EXHIBIT 10
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
among
EPiC ENERGY RESOURCES, INC.
AND
CARNRITE GROUP L.L.C.
AND
THE MEMBERS OF CARNRITE GROUP L.L.C.
Dated as of August 10, 2007
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
This MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is dated as
of August 10, 2007 (the "Execution Date"), by EPIC ENERGY RESOURCES, INC., a
corporation organized under the laws of Colorado ("Purchaser" or "EPIC") and THE
CARNRITE GROUP L.L.C., a Texas limited liability company, ("CARNRITE"), and ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇") and, together with CARNRITE, A. Carnrite,
Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇, the "CARNRITE Parties" or
collectively "Seller" and each a "Carnrite Party"). Each of EPIC, CARNRITE, A.
Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ also referred to
individually as a "Party" or collectively as the "Parties".
WITNESSETH
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WHEREAS, the Carnrite Parties desire to sell and assign to Purchaser and
Purchaser desires to purchase, and acquire from the Carnrite Parties (as
provided herein), all of the Carnrite Parties' right, title, and interest in and
to one hundred percent (100%) of the outstanding membership interests of
CARNRITE (the "Carnrite Membership Interests") on the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, and for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the Parties hereby
agree as follows:
ARTICLE 1
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SECTION 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Accounts Receivable" means (a) all trade accounts receivable and other
rights to payment from customers of CARNRITE and the full benefit of all
security for such accounts or rights to payment, including all trade accounts
receivable representing amounts receivable in respect of goods shipped or
products sold or services rendered to customers of CARNRITE, (b) all other
accounts or notes receivable of CARNRITE and the full benefit of all security
for such accounts or notes and (c) any claim, remedy or other right related to
any of the foregoing.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act. It also means, with respect to a specified
Person, any other Person that directly or indirectly controls, is controlled by,
or is under common control with, such specified Person.
"Agreement" means this Membership Interest Purchase Agreement along with
any attachments, schedules and exhibits which are attached hereto and
incorporated herein. In the case of any conflict between the Agreement and any
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schedules, exhibits or attachments, the provisions of the Agreement shall take
precedence over any attachment or exhibit.
"Ancillary Agreements" have the meaning given in Section 3.2 (c).
"best efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously as possible, provided, however, that a Person required to use his
best efforts under this Agreement will not be thereby required to take actions
that would result in a materially adverse change in the benefits to such Person
of this Agreement and the transactions contemplated hereby, or to dispose of or
make any change to its business, expend any material funds or incur any other
material burden.
"Breach" means any breach of, or any inaccuracy in, any representation or
warranty or any breach of, or failure to perform or comply with, any covenant or
obligation, in or of this Agreement or any other Contract, or any event which
with the passing of time or the giving of notice, or both, would constitute such
a breach, inaccuracy or failure.
"Closing" has the meaning given in Section 2.5.
"Closing Date" has the meaning given in Section 2.5.
"Confidential Information" has the meaning given in Section 8.4.
"Contracts" means any legally binding agreement, contract, lease,
consensual obligation, promise or undertaking (whether written or oral) of
CARNRITE as of the Closing Date.
"Current Liabilities" means, as determined in accordance with GAAP:
(i) accounts payable and accrued Liabilities of CARNRITE;
(ii) Taxes payable by CARNRITE relating to any period prior to the
Closing Date; and
(iii) all other Current Liabilities of CARNRITE not described above.
"Dollars" or "$" means U.S. dollars.
"Employee Plans" has the meaning set forth in Section 3.14 (a).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Employment Agreements" has the meaning given in Section 2.7 (a).
"Encumbrance" means any pledge, lien (including without limitation Tax
lien), collateral assignment, security interest, mortgage, deed of trust, title
retention, conditional sale or other security arrangement, or any license, order
or charge, or any adverse claim of title, ownership or use, or agreement of any
kind restricting transfer, or any other encumbrance whatsoever.
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"Enforceable" means, with respect to any Contract stated to be enforceable
by or against any Person, that such Contract is a legal, valid and binding
obligation of such Person enforceable by or against such Person in accordance
with its terms, except to the extent that enforcement of the rights and remedies
created thereby is subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application affecting the rights and remedies
of creditors and to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
"Environment" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"Environmental, Health, and Safety Requirements" means all federal, state,
local, and foreign statutes, regulations, and ordinances concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances, or wastes,
as such requirements are enacted and in effect on or prior to the Closing Date.
"Environmental Law" means any applicable Legal Requirement that requires
or relates to:
(i) advising appropriate authorities, employees or the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits or other prohibitions and the
commencement of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(ii) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(iii) reducing the quantities, preventing the release or minimizing
the hazardous characteristics of wastes that are generated;
(iv) 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;
(v) protecting resources, species or ecological amenities;
(vi) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other
potentially harmful substances;
(vii) cleaning up pollutants that have been released, preventing the
threat of Release or paying the costs of such clean up or prevention; or
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(viii) 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" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity that is treated as a single employer
with CARNRITE or any CARNRITE Group Member for purposes of Code ss.414.
"Exchange Act" means the Securities Act of 1934, as amended.
"Facility" or "Facilities" means any real property, leasehold or other
interest in real property currently owned or operated by CARNRITE, including the
Tangible Personal Property used or operated by CARNRITE at the respective
locations of the real property specified in
Schedule 3.7.
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"Financial Statements" has the meaning given in Section 3.5.
"GAAP" means United States' generally accepted accounting principles as in
effect from time to time, consistently applied.
"Governing Documents" means with respect to any particular entity, (a) if
a corporation, the articles or certificate of incorporation and the bylaws; (b)
if a general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership agreement and
the certificate of limited partnership; (d) if a limited liability company, the
articles of organization and company agreement; (e) if another type of Person,
any other charter or similar document adopted or filed in connection with the
creation, formation or organization of the Person; (f) all equity holders'
agreements, voting agreements, voting trust agreements, joint venture
agreements, registration rights agreements or other agreements or documents
relating to the organization, management or operation of any Person or relating
to the rights, duties and obligations of the equity holders of any Person; and
(g) any amendment or supplement to any of the foregoing.
"Governmental Body" means any state, municipal, local, national or
international body with jurisdiction over the Parties or the subject matter of
this Agreement.
"Governmental Authorization" means any consent, license, registration or
permit issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any applicable Legal
Requirement.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning given in Section 11.15.
"Indemnifying Party" has the meaning given in Section 11.15.
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"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rulings and regulations promulgated thereunder.
"Inventory" means all inventories of CARNRITE, wherever located, including
all finished goods, work in process, raw materials, spare parts and all other
materials and supplies to be used or consumed by CARNRITE in the production of
finished goods or provision of services.
"IRS" has the meaning set forth in Section 3.14 (b).
"knowledge" has the following meaning: an individual will be deemed to
have Knowledge of a particular fact or other matter if:
(a) that individual is actually aware of the fact or matter; or
(b) a prudent individual could be expected to discover or otherwise become
aware of that fact or matter in the course of conducting a reasonably
comprehensive investigation regarding the accuracy of any representation or
warranty contained in this Agreement.
(c) 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, or who
has at any time served, as a director, officer, partner, executor or trustee of
that Person (or in any similar capacity) has, or at any time had, Knowledge of
that fact or other matter (as set forth in (a) and (b) above), and any such
individual (and any individual party to this Agreement) will be deemed to have
conducted a reasonably comprehensive investigation regarding the accuracy of the
representations and warranties made herein by that Person or individual.
"Legal Requirement" means any federal, state, provincial, territorial,
local, municipal, foreign, international, multinational or other constitution,
law, ordinance, code, regulation, statute or treaty applicable the Carnrite
business.
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"Liabilities" (or when used with reference to a single item described
below, "Liability") means debts, commissions, duties, fees, salaries,
performance or delivery penalties, liabilities, warranty liabilities (whether
implicit or explicit or whether granted orally or in writing) and obligations
(whether pecuniary or not, including without limitation obligations to perform
or forebear from performing acts or services), fines or penalties, whether
accrued or fixed, absolute or contingent, matured or un-matured, determined or
determinable, known or unknown, arising or existing anywhere in the world,
including without limitation those arising under any law, action or governmental
order, liabilities for Taxes and those arising under any contract, agreement,
arrangement, commitment or undertaking of any kind whatsoever (whether written
or oral, express or implied), including those arising under any contractual
obligation of a Party or any predecessor thereof.
"Material Change" means any effect or change that, taken as a whole, would
change the business prospects, operations, financial condition or assets of
CARNRITE, either positively or negatively. The taking of any action contemplated
by this Agreement and the Ancillary Agreements contemplated hereby shall not be
deemed to constitute a Material Change.
"material" or "materiality" means having a material adverse effect on the
financial condition, business, operations or prospects of CARNRITE or on the
ability of the Parties to consummate the transaction contemplated by the
Agreement.
"Multiemployer Plan" has the meaning given in Section 3.14 (a).
"Order" means any order, injunction, judgment, decree, ruling, assessment
or arbitration award of any Governmental Body or arbitrator.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" has the meaning given in Section 3.14 (b).
"Permitted Encumbrance" has the meaning given in Section 6.8.
"Person" means any natural person or legal entity, including without
limitation a joint venture, trust, association, joint stock company,
unincorporated organization, corporation, limited liability company, partnership
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, judicial or
investigative, whether formal or informal, whether public or private) commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"Property" means any material interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
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"Purchase Price" has the meaning set forth in Section 2.5.
"Purchaser Group" has the meaning given in Section 7.8.
"Purchaser Indemnities" has the meaning given in Section 11.2.
"Related Person" means an officer, director, shareholder or Affiliate of
any Carnrite Party or any individual related by blood, marriage or adoption to
any such individual.
"Seller Indemnitees" has the meaning given in Section 11.2.
"Subsidiary" has the meaning given in Section 3.21.
"Tangible Personal Property" means all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
and other items of tangible personal property of every kind owned or leased by
CARNRITE (wherever located), together with any express or implied warranty by
the manufacturers or sellers or lessors of any item or component part thereof
and all maintenance records and other documents relating thereto.
"Tax" (or "Taxes") means all taxes of any kind whatsoever (whether payable
directly or by withholding) assessed or imposed by any government or political
subdivision thereof (foreign or domestic), including without limitation
franchise, income, gross receipts, personal property, real property, ad valorem,
value added, sales, use, documentary, stamp, intangible personal property,
withholding or other taxes, together with any interest and penalties, additions
to tax or additional amounts with respect thereto imposed by any taxing
authority, duties, temporary or other import taxes, or penalties on unpaid or
non-declared taxes.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning given in Section 11.5.
Definitions Appearing Elsewhere in this Agreement. The terms used in this
Agreement which are defined in (a) the preface of this Agreement, (b) the
Witnesseth Section of this Agreement and (c) the further Sections of this
Agreement shall have the respective definitions therein ascribed to them.
ARTICLE 2
PURCHASE AND SALE
SECTION 2.1 Membership Interests to Be Sold and Purchased. Subject to the
terms and conditions of this Agreement, Seller shall, on the Closing Date, sell,
assign, transfer, convey and deliver to Purchaser and on the Closing Date
Purchaser shall purchase, acquire and receive from Seller, all outstanding
Carnrite Membership Interests, subject to the terms in this Agreement.
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SECTION 2.2 Due Diligence. Purchaser shall have an opportunity to conduct
a complete review of CARNRITE's books and records. The documents provided to
Purchaser pursuant to this review are each listed on Exhibit 1.
SECTION 2.3 Pre-Purchase Notifications. Each of Purchaser and the Carnrite
Parties shall be responsible for the Fees and all costs and submission of all
regulatory filings related to any required governmental or regulatory approvals,
including but not limited to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and any other applicable
U.S. laws and regulations. Seller shall cooperate with Purchaser to complete
such filings or applications at the reasonable request of the Purchaser.
SECTION 2.4 Purchase Price. The purchase price (the "Purchase Price") for
the Carnrite Membership Interests will be made on the Closing Date as follows:
Stock. The delivery through the transfer agent of 3,177,810 shares of
stock in EPIC, issued as follows:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (40% = 1,271,125. shares)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (12% = 381,337 shares)
Lea ▇▇▇ ▇▇▇▇▇▇▇▇▇ (12% = 381,337 shares)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (12% = 381,337 shares)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (12% = 381,337 shares)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (12% = 381,337 shares)
SECTION 2.5 Executive Retention Program. At Closing, Purchaser shall
deliver through the transfer agent of 1,673,034 shares of restricted stock in
EPIC under the terms set forth in the respective Employment Agreements for each
of Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇, and as set forth in the
Executive Coaching Agreement for ▇. ▇▇▇▇▇▇▇▇, the forms of which are attached
hereto as Exhibit 2 and 3.
SECTION 2.6 Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Carnrite Membership Interests and all of
the other closing deliveries required by Section 2.5 shall take place at a
closing at the offices of Stibbs & Co., P.C. (the "Closing"). The date on which
the Closing actually occurs shall be called the "Closing Date" as provided in
Section 2.6 and shall be the date of delivery of the items as provided in
Section 2.5 but in no event shall the Closing occur later than August 31, 2007.
Purchaser, at its election, may extend this date for up to thirty (30) days.
SECTION 2.7 Closing Deliveries. At the Closing, each of the following
Parties shall deliver or cause to be delivered to the designated Party or
Parties all of the following, and in the case of executed agreements, documents
or instruments, in each case executed by the Party or a duly authorized
representative of the Party on such Party's behalf;
(a) The Carnrite Parties shall deliver to Purchaser:
(i) Endorsed membership interest certificates for 100% of the Carnrite
Membership Interests;
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(ii) A certificate of the appropriate officer of CARNRITE certifying
resolutions approving and authorizing the execution, delivery and
performance by it of this Agreement and the Ancillary Agreements to which
it is a party and the consummation by it of the transactions described in
this Agreement and the Ancillary Agreements;
(iii) Individual Employment Agreements executed by CARNRITE, Tilbury,
Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ in substantially the form
attached hereto as Exhibit 2 (the "Employment Agreements");
(iv) An Executive Coaching Agreement, executed by CARNRITE and ▇.
▇▇▇▇▇▇▇▇, substantially in the form attached hereto as Exhibit 3 (the
"Executive Coaching Agreement");
(v) As requested by Purchaser, consents from third parties, including
any governmental entity, landlord or other person material to the business
of Carnrite and necessary, in the reasonable opinion of Purchaser, for the
consummation by Purchaser of the transactions contemplated hereby; and
(vi) All other items required to be delivered pursuant to the
provisions of this Agreement.
(b) Purchaser shall deliver to Seller:
(i) all items required to be delivered pursuant to the provisions of
this Agreement; and
(ii) A certificate of the appropriate officer of EPIC certifying
resolutions approving and authorizing the execution, delivery and
performance by it of this Agreement and the Ancillary Agreements to which
it is a party and the consummation by it of the transactions described in
this Agreement and the Ancillary Agreements.
SECTION 2.8 Trade Names. The Carnrite Parties expressly represent and
warrant that the purchase of the Carnrite Membership Interests shall entitle
Purchaser to have any and all rights in and to CARNRITE's trade or brand names
"The Carnrite Group LLC" and variations thereof as used by CARNRITE since its
formation (the "Name"). The Purchaser will continue to use the name "The
Carnrite Group LLC" as the name for CARNRITE for a period of at least eighteen
months after Closing, but may include as a by-line following the name "an EPiC
company." Notwithstanding the above, at the end of the second year following the
Closing, ▇. ▇▇▇▇▇▇▇▇ and a senior representative of Purchaser will, at ▇.
▇▇▇▇▇▇▇▇'▇ request, meet to discuss Purchasers' intended use of the Name for the
forthcoming year. This process will continue each year until such time as
Purchaser is no longer using the Name. Subject to the proviso at the end of this
paragraph, prior to the end of the third year following the Closing, Purchaser
will have the right to use the Name provided that ▇. ▇▇▇▇▇▇▇▇'▇ consent will be
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required as to the form in which the Name is used, which consent will not be
unreasonably withheld. Subject to the proviso at the end of this paragraph,
after the end of the third year following the Closing, if, acting in good faith,
▇. ▇▇▇▇▇▇▇▇ reasonably believes that there is no significant economic advantage
to the continued use of the Name by Purchaser beyond the end of the third year,
▇. ▇▇▇▇▇▇▇▇ may issue to Purchaser a written notice indicating ▇. ▇▇▇▇▇▇▇▇'▇
desire that Purchaser discontinue using the Name (an "Objection Notice").
Notwithstanding the foregoing, if at any time after the second year following
the Closing ▇. ▇▇▇▇▇▇▇▇, acting in good faith, reasonably believe that
Purchaser' continued use of the Name beyond the end of the second year could be
damaging to ▇. ▇▇▇▇▇▇▇▇'▇ personal reputation, ▇. ▇▇▇▇▇▇▇▇ may issue to
Purchaser an Objection Notice.
SECTION 2.9 Effective Date. The effective date of this transaction shall
be March 28, 2007 ("Effective Date").
SECTION 2.10. Recognition of Inducements to Purchase. The Carnrite Parties
agree that their execution of and obligations under the Ancillary Agreements,
including but not limited to the Employment Agreements, the Consulting Agreement
and the Restricted Stock Agreements are material inducements and conditions to
Purchaser's purchase of the Membership Interests under this Agreement, without
which the Purchaser would not have entered into this Agreement.
SECTION 2.11 Stock Certificate Legend. The certificates representing the
shares issued pursuant to Section 2.4 shall contain the following legend: "RULE
144 RESTRICTION", and the certificates representing the shares issued pursuant
to Section 2.5 hereof shall contain the following legend, which shall appear of
the back of the certificates: "The shares represented by this certificate are
subject to forfeiture in accordance with the provisions of the membership
interest purchase agreement dated August 10, 2007 between Epic Energy Resources,
Inc., and the members of The Carnrite Group, LLC." However, if any Carnrite
Party desires to transfer his or her certificate evidencing the shares issues
pursuant to Section 2.5 after March 28, 2009, Purchaser shall use its best
efforts to cause its transfer agent to issue a certificate without the legend
set forth in Section herein without any opinion of counsel requirement.
SECTION 2.12 Tax Advice. Each of A. Carnrite, Tilbury, Robertson,
Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ have sought tax advice on the taxation issues
with regard to this Agreement and the Ancillary Agreements, including but not
limited to taxation of the purchase price consideration and the restricted
shares granted under the Employment Agreements and the Coaching Agreement. Each
of A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and Stortstrom have
discussed Section 83(b) of the Internal Revenue Code with their tax advisor and
understand the time frames therein and its effects.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF A. CARNRITE, TILBURY,
ROBERTSON, WILLIAMS, ▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇▇▇
As an inducement to Purchaser to enter into this Agreement, each of A.
Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and Stortstrom jointly and
severally represent and warrant to Purchaser that the statements contained in
Section 3.1 are correct and complete as of the Closing Date:
SECTION 3.1 Existence and Good Standing.
CARNRITE is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Texas. CARNRITE has all
requisite power and authority to own, lease and operate its assets and to
conduct its business as it is currently conducted, and is duly qualified to
transact business as a foreign limited liability company and is in good standing
in each jurisdiction in which its assets are owned, leased or operated by it or
the nature of the operation of its business requires it to qualify to transact
business as a foreign limited liability company. The jurisdictions in which
CARNRITE is so qualified are set forth on Schedule 3.1 hereto.
SECTION 3.2 Capitalization.
(a) Ownership. The ownership of all of the membership interests in CARNRITE
is accurately set forth in Schedule 3.2 hereto. All of the membership interests
listed on Schedule 3.2 are duly authorized and has been issued in accordance
with the terms of the Governing Documents of CARNRITE, and are fully paid and
non-assessable. The Carnrite Membership Interests have been offered, issued,
sold and delivered by CARNRITE in compliance with all applicable securities
laws. The membership interests on Schedule 3.2 represent the only issued
membership interests of CARNRITE. There are no (i) outstanding securities
convertible or exchangeable into any equity interests of CARNRITE; (ii) options,
warrants, calls, subscriptions or other rights, agreements or commitments
obligating CARNRITE to issue, transfer or sell any equity interests of CARNRITE;
or (iii) voting trusts or other agreements or understandings to which CARNRITE
is a party or by which CARNRITE is bound with respect to the voting, transfer or
other disposition of any membership interest of CARNRITE. Except as set forth on
Schedule 3.2, CARNRITE is not a partner with, member of, or holder of any equity
interest in any other Person. All of the membership interests of CARNRITE are
held beneficially and of record by A. Carnrite, Tilbury, Robertson, Williams,
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ as set forth on Schedule 3.2, free and clear of all Liens.
(b) Due Authorization. CARNRITE has all requisite power and authority to
execute, deliver and perform this Agreement and the documents to be delivered
pursuant to the terms of this Agreement (the "Ancillary Agreements") to which it
is a party and to consummate the transactions described in this Agreement and
12
the Ancillary Agreements. The execution, delivery and performance by CARNRITE of
this Agreement and the Ancillary Agreements to which it is a party and the
consummation by CARNRITE of the transactions described in this Agreement and the
Ancillary Agreements have been duly and validly authorized by all necessary
corporate action on the part of CARNRITE, and no other company actions or
proceedings on the part of CARNRITE are necessary to authorize the execution,
delivery and performance by A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇▇▇ of this Agreement and the Ancillary Agreements to which they are
a party or the transactions described in this Agreement and the Ancillary
Agreements. Each of A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and
Stortstrom has all requisite legal capacity to execute, deliver and perform this
Agreement and the Ancillary Agreements to which he or she is a party and to
consummate the transactions described in this Agreement and the Ancillary
Agreements. Each of the Carnrite Parties has duly and validly executed and
delivered this Agreement and has duly and validly executed and delivered the
Ancillary Agreements to which it is a party. This Agreement constitutes, and
upon execution and delivery of (assuming due execution and delivery thereof by
all other Parties thereto) the Ancillary Agreements to which each of the
Carnrite Parties is a party, shall constitute, legal, valid and binding
obligations of each of the Carnrite Parties, enforceable against each of them in
accordance with their terms, except as may be limited by (a) applicable
bankruptcy, insolvency, moratorium, reorganization or similar Laws that affect
creditors' rights generally; or (b) principles of equity, including legal or
equitable limitations on the availability of specific remedies.
(c) No Conflicts. Neither the execution and delivery of this Agreement by
any Carnrite Party, nor the performance by any Carnrite Party of his, her or its
obligations hereunder, will (i) violate any applicable statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which such Carnrite Party is
subject (or, if applicable, any provision of his or its will, or other Governing
Documents), (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument, or other arrangement
to which such Carnrite Party is a party or by which he, she, or it is bound or
to which any of his, her, or its assets are subject, or (iii) result in the
imposition or creation of a Lien upon or with respect to the assets of Carnrite.
No Carnrite Party is subject to, or a party to, any contract, instrument or
other commitment that would prevent the execution, delivery and performance by a
Carnrite Party of this Agreement, each Ancillary Agreement and the consummation
of the transactions contemplated hereby. Except as set forth in Schedule 3.2(c),
neither the execution and delivery of this Agreement, Ancillary Agreements nor
the consummation of the transactions contemplated hereby , directly or
indirectly (with or without notice or lapse of time), (a) Breaches (i) any
provision of any of the Governing Documents of CARNRITE or (ii) any resolution
adopted by the Managers or Members of CARNRITE, (b) Breaches or gives any
Governmental Body or other Person the right to challenge any of the transactions
contemplated hereby or to exercise any remedy or obtain any relief under any
applicable Legal Requirement or any Order to which any Carnrite Party or any of
13
its assets, is subject; (c) contravenes, conflicts with or results in a
violation or breach of any of the material terms or requirements of, or gives
any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate
or modify, any Governmental Authorization that is held by any Carnrite Party or
that otherwise relates to any CARNRITE assets or to the business of CARNRITE;
(d) causes the Purchaser to be subject to, or to be liable for the payment of,
any Tax not accrued for or reflected in the Financial Statements; (e) Breaches
any provision of, or gives any Person the right to declare a material default or
exercise any remedy under, or to accelerate the maturity or performance of, or
payment under, or to cancel, terminate or modify, any contract to which any
Carnrite Party is a party; or (f) results in the imposition or creation of any
Encumbrance, other than a Permitted Encumbrance, upon or with respect to any of
CARNRITE's assets.
(d) Securities Laws. The EPIC stock received by A. Carnrite, Tilbury,
Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ pursuant to this Agreement is not
being acquired with a view to, or intention of, distribution in violation of the
Securities Act of 1933, as amended from time to time (the "Securities Act"), or
any applicable state securities laws, and the EPIC stock shall not be disposed
of in contravention of the Securities Act or any applicable state securities
laws. Each of A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and Stortstrom
is an "accredited investor" as that term is defined under the Securities Act, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the EPIC stock. Each of A. Carnrite, Tilbury,
Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ understands that the EPIC stock has
not been registered under the Securities Act and therefore cannot be sold unless
subsequently registered under the Securities Act or unless an exemption from
such registration is available. Each of A. Carnrite, Tilbury, Robertson,
Williams, ▇▇▇▇▇▇ and Stortstrom has had the opportunity to ask questions and
receive answers concerning the terms and conditions of the EPIC stock and full
access to such other information concerning Purchaser as he or she has
requested.
SECTION 3.3 Consents. Except as set forth in Schedule 3.3, no CARNRITE
Party is required to give any notice to or obtain any consent from any Person in
connection with the execution and delivery of this Agreement, the Ancillary
Agreements, or the consummation or performance of any of the transactions
contemplated hereby.
SECTION 3.4 Accounts Receivable. All Accounts Receivable that are
reflected on the Financial Statements or on the accounting records of CARNRITE
as of the Closing Date represent or will represent valid obligations arising
from sales actually made or services actually performed by CARNRITE in the
Ordinary Course of Business. Except to the extent paid prior to the Closing
Date, such Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Financial Statements
(which reserves are adequate and calculated consistent with past practice).
CARNRITE has received no notice of any contest, claim, defense or right of
setoff, other than returns in the Ordinary Course of Business of CARNRITE, under
any Contract with any account debtor of an Account Receivable relating to the
amount or validity of such Account Receivable. Schedule 3.4 contains a complete
14
and accurate list of all Accounts Receivable as of the date of the Financial
Statements, which list sets forth the aging of each such Account Receivable.
SECTION 3.5 Financial Statements.
(a) Schedule 3.5 contains a true and correct copy of an unaudited balance
sheet in all material respects of CARNRITE at August 10, 2007, and the related
statements of income, members' equity and cash flows for the period then ended
(the "Financial Statements"). Except as noted on Schedule 3.5 or in the
Financial Statements and except for normal year-end adjustments, the Financial
Statements are in all material respects complete and correct, were prepared in
accordance with GAAP and present fairly, in all material respects, the financial
condition of CARNRITE at the respective dates thereof and the operating income
of CARNRITE for the respective periods then ended. CARNRITE agrees to send all
year to date financials through the Closing Date to Purchaser as soon as they
have been prepared.
(b) CARNRITE has no debt except as set forth in the Financial Statements.
(c) CARNRITE has no off-balance sheet financing statements, as determined
in accordance with GAAP except as set forth on Schedule 3.5.
SECTION 3.6 [Intentionally Deleted]
SECTION 3.7 Real Property. Schedule 3.7 lists and describes briefly all
real property leased or subleased to CARNRITE. CARNRITE has delivered to the
Purchaser correct and complete copies of the leases and subleases listed in
Schedule 3.7, each as amended to date. With respect to each lease and sublease
listed in Schedule 3.7, and any amendment thereto:
(a) the lease or sublease, and any amendment thereto, is legal, valid,
binding, enforceable, and in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable, and in full force and effect on the same terms following the
consummation of the transactions contemplated hereby, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights in general and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the court before
which any proceeding therefore may be brought;
(c) no party to the lease or sublease is in material Breach or default, and
no event has occurred which, with notice or lapse of time, would constitute a
material Breach or default or permit termination, modification, or acceleration
thereunder;
(d) no party to the lease or sublease has repudiated any provision thereof;
(e) there are no disputes, oral agreements, or forbearance programs in
effect as to the lease or sublease;
15
(f) with respect to each sublease, CARNRITE has not taken any action that
would cause the representations and warranties set forth in this Agreement to be
untrue or incorrect with respect to the underlying lease;
(g) CARNRITE has not assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or subleasehold;
(h) to the extent approval of any Governmental Body has been required in
connection with CARNRITE's operation of a property it leases or subleases,
CARNRITE has received all required approvals and has operated and maintained,
and conducted its operations on, the leased or subleased properties in
accordance with applicable laws, rules, and regulations; and
(i) all facilities leased or subleased thereunder are supplied with
utilities and other services reasonably necessary for the operation of said
facilities.
SECTION 3.8 Absence of Certain Changes. Except as and to the extent set
forth in Schedule 3.8, since its formation, CARNRITE has conducted its business
only in the Ordinary Course of Business and there has not been any:
(a) change in CARNRITE's authorized or issued membership interests, grant
of any option or right to purchase membership interests in CARNRITE or issuance
of any security convertible into such membership interest;
(b) amendment to the Governing Documents of CARNRITE;
(c) payment (except in the Ordinary Course of Business) or increase by
CARNRITE of any bonuses, salaries or other compensation to any member, manager,
director, officer or employee or entry into any employment, severance or similar
Contract with any member, director, officer or employee;
(d) adoption of, amendment to or increase in the payments to or benefits
under, any Employee Plan;
(e) damage to or destruction or loss in excess of $20,000.00 to any asset
of CARNRITE, whether or not covered by insurance;
(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 Contract to which CARNRITE is a party, or (ii) any
Contract or transaction involving a total remaining commitment by CARNRITE of at
least $20,000.00;
(g) sale (other than sales of Inventories in the Ordinary Course of
Business), lease or other disposition of any material asset or property of
CARNRITE (including the Intellectual Property assets) or the creation of any
Encumbrance on any asset;
16
(h) cancellation or waiver of any claims or rights with a value to CARNRITE
in excess of $10,000.00;
(i) notification by any material customer or supplier of discontinuance of
or changes to the terms of its relationship with CARNRITE;
(j) Material Change in the accounting methods used by CARNRITE;
(k) Material Contract by CARNRITE to do any of the foregoing; or
(l) Material violation of any Environmental Law.
SECTION 3.9 No Material Change. Except as set forth in Schedule 3.9, since
its formation, there has not been any Material Change in the business, assets,
liabilities (contingent or otherwise), results of operations or financial
condition, of CARNRITE, and to the knowledge of the Carnrite Parties, no event
has occurred or circumstance exists that may result in such a Material Change.
SECTION 3.10 Litigation.
(a) Except as set forth in Schedule 3.10, there is no pending or threatened
Proceeding:
(i) by or against CARNRITE, or by or against A. Carnrite, Tilbury,
Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ that otherwise relates to or may
materially adversely affect the business of, or any of the assets owned or
used by, CARNRITE; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the
transactions contemplated herein.
(b) No event has occurred or circumstance exists that is reasonably likely
to give rise to or serve as a basis for the commencement of any such Proceeding.
CARNRITE has delivered to the Purchaser copies of all pleadings, correspondence
and other documents relating to each Proceeding listed in Schedule 3.10. Except
as set forth on Schedule 3.10, there are no other Proceedings listed or required
to be listed in Schedule 3.10 that could have a material adverse effect on the
business, operations, assets, condition or prospects of CARNRITE.
(c) Except as set forth in Schedule 3.10:
(i) there is no Order to which CARNRITE, its businesses or any of its
assets are subject; and
(ii) no member, manager, officer, director, agent or employee of
CARNRITE is subject to any Order that prohibits such member, manager,
17
officer, director, a ent or employee from engaging in or continuing any
conduct, activity or practice relating g to the business of CARNRITE.
(d) Except as set forth in Schedule 3.10:
(i) To the knowledge of the Carnrite Parties, CARNRITE is,
and, at all times since its formation, has been in compliance with
all of the terms and requirements of each Order to which its assets
is or has been subject;
(ii) To the knowledge of the Carnrite Parties, no event has
occurred or circumstance exists that is reasonably likely to
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of
any Order to which CARNRITE's assets are subject; and
(iii) CARNRITE has not received, at any time since its
formation, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding
any actual or alleged violation of, or failure to comply with, any
Order to which CARNRITE or any of CARNRITE's assets is or has been
subject.
SECTION 3.11 Intellectual Property.
(a) All of the Intellectual Property necessary to operate CARNRITE's
business is set forth on and, except as set forth on Schedule 3.11, is vested in
and beneficially owned by CARNRITE free and clear of any Encumbrance. Except as
disclosed in Schedule 3.11, CARNRITE has no Intellectual Property registered
with any Governmental Body. Except as set forth in Schedule 3.11, CARNRITE has
not granted any license under any of the Intellectual Property to any other
Person.
(b) Except as set forth in Schedule 3.11, CARNRITE does not require a
license or right under or in respect of any intellectual property of any other
Person to conduct its business as it is presently conducted and no substantial
part of the business is carried on under the agreement or consent of any other
Person nor is there any agreement with any other Person which significantly
restricts the fields in which CARNRITE business may be carried on.
(c) No disclosure has been made to any Person of the know-how or financial
or trade secrets of CARNRITE, except properly and in the Ordinary Course of
Business and on condition that such disclosure is to be treated as being of a
confidential nature.
(d) Except as set forth on Schedule 3.11 none of the processes currently
used by CARNRITE or any of the properties, products or services currently sold
by CARNRITE or any Intellectual Property materially infringes the intellectual
property rights of any other Person; and (ii) neither CARNRITE nor Seller has
18
received any notice of adverse claim or threat of adverse claim by any Person
with respect thereto, and to the knowledge of the Carnrite Parties, no basis
exists for any such claim.
SECTION 3.12 Contracts.
(a) Schedule 3.12(a) contains an accurate and complete list, and CARNRITE
has delivered to Purchaser accurate and complete copies, of:
(i) each Contract between CARNRITE and a Related Party;
(ii) each Contract that involves performance of services or delivery
of goods or materials by CARNRITE or to CARNRITE, as the case may be, of
an amount or value in excess of $20,000.00;
(iii) each Contract that involves performance of services or
delivery of goods or materials by CARNRITE or to CARNRITE that is not
cancelable with no more than 90 days notice;
(iv) each Contract that was not entered into in the Ordinary Course
of Business and that involves expenditures or receipts of CARNRITE in
excess of $20,000.00;
(v) each Contract affecting the ownership of, leasing of, title to,
use of or any leasehold or other interest in any real or personal property
(except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
$20,000.00 and with a term of less than one year);
(vi) each Contract with any labor union or other employee
representative of a group of employees relating to wages, hours and other
conditions of employment;
(vii) each Contract (however named) involving a sharing of profits,
losses, costs or liabilities by CARNRITE with any other Person;
(viii) each Contract containing covenants that in any material way
purport to restrict CARNRITE's business activity or limit the freedom of
CARNRITE to engage in any line of business or to compete with any Person;
(ix) each Contract providing for payments to or by any Person based
on sales, purchases or profits, other than direct payments for goods or
services;
(x) each power of attorney of CARNRITE that is currently effective
and outstanding;
19
(xi) each Contract entered into other than in the Ordinary Course of
Business that contains or provides for an express undertaking by CARNRITE
to be responsible for consequential damages;
(xii) each Contract for capital expenditures in excess of
$10,000.00;
(xiii) each Contract not denominated in U.S. dollars;
(xiv) each written warranty, guaranty or other similar undertaking
with respect to contractual performance extended by CARNRITE other than in
the Ordinary Course of Business; and
(xv) each material amendment, supplement and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Schedule 3.12(b), other than in the Ordinary
Course of Business each of the Carnrite Parties and each of their Affiliates do
not have or may not acquire any rights under any Contract of CARNRITE or to any
of CARNRITE's assets.
(c) Except as set forth in Schedule 3.12(c):
(i) unless completed in the Ordinary Course of Business or
discharged due to the bankruptcy of a party thereto, each Contract
identified or required to be identified in Schedule 3.12(c) is in full
force and effect and is valid and enforceable in accordance with its
terms;
(ii) no Contract identified or required to be identified in Schedule
3.12(c) is subject to cancellation or termination as a result of the
transactions conducted in the Ordinary Course of Business contemplated
herein; and
(iii) no Contract identified or required to be identified in
Schedule 3.12(c) will upon completion or performance thereof have a
material adverse effect on CARNRITE.
(d) Except as set forth in Schedule 3.12(d):
(i) CARNRITE has, and at all times since its formation, has been, in
compliance with all material applicable terms and requirements of each
material Contract to which CARNRITE is a party;
(ii) each other Person that has or had any obligation or liability
under any material Contract to which CARNRITE is a party is, and at all
times since its formation, has been, in full compliance with all material
applicable terms and requirements of such Contract;
20
(iii) the Carnrite Parties have no knowledge of any event that has
occurred or circumstance existing that (with or without notice or lapse of
time) contravenes, conflicts with or results in a Breach of, or gives
CARNRITE or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or payment
under, or to cancel, terminate or modify, any Contract to which CARNRITE
is a Party;
(iv) other than in the Ordinary Course of Business, no event has
occurred or circumstance exists under or by virtue of any Contract that
(with or without notice or lapse of time) would cause the creation of any
Encumbrance affecting any of CARNRITE's assets; and
(v) CARNRITE has not given to or received from any other Person, at
any time since its formation, 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 to which
CARNRITE is a Party.
(e) Other than in the Ordinary Course of Business, there are no
renegotiations of, attempts to renegotiate or outstanding rights to renegotiate
any amounts paid or payable to CARNRITE under current or completed Contracts
with any Person having the contractual or statutory right to demand or require
such renegotiation and no such Person has made written demand for such
renegotiation.
(f) Each Contract relating to the sale, design, manufacture or provision
of products or services by CARNRITE has been entered into in the Ordinary Course
of Business of CARNRITE and has 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 material violation of any applicable
Legal Requirement.
SECTION 3.13 Customers and Suppliers. Except as set forth in Schedule
3.13, since its formation, no supplier, customer, distributor or third party
sales representative has canceled or otherwise terminated, or given notice of
intent to cancel or otherwise terminate, for any reason, its relationship with
CARNRITE.
SECTION 3.14 Employee Benefit Plans.
(a) Set forth in Schedule 3.14(a) is a complete and correct list of all
"employee benefit plans" (foreign or domestic) as defined by Section 3(3) of
ERISA or otherwise, all specified fringe benefit plans as defined in Section
6039D of the Code, and all other bonus, incentive-compensation,
deferred-compensation, profit-sharing, stock-option, stock-appreciation-right,
stock-bonus, stock-purchase, employee-stock-ownership, savings, savings plans
(registered or non-registered) severance, change-in-control,
supplemental-unemployment, layoff, salary-continuation, retirement, pension,
health, life-insurance, disability, accident, group-insurance, vacation,
holiday, sick-leave, fringe-benefit or welfare plan, and any other employee
compensation or benefit plan, agreement, policy, practice, commitment, contract
21
or understanding (whether qualified or nonqualified, currently effective or
terminated, written or unwritten) and any trust, escrow or other agreement
related thereto that (i) is maintained or contributed to by CARNRITE or any
other corporation or trade or business controlled by, controlling or under
common control with CARNRITE (within the meaning of Section 414 of the Code or
Section 4001(a)(14) or 4001(b) of ERISA)" ("ERISA Affiliate") or has been
maintained or contributed to since formation by CARNRITE or any ERISA Affiliate,
or with respect to which CARNRITE or any ERISA Affiliate has or may have any
liability, and (ii) provides benefits, or describes policies or procedures
applicable to any current or former director, officer, employee or service
provider of CARNRITE or any ERISA Affiliate, or the dependents of any thereof,
regardless of how (or whether) liabilities for the provision of benefits are
accrued or assets are acquired or dedicated with respect to the funding thereof
(collectively the "Employee Plans"). Schedule 3.14(a) identifies as such any
Employee Plan that is (w) "a "Defined Benefit Plan" (as defined in Section
414(l) of the Code); (x) a plan intended to meet the requirements of Section
401(a) of the Code; (y) "a "Multiemployer Plan" (as defined in Section 3(37) of
ERISA); or (z) a plan subject to Title IV of ERISA, other than a Multiemployer
Plan. Also set forth on Schedule 3.14(a) is a complete and correct list of all
ERISA Affiliates of CARNRITE since formation.
(b) CARNRITE has delivered to the Purchaser true, accurate and complete
copies of (i) the documents comprising each Employee Plan (or, with respect to
any Employee Plan which is unwritten, a detailed written description of
eligibility, participation, benefits, funding arrangements, assets and any other
matters which relate to the obligations of CARNRITE or any ERISA Affiliate);
(ii) all trust agreements, insurance contracts or any other funding instruments
related to the Employee Plans; (iii) all rulings, determination letters,
no-action letters or advisory opinions from the U.S. Internal Revenue Service
("IRS"), the U.S. Department of Labor, the Pension Benefit Guaranty Corporation"
("PBGC") or any other Governmental Body that pertain to each Employee Plan and
any open requests therefor; (iv) the most recent actuarial and financial reports
(audited and/or unaudited) and the annual reports filed with any Government Body
with respect to the Employee Plans during the current year and each of the three
preceding years; (v) all collective bargaining agreements pursuant to which
contributions to any Employee Plan(s) have been made or obligations incurred
(including both pension and welfare benefits) by each of CARNRITE or any ERISA
Affiliate, and all collective bargaining agreements pursuant to which
contributions are being made or obligations are owed by such entities; (vi) all
securities registration statements filed with respect to any Employee Plan;
(vii) all contracts with third-party administrators, actuaries, investment
managers, consultants and other independent contractors that relate to any
Employee Plan, (viii) with respect to Employee Plans that are subject to Title
IV of ERISA, the Form PBGC-1 filed for each of the three most recent plan years;
and (ix) all summary plan descriptions, summaries of material modifications and
memoranda, employee handbooks and other written communications regarding the
Employee Plans.
(c) Except as disclosed in Schedule 3.14(c), full payment has been made of
all amounts that are required under the terms of each Employee Plan to be paid
22
as contributions with respect to all periods prior to and including the last day
of the most recent fiscal year of such Employee Plan ended on or before the date
of this Agreement and all periods thereafter prior to the Closing Date, and no
accumulated funding deficiency or liquidity shortfall (as those terms are
defined in Section 302 of ERISA and Section 412 of the Code) has been incurred
with respect to any such Employee Plan, whether or not waived. The value of the
assets of each Employee Plan that is a Defined Benefit Plan exceeds the amount
of all benefit liabilities (determined on a plan termination basis using the
actuarial assumptions established by the PBGC as of the Closing Date) of such
Employee Plan. CARNRITE is not required to provide security to an Employee Plan
under Section 401(a)(29) of the Code. The funded status of each Employee Plan
that is a Defined Benefit Plan is disclosed on Schedule 3.14(c) in a manner
consistent with the Statement of Financial Accounting Standards No. 87. CARNRITE
has paid in full all required insurance premiums, subject only to normal
retrospective adjustments in the ordinary course, with regard to the Employee
Plans for all policy years or other applicable policy periods ending on or
before the Closing Date.
(d) Except as disclosed in Schedule 3.14(d), no Employee Plan, if subject
to Title IV of ERISA, has been completely or partially terminated, nor has any
event occurred nor does any circumstance exist that could result in the partial
termination of such Employee Plan. The PBGC has not instituted or threatened a
Proceeding to terminate or to appoint a trustee to administer any of the
Employee Plans pursuant to Subtitle 1 of Title IV of ERISA, and no condition or
set of circumstances exists that presents a material risk of termination or
partial termination of any of the Employee Plans by the PBGC. None of the
Employee Plans has been the subject of, and no event has occurred or condition
exists that could be deemed, a Reportable Event as to which a notice would be
required (without regard to regulatory monetary thresholds) to be filed with the
PBGC. CARNRITE has paid in full all insurance premiums due to the PBGC with
regard to the Employee Plans for all applicable periods ending on or before the
Closing Date.
(e) Neither CARNRITE nor any ERISA Affiliate has any liability and the
transactions contemplated hereby will not result in any liability, (i) for the
termination of or withdrawal from any Employee Plan under Sections 4062, 4063 or
4064 of ERISA, (ii) for any lien imposed under Sections 302(f) of ERISA or
Section 412(n) of the Code, (iii) for any interest payments required under
Section 302(e) of ERISA or Section 412(m) of the Code, (iv) for any excise tax
imposed by Section 4971 of the Code, (v) for any minimum funding contributions
under Section 302(c)(11) of ERISA or Section 412(c)(11) of the Code or (vi) for
withdrawal from any Multiemployer Plan under Section 4201 of ERISA.
(f) CARNRITE has, at all times, complied, and currently complies, in all
material respects with the applicable continuation requirements for its welfare
benefit plans, including (1) Section 4980B of the Code (as well as its
predecessor provision, Section 162(k) of the Code) and Sections 601 through 608,
inclusive, of ERISA, which provisions are hereinafter referred to collectively
as "COBRA" and (2) any applicable state statutes mandating health insurance
continuation coverage for employees.
23
(g) The form of all Employee Plans is in compliance with the applicable
terms of ERISA, the Code, and any other applicable laws, including the Americans
with Disabilities Act of 1990, the Family Medical Leave Act of 1993 and the
Health Insurance Portability and Accountability Act of 1996, and such plans have
been operated in compliance with such laws and the written Employee Plan
documents. Neither CARNRITE nor any Fiduciary of an Employee Plan has violated
the requirements of Section 404 of ERISA. All required reports and descriptions
of the Employee Plans (including Internal Revenue Service Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of
Material Modifications) have been (when required) timely filed with the IRS, the
U.S. Department of Labor or other Governmental Body and distributed as required,
and all notices required by ERISA or the Code or any other applicable Legal
Requirement with respect to the Employee Plans have been appropriately given.
(h) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS,
and there are no circumstances that will or could result in revocation of any
such favorable determination letter. Each trust created under any Employee Plan
has been determined to be exempt from taxation under Section 501(a) of the Code.
CARNRITE is not aware of any circumstance that will or could result in a
revocation of such exemption. Each Employee Welfare Benefit Plan (as defined in
Section 3(1) of ERISA) that utilizes a funding vehicle described in Section
501(c)(9) of the Code or is subject to the provisions of Section 505 of the Code
has been the subject of a notification by the IRS that such funding vehicle
qualifies for tax-exempt status under Section 501(c)(9) of the Code or that the
plan complies with Section 505 of the Code, unless the IRS does not, as a matter
of policy, issue such notification with respect to the particular type of plan.
With respect to each Employee Plan, no event has occurred or condition exists
that will or could give rise to a loss of any intended tax consequence or to any
Tax under Section 511 of the Code.
(i) There is no material pending or threatened Proceeding relating to any
Employee Plan, nor is there any basis for any such Proceeding. Neither CARNRITE
nor any Fiduciary of an Employee Plan has engaged in a transaction with respect
to any Employee Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject CARNRITE or Purchaser to a Tax or
penalty imposed by either Section 4975 of the Code or Section 502(l) of ERISA or
a violation of Section 406 of ERISA. The transactions contemplated hereby will
not result in the potential assessment of a Tax or penalty under Section 4975 of
the Code or Section 502(l) of ERISA nor result in a violation of Section 406 of
ERISA.
(j) CARNRITE has maintained workers' compensation coverage as required by
applicable state, provincial, or territorial law through purchase of insurance
and not by self-insurance, other than typical deductibles, or otherwise except
as disclosed to Purchaser on Schedule 3.14(j).
24
(k) Except as required by applicable Legal Requirements, the consummation
of the transactions contemplated hereby will not accelerate the time of vesting
or the time of payment, or increase the amount, of compensation due to any
director, employee, officer, former employee or former officer of CARNRITE.
There are no contracts or arrangements providing for payments that could subject
any person to liability for tax under Section 4999 of the Code.
(l) Except for the continuation coverage requirements of COBRA, CARNRITE
has no obligations or potential liability for benefits to employees, former
employees or their respective dependents following termination of employment or
retirement under any of the Employee Plans that are Employee Welfare Benefit
Plans.
(m) None of the transactions contemplated hereby will result in an
amendment, modification or termination of any of the Employee Plans. No written
or oral representations have been made to any employee or former employee of
CARNRITE promising or guaranteeing any employer payment or funding for the
continuation of medical, dental, life or disability coverage for any period of
time beyond the end of the current plan year (except to the extent of coverage
required under COBRA). No written or oral representations have been made by
CARNRITE to any employee or former employee of CARNRITE concerning the employee
benefits of the Purchaser.
(n) With respect to any Employee Plan that is a "multiemployer pan" within
the meaning of Section 4001(a)(3) of ERISA ("Multiemployer Plan"), and any other
Multiemployer Plan to which CARNRITE has at any time had an obligation to
contribute:
(i) all contributions required by the terms of such Multiemployer Plan
and any collective bargaining agreement have been made when due; and
(ii) CARNRITE would not be subject to any withdrawal liability under
Part 1 of Subtitle E of Title IV of ERISA if, as of the date hereof,
CARNRITE was to engage in a "complete withdrawal" (as defined in ERISA
Section 4203) or a "partial withdrawal" (as defined in ERISA Section 4205)
from such Multiemployer Plan.
(o) All Employee Plans of CARNRITE have been duly registered, where
required, and are in good standing under all applicable legislation (foreign or
domestic) and all required employer contributions under any such plan(s) or
policies have been made and no past service funding liabilities exist
thereunder.
SECTION 3.15 Compliance with Law.
(a) Except as set forth in Schedule 3.15(a),
(i) CARNRITE is, and at all times since its formation, has been, in
full compliance with each applicable Legal Requirement that is or was
25
applicable to them or to the conduct or operation of its business or the
ownership or use of any of its assets in all material respects;
(ii) The Carnrite Parties have no knowledge of an event that has
occurred or a circumstance that exists that (with or without notice or
lapse of time) (A) constitutes or results in a violation by CARNRITE of, or
a failure on the part of CARNRITE to comply with, any applicable Legal
Requirement or (B) gives rise to any material obligation on the part of
CARNRITE to undertake, or to bear all or any portion of the cost of, any
remedial action of any material nature; and
(iii) CARNRITE has not received, at any time since its formation, any
notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible or potential violation of, or failure to comply with, any
applicable Legal Requirement or (B) any actual, alleged, possible or
potential obligation on the part of CARNRITE to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature.
(b) Schedule 3.15(b) contains a complete and accurate list of each
Governmental Authorization that is held by CARNRITE or that otherwise relates to
CARNRITE business or its assets. Each Governmental Authorization needed by
CARNRITE for the conduct of its business is valid and in full force and effect.
Except as set forth in Schedule 3.15(b):
(i) CARNRITE is, and at all times since its formation has been, in
full compliance with all of the material terms and requirements of each
Governmental Authorization identified or required to be identified in
Schedule 3.15(b);
(ii) The Carnrite Parties have no knowledge of any event that has
occurred or circumstance that exists that may (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any
term or requirement of any Governmental Authorization or (B) result
directly or indirectly in the revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any Governmental
Authorization needed by CARNRITE for the conduct of its business;
(iii) CARNRITE has not received, at any time since its formation, any
notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization or (B) any actual, proposed,
possible or potential revocation, withdrawal, suspension, cancellation,
termination of or modification to any Governmental Authorization; and
26
(iv) all applications required to have been filed for the renewal of
the Governmental Authorizations necessary of the conduct of CARNRITE
business have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies.
(c) To the best of the Carnrite Parties' knowledge, the Governmental
Authorizations listed in Schedule 3.15(b) collectively constitute all of the
Governmental Authorizations necessary to permit CARNRITE to lawfully conduct and
operate its business in the manner in which it currently conducts and operates
such business and to permit CARNRITE to own and use its assets in the manner in
which they currently own and use such assets.
SECTION 3.16 Taxes.
(a) Tax Returns Filed and Taxes Paid. CARNRITE has filed or caused to be
filed on a timely basis all Tax Returns and all reports with respect to Taxes
that are or were required to be filed pursuant to applicable Legal Requirements.
All Tax Returns and reports filed by CARNRITE are true, correct and complete.
The Carnrite Parties have paid, or made provision for the payment of, all Taxes
for which they are responsible that have or may have become due for all periods
covered by the Tax Returns or otherwise, or pursuant to any assessment received
by CARNRITE, except such Taxes, if any, as are listed in Schedule 3.16(a) and
are being contested in good faith and as to which adequate reserves (determined
in accordance with GAAP) have been provided in the Financial Statements. Except
as provided in Schedule 3.16(a), CARNRITE is not currently the beneficiary of
any extension of time within which to file any Tax Return. No claim has ever
been made by any Governmental Body in a jurisdiction where CARNRITE does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Encumbrances on any of the assets that arose in connection with any
failure to pay any Tax, and no claims attributable to Taxes which, if adversely
determined, would result in any such Encumbrance.
(b) Delivery of Tax Returns and Information Regarding Audits and Potential
Audits. Carnrite has delivered or made available to Purchaser copies of, and
Schedule 3.16(b) contains a complete and accurate copy of, all federal, state,
provincial, territorial, local, and foreign income Tax Returns of CARNRITE
(other than Tax Returns for sales and use taxes) filed since its formation.
Schedule 3.16(b) contains a complete and accurate list of all audits and pending
Tax disputes. No Carnrite Party has received notice of any undisclosed
deficiencies to be asserted with respect to any such audit. All deficiencies
proposed as a result of such audits have been paid, reserved against, settled or
are being contested in good faith. CARNRITE has delivered, or made available to
Purchaser, copies of any examination reports, statements or deficiencies or
similar items with respect to such audits. Except as provided in Schedule
3.16(b), no Governmental Body has assessed any additional taxes for any period
for which Tax Returns have been filed. Except as provided in Schedule 3.16(b),
27
has no notice of any dispute or claim concerning any Taxes of CARNRITE claimed
or raised by any Governmental Body. Except as described in Schedule 3.16(b),
CARNRITE has not been 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 CARNRITE or for
which CARNRITE may be liable.
(c) Post-Closing Tax Liabilities. The unpaid Taxes of CARNRITE (i) did
not, as of the Closing Date, exceed the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Financial Statements and (ii)
do not exceed that reserve as adjusted for passage of time through the Closing
Date in accordance with the past custom and practice of CARNRITE in filing its
past Tax Returns. Except as disclosed in Schedule 3.16(c), there exists no
proposed tax assessment or deficiency against CARNRITE. Since the date of the
Financial Statements, CARNRITE has not incurred any liability for Taxes arising
from extraordinary gains or losses, as that term is used in GAAP, outside the
Ordinary Course of Business consistent with past custom and practice.
(d) Transactions Affecting Post-Closing Tax Years. Other than in the
Ordinary Course of Business consistent with past custom and practice, CARNRITE
will not be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any (i) change in method of
accounting for a taxable period ending on or prior to the Closing Date, (ii)
"closing agreement" as described in Code Section 7121 (or any corresponding
provision or similar provision of federal, state, local or foreign income Tax
law) executed on or prior to the Closing Date, (iii) installment sale or open
transaction disposition made on or prior to the Closing Date, or (iv) prepaid
amount received on or prior to the Closing Date.
(e) Specific Potential Tax Liabilities and Tax Situations.
(i) Withholding. All Taxes that CARNRITE is or was required by
applicable Legal Requirements to withhold, deduct or collect prior to the
Closing have been duly withheld, deducted and collected and, to the extent
required, will be paid to the proper Governmental Body or other Person.
(ii) Tax Sharing or Similar Agreements. There is no tax sharing
agreement, tax allocation agreement, tax indemnity obligation or similar
written or unwritten agreement or practice with respect to Taxes
(including any advance pricing agreement, closing agreement or other
arrangement relating to Taxes) that will require any payment by CARNRITE.
(iii) Consolidated Group. CARNRITE (i) has not been a member of an
Affiliated Group (or any similar group defined under a similar provision
of federal, state, local or foreign law) and (ii) has no liability for
Taxes of any person (other than CARNRITE) under ss.1.1502-6 of the
28
Treasury Regulations (or any similar provision of state, local or foreign
law), as a transferee or successor by contract or otherwise.
(iv) Listed Transactions. CARNRITE has not participated in a
transaction that has been specifically identified by the IRS as a "listed"
transaction for purposes of ss.1.6011-4(b) of the Treasury Regulations and
has not disclosed any transactions to the IRS under any penalty amnesty
program.
(v) Golden Parachute Agreements. CARNRITE is not a party to any
agreement, contract or plan that has resulted or could result, separately
or in the aggregate, in the payment of (i) any "excess parachute payment"
within the meaning of Code Section 280G (or any corresponding provision of
federal, state, local or foreign Tax law) and (ii) any amount that will
not be fully deductible as a result of Code Section 162(m) (or any
corresponding provision of state, local or foreign Tax law).
(vi) Arrangement Constituting a Partnership. Other than as pertains
to the operation of a limited liability company, CARNRITE is not subject
to any joint venture, partnership or other arrangement or contract that is
treated as a partnership for federal or applicable state income tax
purposes or for any other Tax purposes.
(vii) Tax Attributes. Schedule 3.16(e)(vii) sets forth the amount of
any net operating loss, net capital loss, unused investment, foreign tax
or other credit, or excess charitable contribution allocable to CARNRITE
as of the Closing Date.
(viii) Substantial Understatement Penalty. CARNRITE has disclosed on
its income Tax Returns all positions taken therein that could give rise to
a substantial understatement of federal income Tax within the meaning of
Code Section 6662.
SECTION 3.17 Insurance
(a) CARNRITE has delivered to Purchaser:
(i) accurate and complete copies of all policies of insurance (and
correspondence relating to coverage thereunder) to which CARNRITE is a
party or under which CARNRITE is or has been covered at any time since its
formation, a list of which is included in Schedule 3.17(a);
(ii) accurate and complete copies of all pending applications by
CARNRITE for policies of insurance; and
(iii) any statement by the auditor of CARNRITE's Financial
Statements or any consultant or risk management advisor with regard to the
adequacy of CARNRITE coverage or of the reserves for claims.
29
(b) Except as set forth in Schedule 3.17(b), CARNRITE:
(i) does not have any self-insurance arrangement, other than typical
deductibles, by or that involves CARNRITE, including any reserves
established thereunder;
(ii) does not have any Contract or arrangement, other than a policy
of insurance, for the transfer or sharing of any risk; and
(iii) has complied with all obligations to provide insurance
coverage to third parties (for example, under leases or service
agreements) and identifies the policy under which such coverage is
provided.
(c) Except as set forth in Schedule 3.17(c),:
(i) all policies of insurance to which CARNRITE is a party or that
provide coverage to CARNRITE:
a) are valid, outstanding and enforceable; and
b) are issued by an insurer that is reputable;
(ii) With respect to any policy of insurance, CARNRITE has not
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 policy of insurance is no longer in full
force or effect or that the issuer of any policy of insurance is not
willing or able to perform its obligations thereunder;
(iii) With respect to any policy of insurance that involves
CARNRITE, CARNRITE has paid or caused to be paid, all premiums due, and
has otherwise performed all of its material obligations, under each such
policy of insurance to which it is a party or that provides coverage to
CARNRITE; and
(iv) With respect to any policy of insurance, CARNRITE has given
notice to the insurer of all known claims that may be insured thereby.
SECTION 3.18 Environmental Laws and Regulations.
----------------------------------
(a) Except as set forth in Schedule 3.18:
(i) CARNRITE is, and at all times has been, in compliance with, and
has not been and is not in violation of or liable under, any Environmental
Law. CARNRITE has not received, nor has any other Person for whose conduct
CARNRITE is 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
30
actual or threatened obligation to undertake or bear the cost of any
Environmental, Health and Safety Liabilities with respect to any Facility
or other property or asset (whether real, personal or mixed) in which
CARNRITE has or had an interest, or with respect to any property or
Facility at or to which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used or processed by CARNRITE or any other
Person for whose conduct it is or may be held responsible, or from which
Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled or received.
(ii) There are no pending or threatened claims, Encumbrance, 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 Facility or any other property or
asset (whether real, personal or mixed) in which CARNRITE has or had an
interest.
(iii) CARNRITE does not expect, nor has any other Person for whose
conduct CARNRITE is 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 Facility or property or asset (whether real, personal or
mixed) in which CARNRITE has or had an interest, or with respect to any
property or Facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used or processed by CARNRITE 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.
(iv) Neither CARNRITE nor any other Person for whose conduct
CARNRITE is or may be held responsible has any Environmental, Health and
Safety Liabilities with respect to any Facility or with respect to any
other property or asset (whether real, personal or mixed) in which
CARNRITE has or had an interest or at any property geologically or
hydrologically adjoining any Facility or any such other property or asset.
(v) There are no Hazardous Materials present on or in the
Environment at any Facility or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in
barrels, aboveground or underground storage tanks, landfills, land
deposits, dumps, equipment (whether movable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water,
sumps, or any other part of the Facility or such adjoining property, or
incorporated into any structure therein or thereon. Neither CARNRITE nor
any Person for whose conduct CARNRITE is or may be held responsible, or
any other Person, has permitted or conducted, or is aware of, any
31
Hazardous Activity conducted with respect to any Facility or any other
property or assets (whether real, personal or mixed) in which CARNRITE has
or had an interest except in full compliance with all applicable
Environmental Laws.
(vi) There has been no Release or threat of Release, of any
Hazardous Materials at or from any Facility or at any other location where
any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by any
Facility, or from any other property or asset (whether real, personal or
mixed) in which CARNRITE has or had an interest, or any geologically or
hydrologically adjoining property, whether by CARNRITE or any other
Person.
(vii) CARNRITE has delivered to Purchaser true and complete copies
and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by CARNRITE pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning
compliance, by CARNRITE or any other Person for whose conduct it is or may
be held responsible, with Environmental Laws.
SECTION 3.19 Products and Services. Schedule 3.19 sets forth all claims
asserted or threatened at any time since its formation against CARNRITE in
respect of personal injury, wrongful death or property damage alleged to have
resulted from products or services provided by CARNRITE, and all warranty claims
with respect to any single product with a value, individually or in the
aggregate, in excess of $5,000.00.
SECTION 3.20 Governmental Authorizations. Except as set forth in Schedule
3.20, the applicable Governmental Authorizations are all in full force and
effect and constitute, to the best of the Carnrite Parties' knowledge, all of
the governmental approvals, permits and licenses that are necessary to carry on
and conduct the business and its operations as presently conducted. CARNRITE is
not in material violation of or default under any of the applicable Governmental
Authorizations, is not in violation of any judgment, order, writ, injunction or
decree of any court or administrative agency issued against it and relating to
the conduct of the business, and is not in material violation of any statute,
law, ordinance, rule or regulation applicable to the conduct of the business.
SECTION 3.21 Subsidiaries. All subsidiaries of CARNRITE, whether wholly or
partially owned, and their jurisdiction of organization are listed on Schedule
3.21 (the "Subsidiaries"). Except for the capital stock of, or ownership
interests in the Subsidiaries, CARNRITE does not own or control, directly or
indirectly, any interest or investment in any corporation, partnership,
association or other form of business entity.
SECTION 3.22 Brokers and Finders. Neither CARNRITE nor any of CARNRITE's
managers, officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the Transactions contemplated by this Agreement.
32
SECTION 3.23 Disclosure.
(a) No representation or warranty or other statement made by any Carnrite
Party in this Agreement or otherwise in connection with the transactions
contemplated by this Agreement contains any material untrue statement or omits
to state a material fact necessary to make any of them, in light of the
circumstances in which it was made, not misleading.
(b) No Carnrite Party has knowledge (whether actual or constructive) of
any fact that has specific application to CARNRITE (other than general economic
or industry conditions) and that may materially, adversely affect the assets,
liabilities, business, financial condition or results of operations of CARNRITE
that has not been set forth in this Agreement.
SECTION 3.24 Books and Records. The books of account and other financial
records of CARNRITE, all of which have been made available to the Purchaser, are
complete and correct in every material way and represent actual, bona fide
transactions and have been maintained in accordance with sound business
practices including the maintenance of an adequate system of internal controls.
SECTION 3.25 Condition of Facilities.
(a) Use of the real property for the various purposes for which it is
presently being used is permitted as of right under all applicable zoning legal
requirements and is not subject to "permitted nonconforming" use or structure
classifications. To the best of the Carnrite Parties knowledge, all improvements
to real property leased by CARNRITE or otherwise used in the Ordinary Course of
Business by CARNRITE are in compliance with all applicable Legal Requirements,
including those pertaining to zoning and building, and are accepted as is. To
the best of the Carnrite Parties' knowledge, no part of any improvement
encroaches on any real property not leased by CARNRITE. To the best of
CARNRITE's knowledge, there is no existing or proposed plan to modify or realign
any street or highway or any existing or proposed eminent domain proceeding that
would result in the taking of all or any part of any Facility or that would
prevent or hinder the continued use of any Facility as heretofore used in the
conduct of the business of CARNRITE.
(b) All Tangible Personal Property used in CARNRITE's business is in the
possession or subject to the control of CARNRITE.
SECTION 3.26 No Undisclosed Liabilities. Except as set forth in Schedule
3.26, CARNRITE has no Liability except for Liabilities reflected or reserved
against in the Financial Statements and Current Liabilities incurred in the
Ordinary Course of Business of CARNRITE since the date of the Financial
Statements.
33
SECTION 3.27 Employees.
(a) Schedule 3.27(a) contains a complete and accurate list of the following
information for each key employee of CARNRITE, as designated in writing by
Purchaser, including each employee on leave of absence or layoff status: name;
job title; date of hire; current compensation paid or payable and any change in
compensation since formation of the Company; sick and vacation leave that is
accrued but unused; and service credited for purposes of vesting and eligibility
to participate under any Employee Plan, or any other employee or director
benefit plan.
(b) CARNRITE has no retired employees except as set forth on Schedule
3.27(b).
(c) Schedule 3.27(c) contains a complete and accurate list of the following
information for each such employee of CARNRITE who has been terminated or laid
off, or whose hours of work have been reduced by more than fifty percent (50%)
by CARNRITE, since formation of CARNRITE: (i) the date of such termination,
layoff or reduction in hours; (ii) the reason for such termination, layoff or
reduction in hours; and (iii) the location to which the employee was assigned.
There are no warnings or disciplinary action currently outstanding against, or
since formation of CARNRITE, issued to or taken against, any employee of
CARNRITE.
(d) CARNRITE has not violated the Worker Adjustment and Retraining
Notification Act (the "WARN Act") or any similar state or local applicable Legal
Requirement.
(e) No member, manager, officer, director, employee or contractor of
CARNRITE is bound by any Contract that purports to limit the ability of such
officer, director, employee, or contractor to engage in or continue or perform
any conduct, activity, duties or practice. No former or current employee of
CARNRITE is a party to, or is otherwise bound by, any Contract that in any way
adversely affected, affects, the ability of CARNRITE or the Purchaser to conduct
the business as heretofore carried on by CARNRITE.
(f) The employees of CARNRITE are not entitled to payment for any accrued
but unused vacation time, except upon termination.
(g) Except as disclosed in Schedule 3.27(g), CARNRITE has not, since its
formation, directly or indirectly, made any increase in the compensation or
other benefits payable or to become payable to their employees or any of them,
other than general salary increases in the ordinary course of business,
consistent with past practice, or any increase in the compensation or other
benefits payable or to become payable to any member, manager, officer or
director or any increase in the benefits provided under any of its pension plans
or other employee benefit plans.
(h) Schedule 3.27(h), accurately sets out as of the date hereof, the
names, current salaries and job descriptions and lengths of employment with
CARNRITE and any predecessor corporation, and the dates and the amounts of the
most recent increases in salaries, of all individuals who are employed by
34
CARNRITE at such date on a full or part-time basis. Except as set out in
Schedule 3.27(h), CARNRITE is not a party to and are bound by any:
(i) written contract or commitment for the employment of any
employee, officer or agent, whether contracts of service or contracts for
services;
(ii) oral contract or commitment for the employment of any employee,
officer or agent, whether contracts of service or contracts for services,
except for contracts of indefinite hire terminable by the respective
company without cause on reasonable notice;
(iii) contract or collective agreement with or commitment to any
labor union or employee association and CARNRITE has not conducted
negotiations with respect to any future such contracts or commitments and
there are no current or threatened attempts to organize or establish any
labor union or employee association with respect to CARNRITE, and no trade
union, council of trade unions, employee bargaining agency or affiliated
bargaining agent:
a) holds bargaining rights with respect to any of the
employees CARNRITE by way of certification, interim
certification, voluntary recognition, designation or
successor rights; or
b) has applied to be certified as the bargaining agent of
any of the employees of CARNRITE.
(iv) bonus, pension, profit sharing, deferred compensation,
retirement, hospitalization, disability, insurance or similar plan or
practice, formal or informal, or policy with respect to any of their
employees or others.
(i) There are no allegations with respect to CARNRITE of unfair labor
practices.
(j) Except as disclosed in Schedule 3.27(j), no employee of CARNRITE is on
lay off, leave of absence, maternity or disability leave. Schedule 3.27(j) sets
forth the terms of such lay off, leave of absence, maternity or disability
leave.
(k) Except as disclosed in Schedule 3.27(k), CARNRITE does not owe any
material obligations to former employees.
(l) Except as disclosed in Schedule 3.27(l), there are no independent
contractors engaged by CARNRITE.
35
(m) All plans and policies listed in Schedule 3. 14(a) have been duly
registered where required by, and are in good standing under, all applicable
legislation (foreign or domestic), and all required employer contributions under
any such plans or policies have been made and no past service funding
liabilities exist thereunder.
(n) The amount of salaries, pensions, bonuses, and other remuneration and
fringe benefits of any nature, including vacation pay, severance pay and unpaid
earned wages of the directors, officers and employees of CARNRITE as of the
Closing Date have been paid in full or accrued and there is no outstanding
overdue assessment, order, certificate, lien or judgment regarding employment of
any jurisdiction (foreign or domestic) in which CARNRITE carries on business or
have employees. All employer obligations of CARNRITE with respect to the
directors, officers and employees of CARNRITE for withholding tax, any pension
plan, workers' compensation premiums, contributions or remittances of any kind
in all material respects which are then due, have been paid in full or accrued
as of the Closing Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Carnrite Parties that the
statements contained in this Article 5 are correct and complete as of the
Closing Date:
SECTION 4.1 Incorporation, Authority and Binding Obligation. Purchaser is
a corporation duly incorporated, validly existing and in good standing under the
laws of Colorado and has all necessary corporate power and authority to enter
into this Agreement, to carry out its obligations hereunder and consummate the
transactions contemplated hereby. This Agreement has been or will be duly
executed and delivered by Purchaser, and (assuming due authorization, execution
and delivery by each other party thereto) this Agreement constitutes legal,
valid and binding obligations of Purchaser enforceable against Purchaser in
accordance with their terms, except in the event of Purchaser's bankruptcy,
receivership, insolvency, or assignment for the benefit of creditors. Except as
otherwise provided herein, the Purchaser is not required give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
Governmental Body in order to consummate the transactions contemplated by this
Agreement.
SECTION 4.2 No Conflict. The execution, delivery and performance of this
Agreement by Purchaser does not and will not: (a) violate or conflict with the
certificate of incorporation or bylaws Governing Documents of Purchaser; (b)
conflict with or violate any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award applicable to Purchaser; or (c)
result in any breach of, or constitute a default (or event which with the giving
of notice or lapse of time, or both, would become a breach or default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to any material assets or properties to
which Purchaser is a party or by which any of its respective material assets or
properties is bound or affected.
36
SECTION 4.3 Consents and Approvals. Purchaser shall obtain any required
consent, approval, authorization or other action by, or filing with or
notification to, any governmental or regulatory authority with respect to
Purchaser, except: (a) where failure to obtain such consent, approval,
authorization or action, or to make such filing or notification, would not
prevent or delay Purchaser from performing any of its material obligations under
this Agreement and (b) as may be necessary as a result of any facts or
circumstances relating solely to Seller.
SECTION 4.4 Brokers. Any broker, finder or investment banker who may be
entitled to brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Purchaser or its Affiliates will be compensated by the
Purchaser.
SECTION 4.5 Reliance. In determining whether to purchase Carnrite
Membership Interests, Purchaser has relied solely upon the warranties and
representations of The Carnrite Parties contained in this Agreement, the
Ancillary Documents and any documents required to be delivered in connection
therewith and Purchaser's own due diligence.
SECTION 4.6 Material Matters. Purchaser has sought representations of the
Carnrite Parties that cover all material matters that do not, by their nature
create the possibility of a material omission.
SECTION 4.7 Due Diligence. Purchaser has performed a sufficient and duly
diligent investigation of the Carnrite Parties to assure itself of the propriety
and fairness of the transaction. Purchaser is not aware of any material matter,
document, or otherwise, that has been unreasonably retained or undisclosed by
the Carnrite Parties pertaining to Purchasers performance of its due diligence
investigation.
ARTICLE 5
ADDITIONAL COVENANTS
SECTION 5.1 Books and Records. If, in order to properly prepare documents
required to be filed with governmental authorities (including taxing
authorities) or its financial statements, it is necessary that either party
hereto or any successors be furnished with additional information relating to
CARNRITE and such information is in the possession of the other party hereto,
such party agrees to use its reasonable efforts to furnish such information to
such other party, at the cost and expense of the party being furnished such
information.
SECTION 5.2 Compliance with the Foreign Corrupt Practices Act and Export
Control and Antiboycott Laws.
(a) Neither CARNRITE nor its employees, agents or representatives has, to
obtain or retain business, directly or indirectly offered, paid or promised to
pay, or authorized the payment of, any money or other thing of value (including
37
any fee, gift, sample, travel expense or entertainment with a value in excess of
$100.00 in the aggregate to any one individual in any year) to:
(i) any person who is an official, officer, agent, employee or
representative of any Governmental Body or of any existing or prospective
customer (whether government owned or nongovernment owned);
(ii) any political party or official thereof;
(iii) any candidate for political or political party office; or
(iv) any other individual or entity;
while knowing or having reason to believe that all or any portion of such money
or thing of value would be offered, given, or promised, directly or indirectly,
to any such official, officer, agent, employee, representative, political party,
political party official, candidate, individual, or any entity affiliated with
such customer, political party or official or political office.
(b) Except as set forth in Schedule 5.2 (b), CARNRITE has made all material
payments to third parties by check, by credit card or by wire transfer to such
third party in the country in which the work was performed.
(c) Each material transaction is properly and accurately recorded on the
books and records of CARNRITE in all material respects, and each document upon
which entries in CARNRITE's books and records are based is complete and accurate
in all material respects. CARNRITE maintains no off-the-books accounts and that
CARNRITE's assets are used only in accordance with CARNRITE's management
directives.
(d) CARNRITE has at all times been in compliance with all applicable Legal
Requirements relating to export control and trade embargoes. No product sold or
service provided by CARNRITE since its formation has been directly sold to or
performed in or on behalf of Cuba, Iraq, Iran, Ivory Coast, Libya, North Korea,
Rwanda, Sudan, or Syria.
(e) Except as set forth in Schedule 5.2 (e), CARNRITE has not violated the
antiboycott prohibitions contained in 50 U.S.C. ss. 2401 et seq. or taken any
action that can be penalized under Section 999 of the Code. Except as set forth
in Schedule 5.2(e), since its formation, CARNRITE has not been a party to, is
not a beneficiary under and has not performed any service or sold any product
under any Contract under which a product has been sold directly to customers in
Bahrain, Iraq, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Syria, United
Arab Emirates or the Republic of Yemen.
SECTION 5.3 Relationships with Related Persons. Except as described in
Schedule 5.4, no Related Person has or has had, any interest in any Property
used in or pertaining to CARNRITE's business. Neither CARNRITE nor any Related
Person owns of record or as a beneficial owner, an equity interest or any other
financial or profit interest in any Person that has (a) had business dealings or
38
a material financial interest in any transaction with CARNRITE other than
business dealings or transactions disclosed in Schedule 5.3, each of which has
been conducted in the Ordinary Course of Business with CARNRITE at substantially
prevailing market prices and on substantially prevailing market terms or (b)
engaged in competition with CARNRITE with respect to any line of the products or
services of CARNRITE (a "Competing Business") in any market presently served by
CARNRITE, except for ownership of less than one percent (1%) of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market. Except to the extent set
forth on Schedule 5.3, no Related Person is a party to any Contract with, or has
any claim or right against, CARNRITE.
SECTION 5.4 Title to Assets. CARNRITE has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on the Financial Statements or acquired after the date
thereof, free and clear of all Encumbrances, except for Permitted Encumbrances
or properties and assets disposed of in the Ordinary Course of Business since
the date of the Financial Statements.
(i) As used herein, the term "Permitted Encumbrances" shall include
the following:
(ii) liens for taxes, assessments or governmental or
quasi-governmental charges that are not yet delinquent;
(iii) Encumbrances reflected in the Financial Statements or created
in the Ordinary Course of Business subsequent to the date of the Financial
Statements;
(iv) Encumbrances disclosed in Schedule 5.4;
(v) zoning ordinances, conservation restrictions, building codes and
all other statutes, regulations and administrative enactments of any
federal, state or governmental or public authority having jurisdiction
over the property affected thereby;
(vi) any matters to which a real property lease is subject or
subordinate;
(vii) Encumbrances that will be released or satisfied at Closing,
pursuant to the terms of this Agreement; and
(viii) Encumbrances that do not, individually or in the aggregate,
materially interfere with the present use by the Companies of the real
property subject thereto or affected thereby.
SECTION 5.6 Retention of Current Office Location. Purchaser will cause
CARNRITE to continue to honor CARNRITE's current Lease dated 4/18/2007 of ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ for the remainder of the initial term of
the Lease, which will expire May 1, 2009, and shall not cause or cause to occur
any change that materially affects Tilbury's, Robertson's, ▇▇▇▇▇▇▇▇', ▇▇▇▇▇▇'▇
and ▇▇▇▇▇▇▇▇▇▇'▇ ability to work form home in substantially the same manner as
39
occurring immediately prior to the Closing hereof.
ARTICLE 6
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing.
SECTION 6.1 General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement
(including compliance with any foreign or domestic regulatory requirements),
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as a Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under the terms
herein). The Carnrite Parties acknowledge and agree that from and after the
Closing the Purchaser will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to CARNRITE. After Closing, the Carnrite Parties shall have access, at
all reasonable times, upon written notice to Purchaser, to all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to CARNRITE matters occurring prior to Closing at their sole cost and
expense, and such records shall not be destroyed prior to the expiration of five
years following the Closing Date, unless otherwise agreed by the Parties.
SECTION 6.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving CARNRITE, each of the other Parties will cooperate
with it and its counsel in the contest or defense, make available its personnel,
and provide such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under the terms set out below).
SECTION 6.3 Tax Matters, Generally. The following provisions shall govern
the allocation of responsibility as between the Parties for certain tax matters
following the Closing Date:
A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ shall
defend and indemnify CARNRITE and the Purchaser and hold them harmless from and
against, any loss, claim, liability, expense, or other damage attributable to
all Taxes (or the non-payment thereof) of CARNRITE for all taxable periods
ending on or before the Effective Date. The Purchaser and CARNRITE shall be
responsible for and shall defend, indemnify and hold A. Carnrite, Tilbury,
Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ harmless from all Taxes (or the
non-payment thereof) of CARNRITE for all Taxes resulting from any action taken
by the Purchaser or CARNRITE after the Effective Date (including, without
limitation, actions taken outside the Ordinary Course of Business and occurring
40
on the Closing Date), unless such action is taken by the Purchaser or CARNRITE
to amend or correct the underpayment of Tax in a Tax Return for a taxable period
occurring on or prior to the Effective Date or results from a breach of a
representation or warranty by Purchaser relating to same.
SECTION 6.4 Confidentiality. All information related to this Agreement and
the transaction proposed in this Agreement as well as all other confidential
and/or proprietary information relating to the Intellectual Property Rights are
hereinafter referred to as "Confidential Information." The existing
Confidentiality Agreement dated July 20, 2007 is attached as Exhibit 4. The
Carnrite Parties will treat and hold as such all of the Confidential
Information, and refrain from using any of the Confidential Information except
in connection with this Agreement, and after the Closing Date deliver promptly
to Purchaser or destroy, at the request and option of Purchaser, all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession. Notwithstanding the above, the Carnrite Parties are entitled to
maintain such Confidential Information that it reasonably needs, in its sole
discretion, to respond to a Governmental Body or to carry out any of its
obligations under this Agreement. In the event that the Carnrite Parties are
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that the Carnrite
Parties will notify the Purchaser promptly of the request or requirement so that
the Purchaser may seek an appropriate protective order or waive compliance with
the provisions of this Section. If, in the absence of a protective order or the
receipt of a waiver hereunder, the Carnrite Parties are, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or
else stand liable for contempt, the Carnrite Parties may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Carnrite Party shall use its commercially reasonable best efforts to obtain, at
the reasonable request of Purchaser, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Purchaser shall designate. The
foregoing provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of disclosure.
Notwithstanding the foregoing, the existing Confidentiality Agreement by and
between the Carnrite Parties and Purchaser, attached hereto as Exhibit 4, shall
remain in full force and effect except that any and all obligations arising
under that Confidentiality Agreement shall remain in effect for the longer of
any period established in the Confidentiality Agreement or three years from the
date of this Agreement. In addition, the Parties represent and warrant that the
annexes, if any, attached to the Confidentiality Agreement are accurate and
complete and will be updated as required by the Confidentiality Agreement. These
Confidentiality obligations are subject to the provisions of this Agreement.
SECTION 6.5 Deceptive Trade Practices Act Waiver. The Parties hereby waive
the provisions of the Texas Deceptive Trade Practices Act, Chapter 17,
Subchapter E, Sections 17.41 through 17.63, inclusive (other than Section
17.555, which is not waived), of the Texas Business Assets and Commerce Code. To
evidence their ability to grant such waiver, the Parties hereby represent and
warrant that they: (a) are in the business of seeking or acquiring, by purchase
or lease, goods or services for commercial or business use, (b) have assets of
$5,000,000.00 or more according to their most recent financial statements
41
prepared in accordance with generally accepted accounting principles, (c) have
knowledge and experience in financial and business matters that enable them to
evaluate the merits and risks of the transaction contemplated hereby, and (d)
are not in a significantly disparate bargaining position.
SECTION 6.6 Risk of Loss. Risk of loss for each of CARNRITE's assets shall
be borne by CARNRITE until the Closing Date.
SECTION 6.7 Purchaser Payments. Purchaser shall pay to Carnrite
Consolidated Business Enterprises Ltd within 30 days from the date of Closing
the remaining balance (as shown on the Financial Statements) owed by CARNRITE on
the Demand Note dated May 9, 2007 with CARNRITE as Maker thereon. Purchaser
shall use its best commercially reasonable efforts to remove from the Compass
Bank line of credit of CARNRITE (as shown on the Financial Statements) all
guarantees of A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇
within 30 days of the Closing Date.
ARTICLE 7
SALES AND USE TAXES
The Carnrite Parties will be responsible for the payment of any and all
sales or use Taxes (if any) that may be incurred by the Carnrite Parties in
connection with the sale of the Carnrite Membership Interests contemplated by
this Agreement. Each of Purchaser and the Carnrite Parties agree to cooperate in
minimizing the amount of any such sales or use taxes, determining the amount of
such sales and use taxes that may be payable (if any) and in the filing of all
necessary documentation and all Tax returns, reports and forms ("Returns") with
respect to all such sales and use taxes, including any available pre-Closing
filing procedures.
ARTICLE 8
CONDITIONS TO THE CLOSING
SECTION 8.1 Conditions to Obligations of Seller. The obligations of the
Carnrite Parties to consummate the transactions contemplated by this Agreement
will be subject to the fulfillment (or written waiver by Purchaser), at or prior
to the Closing, of each of the following conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Purchaser contained in Article 4 of this Agreement will be true
and correct in all material respects as of the Closing (other than such
representations and warranties as are expressly made as of another date);
(b) Compliance with Covenants. Each document required to be delivered by
Purchaser pursuant to this Agreement will have been delivered and all of the
covenants contained in this Agreement to be complied with by Purchaser on or
before the Closing will have been complied with in all material respects;
42
(c) No Adverse Order. No Governmental Body or other agency or commission
or United States or state court of competent jurisdiction will have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other Order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting consummation of such
transactions; provided, however, that the Parties will use their best efforts to
have any such Order vacated on or before the Termination Date (as defined in
Article 12 hereof); and,
(d) No Litigation. No suit, claim, cause of action, arbitration,
investigation or other proceeding contesting, challenging or seeking to alter or
enjoin or adversely affect the sale and purchase of the Carnrite Membership
Interests or any other transaction contemplated hereby will be pending or
threatened and;
(e) Board Approval. Purchaser shall have received and delivered to
CARNRITE a resolution reflecting the approval of each of Purchaser's Board of
Directors for this transaction.
SECTION 8.2 Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement will be
subject to the fulfillment (or waiver by Purchaser), at or prior to the Closing,
of each of the following conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Carnrite Parties contained in Article 4 of this Agreement will be
true and correct in all material respects as of the Closing Date (other than
such representations and warranties that are expressly made as of another date);
(b) Compliance with Covenants. Each document required to be delivered by
any Carnrite Party pursuant to this Agreement shall have been delivered and all
of the covenants contained in this Agreement to be complied with by the Carnrite
Parties on or before the Closing will have been complied with in all material
respects;
(c) Delivery of Carnrite Membership Interests. The Carnrite Parties will
have delivered, and Purchaser will have received, the Carnrite Membership
Interests on or before the Closing Date;
(d) No Order. No Governmental Body or other agency or commission or United
States or state court of competent jurisdiction will have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other Order (whether temporary, preliminary or permanent) which is in effect and
has the effect of making any of the transactions contemplated by this Agreement
illegal or otherwise restraining or prohibiting consummation of such
transactions; provided, however, that the Parties will use their best efforts to
have any such Order vacated on or before the Termination Date (as defined in
Article 12 hereof);
43
(e) No Litigation. No suit, claim, cause of action, arbitration,
investigation or other proceeding contesting, challenging or seeking to alter,
enjoin or adversely affect the sale and purchase of the Carnrite Membership
Interests or any other transaction contemplated hereby will be pending or
threatened;
(f) Backlog. As of the Closing Date, CARNRITE shall have contracts which
shall reflect profit margins consistent with CARNRITE's Ordinary Course of
Business and prior bidding practices;
(g) Member Approval. CARNRITE shall have received and delivered to
Purchaser a resolution reflecting the required Member approval for this
transaction; and
(h) Material Change. There shall have been no Material Change in the
business of CARNRITE prior to the Closing Date.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 Loss Defined; Indemnitees. For purposes of this Article 10,
the term "Loss" will mean and include any and all liability, loss, damage,
claim, expense, cost, fine, fee, penalty, breach, obligation or injury resulting
from any and all claims, actions, suits, demands, assessments, investigations,
judgments, awards, arbitrations or other proceedings. It is expressly understood
that "Loss" shall also include special, attorney's fees, court costs and any
direct or consequential damages. As used in this Article 10, the term "Purchaser
Indemnitees" means and includes Purchaser, CARNRITE and any present or future
officer, director, employee, affiliate, stockholder or agent of Purchaser; and
the term "Seller Indemnitees" means and includes A. Carnrite, Tilbury,
Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇.
SECTION 9.2 Indemnification by the Carnrite Parties. To the extent of the
value of the consideration paid by Purchaser for the membership interests of the
Carnrite Parties, and for a period not exceeding 12 months from the date of
Closing hereof, A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇▇, jointly and severally, agree to protect, defend, and indemnify each
Purchaser Indemnitee against, and to hold each Purchaser Indemnitee harmless
from, all Loss suffered or incurred by any Purchaser Indemnitee arising out of:
(a) any breach or inaccuracy in any representation or warranty made by any
Carnrite Party in this Agreement, including any schedule hereto, or in any
Ancillary Agreement;
(b) any failure of any Carnrite Party to duly perform and observe any term,
provision, covenant, agreement or condition under this Agreement, or under any
other Ancillary Agreement;
(c) any claim by a third party that, if true, would mean that a basis for
indemnification set forth in this Section 10.2 exists.
44
SECTION 9.3 Indemnification by Purchaser. Purchaser agrees to protect,
defend, and indemnify each Seller Indemnitee against, and hold each Seller
Indemnitee harmless from, all Loss suffered or incurred by any Seller Indemnitee
arising out of:
(a) any breach or inaccuracy in any representation or warranty made by
Purchaser in this Agreement, or in any Ancillary Agreement;
(b) any failure of Purchaser to duly perform and observe any term,
provision, covenant, agreement or condition under this Agreement, or under any
other Ancillary Agreement;
(c) any claim by a third party that, if true, would mean that a basis for
indemnification set forth in this Section 9.3 exists.
SECTION 9.4 Procedures for Indemnification. As used herein, an "Indemnified
Party" means a Party seeking indemnification for any Loss (including, but not
limited to attorneys fees) pursuant to Section 9.2 or 9.3 hereof, as applicable,
and the term "Indemnifying Party" means the Party who is obligated to provide
indemnification under Section 9.2 or Section 9.3, as applicable. The Indemnified
Party agrees to give the Indemnifying Party prompt written notice of any event,
or any claim, action, suit, demand, assessment, investigation, arbitration or
other proceeding by or in respect of a third party (a "Third Party Claim") of
which it has knowledge, for which such Indemnified Party is entitled to
indemnification under this Article 10. In the case of a Third Party Claim, the
Indemnifying Party will have the right to direct, through counsel of its own
choosing, the defense or settlement of any such Third Party Claim at its own
expense. In such case, the Indemnified Party may participate in such defense,
but in such case the expenses of the Indemnified Party will be paid by the
Indemnified Party. The Indemnified Party will promptly provide the Indemnifying
Party with access to the Indemnified Party's records and personnel relating to
any such Third Party Claim during normal business hours and will otherwise
cooperate with the Indemnifying Party in the defense or settlement of such Third
Party Claim, and the Indemnifying Party will reimburse the Indemnified Party for
all its reasonable out-of-pocket costs and expenses incurred in providing such
access, personnel and cooperation. Upon assumption of the defense of any such
Third Party Claim by the Indemnifying Party, the Indemnified Party will not pay,
or permit to be paid, any part of any claim or demand arising from such Third
Party Claim, unless the Indemnifying Party consents in writing to such payment
(which consent will not be unreasonably withheld) or unless a final judgment
from which no appeal may be taken by or on behalf of the Indemnified Party is
entered against the Indemnified Party for such liability. No such Third Party
Claim may be settled by the Indemnifying Party without the written consent of
the Indemnified Party, which consent will not be unreasonably withheld. If the
Indemnifying Party fails to defend or fails to prosecute or withdraws from such
defense, then the Indemnified Party will have the right to undertake the defense
or settlement thereof, at the Indemnifying Party's expense. If the Indemnified
Party assumes the defense of such Third Party Claim pursuant to this Section and
proposes to settle such claim prior to a final judgment thereon or to forgo
appeal with respect thereto, then the Indemnified Party will give the
Indemnifying Party prompt written notice thereof and the Indemnifying Party will
45
have the right to participate in the settlement or assume or reassume the
defense of such Third Party Claim.
ARTICLE 10
TERMINATION, AMENDMENT, AND WAIVER
SECTION 10.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of CARNRITE and Purchaser;
(b) by either CARNRITE or Purchaser if there will have been instituted,
pending or threatened (and not withdrawn) any action or proceeding by any
Governmental Body seeking to prohibit or limit Purchaser from exercising all
material rights and privileges pertaining to its ownership of the Carnrite
Membership Interests;
(c) by Purchaser, if the conditions set forth in Section 8.1 above have
not been complied with or performed in any respect and such non-compliance or
non-performance is not cured or eliminated (or by its nature cannot be cured or
eliminated) by CARNRITE on or before the Closing Date;
(d) by CARNRITE, if the conditions set forth in Section 8.2 above have not
been complied with or performed in any respect and such non-compliance or
non-performance is not cured or eliminated (or by its nature cannot be cured or
eliminated) by Purchaser on or before the Closing Date.
(e) by Purchaser by giving written notice to CARNRITE (A) in the event the
any Carnrite Party has committed a material Breach of any representation,
warranty or covenant contained in this Agreement in any material respect, the
Purchaser has notified CARNRITE of the Breach, and the Breach has continued
without cure for a period of 30 days after the notice of Breach or (B) if the
Closing shall not have occurred on or before August 31, 2007 by reason of the
failure of any condition precedent under Section 8.1 hereof (unless the failure
results primarily from the Purchaser itself breaching any representation,
warranty or covenant contained in this Agreement); or
(f) by CARNRITE by giving written notice to the Purchaser (A) in the event
the Purchaser has committed a material Breach of any representation, warranty or
covenant contained in this Agreement in any material respect, the Seller has
notified the Purchaser of the Breach, and the Breach has continued without cure
for a period of 30 days after the notice of Breach or (B) if the Closing shall
not have occurred on or before August 31, 2007 by reason of the failure of any
condition precedent under Section 8.2 hereof (unless the failure results
primarily from a Carnrite Party or Carnrite Parties themselves breaching any
representation, warranty or covenant contained in this Agreement).
46
SECTION 10.2 Effect of Termination. In the event of termination in
accordance with Section 11.1 hereof, this Agreement will forthwith become void
and there will be no liability on the part of any Party hereto.
SECTION 10.3 Waiver. At any time prior to the Closing, any Party hereto
may: (a) extend the time for the performance of any of the obligations or other
acts of the other Parties hereto; (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto; or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver will be valid if set
forth in an instrument in writing signed by the Party to be bound thereby.
ARTICLE 11
GENERAL PROVISIONS
SECTION 11.1 Joint and Several Liability. All representations, warranties
and obligations of A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇▇ under this Agreement shall be joint and several.
SECTION 11.2 Survival. Each of the representations and warranties of the
Parties set forth in this Agreement or in the Ancillary Agreements delivered
pursuant to this Agreement shall survive the Closing until the first anniversary
of the Closing hereof.
SECTION 11.3 Expenses. All costs and expenses, including, without limitation,
fees and disbursements of counsel, financial advisors and accountants, incurred
in connection with this Agreement and the transactions contemplated hereby will
be paid by the Party incurring such costs and expenses, whether or not Closing
will have occurred.
SECTION 11.4 Notices. All notices, requests, claims, demands and other
communications hereunder will be in writing and will be given or made (and will
be deemed to have been duly given or made upon receipt) by delivery in person,
by courier service, by confirmed telecopy, or by registered or certified mail
(postage prepaid, return receipt requested) to the Parties at the following
addresses (or at such other address for a Party as will be specified by like
notice):
(a) if to Carnrite Parties: with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Lea ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ Stortstom
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Gillian ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
47
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to Purchaser: with a copy to:
EPiC Energy Resources, Inc. Stibbs & Co., P.C.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇ 2441 High Timbers, ▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 281-362-2704 Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
SECTION 11.5 Headings. The headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. In the event of a conflict between language or
amounts contained in the body of the Agreement and language or amounts contained
in the exhibits attached hereto, the language or amounts in the body of the
Agreement shall control.
SECTION 11.6 Severability. If any term or other provision of this
Agreement is held invalid, illegal or incapable of being enforce by any rule of
law or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties hereto
will negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.
48
SECTION 11.7 Entire Agreement. This Agreement and the Ancillary Agreements
constitute the entire agreement of the Parties hereto with respect to the
subject matter hereof and supersede all prior agreements and undertakings with
respect to the subject matter hereof, both written and oral.
SECTION 11.8 Assignment. This Agreement shall not be assigned by any Party
without the prior written consent of each of the other Parties; provided
however, that Purchaser may assign all or a portion of its rights and
obligations hereunder to one or more Affiliates of Purchaser, provided such
Affiliate agrees in writing to be bound by all of Purchaser's obligations under
this Agreement.
SECTION 11.9 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the Parties hereto and their permitted assigns and nothing herein,
express or implied, is intended to or will confer upon any other person or
entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement, except for the indemnification rights of
Purchaser Indemnitees and Seller Indemnitees under Article 11 hereof.
SECTION 11.10 Amendment; Waiver; Remedies. This Agreement may not be
amended or modified except by an instrument in writing signed by all of the
Parties. Waiver of any term or condition of this Agreement will only be
effective if in writing and will not be construed as a waiver of any subsequent
breach or waiver of the same term or condition, or a waiver of any other term or
condition of this Agreement. No right, remedy or election given by any term of
this Agreement shall be deemed exclusive but each shall be cumulative with all
other rights, remedies and elections available at law or in equity.
SECTION 11.11 Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of Texas applicable to contracts executed
and performed entirely therein, without regard to the principles of choice of
law or conflicts or law of any jurisdiction.
SECTION 11.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
SECTION 11.13 Restriction on Disclosure of Agreement Terms. No Party shall
publicly disclose or announce the subject matter of this Agreement, including,
but not limited to, the price being paid for the Carnrite Membership Interests
hereunder or the detailed terms and conditions of this Agreement (other than to
such Party's employees, directors or advisors with a need to know such
information), without each of the other Parties' prior consent; provided
however, that notwithstanding the foregoing, a Party may make such disclosures
regarding this Agreement, as it determines with the advice of its legal counsel,
are required under applicable laws and regulations or orders, decrees, inquiries
or subpoenas of any court or governmental body, Governmental Body, and in that
case such Party will give the other Party prior notice of its intention to make
such disclosure pursuant to this provision.
49
SECTION 11.14 Dispute Resolution. If a dispute arises out of or relates to
this Agreement, or the interpretation or breach thereof (a "Dispute"), and such
Dispute cannot be settled through good faith negotiation or consultation between
the Parties, the Parties each agree first to attempt to settle in good faith the
Dispute by non-binding mediation ("Mediation Period") of the initial request for
Mediation. The mediator shall be selected by mutual agreement from a list of
impartial mediators familiar with the nature of the subject matter of the
Dispute provided by the American Arbitration Association ("the "AAA"). The
Parties each agree to participate in good faith in the Mediation, and will use
reasonable commercial efforts to reach a resolution within the Mediation Period.
The Parties each will make available during the Mediation Period a
representative with authority to resolve the Dispute. The Parties may agree to
extend the Mediation beyond the Mediation Period. Upon the expiration of the
Mediation Period, should the Dispute remain unresolved, the Parties shall be
free to seek resolution of the Dispute through the state courts located in
▇▇▇▇▇▇ County, Texas.
SECTION 11.15 Time of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
SECTION 11.16 Exhibits. The Exhibits attached hereto are incorporated
SECTION 11.17 Participation Rights.
(a) Tag-Along Right. During the Tag-Along Period, in the event that ▇▇▇
▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇, acting together (the "▇▇▇▇▇ Group"), propose to make a
Tag-Along Sale, each of A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇▇ shall have the right to participate (a "Tag-Along Right") in such
sale with respect to any shares issued under Section 2.4 of this Agreement held
by them, on a pro rata basis (based on the ratio of the aggregate number of
▇▇▇▇▇ Group Shares to be sold by the ▇▇▇▇▇ Group to the aggregate number of
▇▇▇▇▇ Group Shares owned by the ▇▇▇▇▇ Group immediately prior to such sale). In
the event the ▇▇▇▇▇ Group Shares are sold at a fixed price, the shares to be
sold by A. Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ will be
sold for the same price per share received by the ▇▇▇▇▇ Group.
(b) Definitions.
(i) The term "Tag Along Sale" means the sale of the Buyer's common
stock by means of a registration statement filed with the Securities and
Exchange Commission, other than a registration statement on Form S-8.
(ii) The term "▇▇▇▇▇ Group Shares" means all shares of Buyer's stock
owned at any time by ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇.
(iii) The term "Tag-Along Period" means the period from the Closing
Date to March 28, 2009.
(iv) "Transfer" means a transfer, sale, assignment, pledge,
hypothecation or other disposition or exchange.
50
(c) Drag-Along Rights. If the ▇▇▇▇▇ Group proposes a Transfer to any Person
in a bona fide arm's-length transaction or series of transactions (including by
way of a purchase agreement, tender offer, merger or other business combination
transaction or otherwise) (the "Drag-Along Transferee") of an amount of Buyer's
stock equal to 51% or more in the aggregate of the then issued and outstanding
stock of Buyer (an "Exit Sale"), then the ▇▇▇▇▇ Group may elect to require A.
Carnrite, Tilbury, Robertson, Williams, ▇▇▇▇▇▇ and Stortstrom (the "Drag-Along
Shareholders") to Transfer, as a part of the Exit Sale to such Drag-Along
Transferee at the purchase price and upon the other terms and subject to the
conditions of the Exit Sale, that number of shares of stock issued under
Sections 2.4 and 2.5 hereof as is equal to the product of (i) a fraction, the
numerator of which is the number of shares proposed to be sold by the ▇▇▇▇▇
Group and the denominator of which is the aggregate number of shares owned by
the ▇▇▇▇▇ Group on the date of such Exit Sale and (ii) the number of shares
owned by each Drag-Along Shareholder.
IN WITNESS WHEREOF, the Carnrite Parties and Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
duly authorized representatives.
"The Carnrite Parties" "Purchaser"
THE CARNRITE GROUP, LLC EPiC ENERGY RESOURCES, INC.
By: /s/ Lea ▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
------------------------ ------------------------
Name: Lea ▇▇▇ ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: President Title: Chairman of the Board
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as Attorney-in-Fact for Lea ▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
51
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as Attorney-in-Fact for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇ join this Agreement individually only as to the
agreements set forth in Section 11.7, "Participation Rights":
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇ ▇. ▇▇▇▇▇, individually
52
List of Exhibits
1. Due Diligence Documents
2. Form of Employment Agreement
3. Form of Executive Coaching Agreement
4. Confidentiality Agreement
List of Schedules
Section
Schedule Title References
======== ===== ==========
3.1 Existance in Good Standing 3.1
3.2(a) Ownership 3.2(a)
3.2(c) No Conflicts 3.2(c)
3.3 Consents 3.3
3.4 Accounts Receivable 3.4
3.5 Financial Statements 3.5(a)(c)
3.7 Real Property 3.7
3.8 Absence of Certain Changes 3.8
3.9 No Material Change 3.9
3.10 Litigation 3.10(a)(b)(c)(d)
3.11(a) Intellectual Property 3.11(a)(b)(d)
3.12(a) Contracts 3.12(a)(c)(i)
(ii)(iii)
3.12(b) Seller's Rights under Corporation Contracts 3.12(b) 3.12(c)
Corporation Contracts Enforceability and
Termination 3.12(c)(i)(ii)(iii)
3.12(d) Corporation Contracts Compliance 3.12(d)
3.13 Customers and Suppliers 3.13
3.14(a) Employee Benefit Plans 3.14(a), 3.27(m)
3.14(c) Payment Under Employment Plan 3.14(c)
3.14(d) Termination of Employment Plans 3.14(d)
3.14(j) Worker's Compensation Coverage 3.14(j)
3.15(a) Compliance with Law 3.15(a)
3.15(b) Governmental Authorization 3.15(b)(i),
3.15
(c)
3.16(a) Tax Returns Filed and Taxes Paid 3.16(a)
3.16(b) Delivery of Tax Returns 3.16(b)
3.16(c) Post Closing Tax Liabilities 3.16(c)
Tax Attributes 3.16(e)(vii)
3.16(e)(vii)
3.17(a) Insurance 3.17(a)(i)
3.17(b) Insurance Arrangements 3.17(b)
3.17(c) Insurance Validity 3.17(c)
3.18 Environmental Laws and Regulations 3.18(a)
3.19 Products and Services 3.19
3.20 Governmental Authorizations 3.20
3.21 Subsidiaries 3.21
3.26 No Undisclosed Liabilities 3.26
3.27(a) Key Employees List 3.27(a)
3.27(b) Retired Employees 3.27(b)
3.27(c) Terminated Employees 3.27(c)
3.27(g) Increase in Compensation or Benefits 3.27(g)
3.27(h) Employee Contracts 3.27(h)
3.27(j) Employees on Leave 3.27(j)
3.27(k) Obligations to Former Employees 3.27(k)
3.27(l) Independent Contractors 3.27(l)
5.2(b) Foreign Corrupt Practices Payments 5.2(b)
==================================
5.2(e) Anti-Boycott Prohibitions 5.2(e)
=========================
5.3 Relationships with Related Persons 5.3
5.4 Title to Assets 5.4(iii)
Exhibit 1
Due Diligence Documents
See 2 attached CD's
Exhibit 2
Form of Employment Agreement
Exhibit 3
Form of Executive Coaching Agreement
Exhibit 4
Confidentiality Agreement