AGREEMENT AND PLAN OF
MERGER
This Agreement And Plan Of Merger
(“Agreement”) is made as of November 30, 2006, by
Aduddell Industries, Inc., an Oklahoma corporation
(“Aduddell”), Aduddell Merger, Inc., an Oklahoma
corporation and a wholly-owned subsidiary of Aduddell (“
Merger Sub ”), and Brent Anderson Associates, Inc., a
Minnesota corporation (the “Company”), and Brent
Anderson, an individual resident in Minnesota (the “Company
Shareholder”).
RECITALS
A.
Upon the terms and subject to the
conditions of this Agreement and in accordance with the Oklahoma
General Corporation Act (the “ OGCA ”), Aduddell
and the Company intend to enter into a business combination
transaction by means of a merger between Merger Sub and the Company
in which the Company will merge with and into Merger Sub, and
Merger Sub will be the surviving entity and a wholly owned
subsidiary of Aduddell, through an exchange of all the issued and
outstanding shares of capital stock of the Company for shares of
common stock of Aduddell and cash.
B. The
Boards of Directors of each of the Company, Aduddell and Merger Sub
have determined that the Merger (as defined in Section 1.1) is fair
to, and in the best interests of, their respective companies and
their respective Shareholders.
C. The
parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the “ Code
”).
NOW, THEREFORE, in consideration of
the covenants, promises and representations set forth herein, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
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:
“ Adjustments
”--as set forth in Section 2.5.
“ Applicable Contract
”--any Contract (a) under which the Company has or may
acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability, or (c) by which the 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 material inaccuracy in or
material breach of, or any material 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 materially inconsistent with such
representation, warranty, covenant, obligation, or other provision,
and the term “Breach” means any such inaccuracy,
breach, failure, claim, occurrence, or circumstance.
“ Aduddell ”--as
defined in the first paragraph of this Agreement.
“Aduddell Shares”--as
defined in Section 3.2(d).
“Certificate” – as
defined in Section 2.5(b).
“ Closing ”--as
defined in Section 2.11.
“ Closing Date
”--the date and time as of which the Closing actually takes
place.
“ Company ”--as
defined in the first paragraph of this Agreement.
“ Company Common Stock
”--as defined Section 2.5(a) of this Agreement.
“ Company Shareholder
”—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 the merger of the Company with and into
Merger Sub.
(a) the
execution, delivery, and performance of the Employment Agreement
and the Escrow Agreement; and
(b) the
performance by Aduddell and Company of their respective covenants
and obligations under this Agreement.
“ 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 10.2.
“ Employment Agreement
”--as defined in Section 2.12(a)(i).
“ 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.
“ 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.
§ 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)
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protecting resources, species, or
ecological amenities;
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(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.
“ Escrow Agreement
”--as defined in Section 2.12(b)(iii).
“ Facilities
”--any real property, leaseholds, or other interests
currently owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently owned or operated by the
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;
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(b)
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federal, state, local, municipal,
foreign, or other government;
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(c) governmental
or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and
any court or other tribunal);
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(d)
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multi-national organization or body;
or
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(e) body
exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
“ 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 materially affect the value of the Facilities or the
Company.
“ 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.
“ Interim Balance Sheet
”--as defined in Section 3.4.
“ 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
”-- means actual knowledge or
awareness as to a specified fact or event of a Person that is an
individual or of an executive officer or director of a Person that
is a corporation or of a Person in a similar capacity of an entity
other than a corporation.
“ 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.
“ Occupational Safety and
Health Law ”--any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational
safety and health hazards.
“ 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
(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.
“ Plan ”--as
defined in Section 3.13.
“ 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:
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(a)
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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:
(e) 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;
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(f)
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any Person that holds a Material
Interest in such specified Person;
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(g) each
Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar
capacity);
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(h)
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any Person in which such specified
Person holds a Material Interest;
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(i) any
Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity);
and
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(j)
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any Related Person of any individual
described in clause (b) or (c).
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For purposes of this definition, (a)
the “Family” of an individual includes (i) the
individual, (ii) the individual’s spouse, (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 5% 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.
“ Securities Act
”--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor
law.
“ 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.
2.1 The
Merger . At the Effective
Time (as defined in Section 2.2) and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of
the OGCA , the Company shall be merged with and into Merger
Sub (the “ Merger ”), the separate corporate
existence of the Company shall cease and Merger Sub shall continue
as the surviving corporation. Merger Sub as the surviving
corporation after the Merger is hereinafter sometimes referred to
as the “ Surviving Corporation .”
2.2 Effective Time;
Closing . Subject to the
conditions of this Agreement, the parties hereto shall cause the
Merger to be consummated by filing with the Secretaries of State of
the States of Oklahoma an Minnesota in accordance with the relevant
provisions of the OGCA and the Minnesota Business Corporation Act a
Certificate of Merger (the “ Certificate of Merger
”) (the time of such filing with the Secretary of State of
the State of Oklahoma, or such later time as may be agreed in
writing by Company and Aduddell and specified in the Certificate of
Merger, being the “ Effective Time ”) as soon as
practicable on or after the Closing Date (as herein defined). The
term “ Agreement ” as used herein refers to this
Agreement and Plan of Merger, as the same may be amended from time
to time.
2.3 Effect of the
Merger . At the Effective
Time, the effect of the Merger shall be as provided in this
Agreement and the applicable provisions of the OGCA. Without
limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
2.4 Certificate of
Incorporation; Bylaws .
(a) At
the Effective Time, the Certificate of Incorporation of the Merger
Sub, shall be the Certificate of Incorporation of the Surviving
Corporation.
(b) Also
at the Effective Time, the Bylaws of the Merger Sub shall be the
Bylaws of the Surviving Corporation.
2.5 Effect on Capital
Stock . Subject to the
terms and conditions of this Agreement, at the Effective Time, by
virtue of the Merger and this Agreement and without any action on
the part of Aduddell, Merger Sub, the Company or the Company
Shareholder, the following shall occur:
(a)
Conversion of Company Common Stock . each share of capital
stock of the Company (“Company Common Stock”) issued
and outstanding immediately prior to the Effective Time will be
automatically converted into the right to receive on the Closing
its pro rata share of:
(i) a
number of shares of common stock of Aduddell equal to $2,000,000
divided by the average of the closing sales prices for the 30
trading days preceding the Closing Date (but not less than $1.00)
;
(ii) the
sum of One Hundred Fifty Thousand Dollars ($150,000) to the escrow
agent pursuant to the Escrow Agreement by bank cashier’s or
certified check along;
(iii) One
Million Eight Hundred Fifty Thousand Dollars ($1,850,000) by bank
cashier’s or certified check payable to the order of, or by
wire transfer to accounts specified by, Company
Shareholder,
(iv) the
right to receive a number of shares of common stock of Aduddell
equal to Two Million Five Hundred Sixty Five Thousand Dollars
$2,565,000 divided by the average of the closing sales prices for
the 30 trading days preceding the date of issuance of the
certificates, subject to adjustment as set forth in below. Subject
to the adjustments as set forth below, certificates for the
additional shares shall be issued on January 10 of each of the
years as follows. 2007 $1,166,667, 2008 $231,666 and 2009
$1,166,667.
2.6 Adjustment
Procedure .
(a)
Share payments to be made on January 10, 2008 and January
10, 2009 pursuant to Section 2.4 (d) shall be subject to the
following performance criteria:
(i) January
10, 2008: gross 2007 revenues from (i) Aduddell Restoration
Division, (ii) Aduddell Roofing Division’s business
attributable to Merger Sub, and (iii) any consulting revenue
attributable to Merger Sub or Brent Anderson totaling at least
$31,500,000 with historically comparable gross margins of
approximately 20%;
(ii) January
10, 2009: gross 2008 revenues from (i) Aduddell Restoration
Division, (ii) Aduddell Roofing Division’s business
attributable to Merger Sub., and (iii) any consulting revenue
attributable to Merger Sub. or Brent Anderson totaling at least
$34,650,000 with historically comparable gross margins of
approximately 20%.
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(iii)
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Partial payment may be earned for
each period as follows:
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$2,000,000 short of goal pays 75% of
total
$2,000,001 to $4,000,000 short of
goal pays 50% of total
$4,000,001 to $6,000,000 short of
goal pays 25% of total
(b)
Certificates for Shares . Subject to Section 2.5(a)(iv), the
amount of cash and certificates representing the shares of Aduddell
Common Stock issuable with respect to certificates for shares of
Company Common Stock (“Certificates”) shall be issued
to the holders of the shares of Company Common Stock upon surrender
of the Certificates representing such shares in the manner provided
in Section 2.6 (or in the case of a lost, stolen or destroyed
certificate, upon delivery of an affidavit in the manner provided
in Section 2.8).
(c)
Adjustments to Exchange Ratios . Subject to Section
2.5(a)(iv), the numbers of Aduddell Common Stock and amounts of
cash that the holders of the Company Common Stock are entitled to
receive as a result of the Merger shall be equitably adjusted to
reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of
securities convertible into Aduddell Common Stock or Company Common
Stock), extraordinary cash dividends, reorganization,
recapitalization, reclassification, combination, exchange of shares
or other like change with respect to Aduddell Common Stock or
Company Common Stock occurring on or after the date hereof and
prior to the Effective Time.
2.7 Surrender of
Certificates .
(a)
Exchange Procedures . Upon surrender of Certificates at the
Closing, the holders of such Certificates shall receive in exchange
therefor such amounts of cash and certificates representing the
number of shares of Aduddell Common Stock into which their shares
of Company Common Stock shall be converted at the Effective Time,
and the Certificates so surrendered shall forthwith be canceled.
Until so surrendered, outstanding Certificates will be deemed, from
and after the Effective Time, to evidence only the right to receive
the applicable amount of cash and number of shares of Aduddell
Common Stock issuable pursuant to Section 2.5.
(b)
Distributions With Respect to Unexchanged Shares . No
dividends or other distributions declared or made after the date of
this Agreement with respect to Aduddell Common Stock with a record
date after the Effective Time will be paid to the holders of any
unsurrendered Certificates with respect to the shares of Aduddell
Common Stock to be issued upon surrender thereof until the holders
of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such
Certificates, Aduddell shall promptly deliver to the record holders
thereof, without interest, the cash and certificates representing
shares of Aduddell Common Stock issued in exchange therefor and the
amount of any such dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such
shares of Aduddell Common Stock.
(c)
Required Withholding . Each of Aduddell and the Surviving
Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this
Agreement to any holder or former holder of Company Common Stock
such amounts as are required to be deducted or withheld therefrom
under the Code or under any provision of state, local or foreign
tax law or under any other applicable legal requirement. To the
extent such amounts are so deducted or withheld, such amounts shall
be treated for all purposes under this Agreement as having been
paid to the person to whom such amounts would otherwise have been
paid.
(d)
No Liability . Notwithstanding anything to the contrary in
this Section 2.6 , neither Aduddell, the Surviving Corporation, the
Company nor any party hereto shall be liable to a holder of shares
of Aduddell Common Stock or Company Common Stock for any amount
properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
2.8 No Further
Ownership Rights in Company Stock . All cash and shares of Aduddell Common Stock
issued in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock and there shall be no further
registration of transfers on the records of the Surviving
Corporation of shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in
this Section 2.
2.9 Tax
Consequences . It is
intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a “plan of
reorganization” within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Income Tax Regulations.
2.10 Taking of
Necessary Action; Further Action . If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes
of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Company and Merger Sub,
the officers and directors of the Company and Merger Sub will take
all such lawful and necessary action.
2.11 Rule
145 .
All shares of Aduddell Common Stock
issued pursuant to this Agreement be subject to certain resale
restrictions under Rule 145 promulgated under the Securities Act
and all certificates representing such shares shall bear an
appropriate restrictive legend.
2.12 Shareholder
Matters .
(a) By
his execution of this Agreement, Company Shareholder, in his
capacity as a Shareholder of the Company, hereby approves and
adopts this Agreement and authorizes the Company, its directors and
officers to take all actions necessary for the consummation of the
Merger and the other transactions contemplated hereby pursuant to
the terms of this Agreement and its exhibits. Such execution shall
be deemed to be action taken by the irrevocable written consent of
each Shareholder for purposes of Section 302A.441, Minnesota
Statutes 2006.
(b) Company
Shareholder represents and warrants as follows: (i) all Aduddell
Common Stock to be acquired by Company Shareholder pursuant to this
Agreement will be acquired for his account and not with a view
towards distribution; (ii) he understands that he must bear the
economic risk of the investment in the Aduddell Common Stock, which
cannot be sold by him unless it is registered under the Securities
Act, or an exemption therefrom is available thereunder; (iii) he,
has had both the opportunity to ask questions and receive answers
from the officers and directors of Aduddell and all persons acting
on Aduddell’s behalf concerning the business and operations
of Aduddell and to obtain any additional information to the extent
Aduddell possesses or may possess such information or can acquire
it without unreasonable effort or expense necessary to verify the
accuracy of such information; and (iv) he has had access to the
Aduddell SEC Reports filed prior to the date of this Agreement.
Company Shareholder acknowledges that (v) he is an
“accredited investor” as such term is defined in
Rule
501(a) promulgated under the
Securities Act and (vi) he understands that the certificates
representing the Aduddell Common Stock to be received by him may
bear a legend to the effect that the Aduddell Common Stock may not
be transferred except upon compliance with the registration
requirements of the Securities Act (or an exemption
therefrom).
2.13 Closing . The closing of the Contemplated Transactions
(the “Closing”) will take place at the offices of
Aduddell’s counsel at Two Leadership Square, 10 th
Floor, Oklahoma City, Oklahoma 73102, or at other places as agreed
to at 10:00 a.m. (local time) on December___, 2006 (the
“Closing Date.”) Subject to the provisions of Section
9, 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 2.12 will not result in the termination of this
Agreement and will not relieve any party of any obligation under
this Agreement. Closing signatures may be transmitted by
facsimile.
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2.14 Closing
Obligations . At the
Closing:
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(a) The
Company and the Company Shareholder will deliver or cause to be
delivered to Aduddell all certificates, instruments and documents
required by this Agreement, including but not limited
to:
(i) an
employment agreement in the form attached hereto executed by the
Company Shareholder (the “Employment Agreement”);
and
(ii) a
certificate executed by the Company and the Company Shareholder
representing and warranting to Aduddell that each of the
Company’s and the Company Shareholder’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.
(b) Aduddell
will deliver to the Company or the Company Shareholder as the case
may be:
(i) a
certificate executed by Aduddell to the effect that, except as
otherwise stated in such certificate, each of Aduddell’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;
and
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(ii)
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the Employment Agreement, executed
by Aduddell.
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(iii) Aduddell
and the Company will enter into an escrow agreement in a form
acceptable to Aduddell and the Company (the “Escrow
Agreement”) with Bank of Oklahoma.
3.
Representations and Warranties of the Company and the Company
Shareholder . The Company and the Company Shareholder represent
and warrant to Aduddell as follows:
3.1 Organization And
Good Standing .
(a) The
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. The 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.
(b) The
Company has delivered to Aduddell copies of the Organizational
Documents of the Company, as currently in effect.
3.2 Authority; No
Conflict .
(a) This
Agreement constitutes the legal, valid, and binding obligation of
the Company and the Company Shareholder, enforceable against the
Company and the Company Shareholder in accordance with its terms.
Upon the execution and delivery by Company and the Company
Shareholder of the Escrow Agreement and the Employment Agreement
(collectively, the “Company’s and the Company
Shareholder’s Closing Documents”), the Company’s
and the Company Shareholder’s Closing Documents will
constitute the legal, valid, and binding obligations of the Company
and the Company Shareholder’s, enforceable against the
Company and the Company Shareholder in accordance with their
respective terms. The Company and the Company Shareholder has the
absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the Company’s and the
Company Shareholder’s Closing Documents and to perform their
obligations under this Agreement and the Company’s and the
Company Shareholder’s Closing Documents.
(b) Except
as otherwise noted herein, 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 Company, or (B) any
resolution adopted by the board of directors or the Shareholders of
the 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 the
Company or any of the assets owned or used by the 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 the Company or that otherwise relates
to the business of, or any of the assets owned or used by, the
Company;
(iv) cause
Aduddell or the Company to become subject to, or to become liable
for the payment of, any Tax;
(v) cause
any of the assets owned by the Company to be reassessed or revalued
by any taxing authority or other Governmental Body;
(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 the
Company.
Neither the Company Shareholder nor
the 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. Failure to obtain will cause
a material adverse effect.
3.3 Capitalization
. The Shares constitute all of the
issued and outstanding capital stock of the Company. The Company
Shareholder is and will be on the Closing Date the record and
beneficial owner and holder of the Shares, free and clear of all
Encumbrances No legend or other reference to any purported
Encumbrance appears upon any certificate representing the Shares.
All of the Shares 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 of the Shares. None of
the Shares was issued in violation of the Securities Act or any
other Legal Requirement. The Company does not own, or have any
Contract to acquire, any equity securities or other securities of
any Person or any direct or indirect equity or ownership interest
in any other business.
3.4 Financial
Statements . The Company
has delivered to Aduddell: audited consolidated balance sheets of
the Company as at March 31, 2006 (including the notes thereto, the
“Balance Sheet”) and in each of the years 2003 through
2005, and the related audited consolidated statements of income,
changes in Shareholders’ equity, and cash flow for each of
the fiscal years then ended, together with the report thereon of
Ocel, Heimer & Lindsey Ltd., independent certified public
accountants, and (b) an unaudited consolidated balance sheet
of the Acquired Companies as at September 30, 2006 (the
“Interim Balance Sheet”) and the related unaudited
consolidated statements of income, changes in Shareholders’
equity, and cash flow for the six months then ended, including in
each case the notes thereto. Such financial statements and notes
fairly present the financial condition and the results of
operations, changes in Shareholders’ equity, and cash flow of
the Company 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
Company is 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
Company, all of which have been made available to Aduddell, are
complete and correct and have been maintained in accordance with
sound business practices. At the Closing, all of those books and
records will be in the possession of the Company.
3.6 Title to
Properties; Encumbrances . The Company owns (subject only to the matters
permitted by the following sentence) all the properties and assets
(whether tangible or intangible) that they purport to own located
in the facilities owned or operated by the Company or reflected as
owned in the books and records of the Company, including all of the
properties and assets reflected in the Balance Sheet and the
Interim Balance Sheet (except for assets held under capitalized
leases and personal property sold since the date of the Balance
Sheet and the Interim Balance Sheet, as the case may be, in the
Ordinary Course of Business.) All material properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet are
free and clear of all Encumbrances except (a) security
interests shown on the Balance Sheet or the Interim 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, and (b) security
interests incurred in connection with the purchase of property or
assets after the date of the Interim Balance Sheet (such 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.
3.7 Condition and
Sufficiency of Assets .
The equipment of the Company is in good operating condition and
repair, and is adequate for the uses to which it is being put, and
none of such 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
owned or used by the Company are sufficient for the continued
conduct of the Company’s businesses after the Closing in
substantially the same manner as conducted prior to the
Closing.
3.8 Accounts
Receivable . All accounts
receivable of the Company that are reflected on the Balance Sheet
or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date (collectively, the “Accounts
Receivable”) represent or will represent valid obligations
arising from sales actually made or services actually performed in
the Ordinary Course of Business. Unless paid prior to the Closing
Date, the Accounts Receivable are or will be as of the Closing Date
considered current and collectible net of the respective reserves
shown on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company 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 Interim 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). 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.
3.9 Inventory . All inventory of the Company, whether or not
reflected in the Balance Sheet or the Interim 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 the
Interim Balance Sheet or on the accounting records of the Company
as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or market. 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 . To the best
of the Company’s and the Company Shareholder’s
Knowledge, the Company has no liabilities or obligations except for
liabilities or obligations reflected or reserved against in the
Balance Sheet or the Interim Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the respective
dates thereof.
3.11 Taxes
.
(a) The
Company has 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 Company has delivered to
Aduddell copies of all such Tax Returns filed since 2003. The
Company has 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 the Company
Shareholder or the Company.
(b) Neither
the Company Shareholder nor 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 the Company or for
which the Company may be liable.
(c) The
charges, accruals, and reserves with respect to Taxes on the books
of the Company are adequate (determined in accordance with GAAP)
and are at least equal to the Company’s liability for Taxes.
There exists no proposed tax assessment against the Company except
as disclosed in the Balance Sheet. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to
any property or assets held, acquired, or to be acquired by the
Company. All Taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) All
Tax Returns filed by (or that include on a consolidated basis) the
Company are true, correct, and complete. There is no tax sharing
agreement that will require any payment by the Company after the
date of this Agreement. The Company is not, or within the five-year
period preceding the Closing Date has not been, an “S”
corporation
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 the Company, and no event has occurred or
circumstance exists that may result in such a material adverse
change.
3.13 Employee
Benefits . 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 the Company or an ERISA Affiliate of an
Acquired Company.
“ Company Plan ”
means all Plans of which the Company or an ERISA Affiliate of the
Company is or was a Plan Sponsor, or to which the Company or an
ERISA Affiliate of the Company otherwise contributes or has
contributed, or in which the Company or an ERISA Affiliate of the
Company otherwise participates or has participated. All references
to Plans are to Company Plans unless the context requires
otherwise.
“ ERISA Affiliate
” means, with respect to the Company, any other person that,
together with the Company, would be treated as a single employer
under IRC § 414.
“ Multi-Employer Plan
” has the meaning given in ERISA § 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 IRC § 132.
“ PBGC ” means
the Pension Benefit Guaranty Corporation, or any successor
thereto.
“ Pension Plan ”
has the meaning given in ERISA § 3(2)(A).
“ Plan ” has the
meaning given in ERISA § 3(3).
“ Plan Sponsor ”
has the meaning given in ERISA § 3(16)(B).
“ Qualified Plan
” means any Plan that meets or purports to meet the
requirements of IRC § 401(a).
“ Title IV Plans
” means all Pension Plans that are subject to Title IV of
ERISA, 29 U.S.C. § 1301 et seq., other than Multi-Employer
Plans.
“ Welfare Plan ”
has the meaning given in ERISA § 3(1).
(a) The
Company or the Company Shareholder has delivered to Aduddell, or
will deliver to Aduddell within ten days of Aduddell’s
written request therefor:
(i) to
the extent they are in the Company’s or the Company
Shareholder’s possession or under the Company’s or the
Company Shareholder’s control, all documents that set forth
the terms of each Company Plan and Company Other Benefit
Obligation, and of any related trust, including (A) all plan
descriptions and summary plan descriptions of Company Plans for
which the Company is required to prepare, file, and distribute plan
descriptions and summary plan descriptions, and (B) all summaries
and
descriptions furnished to
participants and beneficiaries regarding Company Plans and Company
Other Benefit Obligations for which a plan description or summary
plan description is not required;
(ii) to
the extent they are in the Company’s or the Company
Shareholder’s possession or under the Company’s or the
Company Shareholder’s control, all personnel, payroll, and
employment manuals and policies;
(iii) to
the extent they are in the Company’s or the Company
Shareholder’s possession or under the Company’s or the
Company Shareholder’s control, all collective bargaining
agreements pursuant to which contributions have been made or
obligations incurred (including both pension and welfare benefits)
by the Company and the ERISA Affiliates of the Company, and all
collective bargaining agreements pursuant to which contributions
are being made or obligations are owed by such entities;
(iv) a
written description of any Company Plan or Company Other Benefit
Obligation that is not otherwise in writing;
(v) to
the extent they are in the Company’s possession or under
the
