EXHIBIT 2.1
AGREEMENT
AND PLAN OF ACQUISITION
BY AND BETWEEN
TECHNOL FUEL
CONDITIONERS, INC.
AND
ALLIED SYNDICATIONS, INC.
APRIL 10, 2005
20
<PAGE>
AGREEMENT AND PLAN OF
ACQUISITION
This AGREEMENT AND PLAN OF ACQUISITION
(this "Agreement"), dated as of, April
10, 2005, is made and entered into by and
between Technol Fuel Conditioners,
Inc., a Colorado corporation ("Parent"),
and Allied Syndications, Inc., a Texas
corporation (the "Company"). Parent and the
Company are sometimes collectively
referred to as the "Constituent
Corporations."
WITNESSETH:
WHEREAS, the respective Boards of Directors
of Parent and the Company have
determined that it is advisable and in the
best interests of the respective
corporations and their shareholders that
Allied be acquired by Parent on a share
exchange basis pursuant to the terms of
this Agreement, pursuant to which Allied
be a wholly owned subsidiary of Parent;
and
WHEREAS, for United States federal income
tax purposes, the parties intend that
the Acquisition shall qualify as a
"reorganization" under Section 368(a) of the
Internal Revenue Code of 1986, as amended
(the "Code"), and that this Agreement
constitutes a "plan of reorganization"
within the meaning of the Code; and
WHEREAS, Parent and the Company desire to
make certain representations,
warranties, covenants, and agreements in
connection with, and establish various
conditions precedent to, the Acquisition;
and
WHEREAS, as a condition to, and upon the
execution of this Agreement, Richard
Underwood, the respective Founder is to be
employed by contractual agreement
with the Company to ensure the continuity
of management of the Company, and
WHEREAS, the parties have agreed that the
existing assets and business of
Parent, through its wholly owned
subsidiary, Technol Fuel Conditioners, Inc., a
New Jersey Corporation, will be sold to
Technol Fuel Acqusition Corp. a New
Jersey corporation, which will assume all
the current subsidiary payables and
obligations pursuant to the attached Asset
Purchase Agreement to be consummated
immediately after the effective date of
this Agreement; and
WHEREAS, the Parties and certain persons
who are stockholders of Parent have
entered into certain Escrow Agreement
attached hereto as Exhibit C (the "Escrow
Agreement") whereby the amount of shares of
the common stock of Parent that may
be sold by said stockholders does not
unduely burden the trading market for the
Parent's common stock for a period of time
following the Closing of this
Agreement.
WHEREAS: the Company has entered into that
certain Responsible Party Agreement
attached hereto as Exhibit D (the
"Responsible Party Agreement") to ensure that
certain filings and reports required by the
Securities Exchange Act of 1934 (the
"1934 Act") are timely filed in accordance
with the 1934 Act and the rules and
regulations promulgated by the U.S.
Securities and Exchange Commission
thereunder.Ver6
WHEREAS, as an inducement to Parent to
enter into this Agreement, certain
shareholders of the Company are
concurrently herewith entering into a Voting
Agreement (the "Voting Agreement") in
substantially the form attached hereto as
Exhibit B, whereby each such shareholder
agrees to vote in favor of the
Acquisition and all other transactions
contemplated by this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the
representations, warranties, covenants
and agreements set forth in this Agreement
and in the Articles of Acquisition
(as defined in Section 1.3 hereof), the
parties hereto, intending to be legally
bound, agree as follows:
A.
THE ACQUISITION
1.
THE
ACQUISITION. At the Effective Time (as defined in Section 1.3
hereof), subject to the terms and
conditions of this Agreement the Company,
shall be acquired in its entirety by Parent
subject to the planned "step
transaction" anticipated by the Constituent
Corporations to ensure the Company's
compliance with applicable state securities
laws, the Securities Act of 1933,
and the Securities Exchange Act of 1934 as
reasonably determined by the Company
and by each of the Constituent Corporations
(the "Securities Compliance
Requirement")
1.2
EFFECT OF
ACQUISITION. At the Effective Time, the effect of the
Acquisition shall be as provided in this
Agreement, the applicable provisions of
the Colorado Business Corporations Act
("CBCA").
1.3
EFFECTIVE TIME.
Subject to the terms and conditions of this
Agreement, the Acquisition shall become
effective upon filing any required
notices with Texas or Colorado.The time of
effectiveness is herein referred to
as the "Effective Time." The day on which
the Effective Time shall occur is
herein referred to as the "Effective
Date."
1.4
DIRECTORS AND
OFFICERS. From and after the Effective Time, the
directors of the Parent Corporation
(Technol) shall be the persons who were the
directors of the Company immediately prior
to the Effective Time as elected by
the existing directors of Parent, prior to
their resignations, and the officers
of the Parent Corporation shall be the
persons who were the officers of the
Company immediately prior to the Effective
Time. Said directors and officers of
the Parent Corporation shall hold office
for the term specified in, and subject
to the provisions contained in, the
Articles of Incorporation and Bylaws of the
Parent Corporation and applicable law. If,
at or after the Effective Time, a
vacancy shall exist on the Board of
Directors or in any of the offices of the
Parent Corporation, such vacancy shall be
filled in the manner provided in the
Articles of Incorporation and Bylaws of the
Parent Corporation.1.5 Taking of
Necessary Action; Further Action. Subject
to the Securities Compliance
Requirement, Parent, Subsidiary and the
Company, respectively, shall each use
its or their commercially reasonable best
efforts to take all such action as may
be necessary or appropriate to effectuate
the Acquisition under the CBCA at the
time specified in Section 1.3 hereof. 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 Parent
Corporation with full right, title and
possession to all properties, rights,
privileges, immunities, powers and
franchises of either of the Constituent
Corporations, the officers of the Parent
Corporation are fully authorized in the
name of each Constituent Corporation or
otherwise to take, and shall take, all such
lawful and necessary action.
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1.5
THE CLOSING. The
closing of the transactions contemplated by this
Agreement (the "Closing") will take place
at the offices of the Company, within
three business days after the date on which
the last of the conditions set forth
in Article VI shall have been satisfied or
waived, or at such other place and on
such other date as is mutually agreeable to
Parent and the Company (the "Closing
Date"). The Closing will be effective as of
the Effective Time.
B.
CONVERSION OF SECURITIES
1.
Conversion
of Securities. At the Effective Time, by virtue of the
Acquisition and without any action on the
part of Parent, Subsidiary, the
Company, the holder of any shares of
Company Common Stock (as defined below) or
the holder of any options, warrants or
other rights to acquire or receive shares
of Company Common Stock, the following
shall occur:
(a) Conversion
of Company Common Stock. At the Effective Time,
each share of common stock, no par value,
of the Company (the "Company Common
Stock") issued and outstanding immediately
prior to the Effective Time (other
than any shares of Company Common Stock to
be canceled pursuant to Section
2.1(b) and any Dissenting Shares (as
defined in Section 2.1(g) below)) will be
canceled and extinguished and be converted
automatically into the right to
receive forty hundred twenty nine (429) (or
such conversion which, when
converted will deliver to Company
shareholders Forty Hundred Twenty Nine
Thousand (429,000) shares of Parent Series
A Convertible Preferred Stock (the
"Exchange Ratio") of the Parent (the
"Parent Series A Convertible Preferred
Stock") pursuant to the attached
designation of such Series A Convertible
Preferred Stock. The Parties acknowledge
and agree that the timing and
arrangements for the actions to be taken to
effect the purposes of this Section
2.1 of this Agreement shall be undertaken
only at such time with such protective
measures so as to allow the Company to be
reasonably assured that exchange of
the Company Common Stock for the Series A
Preferred Stock can be effected with
reasonable assurance that the Company is in
compliance with the requirements of
the Securities Act of 1933, applicable
state securities laws, and the Texas
Business Corporation Act.
(b) Cancellation
of Company Common Stock Owned by Parent or
Company. At the Effective Time, all shares
of Company Common Stock that are
owned by the Company as treasury stock and
each share of Company Common Stock
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 canceled and
extinguished without any conversion
thereof.
(c) Adjustments
to Exchange Ratio. The Exchange Ratio shall be
adjusted in the event of (i) any stock
split, reverse split, stock dividend
(including any dividend or distribution of
securities convertible into Parent
Common Stock or Company Common Stock),
reorganization, re-capitalization,
combination, exchange of shares, adjustment
or other like change with respect to
Parent Common Stock or Company Common Stock
occurring after the date hereof and
prior to the Effective Time or (ii) any
increase in the number of shares of
Company Common Stock on a fully diluted,
as-converted basis (i.e., assuming
issuance of all shares of Common Stock
issuable upon the exercise or conversion
of all securities outstanding immediately
prior to the Effective Time which are
convertible into or exercisable for shares
of Company Common Stock, whether or
not vested), other than increases resulting
from transactions permitted in
Section 5.1 hereof, so as to provide
holders of Company Common
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Stock and Parent the same economic effect
as contemplated by this Agreement
prior to such stock split, reverse split,
stock dividend, reorganization,
re-capitalization, combination, exchange of
shares, adjustment or like change or
increase.
(d) Fractional
Shares. No fraction of a share of Parent Series A
Convertible Preferred Stock will be issued,
but in lieu thereof each holder of
shares of Company Common Stock who would
otherwise be entitled to a fraction of
a share of Parent Series A Convertible
Preferred Stock (after aggregating all
fractional shares of Parent Series A
Convertible Preferred Stock to be received
by such holder) shall receive from Parent
one whole share of Parent Series A
Convertible Preferred Stock
(e) Dissenting
Shares. (i) Notwithstanding anything in this
Agreement to the contrary, if dissenters
rights exist under the Texas Business
Corporations Act (TBCA) which are
applicable to the Acquisition, shares of
Company Common Stock that are issued and
outstanding prior to the Effective Date
and which are held by shareholders who (A)
have not voted such shares in favor
of the Acquisition, (B) shall have
delivered, prior to any vote on the
Acquisition, a written demand for the fair
value of such shares in the manner
provided in the TBCA and (C) as of the
Effective Time, shall not have
effectively withdrawn or lost such right to
dissenters' rights ("Dissenting
Shares"), shall not be converted into or
represent a right to receive the shares
of Parent Series A Convertible Preferred
Stock pursuant to Section 2.1 hereof,
but the holders thereof shall be entitled
only to such rights as are granted by
the CBCA. Each holder of Dissenting Shares
who becomes entitled to payment for
such shares pursuant to the TBCA shall
receive payment therefore from the Parent
Corporation in accordance with the TBCA;
provided, however, that if any such
holder of Dissenting Shares shall have
effectively withdrawn such holder's
demand for appraisal of such shares or lost
such holder's right to appraisal and
payment of such shares under the TBCA, such
holder or holders (as the case may
be) shall forfeit the right of appraisal of
such shares and each such share
shall thereupon be deemed to have been
canceled, extinguished and converted, as
of the Effective Time, into and represent
the right to receive payment from the
Parent Corporation of the applicable shares
of Parent Series A Convertible
Preferred Stock, as provided in Section 2.1
hereof.
(ii) The Company shall
give Parent (A) prompt notice of any written
demand for fair value, any withdrawal of a
demand for fair value and any other
instrument served pursuant to the TBCA
received by the Company, and (B) the
opportunity to direct all negotiations and
proceedings with respect to demands
for fair value under the TBCA. The Company
shall not, except with the prior
written consent of Parent, voluntarily make
any payment with respect to any
demand for fair value or offer to settle or
settle any such demand.
2.
STOCK
OPTIONS.
(a) At the
Effective Time, each outstanding option to purchase
shares of Company Common Stock under any
Company Stock Option Plans (each, a
"Company Option"), whether vested or
unvested immediately prior to the Effective
Time, shall be assumed by Parent and
converted into an option (each, a "Parent
Option") to acquire, on substantially the
same terms and conditions, including
but not limited to any performance criteria
with respect to the Company's
business operations set forth in the
applicable stock option agreements as were
applicable under such Company Option, the
number of whole shares of Parent
Series A Convertible Preferred Stock equal
to the number of shares of Company
Common Stock that were issuable upon
exercise of such Company Option immediately
prior to the Effective Time multiplied by
the Exchange Ratio, as adjusted
pursuant to Section 2.1(e) above (rounded
down to
<PAGE>
the nearest whole number of shares of
Parent Series A Convertible Preferred
Stock), and the per share exercise price of
the shares of Parent Series A
Convertible Preferred Stock issuable upon
exercise of such Parent Option shall
be equal to the exercise price per share of
Company Common Stock at which such
Company Option was exercisable immediately
prior to the Effective Time divided
by the Exchange Ratio, as adjusted pursuant
to Section 2.1(e) above (rounded up
to the nearest whole cent). Other than
pursuant to the terms of existing
commitments (all of which commitments are
identified in Section 2.2 of the
Company Disclosure Letter (as defined in
the preamble to Article III hereof)),
the Company shall not, take any action
prior to the Effective Time that will
extend the exercise period of any Company
Option or cause the vesting period of
any Company Option to accelerate under any
circumstances, regardless of whether
such circumstances are to occur before or
after the Effective Time, or otherwise
amend the terms of outstanding Company
Options.
(b) All
outstanding rights of the Company which it may hold
immediately prior to the Effective Time to
repurchase unvested shares of Company
Common Stock (the "Repurchase Options")
shall continue in effect following the
Acquisition and shall continue to be
exercisable by the Parent upon the same
terms and conditions in effect immediately
prior to the Effective Time, except
that the shares purchasable pursuant to the
Repurchase Options and the purchase
price per shall be adjusted to reflect the
conversion to Parent Series A
Convertible Preferred Stock and the
Exchange Ratio.
(c) Parent shall take all
corporate action necessary to reserve
for issuance a sufficient number of shares
of Parent Series A Convertible
Preferred Stock for delivery upon exercise
of the Parent Options and/or debt
conversion.
(d) Parent will
make good faith efforts to ensure, to the extent
permitted by the Code and to the extent
required by and subject to the terms of
any such Incentive Stock Options, that
Company Options which qualified as
Incentive Stock Options prior to the
Closing Date continue to qualify as
Incentive Stock Options of Parent after the
Closing.
(e) Warrants. At
the Effective Time, each warrant, if any, to
purchase shares of Company Common Stock
outstanding immediately prior to the
Effective Date (each, a "Company Warrant")
shall be assumed by Parent and
converted into a warrant (each a "Parent
Warrant") to acquire, on substantially
the same terms and conditions, the number
of whole shares of Parent Series A
Convertible Preferred Stock equal to the
number of shares of Company Common
Stock that were issuable upon exercise of
such Company Warrant immediately prior
to the Effective Time multiplied by the
Exchange Ratio, as adjusted pursuant to
Section 2.1(e) above (rounded down to the
nearest whole number of shares of
Parent Series A Convertible Preferred
Stock), and the per share exercise price
of the shares of the Parent Series A
Convertible Preferred Stock issuable upon
exercise of such Parent Warrant shall be
equal to the exercise price per share
of Company Common Stock at which such
Company Warrant was exercisable
immediately prior to the Effective Time
divided by the Exchange Ratio, as
adjusted pursuant to Section 2.1(e) above
(rounded up to the nearest whole
cent). Other than pursuant to the terms of
existing commitments (all of which
commitments are identified in Section 2.3
of the Company Disclosure Letter), the
Company shall not take any action prior to
the Effective Time that will extend
the exercise period of any Company Warrant
or otherwise amend the terms of
outstanding Company Warrants.
<PAGE>
3.
EXCHANGE
OF CERTIFICATES.
(a) Prior to the
Effective Time, Parent shall designate a law
firm, transfer agent, a commercial bank,
trust company or other financial
institution, which may include Parent's
stock transfer agent, to act as exchange
agent ("Exchange Agent") in the
Acquisition.
(b) Promptly
after the Effective Time, Parent shall make available
to the Exchange Agent for exchange in
accordance with this Article II, (i) the
aggregate number of shares of Parent Series
A Convertible Preferred Stock
issuable pursuant to Section 2.1 in
exchange for outstanding shares of Company
Common Stock, and (ii) cash in an amount
sufficient to permit payment of cash in
lieu of fractional shares pursuant to
Section 2.1(f) (the "Exchange Fund").
Subject to the Company's reasonable
assurance of compliance with state and
federal securities laws and a contemplated
"step transaction" to effect the
purposes of the exchange, then within ten
(10) business days after the Effective
Time, the Parent shall cause to be mailed
to each holder of record of a
certificate or certificates which
immediately prior to the Effective Time
represented outstanding shares of Company
Common Stock (the "Certificates") (i)
a letter of transmittal (which shall
specify that delivery shall be effected,
and risk of loss and title to the
Certificates shall pass, only upon proper
delivery of the Certificates to the
Exchange Agent, and shall be in such form
and have such other provisions as Parent
may reasonably specify and which shall
be reasonably acceptable to the Company)
and (ii) instructions for use in
effecting the surrender of the Certificates
in exchange for certificates
representing shares of Parent Series A
Convertible Preferred Stock (and cash in
lieu of fractional shares). Upon surrender
of a Certificate for cancellation to
the Exchange Agent, together with such
letter of transmittal, duly completed and
validly executed, and such other documents
as may be reasonably required
pursuant to such instructions, the holder
of such Certificate shall be entitled
to receive in exchange a certificate
representing the number of whole shares of
Parent Series A Convertible Preferred
Stock, plus cash in lieu of fractional
shares in accordance with Section 2.1(f),
to which such holder is entitled
pursuant to Section 2.1, and the
Certificate so surrendered shall forthwith be
canceled. Until surrendered as contemplated
by this Section 2.5, each
Certificate that, prior to the Effective
Time, represented shares of Company
Common Stock will be deemed from and after
the Effective Time, for all corporate
purposes, other than the payment of
dividends, to evidence the right to receive
the number of full shares of Parent Series
A Convertible Preferred Stock into
which such shares of Company Common Stock
shall have been so converted and the
right to receive an amount of cash in lieu
of the issuance of any fractional
shares in accordance with Section 2.1(f).
The Constituent Corporations recognize
and agree that the timing and procedures
described in this Section 2.4(c) shall,
at all times, be subject to the Company's
reasonable assurance that its
performance of the foregoing actions will
not conflict with its obligations and
ensure its compliance under state and
federal securities laws and the Company
shall have the right, in the exercise of
its good faith, to amend or adjust the
actions contemplated by this Section 2.4(c)
to ensure the performance of said
obligations and compliance.
(c) No dividends
or other distributions declared or made after the
Effective Time with respect to Parent
Series A Convertible Preferred Stock with
a record date after the Effective Time will
be paid to the holder of any
un-surrendered Certificate with respect to
the shares of Parent Series A
Convertible Preferred Stock represented
thereby until the holder of record of
such Certificate shall surrender such
Certificate. Subject to applicable law,
following surrender of any such
Certificate, there shall be paid to the record
holder of the certificates
<PAGE>
representing whole shares of Parent Series
A Convertible Preferred Stock issued
in exchange therefore, without interest, at
the time of such surrender, the
amount of dividends or other distributions
with a record date after the
Effective Time theretofore paid with
respect to such whole shares of Parent
Series A Convertible Preferred Stock.
(d) None the
Parent Corporation or the Exchange Agent shall be
liable to any holder of shares of Company
Common Stock for any amount properly
delivered to a public official in
compliance with any abandoned property,
escheat or similar law.
(e) At the
Effective Time, the stock transfer books of the Company
shall be closed and there shall be no
further registration of transfers of
shares of Company Common Stock thereafter
on the records of the Company. From
and after the Effective Time, the holders
of certificates representing shares of
Company Common Stock outstanding
immediately prior to the Effective Time shall
cease to have any rights with respect to
such shares of Company Common Stock
except as otherwise provided in this
Agreement or by law.
(f) Subject to
any applicable escheat or similar laws, any portion
of the Exchange Fund that remains unclaimed
by the former shareholders of the
Company for one year after the Effective
Time shall be delivered by the Exchange
Agent to Parent, upon demand of Parent, and
any former shareholders of the
Company shall thereafter look only to
Parent for satisfaction of their claim for
certificates representing shares of Parent
Series A Convertible Preferred Stock
in exchange for their shares of Company
Common Stock pursuant to the terms of
Section 2.1 hereof.
(g) If any
Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that
fact, in form and substance reasonably
acceptable to the Exchange Agent, by the
person claiming such Certificate to be
lost, stolen or destroyed, and complying
with such other conditions as the
Exchange Agent may reasonably impose
(including the execution of an
indemnification undertaking or the posting
of an indemnity bond or other surety
in favor of the Exchange Agent and Parent
with respect to the Certificate
alleged to be lost, stolen or destroyed),
the Exchange Agent will deliver to
such person, such shares of Parent Series A
Convertible Preferred Stock and cash
in lieu of fractional shares, if any, as
may be required pursuant to Section
2.1.
C.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to
Parent and its Subsidiary that to the
Knowledge of the Company, the statements
contained in this Article III are true
and correct, except as set forth in the
letter delivered by the Company to
Parent on the date hereof (the "Company
Disclosure Letter") (which Company
Disclosure Letter sets forth the exceptions
to the representations and
warranties contained in this Article III
under captions referencing the Sections
to which such exceptions apply):
1.
ORGANIZATION AND QUALIFICATION. To the Knowledge of the
Company,
each of the Company and its Subsidiaries
(as defined below) is a company duly
incorporated, validly existing and, if
applicable, in good standing under the
laws of the jurisdiction of its
incorporation and each such entity has all
requisite corporate power and authority to
own, lease and operate its properties
and to carry on its business as now being
conducted. To the Knowledge of the
<PAGE>
Company, each of the Company and its
Subsidiaries is duly qualified or licensed
to carry on its business as it is now being
conducted, and is qualified to
conduct business, in each jurisdiction
where the character of its properties
owned or leased or the nature of its
activities makes such qualification
necessary, except for failures to be so
qualified that would not, individually
or in the aggregate, have a Company
Material Adverse Effect (as defined below).
Neither the Company nor any of its
Subsidiaries is in violation of any of the
provisions of its Articles of Incorporation
or other applicable charter document
(any such document of any business entity
hereinafter referred to as its
"Charter Document") or its Bylaws, or other
applicable organizational document
(any such documents of any business entity
hereinafter referred to as its
"Governing Document"). The Company has
delivered to Parent accurate and complete
copies of the respective Charter Documents
and Governing Documents, as currently
in effect, of each of the Company and its
Subsidiaries. As used in this
Agreement, the term "Company Material
Adverse Effect" means any change, effect,
event or condition that (i) has a material
adverse effect on the assets,
business or financial condition of the
Company and its Subsidiaries, taken as a
whole (other than any such change, effect,
event or condition that arises as a
result of the transactions contemplated
hereby), or (ii) would prevent or
materially impair the Company's ability to
consummate the transactions
contemplated hereby. Notwithstanding the
foregoing, the term "Company Material
Adverse Effect" shall, for all purposes
under this Agreement, not include any
one or more changes, effects, events, or
conditions that create or result in
liabilities, costs, expenses that are less
than two hundred fifty thousand
dollars ($250,000). As used in this
Agreement, the term "Subsidiary" when used
with respect to any party means any
corporation or other organization, whether
incorporated or unincorporated, of which
such party directly or indirectly owns
or controls at least a majority of the
securities or other interests having by
their terms ordinary voting power to elect
a majority of the board of directors
or others performing similar functions.
2.
CAPITAL
STOCK OF SUBSIDIARIES. To the Knowledge of the Company,
neither the Company nor any of its
Subsidiaries owns, controls or holds with the
power to vote, directly or indirectly, of
record, beneficially or otherwise, any
share of capital stock or any equity or
ownership interest in any company,
corporation, partnership, association,
joint venture, business, trust or other
entity, except as listed in Section 3.2 of
the Company Disclosure Letter. Except
as set forth in Section 3.2 of the Company
Disclosure Letter, the Company is
directly or indirectly the record and
beneficial owner of all of the outstanding
shares of capital stock of each of its
Subsidiaries and no equity securities of
any of such Subsidiaries are or may be
required to be issued by reason of any
options, warrants, scrip, rights to
subscribe for, calls or commitments of any
character whatsoever relating to, or
securities or rights convertible into or
exchangeable for, shares of any capital
stock of any such Subsidiary, and there
are no contracts, commitments,
understandings or arrangements by which the
Company or any such Subsidiary is bound to
issue, transfer or sell any shares of
such capital stock or securities
convertible into or exchangeable for such
shares. Other than as set forth in Section
3.2 of the Company Disclosure Letter,
all of such shares so owned by the Company
are validly issued, fully paid and
non-assessable and are owned by it free and
clear of any claim, lien, pledge,
security interest or other encumbrance of
any kind (collectively "Liens") with
respect thereto other than restrictions on
transfer pursuant to applicable
securities laws.
3.
CAPITALIZATION. The authorized capital stock of the Company
consists
of 10,000,000 shares of Company Common
Stock, no par value per share and no
other form of equity shares are authorized.
As of the close of business on
December 31, 2004(the "Company Measurement
Date"), (a)no more than ten million
(10,000,000) shares of Company Common
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Stock were issued and outstanding (the
"Outstanding Shares"), (b) no shares of
Company Preferred Stock were issued and
outstanding, (c) the Company had no
shares of Company Common Stock held in its
treasury, (d) no Company Options to
purchase shares of Company Common Stock in
the aggregate have been granted and
remain outstanding under the Company Stock
Option Plans ("Company Option
Plans"), (e) no Company Warrants to
purchase shares of Company Common Stock were
outstanding, and (f) except for the Company
Options and Company Warrants, there
were no outstanding Rights (defined below).
Except as permitted by Section
5.1(b) and except as provided by the last
sentence of this Section 3.3 of this
Agreement, since the Company Measurement
Date, no additional shares in the
Company have been issued and no Rights have
been granted. Except as described in
the preceding sentence or as set forth in
Section 3.3 of the Company Disclosure
Letter, the Company has: (1) no outstanding
bonds, debentures, notes or other
securities or obligations the holders of
which have the right to vote or which
are convertible into or exercisable for
securities having the right to vote on
any matter on which any shareholder of the
Company has a right to vote; (2) all
issued and outstanding shares of Company
Common Stock are duly authorized,
validly issued, fully paid, non-assessable
and free of preemptive rights; and
(3) there are not, as of the date hereof,
any existing options, warrants, stock
appreciation rights, stock issuance rights,
calls, subscriptions, convertible
securities or other rights which obligate
the Company or any of its Subsidiaries
to issue, exchange, transfer or sell any
shares of the capital stock of the
Company or any of its Subsidiaries, other
than rights to purchase shares under
the Company Stock Option Plans and Company
Warrants, or awards granted pursuant
thereto (collectively, "Rights"). As of the
date hereof, there are no
outstanding contractual obligations of the
Company or any of its Subsidiaries to
repurchase, re-price, redeem or otherwise
acquire any shares of the capital
stock of the Company or any of its
Subsidiaries. As of the date hereof, there
are no outstanding contractual obligations
of the Company to vote or to dispose
of any shares of the capital stock of any
of its Subsidiaries. Notwithstanding
the representations and warranties made in
this Section 3.3 of this Agreement,
the Parties acknowledge that the Company
has undertaken and has continued to
undertake prior to the Effective Date, an
exempt offering of its common stock to
certain investors pursuant to claims of
exemption under state and federal
securities with the result that the Company
has issued and has received
subscriptions receivable for the issuance
of additional shares of the Company's
Common Stock.
4.
AUTHORITY
RELATIVE TO THIS AGREEMENT. To the Knowledge of the
Company, the Company has the requisite
corporate power and authority to execute
and deliver, and perform its obligations
under, this Agreement and the Company
Option Agreement and, subject to obtaining
the necessary approval of its
shareholders, to consummate the Acquisition
and the other transactions
contemplated hereby and thereby under
applicable law. To the Knowledge of the
Company, the execution and delivery of this
Agreement and the consummation of
the Acquisition and other transactions
contemplated hereby and thereby have been
duly and validly authorized by the Board of
Directors of the Company and no
other corporate proceedings on the part of
the Company are necessary to
authorize this Agreement or to consummate
the Acquisition or other transactions
contemplated hereby and thereby (other than
approval by the Company's
shareholders required by applicable law).
To the Knowledge of the Company, this
Agreement has been duly and validly
executed and delivered by the Company and,
assuming the due authorization, execution
and delivery hereof by Parent each
constitutes a valid and binding agreement
of the Company, enforceable against
the Company in accordance with its terms,
except to the extent that its
enforceability may be limited by applicable
bankruptcy, insolvency,
reorganization, moratorium or other laws
affecting the enforcement of creditors
rights generally or by general equitable
principles.
<PAGE>
5.
NO
CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming
that all filings, permits, authorizations, consents
and approvals or waivers thereof have been
duly made or obtained as contemplated
by Section 3.5(b) hereof, to the Knowledge
of the Company neither the execution
and delivery of this Agreement by the
Company nor the consummation of the
Acquisition or other transactions
contemplated hereby or thereby nor compliance
by the Company with any of the provisions
hereof will (i) violate, conflict
with, or result in a breach of any
provision of, or constitute a default (or an
event which, with notice or lapse of time
or both, would constitute a default)
under, or result in the termination or
suspension of, or accelerate the
performance required by, or result in a
right of termination or acceleration
under, or result in the creation of any
Lien upon any of the properties or
assets of the Company or any of its
Subsidiaries under, any of the terms,
conditions or provisions of (x) their
respective Charter Documents or Governing
Documents, (y) any note, bond, charge,
lien, pledge, mortgage, indenture or deed
of trust to which the Company or any such
Subsidiary is a party or to which they
or any of their respective properties or
assets may be subject, or (z) any
license, lease, agreement or other
instrument or obligation to which the Company
or any such Subsidiary is a party or to
which they or any of their respective
properties or assets may be subject, or
(ii) violate any judgment, ruling,
order, writ, injunction, decree, statute,
rule or regulation applicable to the
Company or any of its Subsidiaries or any
of their respective properties or
assets, except, in the case of clauses (i)
(y) and (z) and (ii) above, for such
violations, conflicts, breaches, defaults,
terminations, suspensions,
accelerations, rights of termination or
acceleration or creations of liens,
security interests, charges or encumbrances
which would not, individually or in
the aggregate, have a Company Material
Adverse Effect.
(b) To the
Knowledge of the Company, o filing or registration with
or notification to and no permit,
authorization, consent or approval of any
court, commission, governmental body,
regulatory authority, agency or tribunal
wherever located (a "Governmental Entity")
is required to be obtained, made or
given by the Company in connection with the
execution and delivery of this
Agreement or the consummation by the
Company of the Acquisition or other
transactions contemplated hereby or thereby
except such consents, approvals,
orders, authorizations, registrations,
declarations and filings as may be
required under applicable state securities
laws or any country other than the
United States, or (ii) where the failure to
obtain any such consents, approvals,
authorizations or permits, or to make such
filings or notifications, would not,
individually or in the aggregate, have a
Company Material Adverse Effect.
6.
SECURITIES
FILINGS; FINANCIAL STATEMENTS.
(a) To the
Knowledge of the Company, the Company and/or its
predecessor, has filed all forms, reports,
schedules, statements and other
documents required to be filed by it since
its inception in 2003 to the date
hereof (collectively, as supplemented and
amended since the time of filing, the
"Company Securities Reports") with any
applicable governing body in Texas or
Kentucky. The Company Securities Reports
(i) were prepared in all material
respects with all applicable requirements
of the Securities Acts of Texas and/or
Kentucky as applicable, as the case may be
and (ii) did not at the time they
were filed contain any untrue statement of
a material fact or omit to state any
material fact required to be stated therein
or necessary in order to make the
statements therein, in light of the
circumstances under which they were made,
not misleading. The representation in
clause (ii) of the preceding sentence does
not apply to any misstatement or omission
in any Company Securities Report filed
prior to the date of this
<PAGE>
Agreement which was superseded by a
subsequent Company Securities Report filed
prior to the date of this Agreement. No
Subsidiary of the Company is or was
required to file any report, form or other
document with any regulatory body.
(b) To the
Knowledge of the Company, the un-audited consolidated
financial statements and un-audited
consolidated interim financial statements of
the Company and its Subsidiaries included
(collectively, the "Financial
Statements") have been prepared in
accordance with United States generally
accepted accounting principles applied on a
consistent basis during the periods
involved (except as may be otherwise
indicated in the notes thereto) and present
fairly, in all material respects, the
financial position and results of
operations and cash flows of the Company
and its Subsidiaries on a consolidated
basis at the respective dates and for the
respective periods indicated (except,
in the case of all such financial
statements that are interim financial
statements, for footnotes and normal
year-end adjustments).
(c) Neither the
Company nor any of its Subsidiaries has any
liabilities or obligations of any nature,
whether absolute, accrued, un-matured,
contingent or otherwise whether due or to
become due, known or unknown, or any
unsatisfied judgments or any leases of
personalty or realty or unusual or
extraordinary commitments that are required
to be shown on the face of a balance
sheet or disclosed in notes to financial
statements under United States
generally accepted accounting principles,
except (i) liabilities recorded on the
Company's un-audited balance sheet at
September 30, 2004 (the "Balance Sheet")
included in the financial statements
referred in Section 3.6(a) hereof and the
notes thereto, or (ii) liabilities or
obligations incurred since September 30,
2004 (whether or not incurred in the
ordinary course of business and consistent
with past practice) that would not,
individually or in the aggregate, have a
Company Material Adverse Effect not
otherwise reflected in the Company
disclosure schedules attached hereto under
Schedule 3.2(c).
7.
ABSENCE OF
CHANGES OR EVENTS. EXCEPT AS SET FORTH IN SECTION 3.7 OF
THE COMPANY DISCLOSURE LETTER, SINCE
DECEMBER 31, 2004 THROUGH THE DATE OF THIS
AGREEMENT AND TO THE KNOWLEDGE OF THE
COMPANY, THE COMPANY AND ITS SUBSIDIARIES
HAVE NOT INCURRED ANY LIABILITY OR
OBLIGATION THAT HAS RESULTED OR WOULD
REASONABLY BE EXPECTED TO RESULT IN A
COMPANY MATERIAL ADVERSE EFFECT, AND THERE
HAS NOT BEEN ANY CHANGE IN THE BUSINESS,
FINANCIAL CONDITION OR RESULTS OF
OPERATIONS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES WHICH HAS HAD, OR WOULD
REASONABLY BE EXPECTED TO HAVE,
INDIVIDUALLY OR IN THE AGGREGATE, A COMPANY
MATERIAL ADVERSE EFFECT, AND THE COMPANY
AND ITS SUBSIDIARIES HAVE CONDUCTED
THEIR RESPECTIVE BUSINESSES IN THE ORDINARY
COURSE CONSISTENT WITH THEIR PAST
PRACTICES.
8.
LITIGATION. EXCEPT AS SET FORTH IN SECTION 3.8 OF THE COMPANY
DISCLOSURE LETTER AND TO THE KNOWLEDGE OF
THE COMPANY, THERE IS NO (a) CLAIM,
ACTION, SUIT OR PROCEEDING PENDING OR, TO
THE KNOWLEDGE (AS DEFINED IN SECTION
8.6 HEREOF) OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, THREATENED AGAINST OR
RELATING TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, OR (b) OUTSTANDING JUDGMENT,
ORDER, WRIT, INJUNCTION OR DECREE
(COLLECTIVELY, "ORDERS"), OR APPLICATION,
REQUEST OR MOTION THEREFOR, IN A PROCEEDING
TO WHICH THE COMPANY, ANY SUBSIDIARY
OF THE COMPANY OR ANY OF THEIR RESPECTIVE
ASSETS WAS OR IS A PARTY EXCEPT
ACTIONS, SUITS, PROCEEDINGS OR ORDERS THAT,
INDIVIDUALLY OR IN THE AGGREGATE,
HAS NOT HAD OR WOULD NOT REASONABLY BE
EXPECTED TO HAVE A COMPANY MATERIAL
ADVERSE EFFECT, AND NEITHER THE COMPANY NOR
ANY SUBSIDIARY IS IN DEFAULT IN ANY
MATERIAL RESPECT WITH RESPECT TO ANY SUCH
ORDER.
<PAGE>
9.
TITLE TO
PROPERTIES. THE COMPANY DOES NOT OWN ANY REAL PROPERTY. THE
COMPANY HAS HERETOFORE MADE AVAILABLE TO
PARENT CORRECT AND COMPLETE COPIES OF
ALL LEASES, SUBLEASES AND OTHER AGREEMENTS
(COLLECTIVELY, THE "REAL PROPERTY
LEASES") UNDER WHICH THE COMPANY OR ANY OF
ITS SUBSIDIARIES USES OR OCCUPIES OR
HAS THE RIGHT TO USE OR OCCUPY, NOW OR IN
THE FUTURE, ANY REAL PROPERTY OR
FACILITY (THE "LEASED REAL PROPERTY"),
INCLUDING WITHOUT LIMITATION ALL
MODIFICATIONS, AMENDMENTS AND SUPPLEMENTS
THERETO. EXCEPT IN EACH CASE WHERE THE
FAILURE WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, WOULD REASONABLY BE
EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE
EFFECT OR EXCEPT AS OTHERWISE SET
FORTH IN SECTION 3.9 OF THE COMPANY
DISCLOSURE LETTER, (i) THE COMPANY OR ONE OF
ITS SUBSIDIARIES HAS A VALID LEASEHOLD
INTEREST IN EACH PARCEL OF LEASED REAL
PROPERTY FREE AND CLEAR OF ALL LIENS EXCEPT
LIENS OF RECORD AND OTHER PERMITTED
LIENS AND EACH REAL PROPERTY LEASE IS IN
FULL FORCE AND EFFECT, (ii) ALL RENT
AND OTHER SUMS AND CHARGES DUE AND PAYABLE
BY THE COMPANY OR ITS SUBSIDIARIES AS
TENANTS THEREUNDER ARE CURRENT IN ALL
MATERIAL RESPECTS, (iii) NO TERMINATION
EVENT OR CONDITION OR UNCURED DEFAULT OF A
MATERIAL NATURE ON THE PART OF THE
COMPANY OR ANY SUCH SUBSIDIARY OR, TO THE
KNOWLEDGE OF THE COMPANY OR ANY SUCH
SUBSIDIARY, THE LANDLORD, EXISTS UNDER ANY
REAL PROPERTY LEASE, (iv) THE COMPANY
OR ONE OF ITS SUBSIDIARIES IS IN ACTUAL
POSSESSION OF EACH LEASED REAL PROPERTY
AND IS ENTITLED TO QUIET ENJOYMENT THEREOF
IN ACCORDANCE WITH THE TERMS OF THE
APPLICABLE REAL PROPERTY LEASE AND
APPLICABLE LAW, AND (v) THE COMPANY AND ITS
SUBSIDIARIES OWN OUTRIGHT ALL OF THE
PERSONAL PROPERTY (EXCEPT FOR LEASED
PROPERTY OR ASSETS FOR WHICH IT HAS A VALID
AND ENFORCEABLE RIGHT TO USE) WHICH
IS REFLECTED ON THE BALANCE SHEET, EXCEPT
FOR PROPERTY SINCE SOLD OR OTHERWISE
DISPOSED OF IN THE ORDINARY COURSE OF
BUSINESS AND CONSISTENT WITH PAST PRACTICE
AND EXCEPT FOR LIENS OF RECORD AND OTHER
PERMITTED LIENS. EXCEPT WHERE THE
FAILURE WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, HAVE A COMPANY MATERIAL
ADVERSE EFFECT, THE PLANT, PROPERTY AND
EQUIPMENT OF THE COMPANY AND ITS
SUBSIDIARIES THAT ARE USED IN THE
OPERATIONS OF THEIR BUSINESSES ARE IN
REASONABLE OPERATING CONDITION AND REPAIR,
SUBJECT TO ORDINARY WEAR AND TEAR,
AND, SUBJECT TO NORMAL MAINTENANCE, ARE
AVAILABLE FOR USE.
10.
CERTAIN
CONTRACTS. TO THE KNOWLEDGE OF THE COMPANY, NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES HAS
BREACHED, OR RECEIVED IN WRITING ANY
CLAIM OR NOTICE THAT IT HAS BREACHED, ANY
OF THE TERMS OR CONDITIONS OF (i) ANY
AGREEMENT, CONTRACT OR COMMITMENT REQUIRED
TO BE FILED AS AN EXHIBIT TO THE
COMPANY SECURITIES REPORTS (INCLUDING ANY
AGREEMENTS, CONTRACTS OR COMMITMENTS
ENTERED INTO SINCE SEPTEMBER 30, 2004 THAT
WILL BE REQUIRED TO BE FILED BY THE
COMPANY WITH THE SEC IN ANY REPORT), (ii)
ANY AGREEMENTS, CONTRACTS OR
COMMITMENTS WITH MANUFACTURERS, SUPPLIERS,
SALES REPRESENTATIVES, DISTRIBUTORS,
OR OEM STRATEGIC PARTNERS OF THE COMPANY
PURSUANT TO WHICH THE COMPANY
RECOGNIZED REVENUES OR PAYMENTS IN EXCESS
OF $50,000 FOR THE TWELVE-MONTH PERIOD
ENDED DECEMBER 31, 2004, OR (iii) ANY
AGREEMENTS, CONTRACTS OR COMMITMENTS
CONTAINING COVENANTS THAT LIMIT THE ABILITY
OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES TO COMPETE IN ANY LINE OF
BUSINESS OR WITH ANY PERSON (AS DEFINED
IN SECTION 8.6 HEREOF), OR THAT INCLUDE ANY
EXCLUSIVITY PROVISION OR INVOLVE ANY
RESTRICTION ON THE GEOGRAPHIC AREA IN WHICH
THE COMPANY OR ANY OF ITS
SUBSIDIARIES MAY CARRY ON ITS BUSINESS
(COLLECTIVELY, "COMPANY MATERIAL
CONTRACTS"), IN SUCH A MANNER AS,
INDIVIDUALLY OR IN THE AGGREGATE, HAS HAD OR
WOULD REASONABLY BE EXPECTED TO HAVE A
COMPANY MATERIAL ADVERSE EFFECT. SECTION
3.10 OF THE COMPANY DISCLOSURE LETTER LISTS
EACH COMPANY MATERIAL CONTRACT
DESCRIBED IN CLAUSES (ii) AND (iii) OF THE
PRECEDING SENTENCE. EACH COMPANY
MATERIAL CONTRACT THAT HAS NOT EXPIRED BY
ITS TERMS IS IN FULL FORCE AND EFFECT
AND IS THE LEGAL, VALID AND BINDING
OBLIGATION OF THE COMPANY AND/OR ITS
SUBSIDIARIES, ENFORCEABLE AGAINST THEM IN
ACCORDANCE WITH ITS TERMS, SUBJECT TO
APPLICABLE BANKRUPTCY, INSOLVENCY,
REORGANIZATION, MORATORIUM AND
<PAGE>
SIMILAR LAWS AFFECTING CREDITORS RIGHTS AND
REMEDIES GENERALLY AND SUBJECT, AS
TO ENFORCEABILITY, TO GENERAL PRINCIPLES OF
EQUITY (REGARDLESS OF WHETHER
ENFORCEMENT IS SOUGHT IN A PROCEEDING AT
LAW OR IN EQUITY), EXCEPT WHERE THE
FAILURE OF SUCH COMPANY MATERIAL CONTRACT
TO BE IN FULL FORCE AND EFFECT OR TO
BE LEGAL, VALID, BINDING OR ENFORCEABLE
AGAINST THE COMPANY AND/OR ITS
SUBSIDIARIES HAS NOT HAD AND WOULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE,
REASONABLY BE EXPECTED TO HAVE A COMPANY
MATERIAL ADVERSE EFFECT. EXCEPT AS SET
FORTH IN SECTION 3.10 OF THE COMPANY
DISCLOSURE LETTER, NO CONSENT, APPROVAL,
WAIVER OR AUTHORIZATION OF, OR NOTICE TO
ANY PERSON IS NEEDED IN ORDER THAT EACH
SUCH COMPANY MATERIAL CONTRACT SHALL
CONTINUE IN FULL FORCE AND EFFECT IN
ACCORDANCE WITH ITS TERMS WITHOUT PENALTY,
ACCELERATION OR RIGHTS OF EARLY
TERMINATION BY REASON OF THE CONSUMMATION
OF THE ACQUISITION AND THE OTHER
TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
11.
COMPLIANCE WITH
LAW. TO THE KNOWLEDGE OF THE COMPANY, AND EXCEPT
WHERE THE FAILURE WOULD NOT HAVE A COMPANY
MATERIAL ADVERSE EFFECT, ALL
ACTIVITIES OF THE COMPANY AND ITS
SUBSIDIARIES HAVE BEEN, AND ARE CURRENTLY
BEING, CONDUCTED IN COMPLIANCE IN ALL
MATERIAL RESPECTS WITH ALL APPLICABLE
UNITED STATES FEDERAL, STATE, PROVINCIAL
AND LOCAL AND OTHER FOREIGN LAWS,
ORDINANCES, REGULATIONS, INTERPRETATIONS,
JUDGMENTS, DECREES, INJUNCTIONS,
PERMITS, LICENSES, CERTIFICATES,
GOVERNMENTAL REQUIREMENTS, AND ORDERS OF ANY
COURT OR OTHER GOVERNMENTAL ENTITY OR ANY
NONGOVERNMENTAL SELF-REGULATORY
AGENCY, AND THE COMPANY IS NOT AWARE OF ANY
NOTICE THAT HAS BEEN RECEIVED BY THE
COMPANY'S BOARD OF DIRECTORS OR ANY
SUBSIDIARY OF ANY CLAIMS FILED AGAINST THE
COMPANY OR ANY SUBSIDIARY ALLEGING A
VIOLATION OF ANY SUCH LAWS, REGULATIONS OR
OTHER REQUIREMENTS WHICH WOULD BE REQUIRED
TO BE DISCLOSED IN ANY COMPANY
SECURITIES REPORT. TO THE KNOWLEDGE OF THE
COMPANY, THE COMPANY STOCK OPTION
PLANS AND WARRANTS, IF ANY, HAVE BEEN DULY
AUTHORIZED, APPROVED AND OPERATED IN
COMPLIANCE IN ALL MATERIAL RESPECTS WITH
ALL APPLICABLE SECURITIES, CORPORATE
AND OTHER LAWS OF EACH JURISDICTION IN
WHICH PARTICIPANTS OF SUCH PLANS ARE
LOCATED. TO THE KNOWLEDGE OF THE COMPANY,
THE COMPANY AND ITS SUBSIDIARIES HAVE
ALL PERMITS, LICENSES AND FRANCHISES FROM
GOVERNMENTAL ENTITIES REQUIRED TO
REASONABLY CONDUCT THEIR BUSINESSES AS NOW
BEING CONDUCTED, EXCEPT FOR SUCH
PERMITS, LICENSES AND FRANCHISES THE
ABSENCE OF WHICH HAS NOT HAD AND WOULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, HAVE A
COMPANY MATERIAL ADVERSE EFFECT.
12.
INTELLECTUAL
PROPERTY RIGHTS;
(a) To the
Knowledge of the Company, the Company and its
Subsidiaries own, or are validly licensed
or otherwise possess legally
enforceable rights to use, all patents,
trademarks, trade names, service marks,
domain names and copyrights, any
applications for and registrations of such
patents, trademarks, trade names, service
marks, domain names and copyrights,
and all database rights, net lists,
processes, formulae, methods, schematics,
technology, know-how, computer software
programs or applications and tangible or
intangible proprietary information or
material that are reasonably necessary to
conduct the business of the Company and its
Subsidiaries as currently conducted,
or presently planned to be conducted,
except for such rights the absence of
which would not be reasonably expected to
have a Company Material Adverse Effect
(the "Company Intellectual Property
Rights"). The Company and its Subsidiaries
have taken all action reasonably necessary
to protect the Company Intellectual
Property Rights which is customary in the
industry, including without
limitation, use of reasonable secrecy
measures to protect the trade secrets
included in the Company Intellectual
Property Rights.
<PAGE>
(b) The
execution and delivery of this Agreement and consummation
of the transactions contemplated hereby
will not result in the breach of, or
create on behalf of any third party the
right to terminate or modify, any
material license, sublicense or other
agreement relating to the Company
Intellectual Property Rights, or any
material licenses, sublicenses or other
agreements as to which the Company or any
of its Subsidiaries is a party and
pursuant to which the Company or any of its
Subsidiaries is authorized to use
any third party patents, trademarks,
copyrights or trade secrets ("Company Third
Party Intellectual Property Rights"), the
breach of which would, individually or
in the aggregate, be reasonably likely to
have a Company Material Adverse
Effect. The Company Disclosure Letter,
under the caption referencing this
Section 3.12, lists all royalties, license
fees, sublicense fees of the Company.
(c) To the
Knowledge of the Company, all patents, mining claims,
energy royalty agreements, natural
resources interests, registered trademarks,
service marks, domain names and copyrights
which are held by the Company or any
of its Subsidiaries, the loss or invalidity
of which would reasonably be
expected to cause a Company Material
Adverse Effect, are valid and subsisting.
The Company's Board of Directors is not
aware that it:(i) has not been sued in
any suit, action or proceeding, or received
in writing any claim or notice,
which involves a claim of infringement or
misappropriation of any patents,
trademarks, service marks, domain names,
copyrights or violation of any trade
secret or other proprietary right of any
third party; and (ii) has no Knowledge
that the manufacturing, marketing,
licensing or sale of its products or services
infringe upon, misappropriate or otherwise
come into conflict with any patent,
trademark, service mark, copyright, trade
secret or other proprietary right of
any third party, which infringement,
misappropriation or conflict in the cases
of clause (i) and (ii) would, individually
or in the aggregate, reasonably be
expected to have a Company Material Adverse
Effect. To the Knowledge of the
Company, no other Person has interfered
with, infringed upon, or otherwise come
into conflict with any Company Intellectual
Property Rights or other proprietary
information of the Company or any of its
Subsidiaries which has or would,
individually or in the aggregate,
reasonably be expected to have a Company
Material Adverse Effect.
(d) Except where
the failure to do so would not have a Company
Material Adverse Effect, each employee,
agent, consultant or contractor who has
materially contributed to or participated
in the creation or development of any
copyrightable, patentable or trade secret
material on behalf of the Company, any
of its Subsidiaries or any predecessor in
interest thereto either: (i) is a
party to an agreement under which the
Company or such Subsidiary is deemed to be
the original owner/author of all property
rights therein; or (ii) has executed
an assignment or an agreement to assign in
favor of the Company, such Subsidiary
or such predecessor in interest, as
applicable, all right, title and interest in
such material.
13.
TAXES.
(a) "Tax" or
"Taxes" shall mean all U.S Internal Revenue, federal,
state, provincial, local or foreign taxes
and any other applicable duties,
levies, fees, charges and assessments that
are in the nature of a tax, including
income, gross receipts, property, sales,
use, license, excise, franchise, ad
valorem, value-added, transfer, social
security payments, and health taxes and
any deductibles relating to wages, salaries
and benefits and payments to
subcontractors for any jurisdiction in
which the Company or any of its
Subsidiaries does business (to the extent
required under applicable Tax law),
together with all interest, penalties and
additions imposed with respect to such
amounts.
<PAGE>
(b) To the
Knowledge of the Company, and except as set forth in
(or resulting from matters set forth in)
Section 3.13 of the Company Disclosure
Letter or as could not, individually or in
the aggregate, reasonably be expected
to have a Company Material Adverse
Effect:
TO THE KNOWLEDGE OF THE COMPANY, THE COMPANY AND ITS
SUBSIDIARIES HAVE PREPARED AND TIMELY FILED WITH THE
APPROPRIATE
GOVERNMENTAL AGENCIES ALL FRANCHISE, INCOME, SALES AND ALL OTHER
MATERIAL
TAX
RETURNS AND REPORTS REQUIRED TO BE FILED ON OR BEFORE THE
EFFECTIVE
TIME
(COLLECTIVELY "RETURNS"), TAKING INTO ACCOUNT ANY EXTENSION OF
TIME
TO FILE
GRANTED TO OR OBTAINED ON BEHALF OF THE COMPANY AND/OR ITS
SUBSIDIARIES;
TO THE KNOWLEDGE OF THE COMPANY, ALL TAXES OF THE COMPANY AND
ITS
SUBSIDIARIES SHOWN ON SUCH RETURNS OR OTHERWISE KNOWN BY THE
COMPANY
TO BE DUE
OR PAYABLE HAVE BEEN TIMELY PAID IN FULL TO THE PROPER
AUTHORITIES, OTHER THAN SUCH TAXES AS ARE BEING CONTESTED IN GOOD
FAITH BY
APPROPRIATE PROCEEDINGS OR WHICH ARE ADEQUATELY RESERVED FOR IN
ACCORDANCE
WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES;
ALL DEFICIENCIES RESULTING FROM TAX EXAMINATIONS OF INCOME,
SALES AND
FRANCHISE AND ALL OTHER MATERIAL RETURNS FILED BY THE COMPANY
AND ITS
SUBSIDIARIES IN ANY JURISDICTION IN WHICH SUCH RETURNS ARE
REQUIRED
TO BE SO FILED HAVE EITHER BEEN PAID OR ARE BEING CONTESTED IN
GOOD FAITH
BY APPROPRIATE PROCEEDINGS;
NO DEFICIENCY HAS BEEN ASSERTED OR ASSESSED AGAINST THE
COMPANY OR
ANY OF ITS SUBSIDIARIES WHICH HAS NOT BEEN SATISFIED OR
OTHERWISE
RESOLVED, AND NO EXAMINATION OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS PENDING OR, TO THE KNOWLEDGE OF THE COMPANY,
THREATENED
FOR ANY
MATERIAL AMOUNT OF TAX BY ANY TAXING AUTHORITY;
NO EXTENSION OF THE PERIOD FOR ASSESSMENT OR COLLECTION OF ANY
MATERIAL
TAX IS CURRENTLY IN EFFECT AND NO EXTENSION OF TIME WITHIN
WHICH
TO FILE
ANY MATERIAL RETURN HAS BEEN REQUESTED, WHICH RETURN HAS NOT
SINCE
BEEN
FILED;
TO THE KNOWLEDGE OF THE COMPANY, ALL RETURNS FILED BY THE
COMPANY
AND ITS SUBSIDIARIES ARE CORRECT AND COMPLETE IN ALL MATERIAL
RESPECTS
OR ADEQUATE RESERVES HAVE BEEN ESTABLISHED WITH RESPECT TO ANY
ADDITIONAL
TAXES THAT MAY BE DUE (OR MAY BECOME DUE) AS A RESULT OF SUCH
RETURNS
NOT BEING CORRECT OR COMPLETE;
TO THE KNOWLEDGE OF THE COMPANY, NO TAX LIENS HAVE BEEN FILED
AGAINST
THE COMPANY OR ANY SUBSIDIARIES OF THE COMPANY WITH RESPECT TO
ANY
TAXES;
NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAVE MADE
SINCE JUNE
OF 2003, AND NONE WILL MAKE, ANY VOLUNTARY ADJUSTMENT BY REASON
OF A
CHANGE IN THEIR ACCOUNTING METHODS FOR ANY PRE-ACQUISITION
PERIOD;
TO THE KNOWLEDGE OF THE COMPANY, THE COMPANY AND ITS
SUBSIDIARIES HAVE MADE TIMELY PAYMENTS OF THE TAXES REQUIRED TO
BE
DEDUCTED AND WITHHELD
FROM THE WAGES PAID TO THEIR EMPLOYEES;
<PAGE>
THE COMPANY AND ITS SUBSIDIARIES ARE NOT PARTIES TO ANY TAX
SHARING OR
TAX MATTERS AGREEMENT; AND
TO THE KNOWLEDGE OF THE COMPANY, NEITHER THE COMPANY NOR ANY
OF ITS
SUBSIDIARIES IS LIABLE TO BE ASSESSED FOR OR MADE ACCOUNTABLE
FOR
ANY TAX
FOR WHICH ANY OTHER PERSON OR PERSONS MAY BE LIABLE TO BE
ASSESSED
OR MADE
ACCOUNTABLE WHETHER BY VIRTUE OF THE ENTERING INTO OR THE
CONSUMMATION OF THE
ACQUISITION OR BY VIRTUE OF ANY ACT OR ACTS DONE BY OR
WHICH MAY
BE DONE BY OR ANY CIRCUMSTANCE OR CIRCUMSTANCES INVOLVING OR
WHICH MAY
INVOLVE ANY OTHER PERSON OR PERSONS.
14.
EMPLOYEES.
NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS A
PARTY TO ANY COLLECTIVE BARGAINING
AGREEMENT, ARRANGEMENT OR LABOR CONTRACT WITH
A LABOR UNION OR LABOR ORGANIZATION,
WHETHER FORMAL OR OTHERWISE. THE COMPANY
DISCLOSURE LETTER, UNDER THE CAPTION
REFERENCING THIS SECTION 3.14, LISTS ALL
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL
AGREEMENTS (OR ANY OTHER AGREEMENTS
THAT MAY RESULT IN THE ACCELERATION OF
OUTSTANDING OPTIONS) OF THE COMPANY OR
ITS SUBSIDIARIES. EACH OF THE COMPANY AND
ITS SUBSIDIARIES IS IN COMPLIANCE WITH
ALL APPLICABLE LAWS (INCLUDING, WITHOUT
LIMITATION, ALL APPLICABLE EXTENSION
ORDERS) RESPECTING EMPLOYMENT AND
EMPLOYMENT PRACTICES, TERMS AND CONDITIONS OF
EMPLOYMENT, EQUAL OPPORTUNITY,
ANTI-DISCRIMINATION LAWS, AND WAGES AND HOURS,
EXCEPT WHERE SUCH NONCOMPLIANCE HAS NOT HAD
AND WOULD NOT, INDIVIDUALLY OR IN
THE AGGREGATE, REASONABLY BE EXPECTED TO
HAVE, A COMPANY MATERIAL ADVERSE
EFFECT. THERE IS NO LABOR STRIKE, SLOWDOWN
OR STOPPAGE PENDING (OR, TO THE
KNOWLEDGE OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, ANY UNFAIR LABOR PRACTICE
COMPLAINTS, LABOR DISTURBANCES OR OTHER
CONTROVERSIES RESPECTING EMPLOYMENT
WHICH ARE PENDING OR THREATENED WHICH, IF
THEY ACTUALLY OCCURRED, WOULD
REASONABLY BE EXPECTED TO HAVE A COMPANY
MATERIAL ADVERSE EFFECT) AGAINST THE
COMPANY OR ANY OF ITS SUBSIDIARIES.
15.
EMPLOYEE BENEFIT
PLANS.
(a) "ERISA"
means the Employee Retirement Income Security Act of
1974, as amended, and "Plan" means every
plan, fund, contract, program and
arrangement (whether written or not) which
is maintained or contributed to by
the Company and its Subsidiaries for the
benefit of present or former employees
or with respect to which the Company and
its Subsidiaries otherwise has current
or potential liability. "Plan" includes any
arrangement intended to provide: (i)
medical, surgical, health care,
hospitalization, dental, vision, workers'
compensation, life insurance, death,
disability, legal services, severance,
sickness, accident, or cafeteria plan
benefits (whether or not defined in
Section 3(1) of ERISA), (ii) pension,
profit sharing, stock bonus, retirement,
supplemental retirement or deferred
compensation benefits (whether or not tax
qualified and whether or not defined in
Section 3(2) of ERISA), (iii) bonus,
incentive compensation, stock option, stock
appreciation right, phantom stock or
stock purchase benefits, change in control
benefits or (iv) salary continuation,
unemployment, supplemental unemployment,
termination pay, vacation or holiday
benefits (whether or not defined in Section
3(3) of ERISA). The Company
Disclosure Letter, under the caption
referencing this Section 3.15(a), sets
forth all material Plans by name and brief
description.
(b) To the Knowledge of the Company and to the extent required
(either as a matter of law or to obtain the
intended tax treatment and tax
benefits), all Plans comply and have
complied with the requirements of ERISA,
the Code and other applicable law, except
where such noncompliance would not,
individually or in the aggregate, have a
Company Material Adverse
<PAGE>
Effect. With respect to the Plans, (i) all
required contributions which are due
have been made and an accrual required by
generally accepted accounting
principles has been made on the books and
records of the Company or its
Subsidiaries for all future contribution
obligations; (ii) there are no actions,
suits or claims pending, other than routine
uncontested claims for benefits; and
(iii) there have been no nonexempt
prohibited transactions (as defined in
Section 406 of ERISA or Section 4975 of the
Code), except for such transactions,
if any, which have not had and would not,
individually or in the aggregate,
reasonably be expected to have, a Company
Material Adverse Effect. Except as
otherwise disclosed in the Company
Disclosure Letter under the caption
referencing this Section 3.15(b), all
benefits under the Plans (other than Code
Section 125 cafeteria plans) are payable
either through a fully-funded trust or
an insurance contract and no welfare
benefit Plan (as defined in Section 3(1) of
ERISA) is self-funded.
(c) Parent has
received true and complete copies of (i) all Plan
documents, including related trust
agreements or funding arrangements; (ii) the
most recent determination letter, if any,
received by the Company or its
Subsidiaries from the Internal Revenue
Service (the "IRS") regarding the Plans
and any amendment to any Plan made
subsequent to any Plan amendments covered by
any such determination letter; (iii)
current summary plan descriptions; and (iv)
annual returns/reports on Form 5500 and
summary annual reports for the most
recent plan year. To the Knowledge of the
Company, nothing has occurred that
could materially adversely affect the
qualification of the Plans and their
related trusts under Section 401(a) of the
Code.
(d) Except as
set forth in Section 3.15 of the Company Disclosure
Letter, the Company does not maintain or
contribute to (and has never
contributed to) any multi-employer plan, as
defined in Section 3(37) of ERISA.
Neither the Company nor any of its
Subsidiaries has any actual or potential
material liabilities under Title IV of
ERISA, including under Section 4201 of
ERISA for any complete or partial
withdrawal from a multi-employer plan.
(e) To the
Knowledge of the Company, neither the Company nor any
of its Subsidiaries has any actual or
potential material liability for death or
medical benefits after separation from
employment
(f) To the
Knowledge of the Company, neither the Company nor any
of its Subsidiaries, nor any of their
respective directors, officers, employees
or other "fiduciaries", as such term is
defined in Section 3(21) of ERISA, has
committed any breach of fiduciary
responsibility imposed by ERISA or any other
applicable law with respect to the Plans
which would subject the Company, Parent
or any of their respective directors,
officers or employees to any liability
under ERISA or any applicable law, except
for such breaches, if any, which have
not had and would not, individual or in the
aggregate, reasonably be expected to
have, a Company Material Adverse
Effect.
(g) Except with
respect to Taxes on benefits paid or provided, no
Tax has been waived or excused, has been
paid or is owed by any person
(including, but not limited to, any Plan,
any Plan fiduciary or the Company)
with respect to the operations of, or any
transactions with respect to, any Plan
which would, individually or in the
aggregate, reasonably be expected to have a
Company Material Adverse Effect. No action
has been taken by the Company, nor
has there been any failure by the Company
to take any action, nor is any action
or failure to take action contemplated by
the Company (including all actions
contemplated under this Agreement), that
would subject any person or entity to
any liability or Tax im
