EXHIBIT 10.14
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PLAN AND AGREEMENT OF MERGER
BY AND AMONG
XXXXXX HEALTHCARE, INC.,
XXXXXX ACQUISITION CORP.,
XXXXXX COMPANY
AND
XXXXXXX X. XXXX
DATED JANUARY 9, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE 1
THE MERGER AND CLOSING........................................................2
1.1 Certain Definitions....................................................2
1.2 Effective Date.........................................................2
1.3 Name and Continued Corporate Existence of the Surviving Corporation....2
1.4 Governing Law and Articles of Incorporation of the Surviving
Corporation ...........................................................2
1.5 Bylaws of the Surviving Corporation....................................2
1.6 Directors of the Surviving Corporation.................................2
1.7 Officers of the Surviving Corporation..................................3
1.8 Vacancies..............................................................3
1.9 Capital Stock of the Surviving Corporation.............................3
1.10 Conversion of Securities Upon Merger...................................3
1.10.1 Conversion of Xxxxxx Common Stock........................3
1.10.2 Surrender of Xxxxxx Certificates.........................3
1.10.3 Conversion of Acquisition Sub Common Stock...............3
1.11 Acquisition Sub's Transfer Books Closed................................4
1.12 Assets and Liabilities of Merging Corporations Become Those of the
Surviving Corporation..................................................4
1.13 Conveyances to the Surviving Corporation...............................4
1.14 Accounting Treatment...................................................4
1.15 Federal Income Tax Treatment...........................................4
1.16 Closing................................................................4
1.17 Closing Deliveries.....................................................5
1.17.1 Opinion of Xxxxxx'x Counsel..............................5
1.17.2 Opinion of Shareholder's and Xxxxxx'x Counsel............5
1.18 Employment Agreements..................................................6
1.19 Lockup Agreement.......................................................6
1.20 Revolving Promissory Note..............................................6
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF XXXXXX AND THE SHAREHOLDER.................................................6
2.1 Organization and Standing..............................................6
2.2 Authority and Consent..................................................6
2.3 No Violations or Conflicts.............................................7
2.4 Capitalization.........................................................7
2.5 Title to Stock.........................................................7
2.6 Financial Information..................................................8
2.7 Taxes..................................................................8
2.7.1 General..................................................8
2.7.2 Subchapter S Matters.....................................9
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2.8 Liabilities............................................................9
2.9 Defaults...............................................................9
2.10 Litigation.............................................................9
2.11 Additional Xxxxxx Information.........................................10
2.11.1 Real Property [Schedule ]...............................10
2.11.2 Furniture, Machinery and Equipment [Schedule ]..........10
2.11.3 Inventory [Schedule ]...................................10
2.11.4 Intellectual Property [Schedule ].......................10
2.11.5 Licenses and Permits [Schedule ]........................10
2.11.6 Contracts [Schedule ]...................................10
2.11.7 Receivables [Schedule ].................................10
2.11.8 Payables [Schedule ]....................................11
2.11.9 Indebtedness [Schedule ]................................11
2.11.10 Insurance [Schedule ].................................11
2.11.11 Personnel [Schedule ].................................11
2.11.12 Employee Plans [Schedule ]............................11
2.11.13 Bank Accounts [Schedule ].............................11
2.11.14 Employee Agreements [Schedule ].......................11
2.11.15 Guaranties [Schedule ]................................11
2.11.16 Reserves and Accruals [Schedule ].....................12
2.11.17 Environmental [Schedule ].............................12
2.12 Absence of Certain Changes and Events [Schedule ].....................12
2.12.1 Financial Change........................................12
2.12.2 Property Damage.........................................12
2.12.3 Capitalization Change...................................12
2.12.4 Labor Disputes..........................................12
2.12.5 Other Material Changes..................................12
2.13 Title to and Quiet Possession of Assets...............................12
2.14 Intellectual Property.................................................12
2.15 Condition of Assets...................................................13
2.16 Hazardous Substances..................................................14
2.17 Operation of Business.................................................14
2.18 ERISA Plans, Labor Issues and Affiliate Payments......................14
2.19 Insurance.............................................................15
2.20 Related-Party Transactions............................................16
2.21 Investment Representations............................................16
2.22 Continuity of Interest................................................17
2.23 Brokers...............................................................17
2.24 Untrue Statements.....................................................17
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
XXXXXX AND ACQUISITION SUB...................................................18
3.1 Organization and Standing.............................................18
3.2 Agreement Authorized and its Effect on Other Obligations..............18
3.3 SEC Documents.........................................................18
3.4 Financial Information.................................................18
3.5 Capitalization........................................................19
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3.6 Brokers...............................................................19
3.7 Untrue Statements.....................................................19
ARTICLE 4
INDEMNIFICATION..............................................................19
4.1 Indemnification by the Shareholder; Release...........................19
4.2 Indemnification by Xxxxxx and Surviving Corporation...................20
4.3 Indemnification Procedure.............................................20
4.4 Indemnification Threshold.............................................21
4.5 Sales Tax Claims......................................................21
4.6 Survival of Representations and Warranties............................21
ARTICLE 5
MISCELLANEOUS................................................................21
5.1 Certain Definitions...................................................21
5.2 Further Assurances....................................................24
5.3 Public Announcements..................................................24
5.4 Expenses..............................................................24
5.5 Notices and Waivers...................................................24
5.6 Gender and Certain References.........................................24
5.7 Successor and Assigns.................................................25
5.8 Applicable Law........................................................25
5.9 Dispute Resolution....................................................25
5.10 Severability; Judicial Modification...................................26
5.11 Amendment and Entirety................................................27
5.12 Rights of Parties.....................................................27
5.13 Time of Essence.......................................................27
5.14 Counterparts..........................................................27
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement") is entered into on
this 9th day of January, 1998 by and among Xxxxxx Healthcare, Inc., a Texas
corporation ("Xxxxxx"), Xxxxxx Acquisition Corp., a Minnesota corporation and
wholly-owned subsidiary of Xxxxxx ("Acquisition Sub"), Xxxxxx Company, a
Minnesota corporation ("Xxxxxx"), and Xxxxxxx X. Xxxx, the sole shareholder of
Xxxxxx (the "Shareholder"). Acquisition Sub and Xxxxxx are sometimes referred to
collectively herein as the "Merging Corporations."
WITNESSETH :
WHEREAS, Xxxxxx is a corporation duly organized and validly existing
under the laws of the State of Texas, with its principal executive offices at
000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx Xxxx, Xxxxx 00000;
WHEREAS, Acquisition Sub is a corporation duly organized and validly
existing under the laws of the State of Minnesota, with its principal executive
offices at 000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx Xxxx, Xxxxx 00000;
WHEREAS, Xxxxxx owns 1,000 shares of the common stock, par value $.01
per share, of Acquisition Sub (the "Acquisition Sub Common Stock"), which
constitute all of the issued and outstanding shares of capital stock of
Acquisition Sub;
WHEREAS, Xxxxxx is a corporation duly organized and validly existing
under the laws of the State of Minnesota, with its principal executive offices
at 000 Xxxxxxxx Xx., Xx. Xxxx, Xxxxxxxxx 00000-0000;
WHEREAS, Xxxxxx is principally engaged in the business of distributing
health care and rehabilitation equipment to hospitals, private practice clinics,
long-term health care facilities and educational facilities in Minnesota and the
surrounding states as well as providing technical support on equipment sold (the
"Business");
WHEREAS, the Shareholder owns 10,000 shares of the Class A Common Stock,
par value $1.00 per share, of Xxxxxx (the "Xxxxxx Common Stock"), which
constitute all of the issued and outstanding shares of capital stock of Xxxxxx;
and
WHEREAS, (i) the Board of Directors of Xxxxxx, (ii) Xxxxxx (in its
capacity as sole shareholder of the Acquisition Sub) and the Board of Directors
of Acquisition Sub, and (iii) the Shareholder and the directors of Xxxxxx desire
to merge Acquisition Sub with and into Xxxxxx in accordance with the provisions
of Section 302A.601, ET SEQ. of the Minnesota Business Corporation Act (the
"MBCA") and pursuant to the terms and provisions of this Agreement, and have
approved such merger (the "Merger") and the other terms and provisions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and to prescribe the terms and
conditions of the Merger contemplated hereby, the mode of carrying the same into
effect, the manner and basis of converting the presently
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outstanding shares of Xxxxxx Common Stock into the right to receive the Merger
Consideration described in Section 1.10.1 hereof, and such other details and
provisions as are deemed necessary or proper, the parties hereto hereby agree as
follows:
ARTICLE 1
THE MERGER AND CLOSING
1.1 CERTAIN DEFINITIONS. As used in this Agreement, each parenthetically
capitalized term in the introduction, recitals and other sections of this
Agreement has the meaning so ascribed to it, and other capitalized terms have
the meaning given them in Section 5.1.
1.2 EFFECTIVE DATE. The Merger shall become effective upon the filing of
the Articles of Merger with the Secretary of State of Minnesota following its
execution in accordance with Section 302A.615 of the MBCA. This filing shall be
made concurrently on the date hereof or as soon as practicable thereafter, with
the date on which such filing is made being referred to elsewhere herein as the
"Effective Date."
1.3 NAME AND CONTINUED CORPORATE EXISTENCE OF THE SURVIVING CORPORATION.
On the Effective Date, the identity, existence, purposes, powers, objects,
franchises, rights, and immunities of Xxxxxx, the surviving corporation of the
Merger, shall continue unaffected and unimpaired by the Merger, and the
corporate identity, existence, purposes, powers, objects, franchises, rights,
and immunities of Acquisition Sub shall be wholly merged into Xxxxxx, the
surviving corporation, and Xxxxxx shall be fully vested therewith. Accordingly,
on the Effective Date, the separate existence of Acquisition Sub, except insofar
as continued by statute, shall cease.
1.4 GOVERNING LAW AND ARTICLES OF INCORPORATION OF THE SURVIVING
CORPORATION. The laws of Minnesota shall continue to govern the Surviving
Corporation. On the Effective Date, the Articles of Incorporation of Acquisition
Sub shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended in the manner provided by law.
1.5 BYLAWS OF THE SURVIVING CORPORATION. On the Effective Date, the
Bylaws of Acquisition Sub shall be the Bylaws of the Surviving Corporation until
altered, amended, or repealed in accordance with applicable law.
1.6 DIRECTORS OF THE SURVIVING CORPORATION. On the Effective Date,
pursuant to the Articles of Incorporation and Bylaws of the Surviving
Corporation, the number of directors constituting the entire Board of Directors
shall be fixed at 2. The names of the persons who, on the Effective Date, shall
become the members of the Board of Directors of the Surviving Corporation, and
shall hold office until the first annual meeting of shareholders of the
Surviving Corporation next following the Effective Date, are as follows:
NAME
-------------------
Xxxxxxx X. Xxxxxxx
-------------------
Xxx X. Xxxxxxx
-------------------
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1.7 OFFICERS OF THE SURVIVING CORPORATION. The names of the persons who,
on the Effective Date, shall constitute the officers of the Surviving
Corporation, and who shall hold office, subject to the Bylaws of the Surviving
Corporation, until the first meeting of directors following the next annual
meeting of shareholders thereof, are as follows:
NAME OFFICE
------------------------------ ------------------------------------------------
Xxxxxxx X. Xxxxxxx............ President and Chief Executive Officer
Xxx X. Xxxxxxx................ Senior Vice President, Chief Financial Officer
and Assistant Secretary
Xxxxx X. Xxxxxxxxxx........... Vice President-Finance and Secretary
1.8 VACANCIES. If on or after the Effective Date, a vacancy shall for
any reason exist in the Board of Directors or in any of the offices of the
Surviving Corporation, such vacancy shall be filled in the manner provided in
the Articles of Incorporation and Bylaws of the Surviving Corporation.
1.9 CAPITAL STOCK OF THE SURVIVING CORPORATION. The authorized number of
shares of capital stock of the Surviving Corporation, and the par value,
designations, preferences, rights, and limitations thereof, and the express
terms thereof, shall be as set forth in the Articles of Incorporation of the
Surviving Corporation.
1.10 CONVERSION OF SECURITIES UPON MERGER.
1.10.1 CONVERSION OF XXXXXX COMMON STOCK. On the Effective Date,
the 10,000 shares of Xxxxxx Common Stock issued and outstanding on the
date hereof, all of which are held by the Shareholder (the "Xxxxxx
Shares"), without any action on the part of the Shareholder, shall
automatically become and be converted into the right to receive as
consideration from Xxxxxx (collectively, the "Merger Consideration"),
120,308 shares of the common stock, par value $.01 per share, of Xxxxxx
("Xxxxxx Common Stock") to be issued to the Shareholder on the Effective
Date, such number of Xxxxxx Shares to be determined by dividing $880,000
by the Market Price (the "Xxxxxx Shares").
1.10.2 SURRENDER OF XXXXXX CERTIFICATES. The Shareholder has
surrendered (and Xxxxxx acknowledges its receipt of) the certificate(s)
representing the Xxxxxx Shares (the "Xxxxxx Certificate(s)"). On the
Effective Date, Xxxxxx will cancel the Xxxxxx Certificate(s), and the
Shareholder will become entitled to receive the Merger Consideration.
1.10.3 CONVERSION OF ACQUISITION SUB COMMON STOCK. On the
Effective Date, each share of Acquisition Sub Common Stock then issued
and outstanding, without any action on the part of Xxxxxx, shall
automatically become and be converted into the right to receive one
fully paid and nonassessable share of Xxxxxx Common Stock from Xxxxxx
upon surrender and cancellation of the certificate theretofore
evidencing shares of Acquisition Sub Common Stock.
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1.11 ACQUISITION SUB'S TRANSFER BOOKS CLOSED. Upon the Effective Date,
the stock transfer books of Acquisition Sub shall be deemed closed, and no
transfer of any shares of capital stock of Acquisition Sub shall thereafter be
made or consummated.
1.12 ASSETS AND LIABILITIES OF MERGING CORPORATIONS BECOME THOSE OF THE
SURVIVING CORPORATION. On the Effective Date, all rights, privileges, powers,
and franchises of each of the Merging Corporations, and all property, real,
personal, and mixed, and all debts due on whatever account, as well as stock
subscriptions and all other things in action of or belonging to any of the
Merging Corporations, shall be taken by and deemed to be transferred to and
shall be vested in the Surviving Corporation without further act or deed, and
all such rights, privileges, powers, and franchises, property, debts, or choses
in action, and all and every other interest of each of the Merging Corporations
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the respective Merging Corporations, and the title to any real
property, whether vested by deed or otherwise, in either of the Merging
Corporations, shall not revert or be in any way impaired by reason of the
Merger; PROVIDED, HOWEVER, that all rights of creditors and all liens upon any
properties of each of the Merging Corporations shall be preserved unimpaired,
and all debts, liabilities and duties of the Merging Corporations shall
thenceforth attach to the Surviving Corporation and may be enforced against and
by it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it. Any action or proceeding pending by or against
either of the Merging Corporations may be prosecuted to judgment as if the
Merger had not taken place, or the Surviving Corporation may be substituted in
place of either of the Merging Corporations.
1.13 CONVEYANCES TO THE SURVIVING CORPORATION. The Merging Corporations
hereby agree, respectively, that from time to time, as and when requested by the
Surviving Corporation, or by its successors and assigns, they will execute and
deliver or cause to be executed and delivered, all such deeds, conveyances,
assignments, and other instruments, and will take or cause to be taken such
further or other action as the Surviving Corporation, its successors or assigns,
may deem necessary or desirable to vest or perfect in or confirm to the
Surviving Corporation, its successors and assigns, title to and possession of
all the property, rights, privileges, powers, immunities, franchises, and
interests referred to in this Section 1.13 and otherwise carry out the intent
and purposes of this Agreement.
1.14 ACCOUNTING TREATMENT. The assets and liabilities of the Merging
Corporations shall be taken up on the books of the Surviving Corporation in
accordance with generally accepted accounting principles, and the capital
surplus and retained earnings accounts of the Surviving Corporation shall be
determined, in accordance with generally accepted accounting principles, by the
Board of Directors of the Surviving Corporation. Nothing herein shall prevent
the Board of Directors of the Surviving Corporation from making any future
changes in its accounts in accordance with law.
1.15 FEDERAL INCOME TAX TREATMENT. The Merger is intended to qualify as
a reverse triangular merger transaction described in ss. 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended (the "Code").
1.16 CLOSING. Consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at Xxxxxx & Xxxxxx L.L.P., counsel to
Xxxxxx ("Xxxxxx & Xxxxxx"), at 000 Xxxxxxxxx, Xxxxxxx, Xxxxx 00000-0000 at 9:00
a.m. on January 9, 1998 (the "Closing Date"), unless another time, place or date
is agreed to by the Shareholder and Xxxxxx.
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1.17 CLOSING DELIVERIES. At the Closing, (a) the Shareholder shall
deliver to Xxxxxx the duly and validly issued certificate(s) representing all of
the Xxxxxx Shares, (b) the Shareholder and Xxxxxx shall have delivered to one
another all other documents, instruments and agreements as required under this
Agreement, (c) Xxxxxx shall deliver to the Shareholder the Merger Consideration
payable at Closing as provided in Section 1.10.1, and (d) Xxxxxx and the
Shareholder will deliver to one another the opinions of counsel as described
below:
1.17.1 OPINION OF XXXXXX'X COUNSEL. Xxxxxx shall deliver a
favorable opinion, dated as of the Closing Date, from Xxxxxx & Xxxxxx,
in form and substance satisfactory to the Shareholder, to the effect
that (i) Xxxxxx and Acquisition Sub have been duly incorporated and are
validly existing as corporations in good standing under the laws of
their states of organization, (ii) all corporate proceedings required to
be taken by or on the part of Xxxxxx and Acquisition Sub to authorize
the execution of this Agreement and the implementation of the
transactions contemplated hereby have been taken, (iii) when this
Agreement has been duly executed and delivered by Xxxxxx and Acquisition
Sub, it will be the legal, valid and binding obligation of Xxxxxx and
Acquisition Sub and enforceable against Xxxxxx and Acquisition Sub in
accordance with its terms, except as enforceability may be limited by
(a) equitable principles of general applicability or (b) bankruptcy,
insolvency, reorganization, fraudulent conveyance or similar laws
affecting the rights of creditors generally, and (iv) the Xxxxxx Shares
issuable in exchange for the Xxxxxx Shares, when issued in accordance
with the terms of this Agreement, will be validly issued, fully paid and
non-assessable by Xxxxxx and will not be subject to any preemptive
rights to purchase such shares. In rendering such opinion, such counsel
may rely upon (i) certificates of public officials and of officers of
Xxxxxx and Acquisition Sub as to matters of fact and (ii) the opinion or
opinions of other counsel, which opinions shall be reasonably
satisfactory to the Shareholder, as to matters other than federal or
Texas law.
1.17.2 OPINION OF SHAREHOLDER'S AND XXXXXX'X COUNSEL. The
Shareholder shall deliver a favorable opinion, dated as of the Closing
Date, from Xxxxx, Xxxxxxxx & Xxxx, P.L.L.P., counsel to the Shareholder,
in form and substance satisfactory to Xxxxxx, to the effect that (i)
Xxxxxx has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Minnesota,
(ii) all outstanding shares of the Xxxxxx Common Stock have been validly
issued and are fully paid and nonassessable, (iii) all of the Xxxxxx
Shares are owned of record by the Shareholder, (iv) when this Agreement
has been duly executed and delivered by Xxxxxx and the Shareholder, it
will be the legal, valid and binding obligation of Xxxxxx and the
Shareholder and enforceable against Xxxxxx and the Shareholder in
accordance with its terms, except as the enforceability may be limited
by (a) equitable principles of general applicability or (b) bankruptcy,
insolvency, reorganization, fraudulent conveyance or similar laws
affecting the rights of creditors generally, (v) the execution and
delivery of the Agreement will not constitute a default under or violate
Xxxxxx'x Articles of Incorporation or Bylaws or any provision of
Minnesota law applicable to Xxxxxx or Shareholder, and (vi) upon filing
of Articles of Merger in Minnesota, the Merger will have been
effectuated as of the Effective Date in accordance with the MBCA. In
rendering such opinion, such counsel may rely upon (i) certificates of
public officials and of officers of Xxxxxx or the Shareholder as to
matters of fact and (ii) on the opinion or opinions of other counsel,
which opinions shall be reasonably satisfactory to Xxxxxx, as to matters
other than federal or Minnesota law.
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1.18 EMPLOYMENT AGREEMENTS. At the Closing, Xxxxxx and the Shareholder
will enter into an employment agreement in substantially the same form and terms
as attached hereto as EXHIBIT A, and Xxxxxx and Xxxxx Xxxxxxxxx shall enter into
an agreement in substantially the same form and terms as attached hereto as
EXHIBIT B.
1.19 LOCKUP AGREEMENT. At the Closing, the Shareholder will enter into a
lockup agreement in substantially the same form and terms as attached hereto as
EXHIBIT C (the "Lockup Agreement").
1.20 REVOLVING PROMISSORY NOTE. As soon as practicable after the Closing
Date, Xxxxxx will pay off the outstanding balance of the Revolving Promissory
Note with Liberty State Bank, or obtain a release of Shareholder's personal
guarantee. Xxxxxx further agrees that it will not make any future borrowings
under this credit facility, unless and until Xxxxxx shall have obtained the
release of Shareholder's personal guarantee.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF XXXXXX AND THE SHAREHOLDER
As material inducements to the execution, delivery and performance of
this Agreement by Xxxxxx, each of Xxxxxx and the Shareholder hereby jointly and
severally represents and warrants to Xxxxxx as follows, except as otherwise
described in the Exception Schedule attached hereto. The Exception Schedule
shall identify each exception by the section number(s) of this Article 2 to
which it relates.
2.1 ORGANIZATION AND STANDING. Xxxxxx is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Minnesota.
Xxxxxx has all necessary statutory and corporate power and authority to own,
operate, and lease its properties and to carry on its business as now owned or
leased and operated by it. To the best knowledge of Xxxxxx and the Shareholder,
Xxxxxx is qualified to transact business in every jurisdiction in which the
nature of Xxxxxx'x contacts requires such qualification. Xxxxxx does not own,
directly or indirectly, any interest or investment (whether debt or equity) in
any other Person. True, correct and complete copies of Xxxxxx'x Articles of
Incorporation and Bylaws, as each may have been amended from time to time, are
attached to the Exception Schedule.
2.2 AUTHORITY AND CONSENT. The Shareholder is a resident of Minnesota,
above the age of 18 years, and has legal capacity and requisite power and
authority to enter into, and perform his obligations under this Agreement. The
execution and delivery of this Agreement has been authorized by the directors of
Xxxxxx and the Shareholder, the consummation of the transactions contemplated
hereby has been duly and validly authorized by all necessary corporate action on
the part of Xxxxxx, and this Agreement is a valid and binding obligation of
Xxxxxx and the Shareholder enforceable against Xxxxxx and the Shareholder
(subject to normal equitable principles) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, debtor
relief or similar laws affecting the rights of creditors generally.
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2.3 NO VIOLATIONS OR CONFLICTS. Neither the execution and delivery of
this Agreement by the Shareholder and Xxxxxx nor the consummation of the Merger
and the other transactions contemplated hereby will: (a) violate or conflict
with any provision of Xxxxxx'x Articles of Incorporation or Bylaws, as amended
to date; (b) violate or conflict with any provision of any Laws applicable to
Xxxxxx or its Business, the Shareholder, or either of their respective assets;
(c) result in a breach of, or constitute a default (or with notice or lapse of
time, or both, result in a breach of, or constitute a default) under or
otherwise give any Person the right to terminate or accelerate payment under or
performance of any note, bond, loan agreement, contract, lease, license,
franchise, permit, trust agreement or declaration of trust, or other agreement
or instrument to which Xxxxxx or the Shareholder is a party or to which their
respective assets are subject; or (d) result in the creation or imposition of
any Encumbrance of any nature upon or with respect to any of the assets of
Xxxxxx or the Shareholder.
2.4 CAPITALIZATION. The authorized capital stock of Xxxxxx consists of
50,000 shares of capital stock which is comprised of (i) 25,000 shares of Class
A Voting Stock, par value $1.00 per share, 10,000 of which are issued and
outstanding, and (ii) 25,000 shares of Class B Non-Voting Stock, par value $.01
per share, none of which are issued and outstanding ("Xxxxxx Non-Voting Stock").
All issued and outstanding shares of Xxxxxx Common Stock are validly issued,
fully paid and non-assessable, and are owned beneficially and of record by the
Shareholder. No shares of Xxxxxx Common Stock or Xxxxxx Non-Voting Stock have
been issued in violation of Xxxxxx'x Articles of Incorporation or Bylaws, the
preemptive or other rights of any shareholder or former shareholder of Xxxxxx,
or of any other Person, or any Laws. Neither the Shareholder nor Xxxxxx has any
liability to any former owner of any of Xxxxxx'x securities by reason of any
failure by them to comply with any Laws, Xxxxxx'x Articles of Incorporation or
Bylaws, or any other agreements. There are no outstanding subscriptions,
options, rights, warrants, calls, preemptive rights, convertible securities, or
other agreements or commitments of any kind obligating Xxxxxx or the Shareholder
to sell, convey, issue, transfer from treasury, or otherwise dispose of, any
additional shares of its capital stock of any class, or any other equity or debt
security. Except for the distribution of a 1994 Cadillac, since October 31,
1997, Xxxxxx has not declared, set aside, paid or made, or agreed, arranged or
committed to declare, set aside, pay or make any dividend or other distribution
in respect of its capital stock, and has not directly or indirectly redeemed,
purchased or otherwise acquired its capital stock.
2.5 TITLE TO STOCK. All of the issued and outstanding shares of Xxxxxx
Common Stock are owned beneficially or of record by the Shareholder. The
Shareholder holds good, indefeasible, valid and marketable title to all shares
of Xxxxxx Common Stock so owned by him, free and clear of all Encumbrances. The
Shareholder possesses full authority and legal right to sell, transfer and
assign to Xxxxxx the entire legal and beneficial ownership of the Xxxxxx Common
Stock owned by the Shareholder, free and clear of all Encumbrances. On the
Effective Date, Xxxxxx will own the entire legal and beneficial interest in such
Xxxxxx Common Stock free and clear of all Encumbrances and subject to no legal,
equitable, transfer or other restrictions of any kind, except transfer
restrictions imposed by operation of applicable securities Laws, and any
Encumbrances imposed or created by Xxxxxx. There are no Claims pending or
threatened against Xxxxxx or the Shareholder that concern or affect title to any
of Xxxxxx'x capital stock, or that seek to compel the issuance of capital stock
or other securities of Xxxxxx, nor are Xxxxxx or the Shareholder aware of any
facts or circumstances which would give rise to such a Claim. The Shareholder
acquired his Xxxxxx Common Stock in transactions that fully complied with the
provisions of all applicable Laws. None of the outstanding shares of Xxxxxx
Common Stock is subject to any voting trust, voting agreement
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or other agreement or understanding with respect to the voting thereof, nor is
any proxy in existence with respect thereto.
2.6 FINANCIAL INFORMATION. Xxxxxx has delivered to Xxxxxx Xxxxxx'x
unaudited financial statements, consisting of a balance sheet (the "Balance
Sheet") as of October 31, 1997 (the "Balance Sheet Date"), and an income
statement for the twelve months ended October 31, 1997, true and correct copies
of which are attached to the Exception Schedule (such financial statements
referenced above are herein collectively referred to as the "Financial
Information"). Except for customary year-end audit adjustments to unaudited
statements, the Financial Information (a) is in accordance with Xxxxxx'x books
and records, (b) has been prepared in accordance with generally accepted
accounting principals consistently applied with prior periods, (c) fairly
presents and is a true and complete statement of the financial position and
results of operations of Xxxxxx as of and for the periods indicated, and (d)
does not include or omit any material asset or liability (whether fixed,
accrued, contingent or other) the inclusion or omission of which renders such
financial statements misleading or incomplete. Since the Balance Sheet Date,
Xxxxxx has not changed any accounting method or practice, or experienced any
material adverse change in its financial condition, operations, assets,
liabilities (fixed, accrued, contingent, or other), revenues, expenses, or
business prospects, or experienced any event or condition that is likely to
result in such a material adverse change in its business or assets.
2.7 TAXES.
2.7.1 GENERAL. Xxxxxx has timely filed all federal, state,
county, local and other excise, franchise, property, severance, payroll,
income, capital stock, sales and use, fuel and other tax returns for all
fiscal years ended on or before October 31, 1997, and for any periods
thereafter for which returns are due, and all such returns are true and
correct in all material respects. Xxxxxx has not filed an extension for
any tax return otherwise due. Xxxxxx has timely paid all taxes which are
shown on such returns to be due or have been assessed against it and all
taxes, penalties and interest which any Governmental Authority has
proposed or asserted to be owing (except for those being contested in
good faith as set forth on the Exception Schedule). Xxxxxx has made all
withholding payments of tax required to be made under all tax Laws.
Except as set forth on the Exception Schedule, provisions and accruals
for income taxes, payroll taxes payable, ad valorem property taxes,
sales taxes and all other taxes and governmental charges required to be
paid by Xxxxxx as of the Balance Sheet Date have been set forth in the
Financial Information and conform in all material respects with federal
income tax principles and are adequate to cover Xxxxxx'x liability for
all periods before the Balance Sheet Date. Except for the audit
currently being conducted in South Dakota or as otherwise disclosed on
the Exception Schedule, there is no pending audit of Xxxxxx, and Xxxxxx
has not received any oral or written notice of any proposed audit, by
any Governmental Authority. Xxxxxx has filed sales tax returns in
Minnesota, Iowa, Illinois, North Dakota, South Dakota and Wisconsin. All
tax liabilities to which the properties of Xxxxxx may have been
subjected have been discharged, except for taxes assessed but not yet
payable. There are no tax Claims presently being asserted against
Xxxxxx, and, to the knowledge of Xxxxxx and the Shareholder, there is no
basis for any such Claim. Xxxxxx has not granted any extension to any
taxing authority of the limitation period during which any tax liability
may be asserted thereby. Neither Xxxxxx nor the Shareholder has received
notice or has knowledge of any proposal for increasing the assessed
value of any of Xxxxxx'x properties for tax purposes, or of any pending
proceedings or public improvements which
8
would result in the levy of any special tax or assessment against any of
Xxxxxx'x properties. Xxxxxx is not, and never has been, a member of a
consolidated group subject to Treasury Regulation 1.1502-6 or any
similar provision.
2.7.2 SUBCHAPTER S MATTERS. Xxxxxx (i) made an effective, valid
and binding S election pursuant to Section 1362 of the Code effective
1986, (ii) has since maintained its status as an S Corporation pursuant
to Section 1361 of the Code without lapse or interruption, and (iii) has
made and continuously maintained elections similar to the federal S
election in each state or local jurisdiction where Xxxxxx does business
or is required to file a tax return to the extent such states or
jurisdictions permit such elections. Xxxxxx neither is nor will or can
be subject to the built-in gains tax under Section 1374 of the Code or
any similar corporate level tax imposed on Xxxxxx by any taxing
authority. Xxxxxx (i) has adopted or utilized LIFO as a method of
accounting for inventory, and (ii) has no tax item, election, agreement
or adjustment which will accelerate or trigger income or deferred
deductions of Xxxxxx as a result of termination of Xxxxxx'x status as an
S Corporation.
2.8 LIABILITIES. Xxxxxx has no liabilities or obligations, whether
absolute, accrued, contingent or otherwise, and neither Xxxxxx nor the
Shareholder has any knowledge of any potential liabilities or obligations of
Xxxxxx except: (a) as reflected or reserved against in the Balance Sheet; (b)
obligations to perform services or deliver merchandise in the Ordinary Course of
Business that are not delinquent; (c) obligations for services or goods received
by Xxxxxx in the Ordinary Course of Business with respect to which invoices have
not been received; and (d) liabilities accrued or to be accrued through the
Closing Date and set forth on the Exception Schedule. Without limiting the
generality of the foregoing, Xxxxxx has no liability as a guarantor, endorser,
co-maker, surety, accommodation maker or in any other capacity for any
indebtedness, liability, obligation or commitment of any other Person.
2.9 DEFAULTS. Xxxxxx is not in default under, or in breach or violation
of, and, to the knowledge of Xxxxxx and the Shareholder, no reason exists and no
event has occurred which, with notice or lapse of time or action by a third
party, will result in a default under, breach or violation of, or conflict with:
(a) Xxxxxx'x Articles of Incorporation or Bylaws, as amended to date; (b) any
lease, license, permit, Encumbrance, trust agreement or declaration of trust, or
other agreement or instrument to which Xxxxxx is a party, or to which any of its
assets is subject; or (c) any Laws applicable to Xxxxxx or its business or
assets, including, without limitation, Business Laws, Environmental Laws and
Laws respecting labor, employment and employment practices, except for any such
defaults, breaches, violations or conflicts which individually or in the
aggregate would not constitute a material adverse effect. Xxxxxx has all
permits, certificates, licenses, approvals and other authorizations required in
connection with the operation of its business.
2.10 LITIGATION. There is no lawsuit, action, arbitration, mediation,
administrative proceeding, investigation by a Governmental Authority, or other
legal proceeding pending or, to the knowledge of Xxxxxx or the Shareholder,
threatened against the Shareholder or Xxxxxx or affecting their respective
assets or financial condition, and, to the knowledge of Xxxxxx and the
Shareholder, no facts are in existence on which an action, lawsuit or other
legal or administrative proceeding might be brought. Neither the Shareholder nor
Xxxxxx is subject to any court order, writ, injunction, court decree, settlement
agreement, or judgment that contain or order any ongoing obligations (whether
prohibitory or mandatory in nature) on the part of any of them.
9
2.11 ADDITIONAL XXXXXX INFORMATION. Attached to the Exception Schedule
are true, complete and correct lists and summaries of the following items,
including, without limitation, a description of all Encumbrances to which any
such item is subject, and Xxxxxx and the Shareholder have delivered to Xxxxxx
true, complete and correct copies of any documents, instruments or agreements
referred to below or in such lists and summaries or underlying any item
described therein:
2.11.1 REAL PROPERTY [SCHEDULE 2.11.1]. A legal description of
all real property owned or leased by Xxxxxx or for which it has an
option to purchase, which schedule includes, with respect to each
property, (i) the use to which such property is put, and (ii) whether
such property is owned or leased and, if leased, the name of the lessor
and a copy of any agreement pursuant to which the property is leased;
2.11.2 FURNITURE, MACHINERY AND EQUIPMENT [SCHEDULE 2.11.2]. All
machinery, transportation equipment, tools, equipment, furnishings, and
fixtures owned, leased or subject to a contract of purchase and sale, or
lease commitment, by Xxxxxx with a description of the nature and amount
of any Encumbrances thereon;
2.11.3 INVENTORY [SCHEDULE 2.11.3]. All inventory items or groups
of inventory items owned by Xxxxxx, excluding raw materials and work in
process, which raw materials and work in process are valued on the
Balance Sheet, together with the amount of any Encumbrances thereon; a
separate schedule of inventory as of January 9, 1998 will be provided
following the Closing;
2.11.4 INTELLECTUAL PROPERTY [SCHEDULE 2.11.4]. All patents,
trademarks, service marks, copyrights and other intellectual property
rights, and applications therefor or registrations thereof, wherever
issued or pending; all trade names, assumed or fictitious names, logos,
labels and other trade rights, whether or not registered, where
registered and where used; all inventions, discoveries, improvements,
processes, formulae, trade secrets, ideas and other know-how, whether
patentable or not; all shop rights; and all other agreements (including
agreements with Xxxxxx'x employees) relating in whole or in part to any
of the foregoing, and with respect to each of the foregoing, whether
owned, licensed or used by Xxxxxx;
2.11.5 LICENSES AND PERMITS [SCHEDULE 2.11.5]. All licenses,
permits, franchises, and similar rights relating to Xxxxxx'x business;
2.11.6 CONTRACTS [SCHEDULE 2.11.6]. Each contract, agreement or
commitment to which Xxxxxx is a party, by which it is bound or to which
it or its properties are subject, which involves at least $10,000 or is
not terminable on fewer than 30 days' notice;
2.11.7 RECEIVABLES [SCHEDULE 2.11.7]. All accounts and notes
receivable of Xxxxxx as of December 31, 1997, together with (i) aging
schedules by invoice date and due date, (ii) the amounts provided for as
an allowance for bad debts, (iii) the identity and location of any asset
in which Xxxxxx holds a security interest to secure payment of the
underlying indebtedness, and (iv) a description of the nature and amount
of any Encumbrances on such accounts and notes receivable;
10
2.11.8 PAYABLES [SCHEDULE 2.11.8]. All accounts and notes payable
by Xxxxxx as of December 31, 1997, together with an appropriate aging
schedule in a 30, 60, 90 and over 90- day aged payables format and
separately listing all amounts payable to the Shareholder or any
Affiliate of the Shareholder;
2.11.9 INDEBTEDNESS [SCHEDULE 2.11.9]. All indebtedness owed by
Xxxxxx or to which any of its assets are subject, summarizing for each
item of indebtedness the material terms thereof and specifying all
assets collateralizing such indebtedness;
2.11.10 INSURANCE [SCHEDULE 2.11.10]. All insurance policies or
bonds carried by Xxxxxx for its benefit or for the benefit of its
employees, including, without limitation, property, title, casualty,
liability, workers compensation and auto policies, as well as a listing
of any premiums, audit adjustments or retroactive adjustments due or
pending on such policies or any predecessor policies;
2.11.11 PERSONNEL [SCHEDULE 2.11.11]. The name, current salary or
wage rate, last raise date and amount, current bonus arrangements, last
bonus date and amount, and any other compensation arrangements
(excluding employee insurance and benefit plans described in SCHEDULE
2.11.12) of each director, officer and employee of Xxxxxx, together with
a description of any licenses held by such person that are germane to
Xxxxxx'x business; the name and address of any other Person who is
authorized to bind Xxxxxx contractually, including, without limitation,
independent drivers or independent contractors, and all written or oral
arrangements of Xxxxxx with any employee, agent, consultant or
independent contractor, specifically identifying any arrangement which
cannot be terminated on notice of 14 or fewer days without liability to
Xxxxxx or that entitles the beneficiary thereof to receive any
compensation continuation or severance payment or retain any position
with Xxxxxx;
2.11.12 EMPLOYEE PLANS [SCHEDULE 2.11.12]. All bonus, incentive
compensation, deferred compensation, profit-sharing, retirement,
pension, welfare, group insurance, death benefit, or other fringe
benefit plans, arrangements or trust agreements of Xxxxxx, together with
copies of the most recent reports with respect to such plans,
arrangements, or trust agreements filed with any Governmental Authority
and all Internal Revenue Service determination letters that have been
received with respect to such plans (collectively, the "Employee
Plans");
2.11.13 BANK ACCOUNTS [SCHEDULE 2.11.13]. The name, address and
contact person of each bank or other financial institution in which
Xxxxxx has an account or safe deposit box, the account number, account
name and type of account, the names of all persons authorized to draw
thereon or have access thereto, and the names of all persons, if any,
holding powers of attorney to act for Xxxxxx;
2.11.14 EMPLOYEE AGREEMENTS [SCHEDULE 2.11.14]. Any collective
bargaining agreements of Xxxxxx with any labor union or other
representative of employees, including amendments, supplements, and
written or oral understandings, and all employment and consulting and
severance agreements of Xxxxxx;
2.11.15 GUARANTIES [SCHEDULE 2.11.15]. All indebtedness,
liabilities and commitments of others and as to which Xxxxxx is a
guarantor, endorser, co-maker, surety,
11
or accommodation maker, or is contingently liable therefor and all
letters of credit, whether stand-by or documentary, issued by any third
party;
2.11.16 RESERVES AND ACCRUALS [SCHEDULE 2.11.16]. All accounting
reserves and accruals maintained in the Balance Sheet; and
2.11.17 ENVIRONMENTAL [SCHEDULE 2.11.17] All environmental
permits, approvals, certifications, licenses, registrations, orders and
decrees applicable to current operations conducted by Xxxxxx and all
environmental audits, assessments, investigations and reviews conducted
by Xxxxxx within the last five years on any property owned or used by
Xxxxxx.
2.12 ABSENCE OF CERTAIN CHANGES AND EVENTS [SCHEDULE 2.12]. Except as
set forth in Schedule 2.12 hereto, other than as a result of the transactions
contemplated by this Agreement, since the Balance Sheet Date, there has not
been:
2.12.1 FINANCIAL CHANGE. Any material adverse change in the
financial condition, backlog, operations, assets, liabilities or
business of Xxxxxx;
2.12.2 PROPERTY DAMAGE. Any material damage, destruction, or
loss to the business or properties of Xxxxxx (whether or not covered by
insurance);
2.12.3 CAPITALIZATION CHANGE. Any change in the capital stock or
in the number of shares or classes of Xxxxxx'x authorized or outstanding
capital stock as described in Section 2.4 hereof;
2.12.4 LABOR DISPUTES. Any labor dispute; or
2.12.5 OTHER MATERIAL CHANGES. Any other event or condition known
to the Shareholder particularly pertaining to and adversely affecting
the operations, assets or business of Xxxxxx which would constitute a
material adverse change.
2.13 TITLE TO AND QUIET POSSESSION OF ASSETS. Xxxxxx has good,
indefeasible and marketable title to all of its respective assets and interests
in assets, whether real, personal, mixed, tangible or intangible, that are
reflected on the Balance Sheet, or that have been acquired since the Balance
Sheet Date, except for inventory items sold or consumed in the Ordinary Course
of Business after the Balance Sheet Date. All such assets are free and clear of
all Encumbrances except as set forth in the Exception Schedule. At the Closing
Date, Xxxxxx will have full, free and exclusive use and quiet enjoyment of its
assets, and all rights pertaining thereto except for Encumbrances disclosed in
the Exception Schedule. There are no Persons other than Xxxxxx in possession of
any portion of the assets owned or leased by Xxxxxx. There are no condemnations
or other takings planned or proposed by any Government Authority or private
party which will affect the assets owned or used by Xxxxxx. The continued use by
Xxxxxx of its assets in the same manner previously used by it will not violate
or infringe upon the rights of others.
12
2.14 INTELLECTUAL PROPERTY. Xxxxxx owns or possesses licenses to use all
patents, patent applications, trademarks and service marks (including
registrations and applications therefor), trade names, copyrights and written
know-how, trade secrets and all other similar proprietary data and the goodwill
associated therewith (collectively, the "Intellectual Property") that are either
material to the Business or that are necessary for the rendering of any services
rendered by Xxxxxx and the use or sale of any equipment or products used or sold
by Xxxxxx, including all such Intellectual Property listed in SCHEDULE 2.11.4
hereto. The Intellectual Property is owned or licensed by Xxxxxx free and clear
of any Encumbrance. Xxxxxx has not granted to any other person any license to
use any Intellectual Property. Xxxxxx has not received any notice of
infringement, misappropriation, or conflict with, the intellectual property
rights of others in connection with the use by Xxxxxx of the Intellectual
Property or otherwise in connection with Xxxxxx'x operation of its business.
2.15 CONDITION OF ASSETS.
2.15.1 Xxxxxx'x premises, office equipment, machinery, vehicles, furnishings
and fixtures are in good operating condition and repair consistent with
Xxxxxx'x normal practices subject only to ordinary wear and tear. There
are no outstanding requirements or recommendations by Xxxxxx'x insurers
requiring or recommending any repairs or work be done with respect to
Xxxxxx'x assets or properties.
2.15.2 Xxxxxx'x accounts receivable are evidenced by valid and enforceable
written invoices, contracts or other agreements. All amounts paid or
collected under such contracts or agreements which are required by
applicable Laws, including Business Laws, to be deposited in trust or
deposit accounts have been so deposited on a timely basis in accordance
with such Laws. All such trust and deposit accounts have been
established, funded and maintained in accordance with all applicable
Laws, including Business Laws. Except as set forth in the Exception
Schedule, Xxxxxx'x accounts receivable are fully collectible without
resort to legal proceedings or collection agencies, and are not subject
to any refunds or other adjustments, or any defenses, rights of set-off,
assignments, Encumbrances, or conditions enforceable by third parties,
except to the extent reserved against in the Financial Information.
2.15.3 Xxxxxx'x inventories consist of items held for sale of a quality and
quantity usable in the Ordinary Course of Business, and the cost of such
inventories as of the Closing Date is no less than $200,000 in the
aggregate.
2.15.4 All contracts, leases, plans or other arrangements to which Xxxxxx is a
party, by which it is bound or to which it or its assets are subject are
in good standing, in full force and effect, comply in all material
respects with applicable Laws, and constitute valid and binding
obligations of the respective parties thereto. To the knowledge of
Xxxxxx and the Shareholder, no party (other than Xxxxxx) to any such
contract, lease, plan or other arrangement is in default thereunder, and
no event has occurred which (with or without notice, lapse of time, or
the happening of any other event) would constitute a default thereunder.
2.15.5 All accounting records, tax records, operating and legal records, and
all other records pertaining to Xxxxxx and its business, properties and
affairs, are located at the business office of Xxxxxx. No such records
are stored by or in the possession of the Shareholder or his Affiliates.
Xxxxxx'x corporate record books (including stock records) are: (i)
complete,
13
accurate and up to date with all necessary signatures; (ii) set forth
all meetings and actions taken by Xxxxxx'x shareholders and directors,
and all transactions involving Xxxxxx'x capital stock; and (iii) contain
all canceled stock certificates.
2.16 HAZARDOUS SUBSTANCES. During Xxxxxx'x ownership, lease or use of
property owned, leased or used by it (the "Property"): (a) the Property is not
being and has not been used by Xxxxxx for the storage, treatment, generation,
transportation, processing, handling, burial or disposal of any Hazardous
Substance in material violation of any Environmental Laws; (b) no release of a
Hazardous Substance has occurred by Xxxxxx on or about the property in
quantities which individually or in the aggregate would require reporting to any
Governmental Authority; (c) no underground storage tanks are or have been
located on the Property; (d) there are not and have not been any Hazardous
Substances resulting from Xxxxxx'x ownership, lease or use of the Property in
concentrations which exceed amounts permitted by applicable Environmental Laws
on the Property; (e) all environmental permits and authorizations necessary to
the continued use of the Property by Xxxxxx and the operation of the facilities
located thereon by Xxxxxx have been obtained, are being complied with, and all
fees and assessments in association therewith have been timely paid; (f) the
Property is not being and has not been used by Xxxxxx as a site for burial of
sanitary waste or other non-hazardous waste; (g) the off-site transportation,
storage, treatment, recycling or disposal of Hazardous Substances and
non-hazardous substances existing on, generated or removed from the Property by
Xxxxxx have been and are in compliance with applicable Environmental Laws; and
(h) there are no capital improvements requiring any expenditures by Xxxxxx in
order to comply with any current or proposed Environmental Laws. To the
knowledge of Xxxxxx and the Shareholder, each of (a) through (g) of the
immediately preceding sentence is true with respect to the Property prior to its
ownership or lease by Xxxxxx, and with respect to properties adjacent to the
Property. No notice has been served on Xxxxxx or the Shareholder from any
entity, governmental agency or individual regarding any existing, pending or
threatened investigation, inquiry, enforcement action or litigation related to
alleged violations under any applicable Environmental Laws, or regarding any
claims for remedial obligations, response costs or contribution under any
applicable Environmental Laws.
2.17 OPERATION OF BUSINESS. Xxxxxx is in compliance in all material
respects with all Business Laws applicable to Xxxxxx or the Business, including
the Occupational Safety and Health Act (29 U.S.C. xx.xx. 651, ET SEQ.), as
amended.
2.18 ERISA PLANS, LABOR ISSUES AND AFFILIATE PAYMENTS.
2.18.1 Xxxxxx does not currently sponsor, maintain or contribute to, and has
not at any time sponsored, maintained or contributed to any employee
benefit plan (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (ERISA")) in which
any of its employees are or were participants (whether or not on an
active or frozen basis) other than those identified on SCHEDULE 2.11.12
(the "Employee Plans"). Each of the Employee Plans, if any, can be
terminated or amended at will by Xxxxxx. Xxxxxx has no collective
bargaining agreements with any labor union or other representative of
employees. Xxxxxx has not engaged in any unfair labor practices which
could have a material adverse effect. Xxxxxx has no pending or, to the
knowledge of Xxxxxx or the Shareholder, threatened, dispute with any of
its existing or former employees. Since the Balance Sheet Date, Xxxxxx
has not made any payments to any of its Affiliates, and has not granted
or agreed to grant any bonus to any current employee, any general
increase in the
14
rates of salaries or compensation of its employees or any specific
increase to any current employee, except in accordance with regularly
scheduled periodic bonuses and increases identified on SCHEDULE 2.11.11,
and has not provided for any new pension, retirement or other employee
benefits to any of its current employees or any increases in any
existing benefits.
2.18.2 Each Employee Plan, if any, has been administered and maintained in
compliance with all applicable laws, rules and regulations, except where
the failure to be in compliance would not, individually or in the
aggregate, result in a material adverse effect.
2.18.3 Xxxxxx has not received any notice that any Employee Plan, if any, is
currently the subject of an audit, investigation, enforcement action or
other similar proceeding conducted by any state or federal agency.
2.18.4 No pending or, to the knowledge of Xxxxxx or the Shareholder,
threatened, claims, suits or other proceedings exist with respect to an
Employee Plan, if any, other than normal benefit claims filed by
participants or beneficiaries.
2.18.5 Xxxxxx has no obligation or commitment to provide medical, dental or
life insurance benefits to or on behalf of any of its employees who may
retire or any of its former employees who have retired, except as may be
required pursuant to the continuation of coverage provisions of Section
4980B of the Code and the applicable provisions of ERISA.
2.18.6 Xxxxxx has been and is in compliance with all applicable Laws respecting
employment and employment practices, terms and conditions of employment
and wages and hours, except for any such failures to be in compliance
that, individually or in the aggregate, would not result in a material
adverse effect, and Xxxxxx is not liable for any arrears of wages or
penalties for failure to comply with any of the foregoing. Xxxxxx has
not engaged in any unfair labor practice or discriminated on the basis
of race, color, religion, sex, national origin, age, disability or
handicap in its employment conditions or practices, and there are no
complaints or racial, color, religious, sex, national origin, age,
disability or handicap discrimination charges or complaints pending or,
to the knowledge of Xxxxxx or the Shareholder, threatened against Xxxxxx
before any federal, state or local court, board, department, commission
or agency (nor, to the knowledge of Xxxxxx or the Shareholder, does any
valid basis therefor exist).
2.18.7 Xxxxxx has never been a party to any agreement with any union, labor
organization or collective bargaining unit. No employees of Xxxxxx are
represented by any union, labor organization or collective bargaining
unit. To the knowledge of Xxxxxx or the Shareholder, none of the
employees of Xxxxxx has threatened to organize or join in union, labor
organization or collective bargaining unit.
2.18.8 All employees of Xxxxxx are citizens of, or are authorized in accordance
with federal immigration laws to be employed in, the United States.
15
2.19 INSURANCE. Xxxxxx has at all times carried insurance which Xxxxxx
and the Shareholder believe to be adequate in character and amount and
consistent with good industry practices, with reputable insurers, in respect of
its properties, assets and business and has provided all required performance
bonds, and has complied with all applicable terms and conditions, including
payment of premiums, with respect to such insurance policies and performance
bonds. Xxxxxx has received no notification from any insurance carrier denying or
disputing any claim made by Xxxxxx, denying or disputing any coverage for any
such claim, denying or disputing the amount of any claim, or regarding the
possible cancellation of or premium increases with respect to any policies.
Xxxxxx has no claim pending or anticipated against any of the insurance carriers
under any of such policies and there has been no actual or alleged occurrence of
any kind which may give rise to any such claim.
2.20 RELATED-PARTY TRANSACTIONS. Except as set forth on the Exception
Schedule, none of the shareholders, employees, officers, or directors of Xxxxxx
or member of their immediate family, is indebted to Xxxxxx, nor is Xxxxxx
indebted (or committed to make loans or extend or guarantee credit) to any of
them. None of the shareholders, officers or directors of Xxxxxx, or members of
their immediate family, have any direct or indirect ownership interest in any
firm or corporation with which Xxxxxx is affiliated or with which Xxxxxx has a
business relationship, or any firm or corporation that competes with Xxxxxx,
except that the Shareholder may own stock in publicly traded companies that may
compete with Xxxxxx. No member of the immediate family of any employee, officer
or director of Xxxxxx is directly or indirectly interested in any material
contract, lease or other agreement of any type (oral or written) with Xxxxxx.
2.21 INVESTMENT REPRESENTATIONS. The Shareholder acknowledges,
represents and agrees that:
2.21.1 The Xxxxxx Shares have not been and will not be registered under the
Securities Act or registered or qualified under any applicable state
securities laws, and will be "restricted securities" as that term is
defined under Rule 144 promulgated under the Securities Act;
2.21.2 The Xxxxxx Shares will be issued in reliance upon exemptions from such
registration or qualification requirements, and the availability of such
exemptions depends in part upon the Shareholder's bona fide investment
intent with respect to the Xxxxxx Shares;
2.21.3 The Shareholder's acquisition of the Xxxxxx Shares will be solely for
his own account for investment, and he is not acquiring the Xxxxxx
Shares for the account of any other person(s) or with a view toward
resale, assignment, fractionalization, or distribution thereof;
2.21.4 The Shareholder shall not offer for sale, sell, transfer, pledge,
hypothecate or otherwise dispose of any of the Xxxxxx Shares except in
accordance with the restrictions set forth herein and in the Lockup
Agreement and the requirements of Rule 144 promulgated under the
Securities Act, or pursuant to a valid registration statement under the
Securities Act;
2.21.5 The Shareholder has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks
of an investment in the Xxxxxx Shares, and to make an informed
investment decision;
16
2.21.6 The Shareholder has received the Disclosure Documents (as defined
below), and related materials regarding Xxxxxx; he has had the
opportunity to ask questions of, and receive answers from Xxxxxx'x
officers and directors concerning the acquisition of the Xxxxxx Shares
and to obtain such other information concerning Xxxxxx and the Xxxxxx
Shares, to the extent they possessed the same or could acquire it
without unreasonable effort or expense, as he deemed necessary in
connection with making an informed investment decision;
2.21.7 Since the Xxxxxx Shares have not been registered under the Securities
Act or applicable state securities laws, and are subject to the Lockup
Agreement, the Shareholder must bear the economic risk of holding the
Xxxxxx Shares for an indefinite period of time, and is capable of
bearing such risk; and
2.21.8 Each certificate evidencing the Xxxxxx Shares will bear a conspicuous
restrictive legend substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT
IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND
SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS CORPORATION OF AN
OPINION OF LEGAL COUNSEL SATISFACTORY TO THE CORPORATION THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
IN ADDITION, THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO THE
TERMS OF A LOCKUP AGREEMENT DATED JANUARY 9, 1998, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.
2.22 CONTINUITY OF INTEREST. There is no plan or intention on the part
of the Shareholder to sell, exchange or otherwise dispose of a number of shares
of Xxxxxx Common Stock received pursuant to this Agreement that would reduce the
Shareholder's ownership of shares of Xxxxxx Common Stock received pursuant to
this Agreement in exchange for Xxxxxx Stock owned by the Shareholder, to a
number of shares having a value, as of the Closing Date, of less than 50% of the
value of all shares of Xxxxxx Stock issued and outstanding immediately prior to
the Closing Date. For the purposes of this representation, shares of Xxxxxx
Stock exchanged for cash or other property, surrendered by dissenters, or
exchanged for cash in lieu of fractional shares of Xxxxxx Common Stock will be
treated as outstanding Xxxxxx Stock as of the Closing Date. Moreover, shares of
Xxxxxx Stock and shares of Xxxxxx Common Stock held by the Shareholder and
otherwise sold, redeemed or disposed of prior or subsequent to the Closing Date
will be considered in making this representation.
2.23 BROKERS. None of Xxxxxx, the Shareholder, or any of their
respective Affiliates, has employed any broker, agent or finder, or incurred any
liability for any brokerage fees, agent's fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement.
17
2.24 UNTRUE STATEMENTS. This Agreement and all schedules, documents and
information furnished by the Shareholder or Xxxxxx or any of their respective
representatives to Xxxxxx and its representatives pursuant hereto or in
connection with the transactions contemplated by this Agreement do not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements made herein and therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
XXXXXX AND ACQUISITION SUB
As material inducements for the execution, delivery and performance of
this Agreement by the Shareholder and Xxxxxx, Xxxxxx and Acquisition Sub hereby
jointly and severally represent and warrant to the Shareholder and Xxxxxx as
follows, except as otherwise described in the attached Exception Schedule
attached hereto. The Exception Schedule shall identify each exception by the
section number(s) of this Article 3 to which it relates.
3.1 ORGANIZATION AND STANDING. Xxxxxx and Acquisition Sub are
corporations duly organized, validly existing and in good standing under the
laws of the States of Texas and Minnesota, respectively, and each has full
requisite corporate power and authority to carry on its respective business as
it is currently conducted, and to own and operate the properties currently owned
and operated by it, and is duly qualified or licensed to do business and is in
good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business conducted by it would make such qualification or licensing
necessary.
3.2 AGREEMENT AUTHORIZED AND ITS EFFECT ON OTHER OBLIGATIONS. The
consummation of the transactions contemplated hereby has been duly and validly
authorized by all necessary corporate action on the part of each of Xxxxxx and
Acquisition Sub, and this Agreement is a valid and binding obligation of each of
Xxxxxx and Acquisition Sub enforceable (subject to normal equitable principles)
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, debtor relief or similar laws affecting
the rights of creditors generally. The execution, delivery and performance of
this Agreement and the consummation of the Merger contemplated by this Agreement
will not result in the breach of any term or provision of or constitute a
default under any obligation, indenture, mortgage, deed of trust, lease,
contract or other agreement to which either Xxxxxx and Acquisition Sub, or any
of their Subsidiaries is a party.
3.3 SEC DOCUMENTS. Xxxxxx has made all filings with the United States
Securities and Exchange Commission (the "SEC") that it has been required to make
under the Securities Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Xxxxxx has attached to the Exception Schedule as SCHEDULE
3.3 its Proxy Statement dated May 5, 1997, its Form 10-KSB/A filed for the year
ended December 31, 1996, its Form 10-QSB filed for the period ended September
30, 1997, and its Forms 8-K dated October 15, 1997 and October 24, 1997
(collectively, the "Disclosure Documents"). As of their respective filing dates,
the Disclosure Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which it was made, not misleading.
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3.4 FINANCIAL INFORMATION. The financial information included in the
Disclosure Documents is true and accurate in all material respects and was
prepared in all material respects in accordance with generally accepted
accounting principles ("GAAP"). Except as disclosed on the Exception Schedule or
as otherwise specifically contemplated by the terms and provisions of this
Agreement, since September 30, 1997, (i) there has been no material adverse
change in the consolidated net worth of Xxxxxx, (ii) there has been no physical
damage, destruction or loss suffered
by Xxxxxx that would, after taking into account any insurance recoveries payable
in respect thereof, have a material adverse effect on Xxxxxx, and (iii) no event
has occurred and no condition exists which, individually or in the aggregate,
would have a material adverse effect on this Agreement, Xxxxxx, or the
transactions contemplated by this Agreement.
3.5 CAPITALIZATION. The authorized capital stock of Xxxxxx consists of
20,000,000 shares of Xxxxxx Common Stock, of which 3,133,556 were issued and
outstanding as of November 12, 1997, and 2,500,000 shares of preferred stock,
par value $.10 per share, none of which are issued and outstanding. The
authorized capital stock of Acquisition Sub consists of 1,000 shares of common
stock, par value $.01 per share, all of which are issued and outstanding and
held of record by Xxxxxx. Except as disclosed in the Disclosure Documents or the
Exception Schedule attached hereto, there are no outstanding subscriptions,
options, rights, warrants, calls, preemptive rights, convertible securities, or
other agreements or commitments of any kind obligating Xxxxxx or Acquisition Sub
to sell, convey, issue, transfer from treasury, or otherwise dispose of, any
additional shares of its capital stock of any class, or any other equity or debt
security. Since September 30, 1997, neither Xxxxxx nor Acquisition Sub has
declared, set aside, paid or made, or agreed, arranged or committed to declare,
set aside, pay or make any dividend or other distribution in respect of its
capital stock, and or directly or indirectly redeemed, purchased or otherwise
acquired its capital stock.
3.6 BROKERS. Neither Xxxxxx, Acquisition Sub nor any of their respective
Affiliates have employed any broker, agent, or finder, or incurred any liability
for any brokerage fees, agent's fees, commissions or finder's fees in connection
with the transactions contemplated herein.
3.7 UNTRUE STATEMENTS. This Agreement and all schedules, documents and
information furnished by Xxxxxx, Acquisition Sub or their respective
representatives to the Shareholder and Xxxxxx and any of their respective
representatives pursuant hereto or in connection with the transactions
contemplated by this Agreement do not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements made
herein and therein not misleading.
ARTICLE 4
INDEMNIFICATION
4.1 INDEMNIFICATION BY THE SHAREHOLDER; RELEASE. In addition to any
other remedies available to Xxxxxx under this Agreement, or at law or in equity,
the Shareholder shall indemnify, defend and hold harmless Xxxxxx and the
Surviving Corporation, and their respective officers, directors, employees,
agents and stockholders, against and with respect to any and all Claims that
such indemnitees shall incur or suffer, which arise, result from or relate to
any breach of, or failure by the Shareholder or Xxxxxx to perform, their
respective representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or delivered to Xxxxxx or Acquisition Sub by Xxxxxx or the Shareholder under
this Agreement. Shareholder hereby releases in full all Claims he may have
against Xxxxxx as of the date of this Agreement.
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4.2 INDEMNIFICATION BY XXXXXX AND SURVIVING CORPORATION. In addition to
any other remedies available to the Shareholder under this Agreement, or at law
or in equity, Xxxxxx and the Surviving Corporation shall jointly and severally
indemnify, defend and hold harmless the Shareholder and his employees and agents
against and with respect to any and all Damages that such indemnitees shall
incur or suffer, which arise, result from or relate to any breach of, or failure
by Acquisition Sub or Xxxxxx to perform, any of its representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or delivered to Xxxxxx or the Shareholder
by or on behalf of Xxxxxx or Acquisition Sub under this Agreement.
4.3 INDEMNIFICATION PROCEDURE. (a) Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding by a third party (i.e., one who is not a party to this Agreement)
with respect to which a Claim for indemnification may be made pursuant to this
Article 4, such indemnified party shall, if a Claim in respect thereof is to be
made against any indemnifying party, give written notice to the latter of the
commencement of such third party action; PROVIDED, HOWEVER, that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any obligations hereunder, to the extent the indemnifying
party is not materially prejudiced thereby. In case any such third party action
is brought against an indemnified party and indemnification is sought under this
Article 4, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that it may wish, with counsel reasonably satisfactory
to such indemnified party, and after such notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof unless the indemnifying party has failed to assume the defense
of such Claim and to employ counsel reasonably satisfactory to such indemnified
person. An indemnifying party who elects not to assume the defense of a Claim
shall not be liable for the fees and expenses of more than one counsel in any
single jurisdiction for all parties indemnified by such indemnifying party with
respect to such Claim or with respect to claims separate but similar or related
in the same jurisdiction arising out of the same general allegations.
Notwithstanding any of the foregoing to the contrary, the indemnified party will
be entitled to select its own counsel and assume the defense of any action
brought against it if the indemnifying party fails to select counsel reasonably
satisfactory to the indemnified party, the expenses of such defense to be paid
by the indemnifying party. No indemnifying party shall consent to entry of any
judgment or enter into any settlement with respect to a third party Claim
without the consent of the indemnified party, which consent shall not be
unreasonably withheld, or unless such judgment or settlement includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such third
party Claim. No indemnified party shall consent to entry of any judgment or
enter into any settlement of any such third party action, the defense of which
has been assumed by an indemnifying party, without the consent of such
indemnifying party, which consent shall not be unreasonably withheld.
(b) If any party becomes aware of a fact, circumstance, claim,
situation, demand or other matter (other than a third-party Claim) for which it
or any other indemnified party has been indemnified under this Article 4 and
which has resulted or could result in a Claim being owed to the
20
indemnified party by the indemnifying party, the indemnified party shall give
prompt written notice of the Claim to the indemnifying party, stating the nature
and basis of the Claim and the amount claimed thereunder, together with
supporting information to the Claim, if any. If the indemnifying party does not
notify the indemnified party within 30 days from the date such Claim notice is
given that it disputes the Claim, the amount of the Claim shall conclusively be
deemed to be a liability of the indemnifying party hereunder.
(c) If an indemnified party and an indemnifying party cannot reach
agreement with respect to the validity and amount of any Claim within 30 days
after notice thereof is first given, the validity and amount thereof, as the
case may be, shall be finally settled pursuant to the dispute resolution
procedure set forth in Section 5.9 below.
(d) Payments of all amounts owing hereunder with respect to any Claim
shall be made immediately after (i) the settlement between the parties of the
third party Claim, or (ii) the final resolution of the dispute pursuant to
Section 5.9 below.
4.4 INDEMNIFICATION THRESHOLD. Notwithstanding any provision to the
contrary contained in this Agreement, none of Xxxxxx, Acquisition Sub or the
Shareholder shall make any Claim against the other party for any breach of
representation, warranty, covenant or agreement under this Agreement until the
dollar amount of all loss to such party for such breaches suffered after the
Closing, shall exceed in the aggregate the amount of $5,000, and, to the extent
such amount is exceeded, Xxxxxx, Acquisition Sub or the Shareholder, as the case
may be, shall be required to pay the amount of such excess loss to the other
party for all such breaches; provided, however, that the indemnification
threshold for any Sales Tax Claims (as defined below) will be $20,000
irrespective of any other Claims.
4.5 SALES TAX CLAIMS. For purposes of this Article 4, the term "Sales
Tax Claims" shall mean any Claims from states other than the Sales Tax States
which relate to Xxxxxx'x sales activities on or before the Closing Date. The
Shareholder will have the right to contest (or join Xxxxxx in contesting) any
Sales Tax Claims for which he could become liable. In the event of any such
contest, the Shareholder will be given access to Xxxxxx'x customer files. To the
extent the Shareholder is ultimately liable and pays any such taxes, the
Shareholder shall become subrogated to any rights Xxxxxx may have to recover
those assessed sales taxes from the original purchasers.
4.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement with regard to taxes shall survive the
Closing for as long as the applicable statute of limitations with regard to any
such Claims shall run. All other representations and warranties contained in
this Agreement shall survive for a period of three years. An indemnifying party
shall have no liability under this Article 4 unless notice of a Claim for
indemnity shall be given by the indemnified party prior to the expiration of
these survival periods.
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ARTICLE 5
MISCELLANEOUS
5.1 CERTAIN DEFINITIONS. As used in this Agreement, each of the
following terms has the meaning ascribed to it in this Section 5.1:
5.1.1 "ACQUISITION SUB COMMON STOCK" means the common stock, par value $.01
per share of Acquisition Sub.
5.1.2 "AFFILIATE" when used to indicate a relationship with any Person, means:
(i) any corporation or organization of which such Person is an officer,
director or partner or is directly or indirectly the beneficial owner of
at least 10% of the outstanding shares of any class of equity securities
or financial interest therein; (ii) any trust or other estate in which
such Person has a beneficial interest or as to which such Person serves
as trustee or in any similar fiduciary capacity; or (iii) any Person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, or is
acting as agent on behalf of, or as an officer or director of, such
Person. As used in the definition of Affiliate, the term "control"
(including the terms "controlling," "controlled by" or "under common
control with") means the possession, direct or indirect, of the power to
direct, cause the direction of or influence the management and policies
of a Person, whether through the ownership of voting securities, by
contract, through the holding of a position as a director or officer of
such Person, or otherwise.
5.1.3 "AGREEMENT" means and includes this Agreement and the schedules and
exhibits hereto.
5.1.4 "BUSINESS LAWS" means all Laws relating to establishing, owning,
operating, managing, maintaining, improving or conducting the Business.
5.1.5 "CLAIMS" mean any claims, demands, actions, costs, damages, losses,
expenses, obligations, liabilities, recoveries, judgments, settlements,
suits, proceedings, or causes of action, including interest, penalties
(including civil and criminal penalties) and attorneys' fees.
5.1.6 "ENCUMBRANCE" means and includes (i) any security interest, mortgage,
deed of trust, pledge, lien (including unpaid debts for which a lien
arising under Laws may be asserted if such debts remain unpaid),
encumbrance, charge, defect, option, right of first refusal,
preferential purchase right, proxy or voting trust or agreement,
preemptive right, adverse Claim, equity, power of attorney, equitable
interest or servitude, other right or interest of any other Person, or
restriction of any kind, including but not limited to, any restriction
or servitude on the use, transfer, receipt of income, or other exercise
of any attributes of ownership, and (ii) any Uniform Commercial Code
financing statement or other public filing, notice, or record that by
its terms purports to evidence or notify interested parties of any of
the matters referred to in clause (i) that has not been terminated or
released by another proper public filing, notice, or record.
5.1.7 "ENVIRONMENTAL LAWS" mean all Laws relating to protection of the
environment, including, without limitation, land use, zoning, health,
chemical use, safety and sanitation Laws, and Laws governing the on or
off-site use, storage, treatment, recycling, generation, transportation,
processing, handling, production or disposal of Hazardous Substances
22
or sanitary (non-hazardous) substances or waste, including, without
limitation, garbage, refuse or other similar substances.
5.1.8 "XXXXXX COMMON STOCK" means the Class A Voting Stock, par value $1.00
per share, which together with the Xxxxxx Non-Voting Stock, none of
which is outstanding, constitute all of the capital stock of Xxxxxx
authorized by its Articles of Incorporation, as amended.
5.1.9 "GOVERNMENTAL AUTHORITY" means any federal, state, county, municipal, or
other local governmental body, legislature, agency, commission, board,
department, court or other authority, or any subdivision thereof, or
private body exercising any regulatory, judicial or taxing authority,
and includes, without limitation, the Federal Trade Commission, the Food
and Drug Administration, the Environmental Protection Agency, the
Occupational Safety and Health Administration, and the Internal Revenue
Service.
5.1.10 "HAZARDOUS SUBSTANCE" means, without limitation, (i) any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulations, polychlorinated biphenyls, benzene, petroleum and
petroleum products, methane, or (ii) hazardous materials, hazardous
wastes, biomedical wastes, hazardous or toxic substances or related
materials defined as such in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections
9601 ET SEQ.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901 ET SEQ.), or any other Environmental Laws.
5.1.11 "XXXXXX COMMON STOCK" means Xxxxxx'x common stock, par value $.01 per
share.
5.1.12 "LAWS" mean any statute, law, code, ordinance, rule, regulation, policy,
guideline interpretation, order, permit, license, certificate, writ,
judgment, injunction, decree, determination, award or other decision or
directive of, or promulgated, issued or declared by any Governmental
Authority.
5.1.13 "MARKET PRICE" means the average of the closing bid and asked prices of
the Xxxxxx Common Stock on The Nasdaq SmallCap Market for the thirty
consecutive trading days ending on the third day prior to the Closing
Date, as furnished by any NASD member firm selected from time to time by
the Company for such purpose; PROVIDED, HOWEVER, that if such average is
lower than $7.00, the Market Price shall be $7.00, and if such average
is higher than $9.00, the Market Price shall be $9.00.
5.1.14 "ORDINARY COURSE OF BUSINESS" means an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(i) such action is consistent with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations of
such Person; (ii) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and (iii) such action is similar in
nature and magnitude to actions customarily taken, without any
authorization by the board of directors (or by any Person or group of
Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line
of business as such Person.
23
5.1.15 "PERSON" means an individual, corporation, limited liability company,
partnership, limited partnership, joint venture, joint stock company,
firm, company, syndicate, trust, estate, association, Governmental
Authority, business, organization or any other incorporated or
unincorporated entity.
5.1.16 "SUBSIDIARY," with respect to any Person, shall mean any corporation of
which more than fifty percent of the outstanding voting securities
shall, as of any applicable date of determination, be owned directly, or
indirectly through one or more intermediaries, by that Person.
5.2 FURTHER ASSURANCES. From time to time, as and when requested by any
party hereto, any other party hereto shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonably necessary to
effectuate the transactions contemplated hereby.
5.3 PUBLIC ANNOUNCEMENTS. Except as mutually agreed, neither Xxxxxx, the
Shareholder nor any of their respective Affiliates or agents shall issue any
press release or public announcement regarding the execution of this Agreement
or the transactions contemplated thereby.
5.4 EXPENSES. Xxxxxx and Acquisition Sub will pay all of its own costs
and expenses, including legal and accounting expenses, incurred in connection
with the negotiation, execution, delivery and performance of this Agreement and
the transactions contemplated hereby. Shareholder, out of personal funds and not
funds of Xxxxxx, shall pay all of the costs and expenses, including legal and
accounting expenses, incurred by Shareholder and Xxxxxx in connection with the
negotiation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby; provided, that up to $5,000 of such legal and
accounting expenses and up to $1,500 for preparation of tax returns for the stub
period beginning November 1, 1997 and ending on the Closing Date may be paid out
of funds of Xxxxxx.
5.5 NOTICES AND WAIVERS. Any notice, instruction, authorization,
request, demand or waiver hereunder shall be in writing, and shall be delivered
either by personal delivery, by telegram, telex, telecopy or similar facsimile
means, by certified or registered mail, return receipt requested, or by courier
or delivery service, addressed to the parties hereto at their respective
addresses indicated on Schedule 5.5 attached hereto, or at such other address
and number as a party shall have previously designated by written notice given
to the other parties in the manner hereinabove set forth. Notices shall be
deemed given when received, if sent by facsimile means (confirmation of such
receipt by confirmed facsimile transmission being deemed receipt of
communications sent by facsimile means); and when delivered and receipted for
(or upon the date of attempted delivery where delivery is refused), if
hand-delivered, sent by express courier or delivery service, or sent by
certified or registered mail, return receipt requested.
5.6 GENDER AND CERTAIN REFERENCES. Unless otherwise specified, all
references herein to days, weeks, months or years shall be to calendar days,
weeks, months or years. Whenever the context requires, the gender of all words
used herein shall include the masculine, feminine and neuter. References to
Articles or Sections shall be to Articles or Sections of this Agreement unless
otherwise specified. The headings and captions used in this Agreement are solely
for convenient reference and shall not affect the meaning or interpretation of
any article, section or paragraph herein, or this Agreement. The terms "hereof,"
"herein" or "hereunder" shall refer to this Agreement
24
as a whole and not to any particular article, section or paragraph. The terms
"including" or "include" are used herein in an illustrative sense and not to
limit a more general statement. When computing time periods described by a
number of days before or after a stated date or event, the stated date or date
on which the specified event occurs shall not be counted and the last day of the
period shall be counted.
5.7 SUCCESSOR AND ASSIGNS. This Agreement shall bind, inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns, and if an individual, by his executors,
administrators, and beneficiaries of his estate by will or the laws of descent
and distribution. This Agreement and the rights and obligations hereunder shall
not be assignable or delegable by any party; provided, however, that Xxxxxx
shall be entitled to assign its rights and delegate its duties hereunder to any
Subsidiary.
5.8 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and of the United States
applicable in Texas, excluding, however, (i) any provision of such laws that
would render invalid any provision of this Agreement, and (ii) any rule of
conflict-of-laws that would direct or refer the resolution of any issue to the
laws of any other jurisdiction. Each party hereto hereby acknowledges and agrees
that it has consulted legal counsel in connection with the negotiation of this
Agreement and that it has bargaining power equal to that of the other parties
hereto in connection with the negotiation and execution of this Agreement.
Accordingly, the parties hereto agree that the rule that an agreement shall be
construed against the draftsman shall have no application in the construction or
interpretation of this Agreement.
5.9 DISPUTE RESOLUTION. Any dispute or controversy between the parties
hereto arising from or relating to this Agreement or the construction, validity,
interpretation, meaning, enforcement, performance, non-performance, operation or
breach of this Agreement shall be submitted to mediation, and if such mediation
is unsuccessful then to mandatory, final and binding arbitration. Any mediation
or arbitration under this Agreement shall take place pursuant to the following
procedures:
5.9.1 If a dispute or controversy arises either party will request that
Judicial Arbitration and Mediation Service ("JAMS") (or similar
mediation service of a similar national scope if JAMS no longer then
exists) appoint an independent mediator, who shall serve as mediator for
all purposes hereof. Xxxxxx and the Shareholder shall each pay an equal
proportion of the cost of the mediator's services, in advance upon
request by the mediator or any party.
5.9.2 Within 10 days after appointment of the mediator, the mediator shall
schedule a meeting among the parties and the mediator for the purpose of
mediating the dispute. If the parties do not resolve the dispute within
30 days after appointment of the mediator, the dispute shall be resolved
in arbitration.
5.9.3 Within 15 days after the mediation, the parties shall each name and
appoint their own arbitrator. If either party fails to name and appoint
an arbitrator timely, then an arbitrator shall be appointed for that
party by the Senior United States District Judge for the United States
District Court in Houston, Texas. The two arbitrators so appointed shall
appoint a third arbitrator within 15 days, and if they cannot agree, the
appointment of the third arbitrator will he made by the Senior United
States District Judge for the United States District Court in Houston,
Texas.
25
5.9.4 Each party shall bear its own arbitration fees, costs and expenses. The
arbitration hearing shall be held in Houston, Texas within 15 days of
the appointment of the third arbitrator at a location designated by a
majority of the arbitrators within 10 days of the appointment of the
third arbitrator. The Commercial Arbitration Rules of the American
Arbitration Association, as supplemented hereby, shall apply to the
arbitration. The substantive laws of the State of Texas (excluding
conflict of laws provisions) shall also apply to the arbitration.
5.9.5 The arbitration hearing shall be concluded within 10 days unless
otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within 15 days after the closing of submission of
evidence. An award rendered by a majority of the arbitrators shall be
final and binding on all parties to the proceeding and non-appealable,
and judgment on the award may be entered by any court of competent
jurisdiction.
5.9.6 The parties stipulate that the provisions of this Section 5.9 shall be a
complete defense to any suit, action or proceeding instituted in any
federal, state or local court or before any administrative tribunal with
respect to any controversy or dispute arising out of this Agreement
between the parties, and the parties waive any right to have the award
of the arbitrators appealed. The arbitration provisions of this
Agreement shall, with respect to such controversy or dispute, survive
the termination or expiration of this Agreement. Should any party
institute judicial proceedings seeking to avoid the mediation or
arbitration provisions of this Agreement, or should any party in
judicial proceedings successfully contest an arbitration award rendered
under this Section 5.9, the other parties shall be entitled to recover
reasonable attorney's fees, costs and expenses associated with the
judicial proceedings, with the amount of attorney's fees, costs and
expenses to be determined by the court. If a party fails to comply with
the terms of an arbitration award made under this Agreement, the other
parties shall be entitled to recover reasonable attorney's fees, costs
and expenses incurred in seeking judicial confirmation of the award,
with the amount of attorney's fees, costs and expenses to be determined
by the court. Failure to comply with the terms of an arbitration award
shall include without limitation the failure to pay the full amount due
under an arbitration award within the time specified in the arbitration
award.
5.9.7 In determining any award under this Section 5.9, the arbitrators may
award amounts for special damages, consequential damages, incidental
damages, lost profits, damages for lost business opportunity, punitive
damages or exemplary damages.
5.9.8 Neither any party hereto nor the arbitrators may disclose the existence
or results of any arbitration hereunder without the prior written
consent of the other parties; nor may any party hereto disclose to any
party any confidential information disclosed by any other party hereto
in the course of an arbitration hereunder without the prior written
consent of such other party.
5.10 SEVERABILITY; JUDICIAL MODIFICATION. If any term, provision,
covenant, or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions shall remain in full force and effect and
shall in no way be affected, impaired or invalidated. It is hereby stipulated
and declared to be the intention of the parties that they would have executed
this Agreement had the terms, provisions, covenants and restrictions which may
be hereafter declared invalid, void, or unenforceable not initially been
included herein.
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5.11 AMENDMENT AND ENTIRETY. This Agreement and any exhibits hereto or
thereto, may be amended, modified, or superseded only by written instrument
executed by all parties hereto. This Agreement sets forth the entire agreement
and understanding of the parties with respect to the transactions contemplated
hereby and supersedes all prior agreements, arrangements, and understandings
relating to the subject matter hereof.
5.12 RIGHTS OF PARTIES. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any Persons other than the parties hereto and their respective
successors and assigns, nor shall any provision give any third Persons any right
of subrogation or action over against any party to this Agreement. Without
limiting the generality of the foregoing, it is expressly understood that this
Agreement does not create any third party beneficiary rights.
5.13 TIME OF ESSENCE. Time is of the essence in the performance of this
Agreement.
5.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by facsimile signature, each of which shall be deemed an
original and all which together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Plan and Agreement of Merger is executed and
delivered by the parties on and as of the day first above written.
XXXXXX HEALTHCARE, INC.
/s/ XXXXXXX X. XXXXXXX
-----------------------------
Xxxxxxx X. Xxxxxxx,
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
XXXXXX ACQUISITION CORP.
/s/ XXXXXXX X. XXXXXXX
-----------------------------
Xxxxxxx X. Xxxxxxx,
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
XXXXXX COMPANY
/s/ XXXXXXX X. XXXX
-----------------------------
Xxxxxxx X. Xxxx,
PRESIDENT
SHAREHOLDER:
/s/ XXXXXXX X. XXXX
-----------------------------
Xxxxxxx X. Xxxx
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