Exhibit 2.06
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 23rd day of June, 1999, by and between Xxxxxxxxxx.xxx, Inc., a Nevada
corporation ("Xxxxxxxxxx.xxx") and Xxxxxxx X. XxXxxxx, Xx. and Xxxxxx X. XxXxxxx
who are residents of Nashville, Tennessee (together, the "Shareholders").
RECITALS:
A. The Shareholders together own sixty (60) and forty (40) shares,
respectively, which shares together comprise all of the issued and outstanding
shares of capital stock of Display Arts, Inc., a Tennessee corporation ("Display
Arts"), (collectively, the "Display Arts Stock");
B. The Shareholders are directors and officers of Display Arts; and
C. Xxxxxxxxxx.xxx desires to purchase from the Shareholders, and the
Shareholders desire to sell to Xxxxxxxxxx.xxx, the Display Arts Stock under
terms herein recited.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
ARTICLE I
Sale of Display Arts Stock
1.01 Sale and Transfer of Display Arts Stock. Subject to the terms and
conditions of this Agreement, on the date of the Closing (as defined under
Section 2.01 hereof) the Shareholders shall sell, and Xxxxxxxxxx.xxx shall
purchase, the Display Arts Stock free and clear of any liens or encumbrances.
1.02 Consideration; Payment of Display Arts Closing Debts. At the Closing,
Xxxxxxxxxx.xxx shall pay to the Shareholders the sum of one million three
hundred thousand dollars ($1,300,000), the "Tentative Purchase Price."
Immediately following the Closing, the Shareholders shall deposit such sum into
a bank account in the Shareholders' names over which the Shareholders alone have
signature authority (the "Shareholders' Closing Account"), which account shall
be utilized by the Shareholders for the sole purpose of paying off Display Arts'
debts and obligations related to certain of Display Art's equipment leases and
its bank loans (collectively, the "Display Arts Closing Debts") identified on
the Display Arts Schedule attached hereto (the "Display Arts Schedule"), such
payments to be accomplished in the manner provided under Section 2.02 hereof.
The amount remaining in the Shareholders' Closing Account following payment of
the Display Arts Closing Debts shall constitute the Shareholders' consideration
for the Display Arts Stock (the "Final Purchase Price") and shall be the
Shareholders' sole and exclusive property.
ARTICLE II
Closing
2.01 Closing Date. The closing of the purchase and sale of the Display
Arts Stock hereunder (the "Closing") shall be held at the offices of Display
Arts' attorney, D. Xxxxxxxxx Xxxxxxx, at 12:00 noon on October 1, 1999, or at
such other time and place upon which Xxxxxxxxxx.xxx and the Shareholders may
agree in writing (the "Closing Date"). The parties may by written agreement
extend the Closing to a subsequent date and time.
2.02 Delivery of Consideration and Payment of Display Arts Closing Debts.
A. Payment of Tentative Purchase Price. At the Closing, provided all
obligations hereunder imposed on each party have been fulfilled in all respects
and provided all other conditions hereof have been met, the Shareholders shall
deliver to Xxxxxxxxxx.xxx the stock certificates representing the Display Arts
Stock, duly endorsed for transfer with signatures guaranteed. Upon receipt of
same, Xxxxxxxxxx.xxx shall pay to the Shareholders the Tentative Purchase Price
via wire transfer to a bank account in Nashville, Tennessee, designated by the
Shareholders. The Closing shall not be considered to have been completed until
such wire transfer has been received in such bank account.
B. Shareholders' Closing Account and Payment of the Display Arts
Closing Debts and Finalized Purchase Price. Immediately following the Closing,
the Shareholders shall promptly make disbursements from the Shareholders'
Closing Account to pay off all of the Display Arts Closing Debts. For the sole
purpose of paying off the Display Arts Closing Debts and disbursing to
themselves the Finalized Purchase Price, the Shareholders shall be agents of
Xxxxxxxxxx.xxx. The parties understand and agree that only the Display Arts
Closing Debts shall be paid from the Shareholders' Closing Account and the
Shareholders shall have no obligation whatsoever to pay any other debt, expense
or obligation of Display Arts, except as may be otherwise herein provided.
Promptly following payment of the Display Arts Closing Debts, the Shareholders
shall disburse from the Shareholders' Closing Account the Finalized Purchase
Price to the Shareholders and thereupon such account shall be closed and the
bank statements and other records relating to such account shall be delivered to
Xxxxxxxxxx.xxx. Following the Closing, Xxxxxxxxxx.xxx shall cause Display Arts
to allow the Shareholders full access to the books and records of Display Arts
in the event a disagreement arises between Display Arts or the Shareholders and
a creditor of Display Arts with respect to payment of any of the Display Arts
Closing Debts. Upon request by the Shareholders, Xxxxxxxxxx.xxx shall further
cause Display Arts to provide the Shareholders with photocopies of any of such
books and records at Display Arts' sole expense. In the event of any such
disagreement, the Shareholders shall be permitted to communicate directly with
creditors and employ an attorney (at the Shareholders sole expense) to represent
Display Arts in connection with such disagreement until the same has been
resolved. The Shareholders shall hold Xxxxxxxxxx.xxx and Display Arts harmless
and indemnify such companies for any damages, costs and expenses, including
reasonable attorneys' fees, with respect to the Shareholders' failure to pay in
full any of the Display Arts Closing Debts.
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2.03 Public Offering; Xxxxxxxxxx.xxx's Option to Terminate; Audit of
Display Art's Books.
A. Public Offering; Xxxxxxxxxx.xxx's Option to Termination
Agreement. A condition precedent to the parties consummating the Closing shall
be the satisfactory completion by Xxxxxxxxxx.xxx of an initial public offering
of its common stock (the "IPO"). If, prior to or on the date set for the
Closing, Xxxxxxxxxx.xxx, in its sole judgment, determines that the IPO will not
be accomplished, it shall promptly provide notice thereof to the Shareholders.
This Agreement shall be rescinded as of the effective date of such notice from
Xxxxxxxxxx.xxx to the Shareholders and thereafter neither of the parties shall
have any further obligation to the other party with the exception of the
provisions hereunder concerning the return of confidential information and the
ongoing obligations recited hereunder not to disclose such confidential
information.
B. Audit of Display Arts Books. In preparation for the IPO,
Xxxxxxxxxx.xxx has retained, at Xxxxxxxxxx.xxx's sole expense, a certified
public accounting firm (the "CPA Firm") to perform a certified audit of Display
Art's books, records and financial statements for the periods required by rule 5
promulgated by the Securities and Exchange Commission (the "SEC"). The
Shareholders shall have no liability to the CPA Firm for any of the costs
associated with such audit.
C. Termination of Agreement. Notwithstanding anything herein to the
contrary, it is a material condition of this Agreement that unless the Closing
occurs on or before 12:00 o'clock noon, October 1, 1999 (the "Termination
Date"), this Agreement shall be rescinded in its entirety and thereafter each of
the parties shall have no further obligation to the other party, including
reimbursement of any expenses incurred by such other party in connection with
this Agreement, with the exception of the provisions hereunder concerning the
return of confidential information and the ongoing obligations recited hereunder
imposed upon the parties not to disclose such confidential information. The
parties may by written agreement extend the Termination Date. TIME IS OF THE
ESSENCE WITH RESPECT TO THE PROVISIONS OF THIS SUBSECTION 2.03C.
D. Property to be Distributed to the Shareholders: Shareholders'
Personal Property. Listed on the Display Arts Schedule are items of personal
property that shall be distributed to the Shareholders prior to the closing.
Additionally, the Display Arts Schedule lists items of the Shareholders'
personal property that will be removed from the Display Arts' business premises
promptly following the Closing.
ARTICLE III
Representations and Warranties of The Shareholders
Subject to and except for the information which is set forth in a list of
exceptions, explanations and disclosures identified by the section in this
Article to which they pertain, and contained in the schedule attached hereto
(the "Display Arts Schedule"), the Shareholders, jointly and severally,
represent and warrant to Xxxxxxxxxx.xxx that:
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3.01 Title to the Display Arts Stock. The Shareholders are the owners,
beneficially and of record, of all of the outstanding shares of capital stock
issued by Display Arts to be sold by the Shareholders hereunder, free and clear
of any liens, encumbrances, security agreements, options, claims, charges or
restrictions of any nature whatsoever. The Shareholders shall not vote to
approve or take any actions to cause Display Arts to issue any additional shares
of Display Arts stock or rights to acquire Display Arts stock from and after the
date hereof.
3.02 Authorization. The Shareholders have the full power and authority to
execute and deliver this Agreement and to execute and deliver any and all other
collateral agreements hereto and which are referred to as a part hereof. This
Agreement constitutes the valid and binding obligation of the Shareholders,
enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy laws or other similar laws affecting creditors' rights
generally and by principles of equity.
3.03 Organization. Display Arts is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee, and has
full corporate power and authority to carry on its business as it is now being
conducted. Display Arts is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or properties make such
qualification necessary, except where the failure to be so qualified will not
have a material adverse effect on Display Arts.
3.04 Capitalization. The authorized capital stock of Display Arts consists
of one hundred (100) shares of Common Stock, all of which are issued and
outstanding. All such outstanding shares have been duly authorized, are validly
issued, fully paid and nonassessable, and do not violate Display Arts' Articles
of Incorporation or Bylaws or any agreement to which Display Arts is a party or
by which it is bound. All such outstanding shares have been issued in accordance
with all applicable state and federal securities laws. Except as set forth
herein, there are no options, warrants, calls, rights, commitments or agreements
of any character to which Display Arts is a party or by which it is bound
obligating Display Arts to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or obligating Display
Arts to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement.
3.05 Display Arts Subsidiaries. Display Arts owns no shares of capital
stock directly or indirectly, of any other corporation, partnership or joint
venture interest.
3.06 Validity of Agreement. The Shareholders have the power and authority
to execute and deliver this Agreement. This Agreement constitutes the valid and
binding obligation of the Shareholders, enforceable in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy laws or
other similar laws affecting creditors' rights generally and by principles of
equity. The execution and delivery of this Agreement by the Shareholders, and
the consummation of the transactions contemplated hereby, do not require the
consent, approval or authorization of any person, public authority or other
entity.
3.07 Display Arts' Financial Statements. Attached hereto as a part of the
Display Arts Schedule are true and correct copies of Display Arts' income
statement
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and its balance sheet for its year ended December 31, 1997 and its income
statement and balance sheet for its year ended December 31, 1998. Such
statements are referred to collectively as the "Display Arts Financials" and the
said balance sheets are together referred to as the "Display Arts Balance
Sheets." To the Shareholders' knowledge, the Display Arts Financials:
(i) in all material respects are in accordance with Display Arts'
books and records; and
(ii) in all material respects are prepared in accordance with
generally accepted accounting principles and present fairly the financial
position of Display Arts and the results of its operations as of the respective
dates and for the periods indicated thereon except as otherwise stated in such
financial statements
The above representations concerning the Display Arts Financials are
subject to the additional information provided in the attached Display Arts
Schedule. At the date of the Display Arts Balance Sheets, to the Shareholder's
knowledge Display Arts had no material liabilities or obligations, fixed,
contingent or otherwise, not set forth on the Display Arts Financials or in the
Display Arts Schedule. For purposes of this Agreement, "materiality" shall mean
amounts in excess of fifteen thousand dollars ($15,000) either individually or
in the aggregate.
3.08 Events Since Date of Display Arts Balance Sheet. Since the date of
the Display Arts Balance Sheet dated December 31, 1998, except as otherwise
contemplated by this Agreement, or except as described in the Display Arts
Schedule, Display Arts has conducted and its business only in the ordinary and
usual course and, without limiting the generality of the foregoing:
(a) Display Arts has not sustained any damage, destruction or loss
by reason of fire, explosion, earthquake, casualty, labor trouble, requisition
or taking of property by any government or agency thereof, windstorm, embargo,
riot, act of God or public enemy, flood, accident, revocation of license or
right to do business, total or partial termination, suspension, default or
modification of any Material Contracts (defined under Section 3.15 hereof),
governmental restriction or regulation, other calamity, or other similar or
dissimilar event (whether or not covered by insurance) materially and adversely
affecting the condition (financial or otherwise), business, net worth, assets,
properties or operations of Display Arts taken as a whole.
(b) There have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, operations, obligations or
liabilities (fixed or contingent) of Display Arts which, in the aggregate, have
had or may be reasonably expected to have (whether before or after the Closing
Date) a materially adverse effect on the condition (financial or otherwise),
business, net, worth, assets, properties or operations of Display Arts as a
whole.
(c) Display Arts has not issued, or authorized for issuance, any
equity security, bond, note or other security or granted, or entered into, any
commitment or obligation to issue or sell any such equity security, bond, note
or other security, whether pursuant to offers, stock option agreements, stock
bonus agreements, stock purchase plans, incentive compensation plans, warrants,
calls, conversion rights or otherwise.
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(d) Display Arts has not incurred additional debt for borrowed
money, nor incurred any obligation or liability (fixed, contingent or otherwise)
except in the ordinary and usual course of business.
(e) Display Arts has not declared or made any dividend, payment or
other distribution on or with respect to any share of its capital stock.
(f) Display Arts has not purchased, redeemed or otherwise acquired
or committed itself to acquire for a consideration, directly or indirectly, any
share or shares of its capital stock.
(g) Display Arts has not mortgaged, pledged, otherwise encumbered or
subjected to lien any of its assets or properties, tangible or intangible, nor
committed itself to do any of the foregoing, except for liens for current taxes
which are not yet due and payable and purchase money liens arising out of the
purchase or sale of products or services made in the ordinary and usual course
of business.
(h) Display Arts has not disposed of, or agreed to dispose of, any
asset or property, tangible or intangible, except in the ordinary and usual
course of business, and in each case for a consideration at least equal to the
fair value of such asset or property, nor leased or licensed to others
(including officers and directors), or agreed to lease or license, any asset or
property.
(i) Display Arts has not purchased or agreed to purchase or
otherwise acquire any debt or equity securities of any corporation, partnership,
joint venture, firm or other entity.
(j) Display Arts has not entered into any transaction or contract,
or made any commitment to do the same, except in the ordinary and usual course
of business and not involving an amount in any case in excess of $10,000 nor
waived any right of substantial value or canceled any debt or claim or
voluntarily suffered any extraordinary loss.
(k) Display Arts has not sold, assigned, transferred or conveyed, or
committed itself to sell, assign, transfer or convey, any Proprietary Right (as
defined in Section 3.17 hereof).
(l) Display Arts has not effected or agreed to any amendment or
supplement to any employee profit sharing, stock option, stock purchase,
pension, bonus, incentive, retirement, medical reimbursement, life insurance,
deferred compensation or any other employee benefit plan or arrangement.
(m) Display Arts has not effected or agreed to effect any change in
its directors or executive management.
(n) Display Arts has not effected or committed itself to effect any
amendment or modification to its Articles of Incorporation or Bylaws.
3.09 Properties. To the Shareholder's knowledge, in all material respects,
the Display Arts Balance Sheets reflects all of the assets and properties, real
and personal, used by Display Arts in its business or otherwise held by it,
except for:
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(i) property acquired or disposed of in the ordinary and usual
course of business since the date of such balance sheet.
Except as set forth in the Display Arts Balance Sheets and the Display
Arts Schedule, Display Arts has good and marketable title to all assets and
properties listed on the Display Arts Balance Sheets and thereafter acquired,
free and clear of any imperfections of title, lien, claim, encumbrance,
restriction, charge or equity of any nature whatsoever, except for the lien of
current taxes not yet due and payable. All of the fixed assets and properties
listed on the Display Arts Balance Sheets and thereafter acquired are in good
operating condition and are free from any material defect.
3.10 Accounts Receivable. All of the accounts receivable of Display Arts
shown on the Display Arts Balance Sheets or thereafter acquired arose and are
collectible in the ordinary and usual course of Display Arts business, subject
to normal business risks of the non-collection of such accounts.
3.11 Taxes. With the exception of its 1998 federal and State of Tennessee
income tax returns which have been extended, Display Arts has duly filed with
the appropriate United States, state, local and foreign governmental agencies,
all tax returns and reports required to be filed and has paid in full all taxes,
interest, penalties, assessments or deficiencies, if any, due to, or claimed to
be due by, any taxing authority at this time or has made adequate provision
therefor on its books. Display Arts has not executed or filed with any taxing
authority any agreement extending the period for assessment or collection of any
taxes. Display Arts is not a party to any pending action or proceeding, nor, to
the best of its knowledge, is any such action or proceeding threatened by any
governmental authority for the assessment or collection of taxes, interest,
penalties, assessments or deficiencies, and no claim for assessment or
collection of taxes, interest, penalties, assessments or deficiencies has been
asserted against it. No issue has been raised by any federal, state, local, or
foreign taxing authority in connection with an audit or examination of Display
Arts's tax returns, business or properties which has not been settled or
resolved.
3.12 Compensation. The Display Arts Schedule contains a full and complete
list of all persons who served as directors, officers, employees or consultants
of Display Arts at December 31, 1998, specifying their names and job
designations, the annual compensation paid or payable to such persons and the
basis of such compensation, whether fixed or commission or a combination
thereof. Except as otherwise disclosed in the Display Arts Schedule, since
December 31, 1998, there his been no material change in compensation or any
commitment to materially change the compensation, by means of wages, salaries,
bonuses, gratuities or otherwise, to any such director, officer, employee or
consultant of Display Arts.
3.13 Compliance with Law. Except for possible minor exceptions, the curing
or non-curing of which would not have a material effect on the condition
(financial or otherwise), business, net worth, assets, properties, or operations
of Display Arts taken as a whole, the business of Display Arts has been
conducted in accordance with all applicable laws, regulations, orders and other
requirements of governmental authorities, including, without limiting the
generality of the foregoing, all laws, regulations and orders relating to
employment practices and procedures and the health
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and safety of employees. Display Arts has not received any notice of alleged
violations of any of the foregoing.
3.14 Litigation. Except as set forth in the Display Arts Schedule, there
is no claim, dispute, action, proceeding, suit, appeal or investigation, at law
or in equity, pending against Display Arts or involving any of its business or
properties, before any court, agency, authority, arbitration panel or other
tribunal, and, to the best knowledge of the Shareholders, none has been
threatened. To the best knowledge of the Shareholders, there are no facts which,
if known to shareholders, customers, governmental authorities or other persons,
would result in any such claim, dispute, action, proceeding, suit, appeal or
investigation which would have a material adverse effect on the condition
(financial or otherwise), business, net worth, assets, properties or operations
of Display Arts taken as a whole. Except as set forth in the Display Arts
Schedule, Display Arts is not subject to any order, writ, injunction or decree
of any court, agency, authority, arbitration panel or other tribunal, or in
default with respect to any notice, order, writ, injunction or decree.
3.15 Material Contracts. The Display Arts Schedule contains a full and
complete list (subject in the case of clause (i) below to the dollar amount
indicated therein) of each partially or totally executory contract or agreement
to which Display Arts is a party, or by which it is bound in any respect (the
"Material Contracts"), including, without limitation, any and all:
(i) contracts or agreements for the purchase, sale, lease or other
disposition of equipment, goods, materials, research and development, supplies,
studies, or capital assets, or for the performance of services, in any case
involving more than $10,000, except that such limitation as to dollar amount
shall not apply as to any contracts or agreements covered by Section 3.24;
(ii) contracts or agreements for the joint performance of work or
services, and all other joint venture or teaming agreements;
(iii) management or employment contracts, consulting contracts,
collective bargaining contracts or termination and severance agreements;
(iv) notes, mortgages, deeds of trues, loan agreements, security
agreements, guarantees, debentures, indentures, credit agreements and other
evidences of indebtedness;
(v) pension, retirement, profit sharing, deferred compensation,
bonus, incentive, life insurance, hospitalization, or other employee benefit
plans or arrangements (including, without limitation, any contracts or
agreements with trustees, insurance companies or others relating to any such
employee benefit plan or arrangement);
(vi) stock option, stock purchase, warrant, repurchase or other
contracts or agreements relating to any shares of capital stock;
(vii) contracts or agreements with agents, brokers, consignees,
sales representatives or distributors;
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(viii) contracts or agreements with any director, officer, employee,
consultant or shareholder;
(ix) powers of attorney or singular authorizations granted to third
parties; and
(x) licenses, sublicenses, royalty agreements, and other contracts
or agreements to which Display Arts is a party, or otherwise subject, relating
to technical assistance or to Proprietary Rights (as defined in Section 3.17
hereof).
Except as stated in the Display Arts Schedule, Display Arts is not a party
to, nor bound by, any contract or agreement which:
(A) The Shareholders believe will result in any material loss upon
the performance thereof (including any material liability for penalties or
damages, whether liquidated, direct, indirect, incidental or consequential, or
down time charges), and
(B) No party has raised any claim, dispute or controversy or
withheld payments from Display Arts with respect to any of its contracts nor has
Display Arts received notice or warning of alleged nonperformance, delay in
delivery or other noncompliance with respect to the obligations of Display Arts
under any of its contracts, nor are there any facts which exist indicating that
any of such contracts may be totally or partially terminated or suspended by the
other party thereto. Display Arts has not entered into any contract or agreement
containing covenants limiting its right to compete in any business with any
person. As used in this Agreement, the terms "contract" and "agreement" mean and
include every contract, agreement and commitment whether written or oral.
3.16 Leased Real Property. The Display Arts Schedule contains a full and
complete list of all real property leased by Display Arts. Except as herein
stated to the contrary, all such property is held under valid and enforceable
leases, copies of which have been delivered to Xxxxxxxxxx.xxx and as to which
neither party to the lease is in material default. Display Arts does not own any
real property in fee simple. To the best knowledge of the Shareholders, none of
the operations of Display Arts on any of such real property, nor any improvement
thereon, violate any applicable building code, zoning requirement, or pollution
control ordinance or any other regulation or statute applicable to such real
property. Display Arts is not the lessee under the lease for the premises at
0000 Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxx identified on the Display Arts Schedule.
Display Arts has assumed the obligations of the tenant under such lease, Xxxxxxx
X. XxXxxxx, Xx. Subject to the landlord's consent, prior to the closing, Xxxxxxx
X. XxXxxxx, Xx. shall assign his interest in such lease to Display Arts. If for
any reason such assignment cannot be completed prior to the Closing, after the
Closing Xxxxxxxxxx.xxx shall cause Display Arts to fulfill all of the
obligations of the tenant under such lease and Xxxxxxxxxx.xxx shall hold Xxxxxxx
X. XxXxxxx, Xx. harmless from and against any damages, costs and expenses,
including reasonable attorney's fees, with respect thereto.
3.17 Proprietary Rights. The Display Arts Schedule contains a full and
complete list of all trademarks, trade names, service marks, and copyrights, or
applications therefor, owned or used by Display Arts. Display Arts owns, or
possesses adequate licenses or other rights to use, all trademarks, trademark
applications, service
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marks, trade names, copyrights, inventions, drawings, computer software,
designs, trade secrets, customer fists, proprietary know-how or information, or
other rights with respect thereto (collectively referred to as "Proprietary
Rights") required for or incident to the operation, sale and use of all products
and services sold or provided by Display Arts, free and clear of any right,
lien, encumbrance or claim of others, including without limitation present or
former employees of Display Arts or their former employers; provided, however,
that the possibility exists that other persons, completely independent of
Display Arts or its employees or agents, could have developed trade secrets,
customer information or items of technical information similar or identical to
that of Display Arts. The Shareholders are not aware of any such development by
other persons of similar or identical trade secrets or technical information.
3.18 Toxic Wastes; Employee Safety; Etc. To the Shareholders' best
knowledge, Display Arts makes adequate provision for the control, removal,
disposal and storage of all toxic wastes, if any, generated by its business
operations. Display Arts is not presently in violation of any federal or state
law, regulation, ordinance, or the like governing protection of the environment
and human health and safety regarding toxic wastes. Display Arts is not
presently in violation of any provision of OSHA or any regulation promulgated
thereunder. No action, proceeding, claim, suit or the like is pending or has
been threatened against by any government agency or any person with respect to
toxic wastes, occupational health and safety or environmental damage, nor are
the Shareholders aware of any potential claims concerning any such matters.
3.19 Insurance. The Display Arts Schedule contains a full and complete
list of all policies of insurance to which Display Arts is a party or is a
beneficiary or named insured, and Display Arts has in full force and effect,
with all premiums due thereon paid, the policies of insurance set forth therein.
To the Shareholder's knowledge, all the insurable properties of Display Arts are
insured in amounts and coverages and against risks and losses which are adequate
and usual for similar properties and businesses.
3.20 Bank Accounts. The Display Arts Schedule contains a full and complete
list of all the bank accounts of Display Arts together with the names of the
persons authorized to draw thereon. All cash in such accounts is held in demand
deposits and is not subject to any restriction or limitation as to withdrawal.
3.21 No Conflict. The execution and delivery of this Agreement by the
Shareholders and the performance of their obligations hereunder:
(i) are not in violation or breach of, and will not conflict with or
constitute a default under, any of the terms of its Articles of Incorporation or
Bylaws, or any note, debt instrument, security agreement, lease, deed of trust
or mortgage, or any other contract, agreement or commitment binding upon Display
Arts or any of its assets or properties;
(ii) will not result in the creation or imposition of any lien,
encumbrance, equity or restriction in favor of any third party upon any of its
assets or properties; and
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(iii) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Display Arts or any of its
assets or properties.
The Display Arts Schedule contains a full and complete list of all
necessary consents, waivers and approvals of third parties required to be
obtained by the Shareholders in connection with the execution and delivery of
this Agreement by the Shareholders and the performance of their obligations
hereunder.
3.22 No Default. Display Arts has in all respects performed, or is now
performing, the obligations of, and is not in material default (and would not by
the lapse of time and/or the giving of notice be in material default) in respect
of, any note, debt instrument, security agreement, option to purchase, lease,
deed of trust or mortgage, or any other material contract, agreement or
commitment binding upon it or its assets or properties. Each of the Material
Contracts, agreements or other instruments described on the Display Arts
Schedule is a legal, binding, and enforceable obligation by or against it. To
the best knowledge of the Shareholders, no party with whom Display Arts has an
agreement or contract, which is of material importance to the condition
(financial or otherwise), business, net worth, assets, properties, or operations
of Display Arts taken as a whole, is in default thereunder or has breached any
terms of provisions thereof in a material way.
3.23 Certain Advances. There are no receivables of Display Arts owing by
directors, officers, employees, consultants or its shareholders, or owing by any
affiliate of any director or officer of Display Arts, other than advances in the
ordinary and usual course of business to officers and employees for reimbursable
business expenses.
3.24 Related Parties. No officer or director of Display Arts, or any
affiliate of any such person, has, either directly or indirectly:
(i) an interest in any corporation, partnership, firm or other
person or entity which furnishes or sells products or services which are similar
to those furnished or sold by Display Arts; or
(ii) a beneficial interest in any contract or agreement to which
Display Arts is a party or by which Display Arts may be bound.
For purposes of this Section 3.24, there shall be disregarded any interest
which arises solely from the ownership of less than a one (1) percent equity
interest in a corporation whose stock is regularly traded on any national
securities exchange or in the over-the-counter market.
3.25 Copies of Certain Documents. The Display Arts Schedule contains true
and complete copies of:
(i) its currently effective Articles of Incorporation, certified by
the Secretary of State of Tennessee;
(ii) its currently effective Bylaws, certified by the Secretary of
Display Arts; and
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(iii) all federal and other tax returns filed by Display Arts since
its inception or for five (5) years, whichever period is shorter.
3.26 Underlying Documents. All underlying documents listed or described in
the Display Arts Schedule have heretofore been furnished to Xxxxxxxxxx.xxx or
shall be furnished to Xxxxxxxxxx.xxx upon Xxxxxxxxxx.xxx's request or within
twenty days from the execution of this Agreement. All such documents furnished
to Xxxxxxxxxx.xxx are true and correct copies, and there are no amendments or
modifications thereto, except as expressly noted in the Display Arts Schedule.
3.27 Disclosure. Neither this Agreement, the Display Arts Schedule, nor
any other written statement or certificate furnished by Display Arts or the
Shareholders to Xxxxxxxxxx.xxx in connection with the transactions contemplated
hereby, when taken together, contain any untrue statement of a material fact or
omit to state any material fact necessary to make any statement, in light of the
circumstances under which such statement is made, not misleading.
3.28 Effect of Agreement. The execution, delivery and performance by the
Shareholders of this Agreement, and the consummation of the transactions herein
contemplated, will not conflict with, or result in a breach of the terms of, or
constitute a default under or violation of, any law or regulation of any
governmental authority or any provision of the Articles of Incorporation or
Bylaws of either, or any agreement or instrument to which the Shareholders are a
party or by which they are bound or to which they are subject. No consent of any
person not a party to this Agreement and no consent of any governmental
authority is required to be obtained on the part of the Shareholders to permit
the consummation of the transactions contemplated by this Agreement, which
consents will not have been received before the Closing Date.
3.29 Indemnification of Xxxxxxxxxx.xxx. The Shareholders, agree, jointly
and severally, to indemnify, defend and hold Xxxxxxxxxx.xxx harmless from and
against any and all losses, damages, costs and expenses, including attorneys'
fees (any such loss, damage, cost or expense herein called a "Loss"), which
Xxxxxxxxxx.xxx or any member of the Xxxxxxxxxx.xxx Group may at any time sustain
or incur by reason of:
(i) any inaccuracy or breach of any of the representations,
warranties or covenants of the Shareholders contained herein or in any
certificate delivered pursuant hereto; or
(ii) any claim or claims arising out of the failure of the
Shareholders to discharge any of their obligations pursuant to this Agreement.
In any action in respect of which indemnity may be sought hereunder by a
party hereto shall be brought against such party, the other party shall be
entitled to participate in the defense thereof at its own expense and to settle
any such action on such terms as it shall see fit so long as the party entitled
to indemnification hereunder shall be released from any liability by reason of
such settlement. In such event, the party required to provide indemnification
shall receive full cooperation and access to all relevant and nonprivileged
records. The indemnification provisions of this section shall not be deemed
exclusive and shall not prejudice any other rights or remedies, at law or in
equity, of any party under this Agreement with respect to any matter relating to
the terms, provisions, covenants or conditions of this Agreement or any
transaction
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contemplated hereby. The obligation of the Shareholders under this section or
any other provision of this Agreement under any covenant, warranty,
representation or indemnity (the "Indemnity Obligations") are limited to the
following extent: (a) With the exception of the following item (b), the
Indemnity Obligations shall terminate and expire two (2) years after Closing;
(b) All obligations arising from the Shareholders' representations and
warranties hereunder shall continue until the expiration of the statute of
limitations applicable to any underlying liability or claim by a third party
against Xxxxxxxxxx.xxx; (c) the Shareholders shall have no liability to
Xxxxxxxxxx.xxx under this Agreement unless Xxxxxxxxxx.xxx's damages in the
aggregate exceed twenty five thousand dollars ($25,000) and then the
Shareholders shall be liable only for the excess thereof and (d) the
Shareholders' liability under this Indemnity shall in no event exceed the
Purchase Price.
3.30 Short Period Financial Statements. Attached to the Display Arts
Schedule are true and correct copies of Display Arts' income statement and its
balance sheet for its three months ended March 31, 1997 and its income statement
and balance sheet for its three months ended March 31, 1998. Such statements are
referred to collectively as the "Display Arts Short Period Statements." Such
statements are unaudited and Shareholders make no representations or warranties
with respect thereto other than to represent and warrant that such statements
were prepared based on Display Arts books and records.
ARTICLE IV
Shareholders' Guaranties
The parties acknowledge that the Shareholders of Display Arts are
personally liable for certain obligations of Display Arts as disclosed on the
Display Arts Schedule. Xxxxxxxxxx.xxx covenants that, with the exception of the
Display Arts Closing Debts which shall be paid by the Shareholders immediately
after the Closing from the Shareholders' Closing Account (as provided under
Article II hereof), after the Closing Xxxxxxxxxx.xxx shall cause Display Arts to
pay all of such debts and obligations in a timely manner, and Xxxxxxxxxx.xxx
shall hold the Shareholders and directors of Display Arts harmless and indemnify
them from and against any damages, costs and expenses, including reasonable
attorneys' fees, with respect to such debts and obligations.
ARTICLE V
Representations And Warranties of Xxxxxxxxxx.xxx
Xxxxxxxxxx.xxx represents and warrants to the Shareholders that:
5.01 Organization. Xxxxxxxxxx.xxx is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee and has
full corporate power and authority to carry on its business as now being
conducted.
5.02 Validity of Agreement. Xxxxxxxxxx.xxx has full corporate power and
authority to execute and deliver this Agreement. This Agreement constitutes the
valid and binding obligation of Xxxxxxxxxx.xxx, enforceable in accordance with
its terms,
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except as enforcement may be limited by applicable bankruptcy laws or other
similar laws affecting creditors' rights generally and by principles of equity.
The execution and delivery of this Agreement by Xxxxxxxxxx.xxx, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action, and such execution and delivery do not
require the consent, approval or authorization of any person, public authority
or other entity.
5.03 Effect of Agreement. The execution, delivery and performance by
Xxxxxxxxxx.xxx of this Agreement, and the consummation of the transactions
herein contemplated, will not conflict with, or result in a breach of the terms
of, or constitute a default under or violation of, any law or regulation of any
governmental authority or any provision of the Articles of Incorporation or
Bylaws of Xxxxxxxxxx.xxx, or any agreement or instrument to which Xxxxxxxxxx.xxx
is a party or by which it is bound or to which it is subject. No consent of any
person not a party to this Agreement and no consent of any governmental
authority is required to be obtained on the part of Xxxxxxxxxx.xxx to permit the
consummation of the transactions contemplated by this Agreement, which consent
will not have been received before the Closing Date.
5.04 Indemnification of the Shareholders. Xxxxxxxxxx.xxx agrees to
indemnify, defend and hold the Shareholders harmless from and against any and
all losses, damages, costs and expenses, including attorneys' fees (any such
loss, damage, cost or expense herein called a "Loss"), which they may at any
time sustain or incur by reason of (i) any claim or claims whether or not
presently known to the Xxxxxxxxxx.xxx Group, which arise in connection with the
operation of the business of Xxxxxxxxxx.xxx, where the event which gives rise to
such claim occurred prior to the date of this Agreement, or (ii) any claim or
claims arising out of the failure of Xxxxxxxxxx.xxx to discharge any of its
obligations pursuant to this Agreement. In any action in respect of which
indemnity may be sought hereunder by a party hereto shall be brought against
such party, the other party shall be entitled to participate in the defense
thereof at its own expense and to settle any such action on such terms as it
shall see fit so long as the party entitled to indemnification hereunder shall
be released from any liability by reason of such settlement. In such event, the
party required to provide indemnification shall receive full cooperation and
access to all relevant and nonprivileged records. The indemnification provisions
of this Section shall not be deemed exclusive and shall not prejudice any other
rights or remedies, at law or in equity, of any party under this Agreement with
respect to any matter relating to the terms, provisions, covenants or conditions
of this Agreement or any transaction contemplated hereby. The obligation of
Xxxxxxxxxx.xxx under this section or any other provision of this Agreement under
any covenant, warranty, representation or indemnity (the "Indemnity
Obligations") are limited to the following extent: (a) With the exception of the
following item (b), the Indemnity Obligations shall terminate and expire two (2)
years after Closing; (b) All obligations arising from Xxxxxxxxxx.xxx's
representations and warranties hereunder in addition to its commitments to cause
Display Arts to pay all of the Display Arts debts and obligations for which the
Shareholders and directors of Display Arts are personally liable and the hold
such persons harmless with respect thereto shall continue until the expiration
of the statute of limitations applicable to any underlying liability or claim by
a third party against the Shareholders and directors of Display Arts; and (c)
Xxxxxxxxxx.xxx shall have no liability to the Shareholders under this Agreement
unless damages in the aggregate exceed twenty five thousand dollars ($25,000)
and then Xxxxxxxxxx.xxx shall be liable only for the excess thereof.
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ARTICLE VI
Access to Information; Confidentiality
6.01 Access.
(a) Prior to the Closing Date, the Shareholders shall cause Display
Arts to afford representatives of Xxxxxxxxxx.xxx, including auditors from the
CPA Firm, reasonable access to the officers and personnel of Display Arts and to
such of its financial, contractual and other records as shall be reasonably
necessary for Xxxxxxxxxx.xxx's investigation of Display Arts and its business
and operations including the audit of Display Arts books and records by the CPA
Firm.
(b) Prior to the Closing Date, Xxxxxxxxxx.xxx shall afford
representatives of Display Arts reasonable access to the officers and personnel
of Xxxxxxxxxx.xxx and to such of their financial, contractual and other records
as shall be reasonably necessary for Display Arts's investigation of
Xxxxxxxxxx.xxx and its business and operations.
(c) Xxxxxxxxxx.xxx shall make available to the Shareholders the
opportunity to ask questions of and receive answers from appropriate officers or
representatives of Xxxxxxxxxx.xxx concerning the terms and conditions of the
transactions contemplated by this Agreement and to obtain any additional
information which Xxxxxxxxxx.xxx possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
furnished to the Shareholders hereunder.
(d) The Shareholders shall cooperate with all reasonable requests by
Xxxxxxxxxx.xxx in providing Xxxxxxxxxx.xxx information pertaining to Display
Arts necessary to assist Xxxxxxxxxx.xxx with the IPO.
6.02 Confidentiality.
(a) Prior to the Closing and except as may be required by the IPO,
Xxxxxxxxxx.xxx shall not disclose to any person any information concerning
Display Arts not previously disclosed to the public or in the public domain
including, without limitation, financial data, customer data, operational data
and tax information (collectively, the "Confidential Information") which is
contained herein or in the Display Arts Schedule, or which shall have been
furnished to or obtained by Xxxxxxxxxx.xxx as provided in Section 6.01(a) or to
the CPA Firm or otherwise furnished to Xxxxxxxxxx.xxx. in connection with the
negotiation of this Agreement, other than Xxxxxxxxxx.xxx's employees, legal
counsel, financial advisers, or accountants in confidence, or used for any
purpose other than as contemplated herein. In the event that the purchase and
sale of the Display Arts Stock shall not be consummated, Xxxxxxxxxx.xxx shall
promptly return to Display Arts all such information in its possession or in the
possession of the CPA Firm which is in written form or on computer disk, and
Xxxxxxxxxx.xxx shall delete all of the Confidential Information from its
computer hard drives and request that the CPA Firm do likewise, and from and
after the Termination Date Xxxxxxxxxx.xxx shall refrain from disclosing any such
confidential information to any party verbally or by any other means.
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(b) No information concerning Xxxxxxxxxx.xxx not previously
disclosed to the public or in the public domain which is contained herein or
which shall have been furnished to or obtained by Display Arts or any
shareholder as provided in Section 6.01(b) or 6.01(c), shall be disclosed by
them to any person other than their respective employees, legal counsel,
financial advisors, or accountants in confidence, or used for any purpose other
than as contemplated herein. In the event that the purchase and sale of the
Display Arts Stock shall not be consummated, each such person shall return to
Xxxxxxxxxx.xxx all such information in their possession which is in written
form.
ARTICLE VII
Covenants of The Shareholders
The Shareholders hereby jointly and severally covenant:
7.01 Conduct of Business. From and after the execution and delivery of
this Agreement and until the Closing Date or the termination of this Agreement,
whichever shall first occur, the Shareholders shall cause the following:
(i) Display Arts shall not engage in any activities or transactions
which shall be outside the ordinary course of its business without the prior
written consent of Xxxxxxxxxx.xxx which consent shall not be unreasonably
withheld;
(ii) such persons will use their best efforts to preserve the
existing licenses, franchises, rights and privileges pertinent to the business
and operations of Display Arts; and
(iii) such persons will use their best efforts to preserve intact
the business organization of Display Arts and to preserve its goodwill and
relationships with its suppliers, customers, employees and others with whom it
deals.
7.02 Notice of Certain Adverse Changes, Defaults or Claims. The
Shareholders shall give prompt notice to Xxxxxxxxxx.xxx of any material adverse
change to the properties or business of Display Arts, or any notice of default
received by it, subsequent to the date of this Agreement and prior to the
Closing Date, under any instrument or agreement to which Display Arts is a party
or by which any of its property is bound, or of the assertion of any claim
which, if upheld, would render inaccurate any representation contained herein.
7.03 Actions Requiring Consent. Between the date hereof and the Closing
Date or, the Termination Date, whichever shall first occur, the Shareholders
shall not cause or permit Display Arts, without the prior written consent of
Xxxxxxxxxx.xxx, which consent shall not unreasonably be withheld, to take any
action of the type described in clauses (e) through (n) of Section 3.08 hereof.
7.04 Implementation of Representations and Warranties. Such persons shall
use all reasonable efforts to render accurate as of the Closing Date their
representations and warranties contained in this Agreement, and shall refrain
from taking any action which would render inaccurate as of the Closing Date any
of such representations or warranties.
-16-
7.05 Communications. Between the date hereof and the Closing Date, such
persons shall furnish no communication to the public with respect to the
transactions contemplated by this Agreement without the prior approval of
Xxxxxxxxxx.xxx as to the content thereof, which approval shall not unreasonably
be withheld by Xxxxxxxxxx.xxx.
7.06 Other Negotiations. Between the date hereof and the Closing Date or
the Termination Date, whichever shall first occur, such persons will disclose to
Xxxxxxxxxx.xxx all bona fide inquiries from other persons, firms or corporations
concerning the possible acquisition of Display Arts (by consolidation, merger,
sale or exchange of assets, sale of stock or otherwise) or equity securities of
Display Arts; and the Shareholders shall not solicit nor permit an acquisition
of Display Arts by another person, firm or corporation, whether by
consolidation, merger or purchase or sale of business or assets or by the sale
or exchange of stock, nor will the Shareholders solicit the sale of any of
Display Arts' capital stock or other equity securities to any other person, firm
or corporation. Nothing contained in this Section shall be construed as limiting
the rights of the Board of Directors of Display Arts to discharge their
fiduciary responsibilities in response to unsolicited offers from third parties.
7.07 Cooperation. The Shareholders shall cooperate, and will use their
best efforts to have the other present officers, directors and employees of
Display Arts cooperate, with Xxxxxxxxxx.xxx, at its request, on and after the
Closing Date and without further consideration, in endeavoring to effect the
collection of accounts or notes receivable owing to Display Arts at the Closing
Date, and, at Xxxxxxxxxx.xxx's expense, in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes relating to adjustment of federal income or any other
taxes of Display Arts for all periods prior to the Closing Date and in
connection with any other actions, proceedings, arrangements or disputes
whatsoever involving Display Arts and based upon contracts, arrangements or acts
which were in effect or occurred on or prior to the Closing Date,
7.08 Facilitation of the Xxxxxxxxxx.xxx Public Offering. The Shareholders
shall use their best efforts to cooperate, and will use their best efforts to
have the other present officers, directors, agents, employees, attorneys, and
accountants of Display Arts to cooperate with Xxxxxxxxxx.xxx, in providing in a
timely manner any and all information concerning Display Arts to Xxxxxxxxxx.xxx
and the CPA Firm in the process of Xxxxxxxxxx.xxx's initial public offering of
its common stock, being undertaken by Xxxxxxxxxx.xxx pursuant to the Securities
Act of 1933, as amended ("Public Offering"). Such cooperation shall include, but
not be limited to:
(i) permitting the CPA Firm to perform a certified audit of Display
Arts's financial statements and statements of operation for the two year period
ended December 31, 1998 and for the preparation and review of any interim
financial statements and statements of operations of Display Arts as required by
Regulation S-132 promulgated under the Securities Act, if such certified audit
shall be required in the Public Offering, and
(ii) providing such additional information or documents which may be
reasonably necessary for Xxxxxxxxxx.xxx to conduct its Public Offering and to
permit the effectiveness of the registration statement to be filed by
Xxxxxxxxxx.xxx with the United States Securities and Exchange Commission
("SEC").
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The parties understand and agree that with the exception of providing
information, the Shareholders shall have no obligation whatsoever in connection
with the IPO including, without limitation, participating in the IPO or
providing legal, accounting or other advice or assistance.
ARTICLE VIII
Covenants of Xxxxxxxxxx.xxx
Xxxxxxxxxx.xxx hereby covenants:
8.01 Implementation of Representations and Warranties. Xxxxxxxxxx.xxx
shall use all reasonable efforts to render accurate as of the Closing Date its
representations and warranties contained in this Agreement, and shall refrain
from taking any action which would render inaccurate as of the Closing Date any
of such representations or warranties.
8.02 Communications. Between the date hereof and the Closing Date (except
to the extent required by state or federal securities laws), Xxxxxxxxxx.xxx
shall furnish no communication to the public with respect to the transactions
contemplated by this Agreement without the prior approval of Display Arts as to
the content thereof, which approval shall not unreasonably be withheld by
Display Arts.
8.03 Registration of Xxxxxxxxxx.xxx Common. Xxxxxxxxxx.xxx will use its
best efforts to file and maintain an effective registration statement with the
SEC and applicable state securities commissions covering the registration on
Form SB-2 and sale of its common stock in order to conduct the Public Offering
as soon as practicable after the execution of this Agreement.
8.04 SEC Documents. Xxxxxxxxxx.xxx covenants that all documents prepared
and filed with the SEC in connection with the IPO at the time such are filed or
become effective, will not include an untrue statement of a material fact
pertaining to Display Arts or omit to state a material fact pertaining to
Display Arts required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by Xxxxxxxxxx.xxx in reliance upon and in conformity with
written information concerning Display Arts furnished to Xxxxxxxxxx.xxx by the
Shareholders in connection with this Agreement. Xxxxxxxxxx.xxx covenants that it
will deliver to the Shareholders' attorney, not later than fifteen (15) days
after the same has been filed with the SEC, true and exact copies of all
documents prepared by Xxxxxxxxxx.xxx or its advisors and agents in connection
with the IPO that name, refer to or discuss in any manner Display Arts or this
Agreement.
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ARTICLE IX
Securities Law Matters
The Display Arts Stock to be transferred by the Shareholders to
Xxxxxxxxxx.xxx pursuant to this Agreement shall not be registered under the
Securities Act, in reliance upon exemptions from such registration contained in
the Securities Act including Section (4)(1) and/or Section 4(2) of the Act.
ARTICLE X
Conditions to Obligations of the Shareholders
The obligations of the Shareholders under this Agreement are, at the
option of the Shareholders, subject to the satisfaction at or prior to the
Closing of the following conditions in addition to other applicable provisions
hereof:
10.01 Accuracy of Representations and Warranties. All of the
representations and warranties made by Xxxxxxxxxx.xxx in this Agreement shall be
true in all material respects as of the Closing Date with the same force and
effect as though such representations and warranties had been made as of the
Closing Date, except for changes contemplated by this Agreement, and
Xxxxxxxxxx.xxx shall have delivered to the Shareholders a certificate to such
effect dated the Closing Date and signed by its President and Chief Executive
Officer.
10.02 Fulfillment of Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by Xxxxxxxxxx.xxx at or
before the Closing Date shall have been duly complied with and performed, and
Xxxxxxxxxx.xxx shall have delivered to the Shareholders a certificate to such
effect dated as of the Closing Date and signed by its President and Chief
Executive Officer.
10.03 Approval of Sale. All authorizations, consents and approvals of all
federal, state and governmental agencies and authorities required to be obtained
in order to permit consummation of the transactions contemplated by this
Agreement shall have been obtained.
10.04 No Litigation. There shall be no litigation pending which has been
brought for the purpose of enjoining any transaction contemplated by this
Agreement or which would have the effect, if successful, of imposing a material
liability upon Display Arts or the Shareholders because of such transaction.
ARTICLE XI
Conditions to Obligations of Xxxxxxxxxx.xxx
The obligations of Xxxxxxxxxx.xxx under this Agreement are, at the option
of Xxxxxxxxxx.xxx, subject to the satisfaction at or prior to the Closing of the
following conditions:
11.01 Accuracy of Representations and Warranties. All of the
representations and warranties made by the Shareholders in this Agreement shall
be true in all material respects as of the Closing Date with the same force and
effect as though such
-19-
representations and warranties had been made as of the Closing Date, except for
changes contemplated by this Agreement, and the Shareholders shall have
delivered to Xxxxxxxxxx.xxx a certificate to such effect dated the Closing date.
11.02 Fulfillment of Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by the Shareholders at or
before the Closing Date shall have been duly complied with and performed, and
the Shareholders shall each have delivered to Xxxxxxxxxx.xxx a certificate to
such effect dated the Closing Date.
11.03 Approval of Sale. All authorizations, consents and approvals of all
federal, state and local governmental agencies and authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained.
11.04 Consents Obtained. The Shareholders shall have delivered to
Xxxxxxxxxx.xxx the written consent or approval of each person or organization
whose consent or approval shall be required in order to permit them to
consummate the transactions contemplated hereby or in order to avoid any breach
or termination of any agreement to which they are a party.
11.05 No Litigation. There shall be no litigation pending which has been
brought for the purpose of enjoining any transaction contemplated by this
Agreement or which would have the effect, if successful, of imposing a material
liability upon Xxxxxxxxxx.xxx or any of its officers or directors because of
such transaction.
11.06 Accountant's Review. Xxxxxxxxxx.xxx shall have received a letter
from the CPA Firm to the effect that on the basis of their "acquisition review"
of Display Arts, nothing has come to their attention which has caused them to
believe that the accounts or balances to which they applied their procedures
should be adjusted.
11.07 Accounting Treatment. Xxxxxxxxxx.xxx shall have received from its
legal counsel a written analysis stating that the business combination resulting
from the consummation of the transactions contemplated by this Agreement may be
accounted for on a pooling of interests basis in accordance with generally
accepted accounting principles and in accordance with all rules, regulations and
policies of the SEC.
11.08 Xxxxxxxxxx.xxx Review. There shall not have come to the attention of
Xxxxxxxxxx.xxx, as a result of any investigation performed pursuant to Section
6.01 hereof, any information, not previously disclosed to Xxxxxxxxxx.xxx, which
is likely to materially and adversely affect the business, property or
operations of Display Arts following the Closing Date.
11.09 Resignation of Directors. All persons serving as directors of
Display Arts shall have tendered their resignations to be effective as of the
Closing Date.
11.10 Sale of Display Arts Stock. Not less than one hundred percent (100%)
of the shares of Display Arts Stock outstanding as of the Closing Date shall
have been tendered by the Shareholders for purchase by Xxxxxxxxxx.xxx hereunder.
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11.11 Conversion of Shareholders' Loans to Capital. Prior to the Closing,
the Shareholders' Loans on the books of Display Arts shall be converted to
capital and at the time of the Closing, there shall be no loans owed by Display
Arts to any of the Shareholders.
11.12 Employment Agreements/Covenants Not to Compete. Prior to the
Closing, employment agreement satisfactory to the parties shall be entered into
by and among Xxxxxxxxxx.xxx, Xxxxxxx X. XxXxxxx, Xx. and Xxxxxxx X. XxXxxxx,
Xx., which agreements shall include satisfactory covenants not to compete with
the business of Xxxxxxxxxx.xxx after the date of the Closing.
ARTICLE XII
Survival of Representations Warranties and Covenants
The representations, warranties and covenants of the parties contained in
this Agreement or in any certificate or instrument delivered pursuant hereto
shall survive the Closing hereunder.
ARTICLE XIII
Payment of Expenses
13.01 Expenses. Expenses of Negotiation and Consummation of Agreement.
Except as otherwise herein provided to the contrary, the parties shall each pay
their respective legal and accounting fees and other out-of-pocket expenses
incurred incident to the preparation and carrying out of this Agreement and the
transactions herein contemplated, whether or not such transactions are
consummated. As provided under Section 2.30B, Xxxxxxxxxx.xxx shall pay the fee
of the CPA Firm which it will retain to audit the books and records of Display
Arts. Prior to the Closing, Display Arts may pay the legal, accounting and other
profession fees incurred by the Shareholders in the negotiation and consummation
of this Agreement but not to exceed twenty thousand dollars ($20,000).
13.02 Brokers. Each of the parties represents that it has dealt with no
broker or finder in connection with any of the transactions contemplated by this
Agreement and, insofar as it knows, no broker or other person is entitled to any
commission or finder's fee in connection with any such transaction. Each party
agrees to indemnify and hold the other parties harmless against any loss,
liability, damage, claim or expense incurred by reason of any brokerage
commission or finder's fee alleged to be payable because of any act, omission or
statement of the indemnifying party.
ARTICLE XIV
General Provisions
14.01 Notices. Any notice, request, instruction or other document to be
given hereunder by a party to any other party shall be in writing and effective
when delivered personally or sent by certified mail with return receipt
requested, postage prepaid, as follows:
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To Xxxxxxxxxx.xxx:
Xxxxxxxxxx.xxx, Inc.
000 Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xx. Xxxxx X. Xxxxxxx, Xx.
President
With a Copy to:
Xxxxxxx Xxxxxx, Esq.
Law Office of Xxxxxxx Xxxxxx
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
To the Shareholders:
Xxx. Xxxxxx X. XxXxxxx
Xx. Xxxxxxx X. XxXxxxx, Xx.
0000 Xxxxxxxx Xxxx, Xx. 00
Xxxxxxx, XX 00000
With a Copy to:
D. Xxxxxxxxx Xxxxxxx, Esq.
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
or to such other addresses or other persons as may be designated in writing by
any of the parties, by notice given as aforesaid. Any such notice shall be
effective when received by the party to whom notice is given.
14.02 Headings. The headings of the several sections of this Agreement are
inserted for the convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
14.03 Counterparts. This Agreement may be executed in one or more
counterparts, and when so executed each counterpart shall be deemed to be an
original, and said counterparts together shall constitute one and the same
instrument.
14.04 Assignment. None of the parties may assign or transfer any rights or
obligations under this Agreement.
14.05 Waiver. Any party hereto may, by written notice to the others:
(i) waive any of the conditions to its obligations hereunder or
extend the time for the performance of any of the obligations or actions of the
others,
(ii) waive any inaccuracies in the representations of the others
contained in this Agreement or in any documents delivered pursuant to this
Agreement;
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(iii) waive compliance with any of the covenants of the others
contained in this Agreement; or
(iv) waive or modify performance of any of the obligations of the
others.
No action taken pursuant to this Agreement, including without limitation
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, condition or agreement contained herein. Waiver of the breach of any
one or more provisions of this Agreement shall not be deemed or construed to be
a waiver of other breaches or subsequent breaches of the same provisions.
14.06 Entire Agreement. This Agreement, including the schedules and
exhibits hereto, constitutes the entire agreement between the parties pertaining
to the subject matter contained herein and supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties.
No supplement, modification, or amendment of this Agreement shall be binding
unless executed in writing by the party sought to be bound.
14.07 Good Faith. Each of the parties hereto agree that it or they shall
act in good faith in an attempt to cause all the conditions precedent to their
respective obligations hereunder to be satisfied.
14.08 Applicable Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Tennessee.
14.09 Severability. Should any provision of this Agreement be determined
to be invalid, it shall be severed from this Agreement and the remaining
provisions of the Agreement shall remain in full force and effect.
14. 10 Expenses and Attorneys' fees. If either party to this Agreement
breaches any of its duties or obligations hereunder (the "party at fault") in
addition to any damages that the other party hereto may recover from the party
at fault, the party at fault shall pay all of the other party's costs and
expenses of enforcing the provisions of this Agreement including its reasonable
attorneys' fees.
14.11 Mediation of Disputes. In the event a dispute between the parties
shall arise after the Closing in connection with this Agreement, the parties
agree to submit the matter to mediation under the auspices of the American
Arbitration Association, such mediation to be conducted in Nashville, Tennessee,
with the parties sharing the mediation costs equally but paying their respective
legal, accounting and other advisor fees in connection therewith. In the event
such mediation fails to resolve the dispute, the parties shall be free to
pursuant all available remedies under this law and this Agreement.
-23-
WITNESS the due execution of date first set forth above. this Agreement by
the parties hereto as of the
Xxxxxxxxxx.xxx, Inc.
/s/ [ILLEGIBLE] By: /s/ Xxxxx X. Xxxxxxx, Xx.
------------------------ ------------------------
Xxxxx X. Xxxxxxx, Xx.
Chairman of the Board and
Chief Executive Officer
Shareholders:
/s/ [ILLEGIBLE] /s/ Xxxxxxx X. XxXxxxx, Xx.
------------------------ ----------------------------
Xxxxxxx X. XxXxxxx, Xx.
/s/ [ILLEGIBLE] /s/ Xxxxxx X. XxXxxxx
------------------------ ----------------------------
Xxxxxx X. XxXxxxx
-24-
STOCK PURCHASE AGREEMENT
DISPLAY ARTS SCHEDULE
This schedule is intended to disclose all information required to be disclosed
by the Shareholders under the Stock Purchase Agreement between Xxxxxxxxxx.xxx,
Inc. and the shareholders of Display Arts Inc., Xxxxxxx X. XxXxxxx, Xx. and
Xxxxxx X. XxXxxxx (the "Agreement"). The parties acknowledge that disclosure of
identical information is called for under various sections of the Agreement. The
parties agree that full disclosure by Display Arts of any necessary or required
information in this schedule shall be deemed to be full disclosure
notwithstanding the fact that such disclosure herein may not be referenced to
each and every section of the Agreement that requires the disclosure of such
information.
Section 2.02(B) - Listing of Display Arts Closing Debts (see Section 3.08B and
3.15 below for additional information).
--------------------------------------------------------------------------------
Financial Institution/Lessor Identity of Lease or Bank Loan
---------------------------- ------------------------------
--------------------------------------------------------------------------------
First American National Bank Original loan in amount of
$200,000
--------------------------------------------------------------------------------
First American National Bank Original loan in amount of
$32,150
--------------------------------------------------------------------------------
Capital Innovations Xerox 8954-3T #132956001
--------------------------------------------------------------------------------
Capital Innovations Nova Jet Pro 50 #132956002
--------------------------------------------------------------------------------
Aloha Leasing (Lessor now in Computer/ Plotter
bankruptcy and current payments
are made to trustee)
--------------------------------------------------------------------------------
BankOne Toyota 4Runner
--------------------------------------------------------------------------------
Dolphin Computers
--------------------------------------------------------------------------------
Dolphin Computers
--------------------------------------------------------------------------------
Section 2.03D -
A. Property to be Distributed from Corporation: The following is a list of
Display Arts' property that the shareholders will cause to be distributed to
them prior to the Closing subject to securing a waiver from the secured party:
(1) 1991 Dodge Dynasty Automobile
(2) Kitchen Equipment (teacake kitchen)
B. Shareholders' Personal Property: The below listed items are personal property
belonging to the Shareholders and, therefore, do not constitute assets of the
Corporation. Such items shall be removed from the Display Arts premises promptly
following the closing.
(1) Refrigerator
(2) Freezer
(3) Two red chairs and table
(4) Personal items in top storage
(5) Tools and small workbench
(6) Shop-vac (Sears)
(7) Large xxxxx wooden desk in front office
(8) Glass patio table in kitchen
(9) Four chairs
(10) Two wooden file cabinets in middle room
(11) Roaster
Section 3.07 - Financial Statements: See Attached Display Arts Financial
Statements.
Section 3.08 - Events Since Date of Display Arts Balance Sheet:
A. Termination of Xxxxxxx X. Xxxxxxx. On April 29, 1999, Xxxxxxx X. Xxxxxxx, who
was the manager of the Memphis, Tennessee, operation for Display Arts, was
terminated as an employee of Display Arts. This termination may have an impact
on Display Arts' business operations in Memphis due to Xx. Xxxxxxx' relationship
with customers of Display Arts. Xx. Xxxxxxx is working for another firm in
Memphis that competes with Display Arts. Since his departure from Display Arts,
Xx. Xxxxxxx has contacted a number of Display Arts' customers for the apparent
purpose of persuading them to do business with Xx. Xxxxxxx' new employer. Xx.
Xxxxxxx is co-lessee with Display Arts under the lease for the Toyota 4Runner
vehicle referenced hereinafter under Section 3.05, Leased Equipment. Display
Arts is presently the only party using such vehicle and is paying the total
monthly rental payment. Xx. Xxxxxxx has indicated that he has no desire to share
the vehicle with Display Arts and therefore, will not pay any of the future
monthly rental payments. Xx. Xxxxxxx has made some nonspecific monetary claims
against Display Arts with respect to such vehicle lease. When the vehicle was
leased, Xx. Xxxxxxx paid the initial deposit of $3,520.77. Xx. Xxxxxxx has also
alleged that Display Arts has not turned over to him all of his personal
property that he left on the premises in Memphis when his employment was
terminated.
-2-
B. Loans, Lines of Credit and Liens:
--------------------------------------------------------------------------------
Original Corporate
Financial Amount of Periodic Balance at Assets as
Institution Loan Payments When Paid 06/01/99 Security?
----------- ---- -------- --------- -------- ---------
--------------------------------------------------------------------------------
First $32,150 $1,032.27 monthly $32,150 Yes, a lien
American on assets
National secures this
Bank debt
--------------------------------------------------------------------------------
First $200,000 $3,498.00 monthly $147,250 Yes, a lien
American on assets
National secures this
Bank debt
--------------------------------------------------------------------------------
Other Liens:
(1) Alleged Lien on personal property under Lease for Knoxville location
for rent and Display Arts' other obligations.
Section 3.12 - Employee Information as of 6/1/99:
------------------------------------------------------------------------------------------------------------------------
Increase
Annual (Decrease) in
Salary Unless Bonus and Base
Status/Job Stated Where Other Incentive Compensation
Name Designation Otherwise Employed Arrangements Since 12/31/98
---- ----------- --------- -------- ------------ --------------
------------------------------------------------------------------------------------------------------------------------
Xxxxx, Xxxxxxx X. Employee/ $30,347.00 Nashville see footnote 4,267.00
Purchasing,
Costing,
Production
Scheduling, &
Administration
------------------------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxxx X. Part-time $20,384.00 Nashville see footnote none
Employee/
Customer
Service Rep.
------------------------------------------------------------------------------------------------------------------------
Xxxxxxx, Xxxx X. Employee/ $25,480.00 Knoxville +commission & none
Responsible for quarterly bonus
Knoxville's sales of $600 in
activity including 1999: see
outside sales footnote below
------------------------------------------------------------------------------------------------------------------------
-3-
------------------------------------------------------------------------------------------------------------------------
Increase
Annual (Decrease) in
Salary Unless Bonus and Base
Status/Job Stated Where Other Incentive Compensation
Name Designation Otherwise Employed Arrangements Since 12/31/98
---- ----------- --------- -------- ------------ --------------
------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxx, Xxxxxx Employee/ $26,000.00 Nashville +600 quarterly none
Shipping and logistic bonus : eligible
coordinator for commission
see footnote
------------------------------------------------------------------------------------------------------------------------
Xxxxxx, Xxxxxx Employee/ $32,000.00 Nashville +1,000 bonus none
Head quarterly:
Designer see footnote
below
------------------------------------------------------------------------------------------------------------------------
Xxxxxx, Xxxxx X. Employee/ $41,600.00 Nashville eligible for none
Art Director commission
------------------------------------------------------------------------------------------------------------------------
XxXxxxx, Xxxxxx X. Director/ $18,200.00 Nashville see footnote none
President/
Employee/
Involved with
overall company
activities and
miscellaneous
duties
------------------------------------------------------------------------------------------------------------------------
XxXxxxx, Xxxxxxx X. Xx. Director/ Vice $32,760.00 Nashville +Nimlok bonus 2,600.00
President/ see footnote
Employee/ below
In charge of
overall company
sales and
marketing
------------------------------------------------------------------------------------------------------------------------
XxXxxxx, Xxxxx X. Director/ part time Nashville see footnote none
Secretary- $12.50 per
Treasurer hour
Employee/
Performs company
accounting
including
accounts payable
------------------------------------------------------------------------------------------------------------------------
XxXxxxx, Xxxxxxx X., Xx. CEO/ none none none none
Consultant
(see section 2
under general
disclosure below)
------------------------------------------------------------------------------------------------------------------------
Xxxxx, Xxxxx X. Employee/ $26,000.00 Nashville see footnote 1,040.00
Graphic below
Production
Department
------------------------------------------------------------------------------------------------------------------------
-4-
------------------------------------------------------------------------------------------------------------------------
Increase
Annual (Decrease) in
Salary Unless Bonus and Base
Status/Job Stated Where Other Incentive Compensation
Name Designation Otherwise Employed Arrangements Since 12/31/98
---- ----------- --------- -------- ------------ --------------
------------------------------------------------------------------------------------------------------------------------
New, Xxxxxxx X. Part-time Employee/ $10 per hour Memphis none none
General office work
and shipping
programs
------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxxx Employee/ $28,080.00 Nashville +500 bonus 3,120.00
Customer Service 1/1/99 see
Manager footnote below
------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxx, Xxxxxx X. Employee/ $28,002.00 Knoxville +1,000 bonus 1,014.00
Knoxville 4/99, $250
Office moving allowance
Manager 4/99: see
footnote below
------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx, Xxxx Employee/ $22,880.00 Knoxville +500 bonus none
Salesman 7/99 &
including commission:
outside sales, see footnote
model making and below
large exhibit design
------------------------------------------------------------------------------------------------------------------------
Xxxx, Xxxxxx Employee/ $22,360.00 Nashville see footnote below none
Graphic Production
Department
including
Graphic
Production
Finishing
------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx, X. Xxxx Employee/ $26,000.00 Memphis $500 moving allowance 1,040.00
Graphic 5/99, see footnote
Coordinator & below
Responsible
for Sofamore
Fulfillment
Program
------------------------------------------------------------------------------------------------------------------------
footnote
----------
The above noted employees are eligible for company bonus and profit sharing
based on their performance, the company's performance, and at the discretion of
the board of directors.
-5-
Section 3.14 and other applicable sections: Lawsuits, Claims, Disputes, etc.
with Vendors, Customers and others:
1. Nashville - Ace International, Inc.: Dispute over Scanner
Maintenance Agreement. Ace contends that Display Arts is liable to
pay fee for another year of maintenance. Amount at issue is $2,200.
2. Memphis - Xxxxxxx Xxxxxx D/B/A Grand Central Shuttle Service vs.
Display Arts, Inc. She has sued for $25,000 alleging breach of
contract and other grounds related to Display Arts alleged failure
to complete a small job for her firm. On June 8, 1999, this lawsuit
was dismissed by the General Sessions Court of Shelby County,
Tennessee.
3. Nashville - Xxxxxxx'x Compensation Lawsuit filed by employee, Xxxxx
Xxxxxxxx, for $1 million resulting from employment-related accident.
This lawsuit is being defended by xxxxxxx'x compensation insurance
defense attorneys.
4. Nashville - Dispute with EarthLink and American Express for $3,500.
Display Arts contests billing and is presently attempting to resolve
this dispute.
5. Nashville - Account receivable collection dispute with Xxxx Company
and Cutting Edge Corporation in the amounts of $16,000 and $12,557,
respectively. Lawsuits have been filed for each account with
Franklin Collection Agency managing the collection activity. The
amount sought in each lawsuit is the delinquent account receivable
plus all costs of collection including attorney's fees.
6. Memphis - Potential xxxxxxx'x compensation case with new employee
who was allegedly injured trying to unload a truck.
Section 3.15 and other applicable sections - Material Contracts:
A. LEASED EQUIPMENT
--------------------------------------------------------------------------------
Identity of Lessor Amount of When such Balance Owed on
Equipment Company Lease Payment Payment made Lease at 6/1/99
--------- ------- ------------- ------------ ---------------
--------------------------------------------------------------------------------
Xerox 8954- Capital 2,548.50 monthly $22,498.99
3T Innovations
#132956001
--------------------------------------------------------------------------------
Nova Jet Capital 1,564.06 monthly 13,808.54
Pro 50 Innovations
#132956002
--------------------------------------------------------------------------------
-6-
--------------------------------------------------------------------------------
Identity of Lessor Amount of When such Balance Owed on
Equipment Company Lease Payment Payment made Lease at 6/1/99
--------- ------- ------------- ------------ ---------------
--------------------------------------------------------------------------------
Computer/ Aloha 808.01 monthly 8,888.11
Plotter Leasing
(Lessor
now in
bankruptcy
and current
payments are
made to
trustee)
--------------------------------------------------------------------------------
Toyota BankOne 351.87 monthly 6,332.02
4Runner + payoff amount
on termination
of lease based
on mileage
--------------------------------------------------------------------------------
Computers Dolphin 165.26 monthly 5,618.84
--------------------------------------------------------------------------------
Computers Dolphin 290.42 monthly 9,103.02
--------------------------------------------------------------------------------
B. LEASED PREMISES
-----------------------------------------------------------------------------------------------
Location of Lessor Amount of When Such Duration
Property Company Lease Payment Payment is Made of Lease
-------- ------- ------------- --------------- --------
-----------------------------------------------------------------------------------------------
0000 Xxxxxx Xx. Xxxx Xxxx 7,371.29 1st of month 5 years
Nashville, TN (this is total monthly beginning
(See Footnote payment, 1/2 of which 11/1/98
below) is paid by co-lessee -
see footnote below)
-----------------------------------------------------------------------------------------------
00 Xxxxx Xxxx Xxxxx 2,625.00 by 10th of month 5 1/2 years
Memphis, TN beginning
10/1/96
-----------------------------------------------------------------------------------------------
00 Xxxxx Xxxxx X. X. Xxxx 1,850.00 1st of month 5 years
Knoxville, TN Revocable beginning
Trust 1/1/99
-----------------------------------------------------------------------------------------------
1425 Elm Hill RDR Ltd. 3,740.67 1st of month 5 years
Pike Pt. beginning
Nashville, TN 4/1/98
-----------------------------------------------------------------------------------------------
Footnote
----------
The Faydur Court Lease resulted from a failed merger and the premises contains
excess space that Display Arts is presently trying to sublease. The owner of the
company that Display Arts planned to merge with, Xxxxx Xxxxx, is equally liable
on this lease and to date has been paying one-half of the monthly lease
payments. The tenants under this lease are Xxxxxxx X. XxXxxxx, Xx. and Xxxxx
Xxxxx. Display Arts has assumed all of Xxxxxxx X. XxXxxxx, Xx.'s obligations
under such lease. Subject to landlord's approval, prior to the Closing Xxxxxxx
X. XxXxxxx, Xx. will have his interest in the lease assigned to Display Arts.
-7-
C. Group Health Insurance:
Health and dental coverage for all employees under Employers Health Insurance
Company of Madison Wisconsin.
D. Miscellaneous Agreements:
--------------------------------------------------------------------------------
Vendor Equipment/Service Fee
------ ----------------- ---
--------------------------------------------------------------------------------
Xxx Corporation Furnace and Air $2,940.00/annual
Conditioning Maintenance
--------------------------------------------------------------------------------
Pitney Xxxxx Postage machine rental $1,247.04/annual
--------------------------------------------------------------------------------
Danka Photocopy machine varies based on usage
maintenance
--------------------------------------------------------------------------------
Xerox Colorgrafx Electrostatic machine $1,180.00/monthly
Systems, Inc.
--------------------------------------------------------------------------------
Forklift Company (this Forklift purchase $500/monthly balance
also represents a loan) at 6/1/99 = $2,500
--------------------------------------------------------------------------------
ADT (Knoxville) Security $31.00/monthly
--------------------------------------------------------------------------------
BellSouth Advertising Advertising $1,236.00/monthly
Nashville
--------------------------------------------------------------------------------
BellSouth Advertising Advertising $1,548.00/monthly
Memphis
--------------------------------------------------------------------------------
BellSouth Advertising Advertising $1,054.00/monthly
Knoxville
--------------------------------------------------------------------------------
C4 Imaging Maintenance Contract $300/monthly
--------------------------------------------------------------------------------
Sunshine Pages Advertisement for $4,400/annual - 1998
Advertisement 1998 and 1999 $2,500/annual - 1999
--------------------------------------------------------------------------------
Nimlok Company Exclusive Distributor per agreement
Agreement
--------------------------------------------------------------------------------
BFI Waste Systems Trash Removal as per agreement
--------------------------------------------------------------------------------
Nextel Nexlink Telephone System Cell as per agreement
Contracts Telephone Systems
--------------------------------------------------------------------------------
Section 3.16 - Leased Real Property: See 3.15 Above
-8-
Section 3.19 - Insurance:
--------------------------------------------------------------------------------
Name of Company Policy Number Type of Coverage
--------------- ------------- ----------------
--------------------------------------------------------------------------------
Xxxxxxxx Xxxxxxxx XXXX00000 Commercial General
Insurance Companies Liability
--------------------------------------------------------------------------------
Southern Guaranty 0CCPP33028 Automobile
Insurance Companies
--------------------------------------------------------------------------------
Xxxxxxxx Xxxxxxxx 00XXX00000 Workers Compensation
Insurance Companies
--------------------------------------------------------------------------------
Section 3.20 - Bank Accounts:
--------------------------------------------------------------------------------
Balance at Persons with
Name of Bank Type of Account 12/31/98 Signature Authority
------------ --------------- -------- -------------------
--------------------------------------------------------------------------------
First Tennessee checking $17,860.29 Xxxxxx X. XxXxxxx
National Bank Xxxxxxx X. XxXxxxx, Xx.
--------------------------------------------------------------------------------
First American Checking 7,164.58 Xxxxxxx X. Xxxxxxx and
National Bank (Memphis) Xxxxxxx X. XxXxxxx, Xx.
(Closed 4/23/99)
--------------------------------------------------------------------------------
Section 3.25 - Copies of Certain Documents: See attached information as follows:
Certified Charter, Bylaws and Income Tax Returns.
GENERAL DISCLOSURE:
The following items constitute supplemental information Statements to the
Display Arts Financial and the Stock Purchase Agreement:
1. RECURRING MONTHLY EXPENSES AS OF 6/1/99:
First American National Bank Loan $3,498.00
First American National Bank Loan 1,032.27
Xxx Corporation - HVAC Maintenance 245.00
RDR Rent (Nashville) 3,740.67
Faydur Court Lease (Nashville) - 1/4 monthly
rental w/utilities (est.) 4,000.00
Win. Len (Rent - Memphis) 2,625.00
-9-
Xxx Xxxx (Rent - Knoxville) 1,850.00
U.S. Pest Control 30.00
ADT Security Service (Knoxville) - contract 31.00
Creative Alarm (Nashville) 29.00
Aloha Leasing 808.01
Capital Innovations - lease 1,564.06
Capital Innovations - lease 2,548.50
Pitney Xxxxx - postage meter 103.67
Dolphin Leasing (I-Macs) 314.38
Dolphin Leasing (G3) 165.23
Forklift Systems Payment 500.00
Xxxx South Advertising (Nashville) 1,236.00
Xxxx South Advertising (Memphis) 1,548.00
Xxxx South Advertising (Knoxville) 1,054.00
Utilities - Nashville and Memphis (est.) 2,000.00
Danka - Memphis (est.) 75.00
BFI (Waste Removal) 85.07
C4 Imaging 300.00
Xerox Maintenance Contract 1,180.00
Office/Cell Phone Service - Nashville, Knoxville & Memphis (est.) 1,200.00
Medical/Dental Insurance (est.) 1,250.00
Payroll - (est.) 43,000.00
Workers Comp. (annual - Nashville, Memphis & Knoxville) 1,485.00
Commercial Insurance Policies (Nashville, Memphis & Knoxville) 5,637.00
-10-
2. STATUS OF XXXXXXX X. XXXXXXX, XX.
Xxxxxxx X. XxXxxxx, Xx., is not a salaried employee of Display Arts but he
occupies the position of Chief Executive Officer and since Display Arts'
inception he has performed significant services for Display Arts.
3. Corporate Directors and Officers:
Xxxxxxx X. XxXxxxx, Xx.
Director and Chief Executive Officer
0000 Xxxxxxxx Xxxx, Xx. 00
Xxxxxxx, XX 00000
Xxxxxx X. XxXxxxx
Director and President
0000 Xxxxxxxx Xxxx, Xx. 00
Xxxxxxx, XX 00000
Xxxxxxx X. XxXxxxx, Xx.
Director and Vice-President
000 Xxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxx X. XxXxxxx
Director and Secretary-Treasurer
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxxxxxx X. Xxxxxxxxxx
Director
000 Xxxxx Xxx
Xxxxxxxxx, XX 00000
4. Display Arts Obligation for which Shareholders and Directors are liable:
(a) Nashville lease for Faydur Court
(b) Loans from First American National Bank to Display Arts
5. Loans From Shareholders and Related Parties to Display Arts (does not include
accrued interest) - see financial statements
-11-
