STOCK PURCHASE AGREEMENT
Dated as of June 5,2006
by and among
CHARYS HOLDING COMPANY, INC.,
CROCHET & BOREL SERVICES, INC.
and
XXXX CROCHET
TABLE OF CONTENTS
PAGE
ARTICLE I. PURCHASE AND SALE OF C&B SHARES. . . . . . . . . . . . . . . . 1
ARTICLE II. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . 1
2.01 Determination of Purchase Price . . . . . . . . . . . . . . . . . 1
2.02 Payment of Cash Consideration . . . . . . . . . . . . . . . . . . 2
2.03 Payment of Initial Stock Consideration. . . . . . . . . . . . . . 2
2.04 Aggregate Cash Consideration Adjustment Mechanism . . . . . . . . 3
2.05 Make-Whole Adjustment . . . . . . . . . . . . . . . . . . . . . . 4
2.06 Incentive Compensation. . . . . . . . . . . . . . . . . . . . . . 5
2.07 Purchaser Stock Issued to the Seller. . . . . . . . . . . . . . . 5
2.08 Stock Holdback. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.09 Aged Accounts Receivable Adjustment . . . . . . . . . . . . . . . 7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . 7
3.01 Power, Authority and Organization of the Seller . . . . . . . . . 7
3.02 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.03 Ownership of the C&B Shares . . . . . . . . . . . . . . . . . . . 8
3.04 Absence of Other Claims . . . . . . . . . . . . . . . . . . . . . 8
3.05 Investment Representations. . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES REGARDING THE
CORPORATION. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.01 Organization and Authorization. . . . . . . . . . . . . . . . . . 10
4.02 Authorized and Outstanding Stock. . . . . . . . . . . . . . . . . 11
4.03 Absence of Other Claims . . . . . . . . . . . . . . . . . . . . . 11
4.04 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.05 Required Consents and Approvals . . . . . . . . . . . . . . . . . 11
4.06 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . . 12
4.07 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 12
4.08 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . 12
4.09 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.10 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . 13
4.11 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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TABLE OF CONTENTS
(continued)
PAGE
4.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 14
4.13 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.14 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.15 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . 17
4.16 Collective Bargaining . . . . . . . . . . . . . . . . . . . . . . 18
4.17 Labor Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.18 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 19
4.20 Required Licenses and Permits . . . . . . . . . . . . . . . . . . 21
4.21 Insurance Policies. . . . . . . . . . . . . . . . . . . . . . . . 21
4.22 Major Suppliers and Customers . . . . . . . . . . . . . . . . . . 21
4.23 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . 21
4.24 Agreements in Full Force and Effect . . . . . . . . . . . . . . . 22
4.25 Absence of Certain Changes and Events . . . . . . . . . . . . . . 23
4.26 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . 24
4.27 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.28 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.29 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . . 27
5.01 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.03 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.04 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.05 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.06 Purchaser Shares. . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.01 Operations of the Corporation . . . . . . . . . . . . . . . . . . 28
6.02 Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.03 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.04 Preparation of Supporting Documents . . . . . . . . . . . . . . . 31
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TABLE OF CONTENTS
(continued)
PAGE
6.05 Notices of Certain Events . . . . . . . . . . . . . . . . . . . . 32
6.06 Supplements to Schedules. . . . . . . . . . . . . . . . . . . . . 32
6.07 No Solicitation of Transactions . . . . . . . . . . . . . . . . . 33
6.08 Filings; Other Actions; Notification. . . . . . . . . . . . . . . 33
6.09 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.11 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.12 Non-Operating Expenses. . . . . . . . . . . . . . . . . . . . . . 34
6.13 [Intentionally Reserved]. . . . . . . . . . . . . . . . . . . . . 34
6.14 Use of Cash Consideration . . . . . . . . . . . . . . . . . . . . 35
6.15 Spin-Off Agreement. . . . . . . . . . . . . . . . . . . . . . . . 35
6.16 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.17 Unwind Option . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.18 Employee Bonus Pool . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE . . . . . . . . 37
7.01 Regulatory Consents . . . . . . . . . . . . . . . . . . . . . . . 37
7.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII.CONDITIONS TO OBLIGATIONS OF THE SELLER. . . . . . . . . . . . 38
8.01 Representations and Warranties True and Correct at Closing Dates. 38
8.02 Performance of Obligations. . . . . . . . . . . . . . . . . . . . 38
8.03 Documents Satisfactory in Form and Substance. . . . . . . . . . . 38
8.04 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.05 No Material Change. . . . . . . . . . . . . . . . . . . . . . . . 38
8.06 Opinion of Counsel to the Purchaser . . . . . . . . . . . . . . . 39
ARTICLE IX. CONDITIONS TO OBLIGATIONS OF PURCHASER . . . . . . . . . . . . 39
9.01 Representations and Warranties True and Correct at Closing Dates. 39
9.02 Performance Obligations . . . . . . . . . . . . . . . . . . . . . 39
9.03 No Material Change. . . . . . . . . . . . . . . . . . . . . . . . 39
9.04 Other Necessary Consents. . . . . . . . . . . . . . . . . . . . . 39
9.05 Opinion of Counsel to the Seller. . . . . . . . . . . . . . . . . 39
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TABLE OF CONTENTS
(continued)
PAGE
9.06 Non-Compete Agreement . . . . . . . . . . . . . . . . . . . . . . 40
9.07 Documents Satisfactory in Form and Substance. . . . . . . . . . . 40
9.08 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.09 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . 40
9.10 Release of Liens. . . . . . . . . . . . . . . . . . . . . . . . . 40
9.11 Payment of Indebtedness . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE X. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 40
10.01 Indemnification Obligations of the Seller. . . . . . . . . . . . 40
10.02 Indemnification Obligations of Purchaser . . . . . . . . . . . . 41
10.03 Indemnification Procedure. . . . . . . . . . . . . . . . . . . . 41
10.04 Survival Period. . . . . . . . . . . . . . . . . . . . . . . . . 43
10.05 Liability Limits . . . . . . . . . . . . . . . . . . . . . . . . 43
10.06 Investigations . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.07 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.08 Reduction of Purchase Price. . . . . . . . . . . . . . . . . . . 44
10.09 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.10 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE XI TERMINATION PRIOR TO SECOND CLOSING DATE . . . . . . . . . . . 44
11.01 Termination of Agreement . . . . . . . . . . . . . . . . . . . . 44
11.02 Termination of Obligations . . . . . . . . . . . . . . . . . . . 45
ARTICLE XII. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 45
12.01 Entire Agreement; Survival . . . . . . . . . . . . . . . . . . . 45
12.02 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.03 Parties Bound by Agreement; Successors and Assigns . . . . . . . 46
12.04 Counterparts; Facsimile. . . . . . . . . . . . . . . . . . . . . 46
12.05 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.06 Modification and Waiver. . . . . . . . . . . . . . . . . . . . . 46
12.07 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.08 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.09 Governing Law; Jurisdiction. . . . . . . . . . . . . . . . . . . 47
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TABLE OF CONTENTS
(continued)
PAGE
12.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . 47
12.11 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.12 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . 48
12.13 "Including". . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.14 Gender and Number. . . . . . . . . . . . . . . . . . . . . . . . 48
12.15 References . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.17 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 48
12.18 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.19 Ordinary Course of Business. . . . . . . . . . . . . . . . . . . 48
12.20 Commercially Reasonable Efforts. . . . . . . . . . . . . . . . . 49
12.21 Material Adverse Change (or Effect). . . . . . . . . . . . . . . 49
12.22 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.23 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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LIST OF SCHEDULES AND EXHIBITS
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SCHEDULES
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Schedule 2.04 Statement of Net Worth Mechanics
Schedule 2.06(a)(l) Incentive Compensation Mechanics
Schedule 2.06(a)(2) Incentive Employees
Schedule 2.06(b) Integration Incentive Compensation Mechanics
Schedule 3.03 Encumbrances on C&B Shares
Schedule 4.01(a) Qualifications to Conduct Business
Schedule 4.01(c) Officers and Directors of the Corporation
Schedule 4.04 Conflicts
Schedule 4.05 Required Consents
Schedule 4.07 Financial Statements
Schedule 4.09(a) Real Property
Schedule 4.09(c) Permitted Liens
Schedule 4.10(a) Personal Property
Schedule 4.10(b) Property Held at Other Locations
Schedule 4.10(d) Personal Property Leases
Schedule 4.11 Indebtedness
Schedule 4.12(b) Intellectual Property
Schedule 4.12(d) IP Claims
Schedule 4.13 Litigation
Schedule 4.14(a) Employees
Schedule 4.14(b) Exceptions to Compliance with Employment Laws
Schedule 4.15(a)(i) Employee Benefit Plans
Schedule 4.15(a)(ii) Exceptions to Compliance with ERISA and Code
Schedule 4.16 Collective Bargaining Agreements
Schedule 4.18 Bank Accounts
Schedule 4.19(b) Exceptions to Compliance with Environmental Laws
Schedule 4.20 Corporate Authorizations
Schedule 4.21 Insurance Policies
Schedule 4.22 Major Suppliers and Customers
Schedule 4.23 Contracts and Commitments
Schedule 4.25 Absence of Changes
Schedule 4.26(b) Accounts Receivable
Schedule 4.27(b) Tax Returns
Schedule 4.27(c) Tax Deficiencies
Schedule 4.27(d) Tax Sharing Agreements
Schedule 4.27(e) Tax Election Adjustments
Schedule 6.15 Spin-Off Agreement
Schedule 12.11(a) Seller's Knowledge
LIST OF SCHEDULES AND EXHIBITS
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(CONTINUED)
EXHIBITS
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Exhibit A Form of Seller Note
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Employment Agreement
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), is made and entered
---------
into as of June 5, 2006 (the "Initial Closing Date"), effective as of May 1,
--------------------
2006, by and among CHARYS HOLDING COMPANY, INC., a Delaware corporation
("Purchaser"), CROCHET & BOREL SERVICES, INC., a Texas corporation ("the
--------- ---
Corporation"), and XXXX CROCHET, a resident of the State of Texas (the
-----------
"Seller").
------
W I T N E S S E T H:
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WHEREAS, the Seller owns 500 shares of Common Stock (the "C&B Shares") of
----------
the Corporation, which constitute all of the issued and outstanding shares of
capital stock of the Corporation; and
WHEREAS, the Corporation is in the business of providing environmental
remediation services to customers throughout the United States of America (the
"C&B Business"): and
-------------
WHEREAS, in reliance on and subject to the terms, conditions,
representations, warranties, covenants and agreements contained herein,
Purchaser desires to purchase the C&B Shares from the Seller, and the Seller
desires to sell the C&B Shares to Purchaser;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements herein contained, and upon and subject to the terms and
the conditions hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE OF C&B SHARES
-------------------------------
Upon the terms and subject to the conditions of this Agreement, (a) on the
Initial Closing Date, the Seller shall sell, assign, transfer and convey unto
Purchaser, and Purchaser shall purchase and acquire from the Seller, 249 C&B
Shares (the "Initial Closing C&B Shares"), free and clear of any and all
-----------------------------
claims, liens, charges and encumbrances, and (b) on the Second Closing Date, the
Seller shall sell, assign, transfer and convey unto Purchaser, and Purchaser
shall purchase and acquire from the Seller, 251 C&B Shares, free and clear of
any and all claims, liens, charges and encumbrances,
ARTICLE II.
PURCHASE PRICE
--------------
2.01 DETERMINATION OF PURCHASE PRICE. In consideration of the sale of
----------------------------------
all of the C&B Shares to Purchaser, Purchaser shall pay to the Seller aggregate
consideration in an amount equal to $200,100,000 (the "Base Purchase Price") by
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delivery of (i) cash (the "Cash Consideration") and (ii) shares ("Stock
------------------ -----
Consideration") of the Purchaser's Common Stock (the "Purchaser Stock"), as more
------------- ---------------
fully set forth below and subject to adjustment as provided herein.
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2.02 PAYMENT OF CASH CONSIDERATION.
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(a) On May 3, 2006, Purchaser paid to Seller Cash Consideration in
an amount equal to $1,000,000 (the "Non-Refundable Cash Consideration").
-----------------------------------
(b) On the Initial Closing Date, Purchaser shall deliver to the
Seller Cash Consideration in an amount equal to $19,000,000 (the "Initial
-------
Closing Cash Consideration"),payable in cash or in the form of a promissory note
--------------------------
attached hereto as EXHIBIT A (the "Seller Note").
--------- ------------
(c) On the Final Determination Date (as defined in Section 2.04
------------
below), Purchaser shall deliver to the Seller Cash Consideration in an amount
equal to (A) $80,000,000 less (B) the sum of (1) the amount of any dividends
----
paid by the Corporation to Seller from and after April 25, 2006, plus (2) the
----
amount by which the audited net worth of the Corporation as of December 31, 2005
set forth on the Final Statement of Net Worth is less than $75,000,000 (such
amount being the "Final Determination Date Cash Consideration" and, collectively
-------------------------------------------
with the Non-Refundable Cash Consideration and the Initial Closing Cash
Consideration, the "Aggregate Cash Consideration"). For purposes of this Section
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2.02(c), in determining the audited net worth of the Corporation as of December
-------
31, 2005 set forth on the Final Statement of Net Worth, the allowance for
doubtful accounts receivable established in accordance with generally accepted
accounting principles ("GAAP") shall not be taken into account.
----
2.03 PAYMENT OF INITIAL STOCK CONSIDERATION.
---------------------------------------
(a) On May 3, 2006, Purchaser issued to the Seller Stock
Consideration equal to 1,000,000 shares of Purchaser Stock (the "Non-Refundable
--------------
Stock Consideration").
--------------------
(b) On the Initial Closing Date, Purchaser shall deliver to the
Seller Stock Consideration equal to 3,000,000 shares of Purchaser Stock (the
"Initial Closing Stock Consideration").
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(c) On the Second Closing Date (as defined in Section 6.08(a)
---------------
below), Purchaser shall issue to the Seller Stock Consideration equal to (i)
4,008,000 shares of Purchaser Stock (the "Second Closing Stock Consideration"),
----------------------------------
less (ii) the sum of (A) the Stock Holdback (as defined in Section 2.08 hereof),
------------
plus (B) that number of shares equal to (1) the dollar value of any liabilities
----
set forth on any disclosure schedule delivered to Purchaser by the Seller after
the Initial Closing Date that is not set forth on disclosure schedules delivered
by the Seller prior to the Initial Closing Date or reflected on the Interim
Financial Statements (as defined in Section 4.07 below), divided by (2) the
------------ ----------
Market Price of the Purchaser Stock on the Second Closing Date (the "Second
------
Closing Date Market Price"). The Non-Refundable Stock Consideration, the Initial
-------------------------
Closing Stock Consideration and the Second Closing Stock Consideration
(including the Stock Holdback and any shares of Purchaser Stock withheld
pursuant to Section 2.03(c)(ii)(B), and collectively consisting of an aggregate
-----------------------
of 8,008,000 shares of Purchaser Stock) are hereinafter referred to collectively
as the "Initial Stock Consideration."
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2.04 AGGREGATE CASH CONSIDERATION ADJUSTMENT MECHANISM.
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(a) As soon as practicable, but in no event more than sixty (60)
days after the Initial Closing Date, the Seller shall cause the Corporation to
prepare and deliver to the Purchaser a statement (the "Statement of Net Worth")
----------------------
setting forth the net worth of the Corporation as of December 31, 2005, prepared
from the Audited Financial Statements for the period ended December 31, 2005
(the "Determination Date Financial Statements") and in accordance with SCHEDULE
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2.04.
-----
(b) The Purchaser and its accountants and other representatives
shall have the right to review and verify the Determination Date Financial
Statements and the Statement of Net Worth, and the Seller shall provide the
Purchaser (i) with reasonable access to all books, records, work papers, written
procedures, and reports used to prepare the Determination Date Financial
Statements and the Statement of Net Worth, and (ii) personnel necessary to
enable the Purchaser and its accountants and other representatives to fully
evaluate the Determination Date Financial Statements and the Statement of Net
Worth.
(c) By way of clarification with regard to the Seller's
preparation of the Determination Date Financial Statements and the Statement of
Net Worth, the Purchaser hereby agrees and accepts as binding with respect to
the preparation of the Determination Date Financial Statements and the Statement
of Net Worth the Seller's auditor's (being Xxxx Xxxxx, CPA) application of GAAP
and related accounting principles in the balance sheets included in the
Determination Date Financial Statements, and the Purchaser agrees not to contest
or otherwise propose any change to such application of GAAP and related
accounting principles in connection with preparation of the Determination Date
Financial Statements and the Statement of Net Worth, provided that such
application of GAAP and related accounting principles is in accordance with the
Corporation's past practices, consistently applied.
(d) The Purchaser shall have fifteen (15) days following the
date of Purchaser's receipt of the Determination Date Financial Statements
during which to notify Seller of any dispute of any item contained therein,
which notice shall set forth in detail the basis for such dispute. Purchaser and
the Seller shall cooperate in good faith to resolve any such dispute as promptly
as possible, and upon such resolution, the Statement of Net Worth shall be
revised in accordance with the agreement of the Purchaser and the Seller, In the
event the Purchaser does not notify the Seller of any such dispute within such
fifteen (15)-day period or notifies the Seller within such period that it does
not dispute any item contained therein, the Statement of Net Worth shall become
the Final Statement of Net Worth. In the event the Purchaser and the Seller are
unable to resolve any dispute regarding the Statement of Net Worth within
fifteen (15) days following the Seller's receipt of notice of such dispute, such
dispute shall be submitted to, and all issues having a bearing on the dispute
shall be resolved by, the Houston, Texas office of a nationally recognized
accounting firm that shall be mutually acceptable to the Seller and the
Purchaser, which shall include, without limitation, any "Big Four" accounting
firm (the "Accounting Referee"). In resolving any such dispute, the Accounting
------------------
Referee shall consider only those items or amounts in the Determination Date
Financial Statements or Statement of Net Worth as to which the Purchaser has
disagreed. The Accounting Referee's determination of the Statement of Net Worth
shall be final and binding on the Parties, and shall become the Final Statement
of Net Worth. The Accounting Referee shall use commercially reasonable efforts
to
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complete its work within thirty (30) days following its engagement. The expenses
of the Accounting Referee shall be borne 100% by the non-prevailing party as
determined by the Accounting Referee. The Statement of Net Worth, as adjusted
pursuant to this Section 2.04, shall become the "Final Statement of Net
-------------- -----------------------
Worth" and the date on which Purchaser delivers to Seller the Final Statement of
-----
Net Worth shall be the "Final Determination Date."
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2.05 MAKE-WHOLE ADJUSTMENT.
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(a) The following terms have the meanings set forth below:
(i) "Make-Whole Date" means the date that is 30 days
----------------
following the issuance of Purchaser's Form 10K for fiscal year 2007, provided
that if such date falls on a non-business day, the Make-Whole Date shall be the
preceding business day.
(ii) "Make Whole Deficit" means the value, if negative, of
--------------------
(A) the Target Stock Consideration Value, minus (B) the product of (1) 8,008,000
-----
multiplied by (2) the Market Price of the Purchaser Stock during the 15
--------------
consecutive trading days prior to the Make-Whole Date.
(iii) "Market Price" means, with respect to any period, the
-------------
weighted average sale price of the Purchaser Stock during such period as
determined by (i) the principal stock exchange, or the NASDAQ/NMS, as the case
may be, on which shares of Purchaser Stock is then listed or admitted to
trading, or (ii) if the Purchaser Stock is not then listed or admitted to
trading on any stock exchange or the NASDAQ/NMS, the average of the last
reported closing bid and asked prices on each such day in the over-the-counter
market, as furnished by the NASDAQ system or National Quotation Bureau, Inc., or
(iii) if neither NASDAQ, or National Quotation Bureau, Inc. is at the time
engaged in the business of reporting such prices, then as furnished by any
similar firm then engaged in such business
(iv) "NASDAQ/NMS" means that National Association of
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Securities Dealers' Automated Quotation National Market System,
(v) "Target Stock Consideration Value" means the Target Per
----------------------------------
Share Stock Price multiplied by 8,008,000.
(b) In the event that the Market Price of the Purchaser Stock
during the fifteen consecutive trading days immediately prior to the Make-Whole
Date is less than $12.50 per share (the "Target Per Share Stock Price"),
----------------------------
Purchaser shall, at Purchaser's option, either (x) issue to Seller that number
of additional shares of Purchaser Stock (the "Make-Whole Shares") equal to (1)
-----------------
the Make Whole Deficit, divided by the Market Price of the Purchaser Stock on
----------
the Make-Whole Date, or (y) pay to Seller an amount in cash equal to (1) the
Target Stock Consideration Value, less (2) the Make Whole Deficit. Such issuance
----
shall be completed or such cash payment shall be made no later than the third
business day after the Make-Whole Date.
(c) Notwithstanding anything to the contrary set forth herein,
Purchaser's obligation to make any adjustment in accordance with this Section
-------
2.05, or to issue any Make-Whole Shares, shall terminate in the event that, at
----
any time prior to the Make-Whole Date, (i) the Market Price of the Purchaser
Stock during any twenty (20) consecutive trading days exceeds
- 4 -
$16,00 per share, or (ii) the actual sale price of the Purchaser Stock in each
transaction in which shares of Purchaser Stock are traded during any five (5)
consecutive trading days exceeds $16.50 per share, but in either case only if
all of the Seller's Shares constituting the Initial Stock Consideration are
fully registered.
2.06 INCENTIVE COMPENSATION
----------------------
(a) In addition to the Base Purchase Price, the Seller shall,
for each Performance Year (as defined on SCHEDULE 2.06(a)(l)), be
---------------------
entitled to earn incentive compensation based upon the financial performance
of the Corporation according to the formula set forth on SCHEDULE 2.06(a)(l).
-------------------
Upon determining the portion of the Bonus Pool Amount (as defined on SCHEDULE
--------
2.06(a)(l)) payable for each Employment Year, Seller shall notify Purchaser of
-----------
the portion of such amount to be paid to each employee identified on
SCHEDULE.2.06(a)(2) (the "Incentive Employees") (to the extent that each such
------------------- --------------------
employee continues to be entitled to incentive compensation pursuant to the
terms of his or her employment agreement with the Corporation) or any other
employee who becomes eligible for incentive compensation pursuant to the terms
of his or her employment agreement with the Corporation.
(b) Additionally, the Seller shall be entitled to earn
additional equity compensation based upon the financial performance of acquired
companies, determined in accordance with the provisions of SCHEDULE 2.06(b).
-----------------
2.07 PURCHASER STOCK ISSUED TO THE SELLER
------------------------------------
(a) No fractional shares of Purchaser Stock shall be issued to the
Seller hereunder, and the number of shares of Purchaser Stock to be issued shall
be rounded down to the nearest whole share. If a fractional share interest
arises pursuant to any calculation in Section 2.06 or elsewhere herein, the
------------
Purchaser shall eliminate such fractional share interest by paying the Seller
the amount computed by multiplying the fractional interest by the price of a
full share (with such price being the same price used to determine the shares
then being issued).
(b) The Seller shall be granted registration rights, with respect
to all shares of Purchaser Stock issued to the Seller hereunder, as more
specifically set forth in that certain Registration Rights Agreement (the
"Registration Rights Agreement") in the form attached hereto as EXHIBIT B.
------------------------------- ----------
(c) Shares of Purchaser Stock, when issued and delivered to the
Seller in accordance with the terms hereof, will be duly authorized, validly
issued, fully-paid and non-assessable.
(d) The stock certificates evidencing the shares of Purchaser
Stock issued to Seller hereunder will bear the following legend:
THIS SHARES OF STOCK EVIDENCED BY THIS STOCK CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND
- 5 -
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS
2.08 STOCK HOLDBACK.
----------------
(a) As partial security of the obligations of the Seller under
Section 10.01 hereof or otherwise arising under or relating to this Agreement,
-------------
Purchaser shall withhold a portion of the Second Closing Stock Consideration
equal to 750,000 shares of Purchaser Stock (the "Stock Holdback"). On each of
--------------
(i) the date that is nine (9) months following the Second Closing Date, and (ii)
the date that is eighteen (18) months following the Second Closing Date,
Purchaser shall issue to Seller 375,000 shares of Purchaser Stock (such amount
being equal to one-half of the Stock Holdback) (each such issuance being a
"Stock Holdback Issuance"), subject to the right of Purchaser to set-off against
-----------------------
each Stock Holdback Issuance (each such set-off being a "Stock Holdback
--------------
Issuance, Set-Off") that number of shares of Purchaser Stock equal to the
------------------
remainder of (A) the remainder of (1) the dollar value of any indemnification
claims made by Seller pursuant to Section 10.01 as of the date of each Stock
-------------
Holdback Issuance, less (2) an amount equal to (a) the number of Shares of
----
Purchaser Stock unissued as a result of any previous Stock Holdback Issuance
Set-Off, multiplied by (b) Second Closing Date Market Price, divided by (B) the
---------- -- ----------
Second Closing Date Market Price. The provisions of this Section.2.08 providing
------------
for the Stock Holdback shall not impose any limitation on any liability of the
Seller hereunder, but in no event shall those provisions result in a waiver or
reduction of any limitation on the liability of the Seller expressly set forth
in Article X of this Agreement. The provisions of this Section 2.08 providing
---------- ------------
for a Stock Holdback Issuance Set-Off shall not be exercised by the Purchaser
unless the Purchaser is in material compliance with the provisions of Section
-------
10.03 hereof with regard to the indemnification claim that is the basis for the
-----
Stock Holdback Issuance Set-Off (and without limiting the foregoing, the parties
agree that Purchaser shall be deemed to be in compliance with Section 10.03
-------------
unless the Seller is materially prejudiced by any failure to comply therewith by
Purchaser, provided that Purchaser provides to Seller written notice of the
--------
claim giving rise to the holdback and the reasons for such holdback), nor shall
the provisions of this Section 2.08 providing for a Stock Holdback Issuance
-------------
Set-Off impose any limitation on any liability of the Seller hereunder, but in
no event shall those provisions result in a waiver or reduction of any
limitation on the liability of the Seller expressly set for the in Article X of
---------
this Agreement. Notwithstanding the foregoing, in no event shall the total
value of the Shares retained by the Purchaser pursuant to the Stock Holdback
Issuance Set-Offs (based upon the value of those Shares on the respective dates
of set-off) exceed the Purchaser Cap and the Environmental Cap (each as defined
in Section 10.05 hereof.
--------------
(b) In the event that a claim made by a third party shall be the
basis for a Stock Holdback Issuance Set-Off by the Purchaser, then, no later
than three (3) business days after the Seller delivers to the Purchaser a
settlement, compromise or judgment that satisfies the requirements of Section
-------
10.03(b) hereof, the Purchaser shall issue to the Seller the number of Shares of
--------
Purchaser Stock subject to the Stock Holdback Issuance Set-Off relating to such
third party indemnification claim.
(c) In the event that a claim on behalf of the Purchaser against
the Seller shall be the basis for a Stock Holdback Issuance Set-Off by the
Purchaser, then, no later than three (3)
- 6 -
business days after the Seller pays to the Purchaser all amounts required by
Section 10.03(c)hereof upon the final determination of the Purchaser's claim,
-----------------
the Purchaser shall issue to the Seller the number of Shares of Purchaser Stock
subject to the Stock Holdback Issuance Set-Off relating to the Purchaser's
claim.
(d) Notwithstanding the foregoing, if, at any time prior to
issuance of all of the remaining shares representing the Stock Holdback (the
"Remaining Shares"), the Seller requires a registration of Purchaser Stock
-----------------
pursuant to the terms of the Registration Rights Agreement and, in connection
therewith, the Seller requests that the Remaining Shares be included in the
applicable registration statement, upon the request of the Seller the Purchaser
shall use Commercially Reasonable Efforts to cause the Remaining Shares to be
registered pursuant to the terms of the Registration Rights Agreement, provided
--------
that if the Seller shall sell all or any portion of the Remaining Shares, the
Seller shall deposit the net sales proceeds from such sale with the Purchaser,
and the Purchaser shall thereafter hold, retain and distribute those proceeds in
the same manner, at the same times and in the same amounts as the Purchaser
would have held, retained and distributed the shares representing the Stock
Holdback.
2.09 AGED ACCOUNTS RECEIVABLE ADJUSTMENT. Not later than thirty
---------------------------------------
(30) days following the one year anniversary of the Second Closing Date (the
"Aged Receivables Adjustment Date"), the Purchaser shall deliver to the Seller a
--------------------------------
schedule (the "Aged Receivables Schedule") identifying all accounts receivable
--------------------------
included on the Interim Financial Statements that have not been collected as of
the Aged Receivables Adjustment Date (such accounts receivable being "Aged
----
Receivables"). On the Aged Receivables Adjustment Date, the Purchaser shall
-----------
transfer each such Aged Receivable to the Seller, and the number of shares
remaining in the Stock Holdback shall be reduced by an amount equal to (a) the
aggregate value of the transferred Aged Receivables, divided by (b) the Market
----------
Price of the Purchaser Stock as of the Aged Receivables Adjustment Date. Upon
Purchaser's transfer of the Aged Receivables to Seller, Seller shall be entitled
to the proceeds of the collection of any Aged Receivables following the Aged
Receivables Adjustment Date.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
The Seller represents and warrants to the Purchaser that the statements
contained in this Article III are correct and complete as of the date of this
-----------
Agreement, and will be correct and complete as of the Initial Closing Date and
the Second Closing Date as though made then and as though such date were
substituted for the date of this Agreement throughout this Article III, except
------------
(i) to the extent any such representation or warranty speaks to an earlier date
and (ii) as set forth in the Schedules delivered by the Seller to the Purchaser
(the "Schedules").
---------
3.01 POWER, AUTHORITY AND ORGANIZATION OF THE SELLER. The Seller has
--------------------------------------------------
the right, power and capacity to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Seller and constitutes the Seller's
legal, valid and binding obligation, enforceable in accordance with its terms.
- 7 -
3.02 NO CONFLICT. The execution and delivery of this Agreement by the
-----------
Seller, the consummation of the transactions contemplated herein by the Seller,
and the performance of the covenants and agreements of the Seller, will not,
with or without the giving of notice or the lapse of time, or both, (a) violate,
conflict with or result in a breach or default under any term or condition, or
result in the termination, of any mortgage, indenture, contract, license,
permit, instrument, trust document, or other agreement, document or instrument
to which the Seller is a party or by which the Seller or any of Seller's
properties may be bound; or (b) violate any provision of law, statute, rule,
regulation, court order, judgment or decree, or ruling of any governmental
authority, to which the Seller is a party or by which the Seller or any of
Seller's properties may be bound.
3.03 OWNERSHIP OF THE C&B SHARES. Except as set forth on SCHEDULE
-------------------------------- --------
3.03, the Seller owns, beneficially and of record, good and valid title to the
----
C&B Shares and the C&B Shares (a) are validly issued, fully paid and
nonassessable, (b) are free and clear of any liens, restrictions, claims,
equities, charges, options, rights of first refusal or encumbrances, with no
defects of title whatsoever, and (c) constitute all of the issued and
outstanding shares of capital stock of the Corporation. Other than the C&B
Shares, the Seller owns no shares of capital stock of the Corporation or any
other equity security of the Corporation and has no right of any kind to have
any such equity security issued. Upon the Initial Closing Date or Second
Closing Date, as applicable, Purchaser shall have obtained good and valid title
to the C&B Shares, free and clear of any liens, restrictions, claims,
equities, options, charges, rights of first refusal, or encumbrances or
other restrictions, and with no defects of title whatsoever, The Seller has
full and exclusive power, right and authority to vote the C&B Shares. The Seller
is not a party to or bound by any agreement affecting or relating to its right
to transfer or vote the C&B Shares.
3.04 ABSENCE OF OTHER CLAIMS. No prior offer, issue, redemption, call,
------------------------
purchase, sale, merger, transfer, involvement in any transfer, negotiation or
other transaction of any nature or kind with respect to any capital stock
(including shares, offers, options, warrants, or debt convertible into shares,
options or warrants) of the Corporation or any company controlled by the Seller
or the Corporation or under common control with the Corporation (collectively,
the "Related Companies"), or any corporation which has been merged into any of
------------------
the Related Companies, has given or may give rise to (a) any valid claim or
action by any person (including any former or present holder of any of the C&B
Shares or any other equity securities of any of the Related Companies) which is
enforceable against the Seller or the Corporation; or (b) any valid interest in
the Corporation, and no fact or circumstance exists which could give rise to any
such right, claim, action or interest on behalf of any person.
3.05 INVESTMENT REPRESENTATIONS.
----------------------------
(a) Seller has sufficient knowledge and experience in financial
and business matters to be able to evaluate the risks and merits of the
investment represented by the issuance of the Purchaser Stock pursuant to
Article II hereof (the "Issued Securities").
----------- ------------------
(b) Seller is aware that the business of the Purchaser involves
significant and material economic variables and risks that could adversely
affect Seller's investment in the Issued Securities.
- 8 -
(c) Seller is able to bear the economic risks of an investment in
the Issued Securities, including the risk of losing all of such investment, and
Seller has no need for liquidity with respect to such investment.
(d) Seller acknowledges that no prospectus, offering circular or
other offering statement containing information with respect to the Issued
Securities was delivered in connection with the Seller's investment. Seller has
made his own inquiry and analysis with respect to the Purchaser and its
business, and further represents that Seller has had access, for a reasonable
time prior to the issuance of the Issued Securities, to information concerning
the Purchaser and has had the opportunity to ask questions of, and receive
answers from, officers of the Purchaser concerning an investment in the Issued
Securities and the business, management and financial affairs of the Purchaser,
and to obtain additional information (to the extent the Purchaser possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to Seller or to
which Seller had access.
(e) The Issued Securities were not offered to the Seller by means
of publicly disseminated advertisements or sales literature, or as part of a
general solicitation, nor is Seller aware of any offers made to other persons by
such means.
(f) Seller acknowledges that he has either been supplied with or
has had access to information to which a reasonable investor would attach
significance in making investment decisions. In determining to proceed with this
investment, Seller has relied solely upon the results of his or her own
independent investigation with respect to the Issued Securities.
(g) Seller is an "accredited investor" as defined in Rule 501 (a)
of Regulation D, promulgated under the Securities Act, which requires individual
investors to either (i) have had individual income (exclusive of any income
attributable to a spouse) of more than $200,000, or joint individual income with
a spouse of more than $300,000, in each of the two most recent years and a
reasonable expectation of reaching that level of income in the current year or
(ii) have an individual net worth (or combined net worth with a spouse), in
excess of $1,000,000.
(h) Seller is acquiring the Issued Securities for Seller's own
account and not with a view to resale or other distribution thereof inconsistent
with or in violation of the federal securities laws or the securities or Blue
Sky laws of any state. No other person or entity will have any interest,
beneficial or otherwise, in the Issued Securities that Seller is acquiring
hereunder. Seller is not obligated to transfer the Issued Securities or any
portion thereof to any other person or entity, nor does any Seller have any
agreement or understanding to do so.
(i) Seller acknowledges and agrees that Seller may not, directly
or indirectly, sell, assign, pledge, give, subject to lien or security interest
or otherwise dispose of or encumber (collectively, "Transfer") all or any part
--------
of the Issued Securities except as expressly permitted by this Agreement, the
Registration Rights Agreement and applicable law. Seller understands that the
Purchaser may, as a condition of any Transfer of any Issued Securities which are
not registered for sale pursuant to an effective registration statement of the
Purchaser, require that Seller deliver an opinion of counsel reasonably
acceptable to the Purchaser to the effect that
- 9 -
neither the sale nor the proposed Transfer will result in any violation of
applicable state securities laws, the Securities Act or the securities law of
any other jurisdiction.
(j) Seller acknowledges that, to the extent Seller deems
necessary, he or she has relied on his or her own professional accounting, tax,
legal and financial advisors with respect to an investment in the Purchaser and
the acquisition of the Issued Securities, and obtained, to the extent Seller
deems necessary, such professional advice with respect to the risks inherent in
such investment and the suitability of an investment in the Issued Securities in
light of Seller's financial condition and investment needs.
(k) The information about the Purchaser that has been disclosed to
the Seller in connection with the acquisition of the Issued Securities is deemed
to be confidential information of the Purchaser, and Seller represents and
warrants to, and hereby agrees that, unless the Purchaser has consented in
writing to the contrary, Seller shall treat such information as Confidential
Information under this Agreement.
(l) The agreements, representations and warranties made herein
extend to and apply to all portions of the Issued Securities. The acceptance by
Seller of the Issued Securities shall constitute Seller's confirmation that all
agreements and representations made herein shall be true and correct at such
time.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES REGARDING THE CORPORATION
--------------------------------------------------------
The Corporation and Seller hereby jointly and severally represent and
warrant to the Purchaser that the statements contained in this Article IV are
----------
correct and complete as of the date of this Agreement, and will be correct and
complete as of the Initial Closing Date and the Second as though made then and
as though such date were substituted for the date of this Agreement throughout
this Article IV, except (i) to the extent any such representation or warranty
------------
speaks to an earlier date and (ii) as set forth in the Schedules. Except for the
representations and warranties of the Seller in Article III and of the Seller
-----------
and the Corporation in this Article IV, the Seller and the Corporation make no
-----------
other express or implied representation or warranty to the Purchaser.
4.01 ORGANIZATION AND AUTHORIZATION.
---------------------------------
(a) The Corporation is duly organized, validly existing and in
good standing under the laws of the State of Texas and has all requisite power
and authority, corporate or otherwise, to carry on and conduct its business as
it is now being conducted and to own or lease its properties and assets, and is
duly qualified and in good standing in the jurisdictions set forth on SCHEDULE
--------
4.01(A), which are the only jurisdictions in which the ownership of properties
-------
or assets of the Corporation or the conduct of the C&B Business requires such
qualification.
(b) The Corporation does not have any interest, direct or
indirect, and has no commitment to purchase or otherwise acquire any interest,
direct or indirect, in any other corporation, partnership, joint venture or
other business enterprise.
- 10 -
(c) The current officers and directors of the Corporation are
listed on SCHEDULE 4.01(C).
------------------
(d) The copies of the corporate records of the Corporation that
have previously been delivered to Purchaser are the true, correct and correct
corporate records of the Corporation in effect as of the date hereof. The
minutes of directors' and shareholders' meetings and the stock books of the
Corporation that have been delivered previously to Purchaser are the true,
correct and correct records of all directors* and shareholders' meetings and
stock issuances through and including the date hereof and, reflect all
transactions and other matters required to be reflected in such records, as well
as such other matters customarily contained in records of such type.
4.02 AUTHORIZED AND OUTSTANDING STOCK. All of the C&B Shares are
------------------------------------
validly issued, fully paid and nonassessable. All issuances, transfers or
purchases of the capital stock of the Corporation have been in compliance with
all applicable agreements and all applicable laws, including federal and state
securities laws, and all taxes thereon have been paid. There are no shares of
capital stock held in the treasury of the Corporation.
4.03 ABSENCE OF OTHER CLAIMS. There is not outstanding, nor is the
--------------------------
Corporation bound by, any subscriptions, options, preemptive rights, warrants,
calls, commitments or agreements or rights of any character requiring the
Corporation to issue, or entitling any person or entity to acquire, any
additional shares of capital stock or any other equity security, including any
right of conversion or exchange under any outstanding security or other
instrument, and the Corporation is not obligated to issue or transfer any shares
of its capital stock for any purpose. There are no outstanding obligations of
the Corporation to repurchase, redeem or otherwise acquire any outstanding
shares of its capital stock,
4.04 NO CONFLICT. The execution and delivery of this Agreement by the
------------
Seller or the Corporation, the consummation of the transactions contemplated
herein by the Seller or the Corporation, and the performance of the covenants
and agreements of the Seller or the Corporation, will not, with or without the
giving of notice or the lapse of time, or both, (a) violate or conflict with any
of the provisions of any charter document or bylaw of the Corporation, (b)
except as set forth on SCHEDULE 4.04, violate, conflict with or result in a
--------------
breach or default under or cause termination of any term or condition of any
mortgage, indenture, contract, license, permit, instrument, trust document,
will, or other agreement, document or instrument to which the Corporation is a
party or by which the Corporation or its properties may be bound, (c) violate
any provision of law, statute, regulation, court order or ruling of any
governmental authority, to which the Corporation is a party or by which it or
its properties may be bound, or (d) result in the creation or imposition of any
lien, claim, charge, restriction, security interest or encumbrance of any kind
whatsoever upon any asset of the Corporation.
4.05 REQUIRED CONSENTS AND APPROVALS. Except as set forth on SCHEDULE
-------------------------------- --------
4.05. no consent or approval is required by virtue of the execution hereof by
----
the Seller or the Corporation or the consummation of any of the transactions
contemplated herein by the Seller or the Corporation to avoid the violation or
breach of, or the default under, or the creation of a lien on any assets of the
Corporation pursuant to the terms of, any regulation, order, decree or award of
any court or governmental agency or any lease, agreement, contract, mortgage,
note, license, or
- 11 -
any other instrument to which the Corporation is a party or to which it or any
of its property or assets or any of the C&B Shares is subject.
4.06 NO VIOLATION OF LAW. The Corporation has not and will not be (by
---------------------
virtue of any past or present action, omission to act, contract to which it is a
party or any occurrence or state of facts whatsoever) in violation of any
applicable local, state or federal law, ordinance, regulation, order, injunction
or decree, or any other requirement of any governmental body, agency or
authority or court binding on it, or relating to its property or business or its
advertising, sales or pricing practices (including any antitrust laws and
regulations), and the Corporation hereafter will not suffer or incur any loss,
liability, penalty or expense (including attorneys' fees) by virtue of any such
violation.
4.07 FINANCIAL STATEMENTS. SCHEDULE 4.07 contains the audited balance
---------------------- -------------
sheet of the Corporation as of the years ended December 31, 2005 and December
31, 2004 (the "Audited Financial Statements"), and the related audited
------------------------------
statements of income, retained earnings, and cash flows for the years then
ended, and the related notes thereto; and the unaudited balance sheet of the
Corporation as of April 30, 2006, and the related unaudited statements of
income, retained earnings, and cash flows, or in each instance, equivalent
statements as commonly prepared, for the 24-month period then ended (the
"Interim Financial Statements" and collectively with the Audited Financial
------------------------------
Statements, the "Current Financial Statements"). The Audited Financial
------------------------------
Statements present fairly the financial position of the Corporation as of the
dates thereof, and the related results of its operations for the years then
ended. The Interim Financial Statements present fairly the financial position of
the Corporation as of the date thereof, and the related results of its
operations for the periods then ended. The Audited Financial Statements have
been prepared in accordance with GAAP, and the Interim Financial Statements have
been prepared in accordance with GAAP for interim statements on a basis
consistent with prior periods. All adjustments, consisting of normal, recurring
accruals necessary for a fair presentation, have been made in the Interim
Financial Statements. The audited balance sheet as of December 31, 2005 (the
"Audited Balance Sheet Date") included in the Audited Financial Statements is
-----------------------------
referred to herein as the "Audited Balance Sheet" and the unaudited balance
sheet as of April 30, 2006 (the "Interim Balance Sheet Date") included in the
--------------------------
Interim Financial Statements is referred to herein as the "Interim Balance
Sheet."
4.08 NO UNDISCLOSED LIABILITIES. There are no liabilities of the
----------------------------
Corporation of any kind whatsoever, whether accrued, contingent, absolute or
otherwise, except for:
(a) liabilities and obligations fully reflected or provided for in
the Interim Balance Sheet or the Schedules;
(b) liabilities and obligations incurred in the Ordinary Course of
Business, consistent with past practice, since December 31, 2005 and of a type
reflected on the Interim Balance Sheet, which individually or in the aggregate
are not in excess of $25,000.00; and
(c) liabilities and obligations under Contracts not (i)
attributable to any failure by any the Corporation to comply with the terms
thereof or any express or implied warranty, or (ii) entered into in violation of
this Agreement or arising out of any such breach by the Corporation.
- 12 -
4.09 REAL PROPERTY.
---------------
(a) SCHEDULE 4.09(a) sets forth a complete and accurate list and
-----------------
description of all the real property that the Corporation leases, has agreed (or
has an option) to purchase, sell or lease, or may be obligated to purchase, sell
or lease (the "Real Property"). With respect to each parcel of Real Property
--------------
required to be listed and described on SCHEDULE 4.09(a), the Seller has made
----------------
available to Purchaser true, correct and complete copies of each instrument (if
any) evidencing a grant by or to the Corporation of an option to purchase or
lease such parcel, each lease and leasehold mortgage (if any) with respect to
such parcel, and any title policies or commitments and surveys with respect to
such parcel.
(b) The Corporation does not, and has not ever, owned any real
property
(c) Except for the matters set forth on SCHEDULE 4.09(c) (the
---------------
"Permitted Liens"), no Real Property is subject to (i) any governmental decree
----------------
or order (or threatened or proposed decree or order known to the Corporation or
the Seller) to be sold or taken by public authority, or (ii) any liens, security
interests, easements, rights of way, building use restrictions, exceptions,
variances, reservations, limitations or other encumbrances of any nature
whatsoever.
4.10 PERSONAL PROPERTY.
-------------------
(a) SCHEDULE 4.10(a) sets forth a complete and accurate list and
-----------------
description of all personal property that the Corporation owns or leases, has
agreed (or has an option) to purchase, sell or lease, or may be obligated to
purchase, sell or lease, the net book value of which, as properly reflected in
the books and records of the Corporation on an individual, item-by-item basis,
exceeds $1,000.00.
(b) The Corporation (i) has good and valid title to all the
personal and mixed, tangible and intangible properties and assets which it
purports to own or which it uses in the conduct of the C&B Business, including
Intellectual Property, Software and Licensed Software (as defined in Section
-------
4.12), and all the personal properties and assets reflected, but not shown as
----
leased or encumbered, on the Audited Balance Sheet and the Interim Balance Sheet
(except for inventory and assets sold in the Ordinary Course of Business and
supplies consumed in the Ordinary Course of Business), and (ii) except for
Permitted Liens, owns such personal property free and clear of all title defects
or objections, liens, restrictions, claims, charges, security interests,
easements, or other encumbrances of any nature whatsoever, including any
mortgages, leases, chattel mortgages, conditional sales contracts, collateral,
security arrangements and other title or interest retention arrangements.
Except as set forth on SCHEDULE 4.10(a) and SCHEDULE 4.10(b), all personal
----------------- -----------------
property (including all improvements on any Real Property) and leasehold
improvements are located at the principal location of the C&B Business,
(c) All of the inventories of the Corporation included on the
Interim Balance Sheets or subsequently acquired are merchantable and of a
quality and quantity usable and saleable in the Ordinary Course of Business, and
the quantities of each type of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, and are consistent with
prior levels. All of the inventories of the Corporation included on the
Interim Balance Sheets are valued for the purposes thereof at the lower of cost
or market.
- 13 -
(d) SCHEDULE 4.10(d) contains a complete and accurate list of all
-----------------
leases (including any capital leases) and lease-purchase arrangements (other
than Real Property leases) pursuant to which the Corporation leases personal
property from others and which (i) requires the Corporation to pay, for rent and
any obligatory improvements, more than $5,000,00 in any single year or
$10,000.00 during the entire term of such lease or lease-purchase arrangement
(including any renewal term that the Corporation may not avoid by refusing to
renew in its sole discretion); or (ii) provide for a purchase option for a price
of more than $5,000.00. SCHEDULE 4.10(d) specifies which of such leases, if any,
----------------
are capital leases. All leases that are required to be capitalized by GAAP have
been so accounted for in the Current Financial Statements. The Corporation has
made available to Purchaser a true, correct and complete copy of each of the
items required to be listed on SCHEDULE 4.10(d).
------------------
4.11 INDEBTEDNESS. SCHEDULE 4.11 sets forth a true, correct and complete
------------- --------------
list and description of all instruments or other documents relating to any
direct or indirect indebtedness for borrowed money of the Corporation, as well
as indebtedness by way of lease-purchase arrangements, guarantees, undertakings
on which others rely in extending credit and all conditional sales contracts,
chattel mortgages and other security arrangements with respect to personal
property used or owned by the Corporation (other than those set forth on
SCHEDULE 4.10(d)). The Corporation has made available to Purchaser a true,
------------------
correct and complete copy of each of the items required to be listed on SCHEDULE
--------
4.11.
-----
4.12 INTELLECTUAL PROPERTY.
-----------------------
(a) For purposes of this Agreement, the term "Intellectual
------------
Property" shall mean all patents, patent rights, patent applications, registered
--------
trademarks and service marks, trademark rights, trademark applications, service
xxxx rights, service xxxx applications, trade names, registered copyrights,
copyright rights, domain names and all intellectual, industrial software or
proprietary rights and trade secrets, technology and know-how, owned or used by
the Corporation, which are related to or used in connection with the C&B
Business, together with any amendments, modifications and supplements thereto
and in each case all goodwill associated therewith in connection with the
business in which any such intellectual property is used.
(b) Identification of Intellectual Property. SCHEDULE 4.12(b) sets
---------------------------------------------------------
forth a true, correct and complete list and full description of all Intellectual
Property. With respect to any registrations of the Intellectual Property,
SCHEDULE 4.12(b) also sets forth, as to each such item of the Intellectual
----------------
Property, the (i) relevant application or registration number, (ii) relevant
filing, registration, issue or application date, (iii) record owner, (iv)
country, (v) title or description and (vi) remaining life thereof. In
addition, SCHEDULE 4.12(b) identifies whether each item of the Intellectual
-----------------
Property is owned by the Corporation or is possessed and used by such the
Corporation is not under any license, contract, agreement or other commitment
and, if under any such commitment, the identity of the parties thereto, the term
thereof and all amounts payable thereunder together with the payment terms
therefore.
(c) Ownership and Protection. With respect to each item of
---------------------------
Intellectual Property identified as being owned by the corporation, the
corporation owns all right, title and interest in and to such Intellectual
Property, and has not encumbered or impaired any rights in same. The
Corporation has obtained an enforceable written assignment of all right, title
and
- 14 -
interest in and to each item of the Intellectual Property owned by the
Corporation from each person or entity participating in the discovery,
development or creation of such item or Intellectual Property and has provided
to Purchaser true and correct copies of each such assignment. The Corporation
does not have any obligation to compensate, or to obtain the consent of, any
third party for the use of any item of the Intellectual Property, Ail employees,
independent contractors, or other persons who have had access to or participated
in the development of any Intellectual Property owned by the Corporation have
signed appropriate confidentiality and non-disclosure agreements and, in the
case of independent contractors, appropriate work for hire agreements and
assignments, sufficient to protect such The corporation's ownership rights in
the Intellectual Property and the unauthorized use or disclosure of same. All
registrations and applications to register the Intellectual Property in each of
the countries in which any of the same is registered are valid and subsisting in
all respects and have been properly maintained. No party has any claim to any
moral rights with respect to the Intellectual Property owned by the Corporation.
(d) Litigation and Claims. Except as disclosed on SCHEDULE
------------------------ --------
4.12(d), there is neither pending nor, to the Knowledge of the Corporation or
------
the Seller, threatened any suit, action, claim, arbitration, grievance,
litigation, administrative or legal or other proceeding, or investigation,
against the Corporation or its licensors contesting the validity of, or such the
Corporation's right to use, any of the Intellectual Property.
(e) Licenses. The Corporation has not granted any license or
---------
other right to use, in any manner, any item of Intellectual Property, whether or
not requiring the payment of royalties, and no third party has any right to use
any Intellectual Property owned by the Corporation. The Corporation has not
licensed, leased, sold or otherwise transferred or disclosed the source code for
any of the Intellectual Property to any person or entity other than to the
Corporation's employees and independent contractors pursuant to an agreement
with such employees and independent contractors protecting the intellectual
property rights therein and the nondisclosure thereof.
(f) Protection. The Corporation has reasonably protected the
-----------
Intellectual Property as the proprietary property and trade secrets of the
corporation. There has not been any default under any confidentiality agreement
regarding the use and disclosure of the Intellectual Property.
(g) Infringement.
-------------
(i) To the knowledge of the Corporation or the Seller, no
third party is infringing upon all or any portion of the Intellectual Property,
or (ii) using all or any portion of the Intellectual Property in derogation of
any rights acquired by Purchaser under this Agreement.
(ii) There is no interference action or other litigation
pending or, to the knowledge of the Corporation or the Seller, threatened before
any governmental entity (including the United States Patent and Trademark Office
or corresponding governmental entities in foreign jurisdictions) in regard to
any of the Intellectual Property.
- 15 -
(iii) None of the Intellectual Property infringes any
copyright, trademark, patent, trade secret, or other right of any third party.
The Corporation has not received any notice of infringement upon,
misappropriation of or conflict with any asserted right of any third party, and
there is no basis for any such notice.
(iv) The inception, development and reduction to practice of
the Intellectual Property have not constituted or involved, and do not
constitute or involve, the misappropriation of trade secrets or other rights of
any other person or entity (including any governmental entity).
4.13 LITIGATION. SCHEDULE 4.13 sets forth all litigation,
----------- --------------
claims, suits, actions, investigations, indictments or information, proceedings
or arbitrations, grievances or other procedures (including grand jury
investigations, actions or proceedings, and product liability and workers'
compensation suits, actions or proceedings) pending, or to the Knowledge of the
Corporation or the Seller, threatened, before any court, commission, arbitration
tribunal, or judicial, governmental or administrative department, body, agency,
administrator or official, grand jury, or any other forum for the resolution of
grievances, against the Corporation or involving any of its property or
business, and (b) indicates which of such matters are being defended by an
insurance carrier, and which of the matters being so defended are being defended
under a reservation of rights. Further, except as set forth on SCHEDULE 4.13,
--------------
there are no judgments, orders, writs, injunctions, decrees, indictments or
information, grand jury subpoenas or civil investigative demands, plea
agreements, stipulations or awards (whether rendered by a court, commission,
arbitration tribunal, or judicial, governmental or administrative department,
body, agency, administrator or official, grand jury or any other forum for the
resolution of grievances) against or relating to the Corporation or involving
any of the Corporation's property or business. The Corporation has made
available to Purchaser true, correct and complete copies of pleadings, briefs
and other documents filed in each pending litigation, claim, suit, action,
investigation, indictment or information, proceeding, arbitration, grievance or
other procedure required to be listed on SCHEDULE 4.13, and the judgments,
--------------
orders, writs, injunctions, decrees, indictments and information, grand jury
subpoenas and civil investigative demands, plea agreements, stipulations and
awards required to be listed on said Schedule.
4.14 EMPLOYEES.
----------
(a) SCHEDULE 4.14(a) sets forth the names and current compensation
----------------
(broken down by category, e.g., salary, bonus, commission) of all employees of
the Corporation, together with the date and amount of the last increase in
compensation for each such person. To the Knowledge of the Corporation or the
Seller, no employee intends to terminate his or her employment relationship with
the Corporation as a result of the transactions contemplated herein or
otherwise.
(b) The Corporation has conducted a thorough review of its
employee records and has verified that each foreign national employee of the
Corporation is authorized to be present and employed in the United States.
Additionally, except as disclosed on SCHEDULE 4.14(b), the Corporation is in
----------------
full compliance with all applicable laws, regulations, judgments and other
requirements relating to the regulation of foreign nationals in the United
States including those items relating to the employment and compensation of
foreign nationals in the
- 16 -
United States. Moreover, there are no unresolved past, pending or threatened
administrative, regulatory or judicial actions, proceedings, investigations,
obligations, liabilities, losses, decrees, judgments, penalties, fines, fees,
demands, demand letters, orders, directives, claims, or notices of noncompliance
or violation relating in any way to any The Corporation or its operations in
connection with the Corporation's employment of foreign nationals. As used
herein, the term "foreign national" means a person who is not a citizen of the
United States of America.
4.15 EMPLOYEE BENEFITS.
-------------------
(a) Employee Benefit Plans and Arrangements.
--------------------------------------------
(i) List and Description of Plans and Arrangements. SCHEDULE
---------------------------------------------- --------
4.15(a)(i) sets forth a true, correct and complete list and description of all
----------
agreements, arrangements, commitments, policies or understandings of any kind
(whether written or oral) (A) which relate to employee benefits, (B) which
pertain to present or former employees, retirees, directors or independent
contractors (or their beneficiaries, dependents or spouses) of the Corporation
or its predecessors in interest, and (C) which are currently or expected to be
adopted, maintained, sponsored, or contributed to by the Corporation, any of its
predecessors in interest or any employer which, under Section 414 of the
Internal Revenue Code (the "Code"), would constitute a single employer with the
----
Corporation (a "Company Affiliate") or as to which the Corporation or any
------------------
Company Affiliate has any ongoing liability or obligation whatsoever
(collectively, "Employee Benefit Plans"), including all: (1) employee benefit
------------------------
plans as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), (2) all other deferred compensation, early
-----
retirement, incentive, profit-sharing, thrift, stock ownership, stock
appreciation rights, bonus, stock option, stock purchase, welfare or vacation,
or other nonqualified benefit plans or arrangements, and (3) trusts, group
annuity contracts, insurance policies or other funding media for the plans and
arrangements described hereinabove.
(ii) Compliance with ERISA and the Code. Except as set
----------------------------------------
forth on SCHEDULE 4.15(a)(ii), the Corporation and each Company Affiliate has
---------------------
complied with all of their respective obligations with respect to all Employee
Benefit Plans (including (A) filing or distributing all reports or notices
required by ERISA or the Code and (B) complying with all requirements of Part 6
of ERISA and Code Section 4980B) and has maintained the Employee Benefit Plans
in compliance with all applicable laws and regulations (including ERISA and the
Code). Each eligible Employee Benefit Plan has received a favorable
determination letter from the Internal Revenue Service, and the Internal Revenue
Service has not threatened or taken any action to revoke any favorable
determination letter issued with respect to any such Employee Benefit Plan, No
amendment to any Employee Benefit Plan or related trust has been adopted since
receipt of the most recent determination letter issued with respect to the
Employee Benefit Plan or related trust which would cause disqualification of the
Employee Benefit Plan or related trust.
(iii) Copies of Documents Provided to Purchaser. The
-----------------------------------------------
Corporation has made available to Purchaser true, correct and complete copies of
all documents relating to the Employee Benefit Plans that Purchaser has
requested, including: (A) all plan texts, amendments, trust instruments and
other agreements adopted or entered into in connection with each of the Employee
Benefit Plans, (B) all insurance and annuity contracts related to any Employee
Benefit
- 17 -
Plan, (C) the notices and election forms used to notify employees and their
dependents of their continuation coverage rights under the Corporation's group
health plans (under Code Section 4980B(f) and ERISA Section 606), if applicable,
and (D) the most recently available Form 5500 annual reports, certified
financial statements, actuarial reports, summary plan descriptions and favorable
determination letters, if applicable, for Employee Benefit Plans. Since the date
such documents were supplied to Purchaser, no plan amendments have been adopted,
no changes to the documents have been made, and no such amendments or changes
shall be adopted or made prior to the Second Closing Date.
(iv) Agreements to Create, Continue or Terminate Plans.
--------------------------------------------------------
Neither the Corporation nor any Company Affiliate has any agreement,
arrangement, commitment or understanding, whether legally binding or not, to
create any additional Employee Benefit Plan or to continue, modify, change in
any material respect, or terminate any existing Employee Benefit Plan.
(v) Agency Review. Taxes and Fiduciary Liability. None of
----------------------------------------------
the Employee Benefit Plans is currently under investigation, audit or review by
the Department of Labor, the Internal Revenue Service or any other federal or
state agency or is liable for any federal, state, local or foreign taxes. There
is no transaction in connection with which the Corporation, any Affiliate or any
fiduciary of any of the Employee Benefit Plans could be subject to either a
civil penalty assessed pursuant to ERISA Section 502, a tax imposed by Code
Section 4975 or liability for a breach of fiduciary responsibility under ERISA.
(vi) Claims Against Plans and Fiduciaries. Other than
----------------------------------------
routine claims for benefits payable to participants or beneficiaries in
accordance with the terms of the Employee Benefit Plans, there are no claims,
pending or threatened, by any participant or beneficiary against any of the
Employee Benefit Plans or any fiduciary of any of the Employee Benefit Plans,
and no basis for any such claim or claims exists.
(vii) Retiree Welfare Benefits. Neither the Corporation
---------------------------
nor any Company Affiliate has maintained an Employee Benefit Plan providing
group health, dental, vision, life insurance or other welfare benefits to
employees following retirement or other separation from service, except to the
extent required under Part 6 of Title I of ERISA and Code Section 4980B.
(b) Defined Benefit Plans. The Corporation has never maintained an
----------------------
Employee Benefit Plan that is a pension plan within the meaning of ERISA Section
3(2) which is subject to Title IV of ERISA (a "Defined Benefit Plan"), nor has
the Corporation ever participated in a Defined Benefit Plan that is a
multi-employer plan within the meaning of ERISA Section 3(37)(A). Consequently,
there has never been any Defined Benefit Plan or multi-employer plan maintained
by the Corporation or any Affiliate under which the Corporation and any
Affiliate currently have, or potentially could ever have, any obligation or
liability whatsoever under ERISA.
4.16 COLLECTIVE BARGAINING. Except as set forth on SCHEDULE 4.16,
----------------------- --------------
there are no labor contracts, collective bargaining agreements, letters of
understanding or other arrangements, formal or informal, with any union or labor
organization covering any of employees of the
- 18 -
Corporation and none of said employees are represented by any union or labor
organization. The Corporation has made available to Purchaser a true, correct
and complete copy of each agreement listed on SCHEDULE 4.16.
---------------
4.17 LABOR DISPUTES. The Corporation is in compliance with all federal
---------------
and state laws respecting employment and employment practices, terms and
conditions of employment, wages and hours. The Corporation is not and has not
been engaged in any unfair labor practice, and no unfair labor practice
complaint against the Corporation is pending before the National Labor Relations
Board. Neither the Corporation nor Seller knows or has reason to know of any
labor strike or other labor trouble actually pending, being threatened against,
or affecting the Corporation. Relations between management and labor are
amicable and there have not been, nor are there presently, any attempts to
organize non-union employees, nor are there plans for any such attempts.
4.18 BANK ACCOUNTS. SCHEDULE 4.18 sets forth a true, correct and
--------------- --------------
complete list of each bank or financial institution in which The Corporation has
an account or safe deposit box (giving the address and account numbers) and the
names of the persons authorized to draw thereon or to have access thereto.
4.19 ENVIRONMENTAL MATTERS.
-----------------------
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Environmental Claims" shall mean any and all
---------------------
administrative, regulatory or judicial actions, causes of action, suits,
investigations, obligations, liabilities, losses, proceedings, decrees,
judgments, penalties, fines, fees, demands, demand letters, orders, directives,
claims (including any claims involving liability in tort, strict, absolute or
otherwise), liens, notices of noncompliance or violation, and legal and
consultant fees and costs of investigations or proceedings, relating in any way
to any Environmental Law or the presence or Release (or alleged presence or
Release) into the environment of any Hazardous Material on, at or from the Real
Property (hereinafter "Claims") including and regardless of the merit of such
------
Claim, any and all Claims by any governmental or regulatory authority or by any
third party or other person for enforcement, mitigation, cleanup, removal,
response, remediation or other actions or damages, contribution,
indemnification, cost recovery, compensation or injunctive or declaratory relief
pursuant to any Environmental Law or any alleged injury or threat of injury to
human health, safety, natural resources or the environment.
(ii) "Environmental Laws" shall mean all present and future
-------------------
federal, state and local laws, statutes, ordinances, regulations, codes,
policies, rules, directives, orders, decrees, permits, licenses, approvals,
authorizations, criteria, guidelines, covenants, deed restrictions, treaties,
conventions, and rules of common law now or hereafter in effect, and in each
case as amended, and any judicial or administrative judgment, opinion or
interpretation thereof, relating to the regulation or protection of human
health, safety, natural resources or the environment, including laws and
regulations (and all other items recited above) relating to the use, treatment,
storage, management, handling, manufacture, generation, processing, recycling,
distribution, transport, Release or threatened Release of or exposure to any
Hazardous Material.
- 19 -
(iii) "Hazardous Materials" shall mean, collectively, any
--------------------
substance, material, product, derivative, compound, mixture, mineral, chemical,
waste, medical waste or gas, in each case whether naturally occurring,
human-made or the by-product of any process, including petroleum or petroleum
products (A) that is now or hereafter becomes defined or included within the
definition of a "hazardous substance," "hazardous waste," "hazardous material,"
"toxic chemical," "toxic substance," "hazardous chemical," "extremely hazardous
substance," "pollutant," "contaminant," or any other words of similar meaning
under any Environmental Law, (B) exposure to which or the presence, use,
generation, treatment, Release, transport or storage of which is now or
hereafter prohibited, limited, restricted or regulated under any Environmental
Law or by any governmental or regulatory authority, or (C) that could require
investigation, response or remediation, or could support the assertion of any
Environmental Claim.
(iv) "Release" shall mean the release, deposit, disposal or
-------
leakage of any Hazardous Material at, into, upon or under any land, water or
air, or otherwise into the environment, including by means of burial, disposal,
discharge, emission, injection, spillage, leakage, seepage, leaching, dumping,
pumping, pouring, escaping, emptying, placement and the like.
(b) Except as disclosed on SCHEDULE 4.19(B):
------------------
(i) The Corporation is in full compliance with
all applicable Environmental Laws;
(ii) The Corporation has all permits, licenses and other
approvals required under the Environmental Laws with respect to the Real
Property and the Corporation's operations thereon;
(iii) There are no past, pending or threatened Environmental
Claims relating to the Corporation's operations or the Real Property;
(iv) Hazardous Materials have not at any time been present,
generated, used, treated, managed, recycled, stored or Released at, on, in or
under, or transported to or from the Real Property;
(v) Hazardous Materials have not at any time been Released
at, on, in or under any other property in the vicinity or area of the Real
Property;
(vi) There are not now and never have been any underground
storage tanks located at, on or under the Real Property; there is no asbestos
contained in, forming part of, or contaminating any part of the Real Property;
and no polychlorinated biphenyls (PCBs) are used, stored, located at or
contaminate any part of the Real Property;
(vii) There are no pending or threatened Environmental Claims
at any treatment, storage or disposal facility that has received Hazardous
Materials from or generated at the Real Property; and
- 20 -
(viii) There are no past or present facts, actions,
activities, circumstances, conditions, occurrences, events or incidents,
including the Release or presence of Hazardous Materials, that could (A) form
the basis of an Environmental Claim against or involving The Corporation or the
Real Property, (B) cause the Real Property to be subject to any restrictions on
or affect its ownership, occupancy, use or transferability under any applicable
Environmental Law, (C) require the filing or recording of any notice or
restriction relating to the presence of Hazardous Materials in the real estate
records in the county or municipality in which the Real Property is located,
other than any customary disclosure requirements in connection with the transfer
of the Real Property, or (D) prevent or interfere with the construction,
operation or maintenance of the Real Property.
4.20 REQUIRED LICENSES AND PERMITS. The Corporation has all
---------------------------------
licenses, permits or other authorizations of governmental authorities necessary
for the conduct of the C&B Business and all other licenses, permits or other
authorizations of governmental authorities necessary for the conduct of the C&B
Business, except to the extent that the Corporation is authorized pursuant to
permits held by its customers to conduct operations and perform services in
connection with their respective businesses, A true, correct and complete list
of all such licenses, permits and other authorizations (collectively, the
"Corporation Authorizations") is set forth on SCHEDULE 4.20. The Corporation
--------------------------- --------------
has made available to Purchaser true, correct and complete copies of all written
Corporation Authorizations required to be listed on SCHEDULE 4.20.
---------------
4.21 INSURANCE POLICIES. SCHEDULE 4.21 sets forth a true, correct and
-------------------- --------------
complete list and description of all insurance policies in force naming the
Corporation, or any employees thereof in their capacity as such, as an insured
or beneficiary or as a loss payable payee, or for which the Corporation has paid
or is obligated to pay all or part of the premiums. The Corporation has not
received notice of any pending or threatened termination or premium increase
(retroactive or otherwise) with respect thereto, and the Corporation is in
compliance with all conditions contained therein. There have been no lapses
(whether cured or not) in the coverage provided under the insurance policies,
referenced herein and as set forth on SCHEDULE 4.21, during the term of such
-------------
policies, as extended or renewed. The Corporation has made available to
Purchaser true, correct and complete copies of each of the policies required to
be listed on SCHEDULE 4.21.
---------------
4.22 MAJOR SUPPLIERS AND CUSTOMERS. SCHEDULE 4.22 sets forth a list of
------------------------------ -------------
the top 25 suppliers of goods or services to and the top 25 customers of the
Corporation (by amounts paid or billed) during the 12-month period ended
December 31, 2005 together, in each case, with the amount paid or billed during
such period. The Corporation is not engaged in any dispute with any of such
suppliers or customers. The Corporation has not been advised nor has it any
reason to believe that the consummation of the transactions contemplated
hereunder will have any adverse effect on the business relationship of the
Corporation with any such supplier or customer.
4.23 CONTRACTS AND COMMITMENTS. SCHEDULE 4.23 sets forth a
------------------------------ -------------
list of the Corporation's contracts with customers with an estimated value of
$1,000,000.00 or more. Except as set forth on SCHEDULES 4.10(d) (Leases), 4.11
----------------- ----
(Indebtedness), 4.12(b) AND (d) (Intellectual Property), 4.15(a)(i) (Employee
----------------- ----------
Benefit Plans), 4.16 (Collective Bargaining), 4.21 (Insurance Policies), and
---- ----
4.23 (Contracts and Commitments):
----
- 21 -
(a) The Corporation does not have any outstanding contract,
written or oral, with any officer, employee, agent, consultant, advisor,
salesman, manufacturer's representative, distributor, dealer, subcontractor, or
broker that is not cancelable by the Corporation, on notice of not longer than
thirty (30) days and without liability, penalty or premium of any kind, except
liabilities which arise as a matter of law upon termination of employment, or
any agreement or arrangement providing for the payment of any bonus or
commission based on sales or earnings;
(b) The Corporation is not under any liability or obligation under
any agreement pursuant to which third parties have been provided with products
that can be returned to the Corporation in the event they are not sold and
which could involve a liability of the Corporation of $100,000 or more in the
aggregate;
(c) The Corporation does not have (i) any outstanding loan
or loan commitment (excluding credit extended in the Ordinary Course of
Business to purchasers of inventory) to any person, or (ii) any factoring,
credit line or subordination agreement;
(d) Except as noted on SCHEDULE 4.11 (Indebtedness) and
--------------
except for negotiable instruments in the process of collection, the Corporation
does not have any power of attorney outstanding or any contract, commitment or
liability (whether absolute, accrued, contingent or otherwise), as guarantor,
surety, co-signer, endorser, co-maker, indemnitor in respect of the contract or
commitment of any other person, corporation, partnership, joint venture,
association, organization or other entity;
(e) There are no contracts or agreements with any director,
officer or shareholder of the Corporation, or with any person related to any
such person or with any company or other organization in which any director,
officer, or shareholder of any the Corporation, or anyone related to any such
person, has a direct or indirect financial interest;
(f) The Corporation is not subject to any contract or agreement
containing covenants limiting the freedom of the Corporation to compete in any
line of business in any geographic area or requiring the Corporation to share
any profits;
(g) There is no contract, agreement or other arrangement entitling
any person or other entity to any profits, revenues or cash flows of the
Corporation or requiring any payments or other distributions based on such
profits, revenues or cash flows; and
(h) To the knowledge of the Corporation or the Seller, the
Corporation is not a party to or bound by any presently or previously existing
contract, agreement or other arrangement that has had or may in the future have
a material adverse effect upon the C&B Business, earnings or financial condition
of the Corporation.
The Corporation has made available to Purchaser true, correct and complete
copies of all contracts, agreements, plans, leases, policies and licenses
referred to, or required to be referred to or listed on, any Schedule delivered
hereunder.
4.24 AGREEMENTS IN FULL FORCE AND EFFECT. All contracts, agreements,
--------------------------------------
plans, leases, policies and licenses referred to, or required to be referred to,
on any Schedule delivered hereunder are valid and binding, and are in full force
and effect and are enforceable in
- 22 -
accordance with their terms, except to the extent that the validity or
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
and other similar laws affecting creditors' rights generally or by principles of
equity. Neither the Corporation nor Seller has any Knowledge of any pending or
threatened bankruptcy, insolvency or similar proceeding with respect to any
party to such agreements, and no event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default thereunder by the Corporation or to the knowledge of
the Corporation or Seller or any other party thereto.
4.25 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
-----------------------------------------
SCHEDULE 4.25, since the Interim Balance Sheet Date, the Corporation has
-------------
operated only in the Ordinary Course of Business, and has not:
(a) suffered any material damage or destruction adversely
affecting any asset of the Corporation or the C&B Business;
(b) made any declaration, setting aside or payment of any dividend
or other distribution of assets (whether in cash, stock or property) with
respect to the capital stock of the Corporation, or any direct or indirect
redemption, purchase or other acquisition of stock, or otherwise made any
payment of cash or any transfer of other assets, to Seller or any Related
Company; or transferred any assets from any subsidiary to the Corporation, any
other subsidiary or any Related Company; or transferred any assets from any
Related Company to the Corporation;
(c) suffered any Material Adverse Change in its working capital,
assets, liabilities, financial condition, business prospects, or relationships
with any suppliers or customers listed on SCHEDULE 4.22;
---------------
(d) except for customary increases based on term of service or
regular promotion of non-officer employees, increased (or announced any increase
in) the compensation payable or to become payable to any employee, or increased
(or announced any increase in) any bonus, insurance, pension or other employee
benefit plan, payment or arrangement for such employees, or entered into or
amended any employment, consulting, severance or similar agreement;
(e) incurred, assumed or guaranteed any liability or obligation
(absolute, accrued, contingent or otherwise) other than in the Ordinary Course
of Business;
(f) paid, discharged, satisfied or renewed any claim, liability or
obligation other than payment in the Ordinary Course of Business;
(g) permitted any of its assets to be subjected to any mortgage,
lien, security interest, restriction, charge or other encumbrance of any kind
except for Permitted Liens;
(h) cancelled or forgiven any indebtedness or otherwise waived
any material claims or rights;
- 23 -
(i) sold, transferred or otherwise disposed of any of its assets,
except in the Ordinary Course of Business;
(j) made any single capital expenditure or investment in excess of
$100,000.00;
(k) made any change in any method, practice or principle of
financial or tax accounting;
(1) managed working capital components, including cash,
receivables, other current assets, trade payables and other current liabilities
in a fashion inconsistent with past practice, including failing to sell
inventory and other property in an orderly and prudent manner or failing to make
all budgeted and other normal capital expenditures, repairs, improvements and
dispositions;
(m) paid, loaned, advanced, sold, transferred or leased any asset
to any employee, except for normal compensation involving salary and benefits;
(n) issued or sold any of its capital stock or issued any warrant,
option or other right to purchase shares of its capital stock, or any security
convertible into its capital stock;
(o) entered into any material commitment or transaction, other
than in the Ordinary Course of Business, affecting the C&B Business; or
(p) agreed in writing, or otherwise, to take any action described
in this Section.
Notwithstanding the foregoing and the provisions of Section 4.22 hereof, the
------------
Purchaser hereby stipulates, acknowledges and confirms that the announcement by
the Seller of his intention to sell the C&B Shares (as well as the execution of
this Agreement and the consummation of the transactions contemplated hereby) may
affect the customer relationships of the Corporation, and the Purchaser hereby
stipulates, acknowledges and confirms that any such effect does not and shall
not constitute a breach of any of the representations ad warranties of the
Seller and the Corporation contained in this Agreement.
4.26 ACCOUNTS RECEIVABLE.
---------------------
(a) All accounts receivable owed to the Corporation by any
director, officer, shareholder or employee of the Corporation or any relative of
any such person (including those accounts receivable reflected on the Interim
Balance Sheets and incurred since the Interim Balance Sheet Date) have been paid
in full prior to the date hereof or shall have been paid in full prior to the
Second Closing Date.
(b) All accounts receivable of the Corporation (i) are valid,
existing and fully collectible (subject to an allowance for doubtful accounts in
the amount set forth on the Final Statement of Net Worth without resort to legal
proceedings or collection agencies, (ii) represent monies due for goods sold or
services rendered in the Ordinary Course of Business, and, (iii) are
- 24 -
not subject to any known defenses, rights of set-off, assignment, restrictions,
security interests or other encumbrances, except as shown on SCHEDULE 4.26(b).
----------------
Except as shown on SCHEDULE 4.26(b), as of the date of such Schedule, all such
----------------
accounts receivable were current, and the Corporation is not aware of any
dispute regarding the collectibility of any such accounts receivable. All
reserves shown on the Financial Statements are adequate to cover all losses
giving rise to any such reserve.
4.27 TAX MATTERS.
-------------
(a) Definitions. For purposes of this Agreement, the following
------------
definitions shall apply:
(i) The term "Taxes" shall mean all Taxes, however
-----
denominated, including any interest, penalties or other additions to Tax that
may become payable in respect thereof, imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which Taxes shall include, without limiting the generality of
the foregoing, all income or profits Taxes (including federal income Taxes and
state income Taxes), payroll and employee withholding Taxes, unemployment
insurance, social security Taxes, sales and use Taxes, ad valorem Taxes, excise
Taxes, franchise Taxes, gross receipts Taxes, business license Taxes, occupation
Taxes, real and personal property Taxes, stamp Taxes, environmental Taxes,
transfer Taxes, workers' compensation, Pension Benefit Guaranty Corporation
premiums and other governmental charges, and other obligations of the same or of
a similar nature to any of the foregoing, which the Company is required to pay,
withhold or collect.
(ii) The term "Returns" shall mean all reports, estimates,
-------
declarations of estimated Tax, information statements and returns relating to,
or required to be filed in connection with, any Taxes, including information
returns or reports with respect to backup withholding and other payments to
third parties.
(b) Returns Filed and Taxes Paid. Except as otherwise disclosed
------------------------------
in SCHEDULE 4.27(B): (i) all Returns required to be filed by or on behalf of the
----------------
Corporation have been duly filed on a timely basis and such Returns are true,
complete and correct in all material respects, (ii) all material Taxes shown to
be payable on the Returns or on subsequent assessments with respect thereto have
been paid in full on a timely basis, and no other material Taxes are payable by
the Corporation with respect to items or periods covered by such Returns
(whether or not shown on or reportable on such Returns) or with respect to any
period prior to the date of this Agreement, (iii) the Corporation has withheld
and paid over all Taxes required to have been withheld and paid over, and
complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, creditor, independent contractor, or
other third party, and (iv) there are no liens on any of the assets of the
Corporation with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that the Corporation is contesting in good faith through
appropriate proceedings and for which appropriate reserves have been
established, which contested Taxes are disclosed in SCHEDULE 4.27(b).
-----------------
- 25 -
(c) Tax Deficiencies: Audits; Statutes of Limitations. Except as
--------------------------------------------------
otherwise disclosed in SCHEDULE 4.27(C): (i) the Returns of the Corporation
------------------
have never been audited by a government or Taxing authority, nor is any such
audit in process, pending or threatened (either in writing or verbally, formally
or informally), (ii) no deficiencies exist or have been asserted (either in
writing or verbally, formally or informally) or are expected to be asserted with
respect to Taxes of the Corporation has not received notice (either in writing
or verbally, formally or informally) or expects to receive notice that it has
not filed a Return or paid Taxes required to be filed or paid by it, (iii) the
Corporation is not either a party to any action or proceeding for assessment or
collection of Taxes, nor has such event been asserted or threatened (either in
writing or verbally, formally or informally) against the Corporation or any of
its assets, (iv) no waiver or extension of any statute of limitations is in
effect with respect to Taxes or Returns of the Corporation, and (v) the
Corporation has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement penalty within the
meaning of Code Section 6662.
(d) Tax Sharing Agreements. Except as otherwise disclosed in
------------------------
SCHEDULE 4.27(d) the Corporation is not (nor has ever been) a party to any Tax
-----------------
sharing agreement.
(e) Tax Elections and Special Tax Status. The Corporation has
----------------------------------------
not filed a consent pursuant to the collapsible corporation provisions of Code
Section 341(f). The Corporation is not a party to any safe harbor lease
within the meaning of Code Section 168(f)(8), as in effect prior to amendment by
the Tax Equity and Fiscal Responsibility Act of 1982, The Corporation is not
or has not been a United States real property holding corporation within the
meaning of Code Section 897(c)(l)(A)(ii) during the applicable period specified
in Code Section 897(c)(l)(A)(ii). The Corporation has not entered into any
compensatory agreements with respect to the performance of services which
payment thereunder would be a nondeductible expense pursuant to Code Section
162(m) or 280G or an excise Tax to the recipient pursuant to Code Section 4999.
The Corporation has not been a "distributing corporation" (within the meaning of
Code Section 355(a)(l)(A)) within the 3-year period ending as of the date of
this Agreement. No member of the Group has participated in an international
boycott as defined in Code Section 999. Except as set forth on SCHEDULE 4.27(e),
----------------
the Corporation has not agreed, nor is required to make, any adjustment under
Code Sections 263A or 481(a) by reason of a change in accounting method or
otherwise) or an election under Section 1377(a)(2) of the Code. The Corporation
has not a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country. The Corporation is in compliance with the terms and conditions of any
applicable Tax exemptions, Tax agreements or Tax orders of any government to
which it may be subject or which it may have claimed, and the transactions
contemplated by this Agreement will not have any adverse effect on such
compliance. The Corporation is not a party to any transaction, understanding or
arrangement treated as a Tax shelter under Code Section 611 l(e) or
6662(d)(2)(C)(iii).
(f) S Corporation Status. Since its incorporation, the
-----------------------
Corporation has been and is currently a valid "S" corporation for all federal
and state Tax purposes (and will be up to the Second Closing Date), and neither
the Internal Revenue Service nor any Taxing authority has challenged, or is
challenging, the S election of the Corporation.
- 26 -
4.28 BROKERAGE. No broker, agent, or finder has rendered services to
----------
the Corporation or the Seller in connection with the transactions contemplated
under this Agreement. The Corporation has not incurred any obligation or
liability, contingent or otherwise, for brokers' or finders' fees or agents
commissions or other similar payments in connection with this Agreement or the
transactions contemplated hereby.
4.29 DISCLOSURE. No representations, warranties, assurances or
-----------
statements by the Seller or the Corporation in this Agreement and no statement
contained in any document (including the Financial Statements and the
Schedules), certificates or other writings furnished or to be furnished by the
Seller or the Corporation (or caused to be furnished by the Seller or the
Corporation) to Purchaser or any of its representatives pursuant to the
provisions hereof contains or will contain any untrue statement of material
fact, or omits or will omit to state any fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to the Seller as follows:
5.01 ORGANIZATION. Purchaser is a corporation duly organized, validly
-------------
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on and conduct its business
as it is now being conducted and to own or lease its properties and assets, and
to effect the transactions contemplated hereunder and is duly qualified and in
good standing in each jurisdiction in which the conduct of the business of
Purchaser or the ownership of its properties and assets requires it to be so
qualified, except where the failure to be so qualified or in such good standing,
or to have such power or authority when taken together with all other such
failures, is not reasonably likely to have a Purchaser Material Adverse Effect.
As used in this Agreement, the term "Purchaser Material Adverse Effect" means a
---------------------------------
material adverse effect on the financial condition, properties, business or
results of operation of Purchaser and its subsidiaries taken as a whole;
provided, however, that any such effect resulting from any change (i) in law,
-------- --------
rule or regulation or GAAP or interpretations thereof that applies to both
Purchaser and the Corporation or (ii) in economic or business conditions
generally or in the industries in which the Company conducts its business shall
not be considered when determining if a Purchaser Material Adverse Effect has
occurred.
5.02 AUTHORIZATION. Purchaser has the right, power and capacity to
--------------
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, have
been duly and validly authorized by all necessary corporate action on the part
of Purchaser, This Agreement has been duly and validly executed and delivered
by Purchaser and constitutes Purchaser's legal, valid and binding obligation,
enforceable in accordance with its terms.
5.03 NO CONFLICT. The execution and delivery of this Agreement by
-------------
Purchaser, the consummation of the transactions contemplated herein, and the
performance of the covenants and agreements of Purchaser will not, with or
without the giving of notice or the lapse of time, or
- 27 -
both, (a) violate or conflict with any of the provisions of any charter document
or bylaw of Purchaser, (b) violate, conflict with or result in breach or default
under, result in the acceleration of any obligations or the creation of a lien,
pledge, security interest or other encumbrance on the assets of Purchaser
pursuant to, or cause termination of any term or condition of any mortgage,
lease, indenture, notes, contract, license, permit, instrument, trust document,
or other agreement, arrangement, obligation, document or instrument to which
Purchaser is a party or by which Purchaser or any of its properties may be
bound, or (c) violate any provision of law, statute, rule, regulation, court
order, judgment or decree, or ruling of any governmental authority, to which
Purchaser is a party or by which Purchaser or its properties may be bound,
5.04 BROKERAGE. Except for fees payable by Purchaser to Growth Capital LLC
----------
and Xxxx Xxxxxx, no broker, agent or finder has rendered services to Purchaser
in connection with the transactions contemplated under this Agreement.
5.05 DISCLOSURE. No representations, warranties, assurances or statements
-----------
by Purchaser in this Agreement and no statement contained in any document,
certificates or other writings furnished or to be furnished by Purchaser (or
caused to be furnished by Purchaser) to the Seller or any of their
representatives pursuant to the provisions hereof contains or will contain any
untrue statement of material fact, or omits or will omit to state any fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein or therein not misleading.
5.06 PURCHASER SHARES. The Shares of Purchaser Stock, when issued and
------------------
delivered to the Seller in accordance with the terms hereof, shall be duly
authorized, validly issued, fully-paid and non-assessable.
ARTICLE VI.
COVENANTS
---------
6.01 OPERATIONS OF THE CORPORATION. The Corporation and Seller hereby
---------------------------------
covenant and agree that, except as consented to in writing by Purchaser, after
the Initial Closing Date and prior to the Second Closing Date, the Corporation
shall, and the Seller shall cause the Corporation to, operate and conduct itself
only in the Ordinary Course of Business. Pursuant thereto and not in limitation
of the foregoing, except as otherwise expressly contemplated by this Agreement,
after the Initial Closing Date and prior to the Second Closing Date, the
Corporation shall:
(a) use its Commercially Reasonable Efforts to preserve intact the
goodwill and business organization of the Corporation, keep the officers and
employees of the Corporation available to Purchaser and preserve the
relationships and goodwill of the Corporation with customers, distributors,
suppliers, employees and other persons or entities having business relations
with the Corporation;
(b) maintain its existence and good standing in its jurisdiction
of organization and in each jurisdiction listed on SCHEDULE 4.01(A);
------------------
(c) duly and timely file or cause to be filed all reports and
returns required to be filed with any Governmental Entity and promptly pay or
cause to be paid when due all taxes,
- 28 -
assessments and governmental charges, including interest and penalties levied or
assessed, unless contested in good faith by appropriate proceedings;
(d) maintain in existing condition and repair (ordinary wear
and tear excepted), consistent with past practices, all buildings, offices,
shops and other structures located on the Real Property, and all equipment,
fixtures and other tangible personal property located on the Real Property;
(e) not authorize for issuance or issue and deliver any additional
shares of its capital stock or securities convertible into or exchangeable for
shares of its capital stock, or issue or grant any right, option or other
commitment for the issuance of shares of its capital stock or of such
securities, or split, combine or reclassify any shares of its capital stock;
(f) not amend or modify its charter documents or bylaws;
(g) not create any subsidiary, acquire any capital stock or other
equity securities of any corporation or acquire any equity or ownership interest
in any business or entity;
(h) not dispose of or permit to lapse any ownership and/or right
to the use of any patent, trademark, trade name, service xxxx, license or
copyright of the Corporation (including any of the Intellectual Property), or
dispose of or disclose to any person or entity, any trade secret, formula,
process, technology or know-how of the Corporation not heretofore a matter of
public knowledge;
(i) protect, defend and maintain the ownership, validity and
registration of the Intellectual Property, and not allow any of the registered
Intellectual Property to be abandoned, forfeited, cancelled, expunged and/or
dedicated to the public;
(j) not (i) sell any asset of the Corporation, other than in the
Ordinary Course of Business, (ii) create, incur or assume any indebtedness
secured by the assets of the Corporation, (iii) grant, create, incur or suffer
to exist any lien or encumbrance on the assets of the Corporation that did not
exist on the date hereof, (iv) incur any liability or obligation (absolute,
accrued or contingent), except in the Ordinary Course of Business, (v) write-off
any guaranteed check, note or account receivable, except in the Ordinary Course
of Business, (vi) write-down the value of any asset or investment (including any
asset of the Corporation) on the books or records of the Corporation, except for
depreciation and amortization in the Ordinary Course of Business, (vii) cancel
any debt or waive any claim or right, (viii) make any commitment for any capital
expenditure to be made on or following the date hereof in excess of $100,000.00,
or (ix) enter into any contract or commitment which imposes, or purports to
impose, any obligations or restrictions on any affiliate of the Corporation;
(k) not increase in any manner the compensation of, or enter into
any new bonus or incentive agreement or arrangement with, any of its employees,
officers, directors or consultants, except in the Ordinary Course of Business;
provided, however, that the Corporation shall not take any action described in
this Section 6.01(1) with respect to (i) any manager, officer or director of the
---------------
Corporation or (ii) any person whose annualized compensation is $35,000.00 or
- 29 -
more or whose annual compensation for the twelve (12)-month period following the
Second Closing Date is expected to be $35,000.00 or more;
(l) not pay or agree to pay any additional pension, retirement
allowance or other employee benefit under any Employee Benefit Plans to any of
its employees or consultants, whether past or present, except in the Ordinary
Course of Business; provided, however, that the Corporation shall not take any
action described in this Section 6.01(m) with respect to (i) any manager,
----------------
officer or director of the Corporation or (ii) any person whose annualized
compensation is $35,000,00 or more or whose annual compensation for the twelve
(12) month period following the Second Closing Date is expected to be $35,000.00
or more;
(m) except as required by applicable laws, not adopt, amend or
terminate any Employee Benefit Plan or increase the benefits provided under any
Employee Benefit Plan, or promise or commit to undertake any of the foregoing in
the future;
(n) not enter into a collective bargaining agreement;
(o) not enter into any employment agreement;
(p) not settle or compromise any legal proceedings related to or
in connection with the Corporation or the C&B Business without consultation with
the Purchaser;
(q) maintain supplies and inventory at levels that are in the
Ordinary Course of Business;
(r) continue to extend customers credit, collect accounts
receivable and pay accounts payable and similar obligations in the Ordinary
Course of Business;
(s) perform in all material respects all of its obligations under
all contracts and commitments, and not default or suffer to exist any event or
condition that with notice or lapse of time or both could constitute a default
under any such contracts or commitments (except those being contested in good
faith) and not enter into, assume or amend any contract or commitment other than
in the Ordinary Course of Business;
(t) not pay, discharge or satisfy any claim, liability or
obligation (absolute, contingent or otherwise) other than the payment, discharge
or satisfaction in the Ordinary Course of Business of claims, liabilities and
obligations reflected or reserved against in the Interim Balance Sheet or
incurred in the Ordinary Course of Business;
(u) not increase any reserves for contingent liabilities
(excluding any adjustment to bad debt reserves in the Ordinary Course of
Business);
(v) maintain in full force and effect and in the same amounts
policies of insurance comparable in amount and scope of coverage to that
maintained as of the date hereof by or on behalf of the Corporation;
(w) continue to maintain its books and records in accordance with
GAAP consistently applied and on a basis consistent with past practice;
- 30 -
(x) continue its cash management practices in the Ordinary
Course of Business; and
(y) not authorize, or commit or agree to take, any of the
foregoing actions, which the Corporation is required not to take without
Purchaser's prior written consent.
In connection with the continued operation of the Corporation during the period
commencing on the Initial Closing Date and ending on the Second Closing Date,
the Corporation and Seller shall confer in good faith on a regular and frequent
basis with Purchaser regarding operational matters and the general status of
on-going operations of the Corporation, The Corporation and the Seller hereby
acknowledge that Purchaser does not and shall not waive any right it may have
hereunder solely as a result of such consultations. Neither the Seller nor the
Corporation shall take any action that would, or that could reasonably be
expected to, result in any representation or warranty of the Seller or the
Corporation set forth herein to become untrue.
6.02 ACCESS. During the period from and after the Initial Closing Date
-------
and prior to the Second Closing Date, the Corporation shall (a) provide
Purchaser and its designees (e.g., officers, counsel, accountants, actuaries,
and other authorized representatives) with such information as Purchaser or its
designees may from time to time reasonably request with respect to the
Corporation and the transactions contemplated by this Agreement, (b) provide
Purchaser and its designees, access during regular business hours and upon
reasonable notice to the books, records, offices, personnel, counsel,
accountants and actuaries of the Corporation, as Purchaser or its designees may
from time to time reasonably request, and (c) permit Purchaser and its designees
to make such inspections thereof as Purchaser may reasonably request. Any
investigation shall be conducted in such a manner so as not to interfere
unreasonably with the operation of the business of the Corporation. No such
investigation shall limit or modify in any way the Seller's or the
Corporation's obligations with respect to any breach of their representations,
warranties, covenants or agreements contained herein.
6.03 TRANSFER TAXES. All sales or transfer taxes, including stock
----------------
transfer taxes, document recording fees, real property transfer taxes, and
excise taxes, arising out of or in connection with the consummation of the
transactions contemplated hereby shall be paid by the Seller. The parties
shall cooperate in the preparation, execution and filing of all returns,
questionnaires, applications and other documents regarding any of such taxes and
all transfer, recording, registration and other fees that become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed at or prior to the Second Closing Date.
6.04 PREPARATION OF SUPPORTING DOCUMENTS. In addition to such
---------------------------------------
actions as the Corporation may otherwise be required to take under this
Agreement or applicable law to consummate this Agreement and the transactions
contemplated hereby, the Seller and the Corporation shall take such action,
shall furnish such information, and shall prepare, or cooperate in preparing,
and execute and deliver such certificates, agreements and other instruments as
Purchaser may reasonably request from time to time, before, at or after the
Second Closing Date, with respect to compliance with obligations of Purchaser,
the Seller or the Corporation in connection with Purchaser's purchase of the C&B
Shares from the Seller. Any information so furnished by the Seller or the
Corporation shall be true, correct and complete in all material
- 31 -
respects and shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
6.05 NOTICES OF CERTAIN EVENTS. The Seller shall promptly notify
-----------------------------
Purchaser of:
(a) any fact, condition, change or event that, individually or in
the aggregate, results in any representation or warranty of the Corporation or
the Seller hereunder being inaccurate in any respect as of the date of such
fact, condition, change or event had such representation or warranty been made
as of such date;
(b) any fact, condition, change or event that causes or
constitutes a breach of any of the representations or warranties of the
Corporation or the Seller hereunder made as of the date hereof;
(c) any notice or other communication from any person or entity
alleging that the consent of such person or entity is or may be required in
connection with the transactions contemplated hereby;
(d) any notice or other communication from or to any Governmental
Entity in connection with the transactions contemplated hereby;
(e) any action, suit, claim, investigation or proceeding commenced
or, to its Knowledge, threatened against, relating to or involving or otherwise
affecting the Corporation or its business that, if pending on the date hereof,
would have been required to have been disclosed pursuant to Section 4.13 or that
------------
relate to the consummation of the transactions contemplated hereby; and
(f) (i) the damage or destruction by fire or other casualty of any
asset of the Corporation or part thereof or (ii) any asset of the Corporation or
part thereof becoming the subject of any proceeding (or, to the Knowledge of the
Corporation or the Seller, threatened proceeding) for the taking thereof or of
any right relating thereto by condemnation, eminent domain or other similar
governmental action.
The Seller hereby acknowledges that Purchaser does not and shall not waive
any right it may have hereunder solely as a result of such notifications and any
notification given pursuant to this Section 6.05 shall (x) not have any effect
------------
for purposes of determining satisfaction of the conditions set forth in Article
-------
IX of this Agreement, (y) be disregarded for purposes of determining the
--
obligations of the Seller under Article X hereof, and (z) not in any way limit
---------
Purchaser's exercise of its rights hereunder.
6.06 SUPPLEMENTS TO SCHEDULES. From time to time prior to the Second
---------------------------
Closing Date, the Corporation and the Seller shall promptly supplement or amend
the Schedules to this Agreement with respect to any matter (i) first existing or
occurring after the date hereof which, if existing or occurring at or prior to
such date, would have been required to be set forth in any of the Schedules to
this Agreement, or (ii) that is necessary to correct any information in such
Schedules that is inaccurate on account thereof. No supplement or amendment to
the Schedules shall have any effect for purposes of determining satisfaction of
the conditions set forth in Article IX of this Agreement unless such supplement
----------
is accepted by Purchaser in writing in its
- 32 -
sole discretion. Any information contained in any such supplement or amendment
shall be disregarded for purposes of determining the obligations of the
Corporation and the Seller under Article X hereof.
----------
6.07 NO SOLICITATION OF TRANSACTIONS. Neither the Corporation nor
-----------------------------------
Seller shall, directly or indirectly, through any officer, director, manager or
agent of any of them or otherwise, initiate, solicit or encourage (including by
way of furnishing non-public information or assistance), or enter into
negotiations of any type, directly or indirectly, or enter into a
confidentiality agreement, letter of intent or other similar contract or
commitment with any person or entity other than Purchaser with respect to a sale
of all or any substantial portion of the assets of the Corporation, or a merger,
consolidation, business combination, sale of all or any substantial portion of
the capital stock of the Corporation, or the liquidation or similar
extraordinary transaction with respect to the Corporation. The Corporation and
the Seller shall notify Purchaser orally (within two (2) business days) and in
writing (as promptly as practicable) of all relevant terms of any inquiry or
proposal by a third party to do any of the foregoing that the Seller, the
Corporation or any of its officers, directors, partners, managers, employees,
investment bankers, financial advisors, attorneys, accountants or other
representatives may receive relating to any of such matters. In the event such
inquiry or proposal is in writing, the Seller and the Corporation shall deliver
to Purchaser a copy of such inquiry or proposal together with such written
notice.
6.08 FILINGS; OTHER ACTIONS; NOTIFICATION.
---------------------------------------
(a) The Seller and Purchaser shall cooperate with each other and
use their respective Commercially Reasonable Efforts to take or cause to be
taken all actions, and do or cause to be done all things, necessary, proper or
advisable on its part under this Agreement and applicable laws to consummate and
make effective the transactions contemplated by this Agreement as soon as
practicable, including preparing and filing as promptly as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as promptly as practicable all consents, registrations, approvals,
permits and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Entity in order to consummate the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, the Seller and Purchaser shall, promptly after the Initial Closing
Date, prepare and file the notifications required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Prior to the
-------
Seller's and Purchaser's receipt of clearance or notice of early termination
from the applicable Governmental Entity reviewing the Seller's and Purchaser's
filings made under the HSR Act (the date of such clearance of early termination
being the "Second Closing Date"), Purchaser shall not be entitled to, and shall
-------------------
not, exercise any decision making authority or participate in any way in the
management of the Corporation except as provided in Section 6.1 hereof. Subject
-----------
to applicable laws relating to the exchange of information, Purchaser and Seller
shall have the right to review in advance, and to the extent practicable each
will consult the other on, all the information relating to Purchaser or the
Corporation, as the case may be, that appear in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the Seller and Purchaser shall act reasonably and
as promptly as practicable.
- 33 -
(b) The Seller and Purchaser each shall keep the other apprised of
the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notice or other
communications received by Purchaser, the Corporation or the Seller, as the case
may be, from any third party and/or any Governmental Entity with respect to the
transactions contemplated by this Agreement. Purchaser shall give prompt notice
to the other of any change that is reasonably likely to result in a Purchaser
Material Adverse Effect.
6.09 CONFIDENTIALITY. The Corporation and Seller shall hold in
----------------
confidence at all times following the date hereof all Confidential Information
and shall not disclose, publish or make use of Confidential Information at any
time following the date hereof without the prior written consent of Purchaser.
For purposes hereunder, "Confidential Information" means any data or information
------------------------
of the Corporation (including trade secrets) that is not generally known to the
public or competitors regarding (for example and including) (a) business process
models, (b) proprietary software, (c) research, development, products, services,
marketing, selling, business plans, budgets, unpublished financial statements,
licenses, prices, costs, contracts, suppliers, customers, and customer lists,
(d) the identity, skills and compensation of employees, contractors, and
consultants, (e) specialized training, (f) discoveries, developments, trade
secrets, processes, formulas, data, lists, and all other works of authorship,
mask works, ideas, concepts, know-how, designs, and techniques, whether or not
any of the foregoing is or are patentable, copyrightable, or registrable under
any intellectual property laws or industrial property laws in the United States
or elsewhere, and (g) such other information that may give the Corporation a
competitive business advantage or the disclosure of which could be detrimental
to the interests of the Corporation and from all of the relevant circumstances
could reasonably be assumed by any person or entity to be confidential and
proprietary to the Corporation. Notwithstanding the foregoing, no data or
information constitutes "Confidential Information" if such data or information
------------------------
is publicly known and in the public domain through means that do not involve a
breach by the Corporation or any Seller of any covenant or obligation set forth
in this Agreement.
6.10 PUBLICITY. The initial press release shall be a joint press
----------
release and thereafter the Seller and Purchaser each shall consult with each
other prior to issuing any press releases or otherwise making public
announcements with respect to the transactions contemplated by this Agreement
and prior to making any filings with any third party and/or any Governmental
Entity (including any national securities exchange or interdealer quotation
service) with respect thereto, except as may be required by law or by
obligations pursuant to any listing agreement with or rules of any national
securities exchange or interdealer quotation service.
6.11 EXPENSES. All costs and expenses incurred in connection with
---------
this Agreement and the transactions contemplated by this Agreement shall be paid
by the party incurring such expenses.
6.12 NON-OPERATING EXPENSES. The Seller shall cause the Corporation
------------------------
to cause all non-operating expenses of the Corporation to be paid in full prior
to the Second Closing Date.
6.13 [INTENTIONALLY RESERVED].
--------------------------
- 34 -
6.14 USE OF CASH CONSIDERATION. The Seller covenants and agrees that
---------------------------
immediately following Seller's receipt of the Initial Closing Date Cash
Consideration, the Seller shall assign the Seller Note to Texas State Bank in
lieu of the TSB Deposit (as defined below). The Seller and the Purchaser
further covenant that immediately upon the closing of the financing transactions
contemplated by and among the Purchaser, the Seller and AED Capital, the Seller
shall deposit an amount equal to $15,000,000 from the proceeds of such financing
into the cash collateral account maintained by the Corporation with Texas State
Bank ("TSB") pursuant to that certain Promissory Note dated May 5, 2006 between
---
TSB and Crochet & Borel Services, Inc. and related Security Agreement
(collectively, the "TSB Note") sufficient to ensure that the Corporation is in
--------
full compliance with the terms of the TSB Note, including all covenants
requiring the maintenance of funds in such cash collateral account.
6.15 SPIN-OFF AGREEMENT. Prior to the Second Closing Date, Purchaser
--------------------
and the Seller shall use commercially reasonable efforts to negotiate and
execute an agreement regarding the potential spin-off of the Corporation from
Purchaser with terms and conditions to be mutually agreed upon by Purchaser and
the Seller, substantially in accordance with the provisions of SCHEDULE 6.15.
--------------
6.16 TAX MATTERS.
-------------
(a) Cooperation on Tax Matters. The Seller and Purchaser shall
------------------------------
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any tax return, amended tax
return, determining a liability for taxes, participating in or conducting any
audit or other proceeding in respect of taxes. Such cooperation and
information shall include providing copies of relevant tax returns or portions
thereof, together with accompanying schedules, related work papers and documents
relating to rulings or other determinations by tax authorities. The Seller
and Purchaser shall make their respective employees available on a basis
mutually convenient to both parties to provide explanations of any documents or
information provided hereunder. Each of the Seller and Purchaser shall retain
all tax returns, schedules and work papers, records and other documents in its
possession relating to tax matters of the Corporation and the business and
assets of the Corporation for each taxable period first ending after the Initial
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
tax returns and other documents relate, without regard to extensions except to
the extent notified by the other party in writing of such extensions for the
respective tax periods, or (ii) six years following the due date (without
extension) for such tax returns. Any information obtained under this Section
-------
6.03 shall be kept confidential in accordance with the provisions of this
----
Agreement except as may be otherwise necessary in connection with the filing of
tax returns or claims for refund or in conducting an audit or other proceeding.
(b) Tax Returns and Payment of Taxes.
--------------------------------------
(i) Seller or Seller's designee shall prepare and timely file
or shall cause to be prepared and timely filed all Returns of the Corporation
for tax periods ending on or before the Second Closing Date ("Seller Returns"),
--------------
and shall pay or shall cause to be paid any and all Taxes due with respect to
such Returns. Seller shall have the exclusive authority and obligation to
prepare or cause to be prepared all Seller Returns. Such authority shall include
the
- 35 -
determination of the manner in which any items of income, gain, deduction, loss
or credit arising out of the income, properties and operations of the
Corporation shall be reported or disclosed in such Seller Returns; provided,
however, that such Returns shall be prepared by treating items on such Returns
in a manner consistent with past practice with respect to such items, unless
otherwise required by law. If any such Seller Returns are due after the Initial
Closing Date and Seller is not authorized by law to file such Seller Returns,
Seller shall submit drafts of such Seller Returns to Purchaser for its review at
least 30 days prior to the due date of any such Return. Such drafts of Seller
Returns shall be subject to Purchaser's review and approval, which approval
shall not be unreasonably withheld, and Purchaser shall timely file, or cause to
be timely filed, such Seller Returns with the appropriate taxing authority.
(ii) Purchaser shall prepare (or cause to be prepared),
execute, and timely file all Returns of the Corporation that are not Seller
Returns, and shall pay (or cause to be paid) all Taxes to which such Returns
relate for all periods covered by such Returns. All such Returns shall be
prepared in accordance with the past practice of the Corporation, unless
otherwise required by applicable law. "Pre-Closing Tax Period" shall mean any
----------------------
tax period ending on or before the Initial Closing Date; and, with respect to a
Tax period that begins on or before the Initial Closing Date and ends
thereafter, the portion of such tax period ending on the Closing Date.
(iii) For purposes of calculating Taxes applicable to the
Pre-Closing Tax Periods, the amount of any Tax (except Taxes based on the
Corporation's income or gross-receipts) owed shall be apportioned to Pre-Closing
Tax Periods based on the number of days for the portion of the ending on and
including the Closing Date. Any allocation of income or deductions required to
determine any Taxes based on the Corporation's income or gross-receipts
applicable to a Pre-Closing Tax Period shall be made by means of a closing of
the books and records of the Corporation as of the close of business on the
Initial Closing Date.
6.17 UNWIND OPTION. In the event that the Purchaser fails to pay to
---------------
the Seller the Second Closing Stock Consideration in accordance with the
provisions of Section 2.03 hereof, the Seller may require the Purchaser to sell
------------
to the Seller the Initial Closing C&B Shares in consideration of the Seller's
payment to the Purchaser of (x) the Initial Closing Cash Consideration (by
tender of the Seller Note to Purchaser, if outstanding, or otherwise by payment
to Purchaser of an amount equal all amounts paid to the Seller by Purchaser
pursuant to the Seller Note), and (y) the Initial Closing Stock Consideration.
In the event that Seller exercises the rights set forth in this Section 6.17,
-------------
Purchaser and Seller agree as follows:
(a) Except as may be required by any law, stock exchange, or other
regulation or as otherwise expressly contemplated herein, neither the Purchaser
nor its Affiliates, employees, agents, consultants, advisers, or representatives
shall, without the prior written consent of the Seller and the Corporation,
disclose to any third party this Agreement, the subject matter or terms hereof,
or any Confidential Information concerning the business or affairs of the
Corporation (including without limitation, the Purchase Price, the ownership of
the Corporation, the current and historical capital structure of the
Corporation, the corporate minutes of the Corporation or any other information
relating to dealings between the Seller, the Corporation and the Purchaser)
which the Purchaser may have acquired from the Corporation in the course of
pursuing the transaction contemplated hereby; provided, however, that the
---------
Purchaser may
- 36 -
disclose any such Confidential Information as follows: (i) to the extent that
the Confidential Information is or becomes generally available to the public
through no fault of the Purchaser or its Affiliates, and (ii) to the extent that
the same information becomes available to the Purchaser making such disclosure
on a non-confidential basis from a source other than the Purchaser or its
Affiliates, which source is not prohibited from disclosing such information by
any legal, contractual, or fiduciary obligation.
(b) If the transaction contemplated hereby is not consummated for
any reason, then the Purchaser shall immediately return to the Seller or
destroy, at the option of the Seller (and certify to the Seller the completion
of such destruction, if requested), any and all tangible embodiments (including
any and all copies) of Confidential Information provided to or acquired by the
Purchaser in the course of pursuing the transaction contemplated hereby.
6.18 EMPLOYEE BONUS POOL. A pool of shares of Purchaser Stock (not to
---------------------
exceed 1,000,000 shares) shall be made available in an incentive stock option
plan for the benefit of certain employees of the Corporation designated by the
Seller, with an excercise price not to exceed $6.00 per share.
ARTICLE VII.
CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE
----------------------------------------------
The respective obligation of each party to effect the transactions
contemplated by this Agreement is subject to the satisfaction (or waiver) at or
prior to the Initial Closing Date or the Second Closing Date, as the case may be
(and, if neither the Initial Closing Date nor the Second Closing Date is
specifically referenced in any of the following provisions, at or prior to each
of the Initial Closing Date and Second Closing Date), of each of the following
conditions:
7.01 REGULATORY CONSENTS. At or prior to the Second Closing Date, all
---------------------
notices, reports and other filings required to be made prior to the Second
Closing Date by the Seller, the Corporation or Purchaser with, and all
consents, registrations, approvals, permits and authorizations required
to be obtained prior to the Second Closing Date by the Seller, the Corporation
or Purchaser from, any Governmental Entity (collectively, "Governmental
------------
Consents") in connection with the execution and delivery of this Agreement and
--------
the consummation of the transactions contemplated hereby by the Seller and
Purchaser shall have been made or obtained (as the case may be), except those
that the failure to make or to obtain are not individually or in the aggregate,
reasonably likely to have a Purchaser Material Adverse Effect or to provide a
reasonable basis to conclude that the parties hereto or any of their affiliates
or respective directors, officers, agents, advisors or other representatives
would be subject to the risk of criminal or material financial liability.
7.02 LITIGATION. No court or Governmental Entity of competent
-----------
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, law, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the transactions
contemplated by this Agreement (collectively, an "Order").
-----
- 37 -
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE SELLER
---------------------------------------
The obligation of the Seller to effect the transactions contemplated by
this Agreement is subject to the satisfaction (or waiver by the Seller) at or
prior to the Initial Closing Date or the Second Closing Date, as the case may be
(and, if neither the Initial Closing Date nor the Second Closing Date is
specifically referenced in any of the following provisions, at or prior to each
of the Initial Closing Date and Second Closing Date), of each of the following
conditions:
8.01 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT AT CLOSING DATES.
-----------------------------------------------------------------
Each of Purchaser's representations and warranties contained in this Agreement
that are qualified by materiality shall be true and correct in all respects and
each of Purchaser's representations and warranties contained in this Agreement
that are not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and on and as of the Initial Closing
Date or the Second Closing Date, as the case may be, with the same force and
effect as though made on and as of such date (except to the extent any such
representation or warranty expressly speaks as of an earlier date), and
Purchaser shall have delivered to the Seller certificates dated as of each of
the Initial Closing Date and the Second Closing Date and signed on behalf of
Purchaser by its President to such effect.
8.02 PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed and
----------------------------
complied in all material respects with the respective covenants and agreements
set forth herein to be performed or complied with on or before the Initial
Closing Date or the Second Closing Date, as applicable; and Purchaser shall have
delivered to the Company a certificates dated as of each of the Initial Closing
Date and Second Closing Date and signed on behalf of Purchaser by its President
to all such effects and confirming such other matters as may be reasonably
requested by the Company.
8.03 DOCUMENTS SATISFACTORY IN FORM AND SUBSTANCE. All agreements,
-----------------------------------------------
certificates and other documents delivered by Purchaser to the Seller hereunder
or in connection herewith shall be in form and substance satisfactory to the
Seller and their counsel, in the exercise of their reasonable judgment.
8.04 CERTIFICATES. Purchaser shall have delivered to the Seller
-------------
certificates of the Secretary or Assistant Secretary of Purchaser (i) attaching
and certifying copies of the resolutions of its board of directors authorizing
the execution, delivery and performance of this Agreement and the other
documents, instruments and certifications required or contemplated hereby, (n)
certifying the name, title and true signature of each officer of Purchaser
executing or authorized to execute this Agreement and the other documents,
instruments and certifications required or contemplated hereby, and (iii)
attaching and certifying a true, correct and complete copy of the bylaws of
Purchaser.
8.05 NO MATERIAL CHANGE. The Purchaser shall not have suffered any
--------------------
Material Adverse Change in its business, prospects, financial condition, working
capital, assets, liabilities (absolute, accrued, contingent or otherwise),
reserves or operations.
- 38 -
8.06 OPINION OF COUNSEL TO THE PURCHASER. On or prior to the Second Closing
------------------------------------
Date, the Seller shall have received from counsel to the Purchaser an opinion,
dated the Second Closing Date, in a form to be agreed upon by the parties.
ARTICLE IX.
CONDITIONS TO OBLIGATIONS OF PURCHASER
--------------------------------------
The obligations of Purchaser to effect the transactions contemplated by
this Agreement are subject to the satisfaction (or waiver by Purchaser) at or
prior to the Initial Closing Date or the Second Closing Date, as the case may be
(and, if neither the Initial Closing Date nor the Second Closing Date is
specifically referenced in any of the following provisions, at or prior to each
of the Initial Closing Date and Second Closing Date), of each of the following
conditions:
9.01 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT AT CLOSING DATES.
-----------------------------------------------------------------
Each of the representations and warranties of the Corporation and the Seller
contained in this Agreement that are qualified by materiality shall be true and
correct in all respects and the Corporation's and Seller's representations and
warranties contained in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and on and as of the Initial Closing Date or the Second Closing Date,
as applicable, with the same force and effect as though made on and as of such
date (except to the extent any such representation or warranty expressly speaks
as of an earlier date), and the Seller shall have delivered to Purchaser
certificates dated as of each of the Initial Closing Date and the Second Closing
Date and signed on behalf of the Corporation by its President to such effect.
9.02 PERFORMANCE OBLIGATIONS. The Corporation and the Seller shall
-------------------------
have performed and complied in all material respects with the covenants and
agreements set forth herein to be performed or complied with by it on or before
the Initial Closing Date or Second Closing Date, as applicable; and the Seller
shall have delivered to Purchaser certificates dated as of the Initial Closing
Date and Second Closing Date and signed on behalf of the Corporation by its
President to all such effects, and confirming such other matters as may be
reasonably requested by Purchaser.
9.03 NO MATERIAL CHANGE. On or prior to the Second Closing Date,
---------------------
neither the Seller nor the Corporation shall have suffered any Material Adverse
Change since date of the Audited Financial Statements (whether or not such
change is referred to or described in any Schedule) in its business, prospects,
financial condition, working capital, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves or operations.
9.04 OTHER NECESSARY CONSENTS. On or prior to the Second Closing Date,
-------------------------
the Seller shall have obtained all consents and approvals required to be listed
on SCHEDULE 4.05. With respect to each such consent or approval, Purchaser
---------------
shall have received written evidence, satisfactory to it, that such consent or
approval has been duly and lawfully filed, given, obtained or taken and is
effective, valid and subsisting.
9.05 OPINION OF COUNSEL TO THE SELLER. On or prior to the Second
-------------------------------------
Closing Date, Purchaser shall have received from counsel to the Seller and the
Company an opinion, dated the Second Closing Date, in a form to be agreed upon
by the parties.
- 39 -
9.06 NON-COMPETE AGREEMENT. On or prior to the Second Closing Date,
----------------------
each Incentive Employee shall have executed and delivered to Purchaser
non-competition agreements in the form of EXHIBIT C.
-----------
9.07 DOCUMENTS SATISFACTORY IN FORM AND SUBSTANCE. All agreements,
-----------------------------------------------
certificates, opinions and other documents delivered by the Seller to Purchaser
hereunder shall be in form and substance satisfactory to Purchaser and its
counsel, in the exercise of their reasonable judgment,
9.08 CERTIFICATES. The Seller shall have delivered to Purchaser:
-------------
(a) Certificates of the Secretary or Assistant Secretary of the
Corporation (i) attaching and certifying copies of the resolutions of its board
of directors and shareholders, authorizing the execution, delivery and
performance of this Agreement and the other documents, instruments and
certifications required or contemplated hereby, (ii) certifying the name, title
and true signature of each officer of the Corporation executing or authorized to
execute this Agreement and the other documents, instruments and certifications
required or contemplated hereby, and (iii) attaching and certifying a true,
correct and complete copy of the bylaws of the Corporation; and
(b) Copies of the articles of incorporation of the Corporation
certified by the Secretary of State of the jurisdiction of its incorporation and
by its Secretary or Assistant Secretary, together with a certificates of good
standing or existence as may be available from the Secretaries of State of its
jurisdiction of incorporation or organization and every other state of the
United States in which the conduct of its business or the ownership of its
properties and assets requires it to be so qualified.
9.09 EMPLOYMENT AGREEMENTS. On or prior to the Second Closing Date,
----------------------
each Incentive Employee shall have executed and delivered to Purchaser
employment agreements in the form of EXHIBIT D.
----------
9.10 RELEASE OF LIENS. On or prior to the Second Closing Date,
-------------------
Purchaser shall have received evidence reasonably satisfactory to it that all
liens or encumbrances affecting any asset of the Corporation have been released.
9.11 PAYMENT OF INDEBTEDNESS. On or prior to the Second Closing
--------------------------
Date, Purchaser shall have received evidence reasonably satisfactory to it that
all indebtedness (including all non- operating liabilities and the Borel Note)
of the Corporation has been paid in full.
ARTICLE X.
INDEMNIFICATION
---------------
10.01 INDEMNIFICATION OBLIGATIONS OF THE SELLER. The Seller (and the
--------------------------------------------
Corporation prior to the Second Closing Date) shall, jointly and severally,
indemnify, defend and hold harmless Purchaser and its affiliates, officers,
directors, employees, agents and representatives and the heirs, executors,
successors and assigns of any of the foregoing (the "Purchaser Indemnified
---------------------
Parties") from, against, and in respect of, any and all claims, liabilities,
-------
obligations, damages, losses, costs, expenses, penalties, fines and judgments
(at equity or at law, including
- 40 -
statutory and common) and damages whenever arising or incurred (including
amounts paid in settlement, costs of investigation and reasonable attorneys'
fees and expenses) arising out of or relating to:
(a) any breach or inaccuracy of any representation or warranty
made by the Corporation or the Seller in this Agreement or any documents or
agreements executed and delivered by the Corporation or any Seller in connection
with the transactions contemplated by this Agreement (without regard to any
qualification or exception contained in such representation or warranty relating
to materiality or Material Adverse Effect), whether such representation and
warranty is made as of the date hereof, the Initial Closing Date or the Second
Closing Date;
(b) any breach of any covenant, agreement or undertaking made by
the Corporation or the Seller in this Agreement or in any documents or
agreements executed and delivered by the Corporation or any Seller in connection
with the transactions contemplated by this Agreement;
The claims, liabilities, obligations, losses, damages, costs, expenses,
penalties, fines and judgments of the Purchaser Indemnified Parties described in
this Section l0.0l as to which the Purchaser Indemnified Parties are entitled to
-------------
indemnification are collectively referred to as "Purchaser Losses".
-----------------
10.02 INDEMNIFICATION OBLIGATIONS OF PURCHASER. Purchaser shall
-------------------------------------------
indemnify and hold harmless the Seller and his heirs, executors, successors and
assigns (the "Seller Indemnified Parties") from, against and in respect of any
--------------------------
and all claims, liabilities, obligations, losses, damages, costs, expenses,
penalties, fines and judgments (at equity or at law, including statutory and
common) and damages whenever arising or incurred (including amounts paid in
settlement, costs of investigation and reasonable attorneys' fees and expenses)
arising out of or relating to:
(a) any breach or inaccuracy of any representation or warranty
made by Purchaser in this Agreement or in any document or agreement executed and
delivered by Purchaser in connection with the transactions contemplated by this
Agreement, whether such representation and warranty is made as of the date
hereof or as of the Second Closing Date; or
(b) any breach of any covenant, agreement or undertaking made by
Purchaser in this Agreement or in any document or agreement executed and
delivered by Purchaser in connection with the transactions contemplated by this
Agreement;
The claims, liabilities, obligations, losses, damages, costs, expenses,
penalties, fines and judgments of the Seller Indemnified Parties described in
this Section 10.02 as to which the Seller Indemnified Parties are entitled to
--------------
indemnification are collectively referred to as "Seller Losses".
--------------
10.03 INDEMNIFICATION PROCEDURE.
---------------------------
(a) Promptly following receipt by a Purchaser Indemnified Party or a
Seller Indemnified Party, as applicable (an "Indemnified Party") of notice by a
-----------------
third party (including any Governmental Entity) of any complaint, dispute or
claim or the commencement of any audit, investigation, action or proceeding with
respect to which such Indemnified Party may be entitled to receive payment from
the other party for any Purchaser Losses or any Seller Losses (as the
- 41 -
case may be), such Indemnified Party shall notify Purchaser or the Seller, as
the case may be (the "Indemnifying Party"), provided, however, that the failure
------------------ -------- --------
to so notify the Indemnifying Party shall relieve the Indemnifying Party from
liability hereunder with respect to such claim only if, and only to the extent
that, such failure to so notify the Indemnifying Party results in the forfeiture
by the Indemnifying Party of rights and defenses otherwise available to the
Indemnifying Party with respect to such claim. The Indemnifying Party shall have
the right, upon written notice delivered to the Indemnified Party within twenty
(20) days thereafter assuming full responsibility for any Purchaser Losses or
Seller Losses (as the case may be) resulting from such audit, investigation,
action or proceeding, to assume the defense of such audit, investigation, action
or proceeding, including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of the fees and disbursements of such
counsel. In the event, however, that the Indemnifying Party declines or fails to
assume the defense of the audit, investigation, action or proceeding on the
terms provided above or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case within such 20-day period, then any Purchaser
Losses or any Seller Losses (as the case may be), shall include the reasonable
fees and disbursements of counsel for the Indemnified Party as incurred. In any
audit, investigation, action or proceeding for which indemnification is being
sought hereunder the Indemnified Party or the Indemnifying Party, whichever is
not assuming the defense of such action, shall have the right to participate in
such matter and to retain its own counsel at such party's own expense. The
Indemnifying Party or the Indemnified Party (as the case may be) shall at all
times use reasonable efforts to keep the Indemnifying Party or Indemnified Party
(as the case may be) reasonably apprised of the status of the defense of any
matter the defense of which it is maintaining and to cooperate in good faith
with each other with respect to the defense of any such matter.
(b) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of the Indemnifying
Party, unless (i) the Indemnifying Party fails to assume and maintain the
defense of such claim pursuant to Section 10.03(a) or (ii) such settlement,
----------------
compromise or consent includes an unconditional release of the Indemnifying
Party and its officers, directors, employees and affiliates from all liability
arising out of such claim. An Indemnifying Party may not, without the prior
written consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder unless (x) such settlement, compromise or consent
includes an unconditional release of the Indemnified Party and its officers,
directors, employees and affiliates from all liability arising out of such
claim, (y) does not contain any admission or statement suggesting any wrongdoing
or liability on behalf of the Indemnified Party and (z) does not contain any
equitable order, judgment or term that in any manner affects, restrains or
interferes with the business of the Indemnified Party or any of the Indemnified
Party's affiliates.
(c) In the event an Indemnified Party claims a right to payment
pursuant hereto, such Indemnified Party shall send written notice of such claim
to the appropriate Indemnifying Party (a "Notice of Claim"). Such Notice of
---------------
Claim shall specify the basis for such claim. The failure by any Indemnified
Party so to notify the Indemnifying party shall not relieve the Indemnifying
Party from any liability that it may have to such Indemnified Party with respect
to any claim made pursuant to this Section 10.03(c), it being understood that
----------------
notices for claims in respect of a breach of a representation or warranty must
be delivered prior to the expiration of
- 42 -
the survival period for such representation or warranty under Section 10.04. In
--------------
the event the Indemnifying Party does not notify the Indemnified Party within
thirty (30) days following its receipt of such notice that the Indemnifying
Party disputes its liability to the Indemnified Party under this Article or the
amount thereof, the claim specified by the Indemnified Party in such Notice of
Claim shall be conclusively deemed a liability of the Indemnifying Party under
this Section 10.03(c), and the Indemnifying Party shall pay the amount of such
------------------
liability to the Indemnified Party on demand or, in the case of any notice in
which the amount of the claim (or any portion of the claim) is estimated, on
such later date when the amount of such claim (or such portion of such claim)
becomes finally determined. In the event the Indemnifying Party has timely
disputed its liability with respect to such claim as provided above, as promptly
as possible, such Indemnified Party and the appropriate Indemnifying Party shall
establish the merits and amount of such claim (by mutual agreement, litigation,
arbitration or otherwise) and, within five (5) Business Days following the final
determination of the merits and amount of such claim, the Indemnifying Party
shall pay to the Indemnified Party immediately available funds in an amount
equal to such claim as determined hereunder.
10.04 SURVIVAL PERIOD. The representations and warranties of the
-----------------
parties contained herein shall not be extinguished by the Second Closing Date,
but shall survive the Second Closing Date for, and all claims for
indemnification in connection therewith shall be asserted not later than,
eighteen (18) months following the Second Closing Date; provided, however, that
------------------
the representations and warranties contained in Section 3.01 (Power, Authority
------------
and Organization of the Seller), Section 3.03 (Ownership of the C&B Shares),
------------
Section 4.01 (Organization and Authorization), Section 4.02 (Authorized and
------------- ------------
Outstanding Stock), Section 4.15 (Employee Benefits), Section 4.19
------------- -------------
(Environmental Matters), Section 4.27 (Tax Matters), and Section 4.28
------------- -------------
(Brokerage) (collectively, the "Surviving Representations") shall survive for a
-------------------------
period of four (4) years following the Closing Date, and the period during which
a claim for indemnification may be asserted in connection therewith shall
continue during such four (4) year period. The covenants and agreements of the
parties hereunder shall survive without limitation as to time, and the period
during which a claim for indemnification may be asserted in connection therewith
shall continue indefinitely. Notwithstanding the foregoing, if, prior to the
close of business on the last day a claim for indemnification may be asserted
hereunder, an Indemnifying Party shall have been properly notified of a claim
for indemnity hereunder and such claim shall not have been finally resolved or
disposed of at such date, such claim shall continue to survive and shall remain
a basis for indemnity hereunder until such claim is finally resolved or disposed
of in accordance with the terms hereof.
10.05 LIABILITY LIMITS. Notwithstanding anything to the contrary set
------------------
forth herein, the Purchaser Indemnified Parties shall not make a claim against
the Seller for indemnification under Section 10.01(d) for Purchaser Losses, and
----------------
the Seller will have no liability for indemnification of any Purchaser
Indemnified Party pursuant to Section 10.01(a) unless and until the aggregate
----------------
Losses claimed thereunder exceed an amount equal to $250,000.00 (the "Threshold
Amount"), and once the aggregate amount of such Losses under Section 10.01(a)
----------------
exceeds the Threshold Amount, the Purchaser Indemnified Parties will be entitled
to recover all such Losses to which they are entitled in excess of the Threshold
Amount. The total aggregate amount of the liability of the Seller for
Purchaser Losses with respect any claims made pursuant to Section 10.01(a) other
----------------
than Claims arising under Section 4.19 (Environmental Matters) ("Environmental
------------ -------------
Claims") shall be limited to $3,000,000.00 (the "Purchaser Cap"); provided,
------ ------------- --------
however, that with respect to
-------
- 43 -
Environmental Claims the Purchaser Cap shall be increased by an additional
$2,000,000 to $5,000,000 (the "Environmental Cap"), and the Seller shall be
------------------
liable for one half (1/2) of the amount of any Environmental Claims in excess of
the Environmental Cap; provided, further, that total aggregate amount of the
--------- --------
liability of the Company and the Seller for Purchaser Losses arising out of
fraud or willful misconduct shall not be subject to any limits. Notwithstanding
the foregoing, any indemnification amounts payable by the Seller pursuant to
this Article X will be reduced by any amounts actually recovered by any
----------
Purchaser Indemnified Party under insurance policies or other collateral sources
with respect to such Losses and the Purchaser shall use Commercially Reasonable
Efforts to collect any such amounts.
10.06 INVESTIGATIONS. The respective representations and warranties
---------------
of the parties contained in this Agreement or any certificate or other document
delivered by any party at or prior to the Initial Closing Date or Second Closing
Date, as applicable, and the rights to indemnification set forth in this Article
-------
X shall not be deemed waived or otherwise affected by any investigation made, or
-
knowledge acquired, by a party, provided that if either party becomes aware of a
--------
fact which results in, or could result in, a breach of a covenant or
representation of the other party, the party become aware of such fact shall
promptly notify the other party of such fact, provided, further, that any
--------- --------
party's failure to so notify the other party shall not in any way limit the
rights of such party pursuant to this Agreement if such failure does not result
in a material prejudice to the other party.
10.07 SET-OFF. Purchaser shall be entitled to set-off any amount or
--------
right it may be entitled to pursuant to this Agreement against any amount, right
or obligations owed to the Seller under this Agreement or any agreement or
documents executed and delivered by a Seller.
10.08 REDUCTION OF PURCHASE PRICE. Any indemnification amounts
-------------------------------
payable by the Seller pursuant to this Article X shall be deemed to be a
----------
reduction in the Purchase Price.
10.09 DAMAGES. Notwithstanding any other provision in this agreement
--------
to the contrary, no party shall be liable to the other party for any punitive or
exemplary damages.
10.10 EXCLUSIVE REMEDY. Except as otherwise set forth in this
------------------
Agreement, and except for any legal proceedings instituted by the Seller to
enforce payment and collection of the Final Determination Date Cash
Consideration, after the Closing indemnification pursuant to this Article X
---------
shall be the sole and exclusive remedy for the parties with respect to matters
arising under this Agreement of any kind or nature, including, for any
misrepresentation or breach of any warranty, covenant, or other provision
contained in this Agreement, and the parties hereby waive and release any other
rights, remedies, causes of action, or claims that either of them have or that
may arise against any other party with respect thereto.
ARTICLE XI,
TERMINATION PRIOR TO SECOND CLOSING DATE
----------------------------------------
11.01 TERMINATION OF AGREEMENT. This Agreement may be terminated at
--------------------------
any time prior to the Second Closing Date:
(a) By the mutual written consent of Purchaser, the
Seller and the Corporation;
- 44 -
(b) By the Seller in writing, without liability, if Purchaser
shall (i) fail to perform in any material respect its agreements contained
herein required to be performed by it on or prior to the Second Closing Date, or
(ii) materially breach any of its representations, warranties or covenants
contained herein, which failure or breach is not cured within ten (10) days
after the Seller have notified Purchaser of their intent to terminate this
Agreement pursuant to this subparagraph (b);
(c) By Purchaser in writing, without liability, if the Corporation
or the Seller shall (i) fail to perform in any material respect their agreements
contained herein required to be performed by them on or prior to the Second
Closing Date, or (ii) materially breach any of their representations, warranties
or covenants contained herein, which failure or breach is not cured within ten
(10) days after Purchaser has notified the Seller of its intent to terminate
this Agreement pursuant to this subparagraph (c);
(d) By either the Seller or Purchaser in writing, without
liability, if there shall be any order, writ, injunction or decree of any court
or governmental or regulatory agency binding on Purchaser, the Seller or the
Corporation, which prohibits or restrains Purchaser, the Seller or the
Corporation from consummating the transactions contemplated hereby, provided
that Purchaser, the Seller and the Corporation shall have used their reasonable,
good faith efforts to have any such order, writ, injunction or decree lifted and
the same shall not have been lifted within 30 days after entry, by any such
court or governmental or regulatory agency; or
(e) By either the Seller or Purchaser, in writing, without
liability, if for any reason the Second Closing Date has not occurred by July
15, 2006 other than as a result of the breach of this Agreement by the party
attempting to terminate the Agreement.
11.02 TERMINATION OF OBLIGATIONS. Termination of this Agreement
-----------------------------
pursuant to this Article XI shall terminate all obligations of the parties
-----------
hereunder, except for the obligations under Sections 6.09, 11.02, 12.07 and
-------------------- -----
12.10 hereof; provided, however, that termination pursuant to subparagraphs (b),
----- -------- -------
(c) or (e) of Section 11.01 hereof shall not relieve a defaulting or breaching
-------------
party from any liability to the other party hereto, and provided further that in
all events the Seller shall retain the Non-Refundable Cash Consideration and the
Non-Refundable Stock Consideration regardless of the reason or cause for the
termination of this Agreement.
ARTICLE XII.
MISCELLANEOUS
-------------
12.01 ENTIRE AGREEMENT; SURVIVAL.
-----------------------------
(a) This Agreement (including the Schedules and Exhibits which are
incorporated herein) constitutes the sole understanding of the parties with
respect to the subject matter hereof; provided, however, that this provision is
not intended to abrogate any other written agreement between the parties
executed with or after this Agreement.
12.02 AMENDMENT. No amendment, modification or alteration of the
----------
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the parties hereto.
- 45 -
12.03 PARTIES BOUND BY AGREEMENT; SUCCESSORS AND ASSIGNS. The terms,
-----------------------------------------------------
conditions, and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof. This Agreement shall not be assignable by operation of law or
otherwise.
12.04 COUNTERPARTS; FACSIMILE. This Agreement may be executed in
-------------------------
multiple counterparts, each of which shall for all purposes be deemed to be an
original and all of which, when taken together, shall constitute one and the
same instrument, This Agreement may be executed and delivered by facsimile.
12.05 HEADINGS. The headings of the Sections and paragraphs of this
---------
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof,
12.06 MODIFICATION AND WAIVER. Any of the terms or conditions of
--------------------------
this Agreement may be waived in writing at any time by the party which is
entitled to the benefits thereof. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other provision
hereof (whether or not similar),
12.07 EXPENSES. Except as otherwise provided herein, the Seller and
---------
Purchaser shall each pay all costs and expenses incurred by each of them, or on
their behalf respectively, in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of their own
financial consultants, accountants and counsel. All such expenses incurred by
the Corporation in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Seller on or before the Second Closing
Date.
12.08 NOTICES. Any notice, request, instruction or other document to
--------
be given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by registered or certified mail
(including by overnight courier such as FedEx or express mail service), postage
or fees prepaid,
if to the Seller or, prior to the Xxxx Crochet
Closing Date, the Corporation to: 000 Xxxxxx Xxxxxx
Xxxx Xxxxxx, Xxxxx 00000
with a copy to: Xxxxxx, Xxxx & Xxxxxx, L.L.P.
000 Xxxxxxx
Xxxxxxxx, Xxxxx 00000
Fax No.: (000)000-0000
Attention: Xxxx Xxxxxxxxx III and
Xxxxx X. Xxxxx
if to Purchaser to: Charys Holding Company, Inc.
0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxx, Xx.,
Chief Executive Officer
- 46 -
with a copy to: Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, XX 00000
Fax No.: (000)000-0000
Attention: Xxxxx Xxxxxxx
or at such other address for a party as shall be specified by like notice Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been duly given to the party to which it is addressed at the close of business,
local time of the recipient, on the fourth business day after the day it is so
placed in the mail or, if earlier, the time of actual receipt.
12.09 GOVERNING LAW; JURISDICTION. This Agreement is executed by the
------------------------------
parties hereto in and shall be construed in accordance with and governed by the
laws of the State of Georgia without giving effect to the principles of
conflicts of law thereof. Each of the parties hereto irrevocably agrees that
any legal action or proceeding with respect to this Agreement or the
transactions contemplated hereby, or for recognition and enforcement of any
judgment in respect hereof, brought by the other party hereto or its successors
or assigns shall be brought and determined in state or federal courts sitting in
the States of Georgia or Texas, and each party hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect of its
property, generally and unconditionally, to the exclusive jurisdiction of the
aforesaid courts. Each party hereto hereby irrevocably waives, and agrees not
to assert, by way of a motion, as a defense, counterclaim or otherwise, in any
action or proceeding with respect to this Agreement, (a) any claim that it is
not personally subject to the jurisdiction of the above-named courts for any
reason other than the failure to lawfully serve process, (b) that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), and (c) to the fullest extent permitted by
applicable law, that (i) the suit, action or proceeding in any such court is
brought in an inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper, and (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts.
12.10 PUBLIC ANNOUNCEMENTS. No public announcement shall be made by
----------------------
any person with regard to the transactions contemplated by this Agreement
without the prior consent of the Seller and Purchaser; provided that either
party may make such disclosure if advised by counsel that it is legally required
to do so. The Seller, the Corporation and Purchaser will discuss any public
announcements or disclosures concerning the transactions contemplated by this
Agreement with the other parties prior to making such announcements or
disclosures.
12.11 KNOWLEDGE. (a) With respect to the Corporation and the Seller,
----------
the Corporation and the Seller shall be deemed to have "Knowledge" of a
particular fact or matter if an individual listed on SCHEDULE 12.11 (a) is
------------------
actually aware of such fact or matter without further investigation or inquiry.
- 47 -
(b) With respect to the Purchaser, the Purchaser shall be deemed
to have "Knowledge" of a particular fact or matter if any of Xxxxx Xxx, Xxx
Xxxxx, Xxxxx Xxxxxxxx or Xxxxxxx Oyster is actually aware of such fact or matter
without further inquiry.
12.12 NO THIRD-PARTY BENEFICIARIES. With the exception of the
-------------------------------
parties to this Agreement, there shall exist no right of any person to claim a
beneficial interest in this Agreement or any rights occurring by virtue of this
Agreement.
12.13 "INCLUDING". Words of inclusion shall not be construed as
------------
terms of limitation herein, so that references to "included" matters shall be
regarded as non-exclusive, non- characterizing illustrations.
12.14 GENDER AND NUMBER. Where the context requires, the use of a
--------------------
pronoun of one gender or the neuter is to be deemed to include a pronoun of the
appropriate gender, singular words are to be deemed to include the plural, and
vice versa.
12.15 REFERENCES. Whenever reference is made in this Agreement to
-----------
any Article, Section, Schedule or Exhibit, such reference shall be deemed to
apply to the specified Article or Section of this Agreement or the specified
Schedule or Exhibit to this Agreement. The Schedules and Exhibits referenced in
this Agreement are attached hereto, are hereby incorporated into this Agreement
and are hereby made a part hereof as if set forth in full in this Agreement.
12.16 SEVERABILITY. In case any one or more of the provisions
-------------
contained in this Agreement should be found by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect against any party hereto,
such invalidity, illegality, or unenforceability shall only apply to such party
in the specific jurisdiction where such judgment shall be made, and the
validity, legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, except that this
Agreement shall not be reformed in any way that will deny to any party the
essential benefits of this Agreement, unless such party waives in writing its
rights to such benefits.
12.17 FURTHER ASSURANCES. Each of the parties hereto will use its
--------------------
reasonably good faith efforts to take all actions and to do all things
necessary, proper or advisable following the Second Closing Date to consummate
and effectuate the transactions contemplated by this Agreement.
12.18 CURRENCY. All payments hereunder or contemplated by this
---------
Agreement shall be paid in U.S. currency.
12.19 ORDINARY COURSE OF BUSINESS. "Ordinary Course of Business" means,
---------------------------- ---------------------------
with respect to actions and operations conducted by the Corporation, actions and
operations that are (a) consistent with the past custom and practices of the
Corporation, (b) taken in the ordinary course of the normal, day-to-day
operations of the Corporation, (c) not required to be authorized by the Board of
Directors or other governing body of the Corporation, and (d) similar in nature
and magnitude to actions and operations customarily taken, without any
authorization by the Board of Directors or other governing body, in the ordinary
course of the normal, day-to-day operation of other companies that are in the
same line of business as the Corporation.
- 48 -
12.20 COMMERCIALLY REASONABLE EFFORTS. "Commercially Reasonable
---------------------------------- ------------------------
Efforts" means efforts which are designed to enable a party, directly or
-------
indirectly, to satisfy a condition to or otherwise assist in the consummation of
a desired result and which do not require the performing party to expend funds
or assume liabilities other than expenditures and liabilities which are
customary and reasonable in nature and amount in the context hereof.
12.21 MATERIAL ADVERSE CHANGE (OR EFFECT). "Material Adverse Change
--------------------------------------- -----------------------
(or Effect)" means any change or effect that individually or in the aggregate
------------
with other changes or effects would be material and adverse to (a) the financial
condition, assets, liabilities, businesses, or results or operations of the
Corporation or the Purchaser, as the case may be, taken as a whole, or (b) the
ability of the Seller or the Purchaser, as the case may be, to consummate the
transactions contemplated hereby; provided, however, that any change or effect
-------- --------
resulting from, or directly relating to, any of the following shall not be taken
into account in making any such determination and shall not be deemed to
constitute or give rise to a Material Adverse Effect: (i) a change or effect
which has a similar impact on comparable businesses, (ii) a change or changes in
general business or economic conditions, including, without limitation, changes
in applicable laws or regulations and changes in financial or market conditions,
(iii) changes resulting from conditions generally affecting the geographic area
or local, regional, or national industry in which the Corporation or the
Purchaser, as the case may be, operates, (iv) acts of terrorism or war (whether
or not declared), (v) the performance by any party of its obligations under this
Agreement, (vi) the compliance by any party with any covenant hereunder, (vii)
the performance by any party of any action to which the other party has
consented, (viii) the fact that the Purchaser is the purchaser of the shares,
(ix) the announcement of the transaction or the existence of this Agreement, or
(x) the taking of any action by or on behalf of the other party or its
Affiliates, representatives, or agents.
12.22 ARBITRATION. The parties shall use their respective best
------------
efforts to resolve any disputes, claims, or controversies arising out of or
relating to this Agreement, including the performance, breach, validity,
interpretation., application, or termination thereof (a "Dispute"). Any party
-------
may give written notice of the existence of a Dispute (the "Notice of Dispute"),
-----------------
after which the parties shall attempt to resolve the Dispute through good faith
negotiations by their respective authorized representatives. If the parties are
unable to resolve the Dispute amicably within thirty (30) days after delivery of
the written Notice of Dispute, or such other time as the parties may agree in
writing, then the Dispute shall be subject to arbitration in accordance with
this Section. Any Dispute not resolved amicably through good faith negotiation
as provided above shall be finally resolved by arbitration administered by the
American Arbitration Association in accordance with its Commercial Arbitration
Rules as then in effect (the "AAA Rules"), and judgment on the award may be
--------
entered in any court having jurisdiction thereof. In the event that any party's
claim or counterclaim exceeds $1,000,000, exclusive of interest or attorneys'
fees, the Dispute shall be heard and determined by three arbitrators, each of
whom shall be independent and impartial; otherwise, the Dispute shall be heard
and determined by one arbitrator. In the event that one arbitrator shall hear
the Dispute, the parties shall attempt to agree upon a qualified individual to
serve as arbitrator. If the parties are unable to so agree within thirty (30)
days of the commencement of the arbitration, then the arbitrator shall be
selected and appointed in accordance with the AAA Rules. In the event that
three arbitrators shall hear the Dispute, each party shall, within twenty (20)
days after commencement of the arbitration, select one person to act as
arbitrator. The two arbitrators so selected shall, within
- 49 -
twenty (20) days of their appointment, select a third arbitrator who shall serve
as the chairperson of the arbitral panel. The arbitrators selected shall be
qualified by education, training, and experience to hear and determine matters
in the nature of the Dispute. If a party fails to appoint an arbitrator as
provided herein, or if the arbitrators selected by the parties are unable or
fail to agree upon a third arbitrator within twenty (20) days of their
appointment, or such other time as the parties may agree in writing, then that
arbitrator shall be selected and appointed in accordance with the AAA Rules.
Should an arbitrator die, resign, refuse to act, or become incapable of
performing his or her functions as an arbitrator, the AAA may declare a vacancy
on the Panel. The vacancy shall be filled by the method by which that arbitrator
was originally appointed. The seat of the arbitration shall be Houston, Texas.
The arbitrator(s) shall determine the matters at issue in the Dispute in
accordance with the substantive law of Texas. The parties hereby waive any claim
to exemplary, punitive, or similar damages in excess of compensatory damages,
attorneys' fees, costs, and expenses of arbitration, and the arbitral panel is
not empowered to and shall not award exemplary, punitive, or similar damages in
excess of compensatory damages, attorneys' fees, costs, and expenses of
arbitration. The award of the arbitration(s) shall be in writing and shall set
out the reasons therefor.
12.23 ENFORCEMENT. Prior to the Closing Date, the parties agree that
------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specified terms. It is
accordingly agreed that prior to the Closing Date the parties shall be entitled
to specific performance of the terms hereof, this being in addition to any other
remedy to which they are entitled at law or in equity.
********
- 50 -
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement as of the date first above written.
PURCHASER:
----------
CHARYS HOLDING COMPANY, INC.
By: /s/ Xxxxx X. Xxx Xx.
-------------------------------
Name: Xxxxx X. Xxx Xx.
Title: CEO
THE CORPORATION
---------------
CROCHET & BOREL SERVICES, INC.
By:
------------------------------
Name:
Title:
SELLER:
-------
-----------------------------------
XXXX CROCHET
The spouse of Seller has joined in the
execution of this Agreement for the purpose of
binding and obligating the spouse's community
property interest in the C&B Shares to all of the
terms, covenants, conditions, limitations and
restrictions contained herein as respect the C&B
Shares.
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement as of the date first above written.
PURCHASER:
----------
CHARYS HOLDING COMPANY, INC.
By:
-------------------------------
Name:
Title:
THE CORPORATION:
----------------
CROCHET & BOREL SERVICES, INC.
By: /s/ Xxxx Crochet
-------------------------------
Name: XXXX CROCHET
Title: PRESIDENT
SELLER:
-------
/s/ Xxxx Crochet
-----------------------------------
XXXX CROCHET
The spouse of Seller has joined in the
execution of this Agreement for the purpose of
binding and obligating the spouse's community
property in (crest in the C&B Shares to all of the
terms, covenants, conditions, limitations and
restrictions contained herein as respect the C&B
Shares.
/s/ Xxxx Crochet
----------------------------------
XXXX CROCHET
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
SCHEDULE 2.06(A)(1)
INCENTIVE COMPENSATION
On the date that is 30 days following the issuance of Purchaser's Form 10K (the
"Incentive Bonus Date") for the fiscal years 2007, 2008 and 2009 (each such year
--------------------
being a "Performance Year"), the board of directors of Purchaser (the "Board")
---------------- -----
shall compare the audited year-end financials of the Corporation to the
projected financials of Corporation. Based on the results of such comparison,
the Seller and each Incentive Employee may be eligible for an incentive bonus
calculated as follows:
1. For each Performance Year, the total amount of the bonus pool available
shall be equal to 25% of the audited pre-tax income of the Corporation for such
Performance Year (the "Bonus Pool Amount"). Any portion of the Bonus Pool
-----------------
Amount payable as provided herein shall be divided among the Seller and each
Incentive Employee in accordance with the allocation provided by the Seller to
Purchaser prior to the Incentive Bonus Date for the applicable Performance Year.
2. The aggregate amount of incentive bonuses payable for each Performance
Year shall be an amount equal to (a) the Bonus Pool Amount, multiplied by (b)
the percentage set forth in the table below opposite the applicable Financial
Performance Target, calculated as set forth herein.
--------------------------------------------------------------------------
Actual Performance < 5% Financial Performance Target 0%
----------------------------------------------------------------- -------
Actual Performance > 5% but < 20% Financial Performance Target 5%
-
----------------------------------------------------------------- -------
Actual Performance > 20% but < 35% Financial Performance Target 20%
-
----------------------------------------------------------------- -------
Actual Performance > 35% but < 50% Financial Performance Target 35%
-
----------------------------------------------------------------- -------
Actual Performance > 50% but < 65% Financial Performance Target 50%
-
----------------------------------------------------------------- -------
Actual Performance > 65% but < 80% Financial Performance Target 70%
-
----------------------------------------------------------------- -------
Actual Performance > 80% but < 90% Financial Performance Target 90%
-
----------------------------------------------------------------- -------
Actual Performance > 90% but < 100% Financial Performance Target 100%
-
----------------------------------------------------------------- -------
Actual Performance > 100% but < 110% Financial Performance Target 110%
-
----------------------------------------------------------------- -------
Actual Performance > 110% Financial Performance Target 120%
-
--------------------------------------------------------------------------
3. The "Financial Performance Target" shall be an amount equal to (i) the
sum of the (x) Revenue Factor, (y) EBITDA Factor, and (z) Net Income Factor, for
each Performance Year, as set forth below:
---------------------------------------------------------------------------
PERFORMANCE YEAR PROJECTED REVENUE PROJECTED EBITDA PROJECTED NET INCOME
---------------- ----------------- ---------------- --------------------
FY 2007 250,000 106,000 100,000
---------------- ----------------- ---------------- --------------------
FY 2008 275,000 116,600 110,000
---------------- ----------------- ---------------- --------------------
FY 2009 316,250 134,090 126,500
---------------------------------------------------------------------------
4. "Actual Performance" shall be an amount equal to the sum of actual (i)
Revenue Factor, (ii) EBITDA Factor and (iii) Net Income Factor, for any
Performance Year.
5. The Revenue Factor, the EBITDA Factor and the Net Income Factor shall be
calculated in accordance with GAAP.
Any bonus due shall be payable in cash, to the extent such cash payment is
permitted under the loan agreements to which the Corporation and Purchaser are a
party to. If such agreements do not permit payment of such bonus in cash, then
the bonus shall be paid in Purchaser Stock, at the Market Price as of the last
trading day of the applicable Performance Year.
For purposes of this Exhibit A, the terms set forth above shall mean as
---------
follows:
(i) Revenue Factor shall be a percentage equal to the
---------------
product of (x) forty percent (40%) multiplied by (y) a
fraction the numerator of which is the Corporation's actual
revenues for a Performance Year and the denominator of which
is the Corporation's projected revenues for such
corresponding Performance Year.
(ii) EBITDA Factor shall be a percentage equal to, the
--------------
product of (x) fifty percent (50%) multiplied by (y) a
fraction the numerator of which is the Corporation's actual
EBITDA for a Performance Year and the denominator of which
is the Corporation's projected EBITDA for such corresponding
Performance Year.
(iii) Net Income Factor shall be a percentage equal to, the
------------------
product of (x) ten percent (10%) multiplied by (y) a
fraction the numerator of which is the Corporation's actual
audited pre-tax net income for a Performance Year and the
denominator of which is the Corporation's projected pre-tax
net income for such corresponding Performance Year.
EXAMPLE CALCULATION
-------------------
By way of example, and for illustrative purposes only, the following model
depicts the manner in which the bonus shall be calculated for a single
Performance Year. The numbers and assumptions used herein are not intended to be
the final projections or Bonus Pool Amount for purposes of this Schedule
--------
2.06(1).
-------
------------------------------------------------------------------------------
PERFORMANCE YEAR PROJECTED REVENUE PROJECTED EBITDA PROJECTED NET INCOME
------------------------------------------------------------------------------
FY 2007 $ 5,000,000 $ 100,000 $ 500,000
------------------------------------------------------------------------------
PERFORMANCE YEAR ACTUAL REVENUE ACTUAL EBITDA ACTUAL NET INCOME
------------------------------------------------------------------------------
FY 2007 $ 6,000,000 $ 800,000 $ 250,000
------------------------------------------------------------------------------
Whereby:
1) Revenue Factor = 48%; EBITDA Factor = 40%; Net Income Factor=5%
2) Calculation Value = 48% + 40% + 5% = 93%
3) Incentive Bonus payable based on a calculation value of 93% = $58,125
SCHEDULE 2.06(A)(2)
INCENTIVE EMPLOYEES
Xxxxx Xxxxxxxx
Xxxxx Xxxx
Xxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Xxxx Xxxxxxx
Xxxxx Xxxxxx
Xxxx Xxxxxx
Xxxx XxXxx
Xxxx Xxxxxxxxx
Xxx Xxxxxxxxxx
Xxxxxx Xxxxxxxxx
SCHEDULE 2.06(B)
INTEGRATION INCENTIVE COMPENSATION
During the period beginning on the Second Closing Date and ending on the third
anniversary of the Second Closing Date (the "Integration Incentive Period"), the
----------------------------
Seller shall be entitled to additional equity compensation determined in
accordance with the following provisions:
1. As soon as reasonably practicable following the Second Closing Date, the
Seller shall provide to the Purchaser a schedule identifying potential
acquisition targets conducting business similar to the C&B Business (the
"Acquisition Targets" and each, an "Acquisition Target"). For each Acquisition
-------------------- ------------------
Target, the Seller shall identify the target annual revenue (the "Target
------
Revenue") of such Acquisition Target.
-------
2. On the third anniversary of the Second Closing Date, the Seller shall be
entitled to a bonus calculated as follows, payable in cash or shares of
Purchaser Stock, in Purchaser's discretion: (A) Bonus Multiplier, multiplied by
--------------
(B) the Integration Bonus Pool.
The term "Bonus Multiplier" means a percentage, (A) the numerator of which is
-----------------
the actual aggregate revenue for all Acquisition Targets measured over the
trailing twelve months from Charys fiscal year end in the year in which such
Acquisition Target is acquired (or, if the target is acquired in September 2006,
the actual revenue of the Acquisition Target from 5-1-06 thru 4-31-07), and (B)
the denominator of which is the aggregate Target Revenue for all Acquisition
Targets. An example calculation of the Bonus Multiplier is as follows:
----------------------------------------
First Year
Projected Actual
Millions in year acquired
----------------------------------------
Target A $ 30 $ 20
Target B $ 20 $ 20
Target C $ 100 $ 110
Target D $ 40 Did not acquire
Target E $ 10 $ 40
----------------------------------------
$ 20O $ 190
LIMIT 95.00%
----------------------------------------
The term "Integration Bonus Pool" means the aggregate audited pre-tax revenue of
----------------------
all Acquisition Targets during the Integration Incentive Period. An example
calculation of the Integration Bonus Pool follows:
--------------------------------------------------------------------
Actual
Pre-tax
Year 1 Year 2 Year 3
--------------------------------------------------------------------
Target A $ 3 $ -1 $ -2
Target B $ 2 $ 2 $ 1
Target C $ 15 $ 17
Target D
Target E $ 15
--------------------------------------------------------------------
$ 5 $ 16 $ 31
POOL $ 1 $ 4 $ 8
TOTAL POOL PAYABLE AT END OF YEAR THREE $ 13
AMOUNT EARNED LIMITED TO 95% $ 12.35
--------------------------------------------------------------------
SCHEDULE 6.15
SPIN-OFF AGREEMENT
The following general terms and conditions shall be more fully reflected in a
definitive agreement to be negotiated in good faith and, if reasonably
acceptable to both Purchaser and the Seller, executed, on or prior to the Second
Closing Date.
- Purchaser shall cause the Corporation to maintain separate books
and records and separately audited financial statements for the
Corporation during the period beginning on the Second Closing Date and
ending on the third anniversary of the Second Closing Date (the
"Preparation Period") and during the period ending on the third
-------------------
anniversary of the Second Closing Date and ending on the sixth
anniversary of the Second Closing Date (the "Option Period").
--------------
- During the Option Period, Seller may cause Purchaser to
effectuate a spin-off of the Corporation (a "Spin-Off Transaction")
--------------------
into a separate publicly-traded entity provided that the conditions
set forth in the following section are met.
- Seller may only cause Purchaser to effectuate a Spin-Off
Transaction in the event that (a) during the three year period prior
to the Seller's notification of its intent to effectuate a spin-off
(the "Spin-Off Notice Date") the aggregate net revenue of the
----------------------
Corporation was greater than or equal to $750,000,000, (b) during the
three year period prior to the Spin-Off Notice Date, the aggregate
net earnings of the Corporation are greater than or equal to
$150,000,000, (c) the Seller and the Inventive Employees (the
"Spin-Off Participants") collectively hold in excess of 10,000,000
----------------------
shares of Purchaser Stock, and (d) the Market Price of Purchaser Stock
for twenty (20) consecutive trading days prior to the Spin-Off Notice
Date is in excess of $20 per share, adjusted for any splits or
dividends occurring between the Second Closing Date and the Spin-Off
Notice Date.
- The Spin-Off Transaction shall be effectuated by granting to each
shareholder of Purchaser as of the effective date of the Spin-Off
Transaction one publicly traded share of the Corporation for each
share of Purchaser Stock held by such Shareholder. Simultaneously with
the issuance of such shares, each Spin-Off Participant shall tender to
Purchaser not less than 80% of the shares of Purchaser Stock held by
such Spin-Off Participant in exchange for an equal number of shares of
the Corporation.
EXHIBIT A
---------
SELLER NOTE
PROMISSORY NOTE
JUNE 5, 2006
FOR VALUE RECEIVED, the undersigned, CHARYS HOLDING COMPANY, INC., a
Delaware corporation ("Maker"), promises to pay to the order of XXXX CROCHET, an
-----
individual resident of the State of Texas ("Holder"), an amount equal to
------
$19,000,000 (such amount, being referred to as the "Principal Amount") in lawful
----------------
money of the United States, together with interest thereon at the rate set forth
below, pursuant to the terms and conditions set forth in this promissory note
(this "Note").
----
1. The Principal Amount, together with all accrued and unpaid interest on
the entire Principal Amount, shall be due and payable by Maker to Holder on or
before July 15, 2006 (the "Maturity Date"). Upon payment of the Principal
--------------
Amount, together with payment of the accrued and unpaid interest on the
Principal Amount, this Note shall have been paid in full.
2. From and after the date hereof, through the Maturity Date, or, if sooner,
the date on which this Note has been paid in full, simple interest shall accrue
on the outstanding principal balance hereof at the applicable federal short-term
rate (such rate being determined from a one-month average of market yields from
marketable obligations of the United States with maturities of three (3) years
or less) for May, 2006 of 4.74% as set forth in IRS Rev. Rul. 2006-22 calculated
on the basis of 365 days per year and actual days elapsed and computed on the
daily outstanding principal balance hereof.
3. This Note shall be construed and enforceable in accordance with the laws
of the State of Georgia.
IN WITNESS WHEREOF, Maker has executed this Note effective as of the 5th
day of June, 2006.
CHARYS HOLDING COMPANY, INC.
By: /s/ Xxxxx X. Xxx, Xx.
------------------------------------
Name: Xxxxx X. Xxx, Xx.
Title: Chief Executive Officer
AGREED AND ACKNOWLEDGED BY:
HOLDER:
/s/ Xxxx Crochet
----------------------------------------
Xxxx Crochet
EXHIBIT B
---------
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 5,
---------
2006, by and among CHARYS HOLDING COMPANY, INC., a Delaware corporation (the
"Company"), and XXXX CROCHET, a resident of the State of Texas (the "Investor").
------- --------
WHEREAS:
A. Company and Investor have entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement"), dated as of June 5, 2006, pursuant to which
-------------------------
Investor shall sell, assign, transfer and convey unto Company, and Company shall
purchase from Investor, all of the issued and outstanding capital stock of
Crochet & Borel Services, Inc. (the "C&B Shares");
-----------
B. As part of the consideration of the sale of the C&B Shares to the
Company, the Company shall issue to Investor shares of the Company's Common
Stock (the "Company Common Stock");
----------------------
C. To induce Investor to execute and deliver the Stock Purchase
Agreement, Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations there under,
or any similar successor statute (collectively, the "Securities Act"), and
--------------
applicable state securities laws; and
D. Capitalized terms used but not otherwise defined herein shall have
the meanings set forth in the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Company and Investor hereby agrees
as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Commercially Reasonable Efforts" means efforts which are
---------------------------------
designed to enable a party, directly or indirectly, to satisfy a condition to or
otherwise assist in the consummation of a desired result and which do not
require the performing party to expend funds or assume liabilities other than
expenditures and liabilities which are customary and reasonable in nature and
amount in the context hereof.
(b) "Person" means a corporation, a limited liability
------
company, an association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a governmental
agency.
(c) "Register," "registered," and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a Registration Statement (as
defined below) in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule
providing for offering securities on a continuous or delayed basis ("Rule 415"),
--------
and the declaration or ordering of effectiveness of such Registration Statement
by the Commission.
2. REGISTRATION RIGHTS.
--------------------
(a) Registration. Subject to the terms of that certain Investor
------------
Registration Rights Agreement, dated May 19, 2006, by and among the Company and
Gottbetter Capital Master, Ltd. (the "Gottbetter Agreement"), and subject to the
--------------------
terms of this Agreement, on or prior to the ninetieth (90th) calendar day after
the Closing Date, the Company shall prepare and file with the Securities and
Exchange Commission (the "Commission") a registration statement on Form SB-2,
----------
amend its existing registration statement on Form SB-2 presently on file with
the Commission if not yet declared effective, or file such other appropriate
form for which the Company is then eligible in accordance herewith (the
"Registration Statement") covering the resale of the Company Common Stock to be
-----------------------
issued pursuant to the Stock Purchase Agreement (the "Registrable Securities")
----------------------
to the extent then registrable pursuant to the rules and regulations of the
Commission for an offering to be made on a continuous basis pursuant to Rule
415. Only two Registration Statements shall be required hereunder. Company
Common Stock issued pursuant to the Stock Purchase Agreement shall cease to be
Registrable Securities if sold or transferred by Investor to any other Person
and, in any event, on and after such date when such Company Common Stock may be
sold without volume restrictions pursuant to Rule 144(k) under the Securities
Act as determined by counsel to Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent and
Investor. The Company shall use Commercially Reasonable Efforts to file the
Registration Statement within 90 days following the Closing Date, and use
Commercially Reasonable Efforts to cause the Registration Statement to be
declared effective under the Securities Act within 180 days after the filing
thereof. Further, the Company shall use Commercially Reasonable Efforts to
keep the Registration Statement continuously effective under the Securities Act,
subject to Section 2(b) below, for a period of three (3) years following the
Closing Date (the "Registration Period").
--------------------
(b) Suspension Rights. Notwithstanding anything herein to the
------------------
contrary, the Company shall have the right to suspend the use of the
Registration Statement for a period not greater than forty-five (45) consecutive
days (the "Suspension Period"), but not more than one time during the
------------------
Registration Period, if, in the good faith opinion of the Company's Board of
Directors, after consultation with counsel, material, nonpublic information
exists, including the proposed acquisition or divestiture of assets by the
Company or the existence of pending material corporate developments, the public
disclosure of which would be necessary to cause the Registration Statement to be
materially true and to contain no material misstatements or omissions, and in
each such case, where, in the good faith opinion of the Company's Board of
Directors, such disclosure would be reasonably likely to have a material adverse
effect on the Company or on the proposed transaction or the Company requires
time to prepare a post-effective amendment to the Registration Statement
in order to disclose such material information. The Company shall give
Investor notice promptly upon knowledge that a Suspension Period (without
indicating the nature of such Suspension Period) may occur and prompt written
notice if a Suspension Period will occur and such notices must be acknowledged
in writing by Investor. During the pendency of any Suspension Period, no holder
of Company Common Stock registered for resale on such Registration Statement
shall attempt any public resale of such securities by the Registration
Statement. Upon the conclusion of a Suspension
2
Period, the Company shall provide Investor written notice that the Registration
Statement is again available for use.
(c) Piggyback Rights. For a period of thirty-six (36) months
-----------------
following the Second Closing Date, each time the Company shall determine to file
a registration statement under the Securities Act (excluding a registration on
Form S-4 or S-8, or successor forms thereto, or a registration statement on Form
S-l or SB-2 covering solely an employee benefit plan) in connection with the
proposed offer and sale for money of any of its securities either for its own
account or on behalf of any other security holder, the Company shall, if
Investor continues to own any Company Common Stock at such time, give prompt
written notice of such determination to Investor. Investor shall provide a
written request to the Company if he desires to participate in such registration
(the "Investor Notice"), stating the number of shares of Company Common Stock
----------------
then constituting Registrable Securities to be registered, which Investor Notice
must be given within ten (10) days after the receipt by Investor of the
Company's notice. Upon receipt of the Investor Notice, except as expressly
provided otherwise in this Section 2(c) and subject to any prohibitions or
restrictions set forth in any other agreement in existence on the date hereof
granting registration rights with respect to shares of the Company's capital
stock, the Company shall cause all shares of Company Common Stock constituting
Registrable Securities with respect to which Investor has requested registration
to be included in such registration statement and registered under the
Securities Act, all to the extent requisite to permit the sale or other
disposition by Investor of the Company Common Stock to be so registered. The
Company shall have the right to withdraw and discontinue registration pursuant
to this Section 2(c) of the shares of Company Common Stock if at any time prior
to the effective date of the registration statement, the registration of the
securities to be registered on behalf of the Company or any other participating
security holders is withdrawn or discontinued. If the registration for which the
Company gives written notice pursuant to this Section 2(c) is for a public
offering involving an underwriting, the Company shall so advise Investor as a
part of its written notice. In such event, the right of Investor to
registration pursuant to this Section 2(c) shall be conditioned upon Investor's
participation in such underwriting as a selling stockholder (including the
execution and delivery of the applicable underwriting agreement) and the
inclusion of Investor's shares of Company Common Stock in the underwriting to
the extent provided herein. The Company shall not be required to include any of
the shares of Company Common Stock constituting Registrable Securities in any
registration statement to the extent the public offering involves an
underwriting and the managing underwriter thereof advises the Company in writing
that in their opinion the number of shares of Company Common Stock requested to
be included exceeds the number that can be sold in such offering, at a price
reasonably related to fair market value. To the extent the managing underwriter
provides such advice, the shares of Company Common Stock to be included pursuant
to this Section 2(c) shall be reduced as required by such underwriter.
Notwithstanding anything herein to the contrary, the Company shall not be
required to register Registrable Securities pursuant to this Section 2(c) on any
registration statement prepared for the resale of securities in connection with
the Gottbetter Agreement.
(d) Procedure. If and whenever the Company is required by the
---------
provisions of this Section 2 to effect the registration of shares of Registrable
Securities under the Securities Act, the Company, at its expense and as
expeditiously as reasonably possible shall, in accordance with the Securities
Act and all applicable rules and regulations, prepare and file with the
3
Commission a registration statement with respect to such securities and shall
use Commercially Reasonable Efforts to cause such registration statement to
become and remain effective to the extent required hereby, and, during such
period, prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus contained therein as may be
necessary to keep such registration statement effective and such registration
statement and prospectus accurate and complete, subject to any Suspension Period
pursuant to Section 2(b) hereof. The Company shall furnish to Investor and to
the underwriters of securities being registered such number of copies of the
registration statement and each amendment and supplement thereto, preliminary
prospectus, final prospectus and such other documents as such underwriters and
holders may reasonably request in order to facilitate the public offering of
such securities. In addition, the Company shall otherwise use Commercially
Reasonable Efforts to take such other actions as are necessary and appropriate
to effect any such registration in compliance with all provisions of the
Securities Act and all applicable state securities laws, including, using
Commercially Reasonable Efforts to to register or qualify the securities covered
by such registration statement under such state securities or Blue Sky laws of
such jurisdictions as reasonably necessary to effect the sale thereof and such
other actions as Investor shall reasonably request (provided that the Company
shall not be required thereby to qualify to do business in such jurisdiction or
consent, generally, to the service of process therein).
3. RELATED OBLIGATIONS.
--------------------
(a) The Company shall keep the Registration Statement effective
pursuant to Rule 415 at all times until the date on which the Investor shall
have sold all the Registrable Securities covered by such Registration Statement
(the "Registration Period"), which Registration Statement (including any
--------------------
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
(b) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the Securities Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in such
Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company's filing a
report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company
------------
shall incorporate such report by reference into the Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the Exchange Act report is filed which created the requirement
for the Company to amend or supplement the Registration Statement.
4
(c) The Company shall furnish to the Investor, without charge, at
least one (1) copy of (i) such Registration Statement as declared effective by
the SEC and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, all exhibits and
each preliminary prospectus, (ii) the final prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as the Investor may reasonably request) and (iii) such other
documents as the Investor may reasonably request from time to time in order to
facilitate the disposition of the Registrable Securities owned by the Investor.
(d) The Company shall use Commercially Reasonable Efforts to (i)
register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as the Investor reasonably requests, (ii) prepare and file
in those jurisdictions, such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change to its certificate of incorporation or by-laws,
(x) qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify the
Investor of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
(e) As promptly as practicable after becoming aware of such event
or development, the Company shall notify the Investor in writing of the
happening of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and promptly prepare a
supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver a copy of such supplement or amendment to
each Investor. The Company shall also promptly notify the Investor in writing
(i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to the Investor by facsimile on the same day of such effectiveness),
(ii) of any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(f) The Company shall use Commercially Reasonable Efforts to
prevent the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or
5
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction within the United States of America and, if such an
order or suspension is issued, to obtain the withdrawal of such order or
suspension at the earliest possible moment and to notify the Investor of the
issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
(g) At the reasonable request of the Investor, the Company shall
furnish to the Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as the Investor may
reasonably request (i) a letter, dated such date, from the Company's independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the Investor.
(h) The Company shall make available for inspection by the
Investor and the Investor's accountant or other agent (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
----------
documents and properties of the Company (collectively, the "Records"), as shall
-------
be reasonably deemed necessary by each Inspector, and cause the Company's
officers, directors and employees to supply all information which the Inspector
may reasonably request; provided, however, that each Inspector shall agree, and
the Investor hereby agrees, to hold in strict confidence and shall not make any
disclosure (except to the Investor) or use any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (x) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the Securities Act, (y)
the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction, or
(z) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement of
which the Inspector and the Investor has knowledge. The Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
(i) The Company shall hold in confidence and not make any
disclosure of information concerning the Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning the Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to the Investor and allow the Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
6
(j) The Company shall use Commercially Reasonable Efforts either
to cause all the Registrable Securities covered by a Registration Statement (i)
to be listed on each securities exchange on which securities of the same class
or series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
(ii) the inclusion for quotation on the National Association of Securities
Dealers, Inc. OTC Bulletin Board for such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(j).
(k) The Company shall cooperate with the Investor, to the
extent applicable, to facilitate the timely preparation and delivery of
certificates to a transferee of the Investor (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investor may reasonably request and
registered in such names as the Investor may request.
(l) The Company shall use Commercially Reasonable Efforts to cause
the Registrable Securities covered by the applicable Registration Statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
(m) The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a twelve (12)
month period beginning not later than the first day of the Company's fiscal
quarter next following the effective date of the Registration Statement.
(n) The Company shall otherwise use Commercially Reasonable
Efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
(o) Within two (2) business days after a Registration Statement
which covers Registrable Securities is declared effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investor) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
----------
(p) The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investor of Registrable Securities
pursuant to a Registration Statement.
4. OBLIGATIONS OF THE INVESTOR.
------------------------------
(a) Compliance. Investor covenants and agrees that Investor will
----------
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
a registration statement of the Company.
(b) Investor Information. As a condition to the registration of
---------------------
any Registrable Securities under Section 2 hereof, the Company may require
Investor to furnish to the Company
7
(i) a certified statement as to the number of shares of Company Common Stock
then beneficially owned, and if requested by the Commission, the controlling
Person thereof, (ii) a description of any material relationship between Investor
and the Company, its predecessors or affiliates, within the past three years and
(iii) such other information regarding Investor as is required for such
registration by the rules and regulations of the Commission.
(c) Inside Information. Investor acknowledges that Investor's
-------------------
relationship with the Company may give Investor access to certain non-public
material information of the Company (i.e. information that is likely to have a
significant impact on the decision of a Person to buy, sell or hold Company
stock), which information will only be considered to be publicly available when
it has been released to the public through a Company press release or Commission
filing and the investing public has had sufficient time to absorb and evaluate
its impact. Investor acknowledges that federal securities laws prohibit
Investor and members of Investor's family from buying or selling stock of the
Company while having knowledge of material nonpublic information about the
Company or the market for the Company's stock (so-called "inside information"),
and, notwithstanding any other rights of Investor set forth herein, Investor
covenants not to buy or sell any Company stock based on inside information, nor
to communicate any inside information to a third party.
(d) Restrictions on Sale of Registrable Securities. Investor
---------------------------------------------------
covenants and agrees that, for a period of six (6) months following the
effectiveness of a registration statement with respect to the Registrable
Securities, Investor will not sell, assign, transfer or convey more than fifty
percent (50%) of such Registrable Securities held by Investor. Investor
covenants and agrees that he will not engage in any short sales of, or hedging
transactions with respect to the Company Common Stock held by Investor.
5. EXPENSES OF REGISTRATION.
--------------------------
All expenses incurred in connection with registrations, filings or
qualifications pursuant to the Agreement including, without limitation, all
registration, listing and qualifications fees, printers, legal and accounting
fees shall be paid by the Company.
6. INDEMNIFICATION.
---------------
With respect to Registrable Securities which are included in a Registration
Statement under this Agreement:
(a) The Company will, and hereby does, indemnify, hold harmless
and defend the Investor, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls the Investor within
the meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended, and the rules and regulations there under, or any similar successor
statute (collectively, the "Exchange Act") (each, an "Indemnified Person"),
------------- ------------------
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys' fees, amounts paid in settlement or
expenses, joint or several (collectively, "Claims") incurred in investigating,
------
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the Commission,
whether
8
pending or threatened, whether or not an indemnified party is or may be a party
thereto ("Indemnified Damages"), to which any of them may become subject insofar
-------------------
as such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue sky" laws of
any jurisdiction in which Registrable Securities are offered ("Blue Sky
---------
Filing"), or the omission or alleged omission to state a material fact required
------
to be stated therein or necessary to make the statements therein not misleading;
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the Commission) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation there under relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). The Company shall
----------
reimburse Investor and each such controlling Person promptly as such expenses
are incurred and are due and payable, for any legal fees or disbursements or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (x) shall
not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (y) shall not be available to the
extent such Claim is based on a failure of Investor to deliver or to cause to be
delivered the prospectus made available by the Company, if such prospectus was
timely made available by the Company pursuant to Section 2(d); and (z) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investor.
(b) In connection with a Registration Statement, the Investor
agrees to indemnify, hold harmless and defend, to the same extent and in the
same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers, employees, representatives, or agents and each Person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (each an "Indemnified Party"), against any Claim or Indemnified
-----------------
Damages to which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise
out of or is based upon any Violation, in each case to the extent, and only to
the extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and, subject to Section 6(d),
such Investor will reimburse any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to
9
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investor. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any prospectus shall not inure to the benefit of
any Indemnified Party if the untrue statement or omission of material fact
contained in the prospectus was corrected and such new prospectus was delivered
to Investor prior to Investor's use of the prospectus to which the Claim
relates.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one (1) counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent; provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 5, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
10
(d) The indemnification required by this Section 5 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
(e) The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
-------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 1l(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. AMENDMENT OF REGISTRATION RIGHTS.
------------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Investor.
Any amendment or waiver effected in accordance with this Section 8 shall be
binding upon Investor and the Company,
9. MISCELLANEOUS.
--------------
(a) Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) business day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company, to: Charys Holding Company Inc.
0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
11
With a copy to: Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Investor, to: Xxxx Crochet
000 Xxxxxx Xxxxxx
Xxxx Xxxxxx, Xxxxx 00000
Telephone: ______________
Facsimile: ______________
With a copy to: Xxxxxx Xxxx & Xxxxxx
000 Xxxxxxx
Xxxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxxxx, III and
Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
(b) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(c) The parties hereto agree that the internal laws of the State
of Georgia shall govern this Agreement and the exhibits hereto, including, but
not limited to, all issues related to usury. Any action to enforce the terms of
this Agreement or any of its exhibits shall be brought exclusively in the state
and/or federal courts situated in the States of Georgia or Texas. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this
12
Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(d) This Agreement, the Stock Purchase Agreement, and the
documents referred to in the Stock Purchase Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement, the
Stock Purchase Agreement, and the documents referred to in the Stock Purchase
Agreement supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
(e) This Agreement shall inure to the benefit of and be binding
upon the permitted successors and assigns of each of the parties hereto.
(f) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof,
(g) This Agreement may be executed in identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(h) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(i) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
(j) This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person,
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
CHARYS HOLDING COMPANY INC.
By: /s/ Xxxxx Xxx, Xx.
-------------------------------------
Name: Xxxxx Xxx, Xx.
Title: Chief Executive Officer
INVESTOR:
XXXX CROCHET
By: /s/ Xxxx Crochet
-------------------------------------
14
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
-------------------------
Xxxx Crochet
000 Xxxxxx Xxxxxx
Xxxx Xxxxxx, Xxxxx 00000
Re: CHARYS HOLDING COMPANY INC.
Mr. Crochet:
We are counsel to Charys Holding Company Inc., a Delaware corporation (the
"Company"). In connection with the Company's obligations under that certain
-------
Registration Rights Agreement (the "Registration Rights Agreement") entered into
-----------------------------
by and between the Company and yourself, on , the Company filed a
---------- ----
Registration Statement on Form (File No. 333- ) (the
------ ----------
"Registration Statement") with the Securities and Exchange Commission (the
-----------------------
"SEC") relating to the Registrable Securities which names each of the Investors
---
as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the Securities Act of 1933 at [ENTER
TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no
knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the Securities Act of 1933
pursuant to the Registration Statement.
Very truly yours,
[LAW FIRM]
By:
-------------------------------------
15
EXHIBIT C
---------
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement") is made , 2006 (the
--------- ----
"Effective Date"), by and between Xxxx Crochet ("Seller") and Crochet & Borel
--------------- ------
Services, Inc., a Texas corporation ("Company"). All capitalized terms not
-------
otherwise defined herein shall have the meaning given to them in the Stock
Purchase Agreement, dated as of June 5, 2006, among Company, Charys Holding
Company, Inc. ("Charys") and Seller (the "Stock Purchase Agreement").
------ --------------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller is the sole shareholder and President of the Company, which
is in the business of providing environmental remediation services to customers
throughout the United States of America (the "Business");
--------
WHEREAS, pursuant to the Stock Purchase Agreement, Charys is purchasing all
of the issued and outstanding shares of the Company's capital stock;
WHEREAS, contemporaneously herewith, Seller and Company are entering into
an Employment Agreement (the "Employment Agreement");
---------------------
WHEREAS, Company and Charys would not have entered into the Stock Purchase
Agreement, and Company would not have entered into the Employment Agreement,
without ensuring the confidentiality of certain information and protection
against competition and solicitation by the Seller;
WHEREAS, Company, or its respective assigns, will continue to engage in its
business throughout the Gulf Coast region of the United States of America (the
"Territory"); and
---------
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein and in the Stock Purchase Agreement and Employment
Agreement, the benefits which Seller will receive from the transactions
contemplated by the Stock Purchase Agreement and Employment Agreement, and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. COVENANTS
1.1 Acknowledgements by Seller. Seller acknowledges the following:
-----------------------------
(a) Seller has been engaged in the Business. Such Business is
highly competitive.
(b) Seller's participation in the Business has provided Seller
with valuable, confidential and proprietary information concerning the Business
and its future plans, much of which Seller participated in developing.
(c) Seller has had access to and has become acquainted with
various trade secrets, proprietary data and other confidential information of
the Business and may have
-1-
contributed to such information, consisting of documents, files, software,
development work computer programs and databases, processes, techniques and
procedures, and related documentation, compilations of information, records and
specifications, used in or related to the Business, including:
(i) business information, such as (but not limited to) the
business practices, suppliers, operational methods, technical processes, future
plans, techniques, patent information and applications, leases, contracts and
business plans;
(ii) financial information, such as (but not limited to)
earnings, sales, assets, debts, prices, pricing structure, margins, volume and
quantities of purchases or sales, and other financial data;
(iii) marketing information such as (but not limited to)
prior, ongoing or proposed marketing programs, presentations or agreements by or
on behalf of the Business, pricing information, marketing tests and results of
marketing efforts;
(iv) personnel information, such as (but not limited to)
employees' personal or medical histories, compensation, employee incentive
programs, terms of employment, actual or proposed promotions, hirings,
resignations, terminations including reasons for such terminations, training
methods and other personnel information;
(v) customer information, such as (but not limited to) past,
existing or prospective customers' names, addresses or backgrounds, customer
specifications and requirements, prices that particular or various customers are
charged or pay for services, proposals or agreements between customers and the
Business, status of customers' accounts, and other information about actual or
prospective customers; and
(vi) customer or prospective customer trade secrets,
proprietary data and other confidential information that is provided to Seller
for the sole and exclusive purpose of permitting Seller to market or provide
products or services of the Business to such customers or prospective customers.
(d) Any unauthorized possession, communication or use of
Confidential Information (defined below) would enable Seller (or any third party
to whom the Seller might disseminate the Confidential Information) to compete
unfairly with Company by using the Confidential Information to such person's
advantage.
(e) The agreements and covenants contained in this Agreement are
essential to protect the interests of Company in connection with the
transactions contemplated by the Stock Purchase Agreement.
(f) Company and Charys would not have consummated the transactions
contemplated by the Stock Purchase Agreement, and the Company would not have
entered into the Employment Agreement, but for the agreements and covenants
contained in this Agreement.
For purposes of this Agreement, the trade secrets and confidential
information referred to in Section 1.1(c) above, including those described in
subsections l.l(c)(i) through
-2-
(vi), shall be collectively referred to as the "Confidential Information";
------------------------
provided, however, that "Confidential Information" shall not include information
that (A) is available from sources, other than Seller or their respective
affiliates, which sources Seller reasonably believes do not have a duty of
confidentiality to Company with respect to such information, or (B) is or
becomes publicly available other than as a result of any Seller's breach of this
Agreement.
1.2 Noncompetition. For a period of three (3) years from the date of
---------------
this Agreement or, if longer, for a period beginning on the date of this
Agreement and ending two (2) years after the Employment Agreement's Expiration
Date (as defined in the Employment Agreement), (the "Restricted Period"), Seller
-----------------
shall not, on his own behalf or on behalf of others, directly or indirectly,
own, manage, operate, control, invest in, or participate in the ownership,
management, operations, or control of, lend any Seller's name or any similar
name to, any person, entity or business engaged in the Business in the
Territory. Notwithstanding the foregoing, Seller shall not be prohibited from
having beneficial ownership of up to 2% of the equity interest of any business
entity, the equity securities of which are registered under the Securities
Exchange Act of 1934, as amended.
1.3 Nondisclosure of Confidential Information.
---------------------------------------------
(a) Seller acknowledges that (i) Company has a legitimate and
continuing proprietary interest in the Confidential Information that Company has
acquired for significant consideration; and (ii) in order to guard such interest
of Company, it is necessary for Company to protect all Confidential Information.
Seller agrees that his obligations under Section 1.3(b) of this Agreement shall
be absolute and unconditional.
(b) Seller shall not, directly or indirectly, during the
Restricted Period, use, exploit, publish or otherwise disclose in any manner any
Confidential Information, and shall otherwise keep all Confidential Information
confidential. Notwithstanding the foregoing, Seller shall be entitled to
disclose Confidential Information as may be required by applicable law,
including a subpoena or court or administrative order, provided that in any such
case Seller shall use reasonable efforts to give advance written notice of any
such disclosure to Company and Chayrs. In addition, Seller shall be entitled to
use or disclose Confidential Information to the extent necessary to (i) prepare
tax returns of Seller or (ii) to enforce its rights under the Stock Purchase
Agreement and other documents executed in connection therewith.
(c) Seller acknowledges that all physical property of the Business
in the direct or indirect possession of any Seller, including all documents,
files, software, development work computer programs and databases, processes,
techniques and procedures, and related documentation, compilations of
information, records, specifications, equipment and similar items relating to
the Business or any of the Customers, whether or not prepared by Seller and
whether or not such property is Confidential Information, (i) is and shall
remain the exclusive property of the Business and (ii) shall not be removed from
the premises of the Business. For purposes of this Section 1.3 and Section 1.5
of this Agreement, "Customers" shall mean any customer of the Company, and their
---------
respective affiliates, successors, and assigns, as of the date hereof and as of
the Employment Agreement's Expiration Date.
-3-
1.4 Nonsolicitation of Employees. During the Restricted Period,
-------------------------------
Seller shall not, directly or indirectly, solicit the employment of, employ,
recruit, or retain as an independent contractor or otherwise, any current
employee of Company, or in any way induce or cause any current or future
employee of Company, or any independent contractor with whom Company does
business, to terminate its relationship with Company, or otherwise interfere or
attempt to interfere in any way with any such relationship.
1.5 Nonsolicitation of Customers. During the Restricted Period, Seller
-----------------------------
shall not, on its or his own behalf or on behalf of others, directly or
indirectly, solicit any Customers for the purpose of engaging in the Business.
1.6 Non-Disparagement. Unless necessary to prosecute any claims against
------------------
each other pursuant to this Agreement, the Stock Purchase Agreement or as
required by law, including in response to a subpoena or court or administrative
order, neither Company nor Seller shall, during the Restricted Period or anytime
thereafter, disparage the other or any of its officers, directors, employees or
direct or indirect equity owners (or their respective officers, directors or
employees) in any way, including by making statements that would call into
question the professional competence, billing or distribution practices,
business competence or reputation of any of them.
2. RIGHTS AND REMEDIES UPON BREACH.
Seller acknowledges that (a) the provisions of this Agreement are fundamental
and essential for the protection of Company's legitimate business and
proprietary interests; (b) such provisions are reasonable and appropriate in all
respects; and (c) any breach of this Agreement will result in irreparable damage
to Company for which an adequate monetary remedy does not exist and a remedy at
law may prove to be inadequate. Accordingly, in the event of any actual or
threatened breach by Seller of any provision of Sections 1.2, 1.3, 1.4, 1.5, or
1.6, Company shall, in addition to any other remedies permitted by law, be
entitled to seek, and Seller consents to, equitable remedies including specific
performance, injunctive relief, a temporary restraining order, and temporary or
permanent injunctions, in any court of competent jurisdiction, to prevent or
otherwise restrain a breach of such provision, without the necessity of proving
harm or damages or the posting of any bond or other security, and to recover any
and all costs and expenses, including reasonable attorneys' fees, incurred in
enforcing this Agreement against Seller. Such relief shall be in addition to,
and not in substitution of, any other remedies available to Company. The
existence of any claim or cause of action of Seller against Company shall not
constitute a defense to the enforcement by Company of the covenants contained in
Sections 1,2, 1,3, 1.4, 1.5 or 1.6. Seller shall not defend any such claim or
cause of action on the basis that there is an adequate remedy at law. The
Restricted Period shall be extended by any period during which Seller is in
breach of this Agreement as finally determined by a court of competent
jurisdiction.
3. SEVERABILITY; BLUE PENCILING.
The necessity of each of the restrictions set forth above and the nature and
scope of each such restriction has been carefully considered, bargained for and
agreed to by Company, Charys and Seller (each a "Party", and, collectively, the
-----
"Parties"). The Parties hereby agree and acknowledge that the duration, scope
-------
and geographic area applicable to each of the restrictions
-4-
set forth in this Agreement are fair, reasonable and necessary. The
consideration provided for in the Stock Purchase Agreement, Employment
Agreement, and recited in this Agreement is sufficient and adequate to
compensate Seller for agreeing to each of the restrictions contained in this
Agreement. However, in the event that any portion of this Agreement shall be
determined by any court of competent jurisdiction to be unenforceable, including
by reason of its being extended over too great a period of time or too large a
geographic area or over too great a range of activities, it shall be interpreted
to extend only over the maximum period of time, geographic area or range of
activities as to which it may be enforceable. Each provision and part of a
provision of this Agreement shall be deemed a separate and severable covenant.
It is the desire and intent of the Parties that the provisions of this Agreement
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which such enforcement is sought.
Accordingly, a court of competent jurisdiction is directed to modify any
provision to the extent necessary to render such provision enforceable, and if
such cannot be lawfully done, to sever any such portion of a provision, but only
such portion of a provision as necessary to cause the remaining provisions or
portions of such provision to be enforceable.
4. MISCELLANEOUS.
4.1 Representations of Seller. Seller represents and warrants that
----------------------------
Seller has read and understands this Agreement and has consulted with legal
counsel who has explained all of its terms and provisions and that the agreed
upon consideration for the undertakings made by Seller in this Agreement is
adequate. Seller acknowledges and agrees that the restrictions on competitive
activities and the other undertakings made by Seller in this Agreement will
adversely affect such Seller's ability to obtain future business and to engage
in other pursuits and that Seller nonetheless intends to be bound by all of the
restrictions, undertakings and other obligations required in this Agreement.
4.2 Amendments and Waiver. No amendment, waiver or consent with respect
----------------------
to any provision of this Agreement shall in any event be effective unless it is
in writing and signed by the Parties, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. Any Party's lack of enforcement of any provision of this
Agreement shall not be construed as a waiver, and the nonbreaching Party may
elect to enforce any such provision at any time in the event of a past, repeated
or continuing breach. The rights and remedies in this Agreement are the
exclusive rights and remedies that the Parties may have upon a breach of this
Agreement.
4.3 Notices. All notices or other communications required or permitted
--------
under this Agreement shall be in writing and will be deemed to have been duly
given when (a) delivered by hand, (b) sent by facsimile, provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight courier service (receipt
requested), in each case to the appropriate addresses and fax numbers set forth
below (or to such other addresses and fax numbers as a party may designate by
notice to the other parties):
-5-
SELLER: COMPANY:
Xxxx Crochet CROCHET & BOREL SERVICES, INC.
000 Xxxxxx Xxxxxx
Xxxx Xxxxxx, Xxxxx 00000 --------------------------------------
--------------------------------------
With a copy to: Attn: Chairman of the Board
Xxxxxx Xxxx & Xxxxxx, L.L.P. With copies to:
000 Xxxxxxx
Xxxxxxxx, Xxxxx 00000 CHARYS HOLDING COMPANY, INC.
Fax No.: (000) 000-0000 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxxxx, III and Attention : Xxxxx X. Xxx, Xx.,
Xxxxx X. Xxxxx Chief Executive Officer
and
Paul, Hastings, Xxxxxxxx & Xxxxxx, LLP
000 Xxxxxxxxx Xxxxxx X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Fax No: (000) 000-0000
Attention: Xxxxx Xxxxxxx
Either Party may change its address for receiving notice by giving
written notice to the other Party in the manner provided in this Section 4.3.
4.4 Governing Law. This Agreement shall be governed by, and construed,
--------------
enforced and interpreted in accordance with, the substantive laws (without
regard to its conflicts of laws provisions) of the State of Texas.
4.5 Successors and Assigns. This Agreement, and the rights and
-------------------------
obligations of the Parties, shall inure to the benefit of and be binding on the
Parties and their respective successors and assigns. Seller not may assign any
rights, benefits, duties or obligations under this Agreement.
4.6 Entire Agreement. This Agreement, the Stock Purchase Agreement and
------------------
the documents referred to therein, and the Employment Agreement express the
entire agreement and understanding between the Parties with respect to the
subject matter hereof, and all promises, representations, understandings,
arrangements and prior agreements are merged herein and therein and superseded
hereby and thereby.
4.7 Rules of Construction. The term "including" shall mean "including
------------------------
without limitation." The term "person" shall be broadly construed to mean any
individual, trust, partnership, corporation, limited liability company,
organization, joint venture or any other entity
-6-
or body of any nature. The Article, Section and other headings contained herein
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
4.8 Expenses. Each Party shall pay its own costs and expenses in
---------
connection with the transactions contemplated by this Agreement.
4.9 Counterparts. This Agreement may be executed in multiple
-------------
counterparts, each of which shall for all purposes be deemed to be an original
and all of which, when taken together, shall constitute one and the same
instrument.
[SIGNATURE PAGE FOLLOWS]
-7-
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
COMPANY: SELLER:
CROCHET & BOREL SERVICES, INC.
By:
--------------------------------- ------------------------------
Xxxx Crochet
Name:
-------------------------------
Title: Chairman of the Board
SIGNATURE PAGE TO NON-COMPETITION AGREEMENT
EXHIBIT D
---------
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
---------------------
I, Xxxx Crochet, agree to the terms and conditions of employment with
Crochet & Borel Services, Inc., a Texas corporation ("Company"), set forth in
-------
this Employment Agreement ("Agreement"). All capitalized terms not otherwise
---------
defined herein shall have the meaning given to them in the Stock Purchase
Agreement, dated as of June 5, 2006, among Company, Charys Holding Company, Inc.
("Charys"), and Xxxx Crochet (the "Stock Purchase Agreement").
------ --------------------------
1. TERM OF EMPLOYMENT. My employment under this Agreement shall
commence on , 2006 ("Effective Date") and end on the third anniversary of
------ --------------
the Effective Date ("Expiration Date"), or such earlier date on which my
----------------
employment is terminated under Section 5 of this Agreement, provided that if
neither party provides notice of termination to the other party not later than
90 days prior to the Expiration Date or the expiration date of any subsequent
term, this Agreement shall automatically extend for an additional one year term.
If the Company continues to employ me beyond the Expiration Date without
entering into a written agreement extending the term of this Agreement, except
as provided in a new written employment agreement between the Company and me,
all obligations and rights under this Agreement shall prospectively lapse as of
the Expiration Date, except the Company's ongoing indemnification obligation
under Section 4(g), my confidentiality and other obligations under Section 6,
and our mutual arbitration obligations under Section 8, and I thereafter shall
be an at-will employee of the Company.
2. NATURE OF DUTIES. I shall be the Company's President. As such,
I shall work exclusively for the Company and shall have all of the customary
powers and duties associated with that position. I agree that the Company may
alter my duties from time to time. I shall devote my full business time and
effort to the performance of my duties for the Company, which I shall perform
faithfully and to the best of my ability. I shall be subject to the Company's
policies, procedures and approval practices, as generally in effect from time to
time. Notwithstanding the foregoing or any other provision of this Agreement,
it shall not be a breach or violation of this Agreement for me to (i) serve on
corporate (subject to approval of the Board), civic or charitable boards or
committees, (ii) deliver lectures, fulfill speaking engagements or teach at
educational institutions, or (iii) manage personal investments, so long as such
activities do not significantly interfere with or significantly detract from
the performance of my responsibilities to the Company in accordance with this
agreement.
3. PLACE OF PERFORMANCE. I shall be based at the Company's
headquarters in Port Neches, Texas, except for required travel on the Company's
business.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. $250,000
(b) BONUS. As determined by the board of directors of the
Company.
(c) AUTOMOBILE ALLOWANCE. The Company shall provide an
automobile, or shall provide to me an automobile allowance equal to $1,000 per
month.
(d) STANDARD BENEFITS. During my employment, I shall be
entitled to continue to participate in all employee benefit plans and programs,
including paid vacations, that are provided by the Company as of , 2006 in
------
accordance with the terms of those plans and programs and applicable law.
(e) 401(k). During my employment, I shall be entitled to
continue to participate in the Company's 401(k) plan, in accordance with the
terms of that plan and applicable law.
(f) INDEMNIFICATION. The Company shall extend to me the
same indemnification arrangements as are generally provided to other similarly
situated Company executives, including after termination of my employment.
(g) EXPENSES. I shall be entitled to receive prompt
reimbursement for all reasonable and customary travel and business expenses I
incur in connection with my employment, but I must incur and account for those
expenses in accordance with the policies and procedures established by the
Company.
(h) XXXXXXXX-XXXXX ACT LOAN PROHIBITION. To the extent that
any Company benefit, program, practice, arrangement, or this Agreement would or
might otherwise result in my receipt of an illegal loan ("Loan"), the Company
----
shall use reasonable efforts to provide me with a substitute for the Loan that
is lawful and of at least equal value to me. If this cannot be done, or if doing
so would be significantly more expensive to the Company than making the Loan,
the Company need not make the Loan to me or provide me substitute for it.
5. TERMINATION.
(a) RIGHTS AND DUTIES. If my employment is terminated, I
shall be entitled to the amounts or benefits shown on the applicable row of the
following table, subject to the balance of this Section 5. The Company and I
shall have no further obligations to each other, except the Company's ongoing
indemnification obligation under Section 4(g), my confidentiality and other
obligations under Section 6, and our mutual arbitration obligations under
Section 8, or as set forth in any written agreement I subsequently enter into
with the Company.
-------------------------------------------------------------------------------
DISCHARGE Payment or provision when due of (1) any unpaid base salary,
FOR CAUSE expense reimbursements, and vacation days accrued prior to
termination of employment, and (2) other unpaid vested amounts or
benefits under Company compensation, incentive, and benefit plans.
----------- ------------------------------------------------------------------
DISABILITY Same as for "Discharge for Cause" EXCEPT that i also shall be
potentially eligible for disability benefits under any Company-
provided disability plan in which I then participate.
----------- ------------------------------------------------------------------
DISCHARGE Same as for "Discharge for Cause" EXCEPT that, in exchange for
OTHER THAN my execution of a release in accordance with this section, my base
FOR CAUSE salary, but not my employment, shall continue through the
OR Agreement's Expiration Date, or for 12 weeks, whichever comes
DISABILITY first.
----------- ------------------------------------------------------------------
RESIGNATION Same as for "Discharge for Cause."
----------- ------------------------------------------------------------------
DEATH Same as for "Discharge for Cause" EXCEPT that payments shall be
made to the person or entity prescribed by Company policies.
----------- ------------------------------------------------------------------
EXPIRATION
OF Same as for "Discharge for Cause."
AGREEMENT
-------------------------------------------------------------------------------
(B) DISCHARGE FOR CAUSE, The Company may terminate my
employment at any time if it believes in good faith that it has Cause to
terminate me. "Cause" shall include, but not be limited to:
-----
(i) my refusal to follow the Company's lawful directions
or my material failure to perform my duties (other than by reason of physical or
mental illness, injury, or condition), in either case, after I have been given
notice of my default and a reasonable opportunity to cure my default;
(ii) my material failure to comply with Company
policies;
(iii) my engaging in conduct that is or may be unlawful
or disreputable, to the possible detriment of the Company and its subsidiaries
and affiliates, and their predecessors and successors ("Group"), or my own
-----
reputation;
(iv) my seeking, exploring, or accepting a position with
another business enterprise or venture without the Company's written consent at
any time more than 90 days before the Expiration Date; or
(v) my engaging in activities on behalf of an enterprise
which competes or plans to compete with the Company or any of its subsidiaries
or affiliates.
If my employment ends for any reason other than discharge by the Company for
Cause, but at a time when the Company had Cause to terminate me (or would have
had Cause if it then knew all relevant facts), my termination shall be treated
as a discharge by the Company for Cause.
(c) TERMINATION FOR DISABILITY. Except as prohibited by
applicable law, the Company may terminate my employment on account of
Disability, or may transfer me to inactive employment status, which shall have
the same effect under this Agreement as a termination for Disability.
"Disability" means a physical or mental illness, injury, or condition that
----------
prevents me from performing my duties, as determined under Company policies
relating to disability applicable to me and other similarly situated employees.
(d) DISCHARGE OTHER THAN FOR CAUSE OR DISABILITY. The Company
may terminate my employment at any time for any reason, and without advance
notice. If I am terminated by the Company other than for Cause under Section
5(b) or for Disability under Section 5(c), I will only receive the special
benefits provided for a non-Cause discharge under Section 5(a) if I sign a
general release form furnished to me by the Company (which may include any
provision customary in formal settlement agreements and general releases,
including such things as my release of the Company and all conceivably related
persons or entities ("affiliates") from all known and unknown claims, my
covenant never in the future to pursue any released claim, my promise never to
seek employment with the Company or any affiliate in the future, my promise not
to solicit current or former customers, employees, suppliers or, to the fullest
extent lawful, engage in business activities that compete with the Company or
any affiliate, or disclose or use any of their proprietary or trade secret
information) within 60 days after my employment ends (or within 60 days after an
arbitrator determines that I am entitled to such payments if I sign the general
release) and I do not thereafter properly revoke the release.
(e) RESIGNATION. I promise not to resign my employment before
the Expiration Date without giving the Company at least 30 days advance written
notice. If I resign, the Company may accept my resignation effective on the date
set forth in my notice or any earlier date. If I resign, I shall nevertheless
remain employed under this Agreement except to the extent the Company elects to
cancel it.
(f) DEATH. If I die while employed under this Agreement, the
payments required by Section 5(a) in the event of my death shall be made.
(g) TRANSFERS TO GROUP MEMBER. My transfer to another member
of the Group shall not be deemed a termination of my employment under this
Agreement if it assumes this Agreement.
(h) DISPUTES UNDER THIS SECTION. All disputes relating to
this Agreement, including disputes relating to this section, shall be resolved
by final and binding arbitration under Section 8. For example, if the Company
and I disagree as to whether the Company had Cause to terminate my employment,
we will resolve the dispute through arbitration; the arbitrator will decide
whether the Company had Cause to terminate me.
(i) AMOUNTS OWED TO THE COMPANY. Any amounts payable to me
under this section shall first be applied to repay any amounts I owe the
Company.
6. CONFIDENTIALITY. I acknowledge that as an integral part of the
Company's business, the Company has developed, and will develop, at a
considerable investment of time and expense, marketing and business plans and
strategies, procedures, methods of operation and marketing, financial data,
lists of actual and potential customers and suppliers, and independent sales
representatives and related data, technical procedures, engineering and product
specifications, plans for development and expansion, and other confidential and
sensitive information, and I acknowledge that the Company has a legitimate
business interest in protecting the confidentiality of such information. I
acknowledge that I will be entrusted with such information as well as
confidential information belonging to customers, suppliers, and other third
parties.
(a) "TRADE SECRETS" are defined as information, regardless of
form, belonging to the Company, licensed by it, or disclosed to it on a
confidential basis by its customers, suppliers, or other third parties,
including, but not limited to, technical or nontechnical data, formulae,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, product plans, or lists of actual or potential
customers or suppliers which are not commonly known by or available to the
public and which information: (i) derives economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use; and (ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
(b) "CONFIDENTIAL INFORMATION" is defined as information,
regardless of form, belonging to the Company, licensed by it, or disclosed to it
on a confidential basis by its customers, suppliers, or other third parties,
other than Trade Secrets, which is material and valuable to the Company and not
generally known by the public.
(C) PROMISE NOT TO DISCLOSE. I promise never to use or
disclose any Trade Secret before it has become generally known within the
relevant industry through no fault of my own. I agree that this promise shall
never expire. I further promise that, while this Agreement is in effect and
for 2 years after its termination, I will not, without the prior written
approval of the Company, disclose any Confidential Information before it has
become generally known within the relevant industry through no fault of my own.
(d) PROMISE NOT TO SOLICIT. To prevent me from inevitably
breaking this promise, I further agree that, while this Agreement is in effect
and for 24 months after its termination: (1) as to any customer or supplier of
the Group with whom I had dealings or about whom I acquired proprietary
information during my employment, I will not solicit or attempt to solicit (or
assist others to solicit) the customer or supplier to do business with any
person or entity other than the Group; and (2) I will not solicit or attempt to
solicit (or assist others to solicit) for employment any person who is, or
within the preceding 12 months was, an officer, manager, employee, or consultant
of the Group.
(e) PROMISE NOT TO ENGAGE IN CERTAIN EMPLOYMENT. I agree
that, while this Agreement is in effect and for 24 months after its termination,
I will not accept any employment or engage in any activity, without the written
consent of the Board if the loyal and complete fulfillment of my duties would
inevitably require me to reveal or utilize Trade Secrets or Confidential
Information, as reasonably determined by the Board.
(f) RETURN OF INFORMATION. When my employment with the
Company ends, I will promptly deliver to the Company, or, at its written
instruction, destroy, all documents, data, drawings, manuals, letters, notes,
reports, electronic mail, recordings, and copies thereof, of or pertaining to it
or any other Group member in my possession or control. In addition, during my
employment with the Company or the Group and thereafter, I agree to meet with
Company personnel and, based on knowledge or insights I gained during my
employment with the Company and the Group, answer any question they may have
related to the Company or the Group.
(g) PROMISE TO DISCUSS PROPOSED ACTIONS IN ADVANCE. To
prevent the inevitable use or disclosure of Trade Secrets or Confidential
Information, I promise that, before I disclose or use Trade Secrets or
Confidential Information and before I commence employment, solicitations, or any
other activity that could possibly violate the promises I have just made, I will
discuss my proposed actions with an attorney
for the Company, who will advise me in writing whether my proposed actions would
violate these promises.
(h) INTELLECTUAL PROPERTY. Intellectual property (including
such things as all ideas, concepts, inventions, plans, developments, software,
data, configurations, materials (whether written or machine-readable), designs,
drawings, illustrations, and photographs, that may be protectable, in whole or
in part, under any patent, copyright, trademark, trade secret, or other
intellectual property law), developed, created, conceived, made, or reduced to
practice during my Company employment (except intellectual property that has no
relation to the Group or any Group customer that I developed, purely on my own
time and at my own expense), shall be the sole and exclusive property of the
Company, and I hereby assign all my rights, title, and interest in any such
intellectual property to the Company.
(i) EXECUTION OF INNOVATION AGREEMENT. I agree to the terms
of the Company's Assignment of Inventions agreement, which is attached to this
Agreement as Schedule 1, and I promise to execute it contemporaneously with this
----------
Agreement.
(j) ENFORCEMENT OF THIS SECTION. This section shall survive
the termination of this Agreement for any reason. I acknowledge that (a) my
services are of a special, unique, and extraordinary character and it would be
very difficult or impossible to replace them, (b) this section's terms are
reasonable and necessary to protect the Company's legitimate interests, (c) this
section's restrictions will not prevent me from earning or seeking a livelihood,
(d) this section's restrictions shall apply wherever permitted by law, and (e)
my violation of any of this section's terms would irreparably harm the Company.
Accordingly, I agree that, if I violate any of the provisions of this section,
the Company or any Group member shall be entitled to, in addition to other
remedies available to it, an injunction to be issued by any court of competent
jurisdiction restraining me from committing or continuing any such violation,
without the need to prove the inadequacy of money damages or post any bond or
for any other undertaking.
7. NOTICE.
(a) TO THE COMPANY. I will send all communications to the
Company in writing, addressed as follows (or in any other manner the Company
notifies me to use):
If Mailed: Crochet & Borel Services, Inc.
----------------------------------------
----------------------------------------
Attention: Chairman of the Board
With a copy to:
Charys Holding Company, Inc.
0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxx, Xx., Chief Executive Officer
(b) TO ME. All communications from the Company to me relating
to this Agreement must be sent to me in writing as follows (or in any other
manner that I notify the Company) at my Company office or in any other manner I
notify the Company to use.
If mailed: Xxxx Crochet
000 Xxxxxx Xxxxxx
Xxxx Xxxxxx, Xxxxx, 00000
Facsimile:
With a copy to: Xxxxxx, Xxxx & Xxxxxx, L.L.P.
000 Xxxxxxx
Xxxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxxxx III and
Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) TIME NOTICE DEEMED GIVEN. Notice shall be deemed to
have been given when delivered or, if earlier (1) when mailed by United States
certified or registered mail, return receipt requested, postage prepaid, or
(2) faxed with confirmation of delivery, in either case, addressed as required
in this section.
8. ARBITRATION OF DISPUTES. All disputes between the Company and
me are to be resolved by final and binding arbitration in accordance with the
separate Arbitration Agreement attached as Schedule 2 to this Agreement. This
----------
section shall remain in effect after the termination of this Agreement.
9. GOLDEN PARACHUTE LIMITATION. I agree that my payments and
benefits under this Agreement and all other contracts, arrangements, or programs
shall not, in the aggregate, exceed the maximum amount that may be paid to me
without triggering golden parachute penalties under Section 280G and related
provisions of the Internal Revenue Code, as determined in good faith by the
Company's independent auditors. If any benefits must be cut back to avoid
triggering such penalties, my benefits shall be cut back in the priority order
designated by the Company. If an amount in excess of the limit set forth in this
section is paid to me, I will repay the excess amount to the Company upon
demand, with interest at the rate provided for in Internal Revenue Code Section
1274(b)(2)(B). The Company and I agree to cooperate with each other in
connection with any administrative or judicial proceedings concerning the
existence or amount of golden parachute penalties with respect to payments or
benefits I receive.
10. AMENDMENT. No provisions of this Agreement may be modified,
waived, or discharged except by a written document signed by a duly authorized
Company officer and me. Thus, for example, promotions, commendations, and/or
bonuses shall not, by themselves, modify, amend, or extend this Agreement. A
waiver of any conditions or provisions of this Agreement in a given instance
shall not be deemed a waiver of such conditions or provisions at any other time.
11. INTERPRETATION; EXCLUSIVE FORUM. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Texas (excluding any that mandate the use
of another jurisdiction's laws). Any litigation, arbitration, or similar
proceeding with respect to such matters only may be brought within that state,
and all parties to this Agreement consent to that state's jurisdiction and agree
that venue anywhere in that state would be proper.
12. SUCCESSORS. This Agreement shall be binding upon, and shall
inure to the benefit of, me and my estate, but I may not assign or pledge this
Agreement or any rights arising under it, except to the extent permitted under
the terms of the benefit plans in which I participate. Without my consent,
the Company may assign this Agreement to any affiliate or successor that agrees
in writing to be bound by this Agreement, after which any reference to the
"Company" in this Agreement shall be deemed to be a reference to the affiliate
or successor, and the Company thereafter shall have no further primary,
secondary or other responsibilities or liabilities under this Agreement of any
kind.
13. TAXES. The Company shall withhold taxes from payments it
makes pursuant to this Agreement as it determines to be required by applicable
law.
14. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. In
the event that a court of competent jurisdiction determines that any provision
of this Agreement is invalid or more restrictive than permitted under the
governing law of such jurisdiction, then only as to enforcement of this
Agreement within the jurisdiction of such court, such provision shall be
interpreted and enforced as if it provided for the maximum restriction permitted
under such governing law.
15. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall for all purposes be deemed to be an original
and all of which, when taken together, shall constitute one and the same
instrument.
16. ENTIRE AGREEMENT. All oral or written agreements or
representations, express or implied, with respect to the subject matter of this
Agreement
are set forth in this Agreement. However, this Agreement does not override other
written agreements I have executed relating to specific aspects of my
employment, such as conflicts of interest.
17. FORMER EMPLOYERS. I am not subject to any employment,
confidentiality, or other agreement or restriction that would prevent me from
fully satisfying my duties under this Agreement or that would be violated if I
did so. Without the Company's prior written approval, I promise I will not:
(a) disclose proprietary information belonging to a former
employer or other entity without its written permission;
(b) contact any former employer's customers or employees to
solicit their business or employment on behalf of the Group; or
(c) distribute announcements about or otherwise publicize my
employment with the Group.
I will indemnify and hold the Company harmless from any liabilities, including
defense costs, it may incur because I am alleged to have broken any of these
promises or improperly revealed or used such proprietary information or to have
threatened to do so, or if a former employer challenges my entering into this
Agreement or rendering services pursuant to it.
18. DEPARTMENT OF HOMELAND SECURITY VERIFICATION REQUIREMENT. If I
have not already done so, I agree to timely file all documents required by the
Department of Homeland Security to verify my identity and my lawful employment
in the United States. Notwithstanding any other provision of this Agreement, if
I fail to meet any such requirements promptly after receiving a written request
from the Company to do so, I agree that my employment shall terminate
immediately and that I shall not be entitled to any compensation from the
Company of any type.
[SIGNATURE PAGE FOLLOWS]
--------------------------------------------------------------------------------
I ACKNOWLEDGE THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND ME
RELATING TO THE SUBJECTS COVERED IN THIS AGREEMENT ARE CONTAINED IN IT AND THAT
I HAVE ENTERED INTO THIS AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY
PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS
AGREEMENT ITSELF.
I UNDERSTAND THAT PAUL, HASTINGS, XXXXXXXX & XXXXXX LLP (PHJ&W) REPRESENTED THE
COMPANY, NOT ME, IN NEGOTIATING THIS CONTRACT; I WAS REPRESENTED BY SEPARATE
COUNSEL. TO THE EXTENT PHJ&W HAS REPRESENTED ME, IS REPRESENTING ME, OR
REPRESENTS ME IN THE FUTURE, I IRREVOCABLY WAIVE ANY CONFLICT OF INTEREST
OBJECTIONS I MAY HAVE TO ITS REPRESENTATION OF THE COMPANY AS TO ANY MATTERS
RELATING TO MY EMPLOYMENT BY THE COMPANY, INCLUDING THE NEGOTIATION OF THIS
CONTRACT.
I FURTHER ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, THAT I
UNDERSTAND ALL OF IT, AND THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS
AGREEMENT, TOGETHER WITH ALL ATTACHED SCHEDULES AND EXHIBITS, WITH MY PRIVATE
LEGAL COUNSEL AND HAVE AVAILED MYSELF OF THAT OPPORTUNITY TO THE EXTENT I WISHED
TO DO SO. I UNDERSTAND THAT BY SIGNING THIS AGREEMENT I AM GIVING UP MY RIGHT TO
A JURY TRIAL.
--------------------------------------------------------------------------------
Date: CROCHET & BOREL SERVICES, INC.
-------------------
By:
------------------------------------
Name:
----------------------------------
Title: Chairman of the Board
Date:
-------------------
XXXX CROCHET
----------------------------------------
Schedule 1
----------
ASSIGNMENT OF INVENTIONS
--------------------------
1. I will promptly disclose in writing to the Company all Inventions. For
purposes of this Agreement, "Invention" shall mean any discovery, whether or not
---------
patentable, as well as improvements thereto, which is conceived or first
practiced by me, alone or in a joint effort with others, whether prior to or
following execution of this Agreement, which: (i) may be reasonably expected
to be used in a product of the Company; (ii) results from work that I have been
assigned as part of my duties as an employee of the Company; (iii) is in an area
of technology which is the same as or substantially related to the areas of
technology with which I am involved; (iv) is useful, or which the Company
reasonably expects may be useful, in any manufacturing or product design process
of the Company; or (v) utilizes any Confidential Information.
2. All Inventions developed while employed by the Company in the scope of
such my employment and duties belong to and are the sole property of the Company
and will be subject to this Agreement, I assign to the Company all right, title,
and interest I may have or may acquire in and to all Inventions. I shall sign
and deliver to the Company (during and after employment) any other documents
that the Company considers reasonably necessary to provide evidence of (i) the
assignment of all of my rights, if any, in any Inventions and (ii) the Company's
ownership of such Inventions.
3. I will assist the Company in applying for, prosecuting, obtaining, or
enforcing any patent, copyright, or other right or protection relating to any
Invention, all at the Company's expense but without consideration to me in
excess of my salary or wages. If the Company requires any assistance after
termination of my employment, I will be compensated for time actually spent in
providing that assistance at an hourly rate equivalent to my salary or wages
during the last period of employment with the Company.
4. If the Company is unable to secure my signature on any document necessary
to apply for, prosecute, obtain, or enforce any patent, copyright, or other
right or protection relating to any Invention, whether due to my mental or
physical incapacity or any other cause, I hereby irrevocably designate and
appoint the Company and each of its duly authorized officers and agents as my
agent and attorney-in-fact, to act for and in my behalf to execute and file any
such document and to do all other lawfully permitted acts to further the
prosecution, issuance, and enforcement of patents, copyrights, or other rights
or protections, with the same force and effect as if executed and delivered by
me.
[SIGNATURE PAGE FOLLOWS]
EMPLOYEE: CROCHET & BOREL SERVICES. INC.
------------------------------ ----------------------------------------------
Signature of Employee Signature of Authorized Company Representative
Xxxx Crochet Chairman of the Board
------------------------------ ----------------------------------------------
Print Name of Employee Title of Representative
------------------------------ ----------------------------------------------
Date Date
SIGNATURE PAGE TO ASSIGNMENT OF INVENTIONS AGREEMENT
Schedule 2
----------
MUTUAL AGREEMENT TO ARBITRATE CLAIMS
------------------------------------
I recognize that differences may arise between the Company and me
during or following my employment with the Company, and that those differences
may or may not be related to my employment. I understand and agree that by
entering into this Mutual Agreement to Arbitrate Claims ("Agreement"), I
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anticipate gaining the benefits of a speedy, impartial, final and binding
dispute-resolution procedure.
Except as provided in this Agreement, the Federal Arbitration Act
shall govern the interpretation, enforcement and all proceedings pursuant to
this Agreement. To the extent that the Federal Arbitration Act is inapplicable,
or held not to require arbitration of a particular claim or claims, state law
pertaining to agreements to arbitrate shall apply.
Claims Covered by the Agreement
-----------------------------------
The Company and I mutually consent to the resolution by arbitration of
all claims or controversies ("claims"), past, present or future, whether or not
arising out of my employment (or its termination), that the Company may have
against me or that I may have against any of the following (1) the Company, (2)
its officers, directors, employees or agents in their capacity as such or
otherwise, (3) the Company's parent, subsidiary and affiliated entities, (4) the
Company's benefit plans or the plans' sponsors, fiduciaries, administrators,
affiliates and agents, and/or (5) all successors and assigns of any of them.
The only claims that are arbitrable are those that, in the absence of
this Agreement, would have been justiciable under applicable state or federal
law. The claims covered by this Agreement include, but are not limited to:
claims for wages or other compensation due; claims for breach of any contract or
covenant (express or implied); tort claims; claims for discrimination
(including, but not limited to, race, sex, sexual orientation, religion,
national origin, age, marital status, physical or mental disability or handicap,
or medical condition); claims for benefits (except claims under an I benefit or
pension plan that either (1) specifies that its claims procedure shall culminate
in an arbitration procedure different from this one, or (2) is underwritten by a
commercial insurer which decides claims); and claims for violation of any
federal, state, or other governmental law, statute, regulation, or ordinance,
except claims excluded in the section of this Agreement entitled "Claims Not
Covered By The Agreement."
Except as otherwise provided in this Agreement, both the Company and I
agree that neither of us shall initiate or prosecute any lawsuit or
administrative action (other than an administrative charge of discrimination to
the Equal Employment Opportunity Commission, California Department of Fair
Employment and Housing or similar fair employment practices agency, or an
administrative charge within the
jurisdiction of the National Labor Relations Board), in any way related to any
claim covered by this Agreement.
Claims Not Covered by the Agreement
----------------------------------------
Claims for workers' compensation or unemployment compensation benefits
are not covered by this Agreement.
Also not covered are claims by the Company or by me for temporary
restraining orders or preliminary injunctions ("temporary equitable relief) in
cases in which such temporary equitable relief would be otherwise authorized by
law. Such resort to temporary equitable relief shall be pending and in aid of
arbitration only, and in such cases the trial on the merits of the action will
occur in front of, and will be decided by, the Arbitrator, who will have the
same ability to order legal or equitable remedies as could a court of general
jurisdiction.
Time Limits for Commencing Arbitration and Required Notice of All Claims
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The Company and I agree that the aggrieved party must give written
notice of any claim to the other party no later than the expiration of the
statute of limitations (deadline for filing) that the law prescribes for the
claim. Otherwise, the claim shall be void and deemed waived. I understand that
the aggrieved party is encouraged to give written notice of any claim as soon as
possible after the event or events in dispute so that arbitration of any
differences may take place promptly.
Written notice to the Company, or its officers, directors, employees
or agents, shall be sent to the Company's chief operating officer or chief legal
officer or person with similar authority at the Company's then-current address.
I will be given written notice at the last address recorded in my personnel
file.
The written notice shall identify and describe the nature of all
claims asserted, the facts upon which such claims are based and the relief or
remedy sought. The notice shall be sent to the other party by certified or
registered mail, return receipt requested.
Representation
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Any party may be represented by an attorney or other representative
selected by the party.
Discovery
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Each party shall have the right to take depositions of up to 10 fact
witnesses and any expert witness designated by another party. Each party also
shall have the right to make requests for production of documents to any party
and to subpoena
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documents from third parties. Requests for additional discovery may be made to
the Arbitrator selected pursuant to this Agreement. The Arbitrator may grant an
order for such requested additional discovery if the Arbitrator finds that the
party requires it to adequately arbitrate a claim, taking into account the
parties' mutual desire to have a fast, cost-effective dispute resolution
mechanism.
Designation of Witnesses
--------------------------
At least 30 days before the arbitration, the parties must exchange
lists of witnesses, including any experts, and copies of all exhibits intended
to be used at the arbitration.
Subpoenas
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Each party shall have the right to subpoena witnesses and documents
for the arbitration as well as documents relevant to the case from third
parties.
Arbitration Procedures
-----------------------
The arbitration will be held under the auspices of a sponsoring
organization, either the American Arbitration Association ("AAA") or Judicial
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Arbitration & Mediation Services, with the designation of the sponsoring
organization to be made by the party who did not initiate the claim.
The Company and I agree that, except as provided in this Agreement,
the arbitration shall be in accordance with the sponsoring organization's
then-current employment arbitration rules/procedures. The Arbitrator shall be
either a retired judge, or an attorney who is experienced in employment law and
licensed to practice law in the state in which the arbitration is convened (the
"Arbitrator"). The arbitration shall take place in or near the city in which I
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am or was last employed by the Company.
The Arbitrator shall be selected as follows. The sponsoring
organization shall give each party a list of eleven (11) arbitrators drawn from
its panel of employment dispute arbitrators. Each party shall have ten (10)
calendar days from the postmark date on the list to strike all names on the list
it deems unacceptable. If only one common name remains on the lists of all
parties, that individual shall be designated as the Arbitrator. If more than one
common name remains on the lists of all parties, the parties shall strike names
alternately from the list of common names until only one remains. The party who
did not initiate the claim shall strike first. If no common name exists on the
lists of all parties, the sponsoring organization shall furnish an additional
list of eleven (11) arbitrators from which the parties shall strike alternately,
with the party initiating the claim striking first, until only one name remains.
That person shall be designated as the Arbitrator.
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The Arbitrator shall apply the substantive law (and the law of
remedies, if applicable) of the state in which the claim arose, or federal law,
or both, as applicable to the claim(s) asserted. The Arbitrator is without
jurisdiction to apply any different substantive law or law of remedies. The
Federal Rules of Evidence shall apply. The Arbitrator shall have exclusive
authority to resolve any dispute relating to the interpretation, applicability,
enforceability or formation of this Agreement, including but not limited to any
claim that all or any part of this Agreement is void or voidable. The
arbitration shall be final and binding upon the parties, except as provided in
this Agreement.
The Arbitrator shall have jurisdiction to hear and rule on pre-hearing
disputes and is authorized to hold pre-hearing conferences by telephone or in
person, as the Arbitrator deems advisable. The Arbitrator shall have the
authority to entertain a motion to dismiss and/or a motion for summary judgment
by any party and shall apply the standards governing such motions under the
Federal Rules of Civil Procedure.
Either party, at its expense, may arrange for and pay the cost of a
court reporter to provide a stenographic record of proceedings.
Should any party refuse or neglect to appear for, or participate in,
the arbitration hearing, the Arbitrator shall have the authority to decide the
dispute based upon whatever evidence is presented,
Either party, upon request at the close of hearing, shall be given
leave to file a post-hearing brief. The time for filing such a brief shall be
set by the Arbitrator.
The Arbitrator shall render an award and written opinion in the form
typically rendered in labor arbitrations no later than thirty (30) days from the
date the arbitration hearing concludes or the post-hearing briefs (if requested)
are received, whichever is later. The opinion shall include the factual and
legal basis for the award.
Either party shall have the right, within twenty (20) days of issuance
of the Arbitrator's opinion, to file with the Arbitrator a motion to reconsider
(accompanied by a supporting brief), and the other party shall have twenty (20)
days from the date of the motion to respond. The Arbitrator thereupon shall
reconsider the issues raised by the motion and, promptly, either confirm or
change the decision, which (except as provided by law) shall then be final and
conclusive upon the parties.
Arbitration Fees and Costs
-----------------------------
The Company will be responsible for paying any filing fee and the fees
and costs of the Arbitrator; provided, however, that if I am the party
initiating the claim, I will contribute an amount equal to the filing fee to
initiate a claim in the court of general jurisdiction in the state in which I am
(or was last) employed by the Company. Each party shall pay for its own costs
and attorneys' fees, if any. However, if any party
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prevails on a statutory claim which affords the prevailing party attorneys' fees
and costs, or if there is a written agreement providing for attorneys' fees
and/or costs, the Arbitrator may award reasonable attorneys' fees and/or costs
to the prevailing party, applying the same standards a court would apply under
the law applicable to the claim(s).
Judicial Review
----------------
Either party may bring an action in any court of competent
jurisdiction to compel arbitration under this Agreement and to enforce an
arbitration award.
Interstate Commerce
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I understand and agree that the Company is engaged in transactions
involving interstate commerce.
Requirements for Modification or Revocation
-----------------------------------------------
This Agreement to arbitrate shall survive the termination of my
employment and the expiration of any benefit plan. It can only be revoked or
modified by a writing signed by both the Company's Chief Executive Officer and
me which specifically states an intent to revoke or modify this Agreement.
Sole and Entire Agreement
----------------------------
This is the complete agreement of the parties on the subject of
arbitration of disputes (except for any arbitration agreement in connection with
any pension or benefit plan). This Agreement supersedes any prior or
contemporaneous oral or written understandings on the subject. No party is
relying on any representations, oral or written, on the subject of the effect,
enforceability or meaning of this Agreement, except as specifically set forth in
this Agreement.
Construction
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If any provision of this Agreement is adjudged to be void or otherwise
unenforceable, in whole or in part, such adjudication shall not affect the
validity of the remainder of the Agreement. All other provisions shall remain in
full force and effect.
Consideration
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The promises by the Company and by me to arbitrate differences, rather
than litigate them before courts or other bodies, provide consideration for each
other.
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Not an Employment Agreement
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This Agreement is not, and shall not be construed to create, any
contract of employment, express or implied. Nor does this Agreement in any way
alter the "at-will" status of my employment,
Voluntary Agreement
--------------------
I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, THAT I
UNDERSTAND ITS TERMS, THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY
AND ME RELATING TO THE SUBJECTS COVERED IN THE AGREEMENT ARE CONTAINED IN IT,
AND THAT I HAVE ENTERED INTO THE AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON
ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN
THIS AGREEMENT ITSELF.
I UNDERSTAND THAT BY SIGNING THIS AGREEMENT I AM GIVING UP MY RIGHT TO
A JURY TRIAL.
Employee initials:
------------------
I FURTHER ACKNOWLEDGE THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO
DISCUSS THIS AGREEMENT WITH MY PRIVATE LEGAL COUNSEL AND HAVE AVAILED MYSELF OF
THAT OPPORTUNITY TO THE EXTENT I WISH TO DO SO,
EMPLOYEE: CROCHET & BOREL SERVICES, INC
------------------------------ ----------------------------------------------
Signature of Employee Signature of Authorized Company Representative
Xxxx Crochet Chairman of the Board
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Print Name of Employee Title of Representative
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Date Date
SIGNATURE PAGE TO MUTUAL AGREEMENT TO ARBITRATE CLAIMS
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INITIAL CLOSING DATE AGREEMENT
------------------------------
THIS INITIAL CLOSING DATE AGREEMENT (this "Agreement"), dated as of June 5,
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2006, by and among CHARYS HOLDING COMPANY, INC., a Delaware corporation
("Purchaser"), CROCHET & BOREL SERVICES, INC., a Texas corporation (the
---------
"Corporation"), and XXXX CROCHET, a resident of the State of Texas (the
-----------
"Seller").
------
A. Purchaser, the Corporation and the Seller entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement"; all terms not otherwise
-------------------------
defined herein have the meaning ascribed thereto in the Stock Purchase
Agreement), dated as of June 5, 2006, pursuant to which Purchaser agreed to
acquire from Seller, and Seller agreed to sell to the Purchaser, all of the
issued and outstanding capital stock of Crochet & Borel Services, Inc. (the
"C & B Shares");
------------
B. Pursuant to the terms of the Stock Purchase Agreement,
simultaneously with the execution of this Agreement the Initial Closing Date has
occurred;
C. Purchaser, the Corporation and Seller have agreed to consummate the
transactions contemplated to occur on the Initial Closing Date, in accordance
with the terms of the Stock Purchase Agreement, despite the fact that the
Schedules to be delivered to the Purchaser by the Corporation and Seller (the
"Remaining Schedules") other than SCHEDULE 2.06(a)(1), SCHEDULE 2,06(a)(2),
-------------------- -------------------- -------------------
SCHEDULE 2.06(b), and SCHEDULE 6.15 (the "Completed Schedules") have not yet
---------------- -------------- -------------------
been complete; and
D. Purchaser, the Corporation and Seller have agreed that the
Corporation and Seller shall deliver the Remaining Schedules on or prior to the
Second Closing Date.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Company and Investor hereby agrees
as follows:
1. Purchaser, the Corporation and the Seller hereby agree that the
Completed Schedules are correct and complete as of the Initial Closing Date, and
shall not be subject to further amendment or modification except in accordance
with the terms of the Stock Purchase Agreement.
2. Purchaser, the Corporation and the Seller hereby agree that the
Corporation and the Seller shall deliver the Remaining Schedules on or prior to
the Second Closing Date.
IN WITNESS WHEREOF, the parties have caused this Initial Closing Date
Agreement to be duly executed as of day and year first above written.
THE CORPORATION: PURCHASER:
CROCHET & BOREL SERVICES, INC. CHARYS HOLDING COMPANY INC.
BY: /s/ Xxxx Crochet BY:
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NAME: Xxxx Crochet, President NAME: Xxxxx Xxx, Xx., Chief Executive
Officer
SELLER:
XXXX CROCHET
BY: /s/ Xxxx Crochet
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INITIAL CLOSING BATE AGREEMENT
------------------------------
THIS INITIAL CLOSING DATE AGREEMENT (this "Agreement"), dated as of June 5,
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2006, by and among CHARYS HOLDING COMPANY, INC., a Delaware corporation
("Purchaser"), CROCHET & BOREL SERVICES, INC., a Texas corporation (the
---------
"Corporation"), and XXXX CROCHET, a resident of the State of Texas (the
-----------
"Seller").
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A. Purchaser, the Corporation and the Seller entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement"; all terms not otherwise
-------------------------
defined herein have the meaning ascribed thereto in the Stock Purchase
Agreement), dated as of June 5, 2006, pursuant to which Purchaser agreed to
acquire from Seller, and Seller agreed to sell to the Purchaser, all of the
issued and outstanding capital stock of Crochet & Borel Services, Inc. (the
"C & B Shares");
------------
B. Pursuant to the terms of the Stock Purchase Agreement,
simultaneously with the execution of this Agreement the Initial Closing Date has
occurred;
C. Purchaser, the Corporation and Seller have agreed to consummate the
transactions contemplated to occur on the Initial Closing Date, in accordance
with the terms of the Stock Purchase Agreement, despite the fact that the
Schedules to be delivered to the Purchaser by the Corporation and Seller (the
"Remaining Schedules") other than SCHEDULE 2.06(a)(1), SCHEDULE 2,06(a)(2),
-------------------- -------------------- -------------------
SCHEDULE 2.06(b), and SCHEDULE 6.15 (the "Completed Schedules") have not yet
---------------- -------------- -------------------
been complete; and
D. Purchaser, the Corporation and Seller have agreed that the
Corporation and Seller shall deliver the Remaining Schedules on or prior to the
Second Closing Date.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Company and Investor hereby agrees
as follows:
1. Purchaser, the Corporation and the Seller hereby agree that the
Completed Schedules are correct and complete as of the Initial Closing Date, and
shall not be subject to further amendment or modification except in accordance
with the terms of the Stock Purchase Agreement.
2. Purchaser, the Corporation and the Seller hereby agree that the
Corporation and the Seller shall deliver the Remaining Schedules on or prior to
the Second Closing Date.
IN WITNESS WHEREOF, the parties have caused this Initial Closing Date
Agreement to be duly executed as of day and year first above written.
THE CORPORATION: PURCHASER:
CROCHET & BOREL SERVICES, INC. CHARYS HOLDING COMPANY INC.
BY: BY: /s/ Xxxxx Xxx, Xx.
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NAME: Xxxx Crochet, President NAME: Xxxxx Xxx, Xx., Chief Executive
Officer
SELLER:
XXXX CROCHET
BY:
-----------------------------------
