Exhibit 2.2
STOCK PURCHASE AGREEMENT
BETWEEN
Xxxxxxxxxx Natural Foods, Inc.,
a Florida corporation
Xxxx X. Xxxxxxx, Xxxx X. Xxxxxxx as Trustee
of the Xxxxx X. Xxxxxxx Irrevocable Trust dated August 8, 1991,
Xxxx X. Xxxxxxx as Trustee of the Xxxx X. Xxxxxxx Revocable
Trust dated August 8, 1991, Xxxx X. Xxxxxxx and
Xxxx X. Xxxxxxx as Trustees of the
Xxxx X. Xxxxxxx Irrevocable Trust No. 1,
Xxxx X. Xxxxxxx, and Xxxx X. Xxxxxxx
AND
Food for Health Co., Inc.,
an Arizona corporation
Dated: February 24, 1999
TABLE OF CONTENTS
1. Purchase and Sale of Stock ..............................................1
2. Purchase Price...........................................................1
2.1 Allocation of Purchase Price Among Shareholders.....................2
3. Closing..................................................................2
4. Shareholders' Obligations at Closing; Further Assurances ................3
5. Representations and Warranties by Shareholders...........................3
6. Representations and Warranties by Xxxxxxx................................4
6.1 Organization, Standing and Qualification............................4
6.2 Subsidiaries........................................................4
6.3 Transactions with Certain Persons...................................4
6.4 Capitalization......................................................5
6.5 Financial Statements................................................5
6.6 Absence of Undisclosed Liabilities..................................6
6.7 Taxes.............................................................. 6
6.8 Absence of Changes or Events........................................6
6.9 Litigation..........................................................8
6.10 Compliance with Laws and Other Instruments..........................8
6.11 Title to Properties.................................................9
6.12 Schedules...........................................................9
6.13 Proprietary Rights.................................................11
6.14 No Guaranties......................................................11
6.15 Records............................................................11
6.16 Broker's Fees......................................................11
6.17 Environmental, Health, and Safety Matters..........................11
6.18 Intellectual Property..............................................13
7. Representations and Warranties by Purchaser.............................15
7.1 Organization.......................................................15
7.2 Authorization and Approval of Agreement............................15
7.3 Execution, Delivery and Performance of Agreement...................16
7.4 Litigation.........................................................16
7.5 Broker's Fees......................................................16
8. Conduct of Business Prior to Closing....................................16
8.1 Consents and Approvals.............................................16
9. Investigation, Confidentiality and Exclusivity..........................17
9.1 Investigations.....................................................18
9.2 Confidentiality....................................................18
9.3 Press Releases.....................................................18
9.4 Disposition of Property Upon Termination...........................18
9.5 Exclusivity........................................................19
10. Director and Shareholders Authorizations................................19
11. Conditions Precedent to Purchaser's Obligations.........................19
11.1 Approval of Agreement.............................................19
11.2 Additional Documents..............................................19
11.3 Representations...................................................19
11.4 Covenants.........................................................20
11.5 Diligence.........................................................20
11.6 Closing Financial Statements......................................20
11.7 Certificate.......................................................20
11.8 Good Standing.....................................................20
11.9 Huntington Bank Confirmation......................................20
11.10 Affiliate Confirmation............................................20
11.11 Short-Term Liability..............................................21
11.12 Opinion...........................................................21
11.13 Environmental Report..............................................21
12. Conditions Precedent to Company's and Shareholders' Obligations.........21
12.1 Representations...................................................21
12.2 Covenants.........................................................21
12.3 Certificate.......................................................21
12.4 Payment to Huntington Bank Insiders, and Short-Term Liability.....21
12.5 Opinion...........................................................22
12.6 Purchase Price....................................................22
12.7 Phantom Stock Plan................................................22
13. Indemnification.........................................................22
13.1 By Shareholders...................................................22
13.2 By Purchaser......................................................22
13.3 Procedure.........................................................23
13.4 Contribution......................................................23
14. Offset..................................................................23
15. Survival of Representations and Warranties..............................23
16. Notices.................................................................23
17. Legal and Other Costs...................................................24
17.2 Expenses..........................................................24
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18. Miscellaneous...........................................................24
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") dated as of February 24, 1999
(the "Effective Date"), by and among Xxxxxxxxxx Natural Foods, Inc., d.b.a.
Xxxxxxxxxx'x Market & Cafe, a Florida corporation, having its principal office
at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxx 00000 ("CNF"), Food for
Health Co., Inc., an Arizona corporation, having its principal office at 0000
Xxxx Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000 ("Purchaser"), Xxxx X. Xxxxxxx
("Xxxxxxx"), and Xxxx X. Xxxxxxx as Trustee of the Xxxxx X. Xxxxxxx
Irrevocable Trust dated August 8, 1991 (the "Xxxxx Xxxxxxx Trust"), Xxxx X.
Xxxxxxx as Trustee of the Xxxx X. Xxxxxxx Revocable Trust dated August 8,
1991, Xxxx X. Xxxxxxx and Xxxx X. Xxxxxxx as Trustees of the Xxxx X. Xxxxxxx
Irrevocable Trust No. 1, Xxxx X. Xxxxxxx, and Xxxx X. Xxxxxxx, as sole
shareholders of CNF (collectively, the "Shareholders"). CNF is sometimes
referred to as the "Company."
RECITALS:
A. CNF is in the business of operating retail stores for the purpose of
selling natural foods, supplements, and health and beauty care products to the
consuming public.
B. Shareholders own all the issued and outstanding shares of capital
stock in CNF.
C. Purchaser wishes to acquire the ongoing business of CNF and has
agreed to purchase the issued and outstanding capital stock of CNF.
AGREEMENT:
In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereby agree as follows:
1. PURCHASE AND SALE OF STOCK. Subject to and upon the terms and
conditions set forth in this Agreement, the Shareholders will sell, transfer,
convey, assign and deliver to Purchaser, and Purchaser will purchase, at the
Closing hereunder, all of the outstanding stock of the Company (the "Shares"),
free and clear of all liabilities, obligations, liens and encumbrances.
2. PURCHASE PRICE. In consideration of the transfer and delivery of the
Shares by Shareholders to Purchaser, and in reliance upon the representations
and warranties made in this Agreement by Company and Shareholders, Purchaser
will pay to Shareholders a total purchase price of:
o $2,360,000;
o less $400,000 payable to Xxxxxxx for a non-competition
agreement;
o less the amount, if any, by which the total liabilities
of Company as of the close of business on the last day
of the month preceding the Closing exceed $3,500,000
(the "Purchase Price").
The Purchase Price shall be payable by check or wire in two installments. The
first installment shall be paid at the Closing in the amount of the difference
between the Purchase Price and the "Holdback Amount," which is defined as an
amount equal to 10% of the Purchase Price. The second installment shall be
paid 180 days after the Closing in the amount of the Holdback Amount less all
Liabilities against which Shareholders is obligated to indemnify Purchaser
under Section 13.1. In addition to the Purchase Price, Purchaser shall pay at
Closing $400,000 to Xxxxxxx for an employment and non-competition agreement
between Purchaser and Xxxxxxx attached as Exhibit A.
2.1 ALLOCATION OF PURCHASE PRICE AMONG SHAREHOLDERS. The Purchase
Price shall be paid and allocated among the Shareholders as follows:
INITIAL INSTALLMENT PERCENTAGE OF PURCHASE PRICE
------------------- ----------------------------
Xxxx X. Xxxxxxx Revocable Trust 34.95%
Xxxx X. Xxxxxxx Irrevocable Trust No. 1 23.10%
Xxxxx X. Xxxxxxx Revocable Trust 18.75%
Xxxx X. Xxxxxxx 6.60%
Xxxx X. Xxxxxxx 6.60%
SECOND INSTALLMENT
------------------
Xxxx X. Xxxxxxx Revocable Trust 10.00%
------
100.00%
3. CLOSING. The Closing shall take place on the date when each of the
conditions precedent hereunder have been either satisfied or waived by the
party for whose benefit the condition exists, provided that (i) the Closing
must occur within 120 days after the Effective Date of this Agreement, and
(ii) the Closing must occur either on March 29, 1999, April 25, 1999 or May
23, 1999 or such other date as Purchaser and Company may agree. The Closing
shall take place at 9:00 a.m. local time at the offices of Company or such
other time and place as Purchaser and Company may agree upon. The day on
which the Closing actually takes place is sometimes referred to as the Closing
Date.
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4. SHAREHOLDERS' OBLIGATIONS AT CLOSING; FURTHER ASSURANCES.
4.1 At the Closing, Company and Shareholders will deliver to
Purchaser:
4.1.1 stock certificates representing the Shares, together with
assignments separate from certificates duly executed by the Shareholders; and
4.1.2 all documents required to be delivered to Purchaser under
the provisions of this Agreement.
4.2 At any time and from time to time after the Closing, at
Purchaser's request and without further consideration, the Company and
Shareholders will execute and deliver such other instruments of sale,
transfer, assignment and confirmation and take such action as Purchaser may
reasonably deem necessary or desirable in order to more effectively convey to
Purchaser, and to confirm Purchaser's title to, the Shares, to put Purchaser
in actual possession and operating control thereof and to assist Purchaser in
exercising all rights with respect thereto.
5. REPRESENTATIONS AND WARRANTIES BY SHAREHOLDERS.
Each Shareholder as to itself represents and warrants that: (a) it is the
lawful record and beneficial owner of all of the Shares of the Company's
capital stock set forth on Schedule 6.4, with absolute right to sell them and
with full title thereto, free and clear of any liens, claims, encumbrances or
restrictions of any kind; (b) as to such Shares so owned by it, all are
validly issued and outstanding, fully paid and nonassessable; there are no
undisclosed interests, present or future, in the Shares or the ownership of
the Company, nor do any of them know of any assertion of such an interest, or
of any facts or circumstances which would give any person any such present or
future interest or entitle any person to assert such an interest; (c) there
are no provisions of any contract, indenture, agreement or other instrument to
which the Shareholder is a party or to which the Shares it owns are subject
which would prevent, limit, or condition the sale or transfer of the Shares it
owns or the operation of the Company to the Purchaser; (d) neither the
execution, delivery nor performance of this Agreement by Company, or the
Shareholder will, with or without the giving of notice or the passage of time,
or both, conflict with, result in a default, right to accelerate or loss of
rights under, or result in the creation of any lien, charge or encumbrance
pursuant to, any provision of any law, rule or regulation or any order,
judgment or decree to which the Shareholder is a party or by which it may be
bound or affected; (e) the Shareholder has the full power and authority to
enter into this Agreement, to make the representations, warranties and
covenants contained herein and to carry out the transactions contemplated
hereby, and all proceedings required to be taken by the Shareholder to
authorize the execution, delivery and performance of this Agreement and the
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agreements relating hereto have been properly taken, and this Agreement
constitutes the valid and binding agreement of the Shareholder; and (f)
neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency, or court
to which the Shareholder is subject or, any provision of its trust documents
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 agreement,
contract, lease, license, instrument, or other arrangement to which the
Shareholder is a party or by which it is bound or to which any of his or its
assets is subject.
6. REPRESENTATIONS AND WARRANTIES BY XXXXXXX. Xxxxxxx represents and
warrants to Purchaser as follows:
6.1 Organization, Standing and Qualification. Company is a
corporation duly organized, validly existing and in good standing under the
laws of Florida. Company has full corporate power and authority to enter into
this Agreement and the related agreements referred to herein and to carry out
the transactions contemplated by this Agreement. Company is entitled to carry
on its business as now being conducted and to own, lease or operate its
properties as and in the places where such business is now conducted and such
properties are now owned, leased or operated. For purposes of this Agreement,
the "business" of the Company shall be deemed to include all web sites owned
and controlled by Company and all other assets of the Company, which are
related to the operations of the Company. Xxxxxxx has delivered to Purchaser
true and complete copies of Company's Articles of Incorporation and all
amendments thereto and the Bylaws of Company as presently in effect, certified
as true and correct by Company's Secretary. This Agreement constitutes the
valid and legally binding obligation of Company, Xxxxxxx and the Shareholders,
enforceable in accordance with its terms and conditions. Neither Company,
Xxxxxxx, nor Shareholders need give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency or any other person or entity in order to consummate the
transactions contemplated by this Agreement.
6.2 Subsidiaries. The Company has no subsidiaries and no interest,
direct or indirect, in any other corporation or in any partnership, joint
venture or other business enterprise or entity other than as disclosed in this
Section 6.2. The business carried on by the Company has not been conducted
through any other direct or indirect subsidiary or affiliate of any
shareholders. Xxxxxxx, Xxxx Xxxxxxx and Xxxx Xxxxxxx (collectively, the
"Bennetts") and each Shareholder within the last three years has been involved
as owner, management, employee or consultant in no business other than
Company, except that Xxxx Xxxxxxx owns Performance Water Company, a supplier
of water filters to the Company in arms-length transactions representing
expenditures by the Company in the approximate aggregate amount of $5,000
annually.
6.3 Transactions with Certain Persons. Except as set forth on
Schedule 6.3 and except for transactions not material to Company or its
financial condition, during the past three years Company has not, directly or
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indirectly, (a) purchased, leased or otherwise acquired any property or
obtained any services from, or (b) sold, leased or otherwise disposed of any
property or furnished any services to, or (c) otherwise dealt with (except
with respect to remuneration for services rendered as a director, officer or
employee of Company), in the ordinary course of business or otherwise, (i) any
shareholders of Company or (ii) any person, firm or corporation which,
directly or indirectly, alone or together with others, controls, is controlled
by or is under common control with Company or any shareholders of Company.
Except as set forth in Schedule 6.3, Company does not owe any material amount
to, or have any contract or commitment to pay any material amount or to incur
any material liability on behalf of, any of its shareholders, directors,
officers, employees or consultants ("Insider") (other than compensation for
current services not yet due and payable and reimbursement of expenses arising
in the ordinary course of business), and none of such persons owes any amount
to Company. Except as set forth on Schedule 6.3, no part of the property or
assets of Company or any direct or indirect subsidiary or affiliate of Company
is used by the Bennetts or any Shareholder, except in connection with the
business of the Company. For purposes of this Agreement, the "ordinary course
of business" shall mean the ordinary course of business consistent with past
custom and practice (including with respect to quantity and frequency).
Amounts or liabilities owed to or to be incurred on behalf of Insiders
required to be disclosed on Schedule 6.3 are referred to collectively as the
"Insider Obligations."
6.4 Capitalization. All of the presently authorized, issued and
outstanding shares of capital stock of Company and the names and addresses of
the record and beneficial owners thereof are as set forth on Schedule 6.4.
Except as set forth on Schedule 6.4 there are no outstanding subscriptions,
options, warrants, calls, conversion rights, exchange rights, purchase rights,
contracts, demands, commitments, convertible securities or other agreements or
arrangements of any character or nature whatsoever under which Company or any
Shareholder is or may become obligated to issue, assign, sell or otherwise
cause to become outstanding or transfer any shares of the capital stock of
Company. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to the Company,
other than the Company's 401(k) program, which does not invest any funds in
securities of the Company. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock
of the Company.
6.5 Financial Statements. Company has delivered to Purchaser copies
of the following financial statements prepared by management of the Company
(collectively called the "Financial Statements"), all of which are complete
and correct in all material respects, have been prepared from the books and
records of Company in accordance with generally accepted accounting principles
consistently applied and maintained throughout the periods indicated and
fairly and reasonably present the financial condition of Company as at their
respective dates and the results of its operations for the periods covered
thereby:
6.5.1 unaudited balance sheets of Company as at December 31,
1998 (the "Balance Sheet"), and June 30, 1998, 1997 and 1996 unaudited
statements of earnings and source and uses of cash for the years then ended;
and
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6.5.2 unaudited statements of earnings and sources and uses of
cash for the periods ended December 31, 1998 and June 30, 1998.
Such statements of earnings do not contain any items of special or
non-recurring income or any other income not earned in the ordinary course of
business except as expressly specified therein, and such financial statements
include all adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation.
6.6 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against on the face of the Balance Sheet or depicted in
the Financial Statements (excluding the notes thereto), as of December 31,
1998 (the "Balance Sheet Date"), Company has no debts, liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature
whatsoever, including, without limitation, any foreign or domestic tax
liabilities or deferred tax liabilities incurred in respect of or measured by
Company's income, for the period prior to the close of business on the Balance
Sheet Date or any other debts, liabilities or obligations relating to or
arising out of any act, omission, transaction, circumstance, sale of goods or
services, state of facts or other condition which occurred or existed on or
before the Balance Sheet Date, whether or not then known, due or payable. On
the Balance Sheet and in the Financial Statements as of the Balance Sheet
Date, the inventory of the Company identified thereon shall be and is good and
saleable inventory in the ordinary course of business and all accounts
receivable are either good and collectible or adequately and reasonably
reserved against. None of the Company's employees is now, or will by the
passage of time hereafter become, entitled to receive any vacation time,
vacation pay or severance pay attributable to services rendered prior to the
Balance Sheet Date except as disclosed on the face of the Balance Sheet
(excluding the notes thereto).
6.7 Taxes. All tax returns required to be filed in connection with
all taxes imposed by any taxing authority, and all taxes which are immediately
due or payable by Company, have been accurately prepared and duly and timely
filed and, if applicable, paid and all deposits required by law to be made by
Company with respect to employees' withholding taxes have been duly made.
Company has no tax deficiency or claim outstanding, proposed or assessed
against it.
6.8 Absence of Changes or Events. Except as set forth in Schedule
6.8, since the Balance Sheet Date Company has conducted its business only in
the ordinary course and has not:
6.8.1 incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection with the
purchase of goods or services in the ordinary course of business and
consistent with its prior practice, none of which liabilities, in any case or
in the aggregate, materially and adversely affects the business, liabilities
or financial condition of Company;
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6.8.2 discharged or satisfied any material lien, charge or
encumbrance other than those then required to be discharged or satisfied, or
paid any obligation or liability, absolute, accrued, contingent or otherwise,
whether due or to become due, other than current liabilities shown on the
Balance Sheet and current liabilities incurred since the Balance Sheet Date in
the ordinary course of business and consistent with its prior practice;
6.8.3 declared or made any payment of dividends or other
distribution to its shareholders or upon or in respect of any shares of its
capital stock, or purchased, retired or redeemed, or obligated itself to
purchase, retire or redeem, any of its shares or capital stock or other
securities;
6.8.4 mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction any of its property, business
or assets, tangible or intangible;
6.8.5 sold, transferred, leased to others or otherwise disposed
of any of its assets, except for inventory sold in the ordinary course of
business, or canceled or compromised any debt or claim, or waived or released
any right of material value;
6.8.6 received any notice of termination of any contract, lease
or other agreement prior to its expiration date or suffered any damage,
destruction or loss (whether or not covered by insurance) which, in any case
or in the aggregate, has had or would have a materially adverse effect on the
assets, operations or prospects of Company;
6.8.7 encountered any labor union organizing activity, had any
actual or, threatened employee strikes, work stoppages, slow-downs or
lock-outs, or had any material change in its relations with its employees,
agents, customers or suppliers which could have a material adverse effect on
the Company;
6.8.8 made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or agreed or
orally promised to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to any shareholder,
director, officer, employee, salesman, distributor or agent of Company;
6.8.9 issued or sold any shares of its capital stock or other
securities, or issued, granted or sold any options, rights or warrants with
respect thereto, or acquired any capital stock or other securities of any
corporation or any interest in any business enterprise, or otherwise made any
loan or advance to or investment in any person, firm or corporation;
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6.8.10 other than an expenditure in the approximate amount of
$18,000 for repair or replacement of a compressor in the Company's Winter Park
location, made any capital expenditures or capital additions in excess of an
aggregate of $20,000;
6.8.11 changed its banking or safe deposit arrangements;
6.8.12 instituted, settled or agreed to settle any litigation,
action or proceeding before any court or governmental body relating to the
Company or its property;
6.8.13 failed to replenish its inventories and supplies in a
normal and customary manner consistent with its prior practice and ordinary
business practices prevailing in the industry, or made any purchase commitment
in excess of the normal, ordinary and usual requirements of its business or at
any price materially in excess of the then current market price or upon terms
and conditions materially more onerous than those usual and customary in the
industry, or made any change in its selling, pricing, advertising or personnel
practices inconsistent with its prior practice and ordinary business practices
prevailing in the industry;
6.8.14 suffered any change, event or condition which in any case
or in the aggregate, has had or may have a materially adverse affect on
Company's condition (financial or otherwise), properties, assets, liabilities,
operations or prospects, including, without limitation, any change in
Company's revenues, costs, backlog or relations with its employees, agents,
customers or suppliers;
6.8.15 entered into any transaction, contract or commitment
other than in the ordinary course of business or paid or agreed to pay any
legal, accounting, brokerage, finder's fee, taxes or other expenses in
connection with, or incurred any severance pay obligations by reason of, this
Agreement or the transactions contemplated hereby; or
6.8.16 entered into any agreement or made any commitment to take
any of the types of action described in Sections 6.8.1 through 6.8.15 above.
6.9 Litigation. Except as set forth in Schedule 6.9, there is no
claim, legal action, suit, arbitration, governmental investigation or other
legal or administrative proceeding, nor any order, decree or judgment in
progress, pending or in effect, or to the knowledge of Xxxxxxx threatened, nor
to the knowledge of Xxxxxxx does there exist the basis for any such claim,
action, or other proceeding against or relating to Company, its officers,
directors or employees, its properties, assets or business or the transactions
contemplated by this Agreement.
6.10 Compliance with Laws and Other Instruments. Except as set forth
in Schedule 6.10, Company has conducted its business in material compliance
with all existing laws, rules, regulations, ordinances, orders, judgments and
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decrees now or hereafter applicable to its business, properties or operations.
Neither the ownership nor use of Company's properties nor the conduct of its
business conflicts with the rights of any other person, firm or corporation or
violates, or with or without the giving of notice or the passage of time, or
both, will violate, conflict with or result in a default, right to accelerate
or loss of rights under, any terms or provisions of its Articles of
Incorporation or Bylaws as presently in effect, or any lien, encumbrance,
mortgage, lease, license, agreement, understanding, law, ordinance, rule or
regulation, or any order, judgment or decree to which Company is a party or by
which it may be bound or affected. Xxxxxxx is not aware of any proposed
regulations, judgments, decrees, governmental takings, condemnations or other
proceedings which would be applicable to its business, operations or
properties and which might adversely affect its properties, assets,
liabilities, operations or prospects, either before or after the Closing.
6.11 Title to Properties. Company has good and marketable title to
all the properties and assets of every kind or nature, including but not
limited to intellectual property, it owns in its business or purports to own,
including, without limitation, those reflected in its books and records and in
the Balance Sheet (except inventory shown on the Balance Sheet as consignment
inventory and except inventory sold after the Balance Sheet Date in the
ordinary course of business). None of such properties and assets are subject
to any mortgage, pledge, lien, charge, security interest, encumbrance,
restriction, lease, license, liability or adverse claim of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise., except (i) as expressly set forth in the Balance Sheet as securing
specific liabilities or as otherwise expressly permitted by the terms hereof.
Except for the compressor referred in Section 6.8.10, all of the properties
and assets owned, leased or used by Company are in good operating condition
and repair, are suitable for the purposes used, are adequate and sufficient
for all current operations of Company and are directly related to the business
of Company.
6.12 Schedules. Attached as Schedule 6.12 is a separate schedule
containing an accurate and complete list and description of:
6.12.1 All real property owned by Company or in which Company
has a leasehold or other interest or which is used by Company in connection
with the operation of its business, or any other instrument under which
Company claims or holds such leasehold or other interest or right to the use
thereof or pursuant to which Company has assigned, sublet or granted any
rights therein, identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms thereof.
6.12.2 All tangible personal property (other than inventory and
supplies), owned, leased or used by Company except for items having a value of
less than $2,500 which do not, in the aggregate, have a total value of more
than $20,000, setting forth with respect to all such listed property a summary
description of all leases, liens, claims, encumbrances, charges, restrictions,
covenants and conditions relating thereto, identifying the parties thereto,
the rental or other payment terms, expiration date and cancellation and
renewal terms.
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6.12.3 All fire, theft, casualty, liability and other insurance
policies insuring Company, specifying with respect to each such policy the
name of the insurer, the risk insured against, the limits of coverage, the
deductible amount (if any), the premium rate and the date through which
coverage will continue by virtue of premiums already paid.
6.12.4 All sales agency agreements, distributorship agreements,
or agreements providing for the services of an independent contractor to which
Company is a party or by which it is bound.
6.12.5 All contracts, agreements and commitments, whether or
not fully performed, in respect of the issuance, sale or transfer of the
capital stock, bonds or other securities of Company or pursuant to which
Company has acquired any substantial portion of its business or assets.
6.12.6 All contracts, agreements, commitments or other
understandings or arrangements to which Company is a party or by which it or
any of its property is bound or affected but excluding (A) purchase and sales
orders and commitments made in the ordinary course of business involving
payments or receipts by Company of less than $5,000 in any single case but not
more than $10,000 in the aggregate (exclusive of purchase orders for
replacement inventory), and (B) contracts entered into in the ordinary course
of business and involving payments or receipts by Company of less than $5,000
in the case of any single contract but not more than $10,000 in the aggregate
(exclusive of purchase orders for replacement inventory).
6.12.7 All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans, deferred
compensation agreements, employee pension plans or retirement plans, employee
stock options or stock purchase plans and group life, health and accident
insurance and other employee benefit plans, agreements, arrangements or
commitments, including, without limitation, holiday, vacation, Christmas and
other bonus practices, to which Company is a party or is bound or which relate
to the operation of Company's business.
6.12.8 The names and current annual salary rates of all persons
(including independent commission agents) whose annual compensation (direct or
indirect) from Company is currently at the rate of more than $25,000 per annum
and showing separately for each such person the amounts paid or payable as
salary, bonus payments and any indirect compensation for the year ended
December 31, 1998; and
6.12.9 The names of all of Company's directors and officers;
the name of each bank in which Company has an account or safe deposit box and
the names of all persons authorized to draw thereon or have access thereto;
and the names of all persons, if any, holding tax or other powers of attorney
from Company and a summary of the terms thereof.
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All of the contracts, agreements, leases, licenses and commitments
required to be listed on Schedule 6.12 (other than those which have been fully
performed) are valid and binding, enforceable in accordance with their
respective terms, in full force and effect, no consent or waiver needs to be
obtained prior to the Closing in order to prevent a breach thereof, and,
except as otherwise specified in Schedule 6.12, after the Closing, Company
will be entitled to the full benefits thereof. Except as disclosed in
Schedule 6.12, there is not thereunder any existing default or event which,
after notice or lapse of time, or both, would constitute a default or result
in a right to accelerate or loss of rights. True and complete copies of all
such contracts, agreements, leases, licenses and other documents listed on
Schedule 6.12 (together with any and all amendments thereto) have been
delivered or made available to Purchaser. Each of the documents and materials
previously delivered to Purchaser or its representatives and the Information,
as such term is defined below, whether or not attached to or described in this
Agreement as a schedule, are true and correct copies of such items and
truthfully, accurately and completely describe or depict the information
contained therein. Company and Xxxxxxx have caused the same to be provided to
Purchaser with the intent that Purchaser rely on the same with regard to the
transactions contemplated by this Agreement.
6.13 Proprietary Rights. Company is the owner of its proprietary
rights and property including the Intellectual Property, as defined herein,
all of which is set forth on Schedule 6.13.
6.14 No Guaranties. Company has not guaranteed the obligations or
liabilities of any other person, firm or corporation.
6.15 Records. The books of account, minute books, stock certificate
books and stock transfer ledgers of Company are complete and correct in all
material respects, and there have been no transactions involving the business
of Company which properly should have been set forth therein and which have
not been accurately so set forth.
6.16 Broker's Fees. Company is not obligated to pay any broker's or
other finder's fees to any third party in connection with the transactions
contemplated by this Agreement.
6.17 Environmental, Health, and Safety Matters. For purposes of this
Agreement, "Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution
or protection of the environment, including without limitation all those
relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as
amended and as now or hereafter in effect.
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6.17.1 Company has complied and is in compliance with all
Environmental, Health, and Safety Requirements.
6.17.2 Without limiting the generality of the foregoing,
Company has obtained and complied with, and is in compliance with, all
permits, licenses and other authorizations that are required pursuant to
Environmental, Health, and Safety Requirements for the occupation of its
facilities and the operation of its business.
6.17.3 Neither Company nor Xxxxxxx has received any written or
oral notice, report or other information regarding any actual or alleged
violation of Environmental, Health, and Safety Requirements, or any
liabilities or potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its facilities arising
under Environmental, Health, and Safety Requirements.
6.17.4 None of the following exists at any property or facility
owned or operated by the Company: (1) underground storage tanks, (2) asbestos-
containing material in any form or condition, (3) materials or equipment
containing polychlorinated biphenyls, or (4) landfills, surface impoundments,
or disposal areas.
6.17.5 Company has not treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or owned or
operated any property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given or would give
rise to liabilities, including any liability for response costs, corrective
action costs, personal injury, property damage, natural resources damages or
attorney fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Solid Waste
Disposal Act, as amended ("SWDA") or any other Environmental, Health, and
Safety Requirements.
6.17.6 Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or consent
of government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
6.17.7 Company has not, either expressly or by operation of
law, assumed or undertaken any liability, including without limitation any
obligation for corrective or remedial action, of any other person relating to
Environmental, Health, and Safety Requirements.
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6.17.8 No facts, events or conditions relating to the past or
present facilities, properties or operations of the Company will prevent,
hinder or limit continued compliance with Environmental, Health, and Safety
Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental, Health, and Safety Requirements, or
give rise to any other liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental, Health, and Safety
Requirements, including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
6.18 Intellectual Property. For purposes of this Agreement,
"Intellectual Property" means (a) any inventions and new technologies (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
6.18.1 The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of the businesses of the Company as
presently conducted. Each item of Intellectual Property owned or used by
Company immediately prior to the Closing hereunder will be owned or available
for use by Company on identical terms and conditions immediately subsequent to
the Closing hereunder. Except as provided in Schedule 6.18.1, the Company has
taken all reasonably prudent action to maintain and protect each item of
Intellectual Property that it owns or uses listed in subpart (b) of Section
6.18.
6.18.2 Neither the Company nor the Bennetts nor any Shareholder
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and neither
the Company nor the Bennetts nor any Shareholder, director, officer (nor any
employees with responsibility for Intellectual Property matters) of the
Company has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). To the knowledge of any of
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the directors and officers (and employees with responsibility for Intellectual
Property matters) of Company and Xxxxxxx, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
6.18.3 Schedule 6.18.3 identifies each license, trademark,
patent or registration which has been issued to the Company with respect to
any of its Intellectual Property, identifies each pending patent application
or application for registration which Company has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which Company has granted to any third party with respect to any of
its Intellectual Property (together with any exceptions). Company has
delivered to Purchaser correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date) and has made available to Purchaser correct and complete copies of
all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. Schedule 6.18.3 also identifies each trade name
or unregistered trademark used by Company in connection with of its business.
With respect to each item of Intellectual Property required to be identified
in Schedule 6.18.3:
(A) Company possesses all right, title, and interest in and to the
item, free and clear of any Security Interest, license, or other restriction;
(B) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of Company and
Shareholders and the directors and officers of Company, is threatened which
challenges the legality, validity, enforceability, use, or ownership of the
item; and
(D) Company has not ever agreed to indemnify any Person for or against
any interference, infringement, misappropriation, or other conflict with
respect to the item.
6.18.4 Schedule 6.18.4 identifies each item of Intellectual
Property that any third party owns and that Company uses pursuant to license,
sublicense, agreement, or permission. The Company has delivered to Purchaser
correct and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of Intellectual
Property required to be identified in Schedule 6.18.4:
(A) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect;
(B) 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 consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to above);
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(C) no 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;
(D) no party to the license, sublicense, agreement, or permission has
repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true and correct
with respect to the underlying license;
(F) to the best of Company's knowledge and Xxxxxxx'x knowledge, the
underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge that affects Company's
right to the use of such Intellectual Property;
(G) to the knowledge of Company or Xxxxxxx after diligent inquiry no
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property; and
(H) neither the Company nor the Bennetts nor any Shareholder has
granted any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
6.18.5 To the Knowledge of Company and Xxxxxxx, the Company
will not interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a result
of the continued operation of its businesses as presently conducted and as
presently proposed to be conducted.
7. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to the Shareholders as follows:
7.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona and has
full power and authority to enter into this Agreement and the related
agreements referred to herein and to carry out the transactions contemplated
by this Agreement and to carry on its business as now being conducted and to
own, lease or operate its properties.
7.2 Authorization and Approval of Agreement. All proceedings or
actions required to be taken by Purchaser relating to the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby shall have been taken at or prior to the Closing.
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7.3 Execution, Delivery and Performance of Agreement. Neither the
execution, delivery nor performance of this Agreement by Purchaser will, with
or without the giving of notice or the passage of time, or both, conflict
with, result in a default, right to accelerate or loss of rights under, or
result in the creation of any lien, charge or encumbrance pursuant to, any
provision of Purchaser's Articles of Incorporation or Bylaws or any franchise,
mortgage, deed of trust, lease, license, agreement, understanding, law,
ordinance, rule or regulation or any order, judgment or decree to which
Purchaser is a party or by which it may be bound or affected. Purchaser has
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, and all proceedings required to be taken by
Purchaser to authorize the execution, delivery and performance of this
Agreement and the agreements relating hereto have been properly taken and this
Agreement constitutes a valid and binding obligation of Purchaser.
7.4 Litigation. There is no legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor
any order, decree or judgment in progress, pending or in effect, or to the
knowledge of Purchaser threatened, against or relating to Purchaser in
connection with or relating to the transactions contemplated by this
Agreement, and Purchaser does not know or have any reason to be aware of any
basis for the same.
7.5 Broker's Fees. Purchaser is not obligated to pay any broker's or
other finder's fees to any third party in connection with the transactions
contemplated by this Agreement.
8. CONDUCT OF BUSINESS PRIOR TO CLOSING.
8.1 Consents and Approvals. After the execution of this Agreement
and prior to the Closing, Purchaser, Xxxxxxx and Company shall undertake to
use their best efforts in the exercise of reasonable business judgment to
obtain as quickly as reasonably possible all approvals necessary for the
transactions contemplated by this Agreement from all necessary regulatory
authorities (the "Regulatory Authorities"), Shareholders and other parties,
and to comply with all applicable laws which may be applicable to the
transactions contemplated by this Agreement.
8.2 Prior to the Closing, Company shall conduct its business and
affairs only in the ordinary course and consistent with its prior practice and
shall maintain, keep and preserve its assets and properties in good condition
and repair and maintain insurance thereon in accordance with present
practices, and Company and each Shareholder will use their best efforts in the
exercise of reasonable business judgment (i) to preserve the business and
organization of Company intact, (ii) to keep available to Purchaser the
services of Company's present officers, employees, agents and independent
contractors, (iii) to preserve for the benefit of Purchaser the goodwill of
the Company as relates to its favorable relations with suppliers, customers,
landlords and others having business relations with it, and (iv) to use
reasonable efforts in obtaining the consent of any party whose consent may be
required by reason of the transactions contemplated hereby. Without limiting
the generality of the foregoing, prior to the Closing Company will not,
without Purchaser's prior written approval:
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8.2.1 change its Articles of Incorporation or Bylaws or merge or
consolidate or obligate itself to do so with or into any other entity;
8.2.2 enter into any contract, agreement, commitment or other
understanding or arrangement except for those of the type which would not have
to be listed and described under Section 6.12.6; or
8.2.3 perform, take any action or incur or permit to exist any
of the acts, transactions, events or occurrences of the type (1) described in
Sections 6.8.1, .0, .0, .0, .0, .0, .0, .10, .11, .12, .13, .15, or .16 of
this Agreement which would have been inconsistent with the representations and
warranties set forth therein had the same occurred after the Balance Sheet
Date and prior to the date hereof or (2) described in Section 6.3 of this
Agreement which would be required to be set forth on Schedule 6.3 if it had
taken place during the past three years.
8.3 Company shall give Purchaser prompt written notice of any change
in any of the information contained in the representations and warranties made
in Section 6 or elsewhere in this Agreement or the Schedules referred to
herein which occurs prior to the Closing.
8.4 Company shall not cause or permit its total liabilities to
increase or decrease other than in the ordinary, reasonable and prudent course
of business. Company shall, and Xxxxxxx will cause Company to, consult with
Purchaser with respect to material changes in the conduct of the business of
the Company; provided, however, that nothing contained in this Section 8.4
shall require Company to take or fail to take any action that, in Company's
reasonable judgment, is likely to give rise to a substantial penalty or a
claim for damages by any third party against Company, or is likely to result
in losses to Company, or is otherwise likely to prejudice in any material
respect or interfere with the conduct of Company's business and operations in
the ordinary course consistent with prior practice, or is likely to result in
a breach by Company of any of its representations, warranties or covenants
contained in this Agreement (unless any such breach is first waived in writing
by Purchaser).
8.5 From the date of this Agreement, Company and the Shareholders
shall take no action that would encumber or restrict the Shares or their sale
or transfer, except any action by Company to enforce its rights hereunder.
8.6 From the date of this Agreement, Company and the Shareholders
shall not grant any options or other rights or interests in the Shares.
9. INVESTIGATION, CONFIDENTIALITY AND EXCLUSIVITY.
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9.1 Investigations. Subject to the restrictions of Section 9.2,
Company consents to Purchaser commencing a due diligence investigation of the
operations and financial status of Company at Purchaser's expense. Upon
reasonable notice and during regular business hours, Company will give
Purchaser and Purchaser's attorneys, accountants and other representatives
full access to Company's officers, directors, employees, independent
contractors, counsel, and independent accountants and all properties,
documents, contracts, books and records of Company and will furnish Purchaser
with copies of such documents (certified by Company's officers if so
requested) and with such information with respect to the affairs of Company
(all of which are collectively referred to as "Information") as Purchaser may
reasonably request from time to time, including without limitation all books
and records, references and customer contracts. Purchaser does not assume
responsibility for its accuracy or completeness of the Information, whether or
not Purchaser independently verifies the Information. Any such furnishing of
such Information to Purchaser or any investigation by Purchaser shall not
affect Purchaser's right to rely on any representations and warranties made in
this Agreement or in connection herewith or pursuant hereto. Subject to the
restrictions of Section 9.2, Purchaser shall provide to Company all
information reasonably necessary to permit Company to evaluate Purchaser's
ability to perform under this Agreement.
9.2 Confidentiality. Shareholders, Company and Purchaser agree to
keep the existence and terms of this Agreement confidential and to keep
confidential all information and communications concerning this Agreement,
including the fact that any meetings or discussions between Purchaser and
Company took place or were scheduled to take place, except to the extent
necessary or appropriate in connection with any applicable regulations. The
parties contemplate that by virtue of this Agreement, each may come into
possession of the other's confidential financial and other business
information, and each party agrees that it shall keep such information
confidential and shall not engage in any activities which would or could
violate the Confidentiality and Non-Disclosure Agreement, a copy of which is
attached to this Agreement as Exhibit 9.2, and an original of which has been
signed by each party prior to or contemporaneously with its execution and
delivery of this Agreement. Each party shall make no disclosure regarding any
other party to this Agreement to any person or entity unless it shall have
first obtained and delivered to such other party, as applicable, such person's
or entity's signature on an original of the attached Confidentiality and Non-
Disclosure Agreement and also obtained such other party's written approval for
such disclosure.
9.3 Press Releases. Any public announcement of the pendency of the
transactions embodied in this Agreement shall be made only upon receiving the
prior written consent from Purchaser and Xxxxxxx as to the necessity for the
announcement and the text to be used.
9.4 Disposition of Property Upon Termination. Upon expiration or
earlier termination of this Agreement for any reason, each party shall deliver
to the other all tangible forms of confidential information, trade secrets and
other proprietary property of the other parties which is in its possession or
control, and shall certify to the other parties in writing that it has no
other such property in its possession or control, and that it has no knowledge
of the possession by others of any such property of the other parties
previously in its possession or control.
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9.5 Exclusivity. As long as the parties are proceeding in accordance
with this Agreement, neither party shall have any discussions with any third
party concerning any acquisition of control of Company or any investment in or
merger with Company.
10. DIRECTOR AND SHAREHOLDERS AUTHORIZATIONS.
10.1 At or prior to the Closing, Company will deliver to Purchaser a
copy of the resolutions of the Board of Directors and the resolutions or
consents of the Shareholders of Company, together with any and all required
resolutions or consents of beneficiaries of Shareholders, approving the
execution and delivery of this Agreement and the consummation of all of the
transactions contemplated hereby, duly certified by an officer of Company.
10.2 At or prior to Closing, Purchaser will deliver of Shareholders
a copy of the resolutions or consents of the Board of Directors of Purchaser,
together with any and all resolutions or consents of shareholders of
Purchaser, approving the execution and delivery of this Agreement and the
consummation of all of the transactions contemplated hereby, duly certified by
an officer of Purchaser.
11. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. All obligations of
Purchaser hereunder are subject, at the option of Purchaser, to the
fulfillment of each of the following conditions at or prior to the Closing,
and Company and Shareholders shall exert their best efforts in the exercise of
reasonable business judgment to cause each such condition to be so fulfilled
on or prior to March 29, 1999, or such other date as Purchaser and Company may
agree.
11.1 Approval of Agreement. The Board of Directors and shareholders
of Company shall have approved of this Agreement and related documents.
11.2 Additional Documents. Xxxx X. Xxxxxxx and Purchaser shall have
entered into an employment and non-competition agreement in the form attached
as Exhibit A.
11.3 Representations. All representations and warranties of Company
and the Shareholders contained herein or in any document delivered pursuant
hereto shall be true and correct in all material respects when made and shall
be deemed to have been made again at and as of the date of the Closing, and
shall then be true and correct in all material respects except for changes in
the ordinary course of business after the date hereof in conformity with the
covenants and agreements contained herein, provided that Company and the
Shareholders shall have provided to Purchaser written updates to any
disclosures and schedules under this Agreement ("Updates") necessary to make
all representations and warranties of Company and the Shareholders contained
herein or in any documents delivered pursuant hereto true and correct in all
material respects as of the Closing and provided further that the Purchaser
approves in writing of such Updates in its sole discretion.
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11.4 Covenants. All covenants, agreements and obligations required
by the terms of this Agreement to be performed by Company or by Shareholders
at or before the Closing shall have been duly and properly performed in all
material respects, and all documents required to be delivered to Purchaser at
or prior to the Closing shall have been so delivered.
11.5 Diligence. Purchaser shall have completed its due diligence
within 30 days after the Effective Date with results satisfactory to
Purchaser, provided that Purchaser shall also be satisfied with the results of
due diligence with respect to any material events or developments arising
subsequent to the 30th day after the Effective Date and prior to Closing.
11.6 Closing Financial Statements. Purchaser shall be provided by
Company with an unaudited balance sheet of Company as at the last day of the
month prior to Closing for the period then ended ("Closing Balance Sheet") and
all representations, warranties, indemnities and covenants made by Company
and/or the Shareholders in this Agreement which relate to the Balance Sheet or
the Balance Sheet Date shall similarly be deemed to relate to the Closing
Balance Sheet, as the case may be, as though each of such representations,
warranties, indemnities and covenants were fully set forth herein as
additional representations, warranties, indemnities and covenants containing
the words "Closing Balance Sheet" in lieu of the words "Balance Sheet" and the
date thereof in lieu of the words "the Balance Sheet Date."
11.7 Certificate. There shall be delivered to Purchaser a
certificate executed by the President and Secretary of Company and by each
Shareholders, individually, dated the date of the Closing, certifying that the
conditions set forth in this Section 11 have been fulfilled.
11.8 Good Standing. There shall be delivered to Purchaser a
certificate issued by the Florida Division of Corporations attesting to the
corporate existence and good standing of Company in the state of Florida.
11.9 Huntington Bank Confirmation. There shall be delivered to
Purchaser written confirmation from Huntington Bank of the total amount owed
by Company to Huntington Bank as of Closing including any prepayment or other
charges, and complete wiring instructions sufficient to permit Purchaser to
pay such amount on or after Closing, which amount shall be not significantly
greater (exclusive of interest) than the amount shown on the Closing Balance
Sheet.
11.10 Affiliate Confirmation. There shall be delivered to Purchaser
written confirmation from Xxxxxxx and the Xxxxx X. Xxxxxxx Trust of the
amounts owed by the Company to each as of Closing, which amount shall be not
significantly greater (exclusive of interest) than the amount shown on the
Closing Balance Sheet.
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11.11 Short-Term Liability. The Purchaser shall receive
confirmation in a form acceptable to it of a certain amount owed by the
Company to Tree of Life, Inc. not to exceed $525,000 as of Closing.
11.12 Opinion. Purchaser shall have received an opinion of
Company's counsel, dated the date of the Closing, in form and substance
satisfactory to counsel for Purchaser, to the effect that the Company is duly
formed, validly existing, and in good standing, this Agreement has been duly
authorized on behalf of the Company, Xxxxxxx and the Shareholders, and the
Agreement has been validly executed and is enforceable against the Company,
Xxxxxxx and the Shareholders in accordance with its terms, subject to
qualifications relating to insolvency laws, equitable principles, and the
like.
11.13 Environmental Report. Purchaser and Xxxxxxx shall have
received and approved, in its sole discretion, a Phase 1 environmental report
relating to conditions on or under all locations at or adjacent to premises
used or owned or controlled by Company, the expense of which Purchaser agrees
to pay, provided it does not exceed $7,500.
12. CONDITIONS PRECEDENT TO COMPANY'S AND SHAREHOLDERS' OBLIGATIONS. All
obligations of Company and Shareholders at the Closing are subject, at the
option of Company and each Shareholder, to the fulfillment of each of the
following conditions at or prior to the Closing, and Purchaser shall exert its
best efforts in the exercise of reasonable business judgment to cause each
such condition to be so fulfilled:
12.1 Representations. All representations and warranties of
Purchaser contained herein or in any document delivered pursuant hereto shall
be true and correct in all material respects when made and as of the Closing.
12.2 Covenants. All obligations required by the terms of this
Agreement to be performed by Purchaser at or before the Closing shall have
been duly and properly performed in all material respects.
12.3 Certificate. There shall be delivered to Shareholders a
certificate executed by an officer of the Purchaser, dated the date of the
Closing, certifying that the conditions set forth in this Section 12 have been
fulfilled, and that Purchaser has received the Updates referred to in Section
11.3 and has chosen to waive any breaches of warranties or representations
that may be disclosed in such Updates by electing to close the transaction
described herein.
12.4 Payment to Huntington Bank Insiders, and Short-Term Liability.
There shall have been delivered to Shareholders evidence that Purchaser will,
simultaneously with the Closing, provide funds to Company, as a capital
contribution or loan, sufficient to allow Company to pay (a) to Huntington
Bank the amount certified to Purchaser under Section 11.9, (b) to Xxxxxxx and
The Xxxxx Xxxxxxx Trust the amounts referred to in Section 11.10, and (c) Tree
of Life the amount referred to in Section 11.11. At Closing, Purchaser shall
cause Company to pay such amounts to the respective payees.
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12.5 Opinion. Company shall have received an opinion of Purchaser's
counsel, dated the date of the Closing in form and substance satisfactory to
counsel for Company, to the effect that the Purchaser is duly formed, validly
existing, and in good standing, this Agreement has been duly authorized on
behalf of the Purchaser, and the Agreement has been validly executed and is
enforceable against the Purchaser in accordance with its terms, subject to
qualifications relating to insolvency laws, equitable principles, and the
like.
12.6 Purchase Price. Shareholders shall have received at Closing
payment of the first installment of the Purchase Price in accordance with
Section 2.
12.7 Phantom Stock Plan. The Company shall adopt, simultaneously
with the Closing, a Phantom Stock Plan on the terms set forth in Schedule 12.7
and the following individuals will be eligible for such plan: Xxxx Xxxxx,
Xxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxxxxx, Xxxxx Xxxxxxx, and Xxxxx Xxxxxx.
13. INDEMNIFICATION. Purchaser agrees to indemnify Company and the
Shareholders and Company agree to indemnify Purchaser, in connection with this
transaction, against all expenses, losses, claims, damages and liabilities,
including without limitation expenses of investigating the foregoing, expenses
of appearing in any action or legal proceeding to which any indemnitee may
become subject in order to defend against the foregoing, expenses of preparing
for any such action or proceeding, and reasonable counsel fees and
disbursements (collectively, "Liabilities") which result from or arise from or
are based upon, the matters as set forth below. The indemnification
provisions of this Agreement shall apply equally to Purchaser, Purchaser's
members, officers, directors, agents, employees and affiliates and each
person, if any, who controls Purchaser or any of Purchaser's affiliates
(collectively, the "Purchaser Indemnitees") and to Shareholders, Company and
its officers, directors, agents, employees and affiliates, the beneficiaries
of Shareholders, and each person, if any, who controls Company, Shareholders,
beneficiaries of the Shareholders or any of their affiliates (collectively,
the "Company Indemnitees").
13.1 By Shareholders. Shareholders hereby indemnifies and agrees to
hold Purchaser harmless from, against and in respect of (and shall on demand
reimburse Purchaser for) any and all Liabilities suffered or incurred by
Purchaser by reason of any untrue representation, breach of warranty or
non-fulfillment of any covenant by Shareholders or any one of them contained
herein.
13.2 By Purchaser. Purchaser hereby agrees to indemnify and hold
Shareholders harmless from, against and in respect of (and shall on demand
reimburse Shareholders for) any and all Liabilities resulting from any untrue
representation, breach of warranty or non-fulfillment of any covenant or
agreement by Purchaser contained herein.
22
13.3 Procedure. Promptly after any person entitled to
indemnification hereunder receives notice of the commencement of any
proceeding, such person will give notice in writing to the indemnifying party,
which must be given within two years after the Closing. The indemnifying
party will without being deemed to have admitted any liability assume the
defense, including the employment of and payment of such counsel's fees and
disbursements. Should the person entitled to indemnification reasonably
determine that separate counsel is necessary (whether due to the existence of
different defenses, potential conflicts of interest or otherwise), or if the
indemnifying party has not assumed the defense, then the person entitled to
indemnification may, employ separate counsel, and the indemnifying party shall
pay such counsel's reasonable fees and disbursements as incurred. In the
event of any proceedings in connection with this Agreement, each party agrees
that, if requested, it or its representatives will testify or otherwise assist
each other party in preparing for testimony.
13.4 Contribution. If any indemnification or reimbursement sought
pursuant to this Agreement is held by a court to be unenforceable for any
reason other than the express terms of this Agreement (for example, but not by
way of limitation, enforcement is against public policy), then Purchaser,
Xxxxxxx, Shareholders and Company agree, to contribute to the Liabilities for
which such indemnification or reimbursement is held unavailable in such
proportion as is appropriate to reflect the relative benefits to Purchaser and
Company in connection with the transaction or transactions contemplated by
this Agreement.
14. OFFSET. In addition to any other remedy, Purchaser shall be
entitled, upon any breach of this Agreement by Company or Shareholders, to
offset against Purchaser's obligations to Company, Xxxxxxx, any Shareholder,
or any Affiliate of the foregoing, the amount of damages, losses or expenses
estimated by Purchaser to arise from such breach. Without limiting the
foregoing, Purchaser may exercise this right of offset for any amount by which
the actual liabilities of Company as of the close of business on the last day
of the month preceding the Closing exceed the liabilities on such date as
certified by Company.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements,
representations, warranties, indemnities, covenants and agreements made by
each of the parties hereto shall survive after the Closing for a period of two
years after the Closing.
16. NOTICES. Any and all notices, offers, demands or other
communications required or permitted to be given under any of the provisions
of this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or on the tenth business day after mailed by
first class registered or certified United States mail, return receipt
requested, addressed to the parties at the addresses set forth herein (or at
such other address as any party may specify by notice to all other parties
given as aforesaid). Copies of any notice sent to Purchaser must be sent to:
Xxxxx XxXxxx, Esq., Xxxxx and Xxxx LLP, 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxx 00000. Copies of any notice sent to Company or Shareholders must be
sent to: Xxxx X. Xxxxxxx, 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxx
00000 and Xxxxxxx Xxxxxxxx, Esq., Broad and Xxxxxx, 000 Xxxxx Xxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000.
23
17. LEGAL AND OTHER COSTS.
17.1 In the event that any party defaults (the "Defaulting Party")
in his, her or its obligations under this Agreement and, as a result thereof,
the other party (the "Non-Defaulting Party") seeks to legally enforce his, her
or its rights hereunder against the Defaulting Party, then, in addition to all
damages and other remedies to which the Non-Defaulting Party is entitled by
reason of such default, the Defaulting Party shall promptly pay to the
Non-Defaulting Party an amount equal to all costs and expenses (including
reasonable attorneys' fees and costs) paid or incurred by the Non-Defaulting
Party in connection with such enforcement.
17.2 Expenses. Each party shall be solely responsible for its
respective expenses incurred in regard to the negotiation and drafting of this
Agreement as well as the obligations to be undertaken by the respective
parties in accordance with this Agreement and the proposed transactions
described herein.
18. MISCELLANEOUS.
18.1 This writing constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified, amended or
terminated except by a written agreement specifically referring to this
Agreement signed by all of the parties hereto.
18.2 No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or
default of the same or similar nature.
18.3 This Agreement shall be binding upon and inure to the benefit
of each party hereto, its, his or her successors, assigns, heirs and personal
representatives.
18.4 The paragraph headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of said
paragraphs.
18.5 Without further consideration each party hereto shall
cooperate, shall take such further action and shall execute and deliver such
further documents as may be reasonably requested by any other party in order
to carry out the provisions and purposes of this Agreement.
18.6 Shareholders will pay all sales, transfer and documentary
taxes, if any, payable in connection with the sale, conveyances, assignments,
transfers and deliveries to be made to Purchaser hereunder.
24
18.7 This Agreement may be executed in one or more counterparts, all
of which taken together shall be deemed one original.
18.8 This Agreement and all amendments thereof shall be governed by
and construed in accordance with the laws in force in the State of Arizona.
Venue for any litigation arising thereunder shall lie in the state and federal
courts situated in either Maricopa County, Arizona or Orange County, Florida.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
FOOD FOR HEALTH CO., INC.,
an Arizona corporation
Xxxxx Xxxxxxx
--------------------------
Xxxxx Xxxxxxx, President
Xxxxxxx Xxxxxxxx
---------------------------
Xxxxxxx Xxxxxxxx, Secretary
XXXXXXXXXX NATURAL FOODS, INC.
a Florida corporation
Xxxx Xxxxxxx
---------------------------
Xxxx Xxxxxxx, President
XXXXXXX
Xxxx X. Xxxxxxx
---------------------------
Xxxx Xxxxxxx
25
SHAREHOLDERS
Xxxx X. Xxxxxxx
---------------------------
Xxxx X. Xxxxxxx
Address: 0000 Xxxxx Xxxx Xxx.
Xxxxxxx, XX 00000
Xxxx X. Xxxxxxx
---------------------------
Xxxx X. Xxxxxxx
Address: 000 Xxxxxxx Xx.
Xxxxxxxx, XX 00000
Xxxx X. Xxxxxxx
---------------------------
Xxxx X. Xxxxxxx, Trustee for the
Xxxxx X. Xxxxxxx Irrevocable Trust
dated August 8, 1991
Address: 000 Xxxxxxxx Xx.
Xxxxxxxx, XX 00000
Xxxx X. Xxxxxxx
---------------------------
Xxxx X. Xxxxxxx, Trustee of the
Xxxx X. Xxxxxxx Revocable Trust
dated August 8, 1991
Address: 000 Xxxxxxxx Xx.
Xxxxxxxx, XX 00000
26
Xxxx X. Xxxxxxx
---------------------------
Xxxx X. Xxxxxxx as Trustee of the
Xxxx X. Xxxxxxx Irrevocable Trust No. 1
Address: 0000 Xxxxx Xxxx Xxx.
Xxxxxxx, XX 00000
Xxxx X. Xxxxxxx
---------------------------
Xxxx X. Xxxxxxx as Trustee of the
Xxxx X. Xxxxxxx Irrevocable Trust No. 1
Address: 000 Xxxxxxx Xx.
Xxxxxxxx, XX 00000
27
SCHEDULE 6.4
Percentage Shares
---------- ------
Xxxx X. Xxxxxxx Revocable Trust 44.95% 899
Xxxx X. Xxxxxxx Irrevocable Trust No. 1 23.10% 462
Xxxxx X. Xxxxxxx Revocable Trust 18.75% 375
Xxxx X. Xxxxxxx 6.60% 000
Xxxx X. Xxxxxxx 6.60% 132
------ ----
Total Shares 100.00% 2000
28
SCHEDULE 6.8
Compensation expense increased in the aggregate amount of $29,000 since
December 31, 1998.
29
