STOCK PURCHASE
AGREEMENT
FAN-TASTIC, INC.
Company
LEASING TECHNOLOGY INCORPORATED
Buyer
March 17, 1997
Date
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of March 17,
1997, by and between Leasing Technology Incorporated, a Utah corporation
("Buyer"), and those individuals set forth on Schedule A attached hereto (each
such individual hereinafter referred to as "Seller" and collectively as
"Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, eighty percent
(80%) of the issued and outstanding shares (the "Shares") of capital stock of
Fan-Tastic, Inc., a Utah corporation (the "Company"), for the consideration and
on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Acquired Companies"--the Company and its Subsidiaries, collectively.
"Applicable Contract"--any Contract (a) under which any Acquired Company has or
may acquire any rights, (b) under which any Acquired Company has or may become
subject to any obligation or liability, or (c) by which any Acquired Company or
any of the assets owned or used by it is or may become bound.
"Balance Sheet"--as defined in Section 3.4.
"Best Efforts"--the efforts that a prudent Person desirous of achieving a result
would use in similar circumstances to ensure that such result is achieved as
expeditiously as possible.
"Breach"--a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"Buyer"--as defined in the first paragraph of this Agreement.
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"Closing"--as defined in Section 2.3.
"Closing Date"--the date and time as of which the Closing actually takes place.
"Company"--as defined in the Recitals of this Agreement.
"Consent"--any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Employment
Agreements, the Loan Agreements, the Shareholders' Agreement, the
Option Agreements, the Investment Letters, and the Sellers' Releases;
(c) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares.
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Damages"--as defined in Section 11.2.
"Disclosure Letter"--the disclosure letter delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement.
"Employment Agreements"--as defined in Section 2.4(a)(iii).
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
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"Environmental, Health, and Safety Liabilities"--any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment, or
other remediation or response actions ("Cleanup") required by
applicable Environmental Law or Occupational Safety and Health Law
(whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as
amended ("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged,
and used so that they do not present unreasonable risks to human health
or the Environment when used or disposed of;
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(e) protecting resources, species, or ecological
amenities;
(f) reducing to acceptable levels the risks inherent in
the transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up
or prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Facilities"--any real property, leaseholds, or other interests currently or
formerly owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by any Acquired Company.
"GAAP"--generally accepted United States accounting principles, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"Governmental Authorization"--any approval, consent, license, permit, waiver, or
other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority
of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
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"Hazardous Activity"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"Hazardous Materials"--any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Intellectual Property Assets" --as defined in Section 3.22.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a particular
fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity) has, or at any time had, Knowledge of
such fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Loan Agreements"--the Loan Agreement, Promissory Note, and Security Agreement
as defined in Section 2.4.
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"Occupational Safety and Health Law"--any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Order"--any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-
day operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority) [and is not required to be specifically
authorized by the parent company (if any) of such Person]; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"Organizational Documents"--(a) the articles or certificate of incorporation and
the bylaws of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) any charter
or similar document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the foregoing.
"Person"--any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
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(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or
in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar
capacity); and
(f) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 10% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"Release"--any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
"Representative"--with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
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"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Sellers"--as defined in the first paragraph of this Agreement.
"Sellers' Releases"--as defined in Section 2.4.
"Shares"--as defined in the Recitals of this Agreement.
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or other
Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"Tax Return"--any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or payment of any Tax
or in connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will sell and transfer the Shares to Buyer, and Buyer will purchase the
Shares from Sellers. In addition, at any time prior to March 31, 2000 Sellers
shall have the right to exchange their remaining shares of common stock of the
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Company for shares of Class D preferred stock of Buyer on the basis of 0.0240385
shares of Class D preferred stock of Buyer for every one share of common stock
of the Company.
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Shares will be the
issuance of 100,000 shares of Class D preferred stock of Buyer. The Class D
preferred stock shall be issued to Sellers in the amounts set forth on Schedule
A hereof and shall have such rights, preferences and limitations as set forth on
Schedule B hereof.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement
will take place at the offices of Buyer's counsel at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Tower, 60
East South Temple, Salt Lake City, Utah, at 10:00 a.m. (local time) on March 17,
1997 or at such other time and place as the parties may agree. Subject to the
provisions of Section 10, failure to consummate the purchase and sale provided
for in this Agreement on the date and time and at the place determined pursuant
to this Section 2.3 will not result in the termination of this Agreement and
will not relieve any party of any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers), with
signatures guaranteed by a commercial bank or by a member
firm of the New York Stock Exchange, for transfer to Buyer;
(ii) releases in the form of Exhibit 2.4(a)(ii)
executed by Sellers (collectively, "Sellers' Releases");
(iii) employment agreements in the form of Exhibit
2.4(a)(iii), executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ and Will ▇▇▇▇▇▇▇▇▇ (collectively, "Employment
Agreements");
(iv) investment letters in the form of Exhibit
2.4(a)(iv), executed by Sellers (collectively, the "Investment
Letters"); and
(v) a certificate executed by Sellers, excluding ▇▇▇
▇▇▇▇▇, representing and warranting to Buyer that each of
Sellers' representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and
is accurate in all respects as of the Closing Date as
if made on the Closing Date (giving full effect to any
supplements to the Disclosure Letter that were delivered by
Sellers to Buyer prior to the Closing Date in accordance with
Section 6.5); and
(vi) Loan Agreements in the form of Exhibit
2.4(a)(vi), executed by the Company (the "Loan Agreements");
and
(vii) a shareholder's agreement in the form of
Exhibit 2.4(a)(vii) executed by Sellers (the "Shareholders'
Agreement"); and
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(b) Buyer will deliver to Sellers:
(i) certificates representing the Purchase price,
which Buyer and Sellers mutually agree that for purposes of
this Agreement shall represent a value of $1,000,000;
(ii) the Loan Agreement evidencing a line of credit
for the Company in an amount of not less than $358,000
executed by Lender;
(iii) a certificate executed by Buyer to the effect
that, except as otherwise stated in such certificate, each of
Buyer's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and
is accurate in all respects as of the Closing Date as if made
on the Closing Date;
(iv) the Employment Agreements, executed by the
Company; and
(v) the Shareholders' Agreement executed by Buyer;
and
(vi) Option Agreements in the form of Exhibit
2.4(b)(vi) executed by Buyer (the "Option Agreement") granting
Sellers, collectively an option to purchase 150,000 shares of
Buyer's common stock.
3. REPRESENTATIONS AND WARRANTIES OF CERTAIN SELLERS
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇, jointly and severally
represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list for each Acquired Company of its name, its jurisdiction
of incorporation, other jurisdictions in which it is authorized to do
business, and its capitalization (including the identity of each
stockholder and the number of shares held by each). Each Acquired
Company is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under
Applicable Contracts. Each Acquired Company is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
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(b) Sellers have delivered to Buyer copies of the
Organizational Documents of each Acquired Company, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with
its terms. Upon the execution and delivery by Sellers of the Employment
Agreements, and the Sellers' Releases (collectively, the "Sellers'
Closing Documents"), the Sellers' Closing Documents will constitute the
legal, valid, and binding obligations of Sellers, enforceable against
Sellers in accordance with their respective terms. Sellers have the
absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the Sellers' Closing Documents
and to perform their obligations under this Agreement and the Sellers'
Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions
will, directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of the Acquired Companies, or (B) any resolution adopted by
the board of directors or the stockholders of any Acquired
Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the Contemplated Transactions or
to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which any Acquired Company or
Sellers, or any of the assets owned or used by any Acquired
Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by any Acquired Company or that otherwise relates
to the business of, or any of the assets owned or used by, any
Acquired Company;
(iv) cause Buyer or any Acquired Company to become
subject to, or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by any Acquired
Company to be reassessed or revalued by any taxing authority
or other Governmental Body;
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(vi) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Seller or
Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Sellers are acquiring the Class D preferred shares for
their own account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 10,000,000
shares of common stock, no par value per share and 5,000,000 shares of preferred
stock, no par value per share, of which 5,200,000 shares of common stock are
issued and outstanding and constitute the Shares and no shares of preferred
stock are issued or outstanding. Sellers are and will be on the Closing Date the
record and beneficial owners and holders of the Shares, free and clear of all
Encumbrances. Sellers own the number of shares set forth opposite their name on
Schedule A. With the exception of the Shares (which are owned by Sellers), all
of the outstanding equity securities and other securities of each Acquired
Company are owned of record and beneficially by one or more of the Acquired
Companies, free and clear of all Encumbrances. No legend or other reference to
any purported Encumbrance appears upon any certificate representing equity
securities of any Acquired Company. All of the outstanding equity securities of
each Acquired Company have been duly authorized and validly issued and are fully
paid and nonassessable. There are no Contracts relating to the issuance, sale,
or transfer of any equity securities or other securities of any Acquired
Company. None of the outstanding equity securities or other securities of any
Acquired Company was issued in violation of the Securities Act or any other
Legal Requirement. No Acquired Company owns, or has any Contract to acquire, any
equity securities or other securities of any Person (other than Acquired
Companies) or any direct or indirect equity or ownership interest in any other
business.
▇▇▇ ▇▇▇▇▇ hereby represents and warrants that on the Closing Date he
will be the beneficial owner and holder of the shares set opposite his name on
Schedule A, free and clear of all Encumbrances.
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3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) unaudited consolidated balance
sheets of the Acquired Companies as at December 31, 1996 (the "Balance Sheet")
and the related unaudited consolidated statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended.
Such financial statements and notes fairly present the financial condition and
the results of operations, changes in stockholders' equity, and cash flow of the
Acquired Companies as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP, subject, in the case
of interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the Balance Sheet); the financial statements
referred to in this Section 3.4 reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed in
the notes to such financial statements. No financial statements of any Person
other than the Acquired Companies are required by GAAP to be included in the
consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of the Acquired Companies, all of which have been made available to
Buyer, are complete and correct and have been maintained in accordance with
sound business practices and the requirements of Section 13(b)(2) of the
Securities Exchange Act of 1934, as amended (regardless of whether or not the
Acquired Companies are subject to that Section), including the maintenance of an
adequate system of internal controls. The minute books of the Acquired Companies
contain accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of the Acquired Companies, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of the
Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list
of all real property, leaseholds, or other interests therein owned by any
Acquired Company. Sellers have delivered or made available to Buyer copies of
the deeds and other instruments (as recorded) by which the Acquired Companies
acquired such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of Sellers or the
Acquired Companies and relating to such property or interests. The Acquired
Companies own (with good and marketable title in the case of real property,
subject only to the matters permitted by the following sentence) all the
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) that they purport to own located in the facilities owned or operated
by the Acquired Companies or reflected as owned in the books and records of the
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Acquired Companies, including all of the properties and assets reflected in the
Balance Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Disclosure Letter and personal
property sold since the date of the Balance Sheet, as the case may be, in the
Ordinary Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Acquired Companies since the date of the Balance Sheet
(except for personal property acquired and sold since the date of the Balance
Sheet in the Ordinary Course of Business and consistent with past practice),
which subsequently purchased or acquired properties and assets (other than
inventory and short-term investments) are listed in Part 3.6 of the Disclosure
Letter. All material properties and assets reflected in the Balance Sheet are
free and clear of all Encumbrances and are not, in the case of real property,
subject to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except, with respect to all such
properties and assets, (a) mortgages or security interests shown on the Balance
Sheet as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the Balance Sheet (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (c) liens for current taxes
not yet due, and (d) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount, materially detracts from
the value or impairs the use of the property subject thereto, or impairs the
operations of any Acquired Company, and (ii) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto. All buildings, plants, and structures owned by the Acquired
Companies lie wholly within the boundaries of the real property owned by the
Acquired Companies and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the Acquired
Companies are structurally sound, are in good operating condition and repair,
and are adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the Acquired
Companies are sufficient for the continued conduct of the Acquired Companies'
businesses after the Closing in substantially the same manner as conducted prior
to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies that are reflected on
the Balance Sheet or on the accounting records of the Acquired Companies as of
the Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
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Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of the respective reserves shown on the Balance
Sheet or on the accounting records of the Acquired Companies as of the Closing
Date (which reserves are adequate and calculated consistent with past practice
and, in the case of the reserve as of the Closing Date, will not represent a
greater percentage of the Accounts Receivable as of the Closing Date than the
reserve reflected in the Balance Sheet represented of the Accounts Receivable
reflected therein and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within ninety days after the day on which it first
becomes due and payable. There is no contest, claim, or right of set-off, other
than returns in the Ordinary Course of Business, under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Part 3.8 of the Disclosure Letter contains a complete and
accurate list of all Accounts Receivable as of the date of the Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Acquired Companies, whether or not reflected in
the Balance Sheet, consists of a quality and quantity usable and salable in the
Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date, as the case may be. All inventories
not written off have been priced at the lower of cost or net realizable value on
a first in, first out basis. The quantities of each item of inventory (whether
raw materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the Acquired
Companies have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.11 TAXES
(a) The Acquired Companies have filed or caused to be filed
all Tax Returns that are or were required to be filed by or with
respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. The Acquired
Companies have paid, or made provision for the payment of, all Taxes
that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Sellers or any
Acquired Company, except such Taxes, if any, as are listed in Part
15
3.11 of the Disclosure Letter and are being contested in good faith and
as to which adequate reserves (determined in accordance with GAAP) have
been provided in the Balance Sheet.
(b) Except as described in Part 3.11 of the Disclosure Letter,
no Seller or Acquired Company has given or been requested to give
waivers or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of limitations
relating to the payment of Taxes of any Acquired Company or for which
any Acquired Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of each Acquired Company are adequate
(determined in accordance with GAAP) and are at least equal to that
Acquired Company's liability for Taxes. There exists no proposed tax
assessment against any Acquired Company except as disclosed in the
Balance Sheet or in Part 3.11 of the Disclosure Letter.
(d) All Tax Returns filed by (or that include on a
consolidated basis) any Acquired Company are true, correct, and
complete. There is no tax sharing agreement that will require any
payment by any Acquired Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of any Acquired Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have the
meanings set forth below.
"Company Other Benefit Obligation" means an Other Benefit Obligation
owed, adopted, or followed by an Acquired Company or an ERISA Affiliate
of an Acquired Company.
"Company Plan" means all Plans of which an Acquired Company or an ERISA
Affiliate of an Acquired Company is or was a Plan Sponsor, or to which
an Acquired Company or an ERISA Affiliate of an Acquired Company
otherwise contributes or has contributed, or in which an Acquired
Company or an ERISA Affiliate of an Acquired Company otherwise
participates or has participated. All references to Plans are to
Company Plans unless the context requires otherwise.
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"Company VEBA" means a VEBA whose members include employees of any
Acquired Company or any ERISA Affiliate of an Acquired Company.
"ERISA Affiliate" means, with respect to an Acquired Company, any other person
that, together with the Company, would be treated as a single employer under IRC
ss. 414.
"Multi-Employer Plan" has the meaning given in ERISA ss. 3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or customary
practices, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees, or agents, other than obligations, arrangements, and practices that
are Plans. Other Benefit Obligations include consulting agreements under which
the compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits within the
meaning of IRCss.132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto.
"Pension Plan" has the meaning given in ERISA ss. 3(2)(A).
"Plan" has the meaning given in ERISA ss. 3(3).
"Plan Sponsor" has the meaning given in ERISA ss. 3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet the requirements
of IRC ss. 401(a).
"Title IV Plans" means all Pension Plans that are subject to Title IV of ERISA,
29 U.S.C. ss. 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC ss.
501(c)(9).
"Welfare Plan" has the meaning given in ERISA ss. 3(1).
(b) Part 3.13 of the Disclosure Letter contains a complete and
accurate list of all Company Plans, Company Other Benefit Obligations,
and Company VEBAs, and identifies as such all Company Plans that are
(A) defined benefit Pension Plans, (B) Qualified Plans, (C) Title IV
Plans, or (D) Multi-Employer Plans.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
17
(i) each Acquired Company is, and at all times since
December 31, 1996 has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct
or operation of its business or the ownership or use of any of
its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) may
constitute or result in a violation by any Acquired Company
of, or a failure on the part of any Acquired Company to comply
with, any Legal Requirement, or (B) may give rise to any
obligation on the part of any Acquired Company to undertake,
or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) no Acquired Company has received, at any time
since December 31, 1996, any notice or other communication
(whether oral or written) from any Governmental Body
or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply
with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of any Acquired
Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete
and accurate list of each Governmental Authorization that is held by
any Acquired Company or that otherwise relates to the business of, or
to any of the assets owned or used by, any Acquired Company. Each
Governmental Authorization listed or required to be listed in Part 3.14
of the Disclosure Letter is valid and in full force and effect.
Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since
December 31, 1996 has been, in full compliance with all of the
terms and requirements of each Governmental Authorization
identified or required to be identified in Part 3.14 of the
Disclosure Letter;
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of
or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter;
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(iii) no Acquired Company has received, at any time
since December 31, 1996, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed or
required to be listed in Part 3.14 of the Disclosure Letter
have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations
have been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit the Acquired Companies to lawfully conduct and operate their
businesses in the manner they currently conduct and operate such businesses and
to permit the Acquired Companies to own and use their assets in the manner in
which they currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against any
Acquired Company or that otherwise relates to or may affect
the business of, or any of the assets owned or used by,
any Acquired Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
To the Knowledge of Sellers and the Acquired Companies, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of any Acquired Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired
Companies, or any of the assets owned or used by any Acquired
Company, is subject;
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(ii)no Seller is subject to any Order that relates to
the business of, or any of the assets owned or used by, any
Acquired Company; and
(iii) to the Knowledge of Sellers and the Acquired
Companies, no officer, director, agent, or employee of any
Acquired Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the
business of any Acquired Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since
December 31, 1996 has been, in full compliance with all of the
terms and requirements of each Order to which it, or any of
the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists
that may constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which any Acquired
Company, or any of the assets owned or used by any Acquired
Company, is subject; and
(iii) no Acquired Company has received, at any time
since December 31, 1996, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or
potential violation of, or failure to comply with, any term or
requirement of any Order to which any Acquired Company, or any
of the assets owned or used by any Acquired Company, is or has
been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since the
date of the Balance Sheet, the Acquired Companies have conducted their
businesses only in the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of
capital stock of any Acquired Company; issuance of any security
convertible into such capital stock; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by any Acquired
Company of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of
shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired
Company;
20
(c) payment or increase by any Acquired Company of any
bonuses, salaries, or other compensation to any stockholder, director,
officer, or (except in the Ordinary Course of Business) employee or
entry into any employment, severance, or similar Contract with any
director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of any Acquired Company;
(e) damage to or destruction or loss of any asset or property
of any Acquired Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business,
financial condition, or prospects of the Acquired Companies, taken as
a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii)
any Contract or transaction involving a total remaining commitment by
or to any Acquired Company of at least $10,000;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of
any Acquired Company or mortgage, pledge, or imposition of any lien or
other encumbrance on any material asset or property of any Acquired
Company, including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value to any Acquired Company in excess of $10,000;
(i) material change in the accounting methods used by any
Acquired Company; or
(j) agreement, whether oral or written, by any Acquired
Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete
and accurate list, and Sellers have delivered to Buyer true and
complete copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by
one or more Acquired Companies of an amount or value in excess
of $10,000;
21
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials
to one or more Acquired Companies of an amount or value in
excess of $10,000;
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves
expenditures or receipts of one or more Acquired Companies in
excess of $10,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional sales agreements having a value
per item or aggregate payments of less than $5,000 and with
terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current
or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by any Acquired Company
with any other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of
any Acquired Company or any Affiliate of an Acquired Company
or limit the freedom of any Acquired Company or any Affiliate
of an Acquired Company to engage in any line of business or to
compete with any Person;
(ix) each Applicable Contract providing for payments
to or by any Person based on sales, purchases, or profits,
other than direct payments for goods;
(x) each power of attorney that is currently
effective and outstanding;
(xi) each Applicable Contract entered into other than
in the Ordinary Course of Business that contains or provides
for an express undertaking by any Acquired Company to be
responsible for consequential damages;
22
(xii) each Applicable Contract for capital
expenditures in excess of $10,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by any Acquired Company other than in the Ordinary
Course of Business; and
(iv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete
details concerning such Contracts, including the parties to the Contracts, the
amount of the remaining commitment of the Acquired Companies under the
Contracts, and the Acquired Companies' office where details relating to the
Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) no Seller (and no Related Person of either
Seller) has or may acquire any rights under, and no Seller has
or may become subject to any obligation or liability under,
any Contract that relates to the business of, or any of the
assets owned or used by, any Acquired Company; and
(ii) to the Knowledge of Sellers and the Acquired
Companies, no officer, director, agent, employee, consultant,
or contractor of any Acquired Company is bound by any Contract
that purports to limit the ability of such officer, director,
agent, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the
business of any Acquired Company, or (B) assign to any
Acquired Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract identified or required to be identified in Part
3.17(a) of the Disclosure Letter is in full force and effect and is
valid and enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) each Acquired Company is, and at all times since
December 31, 1996 has been, in full compliance with all
applicable terms and requirements of each Contract under which
such Acquired Company has or had any obligation or liability
or by which such Acquired Company or any of the assets owned
or used by such Acquired Company is or was bound;
(ii) each other Person that has or had any obligation
or liability under any Contract under which an Acquired
Company has or had any rights is, and at all times since
23
December 31, 1996 has been, in full compliance with all
applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene,
conflict with, or result in a violation or breach of, or give
any Acquired Company or other Person the right to declare a
default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received
from any other Person, at any time since December 31, 1996,
any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or
payable to any Acquired Company under current or completed Contracts
with any Person and, to the Knowledge of Sellers and the Acquired
Companies, no such Person has made written demand for such
renegotiation.
(f) The Contracts relating to the sale, design, manufacture,
or provision of products or services by the Acquired Companies have
been entered into in the Ordinary Course of Business and have been
entered into without the commission of any act alone or in concert with
any other Person, or any consideration having been paid or promised,
that is or would be in violation of any Legal Requirement.
3.18 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of
insurance to which any Acquired Company is a party or under
which any Acquired Company, or any director of any Acquired
Company, is or has been covered at any time within the
three years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of any Acquired
Company's financial statements with regard to the adequacy of
such entity's coverage or of the reserves for claims.
(b) Except as set forth on Part 3.18(b) of the Disclosure
Letter:
24
(i) All policies to which any Acquired Company is a
party or that provide coverage to either Seller, any Acquired
Company, or any director or officer of an Acquired Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is
financially sound and reputable;
(C) taken together, provide adequate
insurance coverage for the assets and the operations
of the Acquired Companies for all risks normally
insured against by a Person carrying on the same
business or businesses as the Acquired Companies;
(D) are sufficient for compliance with all
Legal Requirements and Contracts to which any
Acquired Company is a party or by which any of them
is bound;
(E) will continue in full force and effect
following the consummation of the Contemplated
Transactions; and
(F) do not provide for any retrospective
premium adjustment or other experienced-based
liability on the part of any Acquired Company.
(ii) No Seller or Acquired Company has received (A)
any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy
is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(iii) The Acquired Companies have paid all premiums
due, and have otherwise performed all of their respective
obligations, under each policy to which any Acquired Company
is a party or that provides coverage to any Acquired Company
or director thereof.
(iv) The Acquired Companies have given notice to the
insurer of all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure letter:
(a) Each Acquired Company is, and at all times has been, in
full compliance with, and has not been and is not in violation of or
liable under, any Environmental Law.
25
No Seller or Acquired Company has any basis to expect, nor has any of
them or any other Person for whose conduct they are or may be held
to be responsible received, any actual or Threatened order, notice, or
other communication from (i) any Governmental Body or private citizen
acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or
Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of
the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or any Acquired Company has had
an interest, or with respect to any property or Facility at or to
which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used, or processed by Sellers, any Acquired
Company, or any other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Sellers and
the Acquired Companies, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities
or any other properties and assets (whether real, personal, or mixed)
in which Sellers or any Acquired Company has or had an interest.
(c) No Seller or Acquired Company has any basis to expect, nor
has any of them or any other Person for whose conduct they are or may
be held responsible, received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or
of any alleged, actual, or potential obligation to undertake or bear
the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities or any other properties or assets
(whether real, personal, or mixed) in which Sellers or any Acquired
Company had an interest, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by Sellers, any Acquired
Company, or any other Person for whose conduct they are or may be held
responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) No Seller or Acquired Company, or any other Person for
whose conduct they are or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect to the
Facilities or, to the Knowledge of Sellers and the Acquired Companies,
with respect to any other properties and assets (whether real,
personal, or mixed) in which Sellers or any Acquired Company (or any
predecessor), has or had an interest, or at any property geologically
or hydrologically adjoining the Facilities or any such other property
or assets.
26
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits,
dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water,
sumps, or any other part of the Facilities or such adjoining property,
or incorporated into any structure therein or thereon. No Seller,
Acquired Company, any other Person for whose conduct they are or may be
held responsible, or to the Knowledge of Sellers and the Acquired
Companies, any other Person, has permitted or conducted, or is aware
of, any Hazardous Activity conducted with respect to the Facilities or
any other properties or assets (whether real, personal, or mixed) in
which Sellers or any Acquired Company has or had an interest except in
full compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the Knowledge of Sellers
and the Acquired Companies, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or
from or by any other properties and assets (whether real, personal, or
mixed) in which Sellers or any Acquired Company has or had an interest,
or to the Knowledge of Sellers and the Acquired Companies any
geologically or hydrologically adjoining property, whether by Sellers,
any Acquired Company, or any other Person.
(g) Sellers have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Sellers or any Acquired Company pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by Sellers, any Acquired Company,
or any other Person for whose conduct they are or may be held
responsible, with Environmental Laws.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or
director of the Acquired Companies, including each employee on leave of
absence or layoff status: employer; name; job title; current
compensation paid or payable and any change in compensation since
December 31, 1996; vacation accrued; and service credited for purposes
of vesting and eligibility to participate under any Acquired Company's
pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any Director Plan.
27
(b) No employee or director of any Acquired Company is a party
to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director and any other Person ("Proprietary
Rights Agreement") that in any way adversely affects or will affect (i)
the performance of his duties as an employee or director of the
Acquired Companies, or (ii) the ability of any Acquired Company to
conduct its business, including any Proprietary Rights Agreement with
Sellers or the Acquired Companies by any such employee or director. To
Sellers' Knowledge, no director, officer, or other key employee of any
Acquired Company intends to terminate his employment with such Acquired
Company.
(c) Part 3.20 of the Disclosure Letter also contains a
complete and accurate list of the following information for each
retired employee or director of the Acquired Companies, or their
dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other
benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Since December 31, 1996, no Acquired Company has been or is a party to
any collective bargaining or other labor Contract. Since December 31, 1996,
there has not been, there is not presently pending or existing, and to Sellers'
Knowledge there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against or affecting
any Acquired Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. To Sellers'
Knowledge no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by any Acquired Company, and no such action is contemplated by any
Acquired Company. Each Acquired Company has complied in all respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. No Acquired Company is liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual
Property Assets" includes:
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(i) the name "Fan-Tastic" and "Fan-A-Mania", all
fictional business names, trading names, registered and
unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents, patent applications, and inventions
and discoveries that may be patentable (collectively,
"Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights
in Mask Works"); and
(v) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets"); owned, used, or licensed by
any Acquired Company as licensee or licensor.
(b) Agreements--Part 3.22(b) of the Disclosure Letter contains
a complete and accurate list and summary description, including any
royalties paid or received by the Acquired Companies, of all Contracts
relating to the Intellectual Property Assets to which any Acquired
Company is a party or by which any Acquired Company is bound, except
for any license implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs with a value of less
than $5,000 under which an Acquired Company is the licensee. There are
no outstanding and, to Sellers' Knowledge, no Threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those
necessary for the operation of the Acquired Companies'
businesses as they are currently conducted or as reflected in
the business plan given to Buyer. One or more of the Acquired
Companies is the owner of all right, title, and interest in
and to each of the Intellectual Property Assets, free and
clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims, and has the right to use
without payment to a third party all of the Intellectual
Property Assets.
(ii) Except as set forth in Part 3.22(c) of the
Disclosure Letter, all former and current employees of each
Acquired Company have executed written Contracts with one or
more of the Acquired Companies that assign to one or more of
the Acquired Companies all rights to any inventions,
improvements, discoveries, or information relating to the
business of any Acquired Company. No employee of any Acquired
Company has entered into any Contract that restricts or limits
in any way the scope or type of work in which the employee may
29
be engaged or requires the employee to transfer, assign, or
disclose information concerning his work to anyone other than
one or more of the Acquired Companies.
(d) Patents
(i) Part 3.22(d) of the Disclosure Letter contains a
complete and accurate list and summary description of all
Patents. One or more of the Acquired Companies is the owner of
all right, title, and interest in and to each of the Patents,
free and clear of all liens, security interests, charges,
encumbrances, entities, and other adverse claims.
(ii) All of the issued Patents are currently in
compliance with formal legal requirements (including payment
of filing, examination, and maintenance fees and proofs of
working or use), are valid and enforceable, and are not
subject to any maintenance fees or taxes or actions falling
due within ninety days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition
proceeding. To Sellers' Knowledge, there is no potentially
interfering patent or patent application of any third party.
(iv) No Patent is infringed or, to Sellers'
Knowledge, has been challenged or threatened in any way. None
of the products manufactured and sold, nor any process or
know-how used, by any Acquired Company infringes or is alleged
to infringe any patent or other proprietary right of any other
Person.
(v) All products made, used, or sold under the
Patents have been marked with the proper patent notice.
(e) Trademarks
(i) Part 3.22(e) of Disclosure Letter contains a
complete and accurate list and summary description of all
Marks. One or more of the Acquired Companies is the owner of
all right, title, and interest in and to each of the Marks,
free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All Marks that have been registered with the
United States Patent and Trademark Office are currently in
compliance with all formal legal requirements (including the
timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the
Closing Date.
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(iii) No ▇▇▇▇ has been or is now involved in any
opposition, invalidation, or cancellation and, to Sellers'
Knowledge, no such action is Threatened with the respect to
any of the Marks.
(iv) To Sellers' Knowledge there is no potentially
interfering trademark or trademark application of any third
party.
(v) No ▇▇▇▇ is infringed or, to Sellers' Knowledge,
has been challenged or threatened in any way. None of the
Marks used by any Acquired Company infringes or is alleged
to infringe any trade name, trademark, or service ▇▇▇▇ of
any third party.
(vi) All products and materials containing a ▇▇▇▇
▇▇▇▇ the proper federal registration notice where permitted by
law.
(f) Copyrights
(i) Part 3.22(f) of the Disclosure Letter contains a
complete and accurate list and summary description of all
Copyrights. One or more of the Acquired Companies is the owner
of all right, title, and interest in and to each of the
Copyrights, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims.
(ii) All the Copyrights have been registered and are
currently in compliance with formal legal requirements, are
valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days
after the date of Closing.
(iii) No Copyright is infringed or, to Sellers'
Knowledge, has been challenged or threatened in any way. None
of the subject matter of any of the Copyrights infringes or is
alleged to infringe any copyright of any third party or is a
derivative work based on the work of a third party.
(iv) All works encompassed by the Copyrights have
been marked with the proper copyright notice.
(g) Trade Secrets
(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is current,
accurate, and sufficient in detail and content to identify and
explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual.
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(ii) Sellers and the Acquired Companies have taken
all reasonable precautions to protect the secrecy,
confidentiality, and value of their Trade Secrets.
(iii) One or more of the Acquired Companies has good
title and an absolute (but not necessarily exclusive) right to
use the Trade Secrets. The Trade Secrets are not part of the
public knowledge or literature, and, to Sellers' Knowledge,
have not been used, divulged, or appropriated either for the
benefit of any Person (other than one or more of the Acquired
Companies) or to the detriment of the Acquired Companies. No
Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
3.23 CERTAIN PAYMENTS
Since December 31, 1996, no Acquired Company or director, officer,
agent, or employee of any Acquired Company, or to Sellers' Knowledge any other
Person associated with or acting for or on behalf of any Acquired Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of an Acquired Company, or (iv) in violation of any Legal Requirement,
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Acquired Companies.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement
and no statement in the Disclosure Letter omits to state a material
fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 6.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances
in which they were made, not misleading.
(c) There is no fact known to Sellers that has specific
application to any Seller or any Acquired Company (other than general
economic or industry conditions) and that materially adversely affects
or, as far as Sellers can reasonably foresee, materially threatens, the
assets, business, prospects, financial condition, or results of
operations of the Acquired Companies (on a consolidated basis) that has
not been set forth in this Agreement or the Disclosure Letter.
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3.25 RELATIONSHIPS WITH RELATED PERSONS
No Seller or any Related Person of Sellers or of any Acquired Company
has, or since the first day of the next to last completed fiscal year of the
Acquired Companies has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Acquired Companies' businesses. No Seller or any Related Person of Sellers
or of any Acquired Company is, or since the first day of the next to last
completed fiscal year of the Acquired Companies has owned (of record or as a
beneficial owner) an equity interest or any other financial or profit interest
in, a Person that has (i) had business dealings or a material financial interest
in any transaction with any Acquired Company, or (ii) engaged in competition
with any Acquired Company with respect to any line of the products or services
of such Acquired Company (a "Competing Business") in any market presently served
by such Acquired Company except for less than one percent of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market. Except as set forth in
Part 3.25 of the Disclosure Letter, no Seller or any Related Person of Sellers
or of any Acquired Company is a party to any Contract with, or has any claim or
right against, any Acquired Company.
3.26 BROKERS OR FINDERS
Sellers and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇▇▇, SR.,
▇▇▇▇▇▇▇▇▇, JR., ▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇
As used in this Section 4, except as otherwise noted, "Sellers" shall
mean B. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., B. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇ only. B. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., B. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇▇, individually represent and warrant to buyer as follows:
4.1 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with
its terms. Upon the execution and delivery by Sellers of the Sellers'
Releases, (collectively, the "Sellers' Closing Documents"), the
Sellers' Closing Documents will constitute the legal, valid, and
binding obligations of Sellers, enforceable against Sellers in
accordance with their respective terms. Sellers have the absolute and
unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the Sellers' Closing Documents and to
perform their obligations under this Agreement and the Sellers' Closing
Documents.
33
Sellers will not be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
(b) Sellers are acquiring the Class D preferred shares for
their own account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act.
4.2 OWNERSHIP OF SHARES
Sellers are and will be on the Closing Date the record and beneficial
owners and holders of the Shares set opposite their names on Schedule A, free
and clear of all Encumbrances.
4.3 NO UNDISCLOSED LIABILITIES
To the knowledge of Sellers, the Acquired Companies have no liabilities
or obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the respective dates thereof.
4.4 DISCLOSURE
To the knowledge of Sellers:
(a) No representation or warranty of Sellers (as defined in
the first paragraph of this Agreement) contained in Section 3 or
Section 4 of this Agreement and no statement in the Disclosure Letter
omits to state a material fact necessary to make the statements herein
or therein, in light of the circumstances in which they were made, not
misleading.
(b) No notice given pursuant to Section 6.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances
in which they were made, not misleading.
(c) There is no fact known to Sellers that has specific
application to any Seller or any Acquired Company (other than general
economic or industry conditions) and that materially adversely affects
or, as far as Sellers can reasonably foresee, materially threatens, the
assets, business, prospects, financial condition, or results of
operations of the Acquired Companies (on a consolidated basis) that has
not been set forth in this Agreement or the Disclosure Letter.
34
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
5.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Utah.
5.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of the Purchase Price,
and the Employment Agreements, (collectively, the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal,
valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms. Buyer has the absolute and
unrestricted right, power, and authority to execute and deliver this
Agreement and the Buyer's Closing Documents and to perform its
obligations under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 5.2, neither the execution
and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will give
any Person the right to prevent, delay, or otherwise interfere with any
of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational
Documents;
(ii) any resolution adopted by the board of
directors or the stockholders of Buyer;
(iii) any Legal Requirement or Order to which
Buyer may be subject; or
(iv) any Contract to which Buyer is a party
or by which Buyer may be bound.
Except as set forth in Schedule 5.2, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
5.3 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view
to their distribution within the meaning of Section 2(11) of the Securities Act.
35
5.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer
and that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions. To
Buyer's Knowledge, no such Proceeding has been Threatened.
5.5 SEC FILINGS
Buyer has furnished Sellers with copies of Form 10-K and Forms 10-Q for
all period since March 31, 1995. All such documents do not contain any untrue
statements nor do they omit to state any statement necessary to make the
statements made not misleading. All such documents comply with all applicable
rules and regulations of the United States Securities and Exchange Commission.
5.6 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Sellers harmless from any such payment alleged to be due by
or through Buyer as a result of the action of Buyer or its officers or agents.
6. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
6.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will,
and will cause each Acquired Company and its Representatives to, (a) afford
Buyer and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to each Acquired
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
6.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Sellers will,
and will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the
Ordinary Course of Business;
36
(b) use their Best Efforts to preserve intact the current
business organization of such Acquired Company, keep available the
services of the current officers, employees, and agents of such
Acquired Company, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and
others having business relationships with such Acquired Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of such Acquired
Company.
6.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Sellers will not, and will cause
each Acquired Company not to, without the prior written consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
6.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers
will, and will cause each Acquired Company to, make all filings required by
Legal Requirements to be made by them in order to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of this
Agreement and the Closing Date, Sellers will, and will cause each Acquired
Company to, (a) cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
consents identified in Schedule 5.2 (including taking all actions requested by
Buyer to cause early termination of any applicable waiting period under the HSR
Act).
6.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each Seller
will promptly notify Buyer in writing if such Seller or any Acquired Company
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Sellers' representations and warranties as of the date of this Agreement,
or if such Seller or any Acquired Company becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any such
fact or condition, Sellers will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, each Seller
37
will promptly notify Buyer of the occurrence of any Breach of any covenant of
Sellers in this Section 6 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 8 impossible or unlikely.
6.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Sellers will cause all
indebtedness owed to an Acquired Company by any Seller or any Related Person of
any Seller to be paid in full prior to Closing.
6.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 10, Sellers will not, and will cause each Acquired Company and each of
their Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of any Acquired Company, or any of the capital
stock of any Acquired Company, or any merger, consolidation, business
combination, or similar transaction involving any Acquired Company.
6.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers will
use their Best Efforts to cause the conditions in Sections 8 and 9 to be
satisfied.
7. COVENANTS OF BUYER PRIOR TO CLOSING DATE
7.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer
will, and will cause each of its Related Persons to, make all filings required
by Legal Requirements to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Buyer
will, and will cause each Related Person to, cooperate with Sellers with respect
to all filings that Sellers are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with Sellers
in obtaining all consents identified in Part 3.2 of the Disclosure Letter;
provided that this Agreement will not require Buyer to dispose of or make any
change in any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
38
7.2 BEST EFFORTS
Except as set forth in the proviso to Section 7.1, between the date of
this Agreement and the Closing Date, Buyer will use its Best Efforts to cause
the conditions in Sections 8 and 9 to be satisfied.
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions required
to be taken by Buyer at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
(a) All of Sellers' representations and warranties in this
Agreement (considered collectively), and each of these representations
and warranties (considered individually), must have been accurate in
all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on
the Closing Date, without giving effect to any supplement to the
Disclosure Letter.
(b) Each of Sellers' representations and warranties in
Sections 3.3, 3.4, 3.12, and 3.24 must have been accurate in all
respects as of the date of this Agreement, and must be accurate in all
respects as of the Closing Date as if made on the Closing Date, without
giving effect to any supplement to the Disclosure Letter.
8.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
duly performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to
Section 2.4 must have been delivered, and each of the other covenants
and obligations in Sections 6.4 and 6.8 must have been performed and
complied with in all respects.
8.3 CONSENTS
Each of the Consents identified in subpart b of Part 3.2 of the
Disclosure Letter, and each Consent identified in Schedule 5.2, must have been
obtained and must be in full force and effect.
39
8.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) such documents as Buyer may reasonably request for the
purpose of (i) evidencing the accuracy of any of Sellers'
representations and warranties, (ii) evidencing the performance by any
Seller of, or the compliance by any Seller with, any covenant or
obligation required to be performed or complied with by such Seller,
(iii) evidencing the satisfaction of any condition referred to in this
Section 8, or (iv) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
8.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
8.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any of the Acquired Companies,
or (b) is entitled to all or any portion of the Purchase Price payable for the
Shares.
8.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
9. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions required to
be taken by Sellers at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Sellers, in whole or in part):
40
9.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
9.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents required
to be delivered by Buyer pursuant to Section 2.4.
9.3 CONSENTS
Each of the Consents identified in Subpart b of Part 3.2 of the
Disclosure Letter must have been obtained and must be in full force and effect.
9.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to
Sellers:
(a) such documents as Sellers may reasonably request for the
purpose of (i) evidencing the accuracy of any representation or
warranty of Buyer, (ii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (iii) evidencing the satisfaction
of any condition referred to in this Section 9, or (iv) otherwise
facilitating the consummation of any of the Contemplated Transactions.
9.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and
(b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
41
10. TERMINATION
10.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Sellers if a material Breach of any
provision of this Agreement has been committed by the other party and
such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 8
has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of Buyer to comply with its obligations under this Agreement)
and Buyer has not waived such condition on or before the Closing Date;
or (ii) by Sellers, if any of the conditions in Section 9 has not been
satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have
not waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on
or before March 31, 1997, or such later date as the parties may agree
upon.
10.2 EFFECT OF TERMINATION
Each party's right of termination under Section 10.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 10.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
12.1 and 12.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
11. INDEMNIFICATION; REMEDIES
11.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.4(a)(v), and any other certificate
42
or document delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇, jointly and severally,
will indemnify and hold harmless Buyer, the Acquired Companies, and their
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Sellers in this Agreement (without giving effect to any supplement to
the Disclosure Letter), the Disclosure Letter, the supplements to the
Disclosure Letter, or any other certificate or document delivered by
Sellers pursuant to this Agreement;
(b) any Breach of any representation or warranty made by
Sellers in this Agreement as if such representation or warranty were
made on and as of the Closing Date without giving effect to any
supplement to the Disclosure Letter, other than any such Breach that is
disclosed in a supplement to the Disclosure Letter and is expressly
identified in the certificate delivered pursuant to Section 2.4(a)(v)
as having caused the condition specified in Section 8.1 not to be
satisfied;
(c) any Breach by any Seller of any covenant or obligation of
such Seller in this Agreement;
(d) any product shipped or manufactured by, or any services
provided by, any Acquired Company prior to the Closing Date;
(e) any matter disclosed in parts 3.11, 3.13, 3.15 and 3.19 of
the Disclosure Letter; or
(f) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with any
43
Seller or any Acquired Company (or any Person acting on their behalf)
in connection with any of the Contemplated Transactions.
The remedies provided in this Section 11.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
11.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers
the amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, or (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
11.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.3, 3.11, 3.13, and 3.19, unless on or
before March 31, 1998 Buyer notifies Sellers of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer; a
claim with respect to Section 3.3, 3.11, 3.13, or 3.19, or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time. If the Closing occurs, Buyer will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless on or before March 31, 1998 Sellers notify Buyer of
a claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Sellers.
11.5 LIMITATIONS ON AMOUNT--SELLERS
Sellers will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a), clause (b) or, to the extent
relating to any failure to perform or comply prior to the Closing Date, clause
(c) of Section 11.2 until the total of all Damages with respect to such matters
exceeds $50,000, and then only for the amount by which such Damages exceed
$50,000. Sellers will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (d) of Section 11.2 until the total
of all Damages with respect to such matters exceeds $50,000, and then only for
the amount by which such Damages exceed $50,000. However, this Section 11.5 will
not apply to any Breach of any of Sellers' representations and warranties of
which any Seller had Knowledge at any time prior to the date on which such
44
representation and warranty is made or any intentional Breach by any Seller of
any covenant or obligation, and Sellers, other than ▇▇▇ ▇▇▇▇▇, will be jointly
and severally liable for all Damages with respect to such Breaches.
11.6 LIMITATIONS ON AMOUNT--BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a) or (b) of Section 11.3 until the
total of all Damages with respect to such matters exceeds $50,000, and then only
for the amount by which such Damages exceed $50,000. However, this Section 11.6
will not apply to any Breach of any of Buyer's representations and warranties of
which Buyer had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Buyer of any
covenant or obligation, and Buyer will be liable for all Damages with respect to
such Breaches.
11.7 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Section 11.2 or 11.3, of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure
to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 11.7(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will, unless the claim involves Taxes, be entitled
to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party
of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under this Section 11 for
any fees of other counsel or any other expenses with respect to the
defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding,
other than reasonable costs of investigation. If the indemnifying party
assumes the defense of a Proceeding, (i) it will be conclusively
established for purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to indemnification; (ii)
no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A)
45
there is no finding or admission of any violation of Legal Requirements
or any violation of the rights of any Person and no effect on any other
claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying
party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice
is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will
be bound by any determination made in such Proceeding or any compromise
or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that
a Proceeding may adversely affect it or its affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction
of any court in which a Proceeding is brought against any Indemnified
Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on Sellers with
respect to such a claim anywhere in the world.
11.8 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
46
12.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines. Unless consented to by Buyer in
advance or required by Legal Requirements, prior to the Closing Sellers shall,
and shall cause the Acquired Companies to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Sellers and Buyer will consult with each other concerning the means by which the
Acquired Companies' employees, customers, and suppliers and others having
dealings with the Acquired Companies will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
12.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and
Sellers will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and the Acquired Companies to maintain
in confidence, and not use to the detriment of another party or an Acquired
Company any written, oral, or other information obtained in confidence from
another party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
12.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), 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 delivery service
47
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers:
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇. ▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer:
Leasing Technology Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Parry ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Tower
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Utah, County of Salt Lake, or, if it has
or can acquire jurisdiction, in the United States District Court for the Central
District of Utah, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
48
12.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
12.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Buyer and
Sellers dated December 17, 1996) and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
12.9 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly
relate and not to any other representation or warranty in this
Agreement.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Disclosure Letter (other
than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement will control.
49
12.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties, which consent will not be unreasonably
withheld, except that Buyer may assign any of its rights under this Agreement to
any Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
12.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
12.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
12.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
12.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Utah
without regard to conflicts of laws principles.
12.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
50
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Buyer:
LEASING TECHNOLOGY
INCORPORATED
By:---------------------------
▇▇▇▇ ▇▇▇▇▇▇, President
Sellers:
------------------------ ------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------ ------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
------------------------ -----------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
------------------------ ------------------
Will ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
51
SCHEDULE A
Sellers
Name Address Number of Number of Number of
Shares of Preferred LTI
Fan-Tastic Shares of Option
Owned LTI to be to be
issued issued
----------------- ---------------------- -------------- ------------- --------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇ ▇. #R 1,972,600 37,012 56,903
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ 3441 ▇. ▇▇▇▇▇▇▇ 1,054,500 19,786 30,418
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ 4321 S. ▇▇▇▇▇▇▇ 922,500 17,310 26,611
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Life Re Corp. 800,000 17,230 23,076
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ Farigold #9 250,000 4,808 7,212
Alella (Barcelona)
▇▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ c/o Annuity Pro- 150,000 2,885 4,327
fessional Mgt, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇.
#▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
B. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇. 30,000 577 865
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
52
Name Address Number of Number of Number of
Shares of Preferred LTI
Fan-Tastic Shares of Option
Owned LTI to be to be
issued issued
----------------- ---------------------- -------------- ------------- --------------
B. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ 20,400 ▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
========= ======= =======
TOTAL: 5,200,000 100,000 150,000
53
TABLE OF CONTENTS
1. DEFINITIONS...........................................................1
"Acquired Companies"................................................... 1
"Applicable Contract".................................................. 1
"Balance Sheet"........................................................ 1
"Best Efforts"......................................................... 1
"Breach"............................................................... 1
"Buyer"................................................................ 1
"Closing".............................................................. 2
"Closing Date"......................................................... 2
"Company".............................................................. 2
"Consent".............................................................. 2
"Contemplated Transactions"............................................ 2
"Contract"............................................................. 2
"Damages".............................................................. 2
"Disclosure Letter".................................................... 2
"Employment Agreements"................................................ 2
"Encumbrance".......................................................... 2
"Environment".......................................................... 2
"Environmental, Health, and
Safety Liabilities".................................................. 3
"Environmental Law".................................................... 3
"ERISA"................................................................ 4
"Facilities"........................................................... 4
"GAAP"................................................................. 4
"Governmental Authorization"........................................... 4
"Governmental Body".................................................... 4
"Hazardous Activity"................................................... 5
"Hazardous Materials".................................................. 5
"Intellectual Property Assets"......................................... 5
"IRC".................................................................. 5
"IRS" .............................................................. 5
"Knowledge"............................................................ 5
"Legal Requirement".................................................... 5
"Loan Agreements....................................................... 5
"Occupational Safety and
Health Law".......................................................... 6
"Order"................................................................ 6
"Ordinary Course of Business".......................................... 6
"Organizational Documents"............................................. 6
"Person"............................................................... 6
"Proceeding"........................................................... 6
i
"Related Person"....................................................... 6
"Release".............................................................. 7
"Representative"....................................................... 7
"Securities Act"....................................................... 7
"Sellers".............................................................. 7
"Sellers' Releases".................................................... 7
"Shares"............................................................... 8
"Subsidiary"........................................................... 8
"Tax Return"........................................................... 8
"Threat of Release".................................................... 8
"Threatened"........................................................... 8
2. SALE AND TRANSFER OF SHARES; CLOSING................................ 8
2.1 Shares.......................................................... 8
2.2 Purchase Price.................................................. 9
2.3 Closing......................................................... 9
2.4 Closing Obligations............................................. 9
3. REPRESENTATIONS AND WARRANTIES OF CERTAIN SELLERS................... 10
3.1 Organization and Good Standing.................................. 10
3.2 Authority; No Conflict.......................................... 11
3.3 Capitalization.................................................. 12
3.4 Financial Statements............................................ 13
3.5 Books and Records............................................... 13
3.6 Title to Properties; Encumbrances............................... 13
3.7 Condition and Sufficiency of Assets............................. 14
3.8 Accounts Receivable............................................. 14
3.9 Inventory....................................................... 15
3.10 No Undisclosed Liabilities...................................... 15
3.11 Taxes........................................................... 15
3.12 No Material Adverse Change...................................... 16
3.13 Employee Benefits............................................... 16
3.14 Compliance with Legal Requirements; Governmental Authorization.. 17
3.15 Legal Proceedings; Orders....................................... 19
3.16 Absence of Certain Changes and Events........................... 20
3.17 Contracts; No Defaults.......................................... 21
3.18 Insurance....................................................... 24
3.19 Environmental Matters........................................... 25
3.20 Employees....................................................... 27
3.21 Labor Relations; Compliance..................................... 28
3.22 Intellectual Property........................................... 28
3.23 Certain Payments................................................ 32
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3.24 Disclosure...................................................... 32
3.25 Relationships with Related Persons.............................. 33
3.26 Brokers or Finders.............................................. 33
4. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇▇▇, SR., ▇▇▇▇▇▇▇▇▇, JR.,
▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇................................................ 33
4.1 Authority; No Conflict.......................................... 33
4.2 Ownership of Shares............................................. 34
4.3 No Undisclosed Liabilities...................................... 34
4.4 Disclosure...................................................... 34
5. REPRESENTATIONS AND WARRANTIES OF BUYER............................. 35
5.1 Organization and Good Standing.................................. 35
5.2 Authority; No Conflict.......................................... 35
5.3 Investment Intent............................................... 35
5.4 Certain Proceedings............................................. 36
5.5 SEC Filings......................................................36
5.6 Brokers or Finders.............................................. 36
6. COVENANTS OF SELLERS PRIOR TO CLOSING DATE.......................... 36
6.1 Access and Investigation........................................ 36
6.2 Operation of the Businesses of the Acquired Companies........... 36
6.3 Negative Covenant............................................... 37
6.4 Required Approvals.............................................. 37
6.5 Notification.................................................... 37
6.6 Payment of Indebtedness by Related Persons...................... 38
6.7 No Negotiation.................................................. 38
6.8 Best Efforts.................................................... 38
7. COVENANTS OF BUYER PRIOR TO CLOSING DATE............................ 38
7.1 Approvals of Governmental Bodies................................ 38
7.2 Best Efforts.................................................... 39
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE................. 39
8.1 Accuracy of Representations..................................... 39
8.2 Sellers' Performance............................................ 39
8.3 Consents........................................................ 39
8.4 Additional Documents........................................... 40
8.5 No Proceedings.................................................. 40
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8.6 No Claim Regarding Stock Ownership or Sale Proceeds............. 40
8.7 No Prohibition...................................................40
9. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE................ 40
9.1 Accuracy of Representations..................................... 41
9.2 Buyer's Performance............................................. 41
9.3 Consents........................................................ 41
9.4 Additional Documents............................................ 41
9.5 No Injunction................................................... 41
10. TERMINATION........................................................ 42
10.1 Termination Events.............................................. 42
10.2 Effect of Termination........................................... 42
11. INDEMNIFICATION; REMEDIES.......................................... 42
11.1 Survival; Right to Indemnification Not Affected by Knowledge.... 42
11.2 Indemnification and Payment of Damages by Sellers............... 43
11.3 Indemnification and Payment of Damages by Buyer................. 44
11.4 Time Limitations................................................ 44
11.5 Limitations on Amount--Sellers.................................. 44
11.6 Limitations on Amount--Buyer.................................... 45
11.7 Procedure for Indemnification--Third Party Claims............... 45
11.8 Procedure for Indemnification--Other Claims..................... 46
12. GENERAL PROVISIONS................................................. 46
12.1 Expenses........................................................ 46
12.2 Public Announcements............................................ 47
12.3 Confidentiality................................................. 47
12.4 Notices......................................................... 47
12.5 Jurisdiction; Service of Process................................ 48
12.6 Further Assurances.............................................. 49
12.7 Waiver.......................................................... 49
12.8 Entire Agreement and Modification............................... 49
12.9 Disclosure Letter............................................... 49
12.10 Assignments, Successors, and No Third-Party Rights.............. 50
12.11 Severability.................................................... 50
12.12 Section Headings, Construction.................................. 50
12.13 Time of Essence................................................. 50
12.14 Governing Law................................................... 50
12.15 Counterparts.................................................... 50
iv
SCHEDULES
Schedule A Sellers Information..........................................52
Schedule B Rights, Preferences and Limitations of Preferred Stock.........
EXHIBITS
Exhibit 1 Disclosure Letter...............................................
Exhibit 2.4(a)(ii) Release................................................
Exhibit 2.4(a)(iii) Employment Agreement..................................
Exhibit 2.4(a)(iv) Investment Letter......................................
Exhibit 2.4(a)(vi) Loan Agreement.........................................
Exhibit 2.4(a)(vii) Shareholders Agreement................................
Exhibit 2.4(a)(vi) Option Agreement.......................................
v