EXHIBIT 1
EXHIBIT
Exhibit 1. Stock Purchase Agreement
EXHIBIT No. 1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of August 7,
2000, is made and entered into by and between CBQ, INC. ("CBQ"), a Colorado
corporation, Quantum Technology Group, Inc. ("Company"), a Maryland corporation,
and the parties listed on Exhibit A (individually "Seller" and collectively
"Sellers"), whose domiciles are specified therein.
WHEREAS, dpi Net Solutions, Inc., a Maryland corporation, ProWare, Inc., a
Maryland corporation, and Quantum Technology Distribution, Inc., a Maryland
corporation, are wholly owned subsidiaries of the Company (collectively referred
to as "Company Subsidiaries");
WHEREAS, Sellers together own One Million Seventy-Four Thousand One Hundred
Ninety-Nine (1,074,199) shares (the "Shares") of Company, in such class
divisions and at such par values as are set forth in Exhibit A ("Company Common
Stock"), such Shares constituting all the issued and outstanding shares of
common stock of the Company;
WHEREAS, the authorized common stock of CBQ consists of Five Hundred
Million (500,000,000) shares of common stock, par value one tenth of one cent
($0.001) per share (the "CBQ Common Stock");
WHEREAS, the Sellers desire to sell, and CBQ desires to purchase, the
Shares on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, for Federal income tax purposes, it is intended that CBQ's
acquisition of the Shares will qualify as a reorganization under the provisions
of Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, for accounting purposes, it is intended that CBQ's acquisition of
the Shares will be accounted for as a "pooling of interests;" and
WHEREAS, Sellers, CBQ, and Company desire to make certain representations,
warranties, covenants, and agreements in connection with, and establish various
conditions precedent to, the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
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1.01 Purchase and Sale. Each Seller agrees to sell to CBQ, and CBQ agrees
to purchase from each Seller, all of the right, title and interest of each
Seller in and to the Shares at the Closing (as defined in Section 1.03) on the
terms and subject to the conditions set forth in this Agreement.
1.02 Issuance of CBQ Common Stock.
(a) In consideration for the sale by the Sellers of the Shares to CBQ,
CBQ will issue to each of the Sellers on the Closing Date (defined in Section
1.03 below) a pro rata portion of Eleven Million Five Hundred Ninety-Three
Thousand One Hundred Eighty (11,593,180) shares of CBQ Common Stock. All of the
shares of CBQ Common Stock issued in connection with this Agreement (the "Stock
Consideration" or the "CBQI Shares") shall be fully paid and non-assessable but
shall be "restricted securities" as such term is defined in Rule 144 under the
Securities Act of 1933, as amended.
(b) No fractional shares of Stock Consideration and no certificates or
scrip certificates therefor shall be issued to represent any such fractional
interest.
(c) At the Closing, each Seller shall surrender to CBQ all
certificates held by such Seller which evidenced outstanding shares of Company
Common Stock (the "Certificates"). Following surrender of a Certificate to CBQ,
together with duly executed stock powers, endorsed in blank, and such other
customary documents as may be required, the holder of such Certificate shall be
entitled to receive in exchange therefor (i) certificates evidencing that number
of whole shares of Stock Consideration into which the Shares formerly evidenced
by such Certificates are to be entitled to in accordance with Section 1.02(a)
hereof (subject to Section 1.02(b) hereof).
1.03 The Closing.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Kalbian Hagerty, L.L.P., 2001
L Street, N.W., Suite 600, Washington, D.C. 20036, at 1:00 p.m. on August 7,
2000 (the "Closing Date"), or at such other place and on such other date as is
mutually agreeable to CBQ and the Sellers. The Closing will be effective as of
the close of business on the Closing Date.
(b) Subject to the conditions set forth in this Agreement, the parties
agree to consummate the following transactions on the Closing Date:
(i) Each Seller will assign and transfer to CBQ good and valid
title in and to the Shares, free and clear of all security interests, claims,
liens, pledges, options, encumbrances, charges, agreements, voting trusts,
proxies or other arrangements, restrictions or other legal or equitable
limitations of any kind by delivering to CBQ the Certificates representing the
Shares, duly endorsed for transfer or accompanied by duly executed stock powers
endorsed in blank with requisite stock transfer tax stamps, if any, attached;
(ii) CBQ shall deliver to each Seller at the Closing and in
exchange for the Shares held by such Seller CBQI Shares in the amounts set forth
in Section 1.02(a) hereof; and
(iii) Each of the parties shall deliver to the other the
documents required to be delivered pursuant to Article VIII hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
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The Company acknowledges and reconfirms that prior representations and
warranties made by Sellers to the Company and each other continue and survive
this transaction.
The Company represents and warrants to CBQ that, except as set forth in the
Disclosure Schedules delivered to CBQ on the date hereof (the "Disclosure
Schedules") (which Disclosure Schedules sets forth the exceptions to the
representations and warranties contained in this Article II under captions
referencing the Sections to which such exceptions apply) (references below to
the Company shall include the Company and the Company Subsidiaries taken as a
whole, unless the context requires otherwise):
2.01 Incorporation and Corporate Power. The Company, and each subsidiary of
Company named on Disclosure Schedule 2.05, is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate power and authority and all
authorizations, licenses, permits and certifications necessary to carry on its
business as now conducted and as currently proposed to be conducted, and is duly
qualified and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases property or has employees or in which
its failure to be duly qualified and in good standing would have a material
adverse effect on the business, operations or financial condition of the Company
and the Company Subsidiaries. The Company has furnished to CBQ true, correct and
complete copies of the charter documents and by-laws and all amendments thereto
and all minutes and consents of the stockholders and Boards of Directors of the
Company and each Company Subsidiary. Such minutes and consents do and shall
accurately reflect in all material respects the substance of all transactions
referred to therein. Set forth in Disclosure Schedule 2.20 hereto is a true,
complete and correct list of the names and business addresses of each officer
and director of the Company and of each Subsidiary. The Company, subject to
approval of the Agreement by the Company's shareholders, has all requisite
corporate power and authority to execute, deliver, and perform its obligations
under this Agreement and the other agreements, instruments and documents in
connection herewith.
2.02 No Breach. The execution, delivery and performance of this Agreement
by each Seller and the consummation by each Seller of the transactions
contemplated hereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of, result in
the creation of a right of termination or acceleration or any lien, security
interest, charge or encumbrance upon any of the Shares or any assets of any of
the Sellers or the Company, or require any authorization, consent, approval,
exemption or other action by or notice to any court or other governmental body,
under the provisions of the Articles of Incorporation or Bylaws of the Company
or any indenture, mortgage, lease, loan agreement or other agreement or
instrument by which any Seller or the Company is bound or affected, or any law,
statute, rule or regulation or order, judgment or decree to which any Seller or
the Company is subject.
2.03 Approval of the Agreement; Meeting of Shareholders. The Company Board
of Directors has, by resolutions duly adopted at a meeting held on July 27,
2000, approved this Agreement and the transactions contemplated hereby and
thereby and resolved to recommend approval of the Agreement by the Company's
shareholders. The Company shareholders have, by resolutions duly adopted at a
meeting held on July 27, 2000, approved this Agreement and the transactions
contemplated hereby. None of the resolutions described in this Section 2.03 has
been amended or otherwise modified in any respect since the date of adoption
thereof and all such resolutions remain in full force and effect.
2.04 Governmental Authorities; Consents. Sellers, Company and the Company
Subsidiaries are not required to submit any notice, report or other filing with
any governmental authority in connection with the execution or delivery by it of
this Agreement or the consummation of the transactions contemplated hereby or
thereby. Except as set forth in the Disclosure Schedule under the caption
referencing this Section 2.04, no consent, approval or authorization of any
governmental or regulatory authority or any other party or person (except the
approval of the Agreement by the shareholders of the Company, which has been
received) is required to be obtained by the Company or the Company Subsidiaries
in connection with the Company's execution, delivery and performance of this
Agreement or the transactions contemplated hereby or thereby.
2.05 Subsidiaries. Except as otherwise set forth in the Disclosure Schedule
under the caption referencing this Section 2.05, the Company does not own any
stock, partnership interest, joint venture interest or any other security or
ownership interest issued by any other corporation, organization or entity. All
issued and outstanding shares of capital stock of any of the Company
Subsidiaries set forth in such Disclosure Schedule are owned by the Company,
either directly or through one or more other subsidiaries, free and clear of all
liens, charges, encumbrances, claims and options of any nature. All of the
outstanding shares of capital stock of such Company Subsidiaries have been duly
and validly authorized and issued, and are fully paid and non-assessable.
2.06 Capital Stock. The authorized capital stock of the Company consists of
Two Million (2,000,000) authorized shares divided into One Million Five Hundred
Thousand (1,500,000) shares of common stock which, in turn, are divided into One
Million (1,000,000) shares of Class A Common Stock with a par value of $0.001
(the "Class A Common Stock"), and Five Hundred Thousand (500,000) shares of
Class B Common Stock with a par value of $0.0001 (the "Class B Common Stock")
and preferred stock as set forth in the Disclosure Schedule under the caption
referencing this Section 2.06. The issued and outstanding Company Common Stock
and stock of each Company Subsidiary, and the names and addresses of each
stockholder of record of the Company and the number and class of shares held by
each, are as set forth on the Disclosure Schedule under the caption referencing
this Section 2.06. All of such outstanding shares of Company Common Stock have
been duly authorized and are validly issued, fully paid and non-assessable.
Except as provided in Schedule 2.06, the Company has no other equity securities
or securities containing any equity features authorized, issued or outstanding.
There are no agreements or other rights or arrangements existing which provide
for the sale or issuance of capital stock by the Company and there are no
rights, subscriptions, warrants, options, conversion rights or agreements of any
kind outstanding to purchase or otherwise acquire from the Company any shares of
capital stock or other securities of the Company of any kind. There are no
agreements or other obligations (contingent or otherwise) which may require the
Company to repurchase or otherwise acquire any shares of its capital stock.
2.07 Financial Statements. The Company and Company Subsidiaries have
delivered to CBQ copies of (a) the unaudited balance sheet, as of June 30, 2000,
of the Company and Company Subsidiaries (the "Latest Balance Sheet") and the
unaudited statements of earnings, shareholders' equity and cash flows of the
Company and Company Subsidiaries for the five-month period ended May 31, 2000,
(such statements and the Latest Balance Sheet being herein referred to as the
"Latest Financial Statements") and (b) the reviewed draft balance sheets, as of
December 31, 1999 of the Company and Company Subsidiaries. The Latest Financial
Statements and the Annual Financial Statements are based upon the information
contained in the books and records of the Company and the Company Subsidiaries
and fairly present the financial condition of the Company and Company
Subsidiaries as of the dates thereof and results of operations for the periods
referred to therein. The Annual Financial Statements have been prepared in
accordance with generally accepted accounting principles, consistently applied
throughout the periods indicated. The Latest Financial Statements have been
prepared in accordance with generally accepted accounting principles applicable
to unaudited interim financial statements (and thus may not contain all notes
and may not contain prior period comparative data which are required to be
prepared in accordance with generally accepted accounting principles)
consistently with the Annual Financial Statements and reflect all adjustments
necessary to a fair statement of the results for the interim period(s)
presented.
2.08 Absence of Undisclosed Liabilities. Except as reflected in the Latest
Balance Sheet, the Company and Company Subsidiaries have no liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due, whether known or unknown, and regardless of when asserted) arising
out of transactions or events heretofore entered into, or any action or
inaction, or any state of facts existing, with respect to or based upon
transactions or events heretofore occurring, except (i) liabilities which have
arisen after the date of the Latest Balance Sheet in the ordinary course of
business (none of which is a material uninsured liability for breach of
contract, breach of warranty, tort, infringement, claim or lawsuit), or (ii) as
otherwise set forth in the Disclosure Schedule under the caption referencing
this Section 2.08.
2.09 No Material Adverse Changes. Since the date of the Latest Balance
Sheet (the "Balance Sheet Date"), there has been no material adverse change in
the assets, financial condition, operating results, customer, employee or
supplier relations, business condition or prospects of the Company or the
Company Subsidiaries.
2.10 Absence of Certain Developments. Since the Balance Sheet Date, the
Company and Company Subsidiaries have not:
(a) borrowed any amount or incurred or become subject to any liability
in excess of $10,000.00, except (i) current liabilities incurred in the ordinary
course of business and (ii) liabilities under contracts entered into in the
ordinary course of business;
(b) mortgaged, pledged or subjected to any lien, charge or any other
encumbrance, any of its assets, except (i) liens for current property taxes not
yet due and payable, (ii) liens imposed by law and incurred in the ordinary
course of business for obligations not yet due to carriers, warehousemen,
laborers, materialmen and the like, (iii) liens in respect of pledges or
deposits under workers' compensation laws, (iv) liens set forth under the
caption referencing this Section 2.10(b) in the Disclosure Schedule, or (v)
liens voluntarily created in the ordinary course of business;
(c) discharged or satisfied any lien or encumbrance or paid any
liability other than current liabilities paid in the ordinary course of
business;
(d) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or shareholders) any tangible assets or
canceled any debts or claims, in each case, except in the ordinary course of
business, provided however that on June 30, 2000 the Company sold certain assets
associated with its insurance repair and restoration unit for $75,000;
(e) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or shareholders) any patents, trademarks,
trade names, copyrights, trade secrets or other intangible assets;
(f) disclosed, to any person other than CBQ and authorized
representatives of CBQ, any proprietary confidential information, other than
pursuant to a confidentiality agreement prohibiting the use or further
disclosure of such information, which agreement is identified in the Disclosure
Schedule under the caption referencing this Section 2.10(f) and is in full force
and effect on the date hereof;
(g) waived any rights of material value or suffered any extraordinary
losses or adverse changes in collection loss experience, whether or not in the
ordinary course of business or consistent with past practice;
(h) except as disclosed in the pro forma financial projections of July
31, 2000, declared or paid any dividends or other distributions with respect to
any shares of the Company's capital stock of the capital stock of the Company's
Subsidiaries or redeemed or purchased, directly or indirectly, any shares of the
Company's or the Company's Subsidiaries' capital stock or any options;
(i) issued, sold or transferred any of its equity securities,
securities convertible into or exchangeable for its equity securities or
warrants, options or other rights to acquire its equity securities, or any bonds
or debt securities;
(j) taken any other action or entered into any other transaction other
than in the ordinary course of business and in accordance with past custom and
practice, or entered into any transaction with any "insider" (as defined in
Section 2.18 hereof) other than employment arrangements otherwise disclosed in
this Agreement and the Disclosure Schedule, or the transactions contemplated by
this Agreement;
(k) suffered any material theft, damage, destruction or loss of or to
any property or properties owned or used by it, whether or not covered by
insurance;
(l) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee who earns more than $75,000 per
year, or consultant or made or granted any increase in any employee benefit plan
or arrangement, or amended or terminated any existing employee benefit plan or
arrangement, or adopted any new employee benefit plan or arrangement or made any
commitment or incurred any liability to any labor organization;
(m) made any single capital expenditure or commitment therefor in
excess of $25,000.00;
(n) made any loans or advances to, or guarantees for the benefit of,
any persons such that the aggregate amount of such loans, advances or guarantees
at any time outstanding is in excess of $25,000.00;
(o) made charitable contributions or pledges which in the aggregate
exceed $25,000.00;
(p) made any change in accounting principles or practices from those
utilized in the preparation of the Annual Financial Statements;
(q) except for a letter received regarding the use of computer
software without adequate licensing (see Schedule 2.10 (q)), received notice or
threat of any civil litigation or governmental proceeding against or
investigation of the Company or Company Subsidiaries;
(r) received notice, formal or otherwise, that any employee intends to
sever his/her employment with Company or Company Subsidiaries or notice of labor
trouble or claim of wrongful discharge or other unlawful labor practice or act;
or
(s) received notice of any other event or condition of any character
that has or might have a materially adverse effect on the financial condition,
business assets, liabilities or prospects of the Company.
2.11 Title to Properties.
(a) The real property demised by the leases (the "Leases") described
under the caption referencing this Section 2.11(a) in the Disclosure Schedule
constitutes all of the real property used or occupied by the Company or the
Company Subsidiaries (the "Real Property"). The Real Property has access,
sufficient for the conduct of the Company's and the Company Subsidiaries'
businesses as now conducted or as presently proposed to be conducted, to public
roads and to all utilities, including electricity, sanitary and storm sewer,
potable water, natural gas and other utilities, used in the operation of the
business of the Company and the Company Subsidiaries at the respective
locations.
(b) The Leases are in full force and effect, and the Company or the
Company Subsidiaries hold a valid and existing leasehold interest under each of
the Leases for the term except as set forth under such caption in the Disclosure
Schedule. The Company or the Company Subsidiaries have delivered to CBQ complete
and accurate copies of each of the Leases, and none of the Leases has been
modified in any respect, except to the extent that such modifications are
disclosed by the copies delivered to CBQ. The Company and Company Subsidiaries
are not in default, and no circumstances exist which, if unremedied, would,
either with or without notice or the passage of time or both, result in such
default under any of the Leases; nor, to the best knowledge of the Company, is
any other party to any of the Leases in default.
(c) The Company or the Company Subsidiaries own good and marketable
title to each of the tangible properties and tangible assets reflected on the
Latest Balance Sheet or acquired since the date thereof, free and clear of all
liens and encumbrances, except for (i) liens for current taxes not yet due and
payable, (ii) liens set forth under the caption referencing this Section 2.11(c)
in the Disclosure Schedule, (iii) the properties subject to the Leases, (iv)
assets disposed of since the date of the Latest Balance Sheet in the ordinary
course of business, (v) liens imposed by law and incurred in the ordinary course
of business for obligations not yet due to carriers, warehousemen, laborers and
materialmen and (vi) liens in respect of pledges or deposits under workers'
compensation laws.
(d) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of the Company's and the Company Subsidiaries'
businesses are in good condition and repair, ordinary wear and tear excepted,
and are usable in the ordinary course of business. There are no defects in such
assets or other conditions relating thereto which, in the aggregate, materially
adversely affect the operation or value of such assets. The Company or the
Company Subsidiaries own, or lease under valid leases, all buildings, machinery,
equipment and other tangible assets necessary for the conduct of their
businesses.
(e) The Company and Company Subsidiaries are not in violation of any
applicable zoning ordinance or other law, regulation or requirement relating to
the operation of any properties used in the operation of their businesses, and
the Company and Company Subsidiaries have not received any notice of any such
violation, or the existence of any condemnation proceeding with respect to any
of the Real Property, except, in each case, with respect to violations the
potential consequences of which do not or will not have a material adverse
effect on the Company or the Company Subsidiaries.
(f) The Company and Company Subsidiaries have no knowledge of
improvements made or contemplated to be made by any public or private authority,
the costs of which are to be assessed as special taxes or charges against any of
the Real Property, and there are no present assessments.
2.12 Accounts Receivable. The accounts receivable reflected on the Latest
Balance Sheet are valid receivables, are not subject to valid counterclaims or
setoffs, and are collectible in accordance with their terms, except as otherwise
described in the Disclosure Schedule under the caption referencing this Section
2.12, and except to the extent of the bad debt reserve reflected on the Latest
Balance Sheet.
2.13 Tax Matters.
(a) Each of the Company and any subsidiary, any affiliated, combined
or unitary group of which the Company or any subsidiary is or was a member, any
"Plans" (as defined in Section 2.16 hereof), as the case may be (each, a "Tax
Affiliate" and, collectively, the "Tax Affiliates"), has: (i) timely filed (or
has had timely filed on its behalf), or under extension, all returns,
declarations, reports, estimates, information returns, and statements
("Returns") required to be filed or sent by it in respect of any "Taxes" (as
defined in subsection (p) below) or required to be filed or sent by it by any
taxing authority having jurisdiction; (ii) timely and properly paid (or has had
paid on its behalf) all Taxes shown to be due and payable on such Returns; (iii)
established on its Latest Balance Sheet, in accordance with generally accepted
accounting principles, reserves that are adequate for the payment of any Taxes
not yet due and payable; (iv) complied with all applicable laws, rules, and
regulations relating to the withholding of Taxes and the payment thereof
(including, without limitation, withholding of Taxes under Sections 1441 and
1442 of the Internal Revenue Code of 1986, as amended (the "Code"), or similar
provisions under any foreign laws), and timely and properly withheld from
individual employee wages and paid over to the proper governmental authorities
all amounts required to be so withheld and paid over under all applicable laws.
(b) There are no liens for Taxes upon any assets of the Company or of
any Tax Affiliate, except liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or
assessed against the Company or the Tax Affiliates that has not been resolved
and paid in full. No waiver, extension or comparable consent given by the
Company or the Tax Affiliates regarding the application of the statute of
limitations with respect to any Taxes or Returns is outstanding, nor is any
request for any such waiver or consent pending. There has been no Tax audit or
other administrative proceeding or court proceeding with regard to any Taxes or
Returns, nor is any such Tax audit or other proceeding pending, nor has there
been any notice to the Company by any Taxing authority regarding any such Tax,
audit or other proceeding, or, to the best knowledge of the Company, is any such
Tax audit or other proceeding threatened with regard to any Taxes or Returns.
The Company does not expect the assessment of any additional Taxes of the
Company or the Tax Affiliates and is not aware of any unresolved questions,
claims or disputes concerning the liability for Taxes of the Company or the Tax
Affiliates which would exceed the estimated reserves established on its books
and records.
(d) Neither the Company nor any Tax Affiliate is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code and the consummation of the transactions
contemplated by this Agreement will not be a factor causing payments to be made
by the Company or any Tax Affiliate that are not deductible (in whole or in
part) under Section 280G of the Code.
(e) No property of the Company or any Tax Affiliate is property that
the Company or any Tax Affiliates is or will be required to treat as being owned
by another person under the provisions of Section 168(f)(8) of the Code (as in
effect prior to amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Section 168 of the Code.
(f) Neither the Company nor any Tax Affiliate is required to include
in income any adjustment under Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by the Company or any Tax
Affiliate as a result of the Tax Reform Act of 1986 and neither the Company nor
any Tax Affiliate has knowledge that the Internal Revenue Service has proposed
any such adjustment or change in accounting method.
(g) The Company has not been advised that any transactions that could
give rise to an understatement of federal income tax (within the meaning of
Section 6661 of the Code as it applied prior to repeal) or an underpayment of
tax (within the meaning of Section 6662 of the Code) were reported in a manner
for which there is substantial authority or were adequately disclosed (or, with
respect to Returns filed before the Closing Date, will be reported in such a
manner or adequately disclosed) on the Returns required in accordance with
Sections 6661(b)(2)(B) and 6662(d)(2)(B) of the Code.
(h) Neither the Company nor any Tax Affiliate has engaged in any
transaction that would result in a deemed election under Section 338(e) of the
Code, and neither the Company nor any Tax Affiliate will engage in any such
transaction within any applicable "consistency period" (as such term is defined
in Section 338 of the Code).
(i) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies, or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp, occupation, property, or
other taxes, customs duties, fees, assessments, or charges of any kind
whatsoever, including, without limitation, all interest and penalties thereon,
and additions to tax or additional amounts imposed by any taxing authority,
domestic or foreign, upon the Company or any Tax Affiliate.
2.14 Contracts and Commitments.
(a) The Disclosure Schedule, under the caption referencing this
Section 2.14(a), lists the material agreements, whether oral or written, to
which the Company or the Company Subsidiaries are a party, which are currently
in effect, and which relate to the operation of the Company's or Company
Subsidiaries' businesses.
(b) The Company and Company Subsidiaries have performed all
obligations required to be performed by them in connection with the contracts or
commitments required to be disclosed in the Disclosure Schedule under the
caption referencing Section 2.14(a). Except as set forth in the Disclosure
Schedule under the caption referencing this Section 2.14(b), the Company and
Company Subsidiaries are not in receipt of any claim of default under any
contract or commitment required to be disclosed under Section 2.14(a); the
Company and Company Subsidiaries have no present expectation or intention of not
fully performing any material obligation pursuant to any contract or commitment
required to be disclosed under such caption; and the Company and Company
Subsidiaries have no knowledge of any breach or anticipated breach by any other
party to any contract or commitment required to be disclosed under such caption.
(c) Prior to the date of this Agreement, CBQ has been supplied access
to a true and correct copy of each written contract or commitment, and a written
description of each oral contract or commitment, referred to under the caption
referencing this Section 2.14(c) in the Disclosure Schedule, together with all
amendments, waivers or other changes thereto.
2.15 Litigation. Except as set forth in the Disclosure Schedule under the
caption referencing this Section 2.15, there are no actions, suits, proceedings,
orders or investigations pending or, to the best knowledge of the Company and
Company Subsidiaries, threatened against the Company or Company Subsidiaries, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
2.16 Employee Benefit Plans.
(a) To the best of the Company's knowledge and except as set forth
under the caption referencing Section 2.16(a) hereof in the Disclosure Schedule,
with respect to all employees and former employees of the Company and Company
Subsidiaries and all dependents and beneficiaries of such employees and former
employees, (i) the Company and Company Subsidiaries do not maintain or
contribute to any nonqualified deferred compensation or retirement plans,
contracts or arrangements; (ii) the Company and Company Subsidiaries do not
maintain or contribute to any qualified defined contribution plans (as defined
in Section 3(34) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 414(i) of the Code; (iii) the Company and Company
Subsidiaries do not maintain or contribute to any qualified defined benefit
plans (as defined in Section 3(35) of ERISA or Section 414(j) of the Code); and
(iv) the Company and Company Subsidiaries do not maintain or contribute to any
employee welfare benefit plans (as defined in Section 3(1) of ERISA).
(b) To the extent required (either as a matter of law or to obtain the
intended tax treatment and tax benefits) and to the best of the Company's
knowledge, all employee benefit plans (as defined in Section 3(3) of ERISA)
which the Company and Company Subsidiaries do maintain or to which it does
contribute (collectively, the "Plans") comply in all material respects with the
requirements of ERISA and the Code. With respect to the Plans, (i) all required
contributions which are due have been made and a proper accrual has been made
for all contributions due in the current fiscal year; (ii) there are no actions,
suits or claims pending, other than routine uncontested claims for benefits; and
(iii) there have been no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Code).
(c) CBQ has received true and complete copies of (i) the most recent
determination letter, if any, received by the Company and Company Subsidiaries
from the Internal Revenue Service regarding the Plans which the Company or
Company Subsidiaries maintain or to which it contributes and any amendment to
any Plan made subsequent to any Plan amendments covered by any such
determination letter; (ii) the most recent financial statements and annual
report or return for the Plans; and (iii) the most recently prepared actuarial
valuation reports.
(d) The Company and Company Subsidiaries do not contribute (and has
not ever contributed) to any multi-employer plan, as defined in Section 3(37) of
ERISA. The Company and Company Subsidiaries have no actual or potential
liabilities under Section 4201 of ERISA for any complete or partial withdrawal
from a multi-employer plan. The Company and Company Subsidiaries have no actual
or potential liability for death or medical benefits after separation from
employment, other than (i) death benefits under the employee benefit plans or
programs (whether or not subject to ERISA) set forth under the caption
referencing this Section 2.16(d) in the Disclosure Schedule and (ii) health care
continuation benefits described in Section 4980B of the Code.
(e) Neither the Company, Company Subsidiaries, nor any of their
directors, officers, employees or other "fiduciaries", as such term is defined
in Section 3(21) of ERISA, has committed any breach of fiduciary responsibility
imposed by ERISA or any other applicable law with respect to the Plans which
would subject the Company, Company Subsidiaries, CBQ, a CBQ subsidiary or any of
their respective directors, officers or employees to any liability under ERISA
or any applicable law.
(f) The Company and Company Subsidiaries have not incurred any
liability for any tax or civil penalty or any disqualification of any employee
benefit plan (as defined in Section 3(3) of ERISA) imposed by Sections 4980B and
4975 of the Code and Part 6 of Title I and Section 502(i) of ERISA.
2.17 Insurance. The Disclosure Schedule, under the caption referencing this
Section 2.17, lists and briefly describes each insurance policy maintained by
the Company and Company Subsidiaries with respect to the Company's or Company
Subsidiaries' properties, assets and operations and sets forth the date of
expiration of each such insurance policy. All of such insurance policies are in
full force and effect and are issued by insurers of recognized responsibility.
The Company and Company Subsidiaries are not in default with respect to its
obligations under any of such insurance policies.
2.18 Affiliate Transactions. Except as disclosed under the caption
referencing this Section 2.18 in the Disclosure Schedule, and other than
pursuant to this Agreement, no officer, director or employee of the Company or
Company Subsidiaries or any member of the immediate family of any such officer,
director or employee, or any entity in which any of such persons owns any
beneficial interest (other than any publicly-held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than one percent of the stock of which is beneficially owned by any of such
persons) (collectively "insiders"), has any agreement with the Company or
Company Subsidiaries (other than normal employment arrangements) or any interest
in any property, real, personal or mixed, tangible or intangible, used in or
pertaining to the business of the Company or Company Subsidiaries (other than
ownership of capital stock of the Company). None of the insiders has any direct
or indirect interest in any competitor, supplier or customer of the Company or
Company Subsidiaries or in any person, firm or entity from whom or to whom the
Company or Company Subsidiaries lease any property, or in any other person, firm
or entity with whom the Company or Company Subsidiaries transact business of any
nature. For purposes of this Section 2.18, the members of the immediate family
of an officer, director or employee shall consist of the spouse, parents,
children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and
brothers- and sisters-in-law of such officer, director or employee.
2.19 Customers. The Disclosure Schedule, under the caption referencing this
Section 2.19, lists the 20 largest customers of the Company and Company
Subsidiaries for the five-month period ended May 31, 2000, and sets forth
opposite the name of each such customer the approximate percentage of net sales
of the Company or Company Subsidiaries attributable to such customer for each
such period. Since the Balance Sheet Date, no customer listed on the Disclosure
Schedule under the caption referencing this Section 2.19 has indicated that it
will stop or decrease the rate of business done with the Company or Company
Subsidiaries except for changes in the ordinary course of the Company's or
Company Subsidiaries' businesses.
2.20 Officers and Directors; Bank Accounts. The Disclosure Schedule, under
the caption referencing this Section 2.20, lists the names and business
addresses of all officers and directors of the Company, Company Subsidiaries and
all of the Company's and Company Subsidiaries' bank accounts (designating each
authorized signer).
2.21 Compliance with Laws; Permits.
(a) To the best of the Company's knowledge, the Company and Company
Subsidiaries and their officers, directors, agents and employees have complied
in all material respects with all applicable laws, regulations and other
requirements, including, but not limited to, federal, state, local and foreign
laws, ordinances, rules, regulations and other requirements pertaining to
product labeling, consumer products safety, equal employment opportunity,
employee retirement, affirmative action and other hiring practices, occupational
safety and health, workers' compensation, unemployment and building and zoning
codes, which materially affect the business of the Company or Company
Subsidiaries or the Real Property and to which the Company or Company
Subsidiaries may be subject, and no claims have been filed against the Company
or Company Subsidiaries alleging a violation of any such laws, regulations or
other requirements. The Sellers, Company and Company Subsidiaries have no
knowledge of any action, pending or threatened, to change the zoning or building
ordinances or any other laws, rules, regulations or ordinances affecting the
Real Property. The Company and Company Subsidiaries are not relying on any
exemption from or deferral of any such applicable law, regulation or other
requirement that would not be available to CBQ after it acquires the Shares.
(b) The Company and Company Subsidiaries have, in full force and
effect, all licenses, permits and certificates, from federal, state, local and
foreign authorities (including, without limitation, federal and state agencies
regulating occupational health and safety) necessary to conduct their businesses
and own and operate their properties (other than Environmental Permits, as such
term is defined in Section 2.22(c) hereof) (collectively, the "Permits"). A
true, correct and complete list of all the Permits is set forth under the
caption referencing this Section 2.21(b) in the Disclosure Schedule. The Company
and Company Subsidiaries have conducted their businesses in compliance with all
material terms and conditions of the Permits.
(c) The Company and Company Subsidiaries have not made or agreed to
make gifts of money, other property or similar benefits (other than incidental
gifts of articles of nominal value) to any actual or potential customer,
supplier, governmental employee or any other person in a position to assist or
hinder the Company or Company Subsidiaries in connection with any actual or
proposed transaction.
(d) In particular, but without limiting the generality of the
foregoing, the Company and Company Subsidiaries have not violated and have no
liability, and have not received a notice or charge asserting any violation of
or liability under, the federal Occupational Safety and Health Act of 1970 or
any other federal or state acts (including rules and regulations thereunder)
regulating or otherwise affecting employee health and safety.
2.22 Environmental Matters.
(a) As used in this Section 2.22, the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as defined in or
governed by any federal, state or local law, statute, code, ordinance,
regulation, rule or other requirement relating to such substance or otherwise
relating to the environment or human health or safety, including without
limitation any waste, material, substance, pollutant or contaminant that might
cause any injury to human health or safety or to the environment or might
subject the Company or Company Subsidiaries to any imposition of costs or
liability under any Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state,
local and foreign laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to pollution, contamination
or protection of the environment (including, without limitation, all applicable
federal, state, local and foreign laws, rules, regulations, codes, ordinances,
orders, decrees, directives, permits, licenses and judgments relating to
Hazardous Materials in effect as of the date of this Agreement).
(iii) "Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any other
release or threatened release, however defined, whether intentional or
unintentional, of any Hazardous Material.
(b) To the best of the Company's knowledge the Company, Company
Subsidiaries and the Real Property are in material compliance with all
applicable Environmental Laws.
(c) The Company and Company Subsidiaries have obtained, and maintained
in full force and effect, all environmental permits, licenses, certificates of
compliance, approvals and other authorizations necessary to conduct its business
and own or operate the Real Property (collectively, the "Environmental
Permits"). A true and correct copy of each such Environmental Permits shall be
provided by the Company and Company Subsidiaries to CBQ at least 14 days prior
to the Closing. The Company and Company Subsidiaries have conducted business in
compliance with all terms and conditions of the Environmental Permits. The
Company and Company Subsidiaries have filed all reports and notifications
required to be filed under and pursuant to all applicable Environmental Laws.
(d) Except as set forth in the Disclosure Schedule under the caption
referencing this Section 2.22(d): (i) no Hazardous Materials have been
generated, treated, contained, handled, located, used, manufactured, processed,
buried, incinerated, deposited, stored, or released on, under or about any part
of the Company, Company Subsidiaries or the Real Property, (ii) the Company,
Company Subsidiaries and the Real Property and any improvements thereon, contain
no asbestos, urea, formaldehyde, radon at levels above natural background,
polychlorinated biphenyls (PCBs) or pesticides, and (iii) no aboveground or
underground storage tanks are located on, under or about the Real Property, or
have been located on, under or about the Real Property and then subsequently
been removed or filled. If any such storage tanks exist on, under or about the
Real Property, such storage tanks have been duly registered with all appropriate
governmental entities and are otherwise in compliance with all applicable
Environmental Laws.
(e) Except as set forth in the Disclosure Schedule under the caption
referencing this Section 2.22(e), the Company and Company Subsidiaries have not
received notice alleging in any manner that the Company or Company Subsidiaries
are, or might be potentially responsible for any Release of Hazardous Materials,
or any costs arising under or violation of Environmental Laws.
(f) No expenditure will be required in order for CBQ to comply with
any Environmental Laws in effect at the time of the Closing in connection with
the operation or continued operation of the business of the Company, Company
Subsidiaries or the Real Property in a manner consistent with the current
operation thereof by the Company and Company Subsidiaries.
(g) The Company, Company Subsidiaries and the Real Property are not
and have not been listed on the United States Environmental Protection Agency
National Priorities List of Hazardous Waste Sites, or any other list, schedule,
law, inventory or record of hazardous or solid waste sites maintained by any
federal, state or local agency.
(h) The Company and Company Subsidiaries have disclosed and delivered
to CBQ all environmental reports and investigations which the Company and
Company Subsidiaries have obtained or ordered with respect to the business of
the Company, Company Subsidiaries and the Real Property.
(i) No part of the business of the Company, Company Subsidiaries or
the Real Property have been used as a landfill, dump or other disposal, storage,
transfer, handling or treatment area for Hazardous Materials, or as a gasoline
service station or a facility for selling, dispensing, storing, transferring,
disposing or handling petroleum and/or petroleum products.
(j) No lien has been attached or filed against the Company, Company
Subsidiaries or the Real Property in favor of any governmental or private entity
for (i) any liability or imposition of costs under or violation of any
applicable Environmental Law; or (ii) any Release of Hazardous Materials.
(k) The Company, on behalf of itself, Company Subsidiaries and its
successors and assigns, hereby waives, releases and agrees not to bring any
claim, demand, cause of action or proceeding, including without limitation any
cost recovery action, against CBQ under any Environmental Law.
2.23 Disclosure. Neither this Agreement nor any of the Exhibits hereto nor
any of the documents delivered by or on behalf of the Company or Company
Subsidiaries pursuant to Article VIII hereof nor the Disclosure Schedule nor any
of the financial statements referred to in Section 2.07 hereof, taken as a
whole, contains any untrue statement of a material fact regarding the Company or
Company Subsidiaries or their businesses or any of the other matters dealt with
in this Article II relating to the Company or Company Subsidiaries or the
transactions contemplated by this Agreement. This Agreement, the Exhibits
hereto, the documents delivered to CBQ by or on behalf of the Company and
Company Subsidiaries pursuant to Article VIII hereof, the Disclosure Schedule
and the financial statements referred to in Section 2.07 hereof, taken as a
whole, do not omit any material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they were made, not
misleading, and there is no fact which has not been disclosed to CBQ of which
any officer or director of the Company or Company Subsidiaries is aware which
materially affects adversely or could reasonably be anticipated to materially
affect adversely the business, including operating results, assets, customer
relations, employee relations and business prospects, of the Company or Company
Subsidiaries.
2.24 Accounting and Tax Matters. Neither the Company nor the Sellers, nor
any affiliates of the Company, has taken or agreed to take any action that would
prevent the transactions contemplated under this Agreement from being effected
as a pooling of interests for financial reporting purposes or would prevent such
transactions from constituting a transaction qualifying under Section 368(a) of
the Code.
2.25 Prior Representations and Warranties. The Disclosure Schedule
summarizes, under the caption referencing this Section 2.25, all merger,
purchase, sale or exchange transactions for the last eleven (11) years for which
Company continues to have the protection and obligations of representations and
warranties. The Company and Company Subsidiaries hereby represent and warrant
that CBQ will succeed to the rights that the Company and/or Company Subsidiaries
had vis a vis the sellers in those transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF JOHN MORAN AND RAY KOSTKOWSKI
---------------------------------------------------------------
3.01 John Moran ("Moran") represents and warrants to CBQ that, to the best
of his knowledge and for the period of his tenure as President of Company (April
19, 2000 -- Present), each and every one of the representations and warrants of
the Company as set forth in Article II is true and accurate.
3.02 Ray Kostkowski ('Kostkowski") represents and warrants to CBQ that, to
the best of his knowledge and for the period of his tenure as CEO of Company
(April 19, 2000 -- Present), each and every one of the representations and
warrants of the Company as set forth in Article II is true and accurate.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CBQ
-------------------------------------
CBQ hereby represents and warrants to the Sellers that:
4.01 Incorporation and Corporate Power. CBQ is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Colorado, with the requisite corporate power and authority to enter into this
Agreement and perform its obligations hereunder.
4.02 Execution, Delivery; Valid and Binding Agreement. Except for the
approval of the Board of Directors of CBQ, the execution, delivery and
performance of this Agreement by CBQ and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all requisite
corporate action, and no other corporate proceedings on its part are necessary
to authorize the execution, delivery or performance of this Agreement. This
Agreement has been duly executed and delivered by CBQ and, except for such Board
approval, constitutes the valid and binding obligation of CBQ, enforceable in
accordance with its terms.
4.03 No Breach. The execution, delivery and performance of this Agreement
by CBQ and the consummation by CBQ of the transactions contemplated hereby do
not conflict with or result in any breach of any of the provisions of,
constitute a default under, result in a violation of, result in the creation of
a right of termination or acceleration or any lien, security interest, charge or
encumbrance upon any assets of CBQ, or require any authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the Articles of Incorporation or
Bylaws of CBQ or any indenture, mortgage, lease, loan agreement or other
agreement or instrument by which CBQ is bound or affected or, subject to the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), applicable Blue Sky laws and the rules of NASDAQ National Market, any
law, statute, rule or regulation or order, judgment or decree to which CBQ is
subject.
4.04 Governmental Authorities; Consents. Except for the applicable
requirements of the Securities Act, the Exchange Act, applicable Blue Sky laws
and the NASDAQ National Market, and the filing of the Shelf Registration
Statement (as defined in the Investment and Registration Rights Agreement (as
defined below)), CBQ is not required to submit any notice, report or other
filing with any governmental authority in connection with the execution or
delivery by it of this Agreement or the consummation of the transactions
contemplated hereby. No consent, approval or authorization of any governmental
or regulatory authority or any other party or person is required to be obtained
by CBQ in connection with its execution, delivery and performance of this
Agreement or the transactions contemplated hereby.
4.05 Reports; Financial Statements.
(a) CBQ has filed, and will use reasonable efforts to file prior to
the Closing Date, all forms, reports, statements and other documents required to
be filed with the Securities and Exchange Commission (the "SEC") including,
without limitation, (A) all Annual Reports on Form 10-KSB, (B) all Quarterly
Reports on Form 10-QSB, (C) all required proxy statements relating to meetings
of shareholders, (D) all required Current Reports on Form 8-K, (E) all other
required reports or registration statements and (F) all amendments and
supplements to all such reports and registration statements (collectively, the
"CBQ SEC Reports"). The CBQ SEC Reports, including all such reports filed after
the date of this Agreement and prior to the Closing Date, were or will be
prepared in all material respects in accordance with the requirements of
applicable law. None of the CBQ SEC Reports contained or will contain, in each
case at the time filed, any untrue statement of a material fact or omitted or
will omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the CBQ SEC Reports, including any
CBQ SEC Reports filed after the date of this Agreement and prior to the Closing
Date, (i) have been or will be prepared in all material respects in accordance
with the published rules and regulations of the SEC and generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, except (w) to the extent required by changes in generally accepted
accounting principles and (x) with respect to CBQ SEC Reports filed prior to the
date of this Agreement, to the extent indicated in the notes thereto, and (ii)
fairly present or will fairly present the consolidated financial position of CBQ
as of the respective dates thereof and the consolidated results of operations
and cash flows for the periods indicated, except that (y) any unaudited interim
financial statements were or will be subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount and (z)
any pro forma financial information contained in such consolidated financial
statements is not or may not be necessarily indicative of the consolidated
financial position of CBQ and its subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows for the
periods indicated.
ARTICLE V
COVENANTS OF THE COMPANY
------------------------
5.01 Conduct of the Business. Company agrees to observe each term set forth
in this Section 5.01 and agree that, from the date hereof until the Closing
Date, unless otherwise consented to by CBQ in writing:
(a) The business of the Company shall be conducted only in, and none
of the Sellers nor the Company shall take any action except in, the ordinary
course of the Company's business, on an arm's-length basis and in accordance in
all material respects with all applicable laws, rules and regulations and the
Company's past custom and practice;
(b) The Company shall not, directly or indirectly, do or permit to
occur any of the following: (i) issue or sell any additional shares of, or any
options, warrants, conversion privileges or rights of any kind to acquire any
shares of, any of its capital stock, (ii) sell, pledge, dispose of or encumber
any of its assets, except in the ordinary course of business; (iii) amend or
propose to amend its Articles of Incorporation or Bylaws; (iv) split, combine or
reclassify any outstanding shares of Common Stock, or declare, set aside or pay
any dividend or other distribution payable in cash, stock, property or otherwise
with respect to shares of Common Stock; (v) redeem, purchase or acquire or offer
to acquire any shares of Common Stock or other securities of the Company; (vi)
acquire (by merger, exchange, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership, joint venture or other business
organization or division or material assets thereof; (vii) incur any
indebtedness for borrowed money (including advances on existing credit
facilities) or issue any debt securities; (viii) permit any accounts payable
owed to trade creditors to remain outstanding more than 45 days; (ix)
accelerate, beyond the normal collection cycle, collection of accounts
receivable; or (x) enter into or propose to enter into, or modify or propose to
modify, any agreement, arrangement or understanding with respect to any of the
matters set forth in this Section 5.01(b);
(c) The Company shall not, directly or indirectly, (i) enter into or
modify any employment, severance or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termination pay to, any
officers or directors or consultants, except as previously disclosed by the
Company to CBQ prior to the date hereof; or (ii) take any action with respect to
the grant of any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits payable in effect on the date hereof;
(d) The Company shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group arrangement for
the benefit or welfare of any employees or any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangements for the benefit or welfare of any director, except as previously
disclosed in writing by the Company to CBQ prior to the date hereof;
(e) The Company shall not cancel or terminate its current insurance
policies or cause any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled, terminated or
lapsed policies for substantially similar premiums are in full force and effect;
(f) The Company shall (i) use his or its best efforts to preserve
intact the Company's business organization and goodwill, keep available the
services of the Company's officers and employees as a group and maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with the Company; (ii) confer on a regular and
frequent basis with representatives of CBQ to report operational matters and the
general status of ongoing operations; (iii) not intentionally take any action
which would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue at the Closing;
(iv) notify CBQ of any emergency or other change in the normal course of the
Company's business or in the operation of the Company's properties and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such emergency,
change, complaint, investigation or hearing would be material, individually or
in the aggregate, to the business, operations or financial condition of the
Company or to the Company's, Seller's or CBQ's ability to consummate the
transactions contemplated by this Agreement; and (v) promptly notify CBQ in
writing if any Seller or the Company shall discover that any representation or
warranty made by it in this Agreement was when made, or has subsequently become,
untrue in any respect;
(g) The Company (for purposes of this Section 5.01(g), all references
to the Company shall include the affiliates, and any former subsidiaries and
affiliates, of the Company) shall file (or cause to be filed) at its own
expense, on or prior to the due date, all Tax returns, including all returns and
reports relating to the Plans or the Other Arrangements, for all Tax periods
ending on or before the Closing Date where the due date for such returns or
reports (taking into account valid extensions of the respective due dates) falls
on or before the Closing Date (all Tax returns described in this Section 5.01(g)
and any schedules to be included therewith shall be prepared on a basis
consistent with those of the Company prepared for prior Tax periods); provided,
however, that the Company shall not file any such Tax returns, or other returns,
elections, claims for refund or information statements with respect to any
liabilities for Taxes (other than federal, state or local sales, use,
withholding or employment tax returns or statements) for any Tax period, or
consent to any adjustment or otherwise compromise or settle any matters with
respect to Taxes, without prior consultation with CBQ. The Company shall provide
CBQ with a copy of appropriate workpapers, schedules, drafts and final copies of
each federal and state income Tax return or election of the Company at least ten
days before filing such return or election and shall reasonably cooperate with
any request by CBQ in connection therewith;
(h) The Company shall not (i) make or rescind any express or deemed
election or take any other discretionary position relating to Taxes, (ii) settle
or compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or (iii) change any of
its methods of reporting income or deductions for federal income Tax purposes
from those employed in the preparation of the federal income Tax returns for the
taxable year ended December 31, 1995; and
(i) The Company shall not perform any act referenced by (or omit to
perform any act which omission is referenced by) the terms of Section 2.10
hereof.
5.02 Access to Books and Records. Between the date hereof and the Closing
Date, the Sellers shall cause the Company to afford to CBQ and its authorized
representatives (the "CBQ Representatives") full access at all reasonable times
and upon reasonable notice to the offices, properties, books, records, officers,
employees and other items of the Company, and the work papers of Grant Thorton,
LLP, the Company's independent accountants, and otherwise provide such
assistance as is reasonably requested by CBQ in order that CBQ may have a full
opportunity to make such investigation and evaluation as it shall reasonably
desire to make of the business and affairs of the Company. In addition, the
Sellers shall cause the Company and its officers and directors to cooperate
fully (including providing introductions where necessary) with CBQ to enable CBQ
to contact such third parties, including customers, prospective customers,
specifying agencies, vendors or suppliers of the Company, as CBQ deems
reasonably necessary to complete its due diligence; provided, that CBQ agrees
not to initiate such contacts without the prior approval of the Company, which
approval will not be unreasonably withheld.
5.03 Regulatory Filings. As promptly as practicable after the execution of
this Agreement, the Sellers shall, and shall cause the Company to, make or cause
to be made all filings and submissions under any laws or regulations applicable
to the Company for the consummation of the transactions contemplated herein. The
Sellers will coordinate and cooperate with CBQ in exchanging such information,
will not make any such filing without providing to CBQ a final copy thereof for
its review and consent at least two full business days in advance of the
proposed filing and will provide such reasonable assistance as CBQ may request
in connection with all of the foregoing.
5.04 Conditions. The Company shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in Section 8.01 to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but in any event within
thirty business days of such date). The independent public accountants of the
Company, Grant Thorton, LLP, have advised the Company in connection with this
Agreement, specifically as to coordinating the acquisition of the Shares to
qualify as a pooling of interests for financial reporting purposes.
5.05 No Negotiations, etc. The Company shall not, directly or indirectly,
through any officer, director, agent or otherwise, solicit, initiate or
encourage submission of any proposal or offer from any person or entity
(including any of its or their officers or employees) relating to any
liquidation, dissolution, recapitalization, merger, consolidation or acquisition
or purchase of all or a material portion of the assets of, or any equity
interest in, the Company or other similar transaction or business combination
involving the Company, or participate in any negotiations regarding, or furnish
to any other person any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, facilitate or encourage, any effort
or attempt by any other person or entity to do or seek any of the foregoing. The
Sellers shall, and shall cause the Company to, promptly notify CBQ if any such
proposal or offer, or any inquiry from or contact with any person with respect
thereto, is made and shall promptly provide CBQ with such information regarding
such proposal, offer, inquiry or contact as CBQ may request.
5.06 Approvals and Consents. The Company shall obtain all consents and
approvals of regulatory authorities or other third parties required of the
Sellers and/or of the Company to carry out the transactions contemplated by this
Agreement, including any consents or approvals required under the agreements
disclosed on the Disclosure Schedule under the caption referencing Section 2.14,
and will cooperate with CBQ to obtain all such approvals and consents required
of CBQ.
5.07 Closing Certificates. The Company shall use its best efforts to
deliver at the Closing all opinions, certificates and other documents required
to be delivered by them or the Company at the Closing.
5.08 Benefit Plans. The Company shall take all action necessary or required
(i) to terminate or amend, if requested by CBQ, all qualified retirement and
welfare benefit plans and all non-qualified benefit plans and compensation
arrangements as of the Closing Date and (ii) to submit application to the
Internal Revenue Service for a favorable determination letter for each of the
Plans that is subject to the qualification requirements of Section 401(a) of the
Code prior to the Closing.
5.09 Accounting and Tax Matters. The Company shall take any action that
would disqualify CBQ's acquisition of the Shares contemplated by this Agreement
from being effected as a "pooling of interests" for financial reporting purposes
or would prevent such acquisition of the Shares from constituting a transaction
qualifying under Section 368(a) of the Code.
5.10 Accruals and Reserves. The Company shall establish such additional
accruals and reserves as may be necessary to conform the Company's accounting
and credit loss reserve practices and methods to those of CBQ with respect to
the conduct of the business of the Company following the Closing Date and to
provide for the costs and expenses relating to the consummation by the Company
of the transactions contemplated by this Agreement.
5.11 Accounting Policies and Procedures. The Sellers shall not take, and
shall cause the Company not to take, any action, other than as required by law
or generally accepted accounting principles, to modify any of its accounting
policies, procedures and practices from those in effect in the Audited Financial
Statements other than as required by CBQ pursuant to Section 5.12 hereof.
ARTICLE VI
UNDERSTANDINGS OF THE SELLERS AND COMPANY
-----------------------------------------
The Company has communicated to the Sellers and each Seller understands and
acknowledges that:
6.01 Certificate. All certificates representing the CBQI Shares will bear a
legend restricting their transfer as "restricted securities" under Rule 144 of
the Securities Act.
6.02 No Securities Act Registration. The CBQI Shares have not been
registered under the Securities Act of 1933, as amended, or any applicable state
law (collectively, the "Securities Act"). The CBQI Shares may not be sold,
offered for sale, transferred, pledged, hypothecated or otherwise disposed of
except in compliance with the Securities Act. The Sellers must bear the economic
risk of their investment in the CBQI Shares for an indefinite period of time. If
they desire to sell or transfer all or any part of the CBQI Shares within the
restricted period, CBQ may require their counsel to provide a legal opinion that
the transfer may be made without registration under the Securities Act.
6.03 Reliance on Rule 506. CBQ is relying on Regulation D under the
Securities Act of 1933, as amended, to provide an exemption from registration
under the Securities Act of 1933, as amended, and, to avail itself of such
exemption, is relying on the representations and warranties of Sellers set out
in the Letter of Investment Intent (the form of which is attached hereto as
Exhibit 8.01(n)) which each Seller shall sign and the acknowledgements set forth
in this Article VI.
6.04 Lack of Agency Findings. No federal or state agency has made any
findings or determination as to the fairness of an investment in CBQ or any
recommendation or endorsement of this investment.
6.05 Limited Market for CBQI Shares. There is presently only a limited
market for the CBQI shares and no market may exist in the future for any sale or
sales of all or any portion thereof.
6.06 Commitments to Investments. The commitment of the Sellers to
investments that are not readily marketable is not disproportionate to their net
worth and their investment in the CBQI Shares will not cause their commitments
to become excessive.
6.07 Financial Ability. The Sellers have the financial ability to bear the
economic risks of this investment, have adequate means of providing for their
current needs, and have no need for liquidity in this investment.
6.08 High Risk of Investment. The Sellers have evaluated the high risks of
investing in the CBQI Shares and have such knowledge and experience in financial
and business matters in general and in particular with respect to this type of
investment that they are capable of evaluating the merits and risks of an
investment in the CBQI Shares.
6.09 Opportunity to Investigate Investment. Sellers have been given the
opportunity to ask questions of and receive answers from CBQ concerning the
terms and conditions of this investment and to obtain additional information
necessary to verify the accuracy of the information it desired in order to
evaluate his investment. In evaluating the suitability of an investment in the
CBQI Shares, they have not relied on any representations or other information
(whether oral or written) other than that furnished to them by CBQ or the
representatives of CBQ.
6.10 Opportunity to Consult Professionals. Sellers have had the opportunity
to discuss with their professional, legal, tax and financial advisers the
suitability of an investment in the CBQI Shares for their particular tax and
financial situation and all information that they have provided to CBQ
concerning themselves and their financial position is correct and complete.
6.11 Reliance. In making the decision to purchase the CBQI Shares, the
Sellers have relied solely upon independent investigations made by them or on
their behalf.
6.12 Investment Purpose. The Sellers are acquiring the CBQI Shares solely
for their own account, for investment purposes only, and are not purchasing with
a view to, or for, the resale, distribution, subdivision or fractionalization
thereof.
ARTICLE VII
COVENANTS OF CBQ
----------------
CBQ covenants and agrees with Seller as follows:
7.01 Maintain Corporate Existence; Conduct Business in Compliance With
Laws. From the date hereof until the Closing Date, CBQ will: (i) maintain its
corporate existence in good standing; (ii) conduct, and cause its subsidiaries
to conduct, their respective businesses in compliance with all material
obligations and duties imposed on them by all laws, governmental regulations,
rules and ordinances, and judicial orders, judgments and decrees applicable to
CBQ or its subsidiaries, their businesses or their properties; and (iii)
maintain all books and records of it and the subsidiaries, including all
financial statements, in accordance with the accounting principles and practices
consistent with those used for the CBQ Financial Statements, except for changes
in such principles and practices required under generally accepted accounting
principles.
7.02 Regulatory Filings. As promptly as practicable after the execution of
the Agreement, CBQ shall make or cause to be made all required filings and
submissions under any laws or regulations applicable to CBQ for the consummation
of the transactions contemplated herein. CBQ will coordinate and cooperate with
the Company and the Sellers in exchanging such information, will not make any
such filing without providing to the Company a final copy thereof for its review
and consent at least two full business days in advance of the proposed filing
and will provide such reasonable assistance as the Sellers and the Company may
request in connection with all of the foregoing.
7.03 Conditions. CBQ shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in Section 8.02 to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but in any event within
thirty business days of such date).
7.04 Due Authorization, etc. of Stock Issued to Sellers. The shares of CBQ
Common Stock to be issued by CBQ to the Sellers pursuant to this Agreement will,
upon such issuance and delivery to the Sellers in accordance with the terms of
this Agreement, be duly authorized, validly issued, fully paid and
nonassessable. The shares of CBQ Common Stock to be delivered to the Sellers
pursuant to this Agreement are and will be free of any preemptive rights of the
shareholders of CBQ.
7.05 Approvals and Consents. CBQ shall take all necessary corporate and
other action and file all documents required to obtain and will use its best
efforts to obtain all approvals of regulatory authorities, consents and
approvals required of it to carry out the transactions contemplated by this
Agreement and will cooperate with the Company to obtain all such approvals and
consents required by the Company.
7.06 Accounting and Tax Matters. CBQ shall not take any action with respect
to CBQ that would disqualify the acquisition of the Shares from the Sellers from
being effected as a "pooling of interests" for financial reporting purposes or
would prevent such acquisition from constituting a transaction qualifying under
Section 368(a) of the Code.
7.07 Employment Agreements. CBQ acknowledges that the Company's employment
agreements are still in effect.
ARTICLE VIII
CONDITIONS TO CLOSING
---------------------
The parties shall take all commercially reasonable actions necessary or
desirable to cause the conditions set forth in this Article VIII to be satisfied
and to consummate the transactions contemplated herein as soon as reasonably
possible after the satisfaction thereof (but in any event within thirty (30)
business days of such date).
8.01 Conditions to Closing.
The obligation of CBQ to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions at or
before the Closing Date:
(a) The representations and warranties set forth in Article II and
Article III hereof shall be true and correct in all material respects at and as
of the Closing Date as though then made and as though the Closing Date had been
substituted for the date of this Agreement throughout such representations and
warranties (without taking into account any disclosures by the Company of
discoveries, events or occurrences arising on or after the date hereof);
(b) The Company shall have performed in all material respects all of
the covenants and agreements required to be performed and complied with under
this Agreement prior to the Closing Date;
(c) The Company and Sellers shall have obtained, or caused to be
obtained, each consent and approval necessary in order that the transactions
contemplated herein not constitute a breach or violation of, or result in a
right of termination or acceleration of, or creation of any encumbrance on any
of the Company's assets pursuant to the provisions of, any agreement,
arrangement or undertaking of or affecting the Company or any license, franchise
or permit of or affecting the Company;
(d) This Agreement shall have been duly and validly authorized by the
Board of Directors and by the shareholders of the Company, and the Company shall
have delivered to CBQ evidence, in form satisfactory to CBQ's counsel, of such
authorization and approval;
(e) All material governmental filings, authorizations and approvals
that are required for the consummation of the transactions contemplated by this
Agreement will have been duly made and obtained;
(f) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by CBQ of all or a material portion of the business or
assets of the Company and Company Subsidiaries, or to CBQ or the Company to
dispose of or to hold separately all or a material portion of the business or
assets of CBQ or of the Company, as a result of the transactions contemplated
hereby, (iii) seeking to require direct or indirect transfer or sale by CBQ of
any of the shares of Company Common Stock, (iv) seeking to invalidate or render
unenforceable any material provision of this Agreement or any of the other
agreements attached as exhibits hereto (collectively, the "Related Agreements"),
or (v) otherwise relating to and materially adversely affecting the transactions
contemplated hereby;
(g) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal, state or foreign court, government or governmental authority or
agency, which would reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 8.04(f) hereof;
(h) Between the date of this Agreement and the Closing Date, there
shall not have occurred any change with respect to the business, assets,
properties, condition (financial or otherwise), results of operations or
prospects of the Company which is, individually or in the aggregate with other
such facts and circumstances, materially adverse to the Company or to the value
of the shares of Company Common Stock;
(i) There shall have been no damage, destruction or loss of or to any
property or properties owned or used by the Company, whether or not covered by
insurance, which, in the aggregate, has, or would be reasonably likely to have,
a material adverse effect on the Company;
(j) [intentionally omitted];
(k) Prior to the Closing Date, the Company shall have delivered to CBQ
all of the following:
(i) certificates of John Moran and Raymond J. Kostkowski,
substantially in the form set forth in Exhibit 8.01(k)(i) attached hereto, dated
as of the date of the Closing Date, stating that the conditions precedent set
forth in subsections (a) and (b) above have been satisfied;
(ii) copies of the third party and governmental consents and
approvals and of the authorizations referred to in subsections (c), (d) and (e)
above;
(iii) the Company's minute books, stock transfer records,
corporate seal and other materials related to the Company's corporate
administration;
(iv) resignations (effective as of the Closing Date) from such of
the Company's directors and/or officers as CBQ shall have requested prior to the
Closing Date;
(v) a copy of the Articles of Incorporation of the Company and
Company Subsidiaries, certified by the Department of Assessment and Taxation for
the State of Maryland (the "MDAT"), and Certificates of Good Standing from the
MDAT;
(vi) a copy of each of the text of the resolutions adopted by the
board of directors of the Company authorizing the execution, delivery and
performance of this Agreement and the consummation of all of the transactions
contemplated by this Agreement and the bylaws of the Company; along with
certificates executed on behalf of the Company by its corporate secretary
certifying to CBQ that such copies are true, correct and complete copies of such
resolutions and bylaws, respectively, and that such resolutions and bylaws were
duly adopted and have not been amended or rescinded;
(vii) such other certificates, documents and instruments as CBQ
reasonably requests related to the transactions contemplated hereby; and
(viii) a copy of shareholder investor letters from each Company
shareholder.
(l) Approval of Board of Directors. The Board of Directors of CBQ
shall have approved the execution, delivery and performance of this Agreement by
CBQ;
(m) 401(k) Plan and Employee Deferred Benefit Plan. The Company's
"401(k) Plan" dated January 1, 2000, and the Digital Production's, Inc. 401(k)
Profit Sharing Plan and Trust dated January 1, 1997, shall remain in full force
and effect; and
(n) Letters of Investment Intent. The Sellers have each read and
understand Article VI in its entirety and each Seller shall sign a Letter of
Investment Intent in the form attached hereto as Exhibit 8.01(n). Delivery of an
executed Letter of Investment Intent shall be an express condition precedent to
delivery of CBQI Shares to each Seller.
8.02 Conditions to Sellers' and the Company's Obligations. The obligations
of the Company and Sellers to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of the following conditions on or
before the Closing Date:
(a) Representations and Warranties True and Correct. The
representations and warranties set forth in Article IV hereof will be true and
correct in all material respects at and as of the Closing as though then made
and as though the Closing Date had been substituted for the date of this
Agreement throughout such representations and warranties, except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such date;
(b) Covenants Performed. CBQ shall have performed in all material
respects all the covenants and agreements required to be performed by it under
this Agreement prior to the Closing;
(c) Government Approvals. All material governmental filings,
authorizations and approvals that are required for the consummation of the
transactions contemplated hereby will have been duly made and obtained;
(d) No Prohibitions. There shall not be threatened, instituted or
pending any action or proceeding, before any court or governmental authority or
agency, domestic or foreign, (i) challenging or seeking to make illegal, or to
delay or otherwise directly or indirectly restrain or prohibit, the consummation
of the transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to invalidate or render
unenforceable any material provision of this Agreement, or (iii) otherwise
relating to and materially adversely affecting the transactions contemplated
hereby;
(e) No Governmental Actions Taken. There shall not be any action
taken, or any statute, rule, regulation, judgment, order or injunction, enacted,
entered, enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby by any federal, state or foreign court, government or
governmental authority or agency, which would reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in Section
6.02(d) hereof; and
(f) Delivery of Certain Documents. On the Closing Date, CBQ will have
delivered to the Company:
(i) a certificate of an officer of CBQ substantially in the form
set forth as Exhibit 8.02(f)(i) attached hereto, dated the Closing Date, stating
that the conditions precedent set forth in subsections (a) and (b) above have
been satisfied; and
(ii) such number of shares of CBQ Common Stock as shall have been
determined in accordance with Sections 1.02 (a) and (b) hereof, and checks with
respect to any fractional shares in accordance with Section 1.02(e) hereof.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
-------------------------
9.01 Survival of Representations and Warranties. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties contained in Article II and
Article III hereof shall survive with respect to any specific representation or
warranty under which CBQ shall have made a claim for indemnification hereunder
prior to the third anniversary of the Closing Date and as to which such claim
has not been completely and finally resolved prior to the third anniversary of
the Closing Date, such representation or warranty shall survive for the period
of time beyond the third anniversary of the Closing Date sufficient to resolve,
completely and finally, the claim relating to such representation or warranty.
9.02 Indemnification.
(a) Subject to the limitations of Section 9.02(b), the Company, agrees
to indemnify in full CBQ and its officers, directors, employees, agents and
shareholders (collectively, the "Indemnified Parties") and hold them harmless
against any loss, liability, deficiency, damage, expense or cost (including
reasonable legal expenses), whether or not actually incurred or paid, which
Indemnified Parties may suffer, sustain or become subject to, prior to the third
anniversary of the Closing Date, as a result of (i) any misrepresentation in any
of the representations and warranties of the Company contained in this Agreement
or in any exhibits, schedules, certificates or other documents delivered or to
be delivered by or on behalf of the Company pursuant to the terms of this
Agreement or otherwise referenced or incorporated in this Agreement
(collectively, the "Related Documents"), (ii) any breach of, or failure to
perform, any agreement of the Company or the Company contained in this Agreement
or any of the Related Documents, or (iii) any "Claims" (as defined in Section
9.03(a) hereof) or threatened Claims against CBQ arising out of the actions or
inactions of the Company with respect to the Company's business or the Real
Property prior to the Closing Date (collectively, "Losses").
(b) The Company will be liable to the Indemnified Parties for any Loss
only if CBQ delivers to the Company a written notice, setting forth in
reasonable detail the identity, nature and amount of Losses related to such
claim or claims prior to the third anniversary of the Closing Date.
9.03 Indemnity by Moran
(a) Subject to the limitations of Section 9.03(b), Moran agrees to
indemnify in full CBQ and its officers, directors, employees, agents and
shareholders (collectively, the "Indemnified Parties") and hold them harmless
against any loss, liability, deficiency, damage, expense or cost (including
reasonable legal expenses), whether or not actually incurred or paid, which
Indemnified Parties may suffer, sustain or become subject to, as a result of (i)
any misrepresentation in any of the representations and warranties of Moran
contained in Article III of the Agreement, or (ii) any "Claims" (as defined in
Section 9.05(a) hereof) or threatened Claims against CBQ arising out of the
actions or inactions of Moran with respect to the Company's business or the Real
Property prior to the Closing Date (collectively, "Losses").
(b) Moran shall be liable to the Indemnified Parties for any Loss (i)
only if CBQ delivers to the Moran a written notice, setting forth in reasonable
detail the identity, nature and amount of Losses related to such claim or claims
prior to the earlier of (i) twelve (12) months from the Closing date; or (ii)
the date Moran is no longer President of CBQ. In either case Moran shall be
liable to the Indemnified Parties only if the aggregate amount of all Losses
exceeds $100,000.00 (the "Basket Amount"), in which case Moran shall be
obligated to indemnify the Indemnified Parties for the total amount of all such
Losses from the first dollar of Losses over the Basket Amount. CBQ's failure to
provide the detail required by clause (i) in the preceding sentence shall not
constitute either a breach of this Agreement by CBQ or any basis for Moran to
assert that CBQ did not comply with the terms of this Section 9.03 sufficient to
cause CBQ to have waived its rights under this Section 9.03.
9.04 Indemnity by Kostkowski
(a) Subject to the limitations of Section 9.04(b), Kostkowski agrees
to indemnify in full CBQ and its officers, directors, employees, agents and
shareholders (collectively, the "Indemnified Parties") and hold them harmless
against any loss, liability, deficiency, damage, expense or cost (including
reasonable legal expenses), whether or not actually incurred or paid, which
Indemnified Parties may suffer, sustain or become subject to, as a result of (i)
any misrepresentation in any of the representations and warranties of Kostkowski
contained in Article III of the Agreement, or (ii) any "Claims" (as defined in
Section 9.05(a) hereof) or threatened Claims against CBQ arising out of the
actions or inactions of Moran with respect to the Company's business or the Real
Property prior to the Closing Date (collectively, "Losses").
(b) Kostkowski shall be liable to the Indemnified Parties for any Loss
(i) only if CBQ delivers to the Kostkowski a written notice, setting forth in
reasonable detail the identity, nature and amount of Losses related to such
claim or claims prior to the earlier of (i) twelve (12) months from the Closing
Date; or (ii) the date Kostkowski is no longer CEO of CBQ. In either case,
Kostkowski shall be liable to the Indemnified Parties only if the aggregate
amount of all Losses exceeds $100,000.00 (the "Basket Amount"), in which case
Kostkowski shall be obligated to indemnify the Indemnified Parties for the total
amount of all such Losses from the first dollar of Losses over the Basket
Amount. CBQ's failure to provide the detail required by clause (i) in the
preceding sentence shall not constitute either a breach of this Agreement by CBQ
or any basis for Kostkowski to assert that CBQ did not comply with the terms of
this Section 9.04 sufficient to cause CBQ to have waived its rights under this
Section 9.04.
9.05 Method of Asserting Claims.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Losses (any such third party action or proceeding being referred to as
a "Claim"), CBQ shall give the Company prompt notice thereof. The failure to
give such notice shall not affect any Indemnified Party's ability to seek
reimbursement unless such failure has materially and adversely affected the
Company' ability to defend successfully a Claim. The Company shall be entitled
to contest and defend such Claim; provided, that the Company (i) have a
reasonable basis for concluding that such defense may be successful and (ii)
diligently contest and defend such Claim. Notice of the intention so to contest
and defend shall be given by the Company to CBQ within 20 business days after
CBQ's notice of such Claim (but, in all events, at least five business days
prior to the date that an answer to such Claim is due to be filed). Such contest
and defense shall be conducted by reputable attorneys retained by the Company.
CBQ shall be entitled at any time, at its own cost and expense (which expense
shall not constitute a Loss unless CBQ reasonably determines that the Company
are not adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its or their own choosing. If CBQ
elects to participate in such defense, CBQ will cooperate with the Company in
the conduct of such defense. Neither CBQ nor the Company may concede, settle or
compromise any Claim without the consent of the other party, which consents will
not be unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim
seeks equitable relief or (ii) if the subject matter of a Claim relates to the
ongoing business of any of the Indemnified Parties, which Claim, if decided
against any of the Indemnified Parties, would materially adversely affect the
ongoing business or reputation of any of the Indemnified Parties, then, in each
such case, the Indemnified Parties alone shall be entitled to contest, defend
and settle such Claim in the first instance and, if the Indemnified Parties do
not contest, defend or settle such Claim, the Company shall then have the right
to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim against the
Company that does not involve a Claim, CBQ shall deliver a notice of such claim
with reasonable promptness to the Company. If the Company notify CBQ that they
do not dispute the claim described in such notice or fail to notify CBQ within
20 days after delivery of such notice by CBQ whether the Company dispute the
claim described in such notice, the Loss in the amount specified in CBQ's notice
will be conclusively deemed a liability of the Company and the Company shall pay
the amount of such Loss to CBQ on demand. If the Company have timely disputed
its liability with respect to such claim, one of the Company and a Vice
President of CBQ will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through the negotiations of such individuals within
20 days after the delivery of CBQ's notice of such claim, such dispute shall be
resolved, fully and finally, in Washington, D.C., by an arbitrator selected
pursuant to, and an arbitration governed by, the Commercial Arbitration Rules of
the American Arbitration Association. The arbitrator shall resolve the dispute
within 30 days after selection and judgment upon the award rendered by such
arbitrator may be entered in any court of competent jurisdiction. The party
whose determination of the payment amount in dispute is furthest from the amount
determined by the arbitrator shall bear its own costs and expenses of such
arbitration, the fees and expenses of the arbitrator and the out-of-pocket costs
and expenses (including legal fees) of the other party thereto.
(c) After the Closing, the rights set forth in this Article IX shall
be each party's sole and exclusive remedies against the other party hereto for
misrepresentations or breaches of covenants contained in this Agreement and the
Related Documents. Notwithstanding the foregoing, nothing herein shall prevent
any of the parties hereto from bringing an action based upon allegations of
fraud or other intentional breach of an obligation of or with respect to the
other parties in connection with this Agreement and the Related Documents. In
the event such action is brought, the prevailing party's attorneys' fees and
costs shall be paid by the nonprevailing party.
(d) Any indemnification payable under this Article IX shall be, to the
extent permitted by law, an adjustment to purchase price.
ARTICLE X
MISCELLANEOUS
-------------
10.01 Press Releases and Announcements. Prior to the Effective Time, no
party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to the employees, customers or suppliers of the Company
without prior written approval of the other party hereto, except as may be
necessary, in the opinion of counsel to the party seeking to make disclosure, to
comply with the requirements of this Agreement or applicable law. If any such
press release or public announcement is so required, the party making such
disclosure shall consult with the other party prior to making such disclosure,
and the parties shall use all reasonable efforts, acting in good faith, to agree
upon a text for such disclosure which is satisfactory to both parties.
10.02 Expenses. Except as otherwise expressly provided for herein, Company,
the Company, and CBQ will each pay all of their own expenses (including
attorneys' and accountants' fees) in connection with the negotiation of this
Agreement, the performance of their respective obligations under this Agreement
and the consummation of the transactions contemplated hereby and thereby
(whether consummated or not).
10.03 Amendment and Waiver. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment or waiver
is sought to be enforced. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to modify or
amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
10.04 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or three
days after being mailed, if mailed by first class mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
CBQ, Company and the Company will, unless another address is specified in
writing, be sent to the address indicated below:
Notices to CBQ: with a copy to:
-------------- --------------
Bart S. Fisher James R. Hagerty, Esq.
CBQ, Inc. Kalbian Hagerty, L.L.P.
1919 Pennsylvania Avenue, N.W. 2001 L Street, N.W.
Suite 500 Suite 600
Washington, D.C. 20006-3434 Washington, D.C. 20036
Notices to the Sellers and Company: with a copy to:
----------------------------------- ---------------
John Moran C. Wayne Davis, Esq.
Quantum Technology Group, Inc. Thomas & Libowitz
10923 McCormick Road 100 Light Street, Suite 1100
Hunt Valley, Maryland 21031 Baltimore, Maryland 21202
Phone: (410)752-2468
Raymond J. Kostkowski
Quantum Technology Group, Inc.
10923 McCormick Road
Hunt Valley, Maryland 21031
10.05 Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto.
10.06 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.07 Complete Agreement. This Agreement and the Related Agreements and
other exhibits hereto, the Disclosure Schedule and the other documents referred
to herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
10.08 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
10.09 Governing Law. The internal law, without regard for conflicts of laws
principles, of the State of Maryland will govern all questions concerning the
construction, validity and interpretation of this Agreement and the performance
of the obligations imposed by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CBQ, INC.
By: _____________________________
Bart S. Fisher
Title: Chairman and CEO
QUANTUM TECHNOLOGY GROUP, INC.
By: _____________________________
Name: Raymond J. Kostkowski
Title: CEO
By: _____________________________
Name: John Moran
Title: President