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EXHIBIT 10.8
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
STOCK PURCHASE AGREEMENT
by and between
XXXXXX XXXXXXXX
and
WINSTON FURNITURE COMPANY OF ALABAMA, INC.
dated as of June 30, 1998
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TABLE OF CONTENTS
Page
1. Definitions 1
2. Purchase and Sale of Shares 8
(a) Basic Transaction 8
(b) Purchase Price 8
(c) Payment of Purchase Price 8
(d) Funded Indebtedness 9
(e) Earnout 9
(f) Minimum Shareholders Equity Purchase
Price Adjustment 12
(g) Funded Indebtedness. 14
(h) Excluded Assets 14
(i) The Closing 14
(j) Deliveries at the Closing 15
(k) Transfer Taxes 15
3A. Representations and Warranties of the Seller
as to Seller Matters 15
(a) Capacity 15
(b) Binding Obligation 15
(c) Xxxxxxxxxxxxxxxx 00
(x) Ownership of Common Stock. The 15
(e) Brokers Fees 15
3B. Representations and Warranties of the Seller With
Respect to the Company 16
(a) Organization/Power and Authority to Conduct
Business 16
(b) Noncontravention 16
(c) Brokers Fees 16
(d) Capitalization 16
(e) Financial Statements 17
(f) Absence of Certain Developments 17
(g) Undisclosed Liabilities 19
(h) Legal Compliance 19
(i) Company Permits 19
(j) Tax Matters 19
(k) Certain Business Relationships with the Company 20
(l) Title to Tangible Assets Other than Real Property
Interests 21
(m) Title to Real Property 21
(n) Intellectual Property 21
(o) Material Contracts 22
(p) Powers of Attorney 22
(q) Insurance 23
(r) Litigation 23
(s) Labor Relations 23
(t) Employee Benefits 23
(u) Environmental, Health and Safety Matters 25
(v) Customers and Suppliers 26
(w) Inventory 26
(x) Accounts Receivable 26
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(y) List of Accounts 27
(z) Product Warranty 27
(aa) Product Liability 27
4. Representations and Warranties of the Purchaser 27
(a) Organization 27
(b) Authorization of Transaction 27
(c) Noncontravention 27
(d) Brokers Fees 28
(e) Acquisition of Shares for Investment 28
5. Pre-Closing Covenants 28
(a) General 28
(b) Operation of Business 28
(c) Preservation of Business 28
(d) Full Access 29
(e) Notice of Developments 29
6. Post-Closing Covenants 29
(a) General 29
(b) Transition 29
(c) Litigation Support 29
(d) Noncompetition 29
(e) Non-Solicitation of Employees 30
(f) Confidentiality 31
(g) "Section" 338(h)(10) Election 31
7. No Shop 32
8. Conditions to Obligation to Close 32
(a) Conditions to Obligation of the Purchaser 32
(b) Conditions to Obligation of the Seller 34
9. Remedies for Breaches of This Agreement 35
(a) Survival of Representations and Warranties 35
(b) Indemnification 35
(c) Treatment of Indemnification Payments 37
(d) Escrow 37
10. Xxxxxxxxxxx 00
(x) Xxxxxxxxxxx xx Xxxxxxxxx 00
(x) Effect of Termination 38
11. Miscellaneous 38
(a) Press Releases and Public Announcements 38
(b) No Third-Party Beneficiaries 38
(c) Entire Agreement 38
(d) Succession and Assignment 38
(e) Counterparts 39
(f) Headings 39
(g) Notices 39
(h) Governing Law; Venue 40
(i) Amendments and Waivers 40
(j) Severability 40
(k) Expenses 40
(l) Construction 40
(m) Incorporation of Disclosure Schedule 41
(n) Equitable Remedies 41
(o) Waiver of Jury Trial 41
(p) Prevailing Parties 41
Schedule I - Seller Stock Information
Exhibit A - Form of Escrow Agreement
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Exhibit B - Form of Employment Agreement
Exhibit C - Form of Contract for Purchase and Sale
Disclosure Schedule
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of June 30,
1998, by and between Winston Furniture Company of Alabama, Inc., an Alabama
corporation (the "Purchaser"), and Xxxxxx Xxxxxxxx (the "Seller"). The Purchaser
and the Seller are each referred to in this Agreement as a "Party" and
collectively as the "Parties".
The Seller directly owns all of the outstanding capital
stock of Xxxxxxxx, Inc., a Florida corporation (the "Company").
This Agreement contemplates a transaction in which the
Purchaser will purchase from the Seller, and the Seller will sell to the
Purchaser, all of the outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and
the mutual promises herein made, and in consideration of the representations,
warranties and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accounts Receivable" means all of the Company's accounts,
instruments, drafts, acceptances and other forms of receivables and all rights
earned under the Company's contracts to sell goods or render services.
"Actual EBITAM Amount" has the meaning set forth in
"section" 2(e)(iv)(C) below.
"Actual Net Shareholders Equity Amount" has the meaning set
forth in "section"2(f)(ii)(C) below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of "section"1504 of the Code.
"Allocation Schedule" has the meaning set forth in
"section"6(g)(iii) below.
"Authority" means any federal, state, local or foreign governmental
regulatory agency, commission, bureau, authority, court or arbitration tribunal.
"Available Cash" means all Cash held by the Company as of midnight
on the business day before the Closing Date less an amount of Cash necessary to
cover outstanding checks (which are not otherwise stale) which have been issued
by the Company but have not cleared.
"Business of the Company" means the casual contract
furniture business.
"Cash" means cash and cash equivalents (including marketable
securities and short term investments) calculated in accordance
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with GAAP applied on a basis consistent with the preparation of the Financial
Statements.
"CERCLA" has the meaning set forth in "section"3B(u)(vi) below.
"Charter" and "bylaws," respectively, mean with respect to
any corporation, those instruments that, among other things, (a) define its
existence, as filed or recorded with the applicable Authority, including,
without limitation, such corporation's Articles or Certificate of Incorporation,
and (b) otherwise govern its internal affairs, in each case as amended,
supplemented, or restated.
"Closing" has the meaning set forth in "section"2(g) below.
"Closing Balance Sheet" has the meaning set forth in
"section"2(f)(i) below.
"Closing Date" has the meaning set forth in "section"2(g) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, par value $5.00 per
share, of the Company.
"Company" has the meaning set forth in the preface above.
"Company Permits" has the meaning set forth in "section"3B(i) below.
"Confidential Information" means data and information relating to
the business of the Company (which does not rise to the level of a Trade Secret)
and which has value to the Company and is not generally known to its
competitors. Confidential Information does not include any data or information
that has been voluntarily disclosed to the public by the Company or that has
been independently developed and disclosed by others, or that otherwise enters
the public domain through lawful means.
"Disclosure Schedule" means the Disclosure Schedule
accompanying this Agreement.
"Earnout" has the meaning set forth in "section"2(e)(i) below.
"EBITAM" means has the meaning set forth in "section"2(e)(ii) below.
"EBITAM Dispute Accounting Firm" has the meaning set forth
in "section"2(e)(iv) below.
"EBITAM Statement" has the meaning set forth in "section"2(e)(iv)
below.
"Employee Benefit Plan" has the meaning set forth in "section"3B(t)
below.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA "section"3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA "section"3(1).
"Employment Agreement" has the meaning set forth in
"section"8(a)(xii) below.
"Environmental, Health and Safety Requirements" means all
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federal, state, local, regional and foreign statutes, regulations and ordinances
concerning workplace health and safety and pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes.
"Environmental Claim" means any written notice or claim by any
person or any Authority alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (i)
the presence, release or threatened release into the environment, of any
Material of Environmental Concern at any location, whether or not owned, leased
or operated by the Company, or (ii) any violation, or alleged violation, of any
Environmental, Health and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any Person that would be aggregated with the
Company under "section"414(b), (c), (m) or (o) of the Code.
"Escrow Account" has the meaning set forth in "section" 2(c)(ii).
"Escrow Agent" has the meaning set forth in "section" 2(c)(ii).
"Escrow Funds" has the meaning set forth in "section" 2(c)(ii).
"Final EBITAM Determination Date" has the meaning set forth in
"section" 2(e)(iv) below.
"Final Closing Balance Sheet Determination Date" has the meaning set
forth in "section"2(f)(ii) below.
"Final Return" has the meaning set forth in "section" 6(h) below.
"Financial Statements" has the meaning set forth in "section"3B(e)
below.
"Funded Indebtedness" means the aggregate amount (including the
current portions thereof) of all (i) indebtedness for money borrowed from others
and purchase money indebtedness of the Company (including capitalized lease
obligations), (ii) indebtedness of the type described in clause (i) above
guaranteed, directly or indirectly, in any manner by the Company, or in effect
guaranteed, directly or indirectly, in any manner by the Company, through an
agreement, contingent or otherwise, to supply funds to, or in any other manner
invest in, the debtor, or to purchase indebtedness, or to purchase and pay for
property if not delivered or to pay for services if not performed, primarily for
the purpose of enabling the debtor to make payment of the indebtedness or to
assure the owners of the indebtedness against loss, but excluding endorsements
of checks and other instruments in the ordinary course, (iii) indebtedness of
the type described in clause (i) above secured by any Lien upon property owned
by the Company, even though the Company has not in any manner become liable for
the payment of such indebtedness and (iv) interest expense accrued but unpaid,
and all prepayment premiums, on or relating to any of such indebtedness.
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"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"High EBITAM Amount" has the meaning set forth in
"section"2(e)(iv)(B) below.
"High Net Shareholders Equity Amount" has the meaning set
forth in "section"2(f)(ii)(B) below.
"Indemnified Party" has the meaning set forth in "section"9(b)(v)
below.
"Indemnifying Party" has the meaning set forth in "section"9(b)(v)
below.
"Individual Representations and Warranties" has the meaning
set forth in "section"9(a) below.
"Initial Payment" has the meaning set forth in "section"2(c)(i)
below.
"Intellectual Property" means all trademarks, service marks, trade
dress, logos, trade names and corporate names, together with all goodwill
associated therewith (including all translations, adaptations, derivations and
combinations of the foregoing); copyrights and copyrightable works;
registrations, applications and renewals for any of the foregoing; trade secrets
and confidential information (including, without limitation, ideas,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, business and marketing plans, and customer and
supplier lists and related information); and computer software (including,
without limitation, data, data bases and documentation).
"IRS" means the Internal Revenue Service.
"Inventory" means all of the inventories of the Company, including
without limitation, raw materials, work in progress, finished goods, packaging
goods and other like items.
"Knowledge" (and the related phrase "to the Knowledge of") means,
with respect to either Party when modifying any representation or warranty, that
such Party has no knowledge that such representation or warranty is not true and
correct to the same extent as provided in the applicable representation and
warranty, and that (i) in the case of the Seller, the Seller has made
appropriate investigations and inquiries of the officers and responsible
employees of the Company, and (ii) nothing has come to the Seller's attention in
the course of such investigation and inquiries or otherwise which would cause
the Seller, in the exercise of due diligence, to believe that such
representation and warranty is not true in all material respects.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or
other security interest, whether or not related to the extension of credit or
the borrowing of money.
"Leased Real Property" has the meaning set forth in "section"3B(m)
below.
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"Loss" or "Losses" means all damages, dues, penalties, fines,
reasonable amounts paid in settlement, Taxes, costs, obligations, losses,
expenses, and fees (including court costs and reasonable attorneys' fees and
expenses), including, as the context may require, any of the foregoing which
arise out of or in connection with any actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees or rulings.
"Low EBITAM Amount" has the meaning set forth in
"section"2(e)(iv)(A) below.
"Low Net Shareholders Equity Amount" has the meaning set
forth in "section"2(f)(ii)(B) below.
"Material Adverse Change" or "Material Adverse Effect" means any
change or effect that is materially adverse to the business, assets, financial
condition, results of operations or prospects of the Company.
"Material Contract" means any contract or agreement whether written
or oral to which the Company is a party, or by which the Company or any of its
assets is bound, and which (a) relates to Funded Indebtedness or is a letter of
credit, pledge, bond or similar arrangement running to the account of or for the
benefit of the Company, (b) relates to the purchase, maintenance or acquisition
of, or sale or furnishing of, materials, supplies, merchandise, machinery,
equipment, parts or any other property or services (excluding any such contract
made in the Ordinary Course of Business and which is expected to be fully
performed within 90 days of the date hereof or which involves revenues or
expenditures of less than $10,000), (c) is a collective bargaining agreement,
(d) obligates the Company not to compete with any business, or which otherwise
restrains or prevents the Company from carrying on any lawful business or which
restricts the right of the Company to use or disclose any information in its
possession (excluding in each case customary restrictive covenants contained in
agreements entered into in the Ordinary Course of Business), (e) relates to (i)
employment, compensation, severance, or consulting between the Company and any
of its officers or directors, or (ii) between the Company and any other
employees or consultants of the Company who are entitled to compensation
thereunder in excess of $25,000 per annum, (f) is a lease or sublease of real
property, or a lease, sublease or other title retention agreement or conditional
sales agreement involving annual payments in excess of $10,000 individually or
$50,000 in the aggregate for any machinery, equipment, vehicle or other tangible
personal property (whether the Company is a lessor or lessee), (g) is a contract
for capital expenditures or the acquisition or construction of fixed assets for
or in respect of any real property involving payments to be made after the date
hereof in excess of $10,000, (h) is a contract granting any Person a Lien on any
of the assets of the Company, in whole or in part (other than Permitted Liens),
(i) is a contract by which the Company retains any manufacturer's
representatives, broker or other sales agent, distributor or representative or
through which the Company is appointed or authorized as a sales agent,
distributor or representative, (j) is a joint venture or partnership contract or
a limited liability company operating agreement with the Seller, or with any
Affiliate of the Seller, (k) is (i) an agreement for the storage,
transportation, treatment and disposal of any materials subject to regulation
under any Environmental Health and Safety Requirements, or (ii) a contract for
storage, transportation or similar services with carriers or warehousemen
(excluding any such contract entered into in the Ordinary Course of Business and
involving aggregate
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annual expenditures not exceeding $25,000), (l) is an agreement or arrangement
with any Affiliate of the Seller, or (m) any other agreement (or group of
related agreements) the performance of the executory portion of which involves
consideration in excess of $25,000 or which cannot be terminated by the Company
upon 90 days notice.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products in each case with respect to which liability or standards of
conduct are imposed pursuant to any Environmental, Health and Safety
Requirements.
"Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth
in "section"3B(e) below.
"Most Recent Fiscal Month End" has the meaning set forth in
"section"3B(e) below.
"Most Recent Fiscal Year End" has the meaning set forth in
"section"3B(e) below.
"Multiemployer Plan" has the meaning set forth in ERISA
"section"3(37).
"Net Shareholders Equity" means the total assets of the Company
minus the total liabilities of the Company.
"Net Shareholders Equity Dispute Accounting Firm" has the meaning
set forth in "section"2(f)(ii) below.
"Notice of Disagreement With EBITAM Statement" has the
meaning set forth in "section"2(e)(iv) below.
"Notice of Disagreement With Closing Balance Sheet" has the meaning
set forth in "section"2(f)(ii) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means (i) Liens for Taxes not yet due and payable
or being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established, (ii) mechanic's, materialman's,
supplier's, vendor's, landlord's or similar Liens arising in the Ordinary Course
of Business securing amounts which are not delinquent and (iii) purchase money
Liens and Liens securing rental payments under capital lease arrangements.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
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"Pre-Closing Tax Period" means any tax period (including partial
periods) that ends on or prior to the Closing Date.
"Property" or "Properties" has the meaning set forth in
"section"3B(m) below.
"Purchaser" has the meaning set forth in the preface above.
"Purchase Price" has the meaning set forth in "section"2(b) below.
"Purchase Price Adjustment" has the meaning set forth in
"section"2(f)(iii) below.
""section"338(h)(10) Election" has the meaning set forth in
"section"6(g)(i) below.
"Restricted Area" has the meaning set forth in "section"6(d) below.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Seller" has the meaning set forth in the preface above.
"Shares" has the meaning set forth in "section"2(a) below.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns, directly or indirectly, a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Target Amounts" has the meaning set forth in "section" 2(e) below.
"Taxes" means all federal, state, local and foreign taxes
(including, without limitation, income or profits taxes, premium taxes, excise
taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, ad valorem
taxes, severance taxes, capital levy taxes, transfer taxes, value added taxes,
employment and payroll-related taxes, property taxes, business license taxes,
occupation taxes, import duties and other governmental charges and assessments),
of any kind whatsoever, including interest, additions to tax and penalties with
respect 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.
"Third Party Claim" has the meaning set forth in "section"9(b)(v)
below.
"Trade Secrets" means information relating to the Company, without
regard to form, including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which is not commonly known by or
available to the public and which (a) derives economic value, actual or
potential, from not being known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its disclosure
or use, and (b) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
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"Unrestricted Representations and Warranties" has the
meaning set forth in "section"9(a) below.
"1999 EBITAM" has the meaning set forth in "section" 2(e) below.
"2000 EBITAM" has the meaning set forth in "section" 2(e) below.
2. Purchase and Sale of Shares.
(a) Basic Transaction. On and subject to the terms and conditions
of this Agreement, the Purchaser agrees to purchase from the Seller, and the
Seller agrees to sell to the Purchaser, free and clear of all restrictions on
transfer, Liens, claims and demands, all of the shares of Common Stock owned by
the Seller (the "Shares") as set forth in Schedule I hereto, for the
consideration specified below in this "section"2.
(b) Purchase Price. The aggregate purchase price to be paid by the
Purchaser for all of the Shares (the "Purchase Price") shall be (i) $8,000,000,
minus (ii) the amount of Funded Indebtedness as of the Closing Date (after
giving effect to any reduction of such Funded Indebtedness on the Closing Date
by application of Available Cash); (iii) any Purchase Price Adjustment made
pursuant to "section"2(f) below, plus (iv) any Earnout payments made pursuant to
"section"2(e) below.
(c) Payment of Purchase Price. On the Closing Date, the Purchaser
shall make payment of the Purchase Price as follows:
(i) To the Seller, by wire transfer of immediately available funds,
the aggregate sum of $7,500,000 (the "Initial Payment"), to the account or
accounts designated in writing by the Seller at least two business days prior to
the Closing Date. The Seller may direct the Purchaser to deliver a portion of
the Initial Payment to certain third parties for fees, expenses, costs or other
obligations arising out of or in connection with the transactions contemplated
in this Agreement.
(ii) To SunTrust Bank Atlanta, as escrow agent (the "Escrow Agent")
pursuant to the terms of the Escrow Agreement, the sum of $500,000 (the "Escrow
Funds"). As provided in the Escrow Agreement, the Escrow Funds shall be held in
an account (the "Escrow Account") to provide indemnification to the Purchaser as
provided in "section" 9 hereof.
(d) Funded Indebtedness. As soon as practical before the Closing,
the Purchaser and/or the Company (as determined by the Purchaser) shall deliver
to the holders of Funded Indebtedness an amount sufficient to repay all Funded
Indebtedness outstanding immediately prior to the Closing (in connection with
which the Seller shall cause the Company to apply Available Cash to the
reduction of Funded Indebtedness), with the result that immediately following
the Closing there will be no further obligations of the Company, monetary or
otherwise, with respect to any Funded Indebtedness outstanding immediately prior
to the Closing. Prior to the Closing Date, the Seller will provide the Purchaser
with customary pay-off letters from all holders of Funded Indebtedness
outstanding immediately prior to the Closing, and make arrangements reasonably
satisfactory to the Purchaser for such holders to provide to the Purchaser
recordable
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form mortgage and lien releases, canceled notes, trademark and patent
assignments and other documents reasonably requested by the Purchaser
simultaneously with the Closing. If the Purchaser directs the Company to pay any
Funded Indebtedness, it shall provide the Company with sufficient funds to do
so.
(e) Earnout.
(i) The Seller will be entitled to receive a contingent purchase
price payment of up to $1,000,000 (the "Earnout") in accordance with the
provisions of this "section"2(e). The Earnout shall be payable with respect to
the fiscal years ending June 30, 1999 and June 30, 2000 and the amount of the
Earnout payment for each such fiscal year will be equal to the amount (if any)
by which the Company's EBITAM for such fiscal year exceeds the following amounts
(the "Target Amounts"); provided, however, that in no event shall the Earnout
amount for either fiscal year be more than $500,000:
Fiscal Year Ending EBITAM TARGET AMOUNT
--------------------
June 30, 1999 $ 1,775,000
June 30, 2000 $ 1,955,000
The Earnout payment (if any) for either such fiscal year will be paid upon the
final determination of the EBITAM Statement for such fiscal year in accordance
with this "section"2(e), by wire transfer of immediately available funds to an
account or accounts designated by the Seller in writing. Should the Company's
EBITAM for the fiscal year ended June 30, 1999 (the "1999 EBITAM") not exceed
the June 30, 1999 Target Amount as set forth above, Seller shall not be entitled
to any Earnout payment for the fiscal year ended June 30, 1999, unless the 1999
EBITAM when added to the Company's EBITAM for the fiscal year ended June 30,
2000 (the "2000 EBITAM") exceed the sum of the 1999 and 2000 Target Amounts. In
such event, Seller shall be entitled to the Earnout payment for both such fiscal
years.
Should the Company's 2000 EBITAM not exceed the 2000 Target Amount, Seller shall
not be entitled to any Earnout payment for the fiscal year ended June 30, 2000
unless the 2000 EBITAM when added to the 1999 EBITAM exceed the sum of the 1999
and 2000 Target Amounts.
(ii) For purposes of this Agreement, "EBITAM" for either such
fiscal year means the Company's earnings for the twelve months ending on the
last day of such fiscal year, before taking into account (i) any interest on
indebtedness and any financing and related fees and expenses, (ii) all fees or
expenses incurred in connection with the transactions contemplated by this
Agreement, (iii) income Taxes, (iv) any amortization or depreciation to the
extent attributable to the purchase accounting "write-up" resulting from the
transactions contemplated hereby and (v) management or other fees charged by the
Purchaser and/or its Affiliates.
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(iii) Except as otherwise expressly provided herein, any amount or
calculation to be made in connection with the Earnout shall be determined or
made (A) in accordance with GAAP, (B) using the same revenue, income and expense
recognition policies and practices as have been used by the Company prior to the
Closing, unless such policies and practices are determined not to have been
prepared in accordance with GAAP; and (C) based on the unaudited financial
statements of the Company utilized in connection with the preparation of the
audited consolidated financial statements of the Purchaser and its Subsidiaries.
(iv) Promptly (but in no event later than sixty (60) after the end
of each such fiscal year, the Purchaser at its expense shall prepare and deliver
to the Seller a statement of the EBITAM of the Company for the fiscal year then
ended (the "EBITAM Statement"). During the 30 days immediately following receipt
of the EBITAM Statement by the Seller, the Seller and his accountants shall be
entitled to review the EBITAM Statement and any working papers, trial balances
and similar materials relating to the EBITAM Statement prepared by the Purchaser
or its accountants, and the Purchaser shall provide the Seller and his
accountants with timely access, during normal business hours, to the personnel,
properties, books and records of the Company and the Purchaser. The EBITAM
Statement shall become final and binding upon the parties on the 31st day
following delivery thereof unless the Seller gives written notice to the
Purchaser of his disagreement with the EBITAM Statement (a "Notice of
Disagreement With EBITAM Statement") prior to such date. Any Notice of
Disagreement With EBITAM Statement shall specify in reasonable detail the nature
of any disagreement so asserted. If a timely Notice of Disagreement With EBITAM
Statement is received by the Purchaser with respect to the EBITAM Statement,
then the EBITAM Statement (as revised in accordance with clause (A) or (B)
below), shall become final and binding upon the parties on the earlier of (A)
the date the Purchaser and the Seller resolve in writing any differences they
have with respect to any matter specified in a Notice of Disagreement With
EBITAM Statement, or (B) the date any matters in dispute are finally resolved in
writing by the EBITAM Dispute Accounting Firm in the manner described below (the
date on which the EBITAM Statement so becomes final and binding being
hereinafter referred to as the "Final EBITAM Determination Date"). During the 30
days immediately following the delivery of any Notice of Disagreement With
EBITAM Statement, the Purchaser and the Seller shall seek in good faith to
resolve in writing any differences which they may have with respect to any
matter specified in such Notice of Disagreement With EBITAM Statement. During
such period, the Seller and his accountants shall each have access to the
Company's working papers, trial balances and similar materials (including the
working papers, trial balances and similar materials of the Purchaser's
accountants) prepared in connection with the Purchaser's preparation of the
EBITAM Statement. At the end of such 30-day period, the Seller and Purchaser
shall submit to an independent "Big 6" public accounting firm (the "EBITAM
Dispute Accounting Firm") for review and resolution any and all matters which
remain in dispute and which were included in any Notice of Disagreement With
EBITAM Statement (it being understood that the EBITAM Dispute Accounting Firm
shall act as an arbitrator to determine, based solely on presentations by the
Purchaser and the Seller (and not by independent review), only those matters
which remain in
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dispute), and the EBITAM Dispute Accounting Firm shall reach a final, binding
resolution of all matters which remain in dispute, which final resolution shall
be (A) in writing, (B) furnished to the Purchaser and the Seller as soon as
practicable after the items in dispute have been referred to the EBITAM Dispute
Accounting Firm, (C) made in accordance with this Agreement, and (D) conclusive
and binding upon the Parties to this Agreement and not subject to collateral
attack for any reason. The EBITAM Statement, with any adjustments necessary to
reflect the EBITAM Dispute Accounting Firm's resolution of the matters in
dispute, shall become final and binding on the Parties on the date the EBITAM
Dispute Accounting Firm delivers its final resolution to the Parties. The EBITAM
Dispute Accounting Firm shall be mutually selected by the Purchaser and the
Seller, or, if the Purchaser and the Seller cannot so agree within the 30-day
period referred to above, by lot from among the independent "Big 6" public
accounting firms (after excluding Xxxxxxx, Xxxxxxx and Xxxxx and the Purchaser's
independent public accountants) willing to act. Each Party shall pay its own
costs and expenses incurred in connection with such arbitration; provided, that
the fees and expenses of the EBITAM Dispute Accounting Firm shall be borne as
follows:
(A) if the EBITAM Dispute Accounting Firm
resolves all of the remaining objections in favor of the Purchaser (the amount
of the EBITAM so determined is referred to herein as the "Low EBITAM Amount"),
the Seller will be responsible for all of the fees and expenses of the EBITAM
Dispute Accounting Firm;
(B) if the EBITAM Dispute Accounting Firm
resolves all of the remaining objections in favor of the Seller (the amount of
the EBITAM so determined is referred to herein as the "High EBITAM Amount"), the
Purchaser will be responsible for all of the fees and expenses of the EBITAM
Dispute Accounting Firm; and
(C) if the EBITAM Dispute Accounting Firm
resolves some of the remaining objections in favor of the Purchaser and the rest
of the remaining objections in favor of the Seller (the amount of the EBITAM so
determined is referred to herein as "Actual EBITAM Amount"), the Seller will be
responsible for that fraction of the fees and expenses of the EBITAM Dispute
Accounting Firm equal to (1) the difference between the High Amount and the
Actual Amount over (2) the difference between the High Amount and the Low
Amount, and the Purchaser will be responsible for the remainder of the fees and
expenses.
(v) If the Purchaser has determined that an Earnout payment is
payable with respect to either of the fiscal years ending June 30, 1999 and June
30, 2000, the Purchaser shall pay such Earnout payment when it delivers the
EBITAM Statement for such fiscal year (even if the Seller dispute the amount of
such Earnout payment as determined by the Purchaser). If the amount of the
Earnout payment is in dispute, and the Earnout payment that is ultimately
determined to be payable pursuant to "section"2(e)(iv) is (A) greater than the
amount (if any) paid pursuant to the previous sentence, then the Purchaser shall
pay the difference within three business days after such determination, or (B)
less than the amount (if any) paid
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pursuant to the previous sentence, then the Seller shall repay the difference
within three business days after such determination. Payment of the Earnout
shall be made by the Purchaser to the Seller by wire transfer of immediately
available funds to the account or accounts designated in writing by the Seller.
Payment of any amounts payable to the Purchaser pursuant to clause (B) of this
paragraph (v) shall be made by wire transfer of immediately available funds to
the account designated in writing by the Purchaser.
(f) Minimum Shareholders Equity Purchase Price Adjustment.
(i) Within 30 days after the Closing Date, the Purchaser shall
prepare and deliver to the Seller (a) a balance sheet of the Company as of the
close of business on the Closing Date (the "Closing Balance Sheet") and (B) the
Purchaser's calculation of the Net Shareholders Equity of the Company at such
time. The Closing Balance Sheet (including, without limitation, such calculation
of Net Shareholders Equity) shall be prepared in accordance with GAAP applied in
a manner consistent with the same accounting principles and methodologies used
in preparing the Financial Statements except that no effect shall be given to
(x) any transaction occurring between the actual time of Closing and the close
of business on the Closing Date between the Company and the Purchaser or its
Affiliates or relating to the Purchaser's financing of either the Company or any
of the transactions contemplated hereby or (y) any purchase accounting or other
similar adjustments resulting from the consummation of the transactions
contemplated herein.
(ii) During the 30 days immediately following receipt of the Closing
Balance Sheet by the Seller, the Seller and his accountants shall be entitled to
review the Closing Balance Sheet and any working papers, trial balances and
similar materials relating to the Closing Balance Sheet prepared by the
Purchaser or its accountants, and the Purchaser shall provide the Seller and his
accountants with timely access, during the Company's normal business hours, to
the Company's personnel, properties, books and records. The Closing Balance
Sheet shall become final and binding upon the parties on the 31st day following
delivery thereof unless the Seller gives written notice to the Purchaser of his
disagreement with the Closing Balance Sheet (a "Notice of Disagreement With
Closing Balance Sheet") prior to such date. Any Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted. If a
timely Notice of Disagreement With Closing Balance Sheet is received by the
Purchaser with respect to the Closing Balance Sheet, then the Closing Balance
Sheet (as revised in accordance with clause (A) or (B) below), shall become
final and binding upon the parties on the earlier of (a) the date the Purchaser
and the Seller resolve in writing any differences they have with respect to any
matter specified in a Notice of Disagreement With Closing Balance Sheet, or (B)
the date any matters in dispute are finally resolved in writing by the Purchase
Price Adjustment Dispute Accounting Firm in the manner described below (the date
on which the Closing Balance Sheet so becomes final and binding being
hereinafter referred to as the "Final Closing Balance Sheet Determination
Date"). During the 30 days immediately following the delivery of any Notice of
Disagreement With Closing Balance Sheet, the Purchaser and the Seller shall
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seek in good faith to resolve in writing any differences which they may have
with respect to any matter specified in such Notice of Disagreement With Closing
Balance Sheet. During such period, the Seller and his accountants shall each
have access to the Purchaser's and the Company's working papers, trial balances
and similar materials (including the working papers, trial balances and similar
materials of their respective accountants) prepared in connection with the
preparation of the Closing Balance Sheet. At the end of such 30-day period, the
Seller and the Purchaser shall submit to the Purchase Price Adjustment Dispute
Accounting Firm for review and resolution any and all matters which remain in
dispute and which were included in any Notice of Disagreement With Closing
Balance Sheet (it being understood that the Purchase Price Adjustment Dispute
Accounting Firm shall act as an arbitrator to determine, based solely on
presentations by the Purchaser and the Seller (and not by independent review),
only those matters which remain in dispute), and the Purchase Price Adjustment
Dispute Accounting Firm shall reach a final, binding resolution of all matters
which remain in dispute, which final resolution shall be (a) in writing, (B)
furnished to the Purchaser and the Seller as soon as practicable after the items
in dispute have been referred to the Purchase Price Adjustment Dispute
Accounting Firm, (C) made in accordance with this Agreement, and (D) conclusive
and binding upon the Parties and not subject to collateral attack for any
reason. The Closing Balance Sheet, with any adjustments necessary to reflect the
Purchase Price Adjustment Dispute Accounting Firm's resolution of the matters in
dispute, shall become final and binding on the Parties on the date the
Accounting Firm delivers its final resolution to the Parties, which shall be no
later than 90 days after the Closing Date. The Purchase Price Adjustment Dispute
Accounting Firm shall be mutually selected by the Purchaser and the Seller or,
if the Purchaser and the Seller cannot so agree within the 30-day period
referred to above, by lot from among the independent "Big 6" public accounting
firms (after excluding Xxxxxxx, Xxxxxxx and Xxxxx and the Purchaser's
independent public accountants) willing to act (the "Purchase Price Adjustment
Dispute Accounting Firm"). Each Party shall pay its own costs and expenses
incurred in connection with such arbitration, provided that the fees and
expenses of the Purchase Price Adjustment Dispute Accounting Firm shall be borne
as follows:
(A) if the Purchase Price Adjustment Dispute
Accounting Firm resolves all of the remaining objections in favor of the
Purchaser (the amount of the Net Shareholders Equity so determined is referred
to herein as the "Actual Net Shareholders Equity Amount"), the Seller will be
responsible for all of the fees and expenses of the Purchase Price Adjustment
Dispute Accounting Firm;
(B) if the Purchase Price Adjustment Dispute
Accounting Firm resolves all of the remaining objections in favor of the Seller
(the amount of the Net Shareholders Equity so determined is referred to herein
as the "Actual Net Shareholders Equity Amount"), the Purchaser will be
responsible for all of the fees and expenses of the Purchase Price Adjustment
Dispute Accounting Firm; and
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(C) if the Purchase Price Adjustment Dispute
Accounting Firm resolves some of the remaining objections in favor of the
Purchaser and the rest of the remaining objections in favor of the Seller (the
amount of the Net Shareholders Equity so determined is referred to herein as
"Actual Net Shareholders Equity Amount"), the Seller will be responsible for
that fraction of the fees and expenses of the Purchase Price Adjustment Dispute
Accounting Firm equal to (i) the difference between the High Amount and the
Actual Amount over (ii) the difference between the High Amount and the Low
Amount, and the Purchaser will be responsible for the remainder of the fees and
expenses.
(iii) Upon the final determination of the Closing Balance
Sheet in accordance with this "section"2(f), if Net Shareholders Equity is less
than $650,000, the Seller shall pay to the Purchaser the amount of such
deficiency. Any required reduction to the Purchase Price pursuant to this
section 2(f) shall be referred to as the "Purchase Price Adjustment".
(g) OMITTED
(h) Excluded Assets. Notwithstanding the foregoing, the
following transfers by the Company will occur prior to Closing:
(i) The Company will transfer ownership of the
1979 Piper Aztec aircraft to Seller in consideration for the payment by Seller,
in cash, of the cash value of such aircraft as set forth in "section" 2(h)(i) of
the Disclosure Schedule.
(ii) The Company will transfer the ownership of
the vehicle of the Company set forth in "section" 2(h)(ii) of the Disclosure
Schedule to the Seller in consideration of the payment, in cash, of the amounts
set forth in "section" 2(h)(ii) of the Disclosure Schedule. All accompanying
automobile insurance of the Company shall be canceled prior to Closing.
(i) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") are taking place on the date
hereof and concurrently with the execution and delivery of this Agreement. (the
"Closing Date").
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(j) Deliveries at the Closing. At the Closing, (i) the
Seller will deliver to the Purchaser the various certificates and documents
referred to in "section"8(a) below, (ii) the Purchaser will deliver to the
Seller the various certificates and documents referred to in "section"8(b)
below, (iii) the Seller will deliver to the Purchaser stock certificates
representing all of the Shares being purchased from him pursuant to
"section"2(a) above, duly endorsed in blank or accompanied by duly executed
assignment documents, sufficient in form and substance to convey to the
Purchaser good title to such Shares, free and clear of all restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), Liens, claims and demands and (iv) the Purchaser will deliver to the
Seller the Initial Payment.
(k) Transfer Taxes. The Seller shall be responsible for the
payment of all sales and transfer Taxes, if any, which may be payable with
respect to the transactions contemplated by this Agreement.
3A. Representations and Warranties of the Seller as to
Seller Matters. The Seller represents and warrants to the Purchaser as follows:
(a) Capacity. The Seller has full capacity to
execute and deliver this Agreement and to perform his obligations
hereunder.
(b) Binding Obligation. This Agreement
constitutes the valid and legally binding obligation of the Seller enforceable
in accordance with its terms.
(c) Noncontravention. Neither the execution and
the delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) violate any statute, regulation, rule, injunction,
judgment, order, decree or ruling of any Authority to which the Seller is
subject, 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
agreement, contract, lease, license or instrument to which the Seller is a party
or by which the Seller is bound or to which any of the Seller's assets is
subject. The Seller is not required to give any notice to, make any filing with,
or obtain any authorization, consent or approval of any Authority in order for
the Seller to consummate the transactions contemplated by this Agreement.
(d) Ownership of Common Stock. The Seller holds
of record and owns beneficially the number of Shares set forth on Schedule I
attached hereto and has good title to such Shares, free and clear of any
restrictions on transfer, Liens, claims, and demands. The Seller is not a party
to any option, warrant, purchase right, or other contract or commitment that
could require the Seller to sell, transfer, or otherwise dispose of any capital
stock of the Company (other than this Agreement). The Seller is not a party to
any voting trusts, proxies, or other agreements or understandings with respect
to the voting of any capital stock of the Company.
(e) Brokers Fees. Except as set forth in
"section" 3A(e) of the Disclosure Schedule, the Seller has 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
Purchaser or the Company (with respect to periods following the Closing) could
become liable or obligated. Seller shall indemnify and hold Purchaser and the
Company
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harmless from any and all demands and claims which now or hereafter may be
asserted against Purchaser or the Company as to brokerage fees, commissions or
similar types of compensation with respect to the purchase of the Shares or the
Business of the Company from brokers engaged by the Seller.
3B. Representations and Warranties of the Seller With
Respect to the Company. The Seller represents and warrants to
the Purchaser as follows:
(a) Organization/Power and Authority to Conduct
Business. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of Florida. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a Material Adverse Effect. "section"3B(a) of the
Disclosure Schedule sets forth a list of each jurisdiction in which the Company
is licensed or qualified to do business as a foreign corporation. The Company
has full corporate power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.
(b) Noncontravention. Neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any statute, regulation, rule, injunction,
judgment, order, decree or ruling of any Authority to which the Company is
subject or any provision of the charter or bylaws of the Company or (ii) except
as set forth under section 3B(b) of the Disclosure Schedule, 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 or instrument
to which the Company is a party or by which it is bound or to which any of its
assets is subject. The Company is not required to give any notice to, make any
filing with, or obtain any authorization, consent or approval of any Authority
in order for the Company to consummate the transactions contemplated by this
Agreement.
(c) Brokers Fees. The Company does not have 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.
(d) Capitalization. The Common Stock
constitutes the Company's only authorized class of capital stock. "section"3B(d)
of the Disclosure Schedule sets forth for the Company (i) the number of shares
of authorized Common Stock and (ii) the number of issued and outstanding shares
of Common Stock, the names of the holders of record thereof, and the number of
shares held by each such holder. All of the issued and outstanding shares of
capital stock of the Company have been duly authorized, are validly issued,
fully paid and nonassessable and were not issued in violation of the preemptive
rights of any Person or any agreement or law by which the Company at the time of
issuance was bound. There are no outstanding or authorized subscriptions,
warrants, options or, except for this Agreement, other agreements or rights of
any kind to purchase or otherwise receive or be issued, or securities or
obligations of any kind convertible into, any shares of capital stock or any
other security of the Company; there are no dividends which have accrued or been
declared but are unpaid on the capital stock of the Company; and are no
outstanding or authorized stock appreciation, phantom stock or
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similar rights with respect to the Company. The Company does not have any
Subsidiary, and does not own, directly or indirectly, any capital stock or other
equity interests in any corporation, partnership or other entity.
(e) Financial Statements. Set forth in
"section"3B(e) of the Disclosure Schedule are the following financial statements
(collectively the "Financial Statements"): (i) unaudited balance sheets and
statements of income and statements of shareholders equity and cash flows as of
and for the fiscal year ended June 30, 1997 (the "Most Recent Fiscal Year End")
for the Company; and (ii) unaudited balance sheet and statement of income and
statement of cash flows (the "Most Recent Financial Statements") as of and for
the nine months ended March 31, 1998 (the "Most Recent Fiscal Month End") for
the Company. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of the
Company as of such dates and the results of operations of the Company for such
periods; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material, individually
or in the aggregate). The Company has no material debt, liability or obligation
of any nature, whether accrued, absolute, contingent or otherwise, and whether
due or to become due, that is not reflected, and reserved against or disclosed
in the Financial Statements.
(f) Absence of Certain Developments. Except as
otherwise contemplated by this Agreement and except as set forth in section
3B(f) of the Disclosure Schedule, since the Most Recent Fiscal Year End, the
Company has conducted its business only in the Ordinary Course of Business and
there has not been any Material Adverse Change with respect to the Company.
Without limiting the generality of the foregoing, since that date, the Company
has not:
(i) borrowed any amount or incurred any liabilities, except
liabilities incurred in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of or was caused by any breach
of contract, breach of warranty, tort, infringement or violation of law);
(ii) mortgaged, pledged or subjected to any Lien any of its
assets, except for Permitted Liens, or entered into any conditional sale or
other title retention agreement with respect to any property or asset;
(iii) sold, assigned or transferred any of its tangible
assets, except for sales of Inventory in the Ordinary Course of Business;
(iv) sold, assigned or transferred any patents, trademarks or
trade names or any material copyrights, trade secrets or other intangible
assets;
(v) suffered any extraordinary losses or canceled,
compromised, waived or released any right or claim (or series of related rights
and claims) outside the Ordinary Course of Business or involving more than
$10,000 in the aggregate;
(vi) made any capital expenditures or commitments therefor in
excess of $10,000 individually or $25,000 in the aggregate;
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(vii) entered into any material agreement, contract, lease or
license outside the Ordinary Course of Business;
(viii) suffered any theft, damage, destruction or
casualty loss in excess of $25,000 to its property, whether
or not covered by insurance;
(ix) entered into any agreement with any labor union or
association representing any employee, or made any wage or salary increase or
bonus, or increase in any other direct or indirect compensation, for or to any
of its officers, directors or employees, or otherwise made any material change
in employment terms for any of its directors, officers and employees;
(x) made any change in its accounting methods,
principles or practices;
(xi) made any increase in or established any bonus,
insurance, deferred compensation, pension, retirement, profit-sharing, stock
option (including the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards or the amendment of any existing
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or agreement or
arrangement;
(xii) made any payment (including any dividends or other
distributions with respect to the Common Stock) to the Seller or any Affiliate
of the Seller (other than compensation otherwise payable in the Ordinary Course
of Business or forgiven any indebtedness due or owing from the Seller or any
Affiliate of the Seller to the Company;
(xiii) reclassified, combined, split, subdivided or redeemed or
otherwise repurchased any capital stock of the Company, or created, authorized,
issued, sold, delivered, pledged or encumbered any additional capital stock
(whether authorized but unissued or held in treasury) or other securities
equivalent to or exchangeable for capital stock, or granted or otherwise issued
any options, warrants or other rights with respect thereto;
(xiv) acquired or agreed to acquire by merging or
consolidating with, or by purchasing any portion of the capital stock,
partnership interests or assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, association or other
business organization or division thereof;
(xv) made any loan or advance (whether in cash or other
property), or made any investment in or capital contribution to, or extended any
credit to, any Person, except (i) short-term investments pursuant to customary
cash management policies, and (ii) advances to employees made in the Ordinary
Course of Business;
(xvi) (A) except in the Ordinary Course of Business liquidated
Inventory or accepted product returns, (B) accelerated receivables, (C) delayed
payables, or (D) changed in any material respect the Company's practices in
connection with the payment of payables in respect of raw materials purchases;
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(xvii) made or pledged to make any charitable contribution; or
(xviii) committed to do any of the foregoing.
(g) Undisclosed Liabilities. The Company does not have any
liability (whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including any liability for Taxes) and there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against the Company giving rise to any such
liability, except for (i) liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto), (ii) executory liabilities
under agreements, contracts, leases, licenses and other arrangements to which
the Company or any of its assets may be bound (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach
thereof or violation of law), (iii) liabilities reflected on the Disclosure
Schedule, and (iv) liabilities which have arisen in the Ordinary Course of
Business since the Most Recent Fiscal Month End (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement or violation of law).
"section"3B(g) of the Disclosure Schedule sets forth as of the Most Recent
Fiscal Month End a true and correct listing of the indebtedness of the Company
described in clauses (i), (ii) and (iii) of the definition of Funded
Indebtedness.
(h) Legal Compliance. The Company is in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of all
Authorities, except where the failure to comply would not have a Material
Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated hereby. Except as set forth in "section"3B(h) of the
Disclosure Schedule, the Company has not received any written communication
from any Authority that alleges that the Company is not in compliance with any
foreign, federal, state or local laws, rules or regulations.
(i) Company Permits. The Company holds all permits, licenses,
variances, exemptions, orders and approvals of all Authorities necessary for
the lawful conduct of its business (the "Company Permits.") The Company is in
compliance with the terms of the Company Permits. "section"3B(i) of the
Disclosure Schedule sets forth a list of the Company Permits.
(j) Tax Matters.
(i) The Company has elected (with the consent of all of its
shareholders), in compliance with all applicable legal requirements, to be
taxed under Subchapter S of the Code and corresponding provisions under any
applicable state and local Laws, and such elections are in effect for the
Company. No action has been taken by the Company or any shareholder of the
Company that may result in the revocation of any such elections. The Company
has no "Subchapter C earnings and profits" as defined in "section"1362(d) of
the Code. The Company has no "net unrealized built-in gain" as such term is
defined in section 1374(d)(1) and 1374(d)(8) of the Code. The Company has no
liability, absolute or contingent, for the payment of any income Taxes under
the Code or under the laws of such states or localities which afford tax
treatment similar to that under Subchapter S of the Code. The Company
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has filed all Tax Returns required to be filed by it (taking into account any
extensions of due dates). The Company has paid all Taxes required to be paid by
it (without regard to whether a Tax Return is required), except Taxes for which
an adequate reserve has been established on the Most Recent Financial
Statements.
(ii) No Tax Return of the Company is under audit or examination by
any taxing authority, and no written notice of such an audit or examination has
been received by the Company. Each deficiency resulting from any audit or
examination relating to Taxes by any taxing authority has been paid, except for
deficiencies being contested in good faith. The Tax Returns of the Company have
not been examined by and settled with any taxing authority.
(iii) There is no agreement or other document extending, or having
the effect of extending, the period of assessment or collection of any Taxes.
(iv) The Company is not a party to or bound by any tax sharing
agreement, tax indemnity obligation or similar agreement with respect to Taxes
(including any advance pricing agreement, closing agreement or other agreement
relating to Taxes with any taxing authority).
(v) The Company will not be required to include in a taxable
period ending after the Closing Date taxable income attributable to income that
accrued in a prior taxable period but was not recognized in any prior taxable
period as a result of the installment method of accounting, the completed
contract method of accounting, the long-term contract method of accounting, the
cash method of accounting or section 481 of the Code with respect to a change
in method of accounting occurring before the Closing Date or comparable
provisions of state, local or foreign tax law.
(vi) The Company has not filed a consent pursuant to or agreed to
the application of "section"341(f) of the Code.
(vii) The Company has not, during the fiv--year period ending on the
Closing Date, been a personal holding company within the meaning of
"section"541 of the Code.
(viii) The Company has never filed or been included in any combined
or consolidated tax return with any other person or been a member of an
Affiliated Group filing a consolidated federal income Tax Return.
(ix) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
(k) Certain Business Relationships with the Company. Except as
set forth under "section"3B(k) of the Disclosure Schedule and except for normal
advances to employees consistent with past practice, payment of compensation
for employment to employees consistent with past practice, and participation in
Employee Benefit Plans by employees, the Company has not purchased, acquired or
leased any property or services from, or sold, transferred or leased any
property or services to, or loaned or advanced any money to, or borrowed any
money from, or entered into or been subject to any management, consulting or
similar
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agreement with (i) any officer, director or shareholder of the Company, or (ii)
any of their respective Affiliates. Except as set forth under "section"3B(k) of
the Disclosure Schedule, no Affiliate of the Company is indebted to the Company
for money borrowed or other loans or advances, and the Company is not indebted
to any such Affiliate for money borrowed or other loans or advances.
(l) Title to Tangible Assets Other than Real Property Interests.
Except as set forth in "section"3B(l) of the Disclosure Schedule, the Company
has good and valid title to, or a valid leasehold interest in, all the tangible
assets (other than real property or interests in real property) used or useful
in the conduct of the Company's business, except Inventory sold since the date
hereof in the Ordinary Course of Business, free and clear of any Liens other
than Permitted Liens. The machinery and equipment used regularly in the conduct
of the Company's business are in good operating condition and repair (subject
to normal wear and tear), and are suitable for the purposes for which they are
presently used. Except for interests and rights in property pursuant to any
lease, license or other agreement described in "section"3B(l) of the Disclosure
Schedule or pursuant to any lease, license or other agreement not required to
be described in "section"3B(l) of the Disclosure Schedule and except for
property supplied by any customer or supplier in connection with the purchase
or sale of products or services from or to such customer or supplier in the
Ordinary Course of Business, there is no tangible personal property owned by
any third party which is used by the Company in the operation of its business.
"section"3B(l) of the Disclosure Schedule lists all machinery, equipment,
vehicles, furniture and other tangible personal property of any kind and
description (other than Inventory) owned or leased by the Company.
(m) Title to Real Property. The Company does not own any real
property. All real property and interests in real property that are leased by
the Company are referred to herein as "Leased Real Property". "section"3B(m) of
the Disclosure Schedule identifies all Leased Real Property. The Company has
good title to the leasehold estates in all Leased Property (each Leased Real
Property being sometimes referred to herein individually as a "Property" and
collectively as the "Properties"), free and clear of any Liens other than
Permitted Liens. There are no pending condemnation, expropriation, eminent
domain or similar proceedings affecting all or any portion of such Properties
and, to the knowledge of Seller, no such proceedings are contemplated. There
are no leases, subleases, licenses, concessions or other agreements, written or
oral, granting to any party or parties the right of use or occupancy of any
portion of any Property. The Leased Real Property is zoned to permit the uses
for which each parcel of Leased Real Property is presently used or intended to
be used. The Leased Real Property is in compliance with all applicable
building, zoning, and other land use and similar laws, codes ordinances, rules,
regulations and orders, including without limitation, the Americans with
Disabilities Act.
(n) Intellectual Property.
(i) Section 3B(n)(i) of the Disclosure Schedule identifies each
patent, pending patent application or registered Intellectual Property owned or
used by the Company, and each material written license agreement (excluding
off-the-shelf or "shrink-wrap" software license agreements) pursuant to which
the Company has granted to any third party, or received from any third party a
grant of, any rights in any of the Intellectual Property owned or used by the
Company.
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The Company owns, or possesses adequate and enforceable licenses or rights
(free of Liens other than Permitted Liens) to use all Intellectual Property and
any other material intellectual property rights (including, without limitation,
patents, pending patent applications, inventions, drawings, trade secrets,
know-how and confidential information) currently used by the Company, or
necessary to permit the Company to conduct its business as now conducted.
(ii) Except as set forth on "section"3B(n)(ii) of the Disclosure
Schedule, with respect to each item identified in "section"3B(n)(i) of the
Disclosure Schedule:
(A) the Company possesses all right, title and interest, free and
clear of any Lien (other than Permitted Liens), license or other restriction
(B) such item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(C) no action, suit, proceeding, hearing, investigation, written
claim or written demand is pending or, to the Knowledge of the Seller, is
threatened which challenges the legality, validity, enforceability, use or
ownership of the item;
(D) neither the Company nor, to the Knowledge of the Seller, any
other party to any license agreement 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;
(E) to the Knowledge of the Seller, no party to any license
agreement has repudiated any material provision thereof;
(F) no claims are pending or, to the Knowledge of the Seller,
threatened that the Company is infringing on or otherwise violating the rights
of any person with regard to any such item; and
(G) to the Knowledge of the Seller, no person is infringing on or
otherwise violating any right of the Company with respect to such item.
(O) Material Contracts. "section" 3B(o) of the Disclosure Schedule
lists the Material Contracts to which the Company is a party. The Company has
made available to the Purchaser a correct and complete copy of each Material
Contract listed in "section"3B(o) of the Disclosure Schedule. With respect to
each such Material Contract: (A) the Material Contract is legal, valid, binding,
enforceable and in full force and effect; (B) neither the Company nor, to the
Knowledge of the Seller, any other party 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, under the
Material Contract; (C) no party has repudiated any provision of the Material
Contract, (D) there are no disputes or forbearance programs in effect with
respect to the Material Contract.
(P) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
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(q) Insurance. "section"3B(q) of the Disclosure Schedule
describes each insurance policy maintained by the Company. All of such
insurance policies are in full force and effect and the Company is not in
default with respect to its obligations under any of such insurance policies.
Such policies are sufficient for compliance with all requirements of law and
Material Contracts to which the Company is a party. Since the respective dates
of such policies, no notice of cancellation or non-renewal with respect to any
such policy has been received by the Company. "section"3B(q) of the Disclosure
Schedule sets forth a list of all pending claims with respect to all such
policies.
(r) Litigation. "section"3B(r) of the Disclosure Schedule sets
forth each instance in which the Company (i) is subject to any outstanding
injunction, judgment, order, decree or ruling or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party, to any action, suit,
proceeding, hearing or investigation of, in or before any Authority.
(s) Labor Relations. The Company is not and has never been a
party to a collective bargaining agreement. Except as set forth under
"section"3B(s) of the Disclosure Schedule, (i) the Company has not been
involved in or, to the Knowledge of the Seller, threatened with any strike,
slowdown or work stoppage, (ii) the Company has not been involved in or, to the
Knowledge of the Seller, threatened with any unfair labor practice charge,
arbitration, suit or administrative proceeding relating to labor matters
involving its employees, (iii) there are no actions, proceedings or claims
pending or, to the Knowledge of the Seller, threatened against the Company
under any laws relating to employment, including any provisions thereof
relating to wages, hours, collective bargaining, withholding or the payment of
social security or other Taxes, equal employment opportunity, workmen's
compensation, occupational safety and health or any other state or federal law,
rule or regulation governing employment matters, and (iv) the Company is
currently in compliance with all applicable state and federal laws, rules and
regulations governing employment, including, wages and hour, child labor,
workmen's compensation, immigration, equal employment opportunity, family and
medical leave, and occupational safety and health.
(t) Employee Benefits. "section"3B(t) of the Disclosure Schedule
sets forth (a) all of the current Employee Pension Benefit Plans, Employee
Welfare Benefit Plans and all other employee benefit, fringe benefit plans and
programs maintained or contributed to by the Company or any ERISA Affiliate
with respect to current or former employees of the Company (the "Employee
Benefit Plans").
(i) With respect to each Employee Benefit Plan:
(A) each such Employee Benefit Plan (and each related trust,
insurance contract or fund) complies in form and, to the Knowledge of the
Seller, in operation with the applicable requirements of ERISA, the Code and
other applicable laws (including, without limitation, all reporting and
disclosure requirements), and has been operated in all material respects in
accordance with its terms;
(B) all contributions (including all employer contributions and
employee salary reduction contributions, if any) which are due have been paid
to each such Employee Benefit Plan which is an Employee
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Pension Benefit Plan, and there are no accumulated funding deficiencies with
respect to any such Employee Pension Benefit Plan;
(C) each such Employee Benefit Plan which is an Employee Pension
Benefit Plan intended to so qualify under "section"401(a) of the Code so
qualifies and has received a favorable determination letter from the IRS as to
its qualification under "section"401(a) of the Code;
(D) no "prohibited transaction" (as such term is defined in
"section"406 of ERISA or "section"4975 of the Code) has occurred with respect
to any such Employee Benefit Plan which is an Employee Pension Benefit Plan (or
its related trust) which could subject the Company or any officer, director or
employee of the Company, to any Tax or penalty imposed under "section"4975 of
the Code or liability under "section"406 of ERISA;
(E) the Company has delivered to the Purchaser correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the IRS, the most recent Form 5500
Annual Report and all accompanying schedules, the most recent actuarial
valuation (if any), and all related trust agreements, insurance contracts and
other funding arrangements which implement each such Employee Benefit Plan;
(F) no such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been completely or partially terminated or has been the
subject of a "reportable event" (as defined in "section"4043 of ERISA) as to
which notices would be required to be filed with the PBGC. To the Knowledge of
the Seller, no proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than a Multiemployer Plan) has been instituted;
(G) the Company has not incurred, and will not incur as a result
of any existing condition or the transactions contemplated by this Agreement,
any liability to the PBGC (except for required premium payments, if any), or
otherwise under Title IV of ERISA (including any withdrawal liability) or under
the Code with respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan and, as of the Closing Date, the assets of each such
Employee Pension Benefit Plan are at least equal in value to the present value
of accrued benefits of the Plan, based on actuarial methods, tables and
assumptions reasonably satisfactory to the Purchaser; and
(H) no action, suit, proceeding, hearing or investigation with
respect to the administration or the investment of assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or, to the
Knowledge of the Seller, threatened.
(ii) The Company does not contribute to any Multiemployer Plan or
have any liability (including withdrawal liability) under any Multiemployer
Plan.
(iii) The Company does not have any obligation to provide health or
other welfare benefits to former, retired or terminated employees, except as
specifically required
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under "section"4980B of the Code. Section 3B(t) of the Disclosure Schedule
lists the names of (A) each employee and each dependent of any employee who has
experienced a "Qualifying Event", as defined in Part 6 of Subtitle B of Title I
of ERISA and "section" 4980B of the Code, with respect to an Employee Benefit
Plan who is eligible for "Continuation Coverage" as defined in "section"
603(1), (2) (4) or (6) of ERISA and (B) each employee of the Company and each
dependent who has notified the Company of a "Qualifying Event" as defined in
"section" 603(3) or (5) of ERISA, and whose maximum period for continuation
coverage has not expired. With respect to all of its past and present
employees, the Company has complied in all material respects with the notice
and continuation requirements of Part 6 of Subtitle B of Title I of ERISA and
of section 4980B of the Code.
(iv) The Company has no liability for or relating to any Employee
Benefit Plan or arrangement sponsored, maintained or contributed to by an ERISA
Affiliate.
(v) The consummation of the transactions contemplated by this
Agreement will not entitle any individual to any severance pay, and will not
accelerate the time of payment or vesting, or increase the amount of any
compensation due to any individual, and will not be the direct or indirect
cause of any amount payable under any Employee Benefit Plan being classified as
an "excess parachute payment" under "section"280G of the Code.
(u) Environmental, Health and Safety Matters. Except as disclosed
in "section"3B(u) of the Disclosure Schedule:
(i) The Company has not disposed of or released any substance,
arranged for the disposal of any substance, knowingly exposed any employee or
other individual to any substance or condition, or owned or operated its
businesses or any property or facility so as to give rise to any liability or
corrective or remedial obligation of the Company under any Environmental,
Health and Safety Requirement.
(ii) The Company is in compliance with all Environmental Health and
Safety Requirements and the Company has not received any written communication
from any Authority that alleges that the Company is not in such compliance.
(iii) There is no Environmental Claim of which the Company has
received written notice or, to the Knowledge of the Seller, threatened or
recently filed against the Company, nor, to the Knowledge of the Seller, is
there any Environmental Claim against any Person whose liability for any
Environmental Claim the Company has retained or assumed contractually.
(iv) No underground storage tanks, friable and damaged
asbestos-containing materials, or pcb-containing equipment or fluids are
present on any of the Leased Real Property.
(v) There are no Liens arising under any Environmental, Health and
Safety Requirement on any of the Leased Real Property arising as a result of
any actions taken or omitted to be taken by the Company and, to the Knowledge
of the Seller, no actions have been taken by any Authority with respect to any
of the Leased Real Property to
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impose an environmental Lien with respect to the Leased Real Property as a
result of any such actions.
(vi) No real property presently or, to the Knowledge of the Seller,
heretofore owned or operated by the Company is currently listed on the National
Priorities List or the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or on any analogous state list.
(vii) To the Knowledge of the Seller, no off-site location at which
the Company has disposed or arranged for the disposal of any waste is listed on
the National Priorities List or on any analogous state list.
(v) Customers and Suppliers. "section"3B(v) of the Disclosure
Schedule contains a complete and accurate list of the names of the 10 largest
(by volume) customers and suppliers of the Company for the fiscal year ended
June 30, 1998. The Company maintains good relations with each of such customers
and, except as set forth under "section"3B(v) of the Disclosure Schedule, since
the Most Recent Fiscal Year End no event has occurred that would materially
adversely affect the Company's relations with such customers. Except as set
forth under "section"3B(v) of the Disclosure Schedule, since the Most Recent
Fiscal Year End, no customer which accounted for more than 5% of the Company's
aggregate sales revenues during the last twelve months has canceled, terminated
(or, to the Knowledge of the Seller, made any threat to the Company to cancel
or terminate), or materially decreased its usage of the Company's services or
products. Other than the contract with VAW Aluminum which is to be terminated
prior to Closing pursuant to "section" 8(a)(xv), the Company is not a party to
any contract, oral or written, with any supplier or vendor of the Company
obligating the Company to any particular volume of purchases or purchase
price(s).
(w) Inventory. Subject to the reserve for Inventory writedown
disclosed on the face of the Most Recent Balance Sheet as adjusted for the
passage of time through the Closing in accordance with the past custom and
practice of the Company, the Inventory of the Company is merchantable and fit
for the purpose for which it was procured or manufactured and none of such
Inventory is slow-moving, obsolete, damaged or defective. The Inventory of the
Company is valued at the lower of cost (on a first-in-first-out basis) or
market in accordance with GAAP on a basis consistent with prior periods.
(x) Accounts Receivable. All of the Accounts Receivable of the
Company are properly reflected on its books and records and arose from bona
fide transactions in the Ordinary Course of Business, are valid receivables
subject to no setoffs or counterclaims, are current and collectible and will be
collected in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto), as adjusted for the passage
of time in accordance with the past custom and practice of the Company. The
reserve for bad debts set forth on the face of the Most Recent Balance Sheet
has been determined in accordance with GAAP on a basis consistent with the past
custom and practice of the Company.
(y) List of Accounts. "section"3B(y) of the Disclosure Schedule
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sets forth a list of all bank and securities accounts, and all safe deposit
boxes, maintained by the Company and a listing of the persons authorized to
draw thereon or make withdrawals therefrom or, in the case of safe deposit
boxes, with access thereto.
(z) Product Warranty. Each of the products manufactured, sold,
and delivered by the Company have conformed in all material respects with all
applicable contractual commitments and all express and implied warranties, and
the Company has no material liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due) for replacement thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with the
past custom and practice of the Company. Substantially all of the products
manufactured, sold, and delivered by the Company are subject to standard terms
and conditions of sale. The Seller knows of no pending or asserted warranty
claims or claims for return of the Company's products in excess of $10,000.
(aa) Product Liability. The Company has no liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) arising out of any injury to individuals or
property as a result of the ownership , possession, or use of any product
manufactured, sold or delivered by any of the Company. "section"3B(aa) of the
Disclosure Schedule sets forth a true and correct list and brief description of
all product liability claims that have been filed against the Company since
December 31, 1992.
4. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller as follows:
(a) Organization. The Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of Alabama.
(b) Authorization of Transaction. The Purchaser has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Purchaser, enforceable in accordance with its
terms.
(c) Noncontravention Neither the execution and the delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) violate any statute, regulation, rule, injunction, judgment, order,
decree or ruling of any Authority to which the Purchaser is subject or any
provision of its charter or bylaws or other organizational document, as the
case may be, or (ii) except as set forth under "section"4(c) of the Disclosure
Schedule 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 or instrument to which the Purchaser is a party or by
which it is bound or to which any of its assets is subject. The Purchaser is
not required give any notice to, make any filing with, or obtain any
authorization, consent or approval
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of any Authority in order for it to consummate the transactions contemplated by
this Agreement.
(d) Brokers Fees. Except as set forth in section 4(d) of the
Disclosure Schedule, the Purchaser does not have 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 Seller or the Company
(prior to the Closing) could become liable or obligated. Purchaser shall
indemnify and hold Seller harmless from any and all demands and claims which
now or hereafter may be asserted against Seller as to brokerage fees,
commissions or similar types of compensation with respect to the purchase of
the Shares or the Business of the Company from brokers engaged by the
Purchaser.
(e) Acquisition of Shares for Investment. The Shares to be
purchased by the Purchaser pursuant to this Agreement are being acquired for
investment only and not with a view to any public distribution thereof, and the
Purchaser will not offer to sell or otherwise dispose of the Shares so acquired
by it in violation of any of the registration requirements of the Securities
Act or any comparable state laws.
5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing:
(a) General. Subject to the terms and conditions of this
Agreement, each of the Parties will use commercially reasonable efforts to take
all action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, (i) obtaining all permits, authorizations,
consents and approvals of any Authority or other Person which are required for
or in connection with the consummation of the transactions contemplated hereby,
(ii) taking any and all actions necessary to satisfy, but not waive, all of the
conditions to such party's obligations hereunder as set forth in "section"8
below, and (iii) executing and delivering all agreements and documents required
by the terms hereof to be executed and delivered by such Party on or prior to
the Closing. Nothing in this Agreement shall be construed as an attempt or an
agreement by the Company to assign or cause the assignment of any contract or
agreement which is by Law nonassignable without the consent of the other party
or parties thereto, unless such consent shall have been given.
(b) Operation of Business. The Seller will cause the Company not
to engage in any practice, take any action, or enter into any transaction of
the sort described in "section"3B(f) above; provided, however, that the Company
may make a dividend distribution of cash to the Seller if, at the Closing, (i)
the Company shall have no Funded Indebtedness; and (ii) the Net Shareholders
Equity, after giving effect to such dividend distribution, is not less than
$650,000. In addition, the Seller will cause the Company to continue to conduct
its business in the Ordinary Course of Business and not to (i) except in the
Ordinary Course of Business liquidate Inventory or accept product returns, (ii)
accelerate receivables, or (iii) delay payables.
(c) Preservation of Business. The Seller will cause the Company
to use commercially reasonable efforts to maintain its business and properties,
including its present operations, physical facilities, working conditions, and
relationships with
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lessors, licensors, suppliers, customers, distributors and employees.
(d) Full Access. The Seller will cause the Company to permit
representatives of the Purchaser to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Company, to the premises, properties, personnel, customers, suppliers,
distributors, books, records (including tax records), contracts and documents
of or pertaining to the Company. The Purchaser reaffirms its obligations under
the Confidentiality Agreement.
(e) Notice of Developments. Each Party will promptly give notice
to the other Party of its or his discovery of any material adverse development
which, had such development been in existence on the date hereof, would
constitute a breach of the representations and warranties contained in
"section"3A or "section"3B (in the case of the Seller) or "section"4 (in the
case of the Purchaser). No disclosure by either Party pursuant to this
"section"5(e) shall be deemed to amend or supplement the Disclosure Schedules
or to prevent or cure any misrepresentation or breach of warranty.
6. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing:
(a) General. In the event that at any time after the Closing any
further action is necessary 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 may
reasonably request, all at the sole cost and expense of the requesting Party;
provided, however, that the cost of taking of any action necessary to execute
or deliver to the Purchaser any stock powers and such other instruments of
transfer as may be necessary to transfer ownership of the Shares by the Seller
shall be borne by the Seller.
(b) Transition. The Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of the Company from maintaining
the same business relationships with the Company after the Closing as it
maintained with the Company prior to the Closing.
(c) Litigation Support. In the event and for so long as either
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, occurrence,
event, incident, action, failure to act, or transaction on or prior to the
Closing Date involving the Company, each of the Parties will cooperate with the
contesting or defending Party and its or his counsel in the contest or defense,
all at the sole cost and expense of the contesting or defending Party (except
to the extent that the contesting or defending party is entitled to
indemnification therefor under this Agreement).
(d) Noncompetition. In order to induce the Purchaser to enter
into this Agreement, the Seller expressly covenants and agrees that, for a
period of five years from and after the Closing Date, the Seller will not,
directly or indirectly, within the Restricted Area (defined below) engage in or
have any
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interest in any sole proprietorship, partnership, corporation, limited
liability company or business or any other Person (other than the Purchaser or
any of its Subsidiaries), whether as an employee, officer, director, partner,
agent, security holder, consultant or otherwise, that directly or indirectly is
engaged in the Business of the Company as conducted by the Company as of
Closing; provided, however, that nothing herein shall be deemed to prevent the
Seller from acquiring through market purchases and owning, solely as an
investment, less than three percent in the aggregate of the equity securities
of any class of any issuer whose shares are registered under "section"12(b) or
12(g) of the Securities Exchange Act, and are listed or admitted for trading on
any United States national securities exchange or are quoted on the National
Association of Securities Dealers Automated Quotations System, or any similar
system of automated dissemination of quotations of securities prices in common
use, so long as neither of them is a member of any "control group" (within the
meaning of the rules and regulations of the United States Securities and
Exchange Commission) of any such issuer. The Seller acknowledges and agrees
that the covenants provided for in this "section"6(d) are reasonable and
necessary in terms of time, area and line of business to protect the
Purchaser's legitimate business interests as a buyer of the Common Stock and in
protecting the Company's Trade Secrets. The Seller further acknowledges and
agrees that such covenants are reasonable and necessary in terms of time, area
and line of business to protect the Purchaser's other legitimate business
interests, which include its interests in protecting the Company's (i) valuable
confidential business information, (ii) substantial relationships with
customers throughout the Restricted Area and (iii) customer goodwill associated
with the Company's ongoing business. The Seller expressly authorize the
enforcement of the covenants provided for in this "section"6(d) by (A) the
Purchaser and its Subsidiaries, (B) the Purchaser's permitted assigns and (C)
any successors to the Company's business. To the extent that the covenant
provided for in this "section"6(d) may later be deemed by a court to be too
broad to be enforced with respect to its duration or with respect to any
particular activity or geographic area, the court making such determination
shall have the power to reduce the duration or scope of the provision, and to
add or delete specific words or phrases to or from the provision. The provision
as modified shall then be enforced.
For purposes of this Agreement, "Restricted Area" shall mean the
states of Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New
Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma,
Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,
Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and
Wyoming.
(e) Non-Solicitation of Employees. In order to induce the
Purchaser to enter into this Agreement, the Seller expressly covenants and
agrees that for a period of five years from and after the Closing Date, the
Seller will not, directly or indirectly, solicit for employment or employ (or
attempt to solicit for employment or employ), for himself or herself or on
behalf of any sole proprietorship, partnership, corporation, limited liability
company or business or any other Person (other than the Purchaser or any of its
Subsidiaries), any employee or former employee of the Company or encourage any
such employee to
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leave his or her employment with the Company. To the extent that the covenant
provided for in this "section"6(e) may later be deemed by a court to be too
broad to be enforced with respect to its duration or with respect to any
particular activity or geographic area, the court making such determination
shall have the power to reduce the duration or scope of the provision, and to
add or delete specific words or phrases to or from the provision. The provision
as modified shall then be enforced.
(f) Confidentiality. In order to induce the Purchaser to enter
into this Agreement, the Seller expressly covenants and agrees that from and
after the Closing Date, neither the Seller nor any of the Seller's Affiliates
(to the extent any such Affiliate has received Confidential Information or
Trade Secrets) will disclose, divulge, furnish or make accessible to anyone
(other than the Purchaser or any of its Affiliates or representatives) any
Confidential Information or Trade Secrets, or in any way use any Confidential
Information or Trade Secrets in the conduct of any business; provided, however,
that nothing in this section 6(f) will prohibit the disclosure of any
Confidential Information or Trade Secrets (i) which is required to be disclosed
by the Seller or any such Affiliate in connection with any court action or any
proceeding before any Authority, (ii) in connection with the enforcement of any
of the rights of the Seller hereunder, or (iii) in connection with the defense
by the Seller of any claim asserted against him hereunder; provided, however,
that in the case of a disclosure contemplated by clause (i), no disclosure
shall be made until the Seller shall give notice to the Purchaser of the
intention to disclose such Confidential Information or Trade Secrets so that
the Purchaser may contest the need for disclosure, and the Seller will
cooperate (and will cause his Affiliates and their respective representatives
to cooperate) with the Purchaser in connection with any such proceeding.
Notwithstanding any provision of this Agreement which may be to the contrary
(x) the foregoing provisions restricting the use of Confidential Information
shall survive the Closing for a period of five years, and (y) the foregoing
provisions restricting the use of Trade Secrets shall survive the Closing for
so long as permitted by the Florida Trade Secrets Act, Florida Statutes Chapter
688.
(g) "Section"338(h)(10) Election.
(i) The Seller will join with the Purchaser in making an election
under "section"338(h)(10) of the Code and Treasury Regulations
"section"1.338(h)(10)-1(d) (and any corresponding elections under any
applicable state and local Laws) (collectively, a ""section"338(h)(10)
Election") with respect to the purchase and sale of the Shares from the Seller
hereunder. The Seller agrees to pay any Tax attributable to the making of the
"section"338(h)(10) Election and the Seller will indemnify the Purchaser and
the Company from and against any Losses arising out of any failure to pay such
Tax.
(ii) The Seller will be responsible for preparing and filing all
income or franchise Tax Returns of the Company relating to Pre-Closing Tax
Periods. The Purchaser will be responsible for preparing and filing all income
and franchise Tax Returns of the Company relating to periods other than
Pre-Closing Tax Periods. After the Closing has occurred, the Purchaser will
cause the Company to provide, or cause to be provided, to the Seller, without
charge, any information that may reasonably be requested by the Seller in
connection with the preparation of any Tax Returns relating to Pre-Closing Tax
Periods. The Seller will allow
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the Purchaser an opportunity to review and comment on such Tax Returns
(including any amended Returns). The Seller will take no positions on the Tax
Returns of the Company that relate to Pre-Closing Tax Periods that would
adversely affect the Company after the Closing Date. The income of the Company
will be apportioned to the period up to the Closing Date and the period from
and after the Closing Date in accordance with the provisions of
"section"1362(e)(6) of the Code by closing the books of the Company as of the
close of business on the last calendar day immediately preceding the Closing
Date.
(iii) "Section"6(g)(iii) of the Disclosure Schedule sets forth a
preliminary allocation of the "Modified Adjusted Deemed Sales Price", as
defined in Treasury Regulations "section"1.338(h)(10)-(f), among the assets of
the Company (the "Allocation Schedule"). Within 45 days after the Closing Date,
the Seller and the Purchaser shall exchange completed and executed copies of
IRS Form 8023-A (or other applicable form), required schedules thereto, and any
similar forms required by any state or local Tax Authority. If any changes are
required to these forms as a result of information which is first available
after the Closing Date, the Seller and the Purchaser will in good faith use
commercially reasonable efforts to promptly agree on such changes. The Seller
and the Purchaser each agree to file all Tax Returns in accordance with the
Allocation Schedule.
7. No Shop. From the date of this Agreement until the earlier of
(a) the Closing Date, or (b) the termination of this Agreement, the Seller
shall not, and the Seller shall cause the Company and its officers, directors,
employees and other agents not to, directly or indirectly, take any action to
(i) solicit, initiate or encourage any offer or proposal or indication of
interest in a merger, consolidation or other business combination involving any
capital stock in, or a substantial portion of the assets of the Company, other
than in connection with the transactions contemplated by this Agreement, or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Seller shall notify Purchaser immediately if any Person makes
any proposal, offer, inquiry, or contract with respect to any of the foregoing.
8. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Purchaser. The obligation of
the Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in "section"3A
and "section"3B above that are qualified as to their materiality shall be true
and correct and any such representations and warranties that are not so
qualified shall be true and correct in all material respects at and as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement);
(ii) the Seller shall have performed and complied with all of his
covenants hereunder in all material respects through the Closing;
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(iii) there shall not be any injunction, judgment, order, decree,
ruling or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement, and no action, suit, claim or proceeding shall
be pending before any Authority which seeks to prohibit or enjoin the
consummation of the transactions contemplated by this Agreement;
(iv) the Seller shall have delivered to the Purchaser a certificate
to the effect that the conditions specified above in "section"8(a)(i) and (ii)
have been satisfied in all respects;
(v) all of the directors and officers of the Company designated by
the Purchaser prior to the Closing shall have delivered duly signed
resignations effective at the time of the Closing (or the Seller shall have
taken such other action as is necessary to ensure that such persons are not
directors or officers of the Company at the time of the Closing);
(vi) the Purchaser shall have received the consents of Xxxxxx
Financial, Inc. to the transactions contemplated by this Agreement;
(vii) the Seller and the Company shall have obtained all
authorizations, consents, waivers and approvals from parties to contracts or
other agreements to which any of them is a party, or by which any of them or
any of their respective assets are bound, as may be required to be obtained by
them in connection with the consummation of the transactions contemplated
hereby and in order for the Purchaser to operate the business of the Company in
the Ordinary Course of Business after the Closing Date;
(viii) all filings that are required to have been made by the
Company with any Authority in order to carry out the transactions contemplated
by this Agreement and in order for the Purchaser to operate the business of the
Company in the ordinary course after the Closing Date shall have been made;
all authorizations, consents, approvals and Permits from all Authorities
required for the Company to carry out the transactions contemplated by this
Agreement and in order for the Purchaser to operate the business of the
Company in the Ordinary Course of Business after the Closing Date shall have
been received and all statutory waiting periods (or extensions thereof) in
respect thereof shall have expired;
(ix) the Purchaser shall have received a certificate issued by the
Secretary of State of the State of Florida and of each state in which the
Company is qualified as a foreign entity, as of a date reasonably acceptable to
the Purchaser, as to the good standing (or non-dissolution, as applicable) of
the Company in such states;
(x) the Seller shall have delivered to the Purchaser (a) a copy of
the Company's Charter, as amended to date, certified as of the recent date by
the Secretary of State of the State of Florida, and (b) all minute books, stock
transfer books, blank stock certificates and corporate seals of the Company;
(xi) all proceedings, corporate or other, to be taken in connection
with the transactions contemplated by this Agreement by the Company, and all
documents incident thereto, shall be reasonably satisfactory in form and
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substance to the Purchaser, and the Seller shall have made available to the
Purchaser for examination the originals or true and correct copies of all
documents the Purchaser may reasonably request in connection with the
transactions contemplated by this Agreement;
(xii) Xxxxx Xxxxxxxx shall have executed and delivered the
Employment Agreement between him and the Company in the form of Exhibit B
hereto (the "Employment Agreement");
(xiii) the Company shall have acquired the Leased Real Property
pursuant to the Contract for Sale and Purchase attached in the form of Exhibit
C hereto;
(xiv) Purchaser shall have received at Seller's expense a Phase I
Environmental Site Assessment of the Leased Real Property satisfactory to
Purchaser; and
(xv) The contract between the Company and VAW Aluminum shall have
been terminated.
The Purchaser may waive any condition specified in this "section"8(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by him in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in "section"4
above that are qualified as to their materiality shall be true and correct and
any such representations and warranties that are not so qualified shall be true
and correct in all material respects at and as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement);
(ii) the Purchaser shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) there shall not be any injunction, judgment, order, decree,
ruling or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement, and no action, suit, claim or proceeding shall
be pending before any Authority which seeks to prohibit or enjoin the
consummation of the transactions contemplated by this Agreement;
(iv) the Purchaser shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in "section"
"section"8(b)(i) and (ii) has been satisfied in all respects;
(v) all filings that are required to have been made by the
Purchaser with any Authority in order to carry out the transactions
contemplated by this Agreement shall have been made; all authorizations,
consents and approvals from all Authorities required for the Purchaser to carry
out the transactions contemplated by this Agreement shall have been received
and all statutory waiting periods (or extensions thereof) in respect thereof
shall have expired;
(vi) the Seller shall have received a certificate
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issued by the Secretary of State of the State of Alabama, as of a date
reasonably acceptable to the Seller, as to the good standing (or
non-dissolution, as applicable) of the Purchaser in such state;
(vii) the Purchaser shall have delivered to the Seller a copy of the
Purchaser's Charter, as amended to date, certified as of the recent date by the
Secretary of State of the State of Alabama; and
(viii) all proceedings, corporate or other, to be taken in connection
with the transactions contemplated by this Agreement by the Purchaser, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Seller, and the Purchaser shall have made available to the
Seller for examination the originals or true and correct copies of all
documents the Seller may reasonably request in connection with the transactions
contemplated by this Agreement.
The Seller may waive any condition specified in this "section"8(b) if he
executes a writing so stating at or prior to the Closing.
9. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
The representations and warranties of the Seller contained in
"section"3A above (the "Individual Representations and Warranties") and in
"section" "section"3B(c), 3B(d), 3B(j) and 3B(t) above (the "Unrestricted
Representations and Warranties"), and of the Purchaser contained in section 4
shall survive the Closing and continue in full force and effect for the statute
of limitations applicable thereto. The representations and warranties of the
Seller contained in "section"3B (other than the Unrestricted Representations
and Warranties) shall survive the Closing and continue in full force and effect
until March 31, 2001. Any claim for which either Party shall have given proper
notice in accordance with the terms of this Agreement on or prior to the
expiration of the applicable survival period shall survive until such claim is
resolved pursuant to the terms of this Agreement. To preserve any claim for
breach of any such representation or warranty, the Party claiming a breach
shall be obligated to notify the party claimed to be in breach in writing of
any such breach, or facts that can reasonably be expected to give rise to such
breach, before termination of the applicable survival period in respect of such
representation or warranty; otherwise, such Party's claim for breach shall be
forever barred.
(b) Indemnification.
(i) Subject to "section"9(a) above and the conditions set forth in
this "section"9(b), subsequent to the Closing Date the Seller shall indemnify,
defend and hold harmless the Purchaser and the Company from, against and in
respect of any Losses which Purchaser or the Company shall suffer, sustain or
become subject to by virtue of or which arise out of, or result from, any
breach of the representations and warranties of the Seller set forth in
"section"3B above (other than the Unrestricted Representations and Warranties);
provided, however, that: (A) the Purchaser shall not be entitled to
indemnification with respect to any Losses under this "section"9(b)(i) until
all such Losses exceed, in the aggregate, $25,000, and (B) the Seller shall not
be liable for any such
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Losses to the extent that they exceed, in the aggregate, the sum of $8,000,000
plus any Earnout payments made pursuant to "section"2(e) above.
(ii) Subject to "section"9(a) above and the conditions set forth in
this "section"9(b), subsequent to the Closing Date the Seller shall indemnify,
defend and hold harmless the Purchaser and the Company from, against and in
respect of any Losses which Purchaser or the Company shall suffer, sustain or
become subject to by virtue of or which arise out of, or result from, any
breach of any of (A) the Unrestricted Representations and Warranties, (B) the
representations and warranties of the Seller set forth in "section"3A above,
and (C) any breach by the Seller of his covenants and agreements set forth in
this Agreement.
(iii) Subsequent to the Closing Date, the Seller shall indemnify,
defend and hold harmless the Purchaser and the Company from, against and in
respect of any Losses which the Purchaser or the Company shall suffer, sustain
or become subject to by virtue of or which arise out of, or result from (A) the
operation of the Business of the Company prior to Closing; (B) any defect,
alleged defect, recall or warranty claim relating to or arising from the nylon
ratchet backrest assemblies which were discontinued by the Company in 1992 and
which were the subject of a U.S. Consumer Product Safety Commission voluntary
recall, (C) violations or penalties under the Company's Buyers Access Agreement
attributable to actions of the Company prior to Closing and (D) any warranty
claims or returns for any product of the Company shipped prior to Closing.
Notwithstanding "section" 9(a), the indemnification obligations set forth in
this "section" 9(b)(iii) shall survive the Closing, indefinitely.
(iv) Subject to "section"9(a) above and the conditions set forth in
this "section"9(b), subsequent to the Closing Date the Purchaser shall
indemnify, defend and hold harmless the Seller and his estate, heirs, personal
representatives or successors from, against and in respect of any Losses which
the Seller shall suffer, sustain or become subject to by virtue of or which
arise out of, or result from (a) any breach by the Purchaser of its
representations, warranties covenants and agreements set forth in this
Agreement or (B) the operation of the Business of the Company after the
Closing.
(v) Promptly after the assertion by any third party of any claim,
demand or notice (a "Third Party Claim") against any Person or Persons entitled
to indemnification under this "section"9(b) (the "Indemnified Parties") that
results or may result in the incurrence by such Indemnified Parties of any
Losses for which such Indemnified Parties would be entitled to indemnification
pursuant to this Agreement, such Indemnified Parties shall promptly notify the
parties from whom such indemnification could be sought (the "Indemnifying
Parties") of such Third Party Claim. Thereupon, the Indemnifying Parties shall
have the right, upon written notice (the "Defense Notice") to the Indemnified
Parties within 30 days after receipt by the Indemnifying Parties of notice of
the Third Party Claim (or sooner if such claim so requires) to conduct, at
their own expense, the defense against the Third Party Claim in their own names
or, if necessary, in the names of the Indemnified Parties. The Defense Notice
shall specify the counsel the Indemnifying
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Parties shall appoint to defend such Third Party Claim (the "Defense Counsel")
and the Indemnified Parties shall have the right to approve the Defense
Counsel, which approval shall not be unreasonably withheld. In the event the
Indemnified Parties and the Indemnifying Parties cannot agree on such counsel
within 10 days after the Defense Notice is given, then the Indemnifying Parties
shall propose an alternate Defense Counsel, which shall be subject again to the
Indemnified Parties' approval which approval shall not be unreasonably
withheld. Any Indemnified Party shall have the right to employ separate counsel
in any such Third Party Claim and/or to participate in the defense thereof, but
the fees and expenses of such counsel shall not be included as part of any
Losses incurred by the Indemnified Party unless (a) the Indemnifying Parties
shall have failed to give the Defense Notice within the prescribed period, (B)
such Indemnified Party shall have received an opinion of counsel, reasonably
acceptable to the Indemnifying Parties, to the effect that the interests of the
Indemnified Party and the Indemnifying Parties with respect to the Third Party
Claim are sufficiently adverse to prohibit the representation by the same
counsel of both parties under applicable ethical rules, or (C) the employment
of such counsel at the expense of the Indemnifying Parties has been
specifically authorized by the Indemnifying Parties. The Party or Parties
conducting the defense of any Third Party Claim shall keep the other Party
apprised of all significant developments and shall not enter into any
settlement, compromise or consent to judgment with respect to such Third Party
Claim unless the Company and the Seller consent, such consent not to be
unreasonably withheld.
(c) Treatment of Indemnification Payments. All indemnification
payments under this "section"9 shall be deemed adjustments to the Purchase
Price.
(d) Escrow. Seller acknowledges and agrees that the Escrow Funds
deposited with the Escrow Agent secure the obligations of Seller under this
"section" 9. Notwithstanding the foregoing, the provisions in this "section"
9(d) and "section" 2(c)(ii) providing for an Escrow Fund shall not limit in any
way the liability of Seller pursuant to this "section" 9, it being expressly
understood and agreed that resort to the Escrow Fund to satisfy any Loss for
which Purchaser is entitled to indemnification hereunder shall not constitute
an election of remedies by Purchaser except to the extend any such Loss, or any
part thereof, is in fact actually satisfied from the Escrow Fund.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Purchaser and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Purchaser may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the Seller
has within the then previous 10 business days given the Purchaser any notice
pursuant to "section"5(e) above;
(iii) the Purchaser may terminate this Agreement by
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giving written notice to the Seller at any time prior to the Closing (A) in the
event that the Seller has breached any representation, warranty or covenant
contained in this Agreement (other than the representations and warranties in
"section"3B(e)-(aa) above) in any material respect, the Purchaser has notified
the Seller of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before July 31, 1998, by reason of the failure of any
condition precedent under "section"8(a) hereof (unless the failure results
primarily from the Purchaser breaching any representation, warranty or covenant
contained in the Agreement); and
(iv) the Seller may terminate this Agreement by giving written
notice to the Purchaser at any time prior to the Closing (A) in the event the
Purchaser has breached any material representation, warranty or covenant
contained in this Agreement in any material respect, the Seller has notified
the Purchaser of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before July 31, 1998, by reason of the failure of any
condition precedent under "section"8(b) hereof (unless the failure results
primarily from the Seller breaching any representation, warranty or covenant
contained in this Agreement).
(b) Effect of Termination. If either Party terminates this
Agreement pursuant to "section"10(a) above, all rights and obligations of the
Parties hereunder shall terminate without any liability of either Party to the
other Party (except for any liability of any Party then in breach).
11. Miscellaneous.
(a) Press Releases and Public Announcements. Neither Party shall
issue any press release or public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of
the other Party.
(b) 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.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof, other than the Confidentiality Agreement, which shall
remain in full force and effect.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
heirs, personal representatives, successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of the other Party; provided,
however, that, unless expressly prohibited hereunder, the Purchaser may (i)
assign any or all of its rights and interests hereunder to one or more of its
wholly-owned Subsidiaries and (ii) designate one or more of its wholly-owned
Subsidiaries to perform its obligations hereunder and (iii) after the Closing
is effected,
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any or all of the rights and interests of Purchaser hereunder (A) may be
assigned to any purchaser of substantially all of the assets of Purchaser, (B)
may be assigned as a matter of law to the surviving entity in any merger of the
Purchaser, and (C) may be assigned as collateral security to any lender or
lenders (including any agent for any such lender or lenders) providing
financing to the Purchaser in connection with the transactions contemplated
hereby, or to any assignee or assignees of any such lender, lenders or agent
(it being understood that in any or all of the cases described in clauses (i),
(ii) and (iii) above the Purchaser nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) 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.
(g) Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder 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 Seller:
Xxxxxx Xxxxxxxx
000 X.X. 000 Xxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
With copies to (which shall not constitute notice to the Seller):
Xxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxx, P.A.
0000 Xxxxx Xxxxxx
P. O. Box 229010
Xxxxxxxxx, Xx 00000-0000
Fax: (000) 000-0000
If to the Purchaser:
Winston Furniture of Alabama, Inc.
000 Xxxxxx Xxxxxx Xxxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Mr. Xxxxx Xxxx, President
Fax: (000) 000-0000
With copies to (which shall not constitute notice to the Purchaser):
c/o Trivest, Inc.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
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Either Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, 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 intended recipient.
Either Party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
(h) Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Alabama without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Alabama or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Alabama.
The Parties agree that any and all actions arising under or in respect of this
Agreement shall be litigated in any federal or state court of competent
jurisdiction located in the Northern District of the State of Alabama. By
execution and delivery of this Agreement, each Party irrevocably submits to the
personal and exclusive jurisdiction of such courts for itself or himself, and
in respect of its or his property with respect to such action. Each Party
agrees that venue would be proper in any of such courts, and hereby waives any
objection that any such court is an improper or inconvenient forum for the
resolution of any such action. The Parties further agree that the mailing by
certified or registered mail, return receipt requested, to the addresses
specified for notice in this Agreement, of any process or summons required by
any such court shall constitute valid and lawful service of process against
them, without the necessity for service by any other means provided by statute
or rule of court.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Purchaser and the Seller. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder 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
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Expenses. Except as otherwise provided in this Agreement,
each of the Parties will bear their own costs and expenses (including legal and
investment advisory fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Seller agrees that the
Company has not borne and will not bear any of the costs and expenses of the
Seller (including any of his legal and investment advisory fees and expenses)
in connection with this Agreement or any of the transactions contemplated.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event
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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
requires otherwise. The specification of any dollar amount in the
representations and warranties or otherwise in this Agreement or in the
Disclosure Schedule is not intended and shall not be deemed to be an admission
or acknowledgment of the materiality of such amounts or items, nor shall the
same be used in any dispute or controversy between the parties to determine
whether any obligation, item or matter (whether or not described herein or
included in any schedule) is or is not material for purposes of this Agreement.
(m) Incorporation of Disclosure Schedule. The Disclosure
Schedule identified in this Agreement is incorporated herein by reference and
made a part hereof.
(n) Equitable Remedies. The Seller acknowledges and agrees that
the Purchaser would not have an adequate remedy at law in the event any of the
provisions of "section"6(d), " section"6(e) and "section"6(f) of this Agreement
are not performed in accordance with their specific terms or are breached.
Accordingly, the Seller agrees that the Purchaser shall be entitled to an
injunction or injunctions to prevent breaches of "section"6(d), "section"6(e)
and "section"6(f) of this Agreement and to enforce specifically the terms and
provisions thereof in any action instituted in any court of competent
jurisdiction, in addition to any other remedies which may be available to it.
(o) Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT SUCH PARTY MAY LEGALLY AND
EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING
HEREUNDER.
(p) Prevailing Parties. In the event of any litigation with
regard to this Agreement, the prevailing Party shall be entitled to receive
from the nonprevailing Party and the nonprevailing Party shall pay all
reasonable fees and expenses of counsel for the prevailing Party.
SIGNATURES BEGIN ON FOLLOWING PAGE
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
WINSTON FURNITURE COMPANY OF
ALABAMA, INC.
By: /s/ Xxxxxxx X. Xxxx
------------------------------
Xxxxxxx X. Xxxx
Its: President/CEO
(SEAL)
/s/ Xxxxxx Xxxxxxxx
-------------------------------
XXXXXX XXXXXXXX
41
