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Exhibit 2.1
STOCK PURCHASE AND SALE
AGREEMENT
This STOCK PURCHASE AND SALE
AGREEMENT (this “ Agreement ”) made on this 23rd
day of April 2008, by and among OMNI Energy Services Corp., a
Louisiana corporation (the “ Buyer ”),
Industrial Lift Truck & Equipment Co. Inc., a Louisiana
corporation, (the “ Company ”), and the
undersigned holders of one hundred (100%) percent of the
outstanding common stock of the Company (the “
Shareholders ”).
WHEREAS, the Shareholders own
in the aggregate one hundred (100%) percent of the issued and
outstanding shares of common stock, $
par value per share, of and equity
interests in the Company (“ Company Common Stock
”) and wish to sell and transfer to Buyer, which wishes to
purchase and acquire from the Shareholders, one hundred
(100%) percent of the outstanding shares of Company Common
Stock (the “ Company Shares ”) in return for
certain cash consideration as provided herein;
NOW, THEREFORE, in
consideration of the premises and the representations, warranties
and agreements herein contained, the parties hereto agree as
follows:
ARTICLE 1
PURCHASE AND
SALE
1.1 Basic Transaction.
Subject to the terms and conditions of this Agreement, the Buyer
agrees to purchase from each of the Shareholders, and each of the
Shareholders agrees to sell and convey to the Buyer, all of the
Company Shares owned by such Shareholder, for the consideration
specified in Section 1.2.
1.2 Purchase Price. On
the date of the closing of the transactions contemplated by this
Agreement, and in consideration of the delivery of the Company
Shares, the Buyer agrees to pay and deliver or cause to be paid and
delivered to the Shareholders, and certain of their affiliates, an
aggregate of Nineteen Million Seven Hundred Fifty Thousand and
No/100 Dollars ($19,750,000.00) Dollars (the “
Purchase Price ”), in accordance with the
following:
a. On the Closing Date, Buyer
shall pay or cause to be paid and deliver to or for the benefit of
Shareholders Sixteen Million Two Hundred Fifty Thousand and No/100
($16,250,000.00) Dollars ($200,000.00 of which shall come from the
Escrow Account established with Ottinger Hebert, LLC on
January 4, 2008 and $100,000.00 of which shall be credited as
previously paid if the Closing Date is on or before April 30,
2008) payable in cash by wire transfer or other delivery of
immediately available funds (the “ Closing Cash
Payment ”). At closing, Shareholders will be responsible
for the payment of all shareholder notes to the Company at closing.
The Closing Cash Payment shall be allocated among the Shareholders
in the manner set forth on Exhibit 1.2(a) hereto.
b. On the Closing Date, as
part of the Purchase Price, Buyer shall issue and deliver to the
Shareholders a subordinated promissory note made by Buyer in the
original principal amount of Two Million and No/100 ($2,000,000.00)
Dollars which
shall bear interest at a rate
of five (5%) percent per annum and shall have a term of twelve
(12) months from the Closing Date ( “ Seller Note
No. 1 ” ). In the event Jimmie L. Ortego resigns
from the Company for any reason other than reasons beyond his
control (for purposes hereof reasons beyond Ortego’s control
shall include but not be limited to medical reasons, death or
Disability) or is terminated for Cause (as defined in his
Employment Agreement) prior to the maturity date of Seller Note
No. 1, Seller Note No. 1 shall be surrendered by
Shareholders to Buyer and cancelled by Buyer in which event
Shareholders shall forfeit any and all rights to the remaining
unpaid balance of Seller Note No. 1.
c. On the Closing Date, as
part of the Purchase Price, Buyer shall issue and deliver to the
Shareholders a subordinated promissory note made by Buyer in the
original principal amount of One Million and No/100 ($1,000,000.00)
Dollars which shall bear interest at a rate of five
(5%) percent per annum and shall have a term of twenty-four
(24) months from the Closing Date ( “ Seller Note
No. 2 ” ). In the event Jimmie L. Ortego resigns
from the Company for any reason other than reasons beyond his
control (for purposes hereof reasons beyond Ortego’s control
shall include but not be limited to medical reasons, death or
Disability) or is terminated for Cause (as defined in his
Employment Agreement) prior to the maturity date of Seller Note
No. 2, Seller Note No. 2 shall be surrendered by
Shareholders to Buyer and cancelled by Buyer in which event
Shareholders shall forfeit any and all rights to the remaining
unpaid balance of Seller Note No. 2.
d. On the Closing Date, as
part of the Purchase Price, Buyer shall issue and deliver to the
Shareholders a subordinated promissory note made by Buyer in the
original principal amount of Five Hundred Thousand and No/100
($500,000.00) Dollars which shall bear interest at a rate of five
(5%) percent per annum and shall have a term of thirty-six
(36) months from the Closing Date ( “ Seller Note
No. 3 ” ). In the event Jimmie L. Ortego resigns
from the Company for any reason other than reasons beyond his
control (for purposes hereof reasons beyond Ortego’s control
shall include but not be limited to medical reasons, death or
Disability) or is terminated for Cause (as defined in his
Employment Agreement) prior to the maturity date of Seller Note
No. 3, Seller Note No. 3 shall be surrendered by
Shareholders to Buyer and cancelled by Buyer in which event
Shareholders shall forfeit any and all rights to the remaining
unpaid balance of Seller Note No. 3.
e. Interest shall accrue and
be payable monthly on Seller Note Nos. 1, 2 and 3. The first
interest payments shall be due and payable on the first day of the
month following Closing. All subsequent monthly interest payments
shall be due and payable on the first calendar day of each month
thereafter.
f. Seller Note Nos. 1, 2 and
3 shall each be callable at any time at face value by Buyer during
the term of the notes. Seller Note Nos. 1, 2 and 3 shall, at all
times, be subordinate to Buyers senior lenders including any
replacement, substitute or refinance lenders. Buyer’s current
senior lender is LaSalle Business Credit, LLC as Lender and Agent
for the other Lenders.
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g. Seller shall have the
option, at maturity of each of Seller Note No. 1, Seller Note
No. 2 and Seller Note No. 3, to convert such matured note
into the common stock of Buyer, which stock is currently traded on
the NASDAQ National Market under the symbol “OMNI”
(shares of such stock hereinafter referred to as the “
Shares ”), at a price per share equal to $10.50 (the
“ Conversion Price ”). Should Seller desire to
exercise its conversion option, it shall tender the matured note to
Buyer together with written notice of its intent to exercise its
conversion option.
1.3 Key Employee Note.
On the Closing Date Buyer shall issue and deliver in trust
to the Shareholders a subordinated promissory note made by Buyer
for the benefit of certain key employees of Company, to be
distributed/paid as provided in Schedule 1.3 , in the
original principal amount of Five Hundred Thousand and No/100
($500,000.00) Dollars which note shall not bear interest and shall
have a term of thirty-six (36) months from the Closing Date
(“ Key Employee Note ”). The Key Employee Note
is intended to serve as an inducement for certain Company key
employees to remain employed by Company throughout the thirty-six
month term of the Key Employee Note and is integral to this
Agreement, but is not payable to or for the benefit of the
Shareholders and not to be considered income to them.
1.4 Closing. The
closing of the transactions contemplated by this Agreement
(“Closing”) shall occur on or before April 30,
2008 (the “Closing Date”).
a. The execution and delivery
of all documents necessary to enter into the transactions
contemplated by this Agreement shall take place at the offices of
Gordon, Arata, McCollam Duplantis & Eagan, L.L.P., 400
East Kaliste Saloom Road, Suite 4200, Lafayette, Louisiana 70508,
or such other place as the parties may mutually agree on the
Closing Date.
b. At the Closing:
(i) the Shareholders will deliver the various certificates,
instruments, and documents referred to in Section 4.1 below;
(ii) Buyer will deliver the various certificates, instruments,
and documents referred to in Section 4.2 below; (iii) the
Buyer shall deliver to the Shareholders the Purchase Price as
described in Sections 1.2(a), 1.2(b), 1.2 (c), and 1.2(d), as well
as the Key Employee Note described in Section 1.3; and
(iv) each Shareholder will deliver the certificates
representing such Shareholder’s shares of Company Common
Stock together with completed stock powers transferring the shares
to Buyer duly executed by such Shareholder (collectively, the
“ Stock Certificates ”).
1.5 Company Debt. As
of the Closing, Buyer will assume the current debt of the Company
outstanding at such time. Buyer and Shareholders will work to
together to secure the release of the Shareholders from any
liability or obligation as guarantor or surety for such
debt.
1.6 No Assignments. No
assignment, transfer or other disposition of record or beneficial
ownership of any shares of the Company Common Stock may be made on
or after the date hereof prior to Closing or termination of this
Agreement.
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1.7 Payment in Full
Satisfaction of All Rights. The delivery of the Purchase Price
consisting of the Closing Cash Payment and Seller Note Nos.1, 2, 3
shall be deemed to be payment in full satisfaction of all rights
pertaining to the outstanding Company Common Stock.
ARTICLE 2
REPRESENTATIONS AND
WARRANTIES
2.1 Representations and
Warranties by the Shareholders. Each of the Shareholders
represents and warrants, severally but not jointly, to the Buyer
that the statements contained in this Section 2.1 are correct
as to himself as of the date of this Agreement and will be correct
as to himself as of the Closing Date and (as though made then),
except as set forth in the disclosure schedule delivered by the
Shareholders to the Buyer on the date hereof, as supplemented or
amended in accordance with Section 3.4 of this Agreement (such
schedule, as so supplemented or amended, the “
Shareholders Disclosure Schedule ”). The Shareholders
Disclosure Schedule is arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs
contained in this Section 2.1. References in Section 2.1
to a numbered schedule mean the section of the Shareholders
Disclosure Schedule that corresponds with that number; for example,
references to “ Schedule 2.1(d) ” mean
Section 2.1(d) of the Shareholders Disclosure Schedule.
Notwithstanding anything herein to the contrary, each matter
disclosed in either the Shareholders Disclosure Schedule or the
Company Disclosure Schedule shall be deemed responsive to all other
Sections of the Agreement to which disclosure is required by the
Shareholders and/or the Company; provided, however, that the
responsiveness of such a disclosure matter to another Section of
the Agreement and/or disclosure schedule is facially
apparent.
a. Qualification .
Such Shareholder has the legal power and authority to own his or
her properties and assets.
b. Authority Relative to
Agreement . Such Shareholder has the full right, power and
legal authority to execute and deliver this Agreement. Such
Shareholder has the full right, power and legal authority to
perform this Agreement and to consummate the transactions
contemplated on his or her part hereby. No proceeding on the part
of such Shareholder, and no notice, consent, authorization, order
or approval of, filing or registration with, any governmental
commission, board or other regulatory body or any bank, bonding
company, lender, surety, customer, supplier, or any other person or
entity whatsoever is required for or in connection with the
execution and delivery of this Agreement by such Shareholder. No
proceeding on the part of such Shareholder, and no notice, consent,
authorization, order or approval of, filing or registration with,
any governmental commission, board or other regulatory body or any
bank, bonding company, lender, surety, customer, supplier, or any
other person or entity whatsoever is required for or in connection
with the performance by such Shareholder of this Agreement and the
consummation by such Shareholder of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by such
Shareholder and is a valid and binding agreement of such
Shareholder, enforceable against such Shareholder in accordance
with its terms, except as such enforcement is subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar
laws relating to or affecting creditors’ rights.
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c. Non-Contravention .
The execution, delivery and performance of this Agreement by such
Shareholder does not, and the consummation by such Shareholder of
the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation, or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation or
imposition of any material lien, charge, pledge, security interest
or other encumbrance upon any of the property or assets of such
Shareholder pursuant to any provision of, any mortgage, lien,
lease, agreement, license, instrument, law, ordinance, regulation,
order, arbitration award, judgment or decree to which such
Shareholder is a party or by which any of such Shareholder’s
assets are bound. The execution, delivery and performance of this
Agreement by such Shareholder does not and the consummation by such
Shareholder of the transactions contemplated hereby will not
violate or conflict with any other restriction of any kind or
character to which such Shareholder is subject or by which any of
such Shareholder’s assets may be bound.
d. Ownership of the
Company Common Stock . Such Shareholder holds of record and
owns beneficially the number of and percentage of shares of the
Company Common Stock set forth next to his or her name in
Schedule 2.1(d) . Such Shareholder is, and as of the Closing
Date, will be the sole and exclusive lawful owner of such shares of
the Company Common Stock free and clear of all liens, claims,
encumbrances and rights of others of any nature whatsoever, with
full power to vote all such shares on any matter that may properly
come before shareholders of the Company, and such Shareholder may
exercise such voting power on any matter without violation of the
rights of any person. There are no rights, warrants or options
outstanding with respect to such common stock, and such Shareholder
has no obligation to deliver common stock of the Company or any of
its Subsidiaries (as defined below) to any person as of the date
hereof, at any time on or prior to either of the Closing Date,
thereafter or as a result thereof or in connection therewith except
as provided in this Agreement.
2.2 Representations and
Warranties by the Shareholders and the Company. The
Shareholders, in the aggregate, represent and warrant, solidarily,
to the Buyer that the statements contained in this Section 2.2
are correct as of the date of this Agreement and will be correct as
of the Closing Date (as though made then), except as otherwise set
forth in the disclosure schedule delivered by the Shareholders and
the Company to the Buyer on the date hereof, as supplemented or
amended in accordance with Section 3.4 of this Agreement (such
schedule, as so amended or supplemented, the “ Company
Disclosure Schedule ”). The Company Disclosure Schedule
is arranged in sections and paragraphs corresponding to the
lettered and numbered sections and paragraphs contained in this
Section 2.2. References in Section 2.2 to a numbered
schedule mean the section of the Company Disclosure Schedule that
corresponds with that number; for example, references to “
Schedule 2.2(a) ” mean Section 2.2(a) of the
Company Disclosure Schedule. Notwithstanding anything herein to the
contrary, each matter disclosed in either the Shareholders
Disclosure Schedule or the Company Disclosure Schedule shall be
deemed responsive to all other Sections of the Agreement to which
disclosure is required by the Shareholders and/or the Company;
provided, however, that the responsiveness of such a disclosure
matter to another Section of the Agreement and/or disclosure
schedule is facially apparent.
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a. Organization and
Qualification, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Louisiana, and each has the full right, power and
legal authority and all licenses, permits, titles and
authorizations necessary to own all of its properties and assets
and to carry on its business as it is now being conducted. The
copies of the Company’s Articles of Incorporation and Bylaws,
as amended to date, which have been delivered to Buyer, are
complete and correct, and such instruments, as so amended, are in
full force and effect. The Company is duly qualified to do business
and is in good standing in each jurisdiction where, to the
reasonable belief of the Company, the failure to be so qualified
would have a material adverse effect on the Company, which foreign
jurisdictions are listed in Schedule 2.2(a) .
b. Common Stock . The
authorized common stock of the Company consists of Twenty Thousand
and No/100 (20,000.00) shares of Common Stock, of which Ten
Thousand and No/100 (10,000.00) shares of Common Stock are
validly issued and of which Ten Thousand and No/100
(10,000.00) shares are outstanding, fully paid and
non-assessable. All Ten Thousand and No/100 (10,000.00) issued
and outstanding shares are held of record by Jimmie L. Ortego. Ten
Thousand and No/100 (10,000.00) Shares are unissued. The
Company will not issue any additional shares of Company Common
Stock between the date hereof through the Closing Date. No shares
of the common stock of the Company have been issued in violation of
the preemptive rights of any past or present shareholder. As of
Closing, there shall be no outstanding subscriptions, shares of
common stock, calls, warrants, options, contracts, commitments, or
demands relating to the common stock of the Company or other
agreements of any character (other than this Agreement) under which
the Company or Shareholders would be obligated to issue or purchase
shares of its common stock. As of Closing, there shall be no
outstanding stock appreciation, phantom stock, profit participation
or similar rights with respect to the Company. As of Closing, there
is no voting agreement, voting trust, proxy, or other agreement or
understanding with respect to the voting of the common stock or the
equity interests of the Company. The Company has no commitments to
issue or sell any securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for
or acquire from the Company, any shares of its common stock and no
securities or obligations evidencing any such rights are
outstanding.
c. Subsidiaries . The
Company does not, directly or indirectly, own or control more than
ten (10%) percent of the voting securities, or serve as
manager or general partner, of any corporation, firm, partnership,
joint venture or other business entity (“ Subsidiary
”). Neither the Company nor any Subsidiary owns or has any
right or obligation to acquire any class of securities (including,
without limitation, debt securities) issued by any person or entity
and neither the Company nor any Subsidiary is a party to or bound
to any partnership, joint venture, voluntary association, or other
agreement with any person or entity for the conduct of any
business.
d. Authority Relative to
Agreement . The Company has the full right, power, and legal
authority to execute and deliver this Agreement. The Company has
the full right, power, and legal authority to perform this
Agreement and to consummate the transactions contemplated on the
part of the Company hereby. The execution and
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delivery by the Company of
this Agreement and the consummation by the Company of the
transactions contemplated on its part hereby have been duly
authorized by its Board of Directors and by the Shareholders in
their capacity as the holders of one hundred (100%) percent of
the issued and outstanding common stock in the Company. No
proceeding on the part of the Company, and, no notice, consent,
authorization, order or approval of, filing or registration with,
any governmental commission, board or other regulatory body, or any
bank, bonding company, lender, surety, customer, supplier, or any
other person or entity whatsoever is required for or in connection
with the Company’s execution and delivery of this Agreement.
This Agreement has been duly executed and delivered by the Company
and is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as such
enforcement is subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting
creditors’ rights.
e. Non-Contravention .
The execution, delivery, and performance of this Agreement by the
Company does not and the consummation by the Company of the
transactions contemplated hereby will not (1) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, government agency, or court to which the Company or any
of its assets are subject, (2) violate any provision of the
Articles of Incorporation or Bylaws of the Company, or
(3) violate or result in, with the giving of notice or the
lapse of time or both, the violation of any provision of, or result
in the acceleration of or entitle any party to accelerate (whether
after the giving of notice or lapse of time or both) any obligation
under, or result in the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance upon any of the
property of the Company pursuant to any provision of any mortgage,
lien, lease, contract, agreement, license, or instrument to which
the Company is a party or by which any of its assets are bound. The
execution, delivery and performance of this Agreement by the
Company do not, and will not, violate or conflict with any other
restriction of any kind or character to which the Company is
subject or by which any of its assets may be bound, and the same
does not, and will not, constitute an event permitting termination
of any such mortgage, lien, lease, agreement, license or instrument
to which the Company is a party or by which any of its assets are
bound.
f. Financial
Information . The Shareholders have previously furnished Buyer
with true and complete copies of the balance sheets of the Company
and its Subsidiaries, as applicable, for the three calendar years
ended December 31, 2005, December 31, 2006
and December 31, 2007 and the related statements of
income, retained earnings and cash flows for the thirty-six
(36) months then ending. These 2005, 2006 and 2007 financial
statements were compiled by Broussard, Poché, Lewis &
Breaux, L.L.P., certified public accountants. Such financial
statements have been prepared in conformity with the
Company’s usual and ordinary income tax basis of accounting
consistently applied. Such financial statements present fairly the
financial position and results of operations of the Company and its
consolidated Subsidiaries (if any) as of and for the respective
periods then ended. The Company and its Subsidiaries do not have
any liabilities or obligations of a type which should be included
in or reflected as such in financial statements prepared in
accordance with the Company’s usual and ordinary
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income tax basis of
accounting, whether related to tax or non-tax matters, accrued or
contingent, due or not yet due, liquidated or unliquidated, or
otherwise, except as and to the extent disclosed or reflected in
such financial statements. Collectively, the financial statements
are the “ Company Financial Statements .” Copies
of the Company Financial Statements are attached as Schedule
2.2(f) .
g. Absence of Certain
Changes or Events . Since December 31, 2007, except
to the extent described in Schedule 2.2(g) of the Company
Disclosure Schedule, and except as expressly permitted by this
Agreement or in connection with the transactions contemplated
hereby:
(1) the Company has not sold,
leased, transferred, or assigned any of its assets, tangible or
intangible, other than for a fair consideration in the ordinary
course of business;
(2) the Company has not
entered into any agreement, contract, lease, permit or license (or
series of related agreements, contracts, leases, permits and
licenses) involving more than ten thousand and no/100 ($10,000.00)
dollars in the aggregate or outside the ordinary course of
business;
(3) no party (including the
Company) has breached, accelerated, terminated, modified, or
canceled any agreement, contract, lease, permit or license (or
series of related agreements, contracts, leases, permits and
licenses) involving more than ten thousand and no/100 ($10,000.00)
dollars to which the Company is a party or by which it is bound
(“ Company Contracts ”);
(4) the Company has not
imposed or allowed any lien, encumbrance or security interest to be
placed upon any of its assets, tangible or intangible (other than
the Permitted Exceptions, as defined below);
(5) the Company has not made
any capital expenditure (or series of related capital expenditures)
involving more than ten thousand and no/100 ($10,000.00) dollars in
the aggregate or outside the ordinary course of
business;
(6) the Company has not made
any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other corporation, partnership,
limited liability company or other person (or series of related
capital investments, loans, and acquisitions) involving more than
ten thousand and no/100 ($10,000.00) dollars in the aggregate or
outside the ordinary course of business;
(7) the Company has not
issued any note, bond, or other debt security or created, incurred,
assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation involving more than ten thousand and
no/100 ($10,000.00) dollars in the aggregate;
(8) the Company has not
delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
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(9) the Company has not
canceled, compromised, satisfied, settled, waived, or released any
right or claim (or series of related rights and claims) involving
more than ten thousand and no/100 ($10,000.00) dollars in the
aggregate or outside the ordinary course of business;
(10) the Company has not
granted any license or sub-license of any rights under or with
respect to any Intellectual Property (as defined in
Section 2.2(l) below);
(11) there has been no change
made or authorized in the Articles of Incorporation, Bylaws,
Articles of Organization or Operating Agreements of the
Company;
(12) the Company and the
Shareholders have not issued, sold, or otherwise disposed of any of
its equity or common stock, or granted any options, warrants,
rights of first refusal, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of their
equity or common stock;
(13) the Company has not
declared, set aside, or paid any dividend or made any distribution
with respect to its equity interests or common stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any
of its equity interests or common stock;
(14) the Company has not
experienced any damage, destruction, or loss to its property in
excess of ten thousand and no/100 ($10,000.00) dollars which is not
covered by insurance;
(15) the Company has not made
any loan to, or entered into any other transaction with, any of its
directors, officers, managers, shareholders and employees outside
the ordinary course of business;
(16) the Company has not
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing
such contract or agreement;
(17) the Company has not
granted any increase in compensation to any of its directors,
officers, employees, consultants or agents in excess of five
percent of such person’s base compensation;
(18) the Company has not
adopted, amended, modified, or terminated any bonus, stock option,
profit-sharing, incentive, severance, or other benefit plan,
contract, or commitment for the benefit of any of its directors,
officers, managers, Shareholders and employees (or taken any such
action with respect to any other employee benefit plan);
(19) the Company has not made
any other change in employment terms for any of its directors,
officers, managers and employees outside the ordinary course of
business;
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(20) the Company has not made
or pledged to make any material charitable or other contribution
outside the ordinary course of business;
(21) there has not been any
occurrence, event, incident, action, failure to act, or transaction
outside the ordinary course of business involving the Company which
could have a material adverse effect on its assets or its
business;
(22) there has not been any
material adverse change in the business, financial condition,
operation, results of operation, or future prospects of the
Company;
(23) there has not been any
work interruptions, or labor grievances or employee claims filed
against the Company, within the last five
(5) years;
(24) there has not been any
merger or consolidation or agreement to merge or consolidate with
or into any other corporations or entity;
(25) there has not been any
material devaluation of inventory due to obsolescence,
deterioration, or pilferage. All inventory on hand and held for
resale is good and saleable merchandise except as disclosed on
Schedule 2.2(g)(25);
(26) there has not been any
transfer to Shareholder or other third party of any tangible or
intangible property, which is not disclosed in the Financial
Statements.
(27) the Company has good and
merchantable title to all inventory in the actual or constructive
possession of the Company and is valued on the books and records of
the Company at an amount not greater than the lower of its cost or
market value;
(28) the Company has not
experienced any products liability claims in the past three
(3) years;
(29) other than activities in
accordance with normal industry business practices, including but
not limited to, by way of example, gifts of minimal value,
entertainment, meals and social invitations, neither the Company
nor any Shareholder, have, directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any person, private or public,
regardless of form, whether in money, property, or services:
(i) to obtain favorable treatment for business secured;
(ii) to pay for favorable treatment for business secured;
(iii) to obtain special concessions or for special concessions
already obtained, for or in respect of the Company or any Affiliate
of the Company; or (iv) in violation of any Applicable Law; or
(b) established or maintained any fund or asset that have not
been recorded in the books and records of the Company;
and
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(30) the Company has not
committed, orally or in writing, to do any of the
foregoing.
h. Undisclosed
Liabilities . Except as set forth on Schedule 2.2(h) ,
the Company has no liabilities (and there is no known basis for any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Company or its
Subsidiaries giving rise to any liability), except for
(i) liabilities set forth on the face of the Company Financial
Statements (including the notes thereto) and (ii) liabilities
which have arisen after December 31, 2007 , in the
ordinary course of business (none of which results from, arises out
of, relates to, is in the nature of, or was caused or allegedly
caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
i. Permits and Legal
Compliance . The Company has all permits, licenses, orders,
qualifications, and approvals of all governmental and regulatory
authorities material to the conduct of its business, a correct and
complete list of which is set forth in Schedule 2.2(i) . All
such permits, licenses, orders and approvals are in full force and
effect, and no suspension or cancellation of any of them is pending
or threatened. None of such permits, licenses, orders or approvals,
and no application for any of such permits, licenses, orders or
approvals, will be adversely affected by the consummation of the
transactions contemplated by this Agreement. To the best of the
Shareholders’ and Company’s knowledge, information and
belief, the Company has complied with all Applicable Laws
(including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice have been tendered,
submitted, filed or commenced against the Company alleging any
failure so to comply.
j. Title to Properties;
Absence of Liens and Encumbrances, etc. The Company has good
and marketable title to all of the real, tangible personal and
mixed properties and assets owned by it and used in its business,
free and clear of any liens, charges, pledges, mortgages,
conditional sales contracts, security interests or other
encumbrances (other than Permitted Exceptions as defined in
Section 2.2(aa) below). A correct and complete list of all
such properties and assets [other than properties and assets
described in Sections 2.2(k)—Software, 2.2(l) –
Intellectual Property, 2.2 (m)—Defective Property, 2.2(m)(1)
– Real Property and 2.2(m)(2)—Contracts] with a
historical cost in excess of $5,000 is set forth on Schedule
2.2(j) . The properties and assets of the Company are free and
clear of any liens, charges, pledges, mortgages, conditional sales
contracts, security interests or other encumbrances (other than
Permitted Exceptions).
k. Software .
Schedule 2.2(k) contains a list or description by type of
all operating and applications computer programs and data bases
(“ Software ”) which the Company uses or has
available for use and plans to use, and such Software constitutes
all the Software which is used to operate the business of the
Company as currently conducted. All such Software is owned outright
by the Company except as indicated on Schedule 2.2(k) . As
to any Software which Schedule 2.2(k) indicates is not owned
by
11
the Company, the owner of
such Software is identified on Schedule 2.2(k) , and the
Company has the right to use the same pursuant to valid leases or
licenses therefor. To the best of Shareholder’s and
Company’s knowledge, information and belief, none of the
Software used by or available to the Company, and no use thereof,
infringes upon or violates any patent, copyright, trade secret or
other proprietary right of anyone else and no claim with respect to
any such infringement or violation is known to be
threatened.
l. Patent, Trademark, etc.
Claims . The Company is the owner or licensee of all patents,
patent licenses, trademarks/service marks/trade names,
trademark/service mark/trade name registrations, copyrights, and
copyright registrations or any other intellectual property (“
Intellectual Property ”) used in the operation of the
Company’s businesses as presently conducted and purported to
be owned or licensed by them; and a correct and complete list of
such Intellectual Property is set forth in Schedule 2.2(l)
of the Company Disclosure Schedule. Each item of Intellectual
Property owned or used by the Company immediately prior to the
Closing will be owned or available for use by the Company on the
same terms and conditions immediately after the Closing. The
Company owns or has the right to use all such Intellectual
Property. To the best of Shareholder’s and Company’s
knowledge, information and belief after due inquiry, the Company
has not infringed, and is not now infringing, on any trade name,
trademark, service mark, or copyright belonging to any other
person, firm or corporation and have not received any notice of
such infringement. The Company is not a party to any license,
sub-license, agreement or arrangement pursuant to which the Company
uses Intellectual Property except as shown in Schedule
2.2(l) . With respect to each such license, sub-license,
agreement or arrangement set forth in Schedule 2.2(l)
:
(1) the license, sub-license,
agreement or arrangement covering the item is legal, valid,
binding, enforceable, and in full force and effect;
(2) the license, sub-license,
agreement or arrangement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
immediately following the Closing;
(3) no party to such license,
sub-license, agreement or arrangement is in breach or default, and
no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification
or acceleration thereunder; and
(4) no party to the license,
sub-license, agreement or arrangement has repudiated any provision
thereof.
The Company and its
Subsidiaries own, or hold adequate licenses or other rights to use,
their trade names in the business as now conducted by them, and
such use does not, and will not, conflict with, infringe on, or
otherwise violate any rights of others. The Shareholders have
delivered to Buyer correct and complete copies of all such
licenses, sub-licenses agreements and arrangements (as amended to
date) disclosed on Schedule 2.2(l) .
12
m. List of Properties,
Contracts and Other Data . The Company owns or leases all
property and tangible or intangible assets used in the conduct of
its business as presently conducted. Except as reflected in
Schedule 2.2(m) – Defective Property, all of the
property of the Company is in existence and is in good condition
and repair except for reasonable wear and tear, sufficient to
conduct the business of the Company as it is presently being
conducted, and in conformity in all material respects with all
restrictive covenants, building, zoning, OSHA, safety, or other
applicable ordinances, restrictions, regulations, or laws. Except
for the warranties expressly set forth in this Section 2.2(m),
the Company and the Shareholders make no other representations
concerning the condition of the movable (personal) property.
Schedule 2.2(m)(1) and Schedule 2.2(m)(2) contain a
list setting forth, with respect to the Company as of the date
hereof, the following:
(1) Schedule 2.2(m)(1)
of the Company Disclosure Schedule lists and describes briefly all
real property owned by the Company and all real property leased or
subleased by or to the Company (whether as lessor or as lessee).
The Shareholders have delivered to the Buyer correct and complete
copies of the leases and subleases for the real property listed in
Schedule 2.2(m)(1) (as amended to date). With respect to
each lease and sublease listed in Schedule 2.2(m)(1)
:
(i) the lease or sublease is
legal, valid, binding, enforceable, and in full force and
effect;
(ii) the lease or sublease
will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms immediately following the
consummation of the transactions contemplated hereby;
(iii) no party to the lease
or sublease is in breach or default of any material term or
provision, and to the best of Shareholders’ and
Company’s knowledge no event has occurred which, with notice
or lapse of time, or both, would constitute a breach or default or
permit termination, modification, or acceleration
thereunder;
(iv) no party to the lease or
sublease has repudiated any provision thereof;
(v) except as described on
Schedule 2.2(m)(1) , there are no disputes, oral agreements,
or forbearance programs in effect as to the lease or
sublease;
(vi) to the best of
Shareholders’ and Company’s knowledge, information and
belief after due inquiry, with respect to each sublease, the
representations and warranties set forth in subsections
13
(i) through (v) above
are correct and complete with respect to the underlying
lease;
(vii) the Company has not
assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold;
(viii) neither the
Shareholders nor the Company has received any notices from any
governmental authority as to any violations or alleged violations
of any applicable laws, rules and regulations with respect to
facilities leased or subleased by the Company or as to any
unfulfilled legal requirements in connection with the operation
thereof and, such facilities have been operated and maintained in
all material respects in accordance with applicable laws, rules and
regulations other than as disclosed in Schedule 2.2(m)(1) ;
and
(ix) all facilities leased or
subleased thereunder are supplied with utilities and other services
necessary for the operation of the Company at such
facilities.
(2) Schedule 2.2(m)(2)
of the Company Disclosure Schedule lists and describes briefly all
contracts and commitments (including, without limitation,
mortgages, indentures and loan agreements) to which the Company is
a party, or to which it or any of its assets or properties are
subject and which are not specifically referred to elsewhere in
Section 2.2, provided that there need not be listed in
the Company Disclosure Schedule (unless required pursuant to the
preceding subsections of this Section 2.2(m)) any contract or
commitment incurred in the ordinary course of business which
requires payments to or by the Company during its remaining life
aggregating less than twenty-five thousand ($25,000) dollars or
which is terminable by the Company within thirty days without
payment of a premium or penalty.
Correct and complete copies
of all documents, and descriptions complete in all material
respects of all oral agreements or commitments (if any), referred
to in this Section 2.2(m) have been provided to Buyer or its
counsel. Neither the Company nor the Shareholders have been
notified of any claim that any contract listed in Schedule
2.2(m)(2) of the Company Disclosure Schedule is not valid and
enforceable in accordance with its terms for the periods stated
therein, or that there is under any such contract any existing
material default or event of default or event which with notice or
lapse of time or both would constitute such a default.
n. Use of Real
Property . Other than as disclosed in Schedule 2.2(n) ,
neither the Shareholders nor the Company has received notice of
violation of any applicable restrictive covenant, zoning or
building regulation, ordinance or other law, order, regulation,
restriction or requirement relating to the operations of the
Company, or any notice of default under any material lease,
contract, commitment, license or permit,
14
relating to the use and
operation of the owned or leased real property listed in the
Company Disclosure Schedule. Other than as disclosed in Schedule
2.2(n) , neither the Shareholders nor the Company has received
notice that any plant, facility or other building which is owned or
covered by a lease set forth in the Company Disclosure Schedule
does not substantially conform in all material respects with all
applicable ordinances, codes, regulations and requirements, and
none of the Shareholders and the Company have received notice that
any restriction, law or regulation presently in effect or condition
precludes or restricts continuation of the present use of such
properties.
o. Environmental Laws
. Except as set forth in Schedule 2.2(o) , to the best of
its knowledge, the Company, including, without limitation, its
businesses, facilities, property, and equipment have been and are
currently in compliance, in all material respects, with all
applicable federal, state, and local laws, rules, and regulations
of all authorities, including without limitation, applicable
Environmental Laws (as hereinafter defined). Except as set forth in
Schedule 2.2(o) , to the best of its knowledge, the Company
is and has been in compliance with, all permits, certificates,
licenses and other authorizations required to operate its business,
facilities, property, and equipment in compliance with applicable
Environmental Laws (“ Environmental Permits ”),
if any, including, without limitation, any relating to the
generation, processing, treatment, discharge, storage, transport,
disposal, or other management of Hazardous Substances (as
hereinafter defined) and those relating to the protection of
environmentally sensitive areas and has timely filed all
applications for renewal of the same. Except as set forth in
Schedule 2.2(o) , to the best of Shareholder’s and
Company’s knowledge, information and belief, the Company is
not now, and will not be in the future, as a result of the
operation or condition of the business of the Company on or prior
to the date of Closing, subject to any: (a) liability in
connection with any release or threatened release of any Hazardous
Substance into the environment whether on or off any of its
businesses, facilities, premises, properties, or equipment;
(b) reclamation, decontamination, removal, investigation,
remediation or monitoring requirements under Environmental Laws, or
any reporting requirements related thereto; or (c) consent
order, compliance order or administrative order relating to or
issued under any Environmental Law. Except as set forth in
Schedule 2.2(o) , there are no, nor have there been any,
claims, demands, actions, judgments, notices, proceedings, liens,
or liabilities brought, pending or threatened against the Company,
or any of its businesses, facilities, properties, premises or
equipment relating in any manner to actual or alleged
non-compliance with Environmental Laws, harm to the environment, or
the release, threatened release, disposal, presence, handling,
discharge or storage of or exposure to or damage caused by
Hazardous Substances (“ Environmental Claims ”)
as of the Closing Date. Except as set forth in Schedule
2.2(o) , to the knowledge of the Shareholders, no requirement
of Environmental Laws will require future compliance costs on the
part of the Company in excess of Ten Thousand ($10,000) Dollars
above costs currently expended in the ordinary course of business.
There are no obligations, undertakings or liabilities of any other
person or entity, including without limitation, any
predecessor-in-interest, arising out of or relating to
Environmental Laws, which the Company has agreed to, assumed or
retained, by contract or otherwise, except as set forth in
Schedule 2.2(o) . “Environmental Laws” means the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Resource Conservation and Recovery Act of 1976,
the Clean Air Act,
15
the Clean Water Act, and the
Occupational Safety and Health Act of 1970, each as amended,
together with all other laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution, the
environment, public or worker health and safety or a
community’s right to know including laws relating to
emissions, discharges, releases, or threatened releases of
pollutants, contaminants, hazardous substances, hazardous
materials, hazardous wastes, solid wastes, toxic substances,
extremely hazardous substance, hazardous chemical, oil, or
petroleum (or any fraction or constituent thereof) (as each of the
foregoing items is defined, listed or regulated under Environmental
Laws) and such other materials, wastes or substances that are or
become classified or regulated as hazardous or toxic under
Environmental Laws (collectively, “ Hazardous
Substances ”) in ambient or indoor air, surface water,
ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Substances.
p. Litigation . Except
as provided on Schedule 2.2(p) , the Company has not been
served with notice (or otherwise made or become aware of) any
demands, actions, suits, audits, investigations, unfair labor
practice charges, complaints, claims, grievances, proceedings,
audits or investigations with respect to the Company pending
against the Company, at law or in equity, or before or by any
federal, state, municipal, foreign or other governmental
department, commission, board, bureau, agency or instrumentality,
nor are there any such demands, actions, suits, audits,
investigations, unfair labor practice charges, complaints, claims,
grievances, proceedings, audits or investigations that are known to
be threatened against the Company.
q. Labor and Employment
Matters . Schedule 2.2(q) of the Company Disclosure
Schedule sets forth all collective bargaining agreements,
employment and consulting agreements (other than consulting
agreements terminable by the Company within sixty
(60) calendar days without payment of a premium or a penalty),
executive compensation plans, bonus plans, deferred compensation
agreements, employee pension plans or retirement plans, employee
profit sharing plans, employee stock purchase and stock option
plans, group life insurance, hospitalization insurance or other
plans or arrangements providing for benefits to employees of the
Company.
(1) Neither the Company nor
any of the Shareholders has received notice of any controversies
between the Company and any employees or any unresolved labor union
grievances or unfair labor practice or labor arbitration
proceedings pending or threatened, related to the Company, and
there are not any organizational efforts presently being made or
threatened in an organized fashion involving any of the employees
of the Company.
(2) None of the Shareholders
and the Company has received notice of any claim that they have not
complied with any laws relating to the employment of labor,
including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and similar
taxes, equal employment opportunity, employment discrimination and
employment safety, or that it is liable for any arrears of wages or
any taxes or penalties for failure to comply with any of the
foregoing.
16
(3) Schedule 2.2(q)(3)
of the Company Disclosure Schedule sets forth the current annual
compensation (or basis thereof) of all employees of the Company (by
position or by department) as of February 29, 2008
.
r. Accounts Receivable
. All notes and accounts receivable of the Company are reflected
properly on its books and records, are valid receivables subject to
no setoffs or counterclaims (except as clearly indicated in the
Company Financial Statements or as set forth in Schedule
2.2(r)). All of such notes and accounts receivable are current
and collectible as of the date hereof, and each of such notes and
accounts receivable will be collected at their recorded amounts,
subject to normal adjustments, none of which are material in
amount. Schedule 2.2(r) sets forth a complete and accurate
list of all notes and accounts receivable as of
February 29, 2008 , which list indicates the aging of
such notes and accounts receivable.
s. Insurance .
Schedule 2.2(s) sets forth the following information with
respect to each insurance policy (including policies providing
property, casualty, liability, and workers’ compensation
coverage, bond and surety arrangements and Directors and Officers
liability) to which the Company has been a party, a named insured,
or otherwise the beneficiary of coverage at any time within the
past two (2) years (except as to insurance policies owned by
third party vendors, contractors and clients of the Company which
have contractually named the Company as insured or provided other
benefits of coverage as a result of contractual liability coverage,
which policies need not be listed on Schedule 2.2(s) but
shall be made available for inspection by Buyer’s
representatives):
(1) the name, address, and
telephone number of the agent;
(2) the name of the insurer,
the name of the policyholder, and the name of each covered
insured;
(3) the policy number and the
period of coverage;
(4) the scope (including an
indication of whether the coverage was on a claims made,
occurrence, or other basis) and amount (including a description of
deductibles and ceilings of coverage); and
(5) a description of any
retroactive or “swing” premium adjustments or other
loss-sharing arrangements.
To the best of
Shareholder’s and Company’s knowledge, information and
belief after due inquiry, with respect to each such insurance
policy owned by the Company: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect with respect to
the periods and risks which such policy purports to insure;
(B) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect in accordance with its
terms on the same terms immediately following the consummation of
the transactions
17
contemplated hereby;
(C) the Company is not in breach or default (including with
respect to the payment of premiums or the giving of notices), and
no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no
party to the policy has repudiated any provision thereof. The
Company has been covered during the past five years by insurance
similar in scope and amount customary and reasonable for the
businesses in which it has engaged during such period. Schedule
2.2(s) of the Company Disclosure Schedule describes any
self-insurance arrangements affecting the Company. “ Self
insurance arrangements ” means any arrangement by which
the Company have assumed risks in scope and amount customarily
insured by businesses in the Company’s industry and
geographic region.
t. Employee Benefits
.
(1) Schedule 2.2(t) of
the Company Disclosure Schedule lists, with respect to the Company,
any subsidiary of Company and any trade or business (whether or not
incorporated) which is treated as a single employer with Company
(an “ ERISA Affiliate ”) within the meaning of
Sections 414(b), (c), (m) or (o) of the Code,
(i) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ ERISA ”)) and subject to
ERISA, (ii) each loan to a non-officer employee, loans to
officers and directors and any stock option, stock purchase,
phantom stock, stock appreciation right, (iii) all
supplemental retirement, severance, sabbatical, medical, dental,
vision care, disability, employee relocation, cafeteria benefit
(Code Section 125) or dependent care (Code Section 129),
life insurance or accident insurance, bonus, pension, profit
sharing, savings, deferred compensation or incentive plans,
programs or arrangements which are not employee benefit plans as
otherwise covered under clause (i) above, (iv) other
fringe or employee benefit plans, programs or arrangements that
apply to senior management of Company and that do not generally
apply to all employees and (v) any current or former
employment or executive compensation or severance agreements,
written or otherwise, as to which unsatisfied obligations of the
Company remain for the benefit of, or relating to, any present or
former employee, consultant or director of Company (together, the
“ Company Employee Plans ”).
(2) The Company has furnished
to Buyer a copy of each of the Company Employee Plans and related
plan documents (including trust documents, insurance policies or
contracts, employee booklets, summary plan descriptions and other
authorizing documents, and, to the extent still in its possession,
any material employee communications relating thereto) and has,
with respect to each Company Employee Plan which is subject to
ERISA and/or Code reporting requirements, provided copies of the
Form 5500 reports filed for the last three plan years. Except as
described in Schedule 2.2(t)(2) , any Company Employee Plan
intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable
determination letter as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act
of 1986 and subsequent legislation, or has applied
18
to the Internal Revenue
Service for such a determination letter prior to the expiration of
the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for such
determination letter and to make any amendments necessary to obtain
a favorable determination. The Company has also furnished Buyer
with the most recent Internal Revenue Service determination letter
issued with respect to each such Company Employee Plan, nothing has
occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified
status of any Company Employee Plan subject to Code
Section 401(a).
(3) (i) Other than continued
health care coverage required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“ COBRA
”), none of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person,
and each Company Employee Plan may be amended or terminated at any
time without any liability to Company or any of its subsidiaries or
affiliates and each such plan provides the administrator with the
discretion to interpret and construe the terms of the plan;
(ii) there has been no “prohibited transaction,”
as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any Company Employee
Plan; (iii) each Company Employee Plan is in compliance with
the requirements prescribed by any and all statutes, rules and
regulations (including but not limited to ERISA and the Code) and
has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), and
Company and each subsidiary or ERISA Affiliate has performed all
obligations required to be
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