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Exhibit 10.4
STOCK PURCHASE AGREEMENT
BY AND AMONG
I-STORM ACQUISITION CORP.
AND
DIGITAL POWER HOLDING COMPANY
AND
CHIRICAHUA COMPANY
AND
XXXXXXX XXXXXXX
AND
XXXXX X. XXXXXXX
MAY 6, 1998
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TABLE OF CONTENTS
TO
STOCK PURCHASE AGREEMENT
ARTICLE/SECTION/SUBJECT PAGE
----------------------- ----
INTRODUCTION AND RECITALS.........................................................................................1
ARTICLE I PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale of Shares of Company Stock.............................................................2
1.2 Purchase Price for Shares of Company Stock...............................................................2
1.3 Cancellation of Certain Shares of Common Stock...........................................................2
1.4 Option to Purchase Shares................................................................................3
1.5 Voting Trust.............................................................................................3
1.6 Lock-up Agreements.......................................................................................3
1.7 Resignation of Directorship and Officership of the Company at Closing....................................5
ARTICLE II CLOSING
2.1 Date and Time of Closing.................................................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company and the Stockholders.......................................5
(a) Authorization...................................................................................5
(b) Organization; Subsidiaries......................................................................6
(c) Capitalization..................................................................................6
(d) Financial Statements............................................................................6
(e) Owned Real Property.............................................................................7
(f) Leased Real Property; Tenancies.................................................................7
(g) Title...........................................................................................7
(h) Fixed Assets; Condition of Assets...............................................................7
(i) Intellectual Property...........................................................................8
(j) Inventory.......................................................................................8
(k) Accounts Receivable.............................................................................8
(l) Absence of Undisclosed Liabilities..............................................................8
(m) Absence of Certain Changes or Events............................................................8
(n) Agreements.....................................................................................10
(o) Non-Contravention; Consents....................................................................12
(p) Employee Benefit Plans/Labor Relations.........................................................12
(q) Insurance......................................................................................12
(r) Tax Matters....................................................................................13
(s) Compliance with Applicable Law.................................................................14
(t) Litigation.....................................................................................14
(u) Permits........................................................................................15
(v) Restrictive Covenants..........................................................................15
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(w) Unlawful Payments..............................................................................15
(x) Warranties.....................................................................................15
(y) Officers, Directors and Employees..............................................................15
(z) Loans to or from Affiliates....................................................................16
(aa) Books and Records..............................................................................16
(bb) Bank Accounts..................................................................................16
(cc) Agreements with Affiliates.....................................................................16
(dd) Accuracy of Information Furnished..............................................................16
3.2 Representations and Warranties of Purchaser.............................................................17
(a) Authorization..................................................................................17
(b) Organization; Subsidiaries.....................................................................17
(c) Non-Contravention; Consents....................................................................17
(d) Accuracy of Information Furnished..............................................................18
(e) Compliance with Applicable Law.................................................................18
(f) Restricted Stock...............................................................................18
3.3 Survival of Representations and Warranties..............................................................19
ARTICLE IV COVENANTS
4.1 Covenants of the Company and the Stockholders and Xxxxx X. Xxxxxxx......................................20
(a) Notification...................................................................................20
(b) [Intentionally Deleted]........................................................................20
(c) [Intentionally Deleted]........................................................................20
(d) Conduct of Business; Certain Covenants.........................................................20
(e) Proposals; Other Offers........................................................................23
(f) Best Efforts and Cooperation; Further Assurances...............................................23
(g) Access to Additional Agreements and Information................................................23
4.2 Covenants of Purchaser..................................................................................23
(a) Notice of Defaults.............................................................................23
(b) Third Party Consents...........................................................................24
(c) Best Efforts and Cooperation; Further Assurances...............................................24
(d) Tax Audits.....................................................................................24
4.3 Governmental Filings and Consents.......................................................................24
4.4 Publicity...............................................................................................24
4.5 Purchaser's Right to Investigate........................................................................25
(a) Obligation of the Company and the Stockholders and Xxxxx X. Xxxxxxx...........................25
(b) Effectiveness of Representations Notwithstanding Investigation.................................25
ARTICLE V CONDITIONS
5.1 Conditions to Obligations of Purchaser..................................................................26
(a) No Material Adverse Change.....................................................................26
(b) Copies of Resolutions..........................................................................26
(c) Opinion of Company's and Stockholders' Counsel.................................................26
(d) Accuracy of Representations and Warranties; Performance of Covenants...........................26
(e) Delivery of Officers' Certificates.............................................................26
(f) Consents and Waivers...........................................................................27
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(g) Litigation.....................................................................................27
(h) Delivery of Documents and Other Information....................................................27
5.2 Conditions to Obligations of the Company and the Stockholders...........................................27
(a) Copies of Resolutions..........................................................................27
(b) Opinion of Purchasers' Counsel.................................................................27
(c) Accuracy of Representations and Warranties; Performance of Covenants...........................27
(d) Delivery of Officers' Certificates.............................................................28
(e) Consents and Waivers...........................................................................28
ARTICLE VI INDEMNIFICATION AND CLAIMS
6.1 Indemnification by the Company, the Stockholders and Xxxxx X. Xxxxxxx...................................28
6.2 Claims Against Indemnified Party........................................................................29
6.3 Right of Offset.........................................................................................29
6.4 Indemnification by Purchaser............................................................................29
6.5 Claims Against the Company or the Stockholders..........................................................30
6.6 Disclosure Generally....................................................................................30
ARTICLE VII TERMINATION AND REMEDIES FOR BREACH OF THIS AGREEMENT
7.1 Termination by Mutual Agreement.........................................................................31
7.2 Termination for Failure to Close........................................................................31
7.3 Termination by Operation of Law.........................................................................31
7.4 Termination for Failure to Perform Covenants or Conditions..............................................31
7.5 Effect of Termination or Default; Remedies..............................................................31
7.6 Remedies; Specific Performance..........................................................................32
ARTICLE VIII MISCELLANEOUS
8.1 Fees and Expenses.......................................................................................32
8.2 Modification, Amendments and Waiver.....................................................................32
8.3 Assignment..............................................................................................32
8.4 Burden and Benefit......................................................................................32
8.5 Brokers.................................................................................................33
8.6 Entire Agreement........................................................................................33
8.7 Governing Law...........................................................................................33
8.8 Notices.................................................................................................33
8.9 Counterparts............................................................................................34
8.10 Rights Cumulative.......................................................................................34
8.11 Severability of Provisions..............................................................................34
8.12 Headings................................................................................................35
8.13 Joint and Several Representations of Stockholders and Xxxxx X. Xxxxxxx..................................35
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LIST OF EXHIBITS AND SCHEDULE
TO
STOCK PURCHASE AGREEMENT
EXHIBITS:
---------
Exhibit 1.4: Form of Option Agreement
Exhibit 1.3: Form of Voting Trust
Exhibit 3.1(d): Financial Statements
Exhibit 5.1(c): Form of Opinion of Counsel to Company and Stockholders
Exhibit 5.2(b): Form of Opinion of Counsel to Purchaser
SCHEDULES:
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Schedule 3.1(b): Jurisdictions in which Company is Qualified to do Business
Schedule 3.1(m): Certain Changes or Events
Schedule 3.1(n): Agreements
Schedule 3.1(o): Non-Contravention; Consents
Schedule 3.1(q): Insurance
Schedule 3.1(y): Officers, Directors and Employees
Schedule 3.1(z): Loans to or from Affiliates
Schedule 3.1(bb): Bank Accounts
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
this 30th day of April, 1998, by and among I-Storm Acquisition Corp., a Cayman
Islands corporation (the "Purchaser"), Digital Power Holding Company, a Nevada
corporation (the "Company"), and Chiricahua Company and Xxxxxxx Xxxxxxx
(individually referred to hereinafter as a "Stockholder" and collectively
referred to hereinafter as the "Stockholders") and Xxxxx X. Xxxxxxx, the sole
stockholder of Chiricahua Company.
WITNESSETH:
WHEREAS, the authorized capital stock of the Company consists of
2,000,000 shares of preferred stock, $.01 par value (the "Preferred Stock"),
with no shares of Preferred Stock issued and outstanding; and 25,000,000 shares
of common stock, having $.01 par value per share (the "Common Stock"), of which
1,076,134 shares of Common Stock have been issued and are outstanding as of the
date hereof;
WHEREAS, Chiricahua Company owns 410,436 shares of Common Stock,
representing 38% of the issued and outstanding capital stock of the Company; and
WHEREAS, Xxxxxxx Xxxxxxx owns 410,436 shares of Common Stock,
representing 38% of the issued and outstanding capital stock of the Company; and
WHEREAS, Xxxxx X. Xxxxxxx is the sole shareholder of Chiricahua Company
and joins in this Agreement in consideration of the rights and benefits to be
conferred hereunder upon Chiricahua Company; and
WHEREAS, each Stockholder desires to sell, assign, transfer and convey
to the Purchaser a portion of each of such Stockholder's right, title and
interest in and to the issued and outstanding shares of capital stock of the
Company, pursuant to the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, it is the desire of the Purchaser to purchase, obtain and
acquire from the Stockholders sixty percent (60%) of the issued and outstanding
shares of Common Stock of the Company pursuant to the terms and subject to the
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements contained herein and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound hereby, agree as follows:
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ARTICLE 1
PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale of Shares of Company Stock. Upon the terms
and subject to the conditions set forth in this Agreement, the Company and the
Stockholders hereby agree that on the Closing Date (as hereinafter defined in
Section 2.1), the Stockholders shall sell, assign, transfer and convey to the
Purchaser, and the Purchaser hereby agrees to purchase, obtain and acquire from
the Stockholders, an aggregate of six hundred thousand (600,000) shares of
Common Stock, which number of shares shall be equal to sixty percent (60%) of
the issued and outstanding shares of capital stock of the Company (the "Company
Stock"), as of the Closing Date and after taking into account the cancellation
of certain outstanding shares of Common Stock pursuant to Section 1.3 of this
Agreement. The number of shares sold and transferred by each Stockholder is as
follows:
STOCKHOLDER NUMBER OF SHARES TO BE SOLD
----------- ---------------------------
Chiricahua Company 300,000
Xxxxxxx Xxxxxxx 300,000
The Stockholders hereby further agree, upon the terms and subject to the
conditions set forth herein, to transfer and deliver to the Purchaser at the
Closing (as hereinafter defined in Section 2.1) certificates, properly endorsed
in blank or accompanied by a properly executed stock power, representing six
hundred thousand (600,000) shares, and being equal to sixty percent (60%) of the
issued and outstanding shares of Company Stock after taking into account the
cancellation of certain outstanding shares of Common Stock pursuant to Section
1.3 of this Agreement.
1.2 Purchase Price for Shares of Company Stock. In consideration of
and in exchange for the Stockholders' sale, assignment, transfer and conveyance
of six hundred thousand (600,000) shares of Company Stock (equal to sixty
percent (60%) of the issued and outstanding shares of Company Stock to the
Purchaser), the Purchaser hereby agrees to pay the Stockholders an aggregate of
One Hundred Fifty Thousand Dollars ($150,000) in cash, which amount (hereinafter
referred to as the "Purchase Price") shall be payable in cash at Closing, by
certified or cashier's check or regular wire transfer of legal currency of the
United States in immediately available funds.
1.3 Cancellation of Certain Shares of Common Stock. On the Closing
Date, simultaneously with the consummation of the transactions contemplated
hereby, each of Chiricahua Company and Xxxxxxx Xxxxxxx shall transfer to the
Company 38,067 shares of Common Stock (an aggregate of 76,134 shares), and the
Company shall immediately thereafter cancel and retire such shares. After the
cancellation of said shares, there will be 1,000,000 shares of Common Stock
issued and outstanding.
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1.4 Option to Purchase Shares. At Closing, for no additional
monetary consideration, each of the Stockholders and Xxxxxxx Xxxxxxxxxx, a
stockholder of the Company, shall grant to the Purchaser the right to purchase
an additional aggregate of 100,000 shares of Common Stock an exercise price of
$2.00 per share, and each shall execute an Option Agreement in substantially the
same form as that attached hereto as Exhibit 1.4.
1.5 Voting Trust. Simultaneous with the purchase of the shares of
common stock as provided in Section 1.1, the Purchaser shall deposit such shares
into a voting trust to be governed by the terms and conditions of the Voting
Trust attached hereto as Exhibit 1.5 (the "Voting Trust"). Additionally, if and
when the options granted to Purchaser pursuant to Section 1.4, or any part
thereof, are exercised, then immediately after such exercise, the Purchaser
shall deposit the shares received upon such exercise into the Voting Trust, in
accordance with the terms thereof.
1.6 Lock-Up Agreements. As further inducement for the Purchaser to
purchase sixty percent (60%) of the outstanding Common Stock of the Company, the
Stockholders agree to restrict the sale and transferability of the shares of
Common Stock held by them after Closing (the "Lock-Up") as follows:
(a) Except as provided in subsection (f) of this Section 1.6,
for a period of 210 days after the Closing Date, the Stockholders will not sell,
contract to sell, or otherwise dispose of an aggregate of 150,000 shares of
Common Stock owned by them, without the prior written consent of the Purchaser,
which consent shall not be unreasonably withheld, and except as otherwise
provided in Section 1.6(b). The specific number of shares subject to the Lock-Up
for each of the Stockholders are:
NUMBER OF SHARES SUBJECT TO LOCK-UP
-----------------------------------
NAME ("LOCK-UP" SHARES)
---- ------------------
Chiricahua Company 75,000
Xxxxxxx Xxxxxxx 75,000
(b) Commencing on the one hundred twenty-first (121st) day
after Closing and continuing thereafter until the two hundred tenth (210th) day
after Closing, the Stockholders may collectively sell, contract to sell, or
otherwise dispose of up to an aggregate of 20,000 shares of Common Stock owned
by them per month (which amount may not be carried forward to future months).
The remaining shares of Common Stock owned by the Stockholders and subject to
the Lock-Up as set forth in Section 1.6(a) shall continue to be subject to the
restrictions of subsection (a).
(c) Commencing on the two hundred eleventh (211th) day after
Closing, all shares of Common Stock owned by the Stockholders shall be released
from the restrictions set forth in subsections (a) and (b) of this Section 1.6,
above.
(d) On or before Closing, the Stockholders shall submit their
share certificates to the Company's stock transfer agent for the purpose of
placing a legend on certificates for the
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Lock-Up Shares regarding the foregoing transfer restrictions on the reverse side
of such certificates. Such legend shall be in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THAT CERTAIN AGREEMENT DATED MAY 6, 1998 BY AND AMONG I-STORM
ACQUISITION CORP., DIGITAL POWER HOLDING COMPANY, CHIRICAHUA
COMPANY, XXXXXXX XXXXXXX AND XXXXX X. XXXXXXX, AND MAY NOT BE
DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS THEREOF.
(e) The provisions of this Section 1.6 shall survive the
Closing of the transactions contemplated by this Agreement.
(f) Notwithstanding anything else to the contrary in this
Section 1.6, the Purchaser agrees that each of the Stockholders shall be
permitted to transfer their shares of Common Stock, which shares will continue
to be subject to the Lock-Up, to any third party, except that: (i) such shares
must be sold in a private transaction and not through the public market; and
(ii) no shares may be transferred to any market maker or to any party that:
(1) Has filed a registration statement which is subject
of a currently effective registration stop order entered pursuant to any
state's securities law within five years prior to Closing.
(2) Has been convicted within five years prior to
Closing of any felony or misdemeanor in connection with the offer, purchase or
sale of any security or any felony involving fraud or deceit, including, but not
limited to, forgery, embezzlement, obtaining money under false pretenses,
larceny or conspiracy to defraud.
(3) Is currently subject to any state administrative
enforcement order or judgment entered by that state's securities administrator
within five years prior to Closing or is subject to any state's administrative
enforcement order or judgment in which fraud or deceit, including, but not
limited to, making untrue statements of material facts and omitting to state
material facts, was found and the order or judgment was entered within five
years prior to Closing.
(4) Is subject to any state's administrative
enforcement order or judgment which prohibits, denies or revokes the use of any
exemption from registration in connection with the offer, purchase or sale of
securities.
(5) Is currently subject to any order, judgment, or
decree of any court of competent jurisdiction temporarily or preliminarily
restraining or enjoining, or is subject to any
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order, judgment or decree of any court of competent jurisdiction, permanently
restraining or enjoining, such party from engaging in or continuing any conduct
or practice in connection with the purchase or sale of any security or involving
the making of any false filing with the state entered within five years prior to
Closing.
1.7 Resignation of Directorship and Officership of the Company at
Closing. Xxxxxxx Xxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx Xxxxxxx agree that at the
time of Closing, each of them will resign their respective officerships and
directorships with the Company, effective as of the Closing Date.
ARTICLE 2
CLOSING
2.1 Date and Time of Closing. Subject to satisfaction of the
conditions set forth in this Agreement and compliance with the other provisions
hereof, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place on May 6, 1998 at 10:00 a.m. (Eastern Daylight
Savings Time) at the law offices of De Xxxxxxx Xxxxxxxxxxx Xxxxx & Xxxxx, 0000 X
Xxxxxx, X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000, or at such other place and time
thereafter as shall be mutually agreeable to the parties hereto (the "Closing
Date").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company and the
Stockholders. The Company, the Stockholders and Xxxxx X. Xxxxxxx jointly and
severally, except as otherwise specifically provided herein, represent and
warrant to the Purchaser as follows:
(a) Authorization. The execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby have
been duly authorized, adopted and approved by the Board of Directors of the
Company and by each of the Stockholders. The Company has taken all necessary
corporate action and has all the necessary corporate power to enter into this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the officers of the Company
on its behalf and is the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, or by legal or
equitable principles, relating to or limiting creditors' rights generally and
except that the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought. Each
Stockholder severally represents and warrants that he has the ability to
consummate the transactions contemplated hereby, that this Agreement has been
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duly executed and validly delivered by him and that this Agreement is the valid
and binding obligation of such Stockholder, enforceable against each such
Stockholder in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except that
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(b) Organization; Subsidiaries. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada. The Company has the corporate power and authority to own and
lease its properties and assets and to carry on its business as it is now being
conducted and is duly qualified to do business as a foreign corporation in each
jurisdiction where it owns or leases real property or conducts business, except
where the failure to be so qualified would not have a material adverse effect on
the business, operations, earnings, prospects, assets or condition (financial or
otherwise) of the Company. Set forth on Schedule 3.1(b) hereto is a true and
correct list of each jurisdiction in which the Company is qualified to do
business. The Company does not own any shares of capital stock or other interest
in any corporation, partnership, association or other entity.
(c) Capitalization. The number of authorized, issued and
outstanding shares of capital stock of the Company as of the date hereof is as
set forth above in the recitals to this Agreement. The outstanding shares of
Company Stock have been duly authorized, validly issued and are fully paid and
non-assessable. Each Stockholder hereby severally and not jointly represents and
warrants that he is the sole legal and beneficial owner of the number of shares
of Company Stock as set forth in the recitals to this Agreement, which shares,
in the aggregate, represent all of the issued and outstanding shares of capital
stock of the Company. Each Stockholder hereby severally and not jointly
represents and warrants that the issued and outstanding shares of Company Stock
owned by such Stockholder are owned, in each case, free of preemptive rights and
free and clear of all adverse claims, liens, mortgages, charges, security
interests, encumbrances and other restrictions or limitations of any kind
whatsoever. The Company has not issued any shares of capital stock which could
give rise to claims for violation of any federal or state securities laws
(including any rules or regulations promulgated thereunder) or the securities
laws of any other jurisdiction (including any rules or regulations promulgated
thereunder). As of the date hereof, there are no options, warrants, calls,
convertible securities or commitments of any kind whatsoever relating to the
shares of the Company Stock to be acquired by the Purchaser pursuant hereto or
any of the unissued shares of capital stock of the Company, and there are no
voting trusts, voting agreements, stockholder agreements or other agreements or
understandings of any kind whatsoever which relate to the voting of the capital
stock of the Company.
(d) Financial Statements. The Company has heretofore delivered
to the Purchaser audited year-end balance sheets of the Company as of March 31,
1997 and 1998 (the "Balance Sheets"), and the related unqualified audited
statements of operations and retained earnings and cash flows for the years then
ended (all of the foregoing, including the notes thereto,
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may collectively be referred to hereinafter as the "Financial Statements")
accompanied by the corresponding relevant opinions and reports of the Company's
independent auditors as of the same dates and for the same periods, all of which
are attached hereto as Exhibit 3.1(d). The Financial Statements present fairly,
in all material respects, the financial position of the Company as of the
respective dates indicated and the results of operations and cash flows of the
Company for the respective periods indicated in conformity with generally
accepted accounting principles applied on a consistent basis.
(e) Owned Real Property. The Company does not own (of record
or beneficially), nor does it have any interest in, any real property.
(f) Leased Real Property; Tenancies. The Company does not
lease or sublease any real property, nor does it have any interest in using
leases or subleases used in the conduct of its business or otherwise.
(g) Title. The Company does not own any assets or properties,
as reflected on the March 31, 1997 and March 31, 1998 Balance Sheets, nor have
any assets or properties been purchased by the Company after the date thereof.
(h) Fixed Assets; Condition of Assets. All other documents and
agreements pursuant to which the Company has obtained the right to use or occupy
any real property, personal property or assets, are valid and enforceable in all
respects in accordance with their respective terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except that
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. All rights-of-way,
easements, licenses, permits and authorizations related to the location or
operation of the business of the Company are in good standing and are valid and
enforceable in all respects in accordance with their respective terms. There is
not, under any of the foregoing instruments, documents or agreements, any
existing default, nor is there any event which, with notice or lapse of time or
both, would constitute a default, which could have a material adverse effect on
the business, assets, operations, earnings, prospects or condition (financial or
otherwise) of the Company or materially adversely affect the title to its
assets. The Company is not in violation of and has complied with all applicable
zoning, building or other codes, statutes, regulations, ordinances, notices and
orders of any governmental authority with respect to the occupancy, use,
maintenance, condition, operation and improvement of the assets, except where
the failure to comply would not have a material adverse effect on the business,
operations, earnings, prospects, assets or condition (financial or otherwise) of
the Company. The Company possesses all licenses, certificates of occupancy,
permits and authorizations required to be obtained by the Company with respect
to the Company's operation and maintenance of the assets for all uses for which
such property is or assets are operated or used by the Company as of the date
hereof, except where the failure to do so would not have a material adverse
effect on the business, operations, earnings, prospects, assets or condition
(financial or otherwise) of the Company.
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(i) Intellectual Property.
(1) There are no registered and unregistered trademarks,
service marks and trade names (including any applications for the same), trade
secrets, registered and unregistered copyrights, and computer programs and
software (whether or not protected by patent, copyright or otherwise) which are
owned by, licensed by, used in or are material to the business of the Company
(the "Intellectual Property").
(2) The Company has not committed any acts of unfair
competition or directly, indirectly, contributory or by inducement, infringed
upon any patent, trademark, service xxxx, trade name, copyright, computer
program or software, or any other intellectual property, nor has the Company
misappropriated any of the foregoing from any other person or entity or received
from any other person or entity any notice, charge, claim or other assertion
with respect thereto.
(3) The Company has not sent or otherwise communicated
to any other person or entity any notice, charge, claim or other assertion of,
nor has the Company any knowledge of, any present, impending or threatened
infringement upon any patent, trademark, service xxxx, trade name, copyright,
computer program or software, or any other intellectual property by any other
person or entity, or misappropriation of any of the foregoing by any other
person or entity, or any commission of acts of unfair competition by any other
person or entity.
(j) Inventory. The Company has no inventory.
(k) Accounts Receivable. The Company has no accounts
receivable.
(l) Absence of Undisclosed Liabilities. Neither the Company
nor the Stockholders had or has any indebtedness, loss or liability of any
nature whatsoever (other than those incurred in the ordinary course of
business), whether accrued, absolute, contingent or otherwise and whether due or
become due, which is material to the business or operations of the Company.
(m) Absence of Certain Changes or Events. Except as set forth
on Schedule 3.1(m) and except as expressly set forth in this Agreement, the
Company has not, since December 31, 1997:
(1) issued, sold, granted or contracted to issue, sell
or grant any of its stock, notes, bonds, other securities or any option to
purchase any of the same;
(2) amended its Certificate of Incorporation or By-Laws;
(3) made any capital expenditures or commitments for the
acquisition or construction of any property, plant or equipment other than in
the ordinary course of business of the Company;
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(4) entered into any material transaction in any way
inconsistent with the past practices of its business or conducted its business
in any manner inconsistent with its past practices;
(5) incurred any damage, destruction or any other loss
to any of its property or assets whether or not covered by insurance;
(6) suffered any loss and, neither the Company nor the
Stockholders has become aware of any intention on the part of any customer,
dealer or supplier to discontinue its current relationship with the Company, the
loss or discontinuance of which, alone or in the aggregate, could have a
material adverse effect on the Company's business, assets, operations, earnings,
prospects or condition (financial or otherwise);
(7) modified, amended or altered any contractual
arrangement with any customer, dealer or supplier, the modification, amendment
or alteration of which, alone or in the aggregate, could have a material adverse
effect on the Company's business, assets, operations, earnings, prospects or
conditions (financial or otherwise);
(8) incurred any material liability or obligation
(absolute or contingent) or made any material expenditure other than in the
ordinary course of business of the Company;
(9) experienced any material adverse change in the
business, assets, operations, earnings, prospects or condition (financial or
otherwise) of the Company, or experienced or have knowledge of any event which
could have a material adverse effect on the business, assets, operations,
earnings, or condition (financial or otherwise) of the Company;
(10) declared, set aside or paid any dividend or other
distribution in respect of the capital stock of the Company;
(11) redeemed, repurchased, or otherwise acquired any of
its capital stock or securities convertible into or exchangeable for its capital
stock or entered into any agreement with respect to any of the foregoing;
(12) granted, conveyed, transferred, assigned or made
any sale of Accounts Receivable or any accrual of liabilities outside of the
ordinary course of its business;
(13) granted, conveyed, transferred, assigned or made
any sale of any interest in Intellectual Property;
(14) purchased, disposed of or contracted to purchase or
dispose of, or granted or received an option or any other right to purchase or
sell, any of its property or assets, except in the ordinary course of business;
(15) increased the rate of compensation payable or to
become payable to the officers or employees of the Company, or increased the
amounts paid or payable to such
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officers or employees under any bonus, insurance, pension or other benefit plan,
or made any arrangements therefor with or for any of said officers or employees
except for increases consistent with the Company's ordinary course of business
or increases resulting from the application of existing formulas under existing
plans, agreements or policies relating to employee compensation;
(16) adopted or amended any collective bargaining, bonus,
profit-sharing, compensation, stock option, pension, retirement, deferred
compensation or other plan, agreement, trust, fund or arrangement for the
benefit of any employees, except as otherwise required or permitted herein; or
(17) changed any accounting principle, procedure or
practice followed by the Company or changed the method of applying such
principle, procedure or practice.
(n) Agreements. There are no contracts, agreements or other
instruments material to the business or operation of the Company, including
without limitation, those to which the Company is a party and those by which any
of its property or assets are bound. There is no contract or agreement to which
the Company or a Stockholder or Xxxxx X. Xxxxxxx is a party or which affects the
assets, liabilities or outstanding securities of the Company. Except as
otherwise set forth on Schedule 3.1(n), the Company is not a party to or bound
by, nor are any of its properties or assets subject to, any material written or
oral agreement, including without limitation, the following:
(1) any agreement which has not been entered into or
received by the Company in the ordinary course of business or which is not
consistent with the prior practice of the Company;
(2) any agreement which involves the purchase or sale of
goods or payment by or to the Company for services rendered;
(3) any agreement for the employment of any officer or
employee or former officer or employee (other than, with respect to any
employee, agreements which are terminable without liability upon notice of
thirty (30) days or less and do not provide for any further payments following
such termination) pursuant to which payments may be required to be made at any
time following the Closing Date;
(4) any stock option or stock appreciation rights plan
or arrangement;
(5) any mortgage, deed of trust or other form of
secured indebtedness for borrowed money;
(6) any debentures, indentures, notes or installment
obligations, or other instruments for or relating to any unsecured borrowing of
money by the Company;
(7) any guaranty of any obligation of any person or
party for borrowings or otherwise, excluding endorsements made for collection in
the ordinary course of business;
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(8) any agreement or arrangement for the sale or lease
of any of its property or assets;
(9) any agreement or agreements pursuant to which the
Company is or may be obligated to make any payments, contingent or otherwise,
resulting from or arising out of the prior acquisition of any business, or of
all or substantially all of the assets or capital stock of any company or any
division thereof;
(10) any agreement with any labor union;
(11) any agreement, including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment agreements, purchase orders, sales
orders, mortgages and security agreements, to which the Company is a party.
(12) any dealership, franchise or distribution agreement,
territory or license agreement or other similar agreement;
(13) any agreement with any officer, director or
stockholder of the Company, the immediate family of any officer, director or
stockholder of the Company, or any affiliate of any of the foregoing;
(14) any unexpired and enforceable agreements for the
disposition of the Company, whether by grant or option, sale of stock, sale of
assets, merger or otherwise; or
(15) any other agreement, contract, document or
instrument not entered into in the ordinary course of business which is material
to the Company's business and not excluded by reason of operation of this or any
other provision of this Agreement.
Neither the Company, the Stockholders (each severally and not
jointly), Xxxxx X. Xxxxxxx, nor any third party is in default and no event has
occurred which, with notice or lapse of time or both, could cause or become a
default by the Company or the Stockholders or Xxxxx X. Xxxxxxx or, to the best
knowledge of the Company or the Stockholders or Xxxxx X. Xxxxxxx, by any third
party, under any contract, agreement, document or instrument to which the
Company or either Stockholder is a party which is material to the business or
operations of the Company. Each contract, agreement, document or instrument to
which the Company or the Stockholders (each severally and not jointly) or Xxxxx
X. Xxxxxxx is a party which is material to the business or operations of the
Company is enforceable, in accordance with its terms, against all other parties
thereto, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect, or by legal or equitable principles, relating to or limiting creditors'
rights generally and except that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
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(o) Non-Contravention; Consents. Neither the execution and
delivery of this Agreement or the Non-Compete and Confidentiality Agreement by
the Company and the Stockholders, as the case may be, nor consummation of the
transactions contemplated thereby, does or will: (a) violate or conflict with
any provision of the Certificate of Incorporation or By-Laws of the Company as
of the Closing Date; (b) violate or, with the passage of time, result in the
violation of any provision of, or result in the acceleration of or entitle any
party to accelerate any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other encumbrance
upon any of the property or assets, which are material to the business or
operation of the Company, pursuant to any provision of any mortgage, lien,
lease, agreement, permit, indenture, license, instrument, law, order,
arbitration award, judgment or decree to which the Company is a party or by
which it or any of such property or assets are bound, the effect of which
violation, acceleration, creation or imposition could result, in the aggregate,
in liability of the Company; (c) violate or conflict with any other restriction
of any kind whatsoever to which the Company or the Stockholders or Xxxxx X.
Xxxxxxx (each representing as to the same severally and not jointly) are
subject, or by which any of their material properties or assets may be bound,
the effect of any of which violation or conflict would result, in the aggregate,
in liability of the Company; or (d) constitute an event permitting termination
by a third party of any agreement to which the Company is a party or is subject,
which termination could have a materially adverse effect on the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
the Company. Except as set forth on Schedule 3.1(o) hereto, no consent,
authorization, order or approval of, or filing or registration with, any
governmental commission, board or other regulatory body is required in
connection with the execution, delivery and performance of the terms of this
Agreement and consummation of the transactions contemplated hereby by the
Company or the Stockholders or Xxxxx X. Xxxxxxx.
(p) Employee Benefit Plans/Labor Relations. The Company has no
employees and no "employee benefit plans" as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (the "Benefit Plans") covering the employees of the Company. There are
no agreements with or pending petitions for recognition of any labor union or
association as the exclusive bargaining agent for any employees of the Company
and no such petition has been pending at any time during the two years prior to
the date hereof. There has not been any organizing effort by any union or other
group seeking to represent any employees of the Company as its exclusive
bargaining agent at any time during the two years prior to the date hereof.
(q) Insurance. Set forth on Schedule 3.1(q) hereto is a true,
correct and complete list of all insurance policies or binders of insurance or
programs of self-insurance which relate to the business of the Company, copies
of which have been previously provided or made available to the Purchaser. The
coverage under each such policy and binder is in full force and effect. The
Stockholders or Xxxxx X. Xxxxxxx have no knowledge of nor have they or the
Company received any notice of cancellation, termination, nonrenewal or
disallowance of any claim thereunder or with respect thereto. The Stockholders
or Xxxxx X. Xxxxxxx have no knowledge of any facts or the occurrence of any
events which could form the basis of any claim against the Company relating to
its business, assets, properties or operations which could increase
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the insurance premiums payable by the Company under such policy or binder in
excess of normal increases consistent with industry practices.
(r) Tax Matters. The Company is not a member of an affiliated
group, within the meaning of Section 1504 of the Code, (an "Affiliated Group").
The Company has filed when due and will file if and when due prior to the
Closing Date (after giving effect to any extensions granted by the requisite
legal or regulatory authority) all returns, reports, elections, estimates,
declarations, schedules, forms and other documents ("Tax Returns") relating to
taxes required to be filed by the Code or by any applicable federal, state,
county, municipal, local, foreign or other laws, including, without limitation,
consolidated, combined or unitary returns, for any taxable period ending prior
to or on the Closing Date (the "Pre-Closing Tax Period"). The taxable year of
the Company for federal and state income and business tax purposes ends on
December 31 of each year. All taxes shown on any Tax Return required to be filed
with respect to the Company for any Pre-Closing Tax Period have been, or will
have been, paid or accrued prior to the Closing. The Company has heretofore
delivered to the Purchaser all Tax Returns filed on its behalf for the fiscal
years ended March 31, 1997, March 31, 1996, March 31, 1995, March 31, 1994 and
March 31, 1993. The Company has fully accrued on its books all taxes for any
periods which are not yet due. No tax liens have been filed, and no material
claims have been or are being asserted or proposed, against the Company with
respect to any taxes. No Tax Returns of the Company have been audited in the
past five years by any taxing authority, no deficiencies or claims have been
proposed, assessed or claimed (including interest and penalties) against the
Company which have not been paid or accrued, and the Company has not waived or
extended any statute of limitations with respect to the assessment of any taxes,
which waiver or extension has not yet expired by its terms. There are no suits,
actions, proceedings, claims or investigations now pending against the Company
with respect to any taxes. The Company has withheld or collected from each
payment made to each of its employees, consultants, contractors and other payees
the amount of all taxes (including, but not limited to, federal income taxes,
state and local income and wage taxes, payroll taxes, workers' compensation and
unemployment taxes) required to be withheld or collected therefrom for all
Pre-Closing Tax Periods and the Company has timely paid or accrued and reported
the same in respect of its employees, consultants, contractors and other payees
to the proper tax receiving offices. The Company does not have any liability for
any taxes of any nature whatsoever other than as shown on the March 31, 1998
Balance Sheet (except for liabilities for taxes accruing after the date of such
balance sheet in the ordinary course of business) and there is no basis for any
additional liabilities for taxes for any Pre-Closing Tax Period. The reserve for
accrued but unpaid taxes for the period ending March 31, 1998 and March 31, 1999
includes adequate provision for all taxes which have been assessed or which will
be due and payable by the Company for all Pre-Closing Tax Periods. The Company
has not been, and will not on the Closing Date be, liable for any taxes for
which it has not made adequate provision. The Company does not file any state or
local tax returns on a unitary or combined basis with any other member of an
Affiliated Group. The Company will incur no tax liability in connection with the
payment of the Purchase Price described in Section 1.2 above. To the extent that
the Stockholders or Xxxxx X. Xxxxxxx may incur tax liability in connection with
the payment of the Purchase Price, each of the Stockholders or Xxxxx X. Xxxxxxx,
and not the Company, will be responsible for fulfilling any obligations or
liabilities with respect thereto.
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The term "taxes" or "tax" as used in this section or referred
to elsewhere in this Agreement shall mean all taxes, charges, fees, levies,
penalties, or other assessments, including without limitation, income, capital
gain, profit, gross receipts, ad valorem, excise, property, payroll,
withholding, employment, severance, social security, workers' compensation,
occupation, premium, customs duties, windfall profits, sales, use, and franchise
taxes, imposed by the United States, or any state, county, local or foreign
government or any subdivision or agency thereof, and including any interest,
penalties, or additions attributable thereto.
(s) Compliance with Applicable Law. The Company has been and
is in compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules and regulations, except where the failure to comply with which
would not materially adversely affect the business, assets, operations,
earnings, prospects or condition (financial or otherwise) of the Company or
which would subject any officer or director of the Company to civil or criminal
penalties or imprisonment. To the best knowledge of the Company and the
Stockholders, the Company has complied with the rules and regulations of all
governmental agencies having authority over its business or its operations,
including without limitation, agencies concerned with intra-state and interstate
commerce, occupational safety, environmental protection and employment
practices, except where the failure to comply would not have a material adverse
effect on the business, operations, earnings, prospects, assets or condition
(financial or otherwise) of the Company. Neither the Company nor the
Stockholders nor Xxxxx X. Xxxxxxx have any knowledge of or received any notice
of violation of any such rule or regulation during the two years prior to the
date hereof which could result in any liability of the Company for penalties or
damages or which could subject the Company to any injunction or government writ,
order or decree. To the best knowledge of the Company and the Stockholders and
Xxxxx X. Xxxxxxx, there are no facts, events or conditions that could interfere
with, prevent continued compliance with or give rise to any liability under any
foreign, federal, state or local governmental laws, statutes, ordinances or
regulations applicable to the business, assets, operations, earnings, prospects
or condition (financial or otherwise) of the Company, except where the failure
to do so would not have a material adverse effect on the business, operations,
earnings, prospects, assets or condition (financial or otherwise) of the
Company.
(t) Litigation. There is no action, suit, proceeding or
investigation pending or, to the best knowledge of the Company and the
Stockholders and Xxxxx X. Xxxxxxx, threatened, which could restrict the Company
or the Stockholders' or Xxxxx X. Xxxxxxx'x ability to perform their respective
obligations hereunder or could have a material adverse effect on the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
the Company. To the best knowledge of the Company and the Stockholders and Xxxxx
X. Xxxxxxx, there are no grounds for or facts, events or circumstances which
could form the basis of any such action that could cause or result in any such
action, suit, proceeding or investigation or which is possible of assertion.
Neither the Company nor the Stockholders nor Xxxxx X. Xxxxxxx are in default in
respect of any judgment, order, writ, injunction or decree of any court or any
federal, state, local or other governmental agency, authority, body, board,
bureau, commission, department or instrumentality which could have a material
adverse effect on the business, assets, operations, earnings, prospects or
condition (financial or otherwise) of the Company.
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(u) Permits. The Company holds all permits, licenses, orders
and approvals of all federal, state or local governmental or regulatory
authorities, agencies or bodies required for the conduct and operation of the
Company's business as currently conducted, except where the failure to do so
would not have a material adverse effect on the business, operations, earnings,
prospects, assets or condition (financial or otherwise) of the Company. All such
permits, licenses, orders, and approvals are in full force and effect and no
suspension, termination or revocation of any of the foregoing is, to the best
knowledge of the Company and the Stockholders and Xxxxx X. Xxxxxxx, threatened.
None of such permits, licenses, orders or approvals will be adversely affected
by consummation of the transactions contemplated by this Agreement. The Company
has complied with the rules and regulations of all governmental or other
regulatory agencies, authorities, bodies, boards, bureaus, commissions,
departments or instrumentalities which regulate, supervise or are in any manner
concerned with import and export licenses, occupational safety, environmental
protection and employment practices relating to the Company's business, except
where the failure to do so would not have a material adverse effect on the
business, operations, earnings, prospects, assets or condition (financial or
otherwise) of the Company. The Company has no knowledge of nor has it received
any notice of violation of any of such rules or regulations during the two years
prior to the date hereof which would result in any liability of the Company for
penalties or damages or which would subject the Company to any injunction or
governmental writ, order or decree.
(v) Restrictive Covenants. The Company is not a party to any
agreement, contract or covenant limiting the freedom of the Company to compete
in any line of business or with any person or other entity in any geographic
region within or outside of the United States of America.
(w) Unlawful Payments. Neither the Company, the Stockholders
Xxxxx X. Xxxxxxx, any officer or director, nor any agent or representative of
the Company has made, directly or indirectly, any bribe or kickback, illegal
political contribution, payment from corporate funds which was incorrectly
recorded on the books and records of the Company, unlawful payment from
corporate funds to governmental or municipal officials in their individual
capacities for the purpose of affecting their action or the actions of the
jurisdiction which they represent to obtain favorable treatment in securing
business or licenses or to obtain special concessions of any kind whatsoever, or
illegal payment from corporate funds to obtain or retain any business.
(x) Warranties. The Company has not made, extended or
otherwise represented that it would provide any express warranty with respect to
the products or services sold, distributed or leased to its clients or
customers.
(y) Officers, Directors and Employees. Set forth on Schedule
3.1(y) hereto is a true, correct and complete list of all of the officers and
directors of the Company as of the date hereof, including their respective
names, titles and salaries. Also set forth on Schedule 3.1(y) is a true, correct
and complete list of any employment agreements between the Company and any of
the foregoing officers, directors and employees of the Company in effect as of
the date hereof, including summaries of the material terms of each such
agreement.
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(z) Loans to or from Affiliates. Set forth on Schedule 3.1(z)
hereto is a true, correct and complete list of all of the outstanding loans
extended by the Company to any current or former officer, director, employee,
consultant or stockholder of the Company or any affiliate of any of the
foregoing. Also set forth on Schedule 3.1(z) is a true, correct and complete
list of all of the outstanding loans extended to the Company by any current or
former officer, director, employee, consultant or stockholder of the Company.
Such schedule reflects the original principal amount of each loan, the
outstanding principal balance thereunder as of the date hereof, the interest
rate applicable thereto and the maturity date thereof. Except as set forth on
Schedule 3.1(z), there are no other loans pursuant to which the Company is owed
or owes money which involve any officer, director, employee, consultant or
stockholder of the Company.
(aa) Books and Records.
(i) The books of account and other financial records of
the Company are complete and correct and have been maintained in accordance with
good business practices.
(ii) The minute books of the Company, as previously
made available to the Purchaser and its counsel, contain accurate records of all
meetings of the Company's Board of Directors (including any committees) and its
stockholders since the date of the Company's incorporation, and accurately
reflect all other material corporate action of the Company's Board of Directors
(including any committees) and stockholders of the Company since the date of the
Company's incorporation.
(iii) The Company will provide the Purchaser prior to
the Closing Date access to all books and records referred to in clauses (i) and
(ii) above and copies of all such books and records shall be delivered to the
Purchaser at the Closing. The originals of all such books and records are
located at the Company's principal place of business and shall remain at such
principal place of business at the time of Closing.
(bb) Bank Accounts. Set forth on Schedule 3.1(bb) is a true,
correct and complete list of the names of each bank, savings and loan, or other
financial institution at which the Company maintains any account (including any
cash contribution or similar accounts) and the names of all persons authorized
to draw thereon or who have access thereto. Schedule 3.1(bb) includes a true,
correct and complete list of each credit or loan facility established and/or
maintained by or on behalf of the Company and includes the amounts available to
the Company under each such facility, the outstanding principal balance
thereunder as of the date hereof, the interest rate applicable thereto and the
maturity date thereof.
(cc) Agreements with Affiliates. Except as otherwise set forth
herein or in the Schedules hereto, the Company is not a party to any instrument,
license, lease or other agreement, written or oral, with any officer, director
or stockholder of the Company.
(dd) Accuracy of Information Furnished. The Company and the
Stockholders (severally and not jointly with respect to those statements,
representations or warranties made severally and not jointly by such
Stockholders) represent that no statement by the Company or the
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Stockholders set forth herein or in the exhibits or the schedules hereto, and no
statement set forth in any certificate or other instrument or document required
to be delivered by or on behalf of the Company or the Stockholders pursuant
hereto or in connection with the consummation of the transactions contemplated
hereby, contained, contains or will contain any untrue statement of a material
fact, or omits, omitted or will omit to state any material fact which is
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
3.2 Representations and Warranties of Purchaser. The Purchaser
represents and warrants to the Company and the Stockholders as follows:
(a) Authorization. The execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby have
been duly authorized, adopted and approved by the Board of Directors of the
Purchaser. The Purchaser has taken all necessary corporate action and has all
the necessary corporate power to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the officers of the Purchaser on its behalf, and
assuming that this Agreement is the valid and binding obligation of the Company
and each Stockholder, is the valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, or by legal or
equitable principles, relating to or limiting creditors' rights generally and
except that the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(b) Organization; Subsidiaries. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
Cayman Islands. The Purchaser has the corporate power and authority to own and
lease its properties and assets and to carry on its business as it is now being
conducted and is duly qualified to do business as a foreign corporation in each
jurisdiction where it owns or leases real property or conducts business, except
where the failure to be so qualified would not have a material adverse effect on
the business, operations, earnings, prospects, assets or condition (financial or
otherwise) of the Purchaser.
(c) Non-Contravention; Consents. Neither the execution and
delivery of this Agreement, nor consummation of the transactions contemplated
hereby, does or will: (i) violate or conflict with any provision of the
Certificate of Incorporation or By-Laws of the Purchaser; (ii) violate or
conflict with any material provision of any mortgage, lien, lease, agreement,
permit, indenture, license, instrument, law, order, arbitration award, judgment
or decree to which the Purchaser is a party or by which it or the property or
assets which are material to its business or operation are bound, the effect of
any of which violation result, in the aggregate, in liability of the Purchaser
in excess of Ten Thousand Dollars ($10,000); (iii) violate or conflict with any
other restriction to which the Purchaser is subject or by which any of the
property or assets which are material to its business or operation may be bound,
the effect of any of which violation or conflict would result, in the aggregate,
in liability of the Purchaser in excess of Ten Thousand Dollars
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($10,000); or (iv) constitute an event permitting termination of any agreement
to which the Purchaser is subject by any other party thereto, if in any such
circumstance such termination could have a materially adverse on the Purchaser's
ability to fulfill its obligations hereunder. No consent, authorization, order
or approval of, or filing or registration with, any governmental commission,
board or other regulatory body is required in connection with the execution,
delivery and performance of the terms of this Agreement by the Purchaser and
consummation by the Purchaser of any of the transactions contemplated hereby.
(d) Accuracy of Information Furnished. No statement by the
Purchaser set forth herein or in the exhibits or the schedules hereto, and no
statement set forth in any certificate or other instrument or document required
to be delivered by or on behalf of the Purchaser pursuant hereto or in
connection with consummation of the transactions contemplated hereby, contained,
contains or will contain any untrue statement of a material fact, or omitted,
omits or will omit to state any material fact which is necessary to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
(e) Compliance with Applicable Law. The Purchaser has been and
is in compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules and regulations (including without limitation the Securities
Act and the Securities Exchange Act of 1934, as amended) as of the date hereof,
the failure to comply with which could materially adversely affect the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
the Purchaser or which would subject any officer or director of the Company to
civil or criminal penalties or imprisonment. The Purchaser has complied with the
rules and regulations of all governmental agencies having authority over its
business or its operations, including without limitation, agencies concerned
with intra-state and interstate commerce, occupational safety, environmental
protection and employment practices, except where the failure to comply would
not have a material adverse effect on the business, operations, earnings,
prospects, assets or condition (financial or otherwise) of the Purchaser. The
Purchaser has no knowledge of and has not received any notice of violation of
any such rule or regulation during the two years prior to the date hereof which
could result in any liability of the Purchaser for penalties or damages or which
could subject the Purchaser to any injunction or government writ, order or
decree. To the best knowledge of the Purchaser, there are no facts, events or
conditions that could interfere with, prevent continued compliance with or give
rise to any liability under any foreign, federal, state or local governmental
laws, statutes, ordinances or regulations applicable to the business, assets,
operations, earnings, prospects or condition (financial or otherwise) of the
Purchaser, except where the failure to do so would not have a material adverse
effect on the business, operations, earnings, prospects, assets or condition
(financial or otherwise) of the Purchaser.
(f) Restricted Stock. The Purchaser hereby represents that it
is acquiring the Common Stock for investment purposes only and not with a view
to or for transfer in connection with any distribution. The Purchaser
understands that the Company will not permit the transfer of the Common Stock
except upon the issuance to the Company of a favorable opinion of its counsel,
or the submission to the Company of such other evidence as may be satisfactory
to counsel for the Company, in either case to the effect that any such transfer
shall not be in violation of the federal Securities Act of 1933, as amended, and
any applicable state securities laws. The
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Purchaser agrees that a conspicuous legend shall be placed on the shares
delivered to it in connection with this Agreement in substantially the following
form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS,
AND HAS BEEN ACQUIRED PURSUANT TO AN INVESTMENT
REPRESENTATION ON THE PART OF THE PURCHASER HEREOF
AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED, OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, BY THE PURCHASER EXCEPT UPON THE
ISSUANCE TO THE COMPANY OF A FAVORABLE OPINION OF ITS
COUNSEL, OR THE SUBMISSION TO THE COMPANY OF SUCH
OTHER EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL FOR
THE COMPANY, IN EITHER CASE TO THE EFFECT THAT ANY
SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT
AND APPLICABLE STATE SECURITIES LAWS.
The Purchaser agrees that the shares will not be sold without
registration under the Securities Act of 1933, as amended, or exemption
therefrom, and all pertinent corporate records will reflect this restriction.
3.3 Survival of Representations and Warranties. The representations
and warranties set forth in Sections 3.1 and 3.2 hereof shall survive until the
close of business on the third anniversary of the Closing Date, provided that,
notice or demand with respect to any alleged breach thereof which has occurred
prior to the third anniversary of the Closing Date shall be given in writing by
the nonbreaching party or parties to the breaching party or parties not later
than the close of business on the sixtieth day following the third anniversary
of the Closing Date; and further provided that, with respect to claims for
damages arising out of any misrepresentation or breach of warranty made by the
Company and the Stockholders and Xxxxx X. Xxxxxxx relating to taxes, notice
shall have been given on or before the close of business on the sixtieth day
following the later to occur of: (a) the expiration date of the statute of
limitations applicable to any indemnified federal, state or local tax liability,
and (b) the final determination of any such tax liability, including the final
administrative and/or judicial determination thereof.
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ARTICLE 4
COVENANTS
4.1 Covenants of the Company and the Stockholders and Xxxxx X.
Xxxxxxx.
(a) Notification. Each of the Company and the Stockholders and
Xxxxx X. Xxxxxxx shall give prompt notice to the Purchaser of: (i) any notice or
other communication received by the Company or the Stockholders and Xxxxx X.
Xxxxxxx prior to the Closing Date, relating to a default or an event which, with
notice or lapse of time or both would become a default under this Agreement or
under any other material contract, agreement or instrument to which the Company
is a party, by which it or any of its properties or assets are bound or to which
it or any of its properties or assets are subject; (ii) any event which, with
notice or lapse of time or both, would cause any warranty or representation of
the Company or of any Stockholder or Xxxxx X. Xxxxxxx under this Agreement to be
inaccurate, untrue, incomplete or misleading in any respect; (iii) any notice or
other communication from any third party alleging that the consent of such third
party was, is or may be required in connection with the transactions
contemplated by this Agreement; and (iv) any material adverse change in the
business, assets, operations, earnings, prospects or condition (financial or
otherwise) of the Company.
(b) [Intentionally deleted.]
(c) [Intentionally deleted.]
(d) Conduct of Business; Certain Covenants. Prior to and
through the Closing Date, the Company shall conduct and operate its business and
will not, without prior written consent of the Purchaser, which consent shall
not be unreasonably withheld, take any action other than in accordance with the
ordinary and usual course of business. The Company will use commercially
reasonable efforts to preserve intact its business, operation, organization and
relationships with its employees, independent contractors, agents, suppliers,
customers and others having business dealings with it. Prior to and through the
Closing Date, without the prior written consent of the Purchaser, which consent
shall not be unreasonably withheld, the Company shall not, and the Stockholders
or Xxxxx X. Xxxxxxx, shall not permit the Company to:
(1) amend its Certificate of Incorporation or
By-Laws;
(2) issue or otherwise grant or enter into any agreement
relating to the issuance or grant of any stock options, warrants or other rights
calling for or permitting the issue, transfer, sale or delivery of its capital
stock;
(3) pay or declare any cash dividend or other dividend
or distribution with respect to its capital stock;
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(4) issue, transfer, sell or deliver any shares of its
capital stock or any securities convertible into or exchangeable for, with or
without additional consideration, such capital stock;
(5) redeem, purchase or otherwise acquire for any
consideration any outstanding shares of its capital stock or any securities
convertible into or exchangeable for, with or without additional consideration,
such capital stock;
(6) incur any indebtedness for borrowed money, except
in the ordinary course of business or pursuant to existing agreements which the
Company or the Stockholders or Xxxxx X. Xxxxxxx have previously disclosed or
made available to the Purchaser;
(7) permit the occurrence or continuance of any material
default under any agreement to which the Company is a party;
(8) make any acquisition of the capital stock or all or
substantially all of the assets of any entity;
(9) merge or consolidate with any corporation or
enter into any joint venture arrangement with any third party;
(10) enter into any employment or similar contract with
or increase the compensation payable to any officer or employee of the Company;
(11) alter, amend or otherwise modify any material term
or provision of any contract or agreement with any of its clients, customers,
suppliers or vendors;
(12) adopt any Benefit Plan, severance plan or collective
bargaining agreement;
(13) sell, enter into any contract to sell or grant any
option to purchase, any of its assets other than in the ordinary course of
business;
(14) create, assume or permit to exist any lien, pledge,
security interest, encumbrance or mortgage of any kind whatsoever on any of its
properties or assets other than:
(A) liens existing on the date hereof which the
Company which are otherwise permitted hereby;
(B) any mortgage, pledge, lien or other security
interest in or upon any property or asset hereafter acquired by the Company in
the ordinary course of business, which mortgage, pledge, lien or other security
interest is entered into contemporaneously with such acquisition to secure or
provide for the payment of any part of the purchase price therefor, or the
assumption by the Company of any mortgage, pledge, lien or other security
interest in or upon any property or asset hereafter acquired by the Company
which mortgage, pledge, lien or
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other security interest existed at the time of such acquisition; provided that,
each such mortgage, pledge, lien or other security interest shall not extend to
or cover any property or asset of the Company other than such property or asset
hereafter acquired;
(C) any mortgage, pledge, lien or other security
interest created for the sole purpose of renewing or refunding any mortgage,
pledge, lien or other security interest allowed under clause (B) above; provided
that, the principal amount of indebtedness secured thereby shall not exceed the
principal amount of indebtedness so secured at the time of such renewal or
refunding and that such renewed or refunded mortgage, pledge, lien or other
security interest shall not extend the mortgage, pledge, lien or other security
interest renewed or refunded to any additional property or asset;
(D) the pledge by the Company of any property or
asset as security required by law or governmental regulation as a condition to
the transaction of any business or the exercise of any privilege, license or
right;
(E) a banker's lien or right of offset on funds of
the Company deposited with a lender or holder in the ordinary course of business
in favor of any lender of funds or holder of the Company's commercial paper in
the ordinary course of business;
(F) liens for taxes, assessments and governmental
charges or levies imposed upon the Company or upon its income or profit, or upon
any of its property or assets if the same shall not at the time be due or are
being contested in good faith in appropriate proceedings; and
(G) liens imposed by law, such as those of
carriers, warehousemen and mechanics, for sums not yet due or which are being
contested in good faith in appropriate proceedings.
(15) enter into any contract, including but not limited
to assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and security agreements, which:
(A) contain a grant or other transfer, whether
present, retroactive, prospective or contingent, by the Company of any rights in
any intellectual property; or
(B) contain a promise made by or to the Company to
pay any consideration, lump sum, royalty or other payment with respect to the
acquisition, practice or use of any rights in any intellectual property;
(16) except in the ordinary course of business or arising
out of or relating to this Agreement, initiate any legal proceedings involving
the Company, including suits and administrative proceedings in the United States
or any foreign country;
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(17) file with any federal, state or local governmental
agency or regulatory body, any cancellation, reduction, modification, change or
amendment of or addition to any schedule of tariffs currently on file with such
agency or regulatory body, or file with such governmental agency or regulatory
body any schedule of tariffs for services which are not covered by the tariff
schedules on file therewith as of the date hereof; or
(18) take any action that would cause any representation
or warranty contained herein to be materially inaccurate, untrue, incomplete or
misleading.
(e) Proposals; Other Offers. Prior to the Closing Date,
neither the Company nor the Stockholders nor Xxxxx X. Xxxxxxx shall, directly or
indirectly (whether through an employee, a representative, an agent or
otherwise) solicit or encourage any inquiries or proposals, engage in
negotiations for or consent to or enter into any agreement providing for the
acquisition of the capital stock or all or any part of the assets or the
business of the Company. The Company shall promptly notify the Purchaser upon
its receipt or other knowledge of any such request, inquiry or proposal. Neither
the Company nor the Stockholders nor Xxxxx X. Xxxxxxx shall, directly or
indirectly (whether through an employee, a representative, an agent or
otherwise) disclose any nonpublic information relating to the Company or afford
access to any of the books, records or other properties of the Company to any
person or entity that is considering, has considered or is making any such
acquisition inquiry or proposal.
(f) Best Efforts and Cooperation; Further Assurances. Prior to
the Closing Date, with the cooperation of Purchaser where appropriate, the
Company shall:
(1) promptly comply with all filing requirements which
federal, state or local law may impose on the Company with respect to the
transactions contemplated by this Agreement; and
(2) use its diligent efforts to take all actions
necessary to be taken, make any filing and obtain any consent, authorization or
approval of or exemption by any governmental authority, regulatory agency or any
other third party (including, without limitation, any landlord or lessor of the
Company and any party to whom notification is required to be delivered or from
whom any form of consent is required) which is required to be filed or obtained
by the Company in connection with the transactions contemplated by this
Agreement.
(g) Access to Additional Agreements and Information. Prior to
the Closing Date, the Company shall make available or otherwise deliver to the
Purchaser any and all agreements, contracts, documents and other instruments
material to the business or operation of the Company.
4.2 Covenants of Purchaser.
(a) Notice of Defaults. The Purchaser shall give prompt notice
to the Company the Stockholders and Xxxxx X. Xxxxxxx of: (i) any notice or other
communication relating to a default hereunder or event which, with notice or
lapse of time or both, would become a default
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hereunder, received by the Purchaser prior to the Closing Date, or under any
material contract, agreement or instrument to which the Purchaser is a party, by
which it or any of its properties or assets are bound or to which it or any of
its properties or assets are subject which would prevent the consummation of the
transactions contemplated hereby; (ii) any event which, with notice or lapse of
time or both, would cause any representation or warranty of the Purchaser under
this Agreement to be inaccurate or misleading in any respect; (iii) any notice
or other communication by any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement; and (iv) any adverse change in the business,
assets, operations, earnings, prospects or conditions (financial or otherwise)
of the Purchaser.
(b) Third Party Consents. The Purchaser shall use its best
efforts to obtain any consent, authorization or approval of, or exemption by,
any governmental authority or agency or other third party required to be
obtained or made by it in connection with this Agreement or the consummation of
the transactions contemplated hereby.
(c) Best Efforts and Cooperation; Further Assurances. Prior to
the Closing Date, with the cooperation of the Company and the Stockholders and
Xxxxx X. Xxxxxxx, where appropriate, the Purchaser shall:
(1) promptly comply with all filing requirements which
federal, state or local law may impose on the Purchaser with respect to the
transactions contemplated by this Agreement; and
(2) use its diligent efforts to take all actions
necessary to be taken, make any filing and obtain any consent, authorization or
approval of or exemption by any governmental authority, regulatory agency or any
other third party which is required to be filed or obtained by the Purchaser in
connection with the transactions contemplated by this Agreement.
(d) Tax Audits. The Company or the Stockholders shall not
enter into any settlement agreement of any audit relating to any taxes due for
the Pre-Closing Period without the prior written consent of the Purchaser, which
consent shall not be unreasonably withheld; provided however, that nothing
contained herein shall vitiate the absolute duty of the boards of directors of
the Company to act under the circumstances in the best interests of the
stockholders of the Company.
4.3 Governmental Filings and Consents. The Company, the Stockholders
and the Purchaser shall cooperate with one another in filing any necessary
applications, reports or other documents with any federal or state agencies,
authorities or bodies having jurisdiction with respect to the business of the
Company or the transactions contemplated by this Agreement, and in seeking any
necessary approval, consultation or prompt favorable action of, with or by any
of such agencies, authorities or bodies.
4.4 Publicity. The Company, the Stockholders and the Purchaser will
consult with each party hereto prior to making, releasing or otherwise
disseminating any public announcements with respect to the transactions
contemplated by this Agreement. Any public announcements permitted
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hereunder shall be made only at such time and in such manner as the Company and
the Stockholders and Xxxxx X. Xxxxxxx (collectively acting as one), and the
Purchaser shall mutually agree, except that any party hereto shall be free to
make such public announcements as it shall reasonably deem necessary to comply
with federal or state laws, provided that such announcement is simultaneously
delivered to the other parties hereto.
4.5 Purchaser's Right to Investigate.
(a) Obligation of the Company, the Stockholders and Xxxxx X.
Xxxxxxx. The Company shall afford to the officers and authorized representatives
and agents of the Purchaser, during regular business hours and upon reasonable
prior notice, free and full access to any office, warehouse, plant, property,
inventory, accounts, books and records of the Company such as to afford the
Purchaser the full opportunity to make such investigations as it shall desire or
deem appropriate with respect to the affairs of the Company. The officers of the
Company shall furnish the Purchaser with such additional financial and operating
data and other information relating to the assets, property, business and
operation of the Company as the Purchaser shall from time to time reasonably
request. Prior to the Closing Date, or at all times hereafter in the event that
the transactions contemplated hereby are not consummated or this Agreement is
otherwise terminated, the Purchaser shall, except as may be otherwise required
by applicable law, hold confidential all information obtained pursuant to this
Subsection 4.5(a) or otherwise in connection with consummation of the
transactions contemplated by this Agreement with respect to the Company. In the
event that this Agreement is terminated, the Purchaser shall return to the
Company all of such information as shall be in documentary form.
(b) Effectiveness of Representations Notwithstanding
Investigation. Notwithstanding any party's undertaking or conduct of any
investigation pursuant hereto, or any party's failure to so investigate, the
representations, warranties and agreements of each of the parties hereto shall
be operative and effective and shall survive the Closing Date to the extent
previously set forth in Section 3.3. In the event that a party hereto becomes
aware or knows prior to the Closing that a representation or warranty made
herein by another party hereto is untrue, such party shall express such
knowledge by written notice thereof to the party rendering such representation
or warranty on or prior to the Closing Date. Knowledge on the part of the
Purchaser on or prior to the Closing that a representation or warranty of the
Company or the Stockholders is untrue or knowledge on the part of the Company or
the Stockholders on or prior to the Closing Date that a representation or
warranty of the Purchaser is untrue, shall render that specific representation
or warranty inoperative and ineffective and such other party shall not have any
liability in respect thereof pursuant to Article 6 hereof; provided that, such
knowledge is expressed by written notice thereof to the party rendering such
representation or warranty on or prior to the Closing Date.
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ARTICLE 5
CONDITIONS
5.1 Conditions to Obligations of Purchaser. The obligation of the
Purchaser to consummate the transactions contemplated by this Agreement is
subject to the fulfillment of each of the following conditions, which may be
waived in whole or in part by the Purchaser to the extent permitted by
applicable law:
(a) No Material Adverse Change. Since December 31, 1997, no
material adverse change in the business, assets, operations, earnings, prospects
or condition (financial or otherwise) of the Company, and no event which would
materially and adversely affect the business, assets, operations, earnings,
prospects or condition (financial or otherwise) of the Company shall have
occurred.
(b) Copies of Resolutions. At the Closing, the Company shall
have furnished the Purchaser with certified copies of resolutions duly adopted
by the Board of Directors of the Company and the Stockholders authorizing the
execution, delivery and performance of the terms of this Agreement and all other
necessary or proper corporate action to enable the Company to comply with the
terms of this Agreement.
(c) Opinion of Company's and Stockholders' Counsel. The
Company and the Stockholders shall have furnished the Purchaser, at the Closing,
with an opinion of counsel to the Company and the Stockholders, dated as of the
Closing Date, substantially in the form attached hereto as Exhibit 5.1(c).
(d) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of the Company and each of
the Stockholders and Xxxxx X. Xxxxxxx set forth in this Agreement was true,
correct and complete in all respects when made and shall also be true, correct
and complete in all respects at and as of the Closing Date, with the same force
and effect as if made at and as of the Closing Date. The Company and the
Stockholders and Xxxxx X. Xxxxxxx shall have performed and complied in all
respects with all agreements and covenants required by this Agreement to be
performed by the Company and each of the Stockholders and Xxxxx X. Xxxxxxx at or
prior to the Closing Date.
(e) Delivery of Officers' Certificates. The Company and each
of the Stockholders and Xxxxx X. Xxxxxxx shall have delivered to the Purchaser
certificates, dated the Closing Date, and signed by the President of the Company
(with respect to the Company), and by each of the Stockholders and Xxxxx X.
Xxxxxxx, representing and affirming that the representations and warranties made
by each of the Company and the Stockholders and Xxxxx X. Xxxxxxx jointly and/or
severally as set forth in Section 3.1 of this Agreement and referred to in
Subsection 5.1(d) above were and are true, correct and complete as required by
Subsection 5.1(d) above and the conditions set forth in this Section 5.1 have
been satisfied. The Company shall also have delivered a certificate signed by
the Secretary of the Company with respect to the authority
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and incumbency of the officers of the Company executing this Agreement and any
documents required to be executed or delivered in connection therewith.
(f) Consents and Waivers. At the Closing, any and all
necessary consents, authorizations, orders or approvals described in Subsection
3.1(o) above shall have been obtained, except as the same shall have been waived
by the Purchaser.
(g) Litigation. On the Closing Date, there shall be no
effective injunction, writ or preliminary restraining order or any order of any
kind whatsoever with respect to the Company or the Stockholders or Xxxxx X.
Xxxxxxx issued by a court or governmental agency (or other governmental or
regulatory authority) of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated hereby or making consummation
thereof unduly burdensome to the Company or the Stockholders or Xxxxx X.
Xxxxxxx. On the Closing Date and immediately prior to consummation of the
transactions contemplated by this Agreement, no proceeding or lawsuit shall have
been commenced, be pending or have been threatened by any governmental or
regulatory agency or authority or any other person with respect to the
transactions contemplated by this Agreement.
(h) Delivery of Documents and Other Information. Prior to the
Closing Date, the Company shall have made available or delivered to the
Purchaser all of the agreements, contracts, documents and other instruments
required to be delivered pursuant to the provisions of this Agreement, including
the stock certificates referenced in Section 1.6(d).
5.2 Conditions to Obligations of the Company and the Stockholders.
The obligations of the Company and the Stockholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment of
each of the following conditions, which may be waived in whole or in part by the
Company and/or the Stockholders to the extent permitted by law:
(a) Copies of Resolutions. At the Closing, the Purchaser shall
have furnished the Company with certified copies of resolutions duly adopted by
the Board of Directors of the Purchaser authorizing the execution, delivery and
performance of the terms of this Agreement and all other necessary or proper
corporate action to enable the Purchaser to comply with the terms of this
Agreement.
(b) Opinion of Purchasers' Counsel. The Purchaser shall have
furnished the Company and the Stockholders and Xxxxx X. Xxxxxxx, at the Closing,
with an opinion of De Xxxxxxx Xxxxxxxxxxx Xxxxx & Xxxxx, counsel to the
Purchaser, dated as of the Closing Date, substantially in the form attached
hereto as Exhibit 5.2(b).
(c) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of the Purchaser was true,
correct and complete in all respects when made and shall also be true, correct
and complete in all respects at and as of the Closing Date, with the same force
and effect as if made at and as of the Closing Date. The Purchaser shall have
performed and complied with in all respects all agreements and covenants
required by this Agreement to be performed by the Purchaser at or prior to the
Closing Date.
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(d) Delivery of Officers' Certificates. The Purchaser shall
have delivered to the Company and the Stockholders and Xxxxx X. Xxxxxxx
certificates, dated the Closing Date and signed by the President of the
Purchaser, affirming that the representations and warranties of the Purchaser as
set forth in Section 3.2 of this Agreement and referred to in Subsection 5.2(c)
above were and are true, correct and complete as required by Subsection 5.2(c)
above; and (ii) the conditions set forth in this Section 5.2 have been
satisfied. The Purchaser shall also have delivered a certificate signed by the
Secretary of the Purchaser with respect to the authority and incumbency of the
officers of the Purchaser executing this Agreement and any documents required to
be executed or delivered in connection therewith.
(e) Consents and Waivers. On or prior to the Closing Date, any
and all necessary consents, authorizations, orders or approvals described in
Subsection 3.2(d) shall have been obtained, except as the same shall have been
waived by the Company and the Stockholders.
ARTICLE 6
INDEMNIFICATION AND CLAIMS
6.1 Indemnification by the Company, the Stockholders and Xxxxx X.
Xxxxxxx.
(a) Subject to Section 3.3 hereof, the Company and the
Stockholders and Xxxxx X. Xxxxxxx hereby agree, jointly and severally, except as
otherwise specifically provided throughout this Agreement with respect to
representations and warranties made severally and not jointly by each
Stockholder as to which each such Stockholder hereby severally and not jointly
agrees to indemnify and hold harmless the Purchaser (the "Indemnified Party")
against and in respect of all damages, claims, losses and expenses (including,
without limitation, attorneys' fees and disbursements) reasonably incurred by
the Purchaser (all such amounts may hereinafter be referred to as the "Damages")
arising out of (i) any misrepresentation or breach of any warranty made by the
Company or the Stockholders and Xxxxx X. Xxxxxxx pursuant to the provisions of
this Agreement or in any statement, certificate or other document furnished by
the Company or the Stockholders or Xxxxx X. Xxxxxxx pursuant to this Agreement;
and (ii) the nonperformance or breach of any covenant, agreement or obligation
of the Company or the Stockholders or Xxxxx X. Xxxxxxx contained in this
Agreement which has not been waived by the Purchaser.
(b) Subject to Section 3.3 hereof, the Company and the
Stockholders and Xxxxx X. Xxxxxxx shall be obligated to indemnify the
Indemnified Party pursuant to this Section 6.1 with respect to claims for
Damages as to which the Indemnified Party shall have given written notice to the
Company and the Stockholders on or before the close of business on the sixtieth
day following the second anniversary of the Closing Date. The Company and the
Stockholders shall be obligated to indemnify the Indemnified Party with respect
to claims for Damages arising out of any misrepresentation or breach of warranty
made by the Company or the Stockholders or Xxxxx X. Xxxxxxx relating to taxes as
to which the Indemnified Party shall have given notice on or before the close of
business on the sixtieth day following the later of: (i) the expiration date of
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the statute of limitations applicable to any indemnified federal, state, foreign
or local tax liability, or (ii) the final determination of any such tax
liability, including the final administrative and/or judicial determination
thereof.
(c) In any case where the Company or the Stockholders or Xxxxx
X. Xxxxxxx have indemnified an Indemnified Party for any Damages and such
Indemnified Party recovers from third parties all or any part of the amount so
indemnified by the Company or the Stockholders or Xxxxx X. Xxxxxxx, such
Indemnified Party shall promptly pay over to the Company or the Stockholders or
Xxxxx X. Xxxxxxx, as the case may be, the amount so recovered.
6.2 Claims Against Indemnified Party. With respect to claims or
demands by third parties, whenever the Indemnified Party shall have received
notice that such a claim or demand has been asserted or threatened which, if
valid, would be subject to indemnification under Section 6.1 hereof, the
Indemnified Party shall as soon as reasonably possible and in any event within
thirty (30) days of receipt of such notice, notify the Company and the
Stockholders or Xxxxx X. Xxxxxxx of such claim or demand and of all relevant
facts within its knowledge which relate thereto. The Company and/or the
Stockholders or Xxxxx X. Xxxxxxx shall then have the right at their own expense
to undertake the defense of any such claims or demands utilizing counsel
selected by the Company or the Stockholders or Xxxxx X. Xxxxxxx, as the case may
be, and approved by the Purchaser, which approval shall not be unreasonably
withheld. In the event that the Company or the Stockholders or Xxxxx X. Xxxxxxx
should fail to give notice of the intention to undertake the defense of any such
claim or demand within sixty (60) days after receiving notice that it has been
asserted or threatened, the Indemnified Party shall have the right to satisfy
and discharge the same by payment, compromise or otherwise and shall give
written notice of any such payment, compromise or settlement to the Company and
the Stockholders and Xxxxx X. Xxxxxxx.
6.3 Right of Offset. In the event that the Company or any
Stockholder or Xxxxx X. Xxxxxxx may be required to pay monies in indemnification
to any Indemnified Party pursuant to any indemnification provision of this
Agreement, such Indemnified Party shall have the right to offset any amounts
which are owed to it in indemnification by the Company or such Stockholder or
Xxxxx X. Xxxxxxx against any amounts which are payable by such Indemnified Party
to the Company or the Stockholder or Xxxxx X. Xxxxxxx, as the case may be;
provided however, that nothing set forth in this Section 6.3 shall relieve the
Indemnified Party of its obligations to make payments (subject to reduction for
offsets as provided herein) under this Agreement when due.
6.4 Indemnification by Purchaser.
(a) Subject to Section 3.3 hereof, the Purchaser hereby agrees
to indemnify and hold harmless the Company and the Stockholders and Xxxxx X.
Xxxxxxx against and in respect of all damages, claims, losses and expenses
(including without limitation, attorneys' fees and disbursements) reasonably
incurred by the Company or the Stockholders and Xxxxx X. Xxxxxxx with respect
thereto (all such amounts may hereinafter be referred to as "Seller Damages")
arising out of: (i) any misrepresentation or breach of any warranty made by the
Purchaser pursuant to the provisions of this Agreement or in any statement,
certificate or other document furnished by
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the Purchaser pursuant to this Agreement; and (ii) the nonperformance or breach
of any covenant, agreement or obligation of the Purchaser which has not been
waived by the Company and the Stockholders and Xxxxx X. Xxxxxxx collectively.
(b) Subject to Section 3.3 hereof, the Purchaser shall be
obligated to indemnify the Company and/or the Stockholders and Xxxxx X. Xxxxxxx,
as the case may be, pursuant to this Section 6.4 only with respect to claims for
Seller Damages as to which the Company or the Stockholders shall have given
written notice to the Purchaser on or before the close of business on the
sixtieth day following the second anniversary of the Closing Date.
(c) In any case where the Purchaser has indemnified the
Company or the Stockholders for any Seller Damages and the Company or the
Stockholders and Xxxxx X. Xxxxxxx recovers from third parties all or any part of
the amount so indemnified by the Purchaser, the Company or the Stockholders and
Xxxxx X. Xxxxxxx, as the case may be, shall promptly reimburse to the Purchaser
the amount paid by the Purchaser to the Company or the Stockholders and Xxxxx X.
Xxxxxxx, as the case may be, up to the amount so recovered.
6.5 Claims Against the Company or the Stockholders. With respect to
claims or demands by third parties, whenever the Company or the Stockholders and
Xxxxx X. Xxxxxxx shall have received notice that such a claim or demand has been
asserted or threatened, which, if valid, would be subject to indemnification
under Section 6.4 hereof, the Company or the Stockholders and Xxxxx X. Xxxxxxx,
as the case may be, shall as soon as reasonably possible and in any event within
thirty (30) days of receipt of such notice, notify the Purchaser (and the
Stockholders and Xxxxx X. Xxxxxxx in the event that the Company receives such
notice) of such claim or demand and of all relevant facts within its knowledge
which relate thereto. The Purchaser shall have the right at its expense to
undertake the defense of any such claim or demand utilizing counsel selected by
the Purchaser. In the event that the Purchaser should fail to give notice of its
intention to undertake the defense of any such claim or demand within sixty (60)
days after receiving notice that it has been asserted or threatened, the Company
or the Stockholders and Xxxxx X. Xxxxxxx, as the case may be, shall have the
right to satisfy and discharge the same by payment, compromise or otherwise and
shall give written notice of any such payment, compromise or settlement to the
Purchaser.
6.6 Disclosure Generally. If and to the extent any information
required to be furnished in any Schedule is contained in this Agreement or in
any schedule attached hereto, such information shall be deemed to be included in
all schedules in which the information is required to be included. The inclusion
of any information in any schedule attached hereto shall not be deemed to be an
admission or acknowledgement by the Company or the Stockholders or Xxxxx X.
Xxxxxxx, in and of itself, that such information is material to or outside the
ordinary course of the business of the Company.
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ARTICLE 7
TERMINATION AND REMEDIES FOR BREACH OF THIS AGREEMENT
7.1 Termination by Mutual Agreement. This Agreement may be
terminated at any time by mutual consent of the parties hereto, provided that
such consent to terminate is manifested in writing and is signed by each of the
parties hereto.
7.2 Termination for Failure to Close. This Agreement may be
terminated by the Purchaser, the Company or the Stockholders if the Closing
shall not have occurred by April 25, 1998, provided that, the right to terminate
this Agreement pursuant to this section shall not be available to any party
whose failure to fulfill any of its obligations hereunder has been the cause of
or resulted in the failure to consummate the transactions contemplated hereby by
the foregoing date.
7.3 Termination by Operation of Law. This Agreement may be
terminated by the Purchaser, the Company or the Stockholders if there shall be
any statute, rule or regulation that renders consummation of the transactions
contemplated hereby illegal or otherwise prohibited, or a court of competent
jurisdiction or any government (or governmental authority) shall have issued an
order, decree or ruling, or has taken any other action restraining, enjoining or
otherwise prohibiting the consummation of such transactions and such order,
decree, ruling or other action shall have become final and nonappealable.
7.4 Termination for Failure to Perform Covenants or Conditions.
This Agreement may be terminated prior to the Closing Date:
(a) by the Purchaser if: (i) any of the representations and
warranties made in this Agreement by the Company or the Stockholders or Xxxxx X.
Xxxxxxx shall not be true and correct, when made or at any time prior to
consummation of the transactions contemplated hereby as if made at and as of
such time; (ii) any of the conditions set forth in Section 5.1 hereof have not
been fulfilled by the Closing Date; (iii) the Company or the Stockholders or
Xxxxx X. Xxxxxxx shall have failed to observe or perform any of their respective
obligations under this Agreement; or (iv) as otherwise set forth herein; or
(b) by the Company or the Stockholders if: (i) any of the
representations and warranties of the Purchaser shall not be true and correct
when made or at any time prior to consummation of the transactions contemplated
hereby as if made at and as of such time; (ii) any of the conditions set forth
in Section 5.2 hereof have not been fulfilled by the Closing Date; (iii) the
Purchaser shall have failed to observe or perform any of its obligations under
this Agreement; or (iv) as otherwise set forth herein.
7.5 Effect of Termination or Default; Remedies. In the event of
termination of this Agreement as set forth above, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto,
provided that, such party is a Non-Defaulting Party (as
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defined below). The foregoing shall not relieve any party from liability for
damages actually incurred as a result of such party's breach of any term or
provision of this Agreement.
7.6 Remedies; Specific Performance. In the event that any party
shall fail or refuse to consummate the transactions contemplated by this
Agreement or if any default under or breach of any representation, warranty,
covenant or condition of this Agreement on the part of any party (the
"Defaulting Party") shall have occurred that results in the failure to
consummate the transactions contemplated hereby, then in addition to the other
remedies provided herein, the non-defaulting party (the "Non-Defaulting Party")
shall be entitled to seek and obtain money damages from the Defaulting Party, or
may seek to obtain an order of specific performance thereof against the
Defaulting Party from a court of competent jurisdiction, provided that, the
Non-Defaulting party seeking such protection must file its request with such
court within forty-five (45) days after it becomes aware of the Defaulting
Party's failure, refusal, default or breach. In addition, the Non-Defaulting
Party shall be entitled to obtain from the Defaulting Party court costs and
attorneys' fees incurred in connection with or in pursuit of enforcing the
rights and remedies provided hereunder.
ARTICLE 8
MISCELLANEOUS
8.1 Fees and Expenses. The Company and the Stockholders shall pay
the Company's and their own expenses and the Purchaser shall pay its own
expenses incident to execution, delivery and performance of the terms of this
Agreement and the consummation of the transactions contemplated hereby.
8.2 Modification, Amendments and Waiver. The parties hereto may
amend, modify or otherwise waive any provision of this Agreement by mutual
consent, provided that such consent and any amendment, modification or waiver is
in writing and is signed by each of the parties hereto.
8.3 Assignment. None of the Company, the Stockholders, Xxxxx X.
Xxxxxxx nor the Purchaser shall have the authority to assign its respective
rights or obligations under this Agreement without the prior written consent of
the other parties hereto, except that the Purchaser may assign all or any
portion of its respective rights hereunder as security without the prior written
consent of the Company or the Stockholders or Xxxxx X. Xxxxxxx to any affiliate
of the Purchaser (including any wholly-owned subsidiary) or to any lender, bank
or other financial institution providing financing to the Purchaser in
connection with consummation of the transactions contemplated hereby and the
Company and the Stockholders and Xxxxx X. Xxxxxxx shall execute such documents
as are necessary in order to effectuate such assignments.
8.4 Burden and Benefit. This Agreement shall be binding upon and,
to the extent permitted in this Agreement, shall inure to the benefit of the
parties and their respective successors and assigns. In the event of a default
by the Purchaser of any of its obligations hereunder, the
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sole and exclusive recourse and remedy of the Stockholders and the Company and
Xxxxx X. Xxxxxxx shall be against the Purchaser and its assets; under no
circumstances shall any officer, director, stockholder or affiliate of the
Purchaser be liable in law or equity for any obligations of the Purchaser
hereunder.
8.5 Brokers. The Company and the Stockholders represent and warrant
to the Purchaser that there are no brokers or finders entitled to any brokerage
or finder's fee or other commission or fee based upon arrangements made by or on
behalf of the Company or the Stockholders or Xxxxx X. Xxxxxxx or any other
person in connection with this Agreement or any of the transactions contemplated
hereby. The Purchaser represents and warrants to the Company and the
Stockholders or Xxxxx X. Xxxxxxx that there are no brokers or finders entitled
to any brokerage or finder's fee or other commission or fee based upon
arrangements made by or on behalf of the Purchaser in connection with this
Agreement or any of the transactions contemplated hereby.
8.6 Entire Agreement. This Agreement and the exhibits, lists and
other documents referred to herein contain the entire agreement among the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior agreements with respect thereto, whether written or oral.
8.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah, without regard,
however, to such jurisdiction's principles of conflicts of laws.
8.8 Notices. Any notice, request, instruction or other document to
be given hereunder by any party hereto shall be in writing and delivered
personally, by facsimile transmission or telex, or sent by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to the Company
or the Stockholders
or Xxxxx X. Xxxxxxx: Digital Power Holding Company
0000 Xxxxxx Xxxxxx Xxxx
Xxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxxx
Chiricahua Company
0000 Xxxxxx Xxxxxx Xxxx
Xxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxxx
Xxxxxxx Xxxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxx 00000
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Xxxxx X. Xxxxxxx
0000 Xxxxxx Xxxxxx Xxxx
Xxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxxx
with a copy to: Xxxxxxx X. Xxxxxxxxxx, Esq.
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
and
If to the Purchaser: I-Storm Acquisition Corp.
x/x Xxxx Xxxxxxx
Xxxxxxx Xxxxxxxx Xxxxxx
Xxxxx 0, Roy's Drive
Xxxxxx Town, Grand Cayman BWI
Attn: Xxxxx X. XxXxxx
with a copy to: De Xxxxxxx Xxxxxxxxxxx Xxxxx & Xxxxx
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If mailed as aforesaid, the day of mailing or
transmission shall be the date any such notice shall be deemed to have been
delivered.
8.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
8.10 Rights Cumulative. All rights, powers and privileges conferred
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
8.11 Severability of Provisions. The provisions of this Agreement shall
be considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable.
Such invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are valid and enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise unenforceable. Notwithstanding the foregoing, the remaining
provisions hereof shall remain enforceable to the fullest extent permitted by
law.
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8.12 Headings. The headings set forth in the articles and sections of
this Agreement and in the exhibits and the schedules to this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
a part hereof.
8.13 Joint and Several Representations of Stockholders and Xxxxx X.
Xxxxxxx. In the event that: (i) a Stockholder or Xxxxx X. Xxxxxxx has knowledge
prior to the Closing Date that any fact, representation or warranty made herein
by the other Stockholder or Xxxxx X. Xxxxxxx, as the case may be, is inaccurate,
untrue, incomplete or misleading; and (ii) reference herein to the obligation or
liability of the Stockholders hereunder with respect to such fact,
representation or warranty has been restricted or limited to the standard of
several and not joint obligation or liability, such restriction or limitation
shall be null and void and of no effect and the obligation or liability of the
Stockholders or Xxxxx X. Xxxxxxx hereunder with respect to such fact,
representation or warranty shall be joint and not several.
[THE REST OF THIS PAGE IS INTENTIONALLY BLANK.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered on the date and year first above written.
ATTEST: DIGITAL POWER HOLDING COMPANY
By:
--------------------------------- --------------------------------
Name:
--------------------------------
Title:
-------------------------------
STOCKHOLDERS:
WITNESS: CHIRICAHUA COMPANY
By:
--------------------------------- --------------------------------
Name:
-------------------------------
Title:
-------------------------------
WITNESS:
By:
--------------------------------- --------------------------------
Xxxxxxx Xxxxxxx
WITNESS:
By:
--------------------------------- --------------------------------
Xxxxx X. Xxxxxxx
I-STORM ACQUISITION CORP.
ATTEST:
By:
--------------------------------- --------------------------------
Name:
-------------------------------
Title:
-------------------------------
Xxxxxxx Xxxxxxx hereby joins in and executes this Agreement for the purpose of
evidencing his agreement to the provisions contained in Section 1.7 of this
Agreement.
WITNESS:
By:
--------------------------------- --------------------------------
Xxxxxxx Xxxxxxx
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EXHIBIT 1.4
FORM OF OPTION AGREEMENT
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EXHIBIT 3.1(d)
FINANCIAL STATEMENTS
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EXHIBIT 5.1(c)
FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
39
45
EXHIBIT 5.2(b)
FORM OF OPINION OF COUNSEL TO PURCHASER
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46
SCHEDULE 3.1(b)
JURISDICTIONS IN WHICH COMPANY IS QUALIFIED TO DO BUSINESS
41
47
SCHEDULE 3.1(m)
CERTAIN CHANGES OR EVENTS
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48
SCHEDULE 3.1(n)
AGREEMENTS
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49
SCHEDULE 3.1(o)
NON-CONTRAVENTION; CONSENTS
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50
SCHEDULE 3.1(q)
INSURANCE
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SCHEDULE 3.1(y)
OFFICERS, DIRECTORS AND EMPLOYEES
46
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SCHEDULE 3.1(z)
LOANS TO OR FROM AFFILIATES
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SCHEDULE 3.1(bb)
BANK ACCOUNTS
48
