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”).
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, Parent 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 stockholders.
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:
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).
“
Closing ”—as defined in
Section 2.3.
“
Closing Date ”—the date and time as of which the
Closing actually takes place.
“
Company ”—as defined in the first paragraph 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,
the Non-competition 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 Agreements ”—as defined in
Section 2.4(a)(iii).
“
Encumbrance ”—any charge, claim, community
property interest, condition, equitable interest, lien, option,
pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, voting, transfer,
receipt of income, or exercise of any other attribute of
ownership.
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“
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) protecting
resources, species, or ecological amenities;
(f) reducing
to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning
up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention;
or
(h) making
responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover
for injuries done to public assets.
“
ERISA ”—the Employee Retirement Income Security
Act of 1974 or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
“
Escrow Agreement ”—as defined in
Section 2.4.
“
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;
(b) federal,
state, local, municipal, foreign, or other government;
(c) governmental
or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national
organization or body; or
(e) body
exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
“
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
4
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, or a prudent Person could be expected to
discover or otherwise become aware of such fact or other matter in
the course of conducting a reasonably comprehensive investigation
concerning the existence of such fact or other
matter.
“
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
5
(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:
(d) each
other member of such individual’s Family;
(e) any
Person that is directly or indirectly controlled by such individual
or one or more members of such individual’s
Family;
(f) any
Person in which such individual or members of such
individual’s Family hold (individually or in the aggregate) a
Material Interest; and
(g) 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:
(h) 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;
(i) any
Person that holds a Material Interest in such specified
Person;
(j) each
Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar
capacity);
(k) any
Person in which such specified Person holds a Material
Interest;
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(l) any
Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity);
and
(m) any
Related Person of any individual described in clause (b) or
(c).
For
purposes of this definition, (a) the “Family” of
an individual includes (i) the individual, (ii) the
individual’s spouse, (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.
“
Shares ”—as defined in the Recitals of this
Agreement.
“
Subsidiary ”—with respect to any Person (the
“Owner”), any corporation or other Person of which
securities or other interests having the power to elect a majority
of that corporation’s or other Person’s board of
directors or similar governing body, or otherwise having the power
to direct the business and policies of that corporation or other
Person (other than securities or other interests having such power
only upon the happening of a contingency that has not occurred) are
held by the Owner or one or more of its Subsidiaries; when used
without reference to a particular Person, “Subsidiary”
means a Subsidiary of the Company.
“
Tax Return ”—any return (including any
information return), report, statement, schedule, notice, form, or
other document or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or
payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
“
Threat of Release ”—a substantial likelihood of
a Release that may require action in order to prevent or mitigate
damage to the Environment that may result from such
Release.
“
Threatened ”—a claim, Proceeding, dispute,
action, or other matter will be deemed to have been
“Threatened” if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other
circumstances exist, that would lead a prudent Person to conclude
that such a claim,
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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 Parent 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. Unless this Agreement shall have been terminated pursuant
to Sections 9, the closing of the Merger (the “
Closing ”) shall take place at the offices of McAfee
& Taft A Professional Corporation, at a time and date to be
specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set
forth in Sections 7 and 8, or at such other time, date and
location as the parties hereto agree in writing (the “
Closing Date ”). Closing signatures may be transmitted
by facsimile.
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, a copy of which is attached hereto
as Exhibit A, shall be the Certificate of Incorporation of the
Surviving Corporation.
(b) Also
at the Effective Time, the Bylaws of the Merger Sub, a copy of
which is attached hereto as Exhibit B, shall be the Bylaws of
the Surviving Corporation.
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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 the Company
Shareholder, the following shall occur:
(a) Conversion of Company Common Stock . Other than any
shares to be canceled pursuant to Section 2.5(c), each share
of capital stock of the Company (“Shares”) issued and
outstanding immediately prior to the Effective Time will be
automatically converted (subject to Section 2.5(f)) into the
right to receive on the Closing :
(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 in the form attached hereto
as Exhibit _____ 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 (but not less than $1.00), 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.
Share
payments under Subsection (a)(iii) above to be made upon the
achievement of the following sales targets with historically
comparable gross margins:
|
|
2007
|
|
$24,000,000 above current Aduddell
Restoration Divisional revenue of $7,500,000
|
|
|
|
|
|
|
|
2008
|
|
10%
increase over combined previous year for Anderson
Division
|
Partial payment
may be earned for each period as follows:
$2,000,000
short of goal pays 75% of total
9
$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.
2.6 Surrender of Certificates .
(a) Exchange Procedures. Upon surrender of Certificates at
the Closing, the holders of such Certificates shall receive in
exchange therefore such amounts of cash and certificates
representing the number of shares of Parent 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 Parent Common Stock issuable pursuant to
Section 1.6(a).
(b) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of
this Agreement with respect to Parent 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 Parent
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
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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 Parent 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 Parent 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.
2.7 No Further Ownership Rights in Company Stock . All cash
and shares of Parent 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
Article I.
2.7 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.
2.8 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.
2.9 Rule 145 . All shares of Parent 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.
2.10
Stockholder Matters .
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(a) By
his execution of this Agreement, Company Stockholder, in his
capacity as a stockholder 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 Stockholder for purposes of Section 302A.441, Minnesota
Statutes 2006.
(b) Company
Stockholder represents and warrants as follows: (i) all
Aduddell Common Stock to be acquired by Company Stockholder
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
Stockholder 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).
2.11 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. 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 2.11 will not result in the termination of
this Agreement and will not relieve any party of any obligation
under this Agreement.
2.12 Closing Obligations . At the Closing:
(a) The
Company and the Company Stockholder 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”);
(ii) a
certificate executed by the Company and the Company Stockholder
representing and warranting to Aduddell that each of the
Company’s and the Company’s Stockholder representations
and warranties in this Agreement was accurate in all
12
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
(iii) a
Non-competition Agreement in the form attached hereto.
(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
(ii) the
Employment Agreement, executed by Aduddell.
(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 .
(c) 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.
(d) 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 Stockholder, enforceable against the
Company and the Company Stockholder in accordance with its terms.
Upon the execution and delivery by Company and the Company
Stockholder of the Escrow Agreement the Non-Competition Agreement
and the Employment Agreement (collectively, the
“Company’s and the Company Stockholder’s Closing
Documents”), the Company’s and the Company
Stockholder’s Closing Documents will constitute the legal,
valid, and binding obligations of the Company and the Company
Stockholder’s, enforceable against the Company and the
Company Stockholder in accordance with their respective terms. The
Company and the Company Stockholder has the absolute and
unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the
13
Company’s
and the Company Stockholder’s Closing Documents and to
perform its obligations under this Agreement and the
Company’s and the Company Stockholder’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 stockholders 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
14
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 stockholders’ 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 stockholders’
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 stockholders’ 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
15
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.
(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.
16
(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.
(a) As
used in this Section 3.13, the following terms have the
meanings set forth below.
“
Company Other Benefit Obligation ” means an Other
Benefit Obligation owed, adopted, or followed by 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
17
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).
(b) 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’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 p
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