) this Agreement and all Related Agreements shall continue in
full force and effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
In order to induce the Purchaser to enter into this Agreement, the
Sellers hereby make the following representations and warranties to the
Purchaser, jointly and severally:
3.1 Organization and Good Standing. The Company is duly organized,
validly existing and in good standing in its jurisdiction of incorporation
and is duly qualified as a foreign
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corporation and authorized to do business in all other jurisdictions in which
the nature of its business or property makes such qualification necessary and
where the failure to so qualify would have a Material Adverse Effect.
3.2 Authorization. With respect to each Seller, the execution, delivery
and performance by the Seller of this Agreement and of each Related Agreement to
which the Seller is a party, and the sale by the Seller of the Purchased
Securities hereunder: (a) are within the Seller's power and authority; (b) have
been duly authorized by all necessary action; and (c) do not and will not
conflict with or result in any breach of any law, regulation, order, judgment,
writ, injunction, license, permit, agreement or instrument to which the Seller
is subject.
3.3 Enforceability. With respect to each Seller, the execution and
delivery by the Seller of this Agreement and of each of the Related Agreements
to which the Seller is a party, will result in legally binding obligations of
the Seller, enforceable against the Seller in accordance with the respective
terms and provisions hereof and thereof.
3.4 Capitalization.
(a) As soon as is reasonably practicable after Closing, the
Company shall amend its Articles of Incorporation in the form of Exhibit A. Upon
the filing of Exhibit A with the Idaho Secretary of State, the authorized
Capital Stock of the Company shall consist solely of 7,000,000 shares of Common
Stock, $0.01 par value per share, consisting of 6,000,000 shares of Class A
Voting Common Stock and 1,000,000 shares of Class B Nonvoting Common Stock.
Schedule 3.4(a) sets forth a table indicating the capitalization of the Company
immediately prior to the execution of this Agreement. All of the issued shares
of Capital Stock of the Company are issued and owned by the Persons listed on
Schedule 3.4(a) and have been duly authorized, are validly issued and
outstanding and are fully paid and non-assessable.
(b) Except as set forth on Schedule 3.4(b), there are no
material outstanding rights (either preemptive or other) or options to subscribe
for or purchase from the Company, or any material warrants or other agreements
providing for or requiring the issuance or purchase by the Company of, any
Capital Stock or any securities convertible into or exchangeable, for, or
exercisable into, its Capital Stock or any material voting trusts, proxies or
agreements relating to the voting of the Company's Capital Stock. For purposes
of this Section 3.4(b), "material" shall mean any agreement or agreements which,
individually or in the aggregate, would affect more than 5,000 shares of Capital
Stock of the Company.
3.5 Subsidiaries. All the Company's Subsidiaries are listed on
Schedule 3.5.
3.6 Consents. Except as set forth on Schedule 3.6, except as otherwise
required under applicable federal and state Securities Laws, the execution,
delivery and performance by the Sellers of this Agreement and of each Related
Agreement to which they are parties, the sale of the Purchased Securities, the
grant of the Option, and the sale of the Option Securities pursuant to the
exercise of the Option, do not and will not require the approval or consent of,
or any filing with, any governmental authority or agency or any other Person.
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3.7 Reports and Financial Statement; Undisclosed Liabilities.
(a) Complete and correct copies of the Financial
Statements are attached hereto as Schedule 3.7.
(b) Except as otherwise specifically disclosed therein, each
of the audited Financial Statements as of January 31, 1997 and for the year then
ended was prepared in accordance with GAAP applied on a basis consistent with
prior periods except as otherwise stated therein; each of the balance sheets
included in the audited Financial Statements fairly presents the financial
condition of the Company as at the close of business on the date thereof; and
each of the statements of income included in the audited Financial Statements
fairly presents the results of operations of the Company for the fiscal period
then ended. The Company has no liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise, which are not fully reflected or
reserved against in audited Financial Statements, except for liabilities that
may have arisen in the ordinary and usual course of business and consistent with
past practice and that individually or in the aggregate do not have and could
not reasonably be expected to have a Material Adverse Effect.
(c) To the best of the Sellers' knowledge, except as otherwise
specifically disclosed therein, the Balance Sheet of the Company has been
prepared by management of the Company in good faith and in accordance with GAAP,
consistently applied. To the best of the Sellers' knowledge, the Company will
not have any material liabilities, contingent or otherwise, which are not
referred to in such Balance Sheet or in the notes thereto other than liabilities
incurred in the ordinary course of the Company's business since the Balance
Sheet Date, and liabilities not required to be disclosed in accordance with
GAAP.
(d) Since the Balance Sheet Date, there has been no material
adverse change in the business, assets, financial condition or prospects of the
Company.
3.8 Absence of Certain Developments. Except for entering into
this Agreement and except as disclosed on Schedule 3.8 hereof, since the
Balance Sheet Date:
(a) Except for minor variations which do not, either
individually or in the aggregate, have a material adverse effect on Purchaser's
rights, the Company has not whether or not in the ordinary course of business:
(i) issued any Capital Stock or other equity
interest or any right, options or warrants with respect thereto;
(ii) declared, set aside, paid to a reserve fund or
made any payment or distribution of cash or other property to its
stockholders or equity holders with respect to any class of its Capital
Stock or other equity interest or purchased or redeemed any shares of
its Capital Stock or other equity interests;
(iii) suffered any substantial loss to any of its
material assets;
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(iv) made any increases in the base compensation,
bonuses, paid vacation time allowed or fringe benefits for its
directors, officers, partners, employees or consultants, except for
normal periodic increases in base compensation for employees made
pursuant to established compensation policies;
(v) suffered damage, destruction or other casualty
loss, or forfeiture of, any property or assets, whether or not covered
by insurance, which has had or may reasonably be expected to have a
Material Adverse Effect;
(vi) made any capital expenditures, additions or
improvements or commitments for the same, except those which do not
exceed $500,000 in the aggregate;
(vii) entered into any contract, commitment or
agreement under which it has outstanding Indebtedness for borrowed
money or for the deferred purchase price of property in excess of
$500,000, or has the right or obligation to incur any such indebtedness
or obligation, or made any loan or advance to any Person other than
advances to employees for business expenses not exceeding $20,000 in
the aggregate;
(viii) paid any bonuses, deferred or otherwise, or
deferred any compensation to any of its directors, officers, partners
or employees except as reflected in the Financial Statements;
(ix) made any material change in accounting
procedures, policies or practices;
(x) mortgaged or pledged any of its properties or
assets, tangible or intangible, or subjected them to any Lien, except
Liens for current property taxes not yet due and payable and Liens on
personal property created in connection with equipment leases,
installment purchase contracts, conditional sales contracts, purchase
money mortgages and the like to secure Indebtedness incurred to acquire
property not exceeding $500,000 in the aggregate;
(xi) entered into any agreement or arrangement
granting any rights to purchase or lease any of its assets, properties
or rights or requiring the consent of any Person to the transfer,
assignment or lease of any such assets, properties or rights; or
(xii) entered into any agreement or understanding
to do any of the foregoing.
(b) Other than in the ordinary course of business
consistent with past practice, the Company has not:
(i) sold, leased, subleased, assigned or
transferred any of its tangible or intangible properties or assets, or
canceled, waived or compromised any debts or claims;
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(ii) entered into any other material transaction,
or any amendment of any contract, lease, agreement or license which is
material to its business; or
(iii) entered into any agreement or understanding
to do any of the foregoing.
3.9 Liens. The Company has no Liens upon any of its properties other
than the Liens which are listed on Schedule 3.9 hereto and Liens on personal
property created in connection with equipment leases, installment purchase
contracts, conditional sales contracts, purchase money mortgages and the like to
secure Indebtedness incurred to acquire property not exceeding $500,000 in the
aggregate.
3.10 Indebtedness to and from Officers, Directors and Others. Except as
set forth on Schedule 3.10 hereto, the Company is not indebted to any Founder,
director, officer, partner, manager, employee or consultant of the Company, or
to any Affiliate of the Company, except for amounts due as normal salaries,
wages or reimbursement of ordinary business expenses or routine employee
advances for expenses, which business expenses and employee advances do not
exceed $100,000 in the aggregate for all such Founders, directors, officers,
partners, managers, employees and consultants and not exceeding $15,000 for any
such Person. Except as set forth on Schedule 3.10, no Founder, director,
officer, partner, manager, employee or consultant of the Company nor any
Affiliate of the Company, is now, or on the Closing Date will be, indebted to
the Company except for ordinary business expense advances.
3.11 Insurance. A certificate of insurance listing all policies of
title, liability, fire, worker's compensation and other forms of insurance
(including bonds) insuring the properties, assets and operations of the business
of the Company has been provided to the Purchaser. Except as set forth on
Schedule 3.11 hereto, all such policies are in full force and effect, have been
underwritten by unaffiliated insurers and are sufficient for all applicable
requirements of law. All such policies shall continue in full force and effect
after the Closing Date with respect to occurrences which would have been covered
by such policies prior to the Closing Date, except to the extent the Company's
Board of Directors determines that such policies or coverages should be changed.
3.12 Tax Returns. The Company has filed all Tax returns and reports
which are required to be filed with any foreign, federal, state or local
governmental authority or agency and has paid all Taxes which have become due,
and made adequate provision for the payment of all Taxes that will become due,
under applicable foreign, federal, state or local governmental law or
regulations with respect to the periods in respect of which such returns and
reports were filed, and all assessments of Taxes. The Company and its management
knows of no additional assessments since the date of such returns and reports,
and there will be no additional assessments for which adequate reserves
appearing on the Balance Sheet have not been established. Each of the Company
and its Subsidiaries, if any, has made adequate provisions for all current
Taxes.
3.13 [This section is intentionally left blank].
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3.14 Title to Assets. The Company owns all of its respective assets,
and has good and marketable title with respect thereto, reflected in the Balance
Sheet of the Company and its Subsidiaries, as at the Balance Sheet Date, subject
to changes in the ordinary course of business since the Balance Sheet Date,
subject to no Liens other than those granted to First Union Bank of Virginia.
3.15 Material Contracts and Obligations.
(a) Attached hereto as Schedule 3.15 is a true, complete and
accurate list, categorized by subject matter, of all of the following material
outstanding contracts, plans, leases, and commitments and other agreements
(collectively "Contracts") entered into by the Company which are in writing or
have been orally agreed to by the Company:
(i) all Contracts for the purchase or sale of
services, materials, products or supplies which involve aggregate
payments by the Company of more than $750,000 or involve aggregate
payments to the Company of more than $750,000, or which were entered
into other than in the ordinary course of business of the Company;
(ii) all Contracts or arrangements providing for
stock options or stock purchases, bonuses, pensions, deferred or
incentive compensation, retirement or severance payments,
profit-sharing, insurance or other benefit plans or programs for the
Founder or any officer, consultant, director or employee of the
Company;
(iii) all Contracts for construction or for the
purchase of real estate, improvements, fixtures, equipment, machinery
and other items which under GAAP constitute capital expenditures and
which individually or in the aggregate for any related group of items
involve expenditures of the Company in excess of $500,000;
(iv) all Contracts relating to the rental or use of
equipment, vehicles, other personal property or fixtures, except for
Contracts individually involving payment of annual rentals or sums less
than $15,000 and in the aggregate for the Company less than $500,000;
(v) all Contracts relating in any way to direct or
indirect indebtedness for borrowed money or evidenced by a bond,
debenture, note or other evidence of indebtedness (whether secured or
unsecured) of or to the Company, including but not limited to,
indebtedness by way of lease or installment purchase arrangement,
guarantee, reimbursement obligations pertaining to letters of credit,
purchase price discount obligations, undertakings on which others rely
in extending credit, or otherwise, and all mortgages, pledges,
conditional sales contracts, chattel and purchase-money mortgages and
other security arrangements with respect to any real estate,
improvements, equipment, other personal property or fixtures, used or
owned by the Company, except in each case for contracts individually
involving less than $100,000;
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(vi) all Contracts substantially restricting the
Company from engaging in any line of business or competing with any
Person or in any geographical area, or from using or disclosing any
information in its possession (other than routine supplier and customer
confidentiality agreements);
(vii) all license agreements with annual costs in
excess of $250,000, either as licensor or licensee, other than licenses
for software;
(viii) all joint venture Contracts and other
Contracts involving a sharing of profits, revenue or cash flow;
(ix) all Contracts with any Affiliate of the
Company (other than the Related Agreements) and all Contracts not made
in the ordinary course of its business;
(x) all other Contracts, except those which are (A)
cancelable on 30 days' or less notice without any penalty or other
financial obligation or (B) if not so cancelable, involve annual
aggregate payments by or to the Company of $10,000 or less; or
(xi) all written Contracts of employment with any
officer, consultant, director or employee and any such oral Contracts
which are not terminable at will by the Company.
(b) Except as set forth on Schedule 3.15 hereto, all Contracts
required to be disclosed to the Purchaser pursuant to this Section 3.15 are
valid, binding and in full force and effect as to the Company, and neither the
Company nor, to the best of the Sellers's knowledge, any other party thereto, is
in material breach or violation of, or material default under, nor is there any
reasonable basis for a claim of such breach or violation by the Company or such
default by the Company under, the terms of any such Contract, and no event has
occurred which constitutes or, with the lapse of time or the giving of notice or
both, would constitute, such a material breach, violation or default by the
Company.
(c) Set forth on Schedule 3.15(c) is a list of all
Contracts having a funded remaining balance of $750,000 or more.
3.16 Real Property-Owned. The Company does not own any real
property.
3.17 Real and Personal Property - Leased. To the best of the Sellers'
knowledge, set forth in Schedule 3.17 hereto is a true and accurate description
of all real and material personal property leased by the Company, setting forth
(i) the name of the lessor and (ii) a description of the property leased. With
respect to such leases, the property described in such leases is presently used
by the Company as indicated in Schedule 3.17 as lessee under the terms of such
leases, and such leases are in full force and effect, and will be free and clear
of all Liens created by the Company except as set forth in Schedule 3.17 hereto,
and neither the Company is in default of the terms of any such lease in any
material respect nor, to the best of the Sellers'
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knowledge, is any lessor in default in any material respect under any such lease
nor have any events occurred which, with the giving of notice or the lapse of
time, or both, would be a default under any such lease. The Company has made
available the Purchaser a true and correct copy of all leases set forth on
Schedule 3.17.
3.18 Proprietary Rights. To the best of the Sellers' knowledge, except
as set forth on Schedule 3.18, the Company owns all material patents,
trademarks, trade names, service marks, logos, copyrights, including
applications therefor, inventions, formulas, methods and processes (all such
items being hereinafter referred to as "Intangible Property") presently used by
the Company without any infringement upon the proprietary rights of others; all
material patents, patent applications, registered trademarks, trademark
applications, trade names, service marks, logos, licenses and copyrights used or
owned by the Company in connection with its respective businesses are set forth
on Schedule 3.18 hereto and have been duly registered in, filed in, or issued by
the United States Patent Office, United States Register of Copyrights or the
corresponding offices of other jurisdictions, to the extent necessary to effect
lawful ownership of such intellectual property rights in the name of the
Company, and have been properly maintained or renewed in accordance with all
applicable provisions of applicable law; and Schedule 3.18 accurately sets forth
with respect to each patent, patent application, registered trademark, trademark
application, trade name, service xxxx, logo, license and copyright owned or used
by the Company in the conduct of its businesses, (i) the date of expiration, if
any, (ii) whether such ownership rights are exclusive and (iii) any licensee of
such rights. No royalties or fees are payable by the Company to any Person by
reason of the ownership or use of any of the Intangible Property. All items of
Intangible Property are valid and in good standing, and they are adequate and
sufficient to permit the Company to conduct its business as presently conducted,
and no other rights of any kind with respect to the Intangible Property are
required by the Company for its operations as presently conducted. Except as set
forth on Schedule 3.18, the Company has the sole and exclusive right to use the
Intangible Property and the Company has not entered into any licenses,
sublicenses or agreements relating to the use by any other Person of any
Intangible Property now in effect, and to the best of Seller's knowledge no
infringement exists upon the Intangible Property by any other Person. Except as
disclosed on Schedule 3.18 hereto, no charge or claim is pending or threatened,
nor has any charge or claim been made against the Company within the past five
years to the effect that the sale of any of its respective products or services
infringes upon or conflicts in any way with any rights or properties of the type
enumerated above owned or held by any other Person.
3.19 Necessary Property; Condition of Property. To the best of the
Sellers' knowledge, the properties and assets owned, leased by or licensed to
the Company, and reflected in the Balance Sheet, constitute all of the real and
personal properties, tangible and intangible, which are necessary, used or
useful in the conduct of its business in the manner and to the extent presently
conducted or as presently contemplated to be conducted. No other material real
or personal properties are required for the conduct of the business of the
Company as presently conducted.
3.20 Necessary Licenses. To the best of the Sellers' knowledge,
except as set forth on Schedule 3.20, the Company has all licenses, permits,
consents, concessions and other
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authorizations of governmental, regulatory or administrative agencies or
authorities, whether foreign, federal, state, or local (collectively
"Licenses"), required to own and lease its properties and assets and to conduct
its business as now conducted except where the failure to have such Licenses
would not have a Material Adverse Effect. Except as specified in Schedule 3.20
hereto, (or as expressly exempted by Schedule 3.6) no registrations, filings,
applications, notices, transfers, consents, approvals, audits, qualifications,
waivers or other action of any kind is required by virtue of the execution and
delivery of this Agreement, or of the consummation of the transactions
contemplated hereby (a) to avoid the loss of any such License, or any asset,
property or right pursuant to the terms thereof, or the violation or breach of
any law applicable thereto or (b) to enable the Company to hold and enjoy the
same after the Closing Date in the conduct of its business as conducted prior to
the Closing Date.
3.21 Compliance with Law.
(a) To the best of the Sellers' knowledge, except as may be
set forth on Schedule 3.21(a) hereto, the Company is not in default under or in
violation of any law (including, without limitation, laws relating to the
issuance or sale of securities, antitrust, zoning and building codes and
ordinances, occupational safety, the protection of the environment,
transportation, storage or disposal of hazardous waste, anti-pollution and air
and water quality laws), or any licenses, franchises, permits, authorizations or
concessions granted by, or any judgment, decree, writ, injunction or order of,
any governmental or regulatory authority, applicable to its business or any of
its properties or assets, except where such defaults and violations would not,
in the aggregate, have a Material Adverse Effect. The Company has not received
any notification alleging any violations of any of the foregoing within the last
five years with respect to which adequate corrective action has not been taken.
(b) To the best of Sellers' knowledge, no event has occurred
which (i) could result in the Company being found unqualified to hold, or which
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any of the Licenses or the denial of an application for the
renewal thereof or (ii) would result in any impairment of the rights of the
Company as holder of any such License.
(c) To the best of the Seller's knowledge, no present or
former stockholder, officer, director, employee or agent of the Company, has in
order to assist the Company in obtaining or retaining any License or any
business for or with, or directing business to the Company offered, paid,
promised to pay or authorized the payment of any money, or offered, given,
promised to give, or authorized the giving of anything of value to (i) any
officer or employee of any government or any department, agency, instrumentality
thereof, or any person acting in an official capacity for or on behalf of any
such government or department, agency or instrumentality (such an officer or
employee being referred to as a "foreign official"), (ii) any foreign political
party or official thereof or any candidate for foreign political office, or
(iii) any person, while knowing that all or a portion of such money or thing of
value will be offered, given, or promised, directly or indirectly, to any
foreign official, to any foreign political party or official thereof, or to any
candidate for foreign political office, in each case, for purposes of the
following:
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(A) illegally or corruptly influencing any act or
decision of any such foreign official, political party or official
thereof, or candidate in such person's official capacity, or (ii)
inducing such foreign official, political party or official thereof, or
candidate to do or omit to do any act in violation of the lawful duty
of such person, or
(B) illegally or corruptly inducing such foreign
official, political party or official thereof, or candidate to use such
person's influence with a foreign government or instrumentality thereof
to affect or influence any act or decision of such government or
instrumentality.
There is not now, nor has there ever been, any employment of
or beneficial ownership of the Company by any governmental or political official
in any country in the world.
3.22 Environmental Compliance.
(a) To the best of the Sellers' knowledge, (i) the Company has
not generated, used, transported, treated, stored, released or disposed of, and
has not suffered or permitted anyone else to generate, use, transport, treat,
store, release or dispose of any "Hazardous Substance" (as hereinafter defined)
in violation of any "Environmental Laws" (as hereinafter defined); (ii) there
has not been any generation, use, transportation, treatment, storage, release or
disposal of any Hazardous Substance resulting from the conduct of the Company or
the use of any property or facility by the Company or to the best of the
Sellers's knowledge, any nearby or adjacent properties or facilities, which has
created or might reasonably be expected to create any liability on the part of
the Company under the Environmental Laws or which would require reporting to or
notification by the Company to any governmental entity; (iii) no asbestos which
is or has some reasonable likelihood of becoming friable or polychlorinated
biphenyl or underground storage tank is contained in or located at any facility
owned, leased or used by the Company; and (iv) any Hazardous Substance handled
or dealt with in any way in connection with the business of the Company, whether
before or during the ownership of the Company has been and is being handled or
dealt with in all respects in compliance with the Environmental Laws in effect
at the time such activities were being conducted.
(b) For purposes of this Agreement, the term "Hazardous
Substance" shall mean (but shall not be limited to) substances that are defined
or listed in, or otherwise classified pursuant to, any applicable Environmental
Laws as "hazardous substances," "hazardous materials" "hazardous wastes" or
"toxic substances," or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy.
(c) For purposes of this Agreement, the term "Environmental
Laws" shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Resources Conservation and Recovery Act
of 1976, as amended, and any applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, approvals,
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plans, authorizations, concessions, and similar items of all governmental
authorities and all applicable judicial, administrative and regulatory decrees,
judgments and orders, any of which relate to the protection of human health or
the environment from the effects of Hazardous Substances, including, but not
limited to, those pertaining to reporting, licensing, permitting, investigating
and remediating emissions, discharges, releases or threatened releases of
Hazardous Substances into the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances.
3.23 Litigation. To the best of the Sellers' knowledge, except as set
forth on Schedule 3.23 hereto, there is no suit, claim, action, proceeding or
investigation pending or threatened against the Company or any of its respective
assets or properties, including each Employee Benefit Plan at law or in equity
or before any governmental authority or instrumentality or before any arbitrator
of any kind, against the Founder, or any management director, officer, key
employee or the holder of more than five percent (5%) of the Capital Stock of
the Company, nor has there occurred any event or does there exist any condition
on the basis of which any litigation, proceeding or investigation might properly
be instituted and there is no reasonable basis for any such suit, claim, action,
proceeding or investigation. Except as set forth on Schedule 3.23 hereto,
neither the Company nor to the best knowledge of the Sellers, any Founder,
management director, officer, key employee or the holder of more than five
percent (5%) of the Capital Stock of the Company, nor, to the best knowledge of
the Sellers, any Employee Benefit Plan has been a party to any such suit, claim,
action, proceeding or investigation during the past two years involving its
business, assets or properties, nor has any such suit, claim, action, proceeding
or investigation been threatened by or against the Company.
3.24 No Material Adverse Changes. Except as set forth on Schedule 3.24
hereto, since the Balance Sheet Date, there has occurred no material adverse
change in the business, assets, properties (tangible and intangible),
operations, condition (financial or otherwise) or liabilities of the Company,
whether or not in the ordinary course of business, whether separately or in the
aggregate with other occurrences or developments, and whether insured against or
not (a "Material Adverse Effect"), and the Sellers have no knowledge of any
occurrence or development which might reasonably be expected to result in any
such Material Adverse Effect.
3.25 Employee Benefit Plans. Except as described on Schedule 3.25, the
Company does not maintain or operate any Employee Benefit Plan nor has any such
Plan been maintained or operated during the past three years. The Company does
not maintain or contribute to any Guaranteed Pension Plan or Multiemployer Plan.
With respect to each Employee Benefit Plan listed on Schedule 3.25, to the
extent applicable:
(a) Each such Employee Benefit Plan has been maintained and
operated in all material respects in compliance with its terms and with all
applicable provisions of the ERISA, the Code and all applicable regulations,
rulings and other authority issued thereunder;
(b) All contributions required by law to have been made under
each such Employee Benefit Plan (without regard to any waivers granted under
Section 412 of the Code)
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to any fund or trust established thereunder or in connection therewith have
been made by the due date thereof;
(c) Each such Employee Benefit Plan intended to qualify under
Section 401(a) of the Code is the subject of a favorable unrevoked determination
letter issued by the Internal Revenue Service as to its qualified status under
the Code, which determination letter may still be relied upon as to such tax
qualified status, and no circumstances have occurred that would adversely affect
qualified status of any such Employee Benefit Plan;
(d) No Benefit Plan is subject to Title IV of ERISA;
(e) None of such Employee Benefit Plans that are "employee
welfare benefit plans" as defined in Section 3(1) of ERISA provides for
continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's termination of employment, except as
required by applicable law, including section 4980B of the Code or Section 601
of ERISA; and
(f) Neither the Company nor any trade or business (whether or
not incorporated) under common control with the Company within the meaning of
Section 4001 of ERISA has, or at any time has had, any obligation to contribute
to any "multiemployer plan" as defined in Section 3(37) of ERISA.
3.26 Withholdings; Contracts; Labor Relations. The Company has withheld
all amounts required by law or agreement to be withheld by it from the wages,
salaries and other payments to its employees and is not liable for any arrears
of wages or any taxes or penalties for failure to comply with any of the
foregoing. Except as set forth on Schedule 3.26 hereto, the Company is not a
party to any written employment agreement, arrangement or understanding with any
of its officers, employees, partners or shareholders. There are no collective
bargaining agreements covering any of the employees of the Company. The Company
has not breached or otherwise failed to comply in any material respect with any
provision of any collective bargaining agreement or other labor union contract
applicable to any of its employees. No consent of any union (or any similar
group or organization) is required in connection with the consummation of the
transactions contemplated hereby. There are no pending, threatened or
anticipated (a) employment discrimination charges or complaints against or
involving the Company before any federal, state, or local board, department,
commission or agency, (b) unfair labor practice charges or complaints, disputes
or grievances affecting the Company, (c) union representation petitions
respecting the employees of the Company, (d) efforts being made to organize any
of the employees of the Company or (e) strikes, slow downs, work stoppages, or
lockouts or threats thereof affecting the Company.
3.27 Governmental Regulations. The Company is not a "holding company",
or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended; nor is the Company an "investment company", or an "affiliated
person" or a "principal underwriter" of an "investment company", as such terms
are defined in the Investment Company Act of 1940,
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as amended. The Company is not now, nor has it been within the past five years,
a "United States real property holding corporation" as defined in Section 897 of
the Code.
3.28 Corporate Documents, Books and Records. Complete and correct
copies of the Articles of Incorporation and by-laws, and of all amendments
thereto, of the Company have been previously made available to the Purchaser,
and no changes in said documents will be made on or before the Closing Date
other than as disclosed to, and concurred to in writing by, the Purchaser. The
minute books of the Company contain accurate records of all meetings and
consents in lieu of meetings of the Board (and its committees) and shareholders
of the Company since incorporation. Except as reflected in such minute books,
there are no minutes of meetings or consents in lieu of meetings of the Board
(or its committees) or of the shareholders of the Company. The books and records
of the Company accurately reflect the transactions to which the Company is a
party or by which its properties are subject or bound, and such books and
records have been properly kept and maintained in all material respects.
3.29 Broker Costs. None of the Sellers are obligated for any
Broker Costs relating to the transactions contemplated by this Agreement.
3.30 Disclosure. No representation, warranty or statement made in this
Agreement, any Related Agreement, or any agreement, certificate, statement or
document furnished by or on behalf of the Sellers in connection with the
purchase of the Purchased Securities or the grant of the Option contains or will
contain any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances in which they were made, not misleading.
3.31 Certain Agreements of Officers and Employees.
(a) No officer or key employee of the Company is, or is now
expected to be, in violation of any term of any employment contract, patent
disclosure agreement, proprietary information agreement, noncompetition
agreement, nonsolicitation agreement, or any other contract or agreement or
restrictive covenant relating to the right of any such officer or employee to be
an employee, to be employed by the Company, or because of the nature of the
business conducted or proposed to be conducted by the Company or relating to the
use of trade secrets or proprietary information of others, and to the Sellers'
best knowledge and belief, the continued employment of the Company's officers
and employees does not subject the Company or the Purchaser to any liability
with respect to any of the foregoing matters.
(b) Except as set forth on Schedule 3.31(b), to the best
knowledge of the Sellers, no officer of the Company, nor any key employee of the
Company whose termination, either individually or in the aggregate, would have a
Material Adverse Effect on the Company, has any present intention of terminating
his or her employment with the Company.
(c) For purposes of this Agreement, "key employee" means
any of the Persons described in Schedule 3.31(c).
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3.32 Registration Rights. Except for the rights granted to the
Purchaser pursuant to the Registration Rights Agreement, no Person has demand or
other registration rights to cause the Company to file any registration
statement under the Securities Act relating to the securities of the Company or
any right to participate in any such registration statement.
ARTICLE IV
PURCHASER'S REPRESENTATIONS
4.1 Investment Intent. The Purchaser hereby represents and warrants to
the Sellers that it is (i) an "accredited investor" as defined in Regulation D
of the Securities Act and (ii) it is acquiring the Purchased Securities and the
Option for investment and not with a view to the distribution thereof.
4.2 Authorization. The Purchaser hereby represents that this Agreement
and the Related Agreements to which it is a party have been executed by a duly
authorized Person on its behalf, and the execution, delivery and performance
hereof and thereof have been duly authorized by all appropriate action.
4.3 Enforceability. The Purchaser hereby represents that the execution
and delivery by the Purchaser of this Agreement and each of the Related
Agreements will result in legally binding obligations of the Purchaser
enforceable against it in accordance with the respective terms and provisions
hereof and thereof.
4.4 Exemption. The Purchaser understands that the Purchased Securities
and Option are not (and any Common Stock acquired on exercise of the Option at
the time of issuance will not be) registered under the Securities Act on the
grounds that the sale provided for in this Agreement and the issuance of
securities hereunder is exempt from registration under the Securities Act
pursuant to Section 4(1) thereof, and that the Company's reliance on such
exemption is predicated on the Purchaser's representations set forth herein.
4.5 Restrictions on Resale. The Purchaser understands that the
Purchased Securities and the Option Securities may not be sold, transferred, or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering such Securities or an available exemption from registration
under the Securities Act, the Purchased Securities and the Option Securities
must be held indefinitely. The Purchaser agrees that in no event will it make a
transfer or disposition of any of the Purchased Securities or the Option
Securities (other than pursuant to an effective registration statement under the
Securities Act), unless and until (i) the Purchaser shall have notified the
Sellers of the proposed disposition and (ii) if requested by the Sellers, such
Purchaser shall have furnished to the Sellers at the expense of the Purchaser or
its transferee, an opinion of counsel reasonably satisfactory to the Sellers to
the effect that such transfer may be made without registration under the
Securities Act.
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4.6 Broker Costs. The Purchaser is not obligated for any Broker
Costs related to the transaction contemplated by this Agreement.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE
The Purchaser's obligation to purchase the Purchased Securities
pursuant to Section 2.1 of this Agreement is subject to compliance by the
Sellers with the agreements and representations herein contained, and to the
satisfaction, on or prior to the Closing Date, of the following conditions:
5.1 Related Agreements. Each of the Related Agreements shall have been
executed and delivered in the form provided for herein, and each of the Related
Agreements shall, subject only to the satisfaction of the conditions contained
in the Escrow Agreement, be in full force and effect and no term or condition
thereof shall have been amended, modified or waived except with the prior
written consent of the Purchaser. All covenants, agreements and conditions
contained in the Related Agreements which are to be performed or complied with
on or prior to the Closing Date shall have been performed or complied with in
all material respects, subject to the conditions contained in the Escrow
Agreement.
5.2 Charter Documents; Good Standing Certificates. The Purchaser shall
have received from the Sellers (a) a copy, certified by the Secretary of the
Company to be true and complete as of the Closing Date, of the by-laws thereof;
and (b) a certificate, dated not more than five days prior to the date hereof,
of the relevant governmental authority or other appropriate official of each
state in which the Company is qualified to do business, as to the Company's
corporate good standing in such state or qualification to do business, as the
case may be.
5.3 Proof of Corporate Action. The Purchaser shall have received from
the Company copies certified by the Secretary thereof to be true and complete as
of the Closing Date, of the records of all corporate action taken to authorize
the execution, delivery and performance of each of the Related Agreements to
which the Company is a party.
5.4 Incumbency Certificate. The Purchaser shall have received from the
Company an incumbency certificate, dated the Closing Date, signed by a duly
authorized officer thereof and giving the name and bearing a specimen signature
of each individual who shall be authorized to sign, in the name and on behalf of
the Company, each of the Related Agreements to which the Company is or is to
become a party, and to give notices and to take other action on behalf of the
Company under each of such documents.
5.5 Legal Opinions. The Purchaser shall have received (a) from Xxxxx
Xxxxx Xxxxxx Xxxxxx Xxxxxx, counsel to the Sellers, a favorable opinion
substantially in the form of Exhibit E hereto, and (b) from Xxxxxxx, Xxxxxx,
Xxxxxxx, Rock & Fields, counsel to the Company, a favorable opinion in the form
of Exhibit F hereto.
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5.6 Legality; Governmental and Other Authorizations. The purchase of
the Purchased Securities, the Option, and the Option Securities by the
Purchaser, and the other transactions contemplated herein and in the Related
Agreements, shall have been approved by the Securities and Exchange Commission
as provided in Section 2.3. None of the transactions contemplated herein and in
the Related Agreements shall be prohibited by any law or governmental order or
regulation, nor shall they subject the Purchaser to any penalty, special tax, or
other onerous condition. All other necessary consents, approvals, licenses,
permits, orders and authorizations of, or registrations, declarations and
filings with, any governmental or administrative agency or of or with any other
Person, with respect to any of the transactions contemplated by this Agreement
or any of the Related Agreements, shall have been duly obtained or made and
shall be in full force.
5.7 Due Diligence. The Purchaser shall have completed its legal,
accounting and business due diligence review of the Company and the results
thereof shall have been satisfactory to the Purchaser. Not in limitation of the
foregoing, the Purchaser shall have completed review and been satisfied with all
of the terms, conditions and documentation relating to the capital structure of
the Company, including such amendments to the Company's Articles of
Incorporation, by-laws and other documents as shall be necessary to reflect the
terms of the Purchaser's proposed investment. Such review shall be completed
within two days after Purchaser's receipt of the Financial Statements.
5.8 General. All instruments and legal, governmental, administrative,
corporate and partnership proceedings in connection with the transactions
contemplated by this Agreement and the Related Agreements shall be satisfactory
in form and substance to the Purchaser, and the Purchaser shall have received
copies of all documents, including, without limitation, records of corporate or
other proceedings, the opinion of counsel contemplated in Section 5.5 hereof,
and any consents, licenses, approvals, permits and orders required to be secured
by the Sellers in connection with the transactions contemplated herein or which
the Purchaser may have requested in connection therewith.
ARTICLE VI
CONDITIONS TO THE SELLERS' OBLIGATIONS
The Sellers' obligation to sell the Purchased Securities to the
Purchaser pursuant to this Agreement is subject to compliance by the Purchaser
with the agreements herein contained, and to the satisfaction on or prior to the
Closing Date, of the following conditions:
6.1 Representations. The representations made by the Purchaser in
Article IV hereof shall be true and correct in all material respects when made
and shall be true and correct in all material respects as of the Closing Date.
6.2 Related Agreements. Each of the Related Agreements to which the
Purchaser is a party shall have been executed by the Purchaser. All covenants,
agreements and conditions contained in the Related Agreements which are to be
performed or complied with by the
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Purchaser on or prior to the Closing Date shall have been performed or complied
with by the Purchaser in all material respects.
ARTICLE VII
OPTION
7.1 Grant of Option. Subject to and conditioned upon receipt by the
Purchaser of SEC approval thereof under the Public Utility Holding Company Act
of 1935, the Purchaser shall have the right, upon the terms and subject to the
conditions set forth in this Article VII, at any time on or after the date
hereof and at or prior to 11:59 pm., Mountain time, on September 2, 1998 (the
"Expiration Time"), but not thereafter, to acquire from Sellers (in the amounts
set forth in Schedule 7.1) all, but not less than all, of 206,000 fully paid and
nonassessable shares of Class B Stock (the "Option Securities"), at a purchase
price per share (the "Option Price") of $9.00 (the "Option"). Such number of
shares, type of security and Option Price are subject to adjustment as provided
herein, and all references to "Option Securities" and "Option Price" herein
shall be deemed to include any such adjustment.
7.2 Exercise of Option. The purchase rights represented by this Option
are exercisable by the Purchaser at any time and from time to time at or prior
to the Expiration Time by delivering notice of exercise in writing to the
Sellers. The closing for the sale of the Option Securities shall occur at 10:00
a.m. Mountain time at the offices of the Company on the fifth day following
delivery of the notice to Sellers. At such closing, the Purchaser shall deliver
the Option Price for the Option Securities thereby purchased (by cash or by
check or bank draft payable to the order of Sellers), and the Sellers shall
deliver certificates evidencing the Option Securities, properly endorsed in the
name of Purchaser or its assignee. If Sellers do not own a sufficient number of
shares of Class B Stock at the time of receipt of such notice, they shall
promptly exercise their right under the Articles of Incorporation to convert a
sufficient number of shares of Class A Stock to Class B Stock to allow them to
perform their obligations hereunder.
7.3 Transfer of Shares. Certificates for shares purchased hereunder
shall be delivered to the Purchaser properly endorsed to Purchaser, within a
reasonable time after the date on which this Option shall have been exercised in
accordance with the terms hereof. The Sellers hereby represent and warrant that
all shares of Option Securities which may be transferred upon the exercise of
this Option will, upon such exercise, be duly and validly authorized and issued,
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issuance thereof.
7.4 No Rights as Shareholders. This Option does not entitle the
Purchaser to any voting, dividend, distribution or other rights as a
shareholder of the Company with respect to the Option Securities prior to the
exercise hereof.
7.5 Transfer or Assignment. Without the consent of Sellers,
the rights under this Option may be transferred to any direct or indirect
wholly-owned subsidiary of Purchaser's
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parent corporation, Central and South West Corporation, by providing notice of
transfer to Sellers.
7.6 Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
Automatic Conversion, etc. The Option Price and the number and type of
securities and/or other property to which the Purchaser would be entitled upon
exercise of this Option shall be appropriately and proportionately adjusted to
reflect any stock dividend, stock split, combination of shares,
reclassification, recapitalization, automatic conversion, redemption or other
similar event affecting the number or character of outstanding shares of Common
Stock so that the number and type of securities and/or other property to which
the holder would be entitled upon exercise of this Option shall be equal to that
to which such holder would have been entitled at the time of such event if such
holder had exercised this Option immediately prior thereto.
7.7 Adjustment for Reorganization, Consolidation, Merger, etc. In case
of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in which
the Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization, or any transaction in which in excess
of 50% of the company's voting power is transferred, or any sale of all or
substantially all of the assets of the Company (any such transaction being
hereinafter referred to as a "Reorganization"), then, in each case, the holder
of this Option, on exercise or conversion hereof at any time after the
consummation or effective date of such Reorganization, shall receive, in lieu of
the Option Securities transferrable on such exercise prior to the date of such
Reorganization, the stock and other securities and property (including cash) to
which such holder would have been entitled upon the date of such Reorganization
if such holder had exercised this Option immediately prior thereto.
7.8 Cooperation. The Sellers will not take any action, or vote their
shares of Common Stock to cause any amendment of the Company's Articles of
Incorporation or by-laws or to effect any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other action, if the effect of the action would avoid or seek
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Sellers, but will at all times in good faith assist
in the carrying out of all the provisions of this Option and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the holder of the Option against impairment; provided, nothing herein
is intended to conflict with Xx. X.X. Xxxxxxxxx'x fiduciary responsibility to
the Company in his capacity as an officer and/or director of the Company, which
at all times shall take priority over the terms of this Section 7.8.
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ARTICLE VIII
INDEMNITY
8.1 Indemnification.
(a) Notwithstanding any disclosures made in the Schedules hereto,
Xx. X. X. Xxxxxxxxx, Xx. Xxxxxxx Xxxxxxxxx, the Xxxxxxxxx Family Trust B, the
Xxxxxxxxx Family Trust C-1, and the Xxxxxxxxx Family Trust C-2 (collectively,
the "Indemnitors") jointly and severally hereby agree to indemnify, exonerate
and hold the Purchaser and its shareholders, officers, directors, employees and
agents (each, an "Indemnitee") free and harmless from and against any and all
actions, causes of action, suits, losses, liabilities, damages and expenses,
including, without limitation, reasonable attorneys' fees and disbursements
(collectively, "Damages"), arising out of or resulting from any failure by the
Sellers to comply with any of their covenants or any breach by the Sellers of
any of their representations and warranties in this Agreement, or any other
agreement contemplated hereby, except where such Damages are caused directly by
the actions of the Indemnitee in violation of its obligations under such
agreements.
(b) Subject to Section 8.1(c) the aggregate liability of the
Indemnitors for claims made under Section 8.1(a) shall not exceed $1,750,000. In
addition to the foregoing, the Indemnitors shall not be liable for any claim
made under Section 8.1(a) unless such claim exceeds $75,000; provided, when the
cumulative claims under Section 8.1(a) exceed $250,000 the Indemnitors shall be
liable for all such claims up to the $1,750,000 general limitation.
(c) The parties acknowledge that Purchaser has a right of
indemnification against the Company under Section 6.1 of the Registration Rights
Agreement that is similar to Purchaser's right of indemnification against the
Indemnitors under Article VIII of this Agreement. Purchaser agrees that its
aggregate recovery of Damages under said Section 6.1 of the Registration Rights
Agreement and Article VIII of this Agreement shall not exceed $3,500,000;
provided, however, the parties further agree that nothing herein shall affect
Purchaser's unconditional right to pursue indemnification against the
Indemnitors (jointly and severally) under Article VIII of this Agreement, the
Company under the Registration Rights Agreement, or any combination thereof, at
Purchaser's sole discretion.
8.2 Survival of Obligations. The obligations of the Sellers under this
Article VIII shall survive the transfer of the Purchased Securities, the Option,
or the Option Securities, and the termination of this Agreement; provided, in no
event may Purchaser initiate an action for indemnification under Section 8.1
after the fifth anniversary of the date of the Agreement.
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ARTICLE IX
GENERAL
9.1 Notices
(a) All demands, notices, requests, consents and other
communications required or permitted under this Agreement, any Related Agreement
or the Purchased Securities, the Option or the Option Securities shall be in
writing and shall be personally delivered or sent by facsimile machine (with a
confirmation copy sent by one of the other methods authorized in this Section),
commercial (including Fed Ex) or U.S. Postal Service overnight delivery service,
or deposited with the U.S. Postal Service mailed first class, registered or
certified mail, postage prepaid, as set forth below:
If to the Purchaser:
Public Service Company of Oklahoma
c/o CSW Business Ventures
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Doerner, Saunders, Xxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: H. Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Sellers:
Xx. X. X. Xxxxxxxxx
c/o SCIENTECH, Inc.
0000 Xxxxxxxxxxxxx Xxx
Xxxxx Xxxxx, Xxxxx 00000
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with a copy to:
Xxxxx Xxxxx Xxxxxx Xxxxxx Xxxxxx
2300 City Center Bellevue
000 000xx Xxxxxx X.X.
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
and
Xxxxxxx, Xxxxxx, Xxxxxxx, Rock & Fields
000 Xxxxx Xxxxxxx Xxxxxxxxx
Xxxxx, Xxxxx 00000
Attention: Xxxx Street
Tel: 000-000-0000
Fax: 000-000-0000
(b) Notices shall be deemed given upon the earlier to occur of
(i) receipt by the party to whom such notice is directed; (ii) if sent by
facsimile machine, on the day (other than a Saturday, Sunday or legal holiday in
the jurisdiction to which such notice is directed) such notice is sent if sent
(as evidenced by the facsimile confirmed receipt) prior to 4:00 p.m. Mountain
Time and, if sent after 4:00 p.m. Mountain Time, on the day (other than a
Saturday, Sunday or legal holiday in the jurisdiction to which such notice is
directed) after which such notice is sent; (iii) on the first business day
(other than a Saturday, Sunday or legal holiday in the jurisdiction to which
such notice is directed) following the day the same is deposited with the
commercial carrier if sent by commercial overnight delivery service; or (iv) the
fifth day (other than a Saturday, Sunday or legal holiday in the jurisdiction to
which such notice is directed) following deposit thereof with the U..S. Postal
Service as aforesaid. Each party, by notice duly given in accordance therewith
may specify a different address for the giving of any notice hereunder.
9.2 Survival and Termination of Covenants, Agreements, Representations
and Warranties. All covenants, agreements, representations and warranties made
herein or in any other document referred to herein or delivered to any party
pursuant hereto shall be deemed to have been relied on by each such party,
notwithstanding any investigation made by such party or on its behalf. All
representations and warranties made herein or in any of the Related Agreements
shall survive the execution and delivery of this Agreement and of the transfer
of the Purchased Securities, the Option, or Option Securities.
9.3 Amendments and Waivers. Except as otherwise expressly provided
herein, any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively) only with the written consent of the
Sellers and the Purchaser. Any amendment or waiver
-26-
effected in accordance with this Section 9.3 shall be binding upon the Sellers
and the holder of any Purchased Securities sold pursuant to this Agreement.
9.4 Entire Agreement. This Agreement and the other agreements referred
to herein constitute the whole and entire agreement between the parties
pertaining to the subject matter hereof, and supersede all prior agreements or
understandings between the parties with respect thereto. This Agreement may not
be modified except by an instrument in writing signed by all parties.
9.5 Governing Law. The validity, construction and enforcement of, and
the remedies under, this Agreement shall be governed in accordance with the laws
of Idaho, except any choice of law provision of Idaho law shall not apply if the
law of a state or jurisdiction other than Idaho would apply thereby.
9.6 Jurisdiction and Venue. The parties to this Agreement agree that
jurisdiction and venue of any action brought to enforce, or to construe or
determine the validity of, any term or provision contained in this agreement
shall properly lie in the District Court of Bonneville County, Idaho, or the
United States District Court for the District of Idaho, or the District Court of
Tulsa County, Oklahoma, or the United States District Court for the Northern
District of Oklahoma. Such jurisdiction and venue are merely permissive;
jurisdiction and venue shall also continue to lie in any court where
jurisdiction and venue would otherwise be proper. The parties further agree that
the mailing by certified mail, return receipt requested, or the delivery by any
recognized expedited delivery service, of any process required by any such court
shall, when received, constitute valid and lawful service of process against
them, without the necessity for service by any other means otherwise provided by
statute or rule of court.
9.7 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective personal representatives, successors and permitted assigns. No party
may assign its, his or her obligations hereunder without the prior written
consent of all other parties; provided, notwithstanding any provision of this
Agreement or any Related Agreement to the contrary, without prior notice to or
consent of the Sellers, Purchaser may assign all of its rights and obligations
under this Agreement, or any or all of its Purchased Securities, Option, and
Option Securities purchased hereunder, to any Affiliate under the direct or
indirect control of Purchaser's parent corporation, Central and South West
Corporation.
9.8 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
9.9 Attorneys' Fees. If any action is brought to enforce, or to
construe or determine the validity of, any term or provision of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees, costs, and
disbursements in addition to any other relief to which such party may be
entitled.
-27-
9.10 Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.11 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
9.12 Further Action. The parties to this Agreement shall execute
and deliver all documents, provide all information and take or refrain from
taking action as may be necessary or appropriate to achieve the purposes of this
Agreement.
9.13 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
9.14 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument. Any signature delivered by facsimile transmission shall be
deemed a valid and binding signature for all purposes hereof.
9.15 Construction. All parties hereto having participated actively in
the negotiation and drafting of this Agreement, and each party having been
represented by counsel, the terms of this Agreement shall not be construed
against, nor more favorably to, any party, regardless of their responsibility
for its preparation.
9.16 Expenses. The Sellers on the one hand, and the Purchaser on the
other hand, agree to pay their separate costs and expenses (such as travel,
photocopy and telephone expenses and including the fees and expenses of counsel)
in connection with the documentation of the transactions contemplated by this
Agreement and the purchase of the Purchased Securities, and shall not be liable
for the other's expenses; provided, if the transactions contemplated hereby fail
to close for any reason other than breach by Sellers of any of their
representations, warranties or covenants herein, the Purchaser shall pay Sellers
$50,000, as full compensation for and liquidated damages in respect of their
expenses in connection with the transactions contemplated hereby.
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IN WITNESS WHEREOF, the Sellers and the Purchaser have executed this
Agreement as of the day and year first above written.
"Sellers"
XX. X. X. XXXXXXXXX
XXXXXXXXX FAMILY TRUST B
By:
Xx. X. X. Xxxxxxxxx, Trustee
XXXXXXXXX FAMILY TRUST C-1
By:
Xx. X. X. Xxxxxxxxx, Trustee
XXXXXXXXX FAMILY TRUST C-2
By:
Xx. X. X. Xxxxxxxxx, Trustee
XX. XXXXXXX XXXXXXXXX
XX. XXX-XXXXX XXXXXXXXX
-00-
XXXXXX X. XXXXXXXXX
XXXXX X. XXXXXXXXX
"Purchaser"
PUBLIC SERVICE COMPANY OF OKLAHOMA
By:
Name:
Title:
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