Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CRAFTMADE INTERNATIONAL, INC.
▇▇▇▇ ▇▇▇▇▇▇ CO., INC.
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.
▇▇▇▇ ▇▇▇▇▇▇
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
MARCH 1, 2005
TABLE OF CONTENTS
RECITALS ................................................................................................1
ARTICLE I DEFINITIONS.....................................................................................1
ARTICLE II THE MERGER; CLOSING.............................................................................7
2.1 The Merger......................................................................................7
2.2 Effect of Merger................................................................................7
2.3 Seller Consideration............................................................................8
2.4 Certificates of Merger..........................................................................9
2.5 The Closing.....................................................................................9
2.6 Closing Obligations.............................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE SELLERS....................................................................................11
3.1 Organization and Good Standing.................................................................11
3.2 Authority; No Conflict.........................................................................12
3.3 Capitalization.................................................................................13
3.4 Financial Statements...........................................................................13
3.5 Books and Records..............................................................................14
3.6 Title to Properties; Encumbrances..............................................................14
3.7 Accounts Receivable............................................................................14
3.8 Inventory......................................................................................15
3.9 No Undisclosed Liabilities.....................................................................15
3.10 Taxes..........................................................................................15
3.11 No Material Adverse Change.....................................................................16
3.12 Employee Benefit Plans.........................................................................16
3.13 Compliance with Legal Requirements; Governmental Authorizations................................17
3.14 Legal Proceedings; Orders......................................................................17
3.15 Absence of Certain Changes and Events..........................................................18
3.16 Contracts; No Defaults.........................................................................18
3.17 Insurance......................................................................................19
3.18 Environmental Matters..........................................................................20
3.19 Employees......................................................................................22
3.20 Labor Relations; Compliance....................................................................22
3.21 Intellectual Property..........................................................................23
3.22 Certain Payments...............................................................................23
3.23 Disclosure.....................................................................................23
3.24 Relationships with Related Persons.............................................................24
3.25 Brokers or Finders.............................................................................24
3.26 Investment Intent..............................................................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND
THE SUBSIDIARY.................................................................................24
4.1 Organization and Good Standing.................................................................24
4.2 Authority; No Conflict.........................................................................24
4.3 Certain Proceedings............................................................................25
4.4 Brokers or Finders.............................................................................25
4.5 Buyer Shares Consideration.....................................................................25
ARTICLE V COVENANTS OF SELLERS AND THE COMPANY PRIOR
TO CLOSING DATE................................................................................26
5.1 Access and Investigation.......................................................................26
5.2 Operation of the Businesses of the Acquired Companies..........................................26
5.3 Negative Covenant..............................................................................26
5.4 Required Approvals.............................................................................26
5.5 Notification...................................................................................27
5.6 Payment of Indebtedness by Related Persons.....................................................27
5.7 Best Efforts...................................................................................27
5.8 Meeting of Company Shareholders................................................................27
ARTICLE VI COVENANTS OF BUYER AND SUBSIDIARY PRIOR TO
CLOSING DATE...................................................................................28
6.1 Approvals of Governmental Bodies...............................................................28
6.2 Best Efforts...................................................................................28
6.3 Access.........................................................................................28
6.4 Meeting of Subsidiary Stockholders.............................................................28
ARTICLE VII CONDITIONS PRECEDENT TO BUYER'S
AND SUBSIDIARY'S OBLIGATION TO CLOSE...........................................................29
7.1 Accuracy of Representations....................................................................29
7.2 Sellers' Performance...........................................................................29
7.3 Consents.......................................................................................29
7.4 Additional Documents...........................................................................29
7.5 No Proceedings.................................................................................29
7.6 No Claim Regarding Stock Ownership or Sale Proceeds............................................29
7.7 No Prohibition.................................................................................30
7.8 Shareholder Approval...........................................................................30
ARTICLE VIII CONDITIONS PRECEDENT TO COMPANY'S
AND SELLERS' OBLIGATION TO CLOSE..............................................................30
8.1 Accuracy of Representations....................................................................30
8.2 Buyer's Performance............................................................................30
8.3 Consents.......................................................................................30
8.4 Additional Documents...........................................................................30
8.5 No Injunction..................................................................................30
8.6 Stockholder Approval...........................................................................31
ARTICLE IX EMPLOYEES......................................................................................31
9.1 Retention of Employees.........................................................................31
9.2 Employee Benefits..............................................................................31
ARTICLE X TERMINATION....................................................................................32
10.1 Termination Events.............................................................................32
10.2 Effect of Termination..........................................................................32
ARTICLE XI INDEMNIFICATION; REMEDIES......................................................................32
11.1 Survival; Right to Indemnification Not Affected by Knowledge...................................32
11.2 Indemnification and Payment of Damages by the Sellers..........................................33
11.3 Indemnification and Payment of Damages by the Sellers - Environmental Matters..................33
11.4 Indemnification and Payment of Damages by the Sellers - Accounts Receivable....................34
11.5 Indemnification and Payment of Damages by the Sellers - Obsolete Inventory.....................35
11.6 Indemnification and Payment of Damages by the Sellers - Undisclosed Liabilities................35
11.7 Indemnification and Payment of Damages by Buyer................................................35
11.8 Escrow.........................................................................................35
11.9 Procedure for Indemnification - Third Party Claims.............................................36
11.10 Procedure for Indemnification - Other Claims...................................................37
ARTICLE XII GENERAL PROVISIONS.............................................................................37
12.1 Expenses.......................................................................................37
12.2 Public Announcements...........................................................................37
12.3 Confidentiality................................................................................37
12.4 Notices........................................................................................37
12.5 Jurisdiction; Service of Process...............................................................39
12.6 Further Assurances.............................................................................39
12.7 Waiver.........................................................................................39
12.8 Entire Agreement and Modification..............................................................40
12.9 Disclosure Letter..............................................................................40
12.10 Assignments, Successors, and No Third-party Rights.............................................40
12.11 Severability...................................................................................40
12.12 Section Headings, Construction.................................................................40
12.13 Time of Essence................................................................................41
12.14 Governing Law..................................................................................41
12.15 Counterparts...................................................................................41
FORM OF DISCLOSURE LETTER........................................................................................44
FORM OF BUYER'S DISCLOSURE LETTER................................................................................47
EXHIBIT 2.1 FORM OF CERTIFICATES OF MERGER.......................................................................51
EXHIBIT 2.3 BUYER SHARES CONSIDERATION CLOSING SCHEDULE..........................................................59
EXHIBIT 2.6(a)(i) SELLERS' RELEASES..............................................................................60
EXHIBIT 2.6(a)(ii) EMPLOYMENT AGREEMENT..........................................................................63
EXHIBIT 2.6(a)(iii) CONSULTING AGREEMENT.........................................................................82
EXHIBIT 2.6(a)(x) OBERSTEIN PERSONAL GOODWILL AGREEMENT..........................................................97
EXHIBIT 2.6(a)(xi) ▇▇▇▇▇▇ PERSONAL GOODWILL AGREEMENT...........................................................104
EXHIBIT 2.6(b)(vii) BUYER'S AND SUBSIDIARY'S RELEASE............................................................111
EXHIBIT 2.6(c) ESCROW AGREEMENT.................................................................................114
EXHIBIT 7.4(a) FORM OF OPINION OF ▇▇▇▇▇ ▇. ▇▇▇▇▇▇...............................................................126
EXHIBIT 9.1 EMPLOYEES...........................................................................................128
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is made as of March 1,
2005, by and among Craftmade International, Inc., a
Delaware corporation
("Buyer"), ▇▇▇▇▇▇ Lighting Products, Inc., a
Delaware corporation
("Subsidiary"), ▇▇▇▇ ▇▇▇▇▇▇ Co., Inc., a Texas corporation (the "Company"), ▇▇▇▇
▇▇▇▇▇▇ ("▇▇▇▇▇▇") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇") (▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ are
collectively referred to herein as the "Sellers").
RECITALS
WHEREAS, the Sellers are the record and beneficial owners of all of the
issued and outstanding shares of capital stock of the Company; and
WHEREAS, Buyer wishes to acquire all of the outstanding capital stock
of the Company for common stock of Buyer through a merger of the Company with
and into the Subsidiary.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements set forth and for other good and valuable consideration, the
adequacy, sufficiency and receipt of which are hereby acknowledged, the parties
agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
"ACQUIRED COMPANIES"--the Company and its Subsidiaries, collectively.
"APPLICABLE CONTRACT"--any Contract (a) under which any Acquired
Company has or may acquire any rights, (b) under which any Acquired Company has
or may become subject to any obligation or liability, or (c) by which any
Acquired Company or any of the assets owned or used by it is or may become
bound.
"BEST EFFORTS"--the efforts that a prudent Person desirous of achieving
a result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement, the Agreement for the Purchase
and Sale of Personal Goodwill of ▇▇▇▇▇▇ ("▇▇▇▇▇▇ Personal Goodwill Agreement"),
the Agreement for the Purchase and Sale of Personal Goodwill of Oberstein
("Oberstein Personal Goodwill Agreement"), or any instrument delivered pursuant
to this Agreement will be deemed to have occurred if there is or has been (a)
any inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or
other provision, or (b) any claim (by any Person) or other occurrence or
circumstance that is or was inconsistent with such representation, warranty,
covenant, obligation, or other provision, and the term "Breach" means any such
inaccuracy, breach, failure, claim, occurrence, or circumstance.
"BUYER SHARES CLOSING PRICE"--Twenty-One Dollars and One Cent ($21.01)
per share.
"BUYER'S DISCLOSURE LETTER"--the disclosure letter delivered by Buyer
and Subsidiary to Sellers concurrently with the execution and delivery of this
Agreement.
"CLOSING DATE"--the date and time as of which the Closing actually
takes place.
"COMPANY SHARE"--any share of the common stock, $10.00 par value per
share, of the Company.
"COMPANY SHAREHOLDER"--any Person who or which holds any Company
Shares.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by
this Agreement, including (a) the Merger; (b) the execution, delivery, and
performance of the Employment Agreement, Consulting Agreement, the Sellers'
Releases, the Buyer's and Subsidiary's Release, and the Escrow Agreement; (c)
the performance by Buyer, Subsidiary, Sellers and the Company of their
respective covenants and obligations under this Agreement; and (d) Buyer's
acquisition and ownership of the Company Shares and exercise of control over the
Acquired Companies.
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"
DELAWARE GENERAL CORPORATION LAW"--the General Corporation Law of the
State of
Delaware, as amended.
"DISCLOSURE LETTER"--the disclosure letter delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
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"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to (a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products); (b) fines, penalties,
judgments, awards, settlements, legal or administrative proceedings, damages,
losses, claims, demands and response, investigative, remedial, or inspection
costs and expenses arising under Environmental Law or Occupational Safety and
Health Law; (c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or (d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or relates to
(a) advising appropriate authorities, employees, and the public of intended or
actual releases of pollutants or hazardous substances or materials, violations
of discharge limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment; (b) preventing or reducing to acceptable
levels the release of pollutants or hazardous substances or materials into the
Environment; (c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated; (d) assuring that
products are designed, formulated, packaged, and used so that they do not
present unreasonable risks to human health or the Environment when used or
disposed of; (e) protecting resources, species, or ecological amenities; (f)
reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention; or (h) making
responsible parties pay private parties, or groups of them, for damages done to
their health or the Environment, or permitting self-appointed representatives of
the public interest to recover for injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES"--any real property, leaseholds, or other interests
currently or formerly owned or operated by any Acquired Company and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by any Acquired
Company.
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"GAAP"--generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any (a) nation, state, county, city, town,
village, district, or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign, or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal); (d)
multi-national organization or body; or (e) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"HAZARDOUS MATERIALS"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (a) such individual is actually aware of such
fact or other matter; or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as a
director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
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"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MERGER CONSIDERATION"--the aggregate value of the consideration
received by the Sellers pursuant to the conversion of the Company Shares
pursuant to Section 2.2(e).
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if (a) such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person; (b) such
action is not required to be authorized by the board of directors of such Person
(or by any Person or group of Persons exercising similar authority); and (c)
such action is similar in nature and magnitude to actions customarily taken,
without any authorization by the board of directors (or by any Person or group
of Persons exercising similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN AFFILIATE"--with respect to any Person, any other person or
entity with whom the Person constitutes all or part of a controlled group, or
which would be treated with the Person as under common control or whose
employees would be treated as employed by the Person, under Section 414 of the
IRC and any regulations, administrative rulings and case law interpreting the
foregoing.
5
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual, (a) each
other member of such individual's Family; (b) any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family; (c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and (d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual, (a) any
Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person; (b) any Person that holds a Material Interest in such
specified Person; (c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity); (d)
any Person in which such specified Person holds a Material Interest; (e) any
Person with respect to which such specified Person serves as a general partner
or a trustee (or in a similar capacity); and (f) any Related Person of any
individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least ten percent (10%) of the outstanding voting power of a
Person or equity securities or other equity interests representing at least ten
percent (10%) of the outstanding equity securities or equity interests in a
Person.
"RELEASE"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"REQUISITE SHAREHOLDER APPROVAL"--the affirmative vote of the holders
of a majority of the Company Shares in favor of this Agreement and the Merger.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the
6
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"TAX"--any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Governmental Body or payable pursuant to any tax-sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"TAX RETURN"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"TEXAS BUSINESS CORPORATION ACT"--the Texas Business Corporation Act of
the State of Texas, as amended.
"THREAT OF RELEASE"--a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
ARTICLE II
THE MERGER; CLOSING
2.1 The Merger. Subject to the terms and conditions of this Agreement,
the Company will merge with and into the Subsidiary (the "Merger") at the time
(the "Effective Time") provided in the Certificates of Merger filed by the
Company and the Subsidiary with the Secretary of State of the State of Texas and
the Secretary of State of the State of
Delaware, respectively, in the forms
attached hereto as Exhibit 2.1 (the "Certificates of Merger"). The Subsidiary
shall be the corporation surviving the Merger (the "Surviving Corporation").
2.2 Effect of Merger.
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(a) General. The Merger shall become effective at the Effective Time.
The Merger shall have the effect set forth in the Texas Business Corporation Act
and the
Delaware General Corporation Law. The Surviving Corporation may, at any
time after the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either the Company or the
Subsidiary in order to carry out and effectuate the transactions contemplated by
this Agreement.
(b) Certificate of Incorporation. The Certificate of Incorporation
of the Subsidiary shall become the Certificate of Incorporation of the Surviving
Corporation at and as of the Effective Time.
(c) Bylaws. The Bylaws of the Subsidiary shall become the Bylaws of the
Surviving Corporation at and as of the Effective Time.
(d) Directors and Officers. The directors and officers of the
Subsidiary shall become the directors and officers of the Surviving Corporation
at and as of the Effective Time (retaining their respective positions and terms
of office).
(e) Conversion of Company Shares. At and as of the Effective Time:
(i) all Company Shares owned by ▇▇▇▇▇▇ shall be converted into
the right to receive an amount equal to $3 million in common stock,
$0.01 par value per share, of the Buyer (the "Buyer Shares") ("▇▇▇▇▇▇
Buyer Shares"), in the manner hereinafter provided; and
(ii) all Company Shares owned by Oberstein shall be converted
into the right to receive an amount equal to $1 million in Buyer Shares
("Oberstein Buyer Shares") (▇▇▇▇▇▇ Buyer Shares and Oberstein Buyer
Shares are collectively referred to herein as "Buyer Shares
Consideration"), in the manner hereinafter provided;
provided, however, that the Merger Consideration shall be subject to equitable
adjustment in the event of any stock split, stock dividend, reverse stock split,
or other change in the number of Company Shares outstanding. No Company Share
shall be deemed to be outstanding or to have any rights other than those set
forth above in this Section 2.2(e) after the Effective Time.
(f) Conversion of Capital Stock of the Subsidiary. At and as of the
Effective Time, each share of common stock, $0.01 par value per share, of the
Subsidiary shall be converted into one share of common stock, $0.01 par value
per share, of the Surviving Corporation.
2.3 Seller Consideration. Each Seller shall receive a number of Buyer
Shares equal to the total value of consideration tendered in Buyer Shares
divided by the share price of the Buyer Shares at the close of the market on the
day prior to closing ("Buyer Shares Closing Price"), as set forth on Exhibit
2.3. An amount of ▇▇▇▇▇▇ Buyer Shares equal to $0.75 million and an amount of
Oberstein Buyer Shares equal to $0.25 million (the "Escrow Shares"), based on
the Buyer Shares Closing Price, shall be deposited for one year from the closing
with the escrow agent referred to in Section 2.6(c) pursuant to the terms of the
Escrow Agreement (as defined below).
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For illustrative purposes only, based upon a hypothetical Buyer Shares
Closing Price of $20.00, below is a chart illustrating the Buyer Shares
Consideration.
$ AMOUNT OF BUYER HYPOTHETICAL BUYER RESULTING NUMBER OF
SELLERS CAPITAL STOCK SHARES CLOSING PRICE BUYER SHARES
▇▇▇▇▇▇ $3 million $20.00 150,000
(37,500 of which would be
Escrow Shares)
Oberstein $1 million $20.00 50,000
(12,500 of which would be
Escrow Shares)
2.4 Certificates of Merger. Prior to the Closing, the Company and the
Subsidiary will file or cause to be filed with the Secretary of State of the
State of Texas and the Secretary of State of the State of
Delaware the
Certificates of Merger, along with any other necessary Governmental
Authorizations, sufficient to effect the Merger.
2.5 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of ▇▇▇▇▇▇ and ▇▇▇▇▇,
LLP, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Texas, at 10:00 a.m. (local
time) on March 1, 2005 or at such other time and place as the parties may agree.
Subject to the provisions of Article X, failure to consummate the purchase and
sale provided for in this Agreement on the date and time and at the place
determined pursuant to this Section 2.5 will not result in the termination of
this Agreement and will not relieve any party of any obligation under this
Agreement.
2.6 Closing Obligations. At the Closing:
(a) the Company and the Sellers will deliver to the Buyer and the
Subsidiary:
(i) releases in the form of Exhibit 2.6(a)(i) executed by
Sellers (collectively, "Sellers' Releases");
(ii) employment agreement in the form of Exhibit 2.6(a)(ii),
executed by Oberstein (the "Employment Agreement");
(iii) consulting agreement in the from of Exhibit 2.6(a)(iii),
executed by ▇▇▇▇▇▇ (the "Consulting Agreement");
(iv) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and
warranties in this Agreement was accurate in all respects as of the
date of this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date (giving full effect to any
supplements to the Disclosure Letter that were delivered by Sellers to
Buyer prior to the Closing Date in accordance with Section 5.5);
9
(v) an opinion of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, dated the Closing Date, in
the form of Exhibit 7.4(a);
(vi) a certificate executed by Sellers representing and
warranting to Buyer that this Agreement and the Merger shall have
received the approval of all of the Company Shareholders, in accordance
with the Texas Business Corporation Act. Such certificate shall contain
as an exhibit thereto the resolutions of the Company Shareholders,
which approved this Agreement and the Merger;
(vii) certificates representing the Company Shares, for
cancellation;
(viii) certificates representing all outstanding shares of
capital stock of each Acquired Company, other than the Company, owned
of record by the Company;
(ix) resignations by ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ as officers and
members of the Board of Directors of the Company, effective immediately
prior to the Effective Time of the Merger;
(x) Oberstein Personal Goodwill Agreement in the form of
Exhibit 2.6(a)(x), executed by Oberstein; and
(xi) ▇▇▇▇▇▇ Personal Goodwill Agreement in the form of Exhibit
2.6(a)(xi), executed by ▇▇▇▇▇▇.
(b) Buyer and the Subsidiary will deliver:
(i) Buyer Shares Consideration Closing Schedule in the form of
Exhibit 2.3
(ii) certificates for the Buyer Shares Consideration
(including the Escrow Shares) for transfer to the Sellers, representing
the issuance of an amount of Buyer Shares as follows: an amount of
Buyers Shares to ▇▇▇▇▇▇ equal to (A) the Buyer Shares Consideration
less the Escrow Shares multiplied by (B) 75%; and an amount of Buyer
Shares to Oberstein equal to (A) the Buyer Shares Consideration less
the Escrow Shares multiplied by (B) 25%;
(iii) the Escrow Shares to the escrow agent referred to in
Section 2.6(c);
(iv) a certificate to the Sellers executed by Buyer to the
effect that, except as otherwise stated in such certificate, each of
Buyer's and Subsidiary's representations and warranties in this
Agreement was accurate in all respects as of the date of this Agreement
and is accurate in all respects as of the Closing Date as if made on
the Closing Date;
(v) the Employment Agreement to Oberstein, executed by Buyer
and Subsidiary;
(vi) the Consulting Agreement to ▇▇▇▇▇▇, executed by Buyer and
Subsidiary;
10
(vii) a release to the Sellers in the form of EXHIBIT
2.6(b)(vii) executed by Buyer and Subsidiary ("Buyer's and Subsidiary's
Release");
(viii) a certificate to the Sellers executed by Buyer and
Subsidiary representing and warranting to Sellers that this Agreement
and the Merger shall have received the approval of the sole stockholder
of Subsidiary, in accordance with the
Delaware General Corporation Law.
Such certificate shall contain as an exhibit thereto the resolutions of
the sole stockholder of Subsidiary, which approved this Agreement and
the Merger;
(ix) the Oberstein Personal Goodwill Agreement to Oberstein,
executed by Buyer and Subsidiary; and
(x) the ▇▇▇▇▇▇ Personal Goodwill Agreement to ▇▇▇▇▇▇, executed
by Buyer and Subsidiary.
(c) Buyer and Sellers will enter into an escrow agreement in the form
of Exhibit 2.6(c) (the "Escrow Agreement") with the Frost National Bank, a
national banking association.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
Each of the Sellers jointly and severally represent and warrant to
Buyer as follows:
3.1 Organization and Good Standing.
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate
list, for each Acquired Company, of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each shareholder and the number of
shares held by each). Each Acquired Company is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under material
Applicable Contracts. Each Acquired Company is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification and where the failure to so qualify would have a material adverse
effect on its business, condition, prospects or properties.
(b) The Sellers have delivered to Buyer copies of the Organizational
Documents of each Acquired Company, as currently in effect.
11
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding obligation
of the Sellers, enforceable against the Sellers in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights generally
and by general principles of equity. Upon the execution and delivery by the
Sellers of the Escrow Agreement, Oberstein of the Employment Agreement, ▇▇▇▇▇▇
of the Consulting Agreement and the Sellers of the Sellers' Releases
(collectively, the "the Sellers' Closing Documents"), the Sellers' Closing
Documents will constitute the legal, valid, and binding obligations of the
respective Sellers, enforceable against the respective Sellers in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and by general principles of equity. The respective
Sellers have all right, power, authority, and capacity to execute and deliver
this Agreement and the Sellers' Closing Documents and to perform their
respective obligations under this Agreement and the Sellers' Closing Documents.
The Company has all corporate right, power and authority to execute and deliver
this Agreement and to perform its obligations under this Agreement.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, neither
the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time) (i) conflict with, or result in a violation of
any provision of the Organizational Documents of the Acquired Companies; (ii) to
the Knowledge of the Company or the Sellers, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which any
Acquired Company or either Seller, or any of the assets owned or used by any
Acquired Company, may be subject; (iii) conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Body the right
to revoke, suspend, terminate, or modify, any Governmental Authorization that is
held by any Acquired Company or that otherwise relates to the business of, or
any of the assets owned or used by, any Acquired Company; (iv) conflict with, or
result in a violation or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any material
Applicable Contract; or (v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by any
Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Seller or
Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) The Company has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and to perform its
obligations hereunder; provided, however, that the Company cannot consummate the
Merger unless and until it receives the Requisite Shareholder Approval. This
Agreement constitutes the valid and legally binding obligation of the Company,
enforceable in accordance with its terms and conditions, except as
enforceability may be
12
limited by bankruptcy, insolvency, reorganization, moratorium and other laws
affecting creditors' rights generally and by general principles of equity.
3.3 Capitalization. The authorized equity securities of the Company
consist of 25,000 shares of common stock, $10.00 par value per share, of which
2,560 shares are issued and outstanding and constitute the Company Shares.
Sellers own all of the Company Shares and constitute all of the Company
Shareholders. ▇▇▇▇▇▇ owns 1,920 Company Shares and Oberstein owns 640 Company
Shares constituting all of the issued and outstanding Company Shares
(collectively, the "Seller's Shares"). The Sellers are and will be on the
Closing Date the record and beneficial owners and holders of the Seller's
Shares, free and clear of all Encumbrances. The Company has no other class or
series of capital stock authorized, issued and outstanding. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights or other contracts or commitments that could require
any Acquired Company to issue, sell or otherwise cause to become outstanding any
of its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or similar rights with respect to the
Acquired Companies. Except as set forth in Part 3.3 of the Disclosure Letter,
with the exception of the Company Shares (which are owned by the Sellers), all
of the outstanding equity securities and other securities of each Acquired
Company are owned of record and beneficially by one or more of the Acquired
Companies, free and clear of all Encumbrances.
No legend or other reference to any purported Encumbrance appears upon
any certificate representing equity securities of any Acquired Company. All of
the outstanding equity securities of each Acquired Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of any Acquired Company. None of the outstanding equity
securities or other securities of any Acquired Company was issued in violation
of the Securities Act or any other Legal Requirement. No Acquired Company owns,
or has any Contract to acquire, any equity securities or other securities of any
Person (other than Acquired Companies) or any direct or indirect equity or
ownership interest in any other business.
3.4 Financial Statements. The Sellers have delivered to Buyer: (a) an
Interim Balance Sheet of the Acquired Companies as of January 31, 2005, and the
related Interim Statements of Income and Retained Earnings for the eight months
then ended, (b) compiled Balance Sheets of the Acquired Companies as of May 31,
2003 and 2004, respectively, and the related compiled Statements of Income and
Retained Earnings for the fiscal years then ended and (c) compiled Balance
Sheets of the Acquired Companies as of May 31, 2000, 2001 and 2002,
respectively, and the related compiled Statements of Income and Retained
Earnings, and Statement of Cash Flow for each of the fiscal years then ended.
Except as set forth in Part 3.4 of the Disclosure Letter, such financial
statements and notes, where applicable, fairly present the financial condition
and the results of operations, changes in retained earnings, and cash flow of
the Acquired Companies as of the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP, subject,
in the case of interim financial statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse); the financial statements referred to in this Section 3.4
reflect the consistent application of such accounting principles throughout the
periods involved, except as disclosed in the notes to such financial statements.
No financial
13
statements of any Person other than the Acquired Companies are required by GAAP
to be included in the financial statements of the Company.
3.5 Books and Records. The books of account, minute books, stock record
books, and other records of the Acquired Companies, all of which have been made
available to Buyer, are complete and correct in all material respects and have
been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls. The minute books of the
Acquired Companies contain accurate and complete records of all meetings held
of, and corporate action taken by, the shareholders, the Boards of Directors,
and committees of the Boards of Directors of the Acquired Companies, and no
meeting of any such shareholders, Board of Directors, or committee has been held
for which minutes have not been prepared and are not contained in such minute
books. At the Closing, all of those books and records will be in the possession
of the Acquired Companies.
3.6 Title to Properties; Encumbrances. Part 3.6 of the Disclosure
Letter contains a complete and accurate list of all real property, leaseholds,
or other interests therein owned by any Acquired Company. The Sellers have
delivered or made available to Buyer copies of the deeds and other instruments
(as recorded) by which the Acquired Companies acquired such real property and
interests, and copies of all title insurance policies, opinions, abstracts, and
surveys in the possession of the Sellers or the Acquired Companies and relating
to such property or interests. The Acquired Companies own (with good and
marketable title in the case of real property, subject only to the matters
permitted by the following sentence) all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) that they purport
to own located in the facilities owned or operated by the Acquired Companies or
reflected as owned in the books and records of the Acquired Companies, including
all of the properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet (except for personal property sold since the date of the Balance
Sheet and the Interim Balance Sheet, as the case may be, in the Ordinary Course
of Business), and all of the properties and assets purchased or otherwise
acquired by the Acquired Companies since the date of the Balance Sheet (except
for the personal property acquired and sold since the date of the Balance Sheet
in the Ordinary Course of Business and consistent with past practice), which
subsequently purchased or acquired properties and assets (other than inventory
and short-term investments) are listed in Part 3.6 of the Disclosure Letter.
Except as set forth in Part 3.6 of the Disclosure Letter, all material
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature.
3.7 Accounts Receivable. All accounts receivable of the Acquired
Companies that are reflected on the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Acquired Companies as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Except as set forth on Part 3.7 of the
Disclosure Letter, unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date current and collectible net of
the respective reserves shown on the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Acquired Companies as of the Closing Date
(which reserves are adequate and calculated consistent with past practice and,
in the case of the reserve as of the Closing
14
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve with respect to the Accounts Receivable as
reflected in the Interim Balance Sheet and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been or, to
the Knowledge of each of the Company and the Sellers, will be collected in full,
without any set-off, within ninety days after the day on which it first becomes
due and payable. There is no contest, claim, or right of set-off, other than
returns in the Ordinary Course of Business, under any Contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 3.7 of the Disclosure Letter contains a complete and accurate
list of all Accounts Receivable as of the date of the Interim Balance Sheet,
which list sets forth the aging of such Accounts Receivable
3.8 Inventory. All inventory of the Acquired Companies, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Balance Sheet or
the Interim Balance Sheet or on the accounting records of the Acquired Companies
as of the Closing Date, as the case may be. All inventories not written off have
been priced at the lower of cost or market on a first in, first out basis.
3.9 No Undisclosed Liabilities. To the Knowledge of each of the Company
and the Sellers, the Acquired Companies have no material liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet or the Interim Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.10 Taxes.
(a) The Acquired Companies have filed or caused to be filed (on a
timely basis since 1999) all Tax Returns that are or were required to be filed
by or with respect to any of them, pursuant to applicable Legal Requirements.
The Sellers have delivered or made available to Buyer copies of, and Part 3.10
of the Disclosure Letter contains a complete and accurate list of, all such Tax
Returns filed since January 1, 1999. The Acquired Companies have paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Sellers or any Acquired Company, except such Taxes, if any, as
are listed in Part 3.10 of the Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and the Interim Balance Sheet.
(b) Part 3.10 of the Disclosure Letter contains a complete and accurate
list of all audits of all such Tax Returns, including a reasonably detailed
description of the nature and outcome of each audit. All deficiencies proposed
as a result of such audits have been paid, reserved against, settled, or, as
described in Part 3.10 of the Disclosure Letter, are being contested in good
faith by appropriate proceedings. Part 3.10 of the Disclosure Letter describes
all adjustments to the United States federal income Tax Returns filed by any
Acquired Company for all taxable years since 1999, and the
15
resulting deficiencies proposed by the IRS. Except as described in Part 3.10 of
the Disclosure Letter, no Seller or Acquired Company has given or been requested
to give waivers or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of limitations relating to
the payment of Taxes of any Acquired Company or for which any Acquired Company
may be liable.
(c) Except as set forth on Part 3.10 of the Disclosure Letter, the
charges, accruals, and reserves with respect to Taxes on the respective books of
each Acquired Company are adequate (determined in accordance with GAAP) and are
at least equal to that Acquired Company's liability for Taxes. There exists no
proposed tax assessment against any Acquired Company except as disclosed in the
Balance Sheet or in Part 3.10 of the Disclosure Letter. All Taxes that any
Acquired Company is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis)
any Acquired Company are true, correct, and complete in all material respects.
There is no tax sharing agreement that will require any payment by any Acquired
Company after the date of this Agreement. No Acquired Company is, or within the
five-year period preceding the Closing Date has been, an "S" corporation.
3.11 No Material Adverse Change. Since the date of the Interim Balance
Sheet, January 31, 2005, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of any
Acquired Company, and no event has occurred or circumstance exists, to the
Knowledge of each of the Company and the Sellers, that may result in such a
material adverse change.
3.12 Employee Benefit Plans. Except as set forth in Part 3.12 of the
Disclosure Letter, neither the Company nor any Plan Affiliate has maintained,
sponsored, adopted, made contributions to or obligated itself to make
contributions to or to pay any benefits or grant rights under or with respect to
any "Employee Pension Benefit Plan" (as defined in Section 3(2) of ERISA),
"Employee Welfare Benefit Plan" (as defined in Section 3(1) of ERISA),
"Multi-employer Plan" (as defined in Section 3(37) of ERISA), plan of deferred
compensation, medical plan, life insurance plan, long-term disability plan,
dental plan or other plan providing for the welfare of any of the Company's
employees or former employees or beneficiaries thereof, personnel policy
(including but not limited to vacation time, holiday pay, bonus programs, moving
expense reimbursement programs and sick leave), excess benefit plan, bonus or
incentive plan (including but not limited to stock options, restricted stock,
stock bonus and deferred bonus plans), salary reduction agreement,
change-of-control agreement, employment agreement, consulting agreement or any
other benefit, program or contract (collectively, "Employee Benefit Plans"),
whether or not written, which could give rise to or result in the Company or
such Plan Affiliate having any material debt, liability, claim or obligation of
any kind or nature, whether accrued, absolute, contingent, direct, indirect,
known or unknown, perfected or inchoate or otherwise and whether or not due or
to become due. Correct and complete copies of all Employee Benefit Plans
previously have been furnished to Buyer. The Employee Benefit Plans are in
compliance in all material respects with governing documents and agreements
16
and with applicable laws. There has not been any act or omission by the Company
under ERISA or the terms of the Employee Benefit Plans, or any other applicable
law or agreement which could give rise to any liability of the Company, whether
under ERISA, the IRC or other laws or agreements.
3.13 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.13 of the Disclosure Letter, to the
Knowledge of each of the Sellers and the Company, each Acquired Company is, and
at all times since January 1, 1999 has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets.
(b) Part 3.13 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, any Acquired Company. Each Governmental Authorization listed or required to
be listed in Part 3.13 of the Disclosure Letter is valid and in full force and
effect. Each Acquired Company owns or possesses all right, title and interest in
and to all of the Governmental Authorizations that are necessary to enable it to
carry on the business of such Acquired Company as presently conducted. Each
Acquired Company has taken all necessary action to maintain such Governmental
Authorizations. No loss or expiration of any such Governmental Authorization is
threatened, pending or reasonably foreseeable.
3.14 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.14 of the Disclosure Letter, there is
no pending Proceeding (i) that has been commenced by or against any Acquired
Company or that otherwise relates to or may affect the business of, or any of
the assets owned or used by, any Acquired Company; or (ii) that challenges, or
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
To the Knowledge of each of the Sellers and the Company, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. The Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.14 of the Disclosure Letter. The Proceedings listed in Part 3.14 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of any Acquired Company.
(b) Except as set forth in Part 3.14 of the Disclosure Letter: (i)
there is no Order to which any of the Acquired Companies, or any of the assets
owned or used by any Acquired Company, is subject; and (ii) each Acquired
Company is, and at all times since January 1, 1999 has been, in full compliance
with all of the terms and requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject.
17
3.15 Absence of Certain Changes and Events. Except as set forth in Part
3.15 of the Disclosure Letter, since the date of the Balance Sheet, the Acquired
Companies have conducted their businesses only in the Ordinary Course of
Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
any Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by any Acquired Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
(c) payment or increase by any Acquired Company of any bonuses,
salaries, or other compensation to any shareholder, director, officer, or
(except as provided in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any material license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to any Acquired Company of at least
$10,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any Acquired
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of any Acquired Company, including the sale,
lease, or other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to any
Acquired Company in excess of $10,000;
(i) material change in the accounting methods used by any Acquired
Company; or
(j) agreement, whether oral or written, by any Acquired Company to do
any of the foregoing.
3.16 Contracts; No Defaults.
18
(a) Part 3.16(a) of the Disclosure Letter contains a complete and
accurate list, and the Sellers have delivered to Buyer true and complete copies,
of all the material Contracts of each Acquired Company. Part 3.16(a) of the
Disclosure Letter sets forth reasonably complete details concerning such
Contracts, including the parties to the Contracts, the amount of the remaining
commitment of the Acquired Companies under such Contracts, and the Acquired
Companies' office where details relating to such Contracts are located.
(b) Except as set forth in Part 3.16(b) of the Disclosure Letter, each
Contract identified or required to be identified in Part 3.16(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms.
(c) Except as set forth in Part 3.16(c) of the Disclosure Letter:
(i) each Acquired Company is, and at all times since January
1, 1999 has been, in full compliance with all applicable material terms
and requirements of each Contract under which such Acquired Company has
or had any obligation or liability or by which such Acquired Company or
any of the assets owned or used by such Acquired Company is or was
bound;
(ii) each other Person that has or had any obligation or
liability under any material Contract under which an Acquired Company
has or had any rights is, and at all times since January 1, 1999 has
been, in full compliance with all applicable terms and requirements of
such material Contract;
(iii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) may conflict with, or result in a
violation or breach of, or give any Acquired Company or other Person
the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any
other Person, at any time since January 1, 1999, any notice or other
communication (whether oral or written) regarding any actual, alleged,
possible, or potential violation or breach of, or default under, any
material Contract.
(d) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Acquired Companies have been entered
into in the Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
3.17 Insurance.
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(a) The Sellers have delivered to Buyer true and complete copies of all
policies of insurance to which any Acquired Company is a party or under which
any Acquired Company, or any director of any Acquired Company, is or has been
covered at any time within the three (3) years preceding the date of this
Agreement;
(b) Part 3.17(b) of the Disclosure Letter sets forth, by year, for the
current policy year and each of the three (3) preceding policy years, a summary
of the loss experience under each policy.
(c) Except as set forth on Part 3.17(c) of the Disclosure Letter:
(i) All policies to which any Acquired Company is a party or
that provide coverage to any Acquired Company, or any director or
officer of an Acquired Company (A) are valid, outstanding, and
enforceable; (B) taken together, provide adequate insurance coverage
for the assets and the operations of the Acquired Companies for all
risks to which the Acquired Companies are normally exposed; (C) are
sufficient for compliance with all Legal Requirements and Contracts to
which any Acquired Company is a party or by which any of them is bound;
and (D) will continue in full force and effect following the
consummation of the Contemplated Transactions.
(ii) No Acquired Company has received (A) any refusal of
coverage or any notice that a defense will be afforded with reservation
of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will
not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
(iii) The Acquired Companies have paid all premiums due, and
have otherwise performed all of their respective obligations, under
each policy to which any Acquired Company is a party or that provides
coverage to any Acquired Company or director thereof.
(iv) The Acquired Companies have given notice to the insurer
of all claims that may be insured thereby.
3.18 Environmental Matters. Except as set forth in Part 3.18 of the
disclosure letter:
(a) Each Acquired Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. No Acquired Company and no Seller, with respect to the
business of any Acquired Company, has any basis to expect, nor has any of them
or any other Person for whose conduct they are or may be held to be responsible
received, any actual or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which any Seller, with respect to the business of any Acquired Company, or
any Acquired Company has had an interest, or with respect to
20
any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by any Seller,
any Acquired Company, or any other Person for whose conduct they are or may be
held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of the Sellers and the
Acquired Companies, Threatened claims, Encumbrances, or other restrictions of
any nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which any Acquired Company has or had an interest.
(c) No Seller or Acquired Company has any basis to expect, nor has any
of them or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any Acquired Company had an
interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by any Acquired Company or any other Person for whose conduct it is or
may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) No Acquired Company, or any other Person for whose conduct it is or
may be held responsible, has any Environmental, Health, and Safety Liabilities
with respect to the Facilities or, with respect to any other properties and
assets (whether real, personal, or mixed) in which any Acquired Company (or any
predecessor), has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.
(e) To the Knowledge of each of the Sellers and the Company, there are
no Hazardous Materials present on or in the Environment at the Facilities or at
any geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. No Seller, Acquired Company, any other
Person for whose conduct they are or may be held responsible, or any other
Person, has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which any Acquired Company has or had an
interest.
(f) There has been no Release or, to the Knowledge of the Sellers and
the Acquired Companies, Threat of Release, of any Hazardous Materials at or from
the Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which any Acquired Company has or
had an interest,
21
or any geologically or hydrologically adjoining property, whether by the
Sellers, any Acquired Company, or any other Person.
(g) The Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by the Sellers or any Acquired Company pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Sellers, any Acquired Company, or any other Person for whose
conduct they are or may be held responsible, with Environmental Laws.
3.19 Employees.
(a) Part 3.19 of the Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of the Acquired
Companies, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since January 1, 1999; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under any Acquired
Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension Benefit
Plan or Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
(b) No employee or director of any Acquired Company is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Acquired Companies, or (ii) the ability of any
Acquired Company to conduct its business, including any Proprietary Rights
Agreement with the Sellers or the Acquired Companies by any such employee or
director. Except as set forth in Part 3.19 of the Disclosure Letter, to the
Sellers' Knowledge, no director, officer, or other key employee of any Acquired
Company intends to terminate his employment with such Acquired Company.
(c) Part 3.19 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or director
of the Acquired Companies, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.
3.20 Labor Relations; Compliance. Since January 1, 1999, no Acquired
Company has been or is a party to any collective bargaining or other labor
Contract. Since January 1, 1999, there has not been, there is not presently
pending or existing, and there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, lockout or employee grievance process, (b) any
Proceeding against or affecting any Acquired Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters or (c) any application for certification of a collective bargaining
agent. Each Acquired Company has complied in all respects, or such noncompliance
shall not have a material adverse effect with regard to such Acquired
22
Company, with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining and occupational safety and health. No Acquired Company is liable for
the payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
3.21 Intellectual Property.
(a) Except as set forth in Part 3.21 of the Disclosure Letter, the
Company (i) owns all the licenses, trademarks, tradenames, copyrights, marks,
patents and applications for patents listed and attributed to it on Part 3.21(a)
of the Disclosure Letter (the "Intellectual Property Assets"), (ii) neither owns
nor uses any such items which are not listed in the Disclosure Letter, (iii)
pays no royalties to anyone with respect to any such items, and (iv) has full
and lawful right to bring actions for the infringement thereof. The Company
owns, or possesses adequate and enforceable rights to use without payment of
royalties, all licenses, trademarks, tradenames, copyrights, patents, trade
secrets and processes necessary for the conduct of, or use in, its business as
the same is presently being conducted.
(b) Except as set forth on Part 3.21(b) of the Disclosure Letter, the
Company has no Knowledge nor has received any notice to the effect that any
service it provides or sells, or any process, method, part or material it
employs in its business for the use by it or another of any such service, may
infringe, or is in conflict with, any asserted right of another. There is no
pending or Threatened claim or litigation action against the Company contesting
its right to use or the validity of any of the trademarks or tradenames listed
on Part 3.21(a) of the Disclosure Letter or asserting its misuse of any of the
foregoing, which would deprive it of the right to assert its rights thereunder
or which would prevent the sale of any service provided or sold by it.
3.22 Certain Payments. Since January 1, 1999, no Acquired Company or
director, officer, agent, or employee of any Acquired Company, or any other
Person associated with or acting for or on behalf of any Acquired Company, has
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 in securing business, (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 any Acquired Company or any
affiliate of an Acquired Company, or (iv) in violation of any Legal Requirement
or (b) established or maintained any fund or asset that has not been recorded in
the books and records of the Acquired Companies.
3.23 Disclosure.
(a) No representation or warranty of the Sellers in this Agreement and
no statement in the Disclosure Letter omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
23
(b) There is no fact known to either Seller that has specific
application to either Seller or any Acquired Company (other than general
economic or industry conditions) and that materially adversely affects or, as
far as either Seller can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of the
Acquired Companies (on a consolidated basis) that has not been set forth in this
Agreement or the Disclosure Letter.
3.24 Relationships with Related Persons. No Seller or any Related
Person of the Sellers or of any Acquired Company has, or since January 1, 1999
has had, any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to the Acquired
Companies' businesses. Except as set forth on Part 3.24 of the Disclosure
Letter, no Seller or any Related Person of the Sellers or of any Acquired
Company is, or since January 1, 1999, has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with any Acquired Company, or (ii) engaged in competition with any
Acquired Company with respect to any line of the products or services of such
Acquired Company (a "Competing Business") in any market presently served by such
Acquired Company. Except as set forth in Part 3.24 of the Disclosure Letter, no
Seller or any Related Person of the Sellers or of any Acquired Company is a
party to any Contract with, or has any claim or right against, any Acquired
Company.
3.25 Brokers or Finders. The Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.26 Investment Intent. The Sellers are acquiring the Buyer Shares
Consideration for their own account and not with a view to their distribution
within the meaning of Section 2(11) of the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND THE SUBSIDIARY
Buyer and the Subsidiary represent and warrant to Sellers as follows:
4.1 Organization and Good Standing. Each of the Buyer and the
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the laws of the State of
Delaware. Buyer is the owner of all
outstanding shares of common stock of Subsidiary.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding obligation
of Buyer and Subsidiary, enforceable against Buyer and Subsidiary in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditors'
rights generally and by general principles of equity. Upon the execution and
delivery by Buyer and Subsidiary, as applicable, of the Escrow Agreement, the
Employment
24
Agreement, the Consulting Agreement, and the Buyer's and Subsidiary's Release
(collectively, the "Buyer's Closing Documents"), the Buyer's Closing Documents
will constitute the legal, valid, and binding obligations of Buyer and
Subsidiary, as applicable, enforceable against Buyer and Subsidiary, as
applicable, in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
laws affecting creditors' rights generally and by general principles of equity.
Buyer and Subsidiary has all corporate right, power, and authority to execute
and deliver this Agreement and the applicable Buyer's Closing Documents and to
perform its obligations under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Part 4.2 of the Buyer's Disclosure Letter,
neither the execution and delivery of this Agreement by Buyer and Subsidiary nor
the consummation or performance of any of the Contemplated Transactions by Buyer
and Subsidiary will give any Person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of either Buyer's or Subsidiary's
Organizational Documents;
(ii) any Legal Requirement or Order to which Buyer or
Subsidiary may be subject; or
(iii) any Contract to which Buyer or Subsidiary is a party or
by which Buyer or Subsidiary may be bound.
Except as set forth in Part 4.2 of the Buyer's Disclosure Letter, neither Buyer
nor Subsidiary is, and neither Buyer nor Subsidiary will be required to, obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
4.3 Certain Proceedings. There is no pending Proceeding that has been
commenced against Buyer or Subsidiary that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's and Subsidiary's Knowledge, no such
Proceeding has been Threatened.
4.4 Brokers or Finders. Buyer, Subsidiary and their respective officers
and agents have incurred no obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other similar payment
in connection with this Agreement.
4.5 Buyer Shares Consideration. The Buyer Shares Consideration to be
received by Sellers (i) have been duly authorized, and (ii) when issued, will be
validly issued, fully paid, nonassessable, and not issued in violation of any
preemptive rights or any applicable laws, rules or regulations. The Buyer Shares
Consideration will, upon delivery thereof, be free and clear of all liens,
charges, pledges, encumbrances, equities and claims whatsoever other than those
created by Sellers.
25
ARTICLE V
COVENANTS OF SELLERS AND THE COMPANY PRIOR TO CLOSING DATE
5.1 Access and Investigation. Between the date of this Agreement and
the Closing Date, Sellers and the Company will, and will cause each Acquired
Company and its Representatives to, (a) afford Buyer and its Representatives and
prospective lenders and their Representatives (collectively, "Buyer's Advisors")
full and free access, at reasonable times, to each Acquired Company, its
personnel, properties (including subsurface testing), contracts, books and
records, and all other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
5.2 Operation of the Businesses of the Acquired Companies. Between the
date of this Agreement and the Closing Date, Sellers and the Company will, and
will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary
Course of Business and in accordance with all valid regulations, laws and orders
of all Governmental Bodies;
(b) use their Best Efforts to preserve intact the current business
organization of such Acquired Company, keep available the services of the
current officers, employees, and agents of such Acquired Company, and maintain
the relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with such Acquired
Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of such Acquired Company, as reasonably
requested by Buyer.
5.3 Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers and
the Company will not, and will cause each Acquired Company not to, without the
prior consent of Buyer, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of the
changes or events listed in Section 3.15 is likely to occur.
5.4 Required Approvals. As promptly as practicable after the date of
this Agreement, Sellers will, and will cause each Acquired Company to, make all
filings required by Legal Requirements to be made by them in order to consummate
the Contemplated Transactions. Between the date of this Agreement and the
Closing Date, Sellers will, and will cause each Acquired Company to, (a)
cooperate with Buyer with respect to all filings that Buyer elects to make or is
required by Legal Requirements to make in connection with the Contemplated
Transactions and (b) cooperate with Buyer in obtaining all consents identified
in Part 4.2 of the Buyer's Disclosure Letter.
26
5.5 Notification. Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or any
Acquired Company becomes aware of any fact or condition that causes or
constitutes a Breach of any of Sellers' representations and warranties as of the
date of this Agreement, or if such Seller or any Acquired Company becomes aware
of the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the occurrence
or discovery of any such fact or condition, Sellers will promptly deliver to
Buyer a supplement to the Disclosure Letter specifying such change. During the
same period, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Sellers in this Article V or of the occurrence of any
event that may make the satisfaction of the conditions in Article VII impossible
or unlikely. No notice given pursuant to this Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
5.6 Payment of Indebtedness by Related Persons. Except as expressly
provided in this Agreement, Sellers will cause all indebtedness owed to an
Acquired Company by any Seller or any Related Person of any Seller to be paid in
full prior to Closing.
5.7 Best Efforts. Between the date of this Agreement and the Closing
Date, each of the Sellers and the Company will use their Best Efforts to cause
the conditions in Articles VII and VIII to be satisfied.
5.8 Meeting of Company Shareholders.
(a) As soon as practicable after the execution of this Agreement, at a
meeting of the Board of Directors of the Company (or by written consent of all
of the directors of the Company), the Board of Directors of the Company will
approve the Contemplated Transactions, including the Agreement and the Merger,
and will provide an affirmative recommendation to the shareholders of the
Company in favor of the adoption of this Agreement and the approval of the
Merger; provided, however, that no director or officer of the Company shall be
required to violate any fiduciary duty or other requirement imposed by law in
connection therewith.
(b) The Company will call a special meeting of its shareholders (the
"Company Special Meeting"), as soon as practicable after the approval of the
Board of Directors provided in Section 5.8(a) hereof (or provide written consent
of all of the shareholders of the Company), in order that the shareholders may
consider and vote upon the adoption of this Agreement and the approval of the
Merger. Each of the Sellers and the Company shall use his, her or its best
efforts to take all actions and to do all things necessary to consummate and
make effective the Contemplated Transactions, including the Agreement and the
Merger.
27
ARTICLE VI
COVENANTS OF BUYER AND SUBSIDIARY PRIOR TO CLOSING DATE
6.1 Approvals of Governmental Bodies. As promptly as practicable after
the date of this Agreement, Buyer and Subsidiary will make all filings required
by Legal Requirements to be made by it in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, each of
Buyer and Subsidiary will (a) cooperate with Seller with respect to all filings
that Seller elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions and (b) cooperate with Seller in
obtaining all consents identified in Part 3.2 of the Disclosure Letter; provided
that this Agreement will not require Buyer or Subsidiary to dispose of or make
any change in any portion of its business or to incur any other burden to obtain
a Governmental Authorization.
6.2 Best Efforts. Between the date of this Agreement and the Closing
Date, each of Buyer and Subsidiary will use its Best Efforts to cause the
conditions in Articles VII and VIII to be satisfied.
6.3 Access. Between the date of this Agreement and the Closing Date,
Buyer and Subsidiary shall provide to Sellers responses to the Sellers'
reasonable due diligence requests.
6.4 Meeting of Subsidiary Stockholders.
(a) As soon as practicable after the execution of this Agreement, at a
meeting of the Board of Directors of Subsidiary (or by written consent of all of
the directors of Subsidiary), the Board of Directors of Subsidiary will approve
the Contemplated Transactions, including the Agreement and the Merger, and will
provide an affirmative recommendation to the stockholders of Subsidiary in favor
of the adoption of this Agreement and the approval of the Merger; provided,
however, that no director or officer of the Subsidiary shall be required to
violate any fiduciary duty or other requirement imposed by law in connection
therewith.
(b) Subsidiary will call a special meeting of its stockholder (the
"Subsidiary Special Meeting"), as soon as practicable after the approval of the
Board of Directors provided in Section 6.4(a) hereof (or provide written consent
of the sole stockholder of Subsidiary), in order that the stockholder may
consider and vote upon the adoption of this Agreement and the approval of the
Merger. Such Subsidiary Special Meeting or written consent shall be held in
accordance with and shall comply with all applicable provisions of the
Delaware
General Corporation Law. Buyer shall vote or cause to be voted all shares of
common stock of Subsidiary owned by Buyer, along with all shares of common stock
of Subsidiary over which Buyer has a proxy, at any meeting of the stockholders
of the Subsidiary, and any and all adjournments thereof, or by written consent
or otherwise, in favor of the adoption of this Agreement and the approval of the
Merger and the transactions contemplated herein and thereby. Each of Buyer and
Subsidiary shall use its best efforts to take all actions and to do all things
necessary to consummate and make effective the Contemplated Transactions,
including the Agreement and the Merger.
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ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S AND SUBSIDIARY'S OBLIGATION TO CLOSE
The obligation of each of Buyer and Subsidiary to consummate the Merger
and to take the other actions required to be taken by Buyer at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations. Each of Sellers' and the Company's
representations and warranties in this Agreement must have been accurate in all
material respects as of the date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date, without
giving effect to any supplement to the Disclosure Letter.
7.2 Sellers' Performance. Each of the covenants and obligations that
Sellers and the Company are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing must have been duly performed and
complied with in all material respects.
7.3 Consents. Each of the Consents identified in Part 3.2 of the
Disclosure Letter, and each Consent identified in Part 4.2 of the Disclosure
Letter, must have been obtained and must be in full force and effect.
7.4 Additional Documents. Each of the following documents must have
been delivered to Buyer:
(a) an opinion of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, dated the Closing Date, in the form
of Exhibit 7.4(a);
(b) such other documents as Buyer may reasonably request for the
purpose of (i) evidencing the accuracy of any of Sellers' representations and
warranties, (ii) evidencing the performance by any Seller of, or the compliance
by any Seller with, any covenant or obligation required to be performed or
complied with by such Seller, (iii) evidencing the satisfaction of any condition
referred to in this Article VII, or (iv) otherwise facilitating the consummation
or performance of any of the Contemplated Transactions.
7.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds. There must not
have been made or Threatened by any Person any claim asserting that such Person
(a) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or
29
any other voting, equity, or ownership interest in, any of the Acquired
Companies, or (b) is entitled to all or any portion of the Merger Consideration.
7.7 No Prohibition. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
7.8 Shareholder Approval. The Agreement and the Merger shall have
received the approval of all of the Company Shareholders.
ARTICLE VIII
CONDITIONS PRECEDENT TO COMPANY'S
AND SELLERS' OBLIGATION TO CLOSE
The obligation of the Company and Sellers to consummate the Merger and
to take the other actions required to be taken by Sellers at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Sellers, in whole or in
part):
8.1 Accuracy of Representations. Each of Buyer's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 Buyer's Performance. Each of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been performed and complied with in all material
respects.
8.3 Consents. Each of the Consents identified in Part 4.2 of the
Disclosure Letter must have been obtained and must be in full force and effect.
8.4 Additional Documents. Buyer must have caused the delivery to the
Sellers of such other documents as Sellers may reasonably request for the
purpose of (i) enabling their counsel to provide the opinion referred to in
Section 7.4(a), (ii) evidencing the accuracy of any representation or warranty
of Buyer, (iii) evidencing the performance by Buyer of, or the compliance by
Buyer with, any covenant or obligation required to be performed or complied with
by Buyer, (ii) evidencing the satisfaction of any condition referred to in this
Article VIII, or (v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.5 No Injunction. There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the Merger or the other
transactions contemplated by this Agreement,
30
and (b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
8.6 Stockholder Approval. The Agreement and the Merger shall have
received the approval of all of the stockholders of Subsidiary.
ARTICLE IX
EMPLOYEES
9.1 Retention of Employees. Buyer shall cause the Surviving Corporation
to make a good faith effort to retain the Company employees listed on Exhibit
9.1.
9.2 Employee Benefits.
(a) As of the Effective Time, the employees of each Acquired Company
(the "Company Employees") shall continue employment with the Surviving
Corporation and its subsidiaries, respectively, in the same positions and at the
same level of wages and/or salary and employee benefits, as in effect on the
date hereof, with such changes as may occur before the Effective Time in the
ordinary course of business consistent with past practice. Except as may be
specifically required by applicable law or any agreement by which the Company is
bound, the Surviving Corporation and its subsidiaries shall have the same right
to terminate or change the conditions of any Company Employee's employment or to
amend, modify or terminate any employee benefit plan, program or policy, as the
Acquired Companies have on the date hereof.
(b) Without limiting the generality of the foregoing, from and after
the Effective Time, the Surviving Corporation shall make available to the
Company Employees employee benefit plans and programs which are either (i) the
same as are made available to the employees of Buyer, on terms and conditions
generally applicable to the employees of Buyer or (ii) no less favorable to the
Company Employees than the terms and conditions of the Company Benefit
Arrangements in which they were participating immediately prior to the Effective
Time. Notwithstanding the foregoing, in no event shall any employee receive
duplicate benefits with respect to any period of service. To the extent any
employee benefit plan or program in which any Company Employee participates
after the Effective Time (x) imposes any pre-existing condition limitation, such
condition shall be waived if allowed by the appropriate insurance carrier or (y)
imposes a waiting period, for purposes of eligibility or vesting, the Company
Employees will receive credit for service with the Surviving Corporation prior
to the Effective Time.
31
ARTICLE X
TERMINATION
10.1 Termination Events. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any provision of
this Agreement has been committed by the other party and such Breach has not
been waived;
(b) (i) by Buyer if any of the conditions in Article VII has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions in Article
VIII has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before March 31,
2005, or such later date as the parties may agree upon.
10.2 Effect of Termination. Each party's right of termination under
Section 10.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 10.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 12.1 and 12.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
ARTICLE XI
INDEMNIFICATION; REMEDIES
11.1 Survival; Right to Indemnification Not Affected by Knowledge. All
representations, warranties, covenants, and obligations in this Agreement, the
Disclosure Letter, the supplements to the Disclosure Letter, the certificates
delivered pursuant to Section 2.6 and any other certificate or document
delivered pursuant to this Agreement will survive the Closing for a period of
two (2) years. The right to indemnification, payment of Damages or other remedy
based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with
32
respect to, or any Knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant, or obligation. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
11.2 Indemnification and Payment of Damages by the Sellers. The
Sellers, jointly and severally, will indemnify and hold harmless Buyer, the
Acquired Companies, and their respective Representatives, shareholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by the Sellers in
this Agreement (without giving effect to any supplement to the Disclosure
Letter), the Disclosure Letter, the supplements to the Disclosure Letter, or any
other certificate or document delivered by the Sellers pursuant to this
Agreement;
(b) any Breach of any representation or warranty made by the Sellers in
this Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Disclosure Letter,
other than any such Breach that is disclosed in a supplement to the Disclosure
Letter and is expressly identified in the certificate delivered pursuant to
Section 2.6(a)(iv) as having caused the condition specified in Section 7.1 not
to be satisfied;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Seller or any Acquired
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions;
(d) any Breach of any representation or warranty made by Oberstein in
the Oberstein Personal Goodwill Agreement, which shall be executed
contemporaneously with this Agreement; or
(e) any Breach of any representation or warranty made by ▇▇▇▇▇▇ in the
▇▇▇▇▇▇ Personal Goodwill Agreement, which shall be executed contemporaneously
with this Agreement.
The remedies provided in this Section 11.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
11.3 Indemnification and Payment of Damages by the Sellers -
Environmental Matters. In addition to the provisions of Section 11.2, the
Sellers, jointly and severally, will indemnify and hold harmless Buyer, the
Acquired Companies, and the other Indemnified Persons for, and will pay to
Buyer, the Acquired Companies, and the other Indemnified Persons the amount of,
any Damages
33
(including costs of cleanup, containment, or other remediation) arising,
directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of or
relating to: (i) (A) the ownership, operation, or condition at any time on or
prior to the Closing Date of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
any Acquired Company has or had an interest, or (B) any Hazardous Materials or
other contaminants that were present on the Facilities or such other properties
and assets at any time on or prior to the Closing Date; or (ii) (A) any
Hazardous Materials or other contaminants, wherever located, that were, or were
allegedly, generated, transported, stored, treated, Released, or otherwise
handled by the Sellers or any Acquired Company or by any other Person for whose
conduct they are or may be held responsible at any time on or prior to the
Closing Date, or (B) any Hazardous Activities that were, or were allegedly,
conducted by the Sellers or any Acquired Company or by any other Person for
whose conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other damage
of or to any Person, including any employee or former employee of the Sellers or
any Acquired Company or any other Person for whose conduct they are or may be
held responsible, in any way arising from or allegedly arising from any
Hazardous Activity conducted or allegedly conducted with respect to the
Facilities or the operation of the Acquired Companies prior to the Closing Date,
or from Hazardous Material that was (i) present or suspected to be present on or
before the Closing Date on or at the Facilities (or present or suspected to be
present on any other property, if such Hazardous Material emanated or allegedly
emanated from any of the Facilities and was present or suspected to be present
on any of the Facilities on or prior to the Closing Date) or (ii) Released or
allegedly Released by the Sellers or any Acquired Company or any other Person
for whose conduct they are or may be held responsible, at any time on or prior
to the Closing Date.
Buyer will be entitled to control any Cleanup, any related Proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 11.3. The procedure
described in Section 11.10 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 11.3.
11.4 Indemnification and Payment of Damages by the Sellers - Accounts
Receivable. If any of the Accounts Receivable pursuant to Section 3.7 are not
collected in full, without any set-off, within ninety days after the day on
which it first becomes due and payable (the "Uncollectible Accounts Receivable")
and Buyer makes a successful Claim against the Escrow Shares based upon the
Uncollectible Accounts Receivable, Buyer shall transfer, assign and convey the
Uncollectible Accounts Receivable to the Sellers as is, with no warranties
whatsoever and at no cost to the Sellers. The Sellers shall have the right to
pursue the collection of the Uncollectible Accounts Receivable, and such gain or
loss resulting therefrom shall be borne entirely by the Sellers. In addition to
the provisions of Section 11.2, the Sellers, jointly and severally, will
indemnify and hold harmless Buyer, the Acquired Companies, and the other
Indemnified Persons for, and will pay to Buyer, the Acquired
34
Companies, and the other Indemnified Persons the amount of, any Damages arising,
directly or indirectly, from or in connection with the collection of the
Uncollectible Accounts Receivable.
11.5 Indemnification and Payment of Damages by the Sellers - Obsolete
Inventory. Buyer shall have the right to inspect all inventory of the Acquired
Companies pursuant to Section 3.8, and in its sole discretion, may declare
inventory of the Acquired Companies to be obsolete (the "Obsolete Inventory").
In the event that Buyer makes a successful Claim against the Escrow Shares based
upon the Obsolete Inventory, Buyer shall transfer, assign and convey the
Obsolete Inventory to the Sellers as is, with no warranties whatsoever and at no
cost to the Sellers. Sellers shall then have the right to dispose of the
Obsolete Inventory, and such gain or loss resulting therefrom shall be borne
entirely by the Sellers. Any such disposition of the Obsolete Inventory shall
not violate the non-competition provisions of the Employment Agreement or
Consulting Agreement. In addition to the provisions of Section 11.2, the
Sellers, jointly and severally, will indemnify and hold harmless Buyer, the
Acquired Companies, and the other Indemnified Persons for, and will pay to
Buyer, the Acquired Companies, and the other Indemnified Persons the amount of,
any Damages arising, directly or indirectly, from or in connection with the
disposition of the Obsolete Inventory.
11.6 Indemnification and Payment of Damages by the Sellers -
Undisclosed Liabilities. Sellers shall indemnify Buyer and the Acquired
Companies for, and hold Buyer and the Acquired Companies harmless from and
against, all liabilities or obligations of any nature (whether known or unknown
and whether absolute, accrued, contingent, or otherwise) except for liabilities
or obligations reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
11.7 Indemnification and Payment of Damages by Buyer. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, (c) any claim by
any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions, (d) any Breach of any representation or warranty
made by Subsidiary in the Oberstein Personal Goodwill Agreement, which shall be
executed contemporaneously with this Agreement or (e) any Breach of any
representation or warranty made by Subsidiary in the ▇▇▇▇▇▇ Personal Goodwill
Agreement, which shall be executed contemporaneously with this Agreement.
11.8 Escrow. Upon notice to the Sellers specifying in reasonable detail
the basis for such set-off, Buyer may give notice of a Claim (as defined in the
Escrow Agreement) in such amount under the Escrow Agreement. Neither the
exercise of nor the failure to give a notice of a Claim under the Escrow
Agreement will constitute an election of remedies or limit Buyer in any manner
in the enforcement of any other remedies that may be available to it.
35
11.9 Procedure for Indemnification - Third Party Claims.
(a) Promptly after receipt by an indemnified party under Section 11.2,
11.4, 11.5, 11.6 or (to the extent provided in the last sentence of Section
11.3) Section 11.3 of notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except and only to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnifying
party's failure to give such notice.
(b) If any Proceeding referred to in Section 11.9(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Article XI for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any
36
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
11.10 Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
ARTICLE XII
GENERAL PROVISIONS
12.1 Expenses. Except as otherwise expressly provided in this
Agreement, including Section 2.8, each party to this Agreement will bear its,
his or her respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the Contemplated Transactions,
including all fees and expenses of agents, representatives, counsel, and
accountants. In the event of termination of this Agreement, the obligation of
each party to pay his, her or its own expenses will be subject to any rights of
such party arising from a breach of this Agreement by another party.
12.2 Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer reasonably determines.
Unless consented to by Buyer in advance or required by Legal Requirements, prior
to the Closing Sellers shall, and shall cause the Acquired Companies to, keep
this Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. Sellers and Buyer will consult with each other
concerning the means by which the Acquired Companies' employees, customers, and
suppliers and others having dealings with the Acquired Companies will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
12.3 Confidentiality. Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Acquired
Companies to maintain in confidence, and not use to the detriment of another
party or an Acquired Company any written, oral, or other information obtained in
confidence from another party or an Acquired Company in connection with this
Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault of such party,
(b) the use of such information is necessary or appropriate in making any filing
or obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by legal proceedings.
12.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when
37
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
Sellers:
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer:
Craftmade International, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
38
Subsidiary:
▇▇▇▇▇▇ Lighting Products, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Company:
▇▇▇▇ ▇▇▇▇▇▇ Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.5 Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement shall be brought against any of the parties in the courts of the State
of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of Texas, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
12.6 Further Assurances. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
12.7 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. The rights of the parties hereunder are in
addition to all other rights provided by law. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by
39
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12.8 Entire Agreement and Modification. This Agreement supersedes all
prior agreements (including the Letter of Intent) between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
12.9 Disclosure Letter.
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
12.10 Assignments, Successors, and No Third-party Rights. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may assign any of its rights under this
Agreement to any Subsidiary of Buyer (other than Buyer's obligation to issue the
Buyer Shares). Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
12.11 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.12 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
40
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
12.13 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
12.14 Governing Law. This Agreement will be governed by the laws of the
State of Delaware without regard to conflicts of laws principles.
12.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
* * * * *
41
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Attest: CRAFTMADE INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Secretary By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President, Chief Executive
Officer and Chairman of the
Board of Directors
Attest: ▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Secretary
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Attest: ▇▇▇▇ ▇▇▇▇▇▇ CO., INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Secretary
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇, individually
42
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, individually
43
FORM OF DISCLOSURE LETTER
Craftmade International, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Ladies and Gentlemen:
We refer to the
Merger Agreement (the "Agreement") to be entered into
today among the undersigned individuals ("Sellers"), Craftmade International,
Inc., a Delaware corporation ("Buyer"), ▇▇▇▇▇▇ Lighting Products, Inc., a
Delaware corporation ("Subsidiary"), and ▇▇▇▇ ▇▇▇▇▇▇ Co., Inc., a Texas
corporation (the "Company") pursuant to which Company is to merge with and into
Subsidiary, with Subsidiary being the surviving corporation, as provided in the
Agreement.
This letter constitutes the Disclosure Letter referred to in Article I
of the Agreement. The representations and warranties of Sellers in Article III
of the Agreement are made and given subject to the disclosures in this
Disclosure Letter. The disclosures in this Disclosure Letter are to be taken as
relating to the representations and warranties in the section of the Agreement
to which they expressly relate and to no other representation or warranty in the
Agreement.
Terms defined in the Agreement are used with the same meaning in this
Disclosure Letter. References to Appendices are to the Appendices to this
Disclosure Letter.
By reference to Article III of the Agreement (using the numbering in
such Articles), the following matters are disclosed:
* * * * *
44
Very truly yours,
▇▇▇▇ ▇▇▇▇▇▇, individually
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, individually
▇▇▇▇ ▇▇▇▇▇▇ CO., INC.,
a Texas corporation
By:
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
45
Buyer and Subsidiary acknowledge receipt of the Disclosure Letter of
which this is a duplicate (including the Appendices referred to therein).
Dated:
CRAFTMADE INTERNATIONAL, INC.,
a Delaware corporation
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President, Chief Executive
Officer and Chairman of the
Board of Directors
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.,
a Delaware corporation
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
46
FORM OF BUYER'S DISCLOSURE LETTER
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
47
Gentlemen:
We refer to the
Merger Agreement (the "Agreement") to be entered into
today among ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (collectively, "Sellers"),
Craftmade International, Inc. ("Buyer"), ▇▇▇▇▇▇ Lighting Products, Inc., a
Delaware corporation ("Subsidiary"), and ▇▇▇▇ ▇▇▇▇▇▇ Co., Inc., a Texas
corporation (the "Company") pursuant to which Company is to merge with and into
Subsidiary, with Subsidiary being the surviving corporation, as provided in the
Agreement.
This letter constitutes the Buyer's Disclosure Letter referred to in
Article I of the Agreement. The representations and warranties of Buyer and
Subsidiary in Article IV of the Agreement are made and given subject to the
disclosures in this Disclosure Letter. The disclosures in this Disclosure Letter
are to be taken as relating to the representations and warranties in the section
of the Agreement to which they expressly relate and to no other representation
or warranty in the Agreement.
Terms defined in the Agreement are used with the same meaning in this
Disclosure Letter. References to Appendices are to the Appendices to this
Disclosure Letter.
By reference to Article IV of the Agreement (using the numbering in
such Article), the following matters are disclosed:
* * * * *
48
Very truly yours,
CRAFTMADE INTERNATIONAL, INC.,
a Delaware corporation
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President, Chief Executive
Officer and Chairman of the
Board of Directors
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.,
a Delaware corporation
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
49
Sellers acknowledge receipt of the Disclosure Letter of which this is a
duplicate (including the Appendices referred to therein).
Dated:
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
50
EXHIBIT 2.1
FORM OF CERTIFICATES OF MERGER
51
CERTIFICATE OF MERGER
OF
▇▇▇▇ ▇▇▇▇▇▇ CO., INC.
(A TEXAS CORPORATION)
WITH AND INTO
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.
(A DELAWARE CORPORATION)
----------
Pursuant to Section 252 of the
General Corporation Law
of the State of Delaware
----------
▇▇▇▇▇▇ Lighting Products, Inc., a Delaware corporation, hereby
certifies the following information relating to the merger of ▇▇▇▇ ▇▇▇▇▇▇ Co.,
Inc., a Texas corporation with and into ▇▇▇▇▇▇ Lighting Products, Inc. (the
"MERGER"):
1. The name and state of incorporation of the constituent corporations
are: ▇▇▇▇▇▇ Lighting Products, Inc., a corporation organized and existing under
the laws of the State of Delaware ("TLP") and ▇▇▇▇ ▇▇▇▇▇▇ Co., Inc., a
corporation organized and existing under the laws of the State of Texas ("BTC")
(together, the "CONSTITUENT CORPORATIONS").
2. An Agreement and Plan of Merger, dated as of March 1, 2005, between
the Constituent Corporations (the "
MERGER AGREEMENT"), was approved, adopted,
certified, executed and acknowledged by each of the Constituent Corporations in
accordance with Section 252 of the General Corporation Law of the State of
Delaware.
3. Upon consummation of the Merger, the name of the surviving
corporation will be ▇▇▇▇▇▇ Lighting Products, Inc.
4. The Certificate of Incorporation of TLP shall be the Certificate of
Incorporation of the surviving corporation.
5. The executed
Merger Agreement is on file at the principal place of
business of the surviving corporation at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
6. A copy of the
Merger Agreement will be furnished by the surviving
corporation, upon request and without cost, to any stockholder of any of the
Constituent Corporations.
52
7. The authorized capital stock of the Constituent Corporations that
are not corporations domiciled in Delaware is as follows:
NAME OF CORPORATION NUMBER AND CLASS OF SHARES PAR VALUE PER SHARE
------------------- -------------------------- -------------------
BTC 25,000 shares of Common Stock $10.00
8. The effective date of the Merger shall be the date on which this
Certificate of Merger is filed with the Secretary of State of the State of
Delaware.
* * * * *
53
IN WITNESS WHEREOF, the undersigned have caused this Certificate to be
executed as of the 1st day of March, 2005.
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.,
a Delaware corporation
By:
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
▇▇▇▇ ▇▇▇▇▇▇ CO., INC.,
a Texas corporation
By:
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
54
ARTICLES OF MERGER
COMBINATION OF MULTIPLE ENTITIES
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act (the "TBCA"), the undersigned corporations certify the following
articles of merger adopted for the purpose of effecting a merger in accordance
with the provisions of Part Five of the TBCA.
1. The name of each of the undersigned corporations that are a party to
the Agreement and Plan of Merger (the "Plan of Merger"), the type of such
corporation or other entity and the laws under which such corporation was
organized are:
Name of Corporation Type of Entity State
------------------- -------------- -----
▇▇▇▇ ▇▇▇▇▇▇ Co., Inc. corporation Texas
▇▇▇▇▇▇ Lighting Products, Inc. corporation Delaware
2. The Plan of Merger was adopted and approved in accordance with the
provisions of Article 5.03 of the TBCA providing for the combination of ▇▇▇▇
▇▇▇▇▇▇ Co., Inc., a Texas corporation ("BTC"), and ▇▇▇▇▇▇ Lighting Products,
Inc., a Delaware corporation ("TLP") and resulting in TLP being the surviving
corporation in the merger.
3. An executed copy of the Plan of Merger is on file at the principal
place of business of TLP at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ and a copy of the Plan of Merger will be furnished by such entity, on
written request and without cost, to any shareholder of each domestic
corporation that is a party to the Plan of Merger and to any creditor or obligee
of the parties to the merger at the time of the merger if such obligation is
then outstanding.
4. Upon the effective time of the merger, no amendments to the Articles
of Incorporation of TLP are desired to be effected by the merger.
5. As to BTC, the approval of whose shareholders is required, the
number of outstanding shares of each class or series of stock of such
corporation entitled to vote, with other shares or as a class, on the Plan of
Merger are as follows:
Number of Shares
Number of Entitled to Vote
Name of Corporation Shares Outstanding Class or Series as a Class or Series
------------------- ------------------ --------------- --------------------
▇▇▇▇ ▇▇▇▇▇▇ Co., Inc. 2,560 Common Stock N/A
55
6. As to TLP, the approval of whose shareholders is required, the
number of outstanding shares of each class or series of stock of such
corporation entitled to vote, with other shares or as a class, on the Plan of
Merger are as follows:
Number of Shares
Number of Entitled to Vote
Name of Corporation Shares Outstanding Class or Series as a Class or Series
------------------- ------------------ --------------- --------------------
▇▇▇▇▇▇ Lighting Products, Inc. 1,000 Common Stock N/A
7. As to the undersigned corporations, the approval of whose
shareholders is required, the number of shares, not entitled to vote only as a
class, voted for and against the Plan of Merger, respectively, and, if the
shares of any class or series are entitled to vote as a class, the number of
shares of each such class or series voted for and against the Plan of Merger,
are as follows:
56
Number of Shares
Entitled to Vote as
a Class or Series
-------------------
Name of Total Total Voted Voted
Corporation Voted For Voted Against Class or Series For Against
----------- --------- ------------- --------------- ----- -------
▇▇▇▇ ▇▇▇▇▇▇ Co., Inc. 2,560 0 Common Stock N/A N/A
▇▇▇▇▇▇ Lighting Products, 1,000 0 Common Stock N/A N/A
Inc.
8. TLP shall assume all franchise tax liabilities of BTC and shall file
any and all documents with the Texas Comptroller necessary for the assumption by
TLP of any and all of the franchise tax liabilities of BTC.
9. The Plan of Merger and the performance of its terms were duly
authorized by all action required by the laws under which each foreign
corporation that is a party to the Plan of Merger was incorporated and by its
constituent documents.
* * * * *
57
Dated: March 1, 2005
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.,
a Delaware corporation
By:
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
▇▇▇▇ ▇▇▇▇▇▇ CO., INC.,
a Texas corporation
By:
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
58
EXHIBIT 2.3
BUYER SHARES CONSIDERATION CLOSING SCHEDULE
$ AMOUNT OF BUYER BUYER SHARES RESULTING NUMBER OF
SELLERS CAPITAL STOCK CLOSING PRICE BUYER SHARES
------- ----------------- ------------- -------------------
▇▇▇▇▇▇ $3 million $21.01 142,789
(35,697 of which are Escrow
Shares)
Oberstein $1 million $21.01 47,596
(11,899 of which are Escrow
Shares)
59
EXHIBIT 2.6(a)(i)
SELLERS' RELEASES
This Release is being executed and delivered in accordance with Section
2.6(a)(i) of the
Merger Agreement dated as of March 1, 2005 (the "Agreement") by
and among Craftmade International, Inc., a Delaware corporation ("Buyer"),
▇▇▇▇▇▇ Lighting Products, Inc., a Delaware corporation ("Subsidiary"), ▇▇▇▇
▇▇▇▇▇▇ Co., Inc., a Texas corporation (the "Company") and ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇")
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇") (▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ are collectively
referred to herein as the "Sellers"). Capitalized terms used in this Release
without definition have the respective meanings given to them in the Agreement.
Each Seller acknowledges that execution and delivery of this Release is
a condition to Buyer's and Subsidiary's obligation to consummate the Merger
pursuant to the Agreement and that Buyer and Subsidiary are relying on this
Release in consummating such Merger.
Each Seller, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged and intending to be legally bound,
in order to induce Buyer and Subsidiary to consummate the Merger pursuant to the
Agreement, hereby agrees as follows:
Each Seller, on behalf of himself and each of his Related Persons,
hereby releases and forever discharges the Buyer, Subsidiary, the Company and
each of the other Acquired Companies, and each of their respective individual,
joint or mutual, past, present and future Representatives, affiliates,
shareholders, controlling persons, Subsidiaries, successors and assigns
(individually, a "Releasee" and collectively, "Releasees") from any and all
claims, demands, Proceedings, causes of action, Orders, obligations, contracts,
agreements, debts and liabilities whatsoever, whether known or unknown,
suspected or unsuspected, both at law and in equity, which each of the Sellers
or any of their respective Related Persons now has, have ever had or may
hereafter have against the respective Releasees arising contemporaneously with
or prior to the Closing Date or on account of or arising out of any matter,
cause or event occurring contemporaneously with or prior to the Closing Date,
including, but not limited to, any rights to indemnification or reimbursement
from the Company or any other Acquired Company, whether pursuant to their
respective Organizational Documents, contract or otherwise and whether or not
relating to claims pending on, or asserted after, the Closing Date; provided,
however, that nothing contained herein shall operate to release any obligations
of Buyer and Subsidiary arising under the Agreement, Employment Agreement,
Consulting Agreement, or the Agreements for the Purchase and Sale of Personal
Goodwill by and among Subsidiary and each of ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
Each Seller hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting or causing
to be commenced, any proceeding of any kind against any Releasee, based upon any
matter purported to be released hereby.
60
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, each Seller, jointly and severally, shall indemnify
and hold harmless each Releasee from and against all loss, liability, claim,
damage (including incidental and consequential damages) or expense (including
costs of investigation and defense and reasonable attorney's fees) whether or
not involving third party claims, arising directly or indirectly from or in
connection with (i) the assertion by or on behalf of the Sellers or any of their
Related Persons of any claim or other matter purported to be released pursuant
to this Release and (ii) the assertion by any third party of any claim or demand
against any Releasee which claim or demand arises directly or indirectly from,
or in connection with, any assertion by or on behalf of the Sellers or any of
their Related Persons against such third party of any claims or other matters
purported to be released pursuant to this Release.
If any provision of this Release is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
This Release may not be changed except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of Texas without regard
to principles of conflicts of law.
All words used in this Release will be construed to be of such gender
or number as the circumstances require.
* * * * *
61
IN WITNESS WHEREOF, each of the undersigned have executed and delivered
this Release as of this 1st day of March, 2005.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
62
EXHIBIT 2.6(a)(ii)
EMPLOYMENT AGREEMENT
63
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of March 1,
2005 by ▇▇▇▇▇▇ Lighting Products, Inc. a Delaware corporation (the "Employer"),
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, an individual resident in Collin County (the "Executive") and
Craftmade International, Inc., a Delaware corporation ("Craftmade").
RECITALS
Concurrently with the execution and delivery of this Agreement,
Craftmade is acquiring ▇▇▇▇ ▇▇▇▇▇▇ Co., Inc., a Texas corporation doing business
as ▇▇▇▇▇▇ Lighting Products ("▇▇▇▇▇▇ Lighting"), through a merger (the "Merger")
of ▇▇▇▇▇▇ Lighting with and into Employer, pursuant to a
Merger Agreement dated
as of March 1, 2005, among Craftmade, Employer, Executive, ▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇ Lighting (the "
Merger Agreement"). Craftmade and the Employer desire the
Executive's continued employment with Employer, and the Executive wishes to
accept such continued employment, upon the terms and conditions set forth in
this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Article I.
"Basic Compensation"--Salary and Benefits.
"Board of Directors"--the board of directors of the Employer.
"Confidential Information"--information that is used in either the
Employer's business or in Craftmade's business and
(a) is proprietary to, about or created by the Employer or Craftmade;
(b) gives the Employer or Craftmade some competitive advantage, the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Employer or Craftmade;
(c) is not typically disclosed to non-employees by Employer or
Craftmade, or otherwise is treated as confidential by the Employer or Craftmade;
or
64
(d) is designated as Confidential Information by the Employer or
Craftmade or from all the relevant circumstances should reasonably be assumed by
the Employee to be confidential to the Employer or Craftmade and shall include,
but is not limited to:
(1) Customer lists and prospect lists developed by Employer
and Craftmade;
(2) Information regarding the Employer and Craftmade's
customers which Executive acquired as a result of Executive's
employment with the Employer, including but not limited to (i)
customer history, names and contact information, (ii) contact
database, (iii) call reports, (iv) contracts, purchase orders,
and agreements, (v) customer requirements, preferences, and
specifications, (vi) customer financial information, and (vii)
ad material;
(3) Information related to the Employer and Craftmade's
business, including but not limited to (i) marketing
strategies and plans, (ii) operating policies, manuals and
procedures, (iii) pricing and pricing strategies, (iv)
business plans, strategies and designs, (v) pending projects
and proposals, (vi) sales, (vii) profits, (viii) production
numbers, (ix) proprietary production processes, (x) price
lists, quotes and quotas, (xi) engineering drawings, product
specifications, (xii) test documents, and (xiii) other
business and financial information of the Employer;
(4) Information regarding the Employer and Craftmade's
computer and technical programs that Executive acquired as a
result of his employment, including but not limited to (i)
computer processes, (ii) computer programs, codes, and
passwords, and (iii) proprietary technical information such as
formulas and specifications;
(5) Information regarding the Employer and Craftmade's vendors
that Executive acquired as a result of his employment,
including but not limited to, product and service information,
vendor lists, pricing lists and other information regarding
the business activities of such vendors;
(6) Training materials developed by and provided to Executive
by Employer and Craftmade;
(7) Any other information that Executive acquired as a result
of Executive's employment with Employer and/or Craftmade and
which Executive has a reasonable basis to believe Employer and
Craftmade would not want disclosed to a business competitor or
to the general public.
Confidential Information shall not include information publicly known (other
than as a result of a direct or indirect disclosure by the Executive). The
phrase "publicly known" shall mean readily accessible to the public in a written
publication.
65
"Effective Date"--the date stated in the first paragraph of the
Agreement.
"Employment Period"--the term of the Executive's employment under this
Agreement.
"Fiscal Year"--the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
"person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.
"Post-Employment Period"--for purposes of Section 8.2, the two-year
period beginning on the date of termination of the Executive's employment with
the Employer.
ARTICLE II
EMPLOYMENT TERMS AND DUTIES
2.1 Employment. The Employer hereby employs the Executive commencing as
of the Effective Date, and the Executive hereby accepts employment by the
Employer commencing as of the Effective Date, upon the terms and conditions set
forth in this Agreement.
2.2 Term. Subject to the provisions of Article VI, the term of the
Executive's employment under this Agreement will initially be three years,
beginning on the Effective Date and ending on the third anniversary of the
Effective Date (the "Initial Term"). After the Initial Term, the Agreement shall
be extended for two additional one-year terms (the "First Additional Term" and
the "Second Additional Term," respectively), unless the Executive provides
written notice of election not to renew at least 45 days before the commencement
of the First Additional Term and the Second Additional Term, respectively.
2.3 Duties. The Executive will initially serve as Vice President of the
Employer and will have such duties as are typically commensurate with such
position, subject to the assignment or delegation of duties by the Board of
Directors or Chief Executive Officer of Employer. Except as set forth in the
following sentence, the Executive will devote his entire business time,
attention, skill, and energy exclusively to the business of the Employer, will
use his best efforts to promote the success of the Employer's business, and will
cooperate fully with the Board of Directors in the advancement of the best
interests of the Employer. Employee will be allowed to continue in his current
capacity with TOCOR, Inc., so long as such activities do not adversely affect
his duties or performance with the Company and as long as TOCOR, Inc. is not a
competitor of the Company or Craftmade. Executive shall operate primarily out of
Craftmade's executive office, currently in Coppell, Texas.
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ARTICLE III
COMPENSATION
3.1 Basic Compensation.
(a) Salary. The Executive will be paid an annual salary of $200,000.00,
subject to adjustment as provided below (the "Salary"), which will be payable in
equal periodic installments according to the Employer's customary payroll
practices, but no less frequently than monthly. The Salary will be reviewed by
the Board of Directors not less frequently than annually, and may be adjusted
upward in the sole discretion of the Board of Directors.
(b) Bonus. The Chief Executive Officer of Employer will review the
performance of the Executive not less frequently than annually, and the Chief
Executive Officer of Employer shall provide for an annual bonus to the Executive
(the "Bonus") based on the performance of the Employer; such standards for the
performance of Employer shall be comparable to those standards established
concerning the receipt of any bonus by similarly situated executives of the
Employer or Craftmade.
(c) Benefits. The Executive will, during the Employment Period, be
entitled to such pension, profit sharing, life insurance, hospitalization, major
medical, disability and other employee benefits of the Employer or Craftmade
that may be in effect from time to time, to the extent the executive is eligible
under the terms of those plans (collectively, the "Benefits").
ARTICLE IV
FACILITIES AND EXPENSES
The Employer will furnish the Executive office space, equipment,
supplies, and such other facilities and personnel as the Employer deems
necessary or appropriate for the performance of the Executive's duties under
this Agreement. The Employer will pay on behalf of the Executive (or reimburse
the Executive for) reasonable expenses incurred by the Executive at the request
of, or on behalf of, the Employer in the performance of the Executive's duties
pursuant to this Agreement, and in accordance with the Employer's employment
policies, including reasonable expenses incurred by the Executive in attending
conventions, seminars, and other business meetings, in appropriate business
entertainment activities, and for promotional expenses. The Executive must file
expense reports with respect to such expenses in accordance with the Employer's
policies.
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ARTICLE V
VACATIONS AND HOLIDAYS
The Executive will be entitled to the amount of paid vacation as is
provided to similarly situated executives of the Employer or Craftmade, in
accordance with the vacation policies of the Employer or Craftmade in effect for
its executive officers from time to time. Vacation must be taken by the
Executive at such time or times as approved by the Chairman of the Board or
Chief Executive Officer of Employer. The Executive will also be entitled to the
paid holidays set forth in the Employer's or Craftmade's policies. Vacation days
and holidays during any Fiscal Year that are not used by the Executive during
such Fiscal Year may not be used in any subsequent Fiscal Year.
ARTICLE VI
TERMINATION
6.1 Events of Termination. The Employment Period, the Executive's Basic
Compensation, the Executive's Bonus and any and all other rights of the
Executive under this Agreement or otherwise as an employee of the Employer will
terminate (except as otherwise provided in this Article VI):
(a) upon the death of the Executive;
(b) upon the disability of the Executive (as defined in Section 6.2)
immediately upon notice from either party to the other;
(c) upon termination of the Executive for Cause (as defined in Section
6.3), immediately upon notice from the Employer to the Executive, or at such
later time as such notice may specify;
(d) upon termination by the Executive for Good Reason (as defined in
Section 6.4) upon not less than thirty days' prior notice from the Executive to
the Employer;
(e) upon termination of the Executive without Cause; or
(f) upon termination by the Executive for other than Good Reason.
6.2 Definition of Disability. The Executive will be deemed to have a
"disability" if, for physical or mental reasons, the Executive is unable to
perform the Executive's duties under this Agreement for 120 consecutive days, or
180 days during any twelve month period, as determined in accordance with this
Section 6.2. The disability of the Executive will be determined by a medical
doctor selected by written agreement of the Employer and the Executive upon the
request of either party by notice to the other. If the Employer and the
Executive cannot agree on the selection of a
68
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Executive has a disability. The determination of the medical doctor selected
under this Section 6.2 will be binding on both parties. The Executive must
submit to a reasonable number of examinations by the medical doctor making the
determination of disability under this Section 6.2, and the Executive hereby
authorizes the disclosure and release to the Employer of such determination and
all supporting medical records. If the Executive is not legally competent, the
Executive's legal guardian or duly authorized attorney-in-fact will act in the
Executive's stead, under this Section 6.2, for the purposes of submitting the
Executive to the examinations, and providing the authorization of disclosure,
required under this Section 6.2.
6.3 Definition of "Cause". "Cause" means: (a) the Executive's material
breach of this Agreement; (b) the Executive's failure to adhere to any written
Employer policy if the Executive has been given a reasonable opportunity to
comply with such policy or cure his failure to comply (which reasonable
opportunity must be granted during the ten-day period preceding termination of
this Agreement); (c) the appropriation (or attempted appropriation) of a
business opportunity of the Employer or Craftmade, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Employer or Craftmade; (d) the misappropriation
(or attempted misappropriation) of any of the Employer's or Craftmade's funds or
property; or (e) the conviction of or the entering of a guilty plea or plea of
no contest with respect to, a felony, the equivalent thereof, or any other crime
with respect to which imprisonment is a possible punishment.
6.4 Definition of "Good Reason". The phrase "Good Reason" means any of
the following: (a) the Employer's or Craftmade's material breach of this
Agreement; (b) the assignment of the Executive without his consent to a
position, responsibilities, or duties of a materially lesser status or degree of
responsibility than his position, responsibilities, or duties at the Effective
Date; (c) the relocation of the Employee outside of the continental United
States; or (d) any material reduction in Benefits.
6.5 Termination Pay. Effective upon the termination of this Agreement,
the Employer will be obligated to pay the Executive (or, in the event of his
death, his designated beneficiary as defined below) only such compensation as is
provided in this Section 6.5, and in lieu of all other amounts and in settlement
and complete release of (i) all claims the Executive may have against the
Employer or Craftmade, or any of its affiliates, arising out of or pursuant to
this Agreement and (ii) all claims the Employer or Craftmade may have against
the Executive arising out of or pursuant to this Agreement. For purposes of this
Section 6.5, the Executive's designated beneficiary will be such individual
beneficiary or trust, located at such address, as the Executive may designate by
notice to the Employer from time to time or, if the Executive fails to give
notice to the Employer of such a beneficiary, the Executive's estate.
Notwithstanding the preceding sentence, the Employer will have no duty, in any
circumstances, to attempt to open an estate on behalf of the Executive, to
determine whether any beneficiary designated by the Executive is alive or to
ascertain the address of any such beneficiary, to determine the existence of any
trust, to determine whether any person or entity purporting to act as the
Executive's personal representative (or the trustee of a trust established by
the Executive) is duly authorized to act in that capacity, or to locate or
attempt to locate any beneficiary, personal representative, or trustee.
69
(a) Termination by the Executive for Good Reason or Termination by the
Employer Without Cause. If the Executive terminates this Agreement for Good
Reason or if Employer terminates this Agreement without Cause, the Employer will
pay the Executive (i) the Executive's Salary for the remainder, if any, of the
Initial Term, or the First Additional Term or the Second Additional Term, as
applicable, (ii) the value of any accrued but unpaid or unused vacation or sick
leave for the calendar year and (iii) that portion of the Executive's Bonus, if
any, for the Fiscal Year during which the termination is effective, prorated
through the date of termination.
(b) Termination by the Employer for Cause or Termination by the
Executive Without Good Reason. If the Employer terminates this Agreement for
Cause or if the Executive terminates this Agreement for other than Good Reason,
the Executive will be entitled to receive his Salary only through the date such
termination is effective, but will not be entitled to any Bonus for the Fiscal
Year during which such termination occurs or any subsequent Fiscal Year.
(c) Termination upon Disability. If this Agreement is terminated by
either party as a result of the Executive's disability, as determined under
Section 6.2, the Employer will pay the Executive his Salary through the
remainder of the calendar month during which such termination is effective and
the period until disability insurance benefits commence under the disability
insurance coverage furnished by the Employer to the Executive.
(d) Termination upon Death. If this Agreement is terminated because of
the Executive's death, the Executive will be entitled to receive his Salary
through the end of the calendar month in which his death occurs, and that part
of the Executive's Bonus, if any, for the Fiscal Year during which his death
occurs, prorated through the end of the calendar month during which his death
occurs.
(e) Benefits. The Executive's accrual of, or participation in plans
providing for, the Benefits will cease at the effective date of the termination
of this Agreement, and the Executive will be entitled to accrued Benefits
pursuant to such plans only as provided in such plans. Notwithstanding the
preceding, the Executive shall be entitled to receive all accrued but unpaid
salary, Benefits and vacation pay upon the termination of this Agreement.
6.6 Exclusive Remedy. The compensation provided in this Article VI
shall constitute the sole and exclusive remedy of Employee in connection with
his termination of employment and shall be in lieu of all other amounts and in
settlement and complete release of all claims the Employee may have against the
Employer. Upon any termination of employment, the Employee shall execute a
general release of all claims against Employer in form and substance reasonably
satisfactory to Employer.
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ARTICLE VII
NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
7.1 Confidential Information. Upon Executive's execution of this
Agreement, Employer and Craftmade agree that they will immediately provide
Executive with specialized knowledge and training regarding the business in
which the Employer and Craftmade are involved, and will immediately provide
Executive with Confidential Information and trade secrets of the Employer and
Craftmade. Employer and Craftmade also agree to provide Executive with
Confidential Information on an on-going basis.
Executive understands and acknowledges that (a) such Confidential
Information has been developed and/or acquired by the Employer and Craftmade
through the expenditure of substantial time, effort and money, (b) such
Confidential Information gives Employer and Craftmade a competitive advantage
over others who do not have this information, (c) Employer and Craftmade would
be irreparably harmed if the Confidential Information were disclosed to any
third-party; (d) because the Executive possesses substantial technical expertise
and skill with respect to the Employer's business, the Employer and Craftmade
desire to obtain exclusive ownership of all Work Product as defined in Section
7.2(b), and the Employer will be at a substantial competitive disadvantage if it
fails to acquire exclusive ownership of all Work Product; (e) Craftmade has
required that the Executive make the covenants in this Article VII as a
condition to the Merger; and (f) the provisions of this Article VII are
reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Employer with exclusive ownership of
all Work Product.
7.2 Disclosure of Confidential Information and Return of Company
Property. In exchange for the Employer and Craftmade's promises to provide
Executive with specialized training and Confidential Information, Executive
agrees that he will hold all Confidential Information of the Employer and
Craftmade in trust for Employer and will not: (a) use the information for any
purpose other than the benefit of Employer; or (b) disclose to any person or
entity any Confidential Information of Employer or Craftmade except as necessary
during Executive's employment with Employer to perform services on behalf of
Employer.
To execute and enforce the terms of this Article VII, Executive
covenants as follows:
(a) Confidentiality.
(i) During and following the Employment Period, the Executive
will hold in confidence the Confidential Information and will not
disclose it to any person except (A) with the specific prior written
consent of the Employer and Craftmade, (B) as necessary to carry out
the Executive's duties under this Agreement or (C) except as otherwise
expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of the Employer and Craftmade will be
entitled to all of the protections and benefits under applicable law.
If any information that the Employer deems to
71
be a trade secret is found by a court of competent jurisdiction not to
be a trade secret for purposes of this Agreement, such information
will, nevertheless, be considered Confidential Information for purposes
of this Agreement. The Executive hereby waives any requirement that the
Employer submit proof of the economic value of any trade secret or post
a bond or other security.
(iii) None of the foregoing obligations and restrictions
applies to any part of the Confidential Information that the Executive
demonstrates was or became generally available to the public other than
as a result of a direct or indirect disclosure by the Executive.
(iv) The Executive will not remove from the Employer or
Craftmade's premises (except to the extent such removal is for purposes
of the performance of the Executive's duties at home or while
traveling, or except as otherwise specifically authorized by the
Employer and Craftmade) any document, record, notebook, plan, model,
component, device, or computer software or code, whether embodied in a
disk or in any other form (collectively, the "Proprietary Items"). The
Executive recognizes that, as between the Employer and the Executive,
all of the Proprietary Items, whether or not developed by the
Executive, are the exclusive property of the Employer and Craftmade.
Upon termination of this Agreement by either party, or upon the request
of the Employer during the Employment Period, the Executive will return
to the Employer all of the Proprietary Items in the Executive's
possession or subject to the Executive's control, and the Executive
shall not retain any copies, abstracts, sketches, or other physical
embodiment of any of the Proprietary Items.
(v) Executive will take reasonable steps to safeguard all
Confidential Information and prevent its disclosure to unauthorized
persons.
(b) Ownership of Information, Inventions, and Original Works. Any and
all work product, information, inventions, original works of authorship, ideas,
concepts, photographs, illustrations, writings, designs, computer software,
formulations, know-how, trade secrets, discoveries, developments, modifications,
improvements, processes, procedures and/or techniques that Executive may make,
conceive, create, discover, develop, or reduce to practice, either solely by
Executive or jointly with any other person or persons, during Executive's
employment, whether or not during working hours, and which directly or
indirectly:
(i) are useful in connection with any business now or
hereafter carried on or contemplated by the Employer or Craftmade,
including developments or expansions of its present fields of
operations; or
(ii) relate to matters within the scope, field, duties or
responsibility of Executive's employment with the Employer or
Craftmade; or
(iii) are based on Executive's knowledge of the actual or
anticipated business or interest of the Employer or Craftmade; or
72
(iii) are aided by the use of time, materials, facilities or
information of the Employer or Craftmade,
(collectively referred to as "Work Product"), are the sole and exclusive
property of the Employer and Craftmade, and Executive shall promptly disclose
all such Work Product to the Employer.
Executive shall maintain adequate written records of Work Product, in such
format specified by Employer, and such records will be available to and remain
the sole property of the Employer at all times.
Executive assigns to Employer, without further compensation, all right, title
and interest in and to all Work Product in all countries of the world. Executive
recognizes that all Work Product, made, created, conceived, discovered,
developed, or reduced to practice by Executive either solely or jointly with any
other person or persons, within one (1) year after termination of employment
(voluntary or otherwise), are likely to have been conceived in significant part
either while employed by the Employer or Craftmade or as a direct result of
knowledge Executive had of proprietary information. Accordingly, Executive
agrees that such Work Product shall be deemed to be owned by Employer under the
terms of the Agreement, unless clearly proved by Executive to have been
conceived after such termination.
Without further compensation or reimbursement, Executive shall take all actions
necessary so that Employer can prepare and present applications for copyright or
patent therefore, and can secure such copyright or patents wherever possible, as
well as reissue renewals, and extensions thereof, and can obtain the record
title to such copyright or patents.
Executive acknowledges that Employer or Craftmade from time to time may have
agreements with other persons or entities that impose obligations or
restrictions on the Employer or Craftmade regarding Work Product made during the
course of work there under or regarding the confidential information of such
other parties or entities. Executive agrees to be bound by all such obligations
and restrictions and to take all action necessary to discharge the obligations
of Employer or Craftmade.
7.3 Disputes or Controversies. The Executive recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. To
the extent permitted by law, all pleadings, documents, testimony, and records
relating to any such adjudication will be maintained in secrecy and will be
available for inspection by the Employer, the Executive, and their respective
attorneys and experts, who will agree, in advance and in writing, to receive and
maintain all such information in secrecy, except as may be limited by them in
writing.
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ARTICLE VIII
NON-COMPETITION, NON-SOLICITATION
AND NON-INTERFERENCE
8.1 Acknowledgment of the Executive. The Executive acknowledges that:
(a) the services to be performed by him under this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) the Employer's
business is international in scope and its products are marketed throughout the
world; (c) the Employer competes with other businesses that are or could be
located in any part of the world; (d) Craftmade has required that the Executive
make the covenants set forth in this Article VIII as a condition to the Merger;
and (e) the provisions of this Article VIII are reasonable and necessary to
protect the Employer's business.
8.2 Covenant Not to Compete. In order to protect Employer and
Craftmade's Confidential Information, it is necessary to enter into the
following restrictive covenant. Thus, Executive covenants that he will not,
directly or indirectly:
(a) during the Employment Period, except in the course of his
employment hereunder, directly or indirectly, engage or invest in, own, manage,
operate, finance, control, or participate in the ownership, management,
operation, financing, or control of, be employed by, associated with, or in any
manner connected with, lend the Executive's name or any similar name to, lend
Executive's credit to or render services or advice to, any business whose
products, services or activities compete in whole or in part with the products,
services or activities of the Employer, Craftmade or any affiliate of the
Employer or Craftmade, anywhere in the world; provided, however, that the
Executive may purchase or otherwise acquire up to (but not more than) one
percent of any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934;
(b) during the Post-Employment Period, directly or indirectly, engage
or invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the Executive's name or
any similar name to, lend Executive's credit to or render services or advice to,
any business whose products, services or activities compete in whole or in part
with the products, services or activities of the Employer, Craftmade or any
affiliate of the Employer or Craftmade in the market areas utilized by the
Employer, Craftmade or any affiliate of the Employer or Craftmade on the last
day of the Employment Period, which includes, but is not limited to, markets in
the United States; provided, however, that the Executive may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934;
(c) whether for the Executive's own account or for the account of any
other person, at any
74
time during the Employment Period and the Post-Employment Period, solicit
business of the same product lines being carried by the Employer, Craftmade or
any affiliate of the Employer or Craftmade in the same market areas as the
Employer, Craftmade or any affiliate of the Employer or Craftmade, from any
person known by the Executive to be a customer of the Employer, Craftmade or any
affiliate of the Employer or Craftmade, whether or not the Executive had
personal contact with such person during and by reason of the Executive's
employment with the Employer;
(d) whether for the Executive's own account or the account of any other
person (i) at any time during the Employment Period and the Post-Employment
Period, solicit, employ, or otherwise engage as an employee, independent
contractor, or otherwise, any person who is an employee of the Employer,
Craftmade or any affiliate of the Employer or Craftmade or in any manner induce
or attempt to induce any employee of the Employer, Craftmade or any affiliate of
the Employer or Craftmade to terminate his employment with the Employer,
Craftmade or any affiliate of the Employer or Craftmade; or (ii) at any time
during the Employment Period and the Post-Employment Period, interfere with the
Employer's relationship with any person, including any person who at any time
during the Employment Period was an employee, contractor, supplier, or customer
of the Employer, Craftmade or any affiliate of the Employer or Craftmade; or
(e) at any time during or after the Employment Period, disparage the
Employer, Craftmade or any of their shareholders, directors, officers,
employees, or agents.
If any covenant in this Section 8.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.
The period of time applicable to any covenant in this Section 8.2 will
be extended by the duration of any violation by the Executive of such covenant.
The Executive will, while the covenant under this Section 8.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's employer. Craftmade or the
Employer may notify such employer that the Executive is bound by this Agreement
and, at the Employer's election, furnish such employer with a copy of this
Agreement or relevant portions thereof.
ARTICLE IX
GENERAL PROVISIONS
9.1 Injunctive Relief and Additional Remedy. The Executive acknowledges
that the injury that would be suffered by the Employer as a result of a breach
of the provisions of this
75
Agreement (including any provision of Articles VII and VIII) would be
irreparable and that an award of monetary damages to the Employer for such a
breach would be an inadequate remedy. Consequently, the Employer will have the
right, in addition to any other rights it may have, to obtain injunctive relief
to restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and the Employer will not be obligated to post
bond or other security in seeking such relief.
9.2 Covenants of Articles VII and VIII Are Essential and Independent
Covenants. The covenants by the Executive in Articles VII and VIII are essential
elements of this Agreement, and without the Executive's agreement to comply with
such covenants, Craftmade would not have consented to the Merger and Craftmade
would not have entered into this Agreement or employed or continued the
employment of the Executive. The Employer and the Executive have independently
consulted their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific
regard to the nature of the business conducted by the Employer.
The Executive's covenants in Articles VII and VIII are independent
covenants and the existence of any claim by the Executive against the Employer
under this Agreement or otherwise, or against Craftmade, will not excuse the
Executive's breach of any covenant in Articles VII or VIII.
If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Articles VII and
VIII.
9.3 Representations and Warranties by the Executive. The Executive
represents and warrants to the Employer that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the
Executive's obligations hereunder will not, with or without the giving of notice
or the passage of time, or both: (a) violate any judgment, writ, injunction, or
order of any court, arbitrator, or governmental agency applicable to the
Executive; or (b) conflict with, result in the breach of any provisions of or
the termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound.
9.4 Obligations Contingent on Performance. The obligations of the
Employer hereunder, including its obligation to pay the compensation provided
for herein, are contingent upon the Executive's performance of the Executive's
obligations hereunder.
9.5 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement
76
can be discharged by one party, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other party; (b) no waiver
that may be given by a party will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement.
9.6 Successors and Assignment. This Agreement, including without
limitation Articles VII and VIII, shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors, assigns,
heirs, and legal representatives, including any entity with which the Employer
may merge or consolidate or to which all or substantially all of its assets may
be transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.
9.7 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by facsimile (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer:
▇▇▇▇▇▇ Lighting Products, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Executive:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Craftmade:
Craftmade International, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.8 Entire Agreement; Amendments. This Agreement, the
Merger Agreement,
and the documents executed in connection with the
Merger Agreement, contain the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, between
the parties hereto with respect to the subject matter hereof. This Agreement may
not be amended orally, but only by an agreement in writing signed by the parties
hereto.
9.9 Governing Law. This Agreement will be governed by the laws of the
State of Texas without regard to conflicts of laws principles.
9.10 Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement shall be
brought against any of the parties in the courts of the State of Texas, County
of Dallas, or, if it has or can acquire jurisdiction, in the United States
District Court for the Northern District of Texas, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on either party anywhere in the world.
9.11 Section and Article Headings, Construction. The headings of
Sections and Articles in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" and "Article" or "Articles" refer to the corresponding Section or
Sections and Article or Articles of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
9.12 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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9.14 Dispute Resolution. Subject to the Company's right to seek
injunctive relief in court as provided in Section 9.1 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or connection to
this Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any party may submit such
dispute, controversy or claim, including a claim for indemnification under this
Section 9.14, to arbitration.
(a) Arbitrators. The arbitration shall be heard and determined
by one arbitrator, who shall be impartial and who shall be selected by
mutual agreement of the parties; provided, however, that if the dispute
involves more than $50,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an
arbitrator of its choice within thirty (30) days of the submission of a
notice of arbitration and (ii) the party-appointed arbitrators shall in
turn appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of the last party-appointed arbitrator.
If (x) the parties cannot agree on the sole arbitrator, (y) one party
refuses to appoint its party-appointed arbitrator within said thirty
(30) day period or (z) the party-appointed arbitrators cannot reach
agreement on a presiding arbitrator of the tribunal, then the
appointing authority for the implementation of such procedure shall be
the Senior United States District Judge for the Northern District of
Texas, who shall appoint an independent arbitrator who does not have
any financial interest in the dispute, controversy or claim. If the
Senior United States District Judge for the Northern District of Texas
refuses or fails to act as the appointing authority within ninety (90)
days after being requested to do so, then the appointing authority
shall be the Chief Executive Officer of the American Arbitration
Association, who shall appoint an independent arbitrator who does not
have any financial interest in the dispute, controversy or claim. All
decisions and awards by the arbitration tribunal shall be made by
majority vote.
(b) Proceedings. Unless otherwise expressly agreed in writing
by the parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Dallas, Texas, at a site chosen by mutual agreement of the
parties, or if the parties cannot reach agreement on a
location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;
(ii) The arbitrators shall be and remain at all times
wholly independent and impartial;
(iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to
time;
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(iv) Any procedural issues not determined under the
arbitral rules selected pursuant to item (iii) above shall be
determined by the law of the place of arbitration, other than
those laws which would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall be borne in the
manner determined by the arbitrators;
(vi) The decision of the arbitrators shall be reduced
to writing; final and binding without the right of appeal; the
sole and exclusive remedy regarding any claims, counterclaims,
issues or accounting presented to the arbitrators; made and
promptly paid in United States dollars free of any deduction
or offset; and any costs or fees incident to enforcing the
award shall, to the maximum extent permitted by law, be
charged against the party resisting such enforcement;
(vii) The award shall include interest from the date
of any breach or violation of this Agreement, as determined by
the arbitral award, and from the date of the award until paid
in full, at 6% per annum; and
(viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the
party owing the judgment or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
9.15 Guarantee of Performance. In the event that Employer fails to
comply with any of its obligations pursuant to this Agreement, Craftmade shall
use its best efforts to fulfill such obligations of Employer.
* * * * *
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
EXECUTIVE:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
CRAFTMADE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board, President
and Chief Executive Officer
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
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EXHIBIT 2.6(a)(iii)
CONSULTING AGREEMENT
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CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is effective as of the 1st day
of March, 2005, by and among ▇▇▇▇▇▇ Lighting Products, Inc., a Delaware
corporation (the "Company"), Craftmade International, Inc., a Delaware
corporation ("Craftmade"), and ▇▇▇▇ ▇▇▇▇▇▇, an individual resident in Collin
County ("Consultant").
RECITALS
WHEREAS, concurrently with the execution and delivery of this
Agreement, Craftmade is acquiring all of the outstanding capital stock of ▇▇▇▇
▇▇▇▇▇▇ Co., Inc., a Texas corporation doing business as ▇▇▇▇▇▇ Lighting Products
("▇▇▇▇▇▇ Lighting"), through a merger (the "Merger") of ▇▇▇▇▇▇ Lighting with and
into the Company, pursuant to a Merger Agreement dated as of March 1, 2005 among
Craftmade, the Company, Consultant, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Lighting (the
"Merger Agreement").
WHEREAS, the Company recognizes the knowledge and experience of
Consultant and desires to secure the services of Consultant with respect to the
operations of the Company; and
WHEREAS, Consultant desires to perform such services for the Company,
all on the terms and conditions as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Duties of Consultant.
(a) Consultant shall, from time to time upon the request of the Company
and subject to the terms hereof, render assistance, advice, and consultation to
the Company concerning the conduct of the business of the Company (collectively,
the "Services"). The Services shall include, but shall not be limited to, (i)
providing design support services; (ii) the education and instruction of the
Company's employees with the business as conducted by the Company; and (iii)
investigation, analysis, and the preparation of recommendations and advice
concerning purchasing, sales, marketing, organization, management, operations,
and personnel issues of concern to the Company.
(b) Consultant shall perform such duties in Coppell, Texas, or at such
other place or places as Company may, from time to time, reasonably deem
appropriate.
(c) Consultant shall be available to perform services under this
Agreement on such days during the Term (as defined below) as reasonably
requested by the Company.
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2. Compensation.
(a) The Consultant will be paid an annual consulting fee of
$100,000.00, which will be payable in equal monthly installments.
(b) The Consultant will be paid royalties on certain future products
absorbed into the Company's product offering, pursuant to Craftmade's normal
royalty agreements.
3. Independent Contractor Status.
(a) The parties hereby terminate as of the effective date of this
Agreement all prior relationships between them and hereby create the
relationship of the Company and independent contractor. The parties (i)
acknowledge and covenant that Consultant is an independent contractor and will
act exclusively as an independent contractor and not as an employee of the
Company or Craftmade in performing the duties assigned hereunder, and (ii) do
not intend, and will not hold out that there exists, any partnership, joint
venture, undertaking for a profit or other form of business venture or any
employment relationship among the parties other than that of an independent
contractor relationship.
(b) The Consultant, as an independent contractor under this Agreement,
is responsible for all employment taxes of any nature whether incurred as a
result of the Consultant's services and remuneration paid hereunder or as a
result of the employment of any other individuals by the Consultant (such
employment taxes to be referred to herein as the "Taxes"). The Taxes include,
but are not limited to, federal, state, provincial and local income, social
security, self-employment and unemployment taxes.
(c) With respect to the Taxes, the Company shall not treat the
Consultant as an employee, and in no event shall the Company be liable to the
Consultant or the Consultant's heirs, assigns, successors or legal
representatives, nor any governmental agency, for the withholding or payment of
any Taxes.
(d) The Consultant shall release, hold harmless and indemnify
Craftmade, the Company and their respective directors, officers, affiliates,
employees and agents (collectively, the "Indemnitees"), from and against any and
all obligations, losses, costs, claims, judgments, damages, attorneys' fees and
expenses suffered or incurred by the Indemnitees arising out of or reasonably
attributable to any claim related to or concerning the Taxes.
(e) With regard to the Services rendered by Consultant hereunder, the
Company and Craftmade shall not be liable to the Consultant nor to any third
party who may claim any right due to the Consultant's relationship with the
Company or with Craftmade, for any acts or omissions in the performance of the
Services on the part of the Consultant or due to the Consultant's misconduct or
negligence. The Consultant shall indemnify, defend and hold harmless the
Indemnitees from and against any and all obligations, losses, costs, claims,
judgments, damages, attorneys' fees and
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expenses suffered or incurred by the Indemnitees arising out of or attributable
to such Services rendered by the Consultant.
4. Term; Termination.
(a) Subject to the provisions of this Section 4, the term (the "Term")
of this Agreement shall initially be for the period beginning on the effective
date of this Agreement (the "Effective Date") and ending on the third
anniversary of the Effective Date (the "Initial Term"). After the Initial Term,
the Agreement shall be extended for two additional one-year terms (the "First
Additional Term" and the "Second Additional Term," respectively), unless the
Consultant provides written notice of election not to renew at least 45 days
before the commencement of the First Additional Term and the Second Additional
Term, respectively.
(b) This Agreement may be terminated immediately with the mutual
written agreement of the Company, Craftmade and the Consultant. Upon termination
of this Agreement pursuant to this provision, the Consultant shall be entitled
to receive only such compensation payable through the effective date of
termination, payable in full on the effective date of such termination of this
Agreement.
(c) Notwithstanding the preceding, the Company or Craftmade may
terminate this Agreement for Cause with respect to the Consultant. Termination
for "Cause" shall mean termination because of the Consultant's (A) death, (B)
breach of this Agreement, (C) Disability (as defined below), (D) willful
misconduct that causes material economic harm to the Company or Craftmade or
that brings substantial discredit to the Company's or Craftmade's reputation,
(E) failure to follow directions of the Company that are consistent with the
Consultant's duties under this Agreement, or (F) final, nonappealable conviction
of a felony involving moral turpitude; provided, however, that subsections (D)
or (E) shall not constitute Cause unless the Company or Craftmade notifies the
Consultant thereof in writing, specifying in reasonable detail the basis
therefor and stating that it is grounds for Cause, and unless Consultant fails
to cure such matter within 10 days after such notice is sent or given under this
Agreement.
"Disability" shall exist if because of ill health, physical or mental
disability or any other reason beyond his control, and notwithstanding
reasonable accommodations made by the Company, Consultant shall have been unable
or shall have failed to perform his services under this Agreement, as determined
in good faith by the Company or Craftmade, for a period of 120 consecutive days,
or, if in any 12-month period, Consultant shall have been unable or shall have
failed to perform the Services for a period of 180 days, irrespective of whether
or not such days are consecutive.
5. Non-Disclosure.
(a) Confidential Information. Upon Consultant's execution of this
Agreement, the Company and Craftmade agree that they will immediately provide
Consultant with specialized knowledge and training regarding the business in
which the Company and Craftmade are involved,
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and will immediately provide Consultant with Confidential Information (as
hereinafter defined) and trade secrets of the Company and Craftmade. The Company
and Craftmade also agree to provide Consultant with Confidential Information on
an on-going basis.
Consultant understands and acknowledges that (a) such Confidential
Information has been developed and/or acquired by the Company and Craftmade
through the expenditure of substantial time, effort and money, (b) such
Confidential Information gives the Company and Craftmade a competitive advantage
over others who do not have this information, (c) the Company and Craftmade
would be irreparably harmed if the Confidential Information were disclosed; (d)
Craftmade has required that the Consultant make the covenants in this Section 5
as a condition to the Merger; and (e) the provisions of this Section 5 are
reasonable and necessary to prevent the improper use or disclosure of
Confidential Information.
(b) Disclosure of Confidential Information and Return of Company
Property. In exchange for the Company and Craftmade's promises to provide
Consultant with specialized training and Confidential Information, Consultant
agrees that he will hold all Confidential Information of the Company and
Craftmade in trust for the Company and will not: (a) use the information for any
purpose other than the benefit of the Company; or (b) disclose to any person or
entity any Confidential Information of the Company or Craftmade except as
necessary during Consultant's work with the Company to perform services on
behalf of the Company.
To execute and enforce the terms of this Section 5, Consultant
covenants as follows:
(i) During and following the Term, the Consultant will hold in
confidence the Confidential Information and will not disclose it to any
person except (A) with the specific prior written consent of the
Company and Craftmade, (B) as necessary to carry out the Consultant's
duties under this Agreement or (C) except as otherwise expressly
permitted by the terms of this Agreement.
(ii) Any trade secrets of the Company and Craftmade will be
entitled to all of the protections and benefits under applicable law.
If any information that the Company and Craftmade deem to be a trade
secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this Agreement, such information will,
nevertheless, be considered Confidential Information for purposes of
this Agreement. The Consultant hereby waives any requirement that the
Company and Craftmade submit proof of the economic value of any trade
secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions
applies to any part of the Confidential Information that the Consultant
demonstrates was or became generally available to the public other than
as a result of a direct or indirect disclosure by the Consultant.
(iv) The Consultant will not remove from the Company and
Craftmade's premises (except to the extent such removal is for purposes
of the performance of the Consultant's
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duties at home or while traveling, or except as otherwise specifically
authorized by the Company and Craftmade) any document, record,
notebook, plan, model, component, device, or computer software or code,
whether embodied in a disk or in any other form (collectively, the
"Proprietary Items"). The Consultant recognizes that, as between the
Company, Craftmade and the Consultant, all of the Proprietary Items,
whether or not developed by the Consultant, are the exclusive property
of the Company and Craftmade. Upon termination of this Agreement by
either party, or upon the request of the Company and Craftmade during
the Term, the Consultant will return to the Company and Craftmade all
of the Proprietary Items in the Consultant's possession or subject to
the Consultant's control, and the Consultant shall not retain any
copies, abstracts, sketches, or other physical embodiment of any of the
Proprietary Items.
(v) Consultant will take reasonable steps to safeguard all
Confidential Information and prevent its disclosure to unauthorized
persons.
(c) Disputes or Controversies. Consultant recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Company and Craftmade, the Consultant, and its attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
(d) Definitions. For purposes of this Agreement:
(i) "Confidential Information" means any and all:
(1) trade secrets concerning the business and affairs
of the Company, Craftmade, and their respective affiliates,
product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past,
current, and planned research and development, current and
planned manufacturing or distribution methods and processes,
customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, computer software
and programs (including object code and source code), computer
software and database technologies, systems, structures, and
architectures (and related formulae, compositions, processes,
improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information), and any
other information, however documented, that is a trade secret
within the meaning of applicable trade secret laws; and
(2) information concerning the business and affairs
of the Company, Craftmade and their respective affiliates
(which includes historical financial statements, financial
projections and budgets, historical and projected sales,
capital
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spending budgets and plans, the names and backgrounds of key
personnel, personnel training and techniques and materials),
however documented; and
(3) notes, analysis, compilations, studies,
summaries, and other material prepared by or for the Company,
Craftmade, or their respective affiliates, containing or
based, in whole or in part, on any information included in the
foregoing.
(ii) "Person" includes any individual, corporation (including
any non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association,
organization, or governmental body.
6. Non-Competition and Non-Interference.
(a) Acknowledgements of the Consultant. The Consultant acknowledges
that: (a) the services to be performed by him under this Agreement are of a
special, unique, unusual, extraordinary, and intellectual character; (b) the
Company and Craftmade's business is international in scope and their products
are marketed throughout the world; (c) the Company and Craftmade compete with
other businesses that are or could be located in any part of the world; (d)
Craftmade has required that the Consultant make the covenants set forth in this
Section 6 as a condition to the Merger; and (e) the provisions of this Section 6
are reasonable and necessary to protect the Company's business.
(b) Covenant Not to Compete. In order to protect the Company and
Craftmade's Confidential Information, it is necessary to enter into the
following restrictive covenant. Thus, except as set forth below, Consultant
covenants that he will not, directly or indirectly:
(i) during the Term, directly or indirectly, engage or invest
in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed
by, associated with, or in any manner connected with, lend Consultant's
name or any similar name to, lend Consultant's credit to or render
services or advice to, any business whose products, services or
activities compete in whole or in part with the products, services or
activities of the Company, Craftmade or any affiliate of the Company or
Craftmade ("Competing Business"), anywhere in the world; provided,
however, that Consultant may purchase or otherwise acquire up to (but
not more than) one percent (1%) of any class of securities of any
enterprise involved in the business of the Company (but without
otherwise participating in the activities of such enterprise), if such
securities are listed on any national or regional securities exchange
or have been registered under Section 12(g) of the Securities Exchange
Act of 1934;
(ii) during the Post-Agreement Period (as defined below),
directly or indirectly, engage or invest in, own, manage, operate,
finance, control, or participate in the ownership, management,
operation, financing, or control of, be employed by, associated with,
or in any manner connected with, lend Consultant's name or any similar
name to, lend Consultant's
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credit to or render services or advice to, any Competing Business in
the market areas utilized by the Company, Craftmade or any affiliate of
the Company or Craftmade on the last day this agreement remains in
effect, which includes, but is not limited to, markets in the United
States; provided, however, that Consultant may purchase or otherwise
acquire up to (but not more than) one percent (1%) of any class of
securities of any enterprise involved in the business of the Company
(but without otherwise participating in the activities of such
enterprise), if such securities are listed on any national or regional
securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934;
(iii) whether for Consultant's own account or for the account
of any other Person, at any time during the Term and the Post-Agreement
Period, solicit business of the same or similar type and in the same
market areas of that of the business being carried on by the Company,
Craftmade or any affiliate of the Company or Craftmade, from any Person
known by Consultant to be a customer of the Company, Craftmade or any
affiliate of the Company or Craftmade, whether or not Consultant had
personal contact with such Person during and by reason of Consultant's
relationship with the Company;
(iv) whether for Consultant's own account or the account of
any other Person (a) at any time during the Term and the Post-Agreement
Period, solicit, employ, or otherwise engage as a consultant,
independent contractor, or otherwise, any Person who is or was an
employee of the Company, Craftmade or any affiliate of the Company or
Craftmade at any time during the Term or in any manner induce or
attempt to induce any employee of the Company, Craftmade or any
affiliate of the Company or Craftmade to terminate his employment with
the Company, Craftmade or any affiliate of the Company or Craftmade; or
(b) at any time during the Term and the Post-Agreement Period,
interfere with the Company's relationship with any Person, including
any Person who at any time during the Term was an employee, agent,
contractor, supplier, or customer of the Company, Craftmade or any
affiliate of the Company or Craftmade; or
(v) at any time during the Term and the Post-Agreement Period,
disparage the Company, Craftmade, or any of their respective
interestholders, stockholders, managers, directors, officers,
employees, or agents.
Notwithstanding anything herein this Agreement, Consultant may during
the Term and the Post-Term Period engage in the activities described in
subsection 6(b)(i) and (ii) hereof for any Competing Business, provided that
Consultant shall not directly or indirectly sell ceiling fan products that
compete with the products listed on Exhibit "A" hereto, unless Craftmade
expressly consents to such representation. Craftmade may revise Exhibit "A" from
time to time, upon prior notice to Consultant. Consultant shall submit to
Craftmade a list of companies it represents (attached hereto as Exhibit "B") and
shall update the list at least quarterly.
For purposes of this Section 6, the term "Post-Agreement Period" means
two years after the Term.
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If any covenant in this Section 6 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Consultant.
The period of time applicable to any covenant in this Section 6 with
respect to Consultant will be extended by the duration of any violation by
Consultant of such covenant.
Consultant will, while the covenant under this Section 6 is in effect,
give notice to the Company, within ten days after accepting any employment, of
the identity of Consultant's employer. Craftmade or the Company may notify such
employer that Consultant is bound by this Agreement and, at the Company's
election, furnish such employer with a copy of this Agreement or relevant
portions thereof.
7. Injunctive Relief and Additional Remedy. Consultant acknowledges
that the injury that would be suffered by the Company and Craftmade as a result
of a breach of the provisions of this Agreement (including any provision of
Sections 5 and 6) would be irreparable and that an award of monetary damages to
the Company or Craftmade for such a breach would be an inadequate remedy.
Consequently, the Company and Craftmade will have the right, in addition to any
other rights it may have, to obtain injunctive relief to restrain any breach or
threatened breach or otherwise to specifically enforce any provision of this
Agreement, and the Company and Craftmade will not be obligated to post bond or
other security in seeking such relief.
8. Covenants of Sections 5 and 6 Are Essential and Independent
Covenants. The covenants by Consultant in Sections 5 and 6 are essential
elements of this Agreement, and without the Consultant's agreement to comply
with such covenants, the Company and Craftmade would not have entered into this
Agreement or the Merger Agreement or obtained the Services of the Consultant.
The Company, Craftmade and Consultant have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific
regard to the nature of the business conducted by the Company and Craftmade.
Consultant's covenants in each of Section 5 and in Section 6 are independent
covenants and the existence of any claim by Consultant against the Company or
Craftmade under this Agreement or otherwise, will not excuse Consultant's breach
of any covenant in Section 5 or Section 6. This Agreement will continue in full
force and effect as is necessary or appropriate to enforce the covenants and
agreements of Consultant in Sections 5 and 6.
9. Representations and Warranties by the Consultant. Consultant
represents and warrants to the Company and to Craftmade that the execution and
delivery by Consultant of this Agreement do not, and the performance by
Consultant of its obligations hereunder will not, with or without the giving of
notice or the passage of time, or both: (a) violate any judgment, writ,
injunction, or order of any court, arbitrator, or governmental agency applicable
to Consultant; or (b) conflict with, result in the breach of any provisions of
or the termination of, or constitute a default under, any agreement to which
Consultant is a party or by which Consultant is or may be bound.
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10. Obligations Contingent on Performance. The obligations of the
Company and Craftmade hereunder, including the Company's obligation to pay the
compensation provided for herein, are contingent upon Consultant's performance
of its obligations hereunder.
11. Amendment. This Agreement may be amended only by a writing signed
by all parties.
12. Waiver. A waiver of any clause of this Agreement by either party
shall not be construed as a waiver of any other clause. Neither the failure nor
any delay on the party of either party to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy, power
or privilege with respect to any other occurrence.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to conflicts of
law principles.
14. Successors and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and upon their respective
successors-in-interest and assigns. It is agreed that the Company may assign
this Agreement to a subsidiary of the Company or Craftmade (or a subsidiary of
any affiliate of the Craftmade which is directly or indirectly in a line of
corporate ownership with the Craftmade) now in or hereinafter to come into
existence. If such assignment is made, Consultant agrees to substitute assignee
for the Company and assignee shall succeed to all the rights and privileges of
the Company under this Agreement, provided that no such assignment shall relieve
the Company of its obligations hereunder.
15. Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of Texas, Dallas
Division, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world.
16. Severability. If any portion or portions of this Agreement shall,
for any reason, be declared by a court of competent jurisdiction to be invalid
or unenforceable, the remaining portion or portions of this Agreement shall
remain valid and enforceable and shall be carried into effect, unless to do so
would clearly violate the present legal and valid intention of the parties
hereto.
17. Notices. All notices and other communications hereunder must be
delivered in
91
writing and shall be deemed to have been given if delivered by hand or mailed by
first class, registered mail, return receipt requested, postage and registered
fees prepaid, and addressed as follows:
If to the Company:
▇▇▇▇▇▇ Lighting Products, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to Craftmade:
Craftmade International, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to Consultant:
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
18. Entire Agreement. This Agreement embodies the entire understanding
among the parties hereto respecting the subject matter hereof and no change,
alteration or modification may be made except in writing signed by both parties
hereto.
19. Legal Fees. If any legal action is brought by either of the parties
hereto, it is expressly agreed that the party in whose favor final judgment
shall be entered shall be entitled to recover from the other party reasonable
attorney's fees in addition to any other relief which may be awarded, including
attorneys fees on appeal.
20. Construction. The parties understand and acknowledge that they have
each been represented by (or have had the opportunity to be represented by)
counsel in connection with the preparation, execution and delivery of this
Agreement. This Agreement shall not be construed against any party for having
drafted it.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute one and the same Agreement.
92
* * * * *
93
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first written above.
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board, President and
Chief Executive Officer
CRAFTMADE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board, President and
Chief Executive Officer
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
94
EXHIBIT A
LIST OF PRODUCTS
CRAFTMADE CEILING FANS
CRAFTMADE LIGHT KITS
CRAFTMADE ACCESSORIES
CRAFTMADE UNDER-CABINET LIGHTING
ACCOLADE BATH LIGHTING
ACCOLADE OUTDOOR LIGHTING
ACCOLADE LAMPS
FLUSHMOUNTS
▇▇▇▇▇▇ LIGHT BULBS
LIGHT BULBS
DOOR CHIMES
VENTILATION PRODUCTS
SMOKE DETECTORS
▇▇▇▇▇▇ OUTDOOR LIGHTING
95
EXHIBIT B
LIST OF COMPANIES REPRESENTED BY CONSULTANT
AMERICAN FLUORESCENT CORPORATION
CRAFTMADE INTERNATIONAL
▇▇▇▇▇▇▇ LIGHTING
KALCO LIGHTING
SEA GULL LIGHTING PRODUCTS
▇▇▇▇▇▇ LIGHTING PRODUCTS
▇▇▇▇▇▇▇▇▇ LAMP COMPANY
▇▇▇▇▇ DESIGNS
96
EXHIBIT 2.6(a)(x)
OBERSTEIN PERSONAL GOODWILL AGREEMENT
97
AGREEMENT FOR THE PURCHASE AND SALE OF PERSONAL GOODWILL
This AGREEMENT FOR THE PURCHASE AND SALE OF PERSONAL GOODWILL (this
"Agreement") is made as of this 1st day of March, 2005, by and among ▇▇▇▇▇▇
Lighting Products, Inc., a Delaware corporation ("Buyer") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
("Seller").
RECITALS
WHEREAS, the Seller owns 640 shares of the issued and outstanding
capital stock of ▇▇▇▇ ▇▇▇▇▇▇ Co., Inc., a Texas corporation (the "Company"); and
WHEREAS, contemporaneously with this Agreement, Craftmade
International, Inc., a Delaware corporation ("Craftmade"), Buyer, the Company,
Seller and ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") are simultaneously entering into that certain
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which the
Company will be merged with and into the Buyer (the "Merger"), with the Buyer
being the surviving corporation; and
WHEREAS, pursuant to the Merger Agreement, Craftmade is acquiring from
Seller and ▇▇▇▇▇▇ all of the issued and outstanding capital stock of the
Company; and
WHEREAS, the Seller has independently developed, owned and will
continue to own on the Closing Date (as defined in Section 2) close personal and
ongoing business relationships, trade secrets and knowledge in connection with
the Company's light bulb and complimentary lighting products business, through
the personal ability, personality, reputation, skill and integrity of Seller,
and other information relating thereto (collectively, the "Personal Goodwill"),
which the Seller desires to sell to the Buyer as hereinafter provided; and
WHEREAS, Seller is not subject to an employment agreement,
noncompetition agreement, or similar restrictive covenant agreement relating to
the Personal Goodwill that restricts Seller's use of the Personal Goodwill; and
WHEREAS, the Buyer desires to acquire all of the Personal Goodwill, as
hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. Purchase Price and Exchange of Consideration. The Seller shall sell,
assign, transfer, convey and deliver to the Buyer at the Closing the Personal
Goodwill including, but not limited to, all of the Seller's respective rights
and benefits related to the Personal Goodwill. In exchange for the Personal
Goodwill and subject to the terms and conditions of this Agreement, the Buyer
shall pay to the Seller on the Closing Date the total sum of One Million and
00/100 Dollars ($1,000,000.00) for all of the Personal Goodwill (the "Purchase
Price"). The payment required by this Section 1 shall not be affected by the
death or disability of Seller.
98
2. Closing/Termination. The sale and assignment of the Personal
Goodwill (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ and ▇▇▇▇▇,
LLP, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Texas, at 10:00 a.m. (local
time) on March 1, 2005, or at such other time and date as the Buyer and the
Seller may agree (the "Closing Date").
3. Representations and Warranties. The Seller represents and warrants
to the Buyer as follows:
3.1 Personal Goodwill. All of the Personal Goodwill is owned,
and immediately prior to the Closing will be owned, by the Seller, free
and clear of all liens, encumbrances, claims, options, security
interests, calls and commitments of any kind. The Seller has full legal
right, power and authority to enter into this Agreement and to sell,
assign and transfer the Personal Goodwill to the Buyer and, on the
Closing Date, the sale and assignment of the Personal Goodwill to the
Buyer hereunder will transfer to the Buyer valid title thereto, free
and clear of all liens, encumbrances, claims, options, security
interests and commitments of any kind.
3.2 No Restrictions. Seller is not currently a party to any
contract, employment agreement, noncompetition agreement or any other
contract or agreement, or subject to any restriction or condition
contained in any permit, license, judgment, order, writ, injunction,
decree or award which, singly or in the aggregate, materially and
adversely affects or restricts, or is likely to materially and
adversely affect or restrict the Personal Goodwill or the Buyer's
acquisition, use or enjoyment thereof.
3.3 Approval and Authorization. The execution and delivery of
this Agreement by Seller and the performance of the transactions
contemplated herein have been duly and validly authorized by Seller,
and this Agreement is a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its respective terms
subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditor's
rights and general equity principles.
3.4 Economic Benefits. To the best of Seller's knowledge,
Seller is not aware of any present facts or any pending events, which
would prevent the Buyer from realizing the economic benefits associated
with the Personal Goodwill in the same manner as presently enjoyed by
the Seller.
3.5 No Conflicts. The execution and delivery of this Agreement
by Seller does not, and the consummation by Seller of the transactions
contemplated hereby does not and will not, violate or conflict with, or
result (with the giving of notice or the lapse of time or both) in the
violation of, or constitute a default under any provision of, or result
in the acceleration or termination of, or entitle any party to
accelerate or terminate (whether after giving of notice or lapse of
time or both), any obligation or benefit under, or result in the
creation or imposition of any lien, pledge, security interest or other
encumbrance upon the Personal Goodwill pursuant to any material
contract, law, ordinance, regulation, order,
99
arbitration award, judgment or decree to which the Seller is a party,
or by which Seller or his assets (including the Personal Goodwill) are
bound and to Seller's knowledge, does not and will not violate or
conflict with any other material restriction of any kind or character
to which the Seller is subject or by which any of Seller's assets
(including the Personal Goodwill) may be bound.
4. Representations and Covenants of Buyer. The Buyer represents and
warrants as follows:
4.1 Existence and Good Standing. The Buyer has been duly
organized and validly exists in good standing as a corporation under
the laws of the State of Delaware.
4.2 No Default. The execution of this Agreement by the Buyer
and the performance of its obligations hereunder will not violate or
result in a breach of, or constitute a default under any material
agreement to which the Buyer is a party or by which it or its assets
are bound.
4.3 Approval and Authorization. The execution and delivery of
this Agreement and the performance of the transactions contemplated
herein have been duly and validly authorized by all necessary action on
the part of the Buyer and is a legal, valid and binding obligation of
the Buyer, enforceable against the Buyer in accordance with its terms
subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to, or affecting
creditor's rights and general equity principles.
5. Additional Agreements and Covenants: The Buyer and Seller covenant
as follows:
5.1 Preservation and Maintenance of Personal Goodwill. The
Seller shall cooperate with the Buyer after the Closing Date in
connection with all reasonable actions deemed necessary by the Buyer to
transition the economic value of the Personal Goodwill to the Buyer.
5.2 Breaches of Representation and Warranties by Seller. Any
Breach (as defined in the Merger Agreement) of a representation,
warranty, covenant, obligation or other provision of this Agreement by
the Seller shall be subject to the indemnification and escrow
provisions of Sections 11.2 and 11.8 of the Merger Agreement,
respectively.
5.3 Breaches of Representation and Warranties by Buyer. Any
Breach (as defined in the Merger Agreement) of a representation,
warranty, covenant, obligation or other provision of this Agreement by
the Buyer shall be subject to the indemnification provisions of Section
11.7 of the Merger Agreement.
6. Survival. The representations, warranties and covenants of the
parties contained in this Agreement shall survive the Closing Date for two (2)
years thereafter.
100
7. General.
7.1 Further Assurances. The Seller will cooperate with the Buyer on and
after the Closing Date in furnishing information and other assistance in
connection with any actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date and
will take, or cause to be taken such further action, and will execute, deliver
and file such further documents and instruments as the Buyer reasonably requests
in order to effectuate fully the purposes, terms and conditions of this
Agreement.
7.2 Assignment: Binding Effect. This Agreement and the rights of the
Buyer hereunder may be assigned by the Buyer. This Agreement and the rights of
the Seller hereunder may not be assigned by Seller. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors and assigns of the Buyer and the heirs, beneficiaries and legal
representatives of the Seller.
7.3 Execution. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. Execution and
delivery of this Agreement by delivery of a facsimile copy bearing the facsimile
signature of a party shall constitute a valid and binding execution and delivery
of this Agreement by such party. Such facsimile copies shall constitute
enforceable original documents.
7.4 Brokers. Each party represents and warrants that it employed no
broker or agent in connection with this transaction and shall indemnify the
other against all loss, cost, damage or expense arising out of claims for fees
or commissions of brokers or agents employed or alleged to have been employed by
such indemnifying party.
7.5 Notices. Any notice or communication required or permitted
hereunder shall be sufficiently given if sent by facsimile, or first class mail,
postage prepaid to:
(a) Buyer:
▇▇▇▇▇▇ Lighting Products, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
101
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Seller:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
7.6 Applicable Law. This Agreement will be governed by the laws of the
State of Delaware without regard to conflicts of laws principles.
7.7 Captions. The captions in this Agreement are for convenience only
and shall not be considered a part hereof, or affect the construction or
interpretation of any provisions of this Agreement.
7.8 Entire Agreement. This Agreement shall constitute the entire
agreement and understanding between the Seller and the Buyer and supersedes any
prior agreement and understanding, written or oral, relating to the subject
matter of this Agreement. The Seller acknowledges that he has (a) had the
opportunity to seek the advice of independent counsel, including independent tax
counsel, regarding the consequences of this Agreement; and (b) received no
representations from the Buyer or its counsel regarding the tax consequences of
this Agreement. This Agreement may be modified or amended only by a written
instrument executed by the parties hereto.
*****
102
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the day and year first above written.
SELLER:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, individually
BUYER:
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
103
EXHIBIT 2.6(a)(xi)
▇▇▇▇▇▇ PERSONAL GOODWILL AGREEMENT
AGREEMENT FOR THE PURCHASE AND SALE OF PERSONAL GOODWILL
This AGREEMENT FOR THE PURCHASE AND SALE OF PERSONAL GOODWILL (this
"Agreement") is made as of this 1st day of March, 2005, by and among ▇▇▇▇▇▇
Lighting Products, Inc., a Delaware corporation ("Buyer") and ▇▇▇▇ ▇▇▇▇▇▇
("Seller").
RECITALS
WHEREAS, the Seller owns 1,920 shares of the issued and outstanding
capital stock of ▇▇▇▇ ▇▇▇▇▇▇ Co., Inc., a Texas corporation (the "Company"); and
WHEREAS, contemporaneously with this Agreement, Craftmade
International, Inc., a Delaware corporation ("Craftmade"), Buyer, the Company,
Seller and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("Oberstein") are simultaneously entering into that
certain Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which
the Company will be merged with and into the Buyer (the "Merger"), with the
Buyer being the surviving corporation; and
WHEREAS, pursuant to the Merger Agreement, Craftmade is acquiring from
Seller and Oberstein all of the issued and outstanding capital stock of the
Company; and
WHEREAS, the Seller has independently developed, owned and will
continue to own on the Closing Date (as defined in Section 2) close personal and
ongoing business relationships, trade secrets and knowledge in connection with
the Company's light bulb and complimentary lighting products business, through
the personal ability, personality, reputation, skill and integrity of Seller,
and other information relating thereto (collectively, the "Personal Goodwill"),
which the Seller desires to sell to the Buyer as hereinafter provided; and
WHEREAS, Seller is not subject to an employment agreement,
noncompetition agreement, or similar restrictive covenant agreement relating to
the Personal Goodwill; and
WHEREAS, the Buyer desires to acquire all of the Personal Goodwill, as
hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. Purchase Price and Exchange of Consideration. The Seller shall sell,
assign, transfer, convey and deliver to the Buyer at the Closing the Personal
Goodwill including, but not limited to, all of the Seller's respective rights
and benefits related to the Personal Goodwill. In exchange for the Personal
Goodwill and subject to the terms and conditions of this Agreement, the Buyer
shall pay to the Seller on the Closing Date the total sum of Three Million and
00/100 Dollars ($3,000,000.00) for all of the Personal Goodwill (the "Purchase
Price"). The payment required by this Section 1 shall not be affected by the
death or disability of Seller.
105
2. Closing/Termination. The sale and assignment of the Personal
Goodwill (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ and ▇▇▇▇▇,
LLP, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Texas, at 10:00 a.m. (local
time) on March 1, 2005, or at such other time and date as the Buyer and the
Seller may agree (the "Closing Date").
3. Representations and Warranties. The Seller represents and warrants
to the Buyer as follows:
3.1 Personal Goodwill. All of the Personal Goodwill is owned,
and immediately prior to the Closing will be owned, by the Seller, free
and clear of all liens, encumbrances, claims, options, security
interests, calls and commitments of any kind. The Seller has full legal
right, power and authority to enter into this Agreement and to sell,
assign and transfer the Personal Goodwill to the Buyer and, on the
Closing Date, the sale and assignment of the Personal Goodwill to the
Buyer hereunder will transfer to the Buyer valid title thereto, free
and clear of all liens, encumbrances, claims, options, security
interests and commitments of any kind.
3.2 No Restrictions. Seller is not currently a party to any
contract, employment agreement, noncompetition agreement or any other
contract or agreement, or subject to any restriction or condition
contained in any permit, license, judgment, order, writ, injunction,
decree or award which, singly or in the aggregate, materially and
adversely affects or restricts, or is likely to materially and
adversely affect or restrict the Personal Goodwill or the Buyer's
acquisition, use or enjoyment thereof.
3.3 Approval and Authorization. The execution and delivery of
this Agreement by Seller and the performance of the transactions
contemplated herein have been duly and validly authorized by Seller,
and this Agreement is a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its respective terms
subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditor's
rights and general equity principles.
3.4 Economic Benefits. To the best of Seller's knowledge,
Seller is not aware of any present facts or any pending events, which
would prevent the Buyer from realizing the economic benefits associated
with the Personal Goodwill in the same manner as presently enjoyed by
the Seller.
3.5 No Conflicts. The execution and delivery of this Agreement
by Seller does not, and the consummation by Seller of the transactions
contemplated hereby does not and will not, violate or conflict with, or
result (with the giving of notice or the lapse of time or both) in the
violation of, or constitute a default under any provision of, or result
in the acceleration or termination of, or entitle any party to
accelerate or terminate (whether after giving of notice or lapse of
time or both), any obligation or benefit under, or result in the
creation or imposition of any lien, pledge, security interest or other
encumbrance upon the Personal Goodwill pursuant to any material
contract, law, ordinance, regulation, order, arbitration award,
judgment or decree to which the Seller is a party, or by which Seller
or his
106
assets (including the Personal Goodwill) are bound and to Seller's
knowledge, does not and will not violate or conflict with any other
material restriction of any kind or character to which the Seller is
subject or by which any of Seller's assets (including the Personal
Goodwill) may be bound.
4. Representations and Covenants of Buyer. The Buyer represents and
warrants as follows:
4.1 Existence and Good Standing. The Buyer has been duly
organized and validly exists in good standing as a corporation under
the laws of the State of Delaware.
4.2 No Default. The execution of this Agreement by the Buyer
and the performance of its obligations hereunder will not violate or
result in a breach of, or constitute a default under any material
agreement to which the Buyer is a party or by which it or its assets
are bound.
4.3 Approval and Authorization. The execution and delivery of
this Agreement and the performance of the transactions contemplated
herein have been duly and validly authorized by all necessary action on
the part of the Buyer and is a legal, valid and binding obligation of
the Buyer, enforceable against the Buyer in accordance with its terms
subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to, or affecting
creditor's rights and general equity principles.
5. Additional Agreements and Covenants: The Buyer and Seller covenant
as follows:
5.1 Preservation and Maintenance of Personal Goodwill. The
Seller shall cooperate with the Buyer after the Closing Date in
connection with all reasonable actions deemed necessary by the Buyer to
transition the economic value of the Personal Goodwill to the Buyer.
5.2 Breaches of Representation and Warranties by Seller. Any
Breach (as defined in the Merger Agreement) of a representation,
warranty, covenant, obligation or other provision of this Agreement by
the Seller shall be subject to the indemnification and escrow
provisions of Sections 11.2 and 11.8 of the Merger Agreement,
respectively.
5.3 Breaches of Representation and Warranties by Buyer. Any
Breach (as defined in the Merger Agreement) of a representation,
warranty, covenant, obligation or other provision of this Agreement by
the Buyer shall be subject to the indemnification provisions of Section
11.7 of the Merger Agreement.
6. Survival. The representations, warranties and covenants of the
parties contained in this Agreement shall survive the Closing Date for two (2)
years thereafter.
107
7. General.
7.1 Further Assurances. The Seller will cooperate with the
Buyer on and after the Closing Date in furnishing information and other
assistance in connection with any actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date and will take, or cause to be taken
such further action, and will execute, deliver and file such further
documents and instruments as the Buyer reasonably requests in order to
effectuate fully the purposes, terms and conditions of this Agreement.
7.2 Assignment: Binding Effect. This Agreement and the rights
of the Buyer hereunder may be assigned by the Buyer. This Agreement and
the rights of the Seller hereunder may not be assigned by Seller. This
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto, the successors and assigns of the Buyer and the heirs,
beneficiaries and legal representatives of the Seller.
7.3 Execution. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original
and all of which together shall constitute but one and the same
instrument. Execution and delivery of this Agreement by delivery of a
facsimile copy bearing the facsimile signature of a party shall
constitute a valid and binding execution and delivery of this Agreement
by such party. Such facsimile copies shall constitute enforceable
original documents.
7.4 Brokers. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and
shall indemnify the other against all loss, cost, damage or expense
arising out of claims for fees or commissions of brokers or agents
employed or alleged to have been employed by such indemnifying party.
7.5 Notices. Any notice or communication required or permitted
hereunder shall be sufficiently given if sent by facsimile, or first
class mail, postage prepaid to:
(a) Buyer:
▇▇▇▇▇▇ Lighting Products, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
108
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Seller:
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
7.6 Applicable Law. This Agreement will be governed by the
laws of the State of Delaware without regard to conflicts of laws
principles.
7.7 Captions. The captions in this Agreement are for
convenience only and shall not be considered a part hereof, or affect
the construction or interpretation of any provisions of this Agreement.
7.8 Entire Agreement. This Agreement shall constitute the
entire agreement and understanding between the Seller and the Buyer and
supersedes any prior agreement and understanding, written or oral,
relating to the subject matter of this Agreement. The Seller
acknowledges that he has (a) had the opportunity to seek the advice of
independent counsel, including independent tax counsel, regarding the
consequences of this Agreement; and (b) received no representations
from the Buyer or its counsel regarding the tax consequences of this
Agreement. This Agreement may be modified or amended only by a written
instrument executed by the parties hereto.
*****
109
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the day and year first above written.
SELLER:
/s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, individually
BUYER:
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
110
EXHIBIT 2.6(b)(vii)
BUYER'S AND SUBSIDIARY'S RELEASE
This Release is being executed and delivered in accordance with Section
2.6(b)(vii) of the Merger Agreement dated as of March 1, 2005 (the "Agreement")
by and among Craftmade International, Inc., a Delaware corporation ("Buyer"),
▇▇▇▇▇▇ Lighting Products, Inc., a Delaware corporation ("Subsidiary"), ▇▇▇▇
▇▇▇▇▇▇ Co., Inc., a Texas corporation (the "Company") and ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇")
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇") (▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ are collectively
referred to herein as the "Sellers"). Capitalized terms used in this Release
without definition have the respective meanings given to them in the Agreement.
Each of the Buyer and the Subsidiary acknowledges that execution and
delivery of this Release is a condition to Seller's obligation to consummate the
Merger pursuant to the Agreement and that Buyer and Subsidiary are relying on
this Release in consummating such Merger.
Each of the Buyer and the Subsidiary, for good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged and
intending to be legally bound, in order to induce Sellers to consummate the
Merger pursuant to the Agreement, hereby agrees as follows:
Each of the Buyer and the Subsidiary, on behalf of itself and each of
its Related Persons, hereby releases and forever discharges the Sellers and each
of their respective individual, joint or mutual, past, present and future
Representatives, affiliates, shareholders, controlling persons, Subsidiaries,
successors and assigns (individually, a "Releasee" and collectively,
"Releasees") from any and all claims, demands, Proceedings, causes of action,
Orders, obligations, contracts, agreements, debts and liabilities whatsoever,
whether known or unknown, suspected or unsuspected, both at law and in equity,
which each of the Buyer and the Subsidiary or any of their respective Related
Persons now has, have ever had or may hereafter have against the respective
Releasees arising contemporaneously with or prior to the Closing Date or on
account of or arising out of any matter, cause or event occurring
contemporaneously with or prior to the Closing Date, including, but not limited
to, any rights to indemnification or reimbursement from the Company or any other
Acquired Company, whether pursuant to their respective Organizational Documents,
contract or otherwise and whether or not relating to claims pending on, or
asserted after, the Closing Date; provided, however, that nothing contained
herein shall operate to release any obligations of Sellers, the Company or any
other Acquired Company arising under the Agreement, Employment Agreement,
Consulting Agreement, or the Agreements for the Purchase and Sale of Personal
Goodwill by and among Subsidiary and each of ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
Each of the Buyer and the Subsidiary hereby irrevocably covenants to
refrain from, directly or indirectly, asserting any claim or demand, or
commencing, instituting or causing to be commenced, any proceeding of any kind
against any Releasee, based upon any matter purported to be released hereby.
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, each of the Buyer and the Subsidiary, jointly and
severally, shall indemnify and hold harmless each Releasee from and against all
loss, liability, claim, damage (including incidental and consequential damages)
or expense (including costs of investigation and defense and reasonable
attorney's fees) whether or not involving third party claims, arising directly
or indirectly from or in connection with (i) the assertion by or on behalf of
the Buyer and the Subsidiary or any of their Related Persons of any claim or
other matter purported to be released pursuant to this Release and (ii) the
assertion by any third party of any claim or demand against any Releasee which
claim or demand arises directly or indirectly from, or in connection with, any
assertion by or on behalf of the Buyer or the Subsidiary or any of their Related
Persons against such third party of any claims or other matters purported to be
released pursuant to this Release.
If any provision of this Release is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
This Release may not be changed except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of Texas without regard
to principles of conflicts of law.
All words used in this Release will be construed to be of such gender
or number as the circumstances require.
*****
IN WITNESS WHEREOF, each of the undersigned have executed and delivered
this Release as of this 1st day of March, 2005.
CRAFTMADE INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President, Chief Executive Officer
and Chairman of the Board of
Directors
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
EXHIBIT 2.6(c)
ESCROW AGREEMENT
ESCROW AGREEMENT
This Escrow Agreement ("Escrow Agreement"), dated as of March 1, 2005
(the "Closing Date"), is by and among Craftmade International, Inc., a Delaware
corporation ("Buyer"), ▇▇▇▇▇▇ Lighting Products, Inc., a Delaware corporation
("Subsidiary"), ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇") (▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇▇ are collectively referred to herein as the "Sellers") and The
Frost National Bank, a national banking association, as escrow agent ("Escrow
Agent").
This is the Escrow Agreement referred to in the Agreement and Plan of
Merger dated as of March 1, 2005 (the "Merger Agreement") among Buyer, Sellers,
Subsidiary and ▇▇▇▇ ▇▇▇▇▇▇ Co., Inc, a Texas Corporation (the "Company").
The parties, intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) Pursuant to the Merger Agreement, Buyer and Subsidiary are
depositing (i) a certificate representing 35,697 shares of common
stock, $0.01 par value per share ("Buyer Shares"), of the Buyer in the
name of ▇▇▇▇▇▇ and (ii) a certificate representing 11,899 shares of
Buyer Shares in the name of Oberstein (collectively, the "Escrow
Shares") with Escrow Agent. Escrow Agent acknowledges receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to
hold, safeguard and disburse the Escrow Shares pursuant to the terms
and conditions hereof.
2. CLAIMS
(a) From time to time on or before March 1, 2006, Buyer or
Subsidiary may give notice (a "Notice") to the Sellers and Escrow Agent
specifying in reasonable detail the nature and dollar amount (the
"Dollar Amount") of any claim (a "Claim") it may have under Article XI
of the Merger Agreement, along with the exact number of Buyer Shares to
be disbursed with respect to such Claim, and specifying how many of the
Escrow Shares shall be disbursed from the certificate in the name of
▇▇▇▇▇▇ (75% of the Claim) and the certificate in the name of Oberstein
(25% of the Claim); Buyer or Subsidiary may make more than one claim
with respect to any underlying state of facts. If the Sellers give
notice to Buyer, Subsidiary and Escrow Agent disputing any Claim (a
"Counter Notice") within thirty (30) days following receipt by Escrow
Agent of the Notice regarding such Claim, such Claim shall be resolved
as provided in Section 2(b). If no Counter Notice is received by Escrow
Agent within such 30-day period, then the Dollar Amount of damages
claimed by Buyer or Subsidiary as set forth in its respective Notice
shall be deemed established for purposes of this Escrow Agreement and
the Merger Agreement and, at the end of such 30-day period (the "Claim
Date"), Escrow Agent shall disburse to Buyer or Subsidiary the amount
of Buyer Shares specified in such Notice. The number of Buyer Shares
specified by Buyer or
Subsidiary in the Notice shall be equal to (i) the dollar amount
claimed in the Notice divided by (ii) the last reported sale price of
the Buyer Shares on the Nasdaq National Market System, as of the New
York Stock Exchange, Inc. trading day immediately preceding the Claim
Date; provided, however, that such disbursement shall be only to the
extent of the Escrow Shares. Escrow Agent shall not inquire into or
consider whether a Claim complies with the requirements of the Merger
Agreement.
(b) If a Counter Notice is given with respect to a claim,
Escrow Agent shall make a disbursement of the Escrow Shares with
respect thereto only in accordance with (i) joint written instructions
of Buyer, Subsidiary and the Sellers or (ii) a final non-appealable
order of a court of competent jurisdiction. Any court order shall be
accompanied by a legal opinion by counsel for the presenting party
satisfactory to Escrow Agent to the effect that the order is final and
non-appealable. Escrow Agent shall act on such court order and legal
opinion without further question.
3. TERMINATION OF ESCROW; VOLUNTARY RELEASE OF ESCROW SHARES
On March 1, 2006 (the "Disbursement Date"), Escrow Agent shall pay and
distribute the then Escrow Shares to the Sellers (75% to ▇▇▇▇▇▇ and 25% to
Oberstein), unless (i) any Claims are then pending, in which case an amount of
Escrow Shares equal to (A) the aggregate Dollar Amount of such Claims (as shown
in the Notices of such Claims) divided by (B) the last reported sale price of
the Buyer Shares on the Nasdaq National Market System, as of the New York Stock
Exchange, Inc. trading day immediately preceding the Disbursement Date shall be
retained by Escrow Agent (and the balance disbursed to the Sellers in such
proportions) or (ii) Buyer or Subsidiary has given notice to the Sellers and
Escrow Agent specifying in reasonable detail the nature of any other claim it
may have under Article XI of the Merger Agreement with respect to which it, in
good faith, is unable to specify the amount of Damages, in which case the entire
Escrow Shares shall be retained by Escrow Agent, in either case until it
receives joint written instructions of Buyer, Subsidiary and the Sellers or a
final non-appealable order of a court of competent jurisdiction as contemplated
by Section 2(b).
4. DUTIES OF ESCROW AGENT
(a) Escrow Agent shall not be under any duty to give the
Escrow Shares held by it hereunder any greater degree of care than it
gives its own similar property and shall not be required to invest any
funds held hereunder except as directed in this Escrow Agreement.
Uninvested funds held hereunder shall not earn or accrue interest.
(b) Escrow Agent shall not be liable, except for its own gross
negligence, bad faith or willful misconduct and, except with respect to
claims based upon such gross negligence, bad faith or willful
misconduct that are successfully asserted against Escrow Agent, the
other parties hereto shall jointly and severally indemnify and hold
harmless Escrow Agent (and any successor Escrow Agent) from and against
any and all losses, liabilities, claims, actions, damages and expenses,
including reasonable attorneys' fees and disbursements, arising out of
and in connection with this Escrow Agreement. IT IS THE EXPRESS INTENT
OF BUYER, SUBSIDIARY AND SELLERS TO INDEMNIFY AND HOLD HARMLESS THE
ESCROW AGENT FROM ESCROW AGENT'S OWN NEGLIGENT ACTS OR OMISSIONS.
Without limiting the foregoing, Escrow Agent shall in no event be
liable in connection with its investment or reinvestment of any cash
held by it hereunder in good faith, in accordance with the terms
hereof, including, without limitation, any liability for any delays
(not resulting from its gross negligence or willful misconduct) in the
investment or reinvestment of the Escrow Shares, or any loss of
interest incident to any such delays.
(c) Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the
propriety or validity of the service thereof. Escrow Agent may act in
reliance upon any instrument or signature believed by it to be genuine
and may assume that the person purporting to give receipt or advice or
make any statement or execute any document in connection with the
provisions hereof has been duly authorized to do so. Escrow Agent may
conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person has full power
and authority to instruct Escrow Agent on behalf of that party unless
written notice to the contrary is delivered to Escrow Agent. If the
Escrow Agent obeys or complies with any court order, judgment or
decree, it shall not be liable to any of the parties, their respective
successors or assigns, or to any other person or entity because of such
compliance, even if such court order, judgment or decree is
substantially reversed, modified, annulled, set aside or vacated.
(d) Escrow Agent may act pursuant to the advice of counsel
with respect to any matter relating to this Escrow Agreement and shall
not be liable for any action taken or omitted by it in good faith in
accordance with such advice. Escrow Agent shall never be required to
calculate the value, or determine the number of Escrow Shares necessary
to satisfy a Claim or to be distributed to the Sellers.
(e) Escrow Agent does not have any interest in the Escrow
Shares deposited hereunder but is serving as escrow holder only and
having only possession thereof. Any payments of income from this Escrow
Shares shall be subject to withholding regulations then in force with
respect to United States taxes. The parties hereto will provide Escrow
Agent with appropriate Internal Revenue Service Forms W-9 for tax
identification number certification, or non-resident alien
certifications. This Section 4(e) and Section 4(b) shall
survive notwithstanding any termination of this Escrow Agreement or the
resignation of Escrow Agent.
(f) Escrow Agent makes no representation as to the validity,
value, genuineness or the collectability of any security or other
document or instrument held by or delivered to it.
(g) Escrow Agent shall not be called upon to advise any party
as to the wisdom in selling or retaining or taking or refraining from
any action with respect to any securities or other property deposited
hereunder.
(h) Escrow Agent (and any successor Escrow Agent) may at any
time resign as such by delivering the Escrow Shares to any successor
Escrow Agent jointly designated by the other parties hereto in writing,
or to any court of competent jurisdiction, whereupon Escrow Agent shall
be discharged of and from any and all further obligations arising in
connection with this Escrow Agreement. The resignation of Escrow Agent
will take effect on the earlier of (a) the appointment of a successor
(including a court of competent jurisdiction) or (b) the day which is
thirty (30) days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time Escrow Agent
has not received a designation of a successor Escrow Agent, Escrow
Agent may, at Escrow Agent's election, (i) retain and safeguard the
Escrow Shares until receipt of a designation of successor Escrow Agent
or a joint written disposition instruction by the other parties hereto
or a final non-appealable order of a court of competent jurisdiction or
(ii) interplead the Escrow Shares with a court of competent
jurisdiction in Tarrant County, Texas, and recover from the other
parties hereto, jointly and severally, its attorneys' fees and costs in
connection with such interpleader.
(i) If there is any disagreement or dispute in connection with
the Escrow Shares or the subject matter hereof, or in the event of
adverse or inconsistent claims or demands upon, or inconsistent
instructions to, the Escrow Agent, or if the Escrow Agent in good faith
is in doubt as to what action to take pursuant to the Escrow Agreement,
the Escrow Agent may, at its election, refuse to comply with any such
claims, demands or instructions, or refuse to take any other action
pursuant to this Escrow Agreement until:
(i) the rights of all persons involved in the dispute
have been fully and finally adjudicated by a court of
competent jurisdiction or the Escrow Agent has resolved any
such doubts to its good faith satisfaction; or
(ii) all disputes have been resolved between the
parties involved, and the Escrow Agent has received written
notice thereof satisfactory to it from all such persons.
Without limiting the generality of the foregoing, the Escrow
Agent may, at its election, interplead the Escrow Shares or any portion
thereof with a court of competent jurisdiction in Tarrant County,
Texas, or commence judicial proceedings for declaratory judgment, and
the Escrow Agent shall be entitled to recover from the other parties to
this
Escrow Agreement, jointly and severally, its attorneys' fees and costs
in connection with any such interpleader or declaratory judgment
action.
(j) Buyer shall pay Escrow Agent compensation (as payment in
full) for the services to be rendered by Escrow Agent hereunder in the
amounts set forth on Exhibit A attached hereto. Buyer agrees to
reimburse Escrow Agent for all reasonable expenses, disbursements and
advances incurred or made by Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses and disbursements of its
counsel). Any fees or expenses of Escrow Agent or its counsel that are
not paid as provided for herein may be taken from any property held by
Escrow Agent hereunder.
(k) No printed or other matter in any language (including,
without limitation, prospectuses, notices, reports and promotional
material) that mentions Escrow Agent's name or the rights, powers, or
duties of Escrow Agent shall be issued by the other parties hereto or
on such parties' behalf unless Escrow Agent shall first have given its
specific written consent thereto.
(l) The other parties hereto authorize Escrow Agent, for any
securities held hereunder, to use the services of any United States
central securities depository it reasonably deems appropriate,
including, without limitation, the Depositary Trust Company and the
Federal Reserve Book Entry System.
(m) If the number of Escrow Shares to be disbursed at any time
by Escrow Agent to any other party pursuant to the terms of this Escrow
Agreement is less than the total amount of Escrow Shares held by Escrow
Agent, Escrow Agent shall tender the certificates representing the
Escrow Shares to Computershare Investor Services, LLC, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, the transfer agent for Buyer,
to reduce such certificates into smaller denominations sufficient to
permit such partial disbursement.
5. LIMITED RESPONSIBILITY
This Escrow Agreement expressly sets forth all the duties of Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Escrow Agreement against Escrow Agent.
Escrow Agent shall not be bound by, or charged with notice of, the provisions of
any agreement among the other parties hereto except this Escrow Agreement.
6. OWNERSHIP FOR TAX PURPOSES; VOTING AND PECUNIARY BENEFITS
(a) The parties agree that, for purposes of federal and other
taxes based on income, ▇▇▇▇▇▇ and Oberstein will be treated as the
owner of 75% and 25% of the Escrow Shares, respectively, and that
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ will report all income, if any, that is earned on,
or derived from, the Escrow Shares as their income, in such
proportions, in the taxable year or years in which such income is
properly includible and pay any taxes attributable thereto.
(b) The Sellers shall have all voting and pecuniary benefits
associated with the Escrow Shares but shall not have dispositive power
over the Escrow Shares, while the Escrow Shares remain in escrow.
▇▇▇▇▇▇ shall exercise the voting rights and receive the pecuniary
benefits with respect to 75% of the Escrow Shares, and Oberstein shall
exercise the voting rights and receive the pecuniary benefits with
respect to 25% of the Escrow Shares.
7. NOTICES
All notices, consents, waivers and other communications under this
Escrow Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt) provided that a copy is mailed
by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers:
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer:
Craftmade International, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Subsidiary:
▇▇▇▇▇▇ Lighting Products, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Escrow Agent:
The Frost National Bank
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▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
The Frost National Bank
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
8. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Escrow Agreement shall be brought against any
of the parties in the courts of the State of Texas, County of Tarrant, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Northern District of Texas, Fort Worth Division, and each of the parties
consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
9. COUNTERPARTS
This Escrow Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original and all of which, when taken together,
will be deemed to constitute one and the same document.
10. SECTION HEADINGS
The headings of sections in this Escrow Agreement are provided for
convenience only and will not affect its construction or interpretation.
11. WAIVER
The rights and remedies of the parties to this Escrow Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Escrow Agreement or the
documents referred to in this Escrow Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Escrow Agreement or the documents referred to in this Escrow
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
parties; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Escrow Agreement or the documents
referred to in this Escrow Agreement.
12. EXCLUSIVE AGREEMENT AND MODIFICATION
This Escrow Agreement supersedes all prior agreements among the parties
with respect to its subject matter and constitutes a complete and exclusive
statement of the terms of the agreement among the parties with respect to its
subject matter. This Escrow Agreement may not be amended except by a written
agreement executed by the Buyer, Subsidiary, the Sellers and the Escrow Agent.
13. GOVERNING LAW
This Escrow Agreement shall be governed by the laws of the State of
Texas, without regard to conflicts of law principles.
14. SUBSIDIARY
As used in this Escrow Agreement, the term "Subsidiary" shall refer to
▇▇▇▇▇▇ Lighting Products, Inc., a Delaware corporation, and any successor in
interest thereto.
*****
IN WITNESS WHEREOF, the parties have executed and delivered this Escrow
Agreement as of the date first written above.
CRAFTMADE INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
▇▇▇▇▇▇ LIGHTING PRODUCTS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
THE FROST NATIONAL BANK,
a national banking association
By: /s/ D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: Senior Vice President
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/s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇, individually
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, individually
EXHIBIT A
ESCROW AGENT COMPENSATION
As compensation for its services hereunder from the date of this Agreement
through the one year anniversary date hereof, Escrow Agent shall receive a fee
of $2,500.00. As compensation for its services hereunder for each consecutive
twelve-month period, or portion thereof, beginning one year from the date
hereof, Escrow Agent shall receive a fee of $2,500.00 without proration. The
initial fee shall be paid upon the execution hereof, and subsequent fees shall
be paid on the yearly anniversary date hereof, unless the remaining Escrow Fund
is distributed on or before such date. In addition, Escrow Agent shall be
reimbursed from the Escrow Fund for its reasonable and necessary costs incurred
in acting hereunder and the preparation of this Agreement.
EXHIBIT 7.4(a)
FORM OF OPINION OF ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Craftmade International, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
P.O. Box #1037
Coppell, Texas 75019-1037
Ladies and Gentlemen:
We have acted as counsel to ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(collectively, "Sellers"), ▇▇▇▇ ▇▇▇▇▇▇ Co., Inc., a Texas corporation (the
"Company") and the Subsidiaries of the Company in connection with the Merger
Agreement dated as of March 1, 2005 (the "Agreement") among the Sellers, the
Company, ▇▇▇▇▇▇ Lighting Products, Inc., a Delaware corporation ("Subsidiary"),
and Craftmade International, Inc., a Delaware corporation ("Buyer"). This is the
opinion contemplated by Section 7.4(a) of the Agreement. All capitalized terms
used in this opinion without definition have the respective meanings given to
them in the Agreement or the Accord referred to below.
Based on the foregoing, our opinion is as follows:
1. The Agreement, the Escrow Agreement and the Sellers' Releases are
enforceable against the Sellers.
2. The authorized capital stock of the Company consists of 25,000
shares of common stock, $10.00 par value, of which 2,560 shares are outstanding.
Sellers own all of shares of Stock of record and beneficially, free and clear of
all adverse claims.
3. Each Acquired Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation as set forth in Part 3.1(a) of the Disclosure Letter, with full
corporate power and authority to own its properties and to engage in its
business as presently conducted or contemplated, and is duly qualified and in
good standing as a foreign corporation under the laws of each other jurisdiction
in which it is authorized to do business as set forth in Part 3.1(a) of the
Disclosure Letter. All of the outstanding capital stock of each of the
Subsidiaries is owned of record and beneficially by one or more of the Acquired
Companies, free and clear of all adverse claims. All of the outstanding shares
of capital stock of each Acquired Company have been duly authorized and validly
issued and are fully paid and nonassessable and were not issued in violation of
the preemptive rights of any Person.
4. Neither the execution and delivery of the Agreement nor the
consummation of any or all of the Contemplated Transactions (a) breaches or
constitutes a default (or an event that, with notice or lapse of time or both,
would constitute a default) under any agreement to which any Seller is party or
(b) violates any statute, law, regulation or rule, or any judgment, decree or
order of any court or other Governmental Body applicable to any Seller.
5. Neither the execution and delivery of the Agreement nor the
consummation of any or all of the Contemplated Transactions (a) violates any
provision of the certificate of incorporation or bylaws (or other governing
instrument) of any Acquired Company, (b) breaches or constitutes a default (or
an event that, with notice or lapse of time or both, would constitute a default)
under, or results in the termination of, or accelerates the performance required
by, or excuses performance by any Person of any of its obligations under, or
causes the acceleration of the maturity of any debt or obligation pursuant to,
or results in the creation or imposition of any Encumbrance upon any property or
assets of any Acquired Company under, any agreement to which any Acquired
Company is a party or by which any of their respective properties or assets are
bound, or to which any of the properties or assets of any Acquired Company are
subject, or (c) violates any statute, law, regulation, or rule, or any judgment,
decree or order of any court or other Governmental Body applicable to any
Acquired Company.
6. Other than the filing of the Certificates of Merger and the
acceptance thereof by the Secretary of State of the State of Texas and the
Secretary of State of the State of Delaware, no consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Body is required in connection with the execution, delivery and performance of
the Agreement or the consummation of the Contemplated Transactions.
7. There is no Proceeding by or before any court or Governmental Body
pending or overtly threatened against or involving any Acquired Company or that
questions or challenges the validity of the Agreement or any action taken or to
be taken by any Acquired Company pursuant to the Agreement or in connection with
the Contemplated Transactions, and none of the Acquired Companies is subject to
any judgment, order or decree having prospective effect.
Very truly yours,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT 9.1
EMPLOYEES
EMPLOYEE NAME EMPLOYEE TITLE
▇▇▇▇▇▇ ▇▇▇▇▇▇ Customer Service
▇▇▇▇▇▇ ▇▇▇▇▇▇ Accounting
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit (part time - 25 hrs./wk)
▇▇▇▇▇ ▇▇▇▇▇▇ Display,Trouble Shooting-chimes
▇▇▇▇ ▇▇▇▇▇▇ Warehouse
▇▇▇▇▇ ▇▇▇▇▇▇ Warehouse