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Exhibit 10.16
AGREEMENT AND PLAN OF STOCK EXCHANGE
BY AND AMONG
COMPASS KNOWLEDGE HOLDINGS, INC.
AS "CKHI",
COMPASS ACQUISITION CORP.
AS THE "ACQUISITION CORP",
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
THE "STOCKHOLDER",
AND
▇▇▇▇▇▇▇▇▇▇ LEARNING GROUP, INC.
AS "RLG" OR "COMPANY"
DATED: JULY 28, 2000
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TABLE OF CONTENTS
ARTICLE I.........................................................................................................1
DEFINITIONS.......................................................................................................1
1.1 Defined Terms........................................................................................1
ARTICLE 2.........................................................................................................6
THE PURCHASE OF THE STOCKHOLDER SHARES............................................................................6
2.1 Purchase and Sale of Shares..........................................................................6
2.2 Acquisition Consideration............................................................................6
2.3 Registration Rights .................................................................................6
ARTICLE 3 ........................................................................................................6
CLOSING AND EFFECTIVE TIME........................................................................................6
3.1 Closing..............................................................................................6
3.2 Deliveries at Closing................................................................................6
ARTICLE 4.........................................................................................................7
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND RLG.........................................................7
4.1 Organization; Capitalization.........................................................................7
4.2 Authorization........................................................................................8
4.3 Consents and Approvals...............................................................................8
4.4 Title to Assets......................................................................................8
4.5 Facilities...........................................................................................8
4.6 Contracts; No Defaults...............................................................................8
4.7 No Conflict or Violation............................................................................10
4.8 RLG Financial Statements............................................................................10
4.9 Absence of Certain Changes or Events................................................................10
4.10 No Undisclosed Liabilities..........................................................................11
4.11 Accounts Receivable and Payable.....................................................................12
4.12 Inventories.........................................................................................12
4.13 Intellectual Property Rights........................................................................12
4.14 Litigation..........................................................................................13
4.15 Labor Matters.......................................................................................13
4.16 Taxes...............................................................................................13
4.17 Severance Arrangements..............................................................................14
4.18 Insurance...........................................................................................14
4.19 Purchase Commitments................................................................................14
4.20 Suppliers...........................................................................................14
4.21 Bank Accounts.......................................................................................15
4.22 Employee Benefit Plans..............................................................................15
4.23 No Brokers..........................................................................................15
4.24 No Other Agreements to Sell the Assets or Capital Stock of RLG......................................15
4.25 Books and Records...................................................................................15
4.26 Material Misstatements Or Omissions.................................................................15
4.27 Investments.........................................................................................15
4.28 Insider Interests...................................................................................15
4.29 Complaince with Laws and Orders.....................................................................15
4.30 Securities Act of 1933..............................................................................16
4.31 Definition of Knowledge.............................................................................16
ARTICLE 5........................................................................................................16
REPRESENTATIONS AND WARRANTIES OF THE BUYER......................................................................16
5.1 Organization of Buyer...............................................................................16
5.2 Authorization.......................................................................................17
5.3 No Conflict or Violation............................................................................17
5.4 Disclosure..........................................................................................17
5.5 Consents and Apporovals.............................................................................17
5.6 No Undisclosed Liabilities..........................................................................17
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5.7 Capitalization......................................................................................18
5.8 Litigation..........................................................................................18
5.9 Compliance with Law; permits........................................................................18
5.10 No Brokers..........................................................................................18
5.11 Material Misstatements or Omissions.................................................................18
5.12 Definition of Knowledge.............................................................................18
ARTICLE 6........................................................................................................19
COVENANTS OF THE STOCKHOLDER, RLG, AND THE BUYER.................................................................19
6.1 Further Assurances..................................................................................19
6.2 Conduct of Business.................................................................................19
6.3 Records.............................................................................................21
6.4 Access of the Buyer.................................................................................21
6.5 Financial Statements................................................................................21
6.6 Notification of Certain Matters.....................................................................21
6.7 No Mergers, Consolidations, Sale of Stock Etc.......................................................22
6.8 Payment of Indebtedness by Affiliates...............................................................22
6.9 Approval of Stockholder.............................................................................22
ARTICLE 7........................................................................................................22
CONDITIONS TO THE STOCKHOLDER' OBLIGATIONS.......................................................................22
7.1 Representations, Warranties and Covenants...........................................................22
7.2 No Governmental Proceedings or Litigation...........................................................22
7.3 Due Diligence.......................................................................................22
7.4 No Injunction.......................................................................................22
7.5 Certificates........................................................................................22
7.6 Corporate Documents.................................................................................23
7.7 Employment Agreement................................................................................23
7.8 Registration Rights Agreement.......................................................................23
7.9 Acquisition Consideration...........................................................................23
7.10 Closing Deliveries..................................................................................23
ARTICLE 8........................................................................................................23
CONDITIONS TO THE BUYER'S OBLIGATION.............................................................................23
8.1 Representations, Warranties and Covenants...........................................................23
8.2 No Governmental Proceedings or Litigation...........................................................23
8.3 Due Diligence and Audit.............................................................................23
8.4 No Injunction.......................................................................................23
8.5 Certificates........................................................................................23
8.6 Liens...............................................................................................24
8.7 401(k) Plan.........................................................................................24
8.8 Resignation of Officers and Directors...............................................................24
8.9 General Release.....................................................................................24
8.10 Employment Agreement................................................................................24
8.11 Closing Deliveries..................................................................................24
ARTICLE 9........................................................................................................24
ACTIONS BY THE STOCKHOLDER AND THE BUYER AFTER THE CLOSING.......................................................24
9.1 Books and Records...................................................................................24
9.2 Survival of Representations, Etc....................................................................24
9.3 Idemnification......................................................................................24
9.4 Certain Tax Matters.................................................................................28
ARTICLE 10.......................................................................................................29
MISCELLANEOUS....................................................................................................29
10.1 Termination.........................................................................................29
10.2 Assignment..........................................................................................29
10.3 Notices; Transfer of Funds..........................................................................30
10.4 Choice of Law.......................................................................................30
10.5 Submission to Jurisdiction..........................................................................30
10.6 Entire Agreement, Amendments and Waivers............................................................31
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10.7 Multiple Counterparts...............................................................................31
10.8 Expenses............................................................................................31
10.9 Invalidity..........................................................................................31
10.10 Titles;Gender.......................................................................................31
10.11 Publicity...........................................................................................31
10.12 Cumulative Remedies.................................................................................31
LIST OF EXHIBITS
Registration Rights Agreement Exhibit A
Employment Agreement for ▇▇. ▇▇▇▇▇▇▇▇▇▇ Exhibit B
General Releases Exhibit C
RLG Assignment Exhibit D
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AGREEMENT AND PLAN OF STOCK EXCHANGE
This Agreement and Plan of Stock Exchange (the "'Agreement") is entered
this 28th day of July, 2000, by and among COMPASS KNOWLEDGE HOLDINGS, INC., a
Nevada corporation ("CKHI") and COMPASS ACQUISITION CORP., a Florida corporation
(the "Acquisition Corp"), a wholly owned subsidiary of CKHI (CKHI and the
Acquisition Corp shall sometimes be hereinafter collectively known as the
"Buyer") and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (the "Stockholder") and ▇▇▇▇▇▇▇▇▇▇ LEARNING
GROUP, INC., a North Carolina corporation (hereinafter "Company" or "RLG").
BACKGROUND
A. RLG is organized under the laws of the State of North Carolina and
has no subsidiaries.
B. The Stockholder own 100% of all of the issued and outstanding
capital stock of RLG (the "RLG Shares").
C. The parties wish to provide for the terms and conditions upon which
Buyer will in a contemporaneous transaction purchase all of the capital stock of
RLG owned by the Stockholder.
D. The Boards of Directors of Buyer and RLG have approved the terms of
this Agreement.
E. The Buyer, the Stockholder and RLG desire to make certain
representations, warranties, covenants, and agreements in connection with the
transactions contemplated by this Agreement.
TERMS OF AGREEMENT
In consideration of the mutual covenants and promises contained herein
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used herein, the terms below shall have
the following meanings. Any of these terms, unless the context otherwise
requires, may be used in the singular or plural depending upon the reference.
"Acquisition Consideration" shall mean the consideration paid
to the Stockholder by the Buyer as set forth in Section 2.2 of this Agreement.
"Affiliate" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"Assets" shall mean all of RLG's, right, title and interest in
and to all properties, assets and rights of any kind, whether tangible or
intangible, real or personal, owned by RLG or in which RLG has any interest
whatsoever, including, without limitation, all of RLG's, right, title and
interest in the following:
(a) all accounts and notes receivable, refunds or deposits and
prepaid expenses (including, without limitation, any prepaid insurance
premiums);
(b) all Contract Rights;
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(c) all Leases;
(d) all Leasehold Estates;
(e) all Leasehold Improvements;
(f) all Fixtures and Equipment;
(g) all Inventory;
(h) all Books and Records;
(i) all Intellectual Property Rights;
(j) all Claims which RLG may have or hereafter acquire against
any Person;
(k) all Insurance Policies;
(l) all Permits;
(m) all computers and software and software licenses; and
(n) all available supplies, sales literature, promotional
literature, customer, supplier and distributor lists, art work, display units,
telephone and fax numbers and purchasing records of RLG; and guaranties made by
suppliers in connection with the Assets or services furnished to RLG.
"Benefit Arrangement" shall mean any employment, consulting,
severance or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including, without limitation, any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing for the same
or other benefits) or for deferred compensation, profit-sharing bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits that (i) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (ii) is entered into,
maintained, contributed to or required to be contributed to, as the case may be,
by RLG, or an ERISA Affiliate or under which RLG, or any ERISA Affiliate may
incur any liability, and (iii) covers any employee or former employee of RLG or
any ERISA Affiliate (with respect to their relationship with such entities).
"Books and Records" shall mean all books, records, lists,
ledgers, files, reports, plans, drawings and operating records of any kind
pertaining to RLG, including, without limitation, all corporate and tax books
and records of RLG.
"Buyer Material Adverse Effect" shall mean a Material Adverse
Effect on the financial condition, business, earnings, results of operations,
assets, liabilities or operations of the Buyer, taken as a whole resulting from
other than a general deterioration in the economy or events or conditions not
particular to Buyer.
"CKHI Financial Statements" shall mean (i) CKHI's consolidated
audited balance sheet dated December 31, 1999 and the related statements of
income, shareholders' equity, and cash flows for such year then ended.
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"CKHI Stock" shall mean shares of CKHI's common stock, par
value $.001 per share.
"Claims" shall mean all claims, causes of action, choses in
action, rights of recovery and rights of set-off of whatever kind or description
against any Person arising out of or relating to the Assets or relating to RLG,
or its business.
"Closing Balance Sheet" shall mean the unaudited balance sheet
of RLG, dated the Effective Date.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations.
"Company Material Adverse Effect" shall mean a Material
Adverse Effect on the financial condition, business, earnings, results of
operations, Assets, liabilities or operations of RLG resulting from other than a
general deterioration in the economy or events or conditions not particular to
RLG.
"Contract" shall mean any of the agreements, contracts,
Leases, notes, loans, evidence of indebtedness, purchase orders, letters of
credit, franchise agreements, undertakings, covenants not to compete, employment
agreements, licenses, instruments, obligations, commitments, policies, purchase
and sales orders, quotations and other executory commitments to which RLG is a
party or to which any of the Assets is subject, whether oral or written, express
or implied.
"Contract Rights" shall mean all of the rights and obligations
under each Contract with respect to RLG.
"Disclosure Schedules" shall mean the schedules executed and
delivered by RLG and the Stockholder to the Buyer which set forth any exceptions
to the representations and warranties contained in Article 4 hereof and certain
other information called for by Article 4 hereof and other provisions of this
Agreement. Unless otherwise specified, each reference in Article 4 to any
numbered section is a reference to that numbered section which is included in
the Disclosure Schedules. The Disclosure Schedules will be attached collectively
to this Agreement and shall become a material part hereof.
"Employee Plans" shall mean all RLG Benefit Arrangements,
Multiemployer Plans, Pension Plans and Welfare Plans.
"Encumbrance" shall mean any claim, lien, pledge, option,
charge, easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other rights of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future and any contingent sale or other title
retention agreement or lease in the nature thereof.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean any entity which is (or at any
relevant time was) a member of a "controlled group of corporations" with or
under "common control" with RLG as defined in Section 414(b) or (c) of the Code.
"Excluded Assets" shall mean those assets set forth on
Disclosure Schedule 1.1.1 which will include cash and cash equivalents,
computers, printers, office furniture, rugs, TV and VCR.
"Facilities" shall mean all plants, offices, manufacturing
facilities, stores, warehouses,
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improvements, administration buildings, and all real property and related
facilities owned or leased by RLG.
"Facility Leases" shall mean all of the Leases of Facilities.
"Fair Market Value" shall mean $2.00 per share.
"Fixtures and Equipment" shall mean all of the furniture,
fixtures, furnishings, machinery and equipment, spare parts, supplies, Vehicles
and other tangible personal property owned by RLG and located in, at or upon the
Facilities as of the Closing Balance Sheet Date plus all additions, replacements
or deletions since the Closing Balance Sheet Date.
"401(k) Plan" shall mean the 401(k) Profit Sharing Plans for
Employees of RLG.
"GAAP" shall mean generally accepted accounting principles in
the United States of America, as in effect from time to time, consistently
applied.
"Indebtedness" shall mean, at any date, without duplication,
(i) all obligations of RLG for borrowed money properly recordable as a liability
on the financial statements of RLG, (ii) all obligations properly recordable as
a liability on the financial statements of RLG, evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of RLG to pay the
deferred purchase price of property except trade accounts payable arising in the
ordinary course of business, (iv) the net present value of future minimum lease
payments under capital leases, (v) all Indebtedness (as defined in clauses (i)
through (iv) above) of others secured by a lien on any asset of RLG, whether or
not such Indebtedness is assumed by RLG, and (vii) all Indebtedness (as defined
in clauses (i) through (v) above) of others guaranteed by RLG.
"Insurance Policies" shall mean the insurance policies
relating to the Assets or relating to RLG listed in Disclosure Schedule 4.18.
"Inventory" shall mean (a) all of RLG inventories within the
Facilities or wherever otherwise located held for resale or lease to RLG's
customers, (b) all office supplies and similar materials of RLG located in the
Facilities or wherever otherwise located, and (c) all of the raw materials, work
in process, content, curriculum, spare parts, finished products, wrapping,
supply and packaging items, employee uniforms and similar items of RLG in the
Facilities or wherever otherwise located.
"RLG Balance Sheets" shall mean the unaudited balance sheets
of RLG, together with any notes thereto, dated December 31, 1999 and June 30,
2000.
"RLG Common Stock" shall mean the Common Stock of RLG, $1.00
par value per share.
"RLG Financial Statements" shall mean (i) the RLG Balance
Sheets for the twelve (12) month period ending December 31, 1999 and the six (6)
month period ending June 30, 2000, and the related statements of income,
shareholders' equity, and cash flows for the twelve (12) month period ending
December 31, 1999 and the six (6) month period ending June 30, 2000,
respectively.
"Laws, Orders and/or Regulations" shall mean any laws,
statutes, ordinances, regulations, rules, notice requirements, agency guidelines
and orders of any federal, state or local government and any other governmental
department or agency, including, without limitation, education, environmental
laws, energy, motor vehicle safety, public utility, zoning, building and health
codes, occupational safety and laws respecting employment practices, employee
documentation, terms and conditions of employment and wages and hours.
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"Leasehold Estates" shall mean all of the rights and
obligations of RLG as lessee under the Leases listed on a Disclosure Schedule.
"Leasehold Improvements" shall mean all of the leasehold
improvements situated in or on the property leased under the Leases.
"Leases" shall mean all of the leases of RLG listed on a
Disclosure Schedule and all other leases relating to the Assets that are not
required to be scheduled pursuant to this Agreement.
"Material Adverse Effect" shall mean there is a reasonable
likelihood that an event, occurrence, act or omission could reasonably be
expected at the time such event, occurrence, act or omission was undertaken to
result individually, or in the aggregate, in costs, expenses, claims, judgments
and/or loss of revenues in excess of $50,000.
"Multiemployer Plan" shall mean any "multiemployer plan," as
defined in Section 4001(a)(3) of ERISA, (1) which RLG or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which RLG or any ERISA Affiliate may incur
any liability and (2) which covers any employee or former employee of RLG or any
ERISA Affiliate (with respect to their relationship with such entities).
"Organizational Documents" shall mean (a) the articles or
certificate of incorporation and the bylaws or code of regulations of a
corporation; (b) the partnership agreement and any statement of partnership of a
general partnership; (c) the limited partnership agreement and the certificate
of limited partnership of a limited partnership; (d) the limited liability
company agreement and the certificate of formation (or similar document) of a
limited liability company; (e) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (f)
any amendment to any of the foregoing.
"Owned Real Property" shall mean all real property owned in
fee by RLG including, without limitation, all rights, easements and privileges
appertaining or relating thereto, all buildings, fixtures and improvements
located thereon, and all Facilities thereon, if any.
"PBGC" shall mean the Pension Benefits Guaranty Corporation.
"Pension Plan" shall mean any "employee pension benefit plan"
as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (1) which
RLG or any ERISA Affiliate maintains, administers, contributes to or is required
to contribute to, or, within the five years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which RLG or any ERISA Affiliate may incur any liability and (2) which
covers any employee or former employee of RLG or any ERISA Affiliate (with
respect to their relationship with such entities).
"Permits" shall mean all licenses, permits and other
governmental authorizations necessary to carry on the business of RLG, as
presently conducted.
"Person" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, labor union or other entity
or governmental body.
"Representative" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
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"Subsidiary" shall mean (i) any corporation in an unbroken
chain of corporations beginning with RLG if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain; (ii) any partnership in which RLG is a general
partner; or (iii) any partnership in which RLG possesses a 50% or greater
interest in the total capital or total income of such partnership.
"Tax" or "Taxes" means any federal, state, local or foreign
income, gross receipts, license, capital stock, franchise, profits, payroll,
employment, withholding, social security, unemployment, disability, real
property, ad valorem/personal property, stamp, excise, occupation, sales, use,
transfer, environmental, customs duties, value added, alternative or add-on
minimum, estimated or other tax, including any interest, penalty or addition
thereto, whether disputed or not.
"Tax Returns" shall mean any return, declaration, report,
claim for refund, information return or statement or other document (including
schedules or any related or supporting information), and including any amendment
thereof, filed or required to be filed with any governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.
"Treasury Regulations" shall mean the applicable regulations
promulgated under the Code.
"Vehicles" shall mean all automobiles and other vehicles owned
or leased by RLG.
"Welfare Plan" shall mean any "employee welfare benefit plan"
as defined in Section 3(l) of ERISA, (1) which RLG or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which RLG or any ERISA Affiliate may incur any liability and (2) which covers
any employee or former employee of RLG or any ERISA Affiliate (with respect to
their relationship with such entities).
ARTICLE 2
THE PURCHASE OF THE STOCKHOLDER SHARES
2.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of
this Agreement, on the Closing Date (as hereinafter defined), the Stockholder
shall sell to the Buyer and the Buyer shall purchase from the Stockholder all of
the shares of common stock he owns in RLG which represents 100% of all of the
capital stock of RLG which is and will be issued and outstanding as of the
Closing Date (hereinafter the RLG stock shall be called the "RLG Shares").
2.2 ACQUISITION CONSIDERATION. The Acquisition Consideration to be paid
to the Stockholder for the RLG Shares shall be as follows:
(a) One Hundred Twenty-Five Thousand (125,000) shares of CKHI
Stock will be delivered to the Stockholder, at Closing, which for these purposes
shall be valued on a per share basis at their Fair Market Value.
(b) Ten percent (10%) of the total issued and outstanding
capital stock of ▇▇▇▇▇▇, Inc. (the "▇▇▇▇▇▇ Shares") will be delivered to the
Stockholder, at Closing; and
(c) Fifty Thousand Dollars ($50,000) which will be paid to the
Stockholder at Closing.
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2.3 REGISTRATION RIGHTS. At Closing, the parties shall enter into a
Registration Rights Agreement substantially in the form attached hereto as
EXHIBIT "A"
ARTICLE 3
CLOSING AND EFFECTIVE TIME
3.1 CLOSING. Upon the terms and subject to the conditions set forth
herein, the closing of the transactions contemplated herein (the "Closing")
shall be held at 10:00 o'clock A.M., Eastern time, at the offices of CKHI on a
date which is mutually acceptable to the parties but not later than August 15,
2000 ("Closing Date"), unless the parties hereto otherwise agree.
Notwithstanding the Closing Date or the statutory date for effecting the subject
transaction, the parties hereby agree that the effective date of this
transaction shall be as of the close of business on July 31, 2000 (the
"Effective Time").
3.2 DELIVERIES AT CLOSING.
3.2.1 COMPANY STOCK CERTIFICATES. The Stockholder shall, on
the Closing Date, deliver to the Buyer certificates evidencing the RLG Shares,
duly endorsed in blank for transfer or accompanied by stock powers duly executed
in blank. The RLG certificates shall hereinafter be collectively know as the
"Certificates."
3.2.2 PAYMENT OF CONSIDERATION. At the Closing, upon surrender
of the Certificates duly endorsed by the Stockholder, CKHI shall pay to the
Stockholder the Acquisition Consideration.
3.2.3 PAYMENT TO NON-HOLDER. If the Acquisition Consideration
(or any portion thereof) is to be paid to a person other than the person in
whose name the Certificates surrendered in exchange therefor are registered, it
shall be a condition to the payment of the Acquisition Consideration that the
Certificates so surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise be in proper form for transfer, that such
transfer otherwise be proper and that the person requesting such transfer pay to
CKHI any transfer or other taxes payable by reason of the foregoing or establish
to the satisfaction of CKHI that such taxes have been paid or are not required
to be paid.
3.2.4 LOST, STOLEN, OR DESTROYED CERTIFICATES. In the event
any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and subject to such other conditions as the Board of
Directors of the CKHI may impose, CKHI shall deliver in exchange for such lost,
stolen or destroyed Certificate the Acquisition Consideration required to be
delivered in respect thereof.
3.2.5 CERTIFICATES. At the Closing, the Buyer, RLG and the
Stockholder shall deliver the Certificates and other documents and items
described in Articles 8 and 9.
3.2.6 OTHER CLOSING TRANSACTIONS. At the Closing, each of the
parties shall take such other actions required hereby to be performed by it
prior to or on the Closing Date, including, without limitation, satisfying the
conditions set forth in Articles 8 and 9.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND RLG
The Stockholder and RLG hereby jointly and severally represent and warrant to
the Buyer that, subject to the disclosures set forth in the Disclosure
Schedules, the following representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and correct:
4.1 ORGANIZATION; CAPITALIZATION.
4.1.1 RLG is duly organized, validly existing and in good
standing under the laws of the State of North Carolina and has full corporate
power and authority to conduct its business as it is presently being conducted
and to own and lease its properties and assets. Except as set forth in
Disclosure Schedule 4.1.1, RLG is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of its business or the ownership of its properties except where the failure to
be so qualified and in good standing would not have a Material Adverse Effect.
Each jurisdiction in which RLG is qualified to do business as a foreign
corporation is listed in Disclosure Schedule 4.1.1.
4.1.2 The Stockholder has delivered to the Buyer copies of the
Organizational Documents of RLG, as currently in effect.
4.1.3 The capitalization of RLG as of the date hereof and as
of the Closing (including the identity of each shareholder and the number of
shares held by each) is set forth in Disclosure Schedule 4.1.3. All of RLG's
outstanding shares of capital stock are duly authorized, validly issued, fully
paid, non-assessable and free of preemptive rights. All securities of RLG were
offered and sold in compliance with applicable federal and state securities
laws. Each Stockholder represents that he owns and will own beneficially and of
record all of the outstanding shares of capital stock as of the date hereof or
as of the Closing Date, respectively, of RLG, as set forth opposite such
Stockholder's name in Disclosure Schedule 4.1.3, free and clear of all
Encumbrances, with full right, power and authority to transfer such shares to
the Buyer. Except as set forth in Disclosure Schedule 4.1.3, there are no
outstanding subscriptions, calls, commitments, warrants or options for the
purchase of shares of any capital stock or other securities of RLG or any
securities convertible into or exchangeable for shares of capital stock or other
securities issued by RLG, or any other commitments of any kind for the issuance
of additional shares of capital stock or other securities issued by RLG. Upon
delivery to the Buyer, the capital stock of RLG will be free and clear of all
Encumbrances and shall be duly authorized, validly issued, fully paid and
non-assessable. At the Closing, the Stockholder will transfer good and
marketable title to the RLG Shares to the Buyer.
4.1.4 RLG has not at any time had any Subsidiaries, and RLG
neither owns nor holds the right to acquire (directly or indirectly) shares of
capital stock in any other Person.
4.2 AUTHORIZATION. RLG has all necessary corporate power and authority
and has taken all corporate action necessary to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and to perform its
obligations hereunder, and no other proceedings on the part of RLG are necessary
to authorize this Agreement and the transactions contemplated hereby. Each
Stockholder individually has the requisite power and authority and has taken all
action necessary to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and to perform his obligations hereunder, and
no other actions on the part of any Stockholder are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Stockholder and RLG and is a legal, valid and
binding obligation of the Stockholder and RLG, enforceable against each of them
in accordance with its terms, except as may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditors' rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
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4.3 CONSENTS AND APPROVALS. Other than as provided in Disclosure
Schedule 4.3, no notice to, declaration, filing or registration with, or
authorization, consent or approval of, or permit from, any domestic or foreign
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by the Stockholder or RLG in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
4.4 TITLE TO ASSETS. Disclosure Schedule 4.4 identifies all real and
personal property with a book value or replacement cost in excess of $5,000
owned or leased by RLG. RLG owns free and clear of any Encumbrances or, as set
forth in Disclosure Schedule 4.4, leases or has rights to use, the Assets set
forth in Disclosure Schedule 4.4, except for (i) minor liens or Encumbrances
that in the aggregate are not substantial in amount, do not materially detract
from the value of the Assets subject thereto or interfere with the present use
thereof and have not arisen other than in the ordinary course of business and
(ii) Encumbrances specifically identified in Disclosure Schedule 4.4. Except for
real and personal property individually owned by the Stockholder and identified
in Disclosure Schedule 4.4, the Assets include all assets necessary for the
conduct of the business of RLG in the ordinary course consistent with past
practice. The Assets have been maintained in accordance with normal industry
practice, are in reasonable operating condition and repair (except for ordinary
wear and tear), and are sufficient for the operation of the business of RLG as
currently conducted.
4.5 FACILITIES. RLG neither owns nor leases any Facilities.
4.6 CONTRACTS; NO DEFAULTS. Except for Contracts listed in Disclosure
Schedule 4.6, RLG is not a party to, or bound by, any Contract of any kind to be
performed after the Closing Date (i) pursuant to which it is obligated to expend
more than $10,000 in any twelve-month period and that is not subject to
cancellation on not more than 60 days' notice by RLG without penalty or
increased cost or (ii) with any Personnel or affiliates of RLG or any
Stockholder or relatives of any of the foregoing. To the knowledge of the
Stockholder and RLG, there is no default by any party to any such Contract,
which default could have a Company Material Adverse Effect. Disclosure Schedule
4.6 lists the following Contracts, agreements and other written arrangements to
which RLG is a party:
(a) any written arrangement (or group of related written
arrangements) for the lease of personal property providing for lease payments in
excess of $10,000 per annum;
(b) any written arrangement (or group of related written
arrangements) for the purchase or sale of raw materials, commodities, supplies,
products or other property or for the furnishing or receipt of services,
including, without limitation, any customer or vendor contracts in excess of
$10,000 per annum;
(c) any written arrangement (or group of related written
arrangements) concerning a partnership or joint venture with any other Person;
(d) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed or guaranteed (or
may create, incur, assume or guarantee) indebtedness (including capitalized
lease obligations) involving more than $10,000 in principal amount or under
which it has imposed (or may impose) a security interest or lien on any of its
assets, tangible or intangible;
(e) any written arrangement (or group of related written
arrangements) concerning confidentiality or non-competition arrangements;
(f) any written arrangement (or group of related written
arrangements) involving the Stockholder or any Affiliate of the Stockholder;
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(g) any Employee Plan and any written arrangement with any of
RLG's directors, officers, shareholders or employees in the nature of a
collective bargaining agreement, employment agreement or severance agreement;
(h) any written arrangement for any capital expenditure in
excess of $10,000;
(i) any other written arrangement (or group of related written
arrangements) either involving aggregate payments of more than $10,000 or not
entered into in the ordinary course of business consistent with past practice;
and
(j) any oral contract, agreement or other arrangement with
respect to any of the matters referred to in the foregoing clauses (a) through
(i) and any proposal (whether oral or written) to enter into any contract,
agreement or other arrangement (other than sales presentations made to customers
in the ordinary course of business) with respect to any of the matters referred
to in the foregoing clauses (a) through (i).
RLG and the Stockholder will deliver or make available to the Buyer a
correct and complete copy of each Contract listed in Disclosure Schedule 4.6.
Except as set forth in Disclosure Schedule 4.6, with respect to each Contract
listed, to the knowledge of the Stockholder and RLG, (A) the Contract is legal,
valid, binding, enforceable (except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law) and in full
force and effect; (B) to the knowledge of RLG and the Stockholder, no party is
in material breach or default, and no event has occurred which with notice or
lapse of time could constitute a material breach or default or permit
termination, modification or acceleration, under the Contract; and (C) to the
knowledge of RLG and the Stockholder no party has repudiated any material term
of the Contract, and there are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to RLG
under current or completed Contracts with any Person, and no such Person has
made written demand for such renegotiation.
4.7 NO CONFLICT OR VIOLATION. Except as set forth in Disclosure
Schedule 4.7, neither the execution, delivery and performance of this Agreement
nor the consummation of the transactions contemplated hereby will result in (a)
a violation of or a conflict with any provision of the Organizational Documents
of RLG, (b) a breach of, or a default under, or the creation of any right of any
party to accelerate, terminate or cancel, any Contract, Permit, authorization or
concession to which RLG is a party or by which any of the Assets are bound,
which breach or default could reasonably be expected to have a Company Material
Adverse Effect on the business or financial condition of RLG or its ability to
consummate the transaction contemplated hereby: (c) to the knowledge of RLG and
the Stockholder, a violation by RLG or any Stockholder of any law, statute,
rule, regulation, ordinance, code, order, judgment, writ, injunction, decree or
award applicable to RLG or such Stockholder, which violation could reasonably be
expected to have a Company Material Adverse Effect on the business or financial
condition of RLG or its ability to consummate the transactions contemplated
hereby; or (d) an imposition of any material Encumbrance, restriction or charge
on RLG or any of the Assets.
4.8 RLG FINANCIAL STATEMENTS. The RLG Financial Statements (a) are in
conformity with the Books and Records, (b) expect as disclosed in the notes
therein or as described in Disclosure Schedule 4.8 and except for normal
year-end accruals not contained therein, prepared in accordance with GAAP
consistently applied, and (c) except as disclosed in the notes therein or as
described in Disclosure Schedule 4.8 and except for normal year-end accruals not
contained therein, fairly and accurately present, in all material respects, the
assets, liabilities (including all reserves) and financial position of RLG as of
the respective dates thereof and the results of operations and changes in cash
flows for the periods then ended.
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4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Disclosure Schedule 4.9, since the Closing Balance Sheet Date to the knowledge
of the Stockholder and RLG, there has not been any:
(a) change in RLG's financial condition or results of
operations, other than any such changes that have not yet had and could not
reasonably be expected to have a Company Material Adverse Effect;
(b) (i) except for normal periodic increases in the ordinary
course of business consistent with past practice, increase in the compensation
payable or to become payable by RLG to any of its officers, directors,
employees, former employees, or agents (collectively, "Personnel"), (ii) grant,
payment or accrual, contingent or otherwise, for or to the credit of any of the
Personnel with respect to any bonus, incentive compensation, service award or
other like benefit, (iii) adoption, creation or amendment of any Employee Plan,
(iv) employment agreement (written or verbal) to which RLG is a party or (v)
other change in employment terms for any of RLG's officers, employees or agents;
(c) sale, lease, assignment or transfer of any of the Assets,
other than to Persons that are not Affiliates for fair consideration and in the
ordinary course of business consistent with past practice and not individually
or in the aggregate material to RLG;
(d) cancellation, compromise, waiver or release of any rights
or claims (or series of related rights or claims) either (i) involving an
Affiliate of RLG or the Stockholder, (ii) involving more than $10,000, or (iii)
outside the ordinary course of business consistent with past practice;
(e) amendment, cancellation or termination of any Contract, or
Permit (i) involving an Affiliate of RLG, or (ii) involving payments in excess
of $10,000 in the aggregate, or (iii) that are otherwise material to RLG;
(f) capital expenditure or the execution of any Lease,
Contract, or Permit (or series of related Contracts, Leases and Permits) or any
incurring of liability therefor (i) involving an Affiliate of RLG or any
Stockholder, (ii) involving payments in excess of $10,000 in the aggregate, or
(iii) outside the ordinary course of business consistent with past practice;
(g) failure to operate the business of RLG in the ordinary
course consistent with past practice and to use reasonable efforts to preserve
the business intact, to keep available to the Buyer the services of Personnel,
and to preserve for the Buyer the goodwill of RLG's suppliers, customers,
distributors and others having business relations with RLG;
(h) change in accounting methods or practices by RLG;
(i) mortgage, pledge or other encumbrance of any of the
Assets, except those resulting from taxes and special assessments not in default
and payable without penalty or interest;
(j) redemption, purchase, or other acquisition of any of RLG's
equity securities, or any other transfer of the Assets to or on behalf of any
shareholder of RLG, the Stockholder or any other Affiliate of RLG, including,
but not limited to, any payment of principal of or interest on any debt owed to
any of the foregoing or the making of any loan to any of the foregoing as an
employee of RLG;
(k) issuance by RLG of, or commitment of RLG to issue, any
shares of stock or other equity securities or obligations or securities
convertible into or exchangeable for shares of stock or other equity securities;
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(l) indebtedness incurred by RLG for borrowed money or any
commitment to borrow money entered into by RLG or any loans or guarantees made
or agreed to be made by RLG;
(m) liabilities incurred (other than for borrowed money)
involving $10,000 or more except in the ordinary course of business and
consistent with past practice and not individually or in the aggregate material
to RLG, or any increase or change in any assumptions underlying, or methods of
calculating, any bad debt, contingency or other reserves;
(n) acceleration, termination, modification, cancellation or
threatened termination or cancellation of any Contract to which RLG is a party
or by which RLG is bound, outside the ordinary course of business consistent
with past practice or involving more than $10,000 in the aggregate;
(o) capital investment in, any loan to, or any acquisition of
the securities or assets of any other Person (i) involving an Affiliate of RLG
or any Stockholder, (ii) involving more than $10,000 in the aggregate, or (iii)
outside the ordinary course of business consistent with past practice;
(p) grant of any license or sublicense of any rights under or
with respect to any Intellectual Property Rights; or
(q) agreement (either oral or written) by RLG or any Personnel
to do any of the foregoing; or other event or condition of any character that in
any one case or in the aggregate has a Company Material Adverse Effect, or any
event or condition (other than events or conditions affecting the economy
generally) known to RLG or any Stockholder that it is reasonable to expect
could, in any one case or in the aggregate, have a Company Material Adverse
Effect in the future.
4.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Disclosure
Schedule 4.10, to the knowledge of RLG and/or the Stockholder, RLG has no
liabilities or obligations (absolute, accrued, contingent or otherwise) except
(i) liabilities that are reflected and reserved against on the Closing Balance
Sheet that have not been paid or discharged since the date thereof and (ii)
liabilities incurred by RLG since the Closing Balance Sheet Date in the ordinary
course of business consistent with past practice and in accordance with this
Agreement (none of which relates to any breach of contract, breach of warranty,
tort, infringement or violation of law or arose out of any complaint, action,
suit or proceeding except those which individually or in the aggregate could not
have a Company Material Adverse Effect).
4.11 ACCOUNTS RECEIVABLE AND PAYABLE. The accounts receivable of RLG
reflected on the Closing Balance Sheet, and all accounts receivable of RLG
arising since the Closing Balance Sheet Date, represent bona fide claims against
debtors for sales made, services performed or other charges arising on or before
the date hereof, and all the goods delivered and services performed that gave
rise to said accounts were delivered or performed in accordance with the
applicable orders, Contracts or customer requirements. All accounts receivable
of RLG reflected on the Closing Balance Sheet shall be subject to no defenses,
counterclaims or rights of setoff and shall be fully collectible in the ordinary
course of business, without cost to the Acquisition Corp., RLG or CKHI, in
collection efforts therefore, except to the extent of any reserve with respect
thereto set forth on the Closing Balance Sheet (excluding the notes thereto).
The accounts payable of RLG reflected on the Closing Balance Sheet, and all
accounts payable of RLG arising since the Closing Balance Sheet Date, represent
bona fide debts of RLG for purchases made, services contracted for or other
charges arising on or before the date thereof, and all the goods purchased and
services contracted for that gave rise to said accounts were purchased or
performed in accordance with the applicable orders, Contracts or RLG
requirements.
4.12 INVENTORIES. The values at which the Inventories are shown on the
Closing Balance Sheet have been determined in accordance with the normal
valuation policy of RLG as described in the Closing Financial Statements,
consistently applied. The Inventories (and items of inventory acquired or
manufactured subsequent to the Closing Balance Sheet Date) consist only of items
of quality and
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quantity commercially usable and salable in the ordinary course of business,
except for any items of obsolete material or material below standard quality,
all of which have been written down to realizable market value, or for which
adequate reserves have been provided on the Closing Balance Sheet. All
inventories not written off have been priced at the lower of cost or market on a
first in, first out basis. The current quantities of all Inventories are
reasonable in the current circumstances of the business of RLG.
4.13 INTELLECTUAL PROPERTY RIGHTS.
4.13.1 Disclosure Schedule 4.13.1 (i) contains detailed
information (including where applicable the federal registration number and the
date of registration or application for registration and the name in which
registration was applied for) concerning (x) all of RLG's registrations of
trademarks and of other marks, trade names or other trade rights, and all
pending applications for any such registrations and all of RLG's patents and
registered copyrights and all pending applications therefor, (y) all computer
software used by RLG in the conduct of its business ("Computer Software")
indicating whether such Computer Software is owned or licensed and, if licensed,
the material terms of such license, and (z) all other trademarks and other
marks, trade names and other trade rights and all other trade secrets, designs,
plans, specifications, and other intellectual property rights of any kind of
RLG, whether or not registered which are material to the operation of RLG as it
is currently conducted, (all of the items referred to in this clause (i) being
"Intellectual Property Rights") and (ii) identifies any intellectual property
rights that any third party owns and that RLG uses or proposes to use in its
business, and specifies whether such use is or will be pursuant to license,
sublicense, agreement or permission. RLG owns (or, as set forth in Disclosure
Schedule 4.13.1, possesses adequate and enforceable licenses or other rights to
use) all Intellectual Property Rights now used or proposed to be used in its
business and has taken all reasonably necessary or appropriate action to protect
the Intellectual Property Rights. Except as set forth in Disclosure Schedule
4.13.1, no Person has a right to receive a royalty or similar payment in respect
of any Intellectual Property Rights pursuant to any contractual arrangements
entered into by RLG or otherwise. Except as set forth in Disclosure Schedule
4.13, RLG has not received notice nor has the Stockholder any reason to believe
that the use by RLG of the Intellectual Property Rights is interfering with,
infringing upon or otherwise violating the rights of any third party in or to
such Intellectual Property Rights, and no proceedings have been instituted
against or notices received by RLG alleging that RLG's use of any Intellectual
Property Rights infringes upon or otherwise violates any rights of a third party
in or to such Intellectual Property Rights, which infringement or violation
could have a Material Adverse Effect. The Intellectual Property Rights are all
those materially necessary for the operation of the business of RLG as it is
currently conducted. No employee of RLG has entered into any Contract that
restricts or limits in any way the scope or type of work in which the employee
may be engaged or requires the employee to transfer, assign, or disclose
information concerning his or her work to anyone other than RLG.
4.13.2 The source codes for all Computer Software have been
placed in back-up files that are securely stored in a location other than the
Facility or Facilities where such Computer Software is used. All databases used
in the business of RLG are periodically (at least once every week) backed-up,
and such backed-up materials are moved to and securely stored at locations other
than the Facility or Facilities where such databases are used.
4.13.3 To the knowledge of RLG and the Stockholder, all
Computer Software utilized by RLG ("Computer Software") supports the use, entry
or creation of dates on or after January 1, 2000, so that when such a date is
either processed, entered into or is intended to be generated as a result of the
operation of the Computer Software, the Computer Software shall not (i) fail or
produce incorrect date results or (ii) cause any other programs to fail or to
generate errors.
4.14 LITIGATION. Except as set forth in Disclosure Schedule 4.14, there
is no charge, complaint, action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, labor dispute, arbitrable
action or investigation (collectively, "Actions") pending or, to the
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knowledge of RLG or Stockholder, threatened against, relating to or affecting
(i) RLG or the Assets or the operation of the business of RLG as currently
operated, (ii) any Employee Plan or any trust or other funding instrument,
fiduciary or administrator thereof or (iii) the transactions contemplated by
this Agreement, before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, any of which is reasonably expected to result in a loss not covered by
insurance in excess of $10,000 or reasonably expected to have a Company Material
Adverse Effect. To the knowledge of the Stockholder and RLG, RLG is not in
default with respect to any judgment, order, writ, injunction or decree of any
court or governmental agency, and there are no unsatisfied judgments against RLG
or the business of RLG. To the knowledge of RLG and/or the Stockholder, there is
not a reasonable likelihood of an adverse determination of any pending Actions
that could, individually or in the aggregate, reasonably be expected to result
in the payment of a judgment in excess of $10,000 or have a Material Adverse
Effect. Except as set forth in Disclosure Schedule 4.14, each Action pending or,
to the knowledge of RLG and Stockholder, threatened (whether or not disclosed in
Disclosure Schedule 4.14), is covered by insurance of reputable and solvent
insurance companies, and each such applicable Insurance Policy is described in
Disclosure Schedule 4.18 and is in full force and effect, and, except as set
forth in Disclosure Schedule 4.14, RLG has not received any notice or, to the
knowledge of RLG and Stockholder, threat of cancellation, limitation or
noncoverage.
4.15 LABOR MATTERS. RLG has not had and does not have any employees.
4.16 TAXES. RLG has filed all material federal, state, local and
foreign Tax Returns that are required to be filed by it on or prior to the
Closing Date (taking into account applicable extensions), all Taxes shown as
owing by RLG on all such Tax Returns have been fully paid or properly accrued on
RLG's financial statements other than such taxes as are being contested in good
faith, and all such Tax Returns are true and correct in all material respects.
The Tax Returns accurately reflect all liability for Taxes of RLG for the
periods covered thereby. Except as set forth in Disclosure Schedule 4.16:
(a) all material Taxes which RLG is obligated to withhold from
amounts owing to any employee, creditor or third party have been fully paid or
properly accrued;
(b) RLG is not a party to any tax sharing agreements;
(c) there are no liens for Taxes upon the assets of RLG which
are not provided for on the Closing Balance Sheet except liens for Taxes not yet
due and payable and liens for taxes that are being contested in good faith;
(d) there are no outstanding written requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any material Taxes or deficiencies against RLG;
(e) no claim has ever been made by an authority in a
jurisdiction where RLG does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction;
(f) RLG does not have any liability for Taxes for (or
allocable to) any Tax year or period ending on or before the Closing Date that
has not been paid;
(g) RLG has not made, or is not (or is not a party to an
agreement under which it could be) obligated to make, any payments that will not
be deductible under Code Section 280G;
(h) RLG has disclosed on its income Tax Returns all positions
taken therein that could give rise to a substantial understatement of income
Tax;
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(i) there is no dispute or claim concerning any Tax liability
of RLG that has been made or raised by any authority in writing or as to which
RLG or any Stockholder or director or officer of RLG has knowledge;
(j) Disclosure Schedule 4.16 lists all national, estate,
local, and foreign income Tax Returns filed by or with respect to RLG for
taxable periods ended on or after December 31, 1998, and identifies those Tax
Returns that have been or are currently being audited;
(k) RLG has properly requested, received and retained all
necessary exemption certificates and other documentation supporting any claimed
exemption or waiver of Taxes on sales or other transactions as to which RLG
would have been obligated to collect or withhold Taxes.
4.17 SEVERANCE ARRANGEMENTS. Except as set forth in Disclosure Schedule
4.17, RLG has not entered into any severance or similar arrangement in respect
of any Personnel that will result in any obligation (absolute or contingent) of
the Buyer, RLG, or any other Person to make any payment to any such Personnel
following termination of employment.
4.18 INSURANCE. Disclosure Schedule 4.18 contains a complete and
accurate list of all policies or binders of fire, liability, title, worker's
compensation and other forms of insurance (showing as to each policy or binder
the carrier, policy number, coverage limits, expiration dates, annual premiums
and a general description of the type of coverage provided) maintained by RLG on
its business, Assets or Personnel. Except as set forth in Disclosure Schedule
4.18, to the knowledge of the Stockholder and RLG all of such policies are
sufficient for compliance with all requirements of law and of all Contracts to
which RLG is a party, except where the failure to comply could not reasonably be
expected to have a Company Material Adverse Effect. RLG is not in default under
any of such policies or binders, and RLG has not failed to give any notice or to
present any claim under any such policy or binder in a due and timely fashion.
Such policies and binders provide sufficient coverage, in the reasonable opinion
of RLG and the Stockholder, for the risks insured against, are in full force and
effect on the date hereof and shall be kept in full force and effect by RLG
through the Closing Date. Disclosure Schedule 4.18 contains a complete and
accurate list of all open or unresolved claims made pursuant to any insurance
policy maintained by RLG. As of the Closing, RLG shall have made any and all
claims that, to the knowledge of RLG and of the Stockholder, it is entitled to
make in accordance with the terms of any insurance policy maintained by RLG.
4.19 PURCHASE COMMITMENTS. As of the date of this Agreement, all
Contracts or commitments for the purchase of Inventory by RLG were made in the
ordinary course of business consistent with past practice. No outstanding
purchase or outstanding lease commitment of RLG presently is in excess of the
normal, ordinary and usual requirements of its business.
4.20 SUPPLIERS. Disclosure Schedule 4.20 contains a complete and
accurate list of the ten largest suppliers of RLG during RLG's last fiscal year,
showing the approximate total purchases by RLG from each such supplier during
each of the last two fiscal years. To the knowledge of RLG and Stockholder,
since the Closing Balance Sheet Date, there has been no material adverse change
in the business relationship with any supplier named in Disclosure Schedule 4.20
and no threat or indication that any such change is reasonably foreseeable.
4.21 BANK ACCOUNTS. Disclosure Schedule 4.21 contains a true and
correct list of the names of each bank, savings and loan, or other financial
institution in which RLG has an account, including cash contribution accounts,
and the names of all Persons authorized to draw thereon or with access thereto.
4.22 EMPLOYEE BENEFIT PLANS. Disclosure Schedule 4.22 contains a
complete list of Employee Benefit Plans that cover or have covered employees
and/or principals of RLG (with respect to their relationship with RLG). Said
Employee Benefit Plans set forth on Schedule 4.22 are to be assigned
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to an RLG Affiliate in accordance with the RLG Assignment attached hereto as
Exhibit "D" and are not to be transferred, conveyed or assigned to Buyer as part
of this transaction.
4.23 NO BROKERS. RLG does not and will not have any obligation to pay
any finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby. Any such fee payable by the Stockholder is
solely the obligation of the Stockholder.
4.24 NO OTHER AGREEMENTS TO SELL THE ASSETS OR CAPITAL STOCK OF RLG.
Neither RLG nor the Stockholder has any legal obligation, absolute or
contingent, to any other Person to sell or effect a sale of the capital stock of
RLG or to effect any merger, consolidation or the reorganization of RLG or to
enter into any agreement or cause the entering into of an agreement with respect
thereto, other than as set forth herein.
4.25 BOOKS AND RECORDS. RLG has made and kept (and given the Buyer
access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of RLG.
4.26 MATERIAL MISSTATEMENTS OR OMISSIONS. To the knowledge of RLG and
the Stockholder, no representations or warranties by RLG or the Stockholder in
this Agreement, nor any document, exhibit, statement, certificate or schedule
furnished or to be furnished to the Buyer pursuant hereto, or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary to make the statements or facts contained therein not misleading.
4.27 INVESTMENTS. RLG does not own or have the right to acquire,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or entity, other
than (i) non-controlling investments made in the ordinary course of business and
corporate partnering, development, cooperative marketing and similar
undertakings and arrangements entered into in the ordinary course of business,
and (ii) other investments of less than $10,000 in the aggregate.
4.28 INSIDER INTERESTS. Disclosure Schedule 4.28 sets forth all
material contracts, agreements with and other obligations to officers,
directors, employees or shareholders of RLG and their affiliates. Except as set
forth in Disclosure Schedule 4.28, no officer, director or shareholder of RLG,
and no entity controlled by any such officer, director or shareholder, and no
relative or spouse who resides with any such officer, director or shareholder
(i) owns, directly or indirectly, any material interest in any Person that is or
is engaged in business, other than on an arm's-length basis, as a competitor,
lessor, lessee, customer or supplier of RLG or (ii) owns, in whole or in part,
any tangible or intangible property that RLG uses in the conduct of its
business.
4.29 COMPLIANCE WITH LAWS AND ORDERS.
4.29.1 COMPLIANCE. Except as set forth in Disclosure Schedule
4.29.1, RLG (including each and all of its operations, practices, properties,
contracts, agreements and assets) is in compliance with all applicable Laws,
Orders and Regulations, including, without limitation, those applicable to
discrimination in employment, tax, education, insurance, brokering and referral,
advertising, occupational safety and health, trade practices, competition,
pricing and billing, zoning, building and sanitation, employment, retirement and
labor relations, product advertising and the environmental laws, except where
the failure to comply could not reasonably be expected to have a Company
Material Adverse Effect. Except as set forth in Disclosure Schedule 4.29.1,
neither RLG nor the Stockholder has received notice of any violation or alleged
violation of, and is subject to no liability for past or continuing violation
of, any Laws, Orders or Regulations which could, in any one case or in the
aggregate, reasonably be expected to have a Company or Buyer Material Adverse
Effect. All reports and returns required to be
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filed by RLG with any Government Entity have been filed, and were accurate and
complete when filed. Without limiting the generality of the foregoing,
(i) the operation of RLG's business as it is now
conducted does not, nor does any condition existing at any of its facilities, in
any manner constitute a nuisance or other tortuous interference with the rights
of any person or persons in such a manner as to give rise to or constitute the
grounds for a suit, action, claim or demand by any such person or persons
seeking compensation or damages or seeking to restrain, enjoin or otherwise
prohibit any material aspect of the conduct of such business or materially
affect the manner in which it is now conducted which could, in any one case or
in the aggregate, reasonably be expected to have a Company or Buyer Material
Adverse Effect.
RLG has made all required payments to its unemployment
compensation reserve accounts with the appropriate governmental departments of
the states where it is required to maintain such accounts, and each of such
accounts has a positive balance.
4.29.2 LICENSES AND PERMITS. To the knowledge of RLG and the
Stockholder, RLG has all licenses, permits, approvals, authorizations and
consents of all Government Entities and all certification organizations required
for the conduct of the business (as presently conducted) and operation of its
facilities, except for those Permits that could not reasonably be expected to
have a Company Material Adverse Effect if not obtained. All such licenses,
permits, approvals, authorizations and consents are described in Disclosure
Schedule 4.29.2, are in full force and effect and will not be affected or made
subject to loss, limitation or any obligation to reapply as a result of the
transactions contemplated hereby. Except as set forth in Disclosure Schedule
4.29.2, RLG (including its business, operations, properties and assets) is and
has been in compliance with all such permits and licenses, approvals,
authorizations and consents, except for those Permits that could not reasonably
be expected to have a Company Material Adverse Effect if not obtained.
4.30 SECURITIES ACT OF 1933. Each Stockholder is acquiring the CKHI's
Stock for investment purposes, solely for his or her own account and not as a
nominee or agent for any other person and not with a view to, or for offer or
sale in connection with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended (the "Act"), that would be in violation of
the securities laws of the United States of America or any state thereof,
without prejudice, however, to such Stockholder's right at all times to sell or
otherwise dispose of all or any part of the CKHI's Stock pursuant to an
effective registration statement under the Act or pursuant to an exemption from
the registration requirements of the Act.
4.31 DEFINITION OF KNOWLEDGE. Wherever in this Agreement a warranty or
representation is qualified by a word or phrase referring to RLG's or the
Stockholder knowledge, it shall mean, with respect to RLG, the actual knowledge
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, and with respect to the Stockholder, the actual knowledge
of the Stockholder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Stockholder as follows:
5.1 ORGANIZATION OF BUYER. CKHI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
the Acquisition Corp is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida, with full corporate power
and authority to own, lease, and operate their properties and to carry on their
businesses as presently conducted by them. Except as set forth in Disclosure
Schedule 5.1 or the Disclosure Package (defined below), CKHI and the Acquisition
Corp are duly qualified to do business as a foreign
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corporation and are in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of their business or the ownership of their properties except where the failure
to be so qualified and in good standing would not have a Buyer Material Adverse
Effect. Each jurisdiction in which CKHI and the Acquisition Corp are qualified
to do business as a foreign corporation is listed in Disclosure Schedule 5.1.
5.2 AUTHORIZATION. The Buyer has all necessary corporate power and
authority and has taken all corporate action necessary to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder, and no other proceedings on the part of the
Buyer are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Buyer and is a legal, valid and binding obligation of the Buyer enforceable
against them in accordance with its terms, except as may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
5.3 NO CONFLICT OR VIOLATION. Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated hereby will result in (a) a violation of or a conflict with any
provision of the Certificate or Articles of Incorporation or bylaws of the
Buyer, (b) a breach of, or a default under, any term or provision of any
contract, agreement, indebtedness, lease, commitment, license, franchise,
permit, authorization or concession to which the Buyer is a party, which breach
or default could reasonably be expected to have a Buyer Material Adverse Effect
on the business or financial condition of the Buyer or its ability to consummate
the transactions contemplated hereby or (c) to the knowledge of Buyer, a
violation by the Buyer of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree or award, which violation could reasonably be
expected to have a Buyer Material Adverse Effect on the business or financial
condition of the Buyer, or its ability to consummate the transactions
contemplated hereby.
5.4 DISCLOSURE. CKHI has made available to RLG and the Stockholder a
disclosure package consisting of the following documents filed by CKHI with the
Securities and Exchange Commission: (a) Form 10SB and (b) Form 10Q/SB
(collectively referred to as the "Disclosure Package"). To the knowledge of
CKHI, the Disclosure Package does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading. To the knowledge of Buyer nothing has occurred after
the date of the documents contained in the Disclosure Package that would
individually or in the aggregate have a Buyer Material Adverse Effect.
5.5 CONSENTS AND APPROVALS. Except as set forth on Disclosure Schedule
5.4, no notice to, declaration, filing or registration with, or authorization,
consent or approval of, or permit from, any domestic or foreign governmental or
regulatory body or authority, or any other person or entity, is required to be
made or obtained by the Buyer in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
5.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Disclosure
Schedule 5.6 or in the Disclosure Package, to the knowledge of Buyer, Buyer has
no liabilities or obligations (absolute, accrued, contingent or otherwise)
except (i) liabilities that are reflected and reserved against on the financial
statements included in CKHI's Form 10SB that have not been paid or discharged
since the date thereof and (ii) liabilities incurred by Buyer since the date
thereof in the ordinary course of business consistent with past practice and in
accordance with this Agreement (none of which relates to any breach of contract,
breach of warranty, tort, infringement or violation of law or arose out of any
complaint, action, suit or proceeding except those which individually or in the
aggregate could reasonably be expected to result in a Buyer Material Adverse
Effect.
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5.7 CAPITALIZATION. The authorized capital stock of CKHI consists of
50,000,000 shares of Common Stock, $.001 par value per share, which as of May
31, 2000, approximately 14,750,000 shares are issued and outstanding, and (ii)
5,000 shares of Preferred Stock, no par value per share, which as of May 31,
2000, 2,000 shares were issued and outstanding. All of the issued and
outstanding shares of CKHI's Stock are, and all shares of CKHI's Stock to be
issued pursuant to this Agreement will be, duly authorized, validly issued,
fully paid and non-assessable.
5.8 LITIGATION. There is no charge, complaint, action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, labor dispute, arbitrable action or investigation (collectively,
"Actions") pending or, to the knowledge of the Buyer, threatened against,
relating to or affecting (i) the Buyer or its assets or the operation of the
business of the Buyer as currently operated and as proposed to be operated, (ii)
any Employee Plan of Buyer or any trust or other funding instrument, fiduciary
or administrator thereof or (iii) the transactions contemplated by this
Agreement, before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, any of which is reasonably expected to result in a loss not covered by
insurance in excess of $50,000 or reasonably expected to have a Buyer Material
Adverse Effect. To the knowledge of the Buyer, the Buyer is not in default with
respect to any judgment, order, writ, injunction or decree of any court or
governmental agency, and there are no unsatisfied judgments against the Buyer or
the business of the Buyer. To the knowledge of the Buyer, there is not a
reasonable likelihood of an adverse determination of any pending Actions that
could, individually or in the aggregate, reasonably be expected to result in the
payment of a judgment in excess of $50,000 or reasonably be expected to result
in a Buyer Material Adverse Effect. Except as set forth in Disclosure Schedule
5.8, each Action pending or, to the knowledge of the Buyer, threatened (whether
or not disclosed in Disclosure Schedule 5.8) is covered by is covered by
insurance and each such applicable insurance policy is described in Disclosure
Schedule 5.8 and is in full force and effect, and, except as set forth in
Disclosure Schedule 5.8, Buyer has not received any notice or, to the knowledge
of Buyer, threat of cancellation, limitation or noncoverage.
5.9 COMPLIANCE WITH LAW; PERMITS. Except as set forth in Disclosure
Schedule 5.9 or in the Disclosure Package, to the knowledge of the Buyer, the
Buyer and the conduct of the business of the Buyer are in compliance with all
applicable Regulations or judgments, decisions or orders entered by any federal,
state, local, or foreign court relating to the Buyer or its assets, except where
the failure to comply could not reasonably be expected to have a Buyer Material
Adverse Effect. The Buyer has not received any written notice to the effect
that, or otherwise been advised that, it is not in compliance with any
Regulations, and the Buyer has no reason to anticipate that any currently
existing circumstances are likely to result in violations of any such
regulations which could, in any one case or in the aggregate, reasonably be
expected to have a Buyer Material Adverse Effect. To the knowledge of the Buyer,
the Buyer has all Permits, authorizations and approvals, all of which are
currently valid and in full force and effect, necessary to carry on its
business, except for those Permits that could not reasonably be expected to have
a Buyer Material Adverse Effect if not obtained.
5.10 NO BROKERS. Buyer has not incurred by virtue of a contract or an
agreement to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
5.11 MATERIAL MISSTATEMENTS OR OMISSIONS. To the knowledge of Buyer, no
representations or warranties by the Buyer in this Agreement, nor any document,
exhibit, statement, certificate or schedule furnished or to be furnished to the
Stockholder pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary to make the statements
or facts contained therein not misleading.
5.12 DEFINITION OF KNOWLEDGE. Wherever in this Agreement a warranty or
representations is qualified by a word or phrase referring to Buyer's knowledge,
it shall mean the actual or constructive
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knowledge of the Chief Executive Officer, President and/or Chief Financial
Officer of Buyer after having made due inquiry of managers of Buyer and its
subsidiaries and affiliates who they reasonably believe would be responsible for
the relevant information.
ARTICLE 6
COVENANTS OF THE STOCKHOLDER, RLG, AND THE BUYER
The Stockholder, RLG and the Buyer covenant and agree with each other as
follows:
6.1 FURTHER ASSURANCES:
6.1.1 Upon the terms and subject to the conditions contained
herein, the parties agree, both before and after the Closing, (i) to use all
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, all actions necessary to satisfy the conditions
to Closing set forth in Articles 8 and 9 hereof, (ii) to execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the transactions contemplated hereunder, and (iii)
to cooperate with each other in connection with the foregoing. Without limiting
the foregoing, the parties agree to use their respective commercially reasonable
best efforts (i) to obtain all necessary waivers, consents and approvals from
other parties to the Contracts and Leases; PROVIDED, HOWEVER, that RLG shall not
be required to make any payments, commence litigation or agree to modifications
of the terms thereof in order to obtain any such waivers, consents or approvals,
(ii) to obtain all necessary Permits as are required to be obtained under any
Regulations, (iii) to defend all Actions challenging this Agreement or the
consummation of the transactions contemplated hereby, (iv) to lift or rescind
any injunction or restraining order or other court order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby, (v)
to give all notices to, and make all registrations and filings with third
parties, including, without limitations, submissions of information requested by
governmental authorities and (vi) to fulfill all conditions to this Agreement.
The Buyer, Stockholder and RLG will promptly commence all actions required under
this Section 6.1.1.
6.1.2 The Stockholder and the Buyer agree to furnish or cause
to be furnished to each other, upon request, as promptly as practicable, such
information and assistance (including access to books and records) relating to
RLG as are reasonably necessary to respond to notices or audit requests, for the
preparation of any return with respect to Taxes or claims for refund, and for
the prosecution or defense of any claim, suit or proceeding relating to any
proposed adjustment with respect to Taxes.
6.2 CONDUCT OF BUSINESS. From the date hereof through the earlier to
occur of the Closing or the termination of this Agreement, the Stockholder
shall, except as contemplated by this Agreement, or as consented to by the Buyer
in writing, cause RLG to be operated in the ordinary course and in accordance
with past practice and will not take any action inconsistent with this Agreement
or with the consummation of the Closing. Without limiting the generality of the
foregoing, RLG shall not, and, with respect to RLG, the Stockholder shall not,
except as specifically contemplated by this Agreement, as set forth in
Disclosure Schedule 6.2, or as consented to by the Buyer in writing:
(a) change or amend the Organizational Documents of RLG;
(b) enter into, extend, materially modify, terminate or renew
any Lease or any Contract, except modifications, extensions or renewals of
Contracts in the ordinary course of business;
(c) sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets or any interests therein
except in the ordinary course of business and,
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without limiting the generality of the foregoing, RLG will maintain, dispose of,
and sell Inventory consistent with past practices;
(d) incur any liability for indebtedness for borrowed money,
guarantee the obligations of others, indemnify or agree to indemnify others or,
except in the ordinary course of business, incur any other liability;
(e) (i) take any action with respect to the grant of any
bonus, severance or termination pay (otherwise than pursuant to policies or
agreements of RLG in effect on the date hereof that are described on the
Disclosure Schedules) or with respect to any increase of benefits payable under
its severance or termination pay policies or agreements in effect on the date
hereof or increase in any manner the compensation or fringe benefits of any
employee of RLG or pay, any benefit not required by any existing Employee Plan
or policy, other than as set forth in Disclosure Schedule 6.2;
(ii) make any change in the key management structure
of RLG, including, without limitation, the hiring of additional officers or the
termination of existing officers;
(iii) adopt, enter into or amend any Employee Plan,
agreement (including, without limitation, any collective bargaining or
employment agreement), trust, fund or other arrangement for the benefit or
welfare of any employee, except for any such amendment as may be required to
comply with applicable regulations; or
(iv) fail to maintain all Employee Plans in
accordance with applicable Regulations;
(f) acquire by merger or consolidation with, or merge or
consolidate with, or purchase substantially all of the assets of, or otherwise
acquire any material assets or business of, any corporation, partnership,
association or other business organization or division thereof or acquire any
Subsidiary;
(g) willingly allow or permit to be done any act by which any
of the Insurance Policies may be suspended, impaired or canceled;
(h) enter into, renew, modify or revise any agreement or
transaction relating to RLG with any of their Affiliates;
(i) fail to maintain the Assets in substantially their current
state of repair, excepting normal wear and tear, or fail to replace (consistent
with past practice) inoperable, worn-out or obsolete or destroyed Assets;
(j) make any loans or advances relating to RLG to any
partnership, firm, individual, or corporation, except for expenses incurred in
the ordinary course of business consistent with past practice;
(k) fail to comply in all material respects with all
Regulations applicable to RLG and the Assets;
(l) change any of the accounting methods or practices of RLG
as historically applied or make any new elections or change any existing
elections with respect to Taxes;
(m) intentionally do any other act which would cause any
representation or warranty of RLG or the Stockholder in this Agreement to be or
become untrue, or any covenant in this Agreement to be breached, in any material
respect;
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(n) fail to use reasonable efforts consistent with past
business practice to (i) maintain RLG so that the services of their officers,
employees, consultants and agents will remain available to it on and after the
Closing Date, (ii) maintain existing relationships with suppliers, customers and
others having business dealings with RLG and (iii) otherwise preserve the
goodwill of the business of RLG so that such relationships and goodwill will be
preserved on and after the Closing Date;
(o) enter into any agreement, or otherwise become obligated,
to do any action prohibited hereunder;
(p) except as set forth in Disclosure Schedule 6.2, declare,
set aside for payment, or pay any dividend or distribution in respect of any
capital stock of RLG; redeem, purchase or otherwise acquire any of RLG' equity
securities; pay any bonus, fee or other payment; or otherwise transfer any of
the Assets to or on behalf of any Stockholder or any Affiliate of RLG,
including, without limitation, any payment of principal of or interest on any
debt owed to any of the foregoing or any payment of a bonus, fee or other
payment to any of the foregoing as an employee of RLG; or
(q) fail to comply with all applicable filing, payment,
withholding, collection and record retention obligations under all applicable
federal, state, local or foreign Tax laws.
6.3 RECORDS. The parties shall have prepared and made available (or, in
the case of a portion of a period ending on the Closing Date, will prepare and
make available before the Closing) to the other parties all books and working
papers that clearly demonstrate the income and activities of the parties for any
period or any portion of a period ending on or prior to the Closing Date.
6.4 ACCESS OF THE BUYER. RLG shall allow the Buyer, its counsel,
accountants, and other representatives, at Buyer's sole cost and expense, during
regular business hours to make such inspection of the Assets and to inspect and
make copies of Contracts, Books and Records or other information requested by
the Buyer and related to the operation of the business of RLG, including
historical financial information concerning the business of RLG. RLG shall
furnish to the Buyer at the their sole cost and expense, promptly upon request
(i) all such additional documents and information with respect to the affairs of
RLG relating to their business or (ii) access to Personnel and to RLG
accountants and counsel as the Buyer or its counsel or accountants may from time
to time reasonably request and shall instruct such Personnel, accountants and
counsel to cooperate with the Buyer, and to provide such information as the
Buyer and such representatives may request, at Buyer's sole cost and expense, in
all cases only to the extent the foregoing relate to the subject matter of this
Agreement. Buyer shall notify the Stockholder if it obtains knowledge of a
breach of any of RLG or the Stockholder' representations, warranties and
agreements hereunder during such investigation and Buyer shall provide a
reasonable period of time for RLG and the Stockholder if he chooses in his sole
discretion to cure such breach(es), if any, prior to the Closing.
6.5 FINANCIAL STATEMENTS. RLG shall each provide the Buyer with an
unaudited balance sheet and the related statements of income, Stockholder'
equity and cash flows for each calendar month between the date of this Agreement
and the Closing Date within 15 days after the end of each month. Such financial
statements shall (i) be in accordance with the books and records of each company
consistently applied throughout the periods indicated and (ii) except as
disclosed in the notes therein and except for normal year-end accruals not
contained therein, present fairly, as of the respective dates thereof or the
periods covered thereby, as applicable, the financial position, Stockholder'
equity, cash flows and results of operations of each company.
6.6 NOTIFICATION OF CERTAIN MATTERS. Between the date of this Agreement
and the Closing, the parties shall give prompt notice to the other parties of
(i) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty contained in
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this Agreement to be untrue or inaccurate in any material respect any time from
the date hereof to the Closing Date and (ii) any material failure of the parties
or any Affiliate, officer, director, employee, agent or stockholder of the
parties to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that such
disclosure shall not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition. During the same period, the
Stockholder shall promptly notify the Buyer of the occurrence of any breach by
the Stockholder or RLG of any covenant in this Article 6 or of the occurrence of
any event that may make the satisfaction of the conditions in Article 8
impossible or unlikely, and Buyer shall promptly notify the Stockholder of the
occurrence of any such breach or event that comes to their attention. Should any
such fact or condition require any change in any Disclosure Schedule if the
Disclosure Schedule were dated the date of the occurrence or discovery of any
such fact or condition, the Stockholder will promptly deliver to the Buyer a
supplement to the Disclosure Schedule specifying such change and such delivery
shall be deemed to cure any breach of a representation, warranty, covenant or
agreement or to satisfy any condition; provided, however, that Buyer shall not
be required to Close if any such supplement to the Disclosure Schedules
constitutes a Company Material Adverse Effect.
6.7 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC. Prior to the
earlier of the Closing or the termination of this Agreement, neither RLG or the
Stockholder will, directly or indirectly, solicit any inquiries or proposals or
enter into or continue any discussions, negotiations or agreements relating to
the sale or exchange of the RLG capital stock or the merger of RLG, or any
direct or indirect disposition of a significant amount of the Assets or the
business of RLG, any person other than the Buyer or its affiliates, or provide
any assistance or any information to or otherwise cooperate with any person in
connection with any such inquiry, proposal or transaction. In the event that RLG
or any of the Stockholder, or any of their respective Affiliates, receives an
unsolicited offer for such a transaction or obtains information that such an
offer is likely to be made, the Stockholder will provide the Buyer with notice
thereof as soon as practical after receipt, including the identity of the
prospective purchaser or soliciting party.
6.8 PAYMENT OF INDEBTEDNESS BY AFFILIATES. The Stockholder will cause
all indebtedness owed to RLG by the Stockholder or any other Affiliate of such
Stockholder to be paid in full on or prior to Closing.
6.9 APPROVAL OF STOCKHOLDER. At Closing, RLG and Stockholder shall
deliver a Joint Written Consent of the Board of Directors of RLG and the
Stockholder approving and adopting the Agreement and all other actions
contemplated by this Agreement which require approval and adoption by such
shareholders and/or Board of Directors.
ARTICLE 7
CONDITIONS TO THE STOCKHOLDER'S OBLIGATIONS
The obligations of the Stockholder to consummate the transactions
provided for hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by the
Stockholder in accordance with Section 10.6 hereof:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of the Buyer contained in this Agreement shall be true and correct in
all material respects (except with respect to representations and warranties
which are qualified as to materiality or Material Adverse Effect, which
representations and warranties shall be true and correct) as of the date of this
Agreement and as of the Closing Date as though made on the Closing Date, and the
Buyer shall have performed all agreements and covenants required hereby to be
performed by it prior to or at the Closing Date.
7.2 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION. No action by any
governmental authority or other person shall have been instituted or threatened
for the purpose of enjoining or preventing the
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transactions contemplated by this Agreement, that (i) questions the validity or
legality of the transactions contemplated hereby, (ii) could reasonably be
expected to have a Buyer Material Adverse Effect, or (iii) seeks to enjoin
consummation of the transactions contemplated hereby or could reasonably be
expected to cause any of the transactions contemplated by this Agreement to be
rescinded following consummation.
7.3 DUE DILIGENCE. RLG and the Stockholder shall be reasonably
satisfied, with the results of their due diligence examination of the Buyer
7.4 NO INJUNCTION. No injunction or restraining order shall be in
effect prohibiting the transactions contemplated hereby.
7.5 CERTIFICATES. The Buyer will furnish the Stockholder with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article 7 as may be reasonably requested by the
Stockholder.
7.6 CORPORATE DOCUMENTS. The Stockholder shall have received from the
Buyer resolutions adopted by the board of directors of the Buyer approving this
Agreement and the transactions contemplated hereby, certified by an officer of
CKHI.
7.7 EMPLOYMENT AGREEMENT. At the Closing, RLG shall have entered into
Employment Agreements with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ substantially in the forms
attached hereto as Composite Exhibit B.
7.8 REGISTRATION RIGHTS AGREEMENT. CKHI shall have entered into and
delivered to the Stockholder the Registration Rights Agreement substantially in
the same form of Exhibit A attached hereto.
7.9 ACQUISITION CONSIDERATION. CKHI shall have paid to the Stockholder
the Acquisition Consideration.
7.10 CLOSING DELIVERIES. RLG and the Stockholder shall have received at
or prior to the Closing all documents set forth in this Article 7 and such other
documents, instruments, or certificates of Buyer that they may reasonably
request.
ARTICLE 8
CONDITIONS TO THE BUYER'S OBLIGATION
The obligations of the Buyer to consummate the transactions provided
for hereby are subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions, each of which may be waived by the Buyer in
accordance with Section 10.6 hereof:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of each of RLG and the Stockholder contained in this Agreement shall
be true and correct in all material respects (except with respect to
representations and warranties which are qualified as to Company Material
Adverse Effect, which representations and warranties shall be true and correct)
as of the date of this Agreement and as of the Closing Date as though made on
the Closing Date, RLG and the Stockholder shall have performed all agreements
and covenants required hereby to be performed by any of them prior to or at the
Closing Date.
8.2 NO GOVERNMENTAL PROCEEDINGS OR LITIGATION. No Action by any
governmental authority or other person shall have been instituted or threatened
for the purpose of enjoining or preventing the
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transactions contemplated by this Agreement, that (i) questions the validity or
legality of the transactions contemplated hereby, (ii) could reasonably be
expected to have a Company Material Adverse Effect, or (iii) seeks to enjoin
consummation of the transactions contemplated hereby or could reasonably be
expected to cause any of the transaction contemplated by this Agreement to be
rescinded following consummation.
8.3 DUE DILIGENCE AND AUDIT. Buyer shall be reasonably satisfied, in
its sole and absolute discretion, with the results of it's due diligence
examination of RLG and the audits of RLG by its certified public accountants all
costs and expenses of which Buyer shall pay for.
8.4 NO INJUNCTION. No injunction or restraining order shall be in
effect prohibiting the transactions contemplated hereby.
8.5 CERTIFICATES. The Stockholder will have furnished the Buyer with
such certificates of the officers of RLG and others to evidence compliance with
the conditions set forth in this Article 9 as may be reasonably requested by the
Buyer.
8.6 LIENS. If and as requested by Buyer, any liens specifically
designated in Disclosure Schedule 4.4 as needing to be terminated an released
shall have been terminated and released.
8.7 401(k) PLAN. RLG shall have taken all action necessary to terminate
the 401(k) Plan in compliance with applicable law and such terminations shall
have no adverse effect on RLG or the Buyer.
8.8 RESIGNATION OF OFFICERS AND DIRECTORS. Each officer and director of
RLG shall have resigned from such position.
8.9 GENERAL RELEASE. Each Stockholder shall have executed a General
Release in favor of the Acquisition Corp, RLG and CKHI substantially in the same
form as set forth in Exhibit C attached hereto.
8.10 EMPLOYMENT AGREEMENT. ▇▇. ▇▇▇▇▇▇▇▇▇▇ shall have entered into and
delivered to the Buyer the Employment Agreement substantially in the same form
of Exhibit B attached hereto.
8.11 CLOSING DELIVERIES. Buyer shall have received at or prior to the
Closing all documents set forth in this Article 8 and such other documents,
instruments, or certificates of RLG and the Stockholder that it may reasonably
request.
ARTICLE 9
ACTIONS BY THE STOCKHOLDER AND THE BUYER
AFTER THE CLOSING
9.1 BOOKS AND RECORDS. The Stockholder and the Buyer agree that each
will cooperate with and make available to the other party, during normal
business hours, all Books and Records, information and Personnel (without
substantial disruption of employment) retained and remaining in existence after
the Closing Date that are related to the business of RLG and that are necessary
or useful in connection with any tax inquiry, audit, investigation or dispute,
any litigation or investigation or any other matter requiring any such Books and
Records, information or Personnel for any reasonable business purpose. The party
requesting any such Books and Records, information or Personnel shall bear all
of the out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for salaries and employee benefits)
reasonably incurred in connection with providing such Books and Records,
information or Personnel.
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9.2 SURVIVAL OF REPRESENTATIONS, ETC. All of the representations and
warranties made by each party in this Agreement or in any attachment, Exhibit,
Disclosure Schedule, certificate, document or list attached to this Agreement
shall survive the Closing for the period ending two (2) years after the Closing
(and claims based upon or arising out of such representations and warranties may
be asserted at any time before such date). Each party hereto shall be entitled
to rely upon the representations and warranties of the other party set forth in
this Agreement. The termination of the representations and warranties provided
herein shall not affect the rights of a party in respect of any Claim made by
such party in a writing received by the other party prior to the expiration of
the applicable survival period provided herein.
9.3 INDEMNIFICATION.
9.3.1 By the Stockholder.
(i) The Stockholder shall jointly and severally
(among the ▇▇▇▇▇▇▇▇ Stockholders) and severally but not jointly (between the
▇▇▇▇▇▇▇▇ Stockholders and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇) indemnify, save and hold harmless
the Buyer, its Affiliates and Subsidiaries, and its Representatives, from and
against any and all Damages incurred in connection with, arising out of,
resulting from or incident to:
(A) any material breach of any
representation or warranty or the inaccuracy of any representation, made by RLG
or any Stockholder in or pursuant to this Agreement;
(B) any material breach of any covenant or
agreement made by RLG or any Stockholder in or pursuant to this Agreement which
by its terms survives the Closing as provided herein;
(C) the operations of RLG prior to and as of
the Closing Date;
(D) all Compliance representations disclosed
or required to be disclosed under Section 4.30, respectively, hereof;
(E) all claims, causes of action, choses in
action, rights of recovery of whatever kind or description against RLG and/or
the Stockholder arising out of goods sold or installed or services performed
prior to the Closing; and
(F) all RLG Taxes owed for periods prior to
and as of the Closing Date.
(ii) The Stockholder shall indemnify, save and hold
harmless the Buyer, their Affiliates, Subsidiaries, and Representatives, on an
after-tax basis, from and against any and all RLG Taxes and any and all Damages
related to Taxes of RLG with respect to any Tax year or portion thereof ending
on or before the Closing Date (and for any Tax year beginning before and ending
after the Closing Date, for the portion of such year ending on the Closing
Date).
(iii) All payments to be made pursuant to this
Section 9.3.1 shall be paid in cash and/or CKHI Stock as valued in Section
9.3.11 below, promptly by the Stockholder after the resolution of any dispute
between the Stockholder and the indemnified parties regarding the extent and
amount of such indemnification.
9.3.2 BY THE BUYER. The Buyer shall indemnify, save and hold
harmless the Stockholder and their Representatives from and against any and all
Damages incurred in connection with, arising out of, resulting from, or incident
to (i) any material breach of any representation or warranty or
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the inaccuracy of any representation, made by the Buyer in or pursuant to this
Agreement, (ii) any material breach of any covenant or agreement made by the
Buyer in or pursuant to this Agreement which by its terms survives the Closing
and (iii) the operations of RLG after the Closing Date other than those damages
resulting from (x) a breach of this Agreement; or any agreement entered into
between the parties as contemplated by this transaction, (y) the Stockholder
acting outside the scope of his duties and/or responsibilities as contemplated
in or by this Agreement or any agreement entered into between the parties in
connection with this transaction, or (z) willful misconduct of the Stockholder.
The Buyer shall indemnify, save and hold harmless the Stockholder and their
Representatives, on an after-tax basis, from and against any and all Taxes and
any and all Damages related to Taxes of RLG with respect to any Tax year or
portion thereof beginning after the Closing Date (and for any Tax year beginning
before and ending after the Closing Date, for the portion of such year ending
after the Closing Date). All payments to be made pursuant to this Section 9.3.2
shall be paid in cash promptly by the Buyer after the resolution of any disputes
between the Buyer and the Indemnified parties regarding the extent and amount of
such indemnification.
9.3.3 LITIGATION. All unresolved disputes between the parties
will be settled by a court of competent jurisdiction, without jury trial, in
accordance with Section 10.5 hereof.
9.3.4 DEFENSE OF CLAIMS. If a claim for Damages (an "Indemnity
Claim") is to be made by a party entitled to indemnification hereunder against
the indemnifying party, the party claiming such indemnification shall, subject
to Section 9.3 hereof, give written notice (a "Claim Notice") to the
indemnifying party as soon as practicable after the party entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section 9.3.
If any lawsuit or enforcement action is filed against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable (and in any event within 15
calendar days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual prejudice caused by such failure. After such notice, the
indemnified party against which such claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have the right to
undertake, at the indemnifying party's cost and expense, the defense, compromise
or settlement of such claim on behalf of and for the account and risk of the
indemnifying party, provided that the indemnifying party shall have the
opportunity to advise and comment on the Indemnity Claim. The indemnified party
will keep the indemnifying party reasonably informed of the progress of any such
defense, compromise or settlement. The indemnifying party shall be liable for
any settlement of any action effected pursuant to and in accordance with this
Section 9.3 and for any final judgment (subject to any right of appeal), and the
indemnifying party agrees to indemnify and hold harmless an indemnified party
from and against any Damages by reason of such settlement or judgment.
The obligations and liabilities of the parties hereto with
respect to their respective indemnities pursuant to this Section 9.3 resulting
from any Claim shall be subject to the following additional terms and
conditions:
(i) The indemnifying party shall have the right to
undertake, by counsel or other representatives of its own choosing, the defense
or opposition to such Claim.
(ii) In the event that the indemnifying party shall
elect not to undertake such defense or opposition, or within ten (10) days after
notice of any such Claim from the indemnified party shall fail to defend or
oppose, the indemnified party (upon further written notice to the indemnifying
party) shall have the right to undertake the defense, opposition, compromise or
settlement of such Claim, by counsel or other representatives of its own
choosing, on behalf of and for the account and risk of the indemnifying party
(subject to the right of the indemnifying party to assume defense of or
opposition to such Claim at any time prior to settlement, compromise or final
determination thereof).
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(iii) Anything in this Section 9.3.4 to the contrary
notwithstanding: (a) the indemnified party shall have the right, at its own cost
and expense, to participate in the defense, opposition, compromise or settlement
of the Claim; (b) the indemnifying party shall not, without the indemnified
party's written consent, settle or compromise any Claim or consent to entry of
any judgment which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the indemnified party of a release from all
liability in respect of such Claim; and (c) in the event that the indemnifying
party undertakes defense of or opposition to any Claim, the indemnified party,
by counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the indemnifying party and its
counsel or other representatives concerning such Claim and the indemnifying
party and the indemnified party and their respective counsel or other
representatives shall cooperate in good faith with respect to such Claim.
9.3.5 LIABILITY. The provisions of this Section shall cover
all liabilities of whatever kind, nature or description relating, directly or
indirectly, to liability, litigation (to the extent not covered by insurance) or
claims against the Buyer, RLG or the Stockholder (other than liabilities or
claims against any Person acquired by the Buyer or RLG after the Closing) in
connection with, arising out of, or relating to services performed or products
sold by RLG or their agents or contractors prior to the Closing.
9.3.6 BROKERS AND FINDERS. Pursuant to the provisions of this
Section 9.3, each of the Buyer and the Stockholder shall indemnify, hold
harmless and defend the other party from the payment of any and all broker's and
finder's expenses, commissions, fees or other forms of compensation which may be
due or payable from or by the indemnifying party (and in the case of the
Stockholder, if due or payable from or by RLG), or may have been earned by any
third party acting on behalf of the indemnifying party in connection with the
negotiation and execution hereof and the consummation of the transactions
contemplated hereby.
9.3.7 REPRESENTATIVES. No individual Representative of any
party shall be personally liable for any Damages under the provisions contained
in this Section 9.3. Nothing herein shall relieve either party of any liability
to make any payment expressly required to be made by such party pursuant to this
Agreement.
9.3.8 DAMAGES. As used in this Section 9.3, the term "Damages"
shall mean any and all costs, losses, (including, without limitation, diminution
in value),Taxes, liabilities, obligations, damages, including payments made
pursuant to this Article 9 lawsuits, deficiencies, claims, demands, and expenses
(whether or not arising out of third-party claims), including, without
limitation, interest, penalties, costs of mitigation, losses in connection with
any Environmental Law (including, without limitation, any clean-up or remedial
action), lost profits and other losses resulting from any shutdown or
curtailment of operations of the damaged entity, damages to the environment,
reasonable attorneys' fees, all amounts which would constitute Damages but for
payments received under any insurance policy the premium for which has been paid
by any Person that is an Affiliate of the other party, other than the damaged
entity, and all amounts paid in investigation, defense or settlement of any of
the foregoing. The term "Damages" as used in this Section 9.3 is not limited to
matters asserted by third parties against the Stockholder or the Buyer, but
includes Damages incurred or sustained by the Stockholder or the Buyer in the
absence of third-party claims.
9.3.9 MATERIALITY. The parties recognize that many of the
representations, warranties and covenants set forth in this Agreement are
qualified by the term "MATERIAL". For purposes of this Agreement, the parties
hereby agree that a "MATERIAL" event(s) has occurred if the impact of such
event(s) has resulted or is reasonably likely to result in costs, expenses
and/or damages for any event(s) singularly or in the aggregate in excess of
Fifty Thousand Dollars ($50,000.00).
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9.3.10 PAYMENTS. The parties hereby agree that any payment
with respect to any indemnity required pursuant to this Section 9.3 may be
offset against any payments otherwise due by the indemnified party to the
indemnifying party.
9.3.11 LIMITATION. The parties agree that the indemnification
provisions set forth in this Article shall be limited to all Claims,
individually or in the aggregate, in excess of Fifty Thousand Dollars
($50,000.00) (the "Threshold"). Once a Claim(s) exceeds the Threshold, if a
party is entitled to indemnification under this Section 9.3, such party shall
recover all appropriate funds, as provided in this Section 9.3, only to the
extent that such indemnification amount exceeds the Threshold amount. Further,
the indemnitors shall not be liable for any liabilities resulting from Claims
that are covered by any insurance policy or other indemnity or contribution
agreement unless, and only to the extent that, the full limit of such insurance
policy, indemnity or contribution agreement has been exceeded. The party
entitled to indemnification shall have a duty to mitigate its damages.
Notwithstanding the foregoing, the maximum
indemnity obligation of any indemnifying party with respect to any indemnity
required pursuant to this Section 9.3 shall not exceed 3 shall not exceed the
amount of the Acquisition Consideration. For purposes of this section only, a
share of CKHI Stock shall be valued as follows: (1) if the principal market for
such stock is a national securities exchange, the 120 day trailing average of
the closing prices per share of such stock as reported by such exchange or on a
composite tape reflecting transactions on such exchange, (2) if the principal
market for such stock is not a national securities exchange and such stock is
quoted on The Nasdaq Stock Market ("NASDAQ"), and (i) if actual closing price
information is available with respect to such stock, the 120 day trailing
average of the closing prices per share of such stock on Nasdaq, or (ii) if such
information is not available, the 120 day trailing average of the bid prices per
share of such stock on Nasdaq, or (3) if the principal market for such stock is
not a national securities exchange and such stock is not quoted on Nasdaq, the
120 day trailing average of the closing prices per share of such stock as
reported on the OTC Bulletin Board Service or by National Quotation Bureau,
Incorporated or a comparable service; PROVIDED, HOWEVER, that if clauses (1),
(2) and (3) of this Section are all inapplicable, or if no trades have been made
or no quotes are available for such day, the fair market value of such stock
shall be determined as follows: The Stockholder and CKHI shall each appoint an
appraiser and the two appraisers appointed shall have fifteen (15) days to
appoint a third appraiser. Each of such appraisers shall be engaged in the
business of providing appraisals of stock similar to the CKHI Stock. The
Stockholder and CKHI shall pay the fee of the appraisers it appoints plus
one-half of the third appraiser's fee. Within thirty (30) days following the
appointment of the third appraiser, the two originally selected appraisers shall
each submit a sealed appraisal to the Stockholder and CKHI. If after the
appraisals have been submitted and the Stockholder and CKHI are unable to agree
upon an acceptable fair market value within fifteen (15) days, the third
appraiser shall select one of the two previously submitted appraisals as the
Fair Market Value of a share of CKHI Stock. The selection by the third appraiser
shall be final and binding upon the parties. Any delay caused by the appraisal
procedures shall cause the closings otherwise contemplated herein to accommodate
such delay.
9.4 CERTAIN TAX MATTERS. The following provisions shall govern the
allocation of responsibility as between the Buyer and RLG on the one hand and
the Stockholder on the other hand for certain tax matters following the Closing:
(a) For any Tax years ending on or before the Closing Date,
the Stockholder shall prepare or cause to be prepared all Tax Returns for RLG
which are required to (or pursuant to an extension may) be filed after the
Closing Date. Subject to the requirements of applicable law, each such Tax
Return shall be prepared in a manner consistent with the RLG's past practices.
Each income Tax Return of RLG shall be submitted to the Buyer at least 30 days
prior to the due date (including any extension thereof) for filing such Tax
Returns, and the Stockholder shall permit the Buyer to make comments on each
such Tax Return prior to the filing thereof. The Stockholder shall file timely
or cause to be filed timely such Tax Returns. The Buyer agrees that it will
consent to an election of RLG to close
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its books for federal tax purposes as of the Closing Date, in accordance with
Section 1362(e)(3) of the Internal Revenue Code of 1986, as amended, and that
the "S short year" of RLG (as such term is defined in Code Section 1362(e))
ending on the Closing Date will be considered a Tax year ending on the Closing
Date for purposes of this Section 9.4. RLG and the Stockholder agrees that he
will consent to an election pursuant to Section 338(h)(10) of the Code by filing
Form 8023 such that RLG shall be treated as having sold all of its assets at the
Effective Date at fair market value in a single transaction and shall be treated
as a new corporation which purchased all of such assets as of the beginning of
the day after the Effective Date provided, however, Buyer shall pay the
Stockholder with respect to any tax differential that results from such
election.
(b) The Buyer, RLG, and the Stockholder shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section 9.4 and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include
provision of appropriate powers of attorney or similar authorizations, the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. CKHI shall retain all books and records with respect to Tax matters
pertinent to RLG relating to any tax periods and shall abide by all record
retention agreements entered into with any taxing authority, and shall give the
Stockholder reasonable written notice prior to transferring, destroying or
discarding any such book and records prior to the expiration of the applicable
statute of limitations for that tax period, and if the Stockholder so request in
the event of any proposed destruction or discarding of the books and records,
CKHI shall allow the Stockholder to take possession of such books and records.
Buyer and the Stockholder shall, upon request, use their best efforts to obtain
any certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby). Each party shall pay its own expenses incurred in
complying with this Section 9.4(b).
(c) The Stockholder shall, at their expense, be entitled to
control any Tax audit of RLG to the extent such audit affects or may affect the
amount or character of income, gain or loss includible by the Stockholder for
periods or portions thereof ending on or before the Closing Date. The Buyer
shall control all Tax audit issues of RLG that the Stockholder are not entitled,
or does not elect, to control.
ARTICLE 10
MISCELLANEOUS
10.1 TERMINATION.
10.1.1 TERMINATION. This Agreement may be terminated at any
time prior to Closing:
(i) By mutual written consent of the Buyer and the
Stockholder;
(ii) By the Buyer or the Stockholder if the Closing
shall not have occurred on or before August 15, 2000;
(iii) By the Buyer if there is a breach of any
representation or warranty set forth in Article 4 hereof or any covenant or
agreement to be complied with or performed by RLG or the Stockholder pursuant to
the terms of this Agreement which breach constitutes a Company Material Adverse
Effect, or the failure of a condition set forth in Article 8 to be satisfied
(and such condition is not waived in writing by the Buyer) on or prior to the
Closing Date; PROVIDED, HOWEVER, that the Buyer may not
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terminate this Agreement prior to the Closing if the Stockholder have not had an
adequate opportunity to cure such failure; or if the Buyer is in breach or
default of any provision of this Agreement at that time; or
(iv) By the Stockholder if there is a breach of any
representation or warranty set forth in Article 5 hereof or of any covenant or
agreement to be complied with or performed by the Buyer pursuant to the terms of
this Agreement which breach constitutes a Buyer Material Adverse Effect or the
failure of a condition set forth in Article 7 to be satisfied (and such
condition is not waived in writing by the Stockholder) on or prior to the
Closing Date, PROVIDED, HOWEVER, that the Stockholder may not terminate this
Agreement prior to the Closing Date if the Buyer has not had an adequate
opportunity to cure such failure or if the Stockholder is in breach or default
of any provision of this Agreement at that time.
10.1.1 IN EVENT OF TERMINATION. In the event of termination of
this Agreement:
(i) each party will redeliver all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same;
(ii) no confidential information received by any
party with respect to the business of any other party or its Affiliates shall be
disclosed to any third party, unless required by law; and
(iii) In the event that this Agreement shall be
terminated pursuant to Section 10.1.1(i) hereof, all obligations of the parties
hereto under this Agreement shall terminate and there shall be no liability of
any party hereto to any other party and each party hereto shall bear its own
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Agreement. The termination of this Agreement except pursuant
to Section 10.1.1(i) shall not affect the right of any party to bring an action
for breach of this Agreement.
10.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that the Buyer may, without such consent,
assign all of such rights to any lender as collateral security and assign all
such rights and obligations to a wholly-owned subsidiary (or a partnership
controlled by the Buyer) or subsidiaries of the Buyer or to a successor in
interest to the Buyer which shall assume all obligations and liabilities of the
Buyer under this Agreement provided that Buyer shall also remain responsible for
all obligations and liabilities under this Agreement unless the parties
otherwise agree in writing. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and no other person shall have any right,
benefit or obligation under this Agreement.
10.3 NOTICES; TRANSFER OF FUNDS. All notices, requests, demands and
other communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service; and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
IF TO THE BUYER: Compass Knowledge Holdings, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Stockholder: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With copies to:
If to RLG: ▇▇▇▇▇▇▇▇▇▇ Learning Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Fax:
or to such other place and with such other copies as any party may
designate as to itself by written notice to the others.
10.4 CHOICE OF LAW. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the internal laws of the
State of Florida, United States of America without reference to its choice of
law provisions, except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.
10.5 SUBMISSION TO JURISDICTION. Subject to the provisions of Section
10.4 hereof, (i) if RLG or the Stockholder commence any legal proceedings
arising out of or relating to this Agreement or transactions contemplated
hereby, such party hereby submits to the non-exclusive jurisdiction of the
United States District Courts for the Middle District of Florida, Orlando
Division and of any Florida State court sitting in Orlando, Florida, for
purposes of such legal proceedings, and (ii) if Buyer commenced any legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby, Buyer hereby submits to the exclusive jurisdiction of the
United States District Courts for the ____ District of North Carolina and of any
North Carolina State court sitting in Charlotte, North Carolina, for purposes of
such legal proceedings. Each party to this Agreement hereby irrevocably waives,
to the fullest extent permitted by law, any objections which it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
10.6 ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS. This Agreement, together
with all Exhibits and schedules hereto (including the Disclosure Schedules),
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
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10.7 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute one and the same instrument.
10.8 EXPENSES. Except as otherwise specified in this Agreement, the
Stockholder shall be responsible for its and RLG legal, accounting,
out-of-pocket and other expenses incident to this Agreement and to any action
taken by such party in preparation for carrying this Agreement into effect. CKHI
shall be responsible for its legal, accounting, out-of-pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect.
10.9 INVALIDITY. In the event that any one or more of the immaterial
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10.10 TITLES; GENDER. The titles, captions or headings of the Articles
and Sections herein, and the use of a particular gender, are for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
10.11 PUBLICITY. The Buyer in consultation with and following notice to
the Stockholder, may issue or make an appropriate press release or public
announcement after the execution and delivery of this Agreement. Except as
required by law, neither RLG nor the Stockholder may issue any press release or
make any public statement regarding the transactions contemplated hereby,
without the prior approval of the other parties.
10.12 CUMULATIVE REMEDIES. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have in equity or at law, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on their respective behalf, by their respective officers thereunto duly
authorized, all as of the day and year first above written.
"CKHI"
COMPASS KNOWLEDGE HOLDINGS, INC.
By:
-----------------------------------
"BUYER"
COMPASS ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CEO
"STOCKHOLDER"
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
"RLG"
▇▇▇▇▇▇▇▇▇▇ LEARNING GROUP, INC.
By:
-----------------------------------
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