1
EXHIBIT 2.1
THIS PLAN AND AGREEMENT OF MERGER IS NOT A PROSPECTUS AND ANY OFFERING OF THE
SHARES OF COMMON STOCK OF THE XXXX GROUP INC., COVERED BY THIS AGREEMENT IS NOT
A PUBLIC OFFERING. RECIPIENTS OF SUCH SHARES WILL NOT BE ENTITLED TO BRING A
CAUSE OF ACTION FOR RESCISSION UNDER SECTION 12(2) OF THE SECURITIES ACT OF
1933 FOR AN UNTRUE STATEMENT OF A MATERIAL FACT OR FOR THE FAILURE TO STATE A
MATERIAL FACT.
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PLAN AND AGREEMENT OF MERGER
--------------------------------
AMONG
THE SHAREHOLDERS OF NAPTECH, INC., NAPTECH, INC.,
SAON, INC. AND THE XXXX GROUP INC.
DATED AS OF AUGUST 5, 1996
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2
TABLE OF CONTENTS
(Not a Part of the Agreement)
PAGE
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . 1
ARTICLE II THE MERGER, ETC. . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.01. The Merger . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.02. Effective Time . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.03. Closing . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.04. Terms of Merger . . . . . . . . . . . . . . . . . 10
SECTION 2.05. Merger Consideration; Cancellation of the Shares in
the Merger, Etc. . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS AND THE COMPANY . . . . . . . . . . . . . 12
SECTION 3.01. Capacity of the Shareholders . . . . . . . . . 12
SECTION 3.02. Organization, Authority and Qualification of the
Company . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.03. Capital Stock of the Company; Ownership of the Shares 13
SECTION 3.04. Subsidiaries . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.05. Corporate Books and Records . . . . . . . . . . . . . 15
SECTION 3.06. No Conflict . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.07. Governmental Consents and Approvals . . . . . . 16
SECTION 3.08. Financial Information and Books and Records . . 16
SECTION 3.09. Certain Additional Representations . . . . . . . . . 17
SECTION 3.10. No Undisclosed Liabilities or Capital Commitments 17
SECTION 3.11. Acquired Assets . . . . . . . . . . . . . . . . 18
SECTION 3.12. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions . . . . . . . . . . . . 18
SECTION 3.13. Litigation . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.14. Certain Interests . . . . . . . . . . . . . . . . 21
SECTION 3.15. Compliance with Laws . . . . . . . . . . . . . . . . 21
SECTION 3.16. Environmental and Other Permits and Licenses; Related
Matters . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.17. Material Contracts . . . . . . . . . . . . . . . . 23
SECTION 3.18. Intellectual Property . . . . . . . . . . . . . . . . 25
SECTION 3.19. Real Property . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.20. Tangible Personal Property . . . . . . . . . . . . . 26
SECTION 3.21. Assets . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.22. Accounts Receivable and Inventory . . . . . . . . . 28
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SECTION 3.23. Customers . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.24. Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . 28
SECTION 3.25. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.26. Key Employees . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.27. Risk Management . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.28. Accounts; Lockboxes; Safe Deposit Boxes; Powers of
Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.29. Full Disclosure . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.30. Investment Purpose, Etc.. . . . . . . . . . . . . . . . . . . . 35
SECTION 3.31. Brokers . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.32. Freeport Property . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND THE PARENT SUB . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.01. Organization and Authority of the Parent and the
Parent Sub. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.02. No Conflict . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.03. Governmental Consents and Approvals . . . . . . . . . . 37
SECTION 4.04. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.05. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.06. Reports; Financial Statements . . . . . . . . . . . . . 38
ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.01. Conduct of Business Prior to the Effective Time . . . . . . 39
SECTION 5.02. Access to Information . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.03. Confidentiality . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.05. Notice of Developments . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.06. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.07. Use of Names and Intellectual Property . . . . . . . . . . 45
SECTION 5.08. Non-Competition . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.09. Release of Indemnity and Other Obligations . . . . . . 46
SECTION 5.10. Further Action . . . . . . . . . . . . . . . . . . . . 46
SECTION 5.11. Removal of Encumbrances on Assets . . . . . . . . . . . . . 46
SECTION 5.12. Certain Additional Covenants . . . . . . . . . . . . . 47
SECTION 5.13. Termination of Inter-Company Arrangements, etc. . . . . . . 48
ARTICLE VI MINORITY SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.01. Certain Limitations on Representations
and Warranties of the Minority Shareholders . . . . . . . . . . 48
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ARTICLE VII TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.01. Representations, Warranties and Covenants . . . . . . . . . . . 49
SECTION 7.02. Access to Information . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.03. Returns and Payments. . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.04. Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.05. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.06. Contests. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.07. Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.08. Cooperation and Exchange of Information . . . . . . . . . . . . 60
SECTION 7.09. Retention of Tax Returns and Records. . . . . . . . . . . . . . 60
SECTION 7.10. Conveyance Taxes. . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE VIII CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.01. Conditions to Obligations of the Shareholders and the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.02. Conditions to Obligations of the Parent and the
Parent Sub . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE IX SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.01. Survival of Representations, Warranties and Covenants . . . 68
SECTION 9.02. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.03. Limits on Indemnification . . . . . . . . . . . . . . . . . . . 73
SECTION 9.04 Security for Shareholders' Agreement to Indemnify . . . . . . . 74
ARTICLE X TERMINATION AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.01. Termination by the Shareholders or Parent . . . . . . . . . . . 74
SECTION 10.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.03. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE XI GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.01. Solidary Obligation of Shareholders
Other than Minority Shareholders . . . . . . . . . . . . . . . 76
SECTION 11.02. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.04. Public Announcements . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.05. Headings; Construction. . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.06. Severability . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.07. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.08. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.09. No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . 78
SECTION 11.10. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
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SECTION 11.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.13. Specific Performance. . . . . . . . . . . . . . . . . . . 79
SECTION 11.14. Legal Advice. . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.15. Remedies Not Exclusive. . . . . . . . . . . . . . . . . . 79
ARTICLE XII SHAREHOLDER REPRESENTATIVE; POWER. . . . . . . . . . . . . . . .
OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.01. Shareholder Representative; Etc.. . . . . . . . . . . . . 79
Exhibits
Exhibit 1.01(i) List of Minority Shareholders
Exhibit 1.01(ii) Permitted Encumbrances
Exhibit 1.01(iii) List of Shareholders Represented by Company's Counsel
Exhibit 2.05(a)(ii) Allocation of Merger Consideration Among Shareholders
Exhibit 3.03 List of Shares Owned by Each of the Shareholders
Exhibit 3.32 Members and Percentage Ownership of Freeport Properties,
L.L.C.
Exhibit 5.04 Third Party Consents and Estoppel Certificates
Exhibit 5.08(a) Locations for Non-Competition
Exhibit 8.01(f) Legal Opinion of Parent's Counsel
Exhibit 8.01(s)(1) Registration Rights Agreement
Exhibit 8.02(f) Legal Opinion of Company's Counsel
Exhibit 8.02(h)(1) Directors and Officers of the Subsidiary who are not
resigning or to be removed
Exhibit 8.02(s)(2) Representation Letter by the Shareholders
Exhibit 8.02(l) Escrow Agreement
Disclosure Schedule
3.02 Organization, Authority and Qualification of the Company
3.03 Outstanding Options of the Company
3.04 Subsidiaries
3.07 Governmental Consents and Approvals
3.10 No Undisclosed Liabilities or Capital Commitments
3.13 Litigation
3.14 Certain Interests
3.15 Compliance with Laws
3.16 Environmental and Other Permits and Licenses; Related
Matters
3.17 Material Contracts
3.18 Intellectual Property
3.19 Real Property
3.20 Tangible Personal Property
3.21 Assets Needing Repairs
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3.22 Accounts Receivable and Inventory
3.23 Customers
3.24 Employee Benefit Matters
3.25 Labor Matters
3.26 Key Employees
3.27 Risk Management
3.28 Accounts; Lockboxes; Safe Deposit Boxes; Powers of
Attorney
5.09 Certain Agreements Not Released
5.13 Inter-Company Agreements Not Terminated
7.01 Representations and Warranties
8.01(l) Certain Obligations to be Paid by the Company Pre-Closing
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THIS PLAN AND AGREEMENT OF MERGER, dated as of August 5, 1996, among THE
UNDERSIGNED SHAREHOLDERS OF NAPTECH, INC. (collectively, the "Shareholders"),
NAPTECH, INC., a Delaware corporation (the "Company"), THE XXXX GROUP INC., a
Louisiana corporation (the "Parent"), and SAON, INC., a Louisiana corporation
(the "Parent Sub").
RECITALS
WHEREAS, the Shareholders own all the issued and outstanding shares (the
"Shares") of common stock, $0.01 par value per share (the "Common Stock"), of
the Company; and
WHEREAS, the Parent owns all of the issued and outstanding shares of
common stock, $0.01 par value, of the Parent Sub; and
WHEREAS, the Parent, the Parent Sub, the Shareholders and the Company
each have determined that it is in their best interests for the Parent Sub to
merge with and into the Company, upon the terms and subject to the conditions
of this Agreement with the Company to be the Surviving Corporation; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Sections 368(a)(1)(A)
and (a)(2)(E) or Section 368(a)(1)(B) of the Code;
WHEREAS, the Boards of Directors of the Company and the Parent Sub have
duly approved this Agreement and have authorized the execution hereof by the
respective undersigned officers of the Company and the Parent Sub, and have
directed that this Agreement be submitted to the votes of their respective
shareholders, the Shareholders and the Parent, in accordance with Sections 251-
262 of the General Corporation Law of the State of Delaware and Part XI of the
Business Corporation Law (La.R.S. 12:111-116) of the State of Louisiana,
respectively;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Shareholders, the Company,
the Parent Sub and the Parent hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Acquisition Documents" has the meaning specified in Section 9.01.
"Acquisition Proposal" has the meaning specified in Section 5.06.
"Action" means any claim, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.
8
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Plan and Agreement of Merger,
dated as of the date set forth in the preamble to this Agreement, among the
Shareholders, the Company, the Parent Sub and the Parent (including the
Exhibits hereto and the Disclosure Schedule) and all amendments hereto made in
accordance with the provisions of Section 11.10.
"APB 16" has the meaning specified in Section 3.09.
"Asset" or "Assets" has the meaning specified in Section 3.21.
"Balance Sheet Date" means March 29, 1996.
"Best" means A.M. Best Company, Inc.
"Business" means the forming, bending, coating, welding, sale,
engineering, fabrication and manufacture of piping, pipeline systems, piping
sub-assemblies, skids, and modules, and seamless steel pressure vessels, and
all other businesses which are on the date hereof being conducted by the
Company, the Subsidiary and the LLC Subsidiary.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the State
of Louisiana or in the State of Utah.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. Sections 9601 et seq.
"Certificate of Merger" shall mean the certificate of merger with
respect to the merger of the Parent Sub with and into the Company, containing
the provisions required by, and executed in accordance with, Section 112 of the
LBCL and Sections 103 and 251 of the DGCL.
"Claim Notice" has the meaning specified in Section 9.02.
"Closing" has the meaning specified in Section 2.03 .
"Closing Date" has the meaning specified in Section 2.03.
"COBRA" means continuation coverage as set forth in Sections 601 and 602
of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof.
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"Common Stock" has the meaning specified in the Recitals to this
Agreement.
"Company" has the meaning specified in the preamble to this Agreement.
"Company Certificate(s)" has the meaning specified in Section 2.05.
"Company GAAP Statements" has the meaning specified in Section 3.08.
"Company Interim GAAP Statements" has the meaning specified in Section
3.08.
"Company's Counsel" means LeBoeuf, Lamb, Xxxxxx & XxxXxx L.L.P., legal
counsel to the Shareholders listed on Exhibit 1.01 (iii), the Company, the
Subsidiary and the LLC Subsidiary in connection with this Agreement and the
transactions contemplated hereby.
"Company Options" means those outstanding stock options issued by the
Company which are identified in Section 3.03(b) of the Disclosure Schedule.
"Control" (including, without limitation, the terms "controls",
"controlled by" and "under common control with"), with respect to the
relationship between or among two or more Persons, means the possession,
directly or indirectly, or as trustee or executor, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Convertible Note" means that certain convertible promissory note dated
July 26, 1996, made by the Company, having a principal amount outstanding as of
the date hereof of $36,000, payable to Xxxxxx Xxxxx.
"D&P" means Duff & Xxxxxx Credit Rating Co.
"DGCL" means the General Corporation Law of the State of Delaware.
"Disclosure Schedule" means the schedules attached hereto and delivered
to the Parent and the Parent Sub by the Shareholders and the Company together
with this Agreement.
"Effective Time" shall have the meaning specified in Section 2.02.
"Encumbrance" or "Encumbrances" means any security interest, pledge,
mortgage, lien (including, without limitation, environmental and tax liens),
charge, encumbrance, adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
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"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, notices of liability or potential liability,
investigations, proceedings, settlements, consent orders or consent agreements
by any Person relating in any way to any Environmental Law, Environmental
Permits or Hazardous Materials, or arising from alleged injury or threat of
injury to health, safety or the environment.
"Environmental Law" means any Law, now in effect, and any judicial or
administrative interpretation thereof, including, without limitation, any
judicial or administrative order, consent decree or judgment, relating to or
addressing the environment, health, safety or Hazardous Materials, including
without limitation any Occupational Safety and Health Law.
"Environmental Lien" means a lien in favor of any Governmental Authority
for any (a) liability under any Environmental Law, or (b) damages arising from,
or costs incurred by, such Governmental Authority in response to a Release of a
Hazardous Material.
"Environmental Permits" means all Permits required under any applicable
Environmental Law.
"ERISA" has the meaning specified in Section 3.24.
"Escrow Agreement" means the agreement referred to in Section 8.02.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" has the meaning specified in Section 3.08.
"Freeport Property" means the land, building(s) and other improvements
located on South Freeport Industrial Parkway, Clearfield, Utah, in which the
Company conducts its primary business activities and which is owned by Freeport
Properties, L.L.C.
"GAAP" means United States generally accepted accounting principles and
practices as in effect from time to time.
"Governmental Authority" means any United States federal, state or local
or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" or "Governmental Orders" means any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Hazardous Materials" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, polychlorinated biphenyls, or
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any hazardous or toxic constituent thereof and includes, but is not limited to,
any substance defined in or regulated under any Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Person or any
warrants, rights or options to acquire such capital stock, valued, in the case
of redeemable preferred stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all Indebtedness
of others referred to in clauses (a) through (f) above guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or purchase of such
Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property,
or to purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including, without limitation, any agreement to pay for
property or services irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a creditor against loss, and
(i) all Indebtedness referred to in clauses (a) through (f) above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness.
"Indemnified Party" has the meaning specified in Section 9.02.
"Indemnifying Party" has the meaning specified in Section 9.02.
"Indemnity Notice" has the meaning specified in Section 9.02.
"Intellectual Property" means (a) trademarks, service marks, trade
dress, logos, trade names and corporate names, whether or not registered, (b)
copyrights, whether or not registered, and all patents, patent applications and
inventions and discoveries, (c) registrations of and applications for
registration of any of the foregoing, (d) computer software, including, without
limitation, source code, operating systems and specifications, data, data
bases, files, documentation and other materials related thereto, data and
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documentation, (e) trade secrets and confidential, technical and business
information, and (f) whether or not confidential, technology (including,
without limitation, know-how and show-how), research and development
information, drawings, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing information, business and
marketing plans and customer and supplier lists and information.
"Inter-Company Arrangements" has the meaning specified in Section 3.14.
"IRS" means the Internal Revenue Service of the United States.
"Law" or "Laws" means any United States federal, state, local or foreign
statute, law, ordinance, regulation, rule, code, order, Permit, other legal
requirement or rule of law.
"LBCL" means the Business Corporation Law of the State of Louisiana,
La.R.S. 12:1, et seq.
"LLC Subsidiary" means IRM NAPTech Joint Venture, L.L.C.
"Lease" for purposes of Sections 3.17, 3.19 and 3.20 means any and all
leases, subleases, sale/leaseback agreements or similar arrangements, whether
or not capitalized.
"Leased Real Property" means the real property leased by the Company,
the Subsidiary or the LLC Subsidiary, as tenant, together with, to the extent
leased by the Company or the Subsidiary, all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all
fixtures, systems, equipment and items of personal property of the Company or
the Subsidiary attached or appurtenant thereto, and all easements, licenses,
rights and appurtenances relating to the foregoing.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Company, the Subsidiary or the LLC Subsidiary
from a third party.
"Losses" has the meaning specified in Section 9.02 .
"Material Adverse Effect" means any circumstance, change in, or effect
on the Business or the Company that, individually or in the aggregate with any
other circumstances, changes in, or effects on, the Business or the Company:
(a) is or could be materially adverse to the business, operations, prospects,
results of operations or financial condition of the Company, or (b) could
materially and adversely affect the ability of the Parent or the Company to
operate or conduct the Business in the manner in which it is currently operated
or conducted by the Company, the Subsidiary and the LLC Subsidiary.
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13
"Material Contracts" has the meaning specified in Section 3.17.
"Merger" shall mean the merger of the Parent Sub with and into the
Company as contemplated by Section 2.01.
"Merger Consideration" shall have the meaning specified in Section 2.05.
"Minority Shareholders" means the Shareholders owning 4.33% of the
Shares who are identified on Exhibit 1.01(i).
"Multiemployer Plan" has the meaning specified in Section 3.24.
"Multiple Employer Plan" has the meaning specified in Section 3.24.
"Name" has the meaning specified in Section 5.07.
"Notice Period" has the meaning specified in Section 9.02.
"Occupational Safety and Health Law" means any law, rule or regulation
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any mandatory program designed to
provide safe and healthful working conditions.
"Owned Intellectual Property" means all Intellectual Property in and to
which the Company, the Subsidiary, or the LLC Subsidiary holds, or has a right
to hold, any right, title and interest.
"Owned Real Property" means the real property owned by the Company, the
Subsidiary or the LLC Subsidiary prior to the Closing, together with all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of the Company, the Subsidiary or the LLC Subsidiary attached
or appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Parent" has the meaning specified in the preamble to this Agreement.
"Parent SEC Reports" has the meaning specified in Section 4.06.
"Parent Sub" has the meaning specified in the preamble of this
Agreement.
"Parent's Common Stock" means the common stock, no par value, of the
Parent.
"Parent's Counsel" means Kantrow, Spaht, Xxxxxx & Blitzer (A
Professional Law Corporation) and Fulbright & Xxxxxxxx L.L.P., legal counsel to
the Parent and the Parent Sub in connection with this Agreement and the
transactions contemplated hereby.
"Parent's Due Diligence Review" has the meaning specified in Section
8.02(q).
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"Permits" has the meaning specified in Section 3.16.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable which are not in excess of $10,000 in the
aggregate or which are being contested in good faith and for which reserves in
accordance with GAAP have been established on the Financial Statements; (b)
Encumbrances imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the ordinary
course of business securing obligations that (i) are not overdue for a period
of more than 30 days or (ii) are not in excess of $5,000 in the case of a
single property or $10,000 in the aggregate at any time or which are being
contested in good faith and for which reserves in accordance with GAAP have
been established on the Financial Statements; (c) pledges or deposits to secure
obligations under worker's compensation laws or similar legislation or to
secure public or statutory obligations; (d) minor survey exceptions, reciprocal
easement agreements and other customary encumbrances on title to real property
that (i) were not incurred in connection with any Indebtedness,(ii) do not
render title to the property encumbered thereby unmarketable and (iii) do not,
individually or in the aggregate, materially adversely affect the value or use
of such property for its current purposes; (e) in the case of stock of a
corporation, restrictions on the payment of dividends arising under applicable
corporate law or on transferability arising under applicable securities laws;
and (f) the Encumbrances identified on Exhibit 1.01(ii).
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization, governmental authority or
other entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Exchange Act.
"Plan of Merger" shall mean this Agreement.
"Plans" has the meaning specified in Section 3.24.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Regulations" means the Treasury Regulations (including, without
limitation, Temporary Regulations) promulgated by the United States Department
of Treasury with respect to the Code or other federal tax statutes.
"Release" means the release or threatened release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migrating into the indoor or outdoor environment of any Hazardous Material.
"Replacement Options" means stock options to be issued by the Parent at
the Closing pursuant to its 1993 Employee Stock Option Plan in substitution of
the Company Options held by employees of the Company which have not been
exercised prior to the Effective Time, each such Replacement Option to have the
same term, aggregate exercise price, vesting and other provisions, as the
Company Option for which it is substituted and shall be
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exercisable into the number of shares of the Parent's Common Stock equal to the
product of 0.0772611 times the aggregate number of shares included in the
Company Option.
"Returns" has the meaning specified in Section 7.01.
"S&P" means Standard & Poor's Corporation.
"SEC" means the Securities and Exchange Commission.
"Secured Real Property" has the meaning specified in Section 3.16.
"Securities" has the meaning specified in Section 2(11) of the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Representative" has the meaning specified in Section 12.07.
"Shareholders" has the meaning specified in the preamble to this
Agreement.
"Shareholders' Accountants" means Deloitte & Touche LLP, independent
accountants of the Company and the Subsidiary.
"Shares" has the meaning specified in the preamble to this Agreement.
"Subsidiary" means NAPTech Pressure Systems Corporation, a Utah
corporation.
"subsidiaries" means any and all other corporations, partnerships, joint
ventures, limited liability companies, associations and other entities
controlled by the Company directly or indirectly through one or more
intermediaries.
"Surviving Corporation" shall mean the surviving corporation in the
Merger.
"Tangible Personal Property" has the meaning specified in Section 3.20.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect
thereto) imposed by any government or taxing authority, including, without
limitation: taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, premiums, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature
of excise, withholding, ad valorem, stamp, transfer, value added, or gains
taxes; license, registration and documentation fees; and customs duties,
tariffs, and similar charges.
"Tax Returns" has the meaning specified in Section 7.01.
"Third Party Claim" has the meaning specified in Section 9.02.
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ARTICLE II
THE MERGER, ETC.
SECTION 2.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Parent Sub will be merged with and into
the Company in accordance with the provisions of the LBCL and the DGCL and with
the effect provided in Section 115 of the LBCL and Section 259 of the DGCL.
The separate corporate existence of the Parent Sub shall thereupon cease and
the Company shall be the Surviving Corporation and shall continue to be
governed by the laws of the State of Delaware.
SECTION 2.02 Effective Time. The merger shall become effective on such
date and at such time (the "Effective Time") as (a) the Plan of Merger or, in
lieu thereof, a certificate of merger as permitted by La.R.S. 12:112(F) and
Section 251(c) of the DGCL (the "Certificate of Merger"), shall have been
accepted for filing by the Secretary of State of the State of Louisiana and the
Secretary of State of the State of Delaware, or (b) such later date and time as
may be specified in the Plan of Merger or Certificate of Merger, as permitted
by the LBCL and the DGCL.
SECTION 2.03 Closing. Upon the terms and subject to the conditions of
this Agreement, the exchange of the Shares contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at the offices of Kantrow,
Spaht, Xxxxxx & Blitzer (A Professional Law Corporation), Baton Rouge,
Louisiana, at 10:00 A.M. Baton Rouge time on a day selected by the Parent
following the satisfaction or waiver of all other conditions to the obligations
of the parties set forth in Article 8, or at such other place or at such other
time or on such other date as the Shareholders and the Parent may mutually
agree upon in writing (the day on which the Closing takes place being the
"Closing Date"). The Effective Time shall occur on the Closing Date.
SECTION 2.04 Terms of Merger.
(a) Articles of Incorporation. The Articles of Incorporation of the
Company as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and of the DGCL.
(b) Bylaws. The Bylaws of the Company in effect at the Effective
Time shall be the Bylaws of the Surviving Corporation, until duly amended in
accordance with the terms thereof, of the Articles of Incorporation of the
Surviving Corporation and of the DGCL.
(c) Directors and Officers. The directors and officers of the Parent
Sub at the Effective Time shall, from and after the Effective Time, be the
directors and officers, respectively, of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation and the DGCL.
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SECTION 2.05 Merger Consideration; Cancellation of the Shares in the
Merger, Etc.
(a) Consideration; Cancellation of the Shares in the Merger. At the
Effective Time, by virtue of the Merger and without any action by the holders
thereof:
(i) The Shares, constituting all of the issued and outstanding
capital stock of the Company immediately prior to the Effective Time, shall be
converted into the right to receive in exchange therefor 432,783 unregistered
shares of the Parent's Common Stock (the "Merger Consideration"), such number
of shares to be (i) appropriately adjusted for any stock dividends, stock split
or combination of the outstanding shares of the Parent's Common Stock declared
after the date hereof and prior to the Closing Date and (ii) reduced by the
aggregate number of shares of the Parent's Common Stock for which (A)
Replacement Options shall be exercisable after the Effective Time and (B) the
Convertible Note is convertible after the Effective Time at a conversion ratio
of 0.0772611 of shares of the Parent's Common Stock for each share of the
Common Stock.
(ii) All of the Shares to be converted into the right to
receive in exchange therefor the Parent's Common Stock, pursuant to this
Section 2.05, shall cease to be outstanding, shall be canceled and retired and
shall cease to exist, and the Shareholders, which are the registered holders of
the certificates representing the Shares (the "Company Certificate(s)") shall
thereafter cease to have any rights with respect to the Shares, except the
right to receive, upon the surrender of the Company Certificate(s) in
accordance with Section 2.05(b), the Merger Consideration to be allocated among
the Shareholders as set forth on Exhibit 2.05(a)(ii).
(iii) Each share of common stock par value $0.01 per share, of
the Parent Sub issued and outstanding immediately prior to the Effective Time
shall continue to be outstanding and shall be converted into a share of common
stock of the Surviving Corporation.
(b) Exchange of the Shares in the Merger. Following the Effective
Time, upon surrender of the Company Certificate(s) for cancellation to the
Parent, the Shareholders shall receive, in exchange for the Shares represented
by the Company Certificate(s), the Merger Consideration and the Company
Certificate(s) so surrendered shall forthwith be canceled. Until surrendered,
the Company Certificate(s) shall, upon and after the Effective Time, be deemed
canceled and for all purposes to evidence ownership of the number of shares of
the Parent's Common Stock into which the Shares have been converted pursuant to
Section 2.05(a).
(c) No Transfer of Shares after the Day Prior to the Date of this
Agreement. The Shareholders and the Company agree that no transfers of the
Shares will be made on the stock transfer books of the Company after the close
of business on the day prior to the date of this Agreement except as
contemplated by Section 5.12(c)-(e).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS AND THE COMPANY
Subject to the terms and conditions of this Agreement, each of the
Shareholders and the Company hereby represents and warrants to the Parent and
the Parent Sub as of the date hereof, except as may otherwise be set forth on
the Disclosure Schedule, as set forth in Sections 3.01 through 3.31, as
follows:
SECTION 3.01. Capacity of the Shareholders. The Shareholders are
either (i) individuals with full legal capacity to enter into this Agreement,
to carry out Shareholders' obligations hereunder and to consummate the
transactions contemplated hereby, or (ii) corporations, partnerships or limited
liabilities companies duly organized, validly existing and in good standing
under the laws of their respective state(s) of formation with all necessary
power and authority to enter into this Agreement and to carry out their
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Shareholders, the
performance by the Shareholders of their obligations hereunder and the
consummation by the Shareholders of the transactions contemplated hereby have
been duly authorized by all requisite action by the Shareholders signatories
hereto. This Agreement has been duly executed and delivered by the
Shareholders, and this Agreement constitutes a legal, valid and binding
obligation of the Shareholders enforceable against the Shareholders in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting rights of creditors generally or by general principles of equity.
SECTION 3.02. Organization, Authority and Qualification of the Company.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power
and authority to own, operate or lease the properties and assets now owned,
operated or leased by it and to conduct the Business. The Company has all
necessary power and authority to enter into this Agreement, and upon
shareholder approval as required by the DGCL, to carry out the Company's
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the Company,
and this Agreement constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors
generally or by general principles of equity. The Company is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its business makes
such licensing or qualification necessary (other than those jurisdictions where
the failure to be so licensed or qualified are not reasonably likely to have a
Material Adverse Effect) and all such jurisdictions are set forth on Schedule
3.02 of the Disclosure Schedule. All of the foregoing registrations, licenses,
and qualifications are in full force and effect and the Company has not
received any notice of any event, inquiry, investigation or proceeding that
could result in the suspension, revocation or limitation of any such
registration, license, or qualification and to the best knowledge of the
Shareholders and the Company, there is no sustainable basis for any such
suspension, revocation or limitation. All corporate actions taken by the
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Company have been duly authorized or ratified, and the Company has not taken
any action that in any respect conflicts with, constitutes a default under or
results in a violation of any provision of its Articles of Incorporation or By-
laws. True and correct copies of the articles of incorporation and by-laws of
the Company, each as in effect on the date hereof, have been delivered by the
Shareholders to the Parent.
SECTION 3.03. Capital Stock of the Company; Ownership of the Shares.
(a) The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock. As of the date hereof, 5,124,058 shares of Common Stock are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable. None of the issued and outstanding shares of Common Stock was
issued in violation of any preemptive rights.
(b) Except as set forth in Section 3.03 of the Disclosure Schedule,
there are no options, warrants, convertible securities or other rights,
agreements, arrangements or commitments of any character relating to the
capital stock of the Company or obligating the Shareholders or the Company to
issue or sell any shares of capital stock of, or any securities or obligations
convertible into or exchangeable for shares of capital stock of the Company, or
any other interest in, the Company; and, except as permitted by Section 5.12(c)
and (d), no options, warrants, convertible securities or other such rights,
agreements, assignments or commitments shall be outstanding as of the Closing
Date.
(c) The Shares constitute all the issued and outstanding capital
stock of the Company. The Shares are owned of record and beneficially solely
by Shareholders and are registered in the names of Shareholders free and clear
of all Encumbrances other than those set forth in item (e) of Permitted
Encumbrances. Exhibit 3.03 accurately sets forth the number of the Shares
owned by each of the Shareholders.
(d) There are no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any of the Shares.
SECTION 3.04. Subsidiaries. (a) There are no subsidiaries other than
the Subsidiary and the LLC Subsidiary. Section 3.04 of the Disclosure Schedule
sets forth, with respect to the Subsidiary and the LLC Subsidiary, the
jurisdiction and date of its incorporation or formation, its authorized capital
stock or membership interests, the number and type of its issued and
outstanding shares of capital stock or membership interests and the current
ownership of such shares or membership interests.
(b) The Company is not a partner or member of (nor is any part of the
Business conducted through) any partnership or limited liability company other
than the LLC Subsidiary. The Company is not a participant in any other joint
venture or similar arrangement.
(c) (i) The Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah and has all
necessary power and authority to own, operate or lease the properties and
assets now owned, operated or leased by it and to conduct its business. The
Subsidiary is duly licensed or qualified to do business and is
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in good standing in each jurisdiction in which the properties owned or leased
by it or the operation of its business makes such licensing or qualification
necessary (other than those jurisdictions where the failure to be so qualified
or licensed is not reasonably likely to have a Material Adverse Effect) and all
such jurisdictions are set forth on Schedule 3.04(a) of the Disclosure
Schedule. All of the foregoing registrations, licenses, and qualifications are
in full force and effect and the Subsidiary has not received any notice of any
event, inquiry, investigation or proceeding that could result in the
suspension, revocation or limitation of any such registration, license,
qualification or membership, and to the best knowledge of the Shareholders and
the Company, there is no sustainable basis for any such suspension, revocation
or limitation.
(ii) The LLC Subsidiary is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Utah and has all necessary power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to conduct its
business. The LLC Subsidiary is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which the properties owned or
leased by it or the operation of its business makes such licensing or
qualification necessary (other than those jurisdictions where the failure to be
so qualified or licensed is not reasonably likely to have a Material Adverse
Effect) and all such jurisdictions are set forth on Schedule 3.04(a) of the
Disclosure Schedule. All of the foregoing registrations, licenses, and
qualifications are in full force and effect and the LLC Subsidiary has not
received any notice of any event, inquiry, investigation or proceeding that
could result in the suspension, revocation or limitation of any such
registration, license, qualification or membership, and to the best knowledge
of the Shareholders and the Company, there is no sustainable basis for any such
suspension, revocation or limitation. Satisfactory evidence of the execution
and registration of the Articles of Organization of the LLC Subsidiary was
provided to Kennecott Utah Xxxxxx Corporation ("Kennecott") prior to the
commencement of any work being performed by the LLC Subsidiary relating to
Kennecott's purchase order no. BP009.0A-P.
(d) (i) All the outstanding shares of capital stock of the
Subsidiary are validly issued, fully paid, nonassessable, free of preemptive
rights and owned by the Company, free and clear of all Encumbrances other than
those set forth in item (e) of Permitted Encumbrances.
(ii) No less than 50% of the membership interests of the LLC
Subsidiary are owned by the Company, and all membership interests of the LLC
Subsidiary are validly issued, fully paid, nonassessable, free of preemptive
rights and, as of the Closing Date, all membership interests of the LLC
Subsidiary shall be owned by the Company and the Subsidiary, free and clear of
all Encumbrances other than those set forth in item (e) of Permitted
Encumbrances.
(e) (i) There are no options, warrants, convertible securities, or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of the Subsidiary or obligating the Shareholders, the
Company, the Subsidiary or the LLC Subsidiary to issue or sell any shares of
capital stock of, or any other interest in, the Subsidiary.
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(ii) There are no options, warrants, convertible securities, or
other rights, agreements, arrangements or commitments of any character relating
to the membership interests of the LLC Subsidiary or obligating the
Shareholders, the Company, the Subsidiary or the LLC Subsidiary to issue or
sell any membership interests of, or any other interest in, the LLC Subsidiary.
(f) (i) All corporate actions taken by the Subsidiary have been
duly authorized or ratified and the Subsidiary has not taken any action that in
any respect conflicts with, constitutes a default under or results in a
violation of any provision of, its articles of incorporation or by-laws.
Complete and accurate copies of the articles of incorporation and by-laws, in
each case as in effect on the date hereof, of the Subsidiary have been
delivered by the Shareholders and the Company to the Parent.
(ii) All actions taken by the LLC Subsidiary have been duly
authorized or ratified and the LLC Subsidiary has not taken any action that in
any respect conflicts with, constitutes a default under or results in a
violation of any provision of, its articles of organization or operating
agreement. Complete and accurate copies of the articles of organization and
operating agreement, in each case as in effect on the date hereof, of the LLC
Subsidiary have been delivered by the Shareholders and the Company to the
Parent.
(g) (i) The Subsidiary is not a partner or member of (nor is any
part of its business conducted through) any partnership or limited liability
company nor is the Subsidiary a participant in any joint venture or similar
arrangement.
(ii) The LLC Subsidiary is not a partner or member of (nor is
any part of its business conducted through) any partnership or limited
liability company nor is the LLC Subsidiary a participant in any joint venture
or similar arrangement.
(h) (i) There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any shares of capital stock of or any other interests in
the Subsidiary.
(ii) There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any membership interest of or any other interests in the
LLC Subsidiary.
SECTION 3.05. Corporate Books and Records. The minute books of the
Company and the Subsidiary contain minutes of all meetings of the stockholders,
Boards of Directors and all committees of the Boards of Directors of the
Company and the Subsidiary. Complete and accurate copies of all such minute
books of the Company and the Subsidiary have been made available to the Parent
by the Shareholders and the Company.
SECTION 3.06. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.07 have been obtained
and all filings and notifications listed in Section 3.07 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement by the Shareholders and the Company do not and will not (a) violate,
conflict with or result in the breach of any
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provision of (i) the articles of incorporation or by-laws (or similar
organizational documents) of the Company or the Subsidiary or (ii) the articles
of organization or operating agreement of the LLC Subsidiary, (b) conflict with
or violate any Law or Governmental Order applicable to the Shareholders, the
Company, the Subsidiary or any of their respective assets, properties or
businesses, including, without limitation, the Business, or (c) conflict with,
result in any breach of, constitute a default (or event which with the giving
of notice or the lapse of time, or both, would become a default) under, require
any consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the Shares or on any of the assets or
properties of the Shareholders, the Company, the Subsidiary or the LLC
Subsidiary pursuant to any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Shareholders, the Company, the Subsidiary or the LLC
Subsidiary is a party or by which any of the Shares or any of such assets or
properties is bound or affected.
SECTION 3.07. Governmental Consents and Approvals. (a) The execution,
delivery and performance of this Agreement do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority or any other third party, except as
set forth on Section 3.07 of the Disclosure Schedule.
(b) Neither the Shareholders nor the Company has knowledge of any
facts or circumstances pertaining to the Parent or the Parent Sub which are
reasonably likely to prevent the parties hereto from obtaining the governmental
consents and approvals contemplated by Section 3.07(a).
SECTION 3.08. Financial Information and Books and Records. (a) The
Shareholders have previously furnished the Parent complete and accurate copies
of (i) the audited consolidated GAAP balance sheet of the Company and the
Subsidiary for each of the fiscal years ended as of March 29, 1996, March 31,
1995, and April 1, 1994, and the related audited GAAP consolidated statements
of earnings, stockholder's equity and cash flows for each of such periods then
ended together with all related notes and schedules thereto, accompanied by the
reports thereon of the Company and the Shareholders' Accountants (collectively
referred to herein as the "Company GAAP Statements") and (ii) the unaudited
GAAP consolidated balance sheets of the Company and its Subsidiary as May 31,
1996, and the related unaudited GAAP consolidated statements of earnings for
two-month period then ended (collectively referred to herein as the "Company
Interim GAAP Statements" and, together with the Company GAAP Statements, the
"Financial Statements"). The Financial Statements (i) were prepared in
accordance with the books of account and other financial records of the Company
and the Subsidiary, (ii) present fairly in all material respects the
consolidated financial condition and results of operations of the Company and
the Subsidiary as of the dates thereof or for the periods covered thereby in
accordance with GAAP, applied on a basis consistent with the past practices of
the Company, and (iii) include all adjustments that are necessary for a fair
presentation of the consolidated financial condition and the results of the
operations of the Company and the Subsidiary as of the dates thereof or for the
periods covered thereby in accordance with GAAP (subject, in the case of the
Company Interim GAAP Statements, to normal year-end audit adjustments).
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(b) The books of account and other financial records of the Company
and the Subsidiary: (i) reflect all items of income and expense and all assets
and liabilities required to be reflected therein in accordance with GAAP, (ii)
are in all material respects complete and correct, and (iii) have been
maintained in accordance with good business and accounting practices.
(c) The LLC Subsidiary has no liabilities except as disclosed in
Section 3.08(c) of the Disclosure Schedule. All receipts and disbursements of
the LCC Subsidiary are reflected in its bank account or will be reflected in
the Company's June and July, 1996 inter-company account.
SECTION 3.09. Certain Additional Representations.
(a) The Shareholders and the Company hereby acknowledge that the
Parent would not have entered into this Agreement unless it were able to
account for the transactions contemplated by this Agreement by the pooling of
interest method within the meaning of Accounting Principles Board Opinion Xx.
00 ("XXX 00"). Accordingly, with respect to the transactions contemplated by
this Agreement, the Shareholders and the Company hereby represent, warrant and
covenant that the Company has as of the date hereof, and will have as of the
Closing Date, the attributes of a combining enterprise for the pooling of
interest method within the meaning of APB 16. Not by way of limitation or
exclusion, the Shareholders and the Company represent and warrant that there
have not been any transactions which could be construed and interpreted to be a
change in the equity interest of the common stock of the Company in accordance
with XXX 00, Xxxxxxxxx 47c, within two years before the date of this Agreement
and between the date of this Agreement and the Closing Date.
(b) The Convertible Note has been paid in full.
(c) The consolidated losses of the Company, computed in accordance
with GAAP, for the months of April through August, 1996, shall not exceed
$700,000.
(d) The Company and the Shareholders represent and warrant that all
of the Company Options held by individuals no longer employed by the Company,
the Subsidiary or the LLC Subsidiary as of the date hereof are fully vested in
accordance with the original terms of such Company Options.
SECTION 3.10. No Undisclosed Liabilities or Capital Commitments.
(a) There are no Liabilities of the Company, the Subsidiary or the
LLC Subsidiary, other than Liabilities (i) reflected or reserved against in the
Financial Statements, (ii) completely and accurately disclosed in Section 3.10
of the Disclosure Schedule or (iii) incurred since the Balance Sheet Date in
the ordinary course of business of the Company or the Subsidiary and which have
not had and could not have a Material Adverse Effect.
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(b) Except as completely and accurately set forth in Section 3.10 of
the Disclosure Schedule or arising in the ordinary course of business, none of
the Company, the Subsidiary or the LLC Subsidiary is subject to any commitment,
actual or contingent, to make any investment or capital contribution, or
purchase any securities, or supply funds to any Person, in each case in excess
of $5,000 or $10,000 in the aggregate.
SECTION 3.11. Acquired Assets. Each asset of the Company, the
Subsidiary or the LLC Subsidiary (including, without limitation, the benefit of
any licenses, leases or other agreements or arrangements) acquired since the
Balance Sheet Date has been acquired for consideration not more than the fair
market value of such asset at the date of such acquisition.
SECTION 3.12. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since the Balance Sheet Date, except as
completely and accurately disclosed in Section 3.12 of the Disclosure Schedule
(a) the Business has been conducted in the ordinary course and consistent with
past practice and (b) none of the Company, the Subsidiary or the LLC Subsidiary
has:
(i) permitted or allowed any of the assets or properties
(whether tangible or intangible) of the Company, the Subsidiary or the LLC
Subsidiary to be subjected to any Encumbrance, other than Permitted
Encumbrances and Encumbrances that will be released at or prior to the Closing;
(ii) except in the ordinary course of business, discharged or
otherwise obtained the release of any Encumbrance or paid or otherwise
discharged any Liability, other than current liabilities reflected on the
Financial Statements and current liabilities incurred in the ordinary course of
business since the Balance Sheet Date;
(iii) guaranteed any Indebtedness of, or otherwise incurred any
Indebtedness on behalf of any Person;
(iv) failed to pay any creditor any amount owed to such
creditor when due;
(v) redeemed any of the capital stock or declared, made or
paid any dividends or distributions with respect to capital (whether in cash,
securities or other property) to the holders of capital stock of the Company or
the Subsidiary or otherwise, other than dividends, distributions and
redemptions declared, made or paid by the Subsidiary solely to the Company;
(vi) made any material changes in the customary methods of
operations of the Company, the Subsidiary or the LLC Subsidiary, including,
without limitation, purchasing, marketing, selling, pricing, investing or
accounting practices and policies;
(vii) merged with, entered into a consolidation with or acquired
any interest of 5% or more in any Person or acquired a substantial portion of
the assets or business of any Person or any division or line of business
thereof, or otherwise acquired any assets other than in the ordinary course of
business consistent with past practice;
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(viii) made any capital expenditure or commitment for any capital
expenditure in excess of $5,000 in any individual instance, $10,000 in the
aggregate;
(ix) sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real, personal or mixed
(including, without limitation, investment assets, leasehold interests and
intangible assets), other than the sale of its products in the ordinary course
of business;
(x) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of, or
any other interest in, the Company, the Subsidiary or the LLC Subsidiary.
(xi) except as completely and accurately set forth in Section
3.12 of the Disclosure Schedule, entered into any agreement, arrangement or
transaction with any of its directors, officers, employees or shareholders (or
with any relative, beneficiary, spouse or Affiliate of such Person);
(xii) except as completely and accurately set forth in Section
3.12 of the Disclosure Schedule, (A) granted any increase, or announced any
increase, in the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable by the Company, the Subsidiary or the LLC Subsidiary to
any of its employees, including, without limitation, any increase or change
pursuant to any Plan or (B) established or increased or promised to increase
any benefits under any Plan;
(xiii) revalued (other than in accordance with GAAP and as
completely and accurately set forth in Section 3.12 of the Disclosure Schedule)
or restructured any assets of the Company, the Subsidiary or the LLC Subsidiary
(xiv) amended, terminated, cancelled or compromised any material
claims of the Company or the Subsidiary or waived any other rights of
substantial value to the Company, the Subsidiary or the LLC Subsidiary;
(xv) made any change in any method of accounting or accounting
practice or policy used by the Company, the Subsidiary or the LLC Subsidiary
other than changes which were required by GAAP and are completely and
accurately set forth in Section 3.12 of the Disclosure Schedule;
(xvi) failed to maintain the Assets material to the operation of
the Business in such operating condition and repair as is suitable for the
purposes for which they are used;
(xvii) allowed any material Permit or material Environmental
Permit that was issued or relates to the Company, the Subsidiary or the LLC
Subsidiary or otherwise relates to any Asset to lapse or terminate or failed to
renew any such Permit or Environmental Permit or any insurance policy under
which the Company, the Subsidiary or the LLC Subsidiary is an insured that is
scheduled to terminate or expire within forty-five (45) days of the Closing
Date;
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(xviii) incurred any Indebtedness in excess of $5,000 in
any individual instance or since the Balance Sheet Date $10,000 in the
aggregate;
(xix) amended or modified in any material respects, or consented
to the termination of, any Material Contract or the Company's, the Subsidiary's
or the LLC Subsidiary's rights thereunder;
(xx) amended or restated the articles of incorporation or the
by-laws (or other organizational documents) of the Company or the Subsidiary or
the articles of organization or operating agreement of the LLC Subsidiary;
(xxi) terminated, discontinued, closed or disposed of any
office, facility or other business operation, or laid off any employees (other
than less than 15 employees in the ordinary course of business consistent with
past practice) or implemented any early retirement, separation or program
providing early retirement window benefits within the meaning of Section
1.401(a)-4 of the Regulations or announced or planned any such action or
program for the future;
(xxii) settled or compromised any liability, with respect to
Taxes of the Company, the Subsidiary or the LLC Subsidiary;
(xxiii) suffered any casualty loss or damage with respect to any
of the Assets which in the aggregate have a replacement cost in excess of
$10,000, whether or not such loss or damage shall have been covered by
insurance;
(xxiv) disclosed any confidential Intellectual Property (other
than as requested by the Parent) or permitted to lapse or abandoned any
Intellectual Property (or any registration or grant thereof or any application
relating thereto) to which, or under which, the Company or the Subsidiary has
any right, title, interest or license and which is material to the Business;
(xxv) suffered any Material Adverse Effect; or
(xxvi) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 3.12 or granted any options to purchase,
rights of first refusal, rights of first offer or any other similar rights or
commitments with respect to any of the actions specified in this Section 3.12,
except as expressly contemplated by this Agreement.
SECTION 3.13. Litigation. Set forth in Section 3.13 of the Disclosure
Schedule (with respect to each Action disclosed therein) are the parties, the
nature of the proceeding, the date and method commenced and the amount of
damages or other relief sought and, if applicable, paid or granted. Except as
completely and accurately set forth in Section 3.13 of the Disclosure Schedule,
there are no Actions by or against the Company, the Subsidiary or the LLC
Subsidiary (or by or against the Shareholders or any Affiliate thereof and
relating to the Business, the Company, the Subsidiary or the LLC Subsidiary),
or affecting any of the Assets, pending before any Governmental Authority (or,
to the best knowledge of the Shareholders and the Company, threatened to be
brought by or before any
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Governmental Authority). No such Action has, has had or could have a Material
Adverse Effect or could affect the legality, validity or enforceability of this
Agreement or the consummation of the transactions contemplated hereby. None of
the Company, the Subsidiary, or the LLC Subsidiary, any of the Assets or the
Shareholders is subject to any Governmental Order (nor, to the best knowledge
of the Shareholders and the Company, are there any such Governmental Orders
threatened to be imposed by any Governmental Authority) which has, has had or
could have a Material Adverse Effect.
SECTION 3.14. Certain Interests. None of the Shareholders or any
Affiliate of the Shareholders (other than the Company, the Subsidiary or the
LLC Subsidiary) have and no officer or director of the Company, the Subsidiary
or the LLC Subsidiary, and no relative or spouse (or relative of such spouse)
who resides with, or is a dependent of, any such officer or director has (i)
outstanding any Indebtedness to the Company or the Subsidiary, or (ii) entered
into any transactions with the Company, the Subsidiary or the LLC Subsidiary,
individually or in the aggregate, exceeding $20,000, other than market rate
loans which have been paid in full as of the date hereof (any arrangement
referred to in (i) or (ii) shall be referred to as an "Inter-Company
Arrangement") except as completely and accurately set forth in Section 3.14 of
the Disclosure Schedule. Except as set forth in Section 3.14 of the Disclosure
Schedule, all Inter-Company Arrangements are on terms that are at least as
favorable to the Company, the Subsidiary or the LLC Subsidiary as would prevail
in a comparable arm's-length transaction with a third party.
SECTION 3.15. Compliance with Laws. The Company, the Subsidiary and
the LLC Subsidiary have each conducted and continue to conduct the Business in
accordance with all material Laws and Governmental Orders applicable to the
Company, the Subsidiary or the LLC Subsidiary or any of the Assets or the
Business, and none of the Company, the Subsidiary or the LLC Subsidiary is in
violation of any such Law or Governmental Order. The Company, the Subsidiary
and the LLC Subsidiary have duly and validly filed or caused to be filed all
material reports, statements, documents, registrations, filings or submissions
that were required by applicable Laws to be filed; all such filings complied
with all applicable Laws in all material respects when filed, and no material
deficiencies have been asserted with respect to any such filings which have not
been satisfied.
SECTION 3.16. Environmental and Other Permits and Licenses; Related
Matters.
(a) The Shareholders, the Company, the Subsidiary and the LLC
Subsidiary currently hold all the permits, licenses, authorizations,
certificates, consents, exemptions and approvals required under any Law
(collectively, "Permits"), including, without limitation, Environmental
Permits, necessary for the ownership, use, occupancy and operation of each
Asset of the Company, the Subsidiary and the LLC Subsidiary and the conduct of
the Business, and all such Permits are in full force and effect.
(b) (i) Each tenant and occupant of the Real Property holds all
Permits, including, without limitation, Environmental Permits, necessary for
the use, occupancy and operation of the Real Property by such tenant or
occupant, and all such Permits are in full force and effect; (ii) there is no
existing practice, action or activity of any tenant or occupant
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of the Real Property, or of any owner, tenant or occupant of any real property
in which the Company,
the Subsidiary or the LLC Subsidiary or with respect to the Business, the
Shareholders currently holds a security interest (the "Secured Real Property"),
which will give rise to any criminal liability or civil Liability under, or
violate or prevent compliance with, any applicable material Law, including,
without limitation, any applicable Environmental Law; (iii) no tenant or
occupant of the Owned Real Property has received any notice from any
Governmental Authority revoking, cancelling, rescinding, materially modifying
or refusing to renew any Permit or providing written notice of violations under
any Law, including, without limitation, any applicable Environmental Law; (iv)
each tenant and occupant of the Owned Real Property is in all respects in
compliance with its Permits, including, without limitation, Environmental
Permits; (v) there is no existing practice, action or activity of the Company,
the Subsidiary or the LLC Subsidiary or, with respect to any portion of the
Business, the Shareholders and no existing condition of the Assets of the
Company, the Subsidiary or the LLC Subsidiary or the Business which has given
or will give rise to any unresolved criminal liability or civil Liability
under, or violate or prevent compliance with, any applicable Law, including,
without limitation,any applicable Environmental Law; (vi) none of the
Shareholders, the Company, the Subsidiary or the LLC Subsidiary has received
any notice from any Governmental Authority revoking, cancelling, rescinding,
materially modifying or refusing to renew any Permit; and (vii) the Company,
the Subsidiary and the LLC Subsidiary are in all respects in compliance with
the Permits, including, without limitation, Environmental Permits. Section
3.16(a) of the Disclosure Schedule completely and accurately identifies all
Permits, including, without limitation, Environmental Permits and indicates by
asterisk those that will require the consent of any Governmental Authority in
the event of the execution of this Agreement or the consummation of the
transactions contemplated by this Agreement.
(c) (i) None of the Company, the Subsidiary or the LLC Subsidiary,
nor, with respect to any portion of the Business, the Shareholders has violated
or is violating any applicable Environmental Law; (ii) no tenant or occupant of
the Real Property or owner, tenant or occupant of the Secured Real Property is
violating any applicable Environmental Law in connection with the ownership,
use, occupancy or operation of the Real Property or Secured Real Property;
(iii) there has been no Release of Hazardous Materials at, to, from, or under
any real property currently or formerly owned, leased, or operated by the
Company, the Subsidiary or the LLC Subsidiary, or, with respect to any portion
of the Business, the Shareholders, or at, to, from or under any Secured Real
Property except (x) Releases which individually or collectively do not exceed
the applicable reportable quantity established pursuant to CERCLA, or (y)
Releases of petroleum or its derivatives which individually or collectively do
not exceed ten gallons; (iv) none of the Company, the Subsidiary or the LLC
Subsidiary nor, with respect to any portion of the Business, the Shareholders
has generated, transported or arranged for the transport of, or disposed of any
Hazardous Materials at any location, other than amounts and types of Hazardous
Materials normally present in ordinary office trash or household waste other
than the transportation set forth in Section 3.16 of the Disclosure Schedule;
(v) no tenant or occupant of the Real Property has generated at such Real
Property any Hazardous Material, other than amounts and types of Hazardous
Materials normally present in ordinary office trash or household
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waste; (vi) none of the Company, the Subsidiary or the LLC Subsidiary nor, with
respect to any portion of the Business, the Shareholders has any Liabilities in
connection with the Release of any Hazardous Material at any location; (vii)
there is not present at any of the Real Property any underground storage tanks
or sumps, asbestos, or polychlorinated biphenyls; (viii) no Environmental Lien
has attached to any of the Real Property; and (ix) there are no unresolved
past, pending or threatened Environmental Claims against the Company, the
Subsidiary or the LLC Subsidiary, or, with respect to the Business, the
Shareholders, nor are there any circumstances that may form the basis of any
such Environmental Claim.
SECTION 3.17. Material Contracts. (a) Section 3.17(a) of the
Disclosure Schedule completely and accurately lists each of the following
contracts and agreements (including, without limitation, oral agreements) of
the Company, the Subsidiary and the LLC Subsidiary (such contracts and
agreements, together with all contracts, agreements and Leases concerning the
management or operation of any Real Property (including, without limitation,
brokerage contracts) listed or otherwise disclosed in Section 3.19(a) or
3.19(b) of the Disclosure Schedule to which the Company, the Subsidiary or the
LLC Subsidiary is a party and all agreements relating to Intellectual Property
set forth in Section 3.18(a) of the Disclosure Schedule, being "Material
Contracts"):
(i) each contract and agreement for the purchase of materials
or personal property with any supplier or for the furnishing of services to the
Company, the Subsidiary and the LLC Subsidiary or otherwise related to the
Business under the terms of which the Company, the Subsidiary or the LLC
Subsidiary: (A) is likely to pay or otherwise give consideration of more than
$10,000 individually and $20,000 in the aggregate during the current fiscal
year, (B) is likely to pay or otherwise give consideration of more than $5,000
in the aggregate over the remaining term of such contract or (C) cannot be
cancelled by the Company, the Subsidiary or the LLC Subsidiary without penalty
or further payment and without more than 30 days' notice;
(ii) each contract and agreement for the sale of materials or
personal property or for the furnishing of services by the Company, the
Subsidiary or the LLC Subsidiary which: (A) is likely to involve consideration
of more than $5,000 in the aggregate during the calendar year ending December
31, 1996, (B) is likely to involve consideration of more than $5,000 in the
aggregate over the remaining term of the contract or (C) cannot be cancelled by
the Company, the Subsidiary or the LLC Subsidiary without penalty or further
payment and without more than 30 days' notice;
(iii) all broker, distributor, agency, sales promotion, market
research, marketing consulting and advertising contracts and agreements to
which the Company, the Subsidiary or the LLC Subsidiary is a party pursuant to
which services were being provided on the Balance Sheet Date in an amount more
than $5,000 individually and $10,000 in the aggregate over the term of the
contract or agreement;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Company, the
Subsidiary or the LLC
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Subsidiary is a party and which are not cancelable without penalty or further
payment and without more than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness of
the Company, the Subsidiary or the LLC Subsidiary in an amount more than $5,000
individually and $10,000 in the aggregate over the term of the contract or
agreement;
(vi) all contracts and agreements with any Governmental
Authority to which the Company, the Subsidiary or the LLC Subsidiary is a
party;
(vii) all contracts and agreements that limit or purport to
limit the ability of the Company, the Subsidiary or the LLC Subsidiary to
compete in any line of business or with any Person or in any geographic area or
during any period of time;
(viii) all Inter-Company Arrangements and all other contracts and
agreements between or among the Company, the Subsidiary or the LLC Subsidiary
and the Shareholders or any Affiliate of the Shareholders (other than the
Company, the Subsidiary or the LLC Subsidiary);
(ix) all trust agreements or other security agreements related
thereto, to which the Company, the Subsidiary or the LLC Subsidiary is a party
that remain in force; and
(x) all other contracts and agreements whether or not made in
the ordinary course of business, which are material to the Company, the
Subsidiary or the LLC Subsidiary or the conduct of the Business or the absence
of which would have a Material Adverse Effect.
(b) Each Material Contract is legal, valid, binding, enforceable and
in full force and effect, and will not cease to be in full force and effect on
terms identical to those currently in effect following the consummation of the
transactions contemplated by this Agreement, except, in either case, as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors, of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Material Contract. None of the Company, the
Subsidiary or the LLC Subsidiary is in breach of, or default under, any
Material Contract.
(c) To the best knowledge of the Shareholders and the Company, no
other party to any Material Contract is in breach thereof or default
thereunder.
(d) There is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than the ordinary course of
business consistent with past practice, any of the properties or assets of the
Company, the Subsidiary or the LLC Subsidiary.
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SECTION 3.18. Intellectual Property.
(a) Section 3.18(a)(i) of the Disclosure Schedule sets forth a
complete and accurate list and a brief description of the Owned Intellectual
Property consisting of trademarks, service marks, corporate and assumed names,
trade names and copyrights, patents and pending registrations and applications
therefor and Section 3.18(a)(ii) of the Disclosure Schedule sets forth a
complete and accurate list and a brief description, including, without
limitation, a description of any license or sublicense thereof, of all Licensed
Intellectual Property. In each case where a registration or application for
registration listed in Section 3.18(a)(i) of the Disclosure Schedule is held by
assignment, the assignment has been duly recorded with the United States Patent
and Trademark Office. To the Shareholders' and the Company's knowledge, the
rights of the Company, the Subsidiary or the LLC Subsidiary, as the case may
be, in or to such Intellectual Property do not conflict with or infringe on the
rights of any other Person, and none of the Shareholders, the Company, the
Subsidiary or the LLC Subsidiary has received any claim or written notice of
infringement or conflict in respect of any Intellectual Property.
(b) (i) all the Owned Intellectual Property is owned by either the
Company, the Subsidiary or the LLC Subsidiary, as the case may be, free and
clear of any Encumbrance other than Permitted Encumbrances, (ii) the Company,
the Subsidiary or the LLC Subsidiary has the right, pursuant to valid and
enforceable licenses, to use the Licensed Intellectual Property in the manner
in which the Licensed Intellectual Property is currently being used and (iii)
no Actions have been made or asserted or are pending (nor, to the best
knowledge of the Shareholders and the Company, has any such Action been
threatened) against the Company, the Subsidiary or the LLC Subsidiary either
(A) based upon or challenging or seeking to deny or restrict the use by the
Company, the Subsidiary or the LLC Subsidiary of any of the Intellectual
Property or (B) alleging that any services provided or products sold by the
Company, the Subsidiary or the LLC Subsidiary are being provided or sold in
violation of any trademarks, or any other rights of any Person. To the best
knowledge of the Shareholders and the Company, no Person is using any
trademarks, service marks, trade names or similar property that are confusingly
similar to the Owned Intellectual Property or that infringe upon the Owned
Intellectual Property or upon the rights of the Company, the Subsidiary or the
LLC Subsidiary therein. None of the Shareholders, the Company, the Subsidiary
or the LLC Subsidiary has granted any license or other right to any other
Person with respect to the Owned Intellectual Property. The consummation of
the transactions contemplated by this Agreement will not result in the
termination or impairment of any of the owned Intellectual Property or any of
the rights of the Company, the Subsidiary or the LLC Subsidiary in any of the
Licensed Intellectual Property.
(c) The Intellectual Property described in Section 3.18(a)(i) and
3.18(a)(ii) of the Disclosure Schedule constitutes all of the Intellectual
Property used or held or intended to be used by the Company, the Subsidiary or
the LLC Subsidiary or forming a part of all such Intellectual Property
necessary and material in the conduct of the Business and there are no other
items of Intellectual Property that are material to the Company, the Subsidiary
or the LLC Subsidiary or the Business. Such Intellectual Property is all that
is necessary for the operation of the Businesses as currently conducted.
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SECTION 3.19. Real Property.
(a) Section 3.19(a) of the Disclosure Schedule lists: (i) the street
address of each parcel of Owned Real Property, (ii) the date on which each
parcel of Owned Real Property was acquired, (iii) the current owner of each
such parcel of Owned Real Property, (iv) information relating to the
recordation of the deed pursuant to which each such parcel of Owned Real
Property was acquired and (v) the current use of each such parcel of Owned Real
Property.
(b) Section 3.19(b) of the Disclosure Schedule lists: (i) the street
address of each parcel of Leased Real Property, (ii) the identity of the
lessor, lessee and current occupant (if different from lessee) of each such
parcel of Leased Real Property and (iii) the current use of each such parcel of
Leased Real Property.
(c) The Shareholders have, or have caused to be, delivered to the
Parent complete and accurate copies of all Leases listed in Section 3.19(b) of
the Disclosure Schedule. Each such Lease is legal, valid, binding, enforceable
and in full force and each such Lease will not cease to be in full force and
effect on terms identical to those currently in effect as a result of the
consummation of the transactions contemplated by this Agreement, except, in
either case, as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting rights of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Lease or otherwise give the landlord a right to
terminate such Lease in accordance with the terms thereof.
(d) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the best knowledge of the Shareholders
and the Company, threatened against the Real Property.
(e) The rental set forth in each Lease of the Leased Real Property is
the actual rental being paid, and there are no separate agreements or
understandings with respect to the same.
SECTION 3.20. Tangible Personal Property. (a) Section 3.20 of the
Disclosure Schedule lists each group of equipment, inventory, supplies,
furniture, fixtures, personalty, vehicles and other tangible personal property
(the "Tangible Personal Property") used in the Business or owned or leased by
the Company, the Subsidiary or the LLC Subsidiary with a value reasonably
estimated by the Shareholders for each group to exceed $5,000. Except as set
forth in Section 3.20 of the Disclosure Schedule, all of the Tangible Personal
Property is located at 000 Xxxxx Xxxxxxxx Xxxxxxxxxx Xxxxxxx, Xxxxxxxxxx, XX
00000.
(b) The Shareholders have, or have caused to be, delivered to the
Parent complete and accurate copies of all Leases for Tangible Personal
Property providing for annual rentals in excess of $5,000 and any and all
material ancillary documents pertaining thereto. Each such Lease is legal,
valid, binding, enforceable and in full force and effect and each such Lease
will not cease to be legal, valid, binding, enforceable and in full force and
effect on terms identical to those currently in effect as a result of the
consummation of the
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transactions contemplated by this Agreement except, in either case, as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors
generally or by general principles of equity, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default
under such Lease or otherwise give the lessor a right to terminate such Lease
in accordance with the terms thereof.
SECTION 3.21. Assets. (a) None of the Company, the Subsidiary or the
LLC Subsidiary, as the case may be, owns, leases or has the legal right to use
all the properties and assets, including, without limitation, the Owned
Intellectual Property, the Licensed Intellectual Property, the Real Property
and the Tangible Personal Property, used in the conduct of the Business or
otherwise purported to be owned, leased or used by the Company, the Subsidiary
or the LLC Subsidiary and, with respect to contract rights, is a party to and
enjoys the right to the benefits of all material contracts, agreements and
other arrangements used by the Company, the Subsidiary or the LLC Subsidiary or
in or relating to the conduct of the Business (all such properties, assets and
contract rights being the "Assets"). Any of the Company, the Subsidiary or the
LLC Subsidiary, as the case may be, has good and marketable title to, or, in
the case of leased or subleased Assets, valid and subsisting leasehold
interests in, all the Assets, free and clear of all Encumbrances, except for
Permitted Encumbrances. All buildings, plants, and structures owned by the
Company, the Subsidiary and the LLC Subsidiary lie wholly within the boundaries
of the real property owned by the Company and do not encroach upon the property
of, or otherwise conflict with the property rights of, any other Person. The
LLC Subsidiary owns no buildings, plants or structures.
(b) Except as set forth in Section 3.21 of the Disclosure Schedule,
all the Assets, including without limitation the buildings, plants, structures,
and equipment of the Company, the Subsidiary and the LLC Subsidiary, are
structurally sound, are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, equipment or other Assets is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The building, plants, structures, and equipment of
the Company, the Subsidiary and the LLC Subsidiary are sufficient for the
continued conduct of the Business after the Closing in substantially the same
manner as conducted prior to the Closing.
(c) Immediately following the Closing, any of the Company, the
Subsidiary or the LLC Subsidiary, as the case may be, will continue to own,
pursuant to good and marketable title, or lease, under valid and subsisting
leases, or otherwise retain its respective interest in, the Assets without
incurring any material penalty or other materially adverse consequence,
including, without limitation, any increase in rentals, royalties, or licenses
or other fees imposed as a result of, or arising from, the consummation of the
transactions contemplated by this Agreement. Immediately following the
Closing, any of the Company, the Subsidiary or the LLC Subsidiary, as the case
may be, shall own and possess all presently existing documents, books, records,
agreements and financial data of any sort used by the Company, such Subsidiary
or such LLC Subsidiary, in the conduct of the Business or otherwise.
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SECTION 3.22. Accounts Receivable and Inventory. (a) All accounts
receivable of the Company, the Subsidiary and the LLC Subsidiary that are
reflected on the Financial Statements or on the accounting records of the
Company, the Subsidiary and the LLC Subsidiary as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date collectible net of
the respective reserves shown on the Financial Statements or on the accounting
records of the Company, the Subsidiary and the LLC Subsidiary as of the Closing
Date (which reserves are adequate and calculated consistent with past practice
and, in the case of the reserve as of the Closing Date, will not represent a
greater percentage of the Accounts Receivable as of the Closing Date than the
reserve reflected in the Company GAAP Statements represented of the Accounts
Receivable reflected therein and will not represent a material adverse change
in the composition of such Accounts Receivable in terms of aging). Subject to
such reserves, each of the Accounts Receivable either has been or will be
collected in full, without any set-off, within 90 days after the day on which
it first becomes due and payable. There is no contest, claim or right of set-
off, other than returns in the ordinary course of business, under any contract
with any obligor of an Accounts Receivable relating to the amount or validity
of such Accounts Receivable. Section 3.22(a) of the Disclosure Schedule
contains a complete and accurate list of all Accounts Receivable as of the last
day of the calendar month preceding the date of this Agreement, which list sets
forth the aging of such Accounts Receivable.
(b) Except as set forth in Section 3.22(b) of the Disclosure
Schedule, all inventory of the Company, the Subsidiary and the LLC Subsidiary,
whether or not reflected in the Financial Statements, consists of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Financial Statements
or on the accounting records of the Company, the Subsidiary and the LLC
Subsidiary as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or market on a first in,
first out basis. Except as set forth in Section 3.22 of the Disclosure
Schedule, the quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in
the present circumstances of the Company, the Subsidiary and the LLC Subsidiary
SECTION 3.23. Customers. Listed in Section 3.23 of the Disclosure
Schedule are the names and addresses of the most significant customers (by
sales volume) of the Company, the Subsidiary and the LLC Subsidiary for the
twelve-month period ended March 29, 1996 and the amount of products which each
purchased during such period.
SECTION 3.24. Employee Benefit Matters.
(a) Plans and Material Documents. Section 3.24(a) of the Disclosure
Schedule is a complete and accurate list of (i) all employee welfare benefit
and employee pension benefit plans as defined in Sections 3(1) and 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, but not limited to, plans that provide retirement income or result
in a deferral of income by employees for periods
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extending to termination of employment or beyond, and plans that provide
medical, surgical, or hospital care benefits or benefits in the event of
sickness, accident, disability, death or unemployment, and (2) all other
employee benefit agreements or arrangements, including without limitation
deferred compensation plans, incentive plans, bonus plans or arrangements,
stock option plans, stock purchase plans, stock award plans, golden parachute
agreements, severance pay plans, dependent care plans, cafeteria plans,
employee assistance programs, scholarship programs, employment contracts,
vacation policies, and other similar plans, agreements and arrangements that
are currently in effect or were maintained within three years of the date of
this Agreement, or have been approved before this date but are not yet
effective, for the benefit of directors, officers, employees or former
employees (or their beneficiaries) of the Company, the Subsidiary or the LLC
Subsidiary, (ii) each employee benefit plan for which the Company, the
Subsidiary or the LLC Subsidiary could reasonably be expected to incur
liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated, and (iii) any plan in respect of which the Company, the
Subsidiary or the LLC Subsidiary could reasonably be expected to incur
liability under Section 4212(c) of ERISA (collectively, the "Plans"). Section
3.24(a) of the Disclosure Schedule sets forth a complete description of each
Plan that is not in writing and, with respect to each Plan that is in writing,
the Shareholders has furnished the Parent with a complete and accurate copy of
each Plan and a complete and accurate copy of each material document prepared
in connection with each such Plan including, where applicable, without
limitation, (i) a copy of each trust or other funding arrangement, (ii) the
most recently distributed summary plan description and summary of material
modifications, (iii) the most recently filed annual IRS Form 5500, 990 and 1041
reports, (iv) the most recently prepared actuarial report and financial
statement in connection with each such Plan, (v) the most recent IRS
determination letter and all rulings or determinations requested from the IRS
after the date of that determination letter, and (vi) all other correspondence
from the IRS or the Department of Labor received that relate to one or more of
the Plans with respect to any matter, audit or inquiry that is still pending.
Except as completely and accurately set forth in Section 3.24(a) of the
Disclosure Schedule, none of the Company, the Subsidiary or the LLC Subsidiary
has any express or implied commitment (i) to create, incur liability with
respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
(b) Absence of Certain Types of Plans. Except as completely and
accurately disclosed in Section 3.24(b) of the Disclosure Schedule, none of the
Plans provides for the payment of separation, severance, termination or
similar-type benefits to any Person or obligates the Company, the Subsidiary or
the LLC Subsidiary to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agreement
or as a result of a "change in control", within the meaning of such term under
Section 280G of the Code. Except as completely and accurately described in
Section 3.24(b) of the Disclosure Schedule, none of the Plans provides for the
deferral of compensation (other than any Plan intended to be qualified under
Section 401(a) of the Code) or for the grant of stock options, restricted
stock, stock appreciation rights, phantom shares or other equity-based awards
or contingent compensation. Each of the Plans is subject only to the laws of
the United States or a political subdivision thereof.
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(c) Compliance with Applicable Law. Except as completely and
accurately disclosed in Section 3.24(c) of the Disclosure Schedule, each Plan
is now and always has been operated in all material respects in accordance with
the requirements of all applicable Law, including, without limitation, ERISA
and the Code, and all "fiduciaries" of such Plans (within the meaning of
Section 3(21) of ERISA) have always acted in accordance with the provisions of
all applicable Law, including, without limitation, ERISA and the Code. Each of
the Company, the Subsidiary and the LLC Subsidiary has performed all
obligations required to be performed by it under, is not in any respect in
default under or in violation of, and has no knowledge of any default or
violation by any party to, any Plan. There is no litigation, action,
proceeding, investigation or claim asserted or, to the Shareholders', the
Company's or the Subsidiary's or the LLC Subsidiary's knowledge, threatened or
contemplated, with respect to any Plan (other than the payment of benefits in
the normal course) nor any issue resolved adversely to the Company, the
Subsidiary or the LLC Subsidiary that may subject the Company, the Subsidiary
or the LLC Subsidiary to the payment of a penalty, interest, tax or other
amount.
(d) Qualification of Certain Plans. Except as completely and
accurately disclosed in Section 3.24(d) of the Disclosure Schedule, each Plan
which is intended to be qualified under Section 401(a) of the Code or Section
401(k) of the Code has received a favorable determination letter from the IRS
that it is so qualified and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS that it is
so exempt, and no fact or event has occurred since the date of such
determination letter from the IRS which could reasonably be expected to
adversely affect the qualified status of any such Plan or the exempt status of
any such trust.
(e) Absence of Certain Liabilities and Events. There has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan. Except as completely and
accurately set forth in Section 3.24(e) of the Disclosure Schedule, none of the
Company, the Subsidiary or the LLC Subsidiary has incurred any liability for
any penalty or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the
Code or any liability under Section 502 of ERISA, and no fact or event exists
which could reasonably be expected to give rise to any such liability. Except
as set forth in Section 3.24(e) of the Disclosure Schedule, none of the
Company, the Subsidiary or the LLC Subsidiary has incurred any liability under,
arising out of or by operation of Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course), including, without limitation, any liability in connection with (i)
the termination or reorganization of any employee benefit plan subject to Title
IV of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple
Employer Plan, and no fact or event exists which could reasonably be expected
to give rise to any such liability. Except as completely and accurately set
forth in Section 3.24(e) of the Disclosure Schedule, no complete or partial
termination has occurred within the five years preceding the date hereof with
respect to any Plan. No reportable event (within the meaning of Section 4043
of ERISA) for which the 30 days' notice to the Pension Benefit Guaranty
Corporation is not waived has occurred or is expected to occur with respect to
any Plan subject to Title IV of ERISA. Except as set forth in Section 3.24(d)
of the Disclosure Schedule, no Plan had an accumulated funding deficiency
(within the meaning of Section 302 of ERISA or Section 412
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of the Code), whether or not waived, as of the most recently ended plan year of
such Plan. None of the assets of the Company, the Subsidiary or the LLC
Subsidiary is the subject of any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code; none of the Company, the Subsidiary or the LLC
Subsidiary has been required to post any security under Section 307 of ERISA or
Section 401(a)(29) of the Code; and no fact or event exists which could
reasonably be expected to give rise to any such lien or requirement to post any
such security.
(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any government entity and no fact or event exists which could reasonably be
expected to give rise to any such challenge or disallowance.
(g) Certain Employee-Benefit Assets. Except as completely and
accurately disclosed in Section 3.24(g) of the Disclosure Schedule, each of the
guaranteed investment contracts and other funding contracts with any insurance
company that are held by any of the Plans and any annuity contracts purchased
by any of the Plans was issued by an insurance company which carried the
highest rating from each of D&P, S&P, Best and Xxxxx'x Investors Service, Inc.,
as of the date such contract was issued, the date hereof and the Closing Date.
(h) Retiree Medical Benefits. No Plan is or includes any plan or
arrangement providing for post-employment health and/or medical benefit
coverage except to the extent required by COBRA.
(i) Supplemental Pension Benefits. The Company, the Subsidiary and
the LLC Subsidiary have no Liability for any (i) supplemental retirement
benefits or other nonqualified deferred compensation, (ii) severance pay
relating to any termination of employment which occurs prior to the Closing,
(iii) for nonqualified deferred compensation or incentive or contingent
compensation relating to any Plan as in effect, or commitment made, prior to
the Closing Date (to the extent related to periods prior to the Closing Date),
(iv) for uninsured health, medical, disability or worker's compensation claims
incurred prior to the Closing Date, regardless of whether such claims are
reported prior to the Closing Date or are not so reported, or (v) the payment
of accrued bonuses to the extent related to periods prior to the Closing Date
and not accrued or reflected on the Balance Sheet.
(j) No Implied Rights. Nothing contained herein, express or implied,
is intended to or shall confer upon any employee or former employee of the
Company, the Subsidiary or the LLC Subsidiary any right or remedy of any nature
or kind whatsoever under or by reason of this Agreement, including any rights
of continued employment for any period.
(k) Severance Pay and Vacation Pay. No Plan will cause the Company,
the Subsidiary, the LLC Subsidiary or the Parent Sub to have liability for
severance pay or vacation pay as a result of the consummation of the
transactions described in this Agreement.
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SECTION 3.25. Labor Matters. (a) Except as completely and accurately
disclosed in Section 3.25(a) of the Disclosure Schedule, none of the Company,
the Subsidiary or the LLC Subsidiary is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company, the Subsidiary or the LLC Subsidiary and currently there are no known
organizational campaigns, petitions or other unionization activities seeking
recognition of any other collective bargaining unit.
(b) There are no strikes, slowdowns, work stoppages or material labor
relations controversies pending or, to the best knowledge of the Shareholders
and the Company, threatened between the Company, the Subsidiary or the LLC
Subsidiary and any of their respective employees, and none of the Company, the
Subsidiary or the LLC Subsidiary has experienced any such strike, slowdown,
work stoppage or material controversy within the past three years.
(c) The Company, the Subsidiary and the LLC Subsidiary are in
compliance, in all material respects, with all applicable Laws relating to the
employment of labor, including, without limitation, those related to wages,
hours and the payment and withholding of taxes and other sums as required by
the appropriate Governmental Authority, and have withheld and paid to the
appropriate Governmental Authority or is holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Company, the Subsidiary or the LLC Subsidiary and are not liable for any
arrears of wages, taxes, penalties or other sums for failure to comply with any
of the foregoing.
(d) Except as set forth in Section 3.25(e) of the Disclosure
Schedule, the Company, the Subsidiary and the LLC Subsidiary have paid in full
to all their respective employees, retired employees and contractors or
adequately accrued for in accordance with GAAP all wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf of
such employees, retired employees and contractors.
(e) There is no claim against the Company, the Subsidiary or the LLC
Subsidiary with respect to payment of wages, salary or overtime pay that has
been asserted or is now pending or, to the best knowledge of the Shareholders
and the Company, threatened before any Governmental Authority with respect to
any Persons currently or formerly employed by the Company, the Subsidiary or
the LLC Subsidiary.
(f) None of the Company, the Subsidiary or the LLC Subsidiary is a
party to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices.
(g) There is no charge or proceeding with respect to a violation of
any occupational safety or health standards that has been asserted or is now
pending or, to the best knowledge of the Shareholders and the Company,
threatened with respect to the Company, the Subsidiary or the LLC Subsidiary.
(h) Except as set forth in Section 3.25(h) of the Disclosure
Schedule, there is no charge against the Company, the Subsidiary or the LLC
Subsidiary of discrimination in employment or employment practices, for any
reason, including, without limitation, age,
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gender, race, religion or other legally protected category, which has been
asserted or is now pending or, to the best knowledge of the Shareholders and
the Company, threatened before the United States Equal Employment Opportunity
Commission, or any other Governmental Authority in any jurisdiction in which
the Company, the Subsidiary or the LLC Subsidiary has employed or currently
employs any Person.
SECTION 3.26. Key Employees. Section 3.26 of the Disclosure Schedule
lists the name, place of employment, the current annual salary rates, bonuses,
deferred or contingent compensation, pension, accrued vacation, "golden
parachute" and other like benefits paid or payable (in cash or otherwise) in
1995, 1994, 1993 and 1992, the date of employment and a brief description of
position and job function of each current salaried employee, officer or
director of the Company, the Subsidiary or the LLC Subsidiary whose current
base salary exceeded (or, in 1996, is expected to exceed) $50,000.
SECTION 3.27. Risk Management. (a) Section 3.27(a) of the Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including, without limitation, policies providing property, casualty,
business interruption, liability, workers' compensation, and bond and surety
arrangements) under which the Company, the Subsidiary or the LLC Subsidiary is
an insured, a named insured or otherwise the principal beneficiary of coverage:
(i) the name of the agent or broker; (ii) the name of the insurer and the names
of the principal insured and each named insured; (iii) the policy number and
the period of coverage; (iv) the type, scope (including an indication of
whether the coverage was on a claims made, occurrence or other basis) and
amount of coverage; and (v) the premium charged for the policy, including,
without limitation, a description of any retroactive premium adjustments or
other loss-sharing arrangements.
(b) With respect to each such insurance policy: (i) the policy is in
full force and effect; (ii) none of the Company, the Subsidiary or the LLC
Subsidiary is in breach or default (including any breach or default with
respect to the payment of premiums or the giving of notice), and no event has
occurred which, with the giving of notice or the lapse of time or both, would
constitute such a breach or default or permit termination or modification,
under the policy; (iii) no party to the policy has repudiated in writing, or
given written notice of an intent to repudiate, any provision thereof; and (iv)
to the best knowledge of the Shareholders and the Company, no insurer on the
policy has been declared insolvent or placed in receivership, conservatorship
or liquidation or currently has a rating of "B+" or below from Best or a claims
paying ability rating of "BBB" or below from S&P.
(c) Section 3.27(c) of the Disclosure Schedule completely and
accurately sets forth all risks of the Company, the Subsidiary or the LLC
Subsidiary which are covered under any material risk retention program in which
the Company, the Subsidiary or the LLC Subsidiary participates, together with
details for the last three years of the Company's, the Subsidiary's and the LLC
Subsidiary's loss experience with respect to such risks.
(d) Since February 10, 1992, the Company, the Subsidiary and the LLC
Subsidiary have been covered by insurance policies or binders of insurance in
such types and covering such risks as are consistent with customary practices
and standards of companies engaged
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in businesses and operations similar to those of the Company, the Subsidiary or
the LLC Subsidiary, as the case may be, in amounts deemed reasonable by the
Company, the Subsidiary or the LLC Subsidiary, as the case may be.
(e) Except as set forth in Section 3.27(e) of the Disclosure
Schedule, at no time subsequent to January 1, 1993 has the Company, the
Subsidiary or the LLC Subsidiary (i) been denied any insurance or indemnity
bond coverage which it has requested, (ii) made any material reduction in the
scope or amount of its insurance coverage, or received notice from any of its
insurance carriers that any insurance coverage listed in Section 3.27(a) of the
Disclosure Schedule will not be available in the future substantially on the
same terms as are now in effect or (iii) suffered any extraordinary increase in
premium for renewed coverage. Since February 10, 1992, no insurance carrier
has cancelled, failed to renew or materially reduced any insurance coverage for
the Company, the Subsidiary or the LLC Subsidiary or given any notice or other
indication of its intention to cancel, not renew or reduce any such coverage.
(f) The Shareholders are not aware of any facts pertaining to the
Company, the Subsidiary or the LLC Subsidiary or the Business which are
reasonably likely to prevent the Parent from obtaining insurance following the
consummation of the transactions contemplated by this Agreement on terms
substantially similar to the terms currently in effect.
SECTION 3.28. Accounts; Lockboxes; Safe Deposit Boxes; Powers of
Attorney. Section 3.28 of the Disclosure Schedule is a complete and accurate
list of (a) the names of each bank, savings and loan association, securities or
commodities broker or other financial institution in which the Company, the
Subsidiary or the LLC Subsidiary has an account, including, without limitation,
cash contribution accounts, and the names of all persons authorized to draw
thereon or have access thereto, (b) the location of all lockboxes and safe
deposit boxes of the Company, the Subsidiary and the LLC Subsidiary and the
names of all Persons authorized to draw thereon or have access thereto and (c)
the names of all Persons, if any, holding powers of attorney from the
Shareholders relating to the Company, the Subsidiary or the LLC Subsidiary or
the Business, or from the Company, the Subsidiary or the LLC Subsidiary. At
the time of the Closing, without the prior written consent of the Parent, none
of the Company, the Subsidiary or the LLC Subsidiary shall have any such
account, lockbox or safe deposit box other than those listed in Section 3.28 of
the Disclosure Schedule, nor shall any additional Person have been authorized,
from the date of this Agreement, to draw thereon or have access thereto or to
hold any such power of attorney relating to the Company, the Subsidiary or the
LLC Subsidiary or the Business or from the Company, the Subsidiary or the LLC
Subsidiary. There are no commingled monies or accounts of the Company, the
Subsidiary or the LLC Subsidiary with other monies or accounts of the
Shareholders or relating to the other businesses of the Shareholders nor has
the Shareholders transferred monies or accounts of the Company, the Subsidiary
or the LLC Subsidiary other than to an account of the Company, such Subsidiary
or the LLC Subsidiary. At the time of the Closing, all monies and accounts of
the Company, the Subsidiary and the LLC Subsidiary shall be held by, and be
accessible only to, the Company, such Subsidiary or such LLC Subsidiary.
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SECTION 3.29. Full Disclosure. (a) There are no facts pertaining to
the Company, the Subsidiary or the LLC Subsidiary or the Business that are
reasonably likely to have a Material Adverse Effect that have not been
disclosed in this Agreement, the Disclosure Schedule or the Financial
Statements.
(b) No representation or warranty of the Shareholders in this
Agreement, nor any certificate furnished or to be furnished by the Shareholders
to the Parent pursuant to this Agreement, or in connection with the
transactions contemplated by this Agreement, contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
SECTION 3.30. Investment Purpose; Etc.
(a) Each of the Shareholders hereby confirms that the Parent's Common
Stock which (it)(he) will receive in the Merger will be acquired for investment
for the Shareholders' own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that each of the
Shareholders has no present intention of selling, granting any participation in
or otherwise distributing the Parent's Common Stock. By executing this
Agreement, each of the Shareholders further represents that (it)(he) has no
present intention of selling, granting any participation in or otherwise
distributing the same in a manner contrary to the Securities Act or applicable
state law.
(b) Each of the Shareholders understands that the shares of the
Parent's Common Stock that (it)(he) will receive in the Merger are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Parent in a transaction not
involving a public offering and that under such laws and applicable regulations
such shares of the Parent's Common Stock may be resold without registration
under the Securities Act only in certain limited circumstances and in
accordance with the terms and conditions set forth in the legend described in
Section 3.30(c). In this connection, each of the Shareholders represents that
(it)(he) is familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act.
(c) To the extent applicable, each certificate evidencing any of the
shares of the Parent's Common Stock issued to the Shareholders shall be
endorsed with a legend in substantially the form set forth below, and each of
Shareholders covenants that, except to the extent such restrictions are waived
by the Parent, the Shareholders shall not transfer the shares represented by
any such certificate without complying with the restrictions on transfer
described in the legend endorsed on such certificate:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE LAW, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (i) THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES,
OR (ii)
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THIS CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF
THESE SECURITIES SATISFACTORY TO THIS CORPORATION STATING THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION. THE SECURITIES EVIDENCED BY
THIS CERTIFICATE ARE SUBJECT TO (A) THE RESTRICTION SET FORTH IN SECTION
7.01(a)(ii)(A)(2) OF THAT CERTAIN PLAN AND AGREEMENT OF MERGER DATED AS
OF SEPTEMBER _____, 1996 (THE "PLAN OF MERGER") AMONG THE SHAREHOLDERS
OF NAPTech, INC., SAON, INC. AND THE XXXX GROUP INC. ("XXXX") AND (B)
THE RESTRICTIONS SET FORTH IN THOSE TWO (2) CERTAIN REGISTRATION RIGHTS
AGREEMENTS DATED AS OF ______________, 1996 (THE "REGISTRATION
AGREEMENTS") BETWEEN XXXX AND THE SHAREHOLDERS OF NAPTech, INC. AND XXXX
AND FREEPORT PROPERTIES, L.L.C., RESPECTIVELY. COPIES OF THE PLAN OF
MERGER AND THE REGISTRATION AGREEMENTS ARE FILED WITH THE SECRETARY OF
XXXX. BY ACCEPTANCE OF THIS CERTIFICATE, THE HOLDER HEREOF AGREES TO BE
BOUND BY THE TERMS OF THE PLAN OF MERGER AND THE REGISTRATION
AGREEMENTS.
(d) Each of the Shareholders is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.
(e) None of the Shareholders or their Affiliates have purchased or sold
any shares of Parent's Common Stock since February 1, 1996.
SECTION 3.31. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement from the Company, the
Subsidiary or the LLC Subsidiary based upon arrangements made by or on behalf
of the Shareholders, the Company, the Subsidiary or the LLC Subsidiary
SECTION 3.32 Freeport Property. The Freeport Property is owned by
Freeport Properties, L.L.C., a Utah limited liability company, the members of
which and percentage ownership of each member is set forth on Exhibit 3.32, and
the only Encumbrance thereon other than Permitted Encumbrances, is a mortgage
in favor of Research Industries having a present outstanding principal balance
of $1,848,588.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PARENT SUB
Each of the Parent and the Parent Sub hereby represents and warrants to
the Shareholders and the Company as follows:
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SECTION 4.01. Organization and Authority of the Parent and the Parent
Sub. Each of the Parent and the Parent Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Louisiana
and has all necessary corporate power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. Upon the approval of this Agreement by the
Board of Directors of the Parent, the execution and delivery of this Agreement
by the Parent and the Parent Sub, the performance by the Parent and the Parent
Sub of their respective obligations hereunder and the consummation by the
Parent and the Parent Sub of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of the Parent.
This Agreement has been duly executed and delivered by the Parent and the
Parent Sub, and (assuming due authorization, execution and delivery by the
Company and the Shareholders) upon receipt of the necessary approvals by
Governmental Authorities, this Agreement will constitute a legal, valid and
binding obligation of the Parent and the Parent Sub enforceable against the
Parent and the Parent Sub in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors or by
general principles of equity.
SECTION 4.02. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03, except as may result from any facts or
circumstances relating solely to the Shareholders or the Parent Sub, the
execution, delivery and performance of this Agreement by the Parent and the
Parent Sub does not and will not (a) violate, conflict with or result in the
breach of any provision of the articles of incorporation or by-laws of the
Parent or the Parent Sub, (b) conflict with or violate any Law or Governmental
Order applicable to the Parent or the Parent Sub which would have a Material
Adverse Effect on the ability of the Parent or Parent Sub to consummate the
transactions contemplated by this Agreement or (c) conflict with, or result in
any breach of, constitute a default (or event which with the giving of notice
or the lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation, or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Parent or
the Parent Sub pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Parent or the Parent Sub is a party or by which any of
such assets or properties are bound or affected which would have a Material
Adverse Effect on the ability of the Parent or the Parent Sub to consummate the
transactions contemplated by this Agreement. The Parent's Common Stock to be
issued pursuant to Section 2.05 will, when issued, be duly authorized, validly
issued, fully paid and nonassessable.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Parent and the Parent Sub do
not and will not require any consent, approval, authorization or other order
of, action by, filing with, or notification to, any Governmental Authority or
any other third party, except as set forth in Section 3.07 of the Disclosure
Schedule.
SECTION 4.04. Litigation. Except as disclosed in a writing given to
the Shareholders by the Parent prior to the execution of this Agreement, no
claim, action,
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proceeding or investigation is pending or, to the best knowledge of the Parent
and the Parent Sub after due inquiry, threatened, which seeks to delay or
prevent the consummation of, or which could reasonably be expected to
materially adversely affect the Parent's or the Parent's Sub ability to
consummate, or which could otherwise affect the legality, validity or
enforceability of, the transactions contemplated by this Agreement.
SECTION 4.05. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Parent.
SECTION 4.06. Reports; Financial Statements.
(a) Copies of all reports, registration statements and other filings,
together with any amendments thereto, filed by the Parent with the Securities
and Exchange Commission (the "SEC") since December 8, 1993 through the date of
this Agreement (the "Parent SEC Reports"), have been heretofore delivered to
the Shareholders by the Parent. As of the respective dates of their filing
with the SEC, the Parent SEC Reports complied, and all such reports,
registration statements and other filings to be filed by the Parent with the
SEC prior to the Closing Date will comply, in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations of the SEC promulgated thereunder, and did not at the time they
were filed with the SEC, or will not at the time they are filed with the SEC,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
materially misleading.
(b) The consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports and in any such
reports, registration statements and other filings to be filed by the Parent
with the SEC prior to the Closing Date (i) have been or will be prepared in
accordance with the published rules and regulations of the SEC and GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and (ii) fairly present or will fairly present
in all material respects the consolidated financial position of the Parent and
its subsidiaries as of the respective dates thereof and the consolidated
results of operations and cash flows for the periods indicated, except that any
unaudited interim financial statements were or will be subject to normal and
recurring year-end adjustments and may omit footnote disclosure as permitted by
regulations of the SEC.
(c) Since May 31, 1996, to the date hereof, there has been no
material adverse event relating to the Parent and its subsidiaries taken as a
whole and no material adverse change in the financial position or results of
operations of the Parent and its subsidiaries taken as a whole which, in either
case, (i) require a public disclosure or filing by the Parent with the SEC or
(ii) will be required to be included in a Parent SEC Report which report
includes the period from May 31, 1996, to the date hereof.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Effective Time. (a)
Each of the Shareholders and the Company covenants and agrees that from the
date hereof through the earlier of the Closing Date or the termination of this
Agreement, none of the Company, the Subsidiary or the LLC Subsidiary shall
conduct its business other than in the ordinary course and consistent with the
Company's, the Subsidiary's or the LLC Subsidiary's prior practice in order to
protect the value of the Company, the Subsidiary and the LLC Subsidiary.
Without limiting the generality of the foregoing, the Shareholders shall cause
the Company, the Subsidiary, and the LLC Subsidiary, and the Company agrees, to
(i) continue their advertising and promotional activities, pricing and
purchasing policies, operations, and business plan implementation; (ii) not
materially shorten or lengthen the customary payment cycles for any of their
payables or receivables; (iii) use reasonable efforts to attempt to (A) keep
available to the Parent and the Parent Sub the services of the employees of the
Company, (B) continue in full force and effect without material modification
all existing policies or binders of insurance currently maintained in respect
of the Company and the Business except as required by applicable law and (C)
preserve their current relationships with their suppliers, employees, customers
and other persons with which they have significant business relationships; (iv)
exercise, but only after notice to the Parent and receipt of the Parent's prior
written approval, any rights of renewal pursuant to the terms of any of the
leases or subleases set forth in Section 3.19(b) or Leases for Tangible
Personal Property set forth in Section 3.20(a) of the Disclosure Schedule which
by their terms would otherwise expire; (v) maintain all material licenses,
qualifications, registrations and authorizations to do business in each
jurisdiction in which they are so licensed, qualified, registered or
authorized; and (vi) not engage in any practice, take any action, fail to take
any action or enter into any transaction, in each case outside the normal
course of business which could reasonably be expected to cause any
representation or warranty of the Shareholders or the Company to be untrue for
purposes of this Section 5.01(a) as of the date made in any material respect or
result in a breach of any covenant made by the Shareholders or the Company in
this Agreement.
(b) Each of the Shareholders and the Company covenants and agrees
that, prior to the Effective Time, without the prior written consent of the
Parent, which consent will not be unreasonably withheld, none of the Company,
the Subsidiary or the LLC Subsidiary will make outside the ordinary course of
business consistent with past practice any commitment, actual or contingent, to
make any investment or capital contribution, or otherwise expend capital, or
purchase any inventory, or supply funds to any Person, in each case in excess
of $5,000 individually or $10,000 in the aggregate.
(c) Each of the Shareholders and the Company covenants and agrees to,
and shall cause the Company to, use reasonable efforts to minimize the
termination, withdrawal or nonrenewal of any Material Contract.
(d) Prior to the Effective Time, neither the Shareholders nor the
Company, without the prior written consent of the Parent, will:
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(i) except as set forth in Section 3.03 of the Disclosure
Schedule, issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, delivery, sale, disposition or pledge or
other encumbrance of, (A) any additional shares of the capital stock of any
class of the Company, or the Subsidiary, or any membership interest of the LLC
Subsidiary, or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of the capital stock of the
Company, or the Subsidiary, or any membership interest of the LLC Subsidiary or
any rights, warrants, options, calls, commitments or any other agreements of
any character to purchase or acquire any shares of the capital stock of the
Company, the Subsidiary or any membership interest of the LLC Subsidiary or any
securities or rights convertible into, exchangeable for or evidencing the right
to subscribe for any shares of the capital stock or membership interest of the
LLC Subsidiary, or (B) any other securities in respect of, in lieu of, or in
substitution for the Shares;
(ii) redeem, purchase or otherwise acquire any of the
outstanding Securities of the Company, the Subsidiary or the LLC Subsidiary;
(iii) split, combine, subdivide or reclassify any shares of the
capital stock or declare, set aside for payment or pay any dividend, or make
any other actual constructive or deemed distribution in respect of any shares
of the capital stock of the Company, or the Subsidiary, or any membership
interest of the LLC Subsidiary or otherwise make any payments to the
shareholder or shareholders of the Company, the Subsidiary or the LLC
Subsidiary, as the case may be, in its capacity as such.
SECTION 5.02. Access to Information. (a) From the date hereof until
the earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice, each of the Shareholders and the Company shall and shall
cause each of its Affiliates and each of the Company's and such Affiliates'
officers, directors, employees, agents, representatives, accountants and
counsel to: (i) afford the officers, employees and authorized agents,
accountants, counsel, financing sources, prospective financing sources, and
representatives of the Parent full access to the offices, properties, other
facilities, books and records of the Company, the Subsidiary and the LLC
Subsidiary to those officers, directors, employees, managers, members, agents,
accountants and counsel of the Shareholders and the Company and each of their
Affiliates who have any knowledge relating to, and to the books and records of
the Shareholders and their Affiliates relating to, the Company, the Subsidiary
or the LLC Subsidiary or the Business, (ii) furnish to the Parent monthly
financial and management statements of the Company, the Subsidiary or the LLC
Subsidiary as prepared in the ordinary course of business and (iii) furnish to
the officers, employees and authorized agents, accountants, counsel, financing
sources, prospective financing sources, and representatives of the Parent such
additional financial and operating data and other information regarding the
assets, properties and good will of the Company, the Subsidiary and the LLC
Subsidiary, and the Business (or legible copies thereof) as the Parent or any
of its officers, employees, authorized agents, accountants, counsel, financing
sources, prospective financing sources or representatives may from time to time
reasonably request.
(b) Subject to Section 7.08, in order to facilitate the resolution of
any claims made by or against or incurred by the Shareholders or the Company
prior to the Effective Time
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for a period of seven years after the Effective Time, or for such longer period
as may be required so as to extend to the end of the applicable statute of
limitations, the Parent or Parent Sub shall (i) retain the books and records
(or copies thereof) of the Company, the Subsidiary and the LLC Subsidiary
relating to periods prior to the Effective Time in a manner reasonably
consistent with past practice and (ii) upon reasonable notice, afford the
authorized agents and representatives of the Shareholders reasonable access
(including, without limitation, the right to make, at the Shareholders'
expense, photocopies), during normal business hours, to such books and records.
(c) Subject to Section 7.08, in order to facilitate the resolution of
any claims made by or against or incurred by the Parent, the Parent Sub, any
Affiliate of the Parent or the Parent Sub, the Company, the Subsidiary or the
LLC Subsidiary after the Effective Time, for a period of seven years following
the Effective Time, or for such longer period as may be required so as to
extend to the end of the applicable statute of limitations, the Shareholders
shall (i) retain the books and records (or copies thereof) of the Shareholders
which relate to the Company, the Subsidiary and the LLC Subsidiary and their
operations for periods prior to the Effective Time and which shall not
otherwise have been delivered to the Parent, the Company, the Subsidiary or the
LLC Subsidiary and (ii) upon reasonable notice, afford the officers, employees
and authorized agents and representatives of the Parent, the Parent Sub, any
Affiliate of the Parent or the Parent Sub, the Company, the Subsidiary or the
LLC Subsidiary reasonable access (including, without limitation, the right to
make photocopies, at the expense of the Parent, the Parent Sub, such Affiliate
of the Parent or the Parent Sub, the Company, such Subsidiary or such LLC
Subsidiary), during normal business hours, to such books and records.
(d) Within 45 days after the end of each month, each of the
Shareholders and the Company covenants and agrees to provide to the Parent the
monthly consolidated financial statements of the Company prepared in accordance
with GAAP for each month ending between the date hereof and the Closing Date,
together with all related notes, exhibits and schedules thereto.
(e) From the date hereof until the earlier of the Effective Time or
the termination of this Agreement, the Parent agrees to make available to the
Shareholder Representative and the Company's Counsel, upon reasonable notice,
its executive officers to discuss the publicly available information of the
Parent.
SECTION 5.03. Confidentiality. (a) Each of the Shareholders and the
Company agrees to, and shall use their best efforts to cause its agents,
representatives, Affiliates, employees, officers and directors and those of its
Affiliates to: (i) treat and hold as confidential all non-public information
relating to trade secrets, trademark applications, product development, price,
distributor, and customer lists, pricing and marketing plans, policies and
strategies, details of client and consultant contracts, operations methods,
product development techniques, business acquisition plans, new personnel
acquisition plans and all other confidential information with respect to the
Business, the Company, the Subsidiary and the LLC Subsidiary, except as the
Shareholders or the Company reasonably believes is otherwise required to be
disclosed by applicable Law, in which event each of the Shareholders or the
Company agrees to, and shall instruct its agents, representatives,
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Affiliates, employees, officers and directors and those of its Affiliates to,
furnish only that portion of such confidential information which the
Shareholders or the Company are legally required to be provided and exercise
its reasonable efforts to obtain assurances that confidential treatment will be
accorded such information, and (ii) in the event that the Shareholders or any
such agent, representative, Affiliate, employee, officer or director and those
of its Affiliates are served with a subpoena, order or other legal process to
disclose any such information, provide the Parent with prompt written notice of
such requirement so that the Parent, the Parent Sub, the Company, the
Subsidiary or the LLC Subsidiary may, at the expense of the Parent, seek a
protective order or other remedy. Each of the Shareholders and the Company
agrees to, and shall cause its agents, representatives, Affiliates, employees,
officers and directors to, furnish promptly (prior to, at, or as soon as
practicable following, the Effective Time) to the Parent Sub or the Parent any
and all copies (in whatever form or medium) of all such confidential
information then in the possession of the Shareholders or the Company or any of
their agents, representatives, Affiliates, employees, officers and directors
and, except as otherwise required by Section 5.02(c) or Section 7.09, destroy
any and all additional copies then in the possession of the Shareholders or any
of such agents, representatives, Affiliates (other than the Company, the
Subsidiary and the LLC Subsidiary), employees, officers and directors of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, this
Section 5.03(a) shall not apply to any information that, at the time of
disclosure, is available publicly or was not disclosed in breach of this
Agreement by the Shareholders or the Company or their agents, representatives,
Affiliates, employees or officers or directors of its Affiliate. Each of the
Shareholders and the Company agrees and acknowledges that remedies at law for
any breach of its obligations under this Section 5.03(a) are inadequate and
that in addition thereto the Parent or the Parent Sub shall be entitled to seek
equitable relief, including injunction and specific performance, in the event
of any such breach. The non-disclosure obligations of the Company and the
Shareholders in this Section 5.03(a) shall include any non-public or
proprietary information relating to the Parent or its Affiliates which they may
obtain in the course of their due diligence activities permitted by this
Agreement.
(b) Prior to the Closing or upon earlier termination of this
Agreement, each of the Parent and the Parent Sub agrees to, and shall use their
best efforts to cause its agents, representatives, Affiliates, employees,
officers and directors and those of its Affiliates to: (i) treat and hold as
confidential all non-public information relating to trade secrets, trademark
applications, product development, price, distributor, and customer lists,
pricing and marketing plans, policies and strategies, details of client and
consultant contracts, operations methods, product development techniques,
business acquisition plans, new personnel acquisition plans and all other
confidential information with respect to the Business, the Company, the
Subsidiary and the LLC Subsidiary, except as the Parent or the Parent Sub
reasonably believes is otherwise required to be disclosed by applicable Law, in
which event each of the Parent or the Parent Sub agrees to, and shall instruct
its agents, representatives, Affiliates, employees, officers and directors and
those of its Affiliates to, furnish only that portion of such confidential
information which the Parent or the Parent Sub are legally required to be
provided and exercise its reasonable efforts to obtain assurances that
confidential treatment will be accorded such information, and (ii) in the event
that the Parent Sub or any such agent, representative, Affiliate, employee,
officer or director and
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those of its Affiliates are served with a subpoena, order or other legal
process to disclose any such information, provide the Shareholders
Representative with prompt written notice of such requirement so that the
Company or the Shareholders may, at the expense of the Shareholders seek a
protective order or other remedy. Upon termination of this Agreement, each of
the Parent and the Parent Sub agrees to, and shall cause its agents,
representatives, Affiliates, employees, officers and directors to, furnish
promptly (prior to, at, or as soon as practicable following, the Effective
Time) to the Company any and all copies (in whatever form or medium) of all
such confidential information then in the possession of the Parent or the
Parent Sub or any of their agents, representatives, Affiliates, employees,
officers and directors and, except as otherwise required by Section 5.02(b) or
Section 7.09, destroy any and all additional copies then in the possession of
the Parent, the Parent Sub or any of such agents, representatives, Affiliates,
employees, officers and directors of such information and of any analyses,
compilations, studies or other documents prepared, in whole or in part, on the
basis thereof; provided, however, this Section 5.03(b) shall not apply to any
information that, at the time of disclosure, is available publicly or was not
disclosed in breach of this Agreement by the Parent or the Parent Sub or their
agents, representatives, Affiliates, employees or officers or directors of its
Affiliate. Each of the Parent and the Parent Sub agrees and acknowledges that
remedies at law for any breach of its obligations under this Section 5.03(b)
are inadequate and that in addition thereto the Parent or the Parent Sub shall
be entitled to seek equitable relief, including injunction and specific
performance, in the event of any such breach.
(c) Notwithstanding the foregoing provisions of this Section 5.03,
the Parent is expressly permitted to make a press release or other public
announcement on filing regarding this transaction as it deems appropriate in
its discretion.
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents. (a) Each of the Shareholders, the Company, the Parent Sub and the
Parent shall use all reasonable efforts to obtain (or cause the Company, the
Subsidiary and the LLC Subsidiary to obtain) all authorizations, consents,
orders and approvals of all Governmental Authorities and officials that are or
become necessary for their execution and delivery of, and the performance of
their obligations pursuant to, this Agreement, including without limitation
those set forth on Exhibit 5.04 and will cooperate fully with each other in
promptly seeking to obtain all such authorizations, consents, orders and
approvals.
(b) The Shareholders shall cause the Company, the Subsidiary, and the
LLC Subsidiary, and the Company agrees, to give promptly such notices to third
parties and use all reasonable efforts to obtain such third party consents and
estoppel certificates in connection with the transactions contemplated by this
Agreement, including without limitation those set forth on Exhibit 5.04.
(c) The Parent and the Parent Sub shall cooperate and use all
reasonable efforts to assist the Shareholders, the Company, the Subsidiary and
the LLC Subsidiary in giving such notices and obtaining such consents and
estoppel certificates; provided, however, that none of the Shareholders, the
Company, the Parent or the Parent Sub shall have any obligation to give any
guarantee or other consideration of any nature in connection with any such
notice, consent or estoppel certificate or to consent to any change in the
terms of any
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agreement or arrangement which would be adverse to the interests of the
Shareholders, the Parent, the Parent Sub, the Company, the Subsidiary and the
LLC Subsidiary or the Business.
(d) The Shareholders and the Parent agree that, in the event any such
consent, approval or authorization reasonably necessary to preserve for the
Business, the Company, the Subsidiary or the LLC Subsidiary any right or
benefit under any lease, license, contract, commitment or other agreement or
arrangement to which the Shareholders, the Company, the Subsidiary or the LLC
Subsidiary are or is a party is not obtained prior to the Effective Time, the
Shareholders will, subsequent to the Effective Time, cooperate with the Parent
and the Parent Sub in attempting to obtain such consent, approval or
authorization as promptly thereafter as practicable and, in the case of
contracts and agreements, so as to provide for the Parent and Parent Sub the
benefits under such contracts and agreements.
SECTION 5.05. Notice of Developments. (a) Prior to the earlier of the
Closing or termination of this Agreement, the Shareholders and the Company
shall notify promptly, and in any event within five Business Days, the Parent
in writing, to the extent of the best knowledge of the Shareholders and the
Company, of (i) all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could reasonably be expected to
result in any breach of a representation or warranty or covenant of the
Shareholders or the Company in this Agreement or which could reasonably be
expected to have the effect of making any representation or warranty of the
Shareholders or the Company in this Agreement untrue or incorrect in any
material respect and (ii) all other material developments, other than general
economic or market changes, and changes in Tax Law affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
distributor, customer or employee relations or prospects of the Company, the
Subsidiary or the LLC Subsidiary or the Business.
(b) Prior to the earlier of the Effective Time or termination of this
Agreement, the Parent and the Parent Sub shall promptly, and in any event
within five Business Days, notify the Shareholders in writing, to the extent of
the best knowledge of the Parent and the Parent Sub, of all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be expected to result in any breach of a
representation or warranty or covenant of the Parent or Parent Sub in this
Agreement or which could reasonably be expected to have the effect of making
any representation or warranty of the Parent or Parent Sub in this Agreement
untrue or incorrect in any respect.
SECTION 5.06. Acquisition Proposals. (a) The Shareholders and the
Company and their respective officers, directors, employees, representatives
and agents shall immediately cease any existing discussions or negotiations
with any parties conducted heretofore with respect to any Acquisition Proposal.
Neither the Shareholders, the Company, nor their respective officers,
directors, employees or investment bankers, attorneys, accountants or other
agents retained by either of them will (i) initiate or solicit, directly or
indirectly, any inquiries regarding the making of any Acquisition Proposal, or
(ii) engage in negotiations or discussions with, or furnish any information or
data to any third party relating to an Acquisition Proposal.
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(b) For purposes of this Agreement, the term "Acquisition Proposal"
shall mean any purchase offer made by a third party to acquire (i) beneficial
ownership (as defined pursuant to Section 13(d) of the Exchange Act) of an
equity interest in the Company or the Assets or Business pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock or
similar transaction involving the Company, including, without limitation, any
single or multistep transaction or series of related transactions which is
structured to permit such third party to acquire beneficial ownership of a
majority or greater equity interest in the Company or the Assets or Business or
(ii) all or substantially all of the business or assets of the Company or the
Business (other than the transactions contemplated by this Agreement).
SECTION 5.07. Use of Names and Intellectual Property. (a) Each of the
Shareholders covenants and agrees that following the Effective Time, the Parent
shall have the exclusive and royalty-free right to use the names NAPTech, North
American Piping Technologies, NAPTech Pressure Systems, NAPTech and Design
Pressure Products and such other names as may be determined upon completion of
the Due Diligence Review by Xxxx (collectively, the "Name").
(b) From and after the Effective Time, neither the Shareholders nor
any of its Affiliates shall use the Name, any of the Owned Intellectual
Property or any of the Licensed Intellectual Property.
SECTION 5.08. Non-Competition. (a) For a period of two years
following the Effective Time, none of the Shareholders shall, directly or
indirectly, or as a member, shareholder, officer, director, consultant or
employee of any other person or entity, compete with the Parent or any of its
subsidiaries or Affiliates, or own, manage, operate, join, control or
participate in the ownership, management, operation, or control of, or become
employed by, consult or advise, or be connected in any manner with any business
or activity which is in actual, direct or indirect competition or anticipated
competition with the Parent or any of its subsidiaries or Affiliates within
those counties, parishes, municipalities or other places listed in Exhibit
5.08(a) annexed hereto and made a part hereof, so long as the Parent or any of
its subsidiaries or Affiliates carries on a like business therein. Not by way
of limitation or exclusion, none of the Shareholders shall, within the
aforesaid locations and during the aforesaid time period, call upon, solicit,
advise or otherwise do, or attempt to do, business with any customers or
distributors of the Business, the Company, the Subsidiary or the LLC Subsidiary
with whom the Business, the Company, the Subsidiary or the LLC Subsidiary or
any of the Shareholders had any dealings during the period of time in which the
Company was an Affiliate of the Shareholders, or take away or interfere or
attempt to interfere with any custom, trade, business or patronage of the
Business, the Company, the Subsidiary or the LLC Subsidiary, or interfere with
or attempt to interfere with any officers, employees, distributors,
representatives or agents of the Business, the Company, the Subsidiary or the
LLC Subsidiary, or employ or induce or attempt to induce any of them to leave
the employ of the Company, the Subsidiary or the LLC Subsidiary or violate the
terms of their contracts, or any employment arrangements, with the Company, the
Subsidiary or the LLC Subsidiary. Each of the Shareholders acknowledges and
agrees that any breach of the foregoing covenant not to compete would cause
irreparable injury to the Parent and its subsidiaries and Affiliates, and that
the amount of injury would be impossible or difficult
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to fully ascertain. Each of the Shareholders agrees that the Parent and its
subsidiaries and affiliates shall, therefore, be entitled to obtain an
injunction restraining any violation, further violation or threatened violation
of the covenant not to compete hereinabove set forth, in addition to any other
remedies that the Parent or its subsidiaries or Affiliates may pursue.
Notwithstanding the foregoing provisions of this Section 5.08, the
Shareholders, may own, solely as an investment, securities if the Shareholders
(A) are not an affiliate of the issuer of such securities and (B) do not,
directly or indirectly, beneficially own more than 5% of the class of which
such securities are a part. If the two year period referred to in this Section
5.08(a) shall be finally determined by a court to exceed the maximum period
which is permissible by applicable law, the said period shall be reduced to the
maximum period permitted by such law.
(b) Each of the Shareholders acknowledges that the covenants of the
Shareholders set forth in Section 5.08(a) are an essential element of this
Agreement and that, but for the agreement of the Shareholders to comply with
these covenants, the Parent would not have entered into this Agreement. Each
of the Shareholders has independently consulted with its counsel and after such
consultation agrees that the covenants set forth in this Section 5.08 are
reasonable and proper.
SECTION 5.09. Release of Indemnity and Other Obligations. The
Shareholders covenant and agree, on or prior to the Effective Time, to execute
and deliver to the Parent, for the benefit of the Company, the Subsidiary and
the LLC Subsidiary, a general release and discharge, in form and substance
satisfactory to the Parent, releasing and discharging the Parent, Parent Sub,
the Company, the Subsidiary and the LLC Subsidiary, from any and all
obligations to pay any amounts to or perform any obligations owing to, or
indemnify, the Shareholders or otherwise hold the Shareholders harmless
pursuant to any agreement or other arrangement entered into prior to the
Effective Time between the Shareholders or any Affiliate of the Shareholders
(other than the Company, the Subsidiary and the LLC Subsidiary) and the
Company, the Subsidiary or the LLC Subsidiary except such agreements as are
described in Section 5.09 of the Disclosure Schedule.
SECTION 5.10. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Law, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
SECTION 5.11. Removal of Encumbrances on Assets. Each of the
Shareholders and the Company covenants and agrees to cause all Encumbrances on
the Assets (other than Permitted Encumbrances) to be removed at or prior to the
Effective Time. The Parent shall cooperate and use all reasonable efforts to
assist the Shareholders and the Company in obtaining the removal of such
Encumbrances; provided, however, that the Parent and the Parent Sub shall have
no obligation to give any guarantee or other consideration of any nature in
connection with the removal of any such Encumbrance. The parties hereto agree
that, in the event the Shareholders and the Company are unable to cause the
removal of any Encumbrance on any Asset (other than Permitted Encumbrances)
prior to the Effective
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Time, the Shareholders shall, following the Effective Time, use reasonable
efforts to cooperate with the Parent and the Company in attempting to remove
such Encumbrance as promptly as practicable.
SECTION 5.12. Certain Additional Covenants. (a) The Parent agrees to
cause the Company to maintain, for a period of three years after the Closing,
products liability insurance providing coverage comparable to that maintained
by the Company as of the date hereof, to the extent such coverage is available
at a reasonable cost.
(b) The Shareholders agree not to take, and prior to the Effective
Time to cause the Company not to take, an action which would cause the
representations set forth in Section 3.09(a) to become untrue or inaccurate in
any way.
(c) The Parent agrees to issue the Replacement Options at the
Effective Time in substitution of the Company Options held by employees of the
Company at the Effective Time.
(d) If any of the Company Options are exercised by any of the persons
listed in Section 3.03(b) of the Disclosure Schedule after the date of this
Agreement but before the Closing Date, then the Company and the Shareholders
covenant and agree:
(i) If the person exercising the Company Option is an
"accredited investor" within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act, to
cause such person to become a signatory to this Agreement
at the time of such exercise; or
(ii) If the person exercising the Company Option is not an
"accredited investor" within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act, to
purchase on or before the Closing Date, but prior to the
Closing, the Common Stock into which the Company Option is
exercised at a price per share equal to the product of
0.0772611 times the average of the published closing price
of the Parent's Common Stock on the Nasdaq Stock Market
for the five trading days immediately preceding the date
upon which the Company purchases the Common Stock.
(e) The Company and the Shareholders covenant and agree to cause the
exercise, prior to the Closing Date, of any Company Options held by individuals
no longer employed by the Company, the Subsidiary or the LLC Subsidiary as of
the date hereof, and upon such exercise, to cause compliance with the
provisions of Section 5.12(d)(i) or (ii) above, as applicable; provided,
however, the Company shall make no payments to such individuals to cause them
to exercise any such Company Options. Provided further, however, the Company
and the Shareholders shall not be required to cause such exercise if the
Company's Counsel renders an opinion satisfactory to the Parent that the
exchange of the Parent's Common Stock in lieu of the Common Stock as permitted
by each such Company
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Option at a conversion rate of 0.0772611 and the issuance of the Parent's
Common Stock upon exercise of such Company Option is a transaction which
qualifies for an exemption under applicable federal and state securities laws.
(f) If the Convertible Note is converted, after the date of this
Agreement, but before the Closing Date, by the holder thereof into shares of
the Common Stock, then the Company and the Shareholders agree:
(i) If the Person converting the Convertible Note into shares
of Common Stock is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D promulgated under
the Securities Act, to cause such Person to become a
signatory to this Agreement at the time of such
conversion; or
(ii) If the Person converting the Convertible Note into shares
of Common Stock is not an "accredited investor" within the
meaning of Rule 501(a) of Regulation D promulgated under
the Securities Act, to purchase, on or before the Closing
Date, but prior to the Closing, Common Stock into which
the Convertible Note was converted at a price per share
equal to the product of 0.0772611 times the average of the
published closing price of the Parent's Common Stock for
the five trading days immediately preceding the date upon
which the Company purchases the Common Stock.
(g) The Company and the Shareholders agree to cause the Subsidiary to
acquire on or prior to the Closing Date all of the membership interests of the
LLC Subsidiary not owned as of the date hereof by the Company.
SECTION 5.13. Termination of Inter-Company Arrangements, etc. At or
prior to the Closing, the Shareholders shall cause the Inter-Company
Arrangements, other than those described in Section 5.13 of the Disclosure
Schedule, to be terminated on terms reasonably satisfactory to the Parent. The
Parent shall have received the general releases and discharges from the
Shareholders referred to in Section 5.09 in form and substance reasonably
satisfactory to the Parent.
ARTICLE VI
MINORITY SHAREHOLDERS
SECTION 6.01. Certain Limitations on Representations and Warranties of
the Minority Shareholders. Notwithstanding any other provision of this
Agreement to the contrary: (a) the representations and warranties of each of
the Minority Shareholders in Sections 3.01, 3.03(b), (c) and (d) and 3.30 are
limited to the Shares owned by each of such Minority Shareholder and to each
such Minority Shareholder, as applicable; and (b) the
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other representations and warranties of each of the Minority Shareholders in
Article III and Section 7.01 are limited to the actual knowledge of each such
Minority Shareholder.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Representations, Warranties and Covenants.
(a) Reorganization.
(i) The parties hereto intend that the Merger will qualify as
a reorganization under Sections 368(a)(1)(A) and (a)(2)(E) or Section
368(a)(1)(B) of the Code and each party agrees that, unless otherwise required
by law, no such party shall at any time file any return or other document with
the U.S. Internal Revenue Service or any other taxing authority inconsistent
with such treatment.
(ii) In regard to Section 7.01(a) above, the parties hereto
make the following representations, warranties and covenants:
(A) Each of the Shareholders hereby represents and
warrants, as of the date hereof and as of the Closing Date, and
covenants to the Parent as follows:
(1) The Company will retain immediately after
the Merger 90% of the fair market value of the net assets and 70%
of the fair market value of the gross assets held by the Company
immediately prior to the Merger.
(2) None of the Shareholders has any plan or
intention, and agrees for a period of two years following the
Effective Time not, to sell, exchange or otherwise dispose of a
number of shares of the Parent's Common Stock received in the
Merger that would reduce the Shareholders' ownership of shares of
the Parent's Common Stock to a number of shares having a value,
as of the Closing Date, of less than 50% of the value of all of
the formerly outstanding stock of the Company as of the same
date.
(3) The Parent will acquire in the Merger 80% of
the outstanding stock of the Company solely in exchange for
voting stock of the Parent (i.e., the Parent's Common Stock).
(4) The liabilities of the Company, including
the liabilities to which the transferred assets of the Company
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are subject, were incurred by the Company in the ordinary course of
business.
(5) The Company will bear its own expenses
incurred in connection with this Agreement, and any expenses
attributable to the Shareholders incurred in connection with this
Agreement (including the fees and costs of Company's Counsel and
accountants in excess of $81,000) will be paid by them.
(B) The Parent hereby represents and warrants, as of
the date hereof and as of the Closing Date, to the Shareholders as
follows:
(1) The Parent Sub is newly formed, has no other
business or assets and was created for the purpose of this
transaction.
(2) The Parent has no plan or intention to
redeem or otherwise reacquire any of its stock issued in the
Merger.
(3) The Parent has no plan or intention to
liquidate the Surviving Corporation; to sell or otherwise dispose
of the stock of the Surviving Corporation, or cause the Surviving
Corporation to issue additional shares of its stock, thereby
resulting in the Parent losing control of the Surviving
Corporation within the meaning of Section 368(c) of the Code; or
to cause the Surviving Corporation to dispose of, in transactions
for which full consideration is not received, more than 20% of
the assets of the Company acquired in the Merger, except for
transfers of assets to a corporation controlled (within the
meaning of Section 368(c) of the Code) by the Surviving
Corporation.
(4) Following the Merger, it is intended that
the Surviving Corporation will continue the historic business of
the Company or will use a significant portion of the historic
business assets of the Company in a business as such terms are
used in Treas. Reg. Section 1.368-1(d).
(5) The Parent will pay its own expenses
incurred in this transaction and the Parent Sub's expenses, if
any, incurred in connection with this Agreement will be paid by
the Parent.
(6) The Parent will control the Parent Sub
within the meaning of Section 368(c) of the Code immediately
prior to the Closing Date.
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(7) The Parent has no present intention to merge
the Company with or into any other corporation, to transfer the
stock of the Company to a corporation other than one it controls
within the meaning of Section 368(c) of the Code, or to sell or
otherwise dispose of the stock of the Company.
(8) The Parent Sub has no liabilities that will
be assumed by the Company, and the Parent Sub will not transfer
any assets subject to liabilities in the Merger.
(9) Neither the Parent nor the Parent Sub is an
"investment company" as defined in Section 368(a)(2)(F) of the
Code.
(10) There is no intercorporate indebtedness
existing between the Parent and the Company or between the Parent
Sub and the Company that was issued, acquired or will be settled,
in each case at a discount, and that the Parent and the Parent
Sub do not own, nor have they owned during the past five (5)
years, any stock of the Company.
(11) Immediately prior to the Effective Time,
Parent will control the Parent Sub within the meaning of Section
368(c) of the Code.
(12) Neither the Parent nor the Parent Sub is an
"investment company" as defined in Section 368(a)(2)(F) of the
Code.
(13) There is no intercorporate indebtedness
existing between the Parent and the Company or between the Parent
Sub and the Company that was issued, acquired or will be settled
at a discount.
(14) The Parent and the Parent Sub do not own,
nor have they owned during the past five (5) years, any stock of
the Company.
(b) Each of the Shareholders hereby represents and warrants, as of
the date hereof and as of the Closing Date, as follows:
(i) except as set forth in Section 7.01 of the Disclosure
Schedule, (A) all returns and reports in respect of Taxes ("Tax Returns" or
"Returns") required to be filed as of the date of this Agreement with respect
to the Company, the Subsidiary and the LLC Subsidiary (including the
consolidated federal income Tax Returns and state income or
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franchise Tax Returns that include the Company, the Subsidiary or the LLC
Subsidiary on a consolidated, combined, or unitary ("combined") basis) have
been timely filed; (B) all Taxes shown to be payable on such Returns and all
assessments of Tax made against the Company, the Subsidiary or the LLC
Subsidiary with respect to such Returns have been paid; (C) all such Returns
are true, correct, and complete in all material respects; and (D) no adjustment
relating to such Returns has been proposed formally or informally by any Tax
authority and, to the best knowledge of the Shareholders and the Company, no
basis exists for any such adjustment;
(ii) except as set forth in Section 7.01 of the Disclosure
Schedule, there is no pending or, to the best knowledge of the Shareholders and
the Company, threatened actions or proceedings for the assessment or collection
of Taxes against the Company, the Subsidiary or the LLC Subsidiary;
(iii) no consent under Section 341(f) of the Code has been filed
with respect to the Company, the Subsidiary or the LLC Subsidiary;
(iv) there are no Tax liens on any assets of the Company, the
Subsidiary or the LLC Subsidiary, except liens for Taxes that are not yet due
and payable;
(v) no acceleration of the vesting schedule for any property
that is substantially nonvested within the meaning of the regulations under
Section 83 of the Code will occur in connection with the transactions
contemplated by this Agreement;
(vi) none of the Company, the Subsidiary or the LLC Subsidiary
has been a "United States real property holding corporation" within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code;
(vii) except as set forth in Section 7.01 of the Disclosure
Schedule, none of the Company, the Subsidiary or the LLC Subsidiary is or has
been doing business in, is, or has been engaged in a trade or business or has
business in force in any jurisdiction in which it has not filed all required
material income, franchise, or gross premium tax returns or other applicable
returns;
(viii) none of the Company, the Subsidiary or the LLC Subsidiary
is subject to any accumulated earnings tax penalty or personal holding company
tax;
(ix) there are no outstanding waivers or agreements extending
the statute of limitations for any tax period with respect to any Tax to which
the Company, the Subsidiary or the LLC Subsidiary may be subject;
(x) none of the Company, the Subsidiary or the LLC Subsidiary
(A) has an unrecaptured overall foreign loss within the meaning of Section
904(f) of the Code or (B) has participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code;
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(xi) except as set forth in Section 7.01(a) of the Disclosure
Schedule, as of March 29, 1996, none of the Company, the Subsidiary or the LLC
Subsidiary had any (1) income reportable for a taxable period ending after
March 29, 1996, but attributable to a transaction (e.q., an installment sale)
occurring in or a change in accounting method made for a taxable period ending
on or prior to March 29, 1996, that resulted in a deferred reporting of income
from such transaction or from such change in accounting method (other than a
deferred intercompany transaction), or (2) deferred gain or loss arising out of
any deferred intercompany transaction that occurred prior to March 29, 1996;
(xii) there are no outstanding requests for information made by
a taxing authority to the Company, the Subsidiary or the LLC Subsidiary;
(xiii) none of the Company, the Subsidiary or the LLC Subsidiary
has been advised by any Governmental Authority of any proposed reassessments of
the value (or other Tax base) of any property owned by the Company, the
Subsidiary or the LLC Subsidiary that could increase the amount of a property
Tax to which the Company, the Subsidiary or the LLC Subsidiary would be
subject;
(xiv) none of the Company, the Subsidiary or the LLC Subsidiary
is obligated under any agreement with respect to industrial development bonds
or other obligations with respect to which the excludability from gross income
of the holder for federal income tax purposes could be affected by the
transactions contemplated hereunder;
(xv) no power of attorney that is currently in force has been
granted with respect to any matter relating to Taxes that could affect the
Company, the Subsidiary or the LLC Subsidiary;
(xvi) except as set forth in Section 3.04 of the Disclosure
Schedule, none of the Company, the Subsidiary or the LLC Subsidiary has been a
member of any partnership or joint venture or the holder of a beneficial
interest in any trust for any period for which the statute of limitations for
any Tax has not expired;
(xvii) except as set forth in Section 7.01 of the Disclosure
Schedule, neither the Shareholders nor any Affiliate of the Shareholders has
made any capital contributions to the Company, the Subsidiary or the LLC
Subsidiary during the two-year period preceding the date of this Agreement;
(xviii) no "ownership change", within the meaning of Section 382
of the Code has occurred with respect to the Company, the Subsidiary or the LLC
Subsidiary except as contemplated by this Agreement since December 31, 1992;
(xix) Section 7.01 of the Disclosure Schedule (A) lists by type
all income, franchise, and similar Tax Returns (federal, state, local, and
foreign) filed with respect to each of the Company, the Subsidiary and the LLC
Subsidiary for taxable periods ended on or after January 1, 1992; (B) indicates
for which jurisdictions Returns have been filed on the basis of a combined
group; (C) indicates the most recent income, franchise, or similar Tax Return
for each relevant jurisdiction for which an audit has been completed or the
statute
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of limitations has lapsed; and (D) indicates all Tax Returns that currently are
the subject of audit;
(xx) Section 7.01 of the Disclosure Schedule sets forth as of
March 29, 1996, the amount and expiration dates of any net operating loss, net
capital loss, unused business credit, unused foreign tax credit, or excess
charitable contribution allocable to the Company, the Subsidiary and the LLC
Subsidiary as reported on the consolidated federal income tax return filed by
such corporations. As of March 29, 1996, each of the Company, the Subsidiary
and the LLC Subsidiary had no less than $4.584 million aggregate net operating
losses available for carryover to taxable years beginning after March 29, 1996;
(xxi) liabilities, expenses (defined or otherwise), reserves and
allowances on the books and records of the Company, the Subsidiary and the LLC
Subsidiary have been provided which are adequate to satisfy all Liabilities for
Taxes relating to the Company, the Subsidiary and the LLC Subsidiary for any
and all periods (A) through the date of the Financial Statements (without
regard to the materiality thereof) and (B) after the date of the last Financial
Statement through and including the Effective Time (or if later, the Closing
Date);
(xxii) Section 7.01 of the Disclosure Schedule sets forth the tax
basis of the Company, the Subsidiary and the LLC Subsidiary as of March 29,
1996 in each asset; and
(xxiii) Section 7.01 of the Disclosure Schedule shall, not
later than 30 days prior to the Closing Date, completely and accurately list,
all Tax Returns required to be filed by the Company, the Subsidiary and the LLC
Subsidiary between the date of this Agreement and December 31, 1996.
SECTION 7.02. Access to Information. (a) From the date hereof, the
Shareholders shall and shall cause the Company, the Subsidiary and the LLC
Subsidiary to make available to the Parent: (i) all federal, state, and foreign
income, franchise, and similar Tax Returns for taxable periods ended after
January 1, 1992, and any examination reports and statements of deficiencies
assessed against, proposed to be assessed against, or agreed to by the Company,
the Subsidiary or the LLC Subsidiary for such taxable periods; (ii) any tax
sharing or allocation agreement or arrangement involving the Company, the
Subsidiary or the LLC Subsidiary and a complete and accurate description of any
such unwritten or informal agreement or arrangement; (iii) any pro forma
federal income Tax Returns of the Subsidiary, together with any schedule
reconciling the items in the pro forma Tax Return to the items as included in
the consolidated Tax Return, for all taxable years ended after January 1, 1992;
and (iv) any workpapers or schedules showing (A) the tax basis of the
shareholders in the Common Stock, (B) the tax basis of the Company in the stock
of the Subsidiary or the membership interest in the LLC Subsidiary, and (C) the
amount of U.S. tax earnings and profits for the Company, the Subsidiary and the
LLC Subsidiary.
(b) The information described in Section 7.02(a) shall be made
available to the Parent in accordance with the provisions of Section 5.02(a).
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SECTION 7.03. Returns and Payments. (a) From the date of this Agreement
through and after the Closing Date, the Shareholders shall prepare and file or
otherwise furnish in proper form to the appropriate Governmental Authority (or
cause to be prepared and filed or so furnished) in a timely manner (with
extensions) all Tax Returns required to be filed by the Company, the Subsidiary
and the LLC Subsidiary that are due on or before the 10th day after the
Effective Time (or if later, the Closing Date) (and the Parent shall do the
same with respect to any Tax Return required to be filed after the 10th day
after the Effective Time (or if later, the Closing Date)). None of the Parent,
the Parent Sub, the Company, the Subsidiary or the LLC Subsidiary or their
employees or agents shall have any liability to the Shareholders with respect
to the preparation and filing of Returns for periods ending on or prior to the
Effective Time (or if later, the Closing Date) (other than by reason of gross
negligence); the Shareholders shall indemnify each such Person against any
liability or cost by reason of a claim by a Tax authority under Section 6694 of
the Code, or any corresponding provision of any other law, to the extent
relating to such preparation; and the Shareholders shall reimburse the Company,
the Parent Sub and the Subsidiary against third-party professional fees, if
any, incurred in connection with such preparation. Returns of the Company, the
Subsidiary and the LLC Subsidiary not yet filed for any taxable period that
begins before the Effective Time (or if later, the Closing Date) shall be
prepared in a manner consistent with past practices employed with respect to
the Company, the Subsidiary and the LLC Subsidiary (except to the extent
present counsel for the Shareholders or the Company renders a legal opinion
that there is no reasonable basis in law therefor or determines that a Return
cannot be so prepared and filed without being subject to penalties). With
respect to any Return required to be filed by the Parent or the Shareholders
with respect to the Company, the Subsidiary and the LLC Subsidiary and as to
which an amount of Tax is allocable to the other party under Section 7.05(b) or
as to which the other party is responsible for an amount of tax under Section
7.05(a), the filing party shall provide the other party and such party's
authorized representatives with a copy of such completed Return and a statement
certifying the amount of Tax shown on such Return that is allocable to such
other party pursuant to Section 7.05(b), together with appropriate supporting
information and schedules at least 20 Business Days prior to the due date
(including any extension thereof) for the filing of such Return, and such other
party and such other party's authorized representatives shall have the right to
review and comment on such Return and statement prior to the filing of such
Return. Such other party shall have the right to dispute the amount of Taxes
allocated to such party by the filing party, and any dispute that cannot be
resolved between the parties shall be resolved by an independent certified
public accountant reasonably acceptable to all parties or by binding
arbitration as described in Section 7.03(c). Any objections not raised at
least 10 Business Days after the date the filing party provides a draft
completed Return and accompanying statement shall be deemed waived.
(b) The Shareholders shall pay or cause to be paid when due and
payable all Taxes with respect to the Company, the Subsidiary and the LLC
Subsidiary for any taxable period ending before or on the Effective Time (or if
later, the Closing Date). The Parent shall pay or cause to be paid when due
and payable all Taxes with respect to the Company, the Subsidiary and the LLC
Subsidiary for any taxable period ending before or on the Effective Time (or if
later, the Closing Date) to the extent of the amount, if any, accrued for such
Taxes at the Effective Time (or if later, the Closing Date). The Parent shall
also
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pay or cause to be paid when due and payable all Taxes for any taxable period
ending after the Effective Time (or if later, the Closing Date) (subject to any
right of indemnification from the Shareholders hereunder for Taxes).
(c) If the parties cannot resolve a dispute under Section 7.03(a) in
the manner set forth therein, either party shall have the right to submit such
dispute to a single arbitrator for resolution. The arbitrator shall be
selected by mutual agreement of the parties. The arbitrator shall be an
individual who is a certified public accountant and who has substantial
experience with respect to tax matters. If the parties cannot agree upon an
arbitrator within fifteen (15) days after either makes a written request for
arbitration of the dispute to the other party, then within ten (10) days after
the expiration of such fifteen (15) day period, the Parent shall select one
person qualified to serve as arbitrator and the Shareholders shall select a
second person to serve as arbitrator. The Parent and the Shareholders shall
each notify the other party within such ten (10) day period of the name,
address and other information regarding the person so selected. The two (2)
persons so selected shall, within fifteen (15) days after the expiration of the
ten (10) day period, agree upon a third person to serve as arbitrator, and such
third person shall serve as the sole arbitrator. Such person must be a
certified public accountant with substantial experience in tax matters. The
arbitration shall be conducted as soon as practicable after final selection of
the arbitrator in Baton Rouge, Louisiana according to such procedures as may be
established by the arbitrator; provided, however, the arbitrator shall apply
the Federal Rules of Evidence and Federal Rules of Civil Procedures to the
proceeding. Each party shall advance one-half of the costs and fees of the
arbitrator. Arbitration may proceed in the absence of the Parent or the
Shareholders if notice of the date and time for the proceedings has been given
to the absent party at least fifteen (15) days prior to the date of the
proceeding. Submission of the disputed matter to an arbitrator pursuant to
this Section 7.03(c) shall be specifically enforceable. The decision of the
arbitrator shall be final and binding upon the Parent and the Shareholders.
All costs and expenses (including, without limitation, the arbitrator's fees,
reasonable attorney's fees, disbursements and the costs and expenses of the
Parent and the Shareholder) shall be paid by the non-prevailing party.
SECTION 7.04. Refunds. Any Tax refund (or comparable benefit resulting
from a reduction in Tax liability) for a period ending on or before the
Effective Time (or if later, the Closing Date) arising out of the carryback of
a loss or credit incurred by the Company, the Subsidiary or the LLC Subsidiary
in a taxable year ending after the Effective Time (or if later, the Closing
Date) shall be the property of the Parent and, if received by the Shareholders
or any Affiliate of the Shareholders, shall be paid over promptly to the
Parent.
SECTION 7.05. Indemnity. (a) Subject to Section (b) of this Section
7.05, the Shareholders agree to indemnify and hold the Parent, the Company, and
the Subsidiary harmless against any breach of a covenant contained in this
Article VII and the following Taxes (to the extent such Taxes are not satisfied
by liabilities, expenses, reserves or allowances established on the books and
records of the Company, the Subsidiary or the LLC Subsidiary through and
including the Effective Time (or if later, the Closing Date)) and, except as
otherwise provided in Section 7.06, against any loss, damage, liability, or
expense, including reasonable fees for attorneys and consultants, incurred in
contesting or otherwise in connection with any such Taxes: (i) Taxes imposed on
the Company, the Subsidiary or
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the LLC Subsidiary with respect to taxable periods of such corporations ending
before or on the Effective Time (or if later, the Closing Date); (ii) with
respect to taxable periods beginning before the Effective Time (or if later,
the Closing Date) and ending after the Closing Date, (A) Taxes imposed on the
Company, the Subsidiary or the LLC Subsidiary which are allocable, pursuant to
Section 7.05(b), to the portion of such period ending on the Effective Time (or
if later, the Closing Date), and (B) Taxes imposed on the Company, the
Subsidiary or the LLC Subsidiary by reason of such corporation's distributive
share of income or loss from, or otherwise in respect of, any partnership in
which the Company, the Subsidiary or the LLC Subsidiary was a member on or
prior to the Effective Time (or if later, the Closing Date) that are allocable,
pursuant to Section 7.05(b), to the portion of such period ending on the
Effective Time (or if later, the Closing Date); (iii) Taxes imposed on the
Company, the Subsidiary or the LLC Subsidiary by reason of being a member of
any affiliated group (other than the group for which the Company is the common
parent) with which any of the Company, the Subsidiary and the LLC Subsidiary
file or have filed a Return on a consolidated or combined basis for a taxable
period ending before or on the Effective Date (or if later, the Closing Date);
(iv) Taxes imposed on the Parent or the Company, the Subsidiary or the LLC
Subsidiary as a result of any breach of warranty or misrepresentation under
Section 7.01 (for which purpose the representations in Section 7.01 shall be
deemed to have been made with no exception for items disclosed in Section 7.01
of the Disclosure Schedule or otherwise), including as the result of any
failure of the Tax attributes referred to in Sections 7.01(xxi) and 7.01(xxii)
to at least equal the amounts represented; (v) Taxes arising in any taxable
period ending after the Effective Time (or if later, the Closing Date) as a
result of the disallowance or deferral of any expense or capitalized item from
prior periods or the deferral of income items from prior periods to the current
period (net of any applicable Tax reductions; and (vi) Taxes arising in any
taxable period ending after the Closing Date from the failure of the Company,
the Subsidiary or the LLC Subsidiary to establish or retain records required
under applicable Tax law with respect to any transaction, event or item. The
Shareholders' obligation to indemnify the Parent, the Company, the Subsidiary
or the LLC Subsidiary for pre-Closing Date Taxes under this Section 7.05 shall
be reduced to reflect the present value of any post-Closing Date benefit that
the Parent, the Company, the Subsidiary or the LLC Subsidiary (or the
consolidated group with which it files a federal income tax return) may be
reasonably expected to obtain in post-Closing Date income tax filings that
corresponds to Taxes for which an indemnity payment has been made.
(b) In the case of Taxes that are payable with respect to a taxable
period that begins before the Effective Time (or if later, the Closing Date)
and ends after the Effective Time (or if later, the Closing Date), the portion
of any such Tax that is allocable to the portion of the period ending on the
Effective Time (or if later, the Closing Date) shall be:
(i) in the case of Taxes that are either (x) based upon or
related to income or receipts, or (y) imposed in connection with any sale or
other transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, as provided
under Section 7.10), deemed equal to the amount which would be payable if the
taxable year ended with the Effective Time (or if later, the Closing Date)
(except that, solely for purposes of determining the marginal tax rate
applicable to income or receipts during such period in a jurisdiction in which
such tax rate
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depends upon the level of income or receipts, annualized income or receipts may
be taken into account if appropriate for an equitable sharing of such Taxes);
and
(ii) in the case of Taxes not described in subparagraph (i)
that are imposed on a periodic basis and measured by the level of any item,
deemed to be the amount of such Taxes for the entire period (or, in the case of
such Taxes being determined on an arrears basis, the amount of such Taxes for
the immediately preceding period) multiplied by a fraction the numerator of
which is the number of calendar days in the period ending on the Effective Time
(or if later, the Closing Date) and the denominator of which is the number of
calendar days in the entire period.
For purposes of this Section 7.05(b) and 7.05(a), the Taxes attributable to the
Company, the Subsidiary or the LLC Subsidiary by reason of such corporation's
distributive share of income, gain, or loss from, or otherwise in respect of,
any partnership in which the Company, the Subsidiary or the LLC Subsidiary is a
member on the Effective Time (or if later, the Closing Date) shall be
determined as if such partnership's taxable year ended on the Effective Time
(or if later, the Closing Date).
SECTION 7.06. Contests. (a) After the Closing, the Parent shall promptly
notify the Shareholders in writing of any written notice of a proposed
assessment or claim in an audit or administrative or judicial proceeding of the
Parent or of any of the Company, the Subsidiary and the LLC Subsidiary which,
if determined adversely to the taxpayer, would be grounds for indemnification
under this Article VII; provided, however, that a failure to give such notice
will not affect the Parent's rights to indemnification under this Article VII
except to the extent that the Shareholders demonstrate that they were
materially prejudiced thereby.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Effective Time (or if later,
the Closing Date), provided that the Shareholders acknowledge in writing its
liability under this Agreement to hold the Parent, the Company, and the
Subsidiary harmless against the full amount of any adjustment which may be made
as a result of such audit or proceeding that relates to periods ending on or
before the Closing Date, the Shareholders shall have the right at their expense
to participate in and control the conduct of such audit or proceeding but only
to the extent that such audit or proceeding relates solely to a potential
adjustment for which the Shareholders have acknowledged its liability. As
security for the indemnification provided hereunder, the Shareholders shall
place 10% of the shares of the Parent's Common Stock received by them at the
Closing in escrow pursuant to the Escrow Agreement. The Parent shall also have
the right at its expense to participate in such audit or proceeding, but the
Parent shall have no right to control all or any portion of such audit or
proceeding permitted to be controlled by the Shareholders under the immediately
preceding sentence. If the Shareholders assume the defense of any such audit
or proceeding, and the Shareholders and the relevant taxing authority are
thereafter willing to settle such audit or proceeding for the payment by the
Shareholders of a fixed amount of Tax but the Parent rejects such settlement,
then the Shareholders' liability under this sentence for Taxes with respect to
such audit or proceeding shall be limited to the aggregate amount of the
proposed settlement and the Shareholders shall not be liable for any expenses
incurred by the Parent with respect to such audit or
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proceeding. If the Shareholders do not assume the defense of any such audit or
proceeding, the Parent may defend the same at the reasonable expense of the
Shareholders in such manner as they may deem appropriate, including, but not
limited to, settling such audit or proceeding with the consent of the
Shareholders, which consent shall not be unreasonably withheld. In the event
that issues relating to a potential adjustment for which the Shareholders have
acknowledged their liability are required to be dealt with in the same
proceeding as separate issues relating to a potential adjustment for which the
Parent would be liable, the Shareholders shall have the right, at its expense,
to control the audit or proceeding with respect to the issues for which it is
liable and the Parent shall have the right, at its expense, to control the
audit or proceeding with respect to the issues for which they are liable.
(c) With respect to issues relating to a potential adjustment for
which the Shareholders, on the one hand (as evidenced by its acknowledgment
under this Section 7.06), and the Parent or the Company, the Subsidiary or the
LLC Subsidiary, on the other hand, could be liable, or which recur for any
period ending after the Effective Time (or if later, the Closing Date) (whether
or not the subject of audit at such time), (i) each party (either the
Shareholders, on the one hand, or the Parent, the Company, or the Subsidiary,
on the other hand) may participate at its own expense in the audit or
proceeding, and (ii) the audit or proceeding with respect to such issues shall
be controlled by that party which would bear the burden of the greater portion
of the present value of the Tax attributable to the adjustments and any
corresponding adjustments that may reasonably be anticipated for future Tax
periods. The principle set forth in the immediately preceding sentence shall
govern also for purposes of deciding any issue that must be decided jointly
(including, without limitation, choice of judicial forum) in situations in
which separate issues are otherwise controlled under this Article VII by the
Parent, on the one hand, and the Shareholders, on the other hand.
(d) Except as provided in Section 7.06(b) above, neither the Parent
nor the Shareholders shall enter into any compromise or agree to settle any
claim pursuant to any Tax audit or proceeding which would adversely affect the
other parties for such year or a subsequent year without the written consent of
the other parties, which consent may not be unreasonably withheld. The Parent
and the Shareholders agree to cooperate, and the Parent agrees to cause the
Company, the Subsidiary and the LLC Subsidiary to cooperate, in the defense
against or compromise of any claim in any audit or proceeding.
SECTION 7.07. Time of Payment. Payment by the Shareholders of any
amounts due under this Article VII in respect of Taxes shall be made (either
directly by the Shareholders or under the Escrow Agreement) as follows:
(a) at least three Business Days before the due date of the
applicable estimated or final Returns required to be filed by the Parent on
which are required to be reported income for a period ending after the
Effective Time (or if later, the Closing Date) for which the Shareholders are
responsible under Sections 7.05(a) and 7.05(b) without regard to whether the
Returns shows overall net income or loss for such period;
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(b) within ten Business Days following an agreement between the
Shareholders and the Parent that an indemnity amount is payable; and
(c) within five days before the due date for the payment of any Tax
pursuant to an assessment of such Tax by either a taxing authority or a
"determination" as defined in Section 1313(a) of the Code.
If liability under this Article VII is in respect of costs or expenses other
than Taxes, payment by the Shareholders or the Parent of any amounts due under
this Article VII shall be made within twenty Business Days after the date when
the party required to make such payment has been notified by the party entitled
to receive such payment that such party has a liability for a determinable
amount under this Article VII and is provided with calculations or other
materials supporting such liability.
Any amounts due and payable under this Article VII shall bear interest
at 18% per annum, or the highest non-usurious rate of interest allowed by
applicable law, whichever is lower.
SECTION 7.08. Cooperation and Exchange of Information. Pursuant to the
terms set forth in Section 5.02 of this Agreement, the Shareholders, on the one
hand, and the Parent, the Company, the Subsidiary and the LLC Subsidiary, on
the other hand, will provide each other with such cooperation and information
as any of them reasonably may request of the others in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a
right to a refund of Taxes, participating in or conducting any audit or other
proceeding in respect of Taxes or making representations to or furnishing
information to parties subsequently desiring to purchase the Company, the
Subsidiary or the LLC Subsidiary or any part of the Business from the Parent.
Such cooperation and information shall include providing copies of relevant
Returns or portions thereof, together with accompanying schedules, related work
papers and documents relating to rulings or other determinations by Tax
authorities. The Shareholders shall make their accountants and agents
available on a basis mutually convenient to both parties to provide
explanations of any documents or information provided hereunder. The
Shareholders shall cooperate, and shall cause the Company, the Subsidiary and
the LLC Subsidiary to cooperate, in maximizing the value to the Parent and the
Company of the net operating loss and capital loss carryovers and the net
unrealized built-in loss of the Company, the Subsidiary and the LLC Subsidiary.
All costs and expenses reasonably incurred by a party in responding to a
request for information or assistance, including the costs incurred by the
Shareholders in connection with the cooperation described in the preceding
sentence, pursuant to this Section 7.08 shall be paid by the party requesting
such information or assistance.
SECTION 7.09. Retention of Tax Returns and Records. Each of the
Shareholders, the Parent, the Company, and the Subsidiary shall retain all
Returns, schedules and work papers, records and other documents in its
possession relating to Tax matters of the Company, the Subsidiary and the LLC
Subsidiary for each taxable period first ending after the Effective Time (or if
later, the Closing Date) and for all prior taxable periods until the later of
(i) the expiration of the statute of limitations of the taxable periods to
which such Returns and other documents relate, or (ii) six years following the
due date (without
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extension) for such Returns; provided, however, that Returns, schedules, work
papers, records and other documents relating to the determination of the basis
of any asset shall be retained for six years following the disposition of such
asset; and provided, further, that the Shareholders shall not dispose of any
such documents without first notifying the Parent and providing the Parent a
reasonable period of time in which to assume possession of such documents. Any
information obtained under this Section 7.09 shall be kept confidential except
as may be otherwise necessary in connection with the filing of Returns or
claims for refund or in conducting an audit or other proceeding.
SECTION 7.10. Conveyance Taxes. Any real property transfer or gains,
sales, use, transfer, value added, stock transfer, stamp, recording,
registration, and any similar Tax or fee that becomes payable in connection
with any and all of the transactions contemplated by this Agreement shall be
paid by the Shareholders who shall file such applications and documents as
shall permit any such Tax to be assessed and paid on or prior to the Effective
Time (or if later, the Closing Date) in accordance with any available pre-sale
filing procedure. Each party hereto shall execute and deliver all instruments
and certificates necessary to enable the other to comply with the foregoing.
SECTION 7.11. Miscellaneous. (a) The Shareholders and the Parent agree
to treat all payments made by any of them to or for the benefit of the other
(including any payments to the Company, the Subsidiary or the LLC Subsidiary)
under this Article VII, under other indemnity provisions of this Agreement and
for any misrepresentations or breaches of warranties or covenants as
adjustments to the Purchase Price or as capital contributions for Tax purposes
and that such treatment shall govern for purposes hereof except to the extent
that the laws of a particular jurisdiction provide otherwise, in which case
such payments shall be made in an amount sufficient to indemnify the relevant
party on an after-Tax basis.
(b) None of the Shareholders, the Company, the Parent Sub or the
Parent shall file any Return, or take a position with a Tax authority unless
otherwise required by law, that is inconsistent with the Recitals of this
Agreement and the Merger Consideration set forth in Section 2.05.
(c) Except as otherwise specifically provided in Section 7.06, each
party shall bear its own expenses, including expenses for attorneys and other
outside consultants, in contesting any Tax for which such party is liable under
this Article VII.
(d) Any Tax sharing agreement or arrangement between the Company, the
Subsidiary or the LLC Subsidiary, on the one hand, and any other Person, on the
other hand, shall be or have been terminated on or prior to the Effective Time
(or if later, the Closing Date), and no payments shall be permitted or required
to be made thereunder by the Company, or the Subsidiary after the Closing
except to the extent that such amount is shown on the Financial Statements.
(e) Notwithstanding any provision in this Agreement to the contrary,
the obligations of the Shareholders to indemnify and hold harmless the Parent,
the Company, the Subsidiary and the LLC Subsidiary pursuant to this Article
VII, and the representations and warranties contained in Section 7.01, shall
terminate at the close of business on the 30th
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day following the expiration of the applicable statute of limitations with
respect to the Tax liabilities in question (giving effect to any waiver,
mitigation or extension thereof).
(f) From and after the date hereof, neither the Company nor the
Subsidiary shall, and the Shareholders shall not permit the Company, the
Subsidiary or the LLC Subsidiary to, make or revoke, or cause or permit to be
made or revoked, any Tax election, or adopt or change any method of accounting,
that would materially affect the Company, the Subsidiary or the LLC Subsidiary
for any taxable year ending after the Effective Time (or if later, the Closing
Date) without the prior written consent of the Parent, which consent shall not
be unreasonably withheld.
(g) The Parent and the Shareholders shall be entitled to recover
professional fees and related costs that they may reasonably incur to enforce
the provisions of this Article VII if and to the extent they prevail in such
enforcement.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Shareholders and the
Company. The respective obligations of the Shareholders and the Company to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Parent and the Parent Sub contained in this Agreement
shall have been true and correct as of the date they were deemed to have been
made and shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing, except for such
changes as are permitted or contemplated by this Agreement, and other than such
representations and warranties as are made as of another date. The covenants
and agreements contained in this Agreement to be complied with by the Parent
and the Parent Sub on or before the Closing shall have been complied with. The
Shareholders shall have received a certificate from the Parent to such effect
signed by duly authorized representatives thereof and dated as of the Closing
Date;
(b) Reserved.
(c) No Proceeding or Litigation. No Action shall have been commenced
or threatened by or before any Governmental Authority against any of the
Shareholders, the Company, the Parent Sub or the Parent, seeking to restrain or
adversely alter the transactions contemplated by this Agreement or which is
likely to render it impossible or unlawful to consummate such transactions;
provided, however, that the provisions of this Section 8.01(c) shall not apply
if the Shareholders or the Company has directly or indirectly solicited or
encouraged any such Action;
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(d) Resolutions. The Shareholders shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of the
Parent and the Parent Sub of the resolutions duly and validly adopted by the
Board of Directors of the Parent and the sole shareholder and the Board of
Directors of the Parent Sub evidencing its authorization of the execution and
delivery of this Agreement and the other agreements to be executed by the
Parent as contemplated hereby and the consummation of the transactions
contemplated hereby;
(e) Incumbency Certificate. The Shareholders shall have received a
certificate of the Secretary or an Assistant Secretary of the Parent and the
Parent Sub certifying the names and signatures of the officers of the Parent
and the Parent Sub authorized to sign this Agreement and the other documents to
be delivered hereunder;
(f) Legal Opinion. The Shareholders shall have received from
Parent's Counsel a legal opinion, addressed to the Shareholders and dated the
Closing Date, substantially in the form of Exhibit 8.01(f);
(g) Consents and Approvals. The Shareholders, the Company and the
Parent Sub and the Parent shall have received in form and content satisfactory
to the Company (i) all authorizations,consents, orders and approvals of all
Governmental Authorities listed in Section 3.07 of the Disclosure Schedule
which, in each case, shall not contain any material conditions or limitations
which are reasonably unacceptable to the Shareholders, and (ii) all third party
consents and estoppel certificates listed in Section 5.04 of the Disclosure
Schedule;
(h) Related Agreements. The Registration Rights Agreement, in the
form of Exhibit 8.01(h)(1) shall have been duly executed and delivered by the
parties thereto; and
(i) Organizational Documents. The Shareholders shall have received a
copy of (i) the Articles of Incorporation, as amended, of the Parent, certified
by the Louisiana Secretary of State, as of a date not earlier than 10 Business
Days prior to the Closing Date and accompanied by a certificate of the
Secretary or Assistant Secretary of the Parent, dated as of the Closing Date,
stating that no amendments have been made to such Articles of Incorporation
since such date and (ii) the By-Laws of the Parent, as amended, certified by
the Secretary or Assistant Secretary of the Parent.
(j) Sale of Freeport Property. The Freeport Property shall have been
purchased and sold for the consideration and pursuant to an acquisition
agreement as described in Section 8.02(w).
(k) No Material Adverse Event. Since May 31, 1996, to the Closing
Date, there has been no material adverse event relating to the Parent and its
subsidiaries taken as a whole and no material adverse change in the financial
position or results of operations of the Parent and its subsidiaries taken as a
whole which, in either case, (i) require a public disclosure or filing by the
Parent with the SEC or (ii) will be required to be included in a Parent SEC
Report which report includes the period from May 31, 1996, to the Closing Date.
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(l) Payment of Certain Obligations. The Company shall have paid the
obligations described in Section 8.01(l) of the Disclosure Schedule.
(m) Tax Opinion. The Shareholders shall have received an opinion
from the Company's Counsel that the Merger will qualify as a tax-free
reorganization under Section 368(a) of the Code to the Shareholders.
(n) Release of Personal Guarantees. The Shareholders shall have been
released from the personal guarantees set forth on Exhibit 8.01(n).
SECTION 8.02. Conditions to Obligations of the Parent and the Parent
Sub. The respective obligations of the Parent and the Parent Sub to consummate
the transactions contemplated by this Agreement shall be subject to the
fulfillment, at or prior to the Closing, of each of the following conditions,
any of which may be waived by the Parent in writing, and the Company and the
Shareholders shall use their best efforts to cause such conditions to be
fulfilled; provided, however, Parent's election to proceed with the Closing of
the transactions contemplated herein shall not be deemed a waiver of any breach
of any representation, warranty or covenant herein, whether or not known to
Parent or Parent Sub or existing on the Closing Date. For purposes of
determining whether a breach of a representation or warranty has occurred, and
determining the amount of damage suffered by the Parent or the Parent Sub or
their Affiliates as a result thereof for purposes of Section 9.02 hereof, the
Shareholders and the Company shall be deemed to have made the agreements
contained in this Agreement and the representations and warranties set forth in
Article III on the Closing Date as if they were made on such date:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Shareholders and the Company contained in this Agreement
shall have been true and correct as of the date as of which they were deemed to
have been made and shall be true and correct in all material respects as of the
Closing, with the same force and effect as if made as of the Closing except for
such changes as are permitted or contemplated by this Agreement, other than
such representations and warranties as are made as of another date. The
covenants and agreements contained in this Agreement to be complied with by the
Shareholders, the Company, and the Subsidiary on or before the Closing shall
have been complied with. The Parent shall have received a certificate from the
Shareholders to such effect dated as of the Closing Date;
(b) Reserved.
(c) No Proceeding or Litigation. No Action shall have been commenced
or threatened by or before any Governmental Authority against any of the
Shareholders, the Company, the Parent Sub or the Parent, seeking to restrain or
adversely alter the transactions contemplated hereby or which is likely to
render it impossible or unlawful to consummate the transactions contemplated by
this Agreement or which could have a Material Adverse Effect; provided,
however, that the provisions of this Section 8.02(c) shall not apply if the
Parent or the Parent Sub has directly or indirectly solicited or encouraged any
such Action;
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(d) Release of Indemnity Obligations. The Parent shall have received
(i) the general releases and discharges from the Shareholders referred to in
Section 5.09 and (ii) evidence of removal of the Encumbrances as required by
Section 5.09, each to be in form and substance reasonably satisfactory to the
Parent;
(e) Financing. The Parent and the Parent Sub shall have received the
consent of its commercial lenders to the transactions contemplated hereunder
and obtained financing on terms acceptable to them in their sole and absolute
discretion sufficient to enable them to operate the Business;
(f) Legal Opinions. The Parent and the Parent Sub shall have
received from Company's Counsel a legal opinion, addressed to the Parent and
the Parent Sub and dated the Closing Date, substantially in the form of Exhibit
8.02(f);
(g) Consents and Approvals. The Parent and the Shareholders shall
have received, each in form and substance reasonably satisfactory to the
Parent, (i) all authorizations, consents, orders and approvals of all
Governmental Authorities listed in Section 3.07 of the Disclosure Schedule
which shall not contain any material conditions or limitations which are
reasonably unacceptable to Parent; and (ii) all third party consents and
estoppel certificates listed in Section 5.04 of the Disclosure Schedule;
(h) Resignations of Directors, Officers and Managers. The Parent
shall have received the resignations, effective as of the Closing, or evidence
of removal as of the Closing, of all the directors and officers of the
Subsidiary and all managers of the LLC Subsidiary, `except for such persons as
are designated on Exhibit 8.02(h) hereto;
(i) Organizational Documents. The Parent shall have received a copy
of (i) the Articles of Incorporation, as amended, of the Company and of the
Subsidiary, and Articles of Organization of the LLC Subsidiary, certified by
the Secretary of State of the State of its organization, as of a date not
earlier than 10 Business Days prior to the Closing Date and accompanied by a
certificate of the Secretary or Assistant Secretary of each such entity, dated
as of the Closing Date, stating that no amendments have been made to such
Articles of Incorporation and Articles of Organization, as the case may be,
since such date and (ii) the By-laws of the Company and of the Subsidiary and
the Operating Agreement, if any, of the LLC Subsidiary, as amended, certified
by the Secretary or Assistant Secretary of each such entity;
(j) Minute Books. The Parent shall have received a copy of the
minute books and stock register of the Company, the Subsidiary and the minutes
book and membership register of the LLC Subsidiary, certified by their
respective Secretaries or Assistant Secretaries as of the Closing Date;
(k) Good Standing; Qualification to Do Business. The Parent shall
have received good standing certificates, certificates of compliance, or
certificates of existence, as applicable, for the Company, for the Subsidiary
and for the LLC Subsidiary from the secretary of state, or the other applicable
Governmental Authority, of (i) the jurisdiction in which each such entity is
incorporated or organized, and (ii) each other jurisdiction in which
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each such entity does business requiring it to qualify in such jurisdiction, in
each case dated as of a date not earlier than ten Business Days prior to the
Closing Date;
(l) Escrow Agreement. The Shareholders shall have executed and
delivered the Escrow Agreement substantially in the form of Exhibit 8.02(l) and
made the transfer to the escrow agreement as contemplated thereby;
(m) Resolutions. The Parent shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of the Company
resolutions duly and validly adopted by the Shareholders and the Board of
Directors of the Company evidencing its authorization of the execution and
delivery of this Agreement and the other agreements to be executed by the
Company as contemplated hereby and the consummation of the transactions
contemplated hereby;
(n) No Material Adverse Effect. No event or events shall have
occurred which, individually or in the aggregate, have a Material Adverse
Effect;
(o) Environmental Matters. (1) At Parent's election, the Parent
shall have received written reports prepared by an environmental consulting
firm chosen by Parent demonstrating that the Company, the Subsidiary and the
LLC Subsidiary, any Affiliates of the Company, the Subsidiary or the LLC
Subsidiary and, with respect to the Business, the Shareholders are, to the
satisfaction of the Parent, in compliance with Environmental Laws in connection
with the Business and the Assets, and that any potential liabilities of the
Company, the Subsidiary and the LLC Subsidiary, any Affiliates of the Company,
the Subsidiary or the LLC Subsidiary and, with respect to the Business, the
Shareholders, under any Environmental Law for the Release of any Hazardous
Material would not, in the opinion of the Parent, have a Material Adverse
Effect;
(2) Prior to the Closing, the Parent shall have received a
copy of each Environmental Permit currently required to be obtained or
maintained by the Company or, with respect to the Business, the Shareholders,
together with a description of the terms of each Environmental Law that
conditions, restricts or prohibits the transfer of such Environmental Permit to
any new owner or operator;
(p) No Regulatory Restrictions. None of the Company, the Subsidiary
or the LLC Subsidiary shall be subject to any restriction (whether on its
business, operations, ability to pay dividends or incur indebtedness, or
otherwise) imposed or proposed to be imposed as a result of the transactions
contemplated by this Agreement by any Governmental Authority except
restrictions generally applicable to companies engaging in businesses
substantially similar to the Business and restrictions which result primarily
from any action or inaction of the Parent or the fact that the Parent is a
participant in the transactions contemplated by this Agreement;
(q) Due Diligence. The Parent shall have had a full opportunity to
complete its due diligence review of the Business including (i) a review of all
documents, records and other information which the Parent in its opinion shall
have deemed relevant and (iv) visits to or inspections of any location where
the Business is conducted (the "Parent's Due
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Diligence Review") which Parent's Due Diligence Review shall not have revealed
any information not known to Parent on the date hereof which has or is
reasonably likely to have a Material Adverse Effect. Although the Parent has
received the Disclosure Schedule and copies of various documents referred to
therein, the Company and the Shareholders agree and acknowledge that the Parent
has not had the opportunity to review the same and, accordingly, for purposes
of this Section 8.02(q), the Parent shall be deemed to have no knowledge on the
date hereof of any information contained in the Disclosure Schedule or the
documents referred to therein;
(r) Inter-Company Arrangements. The Shareholders and the Company,
the Subsidiary or the LLC Subsidiary, as applicable, shall have terminated the
Inter-Company Arrangements in accordance with Section 5.13 and delivered to the
Parent and the Parent Sub evidence thereof which is reasonably acceptable to
Parent;
(s) Related Agreements. The Registration Rights Agreement and
Representation Letter by the Shareholders in the respective forms of Exhibit
8.01(s)(1) and Exhibit 8.02(s)(2), respectively, shall have been duly executed
and delivered by the parties thereto; and
(t) Accountants' Opinions. No later than August 11, 1996, the Parent
shall have received an opinion from its independent certified public
accountants and the Company's independent certified public accountants, each in
form and substance satisfactory to the Parent, that the transaction
contemplated by this Agreement will qualify as a "pooling of interest" under
applicable accounting rules.
(u) Board Approval. The Board of Directors of the Parent shall have
approved this Agreement and the transaction contemplated hereby.
(v) Execution by the Board of Directors and the Shareholders of the
Company. All of the members of the Board of Directors of the Company and all
of the Shareholders, other than the Minority Shareholders, shall have executed
this Agreement and provided a copy thereof to the Parent no later than August
7, 1996, and all of the Minority Shareholders shall have executed this
Agreement and provided a copy thereof to the Parent no later than August 16,
1996.
(w) Acquisition of Freeport Property. The Parent Sub shall have
acquired the Freeport Property in consideration for 127,000 unregistered shares
of the Parent's Common Stock pursuant to an acquisition agreement containing
representations, warranties, covenants and indemnities by the parties thereto,
including an escrow agreement by the seller(s) of no less than 12,700 shares of
the Parent's Common Stock, of a type and scope substantially similar to those
contained in this Agreement; provided, however, that such acquisition agreement
shall not contain a provision similar to 9.03(d) and any indemnification in
connection with the representations substantially similar to those in Section
3.16 shall not be limited by any cap.
(x) Employment Agreement and Non-Competition Agreements. Xxxxxxxx X.
Xxxxx shall have entered into an employment agreement with the Company
providing for
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a term of one year from the Closing Date and an annual salary of $125,000 and
Messrs. Xxxxxxx, Xxxxxxx and Xxxx shall have entered into non-competition
agreements in favor of the Parent, the Company and their affiliates providing
for a term of no less than two (2) years, after the date of the termination of
their respective employments, the terms of each such agreement to be
satisfactory to the Parent and providing for periodic payments to Messrs.
Xxxxxxx, Xxxxxxx and Xxxx in accordance with the schedule provided to the
Parent by the Company on or prior to August 7, 1996.
(y) Membership Interest in the LLC Subsidiary. The Subsidiary shall
have acquired all membership interests of the LLC Subsidiary, other than the
membership interest owned by the Company as of the date hereof, on such terms
as are satisfactory in the discretion of the Parent, including without
limitation, no obligation by the Company, the Subsidiary or the LLC Subsidiary
to make any additional payment in connection with such acquisition.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.01. Survival of Representations, Warranties and Covenants.
(a) The representations and warranties of the Shareholders contained in this
Agreement, the Exhibits to this Agreement and the Disclosure Schedule and any
certificate, statement or report or other document delivered pursuant to this
Agreement (collectively, the "Acquisition Documents"), shall survive the
Closing until the second anniversary of the Effective Time; provided, however,
that all representations and warranties made by Shareholders in Section 3.03,
3.09(a), 3.16, 3.24 and Article VII shall survive until the expiration of the
applicable statute of limitations or any extension thereof (or as otherwise
stated in Article VII). All covenants of the Shareholders shall survive
indefinitely after the Closing Date except as specifically set forth herein.
Neither the period of survival nor the liability of the Shareholders or the
Parent with respect to the Shareholders' or the Parent's representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the Parent or the Shareholders, as the case may be. If written
notice of a claim has been properly given in the manner required by Section
9.02(d) prior to the expiration of the applicable representations and
warranties, then the relevant representations and warranties shall survive as
to such claim until such claim has been finally resolved. No representation,
warranty or covenant of the Company contained in the Acquisition Documents
shall survive the Closing.
(b) The representations and warranties of the Parent contained in
this Agreement, the Exhibits to this Agreement and the Disclosure Schedule and
any certificate, statement or report or other document delivered pursuant to
this Agreement (collectively, the "Acquisition Documents"), shall survive the
Closing until the second anniversary of the Effective Time; provided, however,
that all representations and warranties made by Parent in Article VII shall
survive until the expiration of the applicable statute of limitations or any
extension thereof (or as otherwise stated in Article VII). All covenants of
the Parent shall survive indefinitely after the Closing Date except as
specifically set forth herein. If written
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notice of a claim has been properly given in the manner required by Section
9.02(d) prior to the expiration of the applicable representations and
warranties, then the relevant representations and warranties shall survive as
to such claim until such claim has been finally resolved.
SECTION 9.02. Indemnification. (a) The Parent, the Parent Sub (prior
to the Closing and thereafter the Company) and its other Affiliates, and each
of their officers, directors, employees, agents, consultants, successors and
assigns shall be indemnified and held harmless by the Shareholders (and, prior
to the Closing, the Company) for any and all Liabilities, losses, damages,
claims, reasonable costs and expenses, interest, awards, judgments, damages
(including punitive damages), fines, fees and penalties (including, without
limitation, attorneys', experts and consultants' fees and expenses)
(collectively, "Losses") actually suffered or incurred by them (including,
without limitation, any Action brought or otherwise initiated by any of them),
arising out of or resulting from:
(i) the inaccuracy of any representation or warranty made by
the Shareholders or the Company contained in any of the Acquisition Documents;
(ii) the breach of any covenant or agreement by the
Shareholders or the Company contained in the Acquisition Documents;
(iii) as expressly provided by Article VII hereof; and
(iv) liabilities of the Company, the Subsidiary or the LLC
Subsidiary, any Affiliate of the Company, the Subsidiary or the LLC Subsidiary
or, with respect to the Business, the Shareholders, arising out of or relating
to events occurring or circumstances or conditions existing at or prior to the
Closing under any Environmental Law or involving Hazardous Materials in
connection with the current or former assets and operations of the Company, the
Subsidiary, the LLC Subsidiary or the Business, or any former business
conducted by the Company or any current or former subsidiary or Affiliate,
including, without limitation, in connection with any security interest in real
property obtained by the Company, the Subsidiary or the LLC Subsidiary prior to
the Closing;
(v) liabilities of the Company, the Subsidiary or the LLC
Subsidiary, any Affiliate of the Company, the Subsidiary or the LLC Subsidiary
or, with respect to the Business, the Shareholders, arising out of or relating
to products sold or services rendered at or prior to the Closing in connection
with the current or former operations of the Company, the Subsidiary, the LLC
Subsidiary or the Business, or any former business conducted by the Company or
any current or former subsidiary or Affiliate.
(b) The Shareholders and (prior to the Closing, the Company, the
Subsidiary and the LLC Subsidiary) and their respective Affiliates, officers,
directors, employees, agents, consultants, successors and assigns shall be
indemnified and held harmless by the Parent for any and all Losses actually
suffered or incurred by any Indemnified Party (including, without limitation,
any Action brought or otherwise initiated by any of them), arising out of or
resulting from:
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(i) the inaccuracy of any representation or warranty made by
the Parent and the Parent Sub contained in the Acquisition Documents; and
(ii) the breach of any covenant or agreement by the Parent or
the Parent Sub contained in the Acquisition Documents.
(c) To the extent that an Indemnifying Party's undertakings set forth
in this Section 9.02 may be unenforceable, such Indemnifying Party shall
contribute the maximum amount that it is permitted to contribute under
applicable law to the payment and satisfaction of all Losses incurred by an
Indemnified Party.
(d) All claims for indemnification against the Shareholders or the
Parent, as the case may be (an "Indemnifying Party"), under any provision of
this Article IX shall be asserted and resolved (except for those claims related
to Taxes specifically provided in Section 7.06) as follows:
(i) In the event of any claim or demand for which an
Indemnifying Party would be liable for Losses to the Persons specified in
Section 9.02(a) or (b), as applicable, (each an "Indemnified Party") which is
asserted against or sought to be collected from such Indemnified Party by a
Person other than the Parent, the Parent Sub or the Shareholders ("Third Party
Claim"), the Indemnified Party shall deliver a Claim Notice (as defined below)
with reasonable promptness to the Indemnifying Party after the Indemnified
Party has actual notice of the Third Party Claim. The failure by any
Indemnified Party to provide the Indemnifying Party with the Claim Notice
required by the preceding sentence shall not impair the Indemnified Party's
rights hereunder except to the extent that an Indemnifying Party demonstrates
that it has been materially prejudiced thereby. The Indemnifying Party shall
notify the Indemnified Party within thirty (30) days of receipt of the Claim
Notice ("Notice Period") whether the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend the Indemnified Party
against such Third Party Claim.
(ii) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
Section 9.02(d), then the Indemnifying Party shall have the right to defend, at
its sole cost and expense, and, except as provided in the following sentence,
through counsel of its choice reasonably acceptable to the Indemnified Party
such Third party Claim by all appropriate proceedings, which proceedings shall
be diligently defended by the Indemnifying Party to a final conclusion or shall
be settled at the discretion of the Indemnifying Party (with the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld), so long as the Indemnified Party is fully released with respect to
such Third Party Claim. If there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the reasonable
judgment of the Indemnified Party for the same counsel to represent both the
Indemnified Party and the Indemnifying Party and the Indemnifying Party does
not provide separate counsel reasonably acceptable to the Indemnified Party,
then the Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party reasonably determines counsel is
required, at the expense of the Indemnifying Party. Assumption by the
Indemnifying Party of the defense of such Third Party Claim will not
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constitute an admission by the Indemnifying Party that the claim or litigation
is one for which the Indemnifying Party is required to indemnify the
Indemnifying Party under this Article IX. The Indemnifying Party shall have
full control of such defense and proceedings; provided, however, that the
Indemnified Party may at the sole cost and expense of the Indemnifying Party,
file during the Notice Period any motion, answer, or other pleadings that the
Indemnified Party may deem necessary or appropriate to protect its interests
and not irrevocably prejudicial to the Indemnifying Party (it being understood
and agreed that, except as provided in Section 9.02(d)(iii) hereof, if an
Indemnified Party takes any such action that is irrevocably prejudicial and
conclusively causes a final adjudication that is materially adverse to the
Indemnifying Party, the Indemnifying Party will be relieved of its obligations
hereunder with respect to the portion of such Third Party Claim prejudiced by
the Indemnified Party's action); and provided further, however, that if
requested by the Indemnifying Party, the Indemnified Party agrees, at the sole
cost and expense of the Indemnifying Party, to cooperate with the Indemnifying
Party and its counsel in contesting any Third Party Claim that the Indemnifying
Party elects to contest, or, if appropriate in the judgment of the Indemnified
Party and related to the Third Party Claim in question, in making any
counterclaim against the person asserting the Third Party Claim or any cross-
complaint against any Person (other than the Indemnified Party). The
Indemnified Party may, at its sole cost and expense, participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this Section 9.02(d)(ii).
(iii) If the Indemnifying Party fails to notify the Indemnified
Party within the Notice Period that the Indemnifying Party desires to defend
the Indemnified Party pursuant to Section 9.03(d)(i), or if the Indemnifying
Party gives such notice but fails to defend the Third Party Claim, then the
Indemnified Party will have the right (but not the obligation) to defend, at
the sole cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings will be vigorously defended by
the Indemnified Party or will be settled at the discretion of the Indemnified
Party. The Indemnified Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided, however,
that if requested by the Indemnified Party, the Indemnifying Party agrees, at
the sole cost and expense of the Indemnifying Party, to cooperate with the
Indemnified Party and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting, or, if appropriate and relating to the Third
Party Claim in question, in making any counterclaim against the person
asserting the Third Party Claim, or any cross-complaint against any person
(other than the Indemnifying Party or any of its Affiliates). Notwithstanding
the forgoing provisions of this Section 9.02(d)(iii), if the Indemnifying Party
has notified the Indemnified Party with reasonable promptness that the
Indemnifying Party disputes, or reserves its rights to dispute, its liability
to the Indemnified Party with respect to such Third Party Claim and if such
dispute is resolved in favor of the Indemnifying Party, the Indemnifying Party
will not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this Section 9.02(d)(iii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all costs and expenses
incurred by the Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section
9.02(d)(iii), but the Indemnifying Party will bear
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its own costs and expenses with respect to such participation. Regardless of
whether the Indemnifying Party defends a Third Party Claim on behalf of the
Indemnified Party or participates in the defense thereof, the Indemnified Party
and the Indemnifying Party shall reasonably cooperate with each other in all
material respects in connection with the defense for such Third Party Claim.
Each Indemnified Party shall furnish such information regarding itself and the
Third Party Claim as the Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with the defense thereof. No
Third Party Claim may be settled by the Indemnifying Party without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld), unless such settlement provides a release of the
Indemnified Party for such claim.
(iv) In the event any Indemnified Party should have a claim for
Losses against any Indemnifying Party hereunder that does not involve a Third
Party Claim being asserted against or sought to be collected from the
Indemnified Party, the Indemnified Party shall deliver an Indemnity Notice (as
defined below) with reasonable promptness to the Indemnifying Party after the
Indemnified Party has actual notice of such claim. The failure by any
Indemnified Party to give the notice referred to in the preceding sentence
shall not impair such party's rights hereunder except to the extent that an
Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. The Indemnifying Party and the Indemnified Party agree to proceed in
good faith to negotiate a resolution of any dispute relating to such a claim
for Losses within sixty (60) days following receipt of any Indemnity Notice.
If any such claim is not resolved within the foregoing period, the parties may
pursue any available remedies.
(v) The term "Claim Notice" shall mean written notification of
a Third Party Claim by an Indemnified Party to an Indemnifying Party pursuant
to Section 9.02(d)(i), enclosing a copy of all papers served, if any, and
specifying the nature of and alleged basis for such Third Party Claim and, to
the extent then feasible, the alleged amount or the estimated amount of such
Third Party Claim.
(vi) The term "Indemnity Notice" shall mean written
notification of a claim for indemnity (which claim does not involve a Third
Party Claim) by an Indemnified Party to an Indemnifying Party pursuant to
Section 9.02(d)(iv) hereof, specifying the nature of and specific basis for
such claim and, to the extent then feasible, the amount or the estimated amount
of such claim.
(vii) Any estimated amount of a claim submitted in a Claim
Notice or an Indemnity Notice shall not be conclusive of the final amount of
such claim.
(viii) Notwithstanding any other provision hereof, any contest or
claim for indemnification under Article VII shall be governed by the procedures
of such Article VII and not by the provisions of this Section 9.03.
(ix) In connection with each Third Party Claim, the
Indemnifying Party shall obligated to provide only one counsel to all
Indemnified Parties.
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(e) (i) The terms and provisions set forth in this Section 9.02
shall constitute the sole rights and remedies of the parties for money damages
in respect of any inaccuracies of representations or warranties or any breaches
of covenants or agreements contained in this Agreement.
(ii) In the event of a claim pursuant to Section 9.02(a)(v),
the Parent agrees, to the extent practical, to seek recovery for the related
Losses first from any products liability insurance providing coverage to the
Parent therefor, and then from the Escrow Shares (as defined in the Escrow
Agreement), prior to collection of such Losses from the Shareholders; provided,
however, the foregoing provision shall in no way limit or restrict any actions
or proceedings by the Parent against any Indemnifying Party, including without
limitation the Shareholders, to the extent the Parent deems, in its discretion,
such actions or proceedings to be necessary to preserve, maintain or enforce
any of its rights against any Indemnifying Party.
SECTION 9.03. Limits on Indemnification.
(a) No amount shall be payable by any Indemnifying Party pursuant to
Section 9.02(a) or (b) unless and until the aggregate amount of Losses
indemnifiable under Section 9.02(a) or (b) exceeds $300,000 and the
Indemnifying Party shall indemnify the Indemnified Party to the full extent of
such Losses up to but not to exceed $10,000,000.
(b) The limitations set forth in Sections 9.03(a) shall not apply
with respect to any Losses suffered or incurred by the Parent in connection
with (i) the representations contained in Sections 3.03, 3.09(a), 3.24 and
3.09(c), (ii) the representations, covenants and indemnities contained in
Article VII and (iii) any sums paid by the Subsidiary to acquire the membership
interest of the LLC Subsidiary not owned by the Company on the date hereof, and
the Shareholders shall fully indemnify the Parent for any such Losses from the
first dollar of such Losses to the full extent of such Losses.
(c) The amount of any indemnification obligation of an Indemnifying
Party shall be reduced by an amount equal to the value of the net Tax benefit
actually received by the Indemnified Party (to be calculated at the highest
marginal rate then applicable to the Indemnified Party) with respect to any
loss or other item the payment of which by an Indemnified Party shall produce a
deduction or an addition to basis for federal income tax purposes, such benefit
to be offset to the extent that the payment is treated as taxable income or
results in a reduction in basis to the Indemnified Party. No Indemnified Party
shall take any action or omit to take any action the primary purpose of which
is to avoid the application of this Subsection 9.03(c); provided, however, that
each Indemnified Party shall be permitted to engage in its own tax planning,
notwithstanding that the effect of such tax planning is to cause this
Subsection 9.03(c) to be inapplicable.
(d) Notwithstanding any provision of this Agreement to the contrary,
including Section 3.16 and this Article IX, and as consideration for the
Shareholders entering into this Agreement, the Shareholders shall have no
liability under this Agreement, direct or indirect, whether by indemnification,
contribution or otherwise, under any Environmental Law or involving any
Hazardous Waste except for Environmental Claims arising out of or relating
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to events occurring or circumstances or conditions existing at or prior to the
Closing under any Environmental Law or involving Hazardous Materials in
connection with the current or former assets and operations of the Company, the
Subsidiary, the LLC Subsidiary or the Business, or any former business
conducted by the Company or any current or former subsidiary or Affiliate.
SECTION 9.04. Security for Shareholders' Agreement to Indemnify. To
secure the Shareholders' obligations to indemnify the Parent hereunder, at the
Closing, the Shareholders shall deposit 10% of the shares of the Parent's
Common Stock received by them at the Closing with City National Bank of Baton
Rouge (or such other financial institution acceptable to the Parent), as escrow
agent, to be held and released in accordance with the terms of the Escrow
Agreement. Such escrowed funds and shares and right of set-off, however, shall
not be the Parent's exclusive remedies hereunder, and nothing herein shall
preclude the assertion by the Parent of any other right or remedies in respect
of the foregoing agreements on indemnity.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination by the Shareholders or Parent. This
Agreement may be terminated at any time prior to the Effective Time:
(a) by the Parent if, between the date hereof and the time scheduled
for the Closing: (i) an event or condition occurs that has resulted in a
Material Adverse Effect, (ii) any representation or warranty of the
Shareholders or the Company contained in this Agreement shall not have been
true and correct in all material respects as of the date when deemed to have
been made and, in the case of a breach reasonably susceptible to cure, shall
not have been cured within 30 calendar days, (iii) the Shareholders or the
Company shall not have complied in all material respects with any covenant or
agreement to be complied with by it and contained in this Agreement and, in the
case of a breach reasonably susceptible to cure, shall not have been cured
within 30 calendar days, or (iv) the Shareholders, the Company, the Subsidiary
or the LLC Subsidiary makes a general assignment for the benefit of creditors,
or any proceeding shall be instituted by or against, the Shareholders, the
Company, the Subsidiary or the LLC Subsidiary seeking to adjudicate any of them
a bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts under
any Law relating to bankruptcy, insolvency or reorganization; or
(b) by the Shareholders if, between the date hereof and the time
scheduled for the Closing: (i) any representation or warranty of the Parent or
the Parent Sub contained in this Agreement shall not have been true and correct
in all material respects as of the date when deemed to have been made and, in
the case of a breach reasonably susceptible to cure, shall not have been cured
within 30 calendar days, (ii) the Parent or the Parent Sub shall not have
complied in all material respects with any covenant or agreement to be complied
with by them and contained in this Agreement, and, in the case of a breach
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reasonably susceptible to cure, shall not have been cured within 30 calendar
days, or (iii) the Parent or the Parent Sub makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against the
Parent seeking to adjudicate it bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy, insolvency or
reorganization;
(c) by either the Shareholders or the Parent if the Effective Time
shall not have occurred by September 30, 1996; provided, however, that (i) if
the provisions of Section 8.01(g) have not been satisfied by September 30,
1996, and the Parent is diligently seeking to satisfy such condition, or (ii)
if the provisions of Section 8.02(g) have not been satisfied by September 30,
1996, and the Shareholders are diligently seeking to satisfy such condition,
then, in each case (subject to the proviso below) the obligations of the
parties to proceed toward Closing shall be extended until October 30, 1996; and
provided, further, that the right to terminate this Agreement under this
Section 10.01(c) shall not be available to any party whose failure to fulfill
any obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Effective Time to occur on or prior to such
date; or
(d) by either the Parent or the Shareholders in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or in the reasonable determination
of the Parent or the Shareholders, otherwise render inadvisable the
consummation of the transaction contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable; or
(e) by the mutual written consent of the Shareholders, the Company,
the Parent Sub and the Parent.
SECTION 10.02. Effect of Termination. (a) In the event of termination
of this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except (a) as set forth in Sections 10.02(b) and 11.02 and (b) that nothing
herein shall relieve any party from liability for any fraud or willful breach
of this Agreement.
(b) Notwithstanding the foregoing, if the Effective Time does not
occur solely because of (i) the failure to satisfy the conditions to the
Parent's and the Parent Sub's obligation to effect the Closing contained in
Sections 8.02 (a), (d), (f), (g) (except insofar as such condition relates to
the delivery of documents required to be obtained from any Governmental
Authority), (h), (i), (j), (k), (1), (m), (r), (s), (t) (relating to the
Company's accountants), (v), (w), (x) and (y), then the Shareholders and the
Company shall reimburse the Parent for its reasonable costs and expenses,
including, without limitation, reasonable fees and disbursements of counsel,
financial advisors, financing sources and accountants, incurred by the Parent
in connection with the preparation, negotiation and performance of this
Agreement and the transactions contemplated hereby up to $250,000 (as supported
by itemized invoices delivered to Shareholder), or (ii) the failure to satisfy
the conditions to the Shareholders' or the Company's obligation to effect the
Closing contained in
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Xxxxxxxx 0.00(x), (x), (x), (x), (x) (except insofar as such condition relates
to the delivery of documents required to be obtained from any Governmental
Authority), (h), (i), (j), (k) or (l), then the Parent shall reimburse the
Shareholders and the Company for their reasonable costs and expenses,
including, without limitation, reasonable fees and disbursements of counsel,
financial advisors and accountants, incurred by the Shareholders in connection
with the negotiation and performance of this Agreement and the transactions
contemplated hereby up to $250,000 (as supported by itemized invoices delivered
to the Parent).
SECTION 10.03. Waiver. Any party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Solidary Obligation of Shareholders Other than Minority
Shareholders. The obligations of the Shareholders under this Agreement, other
than the Minority Shareholders, shall be solidary; provided the maximum
liability of each such Shareholder shall not exceed a percentage of all amounts
owing by the Shareholders hereunder equal to 125% of a fraction of which the
numerator is the number of Shares owned by such Shareholder immediately prior
to the Closing Date and the denominator is the total number of Shares owned by
all the Shareholders immediately prior to the Closing Date. The obligations of
each of the Minority Shareholders shall be pro-rata based on the number of
Shares owned by each Minority Shareholder immediately prior to the Closing Date
as a percentage of the total number of Shares owned by all the Shareholders
immediately prior to the Closing Date. Following the Closing, the Shareholders
shall have no right of or claim to contribution or indemnity against the
Company with respect to any breach, violation, default, or alleged breach,
violation or default of any representation, warranty or covenant of the Company
in any of the Acquisition Documents.
SECTION 11.02. Expenses. Except as otherwise specified in Section
10.02(b), all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred; provided, however, the costs and expenses of the
Company's counsel and accountants in excess of $81,000 shall be paid by the
Shareholders.
SECTION 11.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be
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deemed to have been duly given or made upon receipt) by delivery in person, by
courier service, by telecopy (confirmed by telephone within 24 hours following
receipt thereof), or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 11.03):
(a) if to the Shareholders or the Company:
Xxxxxxxx X. Xxxxxx as Shareholder Representative
000 Xxxxx Xxxxxxxx Xxxxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
1000 Xxxxxx Building
000 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
and
(b) if to the Parent or the Parent Sub:
The Xxxx Group Inc.
00000 Xxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Kantrow, Spaht, Xxxxxx & Blitzer
(A Professional Law Corporation)
Suite 300, City Plaza
000 Xxxxx Xxxxxxxxx
X.X. Xxx 0000
Xxxxx Xxxxx, Xxxxxxxxx 00000-0000
Attention: J. Xxxxxxx Xxxxxxxx, Jr., Esq.
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
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and
Fulbright & Xxxxxxxx, L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
SECTION 11.04. Public Announcements. Except to the extent that the
Shareholders or Parent believes on the advice of counsel that public disclosure
is required by Law, no party to this Agreement shall make, or cause to be made,
any press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without prior notification to the other parties, and the parties shall
cooperate as to the timing and contents of any such press release or public
announcement.
SECTION 11.05. Headings; Construction. The descriptive headings
contained in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. The
provisions of this Agreement were negotiated by the parties hereto and this
Agreement shall be deemed to have been drafted by all the parties hereto.
SECTION 11.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 11.07. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, between the parties with respect to the subject matter hereof.
SECTION 11.08. Assignment. This Agreement may not be assigned by any
party hereto by operation of law or otherwise without the express written
consent of the other parties hereto (which consent may be granted or withheld
in the sole discretion of such other parties).
SECTION 11.09. No Third Party Beneficiaries. Except for the provisions
of Article IX relating to Indemnified Parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express
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85
or implied, is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 11.10. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver in accordance with Section 10.03.
SECTION 11.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Louisiana, applicable to
contracts executed in and to be performed entirely within that state.
SECTION 11.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 11.14. Legal Advice. Each party hereto represents and warrants
to the other party that he, she or it has consulted attorneys, accountants and
tax advisors of their own choosing concerning the legal, financial and tax
consequences of this Agreement
SECTION 11.15. Remedies Not Exclusive. Subject to the provisions of
Section 9.02 (e), no remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or not or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
ARTICLE XII
SHAREHOLDER REPRESENTATIVE; POWER OF ATTORNEY
SECTION 12.01. Shareholder Representative, Etc. Each of the
Shareholders hereby constitutes and appoints Xxxxxxxx X. Xxxxxx as his true and
lawful attorney-in-fact, agent and representative (the "Shareholder
Representative"), with full power of substitution and resubstitution, for him
and in his name, place and xxxxx, in any and all capacities, to negotiate and
sign all amendments to this Agreement, and all other documents in connection
with the transactions contemplated by this Agreement, including without
limitation those instruments called for by this Agreement and all waivers,
consents instructions, authorizations and other actions called for,
contemplated or that may otherwise be necessary or appropriate in connection
with this Agreement or any of the foregoing agreements or instruments, granting
unto the Shareholder Representative full power and authority to do and perform
each and every act and thing requisite and necessary to be
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86
done, as fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that the Shareholder Representative, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof, including without limitation the power and authority to deliver and
convey his Shares in accordance with the terms hereof, to receive and give
receipt for all consideration due him pursuant to this Agreement and to receive
all notices, requests and demands that may be made under and pursuant to this
Agreement. Should the Shareholder Representative be unable or unwilling to
serve or to appoint his successor to serve in his stead, and unless the
Shareholders appoint a successor to serve in his stead, the Shareholders shall
be required to act jointly so that the Parent and the Parent Sub may always
deal with one person on their behalf.
IN WITNESS WHEREOF, the Shareholders, the Company the Parent and the
Parent Sub have caused this Agreement to be executed as of the date first
written above, the corporate parties represented herein by their respective
officers thereunto duly authorized.
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87
THIS PLAN AND AGREEMENT OF MERGER IS NOT A PROSPECTUS AND ANY OFFERING OF THE
SHARES OF COMMON STOCK OF THE XXXX GROUP INC., COVERED BY THIS AGREEMENT IS NOT
A PUBLIC OFFERING. RECIPIENTS OF SUCH SHARES WILL NOT BE ENTITLED TO BRING A
CAUSE OF ACTION FOR RESCISSION UNDER SECTION 12(2) OF THE SECURITIES ACT OF
1933 FOR AN UNTRUE STATEMENT OF A MATERIAL FACT OR FOR THE FAILURE TO STATE A
MATERIAL FACT.
COMPANY:
NAPTech, INC.
By:
-----------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: President
PARENT:
THE XXXX GROUP INC.
By: /s/ XXXX X. XXXXXX
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President and Chief
Financial Officer
PARENT SUB:
SAON, INC.
By: /s/ XXXX X. XXXXXX
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: President
Members of the Board of Directors of NAPTech, Inc.
---------------------------------- -------------------------------------
Xxxxxxxx X. Xxxxxx Xxxxxx X. Xxxxxxxxx
---------------------------------- -------------------------------------
M. Xxxxxxx Xxxxxxx Xxxxxxx Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxx
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88
Members of the Board of Directors of SAON, Inc.
/s/ XXXX X. XXXXXX /s/ X.X. XXXXXXXX, XX.
---------------------------------- -----------------------------------
Xxxx X. Xxxxxx X.X. Xxxxxxxx, Xx.
SHAREHOLDERS OF SAON, Inc.
THE XXXX GROUP INC.
By: /s/ X.X. XXXXXXXX, XX.
-------------------------------
Name: X. X. Xxxxxxxx, Xx.
Title: Chairman of the Board,
President and Chief
Executive Officer
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SHAREHOLDERS OF NAPTech, Inc.:
--------------------------------- --------------------------------
Xxxxxxxx X. Xxxxxx (30.64%) Xxxx Xxxxxxxxx (.98%)
/s/ XXXXXX X. XXXXXXXXX
--------------------------------- --------------------------------
Xxxxxx X. Xxxxxxxxx (10.71%) Xxxxx Xxxxxxxxx (.98%)
--------------------------------- --------------------------------
Xxxxxx X. Xxxxxxxxx (10.34%) Xxxxxx Xxxxx (.05%)
--------------------------------- --------------------------------
NUPETCO Associates (9.76%) Xxxxxxx Xxxxxx (.10%)
--------------------------------- --------------------------------
GES Investments (8.29%) Xxxxxx Xxxxx (.20%)
--------------------------------- --------------------------------
SRW Investments (8.29%) Xxxxx Xxxxxx (.10%)
--------------------------------- --------------------------------
Xxxxxxx Investment (7.81%) Xxxxxx Xxxxxxx (.49%)
--------------------------------- --------------------------------
Xxxxxxx Xxxxxxx (6.37%) Xxxxxx Xxxxxxx (.15%)
--------------------------------- --------------------------------
Prudential Securities (.20%) Xxxxx Xxxxxx (.15%)
--------------------------------- --------------------------------
Xxx Xxxxxxxx (.41%) Xxxxx Xxxxxx (.10%)
--------------------------------- --------------------------------
Xxxxx Xxxxxxxxx (.26%) Xxxx Xxxxx (.10%)
--------------------------------- --------------------------------
Xxxx X. Xxxxxx (.98%) Xxxxxx Xxxxxx (.15%)
/s/ XXXX XXXXXXXX
--------------------------------- --------------------------------
Xxxx Xxxxxxxx (.24%) Xxxxxxx Xxxxxxxx (.24%)
--------------------------------
Xxx Xxxxx (.10%)
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90
---------------------------------
Xxxxxx Xxxxxx (.20%)
---------------------------------
Xxxxxxx Xxxxxx (.10%)
---------------------------------
Xxxxxx Xxxxxx (.10%)
---------------------------------
Xxxxxxxx Kaspervic (.10%)
---------------------------------
Xxxxxxx Xxxxxx (.10%)
---------------------------------
BAP (.59%)
---------------------------------
Xxxxx Xxxxxx (.10%)
/s/ [ILLEGIBLE]
---------------------------------
BB & GC (.52%)
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