AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER, dated as of April ____, 2004
("Agreement"), among Windsortech, Inc., a Delaware corporation ("Parent"),
QualTech International Acquisition Corporation and QualTech Services Acquisition
Corporation, Delaware corporations and wholly owned subsidiaries of Parent
(collectively the "Merger Subs"), and QualTech International Corporation and
QualTech Services Group, Inc., Minnesota corporations (collectively the
"Companies") and the sole shareholders of Companies, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, respectively, residents of Minnesota (collectively the "Shareholders").
WITNESSETH
WHEREAS, the boards of directors of Parent, Merger Subs and Companies
and Shareholders have each determined that it is advisable and in the best
interests of their respective stockholders and as approved with respect to
Shareholders, for Parent and Merger Subs to enter into business combinations
with Companies upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combinations, the boards of directors
of Parent and Merger Subs have each approved the merger of Merger Subs with and
into Companies (the "Mergers") in accordance with the applicable provisions of
the Delaware General Companies Law (the "DGCL") and the Minnesota Business
Companies Act (the "MBCA") and upon the terms and subject to the conditions set
forth herein;
WHEREAS, Parent, Merger Subs and Companies intend, by approving
resolutions authorizing the Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations promulgated thereunder;
and
WHEREAS, pursuant to the Mergers hereunder, each outstanding share
("Shares") of the Companies' common stock, no par value, of which said Shares
are wholly owned (100% of all outstanding Shares), and are duly and beneficially
owned by Shareholders, shall be converted into the right to receive the merger
consideration (pursuant to Section 1.6 hereof), upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Subs, Companies, and Shareholders hereby agree as
follows:
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ARTICLE 1
THE MERGER
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1.1 The Merger.
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(a) Surviving Companies. At the Effective Time (as defined in
Section 1.2), and subject to and upon the terms and conditions of this
Agreement, the DGCL and the MBCA, the Companies shall be merged with and into
the Merger Subs (QualTech International Corporation into QualTech International
Acquisition Corporation and QualTech Services Group, Inc. into QualTech Services
Acquisition Corporation), the separate corporate existence of Companies shall
cease, and the Merger Subs shall continue as the surviving companies. The Merger
Subs as the surviving companies after the Mergers are hereinafter sometimes
referred to as the "Surviving Companies".
(b) Closing. Subject to the satisfaction or waiver of the
conditions set forth in Article IV, the consummation of the Mergers will take
place as promptly as practicable after execution of this Agreement and the
satisfaction or waiver of the conditions set forth in Article IV, conjunctively
at the offices of Burger, Trailor & ▇▇▇▇▇▇, P.A. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, P.A., at
a date and time as mutually agreed to by the parties hereto (the "Closing
Date").
1.2 Effective Time. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in Article IV, the parties hereto shall
cause the Mergers to be consummated by filing duly executed and delivered
Certificates of Merger and/or Articles of Merger with respect to both merger
transactions in the forms attached hereto at Exhibit 1.2 as contemplated by the
DGCL and the MBCA respectively, with the Secretary of States of Delaware and
Minnesota, as required by, and executed in accordance with the relevant
provisions of, the DGCL and the MBCA (the time of such filing being the
"Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Mergers shall be as provided in this Agreement, the Certificates of Merger,
Articles of Merger, and applicable law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Companies and Merger Subs shall vest in
the Surviving Companies, and all debts, liabilities and duties of the Companies
and Merger Subs shall become the debts, liabilities and duties of the Surviving
Companies. Notwithstanding the foregoing, the parties hereto agree that all
operating income and expenses shall be attributed to, property of, and
obligations of the Surviving Companies as of May 1, 2004 and thereafter.
1.4 Surviving Companies - Names.
The names of the Surviving Companies shall be amended as of or
immediately after the Mergers to be "QualTech International Corporation" and
"QualTech Services Group, Inc.".
1.5 Directors and Officers. The directors of Merger Subs immediately
prior to the
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Effective Time shall be the initial directors of the Surviving Companies, each
to hold office in accordance with the Certificates of Incorporation and Bylaws
of the Surviving Companies, and the officers of Merger Subs immediately prior to
the Effective Time shall be the initial officers of the Surviving Companies, in
each case until their respective successors are duly elected or appointed and
qualified.
1.6 Merger Consideration.
(a) At the Effective Time, all Shares issued and outstanding
immediately prior to the effectiveness of the Mergers, other than Shares held in
treasury shall, by virtue of the Mergers and without any action on the part of
the holder thereof, automatically be canceled and extinguished and converted
into the right to receive One Million Nine Hundred Fifty Seven Thousand Eight
Hundred Thirty One (1,957,831) shares of restricted common stock of Parent, with
demand registration rights (which are subject to registration rights pursuant to
this Article 1) ("Parent Shares"), such shares having an aggregate value of
Three Million Two Hundred Fifty Thousand Dollars ($3,250,000.00) upon a value of
Parent Shares (the "Valuation Price") which is equal to the average closing
price of Parent Shares as published by "Yahoo Finance" for twenty (20) trading
days prior to May 1, 2004 (i.e., $1.66 per share). Shares shall be issued to
▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, shareholders of QualTech International
Corporation and QualTech Services Group, Inc., respectively, in accordance with
their percentage of equity (per April 30, 2004 balance sheets of the Companies)
acquired in QualTech International Corporation and QualTech Services Group,
Inc., respectively, at May 1, 2004.
(b) Payment transfer in United States Dollars by cashier's
check or wire transfer in the total amount of Three Million Two Hundred Fifty
Thousand Dollars ($3,250,000.00), less any agreed upon advance payments, on the
Closing Date or in no case later than May 14, 2004, unless agreed to in writing
by representatives of the Companies and Shareholders. Said cash consideration
shall be payable to ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, shareholders of the
Companies, payable in accordance with the percentage equity levels as determined
under Section 1.6(a).
(c) At the Effective Time, each Share held in treasury
immediately prior to the Effective Time shall, by virtue of the Mergers and
without any action on the part of the holder thereof, automatically be canceled
and retired and all rights in respect thereof shall cease to exist. 1.7 Exchange
of Certificates.
(a) Parent Shares at Closing. Parent shall supply, or shall
cause to be supplied, not later than ten (10) business days following the
Closing Date and upon receipt of each outstanding Share of the Companies Shares,
1,000 Shares of QualTech International Corporation held by ▇▇▇▇ ▇. ▇▇▇▇▇ and
1,000 Shares of QualTech Services Group, Inc. held by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, with
certificates evidencing the Parent Shares issuable pursuant to Section 1.6 in
exchange for the outstanding Shares. All of the Parent Shares issued in the
Mergers shall be issued as of and be deemed to be outstanding as of the
Effective Time. Parent shall cause all such Parent Shares to be issued in
connection with the Mergers to be duly authorized, validly issued, fully paid
and nonassessable.
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(b) Restrictions. The Parent Shares issuable pursuant to
Section 1.6 shall be subject to transferability restrictions as set forth below:
(i) Parent will register the Parent Shares at the earliest
date allowable subject to any prior contractual
commitments(s) with third parties and to applicable laws
and/or regulations. Parent, in conjunction with
Shareholders and the Companies, agrees that it will
prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement
with respect to the shares of Parent's common stock
issuable to Companies pursuant to this Section (the
"Registration Statement"), and such Registration
Statement shall be filed within ninety (90) days of the
Closing Date. Parent, subject to the limitations set
forth above, shall use its reasonable efforts to cause
the Registration Statement to become effective within
nine (9) months after the date of this Agreement.
Parent, in conjunction with Shareholders and the
Companies, shall prepare and file with the Commission
such amendments and supplements to the Registration
Statement, including post-effective amendments and the
prospectus used in connection therewith that may be
necessary to keep such Registration Statement effective
for a period of not less than nine (9) months and to
comply with the provisions of the Securities Act of
1933, as amended, and the regulations promulgated
pursuant thereto (the "Act").
(ii) In the event of the issuance of any stop order
suspending the effectiveness of the Registration
Statement, or any order suspending or preventing the use
of any related prospectus or suspending the
qualification of any common stock included in the
Registration Statement, the Parent will use its best
efforts to obtain the withdrawal of such order.
(iii) Parent shall bear all costs, fees or expenses involved
in the preparation and filing of the Registration
Statement by Parent, including without limitation,
accounting and auditing fees and expenses, expenses in
connection with the state qualifications specified
above, filing fees, legal counsel fees and expenses and
printing expenses. Companies, however, shall pay all
applicable transfer taxes and brokerage commissions as a
result of any sale by Companies.
(iv) In the event that Parent is unable to file the
Registration Statement within two hundred seventy (270)
days or any mutually negotiated extension thereof,
within ten (10) days thereafter, Companies may, at their
sole option, require Parent to immediately, in effect,
convey back to Companies their respective shares in the
Companies in exchange for their shares in the Companies
and return of all sums paid hereunder plus interest at
ten (10%) percent per annum. The failure to timely
rescind said transaction shall
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constitute an irrevocable waiver of the right to so
rescind.
(v) If the registration described in this Section is an
underwritten primary registration on behalf of Parent,
and the managing underwriters advise Parent in writing
that in their opinion the number of securities requested
to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering
within a price range that is acceptable to Parent,
Parent will include in such registration (a) first, on a
prorata basis, the securities Parent proposes to sell
and the registerable securities requested to be included
in such registration, and (b) secondly, other securities
requested to be included in such registration.
(vi) If the registration described in this Section is an
underwritten secondary registration on behalf of holders
of Parent's securities, and the managing underwriters
advise the company in writing that in their opinion the
number of securities requested to be included in such
registration exceeds the number which can be sold in an
orderly manner in such offering within a price range
acceptable to the holders initially requesting such
registration, Parent will include in such registration
(a) first, the securities requested to be included
therein by the holders requesting such registration and
the registerable securities requested to be included in
such registration, and (b) second, other securities
requested to be included in such registration.
(c) Legend. Each certificate representing Parent Shares shall
bear a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY
PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF
DESCARTES THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) SUBJECT TO (D) BELOW,
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE 1933 ACT, OR (B) INSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 144 UNDER THE 1933
ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS, OR (C) PURSUANT TO ANOTHER APPLICABLE EXEMPTION
FROM SUCH REGISTRATION AND APPLICABLE STATE SECURITIES
LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE
"GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK
EXCHANGES IN THE U.S.
(d) Restrictions on Parent. From and after the date hereof,
and continuing through the period of time necessary to complete the Registration
Statement for the shares conveyed, or until
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termination of ▇▇▇▇ ▇. ▇▇▇▇▇' employment agreement with Parent and/or Merger
Subs or discontinuation of additional consideration under Section 1.11 hereof,
whichever is earlier, Parent shall comply with the following covenants and
restrictions:
(i) Parent shall not sell, transfer, mortgage, pledge or otherwise
dispose of the Shares or otherwise subject the Shares to any
lien or other encumbrance.
(ii) Parent shall not cause or permit to sell, transfer, mortgage,
pledge or otherwise dispose of any assets of the Surviving
Companies or otherwise subject any of Surviving Companies
assets to any line or other encumbrance other than in the
ordinary course of business.
(iii) Parent shall cause or permit the Surviving Companies to
operate its businesses in the ordinary course in accordance
with past business practices and in accordance with all
applicable laws, rules and regulations.
(iv) Parent shall not cause or permit the Surviving Companies to
issue any additional shares of its capital stock.
(v) Parent shall not cause or permit the Surviving Companies to
incur any indebtedness other than in the ordinary course of
business or as reasonably necessary.
(vi) Parent shall not cause or permit the Surviving Companies to
issue any dividends, profit distributions, salary bonuses or
other compensation to Parent or any principal, officer,
director, employee or agent of Parent.
(vii) Parent shall not cause or permit the Surviving Companies to
expend, utilize or dissipate any of its cash assets other than
in the ordinary course of business.
(viii)Parent shall not cause or permit the Surviving Companies to
terminate the employment of any their employees (current
employees of Companies) other than for good cause.
1.8 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Companies shall be closed, and there shall be no further
registration of transfers of Companies common stock thereafter on the records of
the Companies.
1.9 No Further Ownership Rights in Companies Common Stock. The merger
consideration delivered upon the surrender for exchange of Shares in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such Shares, and there shall be no further
registration of transfers on the records of the Surviving Companies of
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Shares which were outstanding immediately prior to the Effective Time.
1.10 Tax Consequences. It is intended by the parties hereto that the
Mergers shall constitute reorganizations within the meaning of Section 368(a) of
the Code.
1.11 Contingent Additional Merger Consideration. Contingent additional
merger consideration shall be due as follows: Within thirty (30) days following
the second anniversary of the Effective Date, ▇▇▇▇ ▇. ▇▇▇▇▇ shall be entitled to
additional restricted Parent Shares (subject to registration rights pursuant to
Section 1.7) representing at least fifty percent (50%) of total consideration
paid under this Section 1.11 and to cash payments (actual amount of cash
consideration up to fifty percent (50%) of additional consideration to be
determined at the discretion of Parent) which have a value of five and one half
(5.5) times that sum which the Companies average net income after taxes shall
exceed One Million One Hundred Thousand Dollars ($1,100,000.00) based upon the
net income after taxes (earned income sum). [By way of example, if after closing
- Companies net income after taxes year 1 is 1.2 million dollars; Companies net
income after taxes year 2 is 1.4 Million Dollars; average Net Income after taxes
is .2 Million Dollars; this now shall be multiplied by 5.5 (1.1 Million Dollars)
to determine the earned income sum.] Net income after taxes shall be determined
by the Parent's auditors in accordance with generally accepted accounting
principles, using a combined tax rate for state and federal taxes of
thirty-eight percent (38%). The number of shares ▇▇▇▇ ▇. ▇▇▇▇▇ shall receive
shall be that number of shares which represents the monetary value of the earn
out sum based upon the average closing price of Parent's stock. If, upon such
first anniversary of the date of this Agreement, net income after taxes is less
than One Million One Hundred Thousand Dollars ($1,100,000.00), Parent shall not
be obligated to pay ▇▇▇▇ ▇. ▇▇▇▇▇ pursuant to this Section. The compilation of
the financial statements referenced herein shall be consistent with the
Companies' current practice as directed by Parent's accountants. Any earnings
attributable to entities obtained through acquisitions made by intercompany
charges or management fees (except reasonable charges for working capital
infusions) shall not be factored into the calculation of net income after taxes
for purposes of this Agreement. Any distribution of the shares shall be
apportioned between ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as determined at their
discretion.
1.12 Taking of Necessary Action; Further Action. Parent, Merger Subs,
Companies, and Shareholders will take all such reasonable and lawful actions as
may be necessary or appropriate in order to effectuate the Mergers in accordance
with this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Companies with full right,
title and possession to all assets, property, rights, privileges, powers and
franchises of the Companies and Merger Subs, the officers and directors of the
Companies and Merger Subs immediately prior to the Effective Time are fully
authorized in the name of their respective Companies or otherwise to take, and
will take, all such lawful and necessary action.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
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AND SHAREHOLDERS
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The Companies and Shareholders represent, covenant, warrant and agree
that the documents provided to Parent are true and correct and further covenant,
warrant and agree that:
2.1 Companies are duly organized, validly existing, and in good
standing under the laws of Minnesota and Companies have all necessary corporate
powers to own their properties and to operate their businesses as now owned and
operated; and, except for qualification in the State of Minnesota, neither the
ownership of their properties nor the nature of their businesses requires
Companies to be qualified in any jurisdiction other than the state of its
incorporation.
2.2 The authorized capital stock of QualTech Services Group, Inc.
consists of one hundred thousand (100,000) shares and QualTech International
Corporation consists of ten thousand (10,000) shares of common stock, having no
par value, of which 1,000 shares are issued and outstanding with respect to both
entities. All of the Shares are validly issued, fully paid, and nonassessable,
with no personal liability attaching to the ownership thereof. There are no
outstanding subscriptions, options, rights, warrants, convertible securities,
calls, or other agreements or commitments obligating the Companies to issue or
to transfer from treasury or to issue any additional shares of its capital
stock.
2.3 Shareholders of the Companies are the owners, beneficially and of
record, of all the Shares free and clear of all liens, encumbrances, security
agreements, equities, options, claims, charges and restrictions. Companies have
full power and authority to transfer the Shares to Parent.
2.4 Exhibit 2.4(a) attached to this Agreement and made a part hereof by
reference is comprised of the audited balance sheets of the Companies for the
fiscal years ended as of December, 2002, 2003 and the related statements of
income and retained earnings for the years ending on those dates. Exhibit 2.4(b)
attached to this Agreement and made a part hereof by reference sets forth the
balance sheet of Companies as of March 31, 2004, together with related
statements of income and retained earnings for 3 month period ending on such
date. The financial statements in Exhibits 2.4(a) and 2.4(b) are referred to as
the "Financial Statements", and have been prepared by the Companies certified
public accountants. The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently followed by the
Companies throughout the periods indicated, they are complete and correct and
represent the financial position of the Companies as of the respective dates of
the balance sheets included in the Financial Statements, and the results of its
operations for the respective periods indicated.
2.5 Since March, 31, 2004 there has not been any:
(a) Transaction, contract or commitment by Companies except
in the ordinary course of business;
(b) Capital expenditure by Companies exceeding $10,000.00;
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(c) Material adverse change in the earnings, operations,
assets, liabilities, properties, business or prospects
of Companies, or in their condition, financial or
otherwise;
(d) Destruction, damage to, or loss of any asset of
Companies (whether or not covered by insurance) that
materially and adversely affects the financial
condition, business, or prospects of Companies;
(e) Labor trouble or other event or condition of any
character materially and adversely affecting the
financial condition, business, assets, or prospects of
Companies;
(f) Change in accounting methods or practices (including,
without limitation, any change in depreciation or
amortization policies or rates) by Companies;
(g) Declaration, setting aside, or payment of a dividend or
other distribution or other payment in respect to the
capital stock of Companies, or any direct or indirect
redemption, purchase or other acquisition or sale or
disposition by Companies of any of its shares of capital
stock, or grant of any warrants, options or other rights
to purchase or convert any obligation into any shares of
capital stock of Companies;
(h) Increase in the salary or other compensation payable to
or to become payable by Companies to any of its
officers, or employees, other than the increases in the
normal course of business, or the declaration or
payment, or commitment or obligation of any kind for the
payment, by Companies of a bonus or other additional
salary or compensation to any person, other than those
customarily given in the past;
(i) Sale, assignment, conveyance, lease, or other
disposition of any asset of Companies, or agreement to
do so, except in the ordinary course of business;
(j) Amendment or termination of any contract, agreements, or
license to which Companies are a party, except in the
ordinary course of business;
(k) Loan by Companies to any person or entity, or guaranty
by Companies of any loan or obligation;
(l) Mortgage, pledge, or other encumbrance of or lien,
charge or security interest upon any asset of Companies;
(m) Creation or incurrence of (i) any obligation or
liability by Companies to Shareholders or (ii) any other
obligation or liability by Companies (contingent or
otherwise) to anyone or to any entity, except (A) normal
trade
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or business obligations incurred in the ordinary course
of business, the performance of which will not,
individually or in the aggregate, have a material
adverse effect on Companies financial condition or
results of operations, and (B) obligations disclosed in
the exhibits attached hereto;
(n) Discharge or satisfaction of any lien or encumbrance or
payment of any liability or obligation (fixed or
contingent) of the Companies, except in the ordinary
course of business;
(o) Cancellation or compromise of any claim or debt of or
owed to Companies, except for adjustments made in the
ordinary course of business which, in the aggregate, are
not material;
(p) Waiver or release of any rights material and adverse to
the operations, earnings, assets, liabilities,
properties, business, prospects or condition (financial
or otherwise) of Companies;
(q) Charitable contributions by Companies not in accordance
with past practice or entry into any commitment
therefor; and
(r) Loss of supplier(s) or customer(s) which loss(es),
individually or in the aggregate, having had or is
expected to have, a material adverse effect on Companies
business or operations.
2.6 Since March 31, 2004, there has not been any change in the
financial condition or operations of Companies, except changes in the ordinary
course of business, which changes have not in the aggregate been materially
adverse.
2.7 Companies have no debt, liability, or obligation of any nature,
whether accrued, absolute, contingent, or otherwise, and whether due or to
become due, that is not reflected or reserved against in Companies balance
sheets as of March 31, 2004, except for those that may have been incurred after
the date of that balance sheet and are expressly disclosed in this Agreement or
in the exhibits attached hereto. All debts, liabilities, and obligations
incurred after that date were incurred in the ordinary course of business, are
usual and normal in amount both individually and in the aggregate, and are
expressly disclosed in this Agreement or in the exhibits attached hereto. Except
as set forth herein or in the exhibits hereto, Companies do not know and have no
reasonable grounds to know of any basis for assertion against Companies of any
claim or liability of any nature in any amount not fully and expressly disclosed
in the Financial Statements.
2.8 Within the times and in the manner prescribed by law, Companies
have filed all federal, state, local and other governmental agencies, all tax
returns and reports required by law and have paid all taxes, assessments,
penalties and all other charges due and payable pursuant or related to same. All
such returns, reports and payments properly and accurately reflect the tax and
other liabilities of Companies for the periods indicated thereon or for which
payment is made, and they are
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accurate and complete in all respects. The provisions for taxes reflected in the
Companies balance sheets as of March 31, 2004, are for any and all federal,
state, county, and local taxes for the period ending on the date of that balance
sheet and for all prior periods, whether or not disputed. There are no present
disputes as to taxes of any nature payable by Companies. Companies have not
received any notice nor have they any knowledge of any tax deficiency
outstanding, proposed or assessed against it. Companies have made all
withholding and payments of tax required to be made under all applicable
federal, state and local tax regulations and such withholdings have either been
paid to the respective governmental agencies or set aside in accounts for such
purposes or accrued, reserved against and entered upon the books of the
Companies. Companies have not executed or filed with the Internal Revenue
Service or any other taxing authority any agreement or other document extending,
or having the effect of extending, the period for collection or assessment of
any taxes. Companies have not filed any consent with the Internal Revenue
Service described in Section 341(f) of the Internal Revenue Code.
2.9 True and correct copies of the real property lease(s) of premises
occupied by Companies have been provided to Parent, which lease(s) are valid and
in full force, and there does not exist any default or event that with notice or
lapse of time, or both, would constitute a default under said lease. The
Companies are not a party to any other real property lease. No consent to the
transaction contemplated herein is required from any lessor(s) under the
lease(s).
2.10 The binders provided to Parent contains: schedule listing all
trucks, automobiles, machinery, equipment, furniture, fixtures, supplies, tools,
and all other tangible personal property owned by, in the possession of, or used
by Companies in connection with its business and except for inventories, such
assets constitute all such tangible personal property used for the conduct by
Companies of their businesses. None of the assets is leased by the Companies.
2.11 Exhibit 2.11 attached to this Agreement and made a part hereof by
reference is comprised of a schedule of the accounts receivable of Companies as
of March 31, 2004, as reflected in the balance sheet as of that date, included
in the Financial Statements, together with an aging of these accounts. These
accounts receivable, and all accounts receivable of Companies created after that
date, arose from valid sales in the ordinary course of business. These accounts
have been collected in full since that date, or are collectible at their full
amounts, less any reserve as indicated on the Companies financial statements
attached at Exhibits 2.4(a) and 2.4(b).
2.12 Except for those listed on Exhibit 2.12 attached hereto and made a
part hereof by reference, Companies use no trademark, patent, service ▇▇▇▇, or
copyright in their businesses, nor do they own any trademarks, trademark
registrations or applications, trade names, service marks, patents, copyrights,
or copyright registrations or applications. (hereafter collectively referred to
as "Marks"). Companies have not and do not knowingly infringe upon any Marks.
2.13 Companies have good and marketable title to all their assets and
interests in assets, whether real, personal, mixed, tangible, and intangible,
which constitute all the assets and interests in assets that are used in the
businesses of Companies, including, without limitation, all assets listed in the
Financial Statements and exhibits hereto. All these assets are free and clear of
restrictions on or
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conditions to transfer or assignment, and are free and clear of mortgages,
liens, pledges, charges, encumbrances, claims or restrictions.
2.14 Companies have no employment contracts or collective bargaining
agreements, nor has it any pension, bonus, executive compensation, incentive,
deferred compensation, group life or hospitalization, profit-sharing, stock
purchase or option, consulting or other agreements or arrangements providing for
employee remuneration or benefits to which Companies are a party or by which
Companies are bound (and any such bonus and profit sharing plan is terminable at
will). There is no pending or, to Companies knowledge, threatened labor dispute,
strike, or work stoppage affecting Companies businesses, nor is there any
organizational activity by any labor union directed at Companies' employees.
Exhibit 2.14 also sets forth a true, correct and complete listing of the names
and current annual compensation rates of all present directors and officers of
Companies and its ten highest paid employees.
2.15 Companies are in compliance with all federal, state and local laws
affecting employment and employment practices, collective bargaining and the
payment of social security and similar taxes, including terms and conditions of
employment, wages and hours, and is not engaged in nor has within the past six
months engaged in any unfair labor practices. There are no present employees who
have expressed an unwillingness to continue to be employed by Companies upon
consummation of the transactions contemplated herein, and there are no current
organizational efforts being made or threatened involving any employees of
Companies. There are no prior or present employees (or their beneficiaries) of
Companies having pension or retirement benefits under any defined benefit
pension plan, defined contribution plan or any other retirement plan or
arrangement, formal or informal, written or oral. Companies are in compliance
with the provisions for fringe benefits which cover employees.
2.16 The binders provided to Parent contain a description of all
insurance polices held by Companies concerning their businesses and properties.
Companies have maintained and now maintain (i) insurance on all its assets and
businesses of a type customarily insured, covering property damage and loss of
income by fire or other casualty, and (ii) adequate insurance protection against
all liabilities, claims, and risks against which it is customary to insure. All
premiums due on each such policy of insurance have been paid through the date
and in the amount shown in Exhibit 2.16 attached hereto.
2.17 Companies presently have all licenses, permits, and other
authorizations from federal, state and local authorities necessary for the
conduct of the businesses presently conducted by Companies, and Companies have
not received any notice to the contrary. Companies are in compliance with all
applicable federal, state and local laws, rules and regulations and published
guidelines relating to the conduct of their businesses and operations and assets
and have not received any notice to the contrary.
2.18 Companies are not engaged in or party to, or threatened with or
affected by, any legal action or other proceeding before any court or
administrative agency, department, commission,
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board, bureau or other instrumentality, and there are no outstanding orders,
judgments, consent decrees, stipulations or similar obligations by or with any
court or administrative agency, or other legal action or threatened legal
action, claims, suits or proceedings, public or private, affecting the
Companies; except as disclosed by Exhibit 2.18 attached hereto.
2.19 The binders provided to Parent contain a complete list of all
material contracts, agreements or commitments to which Companies are a party or
by which they are in any way obligated or any of their assets or properties may
be bound. Companies have furnished to Parent a true and complete copy of all of
the contracts and other commitments, each of which is a valid and binding
obligation of the parties thereto and is enforceable in accordance with its
terms. All of the bonus and profit sharing plans of Companies are terminable at
will. No default exists, or will result from the consummation of the
transactions contemplated herein, and no event exists which with notice or
passage of time, or both, would constitute a default, under any of such
contracts, agreements or other commitments or any other contracts, agreements or
commitments referred to herein, under which Companies are bound.
2.20 Companies have furnished to Parent for its examination (i) correct
and current copies of the Articles of Incorporation and Bylaws for Companies;
(ii) the Minute Books of Companies containing all records required to be set
forth of all proceedings, consents, actions, and meetings of the shareholders
and board of directors of Companies; and (iii) the stock transfer books of
Companies setting forth all issuance and transfers of any capital stock. Said
documents are true and correct.
2.21 Companies do not own, beneficially or of record, any shares of
capital stock of, or hold any other equity interest in, any person, firm,
corporations or other entities.
2.22 The assets and properties owned, operated or leased by Companies
and currently used in their businesses are in a good state of repair and
operating condition.
2.23 The books, records and workpapers of Companies are complete and
correct, have been maintained in accordance with good business practices and
accurately reflect the basis for the financial condition and results of
operations of Companies set forth in the Financial Statements.
2.24 The conduct of Companies businesses do not violate or infringe any
patent, trademarks or other proprietary rights or any federal, state, local or
other laws, statutes, ordinances or regulations, the enforcement of which could
materially and adversely affect the businesses or operations of Companies or the
value of their properties and assets.
2.25 Companies do not have any employee profit-sharing, pension or
retirement plans except as disclosed in the binders to Parent's auditors.
2.26 Companies are not a party to any contract, lease or commitment
with any officer, director or shareholder (or any affiliate of any such officer,
director or shareholder) of Companies,
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nor are there any loans outstanding to or from any of such persons from
Companies except as reflected on the Companies balance sheets.
2.27 Companies are not a party to or subject to any agreement or
instrument or subject to any charter or other corporate restriction or any other
judgment, order, writ, injunction, decree, rule or regulation which adversely
affects the business, operations, prospects, properties, assets or conditions,
financial or otherwise, of Companies.
2.28 None of the written information and documents furnished or to be
furnished by the Companies, Shareholders or any of their representatives or
agents to Parent or any of its representatives or agents in connection with the
preparation, execution and delivery of this Agreement, and the consummation of
the transactions contemplated hereby is or will be incomplete, false,
misleading, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact required to be stated to make the
statements therein not misleading.
2.29 This Agreement constitutes the legal, valid and binding obligation
of Companies, enforceable against it in accordance with its terms. Companies are
corporations duly organized, validly existing and in good standing under the
laws of the State of Minnesota.
2.30 Shareholders are the record and beneficial owners of all the
Shares.
2.31 Neither Companies nor Shareholders are a party to any agreement,
arrangement or understanding which will survive this transaction with respect to
the sale or other disposition of any Shares (including, without limitation, any
options, warrants, calls, rights or other commitments relating thereto).
2.32 The execution, delivery and performance of this Agreement by
Companies and Shareholders and the consummation by Companies and Shareholders of
the transactions contemplated hereby do not require the consent, waiver,
approval, license or authorization of any person or public authority, do not
violate, with or without the giving of notice and/or the passage of time, any
provision of law applicable to Companies or Shareholders and do not conflict
with or result in a breach or termination of any provision of, or constitute a
default under, or result in the creation of any lien, charge or encumbrance upon
any of the properties or assets of Companies pursuant to any corporate charter,
by-law, mortgage, deed of trust, indenture or other agreement or instrument, or
any other, judgment, decree, statute, regulation or any other restriction of any
kind or character, to which Companies or Shareholders is a party or by which
Companies or Shareholders or any of Companies' assets and properties may be
bound.
2.33 Companies possess all patents, licenses, trade names, trademarks,
service marks, brandmarks, brand names, copyrights, know-how, formula, and other
proprietary and trade rights necessary for the conduct of its businesses as now
conducted, subject to no restrictions and without any known conflict with the
rights of others, and no one has made any claims (nor has any threat to make any
such claims been communicated to Companies or Shareholders) that Companies are
in violation or infringement of any patent, patent license, trade name,
trademark, service ▇▇▇▇,
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brandmark, brand name, copyright, know-how, formula or other propriety or trade
rights of any third party.
2.34 Companies will promptly notify Parent of the existence or
happening of any fact, event or occurrence which may tend to alter the accuracy
or completeness of any representation, covenant, warranty or agreement of
Companies in this Agreement.
(a) There are no events, actions, notices, causes, lawsuits,
proceedings or other matters of any nature whatsoever which would trigger the
indemnification provision set forth in Article V, nor any have been threatened
against Companies.
(b) There are no lawsuits, actions, proceedings, or
governmental proceedings pending nor have any been threatened against the
Companies or Shareholders title or right to convey the Shares of Companies, nor
have any been threatened.
(c) All of the representations, covenants, warranties and
agreements of Companies set forth herein shall be true and correct as of the
Closing Date, shall be deemed to have been ratified and approved by Companies
act of closing, and shall survive the closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBS
--------------------------------------------------------
Parent and Merger Subs hereby, jointly and severally, represent and
warrant to the Companies and Shareholders that:
3.1 Organization and Qualification. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority necessary to own, lease and operate the properties it purports to own,
operate or lease and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power or authority could not reasonably be expected to have a material
adverse effect. The Parent is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could not
reasonably be expected to have a material adverse effect.
3.2 Contractual Obligations; Absence of Claims.
(a) Parent and Merger Subs have not breached any material
representation, warranty or covenant contained in any material contract,
agreement or instrument to which the Parent and Merger Subs are a party and the
Parent and Merger Subs are not in default with respect thereto. The Parent and
Merger Subs have no knowledge that any other party to any such material
contract,
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agreement or instrument is in default or is claimed to be in default in
complying with any provision thereof or has committed or permitted any event
which, with notice or the passage of time or both, would constitute such a
default. Each such material contract, agreement and instrument is in full force
and effect and is valid and binding upon the parties thereto. Parent and Merger
Subs' representations under this Section 3.2(a) are made with the limitation, as
agreed to by the parties hereto, that said representations shall not, in and of
itself, cause a total liability of over $50,000 to Companies and/or Shareholders
by Parent and/or Merger Subs.
(b) Except for any litigation associated with ▇▇▇▇▇ ▇▇▇▇▇▇▇, a former
officer, director, and employee of Windsortech, Inc., no action, suit,
proceeding, investigation or claim is pending or threatened against or with
respect to the Parent or Merger Subs or any properties or assets of Parent or
Merger Subs, nor is there any valid basis for any such action, suit, proceeding,
investigation or claim.
3.3 Authority Relative to this Agreement. Each of Parent and Merger
Subs have all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Merger Subs and the consummation by Parent and Merger Subs of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Subs, and no other
corporate proceedings on the part of Parent and Merger Subs are necessary to
authorize this Agreement or to consummate the transactions contemplated thereby.
This Agreement has been duly and validly executed and delivered by Parent and
Merger Subs and, assuming the due authorization, execution and delivery by the
Companies, constitutes a legal, valid and binding obligation of Parent and
Merger Subs enforceable against each of them in accordance with its terms.
3.4 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger
Subs do not, and the performance of this Agreement by Parent and Merger Subs
will not, (i) conflict with or violate the Articles of Incorporation or Bylaws
of Parent or Merger Subs, (ii) conflict with or violate any law, rule,
regulation, order, judgement or decree applicable to Parent or any of its
subsidiaries or by which its or their respective properties are bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
impair Parent's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Parent
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or its or any of their respective properties
are bound or affected.
(b) The execution and delivery of this Agreement by Parent and Merger
Subs do not, and the performance of this Agreement by Parent and Merger Subs
will not, require any consent,
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approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except for the
requirements, if any, of applicable U.S. federal and state securities laws.
3.5 Disclosure. No representation or warranty in this Agreement or in
any certificate, schedule, statement or other document furnished or to be
furnished to Companies or Shareholders pursuant hereto or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact required to
be stated herein or therein or necessary to make the statements herein or
therein not misleading.
3.6 No Prior Activities. As of the date hereof and the Effective Time,
except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Merger Subs have not and will not have incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person or entity.
ARTICLE IV
CONDITIONS TO THE MERGER
------------------------
4.1 Conditions Applicable to Parent. Parent's obligations to complete
the transactions provided for herein shall be subject to (i) the performance by
the Companies of all of its obligations and agreements to be performed on or
before the Closing Date, (ii) obligations and the accuracy and correctness of
the representations, covenants, agreements and warranties of the Companies
contained herein, both as of the date hereof, as of the Closing Date and
thereafter, and (iii) the further conditions that:
(a) There shall have been no material adverse error,
misstatement or omission in the representations, covenants, agreements and
warranties of Companies, nor any failure to state or disclose any fact or
circumstance necessary to make any statement, warranty, covenant, representation
or agreement of Companies herein not misleading;
(b) The business and properties of Companies shall not have
been adversely affected in any way as a result of any act of God, fire,
accident, strike, lock out, combination of workmen, embargo, riot, condemnation,
confiscation, or other casualty excepting fire, accident or other casualty, the
loss resulting from which shall be or has been fully covered by insurance,
unless such loss would adversely interfere with the operation of a substantial
portion of Companies businesses, in which case Parent may, at its option, cancel
this Agreement;
(c) Parent shall have received opinions from ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, counsel for the Companies, in a form and substance satisfactory to the
Parent and its counsel to the effect that:
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(i) Companies are duly incorporated and existing and in good
standing under the laws of the State of Minnesota and
have the power to own and lease property and to carry on
their businesses as and where such businesses are now
conducted, including, and without limitation, the State
of Minnesota.
(ii) The Shares of common stock being exchanged hereunder by
Companies constitute all the issued and outstanding
shares of the capital stock of Companies and all of such
Shares are fully paid and non-assessable.
(iii) Companies are corporations duly organized and validly
existing in good standing under the laws of the State of
Minnesota. This Agreement has been duly executed and
delivered by Companies and is a valid and binding
obligation of Companies in accordance with its terms;
(d) There shall not be any actual, or in the opinion of
Parent, threatened action or proceeding by or before any court or other
governmental body or agency which seeks to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might materially and
adversely affect the right of Parent to operate or control Companies after the
Closing Date or the right of Companies to conduct their business operations from
and after the Closing Date; and
(e) The leases shall be in good standing and Companies shall
not have received any notice of default or termination from a lessor thereunder.
4.2 Conditions to Obligations of the Companies. The
obligations of the Companies to effect the Mergers are also subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Subs contained in this Agreement shall be true
and correct in all respects on and as of the Effective Time, except for (i)
changes contemplated by this Agreement and, (ii) those representations and
warranties which address matters only as of a particular date (which shall have
been true and correct as of such date); and
(b) Agreements and Covenants. Parent and Merger Subs shall
have performed or complied in all materials respects with all agreements and
covenants required by this Agreement to be performed or complied with by them on
or prior to the Effective Date.
ARTICLE V
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GENERAL PROVISIONS
------------------
5.1 Indemnification.
----------------
(a) Charter and Bylaws.
(i) Parent agrees that all rights to indemnification or
exculpation now existing in favor of the employees,
agents, directors or officers of the Companies (the
"Companies Indemnified Parties") as provided in its
charter or Bylaws shall continue in full force and
effect for a period of not less than one year from the
Closing Date. Any determination required to be made with
respect to whether a Companies Indemnified Parties
conduct complies with the standards set forth in the
charter or Bylaws of the Companies or otherwise shall be
made by independent counsel selected by the Companies
Indemnified Parties reasonably satisfactory to the
Surviving Companies (whose fees and expenses shall be
paid by the Surviving Companies). This Section 5.1 shall
not apply with respect to: (i) any breach of
Shareholders' duties of loyalty to the Parent and Merger
Subs or their stockholders, (ii) for acts or omissions
by Shareholders not in good faith or that involve
intentional misconduct or a knowing violation of the
law; or (iii) for any action in violation of a warranty,
representation or covenant of this Agreement.
(ii) This Section shall survive the consummation of the
Mergers at the Effective Time, is intended to benefit
the Companies, the Surviving Companies and the Companies
Indemnified Parties, shall be binding on all successors
and assigns of the Surviving Companies and shall be
enforceable by the Companies Indemnified Parties.
(b) Survival of Representations and Warranties. The
representations and warranties of Companies and Shareholders made in this
Agreement and in the documents and certificates delivered in connection
herewith, shall survive the Merger from the Closing Date and shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement until four (4) years from the Closing Date (the "Cutoff Date").
No claim for indemnification under this Section 5.1 for breach of a
representation or warranty may be commenced after the Cutoff Date; provided,
however, that claims made within the applicable time period shall survive to the
extent of such claim until such claim is finally determined, settled or resolved
and, if applicable, paid.
(c) Indemnification of Parent and Merger Subs. The Companies
and the Stockholder Representatives (as defined herein) each hereby agree to
indemnify and hold harmless each of Parent, Merger Subs, the Surviving Companies
and each of their respective subsidiaries and affiliates (each in its capacity
as an indemnified party, an "Indemnitee") at all times from and after the date
of this Agreement from and against any loss, liability, damage, or expense
suffered or incurred ("Damages") as a result of the occurrence of any of the
following:
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(i) A breach of any obligation of Companies or
Shareholders of this Agreement, or because any representation, covenant,
agreement or warranty by Companies or Shareholders contained herein, or in any
document furnished or required to be furnished pursuant to this Agreement by
Companies or Shareholders to Parent or Merger Subs or any of its
representatives, or in any documents furnished to Parent or Merger Subs in
connection with the closing hereunder, shall be false or misleading or omits to
state any material fact required to be stated to make the statements therein not
misleading; and
(ii) Any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, suits, actions, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees, that
Indemnitee shall incur or suffer, which arise, result from, or relate to (1) any
breach of, or failure by Companies or Shareholders or by Companies or
Shareholders to perform, any of its representation, warranties, covenants, or
agreements in this Agreement or in any schedule, certificate, exhibit, or other
instrument furnished under this Agreement, or (2) any item of work performed by
Companies or Shareholders prior to the Closing Date.
(d) Third Person Claims. Promptly after an Indemnitee has
received notice of or has knowledge of any claim by a person not a party to this
Agreement (Third Person") or the commencement of any action or proceeding by a
Third Person, the Indemnitee shall give ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the
"Stockholder Representatives") written notice of such claim or the commencement
of such action or proceeding; provided, however, that the failure to give such
notice will not effect the Indemnitees' right to indemnification hereunder with
respect to such claim, action or proceeding, except to the extent that the
Stockholders' Representatives have, or the stockholders have, been actually
prejudiced as a result of such failure. The Stockholder Representatives shall
notify the Indemnitee within seven (7) days from the receipt of the foregoing
notice that they wish to defend against the claim by the Third Person. The
Indemnitee may participate in the defense of any such claim for which the
Stockholder Representatives shall have assumed the defense provided that counsel
for the Stockholder Representatives shall act as lead counsel in all matters
pertaining to the defense or settlement of such claims, suit or proceedings;
provided, however, that Indemnitee shall control the defense of any claim or
proceeding that in Indemnitee's reasonable judgment could have a material and
adverse effect on Indemnitee's business apart from the payment of money damages.
The Indemnitee shall be entitled to indemnification for the reasonable fees and
expenses of its counsel for any period during which the Stockholder
Representatives have not assumed the defense of any claim. Whether or not the
Stockholder Representatives shall have assumed the defense of any claim, neither
the Indemnitee nor the Stockholder Representatives shall make any settlement
with respect to any such claim, suit or proceeding without the prior consent of
the other, which consent shall not be unreasonably withheld or delayed. It is
understood and agreed that in situations where failure to settle a claim
expeditiously could have an adverse effect on the party wishing to settle, the
failure of the party controlling the defense to act upon a request for consent
to such settlement within five business days of receipt of notice thereof shall
be deemed to constitute consent to such settlement for purposes of this Section
5.1.
(e) Limitations on Indemnification. No indemnified party shall
be entitled to
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indemnification under this Section 5.1 for Damages relating to breaches of
representations and warranties set forth herein or in any certificate or
document delivered in connection herewith all as provided in Section 5.1(c),
until the aggregate amount of Damages incurred by such person or persons exceeds
U.S. $10,000, in which event such indemnified party or parties shall be entitled
to indemnification for all Damages.
5.2 Operation of Business Pending Closing. Companies warrant, represent
and covenant that pending the Closing Date, Companies shall continue to conduct
their businesses and operations only in the ordinary course, Companies shall use
their best efforts to preserve the business organization intact, shall, subject
to normal fluctuations, maintain substantially the same balance of cash,
accounts receivable, and inventory as existed on March 31, 2004, and shall
maintain its books of account in a manner which fairly and accurately reflects
its income, expenses and liabilities in accordance with generally accepted
accounting principles consistently applied. Companies warrant, represent and
covenant that during such period, unless Parent may have given such consent
thereto in writing, which consent may be arbitrarily withheld, Companies will
not:
(a) Incur an obligation or liability, absolute or contingent,
other than current liabilities incurred in the ordinary and usual course of its
business.
(b) Incur any indebtedness for money borrowed, make any loans
or advances to any individual, firm or corporation or assume, guarantee, endorse
or otherwise become responsible for the obligations of any individual, firm or
corporation.
(c) Subject any of their properties or assets to a mortgage,
pledge, lien or other encumbrance.
(d) Sell or transfer any of their properties other than in the
ordinary and regular course of business.
(e) Make any investment or expenditure of a capital nature
exceeding $1,000 in amount.
(f) Enter into any contracts or commitments other then in the
normal course of business except those disclosed to Parent by Companies and/or
the Shareholders.
(g) Use any of their assets or properties except for proper
corporate purposes.
(h) Modify, amend, cancel or terminate any existing agreement
except in the ordinary and usual course of its business.
(i) Increase the compensation payable or to become payable to
any of its officers, employees or agents; nor declare or pay any dividends or
bonuses, or enter into any retirement arrangement, with any of the said
officers, employees or agents; except the parties agree that shareholder
distributions shall be distributed by Companies to Shareholders at a combined
federal
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and state rate of 43 percent of ordinary income attributable to Shareholders
through April 30, 2004.
5.3 Access to Books and Records. During the period from the date of
this Agreement to the Closing Date, Companies will cause Companies to afford
representatives of Parent free access to the offices, records, files, books of
account and tax returns of Companies, provided the same shall not unreasonably
interfere with normal operations, and cause Companies to make its employees and
officers available for consultation with and interview by representatives of
Parent and to make all its plants and properties available for inspection by any
accountants, attorney, appraiser or other duly authorized representative of
Parent. Following the Closing Date, Parent will, upon request by Companies or
its representatives, make available to Parent access to Companies books and
records, or upon request and at Companies expense, will make and deliver copies
to Parent of any required records maintained by Companies.
5.4 Additional Parent Indemnification of Shareholders. Parent agrees to
indemnify and hold harmless and pay Shareholders for any additional federal and
state tax liability should the Internal Revenue Service ("IRS") and/or Minnesota
Revenue reject the Mergers as Section 368 qualifying transactions. In order for
this indemnity and hold harmless to be effective, Shareholders shall allow
Parent, at Parent's sole cost and expense, to take all actions necessary to
challenge the IRS' and/or Minnesota Revenue positions. Shareholders shall
cooperate with Parent in this endeavor. Shareholders shall reimburse Parent, on
a pro-rata basis, for any actual tax paid, without interest, as Shareholders
sell Parent Shares acquired under Section 1.6(a). In addition, Shareholders
shall be required to pledge Parent Shares and/or agree to reduced consideration
under this Agreement or compensation under ▇▇▇▇ ▇. ▇▇▇▇▇' employment agreement
necessary in amount to provide adequate collateral and/or reimbursement for tax
paid by Parent under this Section.
5.5 Transactions at Closing. Parent, Companies and Shareholders agree
that, subject to and in addition to the terms and conditions herein elsewhere
set forth, at the Closing:
(a) Parent shall form Merger Subs. Companies shall effectively
merge into Merger Subs. In exchange for said Merger Subs, Parent shall fulfill
its stock and cash obligations as set forth in this Agreement.
(b) Shareholders will surrender their Shares as required by
Section 1 hereof.
(c) Parent will deliver to ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
cashiers checks or wire transfer amounts specified in Section 1.6 hereof.
(d) Companies will deliver to Parent the opinion required by
Section 4.1(c) hereof.
(e) Companies will deliver to Parent a corporate resolution of
Companies authorizing the Mergers pursuant to the terms of this Agreement and
the execution of all necessary documents in connection with such transactions.
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(f) ▇▇▇▇ ▇. ▇▇▇▇▇ will execute an employment agreement with
Parent and/or Merger Subs, a copy of said agreement is attached hereto as
Exhibit 5.5(f) in its substantially executable form.
(g) Shareholder ▇▇▇▇ ▇. ▇▇▇▇▇ will use best efforts to cause
employees to execute employment agreements with Parent and/or Merger Subs.
(h) Execute any other documents the parties deem necessary to
carry out this Agreement, including formation of entities necessary for this
transaction to comply with Section 368 of the Code.
5.6 Documents of Further Assurance. All parties to this Agreement shall
from time to time execute and deliver all such instruments and documents of
further assurance, conveyance, confirmation of title, or otherwise, and will do
any and all such acts and things as may be necessary and requested by a party to
carry out the obligations of the Mergers and to consummate the transactions
contemplated thereby.
5.7 Addition of Exhibits. If any exhibit or document referred to herein
shall not have been attached hereto or delivered to Parent at the time of the
execution of this Agreement of if any such exhibit shall be incomplete at such
time, such exhibits shall be later attached as soon as completed but not later
than the Closing Date, and such exhibits shall, as later attached or completed,
for all purposes, be deemed a part of this Agreement as if attached hereto at
the time of execution. All such exhibits which are not complete or attached on
the date of execution of this Agreement shall be subject to approval by Parent,
in Parent's sole discretion. In the event Parent does not approve any such
exhibit, in Parent's sole discretion, then Parent may terminate this Agreement
within ten (10) days after Parent's actual receipt of the exhibit, in which
event, all parties shall be released from any further liability or obligation
hereunder and all deposits or other sums paid by Parent shall be immediately
returned to it. All exhibits referred to herein are made a part hereof.
5.8 Expenses of Sale and Purchase. Parent shall pay any expenses
incurred by it for services of counsel, accountants or otherwise in connection
with this Agreement or the consummation thereof, and no part thereof shall be
charged to or paid by Companies, and Companies shall pay any and all such
expenses they incur in the same connection.
5.9 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
actually delivered in person, or transmitted by a nationally recognized
overnight delivery service (e.g., Federal Express, Purolator, etc.), or
transmitted via telecopy followed by transmittal on the same date certified
mail, return receipt requested, or mailed by certified mail, return receipt
requested, postage prepaid as follows (or to such other address as a party gives
notice of to other parties):
(a) If to Companies or Shareholders, to ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, telephone: ▇▇▇-▇▇▇-▇▇▇▇, facsimile:
▇▇▇-▇▇▇-▇▇▇▇ with copy to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, P.A.,
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
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telephone: ▇▇▇-▇▇▇-▇▇▇▇, facsimile: ▇▇▇-▇▇▇-▇▇▇▇.
(b) If to Parent or Merger Subs, to WindsorTech, Inc., ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, with copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
Burger, Trailor & ▇▇▇▇▇▇, P.A., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, telephone: ▇▇▇-▇▇▇-▇▇▇▇, facsimile: ▇▇▇-▇▇▇-▇▇▇▇.
All such notices shall be deemed to have been given on the date of
first receipt by the addressee, of if the addressee is unavailable, unwilling or
refuses to accept such receipt, then (except for telecopy notice) on the date of
first attempted weekday delivery, all as shown on the delivery receipt therefor.
5.10 Construction of Agreement. This Agreement shall be construed and
enforced in accordance with the laws of the State of Delaware.
5.11 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any other person other than the
parties hereto, or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
5.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
5.13 Brokerage. Each party represents and warrants to the other parties
that neither it nor any of its agents have directly or indirectly dealt with,
been shown or otherwise consulted any broker or agent thereof in connection with
the Mergers or related transactions. The parties will indemnify and hold each
other harmless against any claims, losses, liabilities, damages, actions and
expenses for fees and commissions for brokerage or other commissions which may
be due or payable to any persons by reason of any act, statement or commitment
to such persons by another party.
5.14 Waivers and Amendments.
(a) The parties hereto may, by written notice to the other
parties, (i) extend the time for the performance of any of the obligations or
other actions of the other; (ii) waive any inaccuracies in the representations
or warranties of the other parties contained in this Agreement; (iii) waive
compliance with any of the covenants of the other parties contained in this
Agreement; and (iv) waive or modify performance of any of the obligations of the
other parties. Any such waiver shall be effective only if made in writing signed
by the party to be charged with such waiver, and then only to the specific
extent waived in such writing, which waiver shall not be deemed to extend to any
other or subsequent matters or circumstances.
(b) This Agreement may be amended, modified or supplemented
only by a written instrument executed by the parties hereto. No action taken
pursuant to this Agreement, including,
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without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained herein. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach. No failure on
the part of any party to exercise and no delay in exercising, any rights power
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy by such party preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
5.15 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof.
5.16 Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
5.17 Separability. In case any provision in this Agreement shall be
deemed to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
5.18 Accounting Terms. Each accounting term not defined in this
Agreement, and each accounting term partly defined in this Agreement to the
extent not defined, shall have the meaning given to it under generally accepted
accounting principles consistent with those in effect on the date of this
Agreement.
5.19 Attorney Fees. In the event any suit, proceeding or legal action
is brought by a party hereto in connection with this Agreement, the prevailing
party shall be entitled to an award of all costs and reasonable attorneys' fees
incurred at all pre-trial, trial and appellate levels.
5.20 Guarantor Indemnification. ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ have
personally guaranteed certain loans the terms of which have been previously
disclosed to Parent. Parent hereby agrees to use reasonable efforts to have said
guarantees released and shall use best efforts to have said guarantees released
within sixty (60) days from the Closing Date. If the appropriate lending
institutions do not agree to release any or all of the personal guarantees,
Parent hereby agrees to indemnify ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ in the event
of a default on any of the obligations created by the loans. Further, Parent
agrees to indemnify and hold harmless ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, their
heirs, executors, representatives and assigns (an "Indemnified Person") from and
against any and all claims, demands, actions, causes of action, losses, costs,
damages, liabilities and expenses, including, without limitation, reasonable
legal fees (hereinafter referred to in the singular as a "claim" and in the
plural as "claims") based upon, arising out of or resulting from any default of
said loans. The indemnification set forth herein shall be in addition to any
liability which Parent may otherwise have to the Indemnified Person. Within five
(5) days of receiving written notice of any claim in respect of which an
Indemnified Person may seek indemnification under this
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Subsection above, such Indemnified Person shall submit notice thereof to Parent,
as the case may be (sometimes referred to as an "Indemnifying Person"). The
failure of the Indemnified Person to notify the indemnifying person of any such
claim shall relieve the indemnifying person from any liability it may have
hereunder.
5.21 Patriot Act. All parties to this Agreement certify that they have
not been designated, and are not owned or controlled by a "suspected terrorist"
as defined in Executive Order 13224. The parties seek to comply with all
applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the parties hereby represent, warrant and agree
that: (i) none of the cash or property that the Parent will use to consummate
the Mergers or has been or shall be derived from, or related to, any activity
that is deemed criminal under United States law; (ii) no disbursement by Parent
shall cause any party to be in violation of the United States Bank Secrecy Act,
the United States International Money Laundering Control Act of 1986 or the
United States International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001; (iii) All parties have complied with the United States
Bank Secrecy Act, the United States International Money Laundering Control Act
of 1986 and/or the United States International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001 and Companies business is not derived from,
or related to, any activity that is deemed criminal under United States law.
Parent shall promptly notify Companies if any of these representations ceases to
be true and accurate regarding Parent. All parties agree to provide any
additional information regarding any other party hereto as deemed necessary to
ensure compliance with all applicable laws concerning money laundering and
similar activities. The parties hereto understand and agree that if at any time
it is discovered that any of the foregoing representations are incorrect, or if
otherwise required by applicable law or regulation related to money laundering
similar activities, the parties may undertake appropriate actions to ensure
compliance with applicable law or regulation.
IN WITNESS WHEREOF, the parties hereto, duly authorized, have executed
this Agreement effective the day and year first written above.
WINDSORTECH, INC.: QUALTECH SERVICES
ACQUISITION CORPORATION:
By: __________________________ By: __________________________
Name: Name:
Title: Title:
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ QUALTECH INTERNATIONAL
ACQUISITION CORPORATION: CORPORATION:
By: __________________________ By: __________________________
Name: Name:
Title: Title:
QUALTECH SERVICES GROUP, INC. QUALTECH SERVICES GROUP,
INC. SOLE SHAREHOLDER:
By: __________________________ _____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
QUALTECH INTERNATIONAL
CORPORATION SOLE SHAREHOLDER:
______________________________
▇▇▇▇ ▇. ▇▇▇▇▇
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EXHIBIT 1.2
QUALTECH INTERNATIONAL ACQUISITION CORPORATION/
-----------------------------------------------
QUALTECH INTERNATIONAL CORPORATION
----------------------------------
CERTIFICATES OF MERGER (DGCL) AND ARTICLES OF MERGER (MBCA)
-----------------------------------------------------------
EXHIBIT 1.2
QUALTECH SERVICES GROUP ACQUISITION CORPORATION/
-----------------------------------------------
QUALTECH SERVICES GROUP, INC.
--------------------------------
CERTIFICATES OF MERGER (DGCL) AND ARTICLES OF MERGER (MBCA)
---------------------------------------------------------
EXHIBIT 2.4(a)
FINANCIAL STATEMENTS - 2002, 2003
--------------------------------------
EXHIBIT 2.4(b)
FINANCIAL STATEMENTS - PERIOD ENDED MARCH 31, 2004
---------------------------------------------------
EXHIBIT 2.11
ACCOUNTS RECEIVABLE
-------------------
EXHIBIT 2.12
MARKS
-----
QualTech International Corporation has established the trade name "QualTech
International".
QualTech Services Group, Inc. has established the trade names "QualTech
Services" and "QualTech Services Group".
EXHIBIT 2.14
ANNUAL COMPENSATION
----------------------
EXHIBIT 2.16
INSURANCE POLICIES
-------------------
EXHIBIT 2.18
LEGAL PROCEEDINGS
-------------------
QualTech International Corporation is a respondent to an unemployment
compensation benefits claim appeal to the Minnesota Department of Employment and
Economic Development by a former employee. The maximum exposure to QualTech
International Corporation is approximately $2,500 in the form of additional
unemployment compensation contributions to the state of Minnesota.
EXHIBIT 5.5(f)
EMPLOYMENT AGREEMENT - ▇▇▇▇ ▇.▇▇▇▇▇
-----------------------------------
