|
EXHIBIT
2.1
AGREEMENT AND PLAN OF MERGER
among
DEEP
DOWN, INC.
MAKO
TECHNOLOGIES, LLC
MAKO
TECHNOLOGIES, INC.
and
THE
SHAREHOLDERS OF MAKO TECHNOLOGIES, INC.
Dated
as of December 7, 2007
TABLE
OF CONTENTS
| ARTICLE I
THE
MERGER |
3
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|
SECTION 1.01.
The
Merger
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3
|
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SECTION 1.02.
Effective
Time; Closing
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3
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|
SECTION 1.03.
Effect of
the Merger
|
4
|
|
SECTION 1.04.
Articles
of Organization and Operating Arrangement
|
4
|
|
SECTION 1.05.
Directors
and Officers
|
4
|
| |
|
| ARTICLE II
CONVERSION OF COMPANY
SECURITIES ;
EXCHANGE OF
CERTIFICATES |
4
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|
SECTION 2.01.
Conversion of
Securities
|
4
|
|
SECTION 2.01.
Merger
Consideration
|
5
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SECTION 2.03.
Exchange
of Certificates
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7
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SECTION 2.04.
Stock
Transfer Books
|
8
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| |
|
| ARTICLE II1
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY |
9
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SECTION 3.1
Organization; Authority;
Due Authorization
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9
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SECTION 3.2
No
Violation
|
10
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SECTION 3.3
Regulatory Approvals and
Other Consents
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10
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SECTION 3.4
Title to Assets
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10
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SECTION 3.5
Financial
Condition
|
10
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SECTION 3.6
Tax Matters
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15
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SECTION 3.7
Compliance with Laws;
Governmental Matters
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16
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SECTION 3.8
Litigation
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17
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SECTION 3.9
Property of the
Company
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18
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SECTION 3.11.
Labor and Employment
Matters
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23
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SECTION 3.12.
Pension and Benefit
Plans
|
25
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SECTION 3.13.
Insurance
|
27
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SECTION 3.30.
Representations and
Warranties on Closing
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32
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|
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ARTICLE
IV REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
|
32
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| |
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| ARTICLE V
CONDUCT
OF BUSINESSES PENDING THE MERGER |
34
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SECTION 5.01.
Conduct
of Business by the Company Pending the Merger
|
34
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SECTION 5.02.
Conduct
of Business by Parent Pending the Merger
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35
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| ARTICLE VI
ADDITIONAL
AGREEMENTS |
37
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SECTION
6.01. Access to
Information; Confidentiality
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37
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SECTION 6.02.
Obligations of Merger
Sub
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37
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SECTION 6.03.
Further
Action; Consents; Filings
|
37
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SECTION 6.04.
Plan of
Reorganization
|
38
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| ARTICLE VII
CONDITIONS TO THE
MERGER |
38
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SECTION 7.01.
Conditions to the
Obligations of Each Party
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38
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SECTION 7.02.
Conditions to the
Obligations of Parent and Merger Sub
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38
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SECTION 7.03.
Conditions to the
Obligations of the Company
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41
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| ARTICLE VIII
TERMINATION,
AMENDMENT AND WAIVER |
42
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SECTION 8.01.
Termination
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42
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SECTION 8.02.
Effect of
Termination
|
42
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SECTION 8.03.
Amendment
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42
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SECTION 8.05.
Expenses
|
43
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ARTICLE
IX INDEMNIFICATION
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43
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SECTION 9.01.
Indemnification by the Company
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43
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| ARTICLE X
GENERAL
PROVISIONS |
45
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SECTION 10.01.
Survival
of Representations, Warranties and Covenants
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45
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SECTION
10.02. Notices
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45
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SECTION 10.03.
Certain Definitions
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46
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SECTION I0.04.
Severability
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50
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SECTION 10.05.
Assignment;
Binding Effect; Benefit
|
50
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SECTION
10.06. Incorporation
of Exhibits
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50
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SECTION 10.07.
Specific Performance
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50
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SECTION 10.08.
Governing Law;
Forum
|
51
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SECTION 10.09.
Headings
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51
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SECTION 10.10. Counterparts
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51
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SECTION 10.11.
Entire
Agreement
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51
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EXHIBITS
| A. |
Shares
Owned by Shareholders and Cash, Notes and Common Stock to be
received in Merger
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| B. |
Add-Backs
— Special
Payments for the Benefit of Shareholders
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| C. |
Form
of Investment Letter from Parent
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| D. |
Form
of Investment Letter from Shareholders |
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E.
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Form
of Certificates of Common Stock of Parent |
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F.
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Form
of Opinion of Parent's Counsel |
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G. |
Form
of Opinion of the Company's Counsel
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H.
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Form
of Agreement not to Compete
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I.
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Form
of Mutual Confidentiality Agreement
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| J. |
Form of Officers'
Certificate of the Company |
| K. |
Form of Officers'
Certificate of Parent |
| L. |
Form
of Employment Agreement of Jacob J. Marcell
|
| M. |
Contracts Requiring
Consent after Closing |
| N. |
Company Financing
Guaranteed by Jacob J. Marcell |
| 0. |
Post-Closing
Holdback Escrow Agreement |
AGREEMENT
AND PLAN OF MERGER dated as of December 7, 2007 (this
"Agreement") among Deep Down, Inc., a Nevada corporation
("Parent"), Mako Technologies, LLC, a Nevada limited liability
company and a wholly owned subsidiary of Parent ("Merger
Sub"), Mako Technologies, Inc.. a Louisiana corporation (the
"Company"), and the undersigned owners of 100% of the issued
and outstanding shares of capital stock of the Company (the
"Shareholders").
WITNESSETH
WHEREAS,
upon the terms and subject to the conditions of this Agreement
and in accordance with the Nevada Revised Statutes (the
"NRS"), and Louisiana Revised Statutes ("LRS") Parent and the
Company will enter into a business combination transaction
pursuant to which the Company will merge with and into Merger
Sub (the "Merger");
WHEREAS,
the Board of Directors of the Company (i) has determined that
the Merger is consistent with and in furtherance of the
long-term business strategy of the Company and fair
to, and in the best interests of the Company and its
shareholders and has approved and adopted this Agreement, the
Merger and the other transactions contemplated by this Agreement
and (ii) has recommended the approval of this Agreement by the
shareholders of the Company;
WHEREAS,
the Merger Consideration, as hereinafter defined, and
components thereof, remains unchanged from the terms agreed
upon in the Letter of Intent dated June 21, 2007 executed by
the parties. The maximum Merger Consideration Basis. as
hereinafter defined, for the year ended December 31, 2007
remains unchanged at $2,400,000; and
WHEREAS,
for federal income tax purposes, the Merger is intended to
qualify as a reorganization under the provisions of section
368(a) of the United States Internal Revenue Code of 1986, as
amended (the "Code").
NOW,
THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to he
legally bound hereby, Parent, Merger Sub and the Company
hereby agree as follows:
ARTICLE
I
THE MERGER
SECTION
1.01. The
Merger. Upon the terms and subject to the conditions
set forth in Article VII, and in accordance with the NRS and
LAS, at the Effective Time, as defined below in Section 1.02.
the Company shall be merged with and into the Merger Sub. As a
result of the Merger, the separate corporate existence of the
Company shall cease and the Merger Sub shall continue as the
survivor of the Merger (the "Surviving Entity").
SECTION
1.02. Effective
Time; Closing. As promptly as practicable and in no
event later than the second business day following the
satisfaction
or, if permissible,
waiver of the conditions set forth in Article VII (or such other
date as may be agreed in writing by each of the parties
hereto), the parties hereto shall cause the Merger to be
consummated by filing this Agreement or a certificate of merger or
certificate of ownership and merger (in any case, the "Certificate
of Merger") with the Secretary of State of the States of Nevada and
Louisiana in such form as is required by, and executed in
accordance with, the relevant provisions of the NRS and LRS. The
term "Effective Time" means the date and time of the filing of the
Certificate of Merger with the Secretary of State of the States of
Nevada and Louisiana (or such later time as may be agreed in
writing by each of the parties hereto and specified in the
Certificate of Merger). Immediately prior to the filing of the
Certificate of Merger. a closing will be held at the offices of
Sonfield & Sonfield, Houston, Texas (or such other place as the
parties may agree). The parties may transfer documents (except the
Purchase Price) by electronic mail, facsimile or overnight delivery
and rely on facsimile signature pages with an overnight follow-up
of the originals.
SECTION
1.03. Effect of the
Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the NRS.
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 Entity, and all debts,
liabilities, obligations. restrictions, disabilities and
duties of each of the Company and Merger Sub shall become the
debts, liabilities, obligations, restrictions, disabilities
and duties of the Surviving Entity.
SECTION
1.04. Articles of
Organization and Operating Arrangement .
(a)
At
the Effective Time, the Articles of Organization of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the
Articles of Organization of the Surviving Entity until thereafter
amended as provided by law and such Articles of
Organization.
(b)
At
the Effective Time, the Operating Arrangement of Merger Sub, as
in effect
immediately prior to the Effective Time, shall, be the Operating
Arrangement of the Surviving Entity until thereafter amended as
provided by law, the Articles of Organization of the Surviving
Entity and such Operating Arrangement.
SECTION
1.05. Directors and
Officers. The member and officers of Merger Sub
immediately prior to the Effective Time shall be the member
and officers of the Surviving Entity, each to hold office in
accordance with the Articles of Organization and Operating
Arrangement of the Surviving Entity.
ARTICLE
II
CONVERSION OF COMPANY SECURITIES; EXCHANGE. OF
CERTIFICATES
SECTION
2.01. Conversion of
Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger
Sub, the Company or the Shareholders, 100% of the shares of
capital stock of the Company (the "Company Stock") issued and
outstanding immediately prior to the Effective Time (other
than any Company Stock to be cancelled pursuant to Section
2.02(d)) shall be canceled and shall be converted into the
right to receive the merger consideration.
SECTION
2.02. Merger
Consideration. The merger consideration (the "Merger
Consideration") shall be payable in two
installments.
Section
2.02.1 The first installment shall be:
(a)
Two
Million Nine Hundred Sixteen Thousand Six Hundred and Sixty
Seven
Dollars ($2,916,667) shall be paid to Shareholders on the Closing
Date in immediately available federal funds to an account or
accounts designated by Shareholders. The amount of cash which each
Stockholder will receive is set forth in Exhibit "A"
hereto;
(b)
Certificates
representing restricted common voting shares of Parent's
common
stock determined by dividing Two Million Six Hundred Twenty Five
Thousand Dollars ($2,625,000) by $1.35.
(c)
Certificates
representing 4,129,630, restricted common voting shares of
Parent's
common stock, $.001 par value per share (the "Common Stock") shall
be delivered to the Shareholders on the Closing Date. The number of
shares of Company Stock owned by Shareholders and the number of the
shares of Common Stock which each will receive is set forth in
Exhibit "A" hereto; provided, however, that, if between the date of
this Agreement and the Effective Time the outstanding shares of
Parent Common Stock shall have been changed into a different number
of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination
or exchange of shares, the number of shares Common Stock shall be
correspondingly adjusted to the extent appropriate to reflect such
stock dividend. subdivision, reclassification, recapitalization,
split,
combination or exchange of shares; and
(d)
each
Company Share held in the treasury of the Company and each
Share owned
by Parent or any direct or indirect wholly owned subsidiary of
Parent or of the Company immediately prior to the Effective Time
shall be cancelled and extinguished without any conversion thereof
and no payment or distribution shall be made with respect
thereto.
(e)
Five hundred thousand shares (500,000) of Parent's common stock
shall be
delivered to the Escrow Agent pursuant to the terms of the
Post-Closing Holdback Escrow Agreement substantially in the form of
Exhibit 0.
Section
2.02.2. The second installment of the Merger Consideration
shall be:
(a)
determined by
reference to the financial performance of the business
of the
Company for the calendar year ending December 31, 2007. On or
before March 15, 2008 the Company's independent auditor will
provide a certificate or letter addressed to the Parent and
the Shareholders, on the basis of review made in accordance
with generally accepted accounting standards, that does not
constitute an examination, setting forth the following with
respect to the Company's fiscal year ended December 31,
2007:
|
(i)
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statement of income related to the business of the
Company's operations
for the period covered thereby;
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(ii)
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payments
of interest related to debt of the Company;
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(iii)
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federal
or state taxes based on income attributable to the Company's
operations;
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(iv)
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depreciation
related to the Company's assets;
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(v)
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amortization
related to the Company's assets;
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(vi)
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special
payments through the Effective Time for the benefit of the
Shareholders listed on Exhibit "B" ("Add-hacks");
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(vii)
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any
charges or expenses solely attributable to the Company being a
subsidiary of Parent, or the Parent's arbitrary decision to
defer income or prepay expenses;and
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(viii)
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and
charges or expenses solely attributable to closing and
consummating the transaction contemplated by this
Agreement.
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(b)
the
Merger Consideration Basis shall be equal to the reported net
income, described
in Section 2.02.2(a)(i) above, after adding items in subsections
(ii) through (viii) of the same section above, up to but not to
exceed $2,400,000. The "Deferred Merger Consideration Basis" shall
be determined by deducting $1,400,000 from the Merger Consideration
Basis.
(c)
the
amount shall he paid, offset only by amounts charged for failure
to obtain
required consents as described in Section 7.02(j), on or before
April 30, 2008 as follows:
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(i)
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cash
in an amount equal to $2.083333 for each $1.00 of Deferred
Merger Consideration Basis, up to, but not to exceed,
$2,083,333;
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(ii)
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1.388889
shares of Parent Common Stock for each $1.00 of Deferred
Merger Consideration Basis, up to, but not to exceed, a total
of 1,388,889 shares; and
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(iii)
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the
number of shares of Common Stock equal to 3.306878 shares for
each $1.00 of Deferred Merger Consideration Basis, up to, but
not to exceed 3,306,878 shares.
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Section
2.02.3. Resolution of Disputes.
(a)
Expedited
Arbitration. If the determinations specified in paragraph
2.02.2(b) cannot be made in accordance with the procedures
outlined in Section 2.02 because of disputes between the
parties with respect thereto, such disputes shall be resolved
by and through an expedited arbitration ("Expedited
Arbitration") proceeding to be conducted under the auspices of
the American Arbitration Association (or any like organization
successor thereto) at Houston, Texas, which is hereby made a
part of this Agreement. Such arbitration proceeding shall be
conducted in as expedited a manner as is then permitted by the
commercial arbitration rules (formal or inlbrmal) of the
American Arbitration Association, and the arbitrator or
arbitrators in any such arbitration shall be certified public
accountants. Both the foregoing agreement of the parties to
arbitrate any and all such claims, and the results,
determination, finding, judgment and/or
award rendered through such Expedited Arbitration, shall be
final and binding on the parties hereto and may be
specifically enforced by legal proceedings.
(b)
Procedure.
Any such Expedited Arbitration may be initiated by written
notice from either party to the other which shall he a
compulsory and binding proceeding on each party. The Expedited
Arbitration shall he conducted before a panel of one
arbitrator selected in accordance with the rules pertaining to
expedited arbitration. The costs of said arbitrator and the
Expedited Arbitration shall be borne equally by the parties
hereto. Each party shall bear separately the cost of their
respective attorneys, witnesses and experts in connection with
such Expedited Arbitration. Time is of the essence of this
Expedited Arbitration procedure, and the arbitrator shall be
instructed and required to render his decision within ten (10)
days following completion of the Expedited
Arbitration.
(c)
Venue
and Jurisdiction. Any and all legal proceedings to compel Expedited
Arbitration hereunder or to enforce any award or judgment rendered
thereby, shall be governed in accordance with Section 10.08
hereunder.
SECTION 2.03. Exchange of
Certificates.
(a)
Exchange
Procedures. At the Closing, the Company shall surrender to
Parent
all certificates representing Company Stock (the " Certificates ") delivered to it
(together with any stock transfer tax stamps required by reason of
the payment of the Merger Consideration to a person other than the
registered holder of the Certificate surrendered), together with
such other customary documents as may reasonably be required by
Parent, in exchange for the Merger Consideration. Immediately
following the Effective Time, all Certificates surrendered to
Parent shall be canceled. Any shareholder of the Company whose
Certificates are not delivered at the Closing shall receive the
Merger Consideration with respect to such Certificates upon
delivery to Parent after the Closing of such Certificates and the
other items required pursuant to the first sentence of this Section
2.03(a).
(b)
Distributions
with Respect to Unexchanged Shares of Parent Common
Stock.
No dividends or other distributions declared or made after the
Effective Time with respect to the Parent Common Stock with a
record date after the Effective Time shall he paid to the holder of
any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby, and no cash payment in lieu of
any fractional shares shall be paid to any such holder pursuant to
Section 2.03(d), until the holder of such Certificate shall
surrender such Certificate.
(c)
No
Further Rights in Company Stock. All shares of Parent Common
Stock
issued upon conversion of the Company Stock in accordance with the
terms hereof (including any cash paid pursuant to Section 2.03(b)
or (d)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such Company Stock.
(d)
No
Fractional Shares. No certificate or scrip representing fractional
shares of
Parent Common Stock shall be issued upon the surrender for exchange
of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any other rights of
a shareholder
of Parent. Each holder of a fractional share interest shall be paid
an amount in cash (without interest) equal to the product obtained
by multiplying (i) such fractional share interest to which such
holder (after taking into account all fractional share interests
then held by such holder) would otherwise be entitled by (ii) the
average of the per share closing prices on the OTC Bulletin Board
(the "OTC") of shares of Parent Common Stock during the 20
consecutive trading days ending on (and including) the trading day
immediately preceding the date of the Effective Time. As promptly
as practicable after the determination of the amount of cash, if
any. to be paid to holders of fractional share interests, the
Parent shall forward payments to such holders of fractional share
interests subject to and in accordance with the terms of Sections
2.03(b).
(e)
No
Liability. Neither Parent nor the Surviving Entity shall
be liable to
any holder
of Company Stock for any such Company Stock (or dividends or
distributions with respect thereto), or cash delivered to a public
official pursuant to any abandoned property, escheat or similar
Law.
(f)
Withholding Rights. Each of the
Surviving Entity and Parent shall be entitled
to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Stock such
amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so
withheld by the Surviving Entity or Parent, as the case may be,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Company Stock in
respect of which such deduction and withholding was made by the
Surviving Entity or Parent, as the case may be.
(g)
Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed,
upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Entity, the posting by such person of a bond, in
such reasonable amount as the Surviving Entity may direct, as
indemnity against any claim that may be made against it with
respect to such Certificate, the Parent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger
Consideration, any cash in lieu of fractional shares of Parent
Common Stock to which the holders thereof are entitled pursuant to
Section 2.02(d) and any dividends or other distributions to which
the holders thereof are entitled pursuant to Section
2.02(0.
SECTION
2.04.
Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall he no
further registration of transfers of Company Stock thereafter on
the records of the Company. From and after the Effective Time, the
holders of Certificates representing Company Stock outstanding
immediately prior to the Effective Time shall cease to have any
rights with respect to such Company Stock, except as otherwise
provided in this Agreement or by Law.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As
an inducement to Parent to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company
and Shareholders represent and warrant to Parent as
follows:
SECTION
3.1 Organization; Authority; Due Authorization.
SECTION
3.1.1Organization and Good Standing. The Company is a
corporation
duly organized, validly existing and in good standing under
the Laws of its jurisdiction of incorporation; has all
requisite power to own, lease and operate its assets,
properties and business and to carry on its business as
conducted during the twelve (12) month period prior to the
date hereof, as now conducted and as proposed to be conducted;
and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in every jurisdiction in
which the nature of its business or the location of its
properties requires such qualification or licensing, except
for such jurisdictions where the failure to so qualify or be
licensed would not have any adverse effect on the
enforceability of any of the Material Contracts or the
Company's ability to bring lawsuits, or a Material Adverse
Effect upon the condition (financial or otherwise), assets,
liabilities, Business, operations or prospects of the Company,
or
the
Company's ability to perform fully its obligations under this
Agreement and the other Company Documents. Section 3.1.1 of
the Company Disclosure Schedule sets forth all jurisdictions
in which the Company is qualified or licensed to do business
as a foreign corporation.
SECTION
3.1.2 Authority to Execute and Perform Agreements. The Company
and its Shareholders have all requisite power, authority and
approvals required to enter into, execute and deliver this
Agreement and all of the other Company Documents and to
perform fully
the Company's obligations hereunder and
thereunder.
SECTION
3.1.3 Due Authorization; Enforceability. The Company and its
Shareholders have taken all actions necessary to
authorize it to enter into and perform fully its
obligations under this Agreement and all of the other Company
Documents and to consummate the transactions contemplated
herein and therein. This Agreement is, and as of the Closing
Date, the other Company Documents will be, the legal, valid
and binding obligations of the Company, enforceable in
accordance with their respective terms.
SECTION
3.1.4 Status and
Effect of Delivery of the Shares. Shareholders are the
lawful owners of the Company Stock and have good title
thereto, free and clear of
all liens, claims, security interests, pledges, encumbrances
and equities of every kind. Except for this Agreement,
there are no outstanding rights, options, warrants,
subscriptions or agreements of any kind to acquire from
Shareholders any of the Company Stock.
SECTION
3.1.5 Company
Stock. The Company Stock represents all of the issued
and outstanding shares of capital stock of the Company. The
Company has 10,000 authorized and 200 issued and outstanding
shares of common stock, no par value.
SECTION
3.2 No Violation. Except as disclosed in Section 3.2 of the
Company Disclosure Schedule, and subject to obtaining the
necessary consents specified in Section 7.02(j), neither the
execution or delivery by the Company or its Shareholders of
this Agreement or any of the Company Documents nor the
consummation of the transactions contemplated herein or
therein will: (a) violate any provision of the Articles of
Incorporation, bylaws or other charter documents of the
Company; (b) violate, conflict with or constitute a default
under, permit the termination or acceleration of, or cause the
loss of any rights or options under, any Material Contract;
(c) require any authorization, consent or approval of,
exemption or other action by, or notice to, any party to any
Material Contract; (d) result in the creation or imposition of
any Lien or Other Encumbrance upon any of the Assets which is
of a character not permitted by Section 3.3 below; or (e)
violate or require any consent or notice under any Law or
Order to which the Company or any of its properties is
subject.
SECTION
3.3 Regulatory Approvals and Other Consents. Section 3.3 of
the Company Disclosure Schedule sets forth a complete and
accurate description of each consent. approval, authorization,
notice, filing, exemption or other requirement, whether
prescribed by the Articles of Incorporation, by-laws,
partnership agreement or other charter document of the
Company, whether prescribed by Law or Order or whether
required pursuant to the terms of any Material Contract, which
must be obtained from any Person or which must otherwise be
satisfied by the Company in order that (i) the execution or
delivery by the Company of this Agreement or any of the
Company Documents and (ii) the consummation of the
transactions contemplated herein or therein will not cause any
breach of the representations and warranties contained in
Article III. Except as set forth in Section 7.02(j), each such
consent, approval, authorization or other requirement will be
obtained or satisfied prior to the Closing.
SECTION
3.4 Title to Assets. Without limiting the representations and
warranties as to specific classes of Assets contained
elsewhere herein, the Company has good and marketable title to
each of the Assets owned by it and the valid and enforceable
right to receive and/or use each of the Assets in which the
Company has any other interest, free and clear of all Liens
and Other
Encumbrances except for (a) any Liens and Other Encumbrances
disclosed in Sections 3.4, 3.5.3, 3.5.4, 3.9.1, 3.9.2, 3.9.3
or 3.10 of the Company Disclosure Schedule, (b) liens for
current taxes not yet due and payable and (c) minor liens or
other encumbrances which will not Materially impair the value
or utility of any Material component of the Assets from and
after the Effective Time or the Company's ability to
consummate the transactions contemplated herein. The transfer
of ownership contemplated by this Agreement will at the
Effective Time vest good and marketable title to. or the valid
and enforceable right to receive and/or use, each such Asset,
free and clear of all Liens and Other Encumbrances except
those marked by an asterisk in Sections 3.4, 3.5.3, 3.5.4,
3.9.1, 3.9.2, 3.9.3 and 3.10 of the Company Disclosure
Schedule and those described in (b) and (c)
above.
SECTION
3.5 Financial Condition.
SECTION
3.5.1 Financial Statements. Section 3.5.1 of the Company
Disclosure Schedule sets forth (1) the audited balance sheet
of the Company as of June 30, 2007, the related statements of
income and retained earnings, and the related statements of
changes of financial position or cash flows for the period
then ended, compiled by the Company's independent certified
public accountants, whose report thereon is included
therewith, (ii) the unaudited balance
sheet of the Company as of September 30, 2007, the related
statements of income and retained earnings, and the related
statements of changes of financial position or cash flows for
the period then ended, compiled by the Company accountants
that do not conform to generally accepte accounting standards,
and (iii) the audited balance sheets and statements of income
of the Company for the twelve (12) month periods ended
December 31, 2006. Said financial statements
(a) were prepared in accordance with the books and records of
the Company; (b) were prepared in accordance with
generally
accepted accounting principles consistently applied; (c)
fairly present the Company's financial condition and the
results of its operations as of the relevant
dates thereof and for the periods covered thereby; (d) contain
and reflect all necessary adjustments and accruals for a fair
presentation of the Company's financial condition and the
results of its operations for the periods covered by said
financial statements; and (e) with respect to contracts and
commitments for the sale of goods or the provision of services
by the Company, contain and reflect adequate reserves for all
reasonably anticipated Material losses and costs and expenses
in excess of expected receipts.
SECTION
3.5.2 No Undisclosed Liabilities. Except for (i) those
liabilities specifically accrued or reserved against on the
Balance Sheet (ii) to the Company's Knowledge those current
liabilities for trade or business obligations incurred since
the Balance Sheet Date in connection with the purchase of
goods or services in the ordinary course of the Business and
consistent with past practices, (none of which is,
individually or in the aggregate, Material and none of which
is for breach of contract, breach of warranty, tort or
infringement) (iii) those liabilities arising under any
Material Contract (none of which liabilities is for breach of
contract, breach of warranty, tort or infringement) or (iv)
those liabilities otherwise specifically disclosed in Section
3.5.2 of the Company Disclosure Schedule (none of which
liabilities is for breach of contract, breach of warranty,
tort or infringement), the Company has, as of the date hereof,
no direct or indirect indebtednesses, liabilities, claims,
losses, damages, deficiencies, obligations or
responsibilities, known or unknown, liquidated or
unliquidated, accrued, absolute, contingent or otherwise, and
whether or not of a kind required by generally accepted
accounting principles to be set forth on a financial
statement, which individually or in the aggregate are Material
to the condition (financial or otherwise), assets,
liabilities, Business, operations or prospects of the Company.
The Company has no Knowledge of any circumstances, conditions,
events or arrangements which may hereafter give rise to any
liabilities of the Company except in the ordinary course of
the Business or as otherwise set forth in this Section
3.5.2.
SECTION
3.5.3 Inventories. All Material Inventories shown on the
Balance Sheet and all Inventories existing as of the date
hereof consisted of, and consist of, items of a quality and
quantity useable and saleable in the ordinary course of the
Business without markdown or discount, were, and are,
merchantable and fit for their particular purpose, except for
obsolete and slow-moving items and items below standard
quality (which in any event did not, and do not, exceed normal
commercial standards in amount), all of which had been, and
have been. written down on the books of the Company to the
lower of cost or net realizable market value or had been, and
have been, provided for by adequate reserves. Except as set
forth in Section 3.5.3 of the Company Disclosure Schedule, all
such Inventories were, and are, owned by the Company free and
clear of any Liens or Other Encumbrances. No items included in
such Inventories were, or are, held by the Company on
consignment from others. The amounts of all such Inventories
shown on the Balance Sheet were based on quantities determined
by physical count or measurement
taken on the Balance Sheet Date and valued at the lower of
cost (determined on a first-in, first-out basis) or market
value and on a basis consistent with that of prior
years.
SECTION
3.5.4 Accounts Receivable. Section 3.5.4 of the Company
Disclosure Schedule sets forth a complete and accurate
schedule of the Accounts Receivable as of the Balance Sheet
Date. as reflected in the Balance Sheet, together with an
accurate aging of the same. All Accounts Receivable accrued on
the Balance Sheet and all Accounts Receivable existing as of
the date hereof resulted from valid sales in the ordinary
course of the Business and were, and are, subject to no valid
offsets or counterclaims. Except as set forth in Section 3.5.4
of the Company Disclosure Schedule, all such Accounts
Receivable were, and are, owned by the Company free and clear
of any Lien or Other Encumbrance. All Accounts Receivable
existing as of the Effective Time will be collected by Parent
within one hundred (180) days after the Effective Time at the
aggregate recorded amount thereof as shown on the Post-Closing
Balance Sheet, except for an amount determined by adding fifty
thousand dollars ($50,000) to the reserves, if any, allocable
thereto shown on the Post-Closing Balance Sheet, and for these
purposes, if more than one invoice is outstanding at any time
for any account debtor, the "first- in. first-out" principle
shall be applied in determining the invoice to which a payment
relates unless the payment by its terms specifies the invoice
to which it relates.
SECTION
3.5.5 Accounts Payable. Section 3.5.5 of the Company
Disclosure Schedule sets forth a true and correct aged list of
all accounts payable of the Company as of the Balance Sheet
Date and as of the date hereof in excess of Ten Thousand
Dollars ($10,000) to any one payee. No account payable of the
Company which has arisen subsequent to the Balance Sheet Date
and as of the date hereof has exceeded Ten Thousand Dollars
($10,000), nor has the aggregate of such accounts payable
exceeded Fifty Thousand Dollars($50,000). All of the accounts
payable on the Balance Sheet, and all accounts payable of the
Company as of the date hereof, arose from bona fide purchases
of goods or services in the ordinary course of the
Business.
SECTION
3.5.6 Absence of Certain Changes. Except as indicated in
Section 3.5.6 of the Company Disclosure Schedule, since the
Balance Sheet Date, the Company has conducted the Business
only in the ordinary course consistent with its past practices
and has not:
(a)
suffered
any change, event or condition which, in any case or in the
aggregate, has had or could reasonably be expected to have a
Material Adverse Effect upon the Company's condition (financial or
otherwise), assets, liabilities, Business, operations or prospects.
the value or utility of the Assets, or the Company's ability to
consummate the transactions contemplated herein;
(b)
suffered
any destruction, damage to or loss of any Asset (whether or not
covered by insurance) which could reasonably be expected to have a
Material Adverse Effect upon the condition (financial or
otherwise), assets, liabilities, Business, operations, or prospects
of the Company, the value or utility of the Assets or the Company's
ability to consummate the transactions contemplated
herein;
(c)
incurred
any obligation or liability or taken property subject to any
liability, whether absolute, accrued, contingent or otherwise and
whether due or to become due, except current liabilities for trade
or business obligations incurred since the Balance Sheet Date in
connection with the purchase of goods or services in the ordinary
course of the Business and consistent with its prior practices,
none of which liabilities, in any event, involved a potential
liability of the Company in excess of Twenty Five Thousand Dollars
($25,000), individually, or One Hundred Thousand Dollars
($100,000), in the aggregate;
(d)
discharged
or satisfied any Lien or Other Encumbrance affecting any of the
Assets other than those then required to be discharged or
satisfied, or paid any obligation or liability, whether absolute,
accrued, contingent or otherwise, and whether due or to become due,
other than current liabilities shown on the Balance Sheet and
current liabilities incurred since the Balance Sheet Date in
connection with the purchase of goods or services in the ordinary
course of the Business and consistent with its prior
practices;
(e)
mortgaged,
pledged or subjected any of the Assets to any Lien or Other
Encumbrance;
(f)
sold,
transferred, leased to others or otherwise disposed of any of the
Assets, except for Assets sold or leased in the ordinary course of
the Business consistent with its past practices or immaterial
amounts of other Tangible Personal Property not required by the
Business:
(g)
made
any capital expenditures or capital additions or betterments in
excess of an aggregate of One Hundred Thousand Dollars ($100,0000)
or entered into any lease of capital equipment or property under
which the annual lease charges exceed One Million Dollars
($1,000,000) in the aggregate;
(h)
amended
or terminated any Material Contract or any License or Permit or
received any notice of termination of any of the same:
(i)
waived,
released or compromised any right or claim of the Company, except
those involving less than Ten Thousand Dollars ($10,000) in the
aggregate;
(j)
declared
or made any payment of dividends or other distribution to its
shareholders or upon or in respect of any shares of its capital
stock, or purchased, retired or redeemed, or obligated itself to
purchase, retire or redeem, any of its shares of capital stock or
other securities;
(k)
issued or sold any shares of its capital stock or other securities,
or issued, granted or sold any options, rights or warrants with
respect thereto, or acquired any capital stock or other securities
of any Person or any interest in any business enterprise, or
otherwise made any loan or advance to or investment in any
Person;
(l) encountered any
labor union organizing activity, suffered any actual or threatened
employee strikes, work stoppages, slow-downs or lock-outs, or any
Material change in its relations with its employees, agents,
customers or suppliers or suffered any actual or threatened
wrongful discharge or other unlawful labor practice action or
proceeding;
(m)
made
any change in the rate of compensation, commission, bonus or other
direct or indirect remuneration payable, or paid or agreed or
orally promised to pay, conditionally or otherwise, any bonus,
extra compensation, pension or severance or vacation pay, to any
shareholder, director, officer, employee, salesman, distributor or
agent of the Company other than in the ordinary course of the
Business consistent with its past practices;
(n)
instituted,
settled or agreed to settle any litigation, action, proceeding or
investigation before any court or governmental body relating to the
Company or the Assets or suffered any actual or threatened
litigation, action, proceeding or investigation before any court or
governmental body relating to the Company or the
Assets;
(o)
transferred
or granted any rights under, or entered into any settlement
regarding the breach or infringement of, any United States or
foreign license, patent, copyright, trademark, trade name,
invention or similar rights, or modified any existing rights with
respect thereto;
(p)
loaned
any monies to any Person or guaranteed any obligations of any
Person;
(q)
failed
to replenish its Inventories in a normal and customary manner
consistent with its prior practices and prudent business practices
prevailing in the industry, or purchased or made any purchase
commitment to purchase items of Inventory in excess of the normal,
ordinary and usual requirements of the Business or at any price in
excess of the then current market price or upon terms and
conditions more onerous than those usual and customary in the
industry, or made any change in its selling, pricing, advertising
or personnel practices inconsistent with its prior practices and
prudent business practices prevailing in the industry;
(r)
changed
its accounting methods or practices (including, without limitation,
any change in depreciation or amortization policies or rates) or
revalued any of its assets;
(s)
changed
its banking or safe deposit arrangements;
(t)
entered
into any transaction, contract or commitment other than in the
ordinary course of the Business and consistent with its prior
practices or paid or agreed to pay any legal, accounting,
brokerage, finder's fee, taxes or other expenses in connection
with, or incurred any severance pay obligations by reason of this
Agreement or the transactions contemplated herein; or
(u)
entered into any agreement or made any commitment to take any of
the types of action described in subparagraphs (a) through (t)
above.
SECTION
3.6 Tax Matters. Except as indicated in Section 3.6 of the
Company Disclosure Schedule:
(a)
within
the times and in the manner prescribed by Law, the Company has
filed all Tax Returns which the Company is required to file, has
paid or provided for all Taxes shown thereon to be due and owing by
it and has paid or provided for all deficiencies or other
assessments of Taxes, interest or penalties owed by it; no taxing
Authority has asserted any claim for the assessment of any
additional Taxes of any nature with respect to any periods covered
by any such Tax Returns, all Taxes which are required to be
withheld or collected by the Company have been duly withheld or
collected and, to the extent required. have been paid to the proper
taxing Authority or properly segregated or deposited as required by
Law;
(b)
each
Tax Return filed by the Company fully and accurately reflects its
liability for Taxes for such year or period and accurately sets
forth all items (to the extent required to be included or reflected
in such returns) relevant to its future liabilities for Taxes,
including the tax bases of its properties and assets. The
provisions for Taxes payable reflected in the Financial Statements
are fully adequate and correct;
(c)
No
audit of any Tax Return of the Company is in progress or, to the
Knowledge of the Company, threatened;
(d)
no
extensions of time with respect to any date on which any Tax Return
was or is to be filed by the Company is in force;
(e)
the
Company has not waived or extended any applicable statute of
limitations relating to the assessment of any Taxes;
(f)
no
issues have been raised with the Company by any taxing authority
which are currently pending in connection with any Tax Returns. No
Material issues have been raised in any examination by any taxing
Authority with respect to the Company which, by application of
similar principles, reasonably could he expected to result in a
proposed deficiency for any other period not so examined. There are
no unresolved issues or unpaid deficiencies relating to any such
examination;
(g)
the
Company has not filed a consent pursuant to Section 341(0 of the
Code nor has agreed to have Section 341(0(2) of the Code applied to
any disposition of a Subsection (0 asset (as such term is defined
in Section 341(0(4) of the Code);
(h)
the
Company has delivered to Parent true and correct copies of all
federal and state income Tax Returns of the Company for the last
five complete fiscal years;
(i)
there
is no Tax sharing or other Tax-related agreement in effect among or
between the Company, on the one hand, and any other Person, on the
other hand. The Company is not subject to any partnership, joint
venture or other arrangement which is treated as a partnership for
Federal or state income Tax purposes;
(j)
none of the shareholders of the Company is a "foreign person" as
defined in Section 1445()(3) of the Code;
and
(k)
the Company
will not be required to recognize after the Effective Time any
taxable income in respect of accounting method adjustments required
to be made under the Tax Reform Act of 1986 or the Revenue Act of
1987 except to the extent such recognition arises out of the
transaction described in this Agreement or actions by the Parent
after the Effective Time.
SECTION
3.7 Compliance with Laws; Governmental Matters.
SECTION
3.7.1 General. The Company has in all Material respects
complied with, and is now in all Material respects in
compliance with, all Laws and Orders applicable to the Company
or the Assets or the operation of the Business, and no
Material capital expenditures will be required in order to
insure continued compliance therewith. Section 3.7.1 of the
Company Disclosure Schedule sets forth each License and
Permit, together with its date of expiration and a brief
description of its Material terms. Except for the Licenses and
Permits already held by the Company as disclosed in Section
3.7.1 of the Company Disclosure Schedule, no other franchise,
license, permit, order or approval of any Authority is
Material to or necessary for the conduct of the Business as
previously conducted during the twelve (12) month period prior
to the date hereof, as presently conducted or as proposed to
be conducted. Each License and Permit is in full force and
effect; the Company is now and has at all times in the past
been in all Material respects in full compliance with each
thereof, no violations are or have in the last five (5) years
been recorded by any Authority in respect of any thereof, and
no proceeding is pending or. to the Knowledge of the Company,
threatened to revoke, amend or limit any thereof. Except as
disclosed in Section 3.7.1 of the Company Disclosure Schedule,
there are no pending or, to the Knowledge of the Company,
threatened proceedings by or before any Authority which
involve new special assessments, assessment districts, bonds,
Taxes, condemnation actions, Laws or Orders or similar matters
which, if instituted, could reasonably be expected to have a
Material Adverse Effect upon the condition (financial or
otherwise), assets, liabilities, business or prospects of the
Company, the value or utility of the Assets or the Company's
ability to consummate the transactions contemplated
herein.
SECTION
3.7.2 Environmental and Industrial Hygiene Compliance. Except
as disclosed in Section 3.7.2 of the Company Disclosure
Schedule, (i) neither the Company nor any of the Assets has
ever been or is now in any Material respect in violation of
any applicable Environmental Laws or Orders; (ii) neither the
Company nor any third party has prior to the date hereof ever
used, generated, manufactured, stored or disposed of on, under
or about the Assets or transported to or from the Assets any
flammable explosives, radioactive materials, hazardous wastes,
toxic substances or related materials; (iii) the Company has
obtained and now holds all permits, licenses and other
authorizations which are required to be
held
by it under all applicable Environmental
Laws or Orders; (iv)
the Company is in compliance in all Material respects with all
terms and conditions of any and all required permits, licenses
and authorizations and all other limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all
applicable Environmental Laws and Orders, and any notice or
demand letter issued, entered: promulgated or approved
thereunder; (v)
no facts, past or present events or conditions interfere with
or prevent continued Material compliance by the Company with,
or give rise to any Material present or potential legal,
common law or statutory liability of the Company under, any
applicable Environmental Law or Order; (vi) there is no
pending civil or criminal litigation, notice of violation or
administrative proceeding involving the Company and relating
in any way to any Environmental Law or Order (including
notices, demand letter or claims under RCRA, CERCLA and
similar state or local laws), other than rulemaking
proceedings, if any; and (vii) there has been no disposal by
the Company, directly or indirectly, of any materials or
wastes to, on or in any site currently listed or formally
proposed to be listed on the National Priorities List under
CERCLA or any site listed or formally proposed to be listed as
a major or priority cleanup site under any comparable state
law. For the purpose of this Section 3.7.2. hazardous
materials shall include but not be limited to substances now
or at any time hereafter defined as "hazardous substances,"
"hazardous materials," or "toxic substances" in
CERCLA, the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq. or RCRA, as the same may be amended from
time to time, or in the regulations adopted and publications
promulgated pursuant to said Laws from time to
time.
SECTION
3.7.3 Indemnity and Hold Harmless. To the extent of one
hundred thousand dollars ($100,000) in the aggregate for a
period of two years after the Effective Time, the Company and
its shareholders shall, from and after the Effective Time,
indemnify and hold harmless Parent and its respective
shareholders, directors, officers, employees, agents and
attorneys, and any successors to the Company's interest in any
such affected property and their respective shareholders,
directors, officers, employees, agents and attorneys, from and
against any and all liabilities, claims, costs and expenses
(including actual attorneys' fees and court costs), directly
or indirectly arising out of the presence, use, generation.
storage, or disposal of hazardous materials on any property of
the Company, whether the same was the fault of the Company or
any prior owner or operator of such affected property or any
other person, including, without limitation, all general,
special, foreseeable or unforeseeable consequential damages
and the cost of any required or necessary repair, cleanup, or
detoxification and the preparation of any closure or other
required plans, whether or not such action is required or
necessary prior to
or following transfer of title to any such affected
property, and to the full extent that such action is
attributable, directly or indirectly, to the presence or use,
generation, storage, release, threatened release, or disposal
of hazardous materials by any person on any property of the
Company prior to the Effective Time.
SECTION
3.7.4 Other Violations. The Company is not in violation of any
provision of the Export Administration Amendments of 1977 or
the Foreign Corrupt Practices Act of 1977.
SECTION
3.8 Litigation. Section 3.8 of the Company Disclosure Schedule
sets forth an accurate and complete description of every
pending or, to the Knowledge of the Company. threatened
adverse claim, dispute, governmental investigation, suit,
action (including, without limitation,
nonjudicial real or personal property foreclosure actions),
arbitration, legal, administrative or other proceeding of any
nature, domestic or foreign, criminal or civil, at law or in
equity, by or against or otherwise affecting the Company, the
Business or the Assets, other than collection actions tiled by
the Company and involving less than Fifty Thousand Dollars
($50,000). The Company has delivered to Parent copies of all
relevant court papers and other documents relating to the
matters referred to in Section 3.8 of the Company Disclosure
Schedule. Except as disclosed in Section 3.8 of the Company
Disclosure Schedule:
(a)
no
such matter or matters, if decided adversely to the Company, could
reasonably be expected to have a Material Adverse Effect upon the
condition (financial or otherwise), assets, liabilities, Business,
operations or prospects of the Company, the value or utility of the
Assets or the ability of the Company to consummate the transactions
contemplated herein;
(b)
the
Company is not in default with respect to any Order by which it is
bound or to which its property is subject and there exists no Order
enjoining or requiring the Company to take any action of any kind
with respect to the Business or the Assets;
(c)
neither
the Company nor, to the Knowledge of the Company, any officer,
director or employee of the Company, has been permanently or
temporarily enjoined by any Order from engaging in or continuing
any conduct or practice in connection with the Business or the
Assets; and
(d)
to
the Knowledge of the Company, no basis exists for any claim,
investigation, suit or proceeding which, if decided adversely to
the Company, could reasonably be expected to have a Material
Adverse Effect upon the condition (financial or otherwise), assets,
liabilities, Business, operations or prospects of the Company, the
value or utility of the Assets or the Company's ability to
consummate the transactions contemplated herein.
SECTION
3.9 Property of the Company.
SECTION
3.9.1 Real Property. Section 3.9.1 of the Company Disclosure
Schedule sets forth, as of the date hereof, (i) a true and
complete description of all of the Real Property which
description includes a legal description of each parcel of the
Real Property and the nature of the interest therein of the
Company; (ii) an identification of all Contracts or Other
Agreements together with all amendments thereto, under which
the Company has any interest or estate in any of the Real
Property; (iii) an identification of all options held by the
Company and all contractual obligations on the part of the
Company to purchase or acquire any interest or estate in any
of the Real Property; (iv) an identification of all options
granted by the Company and all contractual obligations on the
part of the Company to sell or dispose of any interest or
estate in any of the Real Property; and (v) a description of
any appraisal in the possession of the Company which has
valued any such interest or estate in any of the Real Property
within the last ten (10) years. The Company has heretofore
delivered to Parent copies of the most recent title reports,
surveys, title policies and appraisals available to it with
respect to each such interest or estate
in the Real Property. Except as disclosed in Section 3.9.1 of
the Company Disclosure Schedule, as of the date
hereof:
(a)
the
Company has good and marketable title in fee simple to each parcel
of the Real Property described in Section 3.9.1 of the Company
Disclosure Schedule as owned by it in fee, and a right of prior and
continuing possession to each other parcel of the Real Property,
whether such right arises by virtue of a leasehold estate,
easement, license or otherwise, in all cases free and clear of all
Liens and Other Encumbrances excepting only matters of record and
mechanic's or materialmen's liens incurred in the ordinary course
of the Business in respect of obligations which are not yet overdue
(none of which interfere with the full use of any of the Real
Property or any improvements thereto in the conduct of the Business
or will materially affect the market value thereof from and after
the Effective Time) and the lien of current state or local real
property taxes, a lien not yet due and payable. Notwithstanding the
foregoing, however, the Company shall have no liability for any
breach of the foregoing representation which is covered by title
insurance pursuant to Section 8.5 unless, and then only to the
extent that, the title company does
not
i ndemnify Parent with respect thereto pursuant to such
policies of title insurance;
(b)
the
Company has received no notice that a lessor, grantor, licensor or
optionor (as applicable) under any of such leases, subleases,
easements, licenses, agreements or options intends to cancel or
terminate any of the same or to exercise or not to exercise any
option thereunder; the Company has not received any notice that any
landlord, grantor, licensor or optionor from whom the Company has
acquired an interest or estate in the Real Property is in default
of any mortgage, indenture, trust deed, deed of trust or other
covenant or agreement relating to the Real Property; the Company
has not received any notice of any foreclosure, forcible entry,
detainer, ejectment or other suit or action brought with respect to
any parcel of the Real Property by any third party which could, if
successful, result in the loss or possessory rights to such Real
Property by the Company or any person or entity by or
t hrough which the Company holds an interest in
such Real Property; and each master lease, license, easement, and
option under which the Company is a sublessee, sublicensee,
easement holder or optionee is a valid and binding obligation of
the master lessor. licensor, grantor or optionor, as the case may
be, under which the sublessor, sublicensor, grantor or optionor
maintains a valid estate;
(c)
all
of the buildings, fixtures and other improvements constituting a
part of the Real Property are in good operating condition and
repair, free from termites, dry rot, other fungi and other forms of
deterioration, and any and all damage resulting therefrom, and the
operation thereof as conducted during the twelve (12) month period
prior to the date hereof, as presently conducted and as proposed to
be conducted is not in any Material respect in violation of any
applicable building code, zoning ordinance or other Law or without
limitation, applicable environmental protection and occupational
health and safety Laws;
(d)
the
Company holds valid and effective certificates of occupancy
covering all buildings and improvements constituting a part of the
Real Property and holds valid and effective underwriters'
certificates relating to electrical work, zoning, building,
housing, safety,
fire and health approvals and all other permits and licenses
required by applicable Law relating to the operation
thereof;
(e)
there
are no Material condemnation or rezoning proceedings pending or
threatened against or relating to any of the Real Property, no
Material limited term zoning variances or non-conforming or
conditional uses or improvements relating thereto and no tenants or
occupants of any thereof having any rights of occupancy as against
the Company;
(f)
the
Company has not experienced during the three (3) years preceding
the date hereof any Material interruption in the delivery of
adequate quantities of any utilities (including. without
limitation, electricity. natural gas, potable water, water for
cooling or similar purposes and fuel oil) or other public services
(including, without limitation, sanitary and industrial sewer
service) required by the Company in the operation of the Business;
and
(g)
each parcel of the Real Property has unqualified access to public
roads and to all utilities, including electricity, sanitary and
storm sewer, potable water, natural gas and other utilities used in
the operation of the Business.
SECTION
3.9.2 Tangible Personal Property. Section 3.9.2 of the Company
Disclosure Schedule sets forth, as of the date hereof, (i) a
description, including the location, of each item of the
Tangible Personal Property owned by the Company having either
a depreciated hook value or estimated fair market value per
unit in excess of Twenty Five Thousand Dollars ($25,000), or
not owned by the Company but in the possession of or used in
the Business and having rental payments therefor in excess of
One Hundred Thousand Dollars ($100,000) per year; and (ii) a
description of the owner of, and any Contract or Other
Agreement relating to the use of each such item of the
Tangible Personal Property not owned by the Company and the
circumstances under which such property is used. Except as
disclosed in Section 3.9.2 of the Company Disclosure Schedule,
as of the date hereof:
(a)
the
Company has good and marketable title to each item of the Tangible
Personal Property, free and clear of all Liens and Other
Encumbrances except for liens, if any, for personal property taxes
not due and liens of repairmen or bailees or other similar liens
incurred in the ordinary course of the Business in respect of
obligations which are not overdue;
(b)
each
item of the Tangible Personal Property is in good operating
condition and repair, usable in the ordinary course of business,
and the operation thereof as conducted during the twelve (12) month
period prior to the date hereof, as presently conducted and as
proposed to be conducted is not in any Material respect in
violation of any applicable building code, zoning ordinance or
other Law including, without limitation, applicable environmental
protection and occupational health and safety Laws and regulations;
and
(c)
during the past three (3) years, there has not been any significant
interruption in the operations of the Company due to inadequate
maintenance of any item of the Tangible Personal
Property.
SECTION
3.9.3 Intangible Personal Property. Section 3.9.3 of the
Company Disclosure Schedule sets forth, as of the date hereof,
(i) a true and accurate identification of each registered and
unregistered fictitious business name, trademark, service
mark
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