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EXHIBIT 10.15
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of March 10,
1999 by and among xxXxxxxxx.xxx, Inc., a Delaware corporation ("Buyer"), 2-Lane
Media, Inc., a California corporation (the "Company"), and the Shareholders
listed on the signature pages of this Agreement ("Sellers" or "Shareholders").
WHEREAS, Sellers own all issued and outstanding shares of capital stock
of the Company (the "Company Shares"), and Sellers desire to sell to Buyer, and
Buyer desires to purchase from Sellers, the Company Shares.
NOW, THEREFORE, for and in consideration of the representations,
warranties, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and adequacy of which are acknowledged, and
upon the terms and subject to the conditions set forth herein, the parties do
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase of Stock. On the Closing Date (defined below), Buyer
agrees to purchase from Sellers, and Sellers shall sell to Buyer, all of the
issued and outstanding shares of common stock, no par value, of the Company (the
"Company Shares") for a total consideration of 300,000 shares (the "Buyer
Shares") of common stock of Buyer (the "Consideration") (subject to conversion
pursuant to Section 1.2).
1.2 Conversion and Guarantees. xxXxxxxxx.xxx, Inc. is a wholly owned
subsidiary of Citadel Technology, Inc., a publicly traded company. Buyer
represents that it intends to file and have the United States Securities and
Exchange Commission ("SEC") accept and make effective all documents necessary to
permit Sellers to publicly trade their Buyer's Shares within one year after
Closing. Should Seller's Buyer Shares not be registered with the SEC within one
year after closing, Sellers, and each of them, shall have the option to convert
the 300,000 Buyer Shares into a number of unregistered shares of common stock of
Citadel Technology, Inc. ("Citadel Stock") as determined by dividing $1,500,000
by the average closing trade price of Citadel Stock over the thirty (30) trading
days immediately preceding the Closing Date.
Buyer represents that it shall receive within one hundred and twenty (120) days
from the Closing Date at least Five Million Dollars ($5,000,000) in currency of
the United States ("Cash") from its outside investors, said Cash to be good
funds, unencumbered and immediately available for use by Buyer without
restriction ("Cash Investment"). Should said Cash Investment not be received and
immediately available for use by Buyer within one hundred and twenty (120) days
from the Closing Date, Sellers shall have the option to convert the 300,000
Buyer Shares into a number of unregistered shares of common stock of Citadel
Technology, Inc. ("Citadel Stock") determined by dividing $1,500,000 by the
average closing trade price of Citadel Stock over the 30 trading days
immediately preceding the Closing Date. Buyer agrees to provide Sellers with all
documents necessary to determine the date said Cash Investment was actually
received.
In the event that Sellers exercise the aforementioned options, Citadel
Technology, Inc. covenants to timely convert and issue such shares and include
such shares in the next registration of Citadel common stock filed with the SEC,
but shall register such Citadel Technology, Inc. common stock with the SEC at
Citadel's expense within six months after issuance to Sellers. After
registration, Citadel Technology, Inc. shall re-issue its common stock to
Sellers as fully tradeable without restrictive legends.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
The Company and the Sellers jointly and severally represent and warrant
to Buyer as follows:
2.1 Authorization of Sellers. This Agreement has been duly executed and
delivered by each Seller and constitutes the valid and binding obligation of
such Seller, enforceable in accordance with its terms, except (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, (ii) the remedy of
specific performance and injunctive relief are subject to certain equitable
defenses and to the discretion of the court before which any proceedings may be
brought and (iii) rights to indemnification may be limited under applicable
securities laws.
2.2 Existence and Good Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California with all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The Company does not have any subsidiaries. The
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Company is duly qualified or licensed as a foreign corporation and in good
standing in each jurisdiction in which the character or location of the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so duly
qualified or licensed would not have a material adverse effect on the business,
financial condition, results of operations or prospects of the Company. Schedule
2.2 sets forth is a list of jurisdictions in which the Company is qualified or
licensed to do business as a foreign corporation.
2.3 Capital Stock of the Company. (a) The Company's authorized capital
stock consists of 1,250,000 shares of common stock, of no par value, of which
1,000,000 shares will be issued and outstanding (following the transactions
contemplated by the amendments to the Articles of Incorporation attached as
Annex I to this Agreement). No other shares of capital stock are issued or
outstanding. All of the Company Shares have been validly issued and are fully
paid and nonassessable and no holder thereof is entitled to any preemptive
rights. There are no outstanding conversion or exchange rights, subscriptions,
options, warrants or other arrangements or commitments obligating the Company to
issue any shares of capital stock or other securities except as set forth on
Schedule 2.3.
(b) As of the Closing (following the transactions contemplated by the
amendments to the Articles of Incorporation attached as Annex I to this
Agreement), Xxxxx Xxxx, Xxxxxxxx Xxxx, Xxxxxx and Xxxxx Xxxx, and Utara Capital
(i) will own of record and beneficially and have good and marketable title to
105,000, 105,000, 90,000 and 700,000 of the Company Shares, respectively, free
and clear of any and all liens, mortgages, security interests, encumbrances,
pledges, charges, adverse claims, options, rights or restrictions of any
character whatsoever (collectively, "Liens"), and (ii) has the right to vote the
Company Shares on any matters as to which any shares of the Company common stock
are entitled to be voted under the laws of the State of California and the
Company's articles of incorporation and bylaws, free of any right of any other
person.
2.4 Company Authorization. The Company has full corporate power,
capacity and authority to execute this Agreement and all other agreements and
documents contemplated hereby. The execution and delivery of this Agreement and
such other agreements and documents by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by the
Company and no other corporate action on the part of the Company is necessary to
authorize the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms, except that
(i) enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally, (ii) remedies
of specific performance and injunctive relief are subject to certain equitable
defenses and to the discretion of the court before which any proceedings may be
brought, and (iii) rights to indemnification may be limited under applicable
securities laws.
2.5 Financial Statements. (a) Sellers have previously furnished to
Buyer the audited balance sheet of the Company as of September 30, 1998 and the
related statements of operations, shareholders' equity and cash flows for the
two fiscal years then ended, together with the report thereon by Gursey,
Xxxxxxxxx & Co. LLP, independent public accountants, and the footnotes thereto
(the "Prior Years Financials"). The Prior Years Financials present fairly the
financial position and results of operations of the Company as of the indicated
dates and for the indicated periods and have been prepared in accordance with
GAAP consistently applied. The Company shall permit Buyer full access to the
work papers pertaining to the Prior Years Financials, including those work
papers in the possession of or prepared by Gursey, Xxxxxxxxx & Co. LLP.
(b) Except to the extent (and not in excess of amounts) reflected in
the September 30, 1998 balance sheet included in the Prior Years Financials or
as disclosed on Schedule 2.5, the Company has no liabilities or obligations
(including, without limitation, taxes payable and deferred taxes and interest
accrued since September 30, 1998) required to be reflected in the Prior Years
Financials (or notes thereto) in accordance with GAAP other than current
liabilities incurred in the ordinary course of business, consistent with past
practice, subsequent to September 30, 1998.
2.6 Tax Matters. The Company has filed all income tax returns required
to be filed by it and all returns of other Taxes (defined below) required to be
filed and has paid or provided for all Taxes shown to be due on returns. No
action or proceeding for the assessment or collection of any Taxes is pending
against the Company; (ii) no deficiency, assessment or other formal claim for
any Taxes has been asserted or made against the Company that has not been fully
paid or finally settled; and (iii) no issue has been formally raised by any
taxing authority in connection with an audit or examination of any return of
Taxes. No federal or state income tax returns of the Company have been examined,
and there are no outstanding agreements or waivers extending the applicable
statutory periods of limitation for such Taxes for any period. All Taxes that
the Company has been required to collect or withhold have been duly withheld or
collected and, to the extent required, have been paid to the proper taxing
authority. No Taxes will be assessed on or after the Closing Date against the
Company for any tax period ending on or prior to the Closing Date, or for any
period ending after the Closing Date with respect to any portion of such tax
period that includes or is prior to the Closing Date. "Taxes" means taxes,
charges, fees, levies or assessments including, without limitation, income,
excise,
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property, withholding, sales and franchise taxes, imposed by federal, state,
county, local or foreign government or subdivision or agency thereof, and
including any interest, penalties or additions.
2.7 Assets and Properties.
(a) Real Property. The Company does not own any real property.
(b) Personal Property. Except as set forth on Schedule 2.7 and except
for inventory and supplies disposed of or consumed, and accounts receivable
collected or written off, and cash utilized, all in the ordinary course of
business consistent with past practice, the Company owns all of its inventory,
equipment and other personal property (both tangible and intangible) reflected
on the latest balance sheet included in the Prior Years Financials or acquired
since September 30, 1998, free and clear of any Liens, except for statutory
Liens for current taxes, assessments or governmental charges or levies on
property not yet due and payable.
(c) Condition of Properties. Except as set forth on Schedule 2.7, the
leasehold estates the subject of the Real Property Leases (defined below) and
the tangible personal property owned or leased by the Company are in good
operating condition and repair, ordinary wear and tear excepted; and none of the
Company or Sellers has any knowledge of any condition or defect, not disclosed
herein, of any such leasehold estate that would materially affect the fair
market value, use or operation of the leasehold estate or otherwise have a
material adverse effect on the Company or its business or operations.
(d) Compliance. To the knowledge of the Company and Sellers, the
continued ownership, operation, use and occupancy of the leasehold estates the
subject of the Real Property Leases as currently operated, used and occupied
will not violate any zoning, building, health, flood control, fire or other law,
ordinance, order or regulation or any restrictive covenant. To the knowledge of
the Company and Sellers, there are no violations of any federal, state, county
or municipal law, ordinance, order, regulation or requirement affecting any
portion of the leasehold estates and no written notice of any such violation has
been issued by any governmental authority.
2.8 Real Property Leases; Options. Schedule 2.8 sets forth a list of
(i) all leases and subleases under which the Company is lessor or lessee or
sublessor or sublessee of any real property, together with all amendments,
supplements, nondisturbance agreements, brokerage and commission agreements and
other agreements pertaining thereto ("Real Property Leases"); (ii) all material
options held by the Company or contractual obligations on the part of the
Company to purchase or acquire any interest in real property; and (iii) all
options granted by the Company or contractual obligations on the part of the
Company to sell or dispose of any material interest in real property. Copies of
all Real Property Leases and such options and contractual obligations have been
delivered to Buyer. The Company has not assigned any Real Property Lease or such
options or obligations. There are no Liens on the Company's interest in the Real
Property Leases, subject only to (i) Liens for taxes and assessments not yet due
and payable and (ii) matters set forth on Schedule 2.8. The Real Property Leases
and options and contractual obligations listed on Schedule 2.8 are in full force
and effect and constitute binding obligations of the Company and the other
parties thereto, and (x) there are no defaults thereunder and (y) no event has
occurred that with notice, lapse of time or both would constitute a default by
the Company or, to the best knowledge of the Company and Sellers, by any other
party.
2.9 Environmental Laws and Regulations.
(a)(i) The ownership and operations of the "Subject Property" and any
use, storage, treatment, disposal, or transportation of "Hazardous Substances"
that has occurred in or on the Subject Property prior to the date of this
Agreement have been in compliance with "Environmental Requirements"; (ii) during
the ownership, occupancy and operation of the Subject Property by the Company,
or, to the best knowledge of the Company and Sellers, prior to its ownership,
occupancy or operation, no release, leak, discharge, spill, disposal or emission
of Hazardous Substances has occurred in, on or under the Subject Property in a
quantity or manner that violates or requires further investigation or
remediation under Environmental Requirements; (iii) the Subject Property is free
of Hazardous Substances as of the date of this Agreement, except for the
presence of small quantities of Hazardous Substances utilized by the Company or
other tenants of the Subject Property in the ordinary course of their business;
(iv) there is no pending or threatened litigation or administrative
investigation or proceeding concerning the Subject Property involving Hazardous
Substances or Environmental Requirements; (v) there is no ACM (as defined
below), within the Subject Property, whether friable or non-friable, and there
are no above-ground or underground storage tank systems located at the Subject
Property; and (vi) the Company has never owned, operated, or leased any real
property other than the Subject Property. As used in this Agreement, the
following terms shall have the following meanings: "Environmental Requirements"
means all laws, statutes, rules, regulations, ordinances, guidance documents,
judgments, decrees, orders, agreements and other restrictions and requirements
(whether now or hereafter in effect) of any governmental authority, including,
without limitation, federal, state and local
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authorities, relating to the regulation or protection of human health and
safety, natural resources, conservation, the environment, or the storage,
treatment, disposal, transportation, handling or other management of industrial
or solid waste, hazardous waste, hazardous or toxic substances or chemicals, or
pollutants. "Hazardous Substance" means (i) any "hazardous substance" as defined
in Section 101(14) of the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended from time to time (42 U.S.C. Sections 9601
et seq.)("CERCLA") or any regulations promulgated thereunder; (ii) petroleum and
petroleum by-products; (iii) asbestos or asbestos-containing material ("ACM");
or (iv) any additional substances or materials that have been or are currently
classified or considered to be pollutants, hazardous or toxic under
Environmental Requirements. "Subject Property" means all property subject to the
Real Property Leases.
2.10 Contracts. Schedule 2.10 sets forth a list of all material
contracts, arrangements and commitments (whether oral or written) to which the
Company is a party or by which the Company's assets or business are bound
including, without limitation, contracts, arrangements or commitments that
relate to (i) the sale, lease or other disposition by the Company of all or any
substantial part of the business or assets of the Company (otherwise than in the
ordinary course of business), (ii) the purchase or lease by the Company of a
substantial amount of assets (otherwise than in the ordinary course of
business), (iii) the supply by the Company of any customer's requirements for
any item or the purchase by the Company of its requirements for any item or of a
vendor's output of any item, (iv) lending or advancing funds by the Company, (v)
borrowing of funds or guarantying the borrowing of funds by any other person,
whether under an indenture, note, loan agreement or otherwise, (vi) any
transaction or matter with any Affiliate of the Company, (vii) noncompetition or
employment, (viii) licenses and grants to or from the Company relating to any
intangible property listed on Schedule 2.16, (ix) the acquisition by the Company
of any operating business or the capital stock of any person since September 30,
1998, or (x) any other matter that is material to the business, assets or
operations of the Company ("Contracts"). Except as set forth in Schedule 2.10,
each Contract is in full force and effect on the date hereof, the Company is not
in default under any Contract, the Company has not given or received notice of
any default under any Contract, and, to the knowledge of the Company and
Sellers, no other party to any Contract is in default thereunder.
2.11 No Violations. The execution, delivery and performance of this
Agreement and the other agreements and documents contemplated hereby by the
Company and Sellers and the consummation of the transactions contemplated hereby
will not (i) violate any provision of the articles of incorporation or bylaws of
the Company, (ii) violate any statute, rule, regulation, order or decree of any
public body or authority by which the Company or a Seller or its respective
properties or assets are bound, or (iii) result in a violation or breach of, or
constitute a default under, or result in the creation of any encumbrance upon,
or create any rights of termination, cancellation or acceleration in any person
with respect to any Contract or any material license, franchise or permit of the
Company or any other agreement, contract, indenture, mortgage or instrument to
which the Company is a party or by which any of its properties or assets is
bound.
2.12 Consents. Except as set forth on Schedule 2.12, no consent,
approval or other authorization of any governmental authority or under any
Contract or other material agreement or commitment to which the Company or a
Seller is a party or by which its respective assets are bound is required as a
result of or in connection with the execution or delivery of this Agreement and
the other agreements and documents to be executed by the Company and Sellers or
the consummation by the Company and Sellers of the transactions contemplated
hereby.
2.13 Litigation and Related Matters. Set forth on Schedule 2.13 is a
list of all actions, suits, proceedings, investigations or grievances pending
against the Company or, to the best knowledge of the Company and Sellers,
threatened against the Company, the Company's business or any property or rights
of the Company, at law or in equity, before or by any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign ("Agencies"). None of the actions, suits,
proceedings or investigations listed on Schedule 2.13 either (i) results or
would, if adversely determined, result in any material adverse change in the
business, operations or assets or the condition, financial or otherwise, or
results of operations or prospects of the Company or (ii) affects or would, if
adversely determined, affect the right or ability of the Company to carry on its
business substantially as now conducted. The Company is not subject to any
continuing court or Agency order, writ, injunction or decree applicable
specifically to the business, operations or assets of the Company or employees
of the Company, nor in default with respect to any order, writ, injunction or
decree of any court or Agency with respect to its assets, business, operations
or employees. Schedule 2.13 lists (x) all worker's compensation claims
outstanding against the Company as of the date hereof and (y) all actions, suits
or proceedings filed by or against the Company since September 30, 1998.
2.14 Product Liability and Warranty Proceedings. No product liability
or warranty actions, suits or proceedings arising from the manufacture or sale
of goods by the Company have been asserted against the Company since September
30, 1998, except as set forth in Schedule 2.14.
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2.15 Compliance with Laws. The Company (a) is in compliance with all
applicable laws, regulations (including federal, state and local procurement
regulations), orders, judgments and decrees except where the failure to so
comply would not have a material adverse effect on the business, prospects,
financial condition or results of operation or prospects of the Company and (b)
possesses all necessary licenses, franchises, permits and governmental
authorizations to conduct its business in the manner in which and in the
jurisdictions and places where such business is now conducted. Set forth on
Schedule 2.15 is a list of all material licenses, franchises, permits and
governmental authorizations and all applications pending before any agency or
authority for the issuance of any licenses, franchises, permits or governmental
authorizations or the renewal thereof.
2.16 Patents, Trademarks, Etc. Schedule 2.16 lists the patents, patent
applications and licenses, software licenses, trade names, trademarks, service
marks, trademark registrations and applications, service xxxx registrations and
applications, and copyright registrations and applications owned by the Company
or used in the operation of the business of the Company (collectively, the
"Intellectual Property"), which Schedule indicates (i) the term and exclusivity
of its rights with respect to the Intellectual Property and (ii) whether each
item of Intellectual Property is owned or licensed by the Company, and if
licensed, the licensor and the license fees therefor. Unless otherwise indicated
in Schedule 2.16, the Company has the right to use and license the Intellectual
Property, and the consummation of the transactions contemplated hereby will not
result in the loss or material impairment of any rights of the Company in the
Intellectual Property. Each item constituting part of the Intellectual Property
has been, to the extent indicated in Schedule 2.16, registered with, filed in or
issued by, as the case may be, the United States Patent and Trademark Office or
such other government entity, domestic or foreign, as is indicated in Schedule
2.16; all such registrations, filings and issuances remain in full force and
effect; and all fees and other charges with respect thereto are current. There
are no pending proceedings or adverse claims made or, to the best knowledge of
the Company and Sellers, threatened against the Company with respect to the
Intellectual Property; there has been no litigation commenced or threatened in
writing within the past five (5) years with respect to the Intellectual Property
or the rights of the Company therein; and the Company and Sellers have no
knowledge that (i) the Intellectual Property or the use thereof by the Company
conflicts with any patents, patent applications, patent licenses, trade names,
trademarks, service marks, trademark or service xxxx registrations or
applications or copyright registrations or applications of others ("Third Party
Intellectual Property"), or (ii) such Third Party Intellectual Property or its
use by others or any other conduct of a third party conflicts with or infringes
upon the Intellectual Property or its use by the Company.
2.17 Employee Benefit Plans. The Company does not have any employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), maintained or contributed to
by the Company or any of its Group Members (defined below) (collectively, the
"Plans"). Neither the execution and delivery of this Agreement by the Company or
the consummation of the transactions contemplated hereby will (i) entitle any
current or former employee of the Company to severance pay, unemployment
compensation or any similar payment, (ii) accelerate the time of payment or
vesting, or increase the amount of, any compensation due to any such employee or
former employee, or (iii) directly or indirectly result in any payment made or
to be made to or on behalf of any person to constitute a "parachute payment"
(within the meaning of Section 280G of the Code). For purposes of this
Agreement, "Group Member" shall mean any member of any "affiliated service
group" as defined in Section 414(m) of the Code that includes the Company, any
member of any "controlled group of corporations" as defined in Section 1563 of
the Code that includes the Company, or any member of any group of "trades or
businesses under common control" as defined by Section 414(c) of the Code that
includes the Company.
2.18 Employees; Employee Relations. (a) Schedule 2.18 sets forth (i)
the name and current annual salary and other compensation (including, without
limitation, bonus, profit-sharing and other compensation) payable by the Company
to each employee whose current total annual compensation or estimated
compensation is $50,000 or more, (ii) any increase to become effective after the
date of this Agreement in the total compensation payable by the Company to each
such person, (iii) any increase to become payable after the date of this
Agreement by the Company to employees other than those specified in clause (i)
of this Section 2.18(a), (iv) all presently outstanding loans and advances
(other than routine travel advances to be repaid or formally accounted for
within sixty (60) days) made by the Company to, or made to the Company by, any
director, officer or employee, (v) all other transactions between the Company
and any director, officer or employee of the Company since September 30, 1998,
and (vi) all accrued but unpaid vacation pay owing to any officer or employee
that is not disclosed on the Prior Years Financials. (a) The Company is not a
party to nor bound by the terms of any collective bargaining agreement and the
Company has not experienced any material labor difficulties during the last five
years. Except as set forth on Schedule 2.18, there are no labor disputes
existing, or to the best knowledge of the Company and Sellers, threatened
involving, by way of example, strikes, work stoppages, slowdowns, picketing, or
any other interference with work or production, or any other concerted action by
employees. No charges or proceedings before the National Labor Relations Board,
or similar agency, exist, or to the best knowledge of the Company and Sellers,
are threatened. (b) The Company's relationship with its employees is good and
the Company and Sellers have no knowledge of any facts that would indicate that
the Company's employees will not continue in its employ following the Closing on
a basis similar to that existing on the date of this Agreement. Except as
disclosed on Schedule 2.18, the Company is not a party to any employment
contract with any individual or employee, either express or implied. No legal
proceedings, charges,
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complaints, or similar actions exist under any federal, state or local laws or
regulations affecting the employment relationship; and to the best knowledge of
the Company and Sellers, no proceedings, charges, or complaints are threatened
under any such laws or regulations and no facts or circumstances exist that
would give rise to any such proceedings, charges, complaints, or claims, whether
valid or not. The Company is not subject to any settlement or consent decree
with any present or former employee, employee representative or any government
or Agency relating to claims of discrimination or other claims in respect to
employment practices and policies; and no government or Agency has issued a
judgment, order, decree or finding with respect to the labor and employment
practices (including practices relating to discrimination) of the Company. (c)
Since September 30, 1998, the Company has not incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act or
similar state laws. The Company has not laid off more than ten percent (10%) of
its employees at any single site of employment in any ninety (90) day period
during the twelve (12) month period ending September 30, 1998. It shall be the
obligation of the Company and Sellers to provide any notice required by said Act
by reason of the provisions, execution or operation of this Agreement. (d) The
Company and Sellers are in full compliance with the provisions of the Americans
with Disabilities Act (the "ADA").
2.19 Insurance. Schedule 2.19 contains a list of the policies and
contracts (including insurer, named insured, type of coverage, limits of
insurance, required deductibles or co-payments, annual premiums and expiration
date) for fire, casualty, liability and other forms of insurance maintained by,
or for the benefit of, the Company. All such policies are in full force and
effect and are adequate for the business in which the Company engages. Neither
the Company nor either Seller has received any notice of cancellation or
non-renewal or of significant premium increases with respect to any such policy.
No pending claims made by or on behalf of the Company under such policies have
been denied or are being defended against third parties under a reservation of
rights by an insurer of the Company. All premiums due prior to the date hereof
for periods prior to the date hereof with respect to such policies have been
timely paid, and all premiums due before the Closing Date for periods between
the date hereof and the Closing Date will be timely paid.
2.20 Accounts Receivable. The accounts receivable set forth in the
Prior Years Financials and those accounts receivable accruing through the
Closing Date represent valid and bona fide sales to third parties incurred in
the ordinary course of business, collectible in accordance with their terms,
subject to no defenses, set-offs or counterclaims, except to the extent of any
reserves for doubtful accounts reflected in the September 30, 1998 balance sheet
included in the Prior Years Financials.
2.21 Interests in Customers, Suppliers, Etc. No shareholder, officer,
director or Affiliate of the Company possesses, directly or indirectly, any
financial interest in, or is a director, officer, employee or Affiliate of, any
corporation, firm, association or business organization that is a client,
supplier, customer, lessor, lessee or competitor of the Company. Ownership of
securities of a corporation whose securities are registered under the 1934 Act
not in excess of five percent (5%) of any class of such securities shall not be
deemed to be a financial interest for purposes of this Section 2.21.
2.22 Business Relations. Schedule 2.22 contains an accurate list of all
significant customers of the Company (i.e., those customers representing 5% or
more of the Company's revenues for the 12 months ended September 30, 1998 or who
have paid to the Company $50,000 or more over any four consecutive fiscal
quarters in the two years ended September 30, 1998). Except as set forth in
Schedule 2.22, to the best knowledge of the Company and Sellers, no customer or
supplier of the Company will cease to do business with the Company after the
consummation of the transactions contemplated hereby, which cessation would have
a material adverse effect on the business, operations or financial condition of
the Company. Except as set forth in Schedule 2.22, since September 30, 1998, the
Company has not experienced any difficulties in obtaining any inventory items
necessary to the operation of its business, and, to the best knowledge of the
Company and Sellers, no such shortage of supply of inventory items is threatened
or pending. The Company is not required to provide any bonding or other
financial security arrangements in any material amount in connection with any
transactions with any of its customers or suppliers.
2.23 Officers and Directors. Schedule 2.23 sets forth a list of
officers and directors of the Company.
2.24 Bank Accounts and Powers of Attorney. Schedule 2.24 sets forth
each bank, savings institution and other financial institution with which the
Company has an account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto. Each person holding a
power of attorney or similar grant of authority on behalf of the Company is
identified on Schedule 2.24. Except as disclosed on such Schedule, the Company
has not given any revocable or irrevocable powers of attorney to any person,
firm, corporation or organization relating to its business for any purpose
whatsoever.
2.25 Accuracy of Information Furnished. Any information furnished to
Buyer by the Company or Sellers prior to, at or after the date of this
Agreement, in the Schedules hereto, or otherwise is, or when furnished will be,
true and correct in all material respects. Such information states, or when
furnished will state, all material facts required to be stated therein or
necessary
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to make the statements therein, in light of the circumstances under which the
statements are made, not misleading.
2.26 Availability of Documents. The Company has made available for
inspection by Buyer and its representatives true, correct, and complete copies
of the articles of incorporation and bylaws of the Company, all written
agreements, arrangements, commitments, and documents referred to in the
Schedules attached hereto, and the corporate minute books of the Company. Such
corporate minute books contain the minutes of all of the meetings of
shareholders, board of directors, and any committees of the Company that have
been held preceding the date hereof and all written consents to action executed
in lieu thereof.
2.27 Brokerage, Financial Advisor or Finder Fees. No agent, advisor,
broker, person or firm acting on behalf of the Company or Sellers is, or will
be, entitled to any commission or broker's, advisor's or finder's fees from any
of the parties hereto, or from any of their respective Affiliates in connection
with any of the transactions contemplated hereby.
2.28 Absence of Certain Changes or Events. Except as set forth in
Schedule 2.28 or as otherwise contemplated by this Agreement, since September
30, 1998, there has not been (a) any damage, destruction or casualty loss to the
physical properties of the Company (whether or not covered by insurance),
materially and adversely affecting the business, operations, prospects or
financial condition of the Company, (b) any material adverse change in the
business, operations, financial condition or results of operations or prospects
of the Company, (c) any entry into any transaction, commitment or agreement
(including, without limitation, any borrowing) material to the Company, except
transactions, commitments or agreements in the ordinary course of business
consistent with past practice, and which, if occurring after the date hereof,
would be in compliance with Section 4.1, (d) any declaration, setting aside or
payment of any dividend or other distribution in cash, stock or property with
respect to the Company's capital stock or other securities, any repurchase,
redemption or other acquisition by the Company of any capital stock or other
securities, or any agreement, arrangement or commitment by the Company to do so,
(e) any increase that is material in the compensation payable or to become
payable by the Company to its directors, officers, employee or agents or any
increase in the rate or terms of any bonus, or other employee benefit plan,
payment or arrangement made to, for or with any such directors, officers,
employees or agents, (f) any sale, transfer or other disposition of, or the
creation of any Lien upon, any part of the Company's assets, tangible or
intangible, except for sales of inventory and use of supplies and collections of
accounts receivables in the ordinary course of business consistent with past
practice, or any cancellation or forgiveness of any debts or claims by the
Company, (g) any change in the relations of the Company with or loss of its
customers or suppliers, of any loss of business or increase in the cost of
inventory items or change in the terms offered to customers, which would
materially and adversely affect the business, operations or financial condition
of the Company, or (i) any capital expenditure (including any capital leases) or
commitment therefor by the Company in excess of $50,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 Organization and Authorization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Buyer has all requisite corporate power, capacity and authority to execute and
deliver this Agreement and all other agreements and documents contemplated
hereby. The execution and delivery of this Agreement and such other agreements
and documents by Buyer and the consummation by Buyer of the transactions
contemplated hereby have been duly authorized by Buyer and no other corporate
action on the part of Buyer is necessary to authorize the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Buyer and constitutes the valid and binding obligation of Buyer, enforceable in
accordance with its terms except (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, (ii) the remedy of specific performance and
injunctive relief are subject to certain equitable defenses and to the
discretion of the court before which any proceedings may be brought, and (iii)
rights to indemnification may be limited under applicable securities laws.
3.2 No Violations. The execution and delivery of this Agreement and
other agreements and documents contemplated hereby by Buyer and the consummation
of the transactions contemplated hereby will not (a) violate any provision of
the certificate of incorporation or bylaws of Buyer, (b) violate any statute,
rule, regulation, order or decree of any public body or authority by which Buyer
or its properties or assets are bound, or (c) result in a violation or breach
of, or constitute a default under or result in the creation of any encumbrance
upon, or create any rights of termination, cancellation or acceleration in any
person with respect to any agreement, contract, indenture, mortgage or
instrument to which Buyer is a party or any of its properties or assets is
bound.
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3.3 Consents. No consent, approval or other authorization of any
governmental authority or third party is required as a result of or in
connection with the execution and delivery of this Agreement and the other
agreements and documents to be executed by Buyer or the consummation by Buyer of
the transactions contemplated hereby.
3.4 Brokerage, Financial Advisor or Finder Fees. No agent, advisor,
broker, person or firm acting on behalf of Buyer is, or will be, entitled to any
commission or broker's, advisor's or finder's fees from any of the parties
hereto, or from any of their respective Affiliates, in connection with any of
the transactions contemplated hereby.
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Course of Conduct by the Company. From the date hereof through the
Closing Date, except as approved in writing by Buyer or as permitted or
contemplated by this Agreement, the Company's business shall be conducted in the
ordinary course of business consistent with past practice, and Sellers shall
cause the Company to comply with the following covenants:
(a) Capital Expenditures. The Company shall not make capital
expenditures or commitments which, when combined with capital expenditures or
commitments after September 30, 1998, would exceed $50,000.
(b) Organizational Documents. The Company shall not make any change in
its articles or bylaws, other than to file and have declared effective an
amendment to its Articles of Incorporation in substantially the form attached to
this Agreement as Annex I with the California Secretary of State.
(c) Stock Issuance; Redemptions; Reorganizations. The Company shall not
(i) issue, grant or dispose of, or make any agreement, arrangement or commitment
obligating the Company to issue, grant or dispose of any capital shares or other
securities of the Company, (ii) redeem or acquire, or make any agreement,
arrangement or commitment obligating the Company to redeem or acquire, any
shares of capital stock or other securities of the Company, or (iii) authorize
or effect or make any agreement, arrangement or commitment obligating the
Company to effect, any reorganization, recapitalization or split-up of such
capital stock of the Company (other than as contemplated by the amendments to
the Company's Articles of Incorporation in substantially the form attached as
Annex I to this Agreement).
(d) Employee Matters. The Company shall not (i) make any material
increase in the compensation payable or to become payable to any of the
officers, employees, or agents of the Company, or (ii) make, amend or enter into
any employment contract or any bonus, incentive, stock option, profit sharing,
pension, retirement, stock purchase, hospitalization, medical reimbursement,
insurance, severance benefit or other similar plan or arrangement or make any
voluntary contribution to any such plan or arrangement.
(e) Insurance Coverage. The Company shall maintain insurance coverage
for the benefit of the Company on the same basis as, or on a substantially
equivalent basis to, the current insurance coverage.
(f) Business Organization. The Company shall use commercially
reasonable efforts to preserve intact its business organization and to keep
available the services of its present officers and employees as a group.
(g) Maintenance of Property. The Company shall maintain its property,
equipment and other tangible personal property in its present operating
condition and repair, ordinary wear and tear excepted. The Company will fully
perform and pay for all maintenance, painting, repairs, alterations and other
work required to be performed by the Company as lessee under the Real Property
Leases listed on Schedule 2.8.
(h) Relations with Suppliers, Customers, Etc. The Company will use
commercially reasonable efforts to preserve its relationships with its material
customers and others having material business dealings with it and shall not
change or modify or commit to change or modify any terms offered to customers.
The Company promptly shall notify Buyer if the Company is informed by any of its
customers or suppliers that such customer or supplier will or may cease to do
business with the Company either prior to or following the Closing.
(i) Incurrence of Debt. The Company will not voluntarily incur or
assume, whether directly or by way of guaranty or otherwise, any material
obligation or liability, except obligations and liabilities incurred in the
ordinary course of business, consistent with past practice.
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(j) Liens. The Company will not mortgage, pledge, encumber, create or
allow any Liens not existing on the date hereof upon any of its properties or
assets, tangible or intangible, except Liens created in the ordinary course of
business, consistent with past practice.
(k) Disposition of Assets. The Company will not sell, transfer or
otherwise dispose of any of its tangible or intangible property or assets,
except for inventory and supplies sold, disposed of or consumed and accounts
receivable collected or written off in the ordinary course of business,
consistent with past practice. The Company will not cancel or forgive any debts
or claims except or in the ordinary course of business, consistent with past
practice.
(l) Agreements, Leases and Licenses. The Company will not amend,
terminate, or allow to lapse any material agreement, lease, license or permit to
which it is a party or of which it is the holder.
(m) Accounting Practices. The Company will not make any material
changes in its accounting methods, principles or practices, except as required
by GAAP.
(n) Changes in Business Practice. The Company will not take any action,
the purpose or effect of which is to shift income from post-closing periods to
the pre-closing period or defer expenses from the pre-closing period to
post-closing periods, which action is not in the ordinary course of business,
consistent with past practice.
(o) Transactions with Affiliates. The Company will not enter into any
agreement, arrangement or transaction with, or make any payment, distribution,
loan or advance to, any Affiliate of the Company or any officer, director or
shareholder of the Company, except for salaries and travel advances consistent
with past practices or as otherwise specifically permitted by this Agreement.
(p) Material Transactions. The Company will not enter into any other
agreement, course of action or transaction material to it, except in the
ordinary course of business, consistent with past practice.
4.2 Approvals and Consents. The Company and Sellers shall use their
respective best efforts (i) to cause all conditions to the obligations of Buyer
under this Agreement over which they are able to exercise influence or control
to be satisfied prior to the Closing Date and (ii) to obtain promptly and to
comply with all requisite statutory, regulatory or court approvals, third party
releases and consents, and other requirements necessary for the valid and legal
consummation of the transactions contemplated hereby.
4.3 Investigations. The Company shall provide Buyer and its
representatives and agents such access to the books and records of the Company
and furnish to Buyer such financial and operating data and other information
with respect to the businesses and property of the Company as it may reasonably
request from time to time, and permit Buyer and its respective representatives
and agents to make such inspections of the Company's real and personal
properties as they may reasonably request. Sellers shall promptly arrange for
Buyer and its representatives and agents to meet with such directors, officers,
employees and agents of the Company as requested.
4.4 Records Pertaining to the Company. At the Closing, Sellers will
deliver or cause to be delivered to the Company any records (i) in the
possession of Sellers, (ii) applicable primarily to the Company, and (iii) of
which the Company does not already have copies. Sellers shall, for a period of
seven years (except in the case of any sales invoices, which shall be for three
years) after the Closing Date, neither dispose of nor destroy any of the
business records or files of Sellers that pertain in part to the Company without
first offering to turn over possession of copies thereof to the Company at the
Company's expense, by written notice to the Company, at least thirty (30) days
prior to the proposed date of such disposition or destruction. Sellers shall
allow the Company and its representatives access to all business records and
files of Sellers that pertain in part to the Company, during normal working
hours at the principal place of business of Sellers, or at any location where
such records are stored, and the Company shall have the right, at its own
expense, to make copies of any such records and files. From and after the
Closing Date, Sellers shall make available to Buyer, upon written request, (i)
personnel of Sellers to assist Buyer in locating and obtaining records and files
maintained by Sellers, and (ii) any of the personnel of Sellers, whose
assistance or participation is reasonably required by Buyer in anticipation of,
or preparation for, any existing or future third party actions, Tax or other
matters in which the Company or any of its past, present or future Affiliates is
involved and which relate to the business of the Company. Sellers shall use
their respective best efforts (including, without limitation, furnishing any
certificates reasonably requested, and complying with other reasonable requests
as a prerequisite to availability) to cause Gursey, Xxxxxxxxx & Co. LLP , and
any other independent
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accounting firm that has reviewed or prepared a report on any financial
statements of the Company or any consolidated financial statements of Gursey,
Xxxxxxxxx & Co. LLP for any consolidated group which included the Company with
respect to any financial accounting period commencing on or after Gursey,
Xxxxxxxxx & Co. LLP to make available to Buyer for inspection and copying, at
Buyer's expense and upon its written request therefor, such accounting firm's
work papers with respect to any such financial statements and shall take all
such actions as required by any such accounting firm in connection with such
request.
4.5 Tax Elections. No new elections with respect to Taxes or any
changes in current elections with respect to Taxes affecting the Company shall
be made after the date of this Agreement without prior written consent of Buyer.
4.6 No Solicitation. Except with respect to Buyer and its Affiliates,
after the date hereof, Sellers shall not, and Sellers shall cause the Company
and the respective officers, directors, employees, agents and representatives of
Sellers and the Company (including, without limitation, any investment banker,
attorney or accountant retained by any of them) not to (i) initiate or solicit,
directly or indirectly, any inquiries or the making of any proposal with respect
to a merger, consolidation, sale of shares of capital stock or similar
transaction involving, or any purchase of all or any significant portion of the
assets (other than in the ordinary course of business) of, or any equity
interest in, the Company (an "Acquisition Transaction"), or (ii) engage in any
negotiations concerning, or provide to any other person any information or data
relating to the Company for the purposes of or have any discussions with any
person relating to, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage any effort or attempt by any other
person to seek or effect, an Acquisition Transaction. Sellers shall promptly
advise Buyer of, and communicate to Buyer the terms of, any such inquiry or
proposal the Company or Sellers may receive.
4.7 Public Announcements. Prior to the Closing, no party shall make any
press release or public announcement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Buyer
and the Company, which consent shall not be unreasonably withheld.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to purchase the Company Shares, and to cause
the transactions contemplated hereby to occur at Closing, shall be subject to
the satisfaction of each of the following conditions at or prior to Closing:
5.1 Representations and Warranties. Each representation and warranty of
the Company and Sellers contained in this Agreement and in any Schedule or other
disclosure in writing from the Company or Sellers shall be true and correct when
made, and shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though such representation and warranty had
been made on and as of the Closing Date.
5.2 Covenants of Sellers and Company. All of the covenants and
agreements herein on the part of Sellers and the Company to be complied with or
performed on or before the Closing Date shall have been fully complied with and
performed.
5.3 Certificate of the Company and Sellers. There shall be delivered to
Buyer a certificate dated the Closing Date and signed by the President of the
Company and each Seller to the effect set forth in Sections 5.1 and 5.2, which
certificate shall have the effect of a representation and warranty made by the
Company and each Seller on and as of the Closing Date.
5.4 Absence of Litigation. No inquiry, action, suit or proceeding shall
have been asserted, threatened or instituted (i) in which it is sought to
restrain or prohibit the carrying out of the transactions contemplated by this
Agreement or to challenge the validity of such transactions or any part thereof,
(ii) which could, if adversely determined, result in any material adverse change
in the business, operations or assets or the condition, financial or otherwise,
or results of operations or prospects of the Company, or (iii) which could, if
adversely determined, have a material adverse effect on the right or ability of
the Company to carry on its business as now conducted.
5.5 Consents and Approvals. All material authorizations, consents,
approvals, waivers and releases, if any, necessary for Sellers and the Company
to consummate the transactions contemplated hereby shall have been obtained and
copies thereof shall be delivered to Buyer.
5.6 Certificates. The Company and Sellers shall have delivered to Buyer
(i) certificates of the appropriate governmental authorities, dated as of a date
not more than fifteen (15) days prior to the Closing Date, attesting to the
existence and good standing of the Company in the State of California; (ii) a
copy, certified by the Secretary of State of California as of a date not more
than fifteen (15) days prior to the Closing Date, of the charter and all
amendments thereto of the Company; (iii) a copy
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certified by the Secretary of the Company, dated the Closing Date, of the bylaws
of the Company; and (iv) certificates, dated the Closing Date, of the Secretary
of the Company, relating to the incumbency and corporate proceedings in
connection with the consummation of the transactions contemplated hereby.
5.7 Estoppel Certificates. Sellers shall have delivered to Buyer duly
executed estoppel certificates in form and substance satisfactory to Buyer from
the lessors under the Real Property Leases.
5.8 No Material Adverse Change. There shall not have been any material
adverse change since September 30, 1998 in respect of the financial condition,
results of operations, business, assets or prospects of the Company and the
Company shall not have suffered any loss (whether or not insured) by reason of
physical damage caused by fire, earthquake, flood, accident or other calamity
which could have a material adverse effect on the condition, financial or
otherwise, results of operations or business, assets or prospects of the
Company.
5.9 No Transfers to Affiliates. Except as otherwise expressly
contemplated by this Agreement, the Company shall not have distributed or
transferred any of its assets or properties, or made any payments, to or for the
benefit of any of its Affiliates.
5.10 Due Diligence Review. The due diligence review of the Company
(including, without limitation, legal, financial, and operational matters) to be
conducted by or on behalf of Buyer shall have been completed in a manner
satisfactory to Buyer and shall not reveal or produce adverse facts with respect
to the Company, its premises, business, operations, financial condition or
prospects which are not otherwise disclosed in this Agreement or any Schedule
attached. No condition shall exist that was not disclosed in writing to Buyer
prior to the date hereof that would have a material adverse effect on the
business, operations, financial condition or prospects of the Company.
5.11 Nonforeign Affidavit. Sellers shall have furnished to Buyer an
affidavit, stating, under penalty of perjury, that the indicated number is the
transferor's United States taxpayer identification number and that the
transferor is not a foreign person, pursuant to Section 1445(b)(2) of the Code.
5.12 Employment Agreements. The Employees listed on Annex I shall have
executed and delivered to Buyer employment agreements in the form attached
hereto as Exhibit B (the "Employment Agreements").
5.13 Certificates. Sellers shall have tendered certificates
representing the Company Shares, duly endorsed in blank or accompanied by
appropriate stock powers, in proper form for transfer, with all transfer taxes
paid.
5.14 Resignations and Releases of Directors and Officers. Buyer shall
have received the resignations of and releases from each director and officer of
the Company, effective as of the Closing.
5.15 Amendments to Organizational Documents. The Sellers shall have
caused the Company to file and have declared effective amendments to its
Articles of Organization with the California Secretary of State in substantially
the form attached as Annex I.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers to sell the Company Shares and to cause the
other transactions contemplated hereby to occur at the Closing shall be subject,
except as Sellers may waive in writing, to the satisfaction of each of the
following conditions at or prior to the Closing:
6.1 Representations and Warranties. Each representation and warranty of
Buyer contained in this Agreement and in any Schedule or other disclosure in
writing from Buyer shall be true and correct when made, and shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representation and warranty had been made on and as of the
Closing Date.
6.2 Covenants of Buyer. All of the covenants and agreements herein on
the part of Buyer to be complied with or performed on or before the Closing Date
shall have been fully complied with and performed.
6.3 Certificate of Buyer. Buyer shall have delivered to Sellers a
certificate dated the Closing Date and signed by the
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President or a Vice President of Buyer to the effect set forth in Sections 6.1
and 6.2, which certificate shall have the effect of a representation and
warranty made by Buyer on and as of the Closing Date.
6.4 Absence of Litigation. No inquiry, action, suit or proceeding shall
have been asserted, threatened or instituted in which it is sought to restrain
or prohibit the carrying out of the transactions contemplated by this Agreement
or to challenge the validity of such transactions or any part thereof.
6.5 Consents and Approvals. All material authorizations, consents,
approvals, waivers and releases, if any, necessary for Buyer to consummate the
transactions contemplated hereby have been delivered to Sellers.
6.6 Certificates. Buyer shall have delivered to Sellers (i) a
certificate of the appropriate governmental authority, dated as of a date not
more than fifteen (15) days prior to the Closing Date, attesting to the
existence and good standing of Buyer in the State of Delaware; (ii) copies,
certified by the Secretary of State of Delaware as of a date not more than
fifteen (15) days prior to the Closing Date, of the certificate of incorporation
and all amendments thereto of Buyer; (iii) a copy, certified by the Secretary of
Buyer, dated the Closing Date, of the bylaws of Buyer; and (iv) a certificate,
dated the Closing Date, of the Secretary of Buyer relating to the incumbency and
corporate proceedings in connection with the consummation of the transactions
contemplated hereby.
6.7 Transfer of Shares. Buyer shall have delivered to Sellers the Buyer
Shares specified in Section 7.3.
6.8 Employment Agreements. Buyer shall have executed and delivered to
the Employees listed in Annex I the Employment Agreements.
ARTICLE VII
CLOSING
7.1 Closing. Unless this Agreement is terminated as provided in Section
8.1, subject to the satisfaction or waiver of all the conditions set forth in
Articles V and VI, the closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of the Company or such other location
as agreed to by Buyer and Sellers, on (i) March 17, 1999, or (ii) such other
date as the parties may agree upon in writing (the "Closing Date").
7.2 Delivery of the Shares. At the Closing, Sellers shall deliver or
cause to be delivered to Buyer the stock certificate(s) evidencing all of the
Company Shares owned by them, duly endorsed or accompanied by duly executed
stock powers assigning the Company Shares to Buyer and otherwise in good form
for transfer.
7.3 Payments to Sellers. At the Closing, Buyer shall deliver as
designated by Sellers the Consideration.
ARTICLE VIII
TERMINATION PRIOR TO CLOSING
8.1 Termination. (a) This Agreement may be terminated and abandoned at
any time prior to the Closing: (i) by the written mutual consent of Buyer and
Sellers; (ii) by Buyer on the Closing Date if any of the conditions set forth in
Article V shall not have been fulfilled on or prior to the Closing Date; (iii)
by Sellers on the Closing Date if any of the conditions set forth in Article VI
shall not have been fulfilled on or prior to the Closing Date; (iv) by either
Buyer or Sellers if the Closing shall not have occurred on or before April 1,
1999 (unless extended by the Buyer for an additional 30 days); and (v) by Buyer,
upon written notice to Sellers, if the examination of the Company, including its
assets, liabilities, operations, business and prospects, by Buyer or its
representatives or agents, discloses the existence or nonexistence of any
matters or things that, in the sole judgment of Buyer, would be reasonably
likely to result in a material loss or damage to Buyer or the Company or a
material diminution in value of the Company.
(b) Any termination pursuant to this Article VIII shall not affect the
obligations of the parties under Sections 4.8 and 10.16 hereof and shall be
without prejudice to the terminating party's rights and remedies under this
Agreement by reason of any violation of this Agreement occurring prior to such
termination. In the event of a termination pursuant to this Article VIII, each
party shall bear its own costs and expenses incurred with respect to the
transactions contemplated hereby.
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ARTICLE IX
INDEMNIFICATION
9.1 Buyer's Losses. (a) Sellers jointly and severally agree to
indemnify and hold harmless Buyer and the Company and their respective
directors, officers, employees, representatives, agents and attorneys from,
against and in respect of any and all Buyer's Losses (as defined below)
suffered, sustained, incurred or required to be paid by any of them by reason of
(i) any representation or warranty made the Company or Sellers in or pursuant to
this Agreement (including, without limitation, the representations and
warranties contained in any certificate delivered pursuant to Section 5.3) being
untrue or incorrect in any respect; (ii) any failure by the Company or Sellers
to observe or perform their covenants and agreements set forth in this Agreement
or any other agreement or document executed by them in connection with the
transactions contemplated hereby; (iii) any liability for warranty claims
arising from the sale of goods or services by the Company through the Closing
Date; or (iv) the termination of or withdrawal by the Company or any Group
Member from any employee pension benefit plan, as defined in Section 3(2)(A) of
ERISA that is maintained pursuant to a collective bargaining agreement under
which more than one employer makes contributions and to which the Company or any
Group Member is then making or accruing an obligation to make contributions or
has within the preceding five (5) plan years made contributions, except in any
instance to the extent Buyer's Losses result from Buyer's own gross negligence
or willful misconduct. This Section 9.1 is intended to indemnify Buyer, the
Company and their respective directors, officers, employees, representatives,
agents and attorneys from the results of their negligence.
(b) "Buyer's Losses" shall mean all damages (including, without
limitation, amounts paid in settlement with Sellers' consent, which consent may
not be unreasonably withheld), losses, obligations, liabilities, liens,
deficiencies, costs (including, without limitation, reasonable attorneys' fees),
penalties, fines, interest, monetary sanctions and expenses, including, without
limitation, reasonable attorneys' fees and costs incurred to comply with
injunctions and other court and agency orders, and other costs and expenses
incident to any suit, action, investigation, claim or proceeding or to establish
or enforce Buyer's or such other persons' right to indemnification hereunder.
9.2 Sellers' Losses. (a) Buyer and the Company jointly and severally
agree to indemnify and hold harmless Sellers, and their respective directors,
officers, employees, representatives, agents and attorneys from, against, for
and in respect of any all Sellers' Losses (defined below) suffered, sustained,
incurred or required to be paid by either Seller by reason of (i) any
representation or warranty made by Buyer in or pursuant to this Agreement
(including, without limitation, representations and warranties contained in
certificates delivered pursuant to Section 6.3) being untrue or incorrect in any
respect; (ii) any failure by Buyer to observe or perform its covenants and
agreements set forth in this Agreement or any other agreement or document
executed by it in connection with the transactions contemplated hereby; or (iii)
any liability for warranty claims arising from the sale of goods or services by
the Company subsequent to the Closing Date, except in any instance to the extent
Seller's Losses result from Sellers' own gross negligence or willful misconduct.
This Section 9.3 is intended to indemnify Sellers and their directors, officers,
employees, representatives, agents and attorneys from the results of their
negligence.
(b) "Sellers' Losses" shall mean all damages (including, without
limitation, amounts paid in settlement with Buyer's consent, which consent may
not be reasonably withheld), losses, obligations, liabilities, claims,
deficiencies, costs (including, without limitation, reasonable attorneys' fees)
and expenses, including, without limitation, reasonable attorneys' fees and
costs incurred to comply with injunctions and other court and agency orders, and
other costs and expenses incident to any suit, action, investigation, claim or
proceeding or to establish or enforce Sellers' or such other persons' right to
indemnification hereunder.
9.3 Notice of Loss. Except to the extent set forth in the next
sentence, Buyer and Sellers will not have any liability under the indemnity
provisions of this Agreement with respect to a particular matter unless a notice
setting forth in reasonable detail the breach or other matter which is asserted
has been given to the Indemnifying Party (defined below) and, in addition, if
such matter arises out of a suit, action, investigation, proceeding or claim,
such notice is given promptly, but in any event within thirty (30) days after
the Indemnified Party (defined below) is given notice of the claim or the
commencement of the suit, action, investigation or proceeding. Notwithstanding
the preceding sentence, failure of the Indemnified Party to give notice
hereunder shall not release the Indemnifying Party from its obligations under
this Article, except to the extent the Indemnifying Party is actually prejudiced
by such failure to give notice. With respect to Buyer's Losses, Sellers, jointly
and severally, shall be the Indemnifying Party and Buyer, the Company and their
respective directors, officers, employees, representatives, agents and attorneys
shall be Indemnified Parties. With respect to Sellers' Losses, Buyer shall be
the Indemnifying Party and Sellers and their respective directors, officers,
employees, representatives, agents and attorneys shall be the Indemnified Party.
9.4 Right to Defend. Upon receipt of notice of any suit, action,
investigation, claim or proceeding ("Action") for which indemnification might be
claimed by an Indemnified Party, the Indemnifying Party shall be entitled to
defend, contest or otherwise protect against any such Action at its own cost and
expense, and the Indemnified Party must cooperate in any such
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defense or other action. The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in defense thereof by counsel of
its own choosing, but the Indemnifying Party shall be entitled to control the
defense unless the Indemnified Party has relieved the Indemnifying Party from
liability with respect to the particular matter or the Indemnifying Party fails
to assume defense of the matter. In the event the Indemnifying Party shall fail
to defend, contest or otherwise protect in a timely manner against any such
Action, the Indemnified Party shall have the right, but not the obligation,
thereafter to defend, contest or otherwise protect against the same and make any
compromise or settlement thereof and recover the entire cost thereof from the
Indemnifying Party including, without limitation, reasonable attorneys' fees,
disbursements and all amounts paid as a result of such Action or the compromise
or settlement thereof; provided, however, that the Indemnified Party must send a
written notice to the Indemnifying Party of any such proposed settlement or
compromise, which settlement or compromise the Indemnifying Party may reject, in
its reasonable judgment, within thirty (30) days of receipt of such notice.
Failure to reject such notice within such thirty (30) day period shall be deemed
an acceptance of such settlement or compromise. The Indemnified Party shall have
the right to effect a settlement or compromise over the objection of the
Indemnifying Party; provided, that if (i) the Indemnifying Party is contesting
such claim in good faith or (ii) the Indemnifying Party has assumed the defense
from the Indemnified Party, the Indemnified Party waives any right to indemnity
therefor. If the Indemnifying Party undertakes the defense of such matters, the
Indemnified Party shall not, so long as the Indemnifying Party does not abandon
the defense thereof, be entitled to recover from the Indemnifying Party any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than the reasonable costs of
investigation undertaken by the Indemnified Party with the prior written consent
of the Indemnifying Party.
9.5 Cooperation. The Company, Buyer, Sellers and each of their
Affiliates, successors and assigns shall cooperate with each other in the
defense of any suit, action, investigation, proceeding or claim by a third party
and, during normal business hours, shall afford each other access to their books
and records and employees relating to such suit, action, investigation,
proceeding or claim and shall furnish each other all such further information
that they have the right and power to furnish as may reasonably be necessary to
defend such suit, action, investigation, proceeding or claim, including, without
limitation, reports, studies, correspondence and other documentation relating to
EPA, OSHA, and EEOC matters.
9.6 Waiver of Contribution and Indemnification. Sellers hereby waive
and release any rights of indemnification or contribution they may have against
the Company as a result of payments made under this Article.
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. This Agreement (including the exhibits and
schedules hereto) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof, and no party shall be liable or bound
to the other in any manner by any representations or warranties not set forth
herein.
10.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, interests, or obligations hereunder may be assigned by any party hereto
without the prior written consent of all other parties hereto, and any purported
assignment in violation of this Section 10.2 shall be null and void.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
10.4 Headings. The headings of the articles and sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
10.5 Construction. As used in this Agreement, the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular article, section, paragraph or
other subdivision.
10.6 Modification/Waiver. Any term or condition hereof may be waived in
writing at any time by the party entitled to the benefits thereof, and this
Agreement may be modified or amended by a written instrument executed by Buyer,
the Company and each Seller. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by all of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.
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10.7 Schedules, Etc. All exhibits and schedules annexed hereto are
expressly made a part of this Agreement as though fully set forth herein. Buyer
acknowledges receipt under separate cover of all information required under the
aforementioned schedules.
10.8 Notices. Any notice, request, document or other communication to
be given hereunder by any party hereto to any other party hereto shall be in
writing and validly given if (i) delivered personally, (ii) sent by telecopy
with electronic confirmation of receipt, (iii) delivered by overnight express,
or (iv) sent by registered or certified mail, postage prepaid, as follows: if to
Buyer, to xxxxxxxxxxxx.xxx, inc., 0000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxx, Xxxxx 00000, Attention: Xxxxxx X. Xxxxxxx, Telecopy No. (000) 000-0000;
if to Sellers or the Company, 2-Lane Media, Inc., 0000 Xxxxxxxx Xxxxxxxxx, Xxxxx
000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx Xxxx and Xxx Foo, Telecopy
No. ( 000) 000-0000; or at such other address for a party as shall be specified
by like notice. Any notice that is delivered personally, or sent by telecopy or
overnight express in the manner provided herein shall be deemed to have been
duly given to the party to whom it is directed upon actual receipt by such
party. Any notice that is addressed and mailed in the manner herein provided
shall be conclusively presumed to have been given to the party to whom it is
addressed at the close of business, local time of the recipient, on the fourth
day after the day it is so placed in the mail.
10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED, AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO ITS
CHOICE OF LAW PRINCIPLES).
10.10 Survival of Covenants, Agreements, Representations and
Warranties.
(a) Covenants and Agreements. All covenants and agreements made
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the Closing and shall continue in full force and effect
thereafter according to their terms without limit as to duration.
(b) Representations and Warranties. All representations and warranties
contained herein shall survive the Closing and shall continue in full force and
effect thereafter for a period of two years following the Closing, except that
(i) the representations and warranties contained in Section 2.6 hereof shall
survive until the earlier of (x) the expiration of the applicable periods
(including any extensions) of the respective statutes of limitation applicable
to the payment of the Taxes to which such representations and warranties relate
without an assertion of a deficiency in respect thereof by the applicable taxing
authority or (y) the completion of the final audit and determinations by the
applicable taxing authority and final disposition of any deficiency resulting
therefrom, (ii) the representations and warranties contained in Section 2.17
shall survive until the expiration of the applicable period of the statutes of
limitation applicable to ERISA matters, and (iii) the representations and
warranties contained in Sections 2.1, 2.2, 2.3, 2.4 and 2.9 shall survive
indefinitely.
10.11 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
10.12 Expenses. Sellers, on the one hand, and Buyer, on the other hand,
shall be solely responsible for their respective costs and expenses incurred in
connection with the transactions contemplated hereby.
10.13 Third Party Beneficiaries. Except as otherwise specifically
provided in Article IX, no individual or firm, corporation, partnership or other
entity shall be a third-party beneficiary of the representations, warranties,
covenants and agreements made by any party hereto.
10.14 Number and Gender of Words. Whenever the singular number is used,
the same shall include the plural where appropriate, and words of any gender
shall include each other gender where appropriate.
10.15 Further Assurances. From time to time after the Closing, at the
request of any other party but at the expense of the requesting party, Buyer,
the Company or Sellers, as the case may be, will execute and deliver any such
other instruments of conveyance, assignment and transfer, and take such other
action as the other party may reasonably request in order to consummate or
evidence the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date above written.
BUYER:
XXXXXXXXX.XXX, INC.
By: /s/ XXXXXX X. XXXXXXX
--------------------------------
Xxxxxx X. Xxxxxxx, President
GUARANTOR:
Citadel Technology, Inc.
By: /s/ XXXXXX X. XXXXXXX
--------------------------------
Xxxxxx X. Xxxxxxx, President
Title: President
--------------------------------
COMPANY:
2-LANE MEDIA, INC.
By: /s/ XXXXX XXXX
--------------------------------
Title: CEO
--------------------------------
SHAREHOLDERS
/s/ XXXXX XXXX
----------------------------------------
Xxxxx Xxxx
/s/ XXXXXXXX XXXX
----------------------------------------
Xxxxxxxx Xxxx
/s/ XXXXXX XXXX XXXXXX XXXX
----------------------------------------
Xxxxxx and Xxxxxx Xxxx, JTWROS
UTARA CAPITAL
By: /s/ XXXXXX XXXXXXXX
--------------------------------
Xxxxxx Xxxxxxxx
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