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AGREEMENT OF PURCHASE AND SALE OF STOCK
This AGREEMENT OF PURCHASE AND SALE OF STOCK ("Agreement") is made as
of the 7th day of April, 2000, by and among PET QUARTERS, INC., an Arkansas
corporation ("PetQuarters"), and XXXXXXX XXXXXX, XXXXXXX XXXXXX, XXXXXX XXXXX,
XXXXXXX XXXXXXX, XXXXXX XXXXXX, XXXXXX XXXXXXX, XXX XXXXXXXXXX, XXXXXX XXXXXXX,
XXXXXX XXXXXXX and XXX/FIT INTERNET, LLC, nine individuals and a Delaware
limited liability company (collectively, the "Shareholders").
RECITALS
WHEREAS, the Shareholders have represented that they own all of the
issued and outstanding stock of XxXXxxx.xxx, Inc., a Tennessee corporation
("WeR");
WHEREAS, PetQuarters desires to purchase from the Shareholders, and the
Shareholders desire to sell to PetQuarters, all of the outstanding stock of WeR
(the "Shares") for shares of common stock of PetQuarters in a transaction
intended to qualify as a reorganization under Section 368 of the Code (the
"Transaction");
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the terms identified below in this Article I
shall have the meanings indicated, unless a different and common meaning of the
term is clearly indicated by the context.
AFFILIATE. With respect to any person, Entity or Party, (i) any person,
Entity or Party controlling, controlled by or under common control with any such
person, Entity or Party or (ii) any director or executive officer of any such
person, Entity or Party or of any person, Entity or Party referred to in clause
(i) of this definition.
AGREEMENT. This Agreement of Purchase and Sale of Stock, including all
of its Schedules and Exhibits, and including all duly adopted amendments,
modifications, and supplements.
CERCLA. Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C.A. Sections 9601 et seq.
CLOSING. The completion of the Transaction, to take place as described
in Article IX hereof.
CLOSING DATE. The date on which the Closing actually occurs, which
shall be the day after the Financial Statements are delivered to PetQuarters,
which shall not be later than April 14, 2000, unless otherwise agreed by the
parties, but shall not in any event be prior to satisfaction or waiver of the
conditions to Closing set forth in Article VIII hereof.
CODE. The Internal Revenue Code of 1986, as amended and in effect at
the time of execution of the Agreement.
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CONTROL. The possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a person, Entity or
Party, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
CONFIDENTIAL INFORMATION. As defined in Section 5.2.
CUSTOMER. Any person or Entity for whom WeR provided services on or
within the two years immediately prior to the Closing Date or to whom WeR
provided a product on or within the two years immediately prior to the Closing
Date.
DEFECT NOTICE. As defined in Section 4.14.
ENTITY. A corporation, partnership, sole proprietorship, trust, joint
venture, limited liability company or other form of organization formed for the
conduct of a business whether active or passive.
ENVIRONMENTAL CONDITION. As defined in Section 7.2.
ENVIRONMENTAL LAWS. All federal, state and local requirements,
including statutes, regulations, ordinances, orders, common law, and judicial
and regulatory interpretations thereof, relating to protection of the
environment and the public health, safety and welfare, including without
limitation those requirements relating to manufacture, generation, distribution,
transport, handling, use, processing, treatment, storage, disposal or other
management of Hazardous Materials, those relating to investigation or
remediation of the Release of Hazardous Materials, and those relating to
protection of animal and plant species, environmentally sensitive areas, and
natural resources, including without limitation CERCLA.
ENVIRONMENTAL PERMITS. All interim and final permits, licenses,
registrations, certificates, approvals, and other authorizations issued,
obtained or conferred pursuant to Environmental Laws.
EPA. As defined in Section 4.27.
ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect at the time of execution of the Agreement.
EQUITY. The sum of the equity accounts as reflected on WeR's Balance
Sheet, as of March 31, 2000.
EXCHANGE ACT. The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
FINANCIAL STATEMENTS. WeR's Balance Sheets and income statement, as of
March 31, 2000.
GAAP. Generally accepted accounting principles consistently applied, as
in effect on the date of any statement, report or determination that purports to
be, or is required to be, prepared or made in accordance with generally accepted
accounting principles.
HAZARDOUS MATERIAL. Any "hazardous substance" or "pollutant or
contaminant" as those terms are defined in Section 101 of CERCLA and all
implementing federal regulations; any natural gas, natural gas liquids,
liquefied natural gas, synthetic gas, or petroleum substance, including crude
oil or any fraction thereof; and any radioactive substance, asbestos,
polychlorinated biphenyls, urea formaldehyde, lead based paint, or other
substance subject to federal, state or local Environmental Laws.
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IMPROVEMENTS. As defined in Section 4.14.
INDEMNIFIED PARTY. As defined in Section 7.4.
INDEMNIFYING PARTY. As defined in Section 7.4.
LEASES. As defined in Section 4.14.
LIABILITIES. At any point in time (the "Determination Time"), the
obligations of WeR, whether known or unknown, contingent or absolute, recorded
on its books or not, arising or resulting in any way from facts, events,
agreements, obligations or occurrences that existed or transpired at a prior
point in time, or resulted from the passage of time to the Determination Time.
LOSSES. With respect to any person, Entity or Party, any payment, loss,
liability, obligation, damage (including, without limitation, consequential,
punitive, special or otherwise), deficiency, lien, judgment, cost or expense
(including, without limitation, reasonable attorneys' and accountants' fees and
expenses and court costs) of any kind, nature or description.
MATERIAL ADVERSE EFFECT. Any effect on the business operations,
properties, or financial condition of either Party that is material and adverse
to that Party and its subsidiaries and affiliates, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise interfere
with the ability of the Party to enter into and perform any of its obligations
under this Agreement in any material respect.
PARTIES. PetQuarters and the Shareholders.
PAYABLES. Liabilities of WeR arising from the borrowing of money or the
incurring of obligations for merchandise or goods purchased. All amounts owed by
WeR to Shareholders, their family members or Affiliates shall be contributed to
Shareholders' equity prior to Closing and shall not be considered as Payables.
PENSION PLAN. A "pension plan" or "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
POLICIES. As defined in Section 4.14.
PROPERTIES. The real properties owned by WeR, as described in Schedule
4.14A hereof.
PROPRIETARY RIGHTS. Trade secrets, copyrights, patents, trademarks,
service marks, and all similar types of intangible property developed, created,
or owned by WeR, or used by WeR in connection with its business, whether or not
the same are entitled to legal protection.
PURCHASE PRICE. As defined in Section 2.2.1.
PURCHASER INDEMNITEE. PetQuarters, any affiliate of PetQuarters, any
person or Entity with whom PetQuarters is affiliated or with whom PetQuarters
has a partnership or joint venture relationship (a "Purchaser Partner"), and any
officer, director, shareholder, employee, agent, attorney, joint venturer,
partner (limited or general), servant, representative, trustee, successor or
assign of PetQuarters or of any Purchaser Partner or of any affiliate of
PetQuarters or any Purchaser Partner.
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RECEIVABLES. Accounts receivable, notes receivable, and other
obligations appearing as assets on the books of WeR, and customarily reflected
as assets in balance sheets of Entities prepared in accordance with GAAP,
indicating moneys owed to the Entity.
RELEASE OR RELEASED. Any past or present spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, depositing, conducting, draining, throwing, running, seeping,
disposing, or otherwise releasing into a workplace or the environment (including
the abandonment or discarding of barrels, containers and other open or closed
receptacles), or causing, suffering, allowing any of these acts or omissions.
SEC. The Securities and Exchange Commission.
SECURITIES ACT. The Securities Act of 1933, as amended.
SEC DOCUMENTS. PetQuarter's latest Form 10 or 10-SB, Form 10-K or
10-KSB as of the time in question, all Forms 10-Q or 10_QSB and 8-K filed
thereafter and any other reports, statements or other documents filed with the
SEC prior to the Closing Date.
SHARES. The 10,000 shares of WeR's common stock, $0.01 par value, owned
by the Shareholders and representing all of the issued and outstanding shares of
WeR's common stock.
SHAREHOLDERS. Xxxxxxx Xxxxxx, Xxxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxx
Xxxxxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxxxxx, Xxx Xxxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx
Xxxxxxx and XXX/FIT Internet, LLC.
SHAREHOLDER INDEMNIFIABLE CLAIMS. As defined in Section 7.2.
TAX OR TAXES. (i) All federal, foreign, state, county or local net or
gross income, gross receipts, sales, use, ad valorem, value-added, franchise,
production, severance, windfall profit, withholding, payroll, employment, excise
or similar taxes, assessments, duties, fees, levies, penalties, financial
assurance or other governmental charges (together with any interest thereon, any
penalties, additions to tax or additional amounts with respect thereto, and any
interest in respect of such penalties, additions or additional amounts), and
(ii) liability for the payment of any consolidated tax (together with any
interest thereon, any penalties, additions to tax or additional amounts with
respect thereto, and any interest in respect of such penalties, additions or
additional amounts) of the type described in clause (i) of this paragraph.
THIRD PARTY. As defined in Section 6.8.
THIRD PARTY CLAIM. As defined in Section 7.5.
TRANSACTION. The purchase and sale of the Shares as contemplated by
this Agreement and all incidental actions or related transactions contemplated
hereby.
VENDOR. Any third party selling or licensing a product or service to a
Customer or to WeR on or prior to the Closing Date.
WELFARE PLAN. A "welfare plan" or an "employee welfare benefit plan" as
defined in Section 3(1) of ERISA.
WeR'S BALANCE SHEETS. The most recent balance sheet of WeR included in
the Financial Statements.
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ARTICLE II
THE TRANSACTION
2.1 THE TRANSACTION. Upon the terms and subject to the conditions set
forth in this Agreement, on the Closing Date, the Shareholders shall sell,
grant, convey, assign, transfer and deliver to PetQuarters, and PetQuarters
shall purchase and acquire from the Shareholders all of the Shares. The exact
number of Shares to be sold by the Shareholders hereunder is 10,000 shares of
WeR common stock, $0.01 par value.
2.2 PURCHASE PRICE.
2.2.1 PURCHASE PRICE. The purchase price for the Shares shall
be 714,826 shares of the common stock, $0.001 par value, of PetQuarters (the
"Purchase Price"), as adjusted pursuant to paragraph 2.2.2 hereof.
2.2.2 ADJUSTMENT OF PURCHASE PRICE. Pursuant to this
Agreement, PetQuarters will assume only those Liabilities and Payables of WeR,
in an amount not to exceed $100,000, that are set forth on Schedule 2.2.2
hereto. The Purchase Price, however, will be reduced by an amount equal to the
Liabilities and Payables assumed by PetQuarters at a rate of one (1) share of
common stock of PetQuarters for every $3.50 of Liability and Payables assumed.
2.2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall
be allocated and paid to each of the Shareholders in proportion to his, her or
its pro rata ownership of all the Shares, as set forth on Schedule 2.2.3 hereto.
2.3 PARTIES TO THE AGREEMENT AND TRANSACTION. To the extent that any
provision of this Agreement calls for agreement by WeR as a party hereto, such
provision shall mean WeR as it exists prior to consummation of the Transaction.
If, after such consummation, any provision hereof requires amendment,
modification, interpretation, etc., the same may be accomplished by the
Shareholders and PetQuarters, without the participation of WeR.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PETQUARTERS
PetQuarters hereby represents and warrants to the Selling Parties:
3.1 ORGANIZATION AND QUALIFICATION. PetQuarters is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arkansas and has the requisite corporate power and authority to own its
properties and carry on its business as it is now being conducted. PetQuarters
is duly licensed or qualified to do business as a foreign corporation, and is in
good standing, in each jurisdiction where the character of the properties owned
or leased by it, or the nature of its activities, are such that qualification as
a foreign corporation in that jurisdiction is required by law, except in any
such case where the failure to be so qualified would not have a material adverse
effect on the assets, business, condition (financial or otherwise) or operations
of PetQuarters.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution and delivery of
this Agreement and the consummation of the Transaction have been duly authorized
and approved by the Board of Directors of PetQuarters and no other corporate
proceedings on the part of PetQuarters are necessary to approve and
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adopt this Agreement or to approve the consummation of the Transaction. This
Agreement has been duly and validly executed and delivered by PetQuarters and
constitutes a valid and binding Agreement of PetQuarters, enforceable against
PetQuarters in accordance with its terms.
3.3 CAPITALIZATION; OWNERSHIP OF SHARES. The authorized capital stock
of PetQuarters consists of 40,000,000 shares of common stock, $0.001 par value,
of which 13,607,708 shares (the "PQ Shares") and no more are currently issued
and outstanding, and 10,000,000 shares of preferred stock, $0.001 par value, of
which no shares are currently issued and outstanding. The PQ Shares are duly
authorized, validly issued, fully paid and nonassessable, and have been issued
in compliance with federal and state securities laws. Other than as previously
disclosed to the Shareholders in the SEC Documents or set forth on Schedule 4.1
hereto, there are no outstanding subscriptions, options, warrants, convertible
instruments or other rights, agreements or commitments obligating PetQuarters to
sell or issue, or to require the shareholders of PetQuarters to sell or
otherwise transfer, any capital stock or other securities of PetQuarters.
3.4 ABSENCE OF BREACH; NO CONSENTS. The execution, delivery, and
performance of this Agreement, and the performance by PetQuarters of its
obligations hereunder will not (i) violate or conflict with any of the
provisions of the Articles of Incorporation or Bylaws of PetQuarters, as amended
to the date hereof; (ii) contravene any law, ordinance, rule, or regulation of
any State or political subdivision thereof or of the United States or of any
applicable foreign jurisdiction, or contravene any order, writ, judgment,
injunction, decree, determination, or award of any court or other authority
having jurisdiction, or cause the suspension or revocation of any authorization,
consent, approval, or license, presently in effect, which affects or binds
PetQuarters or any of its material properties; (iii) result in a breach of any
term or provision of, or constitute a default under, or result in the
acceleration of or entitle any party to accelerate (whether after the giving of
notice or the lapse of time or both) any obligation under, or result in the
creation or imposition of any lien, charge, pledge, security interest or other
encumbrance of all or any part of the property of PetQuarters pursuant to any
provision of, any order, judgment, arbitration award, injunction, decree,
indenture, mortgage, lease, license, lien or other agreement or instrument to
which PetQuarters is a party or by which it is bound; (iv) require the
authorization, consent, approval of, or license, declaration, filing or
registration with, any governmental or regulatory authority or any third party;
or (v) constitute grounds for the loss or suspension of any permits, licenses,
or other authorizations used in the business of PetQuarters.
3.5 SEC DOCUMENTS. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
the rules and regulations of the SEC promulgated thereunder and the SEC
Documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Pet Quarters included in the
SEC Documents complied in all material respects with the applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim financial statements, to the extent they exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of PetQuarters as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments).
3.6 VALID ISSUANCES. When issued and paid for in accordance with the
terms of this Agreement, the shares of PetQuarters' common stock issued to the
Shareholders will be duly and validly issued, fully paid, and non-assessable.
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3.7 NO MATERIAL ADVERSE CHANGE. Since the filing of the SEC Documents,
no Material Adverse Effect has occurred or exists with respect to PetQuarters.
Moreover, no event or circumstance has occurred or exists with respect to
PetQuarters or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulations, requires public disclosure or
announcement prior to the date hereof by PetQuarters which has not been so
publicly announced or disclosed.
3.8 ACCURACY OF INFORMATION. None of PetQuarters' representations,
warranties or statements contained in this Agreement, in the Schedules and
Exhibits hereto or in any other document delivered to PetQuarters in connection
with the transactions contemplated by this Agreement whether on their own behalf
or for WeR, contains or will contain any untrue statement of a material fact or
omits to state any material fact necessary in order to make any of such
representations, warranties or statements, in light of the circumstances under
which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SELLING PARTIES
Each of the Shareholders (except for AHN/FIT, as defined in Section
6.1(f) hereof), severally and not jointly, represents and warrants to
PetQuarters as follows:
4.1 ORGANIZATION AND QUALIFICATION. WeR is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Tennessee and has the requisite corporate power and authority to own its
properties and carry on its business as it is now being conducted. WeR is duly
licensed or qualified to do business as a foreign corporation, and is in good
standing, in each jurisdiction where the character of the properties owned or
leased by it, or the nature of its activities, are such that qualification as a
foreign corporation in that jurisdiction is required by law, except in any such
case where the failure to be so qualified would not have a material adverse
effect on the assets, business, condition (financial or otherwise), or
operations of WeR.
4.2 CAPITALIZATION; OWNERSHIP OF SHARES. The authorized capital stock
of WeR consists of 10,000 shares of common stock, $0.01 par value, all of which
are issued and outstanding. The Shares constitute 100% of the issued and
outstanding stock, of any class, of WeR, and are duly authorized, validly
issued, fully paid and nonassessable, and have been issued in compliance with
federal and state securities laws. There are no outstanding subscriptions,
options, warrants, convertible instruments or other rights, agreements or
commitments obligating WeR to sell or issue, or requiring the Shareholders to
sell or otherwise transfer, the Shares, or any other capital stock or other
securities of WeR. All of the issued and outstanding Shares are owned of record
and beneficially by the Shareholders, free and clear of any liens, encumbrances,
security interests, options, pledges, agreements, claims, charges or
restrictions of any nature whatsoever. The Shareholders have full power to
transfer the Shares to PetQuarters without obtaining the consent or approval of
any other person, Entity or governmental authority.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. This Agreement has been duly
and validly executed and delivered by the Selling Parties and, assuming the due
authorization, execution and delivery by PetQuarters, constitutes a valid and
binding Agreement of each of the Shareholders enforceable in accordance with its
terms. Each Shareholder that is not an individual has all requisite corporate
power and authority to enter into this Agreement and to carry out the
Transaction, and its doing so has been duly and sufficiently authorized by its
managing body or persons.
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4.4 ABSENCE OF BREACH; NO CONSENTS. The execution, delivery, and
performance of this Agreement, and the performance by WeR and the Shareholders
of their respective obligations hereunder will not (i) violate or conflict with
any of the provisions of the Charter or Bylaws of WeR as amended to the date
hereof; (ii) contravene any law, ordinance, rule, or regulation of any State or
political subdivision thereof or of the United States or of any applicable
foreign jurisdiction, or contravene any order, writ, judgment, injunction,
decree, determination, or award of any court or other authority having
jurisdiction, or cause the suspension or revocation of any authorization,
consent, approval, or license, presently in effect, which affects or binds WeR
or any of its material properties; (iii) result in a breach of any term or
provision of, or constitute a default under, or result in the acceleration of or
entitle any party to accelerate (whether after the giving of notice or the lapse
of time or both) any obligation under, or result in the creation or imposition
of any lien, charge, pledge, security interest or other encumbrance of all or
any part of the property of WeR pursuant to any provision of, any order,
judgment, arbitration award, injunction, decree, indenture, mortgage, lease,
license, lien or other agreement or instrument to which WeR or any of the
Shareholders are a party or by which any of them is bound; (iv) require the
authorization, consent, approval of, or license, declaration, filing or
registration with, any governmental or regulatory authority or any third party;
or (v) constitute grounds for the loss or suspension of any permits, licenses,
or other authorizations used in the business of WeR.
4.5 BROKERS. No agent, broker, finder, investment banker, person,
Entity or firm acting on behalf of the Shareholders or under their authority is
entitled to any brokerage, finder's, or other fee or commission in connection
with this Agreement or the Transaction.
4.6 FINANCIAL STATEMENTS. Copies of the Financial Statements beginning
July 1999 and ending March 31, 2000 will be provided to PetQuarters prior to the
Closing Date. The Financial Statements (i) will fairly and accurately present
the financial position and condition of WeR as at the dates thereof and for the
periods then ended, in accordance with GAAP (except as otherwise stated
therein), (ii) will be complete, correct and in accordance with the books of
account and records of WeR and (iii) will be capable of being legitimately
reconciled with the financial records maintained and the accounting methods
applied by it for federal income tax purposes.
4.7 NO UNDISCLOSED LIABILITIES. To the knowledge of the Shareholders,
WeR does not have any Liabilities which shall not be adequately reflected or
reserved against on the face of WeR's Balance Sheets or incurred since the date
of WeR's Balance Sheet in the ordinary course of business and consistent with
past practice, in each case in normal amounts and none of which is materially
adverse, or except as otherwise disclosed herein. All Payables and Liabilities
of WeR are set forth in Schedule 4.7 hereto.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS SINCE MARCH 10, 2000. Since
March 10, 2000, WeR has not, except as set forth on Schedule 4.8 hereof:
(i) experienced any material adverse change in the assets,
business, condition (financial or otherwise), or operations of WeR,
excluding any changes resulting from economic or political conditions
or changes in conditions generally applicable to the industries in
which WeR is involved;
(ii) suffered any damage, destruction, or loss, whether covered by
insurance or not, having a material adverse effect on the assets,
business, condition (financial or otherwise), or operations of WeR;
(iii) entered into, amended or terminated any material commitment,
contract, agreement, or transaction (including, without limitation, any
material borrowing or capital
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expenditure or sale or other disposition of any material asset or
assets) of or involving WeR other than this Agreement and the agreement
with World TeleHealth;
(iv) redeemed, repurchased or otherwise acquired for value its
capital stock, or issued any of its capital stock or securities
convertible into or rights to acquire any such capital stock, or
declared, set aside or paid any dividend or distribution on its capital
stock;
(v) transferred or granted any rights under any of its material
leases, licenses, agreements, patents, trademarks, trade names, or
copyrights;
(vi) transferred, leased or otherwise disposed of any its assets
or properties other than in the ordinary course of business and
consistent with past practice or, except in the ordinary course of
business and consistent with past practice, acquired any assets or
properties, or entered into any agreement relating to the foregoing;
(vii) mortgaged, pledged, or subjected to any lien or other
encumbrance any of its assets or properties, other than in the ordinary
course of business, or entered into any agreement relating to the
foregoing;
(viii) made or granted any wage or salary increase applicable to
any group or classification of employees generally, entered into any
employment contract with, or made any loan to, or entered into any
material transaction with, any officer or employee, or changed the
nature of any supplemental benefits provided to any such executives or
other employees; or
(ix) modified inventory levels in relation to sales levels, other
than in the ordinary course of business and consistent with past
practice.
4.9 TAXES. WeR has duly and timely filed or caused to be filed all
federal, state, local and foreign Tax returns (including, without limitation,
consolidated and/or combined Tax returns), reports, and declarations that are
required by applicable law to be filed by it, and has paid, or made full and
adequate provision for the payment of, all federal, state and local income and
other Taxes shown to be due for the periods covered by such returns, reports,
and declarations. Except as set forth on Schedule 4.9 hereof, no deficiency in
payment of Taxes for any period has been asserted by any taxing body and remains
unsettled at the date hereof.
4.10 NO BREACH OR DEFAULT. WeR is not in breach, violation or default
under any contract to which it is a party or by which it is bound, nor has any
event occurred which, after the giving of notice or the passage of time or both,
would constitute a breach, violation or default under any such contract, and WeR
has not received notice of any claim or assertion that it is or may be in any
such breach, violation or default. The Selling Parties have no reason to believe
that the parties to such contracts will not fulfill their obligations under such
contracts in all material respects or are threatened with insolvency.
4.11 LITIGATION.
4.11.1 Schedule 4.11 hereof sets forth a list and a summary
description of all pending or, to the knowledge of WeR or any of the
Shareholders, threatened actions, suits, proceedings, disputes or investigations
by or against the any of the Shareholders, WeR or any of its officers,
directors, employees, agents or affiliates involving, affecting or relating to
any assets, properties or operations of WeR or the transactions contemplated by
this Agreement, setting forth, with respect to each action, suit, proceeding,
dispute or investigation, the existence and extent of insurance coverage.
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4.11.2 Except as set forth on Schedule 4.11 hereof, there are
no claims, actions, suits, proceedings or investigations pending or, to the
knowledge of WeR or any of the Shareholders, threatened before any federal,
state or local court or governmental or regulatory authority, domestic or
foreign, or before any arbitrator of any nature, brought by or against any of
the Shareholders, WeR or any of its respective officers, directors, employees,
agents or affiliates involving, affecting or relating to any assets, properties
or operations of WeR or the transactions contemplated by this Agreement, nor
does there exist any fact which might reasonably be expected to give rise to any
such suit, proceeding, dispute or investigation.
4.11.3 Except as set forth on Schedule 4.11 hereof, neither
WeR nor any of its assets or properties is subject to any order, writ, judgment,
award, injunction or decree of any federal, state or local court or governmental
or regulatory authority or arbitrator, which adversely affects or might
reasonably be expected to affect the assets, properties, business operations,
prospects, net income or financial condition of WeR or which would or might
reasonably be expected to interfere with the transactions contemplated hereby.
4.12 EMPLOYEES, ETC. Except as disclosed in Schedule 4.12 hereof, there
are no collective bargaining, bonus, profit sharing, compensation, or other
plans, agreements, trusts, funds, or arrangements maintained by WeR for the
benefit of its directors, officers, or employees, and there are no employment,
consulting, severance, or indemnification arrangements, agreements or
understandings between WeR, on the one hand, and any current or former
directors, officers, or other employees (or affiliates thereof) of WeR, on the
other hand. There are no persons whose income from WeR in any fiscal year
exceeded, or whose income from WeR in the fiscal year begun immediately
thereafter is at a rate exceeding, $10,000.00 per annum,. WeR is not, and
following the Closing will not be, bound by any express or implied contract or
agreement to employ, directly or as a consultant or otherwise, any person for
any specific period of time or until any specific age except as specified in
agreements in writing identified on Schedule 4.12 hereof.
4.13 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.13 hereof,
WeR is not in default with respect to any order of any court, governmental
authority or arbitration board or tribunal to which WeR is a party or is
subject. Except as set forth on Schedule 4.13 hereof, to the knowledge of WeR
and the Shareholders, WeR is in compliance with all, and has received no notice
of any violation of any laws, ordinances, governmental rules or regulations
applicable to its operations, including without limitation the use of premises
occupied by it, or with respect to which compliance is a condition of engaging
in any aspect of the business of WeR and has all authority permits, licenses,
zoning rights, and other governmental authorizations necessary to conduct its
business as presently conducted.
4.14 REAL PROPERTY. WeR does not own or lease, either in whole or in
part, any real property.
4.15 ASSETS. Schedule 4.15 hereof lists all of WeR's fixed assets
including, but not limited to, all motor vehicles, machinery, equipment,
furniture, fixtures, inventory and other tangible personal property owned,
leased or used by WeR.
4.16 TITLE TO PROPERTY; ENCUMBRANCES. WeR has good and valid title to
all of its properties and assets (except for (i) inventory subsequently sold or
otherwise disposed of for fair value in the ordinary course of business
consistent with past practice, (ii) accounts receivable subsequently collected
in the ordinary course of business consistent with past practice, (iii)
immaterial amounts of inventory, machinery and equipment that have been
determined to be obsolete or otherwise not necessary and have been disposed of
in the ordinary course of business consistent with past practice, and (iv) those
assets of WeR that are leased), in each case free and clear of all Encumbrances
except for any Encumbrance reflected on Schedule 4.16 hereof. WeR does not know
of any potential action by any party,
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governmental or other, and no proceedings with respect thereto have been
instituted of which WeR has notice, that would materially affect WeR's ability
to use and to utilize each of such assets in its business. WeR has received no
notices from any mortgagee regarding any properties leased by WeR.
4.17 RESERVED.
4.18 SUBSIDIARIES; AFFILIATED ENTITIES. WeR has no subsidiaries. WeR
does not own, directly or indirectly, a majority or controlling equity or
related interest in any partnership, corporation, joint venture, business
association or other Entity. No part of WeR's business is conducted through
Entities other than WeR.
4.19 TRADE NAMES. WeR does not use any fictitious business names or
trade names. PetQuarters
4.20 EMPLOYEE BENEFIT PLANS. WeR does not maintain or contribute to any
Pension Plan or any Welfare Plan, nor is WeR presently, nor has it been within
the last six years, a participating employer in any "multiemployer plan" (as
defined in ERISA Section 3(37) or Section 414(f) of the Code). There has been no
termination of a Pension Plan, whether partial or complete, within the meaning
of Title IV of ERISA, that has occurred during the five-year period ending on
the date hereof. WeR has no knowledge of any material liability being incurred
under Title IV of ERISA by WeR with respect to any Pension Plan maintained by a
trade or business (whether or not incorporated) which is under common control
with, or part of a controlled group of corporations with, WeR, within the
meaning of Sections 414(b) or (c) of the Code.
4.21 ACCOUNTS RECEIVABLE. All Receivables of WeR, whether or not
reflected in WeR's Balance Sheets, represent transactions in the ordinary course
of business, and are current and collectible net of any reserves to be shown on
such Balance Sheet (which reserves are adequate and were calculated consistent
with past practice). Schedule 4.21 hereof specifically identifies all
Receivables as of the date hereof (subject to posting of sales in accordance
with WeR's customary practices) and the aging of such Receivables.
4.22 INVENTORIES. WeR has no inventory, except a limited and reasonable
amount of office supplies. No items included in the inventories have been
pledged as collateral (except as disclosed on Schedule 4.22 hereof).
4.23 CONTRACTS. Except as identified on Schedule 4.23 hereof, WeR has
no contracts, agreements, or understandings, whether express or implied, written
or oral; provided, however, that WeR may have, and Schedule 4.23 hereof does not
identify, any such contracts, agreements, or understandings that fall into one
of the following categories: (a) those that are terminable on notice of less
than thirty-two (32) days and do not involve payments or obligations of more
than $1,000 in any period of thirty-one (31) days or less (on termination or
otherwise); or (b) those that involve aggregate payments or obligations of less
than $3,000. Schedule 4.23 hereof includes a brief summary of each such
contract, agreement or understanding identified therein, or of the type of such
contracts and the aggregate exposure or commitment under similar contracts in
the case of contracts included by reason of the preceding sentence.
4.24 ACCOUNTS PAYABLE. The accounts payable to be reflected on WeR's
Company Balance Sheets do, and those reflected on the books of WeR at the time
of the Closing will, reflect all amounts owed by WeR in respect of trade
accounts due and other Payables, and the actual Liability of WeR in
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respect of such obligations was not, and will not be, on any of such dates, in
excess of the amounts so reflected on the balance sheets or the books of WeR, as
the case may be. Shareholders agree, however, that all amounts owed by WeR to
Shareholders shall be contributed by Shareholders to the equity of WeR prior to
Closing.
4.25 LABOR MATTERS. Except as set forth on Schedule 4.25 hereof, there
are no activities or controversies, including, without limitation, any labor
organizing activities, election petitions or proceedings, proceedings
preparatory thereto, unfair labor practice complaints, labor strikes, disputes,
slowdowns, or work stoppages, pending or, to the best of the knowledge of WeR,
threatened, between WeR and any of its employees.
4.26 INSURANCE. WeR has no insurance policies currently in force.
4.27 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.27
hereof:
(i) to the best knowledge of the Shareholders: WeR and its
operations, including as applicable its personnel, equipment,
facilities and owned or leased premises (collectively "the Company
and/or its operations") have obtained and continue to hold all
Environmental Permits which are required under all applicable
Environmental Laws;
(ii) to the best knowledge of the Shareholders: WeR and its
operations are in substantial compliance with all Environmental Permits
and Environmental Laws and have not received notice from a federal,
state or local authority that WeR or its operations have violated any
of the foregoing; nor have WeR or its operations failed to provide any
notification, certification, report, response, payment or other filing
required by a federal, state or local regulatory agency, Environmental
Law, or Environmental Permit;
(iii) to the best knowledge of the Shareholders: neither WeR
nor its operations are subject to any judicial, governmental,
regulatory, or administrative proceeding alleging the violation of any
Environmental Permit or Environmental Law, or seeking to suspend,
revoke, involuntarily amend or modify, or not renew any Environmental
Permit or activity authorized thereunder;
(iv) to the best knowledge of the Shareholders: none of WeR's
operations are on the "CERCLIS" list or the "National Priorities List"
of the U.S. Environmental Protection Agency ("EPA"), or any similar
state list, or the subject of any federal, state or local investigation
evaluating whether any remedial action is needed to respond to a
Release of any Hazardous Material;
(v) to the best knowledge of the Shareholders: WeR and its
operations have not Released any Hazardous Material in quantities that
are reportable under Environmental Laws (other than a Release
authorized by an Environmental Permit); nor are WeR or its operations
persons who own or operate, or who at the time of disposal owned or
operated, or who accepted Hazardous Material for transport and
selected, a facility at which Hazardous Material is or has been stored,
treated, or disposed of, and which did not or does not have all
necessary Environmental Permits; nor have WeR or its operations
provided any notification of such a Release or facility to required
federal, state and local regulatory authorities;
(vi) to the best knowledge of the Shareholders: WeR and its
operations have no contingent or actual liability in connection with
any Release of any Hazardous Material into the
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workplace or the environment; nor does any parent, subsidiary,
affiliated Entity, or predecessor have any such liability for which WeR
and its operations have been or may be held liable;
(vii) to the best knowledge of the Shareholders: WeR and its
operations have not caused, suffered or allowed the performance or
omission of any act and know of no condition which could give rise to
liability now or in the future to any person or Entity under any
Environmental Laws, nor have WeR or its operations received notice of
any such liability or any claim therefor, including without limitation
notice of a removal, remedial, or response action, or a possible
cost-recovery or contribution claim, by a federal, state or local
regulatory authority, or by a third person;
(viii) to the best knowledge of the Shareholders: no Hazardous
Material is present or has been Released on, at, beneath or near any of
WeR's or its operations' past or present facilities or properties with
the exception of such Hazardous Materials authorized for receipt and
actually managed at those facilities and properties in accordance with
all applicable Environmental Laws and Environmental Permits; and no
Hazardous Material is present or has been Released beyond the
authorized waste management areas, including to any surface water or
groundwater on, at, beneath or, to the Shareholders' knowledge, near
the facilities or properties;
(ix) to the best knowledge of the Shareholders: WeR and its
operations do not own or operate, nor have they ever owned or operated,
an underground or aboveground storage tank, nor is any such tank
located on or under any of the real properties leased or owned by WeR
or its operations; and
(x) to the best knowledge of the Shareholders: WeR has never
sold or manufactured any product containing asbestos or polychlorinated
biphenyls.
4.28 PROPRIETARY RIGHTS. WeR has not received any notice of conflict
which asserts the rights of others with respect thereto and is not aware of any
infringing use of any of its Proprietary Rights; and WeR has in all material
respects performed all of the obligations required to be performed by it, and is
not in default in any material respect, under any agreement relating to any
Proprietary Right.
4.29 RESERVED.
4.30 ACCURACY OF INFORMATION. None of the Shareholders'
representations, warranties or statements contained in this Agreement, in the
Schedules and Exhibits hereto or in any other document delivered to PetQuarters
in connection with the transactions contemplated by this Agreement whether on
their own behalf or for WeR, contains or will contain any untrue statement of a
material fact or omits to state any material fact necessary in order to make any
of such representations, warranties or statements, in light of the circumstances
under which they were made, not misleading.
4.31 JURISDICTIONS. Schedule 4.31 contains a list of all jurisdictions
in which WeR is presently licensed or qualified to do business. WeR has complied
in all material respects with all applicable laws of each such jurisdiction and
all applicable rules and regulations of each regulatory agency therein. WeR (i)
has not been denied admission to conduct any type of business in any
jurisdiction in which it is not presently admitted as set forth in such Schedule
4.31 hereof; (ii) have not had its license or qualifications to conduct business
in any jurisdiction revoked or suspended; or (iii) has not been involved in any
proceeding to revoke or suspend a license or qualification.
4.32 RECORDS. WeR and the Shareholders have delivered or made available
to PetQuarters and its counsel true and complete copies of WeR's Charter,
bylaws, minutes of all meetings of directors
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and shareholders and certificates reflecting all actions taken by the directors
or shareholders without a meeting, partnership agreements and certificates, and
other organizational documents of WeR, and such documents are, except as stated
therein, in full force and effect on the date hereof. After consummation of the
transaction contemplated hereby, all such documents of WeR shall be delivered to
PetQuarters.
4.33 ACTIONS SINCE BALANCE SHEET DATE. Except as set forth on Schedule
4.33 hereof, WeR has taken no actions that would be prohibited under the
provisions of this Agreement (without the prior consent of PetQuarters) after
the date of this Agreement.
ARTICLE V
COVENANTS OF PETQUARTERS
5.1 AFFIRMATIVE COVENANTS. From the date hereof through the Closing
Date, PetQuarters will take every action reasonably required of it in order to
satisfy the conditions to Closing set forth in this Agreement and otherwise to
ensure the prompt and expedient consummation of the Transaction substantially as
contemplated hereby, and will exert all reasonable efforts to cause the
Transaction to be consummated, provided in all instances that the
representations and warranties of the Shareholders in this Agreement are and
remain true and accurate and that the covenants and agreements of the
Shareholders in this Agreement are honored and that the conditions to the
obligations of PetQuarters set forth in this Agreement are not incapable of
satisfaction.
5.2 CONFIDENTIALITY OF INFORMATION. Except as and to the extent
required by law, prior to the Closing, PetQuarters will not disclose or use, and
will direct their representatives not to disclose or use to the detriment of the
Shareholders, any Confidential Information (as defined below) with respect to
WeR furnished, or to be furnished, by either WeR, the Shareholders or their
respective representatives to PetQuarters or its representatives at any time or
in any manner other than in connection with its evaluation of the Transaction;
provided, however, that any disclosure or use that is deemed necessary by
PetQuarters in its reasonable discretion to determine the transferability of any
and all operating permits shall not be deemed to be a violation of this Section
5.2. "Confidential Information" means any information about WeR, whether
written, oral or electronic (and specifically includes any Company Disclosure
Statements delivered to PetQuarters), unless (a) such information is already
known to PetQuarters or its representatives or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of PetQuarters or its representatives, (b) the use of such information is
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the Transaction, or (c) the furnishing
or use of such information is required by or necessary or appropriate in
connection with legal proceedings. Upon the written request of WeR in the event
this Agreement is terminated for any reason prior to Closing, PetQuarters will
promptly return to WeR or destroy any Confidential Information in their
possession and certify in writing to WeR that they have done so.
5.3 EXPENSES. Whether or not the Transaction is consummated, all costs
and expenses incurred by PetQuarters in connection with this Agreement and the
Transaction shall be paid by PetQuarters.
5.4 UNREGISTERED SECURITIES. PetQuarters acknowledges that the Shares
are not registered under the Securities Act of 1933 nor under the Arkansas
Securities Act nor under the Tennessee Securities Act and represents and
warrants as follows:
(i) PetQuarters is acquiring the Shares for its own account
solely for the investment purposes and not with a view to resell said
Shares.
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(ii) PetQuarters has such knowledge and experience in business
and financial matters as to enable it to be capable of evaluating the
risks and merits of this investment.
(iii) PetQuarters is able to bear the economic risks of an
investment in the Shares.
(iv) The Shares will not be resold or otherwise transferred or
assigned without appropriate compliance with the registration
provisions of the Securities Act of 1933 and the applicable state Blue
Sky laws or exemption therefrom.
(v) PetQuarters has been provided with or permitted access to
all information which it deems material to formulating an investment
decision and that such information has been sufficient to make an
informed investment decision.
5.5 CONDUCT OF BUSINESS.
5.5.1 AFFIRMATIVE COVENANTS. PetQuarters covenants and agrees
with the Shareholders that, on and after the date hereof and prior to the
consummation of the Transaction or the termination of this Agreement pursuant to
its terms, PetQuarters shall:
(i) conduct its business according to the ordinary and usual
course of business consistent with past practice;
(ii) use commercially reasonable efforts to preserve intact
its business organization and goodwill, to keep available the services
of its officers, directors and employees, and maintain good
relationships with suppliers, lenders, creditors, distributors,
employees, customers, licensors, licensees and others having business
or financial relationships with them, and it shall immediately notify
the Shareholders of any event or occurrence or emergency material to,
and not in the ordinary and usual course of, its business;
(iii) continue properly and promptly to file when due all
federal, state, local, foreign, and other tax returns, reports, and
declarations required to be filed by it, and will pay, or make full and
adequate provision for the payment of, all taxes and governmental
charges due from or payable by it;
(iv) comply in all material respects with all laws and
regulations applicable to it and its operations; and
(v) maintain its assets and properties in good repair and in
the same condition, reasonable wear and tear excepted, as they were on
the date of this Agreement.
5.5.2 NEGATIVE COVENANTS. Without limiting the generality of
the foregoing, and except for actions previously disclosed to Shareholders,
PetQuarters shall not on or after the date hereof and prior to the consummation
of the Transaction or the termination of this Agreement pursuant to its terms:
(i) amend its Articles of Incorporation or Bylaws;
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(ii) split, combine, or reclassify any of its outstanding
securities or declare, set aside, or pay any dividend or other
distribution on or make or agree or commit to make any exchange for or
redemption of any such securities payable in cash, stock, or property;
(iii) issue or agree to issue any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any
class, enter into any contract, agreement, commitment, or arrangement
with respect to any of the foregoing or otherwise change their
capitalization as it exists on the date hereof;
(iv) adopt, enter into, or amend any bonus, profit-sharing,
compensation, stock option, warrant, pension, retirement, deferred
compensation, employment, severance, termination, or other employee
benefit plan, agreement, trust fund, or arrangement for the benefit or
welfare of any officer, director or employee; or
(v) agree to any material (in relation to historical
compensation) increase in the compensation payable or to become payable
to, or any increase in the contractual term of employment of, any
officer, director, or employee except, with respect to employees who
are not officers or directors, in the ordinary course of business in
accordance with past practice.
5.6 UPDATING OF EXHIBITS AND DISCLOSURE DOCUMENTS. PetQuarters shall
notify the Shareholders of any changes, additions, or events which may cause any
change in or addition to any Schedules and Exhibits hereto or any other
schedules or exhibits delivered by PetQuarters under this Agreement promptly
after the occurrence of the same and again at the Closing by delivery of
appropriate updates to all such schedules and exhibits. No such notification
made pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless the Shareholders
specifically agree thereto in writing nor shall any such notification be
considered to constitute or give rise to a waiver by the Shareholders of any
condition set forth in this Agreement.
5.7 COOPERATION. PetQuarters will cooperate with the Shareholders, and
their counsel, accountants and agents in every way in carrying out the
transactions contemplated by this Agreement and in delivering all documents and
instruments deemed reasonably necessary or useful by the Shareholders.
5.8 UPDATING OF EXHIBITS AND DISCLOSURE DOCUMENTS. PetQuarters shall
notify the Shareholders of any changes, additions, or events which may cause any
change in or addition to any Schedules and Exhibits hereto or any other
schedules or exhibits delivered by PetQuarters under this Agreement promptly
after the occurrence of the same and again at the Closing by delivery of
appropriate updates to all such schedules and exhibits. No such notification
made pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless the Shareholders
specifically agrees thereto in writing nor shall any such notification be
considered to constitute or give rise to a waiver by the Shareholders of any
condition set forth in this Agreement.
ARTICLE VI
COVENANTS OF THE SELLING PARTIES
6.1 RESTRICTIVE COVENANTS.
(a) CUSTOMER RESTRICTION. Each Shareholder covenants and
agrees that he, she or it shall not, for a period of two (2) years from
and after the Closing Date, working alone or in conjunction with one or
more other persons or Entities, for compensation or not, (i) provide or
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offer to provide any product or service similar to that offered by WeR
immediately prior to the Closing, or (ii) induce or attempt to induce
any person or Entity to withdraw, curtail or cancel business of WeR,
PetQuarters or in any manner modify or fail to enter into any actual or
potential business relationship with PetQuarters or WeR.
(b) NON-RAID. Each Shareholder covenants and agrees that
he, she or it shall not, for a period of two (2) years from and after
the Closing Date, working alone or in conjunction with one or more
other persons or Entities, for compensation or not, (i) recruit or
otherwise solicit or induce any person or Entity who is, on the Closing
Date or thereafter, an employee, officer or director of WeR to
terminate their employment with, or otherwise cease their relationship
with, WeR, PetQuarters or any of their respective subsidiaries or
affiliates, or (ii) hire, recruit or otherwise solicit any person or
Entity who, within the six months immediately preceding the Closing
Date, had been an employee, officer or director of WeR; provided,
however, that clause (ii) shall not prohibit any Shareholder from
hiring, recruiting or soliciting any person or Entity with which WeR
has terminated its relationship after the Closing Date.
(c) NONCOMPETITION. Each Shareholder covenants and
agrees that such Shareholder shall not, for a period of two (2) years
from and after the Closing Date, working alone or in conjunction with
one or more other persons or Entities, for compensation or not, permit
such Shareholder's name to be used by or engage in or carry on,
directly or indirectly, either for himself or as a member, stockholder,
partner, investor (other than as an owner of less than 5% of any public
traded Entity), officer or director of an Entity (other than
PetQuarters or a subsidiary or affiliate of PetQuarters) or as an
employee, agent, associate or contractor of any person or Entity (other
than PetQuarters or any of its subsidiaries or affiliates), any
business in competition with the business of WeR as carried on by WeR
immediately prior to the Closing, but only for as long as such business
is carried on by (i) PetQuarters and/or any of its subsidiaries or
affiliates or (ii) any person or Entity deriving title from PetQuarters
or any of its subsidiaries or affiliates to the assets and goodwill of
the business being carried on by WeR immediately prior to the Closing.
The Parties intend that the covenants contained in this Section 6.1(c)
shall be deemed to be a series of separate covenants, one for each
State or country in which WeR does business immediately prior to the
Closing and, except for geographic coverage, each such separate
covenant shall be identical in terms to the covenant contained in this
Section 6.1(c); provided, however, that nothing herein shall prohibit
Xxxxxx Xxxxx'x activities in connection with Vet Xxxxxxxx.xxx, a
business to business sales company supplying equipment for
veterinarians.
(d) REFORMATION. If, in any judicial proceeding, the
court shall refuse to enforce all of the separate covenants contained
in Section 6.1(a),6.1(b) or 6.1(c) hereof because the time limit is too
long, it is expressly understood and agreed between the Parties that
for purposes of such proceeding such time limitation shall be deemed
reduced to the extent necessary to permit enforcement of such
covenants. If, in any judicial proceeding, the court shall refuse to
enforce all of the separate covenants contained in Section 6.1(a),
6.1(b) or 6.1(c) hereof because they are more extensive (whether as to
geographic area, scope of business or otherwise) than necessary to
protect the business and goodwill of PetQuarters or any of its
subsidiaries or affiliates, it is expressly understood and agreed
between the Parties that for purposes of such proceeding the geographic
area, scope of business or other aspect shall be deemed reduced to the
extent necessary to permit enforcement of such covenants.
(e) INJUNCTIVE RELIEF. Each Shareholder acknowledges
that a breach of Section 6.1 hereof would cause irreparable damage to
PetQuarters, and in the event of such Shareholder's actual or
threatened breach of the provisions of Section 6.1 hereof, PetQuarters
shall be entitled
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to a temporary restraining order and an injunction restraining such
Shareholder from breaching such covenants without the necessity of
posting bond or proving irreparable harm, such being conclusively
admitted by such Shareholder. Nothing shall be construed as prohibiting
PetQuarters from pursuing any other available remedies for such breach
or threatened breach, including the recovery of damages from such
Shareholder. Each Shareholder acknowledges that the restrictions set
forth in Section 6.1 hereof are reasonable in scope and duration, given
the nature of the business of PetQuarters. Each Shareholder agrees that
issuance of an injunction will not pose an unreasonable restriction on
such Shareholder's ability to obtain employment or other work following
the Closing Date.
(f) OTHER AGREEMENTS. The provisions of this Section 6.1
shall be independent of and in addition to any other agreement between
PetQuarters or WeR and any Shareholder regarding the subject matter of
this Section 6.1, except nothing in this Section 6.1 shall be deemed to
impose any greater restrictions on AHN/FIT Internet, LLC ("AHN/FIT"),
than those imposed on AHN/FIT in that certain Sponsorship, Licensing
and Promotion Agreement dated as of July 23, 1999, by and between WeR
and AHN/FIT (the "Galaxy Contract"), as amended heretofore, a complete
copy of which has been provided to PetQuarters.
6.2 AFFIRMATIVE COVENANTS. From the date hereof through the Closing
Date, the Shareholders will take every action reasonably required of any of them
to satisfy the conditions to Closing set forth in this Agreement and otherwise
to ensure the prompt and expedient consummation of the Transaction substantially
as contemplated hereby, and will exert all reasonable efforts to cause the
Transaction to be consummated, provided in all instances that the
representations and warranties of PetQuarters in this Agreement are and remain
true and accurate and that the covenants and agreements of PetQuarters in this
Agreement are honored and that the conditions to the obligations of WeR set
forth in this Agreement are not incapable of satisfaction.
6.3 ACCESS AND INFORMATION. The Shareholders shall direct WeR to afford
to PetQuarters and to the PetQuarters' accountants, counsel and other
representatives reasonable access during normal business hours throughout the
period prior to the Closing to all of WeR's properties, books, contracts,
commitments, records and personnel, and, during such period, WeR shall furnish
promptly to PetQuarters (1) all written communications from WeR to its directors
or to its Shareholders generally, (2) WeR's internal monthly financial
statements when and as available, and (3) all other information concerning its
business, properties, and personnel as PetQuarters may reasonably request, but
no investigation pursuant to this Section 6.3 shall affect any representations
or warranties of the Shareholders, or the conditions to the obligations of
PetQuarters to consummate the Transaction contemplated by this Agreement.
PetQuarters and its representatives shall assert their rights hereunder in such
manner as to minimize interference with the business of WeR.
6.4 NO SOLICITATION. The Shareholders and those acting on their behalf
will not, and WeR will use their best efforts to cause their officers,
employees, agents, and representatives (including any investment banker) not,
directly or indirectly, to solicit, encourage, or initiate any discussions with,
or negotiate or otherwise deal with, or provide any information to, any person
or Entity other than PetQuarters and its officers, employees, and agents,
concerning any merger, sale of substantial assets, or similar transaction
involving WeR or division of WeR or any sale of any of their capital stock or of
any division. WeR will notify PetQuarters immediately upon receipt of any
inquiry, offer or proposal relating to any of the foregoing. None of the
foregoing shall prohibit providing information to others in a manner in keeping
with the ordinary conduct of WeR's business, or providing information to
government authorities.
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6.5 CONDUCT OF BUSINESS.
6.5.1 AFFIRMATIVE COVENANTS. The Shareholders covenant and
agree with PetQuarters that, on and after the date hereof and prior to the
consummation of the Transaction or the termination of this Agreement pursuant to
its terms, WeR shall, and the Shareholders shall cause WeR to:
(i) conduct its business according to the ordinary and usual
course of business consistent with past practice;
(ii) use commercially reasonable efforts to preserve intact
their business organization and goodwill, to keep available the
services of their officers, directors and employees, and maintain good
relationships with suppliers, lenders, creditors, distributors,
employees, customers, licensors, licensees and others having business
or financial relationships with them, and they shall immediately notify
PetQuarters of any event or occurrence or emergency material to, and
not in the ordinary and usual course of, their business;
(iii) continue properly and promptly to file when due all
federal, state, local, foreign, and other tax returns, reports, and
declarations required to be filed by them, and will pay, or make full
and adequate provision for the payment of, all taxes and governmental
charges due from or payable by them;
(iv) comply in all material respects with all laws and
regulations applicable to them and their operations; and
(v) maintain their assets and properties in good repair and in
the same condition, reasonable wear and tear excepted, as they were on
the date of this Agreement.
6.5.2 NEGATIVE COVENANTS. Without limiting the generality of
the foregoing, and except for actions listed on Schedule 6.5.2 hereof, without
PetQuarters' prior written consent, the Shareholders shall not cause, allow or
permit WeR to, on or after the date hereof and prior to the consummation of the
Transaction or the termination of this Agreement pursuant to its terms:
(i) amend its Charter or Bylaws;
(ii) split, combine, or reclassify any of its outstanding
securities or declare, set aside, or pay any dividend or other
distribution on or make or agree or commit to make any exchange for or
redemption of any such securities payable in cash, stock, or property;
(iii) issue or agree to issue any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any
class, enter into any contract, agreement, commitment, or arrangement
with respect to any of the foregoing or otherwise change their
capitalization as it exists on the date hereof;
(iv) create, incur, or assume any long-term or short-term
indebtedness for money borrowed, guarantee the payment of any such
indebtedness, or make any capital expenditures or commitment for
capital expenditures, except in the ordinary course of business and
consistent with past practice;
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(v) adopt, enter into, or amend any bonus, profit-sharing,
compensation, stock option, warrant, pension, retirement, deferred
compensation, employment, severance, termination, or other employee
benefit plan, agreement, trust fund, or arrangement for the benefit or
welfare of any officer, director or employee;
(vi) agree to any material (in relation to historical
compensation) increase in the compensation payable or to become payable
to, or any increase in the contractual term of employment of, any
officer, director, or employee except, with respect to employees who
are not officers or directors, in the ordinary course of business in
accordance with past practice.
(vii) sell, lease, mortgage, encumber, or otherwise dispose of
or grant any interest in any of their assets or properties except for
sales, encumbrances, and other dispositions or grants in the ordinary
course of business and consistent with past practice and except for
liens for taxes not yet due or liens or encumbrances that are not
material in amount or effect and do not impair the use of the property,
or as specifically provided for or permitted in this Agreement;
(viii) enter into, amend or terminate any material contract,
agreement, commitment, or understanding;
(ix) enter into any agreement, commitment, or understanding,
whether in writing or otherwise, with respect to any of the foregoing;
or
(x) hold any meetings of its board of directors, or any
committee thereof, or of their Shareholders, without inviting a
representative selected by PetQuarters to attend the same (although WeR
may request that such representative absent himself or herself during
that portion of any such meeting that pertains to issues arising under
this Agreement).
6.6 COOPERATION. The Shareholders will cooperate with PetQuarters, and
its counsel, accountants and agents in every way in carrying out the
transactions contemplated by this Agreement and in delivering all documents and
instruments deemed reasonably necessary or useful by PetQuarters.
6.7 EXPENSES. Whether or not the Transaction is consummated, all costs
and expenses incurred by the Shareholders in connection with this Agreement and
the Transaction which are ordinarily and customarily incurred and paid by WeR in
its business operations may be paid by WeR, but all costs and expenses incurred
by the Shareholders in connection with this Agreement and the Transaction which
are not ordinarily and customarily incurred by WeR in its business operations,
specifically including those expenses which would have to be capitalized by
PetQuarters as an expense of acquiring the Shares or by the Shareholders as an
expense of selling the Shares, shall be paid by the Shareholders. All Tax
obligations of the Shareholders or of WeR incurred on or after the Closing Date,
arising from the operation of WeR prior to the Closing Date or the Transaction
(specifically including the Shareholders' contribution of any amounts owed to
Shareholders to equity) shall be paid by the Shareholders and not WeR or
PetQuarters.
6.8 PUBLICITY. Prior to the Closing, no Party will issue or make any
reports, statements or releases to the public with respect to this Agreement or
the Transaction contemplated hereby without consulting the other as to the
content and wording of such disclosure or release; provided, however, that the
foregoing shall not be deemed to prohibit any disclosure required by applicable
law or by any governmental authority having jurisdiction over such matters, or
by the disclosure obligations of PetQuarters as a public company.
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6.9 ENVIRONMENTAL MATTERS. The Shareholders shall, during the period
between the date of this Agreement and Closing, promptly provide to PetQuarters
any notices or claims received by WeR or the Shareholders that arise under any
Environmental Laws.
6.10 UPDATING OF EXHIBITS AND DISCLOSURE DOCUMENTS. The Shareholders
shall notify PetQuarters of any changes, additions, or events which may cause
any change in or addition to any Schedules and Exhibits hereto or any other
schedules or exhibits delivered by the Shareholders under this Agreement
promptly after the occurrence of the same and again at the Closing by delivery
of appropriate updates to all such schedules and exhibits. No such notification
made pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless PetQuarters
specifically agrees thereto in writing nor shall any such notification be
considered to constitute or give rise to a waiver by PetQuarters of any
condition set forth in this Agreement.
6.11 EXECUTION OF ADDITIONAL DOCUMENTS. Each Party will at any time,
and from time to time after the Closing Date, upon request of any other Party,
execute, acknowledge and deliver all such further deeds, assignments, transfers,
conveyances, powers of attorney and assurance, and take all such further action,
as may be reasonably required to carry out the intent of this Agreement, and to
transfer and vest title to any Shares being transferred hereunder, and to
protect the right, title and interest in and enjoyment of all of the Shares
sold, granted, assigned, transferred, delivered and conveyed pursuant hereto;
provided, however, that this Agreement shall be effective regardless of whether
any such additional documents are executed.
6.12 UNREGISTERED SECURITY. The Shareholders acknowledge that the
shares of common stock of PetQuarters to be delivered to the Shareholders as the
Purchase Price (the "Purchase Shares") are not registered under the Securities
Act of 1933 nor under the Arkansas Securities Act nor under the Tennessee
Securities Act and represent and warrant as follows:
(i) The Shareholders are acquiring the Purchase Shares for
their own accounts solely for the investment purposes and not with a
view to resell said Purchase Shares.
(ii) The Shareholders have such knowledge and experience in
business and financial matters as to enable them to be capable of
evaluating the risks and merits of this investment.
(iii) The Shareholders are able to bear the economic risks of
an investment in the Purchase Shares.
(iv) The Purchase Shares will not be resold or otherwise
transferred or assigned without appropriate compliance with the
registration provisions of the Securities Act of 1933 and the
applicable state Blue Sky laws or exemption therefrom.
(v) The Shareholders have been provided with or permitted
access to all information which they deem material to formulating an
investment decision and that such information has been sufficient to
make an informed investment decision.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES/INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties by the Parties in Articles III and IV hereof or in any other Article
or Section hereof except Section 5.2, or in any certificate or other document
furnished or to be furnished by the Parties pursuant hereto, shall survive
delivery by the Parties of the consideration to be given by them hereunder, and
shall survive the execution hereof, the Closing hereunder and the Closing Date,
all such representations and warranties to expire on the first anniversary of
the Closing Date.
7.2 INDEMNIFICATION BY SHAREHOLDERS. Upon the terms and subject to the
conditions set forth in Sections 7.4 and 7.5 hereof and this Section 7.2, each
of the Shareholders, except AHN/FIT, agrees, severally based upon the pro rata
share of the Purchase Price received by such Shareholder, to indemnify, defend,
protect, save and hold harmless PetQuarters against, and will reimburse
PetQuarters on demand for, any and all Losses made or incurred by or asserted
against PetQuarters, at any time after the Closing Date, directly or indirectly,
arising out of, related to, caused by, or resulting from any of the following
("Shareholder Indemnifiable Claims"):
(a) any inaccuracy or misrepresentation in, omission from, or
breach or nonfulfillment of representation, warranty, term, provision,
covenant or agreement on the part of any Shareholder contained in this
Agreement or in any certificate or other instrument furnished or to be
furnished by WeR or any Shareholder to PetQuarters pursuant hereto;
provided, however, that no Shareholder shall have any liability to
PetQuarters for breach of any covenant set forth in Section 6.1 hereof
except for liability arising from such Shareholder's own conduct; or
(b) any liability or obligation of WeR or any Shareholder,
whether imposed by any law or pursuant to any agreement, for any Taxes
with respect to periods or events or transactions (including, without
limitation, the events or transactions described or permitted to be
taken hereunder) prior to or ending on the Closing Date.
The obligation of the Shareholders to indemnify PetQuarters with respect to any
Shareholder Indemnifiable Claims shall not be affected by the fact that
PetQuarters or its representatives conducted any due diligence investigation.
For the purposes of the indemnity provided by the Shareholders to PetQuarters
pursuant to this Section, that pro rata share of the Purchase Price and
subsequent possible liability under this Section that is not being assumed by
AHN/FIT shall be assumed by Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxx in direct
proportion to their pro rata shares of Purchase Price as received by them.
7.3 INDEMNIFICATION BY PETQUARTERS. Upon the terms and subject to the
conditions set forth in Sections 7.4 and 7.5 hereof and this Section 7.3 and in
addition that indemnification contained in Section 5.5, PetQuarters agrees to
indemnify, defend, protect, save and hold harmless each Shareholder against, and
will reimburse each Shareholder on demand for, any and all Losses made or
incurred by or asserted against any Shareholder, at any time after the Closing
Date, directly or indirectly, arising out of, related to, caused by, or
resulting from any of the following ("Purchaser Indemnifiable Claims").
(a) Any inaccuracy or misrepresentation in, omission from, or
breach or nonfulfillment of any representation, warranty, term,
provision, covenant or agreement on the part of PetQuarters contained
in this Agreement or in any certificate or other instrument furnished
or to be furnished by PetQuarters to any Shareholder pursuant hereto;
and
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(b) Liabilities which are disclosed by WeR and Shareholders to
PetQuarters and assumed by PetQuarters pursuant to this Agreement,
including, but not limited to, any lawsuit (at law or in equity),
administrative or other proceeding initiated by any person or Entity
against any Shareholder to enforce the payment or performance of any
such Liabilities, to the extent not specifically subject to an
indemnity by the Shareholders under the terms of this Agreement; and
(c) The obligations of PetQuarters arising at any time (the
"Determination Time") from the business operations of PetQuarters or
resulting from ownership of the Shares, whether known or unknown,
contingent or absolute, recorded on its/their books or not, and arising
or resulting in any way from facts, events, agreements, obligations or
occurrences that existed or transpired at a prior time or resulted from
the passage of time to the Determination Time, including, but not
limited to, any lawsuit (at law or in equity), administrative or other
proceeding initiated by any person or Entity against any Shareholder to
enforce the payment or performance of any such obligation, to the
extent not specifically subject to an indemnity by the Shareholders
under the terms of this Agreement.
7.4 LIMITATIONS ON INDEMNIFICATION. Rights to indemnification under
Section 7.2 or 7.3 hereof are subject to the following limitations:
(a) With respect to any Losses incurred by PetQuarters with
respect to any Shareholder Indemnifiable Claim relating to any
representation or warranty of Shareholder set forth in Section 4.9
hereof or any matter referred to in Section 7.2(b) hereof, PetQuarters
shall be entitled to indemnification under Section 7.2 hereof for all
such Losses incurred by it with respect to such Shareholder
Indemnifiable Claim up to the amount of the Purchase Price.
(b) Subject to Section 7.4(g) hereof, the obligations of the
Shareholders under Section 7.2 hereof with respect to any Losses
incurred by any Purchaser Indemnitee with respect to any Shareholder
Indemnifiable Claim relating to any representation or warranty of
Shareholder set forth in Section 4.9 hereof or any matters referred to
in Section 7.2(b) hereof shall terminate on the expiration of the
respective statute of limitations applicable to assessment and
collection of Taxes under the laws then applicable to such Taxes.
(c) The obligations of the Shareholders under Section 7.2
hereof with respect to any Losses incurred by PetQuarters with respect
to Shareholder Indemnifiable Claims relating to any representation or
warranty of Shareholder set forth in Section 4.2 hereof shall not
expire.
(d) Subject to Section 7.4(g) hereof, the obligations of the
Shareholders under Section 7.2 hereof with respect to any Losses
incurred by PetQuarters with respect to any Shareholder Indemnifiable
Claim relating to any representation or warranty hereunder (other than
any representation or warranty of the Shareholders set forth in Section
4.2 or 4.9 hereof) shall terminate on the first anniversary of the
Closing Date.
(e) Subject to Section 7.4(g) hereof, the obligations of the
Shareholders under Section 7.2 hereof with respect to any Losses
incurred by PetQuarters with respect to any Shareholder Indemnifiable
Claim arising out of or relating to any covenant or agreement of the
Shareholders set forth in this Agreement shall terminate upon
expiration, if any, of such covenant or agreement as provided herein.
(f) Subject to Section 7.4(g) hereof and not including any
indemnity provided by Sections 7.3(b) and 7.3(c) hereof, the
obligations of PetQuarters under Section 7.3 hereof with respect to any
Losses incurred by any Shareholder with respect to any Purchaser
Indemnifiable
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Claim relating to any matter referred to in Section 7.3(a) hereof shall
terminate on the first anniversary of the Closing Date.
(g) The foregoing provisions of this Section 7.4
notwithstanding, if, prior to the termination of any obligation to
indemnify, written notice of a Shareholder Indemnifiable Claim or a
Purchaser Indemnifiable Claim, as the case may be, is given by the
Party seeking indemnification (the "Indemnified Party") to the Party
from whom indemnification is sought (the "Indemnifying Party"), or a
suit or action based upon a Shareholder Indemnifiable Claim or a
Purchaser Indemnifiable Claim, as the case may be, is commenced against
the Indemnifying Party, the Indemnified Party shall not be precluded
from pursuing such claim, breach, occurrence, other matter, or suit or
action, or from recovering from the Indemnifying Party (whether through
the courts or otherwise) on the Shareholder Indemnifiable Claim or
PetQuarters Indemnifiable Claim, as the case may be, by any reason of
the termination otherwise provided for above in this Section 7.4, if
any.
7.5 CONDITIONS OF INDEMNIFICATION. With respect to any actual or
potential claim, any written demand, the commencement of any action, or the
occurrence of any other event which involves any Shareholder Indemnifiable Claim
or Purchaser Indemnifiable Claim:
(a) Promptly after the Indemnified Party first receives
written documents pertaining to the Claim, or if such Claim does not
involve a third party Claim (a "Third Party Claim"), promptly after the
Indemnified Party first has actual knowledge of such Claim, the
Indemnified Party shall give notice to the Indemnifying Party of such
Claim in reasonable detail and stating the amount involved, if known,
together with copies of any written documents.
(b) The obligation of the Indemnifying Party to indemnify the
Indemnified Party with respect to any Claim shall not be affected by
the failure of the Indemnified Party to give the notice with respect
thereto in accordance with Section 7.5(a) hereof unless the
Indemnifying Party has been materially prejudiced thereby.
(c) If the Claim involves a Third Party Claim, then the
Indemnifying Party shall have the right, at its sole cost, expense and
ultimate liability regardless of the outcome, and through counsel of
its choice (which counsel shall be reasonably satisfactory to the
Indemnified Party), to litigate, defend, settle or otherwise attempt to
resolve such Third Party Claim; provided, however, that if in the
Indemnified Party's reasonable judgment a conflict of interest may
exist between the Indemnified Party and the Indemnifying Party with
respect to such Third Party Claim, then the Indemnified Party shall be
entitled to select counsel of its own choosing, reasonably satisfactory
to the Indemnifying Party, in which event the Indemnifying Party shall
be obligated to pay the fees and expenses of such counsel.
Notwithstanding the preceding sentence, the Indemnified Party may
elect, at any time and at the Indemnified Party's sole cost, expense
and ultimate liability, regardless of the outcome, and through counsel
of its choice, to litigate, defend, settle or otherwise attempt to
resolve such Third Party Claim. If the Indemnified Party so elects (for
reasons other than the Indemnifying Party's failure or refusal to
provide a defense to such Third Party Claim), then the Indemnifying
Party shall have no obligation to indemnify the Indemnified Party with
respect to such Third Party Claim, but such disposition will be without
prejudice to any other right the Indemnified Party may have to
indemnification under Section 7.2 or 7.3 hereof, regardless of the
outcome of such Third Party Claim. If the Indemnifying Party fails or
refuses to provide a defense to any Third Party Claim, then the
Indemnified Party shall have the right to undertake the defense,
compromise or settlement of such Third Party Claim, through counsel of
its choice, on behalf of and for the account and at the risk of the
Indemnifying Party, and the Indemnifying Party shall be obligated to
pay the costs, expenses and attorney's fees
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incurred by the Indemnified Party in connection with such Third Party
Claim. In any event, PetQuarters Indemnitees, the Company and the
Shareholders shall fully cooperate with each other and their respective
counsel in connection with any such litigation, defense, settlement or
other attempted resolution.
7.6 PAYMENT OF INDEMNIFICATION BY SHAREHOLDERS. If PetQuarters is
required or obligated to pay cash to any third-party pursuant to a Shareholder
Indemnifiable Claim, the Shareholders shall pay or reimburse PetQuarters in
cash, or by wire of immediately available funds, such amount that PetQuarters is
required to pay to such third-party. For all other Losses suffered by
PetQuarters pursuant to a Shareholder Indemnifiable Claim, all indemnification
to be paid by the Shareholders, or any of them, shall be effected, at the sole
option of the Indemnifying Party, by either (a) tendering to the Indemnified
Party that number of PQ Shares as is equal to the quotient of the amount of the
indemnification divided by $3.50, or (b) the payment in cash, by certified check
or by wire of immediately available funds the full amount of the indemnified
liability.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATION OF PETQUARTERS. The obligation of
PetQuarters to effect the Transaction shall be subject to the fulfillment at or
prior to the Closing of the following conditions, unless PetQuarters shall waive
such fulfillment:
(i) No injunction, restraining order or other order issued by
a court of competent jurisdiction that prohibits the consummation of
the Transaction shall be in effect and no action, suit or proceeding
before any court or any governmental body or authority pertaining to
the Transaction contemplated by this Agreement or to its consummation
shall have been instituted on or before the Closing Date;
(ii) There shall not have been taken or proposed any action,
and no statute, rule or regulation shall have been promulgated or
enacted, by any local, state, federal or foreign government or
governmental agency, that would render the consummation of the
Transaction illegal;
(iii) This Agreement and the transactions contemplated hereby
shall have received all approvals, consents, authorizations, and
waivers from governmental and other regulatory agencies and other third
parties (including lenders, holders of debt securities, and lessors)
required to consummate the Transaction and, if applicable to the
Transaction, the waiting period prescribed by the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act shall have expired or been terminated;
(iv) Each of the Shareholders shall have performed or caused
WeR to have performed, as required, in all material respects all
agreements and covenants and satisfied all conditions on their part to
be performed or satisfied on or prior to the Closing;
(v) No material adverse change shall have taken place in the
assets, business, condition (financial or otherwise), or operations of
WeR;
(vi) The representations and warranties of each of the
Shareholders set forth in this Agreement, the Schedules or Exhibits
hereto or in any written statement that shall be delivered to
PetQuarters shall be true and correct in all material respects on and
as of the Closing Date as if made on and as of such date;
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(vii) PetQuarters shall have received from each of the
Shareholders a certificate, executed by such Shareholder or its
authorized representative, dated as of the Closing Date, as to the
satisfaction of the conditions in paragraphs (iv), (v) and (vi) above;
(viii) PetQuarters shall have received, on and as of the
Closing Date, an opinion of counsel to the Shareholders in a form
reasonably acceptable to PetQuarters;
(ix) PetQuarters shall have received, on and as of the Closing
Date, such other closing documents and instruments as PetQuarters shall
reasonably request, in each case reasonably satisfactory in form and
substance to PetQuarters and its counsel;
(x) The Shareholders shall have delivered to PetQuarters,
except as otherwise requested by PetQuarters, the written resignations
of all of the officers and directors of WeR, and will cause any other
action to be taken with respect to those resignations that PetQuarters
may reasonably request;
(xi) PetQuarters shall have received executed copies of the
Employment Agreements for Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxx,
substantially in the form attached hereto as Exhibit B.
(xii) PetQuarters shall have received Audited Financial
Statements through March 31, 2000 for WeR; and
(xiii) PetQuarters shall have received written confirmation
from AHN/FIT, satisfactory to PetQuarters, that AHN/FIT (i) consents to
the assignment of the Galaxy Contract to PetQuarters, (ii) waives any
past defaults of WeR under the Galaxy Contract, and (iii) will give
PetQuarters a reasonable time to cure any ongoing defaults under the
Galaxy Contract.
(xiv)
For purposes of paragraph (v) above but without limiting the scope of such
paragraph, "material adverse change" shall include any reduction of $5,000 or
more in the Equity of WeR as of the Closing Date as compared to the Equity of
WeR shown in WeR's Balance Sheet prepared in accordance with generally accepted
accounting principals, it being agreed and understood that it is the intent of
the Parties that WeR shall continue to operate as it has done in the past until
Closing and that the Shareholders will continue to operate as they have done
until Closing, and that no extraordinary distributions shall be made to the
Shareholders.
8.2 CONDITIONS TO OBLIGATION OF THE SHAREHOLDERS. The obligation of the
Shareholders to effect the Transaction shall be subject to the fulfillment at or
prior to the Closing of the following conditions, unless the Shareholders shall
waive such fulfillment:
(i) No injunction, restraining order or other order issued by
a court of competent jurisdiction that prohibits the consummation of
the Transaction shall be in effect and no action, suit or proceeding
before any court or any governmental body or authority pertaining to
the Transaction contemplated by this Agreement or to its consummation
shall have been instituted on or before the Closing Date;
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(ii) There shall not have been taken any action, and no
statute, rule or regulation shall have been promulgated or enacted, by
any state, federal or foreign government or governmental agency, that
would render the consummation of the Transaction illegal;
(iii) This Agreement and the transactions contemplated hereby
shall have received all approvals, consents, authorizations, and
waivers from governmental and other regulatory agencies and other third
parties (including lenders, holders of debt securities, and lessors)
required to consummate the Transaction and, if applicable to the
Transaction, the waiting period prescribed by the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act shall have expired or been terminated;
(iv) PetQuarters shall have performed all agreements and
covenants and satisfied all conditions on its part to be satisfied on
or prior to the Closing;
(v) The Shareholders shall have received, on and as of the
Closing Date, an opinion of counsel to PetQuarters in a form reasonably
acceptable to the Shareholders;
(vi) The representations and warranties of PetQuarters set
forth in this Agreement shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such
date;
(vii) No material adverse change shall have taken place in the
assets, business, condition (financial or otherwise), or operations of
PetQuarters;
(viii) The Shareholders shall have received from PetQuarters a
certificate, executed by its authorized representative, dated as of the
Closing Date, as to the satisfaction of the conditions in paragraphs
(iv), (vi) and (vii) above;
(ix) The Shareholders shall have received, on and as of the
Closing Date, such other closing documents and instruments as the
Shareholders shall reasonably request, in each case reasonably
satisfactory in form and substance to the Shareholders and their
counsel;
(x) Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxx shall have received
executed copies of their Employment Agreements, substantially in the
form attached hereto as Exhibit B.
ARTICLE IX
THE CLOSING
9.1 CLOSING. The Closing hereunder shall take place at the offices of
Xxxxxx, Xxxxxxx & Xxxxxxxx LLP in Little Rock, Arkansas, or at such other place
as PetQuarters and the Selling Parties may agree upon, on the Closing Date.
9.2 DELIVERY BY THE SELLING PARTIES. At the Closing, the Selling
Parties shall deliver to PetQuarters the following instruments, in form and
substance satisfactory to PetQuarters and its counsel, against delivery of the
items specified in Section 9.3:
(i) Certificates representing all of the Shares, registered in
the names of the Shareholders, duly endorsed by the Shareholders for
transfer and upon which are affixed any documentary stock transfer
stamps required by law (executed in blank or in favor of PetQuarters),
together with all other documents necessary or appropriate to validly
transfer the Shares to
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PetQuarters free and clear of any and all encumbrances. On submission
of the certificates to WeR for transfer, WeR shall issue to PetQuarters
certificates representing the Shares, registered in PetQuarters' name;
(ii) The stock books, stock ledgers, minute books and
corporate seals of WeR;
(iii) The certificates as provided in Section 8.1(vii);
(iv) The opinion of counsel to the Shareholders as provided in
Section 8.1(viii); and
(v) The written resignations of WeR's officers and directors
as provided in Section 8.1(x).
9.3 DELIVERY BY PETQUARTERS. At the Closing, PetQuarters shall deliver
to the Shareholders the following instruments, in form and substance
satisfactory to the Shareholders and their counsel, against delivery of the
items specified in Section 9.2:
(i) The stock certificates for the Purchase Price as provided
in Sections 2.2.1 and 2.2.2;
(ii) The opinion of counsel to PetQuarters as provided in
Section 8.2(v); and
(iii) The certificates as provided in Section 8.2(viii).
ARTICLE X
TERMINATION, AMENDMENT, WAIVER
10.1 TERMINATION. This Agreement and the Transaction may be terminated
at any time prior to the Closing:
10.1.1 By mutual consent of PetQuarters and the Selling
Parties; or
10.1.2 By either PetQuarters or the Shareholders, upon written
notice to the other, if the conditions to such Party's obligations to consummate
the Transaction, in the case of PetQuarters, as provided in Section 8.1, or, in
the case of the Shareholders, as provided in Section 8.2, were not, or cannot
reasonably be, satisfied on or before April 14, 2000, unless the failure of
condition is the result of the material breach of this Agreement by the Party
seeking to terminate.
Regardless of the reason or method of termination, Sections 5.2, 5.3, and 6.7 of
this Agreement shall survive any termination of this Agreement.
10.2 AMENDMENT. This Agreement may be amended by the Shareholders and
PetQuarters by action taken at any time prior or subsequent to the Closing. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties required by the preceding sentence.
10.3 WAIVER. At any time prior to the Closing Date, PetQuarters or the
Shareholders may (1) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (2) waive any
inaccuracies in the representations and warranties contained
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herein or in any document delivered pursuant hereto, or (3) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a Party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such Party.
ARTICLE XI
GENERAL PROVISIONS
11.1 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or delivered by an
overnight mail service such as UPS or Federal Express to the parties at the
following addresses (or at such other address for a Party as shall be specified
by like notice given at least five (5) business days prior thereto):
If to PetQuarters:
PetQuarters, Inc.
X.X. Xxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
with a copy to:
Xxxxxx, Xxxxxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxxx
Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: C. Xxx Xxxxxxxx
If to the Shareholders or any of them:
WeRPets, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxx 000-000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
with a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Xxxxx
Nashville City Center
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
11.2 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.3 MISCELLANEOUS. This Agreement (1) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between the parties, with respect to the subject matter hereof, except as
specifically provided otherwise or referred to herein, so that no such external
or separate agreements relating to the subject matter of this Agreement shall
have any effect or be binding, unless the same is referred to specifically in
this Agreement or is executed by the parties after
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the date hereof; (2) is not intended to confer upon any other person or Entity
any rights or remedies hereunder; (3) shall not be assigned by operation of law
or otherwise without the other Party's prior written consent, which shall not be
unreasonably withheld; (4) shall be binding on, and shall inure to the benefit
of, the parties hereto, and their respective successors, heirs and assigns; and
(5) shall be governed in all respects, including validity, interpretation and
effect, by the internal laws of the State of Tennessee, without regard to the
principles of conflict of laws thereof. This Agreement may be executed in two or
more counterparts which together shall constitute a single agreement.
11.4 SEVERABILITY. Should any one or more of the provisions of this
Agreement or any agreement entered into pursuant hereto be determined to be
illegal or unenforceable, all other provisions of this Agreement and such other
agreements shall be given effect separately from the provision or provisions
determined to be illegal or unenforceable and shall not be affected thereby.
11.5 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
on the date first written above by their respective officers thereunto duly
authorized.
PETQUARTERS, INC.
By:
------------------------------------
Xxxxx Xxxxxxx, President
THE SHAREHOLDERS:
------------------------------------- -------------------------------------
XXXXXXX XXXXXX XXXXXX XXXXXXX
------------------------------------- -------------------------------------
XXXXXXX XXXXXX XXX XXXXXXXXXX
------------------------------------- -------------------------------------
XXXXXX XXXXX XXXXXX XXXXXXX
------------------------------------- -------------------------------------
XXXXXXX XXXXXXX XXXXXX XXXXXXX
AHN/FIT INTERNET, LLC,
-------------------------------------
XXXXXX XXXXXX
By:
-----------------------------------
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