AGREEMENT AND PLAN OF MERGER
by and among
NEXTPATH TECHNOLOGIES, INC.
(Parent)
SAGEBRUSH TECHNOLOGY, INC.,
a Delaware Corporation
(Sub)
SAGEBRUSH TECHNOLOGY, INC.,
a New Mexico Corporation
(Target)
and
DONALD G. CARSON, BETTY CARSON
AUGUST SANCHEZ AND YVONNE SANCHEZ
(Shareholders)
Dated as of December 14, 1999
TABLE OF CONTENTS
Section Description Page
1. Definitions ......................................................... 2
2. The Merger .......................................................... 7
(a) The Merger ................................................. 7
(b) Effective Time of the Merger ............................... 8
(c) The Surviving Corporation .................................. 8
3. Conversion of Shares and Consideration Therefor ..................... 8
(a) Conversion of Target Shares ................................ 8
(b) Additional Consideration ................................... 8
(c) Delivery of Parent Shares .................................. 8
(d) Delivery of Target Shares .................................. 9
(e) Taking Necessary Action; Further Action .................... 9
(f) Registration Rights ........................................10
(g) Assumption of Obligations ..................................10
(h) Additional Payments to Donald G. Carson ....................10
4. The Closing .........................................................10
(a) The Closing ................................................10
(b) Deliveries at the Closing ..................................10
5. Escrow Account ......................................................11
(a) Deposit Into Escrow Account ................................11
(b) Investment of Escrow Amount ................................11
(c) Distribution from Escrow Account ...........................11
(d) Dispute Resolution .........................................12
(e) Reimbursement of Shareholders ..............................12
6. Representations and Warranties Concerning the Transaction ...........13
(a) Representations and Warranties of the Shareholders .........13
(i) Authorization of Transaction ......................13
(ii) Noncontravention ..................................13
(iii) Broker's Fees .....................................14
(iv) The Shares ........................................14
(v) Suitability .......................................14
(vi) Absence of Registration ...........................14
(vii) Restrictions on Transferability ...................14
(viii) Access to Information .............................14
(ix) Investment ........................................15
(x) Liability .........................................15
(xi) Other Positions ...................................15
(xii) Disclosure ........................................15
(b) Representations and Warranties of the Parent ...............15
(i) Organization and Qualification ....................15
(ii) Capitalization ....................................16
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(iii) Authorization of Transaction ......................16
(iv) Noncontravention ..................................17
(v) Default ...........................................17
(vi) Litigation ........................................17
(vii) Suitability .......................................17
(viii) Absence of Registration ...........................17
(ix) Restrictions on Transferability ...................17
(x) Access to Information .............................18
(xi) Brokers' Fees .....................................18
(xii) Investment ........................................18
(xiii) Financing .........................................18
(xiv) Creativity Incentive Plan .........................18
(xv) Directors and Officers Liability Insurance ........19
(xvi) Sub Shares ........................................19
(xvii) No Redemption of Parent Shares ....................19
(xviii) Disclosure ........................................19
7. Representations and Warranties Concerning the Target ................19
(a) Organization and Qualification .............................19
(b) Capitalization .............................................19
(c) Notice of Transaction ......................................20
(d) Noncontravention ...........................................20
(e) Subsidiaries ...............................................20
(f) Financial Statements .......................................20
(g) Events Subsequent to the Most Recent Financial Statement ...20
(h) Undisclosed Liabilities ....................................22
(i) Tax Matters ................................................22
(j) Tangible Assets ............................................22
(k) Real Property ..............................................22
(l) Personal Property ..........................................23
(m) Intellectual Property ......................................23
(n) Product Liability/Warranties ...............................24
(o) Contracts ..................................................25
(p) Insurance ..................................................25
(q) Litigation .................................................26
(r) Employees ..................................................26
(s) Employee Benefits ..........................................26
(t) Health and Safety Matters ..................................26
(u) Environmental Matters ......................................26
(v) Legal Compliance ...........................................28
(w) Certain Business Relationships with the Target .............28
(x) Brokers' Fees ..............................................29
(y) Year 2000 Compliance .......................................29
(z) Customer List ..............................................29
(aa) Acquired Accounts Receivable ...............................29
(bb) Accounts Payable ...........................................29
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(cc) Target Liability ...........................................30
(dd) Minutes 30
(ee) Continuity of Business Enterprise ..........................30
(ff) Disclosure .................................................30
8. Additional Covenants ...............................................30
(a) General 30
(b) Litigation Support .........................................30
(c) Transition .................................................30
(d) Confidentiality ............................................31
(e) Additional Tax Matters .....................................31
(f) Covenant Not to Compete ....................................32
(g) Employment Matters .........................................32
9. Conditions to Obligations to Close ..................................33
(a) Conditions to Obligation of the Parent .....................33
(b) Conditions to Obligations of the Shareholders ..............35
10. Closing Deliveries ..................................................37
(a) Instruments to be Delivered by the Shareholders at Closing .37
(b) Documents to be Delivered by the Parent and Sub at Closing .38
11. Audit ...............................................................39
12. Indemnification .....................................................39
(a) Survival ...................................................39
(b) Indemnification by the Shareholders ........................39
(c) Indemnification by the Parent and Sub ......................40
(d) Notice and Opportunity to Defend ...........................40
13. Miscellaneous 40
(a) Disclosure Schedules .......................................40
(b) Press Releases and Announcements ...........................41
(c) No Third-Party Beneficiaries ...............................41
(d) Entire Agreement ...........................................41
(e) Succession and Assignment ..................................41
(f) Counterparts/Facsimile .....................................41
(g) Headings ...................................................41
(h) Notices 42
(i) Amendments and Waivers .....................................42
(j) Severability ...............................................42
(k) Expenses ...................................................43
(l) Construction ...............................................43
(m) Incorporation of Exhibits and Disclosure Schedules .........43
(n) Specific Performance .......................................43
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EXHIBITS
A Agreement of Merger
B Certificate of Merger - Delaware
B-1 Articles of Merger - New Mexico
C Escrow Agreement
D Financial Statements
E Consulting Agreement - Carson
F Employment Agreement - Sanchez
G Closing Certificate - Shareholders
H Opinion of Counsel - Shareholders
I Release of Shareholders
J Closing Certificate - Parent
K Opinion of Counsel - Parent
L Agreement-Ladd
M Assignment of Patent No. 5,105,672
N Assignment of Roto-Lok(R)Trademark
O Assignment of Technology in Harmony with Nature Trademark
P Assignment of Interest in License Agreement
DISCLOSURE SCHEDULES
3(g) Assumed Obligations
6(a) Shareholders" Amended Representations and Warranties
6(b) Parent's' Amended Representations and Warranties
6(b)(iv) Parent Approvals
6(b)(vi) Litigation
7 Amended Representations and Warranties Concerning the Target
7(d) Approvals
7(f) Financial Statements
7 (g) Events Subsequent to the Most Recent Financial Statement
7(h) Target Liabilities
7(i) Tax Matters
7(k) Real Property
7(l) Personal Property
7(m) Intellectual Property
7(n) Product Liability/Warranties
7(o) Contracts
7(p) Insurance
7(q) Litigation
7(r) Employees
7(s) Employee Benefit (ERISA) Matters
7(t) Health and Safety Matters
7(u) Environmental Matters
7(v) Legal Compliance
7(w) Business Relationships
7(y) Year 2000 Compliance
7(z) Customer List
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7(aa) Acquired Accounts Receivable
7(bb) Accounts Payable
7(cc) Target Liability
7(dd) Minutes
9(a)(xi) Shareholders' Debt to Target
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered
into as of December 14, 1999 (the "Effective Date") by and among NextPath
Technologies, Inc., a Nevada corporation (the "Parent"), Sagebrush Technology,
Inc., a Delaware corporation (the "Sub"), Sagebrush Technology, Inc., a New
Mexico corporation (the "Target"), and Donald G. Carson and Betty Carson,
husband and wife, of Albuquerque, New Mexico, and August Sanchez and Yvonne
Sanchez, husband and wife, of Albuquerque, New Mexico (Donald G. Carson, Betty
Carson, August Sanchez and Yvonne Sanchez are collectively referred to as the
"Shareholders;" Donald G. Carson and Betty Carson are collectively referred to
as the "Carson Shareholders;" and August Sanchez and Yvonne Sanchez are
collectively referred to as the "Sanchez Shareholders"). The Parent, Sub, Target
and the Shareholders are referred to in this Agreement individually as a "Party"
and collectively as the "Parties." The Target and the Sub are referred to in
this Agreement collectively as the "Constituent Corporations." This Agreement
shall supercede the Stock Purchase Agreement among the Parties dated October 26,
1998.
WHEREAS, the Parent is engaged in the development of new and
innovative technologies;
WHEREAS, the Target, whose principal executive offices are
located at 10300-A Constitution, NE, Albuquerque, New Mexico 87112, is engaged
in the business of designing, developing, manufacturing and marketing
positioning devices (gimbals), and other business activities (the "Business");
WHEREAS, the Target has developed and is the owner of
proprietary technology related to the Business;
WHEREAS, the Shareholders own or hold a community interest in
all of the issued and outstanding common stock of the Target (the "Shares");
WHEREAS, the Shareholders and the Boards of Directors of the
Parent, Sub and Target have approved the acquisition of the Target by the
Parent, and the merger of the Target into the Sub (the "Merger"), pursuant to
the Agreement of Merger set forth as Exhibit A attached to this Agreement (the
"Merger Agreement") and the transaction contemplated by this Agreement, in
accordance with the applicable provisions of the statutes of the States of
Delaware and New Mexico, which permit the Merger;
WHEREAS, for Federal income tax purposes, it is intended that
the transaction contemplated by this Agreement shall be a forward triangular
merger which qualifies as a reorganization pursuant to Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code; and
WHEREAS, concurrent with the Merger, the Sub and Donald G.
Carson desire to enter into a consulting agreement and the Sub and August
Sanchez desire to enter into an employment agreement.
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NOW, THEREFORE, in consideration of the representations,
warranties, and covenants contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is acknowledged,
the Parties agree as follows:
1. Definitions.
"Acquired Accounts Receivable" means all accounts receivable
of the Target which are unpaid as of the Closing Date and which are listed on
Disclosure Schedule 7(aa).
"Adverse Consequences" means all actual damages from
complaints, actions, suits, proceedings, hearings, investigations, claims,
demands, judgments, orders, decrees, stipulations, injunctions, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including all reasonable attorneys'
fees and court costs.
"Affiliate" means (a) any person directly or indirectly
owning, controlling, or holding with power to vote ten percent (10%) or more of
the outstanding voting securities of such other person; (b) any person ten
percent (10%) or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote, by such other person;
(c) any person directly or indirectly controlling, controlled by, or under
common control with such other person; (d) any officer, director or partner of
such other person; and (e) if such other person is an officer, director or
partner, any company for which such person acts in any such capacity.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms the basis for any
specified consequence.
"Business" means the business of designing, developing,
manufacturing and marketing of positioning devices (gimbals) and all other
business activities engaged in by the Target.
"Business Day" means any day except a Saturday, Sunday or
other day in which commercial banks in the State of New Mexico are authorized by
law to close.
"Carson Shareholders" mean Donald G. Carson and Betty Carson,
husband and wife.
"Cause" means the conviction of (a) a felony, or (b) a
misdemeanor involving embezzlement, fraud, conversion or misuse of the Sub's
funds or resources or that affects the Sub's business, operations or reputation
or substantially impairs a person's qualifications, character or ability to
perform his or her duties.
"Claim Settlement Amount" has the meaning set forth in Section
12.
"Closing" has the meaning set forth in Section 4(a).
"Closing Date" has the meaning set forth in Section 4(a).
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"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information, technical
data or know-how related to any aspect of a Party's business (including without
limitation, research findings, products, proposals, formulas, test results,
product developments, discoveries, inventions, processes, designs, drawings,
engineering studies, marketing reports, customer lists and financial
information) which is disclosed by one party (the "Disclosing Party") to the
another party (the "Receiving Party"), either directly or indirectly, in
writing, orally, electronically, graphically, or by drawings, plans or
inspection of products, tests or equipment. The term "Confidential Information"
shall not include any information, technical data or know-how which: (a) is
already (or otherwise becomes) publicly known, not as a result of any action or
inaction of the Receiving Party; (b) is in the Receiving Party's possession
prior to disclosure by the Disclosing Party as can be shown by the Receiving
Party's files and records as they existed immediately prior to the disclosure;
(c) is approved for release by written authorization of the Disclosing Party;
(d) is independently developed and disclosed by a third party to the Receiving
Party; or (e) is required at or before the time in question to be disclosed by
law or regulation.
"Controlled Group of Corporations" has the meaning set forth
in Code Sec. 1563.
"Disclosure Schedule" has the meaning set forth in Section 6.
"DOJ" means the Antitrust Division of the United States
Department of Justice or any successor Governmental Body.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi-employer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program but does not include standard vacation
and sick leave benefits.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"Environmental Damages" means all claims, judgments, damages,
losses, penalties, fines, liabilities (including strict liability),
encumbrances, liens, costs, and expenses of investigation and defense of any
claim, whether or not such claim is ultimately defeated, and of any good faith
settlement or judgment, of whatever kind or nature, contingent or otherwise,
matured or unmatured, foreseeable or unforeseeable, including without limitation
reasonable attorneys' fees and disbursements and consultants' fees, any of which
are incurred at any time as a result of the existence prior to the Closing Date
of: (i) Hazardous Material upon, about, or beneath the Real Property, or (ii) a
violation of Environmental Requirements pertaining to the Real Property, if the
existence of such Hazardous Material or the violation of Environmental
Requirements arose upon or after the Target's ownership or operation of the Real
Property.
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"Environmental Requirements" means all applicable statutes,
regulations, rules, ordinances, codes, licenses, permits, orders, approvals,
plans, authorizations, concessions, franchises, and similar items, of all
governmental agencies, departments, commissions, boards, bureaus, states,
political subdivisions, or instrumentalities of the United States, and all
applicable judicial, administrative, and regulatory decrees, judgments, and
orders relating to the protection of human health or the environment.
"Equitable Exceptions" has the meaning set forth in Section
6(a)(i).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statements" has the meaning set forth in Section
7(f).
"FTC" means the United States Federal Trade Commission or any
successor Governmental Body
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Governmental Body" means any federal, state, county, city,
town, village, municipal or other governmental department, commission, board,
bureau, agency, authority or instrumentality.
"Hazardous Materials" means any substance other than
substances and materials necessary to produce the products currently
manufactured by the Target on the Real Property or used in the ordinary course
of the Business: (i) the presence of which requires investigation or remediation
under any applicable federal, state, or local statute, regulation, ordinance,
order, action, policy, or common law; (ii) that is defined as `a "hazardous
waste" or "hazardous substance" under any applicable federal, state, or local
statute, regulation, or ordinance; (iii) that is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is regulated by any applicable governmental authority within a
United States agency, department, commission, board, agency, or instrumentality;
(iv) the presence of which on the Real Property causes or threatens to cause a
nuisance upon the Real Property or to adjacent properties, or poses or threatens
to pose a hazard to the health or safety of persons on or about the Real
Property; (v) the presence of which on adjacent properties could constitute a
trespass by the Target or the Parent as of the Closing Date; (vi) that contains
gasoline, diesel fuel, or other petroleum hydrocarbons in any unconfined manner;
or (vii) that contains PCBs, asbestos, or urea formaldehyde foam insulation.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" means the party indemnified under this
Agreement.
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"Indemnifying Party" means the party indemnifying the
Indemnified Party under this Agreement.
"Intellectual Property" means all (a) trademarks, service
marks, trade dress, logos, trade names, and corporate names and registrations
and applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software, data, and
documentation, (d) trade secrets and confidential business information
(including formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information), (e) all property, tangible or intangible, acquired or used
directly or indirectly in connection with the development and/or maintenance of
the Target's website, including without limitation, the databases and all
information contained therein, the domain names, the technology underlying the
website, all hardware and software, all contents of the website, all information
received from the persons accessing the website, and any and all trademark,
copyright and other intellectual property rights to any or all of the foregoing,
and (f) all goodwill associated with any of the above.
"Knowledge" means, with respect to the Target, actual
knowledge by Donald G. Carson or Betty Carson.
"Known Claim" has the meaning set forth in Section 12.
"Known Claim Amount" has the meaning set forth in Section 12.
"Laws" means all laws, statutes, codes, rules, regulations,
ordinances, or orders of any Governmental Body.
"Liability" means any liability, debt, obligation, amount or
sum due (whether absolute or contingent, whether liquidated or unliquidated, and
whether due or to become due) including any liability for Taxes.
"Material" or "Material Adverse Effect" means a material
adverse effect (10% or greater) on the assets, financial condition or results of
operations of the Party immediately upon the effectiveness of the Closing on the
Closing Date.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statement" has the meaning set forth in
Section 7(f).
"Multi-employer Plan" has the meaning set forth in ERISA
Sec. 3(37).
"Order" means any order, writ, injunction, decree, judgment,
award, determination or written direction of any court, arbitrator or
Governmental Body.
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"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Parent" means NextPath Technologies, Inc., a Nevada
corporation.
"Party" has the meaning set forth in the preface above.
"Patent" or "Patents" means United States Patent Number
5,105,672, issued April 21, 1992, for a Rotary Drive Apparatus Having One Member
With Smooth Outer Peripheral Surface, including any divisions or continuances in
whole or in part thereof, any U.S. or foreign patents or applications that are
later added to this Agreement, any patents issuing on any such applications, any
reissuance or extensions or reexaminations of any such patents and any foreign
patents or patent applications corresponding to any of the U.S. patents or
patent applications included in the Patent.
"Permitted Lien" means (i) any Security Interest for which the
underlying liability is disclosed on the Most Recent Balance Sheet, (ii) any
Security Interest for Taxes not yet due or being contested in good faith, or
(iii) any Security Interest which does not materially detract from the value or
materially interfere with the use of any asset as currently used in the Business
by the Target.
"Person" means an individual, corporation, partnership,
association, trust or other entity or organization, including a Governmental
Body or an agency or instrumentality thereof.
"Personal Property" means all tangible property other than
Real Property.
"Pre-Closing Tax Period" means any Tax period ending prior to
the Closing Date.
"Preliminary Report Financials" has the meaning set forth in
Section 7(f).
"Products" means that group of products which has been
designed, developed and/or produced, or which is presently sold or offered for
sale by, the Target.
"Prohibited Transaction" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"Real Property" means all real estate, improvements, buildings
and fixtures owned or leased by the Target or its subsidiaries in connection
with the Business.
"Reportable Event" has the meaning set forth in ERISA
Sec. 4043.
"Sanchez Shareholders" means August Sanchez and Yvonne
Sanchez, husband and wife.
"Securities Act" means the Securities Act of 1933, as amended.
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"Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than (a) mechanic's,
materialmen's and similar liens, (b) liens for Taxes not yet due and payable (or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings), (c) liens arising under workers' compensation, unemployment
insurance, social security, retirement, and similar legislation, (d) liens
arising in connection with sales of foreign receivables, (e) liens on goods in
transit incurred pursuant to documentary letters of credit, (f) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Shareholders" means Donald G. Carson and Betty Carson,
husband and wife, and August Sanchez and Yvonne Sanchez, husband and wife.
"Shares" means all of the outstanding shares of the common
stock of the Target as owned by the Shareholders on the Effective Date and on
the Closing Date.
"Sub" means Sagebrush Technology, Inc., a Delaware
corporation.
"Subsidiary" means any corporation or limited liability
company with respect to which another specified corporation or limited liability
company has the power to vote or direct the voting of sufficient securities to
elect a majority of the directors or managers.
"Target" means Sagebrush Technology, Inc. a New Mexico
corporation.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
2. The Merger.
(a) The Merger. At the Effective Time (as defined in Section
2(b) below), the Target shall be merged with and into the Sub in accordance with
the applicable provisions of Delaware and New Mexico law, and the separate
existence of the Target shall thereupon cease, and the Sub, as the Surviving
Corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence under the laws of the State of Delaware under its present
name.When the Merger becomes effective, the Surviving Corporation shall
thereupon and thereafter possess all the rights, privileges, powers, and
franchises as well of public as of a private nature, and being subject to all
the restrictions, disabilities and duties of each of the Constituent
Corporations, and all property, real, personal and mixed and all goodwill
associated therewith, and all debts due to either Constituent Corporation on
whatever account, as well as all other things belonging to or due to each of the
Constituent Corporations, shall be vested in the Surviving Corporation without
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further act or deed. The Surviving Corporation shall thenceforth be responsible
and liable for all debts, liabilities, duties and obligations of each of the
Constituent Corporations, in accordance with applicable Delaware law.
(b) Effective Time of the Merger. On the Closing Date, the
Merger Agreement or a Certificate of Merger, if permitted, together with any
other required instruments and certificates, shall be duly executed and filed
with the Delaware Secretary of State in accordance with Delaware law and
duplicate Articles of Merger, together with any other required instruments and
certificates, shall be duly executed and filed with the New Mexico Public
Regulation Commission. Subject to the laws of the States of New Mexico and
Delaware, the Merger shall become effective on the date the Merger Agreement is
filed with the Delaware Secretary of State or such later time or date as may be
specified in the Certificate of Merger (the "Effective Time").
(c) The Surviving Corporation.
(i)......Name. The Surviving Corporation shall be the
Sub, "Sagebrush Technology, Inc.," a Delaware corporation.
(ii).....Certificate of Incorporation.The Certificate
of Incorporation of the Sub in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation.
(iii)....Bylaws. The Bylaws of the Sub in effect at
the Effective Time shall be the Bylaws of the Surviving Corporation.
(iv).....Directors and Officers. The directors and
officers of the Sub as existing immediately prior to the Effective Time shall be
the directors and officers of the Surviving Corporation.
3. Conversion of Shares and Consideration Therefore.
(a) Conversion of Target Shares. Pursuant to the Merger
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of the Shareholders, the Shares shall be converted into, and become
exchangeable for, Six Hundred Thousand (600,000) shares of Parent's restricted
common stock, par value $.001 (the "Parent Shares").
(b) Additional Consideration. In addition to the conversion of
the Shares into Parent Shares, the Sub shall pay to the Shareholders Two Million
Six Hundred Twenty-Five Thousand Dollars ($2,625,000) (the "Additional
Consideration"). On the Closing Date (as defined in Section 4), the Sub shall
pay the Additional Consideration as follows:
(i)......Eight Hundred Seventy-Five Thousand Dollars
($875,000) (the "Escrow Payment") shall be paid to the Escrow Agent to be held
and distributed as set forth in Section 5; and
(ii).....One Million Seven Hundred Fifty Thousand
Dollars ($1,750,000) (the "Initial Payment") shall be paid to the Shareholders
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by wire transfer of immediately available funds. The Initial ayment shall
be paid to the respective Shareholders in the following amounts:
Shareholder Initial Payment
Donald G. and Betty Carson $1,500,000
August and Yvonne Sanchez 250,000
TOTAL $1,750,000
The Parent Shares, Escrow Payment and Initial Payment shall
collectively be known as the "Merger Consideration".
(c) Delivery of Parent Shares. The Parent shall deliver the
Parent Shares to the Shareholders at Closing in the form of certificates
evidencing ownership as follows:
Shareholders Parent Shares
Donald G. and Betty Carson, 514,286
Joint Tenants With Right of Survivorship
August and Yvonne Sanchez, 85,714
Joint Tenants with Right of Survivorship
The Parent Shares will be "Restricted Securities," as defined by Rule 144 under
the Securities Act of 1933, will be restricted as to transferability, and will
bear substantially the following legend:
The Securities represented by this Certificate have not been
registered under the United States Securities Act of 1933 (the
"Act") and are "restricted securities" as that term is defined
in Rule 144 under the Act. The Securities may not be offered
for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Act, or pursuant to
an exemption from registration under the Act, the availability
of which is to be established to the satisfaction of the
Company.
(d) Delivery of Target Shares. At Closing, the Shareholders
shall deliver to the Parent all certificates of the Shares which shall be
cancelled and exchanged for the Merger Consideration. From and after the
Effective Time, the stock transfer books of the Target shall be closed and no
transfer of Shares shall thereafter be made.
(e) Taking of Necessary Action; Further Action. The Parent,
Sub, Target and Shareholders shall take all such action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible, subject
to all of the terms and conditions of this Agreement. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers,
- 9 -
franchises, and all goodwill associated therewith, of either of the Constituent
Corporations, the officers and directors of the Constituent Corporations are
fully authorized in the name of the Constituent Corporations or otherwise to
take, and shall take, all such action.
(f) Registration Rights. The Parent shall file a registration
statement effecting the registration under the Securities Act of the Parent
Shares with the Securities and Exchange Commission within six months of the
Closing Date.
(g) Assumption of Obligations. The Parent and Sub shall (i)
assume the obligations, if any, of the Shareholders and the Target, or any of
them, to Brad Greico, Gary Greico, Paul McClory, 3GC Ltd., TransInt Holdings,
Inc. and Willow Holdings, Inc. or any of them (the "Releasors"), arising out of
or in connection with the transfer by or on behalf of the Releasors of funds for
the benefit of the Shareholders or the Target or negotiations by the Releasors
with respect to an investment in the Target as described in Disclosure Schedule
3(g), and (ii) will indemnify, defend and hold the Shareholders, and each of
them, harmless from each and every demand, claim, cause of action, loss, damage,
cost or expense, howsoever denominated, including without exception attorney's
fees, which may be suffered, paid or incurred by any of them, as a consequence,
arising out of, or as a result of, any claim by any of the Releasors against the
Target, the Shareholders, or any of them.
(h) Additional Payments to Donald G. Carson. At Closing, the
Parent agrees to pay Donald G. Carson and Betty Carson, husband and wife, the
following amounts:
(i) $60,000, which represents accrued and unpaid
royalties that Sagebrush owes Donald G. Carson,
(ii) $50,680.13, which represents the payment by
Donald G. Carson and Betty Carson of a bank loan obtained for the
benefit of the Target, and
(iii) $4,441.75, which represents vacation benefits
lost when Donald G. Carson changes from an employee of the Target to a
consultant of the Sub.
4. The Closing.
(a) The Closing. The closing of the transaction contemplated
by this Agreement (the "Closing") will take place in Oklahoma City, Oklahoma,
commencing at 9:00 a.m. local time on the first Business Day following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated in this Agreement, or such other date,
time and place as the Parties may mutually determine (the "Closing Date");
provided however, that the Closing Date will be no later than December 31, 1999
after which any Party may terminate this Agreement upon written notice to the
other Parties and without obligation to the other Parties.
(b) Deliveries at the Closing. At the Closing, (i) the
Shareholders will deliver to the Parent the various certificates, instruments,
and documents referred to in Section 10(a), and (ii) the Parent will deliver to
the Shareholders the various certificates, instruments, and documents referred
to in Section 10(b).
- 10 -
5. Escrow Account.
(a) Deposit Into Escrow Account. On the Closing Date, the Sub
will deposit the Escrow Payment (the Escrow Payment together with any proceeds
realized from the investment of the Escrow Payment are collectively referred to
as the "Escrow Amount") into an escrow account (the "Escrow Account") with
BancTrust, the Trust Division of BancFirst, Oklahoma City, Oklahoma (the "Escrow
Agent") to be held and invested by the Escrow Agent pursuant to the terms and
conditions of the Escrow Agreement attached as Exhibit C to this Agreement and
distributed not later than one (1) year following the Closing Date (the "Escrow
Closing Date").
(b) Investment of Escrow Amount. The Escrow Agent shall invest
the Escrow Amount during the term of the Escrow Agreement in such short term
cash equivalent or money market obligations and/or investments as the Escrow
Agent, in its discretion, may deem appropriate. All income derived from the
investment of the Escrow Amount shall accrue to the Escrow Account. In the event
that the Escrow Payment does not appreciate in value by at least $87,500 (10%)
during the one year term of the Escrow Agreement (the "Escrow Appreciation
Amount'), the Parent or the Sub shall deposit an amount equal to the shortfall
between the Escrow Appreciation Amount and the actual amount of appreciation
with the Escrow Agent on the Escrow Closing Date. On the Escrow Closing Date,
the term "Escrow Amount" shall include any such deposit made by the Parent.
(c) Distribution from Escrow Account. Not later than ten (10)
days before the Escrow Closing Date, the Parent shall provide the Shareholders
and the Escrow Agent with a list of all claims asserted against the Parent or
the Sub as of that date for which the Parent or the Sub seeks indemnification by
the Shareholders and claims which the Parent or Sub may have against the
Shareholders for breach of this Agreement or of any representation or warranty
of the Shareholders contained in this Agreement (the "Known Claim Amounts" and
the "Known Claim Amounts List") and a list of any Claim Settlement Amounts to
which the Parent or the Sub claim to be entitled pursuant to Section 12 (the
"Claim Settlement Amount List"). On the Escrow Closing Date, the Escrow Agent
shall distribute the Escrow Amount in the following amounts and order of
priority:
(i) if the face value of the Known Claim Amounts and
Claim Settlement Amounts as set forth in the Known Claims Amount List
and the Claim Settlement Amount List does not exceed One Hundred Twenty
Thousand Dollars ($120,000.00) in the aggregate, then, on the Escrow
Closing Date, the Escrow Agent shall distribute the Escrow Amount to
the Shareholders, sixth sevenths (6/7) to Donald G. Carson and Betty
Carson, and one seventh (1/7) to August Sanchez and Yvonne Sanchez; and
(ii) if the face value of the Known Claim Amounts and
Claim Settlement Amounts as set forth in the Known Claims Amount List
and the Claim Settlement Amount List exceeds One Hundred Twenty
Thousand Dollars ($120,000.00) in the aggregate, then, on or before the
Escrow Closing Date, the Carson Shareholders shall provide the Parent
and the Escrow Agent with a statement indicating the extent, if at all,
to which the Carson Shareholders acknowledge the validity of the Known
- 11 -
Claims Amounts and Claim Settlement Amounts ("Acknowledged Claims
Statement"), and the Escrow Agent shall distribute or hold the Escrow
Amount as follows:
(A) On the Escrow Closing Date, distribute
to the Parent or Sub or their designee an amount equal to that
portion of the value of the Known Claim Amounts and Claim
Settlement Amounts acknowledged as valid by the Carson
Shareholders in the Acknowledged Claims Statement, provided
the value of the acknowledged portions exceeds an aggregate of
One Hundred Twenty Thousand Dollars ($120,000);
(B) Until the award is rendered by the
arbitrator pursuant to Section 5(d), hold in the Escrow
Account and continue to invest an amount equal to the
difference between (a) the aggregate face value of the Known
Claim Amounts and Claim Settlement Amounts as set forth in the
Known Claims Amount List and the Claim Settlement Amount List,
and (b) the sum distributed pursuant to Section 5(c)(ii)(A),
above, and upon the rendering of an award pursuant to Section
5(d), distribute, in accordance with the award, the difference
and any income derived from the investment of the difference
from the Escrow Closing Date; and
(C) On the Escrow Closing Date, distribute
to the Shareholders an amount equal to the difference between
(a) the Escrow Amount and (b) the total of the sums
distributed or held pursuant to sections 5(c)(ii)(A) or (B) on
the following basis: sixth sevenths (6/7) to Donald G. Carson
and Betty Carson, husband and wife, and one seventh (1/7) to
August Sanchez and Yvonne Sanchez, husband and wife.
(d) Dispute Resolution In the event the Carson Shareholders
notify the Parent that they dispute a Known Claims Amount or a Claim Settlement
Amount proposed by the Parent, the Carson Shareholders and the Parent shall use
their reasonable efforts to negotiate a prompt resolution of the dispute. Should
they be unable to resolve the dispute, upon the written demand of either, they
shall resolve the dispute through binding arbitration in New Mexico. The
arbitration will be conducted pursuant to the Commercial Arbitration Rules of
the American Arbitration Association, but will not be administered by the
American Arbitration Association. The arbitrator will be chosen as follows:
following receipt of a written demand to arbitrate, the Parent and the Carson
Shareholders will each appoint an arbitrator within seven days. The appointed
arbitrator(s) will, within seven days of the date of his/her/their appointment,
appoint a neutral arbitrator who will hear the case. The parties may communicate
with the neutral arbitrator in writing with a copy of the communication provided
to the other party. The arbitrator will prepare a written award, resolving all
disputes between the parties in accordance with the provisions of this
Agreement, and will deliver an original of the award to each of the parties and
the Escrow Agent. The fee and expenses of each appointed arbitrator shall be
paid by the party appointing the arbitrator and the fee and expenses of the
neutral arbitrator shall be paid one-half by each party.
(e) Reimbursement of Shareholders. If the Parent is reimbursed
for a Known Claim Amount or a Claim Settlement Amount out of the Escrow Account
- 12 -
and the Known Claim Amount or the Claim Settlement Amount is subsequently
reduced, the Parent or Sub shall, within thirty (30) days of the reduction,
reimburse the Shareholders in an amount equal to the reduction of the Known
Claim Amount or the Claim Settlement Amount.
6. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Shareholders. The
Carson Shareholders, for themselves, jointly and severally, and the Sanchez
Shareholders, for themselves, jointly and severally, represent and warrant to
the Parent and Sub that the statements contained in this Section 6(a) are true,
correct and complete as of the Effective Date and will be true, correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the Effective Date throughout this Section 6(a)),
except to the extent that such representations and warranties are expressly made
as of another specified date, and as to such representations and warranties, the
same will be true, correct and complete as of such date and except as set forth
in Disclosure Schedule 6(a) attached to this Agreement.
(i) Authorization of Transaction. The Shareholders
have full power and authority to execute and deliver this Agreement and
to perform their obligations under this Agreement. This Agreement has
been duly executed and delivered by the Shareholders. This Agreement
constitutes the valid and legally binding obligation of the
Shareholders, enforceable in accordance with its terms and conditions,
except that (A) such enforceability may be subject to bankruptcy,
insolvency, reorganization, moratorium or other laws, decisions or
equitable principles now or hereafter in effect relating to or
affecting the enforcement of creditors' rights or debtors' obligations
generally, and to general equity principles, and (B) the remedy of
specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought (the terms of
clause (A) and (B) are sometimes collectively referred to as the
"Equitable Exceptions"). The Merger and the Merger Agreement have been
approved by the Shareholders of the Target and otherwise in accordance
with the applicable law of the State of New Mexico. Except for filings
required by the HSR Act, if so required, the Shareholders need not give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Body in order to consummate
the transactions contemplated by this Agreement.
(ii) Noncontravention. Except for approvals required
under the HSR Act, if any, neither the execution and the delivery of
this Agreement by the Shareholders, nor the consummation of the
transactions contemplated by this Agreement by the Shareholders, will
(A) violate any Law or Order or other restriction of any Governmental
Body to which any of the Shareholders is subject, or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any part the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement
or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which any of the Shareholders is a
party or, to the knowledge of the Shareholders, by which he or she is
bound or to which any of his or her assets is subject and as a result
have a Material Adverse Effect on him or her.
- 13 -
(iii) Broker' s Fees. The Shareholders have no
Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement for which the Parent or Sub could become liable or obligated.
(iv) The Shares. The Shareholders hold of record and
own beneficially all of the Shares free and clear of any restrictions
on transfer (other than any restrictions under the Securities Act and
state securities laws), claims, Taxes, Security Interests (other than
those to be removed at Closing), options, warrants, rights, contracts,
calls, commitments, equities, and demands. None of the Shareholders are
a party to any option, warrant, right, contract, call, put, or other
agreement or commitment providing for the disposition by the
Shareholders of any capital stock of the Target (other than this
Agreement, including any Exhibits in this Agreement). None of the
Shareholders is a party to any voting trust, proxy, or other agreement
or understanding with respect to the voting of any capital stock of the
Target.
(v) Suitability. Each of the Shareholders is an
Accredited Investor, as that term is defined in Regulation D and the
Securities Act, either directly or through their professional tax and
other advisors, has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and
risks relating to the acquisition of the Parent Shares and making an
informed purchase and investment decision.
(vi) Absence of Registration. Each of the
Shareholders understands that the Parent Shares have not been
registered under the Securities Act or any state securities laws, and
are being offered and sold under exemptions from the registration
provisions of the Securities Act, and applicable state securities laws,
and that such exemptions may depend upon, among other things, the bona
fide nature of the respective Shareholder's investment intent as
expressed in this Agreement.
(vii) Restrictions on Transferability. Each of the
Shareholders acknowledges that the Parent Shares may not be offered or
sold and must be held indefinitely unless subsequently registered under
the Securities Act and applicable state securities laws or unless any
proposed transaction involving any of the Parent Shares qualifies for
exemption from registration under the Securities Act and applicable
state securities law, and that no such exemption may be available at
any particular time. Each of the Shareholders further acknowledges that
the Parent Shares are and will be subject to the legend set forth in
Section 3(c) as they are "restricted securities" under Rule 144 as
promulgated by the SEC under the Securities Act.
(viii) Access to Information. Each of the
Shareholders has had an opportunity to discuss, and has discussed to
his or her satisfaction, the Parent's business, management and
financial affairs with the Parent and others involved in the management
of the Parent. Each of the Shareholders has had the opportunity to ask
questions and receive answers, and has asked questions and received
answers to his or her satisfaction, concerning the terms and conditions
of this transaction, and has had the opportunity to obtain, and has
obtained, to his or her satisfaction, any additional information which
- 14 -
the Parent possesses or could acquire without unreasonable effort or
expenses. Each of the Shareholders has had the opportunity to review,
and has reviewed to his or her satisfaction, the Parent's facilities
and books and records as necessary to evaluate the Parent Shares and
the business of the Parent. Each of the Shareholders acknowledges that
the Parent has not made any representations regarding the Parent Shares
or the business of the Parent or the management or financial affairs of
the Parent except to the extent set forth in this Agreement and the
Exhibits to this Agreement, and any other writing delivered pursuant to
this Agreement or at Closing. Each of the Shareholders acknowledges the
risks inherent in the quality, character and underlying business of the
Parent. At Closing, each of the Shareholders will assume the risk of
full or partial loss of his or her investment.
(ix) Investment. Each of the Shareholders is
acquiring the Parent Shares for investment purpose only and not with a
view to or for sale in connection with any distribution of them within
the meaning of the Securities Act. Furthermore, each of the
Shareholders acknowledges that neither the Securities and Exchange
Commission nor any state securities commission has passed upon the
merits of an investment in the Parent Shares and that any
representation to the contrary is a criminal offense.
(x) Liability. Each of the Shareholders represents
that as of the Closing Date. Each of the Shareholders represents that
as of the Closing Date, except for the amounts to be paid to Donald G.
Carson at Closing pursuant to Section 3(h)(i-iii), and sums which may
accrue to Betty Carson and August Sanchez as employees of the Target
prior to the Closing in the Ordinary Course of Business, the Target has
no Liability whatsoever to the Shareholders, jointly or severally, and
the Shareholders, jointly or severally, have no claims or causes of
action whatsoever against the Target.
(xi) Other Positions. None of the Shareholders is an
officer, director, employee, or equity owner of any entity other than
the Target.
(xii) Disclosure. The representations and warranties
contained in this Section 6 as amended, modified and/or supplemented by
the Disclosure Schedules do not contain any untrue statement of a
Material fact or omit to state any Material fact necessary in order to
make the representations, warranties, statements and information
contained in this Section 6 and in any Disclosure Schedule not
misleading.
(b) Representations and Warranties of the Parent and Sub. The
Parent and Sub represents and warrant to the Shareholders that the statements
contained in this Section 6(b) are true, correct and complete as of the
Effective Date and will be true, correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
Effective Date throughout this Section 6(b)), except to the extent that such
representations and warranties are expressly made as of another specified date,
and as to such representations and warranties, the same will be true, correct
and complete as of such date, and except as set forth in the Disclosure Schedule
6(b) attached to this Agreement.
(i) Organization and Qualification. The Parent is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada. It has full power and authority
- 15 -
to carry on its business as it is now being conducted and to own and
operate its assets and business. If required by law, the Parent will be
duly licensed or qualified to transact business as a foreign
corporation in New Mexico. The Parent changed its name from "Hyperion
Technologies, Inc." to "NextPath Technologies, Inc." on July 23, 1999.
The Sub is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
It has full power and authority to carry on its business as it is now
being conducted and to own and operate its assets and business. The Sub
will be duly licensed or qualified to transact business as a foreign
corporation in New Mexico.
(ii) Capitalization. The Parent has authorized
capital stock consisting of 100,000,000 shares of common stock, $0.001
par value, of which approximately 30,000,000 shares have been issued
and are outstanding as of the Effective Date, and 1,000,000 shares of
preferred stock, $0.001 par value, none of which have been issued and
are outstanding as of the Effective Date. The outstanding shares have
been validly issued and are fully paid and nonassessable. When
delivered to the Shareholders pursuant to this Agreement, the Parent
Shares will have been validly issued and will be fully paid and
nonassessable. No subscriptions, options, warrants, calls, commitments
or agreements (including, without limitation, voting trust agreements
or any other agreement relating to the voting of shares or restricting
in any manner the sale or transfer of shares) relating to the
authorized or issued shares of the Parent are outstanding.
The Sub has authorized capital stock consisting of
5,000 shares of common stock, $.01 par value, of which 5,000 shares
have been issued and are outstanding as of the Effective Date, all of
which are owned by the Parent. The outstanding shares have been validly
issued and are fully paid and nonassessable. No subscriptions, options,
warrants, calls, commitments or agreements (including, without
limitation, voting trust agreements or any other agreement relating to
the voting of shares or restricting in any manner the sale or transfer
of shares) relating to the authorized or issued shares of the Sub are
outstanding.
(iii) Authorization of Transaction. The Parent and
the Sub have full power and authority (including full corporate power
and authority) to execute and deliver this Agreement and to perform
their obligations under this Agreement and this Agreement has been duly
executed and delivered by them. This Agreement constitutes the valid
and legally binding obligation of the Parent and the Sub, enforceable
in accordance with its terms and conditions except for the Equitable
Exceptions. The Merger and the Merger Agreement have been approved by
Directors of the Parent and Sub and by the Parent as the sole
shareholder of the Sub and otherwise in accordance with applicable law
of the states of Nevada and Delaware. Except for filings required under
applicable law to effect the Merger, and any required under the HSR
Act, if so required, the Parent and the Sub need not give any notice
to, make any filing with, or obtain any authorization, consent, or
approval of any Governmental Body in order to consummate the
transactions contemplated by this Agreement.
- 16 -
(iv) Noncontravention. Except for approvals required
under the HSR Act, if so required, and as set forth in Disclosure
Schedule 6(b)(iv) attached to this Agreement, neither the execution and
the delivery of this Agreement by the Parent and the Sub, nor the
transfer to or receipt by Parent or Sub of funds to be used to
consummate the transaction contemplated by this Agreement, nor the
consummation of the transactions contemplated by this Agreement by the
Parent and the Sub, will (A) violate any Law or Order or other
restriction of any Governmental Body to which the Parent or the Sub is
subject or any provision of its charter or bylaws, or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness,
Security Interest, or other arrangement to which the Parent or the Sub
is a party or, to the Knowledge of the Parent or Sub, by which it is
bound or to which any of its assets is subject and which as a result
have a Material Adverse Effect on the Parent or the Sub.
(v) Default. To its knowledge, neither the Parent nor
the Sub has defaulted under any agreement to which it is a party or by
which it is bound, which would have a Material Adverse Effect on the
Parent or the Sub.
(vi) Litigation. Neither the Parent nor the Sub is a
party to any litigation, pending or threatened. Other than as set forth
in Disclosure Schedule 6(b)(vi) related to Jolt Ltd. and Air Optics,
Inc., no material claim has been made, asserted or threatened against
the Parent or the Sub. There are no proceedings involving the Parent or
the Sub pending before any federal, state or municipal government, or
any department, board, body or agency, nor have any been threatened.
(vii) Suitability. Through its directors and
officers, the Parent and Sub have such knowledge and experience in
financial and business matters that each is capable of evaluating the
merits and risks relating to the Merger and making an informed decision
regarding the Merger.
(viii) Absence of Registration. The Parent and the
Sub understand that the Shares have not been registered under the
Securities Act, or any state securities laws, and are being acquired
under exemptions from the registration provisions of the Securities
Act, and applicable state securities laws, and that such exemptions may
depend upon, among other things, the bona fide nature of their
respective investment intent as expressed in this Agreement.
(ix) Restrictions on Transferability. The Parent
acknowledges that the Shares may not be offered or sold and must be
held indefinitely unless subsequently registered under the Securities
Act and applicable state securities laws or unless any proposed
transaction involving any of the Shares qualifies for exemption from
registration under the Securities Act and applicable state securities
law, and that no such exemption may be available at any particular
time. The Parent further acknowledges that the Shares are "restricted
securities" under Rule 144 promulgated by the SEC under the Securities
Act.
- 17 -
(x) Access to Information. The Parent and Sub have
had an opportunity to discuss, and have discussed to their
satisfaction, the Target, the Business and the Target's management and
financial affairs with the Shareholders and others involved in the
management of the Target. The Parent and Sub have had the opportunity
to ask questions and receive answers, and have asked questions and
received answers to their satisfaction, concerning the terms and
conditions of this transaction, and have had the opportunity to obtain,
and have obtained, to their satisfaction, any additional information
which the Target or the Shareholders possess or could acquire without
unreasonable effort or expenses. The Parent and Sub have had the
opportunity to review, and have reviewed to its satisfaction, the
Target's facilities and books and records as necessary to evaluate the
Shares and the business of the Target. The Parent and the Sub
acknowledge that neither the Target nor any of the Shareholders has
made any representations regarding the Shares or the Business,
management or financial affairs of the Target except to the extent set
forth in this Agreement and the Exhibits to this Agreement, and any
other writing delivered pursuant to this Agreement or at Closing. The
Parent and the Sub acknowledge the risks inherent in the quality,
character and underlying business of the Target. At Closing, the Parent
will assume the risk of the Merger and full or partial loss of their
investment.
(xi) Brokers' Fees. Neither the Parent nor the Sub
has any Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated
by this Agreement for which the Shareholders could become liable or
obligated.
(xii) Investment. If and to the extent the Parent and
Sub, through their participation in the Merger and the transactions
contemplated hereunder, may be deemed to be acquiring the Shares, they
are acquiring them for the purpose of retiring them coincident with the
Merger, at the Effective Time, and not with a view to or for sale in
connection with any distribution of any of the Target Shares within the
meaning of the Securities Act. Furthermore, the Parent and Sub
acknowledge that neither the Securities and Exchange Commission nor any
state securities commission has passed upon the merits of an investment
in the Shares and that any representation to the contrary is a criminal
offense.
(xiii) Financing. The Parent and the Sub have, or
will have prior to Closing, sufficient funds and/or commitments for all
financing necessary to pay the cash portion of the Merger Consideration
to the Shareholders and the Escrow Agent, which commitments are, or
will be, in full force and effect.
(xiv) Creativity Incentive Plan. The Surviving
Corporation will establish an employee Creativity Incentive Plan
("CIP") to encourage invention and creativity by its employees. The CIP
will be innovative and go beyond the customary industry norms in
providing rewards to employees for invention and creativity. The CIP
will be established within six months of the Closing Date. It shall be
established by a committee with representatives from the employees,
management, the directors and one representative of an outside
consulting firm that meets with the approval of the employees,
management and the directors on the CIP committee.
- 18 -
(xv) Directors and Officers Liability Insurance. The
Surviving Corporation will obtain standard directors and officers
liability insurance.
(xvi) Sub Shares. The Parent holds of record and owns
beneficially all of the capital stock of the Sub, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), claims, Taxes, Security
Interests (other than those to be removed at Closing), options,
warrants, rights, contracts, calls, commitments, equities, and demands.
The Parent is not a party to any option, warrant, right, contract,
call, put, or other agreement or commitment providing for the
disposition by the Parent of any capital stock of the Sub. The Parent
is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of the
Sub.
(xvii) No Redemption of Parent Shares. The Parent has
no plan or intention to redeem or otherwise reacquire any of the Parent
Shares to be issued in the Merger.
(xiv) Disclosure. The representations and warranties
contained in this Section 6(b) as amended, modified and/or supplemented
by the Disclosure Schedules do not contain any untrue statement of a
Material fact or omit to state any Material fact necessary in order to
make the representations, warranties, statements and information
contained in this Section 6(b) and in any Disclosure Schedule not
misleading.
7. Representations and Warranties Concerning the Target. The
Carson Shareholders, jointly and severally, represent and warrant to the Parent
and the Sub that the statements contained in this Section 7 are true, correct
and complete as of the Effective Date and will be true, correct and complete as
of the Closing Date (as though made then and as though the Closing Date were
substituted for the Effective Date throughout this Section 7), except to the
extent that such representations and warranties are expressly made as of another
specified date, and as to such representations and warranties, the same shall be
true, correct and complete as of such date and except as set forth in a
Disclosure Schedule to this Section 7.
(a) Organization and Qualification. The Target is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of New Mexico. It is duly authorized to conduct business and
is in good standing under the laws of the State of New Mexico. The Target has
not registered or qualified, and has not been required to register or qualify,
to do business as a foreign corporation in any other jurisdiction.
(b) Capitalization. The entire authorized capital stock of the
Target consists of fifty million (50,000,000) shares of no par value common
stock, of which one hundred forty thousand (140,000) shares are issued and
outstanding and owned by the Shareholders. The Target has no preferred shares
authorized. None of the Shares are held in treasury. The Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the Shareholders. There are no outstanding or authorized options,
warrants, rights, contracts, calls, puts, rights to subscribe, conversion
rights, or other agreements or commitments to which the Target is a party or
- 19 -
which are binding upon the Target providing for the issuance, disposition, or
acquisition of any of its capital stock. There are no outstanding or authorized
stock appreciation or similar rights with respect to the Shares.
(c) Notice of Transaction. Except for filings required under
applicable law to effect the Merger and any required under the HSR Act, the
Target need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of, any Governmental Body in order to
consummate the transactions contemplated by this Agreement.
(d) Noncontravention. Except for approvals required under the
HSR Act, if required, and as set forth on Disclosure Schedule 7(d), the
consummation of the transactions contemplated by this Agreement will not (i)
violate any Law or Order or other restriction of any Governmental Body to which
the Target is subject or any provision of its charter or bylaws, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other arrangement to
which the Target is a party or, to the Knowledge of the Carson Shareholders, by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets) and which has a
Material Adverse Effect on the Target.
(e) Subsidiaries. The Target has no Subsidiaries and does not
control, directly or indirectly, or have any direct or indirect equity
participation in any Person.
(f) Financial Statements. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"): (i)
balance sheet and statement of income, changes in stockholders' equity, and cash
flow as of January 11, 1999 (the "Preliminary Report Financials") for the
Target, and (ii) an unaudited balance sheet and statement of income, changes in
stockholders' equity, and cash flow as of and for the stub period ending
September 30, 1999 for the Target (the "Most Recent Financial Statement"). The
Most Recent Financial Statements have been prepared on a consistent basis
throughout the periods covered thereby, are true and complete in all material
respects, fairly present the financial condition of the Target as of such dates,
and are consistent with the books and records of the Target (which books and
records are true, correct and complete in all material respects).
(g) Events Subsequent to the Most Recent Financial Statement.
Except as set forth on Disclosure Schedule 7(g), since September 30, 1999, there
has not been any Material adverse change in the assets, Liabilities, Business,
financial condition, operations, or results of operations of the Target. Without
limiting the generality of the foregoing since that date:
(i) the Target has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(ii) the Target has not entered into any contract,
lease, sublease, license or sublicense (or series or related contracts,
leases, subleases, licenses and sublicenses) involving more than
$10,000 and outside the Ordinary Course of Business;
- 20 -
(iii) the Target has not accelerated, terminated,
modified, or canceled any contract, lease, sublease, license or
sublicense (or series of related contracts, leases, subleases, licenses
and sublicenses) involving more than $10,000 to which the Target is a
party or by which it is bound;
(iv) no party has notified the Target of any
acceleration, termination, modification or cancellation of any Material
customer contract or any contract, agreement, lease, sublease, license
or sublicense (or series of related contracts, leases, subleases,
licenses and sublicenses), involving more than $10,000 to which the
Target is a party or by which it is bound;
(v) the Target has not made any capital expenditure
(or series of related capital expenditures) either involving more than
$5,000 individually or $15,000 in the aggregate, and outside the
Ordinary Course of Business;
(vi) the Target has not made any capital investment
in, any loan to, or any acquisition of the securities or assets of any
other person (or series of related capital investments, loans, and
acquisitions) either involving more than $5,000 individually or $15,000
in the aggregate;
(vii) the Target has not delayed or postponed (beyond
its normal practice) the payment of accounts payable and other
Liabilities;
(viii) there has been no change made or authorized to
the Articles of Incorporation or Bylaws of the Target.
(ix) the Target has not experienced any damage,
destruction or loss involving more than $5,000 (whether or not covered
by insurance) to its property;
(x) the Target has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees outside the Ordinary Course of Business or involving more
than $5,000, giving rise to any claim or right on its part against the
person or on the part of the person against them;
(xi) the Target has not entered into any employment
contract, written or oral, or modified the terms of any existing such
contract or agreement with any of its full-time staff employees, and
the Target has no collective bargaining agreements;
(xii) the Target has not granted an increase in the
base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xiii) the Target has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E)
retirement, (F) medical, hospitalization, life, or other insurance, (G)
severance, or (H) other plan, contract or commitment for any of its
directors, officers, and employees, or modified or terminated any
existing such plan, contract or commitment; and
(xiv) the Target has not committed to do any of the
foregoing.
- 21 -
(h) Undisclosed Liabilities. Except as set forth in Disclosure
Schedule 7(h), the Target does not have any Liability known to the Carson
Shareholders which is individually in excess of $5,000, or in excess of $25,000
in the aggregate, except for (i) Liabilities reflected on the face of the Most
Recent Financial Statement, and (ii) Liabilities which have arisen after the
Most Recent Financial Statement in the Ordinary Course of Business.
(i) Tax Matters. Except as set forth on Disclosure Schedule
7(i):
(i) the Target has filed all Tax Returns that it was
required to file. All such Tax Returns were true and complete in all
material respects. All Taxes owed by the Target and currently due and
payable (whether or not shown on any Tax Return) have been paid when
due. The Target is not the beneficiary of any extension of time within
which to file any Tax Return. To the Knowledge of the Carson
Shareholders, no claim is currently pending by any authority in any
jurisdiction where the Target does not file Tax Returns that the Target
is or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of the Target that arose in
connection with any failure (or alleged failure) to pay any Tax;
(ii) the Target has not received any notice that any
authority intends to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim
concerning any Tax Liability of the Target either (A) claimed or raised
by any authority in writing, or (B) as to which the Carson Shareholders
have Knowledge based upon personal contact with any agent of such
authority. Disclosure Schedule 7(i) lists all federal, state and local
income Tax Returns filed with respect to the Target for taxable periods
ended on or after December 31, 1994 that currently are the subject of
an audit; and
(iii) The Target has not filed a consent under Code
Sec. 341(f) concerning collapsible corporations. The Target has not
made any payments, is not obligated to make any payments, and is not a
party to any agreement that under certain circumstances could obligate
it to make any payments that will not be deductible to the Target and
its Subsidiaries under Code Sec. 280G. The Target has not been a United
States real property holding corporation within the meaning of Code
Sec. 897(c)(2) during the applicable period specified in Code Sec.
897(c)(1)(A)(ii). The Target has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Code Sec. 6662. The Target is not a party to any Tax allocation or
sharing agreement.
(j) Tangible Assets. The Target owns or leases all tangible
assets necessary for the conduct of its businesses as currently conducted. To
the Knowledge of the Carson Shareholders, each such tangible asset having a
value of $1,000 or more is free from material defects (patent and latent), has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
(k) Real Property. The Target owns no real property.
Disclosure Schedule 7(k) sets forth all real estate, improvements, buildings and
fixtures leased by the Target (the "Real Property"). Subject to the Permitted
- 22 -
Liens and any Security Interests disclosed on Disclosure Schedule 7(k), the
Target has a valid leasehold interest in, the Real Property. To the Knowledge of
the Carson Shareholders, all leases of Real Property are valid, binding and
enforceable in accordance with their respective terms. The Target is not in
material default under any such leases, and to the Knowledge of the Carson
Shareholders, there does not exist under any such lease any material default of
any other party or any event which with notice or lapse of time or both would
constitute a material default. To the Knowledge of the Carson Shareholders, the
Real Property is in good operating condition and repair, normal wear and tear
excepted, is in compliance with all applicable material code requirements, and
is free from any defects that have, or reasonably could have, a Material Adverse
Effect. Except as set forth on Disclosure Schedule 7(k), to the Knowledge of the
Carson Shareholders there are no existing structural defects in any of the Real
Property.
(l) Personal Property. Disclosure Schedule 7(l) sets forth all
tangible property, other than Real Property, owned or leased by the Target in
connection with the Business which has a value of $1,000 or more (or otherwise
listed in the Target's records) (the "Personal Property"). Subject to the
Permitted Liens and any Security Interests disclosed on Disclosure Schedule
7(l), the Target has good title to, or in the case of leased Personal Property
has a valid leasehold interest in, the Personal Property. All leases of Personal
Property are valid, binding and enforceable in accordance with their respective
terms. The Target is not in material default under any such leases, and to the
Knowledge of the Carson Shareholders, there does not exist under any such lease
any material default of any other party or any event which with notice or lapse
of time or both would constitute a Material default. Except as set forth on
Disclosure Schedule 7(l), to the Knowledge of the Carson Shareholders, the
Personal Property is in good operating condition and repair, normal wear and
tear excepted, and is free from any defects that have, or reasonably could have,
a Material Adverse Effect. Except as set forth on Disclosure Schedule 7(l), to
the Knowledge of the Carson Shareholders there are no existing material defects
in any of the Personal Property. Disclosure Schedule 7(l) also separately lists
all furniture and other personal property which belongs to Donald G. or Betty
Carson, which will remain the property of the Carsons after closing of this
transaction.
(m) Intellectual Property.
(i) Except as set forth on Disclosure Schedule 7(m),
the Target owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property material
to the operation of the Business as currently conducted. Each item of
Intellectual Property owned or used by the Target immediately before
the Closing will be owned or available for use by the Target on
identical terms and conditions immediately subsequent to the Closing.
(ii) To the Knowledge of the Carson Shareholders, the
Target has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with, any Intellectual Property rights of
third parties; and the Target has not received within the past three
(3) years any charge, complaint, claim, or notice alleging any such
interference, infringement, misappropriation, or violation.
- 23 -
(iii) Disclosure Schedule 7(m) identifies each patent
or trademark, tradename or copyright registration, and website which
has been issued to the Shareholders and/or the Target with respect to
any of their Intellectual Property, identifies each pending patent
application or application for trademark, tradename, copyright
registration or website which the Shareholders and/or the Target have
made with respect to any of their Intellectual Property, and identifies
each license, agreement, or other permission which the Shareholders
and/or the Target have granted to any third party with respect to any
of their Intellectual Property (together with any exceptions). Except
as identified in Disclosure Schedule 7(m), with respect to each item of
Intellectual Property that the Shareholders and/or the Target own:
(A) the identified owner possesses all
right, title, and interest in and to the item;
(B) the item is not subject to any
outstanding Order; and
(C) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is
pending or, to the Knowledge of the Shareholders, is
threatened, which challenges the legality, validity,
enforceability, use, or ownership of the item.
(iv) Disclosure Schedule 7(m) also identifies each
item of Intellectual Property that any third party owns and that the
Target uses pursuant to license, sublicense, agreement, or permission
(other than general commercial software). Except as identified in
Disclosure Schedule 7(m), with respect to each such item of used
Intellectual Property:
(A) to the Knowledge of Carson Shareholders,
the license, sublicense, or permission covering the item is
legal, valid, binding, and in full force and effect, subject
to the Equitable Exceptions;
(B) to the Knowledge of Carson Shareholders,
the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the Closing;
(C) the Target is not, and to the Knowledge
of the Carson Shareholders no other party to the license,
sublicense, agreement, or permission is, in breach or default,
and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination,
modification, or acceleration thereunder; and
(D) to the Knowledge of the Carson
Shareholders, no charge, complaint, action, suit, proceedings,
hearing, investigation, claim or demand is pending or is
threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property.
(n) Product Liability/Warranties. Except as disclosed on
Disclosure Schedule 7(n), there is no outstanding claim or action against the
Target and, to the Knowledge of the Carson Shareholders, no threatened claim,
- 24 -
action or investigation against the Target, for product liability or for breach
of warranty of fitness to any customer of the Business which individually or in
the aggregate could have a Material Adverse Effect.
(o) Contracts. Disclosure Schedule 7(o) lists the following
contracts, agreements, leases, customer contracts or agreements and other
written arrangements, the stated value of which exceeds $10,000, to which the
Target is a party:
(i) any written arrangement (or group of related
written arrangements) for the lease of Personal Property, Real Property
or Intellectual Property;
(ii) any written arrangement (or group of related
written arrangements) for the purchase or sale of Products, raw
materials, commodities, supplies, or other personal property or for the
furnishing or receipt of services (other than employment agreements);
(iii) any written arrangement concerning a
partnership or joint venture;
(iv) any written arrangement requiring
confidentiality or non-competition;
(v) any written arrangement involving the
Shareholders and their Affiliates related to the Target not disclosed
on the Preliminary Report Financials; and
(vi) any other written arrangement (or group of
related written arrangements) involving the Target, including
employment agreements.
The Carson Shareholders have delivered to the Parent a correct
and complete copy of each written arrangement (as amended to date) listed in
Disclosure Schedule 7(o). With respect to each written arrangement so listed:
(A) to the Knowledge of the Carson Shareholders, the written arrangement is
legal, valid, binding, enforceable, and in full force and effect, subject to the
Equitable Exceptions; (B) to the Knowledge of the Carson Shareholders, the
written arrangement will continue to be legal, valid, binding, enforceable and
in full force and effect, subject to Equitable Exceptions, on identical terms
following the Closing; (C) the Target is not, nor to the Knowledge of the Carson
Shareholders, is any other party in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a material breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) the Target has not, nor to the Knowledge of the
Carson Shareholders, has any other party, repudiated any provision of any of the
written arrangements.
(p) Insurance. Disclosure Schedule 7(p) sets forth an accurate
and complete list of all policies of fire, liability, key man life insurance,
worker's compensation, products liability and other forms of insurance owned or
held by or beneficially for the Target. All such policies are in full force and
effect, no premiums with respect to them are past due and no notice of
cancellation or termination has been received by the Carson Shareholders or the
Target with respect to any of them.
- 25 -
(q) Litigation. Disclosure Schedule 7(q) sets forth each
instance in which the Target (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge, or (ii) is a party or, to the
Knowledge of the Carson Shareholders, is threatened to be made a party to any
charge, complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator.
(r) Employees. Disclosure Schedule 7(r) lists all of the
Employees of the Target. To the Knowledge of the Carson Shareholders, no key
employee or full-time group of employees has any plans to terminate employment
with the Target (other than Donald G. and Betty Carson). Except as set forth on
Disclosure Schedule 7(r), the Target is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. To
the Knowledge of the Carson Shareholders, the Target has not committed any
unfair labor practice.
(s) Employee Benefits. The Target does not maintain any
Employee Benefit Plans for the benefit of any current or former employee of the
Target. Disclosure Schedule 7(s) discloses a past arrangement as to which the
Target has obtained a release from the affected employee. The Target has not
incurred, and the Carson Shareholders have no reason to expect that the Target
will incur, any Liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal Liability) or under
the Code with respect to any Employee Pension Benefit Plan that the Target and
the Controlled Group of Corporations which includes the Target maintains or ever
has maintained or to which it contributes, ever has contributed, or ever has
been required to contribute. The Target does not maintain, nor has it ever
maintained or contributed to, or ever has been required to contribute to any
Employee Welfare Benefit Plan providing health, accident, or life insurance
benefits to former employees, their spouses, or their dependents (other than in
accordance with Code Sec. 162(k)).
(t) Health and Safety Matters. Except as set forth on
Disclosure Schedule 7(t), to the Knowledge of the Carson Shareholders:
(i) the Target is in substantial compliance with all
Laws concerning public health and safety, and employee health and
safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced
against it alleging any failure to comply with any such Laws; and
(ii) the Target has no Material Liability under the
Occupational Safety and Health Act, as amended, or any other Law
concerning employee health and safety.
(u) Environmental Matters. Except as set forth on Disclosure
Schedule 7(u), to the Knowledge of the Carson Shareholders:
(i) Hazardous Materials. The current and former
owners and tenants, occupants, and users of the Real Property and any
other persons or concerns, have not: (i) engaged in or permitted any
operations or activities upon, or any use or occupancy of, the Real
Property, or any portion of the Real Property, for the purpose of, or
- 26 -
in any way involving, the handling, manufacture, treatment, storage,
use, generation, release, discharge, refining, dumping, or disposal of
any Hazardous Materials (whether legal or illegal, accidental or
intentional) on, under, in, or about, the Real Property, or (ii)
unlawfully transported any Hazardous Materials to, from, or across, the
Real Property. No Hazardous Materials are constructed, deposited,
stored, or otherwise located on, under, in, or about, the Real
Property, and no Hazardous Materials have migrated, or are likely to
migrate, from other properties upon, about, or beneath, the Real
Property. No Hazardous Materials generated by the Target, if any, or,
to the Knowledge of the Carson Shareholders, located under, in, or
about, the Real Property in the past have been unlawfully transported
to any waste disposal facility or other site.
(ii) Environmental Requirements. Prior users of the
Real Property and activities on the Real Property and all activities
and conduct of business related to the Real Property have at all times
complied with all Environmental Requirements (as defined in Section 1),
and no activity on, or condition of, the Real Property has constituted
a nuisance or tortious condition with respect to any third party. The
Real Property and the existing uses and activities on the Real Property
and all activities and conduct of business related to the Real Property
(including the Business), comply with all Environmental Requirements,
and no activity on, or condition of, the Real Property constitutes a
nuisance or constitutes a tortious condition with respect to any third
party.
(iii) Notice of Violations. Neither the Target nor
any other owner, tenant, occupant, or user of the Real Property has
ever received any notice or other communication concerning any alleged
violation of Environmental Requirements, or notice or other
communication concerning alleged liability for Environmental Damages
(as defined in Section 1) in connection with the Real Property. There
is no (i) writ, injunction, decree, order, or judgment outstanding in
relation to the ownership, use, maintenance, or operation of the Real
Property by any person or concern; (ii) lawsuit, claim, proceeding,
citation, directive, summons, or investigation pending or threatened in
relation to the ownership, use, maintenance, or operation of the Real
Property by any person or concern; or (iii) alleged violation of
Environmental Requirements. Neither the Target nor any other person or
company has been ordered or requested by any regulatory authority to
take any steps to remedy any condition on the Real Property
constituting a violation of Environmental Requirements.
(iv) Underground Inspection and Storage Tanks. There
is not now and there has never been located on the Real Property, any
(i) underground improvement, including without limitation, any
treatment or storage tank or water, gas, or oil well, or (ii)
above-ground storage tank.
(v) Environmental Laws and Orders. The Target has no
Material Liability (and there is no Basis related to the past or
present operations, properties, or facilities of the Target and its
predecessors and Affiliates for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against the Target giving rise to any Liability) under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976, the Federal
Water Pollution Control Act of 1972, the Clean Air Act of 1970, the
- 27 -
Safe Drinking Water Act of 1974, the Toxic Substances Control Act of
1976, the Refuse Act of 1997, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other Law or Order
of any Governmental Body, concerning release or threatened release of
hazardous substances, public health and safety, or pollution or
protection of the environment;
(vi) Proposals. The Target has no Material Liability
(and the Target and its predecessors have not handled or disposed of
any substance, arranged for the disposal of any substance, or owned or
operated any property or facility in any manner that could form the
Basis for, any present or future charge, complaint, action, suit,
proceeding, heating, investigation, claim, or demand (under the common
law or pursuant to any statute) against the Target giving rise to any
Material Liability) for damage to any site (including the Real
Property), location, or body of water (surface or subsurface) or for
illness or personal injury;
(vii) Permits, Licenses and Other Authorization. The
Target has obtained and been in compliance in all material respects
with all of the terms and conditions of all permits, licenses, and
other authorizations which are required under, and has materially
complied with, all other Laws and Orders of any Governmental Body
relating to public health and safety, worker health and safety, and
pollution or protection of the environment, including laws relating to
emissions, discharge, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
(v) Legal Compliance. Except as set forth in Disclosure
Schedule 7(v):
(i) The Target has materially complied with all
non-environmental Laws applicable to it. To the Knowledge of the Carson
Shareholders, no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced
against the Target which is currently pending and alleges any failure
to comply with any such non-environmental Law;
(ii) To the Knowledge of the Carson Shareholders, the
Target has not violated in any material respect or received a notice or
charge asserting any violation of any state or federal law; and
(iii) The Target has filed in a timely manner all
material reports, documents, and other materials it was required to
file (and the information contained therein was correct and complete in
all material respects) under all applicable Laws.
(w) Certain Business Relationships with the Target. Except as
set forth on Disclosure Schedule 7(w), neither the Shareholders nor their
Affiliates have been involved in any business arrangement or relationship with
the Target within the past twelve (12) months, and neither the Shareholders nor
- 28 -
their Affiliates owns directly any Material property or right, tangible or
intangible, which is used in the Target's Business.
(x) Brokers' Fees. The Target does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or similar
representative with respect to the transactions contemplated by this Agreement.
(y) Year 2000 Compliance. Except as set forth on Disclosure
Schedule 7(y):
(i) The Target has used its best efforts to verify
that all Material devices, systems, machinery, information technology,
computer software and hardware, and other date sensitive technology
(jointly and severally the "Systems") necessary for the Target to carry
on its business as currently conducted and as contemplated to be
conducted in the future are Year 2000 Compliant or will be Year 2000
Compliant within a period of time calculated to result in no material
disruption of any of the Target's business operations. For purposes of
these provisions, "Year 2000 Compliant" means that the Systems are
designed to be used before, during and after the Gregorian calendar
year 2000 A.D. and will operate during each such time period without
error relating to date data, specifically including any error relating
to, or the product of date data which represents or references
different centuries or more than one century.
(ii) The Target has: (1) undertaken a detailed
inventory, review, and cost and other assessment of all areas within
its business and operations that could be Materially Adversely Affected
by the failure of the Target to be Year 2000 Compliant on a timely
basis; (2) developed a detailed plan and timetable for becoming Year
2000 Compliant on a timely basis, and (3) to date, implemented that
plan in accordance with that timetable in all material respects.
(iii) The Target has received Year 2000 Compliance
inquiries from the entities listed on Disclosure Schedule 7(y) and has
responded to each of them that it believes it is Year 2000 Compliant.
(z) Customer List. Disclosure Schedule 7(z) is a true and
complete list of all customers of the Target having orders of $10,000 or more as
of the Effective Date, by name, address and telephone number. On the Closing
Date, the Carson Shareholders will deliver a then current list of all such
customers of the Target, by name, address and telephone number together with any
and all files, records and accounts related to the customers.
(aa) Acquired Accounts Receivable. Disclosure Schedule 7(aa)
is a true and complete list of all accounts receivable of the Target as of the
Effective Date, by name, address and telephone number. On the Closing Date, the
Carson Shareholders will deliver a then current list of all accounts receivable
of the Target, by name, address and telephone number (the "Acquired Accounts
Receivable").
(bb) Accounts Payable. Disclosure Schedule 7(bb) is a true and
complete list of all accounts payable of the Target as of the Effective Date, by
name, address and telephone number. On the Closing Date, the Carson Shareholders
will deliver a then current list of all accounts payable of the Target, by name,
address and telephone number.
- 29 -
(cc) Target Liability. Except as set forth in Disclosure
Schedule 7(cc) or any other Disclosure Schedule attached to this Agreement, the
Target has no Liability whatsoever to (i) the Shareholders or any current or
former officer, director, shareholder, employee, accountant or attorney, or (ii)
to any other party in excess of $10,000.
(dd) Minutes. Attached to this Agreement as Disclosure
Schedule 7(dd) is a complete list of all minutes related to the Target for the
past three years.
(ee) Continuity of Business Enterprise. The Target operates
and has operated a historic business (within the meaning of IRS Reg. ss.1.368-1
(d)), namely the Business, and in connection therewith has used its historic
business assets (within the meaning of IRS. Reg. ss.1.368-1(d)).
(ff) Disclosure. The representations and warranties contained
in this Section 7 as amended, modified and/or supplemented by the Disclosure
Schedules do not contain any untrue statement of a Material fact or omit to
state any Material fact necessary in order to make the representations,
warranties, statements and information contained in this Section 7 and in any
Disclosure Schedule not misleading.
8. Additional Covenants. The Parties further covenant and
agree as follows:
(a) General. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Section 12). The Carson Shareholders acknowledge and agree that from and after
the Closing Date the Parent will be entitled to possession of all documents,
books, records, agreements, and financial data of any sort relating to the
Target and the Business; provided that the Carson Shareholders may retain any
copies of the foregoing as shall be necessary to comply with applicable tax and
other laws, regulations and ordinances.
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Target, each of the other Parties will
cooperate with him, her or it and his, her or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Section 12).
(c) Transition. The Shareholders will not take any action that
is primarily designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Target from
maintaining the same business relationships with the Target after the Closing
- 30 -
Date for a period of twelve (12) months thereafter as it maintained with the
Target prior to the Closing Date. The Shareholders will refer all customer
inquiries relating to the Target's Business to the Parent and/or the Surviving
Corporation from and after the Closing Date for a period of twelve (12) months
thereafter.
(d) Confidentiality. The Shareholders will (i) treat and hold
as such all of the Confidential Information, (ii) refrain from using any of the
Confidential Information except in connection with this Agreement, the
Consulting Agreement and the Employment Agreements for a period of two (2) years
from the Closing Date, and (iii) deliver promptly to the Surviving Corporation
or destroy, at the request and option of the Surviving Corporation, all tangible
embodiments (and all copies) of the Confidential Information which are in their
possession. In the event that a Shareholder is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, the Shareholder will notify the Surviving
Corporation promptly of the request or requirement so that the Parent may seek
an appropriate protective order or waive compliance with the provisions of this
Section 8(d). If, in the absence of a protective order or the receipt of a
waiver under this Section 8(d), a Shareholder is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, the Shareholder may disclose the Confidential Information
to the tribunal; provided, however, that the Shareholder shall use his or her
reasonable best efforts to obtain, at the reasonable request of the Surviving
Corporation, an order or other assurance that confidential treatment will be
accorded to the portion of the Confidential Information required to be disclosed
as the Parent shall designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the public immediately
prior to the time of disclosure.
(e) Additional Tax Matters.
(i) The Carson Shareholders will cause the Target (at
the Carson Shareholders' sole cost and expense) to file with the
appropriate Governmental Bodies all Tax Returns required to be filed by
it for any Pre-Closing Tax Period and will remit any Taxes due in
respect of the Tax Returns; provided however, that any withholding,
social security, unemployment, disability, or other employee related
taxes and any gross receipts taxes, which have arisen regularly in the
Ordinary Course of Business with respect to the period before the
Closing Date and are not due and payable as of the Closing Date, will
be the responsibility of the Parent and the Surviving Corporation. Any
Taxes (other than income taxes) due as a result of the transactions
contemplated by this Agreement will be the sole responsibility of the
Parent, which shall also be responsible for the preparation and filing
of the associated Tax Returns. Each Shareholder shall be solely
responsible for the preparation and filing of Tax Returns and payment
of Taxes such as income taxes due and owing by him or her as a result
of the sale of the Shares.
(ii) The Parent and the Carson Shareholders recognize
that each of them will need access, from time to time, after the
Closing Date, to certain accounting and Tax records and information
concerning the Target held by the Surviving Corporation and/or the
Target to the extent the records and information pertain to events
occurring on or before the Closing Date; therefore, the Parent agrees
- 31 -
to cause the Surviving Corporation to (A) use its best efforts to
properly retain and maintain those records for a period of six (6)
years from the date the Tax Returns for the year in which the Closing
occurs are filed or until the expiration of the statute of limitations
that applies to the Tax Return in question (i.e., including Tax Returns
for years preceding the year in which the Closing occurs), whichever is
later, and (B) allow the Carson Shareholders and their agents and
representatives at times and dates mutually acceptable to the Parties,
to inspect, review and make copies of those records that the other
party may deem necessary or appropriate from time to time, those
activities to be conducted during normal business hours and at the
other Party's expense. The Parent, the Surviving Corporation and the
Carson Shareholders immediately shall give to one another true and
complete copies of all notices and communications received from the
I.R.S. or any other Governmental Body relating to any Tax or Tax Return
for any Pre Closing Tax Period.
(iii) Following the Closing, if and to the extent
necessary to qualify or prevent the disqualification of the transaction
contemplated hereunder as a tax free reorganization under I.R.C.
Sections 368(a)(1)(A) and 368(a)(2)(D), the Parent and Sub will satisfy
the Continuity of Business Enterprise requirements as embodied in
I.R.S. Reg. ss.1.368-i(d).
(f) Covenant Not to Compete. Without the prior written
permission of the Parent, which permission may be withheld in the sole
discretion of the Parent, or unless they are an employee, officer, director or
consultant with the Target or the Parent, for a period of two (2) years from and
after the Closing Date, the Shareholders will not, jointly or severally,
directly or indirectly, as principal, agent, trustee or through the agency of
any corporation, partnership, association or agent or agency, (i) participate or
engage in the Business existing as of the Closing Date, (ii) service or solicit
any of the Surviving Corporation's business from any customer of the Surviving
Corporation, (iii) request or advise any customer of the Surviving Corporation
to withdraw, curtail or cancel such customer's business with the Surviving
Corporation, or (iv) solicit for employment any person employed by the Surviving
Corporation on the Closing Date; provided however, that (i) no owner of less
than five percent (5%) of the outstanding stock of any publicly traded
corporation shall, for purposes of this Section 8(f), be deemed to engage solely
by reason of that stock position in any of its businesses and (ii) the future
acquisition by any of the Shareholders, or his or her Affiliates, of any Person
or company engaged in the Business shall not be deemed to violate this Section
8(f) if less than twenty-five percent (25%) of the total revenues of such
acquired business or Person are derived from the Business.
(g) Employment Matters. Disclosure Schedule 7(r) lists all of
the current employees of the Target (the "Current Employees"). For a period of
one (1) year after the Closing Date, the Surviving Corporation agrees that it
will not substantially reduce the base salary or wage rate in effect immediately
prior to the Closing Date of any Current Employee other than for Cause with the
exception of Donald G. Carson, who agrees to resign his position as an officer
and an employee of the Target on the Closing Date. In addition, the Parent
agrees that on the Closing Date it will cause the Target to enter into (i) the
Consulting Agreement with Donald G. Carson attached to this Agreement as Exhibit
E, and (ii) the Employment Agreement with August Sanchez attached to this
Agreement as Exhibits F.
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9. Conditions to Obligations to Close.
(a) Conditions to Obligation of the Parent and Sub. The
obligation of the Parent and Sub to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction or waiver of
the following conditions:
(i) the representations and warranties of the
Shareholders as set forth in Sections 6(a) and 7 must be true, correct
and complete in all Material respects at and as of the Closing Date as
evidenced by the delivery by the Shareholders to the Parent at Closing
of the Shareholders' Closing Certificate to the effect that the
representations and warranties of the Carson Shareholders and the
Sanchez Shareholders, as the case may be, as set forth in Sections 6(a)
and 7 are true, correct and complete in all Material Respects as of the
Closing Date to be attached to this Agreement as Exhibit G;
(ii) the Shareholders shall have performed and
complied with all of their covenants in this Agreement in all Material
respects through the Closing;
(iii) the Target shall have procured all necessary
third party consents specified in Section 7(c), if any, reasonably
requested by Parent in connection with the matters pertaining to the
Target disclosed or required to be disclosed in the Disclosure
Schedules and each of the Shareholders shall have taken any additional
action (and the Carson Shareholders shall have caused the Target to
take any additional action) that may be necessary, proper, or advisable
in connection with any other notices to, filings with, and
authorizations, consents, and approvals of Governmental Bodies, and
third parties that he, she or it may be required to give, make or
obtain;
(iv) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect
adversely the right of the Parent or Sub to own, operate, or control
the Shares or the Target (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(v) the Shareholders shall have delivered to the
Parent the Shareholders' Closing Certificate (without qualification as
to knowledge or Materiality or otherwise) to the effect that each of
the conditions specified in Section 9(a)(i)-(iv) is satisfied in all
respects to be attached to this Agreement as Exhibit G;
(vi) the Shares must represent all of the issued and
outstanding capital stock of the Target and all of the Shares must be
free and clear of any Security Interests or other liens, claims or
encumbrances of any nature whatsoever;
(vii) the Parties and the Target must have received
all other authorizations, consents and approvals of Governmental Bodies
including such authorizations, consents or approvals required under the
HSR Act, if any, and set forth in the Disclosure Schedules;
- 33 -
(viii) the Parent must have received from counsel to
the Carson Shareholders an opinion with respect to the matters set
forth in Sections 6(a)(i) and 7(a)-(d) addressed to the Parent and
dated as of the Closing Date in substantially the form attached to this
Agreement as Exhibit H;
(ix) the Parent must have received the resignations,
effective as of the Closing, of each officer and director of the
Target;
(x) no Material adverse change shall have occurred in
the Target's Business or its future prospects;
(xi) any debt listed on Disclosure Schedule 9(a)(xi)
has been paid in full;
(xii) except as set forth in the Disclosure
Schedules, since the date of the Most Recent Financial Statement the
Target must not have transferred, conveyed, disposed of and/or sold any
of Material assets, except in the Ordinary Course of Business;
(xiii) the Target must have delivered to the Parent a
certificate from the Target's treasurer stating that from the date of
the Most Recent Financial Statement to the Closing Date there has been
no change in the capitalization of the Target or any Material adverse
change in its financial condition or assets;
(xiv) the Shareholders must have delivered to the
Parent certificates representing the Shares, which shall be cancelled
and exchanged for the Merger Consideration, and otherwise must have
satisfied fully all of their obligations required by this Agreement to
be satisfied before or at Closing;
(xv) the Target must not be in a bankruptcy,
reorganization or insolvency proceeding nor shall any such proceeding
be contemplated;
(xvi) Donald G. Carson (A) must have secured complete
ownership and control of United States Patent Number 5,105,672 (the
"Patent") by securing all of the right, title and interest of his
co-patent holder in and to the Patent and must have assigned the Patent
to the Sub using the Assignment attached to this Agreement as Exhibit
M, and (B) must have secured complete ownership and control of United
States Trademark Registration No. 1347219 for ROTO-LOK(R) and must have
assigned it to the Sub using the Assignment attached to this Agreement
as Exhibit N, and (C) must assign to the Sub all interest he may have
to the unregistered trademark for "Technology in Harmony with Native"
and related solar system logo using the Assignment attached to this
Agreement as Exhibit O;
(xvii) Donald G. Carson must have signed and
delivered the Consulting Agreement (Exhibit E) with attached
Confidentiality Agreement;
(xviii) August Sanchez must have signed and delivered
the Employment Agreement (Exhibit F) with attached Confidentiality
Agreement;
- 34 -
(xix) the Carson Shareholders must have delivered to
the Parent a Certificate of Good Standing from the State of New Mexico,
dated within five (5) business days prior to the Closing Date,
certifying that the Target is in good standing in the State of New
Mexico;
(xx) the Shareholders must have delivered to the
Parent the Release attached as Exhibit I and dated as of the Closing
Date, whereby the Shareholders release the Target from any and all
claims and causes of action they may have against the Target as of the
Closing Date;
(xxi) the Carson Shareholders must have delivered to
the Parent and the Sub all minutes related to the Target for the past
three years; and
(xxii) the Carson Shareholders and August Sanchez
must have delivered to the Parent, Officer, Directors and Significant
Employee Questionnaires as prepared by the Parent and completed by
Donald G. Carson, Betty Carson and August Sanchez.
The Parent may waive any condition specified in this Section
9(a) if it executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligations of the Shareholders. The
obligations of the Shareholders to consummate the transactions to be performed
by them in connection with the Closing are subject to satisfaction or waiver of
the following conditions:
(i) the representations and warranties of the Parent
and the Sub set forth in Section 6(b) must be true, correct and
complete in all Material respects at and as of the Closing Date as
evidenced by the delivery by the Parent and the Sub to the Shareholders
at Closing of a Closing Certificate to the effect that the
representations and warranties of the Parent as set forth in Section
6(b) are true, correct and complete in all Material respects as of the
Closing Date to be attached to this Agreement as Exhibit J;
(ii) the Parent and Sub must have performed and
complied with all of their covenants under this Agreement in all
Material respects through the Closing;
(iii) no action, suit or proceeding must be pending
or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
judgment, order, decree, stipulation, injunction, or charge must be in
effect);
(iv) the Parent must have delivered to the
Shareholders the Parent's Closing Certificate (without qualification as
to knowledge or Materiality or otherwise) to the effect that each of
the conditions specified in Section 9(b)(i)-(iii) is satisfied in all
respects to be attached to this Agreement as Exhibit J;
- 35 -
(v) the Parties and the Target must have received all
other authorizations, consents, and approvals of Governmental Bodies
including such authorizations, consents and approvals required under
the HSR Act, if any, and set forth in the Disclosure Schedules;
(vi) the Shareholders must have received from counsel
to the Parent an opinion with respect to the matters set forth in
Sections 6(b)(i)-(iv) addressed to the Shareholders and dated as of the
Closing Date in substantially the form attached to this Agreement as
Exhibit K;
(vii) all actions to be taken by the Parent and Sub
in connection with the consummation of the transactions contemplated
hereby must be reasonably satisfactory in form and substance to the
Shareholders;
(viii) the Parent and Sub must have paid and
delivered the Merger Consideration to the Shareholders, and otherwise
must have satisfied fully all of their other obligations required by
this Agreement to be satisfied before or at Closing;
(ix) the Parent and Sub must not be in a bankruptcy,
reorganization or insolvency proceeding, nor must any such proceeding
be contemplated;
(x) the Target must have executed and delivered to
Donald G. Carson the Consulting Contract and to August Sanchez the
Employment Agreement attached to this Agreement as Exhibits E and F;
and
(xi) James R. Ladd must have executed and delivered
the Agreement attached to this Agreement as Exhibit L.
(xii) the Parent Shares must be free and clear of any
Security Interests or other liens, claims or encumbrances of any nature
whatsoever other than those related to applicable securities laws
restrictions;
(xiii) the Parent and the Sub must have delivered to
the Shareholders a certified copy of resolutions adopted by their
respective Boards of Directors authorizing and approving the execution
and delivery of this Agreement and the satisfaction by Parent and the
Sub of their respective obligations hereunder;
(xiv) the Parent and the Sub must have delivered to
the Shareholders a Certificate of Good Standing from the States of
Nevada and Delaware, respectively, effective within five (5) business
days prior to the Closing, certifying that the Parent is in good
standing in the State of Nevada and the Sub is in good standing in the
State of Delaware. The Shareholders may waive any condition specified
in this Section 9(b) if they execute a writing so stating at or prior
to the Closing.
- 36 -
10. Closing Deliveries.
(a) Instruments to be Delivered by the Shareholders at
Closing. Provided the conditions precedent described in Section 9(b) have been
satisfied, the Shareholders shall deliver the following to the Parent at
Closing:
(i) the Shares which shall be cancelled and
exchanged for the Merger Consideration;
(ii) the Escrow Agreement attached to this Agreement
as Exhibit C;
(iii) the executed resignations letters of all
officers and directors of the Target;
(iv) the Consulting Agreement and Confidentiality
Agreement of Donald G. Carson as attached to this Agreement as Exhibit
E;
(v) the Employment Agreement and Confidentiality
Agreement of August Sanchez as attached to this Agreement as Exhibit F;
(vi) the Assignment attached to this Agreement as
Exhibit M by Donald G. Carson to the Sub of all of his right, title and
interest to United States Patent No. 5,105,672 for a Rotary Drive
Apparatus Having One Member With Smooth Outer Peripheral Surface;
(vii) the Assignment attached to this Agreement as
Exhibit M by Donald G. Carson to the Sub of all of his right, title and
interest to United States Trademark Registration No. 1347219 for
ROTO-LOK(R);
(viii) the Assignment attached to this Agreement as
Exhibit O by Donald G. Carson to the Sub of all his right, title and
interest to the unregistered trademark "Technology in Harmony with
Nature" and related solar system logo; and
(ix) a Certificate of Good Standing from the State of
New Mexico, effective within five (5) business days prior to the
Closing Date, certifying that the Buyer is in good standing in the
State of New Mexico;
(x) a certified copy of the resolutions duly adopted
by the Board of Directors of the Target authorizing and approving the
execution and delivery of this Agreement and the satisfaction by the
Target of its obligations under this Agreement;
(xi) a certified copy of all minutes related to the
Target for the past three years, including without limitation those
authorizing the Merger in accordance with applicable law;
(xii) a duplicate original copy of all instruments
and filings required by applicable law to be executed or delivered by
the Target and filed with appropriate public officials in New Mexico or
elsewhere, to effect the Merger;
- 37 -
(xiii) the Shareholders' Closing Certificate referred
to in Section 9(a)(v);
(xiv) the Treasurer's Certificate referred to in
Section 9(a)(xiii); and
(xv) the Assignment of Interest in License Agreement
attached to this Agreement as Exhibit P.
(xvi) any and all other instruments required by this
Agreement to be delivered by the Shareholders to the Parent and Sub at
Closing.
(b) Documents to be Delivered by the Parent and Sub at
Closing. Provided the conditions precedent described in Section 9(a)
have been satisfied, the Parenr and Sub shall deliver the following at
Closing:
(i) the Initial Payment to the Shareholders and the
Escrow Amount to the Escrow Agent;
(ii) the Escrow Agreement attached to this Agreement
as Exhibit C;
(iii) the executed Consulting Contract with Donald G.
Carson attached to this Agreement as Exhibit E;
(iv) the executed Employment Agreement with August
Sanchez attached to this Agreement as Exhibit F;
(v) a Certificate for 514,286 of the NextPath Shares
in the name of Donald G. Carson and Betty Carson, joint tenants with
right of survivorship;
(vi) a Certificate for 85,714 of the NextPath Shares
in the name of August Sanchez and Yvonne Sanchez, joint tenants with
right of survivorship;
(vii) the Agreement of James R. Ladd attached to this
Agreement as Exhibit L;
(viii) a certified copy of the resolutions duly
adopted by the Board of Directors of the Buyer and Sub authorizing and
approving the execution and delivery of this Agreement and the
satisfaction by the Buyer and Sub of their obligations under this
Agreement, and the Merger;
(ix) a Certificate of Good Standing from the State of
Delaware effective within five (5) business days prior to the Closing
Date, certifying that the Sub is in good standing in the State of
Delaware;
(x) a Certificate of Good Standing from the State of
Nevada effective within five (5) business days prior to the Closing
Date, certifying that the Parent is in good standing in the State of
Nevada;
- 38 -
(xi) a duplicate original copy of all instruments and
filings required by applicable law to be executed or delivered by the
Subsidiary or the Parent and filed with appropriate public officials in
Delaware or elsewhere, to effect the Merger;
(xii) the Closing Certificate referred to in Section
9(b)(i)]; and
(xiii) any and all other instruments required by this
Agreement to be delivered by the Parent or Sub to the Shareholders at
Closing.
11. Audit. As soon as is reasonably practicable following the
Closing Date, but in any event within ninety days, the Parent may, but shall not
be required to, cause an audit of the Surviving Corporation to be conducted at
the Parent's expense. The Carson Shareholders agree to cooperate as reasonably
requested by the Parent, with the audit. A copy of the final audit report shall
be provided to the Shareholders. In addition, the Carson Shareholders agree to
cooperate as reasonably required in the preparation in a form satisfactory to
the Parent and the Parent's accountants, of any other financial and other
information needed by the Parent to comply with reporting and filing
requirements imposed on the Parent by federal, state and securities exchange
regulations. All expenses paid and incurred in the preparation of the Audit will
be borne solely by the Parent. Without the consent of the Carson Shareholders,
the audit report, financial and other information and analyses prepared or
prepared pursuant to this Section 11 will be held in strict confidence and made
available only to the Parent, its directors, officers, financial and tax
consultants, legal counsel, and other advisors, agents and potential investors
whose review is required in connection with the Parent's satisfaction of its
obligations under this Agreement, and the Securities and Exchange Commission and
such other persons, if any, to whom disclosure is required by applicable law.
12. Indemnification.
(a) Survival. All of the representations, warranties and
covenants of the Parties contained in this Agreement shall survive the Closing
and will continue in full force and effect for a period of three (3) years
thereafter, except as otherwise provided elsewhere in this Agreement.
(b) Indemnification by the Shareholders. The Carson
Shareholders, jointly and severally, for themselves, and the Sanchez
Shareholders, jointly and severally for themselves, agree to defend, indemnify
and hold the Parent and Sub harmless from and against any and all loss, damage,
liability, cost, and expense, including without limitation reasonable attorney
fees, suffered or incurred by the Parent or Sub, as and when incurred, by reason
of, relating to, or arising out of their respective misrepresentation, breach of
warranty, or breach or non-fulfillment of any agreement of the Carson
Shareholders or the Sanchez Shareholders, as the case may be, contained in this
Agreement or in any document executed and delivered in connection with this
Agreement and the Carson Shareholders' operation of the Business prior to the
Closing Date. In addition, the Carson Shareholders, jointly and severally for
themselves, and the Sanchez Shareholders, jointly and severally for themselves,
agree to defend, indemnify and hold the Parent and Sub harmless from and against
any and all loss, damage, liability, cost, and expense, including without
limitation reasonable attorney fees, suffered or incurred by the Parent or Sub,
as and when incurred, by reason of, relating to, or arising out of (i) their
- 39 -
respective Taxes with respect to any period, and (ii) any and all Taxes of the
Target with respect to any period (or an portion thereof) up to and including
the Closing Date except for those for which the Parent and the Surviving
Corporation are responsible pursuant to Section 8(e)(i). Provided, however, the
Shareholders shall have no obligation to defend, indemnify or hold the Parent or
Sub harmless until the Parent and the Sub have suffered aggregate losses in
excess of $120,000. The Shareholders shall have the right, but not the
obligation, to assume the defense of the Parent or Sub with respect to any
action covered by this Section 12(b). If the Shareholders elect not to assume
the defense of the Parent or Sub as provided in Section 12(d), then the Parent
or Sub shall have the right, upon a final and binding conclusion of the action,
to make a claim against the Carson Shareholders or the Sanchez Shareholders,
jointly and severally, as the case may be, for reimbursement of reasonable
expenses and attorney's fees incurred by the Parent or Sub in the defense of the
action.
(c) Indemnification by the Parent and Sub. The Parent and Sub
agree to defend, indemnify, and hold the Shareholders, jointly and severally,
harmless from and against any and all loss, damage, liability, cost, and
expense, including without limitation reasonable attorneys' fees, suffered or
incurred by the Shareholders, as and when incurred, by reason of or arising out
of (i) any misrepresentation, breach of warranty, or breach or non-fulfillment
of any agreement of the Parentor Sub contained in this Agreement or in any
document executed and delivered in connection with this Agreement, and (ii) the
Sub's operation of the Business after the Closing Date; provided, however,
except with respect to their obligations under Section 3(g), the Parent and Sub
shall have no obligation to defend, indemnify or hold the Shareholders harmless
until the Shareholders have suffered aggregate losses in excess of $120,000. The
Parent and Sub shall have the right, but not the obligation, to assume the
defense of the Shareholders with respect to any action covered by this Section
12(c). If the Parent or Sub elects not to assume the defense of the
Shareholders, then the Shareholders shall have the right, upon a final and
binding conclusion of the action, to make a claim against the Parent for
reimbursement of reasonable expenses and attorney's fees incurred by the
Shareholders in the defense of the action.
(d) Notice and Opportunity to Defend. The Indemnified Party
shall notify the Indemnifying Party in writing (the "Indemnity Demand Notice")
within thirty (30) days after a claim is presented to the Indemnified Party, and
the Indemnifying Party may assume the defense of such claim at its sole expense.
The notice shall contain (i) a copy of the claim, and (ii) if not stated in the
claim, a good faith estimate of the amount in controversy under the claim (the
"Known Claim Amount"). If the Indemnifying Party does not assume the defense of
the Indemnified Party or settle such claim within thirty (30) days of the date
of the receipt of the Indemnity Demand Notice, the Indemnified Party shall pay
the expenses of such defense, and the Indemnified Party may settle or compromise
such claim upon prior written notice to the Indemnifying Party without the
Indemnifying Party's consent and the Indemnified Party shall be entitled to
reimbursement as provided in this Section 12.
13. Miscellaneous.
(a) Disclosure Schedules. Any Disclosure Schedule may be
updated one or more times before the Closing Date. Any updated Disclosure
Schedule must be delivered at least five (5) Business Days before the Closing
- 40 -
unless the updated Disclosure Schedule is required by this Agreement to be
current as of the Closing.
(b) Press Releases and Announcements. Except as may be
required by applicable securities laws or stock exchange requirements, if any,
no Party may issue any press release or announcement relating to the subject
matter of this Agreement before, at, or about the Closing without the prior
written consent of the other Parties, which written approval will not be
unreasonably withheld; provided, however, that any Party may make any public
disclosure it believes in good faith is required by law or regulation (in which
case the disclosing Party will advise the other Parties prior to making the
disclosure) after giving the other Parties five (5) Business Days to review and
comment on the disclosure. Notwithstanding anything to the contrary in this
Section 13(b), the Parties specifically agree and consent that the Parent may
issue a Press Release and make other disclosures concerning this Agreement as in
the opinion of its counsel are required to comply with federal and state
securities laws.
(c) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the Exhibits,
Disclosure Schedules and other documents referred to in this Agreement, all of
which are incorporated into this Agreement by reference) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, that may have
related in any way to the subject matter of this Agreement.
(e) Succession and Assignment. This Agreement shall be binding
upon, and shall inure to the benefit of, the Parties and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his, her or its rights, interests, or obligations under this Agreement
without the prior written approval of the other Parties; provided, however, that
the Parent or Sub may (i) assign any or all of their rights and interests under
this Agreement to a wholly-owned subsidiary (in which case the Parent or Sub, as
the case may be, shall nonetheless remain liable and responsible for the
performance of all of its obligations under this Agreement).
(f) Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. A facsimile,
telecopy or other reproduction of this Agreement may be executed by one or more
Parties, and an executed copy of this Agreement may be delivered by one or more
Parties by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of the Party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any Party, all Parties agree to execute an
original of this Agreement as well as any facsimile, telecopy or other
reproduction of this Agreement.
(g) Headings. The Section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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(h) Notices. All notices, requests, demands, claims, and other
communications under this Agreement must be in writing. Any notice, request,
demand, claim, or other communication under this Agreement shall be deemed duly
given if (and then two Business Days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to the Parent or Sub:
NextPath Technologies, Inc.
James R. Ladd, President
114 South Churton Street, Suite 101
Hillsborough, NC 27278
If to Carson Shareholders or Target:
Donald G. Carson and Betty Carson
12108 Towner Avenue, NE
Albuquerque, NM 87112
If to Sanchez Shareholders:
August Sanchez and Yvonne Sanchez
4236 Rancho Centro, NE
Albuquerque, NM 87120
Any Party may give any notice, request, demand, claim, or other communication
under this Agreement using any other means (including personal delivery,
expedited courier, messenger service, facsimile, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is received by
the individual for whom it is intended. Any Party may change the address to
which notices, requests, demands, claims, and other communications under this
Agreement are to be delivered by giving the other Parties written notice in the
manner set forth in this Section 13(h).
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless it is in writing and signed by the Parties.
No waiver by any Party of any default, misrepresentation, or breach of warranty
or covenant under this Agreement, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant under this Agreement or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions of
this Agreement or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Agreement is invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
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term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(k) Expenses. Each of the Parties will bear his, her or its
own costs and expenses (including legal fees and expenses and investment banking
fees, if any) incurred in connection with the negotiation of this Agreement and
the transactions contemplated by this Agreement.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. This
Agreement shall be interpreted and enforced under the laws of the State of New
Mexico. The prevailing party in any dispute to enforce this Agreement shall be
entitled to recover from the losing party its costs and a reasonable attorneys'
fee to be determined by the court.
(m) Incorporation of Exhibits and Disclosure Schedules. The
Exhibits and Disclosure Schedules identified in this Agreement are incorporated
into this Agreement by reference and made a part of this Agreement.
(n) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to specifically
enforce this Agreement and the terms and provisions of this Agreement in any
action instituted in any court of the United States or any state having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.
IN WITNESS WHEREOF, the Parties have executed this Agreement
and Plan of Merger as of the Effective Date.
PARENT: NextPath Technologies, Inc., a Nevada corporation
By: /s/James R. Ladd
----------------------------------
James R. Ladd, President
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SUB: Sagebrush Technology, Inc., a Delaware corporation
By: /s/James R. Ladd
----------------------------------
James R. Ladd, President
SHAREHOLDERS:
Donald G. Carson
Betty Carson
August Sanchez
Yvonne Sanchez