EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
By and Among
CARESIDE, INC.,
CARESIDE HEMATOLOGY, INC.,
TEXAS INTERNATIONAL LABORATORIES, INC.
XXXX XX XXXXX
And
XXXX XXXX XX XXXXX
Dated as of December 7, 1999
TABLE OF CONTENTS
Page
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ARTICLE 1 - THE MERGER AND RELATED MATTERS........................................................................1
1.1. The Merger............................................................................................1
1.2. Merger Consideration; Conversion of Stock.............................................................2
1.3. Surrender of Certificates.............................................................................2
1.4. Delivery of Merger Consideration......................................................................2
1.5. Certificate of Incorporation of the Surviving Corporation.............................................2
1.6. By-Laws of the Surviving Corporation..................................................................3
1.7. Directors and Officers of the Surviving Corporation...................................................3
1.8. Availability of Agreement.............................................................................3
ARTICLE 2 - CLOSING; DELIVERIES...................................................................................3
2.1. Closing...............................................................................................3
2.2. Deliveries of TIL and Shareholders....................................................................3
2.3. Deliveries of CSA and CSH.............................................................................4
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES........................................................................4
3.1. Representations and Warranties of TIL.................................................................4
3.2. Representations and Warranties of Shareholders.......................................................14
3.3. Representations and Warranties of CSA or CSH.........................................................15
ARTICLE 4 - LEGENDS ON STOCK CERTIFICATES........................................................................18
4.1. Stock Legends........................................................................................18
ARTICLE 5 - POST-CLOSING COVENANTS...............................................................................19
5.1. Further Assurances...................................................................................19
5.2. Intended Tax Treatment...............................................................................19
5.3. Payment of Franchise Taxes...........................................................................19
5.4. Ysebaert Contract....................................................................................19
5.5. Reservation of Rights................................................................................20
5.6. Public Announcements.................................................................................20
ARTICLE 6 - SURVIVAL; INDEMNIFICATION; EXPENSES..................................................................20
6.1. Indemnification by Shareholders......................................................................20
6.2. Indemnification by CSA...............................................................................21
6.3. Claim Procedures.....................................................................................21
6.4. Limitations..........................................................................................22
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6.5. Survival of Representations and Warranties...........................................................22
6.6. Exclusive Remedy.....................................................................................23
ARTICLE 7 - GENERAL..............................................................................................23
7.1. Notices..............................................................................................23
7.2. Entire Agreement.....................................................................................24
7.3. Binding Effect; Benefit; Assignment..................................................................24
7.4. Amendment and Modification...........................................................................24
7.5. Further Actions......................................................................................24
7.6. Headings.............................................................................................25
7.7. Counterparts; Exchange of Signature Pages by Telecopier..............................................25
7.8. Applicable Law.......................................................................................25
7.9. Severability.........................................................................................25
ARTICLE 8 - DEFINITIONS..........................................................................................25
EXHIBITS
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Exhibit A - Consulting and Non-Competition and Confidentiality Agreement
Exhibit B - Employment and Non-Competition and Confidentiality Agreement
Exhibit C - Registration Rights Agreement
SCHEDULES
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Schedule 1.2(b) - Additional Merger Consideration
Schedule 3.1(j) - Certain Changes and Events
Schedule 3.1(k) - Compliance with Laws
Schedule 3.1(l) - Material Contracts
Schedule 3.1(m) - Litigation
Schedule 3.1(r) - Intellectual Property
Schedule 3.1(s) - Insurance
Schedule 3.1(u) - Product Warranty
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 7, 1999
("Agreement"), by and among Careside, Inc., a Delaware corporation ("CSA"),
Careside Hematology, Inc., a Delaware corporation and wholly owned subsidiary of
CSA ("CSH"), Texas International Laboratories, Inc., a Texas corporation (the
"TIL"), Xxxx Xx Xxxxx ("YLB") and Xxxx Xxxx Xx Xxxxx ("JYLB" and together with
YLB the "Shareholders").
WHEREAS, the respective Boards of Directors of CSA, CSH and TIL have
approved the merger of TIL with and into CSH (the "Merger"), subject to the
terms and conditions of this Agreement;
WHEREAS, Shareholders own all of the outstanding shares of common
stock, $1.00 par value per share, of TIL (the "TIL Common Stock"); and
WHEREAS, the Board of Directors of TIL has directed that this
Agreement be submitted, and has submitted this Agreement, to Shareholders for
approval and adoption and the Shareholders have so approved and adopted it, as
required by applicable law.
NOW THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations, warranties and agreements herein contained,
the parties, intending to be legally bound hereby, agree as follows:
ARTICLE 1
THE MERGER AND RELATED MATTERS
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1.1. The Merger.
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(a) Subject to the terms and conditions of this Agreement, at the time
of the Closing (as defined in Article 2 hereof), (i) articles of merger (the
"Texas Articles of Merger") shall be duly prepared, executed and acknowledged by
CSA, CSH and TIL in accordance with the Texas Business Corporation Act (the
"TXBCA") and (ii) a certificate of merger (the "Delaware Certificate of Merger")
shall be duly prepared, executed and acknowledged by CSA, CSH and TIL in
accordance with the Delaware General Corporation Law (the "DEGCL"), and each
shall be filed on the Closing Date (as defined in Article 2 hereof). The Merger
shall become effective upon the filing of the Texas Articles of Merger with the
Secretary of State of the State of Texas and the Delaware Certificate of Merger
with the Secretary of State of the State of Delaware in accordance with the
provisions and requirements of the TXBCA and the DEGCL. The date and time when
the Merger shall become effective is hereinafter referred to as the "Effective
Time."
(b) At the Effective Time, TIL shall be merged with and into CSH and
the separate corporate existence of TIL shall cease, and CSH shall continue as
the surviving corporation under the laws of the State of Delaware (the
"Surviving Corporation").
(c) From and after the Effective Time, the Merger shall have the
effects set forth in the applicable provisions of the TXBCA and the DEGCL.
1.2. Merger Consideration; Conversion of Stock. The Merger shall have the
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effect set forth in this Section 1.2 on the shares of TIL Common Stock and the
shares of capital stock of CSH, par value $0.01 per share (the "CSH Stock"):
(a) As of the Effective Time of the Merger:
(i) All of the TIL Common Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
converted into the right to receive 521,739 shares of common stock (the "CSA
Common Stock") of the CSA, par value $.01 per share (the "Merger
Consideration"). The Merger Consideration has been determined by dividing
$3,000,000 by $5.75 (the "Share Value");
(ii) Each share of CSH Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall remain outstanding following
the Merger and shall constitute all of the issued and outstanding shares of
common stock of the Surviving Corporation immediately after the Effective Time
of the Merger.
(b) Notwithstanding anything contained herein to the contrary,
Shareholders shall be entitled to receive, as additional Merger Consideration,
in respect of accounts receivable and items of inventory of TIL listed on
Schedule 1.2(b), the amounts set forth on Schedule 1.2(b).
1.3. Surrender of Certificates. Shareholders shall deliver to CSA at the
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Closing the certificates representing the TIL Common Stock, duly endorsed in
blank by Shareholders, or accompanied by blank stock powers. Shareholders agrees
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to the TIL Common
Stock or with respect to the stock powers accompanying any TIL Common Stock.
1.4. Delivery of Merger Consideration. At the Closing, CSA shall deliver to
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Shareholders a copy of an irrevocable letter directing CSA's transfer agent to
deliver certificates representing the CSA Common Stock that constitutes the
Merger Consideration to Shareholders.
1.5. Certificate of Incorporation of the Surviving Corporation. The
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Certificate of Incorporation of CSH, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided therein or by law. No amendment
to the Certificate of Incorporation of CSH is to be effected by the Merger.
1.6. By-Laws of the Surviving Corporation. The By-Laws of CSH, as in effect
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immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended as provided therein or by law.
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1.7. Directors and Officers of the Surviving Corporation. The persons
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serving, immediately prior to the Effective Time, as the directors and officers
of CSH will continue to hold such positions following the Effective Time and
until the next annual Shareholders' meeting of the Surviving Corporation and
until their respective successors shall be duly elected or appointed and
qualified.
1.8. Availability of Agreement. An executed copy of this Agreement will be
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on file at the principal place of business of the Surviving Corporation at 0000
Xxxxxxx Xxxxxxx, Xxxxxx Xxxx, XX 00000, immediately following the Closing Date.
A copy of this Agreement will be furnished by the Surviving Corporation to any
past or present shareholder of TIL, CSA, or CSH, on written request and without
cost.
ARTICLE 2
CLOSING; DELIVERIES
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2.1. Closing. The consummation of the Merger and delivery of the Merger
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Consideration (the "Closing") shall take place at the offices of TIL located at
000 Xxxx Xxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx at 10 A.M., local time (the
"Closing Date").
2.2. Deliveries of TIL and Shareholders. At Closing TIL, or one or both of
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the Shareholders, as applicable, shall deliver to CSA and CSH:
(a) a Consulting and Non-Competition and Confidentiality Agreement by
and between YLB and CSH (the "Consulting Agreement"), substantially in the form
attached to this Agreement as Exhibit A;
(b) an Employment and Non-Competition and Confidentiality Agreement by
and between JYLB and CSH (the "Employment Agreement"), substantially in the form
attached to this Agreement as Exhibit B;
(c) a Registration Rights Agreement by and between CSA and
Shareholders, substantially in the form attached hereto as Exhibit C (the
"Registration Rights Agreement");]
(d) the Books and Records of TIL;
(e) stock certificates representing all of the shares of TIL Common
Stock that are issued and outstanding with appropriate stock powers attached;
(f) duly executed documentation providing access to all bank,
investment and other accounts to only those persons designated by CSA or CSH;
and
(g) Required Consents.
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2.3. Deliveries of CSA and CSH. At Closing, CSA or CSH, as applicable,
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shall deliver to one or both of the Shareholders, as applicable:
(a) the Consulting Agreement;
(b) the Employment Agreement;
(c) the Registration Rights Agreement;
(d) a copy of an irrevocable letter from CSA addressed to CSA's
transfer agent directing the issuance of, and delivery of stock certificates
evidencing, the CSA Common Stock representing the Merger Consideration; and
(e) the Xxxxxxx Investment Consent (as hereinafter defined).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
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3.1. Representations and Warranties of TIL. TIL represents and warrants
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to and for the benefit of CSA and CSH as follows (whenever a representation and
warranty is made "to the knowledge of TIL", or words of similar effect, such
representation and warranty shall be deemed to have been made based on the
actual knowledge of TIL, which shall, for such purpose include the actual
knowledge of each of the Shareholders):
(a) Due Organization, Good Standing and Corporate Power. TIL is a
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corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and TIL has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. TIL is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by its
makes such qualification necessary, except in such jurisdictions where the
failure to be so qualified or licensed and in good standing would not have a
Material Adverse Effect on TIL. True and complete copies of TIL's charter,
bylaws and Books and Records have been delivered to or made available to CSA and
CSH prior to the Closing. TIL does not own any equity interest in any other
Person.
(b) Authorization and Validity of Agreement. TIL has full corporate
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power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by TIL of this Agreement, and
the consummation by it of the transactions contemplated hereby, have been duly
authorized and approved by its Board of Directors and have been approved by
Shareholders, and no other corporate action on the part of TIL is necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by TIL and constitutes the valid and binding
obligation of TIL, enforceable against
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TIL in accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally, and general equitable principles.
(c) Capitalization.
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(i) The authorized capital stock of TIL consists of 400,000
shares of common stock, of which 2,500 shares of common stock are issued and
outstanding, of which 1,667 shares are owned by YLB and 833 shares are owned by
JYLB. All issued and outstanding shares are owned of record and beneficially by
Shareholders, free and clear of all liens, encumbrances, options or claims
whatsoever. All issued and outstanding shares of TIL Common Stock have been
validly issued and are fully paid and nonassessable, and are not subject to, nor
were they issued in violation of, any preemptive rights. There are no
outstanding or authorized options, warrants, rights, subscriptions, claims of
any character, agreements, obligations, convertible or exchangeable securities,
or other commitments, contingent or otherwise, relating to the TIL Common Stock,
pursuant to which TIL is or may become obligated to issue shares of TIL Common
Stock, any other shares of capital stock or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of the
capital stock of TIL. TIL does not hold any shares of capital stock in its
treasury or otherwise, and no shares of TIL Common Stock are reserved for
issuance.
(d) Consents and Approvals; No Violations. To TIL's knowledge,
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assuming (i) the filing of the Texas Articles of Merger and the Delaware
Certificate of Merger and other appropriate merger documents, if any, as
required by the laws of the States of Texas and Delaware are made, the execution
and delivery of this Agreement by TIL and the consummation by TIL of the
transactions contemplated hereby will not:
(i) violate any provision of the charter documents or the by-laws
of TIL;
(ii) violate any statute, ordinance, rule, regulation, order or
decree of any court or of any governmental or regulatory body, agency or
authority applicable to TIL or by which any of its properties or assets may be
bound;
(iii) require any filing with, or permit, consent or approval of,
or the giving of any notice to, any governmental or regulatory body, agency or
authority; or
(iv) result in a violation, termination or breach of, conflict
with, constitute (with or without the giving of notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of TIL under, result
in the forfeiture of any rights, entitlements or privileges under, create any
right or entitlement (including, without limitation, to employment or
compensation) not expressly provided for herein, or require the consent or
approval of any party under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or other instrument or obligation to which TIL is a party,
or by which it or any of its properties or assets may be bound.
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(e) Company Financial Statements. TIL delivered to CSA and CSH true
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and correct copies of the following financial statements relating to its
business (collectively, the "Financial Statements"): (i) balance sheets of TIL
as of December 31, 1996, 1997, and 1998; (ii) statements of operations and cash
flows for each of the years then ended; and (iii) balance sheets for the
periods ended March 31, 1999, June 30, 1999 and November 30, 1999 and related
statements of operations for the periods then ended (the "Interim Financial
Statements"). The Financial Statements are in accordance with the applicable
Books and Records of TIL (which Books and Records are true and complete) and
have been prepared in accordance with GAAP, consistently applied during the
relevant periods and, when read together with the notes thereto, present fairly
the financial condition and the results of operations of TIL as at and for the
respective periods ended on such dates.
(f) Absence of Undisclosed Liabilities. Except as set forth in the
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balance sheet statement attached hereto as Schedule 3.1(f) (the "Most Recent
Balance Sheet"), TIL does not have any outstanding claims against it,
liabilities or indebtedness, contingent or otherwise. To TIL's knowledge, there
is no reasonable basis for the assertion against TIL of any liability of any
nature or in any amount not fully reflected or reserved against in the Most
Recent Balance Sheet or expressly disclosed by this Agreement. The adjusted tax
basis and the fair market value of the assets of TIL exceed the liabilities of
TIL as of the date hereof.
(g) Accounts Receivable. The accounts receivable of TIL as reflected
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in the Most Recent Balance Sheet, to the extent uncollected on the Closing Date,
are bona fide receivables, were acquired in the ordinary course of business, and
to TIL's knowledge, are collectible (net of reserves set forth on the Most
Recent Balance Sheet, which reserves were adequate and in an amount consistent
with TIL's historical accounting policies). To TIL's knowledge, the accounts
receivable of TIL reflected in the Most Recent Balance Sheet represent monies
due for goods sold and delivered or services rendered, and are subject to no
refunds, discounts, rebates or other adjustments (except discounts for prompt
payment given in the ordinary course of business) and to no defenses, rights of
setoff, assignments, restrictions, encumbrances or conditions enforceable by
third parties on or affecting any thereof. TIL has never factored any of its
accounts receivable.
(h) Inventories. To TIL's knowledge, the inventories of TIL consist
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of items which are good and merchantable, and are of a quality and quantity
presently usable or salable in the ordinary course of business, subject to such
amount of the reserves applicable thereto as are on the Most Recent Balance
Sheet.
(i) Title to Properties; Encumbrances. To TIL's knowledge, TIL has
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good, valid and marketable title to all its tangible properties and assets (real
and personal), including, without limitation, all the tangible properties and
assets reflected in the Most Recent Balance Sheet, except as indicated in the
notes thereto and except for tangible properties and assets reflected in the
Most Recent Balance Sheet which have, since the date thereof, been sold or
otherwise disposed of in the ordinary course of business consistent with past
practices. TIL does not own any real estate. To TIL's knowledge, all of its
tangible properties and assets are subject to no encumbrance, lien, charge or
other restriction of any kind or character, except for
(i) liens reflected in the Most Recent Balance Sheet,
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(ii) liens consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially detract from
the value of, or impair the use of, such property by TIL in the operation of its
respective business,
(iii) liens for current taxes, assessments or governmental
charges or levies on property not yet due and delinquent; and
(iv) that certain lease entered into by and between TIL and
Xxxxxxxxxx Realty Investors, dated December 31, 1997, which to TIL's knowledge
is the only operating or capital lease to which TIL is a party.
(j) Absence of Certain Changes and Events. Since November 30, 1999,
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to TIL's knowledge,
(i) there has not been any change in TIL which has resulted or
could reasonably be expected to result in a Material Adverse Effect on TIL;
(ii) the business of TIL has been conducted in the ordinary
course consistent with past practices;
(iii) except in the ordinary course of business, TIL has not
incurred any material liabilities (direct, contingent or otherwise) or engaged
in any material transaction or entered into any material agreement;
(iv) TIL has not made any change in or amendment to its charter
documents or by-laws;
(v) TIL has not issued or sold any capital stock or other
securities of any kind;
(vi) TIL has not declared, paid or set aside for payment any
dividend or other distribution (payable in cash, securities or other property)
in respect of its capital stock or other securities;
(vii) TIL has not split, combined, reclassified, redeemed,
purchased or otherwise acquired any capital stock or other securities of TIL;
(viii) TIL has not disposed of any assets except for (i)
inventory sold or cash applied in the ordinary course of business consistent
with past practices and (ii) a Xxxxxx "Tiger" (N27175) airplane; and (iii) as
disclosed in Schedule 3.1(j);
(ix) TIL has not agreed to the settlement of any litigation; or
(x) TIL has not agreed, in writing or otherwise, to take any
of the foregoing actions.
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(k) Compliance with Laws. TIL is in compliance in all material
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respects and has at all times complied in all material respects, with all
applicable laws, regulations, orders, judgments and decrees. Without limiting
the generality of the foregoing,
(i) TIL has complied in all material respects with each, and,
to the knowledge of Shareholders, is not currently in material violation of any,
federal, state or local law, statute, regulation, permit provision or ordinance,
relating to the generation, handling, storage, transportation, treatment or
disposal of chemicals, toxic substances, solid wastes, hazardous wastes and
hazardous substances (the "Environmental Laws");
(ii) TIL has obtained and complied with all necessary permits
and other approvals, including interim status under the Resource Conservation
and Recovery Act, as amended ("RCRA"), necessary to store, treat, dispose of and
otherwise handle hazardous wastes and hazardous substances and have reported, to
the extent required by any Environmental Laws, all past and present sites owned,
leased or operated by TIL where hazardous wastes or hazardous substances, if
any, have been treated, stored or disposed; and
(iii) to the knowledge of TIL, except as set forth on Schedule
3.1(k), there are no locations at any sites currently or previously owned,
leased or operated by TIL where hazardous wastes or hazardous substances have
(a) been generated, which could give rise to any liability for TIL; or (b)
entered into the soil, surface water or groundwater. Schedule 3.1(k) lists the
following insofar as they affect or relate to any sites owned, leased or
operated by TIL:
(1) All federal, state, and local permits relating to
hazardous wastes or hazardous substances held by TIL;
(2) All variances, notices of violation, compliance orders
or judgments against TIL involving any environmental matters;
(3) Any locations at any sites currently or previously
owned, leased or operated by TIL where, to the knowledge of TIL, hazardous
wastes or hazardous substances have been generated, handled, stored, treated or
disposed; and
(4) All notices given by TIL to any governmental agency or
authority about discoveries of problems associated with hazardous wastes and
hazardous substances at any sites currently or previously owned, leased or
operated by TIL.
For purposes of this Section 3.1(k), the term "hazardous wastes" shall
have the meaning given to such term in RCRA and the regulations promulgated
thereunder, and the term "hazardous substance" shall have the meaning given to
such term in the Federal Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, and the Clean Water Act and the regulations
promulgated thereunder.
(l) Material Contracts. Schedule 3.1(l) hereof contains a list of all
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Contracts (as defined below) of the following types to which TIL currently is a
party and which is a party as of the Closing Date:
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(i) each contract of employment of any officer, employee or
consultant or with any labor union or association;
(ii) each contract or series of related contracts involving payments
either individually or in the aggregate in excess of $25,000 in or pursuant to
which any person who is or was an officer, director, stockholder or employee of
TIL has a material interest;
(iii) each contract relating to the borrowing or lending of money
or the guarantee of any obligations for borrowed money or otherwise, excluding
endorsements made for purposes of collection in the ordinary course of business;
(iv) each contract continuing for a period of more than one year from
its date involving payments in excess of $25,000 in any year or $25,000 in the
aggregate;
(v) each contract for charitable contributions in excess of $1,000;
(vi) each contract for the sale and/or installation of any equipment
where the purchase price for such equipment is more than $25,000, and each
contract for equipment maintenance involving total payments of more than
$25,000, including each contract for the sale and/or installation of any
equipment where such sale and/or installation has been completed but TIL has a
continuing obligation, contingent or otherwise;
(vii) each contract for capital expenditures or for the purchase
of materials, supplies, equipment or services involving payments in excess of
$25,000;
(viii)each license or royalty agreement (other than standard
software manufacturer's licenses included in the packaged software sold by TIL
or under which TIL's use of software in its own business operations is
licensed);
(ix) each distribution, dealer, reseller, manufacturer's
representative, sales agency or franchise agreement;
(x) each contract relating to advertising, promotion or public
relations, or with any contractor or subcontractor, not terminable without
penalty by TIL or such subsidiary on 30 days' or less notice;
(xi) each contract with any government or agency or instrumentality
thereof;
(xii) each option to purchase any of TIL's assets, properties or
rights;
(xiii)each agreement under which price discounts have been granted to
customers other than in the ordinary course of business;
(xiv) each contract with respect to the discharge or removal of
effluent, hazardous wastes or pollutants of any nature;
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(xv) any other contract or series of related contracts
involving payments in the aggregate of more than $25,000;
(xvi) each contract containing covenants not to compete in any
business or geographical area or not to use or disclose any information in the
possession of TIL;
(xvii) all contracts for the leasing or rental of real or
personal property with annual rental payments in excess of $5,000.00); and
(xviii)any other contract not made in the ordinary course of
business.
"Contract" shall mean any written or oral contract, lease, commitment, sales
order, purchase order, agreement, indenture, mortgage, franchise, note, bond,
lien, instrument, plan, permit or license. TIL has delivered to CSA true and
correct copies of each written document listed in Schedule 3.1(l) and a written
description of each material oral arrangement so listed.
To TIL's knowledge, all such Contracts are valid, enforceable in
accordance with their terms and in full force and effect, and, to the knowledge
of TIL, TIL is not in default thereunder. TIL has not received notice that any
party to any such contract intends to cancel or terminate such contract.
(m) Litigation. Except as disclosed in Schedule 3.1(m) hereof, there
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is no action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or, to the knowledge of TIL,
any investigation by) any governmental or other instrumentality or agency,
pending, or, to the knowledge of TIL, threatened, against or affecting TIL, or
any of its properties or rights. There are no such suits, actions, claims,
proceedings or investigations pending of which TIL has received notice, nor, to
the knowledge of TIL, is any thereof threatened, seeking to prevent or
challenging the transactions contemplated by this Agreement. TIL is not subject
to any judgment, order or decree entered in any lawsuit or proceeding.
(n) Employee Benefit Plans.
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(i) To TIL's knowledge, there exists no pension,
profit-sharing, stock bonus, stock option, phantom stock, stock purchase,
restricted stock, bonus, incentive or deferred compensation, severance, or other
employee benefit plan, program, arrangement, agreement or policy of any kind,
whether written or unwritten, that the TIL sponsors, maintains, contributes to,
is obligated to contribute to, is a party to or is otherwise bound, or with
respect to which the TIL may have any liability.
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(ii) To TIL's knowledge, TIL does not sponsor, maintain or
contribute to, has not in the past sponsored, maintained or contributed to, and
has no liabilities with respect to, any defined benefit pension plan subject to
Title IV of ERISA or any "multiemployer plan" (as defined in Section 3(37) of
ERISA).
(iii) To TIL's knowledge, the execution of and performance of the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) result in any payment in the
nature of compensation that would be a "parachute payment" as that term is
defined in Section 280G(b)(2) of the Code.
(o) Employment Relations and Agreements. To TIL's knowledge, (i) TIL
-----------------------------------
is in compliance and has at all times complied in all material respects with all
federal, state or other applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and has not
and is not engaged in any unfair labor practice; (ii) no unfair labor practice
complaint against TIL is pending before the National Labor Relations Board;
(iii) there is no labor strike, dispute, slowdown or stoppage actually pending
or, to the knowledge of TIL, threatened against or involving TIL; (iv) no
representation question exists respecting the employees of TIL; (v) no grievance
which might have a Material Adverse Effect on TIL taken as a whole or the
conduct of its business exists, no arbitration proceeding arising out of or
under any collective bargaining agreement is pending and no claim therefor has
been asserted; (vi) no collective bargaining agreement is currently being
negotiated by TIL; (vii) TIL has not experienced any material labor difficulty;
and (viii) no "plant closing" or "mass layoff" within the meaning of the Worker
Adjustment and Retraining Notification Act has occurred with respect to TIL. To
the knowledge of TIL, there has not been, and, there is no reason to anticipate,
any change in relations with employees of TIL as a result of the transactions
contemplated by this Agreement which could have a Material Adverse Effect on
TIL. Except as disclosed in this Agreement, TIL has no knowledge of any
employment, consulting, severance or indemnification agreements between TIL and
any director, officer, employee or agent of TIL or any agreement that would give
any person or entity the right to receive any payment from TIL as a result of
the Merger. Except as disclosed in this Agreement, TIL has no knowledge of any
limitation on the Surviving Corporation's right to discharge any employee of TIL
following the Closing or which would entitle any such discharged employee to
receive compensation from CSH on account of such discharge except for federal or
state laws restricting discharge on account of race, religion, country of
origin, sex, sexual orientation, age, disability.
(p) Relations with Certain Vendors. To TIL's knowledge, TIL has
------------------------------
maintained and currently has, good working relationships with each of its
manufacturers, vendors and suppliers, and none of the manufacturers, vendors or
suppliers has brought, taken or threatened to bring or take any action or
proceeding or adverse act or position against TIL. To TIL's knowledge, TIL's
relations with its vendors and suppliers will not be adversely affected by the
consummation of the Merger.
(q) Taxes. For any period ending on or before the Closing Date:
-----
(i) TIL is a calendar year taxpayer for federal, state and
local income tax purposes and has duly and timely filed with any federal, state
or local governmental taxing authority, body or agency, all federal, state, and
local tax returns, declarations, reports, estimates,
-11-
information returns and statements for all taxable periods through December 31,
1998 (collectively, "Returns") and all such Returns are true, correct and
complete and all Taxes (as hereinafter defined) shown due thereon have been
paid. To TIL's knowledge, all foreign Returns which it is required to file have
been duly and timely filed, are true and correct and all Taxes shown due thereon
have been paid. TIL has satisfied all required federal, state and local, and to
TIL's knowledge all foreign, estimated income Tax filings and payments in
respect of calendar year 1999. All federal, state and local income Taxes, and to
TIL's knowledge all foreign income Taxes, not yet due and payable have been
withheld or reserved for or, to the extent that they relate to periods on or
prior to the date of the Most Recent Balance Sheet, are reflected as a liability
on the Most Recent Balance Sheet.
(ii) TIL has properly withheld all amounts required by law to be
withheld for income Taxes and unemployment Taxes including without limitation,
with respect to social security and unemployment compensation, relating to its
employees, and has properly remitted all withheld amounts required to be
remitted to the appropriate taxing authority, agency or body.
(iii) To TIL's knowledge, TIL has satisfied all filing and
payment requirements in respect of all other Taxes.
(iv) The Returns filed by TIL have never been audited by any
federal, state, local or foreign taxing authority with respect to any item or
income, loss, deduction or credit attributable to the operations of TIL. TIL has
received no notice of an intent to audit TIL's Returns from any governmental
authority.
(v) TIL has received no notice from any federal, state, local
or foreign taxing authority that there is any deficiency for any Taxes
attributable to TIL's operations.
(vi) There are no liens for Taxes upon any assets of TIL other
than property tax liens for property taxes not yet due or delinquent.
(vii) TIL is not a party to any agreement providing for the
allocation or sharing of Taxes.
(viii)TIL has not agreed to make, nor are they required to make,
any adjustment under Section 481(a) of the Code for any period ending after the
Closing Date by reason of a change in accounting method or otherwise.
(ix) None of the assets of TIL is required to be treated as
owned by any other person pursuant to the "safe harbor lease" provisions of
former Section 168(f)(8) of the Code.
(x) TIL is not a party to any venture, partnership, contract or
arrangement under which it could be treated as a partner, for federal income tax
purposes.
-12-
(xi) TIL has no permanent establishment located in any tax
jurisdiction other than the United States and is not liable for the payment of
taxes levied by any such jurisdiction located outside the United States.
(xii) TIL is not an "investment company" within the meaning of
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(xiii)For purposes of this Agreement, the term "Taxes" shall
mean all taxes, charges, fees, levies or other assessments, including but not
limited to all net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, withholding, payroll, employment, social security,
unemployment, excise, estimated, stamp, occupancy, occupation, property or other
taxes, customs duties, fees, assessments or charges of any kind whatsoever,
including all interest and penalties thereon, and additions to tax or additional
amounts imposed by any taxing authority, domestic or foreign, upon TIL or any of
its properties.
(r) Intellectual Properties. To TIL's knowledge, TIL owns or has the
-----------------------
right to use (on a royalty-free basis) all domestic and foreign patents, patent
applications, patent licenses, software licenses, know-how licenses, trade
names, trademarks, copyrights, unpatented inventions, service marks, trademark
registrations and applications, service xxxx registrations and applications,
copyright registrations and applications, trade secrets and other confidential
proprietary information (collectively the "Intellectual Property") necessary to
the operation of its business. Schedule 3.1(r) hereof contains an accurate and
complete list of all Intellectual Property which is, to TIL's knowledge,
necessary to the operation of the business of TIL. Unless otherwise indicated
in Schedule 3.1(r), TIL owns the entire right, title and interest in and to the
Intellectual Property listed in Schedule 3.1(r) used in the operation of its
business (including, without limitation, the exclusive right to use and license
the same) and each item constituting part of the Intellectual Property which is
owned by TIL has been, to the extent indicated in Schedule 3.1(r), duly
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office or such other government entities, domestic or
foreign as are indicated in Schedule 3.1(r), and such registrations, filings and
issuances remain in full force and effect. Except as stated in Schedule 3.1(r),
there are no pending or, to the knowledge of TIL, threatened proceedings or
litigation or other adverse claims affecting or with respect to the Intellectual
Property. Schedule 3.1(r) lists all notices or claims received by TIL during
the past two years which claim infringement, contributory infringement,
inducement to infringe, misappropriation or breach by TIL of any domestic or
foreign patents, patent applications, patent licenses and know-how licenses,
trade names, trademark registrations and applications, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. Except as set forth in Schedule 3.1(r),
there is, to the knowledge of TIL, no reasonable basis upon which a claim may be
asserted against TIL, for infringement, contributory infringement, inducement to
infringe, misappropriation or breach of any domestic or foreign patents, patent
applications, patent licenses, know-how licenses, trade names, trademark
registrations and applications, common law trademarks, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. To the knowledge of TIL, no person or
entity is infringing the Intellectual Property.
(s) Insurance. TIL has not carried any insurance insuring against
---------
product liability, general liability or otherwise.
-13-
(t) Statements and Other Documents Not Misleading. Neither this
---------------------------------------------
Agreement, including all Schedules, nor the Collateral Documents furnished by
TIL in connection with the transactions contemplated hereby, contains any untrue
statement of any material fact or omits to state any material fact required to
be stated in order to make such statement, document or other instrument not
misleading. There is no fact known to TIL which may have a Material Adverse
Effect on TIL which has not been set forth in this Agreement or the Schedules.
(u) Product Warranty. To TIL's knowledge, products sold by TIL prior
----------------
to Closing have been free of product defect. TIL has not received any notices
of any warranty claims. To TIL's knowledge, except for reserves for warranty
liabilities specifically set forth on the Most Recent Balance Sheet, there are
no: (i) liabilities of TIL, fixed or contingent, asserted or unasserted, with
respect to any product liability or any similar claim that relates to any
product manufactured or sold by TIL to others; or (ii) liabilities of TIL, fixed
or contingent, asserted or unasserted, with respect to any claim for the breach
of any express or implied product warranty or any similar claim with respect to
any product manufactured or sold by TIL to third parties. Schedule 3.1(u) sets
forth the standard warranty obligations made by TIL in the ordinary course of
business to purchasers of its products.
3.2. Representations and Warranties of Shareholders. Each of the
----------------------------------------------
Shareholders represents and warrants to and for the benefit of CSA and CSH as
follows (whenever a representation and warranty is made "to the knowledge of
Shareholders", such representation and warranty shall be deemed to have been
made based on the actual knowledge of one or both of the Shareholders, as
applicable):
(a) he is a resident of the State of Texas;
(b) he has the power and authority to enter into this Agreement and
the other documents, agreements and instruments to be executed and delivered and
performed in connection with this Agreement, (the "Collateral Documents")
executed by him; such documents have been duly executed and delivered by him and
constitute his valid and binding obligation, enforceable against him in
accordance with their terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally, and general equitable principles;
(c) his execution and performance of the Collateral Documents to
which he is a party will not violate any other contract to which he is a party
or is otherwise bound;
(d) he has full power and authority to vote his shares of TIL Common
Stock and make, enter into and carry out the terms of this Agreement, has not
granted the right to vote such shares to any other person or entity during the
term of this Agreement, will not, and will not permit any entity under his
control to, deposit any of his shares in a voting trust or subject any of such
shares to any arrangement or agreement with respect to the voting of such
shares, other than as provided in this Agreement;
-14-
(e) he is acquiring the shares of CSA Common Stock pursuant to the
Merger solely for his own account, for investment purposes, and pursuant to an
exemption from the registration requirements under applicable federal and state
securities laws;
(f) he is aware that such shares of CSA Common Stock have not been
registered with federal or state securities regulatory agencies in reliance upon
exemptions from the registration requirements under applicable federal and state
laws;
(g) he acknowledges and agrees that such shares of CSA Common Stock
may not be sold, pledged, hypothecated or otherwise transferred or disposed of
without registration under federal and applicable state securities laws or
exemption therefrom;
(h) he agrees that the certificates representing such shares of CSA
Common Stock may be inscribed with a legend to reflect the foregoing
restrictions on transferability as further described in Article 4 hereof;
(i) because of the restrictions on the transferability of such shares
of CSA Common Stock, he acknowledges that he may be required to bear the
economic risk of holding such shares for an indefinite period of time; (viii) he
has received and reviewed copies of the Commission Filings (as defined in
Section 3.3(f) hereof) (and the exhibits thereto) prepared by CSA;
(j) he and his advisers (if any) have been afforded the opportunity
to ask such questions and obtain such additional information concerning CSA and
its business and affairs as he and any such advisers have considered necessary
to enable them to understand the nature of his investment in the shares of CSA
Common Stock issuable pursuant to the Merger and to verify the accuracy of
information obtained by them from CSA; and
(k) none of the shares of CSA Common Stock issuable to him in the
Merger will, immediately following the Effective Time, be subject to a "put" or
"call" option.
3.3. Representations and Warranties of CSA or CSH. CSA or CSH represents
--------------------------------------------
and warrants to and for the benefit of TIL and Shareholders as follows:
(a) Due Organization; Good Standing and Corporate Power. Each of CSA
---------------------------------------------------
or CSH is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly authorized and qualified
under all applicable laws to carry on its business in the manner now conducted.
Each of CSA and CSH has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as such business
is currently being conducted. True and complete copies of the minute books of
CSA and CSH have been made available to Shareholder.
(b) Authorization and Validity of Agreement. Each of CSA and CSH has
---------------------------------------
full corporate power and authority to execute and deliver this Agreement and the
Collateral Documents and to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Collateral Documents by each
of CSA and CSH and the consummation by it
-15-
of the transactions contemplated hereby and thereby, have been duly authorized
and approved by the Board of Directors of each of CSA and CSH. No other
corporate action on the part of each of CSA and CSH is necessary to authorize
the execution, delivery and performance by each of CSA and CSH of this Agreement
and the Collateral Documents and the consummation by each of CSA and CSH of the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by each of CSA and CSH and is a valid and binding
obligation of each of CSA and CSH, enforceable against each of CSA and CSH in
accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally, and general equitable principles.
(c) Capitalization of CSA. The authorized capital stock of CSA
---------------------
consists of 50,000,000 authorized shares of CSA Common Stock and 5,000,000
shares of Series A Convertible Preferred Stock, $.01 par value per share
("Preferred Stock"). As of the date of this Agreement, 162,914 shares of
Preferred Stock are issued and outstanding and 7,084,340 shares of CSA Common
Stock are issued and outstanding, all of which have been validly issued and are
fully paid and nonassessable. As of the date of this Agreement, no shares of
CSA Common Stock are held in the treasury of CSA or by its subsidiaries and
5,020,182 shares of CSA Common Stock have been reserved for issuance upon
exercise of outstanding options and warrants and conversion of outstanding
convertible securities.
(d) Validity of Shares to be Issued. The shares of CSA Common Stock
-------------------------------
to be issued by CSA in the Merger pursuant to Article 1 hereof have been duly
authorized and, when issued by CSA in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable and not subject
to preemptive rights of any past or present shareholders of CSA. CSA is not
aware of any current fact or circumstance which would make CSA unable to comply
with its obligations under the Registration Rights Agreement to effect a
registration of the shares of CSA Common Stock received as the Merger
Consideration.
(e) Consents and Approvals. Assuming (i) the requirements of this
----------------------
Agreement are met, and (ii) the filing of the Texas Articles of Merger and the
Delaware Certificate of Merger and other appropriate merger documents, if any,
as required by the laws of the States of Texas and Delaware are made, the
execution and delivery of this Agreement by CSA and CSH and the consummation by
CSA and CSH of the transactions contemplated hereby will not:
(i) violate any provision of the charter documents or by-laws of
CSA or CSH;
(ii) violate any statute, ordinance, rule, regulation, order or
decree of any court or of any governmental or regulatory body, agency or
authority applicable to CSA or CSH or by which any of their properties or assets
may be bound;
(iii)require any filing with, or permit, consent or approval
of, or the giving of any notice to, any governmental or regulatory body, agency
or authority, other than the filing of a Form D with the Commission and any
necessary state "blue-sky" filings; or
-16-
(iv) except for the consent of Xxxxxxx Investment Company, Inc. (the
"Xxxxxxx Investment Consent") under the terms of an underwriting agreement by
and among CSA and Xxxxxxx Investment Company, Inc, Millennium Financial Group,
Inc and xxxxxx xxxx securities corporation, as representatives of the several
underwriters listed therein, dated June 15, 1999, result in a violation,
termination or breach of, conflict with, constitute (with or without the giving
of notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation, payment or acceleration) under, result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of CSA or CSH under, result in the forfeiture of any
rights, entitlements or privileges under, create any right or entitlement
(including, without limitation, to employment or compensation) not expressly
provided for herein, or require the consent or approval of any party under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease, franchise agreement or other
instrument or obligation to which CSA or any of its subsidiaries is a party, or
by which it or any of their respective properties or assets may be bound.
(f) Reports and Financial Statements. Since June 16, 1999, CSA has
--------------------------------
filed all forms, reports and documents with the Securities and Exchange
Commission (the "Commission") required to be filed by it pursuant to the federal
securities laws and the Commission rules and regulations thereunder (the
"Commission Filings"), and all Commission Filings have complied in all material
respects with all applicable requirements of the federal securities laws and the
Commission rules and regulations promulgated thereunder and have not contained
any untrue statement of material fact required to be stated therein or necessary
in order to make the statements made therein, in light of circumstances under
which they were made, not misleading.
(g) Absence of Certain Changes and Events. Except as expressly
-------------------------------------
disclosed in the Commission Filings, since September 30, 1999, there has not
been any change in CSA or CSH which results or could reasonably be expected to
result in a Material Adverse Effect on CSA or CSH.
(h) Broker's or Finder's Fee. No agent, broker, person or firm acting
------------------------
on behalf of CSA or CSH shall, by reason of the transactions contemplated
hereby, be or become entitled to any commission or broker's or finder's fees
from any of the parties hereto, or from any person controlling, controlled by,
or under common control with any of the parties hereto, in connection with this
Agreement or any of the transactions contemplated herein.
(i) Statements and Other Documents Not Misleading. Neither this
---------------------------------------------
Agreement, including all Schedules, nor any Collateral Document furnished by CSA
or CSH to TIL in connection with the transactions contemplated hereby contains
or will contain any untrue statement of any material fact or omits or will omit
to state any material fact required to be stated in order to make such
statement, document or other instrument not misleading. There is no fact known
to CSA or CSH which may have a Material Adverse Effect on CSA or CSH which has
not been set forth in this Agreement, the Schedules hereto or the Commission
Filings.
(j) Ownership of CSH; No Prior Activities. CSH is a direct, wholly-
-------------------------------------
owned subsidiary of the CSA and was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement. Except for obligations or
liabilities incurred in connection with
its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, CSH has not and will not have incurred, directly
or indirectly, through any subsidiary or Affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any Person which could
adversely effect the ability of the CSA to consummate the transactions
contemplated hereby.
(k) Tax-Free Reorganization. Prior to the Merger, CSA will be in
-----------------------
control of CSH within the meaning of Section 368(c) of the Code. CSA has no
plan or intention to cause the Surviving Corporation to issue additional shares
of its stock that would result in CSA losing control of the Surviving
Corporation within the meaning of Section 368(c) of the Code. In addition, CSA
has no plan or intention to (w) reacquire any of its stock issued in the Merger
or to liquidate CSH; (x) merge CSH with or into another corporation, (y) sell or
otherwise dispose of the stock of CSH except for transfers of stock to another
corporation controlled by CSA; or (z) cause CSH to sell or otherwise dispose of
any of its assets, except for dispositions made in the ordinary course of
business or transfers of assets to a corporation controlled by CSA. CSA does not
own, nor has it owned during the past five years, any shares of the stock of
TIL. Each of CSA and CSH is undertaking the Merger for a bona fide business
purpose. As of the Closing Date, the fair market value of the assets of CSH will
exceed the sum of CSH's liabilities plus the amount of other liabilities, if
any, to which CSH's assets are subject.
(l) Investment Company. Neither CSA nor CSH is an investment company
------------------
as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
ARTICLE 4
LEGENDS ON STOCK CERTIFICATES
4.1. Stock Legends. Each of the Shareholders acknowledges that the shares
-------------
of CSA Common Stock to be delivered to Shareholder pursuant to this Agreement
have not been registered under the Securities Act or any state securities laws,
and therefore may not be resold without compliance with the Securities Act. Each
of the Shareholders covenants, warrants and represents that none of the shares
of CSA Common Stock issued to him will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full compliance
with all of the applicable provisions of the Securities Act, the rules and
regulations of the Commission and applicable state securities laws. All of the
share certificates of CSA Common Stock shall bear the following legend in
addition to any other legends required under this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES OR BLUE SKY LAWS. SUCH SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE
-18-
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
OR BLUE SKY LAWS, UNLESS, IN THE OPINION (WHICH
SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE
CORPORATION) OF COUNSEL SATISFACTORY TO THE
CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
ARTICLE 5
POST-CLOSING COVENANTS
5.1. Further Assurances. TIL, Shareholder, CSA and CSH each will, following
------------------
any party's request therefor, execute and deliver such further instruments of
conveyance and transfer and take such other action as such party may reasonably
may request to consummate the transactions contemplated herein.
5.2. Intended Tax Treatment. CSA, CSH, TIL and Shareholder are entering
----------------------
into this Agreement with the intention that the Merger qualify as a tax-free
reorganization for federal income tax purposes, except to the extent of any
"boot" received, and no party will take any actions that disqualify the Merger
for such treatment. Following the Closing, CSA's intention is that the Surviving
Corporation will continue the historic business of TIL or use a significant
portion of the historic business assets of TIL in a business, all as required to
satisfy the "continuity of business enterprise" requirement under Section 368 of
the Code.
5.3. Payment of Franchise Taxes. From and after the Closing, CSH
--------------------------
acknowledges that is shall be responsible for the payment to the State of Texas
of fees and franchise taxes due by TIL or CSH and shall be obligated to pay such
fees and franchise taxes if the same are not timely paid.
5.4. Ysebaert Contract. Notwithstanding anything contained herein to the
-----------------
contrary, CSA and CSH do hereby agree that a condition precedent to their
execution of this Agreement was that TIL obtain an addendum to that certain
manufacturing contract ("Manufacturing Contract") between TIL and Ysebaert, S.A.
("Ysebaert"). Pursuant to such condition precedent, the addendum to the
Manufacturing Contract (the "Addendum") was executed effective as of November 5,
1999, by both Ysebaert and TIL (the Manufacturing Agreement, as amended by the
Addendum, hereinafter referred to as the "Ysebaert Contract"). CSA and CSH
hereby agree and represent that pursuant to the terms and provisions of the
Ysebaert Contract, upon the consummation of the Merger, CSA and/or CSH shall be
entitled to all rights of TIL under the Ysebaert Contract and shall be liable
for all duties and obligations of TIL under the Ysebaert Contract including, but
not limited to the obligation of the purchase of Four Hundred Fifty (450)
Hematil-2000 analyzers from Ysebaert, as reduced by sales thereunder prior to
Closing.
In addition to the indemnities by CSA and CSH to the TIL Indemnitees set
forth in Section 6.2 hereof, CSA and CSH hereby agree to hold harmless the TIL
Indemnitees, their
-19-
heirs, beneficiaries and successors, from and against any Costs incurred in
respect of any claim or proceeding initiated after the Closing (whether or not
based on facts and circumstances arising before, on or after the Closing Date)
which is premised upon any activity under the Ysebaert Contract constituting an
infringement of the intellectual property rights of others.
5.5. Reservation of Rights. Nothing in Sections 5.3 or 5.4 hereof shall
---------------------
preclude CSH or CSA from exercising any or all of its rights under Article 6
hereof in respect of a breach of a representation or warranty.
5.6. Public Announcements. Unless required by applicable law, TIL will not
--------------------
issue any press release or otherwise make any public statement with respect to
the transactions contemplated hereby without the prior written consent of the
other party.
ARTICLE 6
SURVIVAL; INDEMNIFICATION; EXPENSES
-----------------------------------
6.1. Indemnification by Shareholders. Shareholders shall defend,
-------------------------------
indemnify and hold harmless CSA, CSH and their respective affiliates, officers,
directors, employees and controlling persons (the "CSA Indemnitees") from any
liability, damage, deficiency, loss, taxes, interest (including interest on
claims), penalty, judgments, assessments, cost or expense, including reasonable
attorneys fees and costs of investigating and defending against lawsuits,
complaints, actions or other pending or threatened litigation, where applicable
measured net of any corresponding insurance recovery (being hereafter
collectively referred to in this Article 6 as "Costs"), arising from or
attributable to any error, misstatement, omission or inaccuracy in or breach of
any representation or warranty contained in Article 3 of this Agreement or in
any Schedule, Exhibit, certificate, agreement, instrument or other document
entered into or delivered pursuant hereto.
6.2. Indemnification by CSA and CSH. CSA and CSH shall defend, indemnify
------------------------------
and hold harmless Shareholders (the "TIL Indemnitees") from Costs arising from
or attributable to any error, misstatement, omission or inaccuracy in, or breach
of, any representation, warranty or covenant made by CSA or CSH in Article 3
hereof or in any certificate, agreement, instrument, or other document entered
into or delivered pursuant hereto.
6.3. Claim Procedures.
----------------
(a) An indemnified party hereunder shall promptly give notice ("Notice
of Claim") to the indemnifying party after obtaining knowledge of any claim or
other item against the indemnified party as to which recovery may be sought
against the indemnifying party because of the covenants of indemnity set forth
above. If such indemnity shall arise from the claim of a third party, the
indemnified party shall permit the indemnifying party to assume the defense of
any such claim or any litigation resulting from such claim. If the indemnifying
party assumes the defense of the claim, matter or litigation at issue, each
indemnified party shall have the right to employ separate counsel in such claim,
matter or litigation and to participate in the
-20-
defense or conduct thereof, but the fees and expenses of such counsel shall not
be at the expense of the indemnifying party unless
(i) the indemnifying party shall have failed, within a
reasonable time after having been notified by the indemnified party of the
existence of such claim, matter or litigation as provided in the preceding
sentence, to assume the defense of such claim,
(ii) the employment of such counsel has been specifically
authorized in writing by the indemnifying party,
(iii)the named parties to any such action (including any
impleaded parties) include both such indemnified party and the indemnifying
party and such indemnified party shall have been advised in writing by such
counsel that there may be conflicting interests between the indemnifying party
and the indemnified party in the legal defense thereof and, in such event, legal
counsel selected by the indemnifying party shall be required to cooperate fully
with legal counsel selected by the indemnified party relating to such defense,
(iv) the relief sought exceeds the indemnifying parties' maximum
indemnification obligations under Section 6.4, or
(v) equitable relief is being sought against any of the
indemnified parties.
(b) If the indemnifying party assumes the defense of the particular
claim or litigation, neither the indemnifying party nor the indemnified party
shall, in the defense of such claim or litigation, consent to entry of any
judgment or enter into any settlement, except with the written consent of the
other party, which consent shall not be unreasonably withheld. In addition, the
indemnifying party shall not enter into any settlement of any litigated claim
(except with the written consent of the indemnified party) which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the indemnified party a full release from all liability in respect
of such claim or litigation.
(c) Failure by the indemnifying party to notify the indemnified party
of its election to defend any such claim or litigation by a third party within
fifteen (15) days after notice thereof shall have been given to the indemnifying
party shall be deemed a waiver by the indemnifying party of its right to defend
such claim or litigation. If the indemnifying party shall not assume the
defense of any such claim by a third party or litigation resulting therefrom,
the indemnified party may defend against such claim or litigation in such manner
as it may deem appropriate and may settle such claim of litigation on such terms
as it may deem appropriate without prejudicing its rights against the
indemnifying party provided for herein.
(d) Nothing contained herein shall be construed to give any insurance
carrier a right of subrogation for claims paid except as such right would
otherwise exist in the absence of this Article 6.
(e) Further, for purposes of this Section, notification from the
Internal Revenue Service of an intended audit of TIL's tax returns for any
period prior to Closing Date
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shall be considered notice of a claim as to which CSA shall promptly notify
Shareholders. Shareholders shall pay for and have complete control of and
discretion in defending and/or settling the audit, and all liabilities incurred
by way of defense and settlement of the audit and claims arising thereunder
shall be paid by Shareholders.
6.4. Limitations. Neither the CSA Indemnitees nor TIL Indemnitees shall be
-----------
entitled to recover any Costs under this Agreement until the aggregate amount of
the Costs suffered by the CSA Indemnitees or TIL Indemnitees (as the case may
be) shall exceed $10,000 (the "Minimum Loss"). Except as provided herein, once
the Minimum Loss has been exceeded in respect of a party, the party who suffered
Costs in excess of the Minimum Loss shall be entitled to recover all Costs. In
addition, except as provided herein, after such party has recovered all Costs,
it shall be entitled to recover any future Costs which it may thereafter suffer
without regard to the Minimum Loss limitation. Notwithstanding anything
contained in the Article 6 to the contrary, Shareholders shall only be required
to indemnify the CSA Indemnitees and the CSA Indemnitees shall only be entitled
to recover Costs from Shareholders which in the aggregate are equal to or less
than Three Million and No/100 Dollars ($3,000,000.00).
6.5. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties herein or in any Schedule, any Exhibit, certificate, agreement,
instrument or other document entered into or delivered pursuant hereto shall be
deemed to have been relied upon by the other party, and, except as provided in
paragraph (b) below, shall survive the execution and delivery of this Agreement
and the Merger and payment therefor until May 31, 2001 (the "Cut-Off Date").
Except as provided in this paragraph below, no claim of misrepresentation or
breach of any representation or warranty may be made by any party hereunder
unless notice of such claim is given to the party claimed against on or before
the Cut-Off Date. In addition, no claim for a breach of an agreement, covenant
or undertaking contained herein may be made by any party hereunder unless notice
of such claim is given to the party claimed against before the Cut-Off Date. The
representations and warranties made in Section 3.1(o) (Taxes) shall survive the
execution and delivery of this Agreement and the Merger and payment therefor
until the expiration of the time period which is prescribed by the applicable
federal, state or local statute of limitations with respect to which a third
party may make a claim relating to such matters.
6.6. Exclusive Remedy. After the Closing, to the extent permitted by law,
----------------
the indemnities set forth in this Article 6 shall be the exclusive remedy of CSA
and CSH for any misrepresentation or breach of warranty contained in Section 3.1
or 3.2 of this Agreement.
ARTICLE 7
GENERAL
-------
7.1. Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
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(a) if to TIL or Shareholders, to them at:
000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xx. Xxxx Xx Xxxxx
with a copy to:
Gardere, Wynne, Xxxxxx & Xxxxx, L.L.P.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Ms. Xxxxxx Xxxxxx Le Bihan
(b) if to CSA or CSH, to them at:
Careside, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxxx Xxxx, XX 00000
Attention: X. Xxxxxxx Stoughton
with a copy to:
Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Xxxxxx
Xxxxxxxxxx & Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esquire
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been given on the date of
delivery unless mailed, in which case it shall be deemed given on the third
business day after the mailing thereof. Notwithstanding the foregoing, a notice
of a change of address shall be effective only upon receipt thereof.
7.2. Entire Agreement. This Agreement and the Schedules, Exhibits and
----------------
Collateral Documents referred to herein or delivered pursuant hereto
collectively contain the entire understanding of the parties hereto with respect
to the subject matter contained herein and supersede all prior and
contemporaneous agreements and understandings, oral and written, with respect
thereto.
7.3. Binding Effect; Benefit; Assignment. This Agreement shall inure to the
-----------------------------------
benefit of and be binding upon the parties hereto and their respective
successors, heirs and permitted assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any person,
other than the parties hereto or their respective successors and permitted
assigns and other than CSA
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Indemnitees and TIL Indemnitees (to the extent provided in Article 6), any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. Nothing contained herein shall restrict CSA from granting a security
interest in its rights hereunder to any third party providing it with financing.
7.4. Amendment and Modification. Subject to applicable law, this Agreement
--------------------------
may be amended, modified and supplemented in writing by the parties hereto in
any and all respects after the Effective Time by the Board of Directors of CSA
and CSH or officers of CSA and CSH authorized by each of their respective Board
of Directors, and by Shareholders.
7.5. Further Actions. Each of the parties hereto agrees that, subject to
---------------
its legal obligations, it will use its best efforts to do all things reasonably
necessary to consummate the transactions contemplated hereby.
7.6. Headings. The descriptive headings of the several Articles and
--------
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement.
7.7. Counterparts; Exchange of Signature Pages by Telecopier. This
-------------------------------------------------------
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original, and all of which together shall be deemed to be one and the
same instrument. This Agreement may be executed by exchange of signature pages
transmitted via telecopier with the same force and effect as if original
signatures on such pages were exchanged.
7.8. Applicable Law. This Agreement and the legal relations between the
--------------
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware, without regard to the conflict of laws rules thereof.
7.9. Severability. If any term, provision, covenant or restriction
------------
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
ARTICLE 8
DEFINITIONS
-----------
As used herein, the following capitalized terms have the meaning set
forth below:
8.1. "Books and Records" means all files, documents, instruments,
papers, books and records relating to the business of TIL, including (without
limitation) financial statements, Tax Returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title policies, Contracts, customer lists, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
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8.2. "Material Adverse Effect" means an event, fact or circumstance,
or series of related events, facts or circumstances which, individually or in
the aggregate with all such events, facts or circumstances, results or could
result in a material adverse effect on business, financial condition, results of
operations, cash flows or prospects of a particular Person or group of Persons.
8.3. "Person" means any natural person, sole proprietorship,
corporation, partnership, joint venture, limited liability company, limited
liability partnership, association, trust, or any other entity or organization,
including any governmental entity.
8.4. "Required Consents" means any and all permits, licenses, waivers,
consents or approvals from any government entity, other parties to Contracts,
licenses and other instruments necessary to consummate the transactions
contemplated hereby and by any Exhibit hereto, including the transfer to the
Surviving Corporation of all of the benefits under all Contracts, licenses and
permits.
IN WITNESS WHEREOF, each of CSA, CSH, TIL and Shareholders have
executed this Agreement and Plan of Merger as of the date first above written.
CARESIDE, INC.
By: /s/ Xxxxx X. Xxxx
_________________________________
Name: Xxxxx X. Xxxx
Title: Chief Financial Officer
CARESIDE HEMATOLOGY, INC.
By: /s/ Xxxxx X. Xxxx
_________________________________
Name: Xxxxx X. Xxxx
Title: Chief Financial Officer
[EXECUTIONS CONTINUED]
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TEXAS INTERNATIONAL LABORATORIES, INC.
By: /s/ Xxxx Xx Xxxxx
---------------------------------
Name: Xxxx Xx Xxxxx
Title: President
/s/ Xxxx Xx Xxxxx
------------------------------------
Xxxx Xx Xxxxx
/s/ Xxxx Xxxx Xx Xxxxx
------------------------------------
Xxxx Xxxx Xx Xxxxx
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