EXHIBIT 10.24
PURCHASE AGREEMENT
BY AND AMONG
XXXXX NURSERIES, INC.
XXXXXX FARMS, INC.
BOTANICAL FARMS, INC.
XXXXXX X. XXXXXX III
XXXXXXX X. XXXXXX
XXXXXXX X. XXXXXX, AS TRUSTEE OF THE
TRACE XXXXXX FAMILY INVESTMENT TRUST
AND
XXXXXXX X. XXXXX
DATED AS OF MARCH 3, 2000
TABLE OF CONTENTS
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Page
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Section 1. ACQUISITION.................................................. 2
1.1 Acquired Assets and Assumed Liabilities...................... 2
(a) Acquired Assets.......................................... 2
(b) Excluded Assets.......................................... 4
1.2 Partnership Interests and Enviro-Safe Stock.................. 4
Section 2. PURCHASE PRICE AND OTHER TERMS............................... 5
2.1 Purchase Price............................................... 5
2.2 Earn-Out..................................................... 6
2.3 Increase in Purchase Price................................... 9
2.4 [RESERVED]................................................... 12
2.5 [RESERVED]................................................... 12
2.6 Sales, Use and Transfer Taxes................................ 12
2.7 Allocation of Purchase Price................................. 12
2.8 Possession................................................... 12
2.9 Representative............................................... 12
Section 3. REPRESENTATIONS AND WARRANTIES OF SELLERS.................... 13
3.1 Capitalization............................................... 13
3.2 Subsidiaries and Other Equity Investments.................... 13
3.3 Organization, Good Standing and Authority.................... 14
3.4 Execution and Delivery....................................... 14
3.5 No Conflicts................................................. 14
3.6 Financial Statements......................................... 15
3.7 No Undisclosed Liabilities; Trade Payables................... 15
3.8 Absence of Certain Changes................................... 15
3.9 Property; Encumbrances....................................... 17
3.10 Condition of Personal Property............................... 17
3.11 Condition of Real Property................................... 17
3.12 Accounts Receivable.......................................... 18
3.13 Inventories.................................................. 18
3.14 Intellectual Property and Proprietary Rights................. 18
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3.15 Banking...................................................... 18
3.16 Insurance.................................................... 19
3.17 Indebtedness................................................. 19
3.18 Judgments; Litigation........................................ 19
3.19 Government Payments.......................................... 20
3.20 No Unlawful Contributions.................................... 20
3.21 Employee Benefit Matters..................................... 21
3.22 Permits, Licenses, Etc....................................... 22
3.23 Consents..................................................... 23
3.24 Material Contracts; No Defaults.............................. 23
3.25 Employee Matters............................................. 24
3.26 Affiliations................................................. 24
3.27 Principal Customers and Suppliers............................ 25
3.28 Compliance with Laws......................................... 26
3.29 Product Liability and Product Warranty....................... 26
3.30 Hazardous Materials.......................................... 26
3.31 Utilities.................................................... 27
3.32 Condition of Structures and Tangible Personal Property....... 27
3.33 Year 2000 Compliance......................................... 27
3.34 Brokers' Fees................................................ 27
3.35 Disclosure................................................... 28
3.36 No Third Party Approval Required............................. 28
Section 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT....... 28
4.1 Organization and Good Standing............................... 28
4.2 Execution and Delivery....................................... 28
4.3 No Conflicts................................................. 28
4.4 Brokers' Fees................................................ 29
4.5 Approval..................................................... 29
4.6 No Third Party Approval Required............................. 29
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Section 5. [RESERVED]................................................... 29
Section 6. CONDITIONS PRECEDENT TO CLOSING; POST-CLOSING OBLIGATIONS.... 29
6.1 Conditions to Obligations of Purchaser....................... 29
(a) Representations and Warranties; Performance of
Obligations............................................. 30
(b) Certificates and Deliveries by Sellers.................. 30
(c) No Injunction........................................... 30
(d) Authorizations.......................................... 30
(e) Consents and Approvals.................................. 30
(f) Xxxx of Sale............................................ 31
(g) Opinion of Counsel to Sellers and Shareholders.......... 31
(h) Assignment of Partnership Interests..................... 31
(i) Stock Certificates...................................... 31
(j) Termination of Liens.................................... 31
(k) No Material Adverse Change.............................. 31
(l) Transfer of Excluded Real Property...................... 31
(m) Real Property........................................... 31
(n) Title Report............................................ 31
(o) Surveys................................................. 32
(p) Environmental Audit..................................... 32
(q) Financing............................................... 32
(r) Assignment and Assumption Agreement..................... 32
(s) Assignment of Permits................................... 32
(t) Shareholder Loans....................................... 32
6.2 Conditions to Obligations of Sellers and Shareholders........ 32
(a) Representations and Warranties; Performance of
Obligations............................................. 32
(b) Certificates and Deliveries by Purchaser................ 33
(c) No Injunction........................................... 33
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(d) Consents and Approvals................................. 33
(e) Assignment and Assumption Agreement.................... 33
(f) Payment of Purchase Price.............................. 33
(g) Tax Indemnity Agreement................................ 33
(h) Closing Costs.......................................... 33
(i) Opinion of Counsel of Purchaser........................ 34
6.3 Post-Closing Obligations..................................... 34
(a) Name Change............................................ 34
(b) Release of Guarantees.................................. 34
(c) Section 338(h)(10) Election............................ 34
(d) Payment of Audit Fees and Expenses..................... 35
(e) Parent Guaranty........................................ 35
Section 7. INDEMNIFICATION.............................................. 35
7.1 Survival Provisions.......................................... 35
7.2 Indemnification.............................................. 36
7.3 Limitations on Indemnification............................... 37
7.4 Third Party Claims........................................... 37
7.5 Representative............................................... 38
7.6 Other Agreements; Offset Rights.............................. 38
7.7 Exclusive Rights............................................. 39
7.8 Guarantees................................................... 39
Section 8. COVENANTS NOT TO COMPETE..................................... 39
8.1 Covenant Not to Compete...................................... 39
8.2 No Solicitation.............................................. 39
8.3 Severability................................................. 40
8.4 Specific Performance......................................... 40
Section 9. CONDUCT OF BUSINESS PENDING CLOSING.......................... 40
9.1 Qualification................................................ 40
9.2 Ordinary Course............................................. 40
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9.3 Organic Changes.............................................. 41
9.4 Indebtedness................................................. 41
9.5 Accounting................................................... 41
9.6 Compliance with Legal Requirements........................... 41
9.7 Disposition of Assets........................................ 41
9.8 Compensation................................................. 41
9.9 Modification or Breach of Agreements; New Agreements......... 42
9.10 Capital Expenditures......................................... 42
9.11 Maintain Insurance........................................... 42
9.12 Discharge.................................................... 42
Section 10. TERMINATION.................................................. 42
10.1 Grounds for Termination...................................... 42
10.2 Effect of Termination........................................ 43
Section 11. GENERAL PROVISIONS........................................... 43
11.1 Notices...................................................... 43
11.2 Severability................................................. 44
11.3 Expenses..................................................... 44
11.4 Public Announcements......................................... 45
11.5 Third-Party Rights........................................... 45
11.6 Entire Agreement............................................. 45
11.7 Successors and Assigns....................................... 45
11.8 Counterparts................................................. 45
11.9 Recitals, Schedules and Exhibits............................. 45
11.10 Construction................................................. 45
11.11 Governing Law................................................ 46
11.12 Attorneys' Fees.............................................. 46
11.13 Arbitration.................................................. 46
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PURCHASE AGREEMENT
This Purchase Agreement is made and entered into as of March 3, 2000
(this "Agreement"), by and among Xxxxx Nurseries, Inc., a California corporation
("Purchaser"), Xxxxx Horticulture, Inc., a Delaware corporation ("Parent"),
Xxxxxxx X. Xxxxx ("Xxxxx"), Xxxxxx X. Xxxxxx III ("WLovell"), Xxxxxxx X. Xxxxxx,
as trustee of the Trace Xxxxxx Family Investment Trust (the "Trust"), Xxxxxxx X.
Xxxxxx ("JLovell"; Xxxxx, WLovell, the Trust and JLovell, hereinafter are
referred to as "Shareholders"), Xxxxxx Farms, Inc., a Florida corporation
("Xxxxxx Farms") and Botanical Farms, Inc., a Florida corporation ("Botanical
Farms") (Xxxxxx Farms and Botanical Farms are hereinafter collectively are
referred to as "Sellers").
RECITALS
A. (i) Shareholders and (ii) WLovell and JLovell, own all of the
issued and outstanding shares of capital stock of Xxxxxx Farms and Botanical
Farms, respectively;
B. JLovell and WLovell own all of the issued and outstanding shares
of capital stock of Enviro-Safe Laboratories, Inc., a Florida corporation
("Enviro-Safe");
C. JLovell and WLovell own all of the partnership interests of Xxxxxx
Properties, a Florida general partnership ("Xxxxxx Partnership");
X. Xxxxxxx and Xxxxxx Partnership own all of the real and personal
property used in the operation of the business commonly referred to as Xxxxxx
Farms in Miami, Florida and Blairsville, Georgia, as more particularly described
below;
X. Xxxxxxx desire to sell certain assets, and JLovell and WLovell
desire to sell, all of the issued and outstanding shares of capital stock of
Enviro-Safe and all of the partnership interests of Xxxxxx Partnership to
Purchaser, and Purchaser desires to purchase such assets, capital stock and
partnership interests from Sellers, Shareholders, JLovell and WLovell and to
assume certain liabilities upon consummation of the transactions contemplated by
this Agreement, all pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be bound hereby, the parties
hereto hereby agree as follows:
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AGREEMENT
Section 1. ACQUISITION.
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1.1 Acquired Assets and Assumed Liabilities.
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(a) Acquired Assets. Upon the terms and subject to the
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conditions of this Agreement, as of the Closing, Purchaser shall purchase from
Sellers, and such Sellers shall sell, assign, transfer and convey to Purchaser,
all of such Sellers' right, title and interest in and to all of the property,
rights, contracts and claims directly related to or used in the operation of the
business of such Sellers, wherever located and whether or not carried or
reflected on the books and records of such Sellers and whether or not carried in
the names of such Sellers, including, but not limited to, the following
property, rights, contracts and claims, but excluding the Excluded Assets
(collectively, the "Acquired Assets"):
(i) Business Rights. All of each such Seller's right, title
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and interest in and to all patents, patent applications, rights to xxx for
infringements of patents, trademarks, servicemarks, trademark and servicemark
registrations and applications, copyrights, copyright registrations and
applications, trade names, fictitious business names, logos, brand names,
computer software, together with any rights at common law directly arising
therefrom, licenses with respect to any of the foregoing and other intellectual
property rights used in connection with the business of any such Seller, all of
which are listed on Schedule 1.1(a)(i) (the "Business Rights").
(ii) Owned Real Property. All of the following:
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(a) the parcels of land described on Schedule 1.1(a)
(ii)(a) hereto (the "Sellers' Land"), together with all the rights and
appurtenances pertaining thereto, including, without limitation, any right,
title and interest of such Sellers in and to adjacent streets, alleys or rights-
of-way, covenants, agreements, rights, tenements, hereditaments and any
easements serving the Sellers' Land;
(b) all improvements, structures and fixtures on the
Sellers' Land (the "Sellers' Improvements"), including those described on
Schedule 1.1(a)(ii)(b) hereto; and
(c) plans, specifications, surveys, studies, reports,
renderings or drawings pertaining to the Sellers' Land and Sellers'
Improvements.
The Sellers' Land and the Sellers' Improvements are sometimes collectively
referred to herein as the "Sellers' Real Property".
(iii) Leased Real Property. All of each Seller's leasehold
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interests in real property and buildings used in connection with each such
Seller's business and all of each such Seller's right, title and interest in and
to the security deposits, if any, paid by such Sellers (or their
predecessors-in-interest) with respect to
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any leasehold interests listed on Schedule 1.1(a)(iii) (the "Sellers' Leased
Real Property").
(iv) Customer Lists. All customer or vendor lists or other
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documents used by each such Seller in its business, including, but not limited
to, correspondence, credit information, manuals, and data, sales, marketing and
advertising materials.
(v) Contracts. All of each such Seller's rights and
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interests under the contracts, instruments, agreements, commitments or other
understandings or arrangements attributable or relating to each such Seller's
business, the Acquired Assets or the Assumed Liabilities (the "Contracts").
(vi) Records and Documentation. Originals or, at each
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such Seller's option, copies of all business and financial records, tax
information, files, books and form contracts specifically relating to the
Acquired Assets described in the other clauses of this Section 1.1(a) or to the
Assumed Liabilities, including, but not limited to, books and records, if any,
which reflect the principal terms of each Contract Purchased by Purchaser.
(vii) Authorizations. All federal, foreign, state, local
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or other governmental consents, licenses, permits, grants or authorizations and
the like owned, held or utilized by each such Seller in the operation of their
business (the "Authorizations").
(viii) Inchoate Rights. All rights, claims, credits, causes
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of action or rights of set-off with respect to or arising out of (A) the
Acquired Assets, (B) the Assumed Liabilities or (C) proceeds paid or payable
under insurance contracts relating to the Acquired Assets.
(ix) Furniture, Fixtures, Equipment, etc. All items of
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furniture, fixtures, leasehold improvements, equipment, vehicles, computers,
computer software, photocopy machines and office supplies, whether owned or
leased by each such Seller and used in each such Seller's business, all of which
are listed on Schedule 1.1(a)(ix) (the "Furniture & Equipment").
(x) Inventory. All items of inventory used in connection
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with each such Seller's business (the "Inventory").
(xi) Accounts Receivable. The accounts receivable of such
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Sellers.
(xii) Other Items of Property. All other items of property,
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other than the Excluded Assets, which are used by each such Seller in connection
with each such Seller's business to the extent that each such Seller has any
rights or interests therein that are assignable.
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(xiii) Goodwill. All goodwill associated with any of the
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business conducted by each such Seller and any of the assets, properties and
rights set forth above.
(b) Excluded Assets. No such Seller shall sell, assign,
---------------
transfer or convey to Purchaser, nor shall Purchaser purchase (i) the corporate
charter, qualifications to conduct business as foreign corporations,
arrangements with registered agents relating to foreign qualifications, taxpayer
and other identification numbers, seals, minute books, stock transfer books,
blank stock certificates, and any other documents relating to the organization,
maintenance, and existence of such Sellers as corporations, (ii) any of the
rights of such Sellers under this Agreement or any other agreement entered into
in connection with this Agreement, (iii) any of the assets or properties set
forth on Schedule 1.1(b), or (iv) cash of such Sellers (collectively, the
"Excluded Assets").
(c) Assumed Liabilities. Upon the terms and subject to the
-------------------
conditions of this Agreement, and in reliance on the representations,
warranties, covenants and agreements made by each such Seller herein, effective
as of the Closing Date, Purchaser shall assume and be obligated pursuant to this
Agreement to pay when due, perform, or discharge only (i) the liabilities of
Xxxxxx Farms and Botanical Farms becoming due after the Closing Date under the
agreements listed on Schedule 1.1(c), including capital leases not to exceed an
amount equal to (A) $600,000 less (B) the amount of capital leases held by
Enviro-Safe, which Xxxxxx Farms and Botanical Farms will assign to Purchaser on
the Closing Date, (ii) accounts payable and accrued liabilities of Xxxxxx Farms
and Botanical Farms which arose in the Ordinary Course, and are still
outstanding in the Ordinary Course at the Closing (but not any accrued
liabilities or payables which Xxxxxx Farms or Botanical Farms has failed to pay
in a timely manner, or accounts payable represented by invoices dated on or
prior to December 31, 1999 with due dates on or prior to the Closing Date, or
failed to pay consistent with its past practices or any liabilities to the
Performance Group or liabilities for legal fees arising from or related to this
Agreement), (iii) open purchase orders arising in the Ordinary Course and (iv)
workers compensation liabilities of Sellers (collectively, the "Assumed
Liabilities").
(d) Liabilities Excluded by Purchaser. Except as set forth in
---------------------------------
Schedule 1.1(c), Purchaser shall not assume or otherwise become obligated
pursuant to this Agreement to pay when due, perform or discharge any debts,
claims, liabilities, obligations, damages or expenses of any Seller (whether
known or unknown, contingent or absolute, or arising before, on or after the
Closing Date). In no event shall Purchaser assume any liability for (i) taxes
with respect to periods ending prior to the Closing Date, except for sales,
payroll and withholding taxes included among liabilities described in Section
1.1(c)(ii), (ii) defaults under contracts or obligations of Sellers resulting
from events or occurrences arising prior to the Closing Date, (iii) broker's
fees or other expenses related to the transactions contemplated by this
Agreement incurred by Sellers or Shareholders, (iv) loans from Shareholders or
other loans for borrowed money or (v) obligations under contracts or agreements
of Sellers not listed on Schedule 1.1(c) hereto (collectively, the "Excluded
Liabilities").
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1.2 Partnership Interests and Enviro-Safe Stock. At Closing,
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Purchaser agrees to purchase from JLovell and WLovell, and JLovell and WLovell
agree to sell, assign and transfer to Purchaser (i) all of the partnership
interests of Xxxxxx Partnership, free and clear of all Liens, and (ii) all of
the outstanding stock of Enviro-Safe, free and clear of all Liens. As a result
of the foregoing, Purchaser will indirectly own all of the property, rights,
contracts and claims directly related to or used in the operation of the
business of Xxxxxx Partnership and Enviro-Safe, including, without limitation,
the following:
(a) the parcels of land described on Schedule 1.2(a) hereto which
shall exclude the property described on Schedule 1.2(a)(i) (the "Acquired Land";
the Acquired Land and the Sellers' Land are sometimes collectively referred to
herein as the "Land"), together with all the rights and appurtenances pertaining
thereto, including, without limitation, any right, title and interest of such
parties in and to adjacent streets, alleys or rights-of-way, covenants,
agreements, rights, tenements, hereditaments and any easements serving the
Acquired Land;
(b) all improvements, structures and fixtures on the Acquired
Land (the "Acquired Improvements"; the Acquired Improvements and the Sellers'
Improvements are sometimes collectively referred to herein as the
"Improvements"), including those described on Schedule 1.2(b) hereto; and
(c) plans, specifications, surveys, studies, reports, renderings
or drawings pertaining to the Acquired Land and Acquired Improvements.
The Acquired Land and the Acquired Improvements are sometimes collectively
referred to herein as the "Acquired Real Property" and the Acquired Real
Property and Sellers' Real Property are sometimes collectively referred to
herein as the "Real Property."
(d) All of such parties' leasehold interests in real property and
buildings used in connection with each parties' business and all of each such
parties' right, title and interest in and to the security deposits, if any, paid
by such parties (or their predecessors-in-interest) with respect to any
leasehold interests listed on Schedule 1.2(d) (the "Acquired Leased Real
Property"; the Sellers' Leased Real Property and the Acquired Leased Real
Property are sometimes collectively referred to herein as the "Leased Real
Property").
Section 2. PURCHASE PRICE AND OTHER TERMS.
------------------------------
2.1 Purchase Price.
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(a) At Closing, as consideration for the Acquired Assets, the
partnership interests of Xxxxxx Partnership and the stock of Enviro-Safe,
Purchaser shall pay to Sellers an aggregate amount of Ninety Million Dollars
($90,000,000) (the "Purchase Price"). The Purchase Price is subject to
increases and adjustments pursuant to Sections 2.2 and 2.3 below. The Purchase
Price, as adjusted, shall be allocated among the Acquired Assets, the
partnership interests of Xxxxxx Partnership and the stock of
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Enviro-Safe pursuant to Schedule 2.7 hereof, and shall be paid in cash to
Sellers and Shareholders in the amounts set forth on Schedule 2.1.
(b) [RESERVED].
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2.2 Earn-Out. In addition to the Purchase Price set forth in Section
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2.1, Purchaser shall pay to Xxxxxx Farms an additional amount based on the
Adjusted EBITDA of the operations (as set forth in Sections 1.1 and Section 1.2
hereof) purchased by Purchaser pursuant to this Agreement (the "Purchased
Operations") during the calendar year 2000 and 2001, subject to Section 2.2(g)
below (the "Earn-Out") as determined as set forth below.
"Adjusted EBITDA" shall mean the amount determined pursuant to
the terms of Schedule 2.2 attached hereto.
(a) As soon as possible following December 31, 2000, but in no event
later than March 31, 2001, Purchaser shall deliver to Shareholders (i) the
financial statements of the Purchased Operations for the year ended December 31,
2000 (the "Purchased Operations Financials"), and (ii) a calculation of the
Purchased Operations Adjusted EBITDA for 2000 (the "Purchaser's 2000 Adjusted
EBITDA Calculation"). Shareholders shall be entitled to cause their attorneys,
accountants and other representatives to examine the books and records of the
Purchaser during normal business hours for the purpose of verifying such
calculation.
(b) If Shareholders object to the Purchaser's 2000 Adjusted EBITDA
Calculation within twenty days after receipt thereof, Shareholders shall notify
Purchaser of the same in writing, in accordance with the notice provisions of
this Agreement, and deliver to Purchaser a proposed modification to Purchaser's
2000 Adjusted EBITDA Calculation, accompanied by reasonable supporting detail,
setting forth (i) the amount of the proposed modification, (ii) the item or
items to which such proposed modification relates, and (iii) the facts and
circumstances supporting the reasonableness and propriety of such modification
(the "Proposed EBITDA Modification"). If Shareholders do not object to the
Purchaser's 2000 Adjusted EBITDA Calculation within such twenty-day period, the
Purchaser's 2000 Adjusted EBITDA Calculation shall be final, conclusive and
binding on Shareholders, Sellers and Purchaser.
(c) If Shareholders object and deliver a Proposed EBITDA Modification
within such twenty-day period, the parties shall negotiate in good faith to
reach an agreement. If the parties are unable to resolve the dispute among
themselves within twenty (20) days after the receipt of the Proposed EBITDA
Modification, the matter shall be submitted to KPMG Peat Marwick (the
"Independent Accountants"). As promptly as practicable, but in no event later
than ten (10) days after such submission, the parties, or their respective
accountants, shall deliver to the Independent Accountants written submissions in
support of their positions with respect to such dispute and shall direct the
Independent Accountants to resolve such dispute. The costs of the Independent
Accountants shall be divided equally between Purchaser, on the one hand, and
Sellers, on the other hand. The decision of the Independent Accountants with
respect to the
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computation of the Adjusted EBITDA for 2000 shall be final and binding on each
of the parties hereto.
(d) Upon final determination of the Adjusted EBITDA for 2000, and
subject to the terms and conditions set forth in Section 2.2(g) below, Purchaser
shall pay to the Sellers $7.50 for every dollar by which the Adjusted EBITDA for
2000 exceeds $14,000,000, but not more than an aggregate of $7,500,000 for 2000.
If the Adjusted EBITDA for 2000 is equal to or less than $14,000,000, there
shall be no Earn-Out payment due for the calendar year 2000.
(e) The provisions of Sections 2.2(a) through (c) above shall be
recalculated for the calendar year 2001 and, subject to the terms and conditions
set forth in Section 2.2(g) below, Purchaser shall pay to Sellers an amount
equal to (i) $5.00 for every dollar by which the Adjusted EBITDA for 2001
exceeds $15,000,000 (including the amount, if any, by which the Adjusted EBITDA
for 2000 exceeds $15,000,000, but not more than an aggregate amount of
$500,000), but not more than an aggregate of $5,000,000 for 2001 plus (ii) five
(5) times the positive number, if any, produced by the following calculation:
A: Adjusted EBITDA for 2000, plus
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B: Lesser of (i) $500,000 or (ii) the excess of the Adjusted EBITDA
for 2001 over $16,000,000 (excluding carryforward of EBITDA for
2000, if any), minus
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C: Greater of (i) $14,000,000 or (ii) the Adjusted EBITDA for 2000;
provided, however, that the number produced by A + B - C shall not exceed the
excess, if any, of $15,000,000 over the Adjusted EBITDA for 2000 (the "Year 2000
Limitation"). If the Adjusted EBITDA for 2001 is equal to or less than
$15,000,000 (including the amount, if any, by which the Adjusted EBITDA for 2000
exceeds $15,000,000, but not more than an aggregate of $500,000), there shall be
no Earn-Out payment due for the calendar year 2001.
The following chart illustrates the application of Section 2.2(e)(ii)
under various hypothetical scenarios:
Assumed Facts Result
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2000 2001 (to be multiplied by 5)
Adjusted Adjusted
EBITDA EBITDA
------ ------
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Assumed Facts Result
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2000 2001 (to be multiplied by 5)
Adjusted Adjusted
EBITDA EBITDA
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$13,500,000 $16,100,000 A $13,500,000
+ B $ 100,000
- C $14,000,000
- -----------
$ -0-
$13,500,000 $16,600,000 A $13,500,000
+ B $ 500,000
- C $14,000,000
- -----------
$ -0-
$13,900,000 $16,100,000 A $13,900,000
+ B $ 100,000
- C $14,000,000
- -----------
$ -0-
$13,900,000 $16,600,000 A $13,900,000
+ B $ 500,000
- C $14,000,000
- -----------
$ 400,000
$14,600,000 $16,100,000 A $14,600,000
+ B $ 100,000
- C $14,600,000
- -----------
$ 100,000
$14,600,000 $16,600,000 A $14,600,000
+ B $ 500,000
- C $14,600,000
- -----------
$ 500,000*
$15,000,000 N/A $ -0-
due to the Year 2000
Limitation
*The Year 2000 Limitation limits the amount to $400,000.
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(f) No payments shall be made pursuant to this Section 2.2 until
all disputes regarding the calculation of the Adjusted EBITDA have been resolved
in the manner described in this Section 2.2.
(g) Notwithstanding the foregoing, if the inventory for the
Purchased Operations or the Real Property or Furniture & Equipment suffers
material damage due to a hurricane or other major storm in either calendar year
2000 or 2001, the result of which causes the Adjusted EBITDA to be equal to or
less than $14,000,000 or $15,000,000 (including up to $500,000 by which the
Adjusted EBITDA for 2000 exceeds $15,000,000) for the calendar years 2000 and
2001, respectively, then the Earn-Out for such year, and the succeeding year, if
any, shall be recalculated for the following year. For example, if such damage
occurred in 2000, the Earn-Out for 2000 shall be suspended and the Earn-Out for
2001 shall be based on the calculation in Section 2.2(d) using a threshold
Adjusted EBITDA of $14,000,000 and all references to Adjusted EBITDA for 2000
would mean Adjusted EBITDA for 2001. In such event, the original Earn-Out for
2001 shall be suspended until 2002 when the Earn-Out shall be based on the
calculation in Section 2.2(e) using a threshold Adjusted EBITDA of $15,000,000
and all references to Adjusted EBITDA for 2001 would mean Adjusted EBITDA for
2002.
(h) The obligation of Purchaser to make Earn-Out payments to
Xxxxxx Farms pursuant to Section 2.2 hereof shall survive, and shall not be
eliminated as a result of, (i) any reorganization or reclassification of
Purchaser, (ii) any merger or consolidation of Purchaser with or into any other
entity, or (iii) any sale of all or substantially all of the assets of
Purchaser. From the Closing Date until payment in full of each and every Earn-
Out payment in accordance with Section 2.2, Purchaser shall not, and Parent
shall assure that Purchaser shall not, effect any of the foregoing unless after
giving effect thereto Purchaser, its successor or assignee, shall have at least
$13,000,000 in the aggregate in inventory and accounts receivable as calculated
in accordance with GAAP net of any reserve for doubtful accounts.
2.3 Increase in Purchase Price. The Purchase Price payable in
--------------------------
accordance with Section 2.1 shall be increased by the amount set forth in
Section 2.3(a) (the "Additional Purchase Price") provided, however, that the
amount of the Additional Purchase Price shall not exceed $2.5 million (the "Cap
Amount").
(a) The Additional Purchase Price is the sum of the amounts in
subdivision (i), (ii) and (iii) of this Section 2.3(a)
(i) An amount payable to Xxxxxx Farms, a subchapter S
corporation, equal to X multiplied by Y where X equals 1.25 and Y equals (x) the
-
amount of the ordinary income net of ordinary deductions realized by Xxxxxx
Farms for income tax purposes arising solely by reason of the sale by Xxxxxx
Farms of its Acquired Assets to Purchaser, and the assumption of their Assumed
Liabilities by Purchaser, in accordance with this Agreement, multiplied by (y)
-
19.6 percent. In no event, however, shall Purchaser pay to Xxxxxx Farms any
amounts arising from any failure of Xxxxxx Farms to have been an "S" corporation
continuously since at least January 1, 1990.
-9-
If the amount in this subdivision (a)(i) equals or exceeds the Cap Amount,
the amount in subdivision (a)(ii) and (a)(iii), below, shall be zero.
(ii) An amount payable to JLovell and WLovell equal to X
multiplied by Y where X equals 1.25 and Y equals (x) the amount of the ordinary
-
income net of ordinary deductions realized by Enviro-Safe for income tax
purposes arising solely by reason of the deemed sale for tax purposes by Enviro-
Safe, due to the 338(h)(10) election contemplated pursuant to Section 6.3(c)
hereof, of its assets to Purchaser, and the related deemed assumption of its
liabilities by Purchaser, in accordance with this Agreement, multiplied by (y)
-
19.6 percent.
If the amount in this subdivision (a)(i) plus (a)(ii) equals or exceeds the
Cap Amount, the amount in subdivision (a)(iii), below, shall be zero.
The amount set forth in this subdivision (a)(ii) may not exceed the
positive difference between the Cap Amount and the amount in subdivision (a)(i).
(iii) An amount payable to Botanical Farms, a subchapter C
corporation ("Botanical Farms"), equal to X multiplied by Y where --
(x) X equals the number equal to 1 divided by (i)(aa) 1,
-
minus (bb) the marginal, combined, effective Federal and State income tax rate
--
of Botanical Farms, expressed as a decimal number (i.e., 40 percent would be
----
0.40), with respect to the amount payable to Botanical Farms in accordance with
this subdivision (a)(ii) for the taxable year of Botanical Farms ending in 2000
and by assuming that such taxable year closed on the Closing Date.
(y) Y equals the amount of income realized in Botanical
-
Farms for Income Tax purposes arising solely by reason of the sale by Botanical
Farms of its Acquired Assets to Purchaser, and the assumption of its Assumed
Liabilities by Purchaser, in accordance with this Agreement.
In calculating the amount in this subdivision (a)(iii), the number in
subdivision (a)(iii)(x) shall be determined with regard to the application of
-
the alternative minimum tax imposed by Section 55 of the Internal Revenue Code
of 1986, as amended (the "Code"). The calculation of the amount payable under
this subdivision (a)(iii) may require trial and error, or multiple, computations
which shall be made in accordance with Treasury Regulation Section 1.338-
4T(d)(3) and (g). The amount set forth in this subdivision (a)(iii) may not
exceed the positive difference between the Cap Amount and the amounts in
subdivision (a)(i) and (a)(ii).
(b) The amount of the income of Xxxxxx Farms or Enviro-Safe set
forth in subdivision (a)(i)(x) and (a)(ii)(x) and the amount of income of
- -
Botanical Farms set forth in subdivision (a)(iii)(y) and shall be based upon the
-
purchase price allocations set forth in Section 2.7. If those allocations are
later adjusted as a result of an examination or audit by the Internal Revenue
Service or other tax authority, Section 2.3(a)(i), (ii) and (iii) shall be re-
applied based upon those allocations as finally
-10-
determined. If the Additional Purchase Price, as so re-determined, exceeds the
Additional Purchase Price, as initially determined, Purchaser shall pay such
excess amount (the "Shortfall") to Xxxxxx Farms, Enviro-Safe or Botanical Farms
plus interest at the underpayment rate specified in Section 6621 of the Code;
provided, however, that the sum of the amount of the Shortfall and the
Additional Purchase Price (as initially determined) may not exceed the Cap
Amount. The procedures set forth in Section 7.4 shall apply to any amount
payable by Purchaser to Xxxxxx Farms, Botanical Farms, JLovell or WLovell by
reason of this Section 2.3(a) and (b).
(c) On the Closing Date Purchaser shall pay to Xxxxxx Farms,
Botanical Farms, JLovell and WLovell an estimate of the Additional Purchase
Price equal to $2,008,265 in the aggregate (the "Estimated Additional Purchase
Price") based upon the methodology of the purchase price allocation set forth in
Schedule 2.7 with respect to ordinary income items including, but not limited
to, accounts receivable (net of a reserve for bad debts consistent with past
practices), depreciable property, inventory or goods in process or other similar
items or items described in Section 1252 of the Code ("Ordinary Income Items").
A work sheet showing the calculation of the Estimated Additional Purchase Price
is attached hereto as Schedule 2.3(c). On the Closing Date, the Purchaser shall
pay the Estimated Additional Purchase Price to Xxxxxx Farms, Botanical Farms,
JLovell and WLovell.
(d) As the precise amount of the Ordinary Income Items will not
be known on the Closing Date, within ninety (90) days after the Closing Date,
Purchaser shall at its expense cause the accountants for Purchaser to examine
the books and records of Xxxxxx Farms, Enviro-Safe and Botanical Farms and
verify the amount of the Ordinary Income Items, and provide written notice to
Xxxxxx Farms, Botanical Farms, JLovell and WLovell of a proposed Additional
Purchase Price along with supporting detail which substantiates the
determination of the Ordinary Income Items and the calculation of the proposed
Additional Purchase Price. To determine the Closing Date inventory amount,
Purchaser shall start with the Opening Inventory Amount (as defined on Schedule
2.2 hereto), add additions to inventory as calculated in accordance with GAAP,
and subtract an amount equal to the Xxxxxx Farms' net sales from January 1, 2000
through the Closing Date multiplied by Xxxxxx Farms' "Historical Percentage of
Cost of Goods Sold." As used herein, Historical Percentage of Cost of Goods Sold
shall mean a fraction, the numerator of which shall be Xxxxxx Farms' cost of
goods sold for calendar year 1999 divided by 1999 net sales. Such cost of goods
sold shall be based on Xxxxxx Farms' 1999 performance and calculated in
accordance with Purchaser's standard procedures for determining cost of goods
sold. Purchaser shall xxxxx Xxxxxx Farms, Botanical Farms, JLovell, WLovell and
their attorneys, accountants or other authorized representatives, access after
the Closing Date to the books and records of Xxxxxx Farms, Enviro-Safe and
Botanical Farms during normal business hours and to the workpapers of the
accountants for Purchaser, and further agree to provide Xxxxxx Farms Botanical
Farms, JLovell and WLovell with other information requested by Xxxxxx Farms,
Botanical Farms, JLovell and WLovell reasonably necessary to verify the accuracy
of the proposed Additional Purchase Price as calculated by Purchaser. Unless
Xxxxxx Farms, or Botanical Farms provides written notice to Purchaser within one
hundred thirty-five (135) days after the Closing Date objecting to the proposed
Additional Purchase Price
-11-
("Objection Notice"), such proposed Additional Purchase Price shall be the
amount payable under Section 2.3(a) (the "Final Additional Purchase Price").
(e) If Xxxxxx Farms, Botanical Farms or the Representative
provides a timely Objection Notice to Purchaser, the parties shall use
reasonable efforts to resolve their differences during the thirty (30) day
period following Purchaser's receipt of the Objection Notice. If the parties
cannot resolve their differences during that 30-day period, the Independent
Accountants shall determine the Final Additional Purchase Price, which shall be
binding upon the parties and whose fees and costs shall be shared equally by
Purchaser, on the one hand, and Xxxxxx Farms, Botanical Farms, JLovell and
WLovell, on the other hand.
(f) If the Final Additional Purchase Price exceeds the Estimated
Additional Purchase Price, Purchaser shall pay that excess amount, without
interest, to Xxxxxx Farms, JLovell and WLovell or Botanical Farms, as
applicable, within five (5) days of the determination of the Final Additional
Purchase Price. If the Estimated Additional Purchase Price exceeds the Final
Additional Purchase Price, Xxxxxx Farms, or Botanical Farms, or JLovell and
WLovell as applicable, shall pay that excess amount, without interest, to
Purchaser within five (5) days of the date of determination of the Final
Additional Purchase Price.
2.4 [RESERVED].
2.5 [RESERVED].
2.6 Sales, Use and Transfer Taxes. In addition to the Purchase Price,
-----------------------------
at the Closing, Purchaser shall pay the Closing Costs (as defined in Section
6.2(h)), and the Purchaser shall be responsible for (i) for any documentary
stamp taxes, transfer taxes, surtaxes, and any sales, use or other taxes,
duties, fees and governmental exactions imposed by reason of the transfer of the
Acquired Assets, the assignment of the partnership interests of Xxxxxx
Partnership and the vesting of title to the Real Property in Purchaser, all as
provided hereunder and any deficiency, interest or penalty asserted with respect
thereto, and (ii) all expenses associated with the new mortgages placed on the
Acquired Assets, including expenses of the title search and update.
2.7 Allocation of Purchase Price. The Purchase Price and Assumed
----------------------------
Liabilities shall be allocated in relation to the Acquired Assets, the
partnership interests of Xxxxxx Partnership and the stock of Enviro-Safe as set
forth on Schedule 2.7 hereto. Each party agrees that it will not, in its Tax
returns or elsewhere, take a position inconsistent with the allocations provided
for in this Section.
2.8 Possession. Possession of the Acquired Assets will be delivered to
----------
Purchaser on the Closing Date, and the assignment to Purchaser of each Seller's
rights in the Contracts, Business Rights, Authorizations, Real Property, Leased
Real Property, Furniture & Equipment and Inventory, and all other assets of
Sellers that are included among the Acquired Assets, and the transfer of the
Assumed Liabilities to the Purchaser,
-12-
together with the transactions contemplated pursuant to Section 1.2 hereof, will
be effective as between Sellers and Purchaser as of 12:01 a.m. on the Closing
Date.
2.9 Representative. Sellers, the Shareholders, and the Xxxxxx
--------------
Partnership hereby (i) appoint WLovell to act as their representative (the
"Representative") to act on their behalf with respect to all decisions involving
the Additional Purchase Price pursuant to Section 2.3 hereof, the Earn-Out
provisions of Section 2.2 hereof, and the indemnification provisions of Section
7 hereof, and (ii) agree to be bound by the actions of the Representative while
acting on behalf of each Seller, Shareholder and the Xxxxxx Partnership pursuant
to such appointment.
Section 3. REPRESENTATIONS AND WARRANTIES OF SELLERS. As an inducement to
-----------------------------------------
Purchaser to enter into this Agreement and to consummate the transactions
contemplated hereby, Sellers and Shareholders, jointly and severally, represent
and warrant to Purchaser, and covenant and agree, as of the date hereof and as
of the Closing Date, as follows (to the extent the following representations and
warranties are limited to the "knowledge of Sellers" or similar phrases, the
knowledge of one or more Sellers or Shareholders shall be sufficient to bind all
the other Sellers and "knowledge" shall mean the knowledge of such Shareholder
or Seller, or the knowledge of its directors, partners, officers or Xxxxxxx
Xxxxxx, after such individuals have made all reasonable inquiries; for purposes
of the representations, warranties and Schedules set forth in each subsection of
this Section 3, all references to "Sellers" shall include Xxxxxx Partnership and
Enviro-Safe and any defined terms set forth in Section 1.1(a) hereof shall also
be deemed to refer to such property, rights, contracts, claims and other items
held by Xxxxxx Partnership and Enviro-Safe):
3.1 Capitalization.
--------------
(a) The authorized capital stock of each corporate Seller is as
set forth on Schedule 3.1(a) (the "Common Stock"), of which the shares set forth
on such Schedule are outstanding as of the Closing owned by the persons set
forth on such Schedule. All outstanding shares of Common Stock have been and
will be as of the Closing Date, duly authorized and validly issued, fully paid
and non-assessable, free and clear of all liens, claims or encumbrances of any
kind, and none of them was or will be issued in violation of any preemptive or
other right. The outstanding partnership interests of Xxxxxx Partnership are as
set forth on Schedule 3.1(a) owned by the persons set forth on such Schedule,
free and clear of all liens, claims or encumbrances of any kind, and none of
them was or will be issued in violation of any preemptive or other right.
(b) There are no outstanding (i) shares of capital stock or other
voting securities of any Seller, (ii) securities of any Seller convertible into
or exchangeable for shares of capital stock or voting securities of any Seller
or (iii) options or other rights to acquire from any Seller, and there is no
obligation of any Seller to issue any, capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of such Seller (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "Company Securities"). There are no outstanding
obligations of such Seller to issue or deliver or to repurchase, redeem or
otherwise
-13-
acquire any Company Securities, other than transactions conducted or to be
conducted in connection with the transactions contemplated by this Agreement.
(c) Except as disclosed on Schedule 3.1(c), no Seller is a party
to any agreement or understanding relating to the ownership, voting or transfer
of any Common Stock or any other Company Securities.
3.2 Subsidiaries and Other Equity Investments. No Seller owns,
-----------------------------------------
directly or indirectly, any shares of capital stock of any corporation, or any
equity investment in any other Person, and no Seller has any obligation to
acquire any such shares or to make any such investment.
3.3 Organization, Good Standing and Authority. Each Seller is duly
-----------------------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction under which it is organized and has all powers and governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted and as proposed to be conducted. Each Seller has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each jurisdiction in which it is required to
be so qualified, such jurisdictions comprising all jurisdictions in which each
Seller owns or leases any property or maintains any employees.
3.4 Execution and Delivery. Except as set forth on Schedule 3.23, all
----------------------
consents, approvals, authorizations and orders necessary for the execution,
delivery and performance of this Agreement and the other agreements and
instruments contemplated hereby (the "Other Agreements") by each Seller and
Shareholder have been duly and lawfully obtained, and each Seller and
Shareholder has, and at the Closing will have, full right, power, authority and
capacity to execute, deliver and perform this Agreement and the Other
Agreements. This Agreement and the Other Agreements have been duly executed and
delivered by the Sellers and Shareholders and constitute legal, valid and
binding agreements of the Sellers and Shareholders enforceable against the
Sellers and Shareholders in accordance with their respective terms, except to
the extent such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
relating to or limiting creditors' rights generally and (b) general principles
of equity (whether considered in an action in equity or at law).
3.5 No Conflicts. Except for the matters set forth on Schedule 3.5,
------------
the execution, delivery and performance of this Agreement and the Other
Agreements and the consummation of the transactions contemplated hereby and
thereby will not (a) conflict with or result in a breach or violation of any
term or provision of, or constitute a default under (with or without notice or
passage of time, or both), or otherwise give any Person a basis for accelerated
or additional rights, termination or nonperformance under, any indenture,
mortgage, deed of trust, loan or credit agreement, material lease, license or
other material agreement or instrument to which any Seller or Shareholder is a
party or by which any Seller or Shareholder is bound or affected or to which any
of the property or assets of any Seller or Shareholder is bound or affected, (b)
result in the violation of the provisions of the Articles of Incorporation or
Bylaws or
-14-
partnership agreement, as the case may be, of any Seller or, any order, writ,
judgment, injunction, decree or award, whether foreign or domestic or any
applicable statute, law, ordinance, rule, regulation, permit ("Legal
Requirement"), or (c) result in the creation or imposition of any lien,
mortgage, pledge, security interest, charge or encumbrance of any kind, whether
voluntary or involuntary, (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and, with respect to capital stock, any option or other
right to purchase or any restriction on voting or other rights (each a "Lien")
upon any property or asset of any Seller or Shareholder. Except for this
Agreement, neither Sellers nor and Shareholder have any legal obligation,
absolute or contingent, to any other Person to sell any capital stock, the
business, the Real Property or substantially all of the assets of any Seller or
to effect any merger, consolidation or other reorganization of any Seller or to
enter into any agreement with respect thereto.
3.6 Financial Statements. Schedule 3.6 contains true and complete
--------------------
copies of the following financial statements (collectively, the "Financial
Statements"): (a) the unaudited combined balance sheet on an accrual basis (the
"Balance Sheets") of each Seller (which for purposes of this Section 3.6
includes Xxxxxx Partnership and Enviro-Safe) at December 31, 1999 (the "Balance
Sheet Date"); (b) the unaudited cash basis balance sheets of Xxxxxx Farms,
Botanical Farms, Enviro-Safe and Xxxxxx Partnership at December 31, 1999, and
the related cash basis income statement for each such entity for the twelve-
month period ending December 31, 1999 and schedules showing the adjustment from
cash to accrual basis for the fiscal year then ended; and (c) each of Xxxxxx
Farms' and Enviro-Safe's audited balance sheets for the fiscal years ended
December 31, 1997 and December 31, 1998, and in each case the related audited
consolidated statements of income, equity and cash flow (including the
accompanying notes) for each fiscal year then ended. The Financial Statements
(i) except for the 1999 Financial Statements, have been prepared in accordance
with GAAP consistently applied as at the dates and during the periods covered
thereby, and (ii) are true and correct in all material respects and present
fairly the financial position and results of operations and cash flows of the
Sellers as of the dates and for the periods specified therein. "GAAP" shall mean
generally accepted accounting principles, consistently applied.
3.7 No Undisclosed Liabilities; Trade Payables. Except (a) as set
------------------------------------------
forth on Schedule 3.7 hereto, (b) to the extent set forth or provided for in the
Balance Sheets or the notes thereto, or (c) for non-material current liabilities
of the same nature as those set forth in the Balance Sheets and the notes
thereto incurred since the Balance Sheet Date in the ordinary course of the
Sellers' business, consistent with past practices ("Ordinary Course"), the
Sellers have no liabilities or obligations, whether accrued, absolute,
contingent or otherwise (including, without limitation, unasserted claims,
whether known or unknown).
3.8 Absence of Certain Changes. Since the Balance Sheet Date, except
--------------------------
as otherwise disclosed in Schedule 3.8, no Seller has:
(a) incurred any debts or liabilities (absolute, accrued,
contingent or otherwise), other than current liabilities incurred in the
Ordinary Course;
-15-
(b) been subjected to or permitted a Lien upon or otherwise
encumbered any of its assets, except any Lien for taxes not yet due;
(c) sold, transferred, licensed or leased any of its rights,
assets or properties, except in the Ordinary Course;
(d) discharged or satisfied any Lien other than a Lien securing,
or paid any obligation or liability other than, current liabilities shown on the
Balance Sheets and current liabilities incurred since the Balance Sheet Date, in
each case in the Ordinary Course;
(e) canceled or compromised any debt owed to or by or claim of
or against it, or waived or released any right of material value, other than in
the Ordinary Course;
(f) suffered a material adverse effect on the business,
financial condition, properties, profitability or operations of any Seller or
the Acquired Assets ("Material Adverse Effect") resulting from any physical
damage, destruction or loss (whether or not covered by insurance);
(g) entered into any material transaction or otherwise committed
or obligated itself to any capital expenditure, other than in the Ordinary
Course;
(h) made or suffered any change in its condition (financial or
otherwise), properties, profitability or operations, none of which (individually
or in the aggregate) has had, or may reasonably be expected to have, a Material
Adverse Effect;
(i) made any change in the accounting methods, principles or
practices followed by it;
(j) made or suffered any amendment or termination of any Material
Contract, other than in the Ordinary Course;
(k) paid any increase in compensation of any kind to any
employee, officer, director or consultant;
(l) changed or suffered any change in any benefit plan or labor
agreement affecting any employee of any Seller, other than in the Ordinary
Course or to conform to Legal Requirements;
(m) issued any capital stock, partnership interests, or options
or rights to acquire capital stock or partnership interests, redeemed or
repurchased any outstanding shares of capital stock or partnership interests,
declared, set aside or paid any dividend or distribution on any shares of
capital stock or partnership interests, merged with any other entity or
purchased or acquired capital stock or other interest in any other entity,
purchased or otherwise acquired all or substantially all of the business or
assets of
-16-
any other Person, or transferred or sold a substantial portion of its business
or assets to any Person;
(n) failed to pay or perform any material obligation when and to
the extent due other than pursuant to a good faith defense or right of setoff;
(o) entered into any agreement or otherwise obligated itself to
do any of the foregoing; or
(p) accelerated collection of its accounts receivable, deferred
payment of its accounts payable or other sums owing to third parties or accrued
liabilities, deferred the purchase of equipment or other capital goods, delayed
normally scheduled maintenance or reduced inventory below its customary level.
3.9 Property; Encumbrances. Except as set forth on Schedule 3.9 and
----------------------
Liens for taxes not yet due (collectively, the "Permitted Liens"), Sellers
(which for purposes of this Section 3.9 includes Xxxxxx Partnership and Enviro-
Safe) in the aggregate have good, valid and merchantable title to all the
Acquired Assets other than the Real Property and good, valid and insurable title
to the Real Property, free and clear of all Liens. The Real Property purchased
by Purchaser, or that vests in Purchaser due to its acquisition of the
partnership interests of Xxxxxx Partnership, and the other Acquired Assets and
the personal property held by the Sellers pursuant to leases and licenses
comprise all of the real property and personal property used in the conduct of
the Purchased Operations. Except as set forth on Schedule 3.23, the leases and
licenses included in the Acquired Assets are in full force and effect without
any material default, waiver or indulgence thereunder by any Seller or, to the
knowledge of Sellers, by any other party thereto. True and complete copies of
all leases and licenses have been provided to Purchaser.
3.10 Condition of Personal Property. Except as listed on Schedule
------------------------------
3.10, the Acquired Assets and all personal property owned by the Sellers and all
personal property held by the Sellers pursuant to personal property leases or
licenses is in good operating condition, subject only to ordinary wear and tear.
3.11 Condition of Real Property.
--------------------------
(a) The Real Property and all of the structures, buildings and
facilities on the Real Property (the "Structures") are (i) in good operating
condition, subject only to ordinary wear and tear, and (ii) supplied with
utilities and other services, including the supply of water and/or rights to
water, necessary for the operation of such Structures and the business conducted
by Sellers therein. The Structures are the only structures, buildings and
facilities used in the operation of the Purchased Operations. No condemnation
proceeding is pending, or to the Sellers' knowledge, threatened, which would
impair the occupancy, use or value of any of the Real Property.
(b) Except as set forth in Schedule 3.11(b), no Structure, nor
the operations of Sellers therein, (i) is in violation of any Legal Requirement,
(ii) is classified as "non-conforming use" or "permitted non-conforming
structure" or
-17-
(iii) encroaches on any property owned by, or easement granted in favor of, any
other Person.
(c) Except as set forth on Schedule 3.11(c), there are no (i)
leases, subleases or other agreements, written or oral, granting to any other
Person the right to acquire, use or occupy any portion of any Real Property, or
(ii) outstanding options or rights of first refusal to purchase all or any
portion of Real Property or interest therein. No Persons (other than the
Sellers) are in possession of any of the Real Property, except pursuant to the
terms of lease agreements referred to on Schedule 3.11(c) copies of which have
been provided to Purchaser.
(d) Except as set forth on Schedule 3.11(d), (i) with respect to
Leased Real Property the owner thereof has good and insurable title thereto, and
the Seller (which for purposes of this 3.11(d) includes Xxxxxx Partnership) a
party to the underlying lease on such Leased Real Property has a valid leasehold
interest therein, free and clear of all Liens, (ii) there is ingress and egress
(and a continuing right thereto), without the need for an easement, between
paved public rights-of-way and the Real Property and Leased Real Property, and
(iii) no Seller has sold, transferred or subjected to a Lien, except Permitted
Liens, such Real Property or any interest therein.
3.12 Accounts Receivable. Except as set forth on Schedule 3.12, all
-------------------
accounts receivable of Sellers reflected in the Balance Sheets and all accounts
receivable of Sellers that have arisen since the Balance Sheet Date (except such
accounts receivable as have been collected since such dates) are valid and
enforceable claims and were earned by performance in the Ordinary Course. Such
accounts receivable of Sellers are: (i) subject to no valid defense, offset or
counterclaim; and, (ii) are fully collectible within 120 days after the Closing
Date, except to the extent of the allowance, if any, for doubtful accounts,
which allowance is consistent in amount with past practices.
3.13 Inventories. All inventories of raw materials, work-in-process
-----------
and finished goods set forth or reflected in the Balance Sheets or acquired by
Sellers since the Balance Sheet Date are of a quality and quantity usable and
saleable in the Ordinary Course, subject to loss or damages sustained in the
Ordinary Course.
3.14 Intellectual Property and Proprietary Rights. Schedule 3.14
--------------------------------------------
contains a true and complete list of all patents, patent applications, trade
names, trademarks, service marks, trademark and service xxxx registrations and
applications, copyrights, copyright registrations and applications, and grants
of a license or right to any Seller with respect to any of the foregoing,
claimed by any Seller or currently used or proposed to be used by any Seller in
the conduct of its business, whether registered or not (collectively, the
"Intellectual Property Rights"). Each Seller owns or has the unrestricted right
to use the Intellectual Property Rights and every trade secret, know-how,
process, discovery, development, design, technique, customer and supplier list,
marketing and purchasing strategy, invention, process, confidential data and/or
other information (collectively, "Proprietary Information") used in the design,
development, manufacture, operation, sale and use of all products and services
sold or rendered or proposed to be sold or rendered by such Seller, free and
clear of any right, equity or claim of others.
-18-
Except as set forth on Schedule 3.14, (a) no Seller has sold, transferred,
assigned, licensed or subjected to any Lien any Intellectual Property Right or
Proprietary Information or any interest therein, (b) no Seller is obligated or
under any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensor of, or other claimant to, any Intellectual
Property Right or Proprietary Information and (c) no Intellectual Property Right
or Proprietary Information conflicts with, infringes on or otherwise violates
any rights of others or is subject to any pending or threatened litigation or
other adverse claim of infringement by any other Person.
3.15 Banking. Schedule 3.15 contains a true and complete list of the
-------
names and locations of all financial institutions at which any Seller maintains
a checking account, deposit account, securities account, safety deposit box or
other deposit or safekeeping arrangement, the numbers or other identification of
all such accounts and arrangements and the names of all Persons authorized to
draw against any funds therein.
3.16 Insurance. Schedule 3.16 contains a true and complete list
---------
(including the name of the insurer, policy number, coverage amount, deductible
amount, premium amount and expiration date) of all insurance policies and bonds
and self insurance arrangements currently in force that cover or purport to
cover risks or losses to or associated with the Acquired Assets or any Seller's
business, operations, premises, properties, assets, employees, agents and
directors (the "Policies"). Except as set forth on Schedule 3.16, no Seller is,
and to the knowledge of Sellers, no other party is, in material breach of or
default under any of the Policies, no Seller or Shareholder has received any
written notice of pending or threatened cancellation of any Policy, and no claim
or coverage under any Policy is currently being disputed.
3.17 Indebtedness. No Seller has any Indebtedness other than as set
------------
forth on Schedule 3.17, and true and complete copies of all instruments and
documents evidencing, creating, securing or otherwise relating to such
Indebtedness have been delivered to Purchaser. No event has occurred and no
condition has become known to any Seller, other than the consummation of the
transactions contemplated herein, that constitutes or, with notice or passage of
time, or both, would constitute a material default or termination under any
instrument or document relating to or evidencing such Indebtedness.
"Indebtedness" shall mean the following items, calculated in accordance with
GAAP: (i) all indebtedness for borrowed money including accrued interest expense
thereon; (ii) that portion of obligations with respect to capital leases that is
properly classified as a liability on a balance sheet in conformity with GAAP;
(iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money; (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
if the purchase price is due more than six months from the date the obligation
is incurred or is evidenced by a note or similar written instrument; (v) all
indebtedness secured by any Lien on any property or asset owned or held by such
Person; and (vi) any fees or penalties or any other costs related to the early
payoff or termination of any of the foregoing.
3.18 Judgments; Litigation. Except as set forth on Schedule 3.18,
---------------------
there is no (a) outstanding judgment, order, decree, award, stipulation or
injunction of any
-00-
xxxxx, xxxxx, xxxxxxx or foreign court, government or governmental department,
commission, instrumentality, board, agency or authority ("Governmental Entity")
against or affecting any Seller or its properties, assets or business, (b)
action, suit, arbitration, hearing, inquiry, proceeding, complaint, charge or
investigation, whether civil, criminal or administrative ("Action"), by or
before any Governmental Entity or arbitrator or any appeal from any of the
foregoing pending, or to the Sellers' knowledge, threatened against or affecting
any Seller or its properties, assets or business, or (c) fact or circumstance
arising from the operation of any Seller or any business which is reasonably
likely to lead to the instigation of any Action.
3.19 Government Payments. Except as set forth on Schedule 3.19, all
-------------------
returns, declarations, reports and statements ("Government Returns") relating to
any federal, state, local or foreign income, gross receipts, license, payroll,
employment, real property, personal property, escheated funds or property,
sales, use, import, export or other tax, assessment, duty, fee or tax related
charge of any kind whatsoever ("Government Payments") required to be filed by
any Seller in connection with the operations of any Seller or the Acquired
Assets are true, complete and correct in all material respects, are in
compliance with all Legal Requirements applicable thereto and have been properly
and timely filed. Except as set forth on Schedule 3.19, no Seller has requested
any extension of time within which to file any Government Return, which
Government Return has not since been filed. Purchaser has heretofore been
furnished by Sellers with true, correct and complete copies of each Government
Return of Sellers with respect to the past three (3) taxable years, and of all
reports of, and communications from, any Governmental Entities relating to
Government Payments for such period. Except as set forth on Schedule 3.19, all
Government Payments required to be paid or withheld and deposited in connection
with the operations of Sellers or the Acquired Assets have been duly and timely
paid or deposited by Sellers. Sellers have properly withheld or collected all
amounts required by law for Government Payments relating to their employees,
creditors, independent contractors and other third parties, and for Government
Payments on sales, and has properly and timely remitted such withheld or
collected amounts to the appropriate Governmental Entity. Sellers have made
adequate provision on their books of account for all Government Payments with
respect to their business, properties and operations. Sellers' accruals for
Government Payments will be adequate to cover all liabilities for Government
Payments of Sellers for all periods ending on or before the Closing Date and
such accruals would be adequate if Sellers were to file a Government Return on
the Closing Date covering all liabilities accrued through the Closing Date.
Except as set forth on Schedule 3.19, during the past four (4) taxable years, no
Seller has (a) had a tax deficiency proposed, asserted or assessed against it,
(b) executed any waiver of any statute of limitations on the assessment or
collection of any Government Payments, or (c) been delinquent in the payment of
any Government Payments. Except as set forth on Schedule 3.19, during the past
four (4) taxable years, no Government Return of any Seller has been audited or
the subject of other Action by any Governmental Entity. Except as set forth on
Schedule 3.19, no Seller has received any notice from any Governmental Entity of
any pending examination or any proposed deficiency, addition, assessment, demand
for payment or adjustment relating to or affecting any Seller or its assets or
properties. No Seller has made any payments or is obligated to make any payments
that will not be deductible under Section 280G of the Code. No Seller is a
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party to a tax allocation or sharing agreement or has ever been (or has any
liability for unpaid Government Payments because it was) a member of an
affiliated group with the meaning of Code Section 1504(a). Enviro-Safe has made
an election under Section 1362(a) of the Code, to be an "S corporation", as
defined therein; such election became effective since the date of its
incorporation, and all Persons who were shareholders of Enviro-Safe on the day
on which such election was made validly consented to such election. Such
election was effective on the date made and has remained in effect continuously
from such date, and such election has not been terminated, whether by
revocation, disqualification or for any other reason. No actions have been taken
and no omissions have occurred which would cause such election to terminate or
be revoked at any time before the Closing Date. Enviro-Safe has made a
corresponding election to be taxed as an "S corporation in Florida.
3.20 No Unlawful Contributions. No Seller nor any partner, director,
-------------------------
officer, agent, employee or other Person associated with or acting on behalf of
any Seller has made or used any corporate or partnership funds to make any
unlawful contributions, gifts or payments for entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful
payments to officials or employees of any Governmental Entity from corporate
funds; failed to file any reports required with respect to lawful contributions;
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; made any intentionally false or fictitious entries on the books or
records of any Seller; or made or received any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
3.21 Employee Benefit Matters.
------------------------
(a) Schedule 3.21 sets forth a list of all "employee benefit
plans" (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) and all other profit-sharing, deferred
compensation, bonus, stock option, stock purchase, vacation pay, holiday pay,
pension, retirement plans, medical and other compensation or benefit
arrangements maintained or contributed to or required to be contributed to by or
on behalf of any Seller for the benefit of its employees (or former employees),
their beneficiaries and/or those persons providing services to such Seller,
including, without limitation, a complete listing of all plans with respect to
which such Seller has made or has been required to make, directly or indirectly,
contributions, transfers or payments within six (6) years prior to the Closing
(collectively, "Benefit Plans").
(b) Except as set forth on Schedule 3.21, each Seller has
delivered to Purchaser true and complete copies of (i) each Benefit Plan and any
related funding agreements (e.g., insurance contracts or trusts), including all
amendments; (ii) the current draft of the Summary Plan Description pertaining to
each Benefit Plan for which a Summary Plan Description is required by ERISA or
by the terms of such Benefit Plan; (iii) the three (3) most recent annual
reports for each Benefit Plan (including all relevant schedules) for which such
annual reports are required; and (iv) the Internal Revenue Service determination
letter (if applicable) for each Benefit Plan and each amendment thereto.
-21-
(c) Each Benefit Plan has been established and while under the
respective Seller's control maintained and administered in all material respects
in accordance with its terms, any related agreements and all applicable laws
and, if intended to qualify under (S) 401(a) of the Code, is so qualified, and
with respect to each Benefit Plan that is subject to Title IV of ERISA: (i) no
Seller has ever contributed or been obligated to contribute to any "multi-
employer plan" (as defined in (S) 3(37) of ERISA) on account of any withdrawal
from such Benefit Plan; and (ii) no such Benefit Plan subject to a funding
requirement has been terminated at a time when such Benefit Plan was not
sufficiently funded.
(d) All contributions and other payments to be made to each
Benefit Plan under the terms of that Benefit Plan, ERISA, the Code or any other
applicable law have been timely made and all contributions made have been fully
deductible under the Code. The books and records of Sellers properly reflect all
amounts required to be accrued as liabilities to date under each Benefit Plan.
(e) In the case of each Benefit Plan for periods during which
such Benefit Plan was administered by the respective Seller, there is no
accumulated funding deficiency (within the meaning of (S) 4971 of the Code),
whether or not such deficiency has been waived, or any other unfunded liability.
(f) Each Benefit Plan currently complies in all material
respects, in form and operation, with all applicable laws, including, without
limitation, ERISA, the Code, the continuation coverage rules of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA"), Code (S) 4980B and part 6
of Title I of ERISA.
(g) No "prohibited transactions" (as defined in (S) 4975(c)(1)
of the Code) or breaches of fiduciary duty involving Sellers, or a director,
partner or officer of any Seller, have occurred with respect to any of the
Benefit Plans.
(h) All trusts maintained in connection with a Benefit Plan,
including trusts that are intended to comply with the provisions of Code (S)
501(c)(9) or (S) 501(c)(17), are exempt from federal income taxation under Code
(S) 501(a) and there has been no written or other claims of noncompliance or
failure to properly maintain, operate or administer any Benefit Plan (or a
related trust) which has rendered or is reasonably likely to render such Benefit
Plan or trust, or any Seller, subject to or liable for any taxes, penalties or
liabilities to any Person.
(i) There is no contract, agreement or benefit arrangement
covering any employee of any Seller which, individually or collectively, could
give rise to the payment of any amount which would constitute an "excess
parachute payment" (within the meaning of (S) 280G of the Code).
(j) No Seller maintains any Benefit Plan that provides severance
pay or medical benefits to one or more former employees (including retirees) or
other Persons who provided services to such Seller, or provides for post-
retirement
-22-
benefits to present or former employees or such other Persons, other than
benefits that are required to be provided pursuant to COBRA or state law
conversion rights.
(k) Except as set forth on Schedule 3.21, there are no
proceedings, lawsuits or, to the Sellers' knowledge, investigations, either
currently in progress or, on the basis of facts or circumstances recognized by
any Seller, expected to be instituted in the future against (i) any Benefit
Plan, or (ii) any fiduciary of such plan (within the meaning of (S) 3(21)(A) of
ERISA) brought on behalf of any participant, beneficiary or fiduciary
thereunder, or by any Governmental Entity.
3.22 Permits, Licenses, Etc.
----------------------
(a) Except as set forth on Schedule 3.22(a)(i), each Seller
possesses, and is in compliance with, all franchises, licenses, permits,
certificates, authorizations, rights and other approvals of Governmental
Entities (collectively, the "Permits") necessary to (i) occupy, maintain,
operate and use the Real Property as it is currently used (ii) conduct its
business as currently conducted, and (iii) maintain and operate the Benefit
Plans. Schedule 3.22(a)(ii) contains a true and complete list of all Permits.
Each Permit has been lawfully and validly issued and is in full force and
effect, and no proceeding is pending or, to the Sellers' knowledge, threatened,
with respect to the revocation, suspension or limitation of any Permit. The
execution, delivery and performance of this Agreement and the Other Agreements
and the consummation of the transactions contemplated hereby and thereby will
not result in the revocation, suspension, limitation or adverse modification of
any Permit and, except as set forth in Schedule 3.22(a)(iii), no Permit will
require the consent of its issuing authority to, or as a result of the
consummation of, the transactions contemplated hereby.
(b) Schedule 3.22(b)(i) identifies all Permits which materially
restrict the present output of any Seller, which limit the term of possession or
operation of any material assets of any Seller, or which pertain to
environmental discharge. No Seller has been notified or presently has reason to
believe any of the Permits will not in the Ordinary Course be renewed upon their
expiration. Except as set forth on Schedule 3.22(b)(ii), no Seller is in
material breach of, or has received in writing or otherwise any claim or
assertion that such Seller has breached any of the terms or conditions of any
Permit.
3.23 Consents. Schedule 3.23 sets forth all consents, authorizations,
--------
and approvals of, all filings and registrations with, and all notices to, any
Person that are necessary as a result of the consummation of the transactions
contemplated hereby so as not to (a) cause the Purchased Operations to be
interrupted or (b) result in any penalty or fee to be levied against Purchaser
or the Purchased Operations. Except as set forth on Schedule 3.23, all such
consents and filings have been obtained or made or will be obtained or made
prior to the Closing.
3.24 Material Contracts; No Defaults. Schedule 3.24 contains a true
-------------------------------
and complete list and description of all material Contracts, written or oral
(the "Material Contracts"). As used herein, "material" shall mean any contract
which (i) obligates any
-23-
Seller to make annual payment(s) in excess of $25,000, (ii) has a term in
excess of one year or cannot be terminated by any Seller on less than thirty
(30) days' notice without cost or penalty, or (iii) accounts for more than five
percent (5%) of any Seller's accounts payable or accounts receivable. No
contract included as an Excluded Asset or an Excluded Liability on Schedule
1.1(b) or Schedule 1.1(c), respectively, shall be deemed a Material Contract.
True and complete copies of such written Material Contracts and complete
summaries of such oral Material Contracts have been provided to Purchaser.
Except as set forth on Schedule 3.24, each Material Contract is, and immediately
after the Closing will be (on identical terms), legal, valid, binding,
enforceable and in full force and effect in the form delivered to Purchaser.
Except as set forth on Schedule 3.24, no Seller, nor, to the knowledge of
Sellers, any other party, is in material breach or default under any Material
Contract, and no Seller has received in writing any claim or assertion that such
Seller is in material breach or default under any Material Contract. Except as
set forth on Schedule 3.24, no event has occurred or, based on facts presently
known to exist, is anticipated which with notice or lapse of time or both would
constitute a material breach or default, or permit termination, acceleration or
modification under any Material Contract.
3.25 Employee Matters.
----------------
(a) Schedule 3.25(a) contains a true and complete list of all
contracts, agreements, plans, arrangements, commitments and understandings
(formal and informal) pertaining to terms of employment, compensation, bonuses,
profit sharing, stock purchases, stock repurchases, stock options, commissions,
incentives, loans or loan guarantees, severance pay or benefits, use of any
Seller's property and related matters of any Seller with any current or former
partner, officer, director, employee or consultant or Persons who provide or
provided services of any Seller (other than such items which represent minor
variances from general practices of any Seller), and true and complete copies of
all such contracts, agreements, plans, arrangements and understandings have been
made available to Purchaser.
(b) Except as set forth on Schedule 3.25(b), each Seller is in
compliance in all material respects with all Legal Requirements respecting
employment and employment practices, terms and conditions of employment, wages
and hours and occupational safety, and no Seller has received notice of, or is
engaged in, any unfair labor practice. No unfair labor practice complaint
against any Seller is pending before the National Labor Relations Board.
(c) Except to the extent provided in Schedule 3.25(c), there are
no material claims, grievances or arbitration proceedings, workers' compensation
proceedings, labor disputes (including charges of violations of any Legal
Requirements relating to current or former employees (including retirees),
current or former applicants for employment or persons who provide services to
any Seller), governmental investigations or administrative proceedings of any
kind pending or, to any Sellers' knowledge, threatened against or relating to
any Seller, or their employees or employment practices, or operations as they
pertain to conditions of employment, nor is any Seller subject to any order,
judgment, decree, award or administrative ruling arising
-24-
from any such matter. No facts or circumstances exist that could provide a
reasonable basis for a claim of wrongful termination by any current or former
employee of any Seller or Persons who provide services to any Seller against any
Seller.
(d) No labor, collective bargaining, union or similar agreement
is currently in existence or is being negotiated by any Seller, and no union or
labor organization has been certified or recognized as the representative of any
employees of any Seller or Persons who provide services to any Seller or is
seeking such certification or recognition or is attempting to organize any of
the employees of any Seller or persons who provide services to any Seller. There
is not occurring or, to Sellers' knowledge, threatened, any strike, slow down,
picket, work stoppage or other concerted action by any union or other group of
employees or other Persons against any Seller, or its premises or products.
3.26 Affiliations. Except as disclosed on Schedule 3.26, and except
------------
for the ownership of less than five percent (5%) of the securities of a public
company, no Seller, Shareholder, nor any officer, partner, director or key
employee of, or other person providing services to, any Seller or any Affiliate
(as defined herein) of any Seller or any of such Persons has, directly or
indirectly, (a) an interest in any Person, other than a Seller, that (i)
furnishes or sells, or proposes to furnish or sell, services or products that
are furnished or sold by any Seller, or (ii) purchases from or sells or
furnishes to, proposes to purchase from or sell or furnish to, any Seller any
goods or services, or (b) a beneficial interest in any contract or agreement to
which any Seller is a party or by which any Seller or any of the assets of any
Seller are bound or affected, or (c) any claim against any Seller or any of its
assets which could materially and adversely affect such Seller's assets, such
Seller's title to or its right to use its assets, or such Seller's right to
conduct its business following the Closing. Except as disclosed on Schedule
3.26, none of the assets of any Seller include any receivables from any officer,
director, partner, shareholder or employee of, or other person providing
services to any Seller. "Affiliate" shall mean any other Person directly or
indirectly controlling or controlled by or under common control with such
specified Person. For purposes of this definition, "control" means the power to
direct the management and policies of another Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise. A
"Person" shall mean an individual, corporation, partnership, joint venture,
limited liability company, trust or unincorporated organization or association
or other form of business enterprise or a Governmental Entity.
3.27 Principal Customers and Suppliers.
---------------------------------
(a) Schedule 3.27(a) contains a true and complete list of the
name and address of each customer that is a party to a Contract or which is
among the ten largest customers of any Seller as measured by such Seller's sales
of goods or services during the twelve months ended on December 31, 1999. In the
last six months, no such customer (i) has canceled, suspended or otherwise
terminated its relationship with such Seller, (ii) has advised such Seller of
its intention to cancel, suspend or otherwise terminate its relationship with
such Seller, to materially decrease its purchases from such Seller or to
materially and adversely change the terms upon which it purchases products
-25-
from such Seller, or (iii) could reasonably be expected to cancel, suspend or
terminate its relationship with such Seller, to materially decrease its
purchases from such Seller or to materially and adversely change the terms upon
which it purchases products from such Seller as a result of the consummation of
the transactions contemplated by this Agreement or otherwise.
(b) Schedule 3.27(b) contains a true and complete list of each
supplier that is a party to a Contract or from whom any Seller purchased a
material portion of such Seller's purchases of goods or services during the
twelve months ended on December 31, 1999. In the last six months, no such
supplier (i) has canceled, suspended or otherwise terminated its relationship
with such Seller, (ii) has advised such Seller of its intention to cancel,
suspend or otherwise terminate its relationship with such Seller, to materially
increase its pricing for such Seller, to materially curtail its accommodations,
sales or services to such Seller or to materially and adversely change the terms
upon which it sells products to such Seller, or (iii) could reasonably be
expected to cancel, suspend or terminate its relationship with such Seller, to
materially increase its pricing for such Seller, to materially curtail its
accommodations, sales or services to such Seller or to materially and adversely
change the terms upon which it sells products to such Seller as a result of the
consummation of the transactions contemplated by this Agreement or otherwise.
There are no current restrictions or, to the Sellers' knowledge, threatened or
reasonably anticipated restrictions, on the supply of goods and services to any
Seller that have, or could reasonably be expected to have, a Material Adverse
Effect.
3.28 Compliance with Laws. Except as described on Schedule 3.28, each
--------------------
Seller is in compliance in all material respects with all Legal Requirements.
3.29 Product Liability and Product Warranty. There are no and have
--------------------------------------
never been any warranties granted or made with respect to products sold, or
services rendered, by any Seller.
3.30 Hazardous Materials. For purposes of this Section 3.30, the term
-------------------
"Real Property" shall include any real property currently or previously owned or
leased by any Seller or in which any Seller had any rights. Except as set forth
on Schedule 3.30:
(a) No flammable, ignitable, corrosive, reactive, radioactive or
explosive substance or material, petroleum or its byproducts or breakdown
products, hazardous waste, toxic substance or related material or any other
substance or material defined or designated as a hazardous or toxic substance,
material or waste by any Legal Requirement ("Hazardous Material") (i) has been
released, placed, stored, generated, used, manufactured, treated, deposited,
spilled, discharged, released or disposed of on or under any Real Property
currently or previously owned or leased by any Seller or is presently located on
or under any of the Real Property (or to Sellers' knowledge without inquiry, any
property adjoining any Real Property) in violation of any Legal Requirement,
(ii) has been released, placed, stored, generated, used, manufactured, treated,
deposited, spilled, discharged, released or disposed of by or on behalf of any
Seller at any other site, (iii) is presently maintained, used, generated, or
permitted to remain in place by any Seller in violation of any Legal
Requirement, (iv) is required by
-26-
any Legal Requirement to be eliminated, removed, treated or mitigated by any
Seller, or (v) is of a type, location, material, nature or condition which
requires notification to any third party by any Seller under any Legal
Requirement or common law;
(b) No notice, citation, summons or order has been received by
any Seller, no notice has been given by any Seller and no complaint has been
filed, no penalty has been assessed and no investigation or review is pending
or, to the knowledge of Sellers, threatened by any Governmental Entity, with
respect to (i) any alleged violation by any Seller of any Legal Requirement
related to Hazardous Materials, or (ii) any alleged failure by any Seller to
have any environmental permit, certificate, license, approval, registration or
authorization required in connection with its business or properties, or (iii)
any use, possession, generation, treatment, storage, recycling, transportation,
release or disposal by or on behalf of any Seller of any Hazardous Material; and
(c) Except as set forth on Schedule 3.30(c), no Seller has
received any request for information, notice of claim, demand or notification
that it is or that indicates that it may be a "potentially responsible party"
with respect to any investigation or remediation of any threatened or actual
release of any Hazardous Material. No underground storage tanks, whether or not
in use, are or have ever been located at any of the Real Property. A list of all
above ground storage tanks is set forth on Schedule 3.30(c) hereto and all such
tanks are in compliance with applicable Legal Requirements. Except as set forth
on Schedule 3.30(c), no Seller has received any notice with respect to the
listing or proposed listing of any property currently or previously owned,
operated or leased by any Seller on any federal or state list of sites requiring
investigation or cleanup. Except as set forth on Schedule 3.30(c), there have
been no environmental inspections, investigations, studies, tests, reviews or
other analysis conducted on behalf of any Seller in relation to any of the Real
Property. Except as set forth on Schedule 3.30(c), no Seller has released,
transported or arranged for the transportation of any Hazardous Material from
any property currently or previously owned, operated or leased by any Seller in
violation of any Legal Requirement. Except as set forth on Schedule 3.30(c),
each Seller has complied with all Legal Requirements relating to the use,
possession, generation, treatment, storage, recycling, transportation, release
and disposal of Hazardous Materials.
3.31 Utilities. Except as set forth on Schedule 3.31, all water,
---------
sewer, gas, electric, telephone and drainage facilities and all other utilities
required by law or for the normal use and operation of the Real Property are
installed to the property lines of such Real Property and are connected pursuant
to valid permits.
3.32 Condition of Structures and Tangible Personal Property. Except as
------------------------------------------------------
set forth on Schedule 3.32, the Structures and material tangible Personal
Property (i) are in a good operating condition and repair (subject to ordinary
wear and tear), and (ii) have been properly operated, serviced, and maintained,
and (iii) are suitable for the uses for which they are presently being used in
the operation of Sellers' business.
-27-
3.33 Year 2000 Compliance. Except as set forth in Schedule 3.33, each
--------------------
Seller's computer software, firmware and hardware (whether general or specific
purpose) and other similar or related items of automated, computerized and/or
software systems that are used or relied on by each Seller in the conduct of its
business (collectively, the "Information Technology") is designed to be used
during and after the calendar year 2000 A.D., and the Information Technology
used during each such time period always have and will accurately receive,
provide and process (including, but not limited to, calculating, comparing and
sequencing) date and time data from, into and between the twentieth and twenty-
first centuries (including, but not limited to, the years 1999 and 2000) and
leap year calculations and never have and will not malfunction, cease to
function or provide invalid or incorrect results as a result of date and time
data, to the extent that other information technology, used in combination with
the Information Technology, properly exchanges date and time data with it.
3.34 Brokers' Fees. Except as set forth on Schedule 3.34, no broker,
-------------
finder or similar agent has been employed by or on behalf of any Seller or
Shareholder in connection with this Agreement or the transactions contemplated
hereby, and no Seller or Shareholder has entered into any agreement, arrangement
or understanding of any kind with any Person for the payment of any brokerage
commission, finder's fee or any similar compensation in connection with this
Agreement or the transactions contemplated hereby.
3.35 Disclosure. No representation or warranty of any Seller or
----------
Shareholder in this Agreement or any of the Other Agreements, and no information
contained in any Schedule or other writing delivered pursuant to this Agreement
or at the Closing, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact required to make the
statements herein or therein not misleading. Except as provided herein, Sellers
have delivered to Purchaser true, correct and complete copies of all documents,
and any and all amendments to any such documents, referred to in this Agreement
or in any Schedule delivered to Purchaser pursuant to this Agreement.
3.36 No Third Party Approval Required. Except as set forth on Schedule
--------------------------------
3.36, no approval, authorization, consent, order or other action of or filing
with any Person or Governmental Entity is required in connection with the
execution and delivery of this Agreement or the consummation by Sellers or
Shareholders of the transactions described in this Agreement, except to the
extent that the parties may be required to file reports in accordance with the
applicable federal or state securities laws or to the extent such consents have
been obtained.
Section 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT.
------------------------------------------------------
Purchaser or Parent, as applicable, hereby represents and warrants to Sellers,
and covenants and agrees, as of the date hereof and as of the Closing Date as
follows:
4.1 Organization and Good Standing. Purchaser has been duly organized
------------------------------
and is validly existing as a corporation in good standing under the laws of the
-28-
State of its incorporation with full power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. All of the
issued and outstanding capital stock of Purchaser is owned by Parent. The only
significant asset owned by Parent is the stock of Purchaser.
4.2 Execution and Delivery. This Agreement and the Other Agreements
----------------------
to which it is a party have been duly authorized by all necessary action on the
part of Purchaser, have been duly executed and delivered by Purchaser and
constitutes the legal, valid and binding agreement of Purchaser enforceable
against Purchaser in accordance with their terms, except to the extent such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, relating to or
limiting creditors' rights generally and (b) general principles of equity
(whether considered in an action in equity or at law).
4.3 No Conflicts. The execution, delivery and performance of this
------------
Agreement and the consummation of the transactions contemplated hereby will not
(a) conflict with or result in a breach or violation of any term or provision
of, or constitute a default under (with or without notice or passage of time, or
both), or otherwise give any Person a basis for accelerated or increased rights,
termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument to
which Purchaser is a party or by which Purchaser is bound or affected or to
which any of the property or assets of Purchaser is bound or affected, (b)
result in the violation of the provisions of the Articles of Incorporation or
Bylaws of Purchaser or any Legal Requirement, or (c) result in the creation or
imposition of any Lien upon any property or asset of Purchaser.
4.4 Brokers' Fees. No broker, finder or similar agent has been
-------------
employed by or on behalf of Purchaser in connection with this Agreement or the
transactions contemplated hereby, and Purchaser has not entered into any
agreement, arrangement or understanding of any kind with any Person for the
payment of any brokerage commission, finder's fee or any similar compensation in
connection with this Agreement or the transactions contemplated hereby.
4.5 Approval. Purchaser's Board of Directors has approved the
--------
execution of this Agreement and the transactions contemplated hereby.
4.6 No Third Party Approval Required. Except as set forth in Schedule
--------------------------------
4.6, no approval, authorization, consent, order or other action of or filing
with any Person or Governmental Entity is required in connection with the
execution and delivery of this Agreement or the consummation by Purchaser of the
transactions described in this Agreement, except to the extent that the parties
may be required to file reports in accordance with the applicable federal or
state securities laws or to the extent such consents have been obtained.
Section 5. [RESERVED].
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Section 6. CONDITIONS PRECEDENT TO CLOSING; POST-CLOSING OBLIGATIONS.
---------------------------------------------------------
Subject to the fulfillment of the conditions precedent specified in Sections 6.1
and 6.2 hereof, the purchase and sale of the Acquired Assets, the assumption of
the Assumed Liabilities and the other transactions contemplated herein shall be
consummated at a closing (the "Closing") to be held at 10:00 a.m. local time on
March 3, 2000, or at such other date or at such other time as Purchaser and
Sellers shall mutually agree (such date and time being referred to as the
"Closing Date"). The Closing shall be held at the offices of Paul, Hastings,
Xxxxxxxx & Xxxxxx, LLP at 000 Xxxx Xxxxxx Xxxxx, Xxxxxxxxxxx Xxxxx, Xxxxx Xxxx,
Xxxxxxxxxx or at such other place as the parties shall agree.
6.1 Conditions to Obligations of Purchaser. For the purpose of this
--------------------------------------
Section 6.1, any defined terms set forth in Section 1.1(a) shall also be deemed
to refer to such property, rights, contracts, claims and other items held by
Xxxxxx Partnership and Enviro-Safe. The obligation of Purchaser to consummate
the purchase of the Acquired Assets and other interests pursuant to this
Agreement is subject to the satisfaction, at or before the Closing, of the
following conditions, any of which may be waived by Purchaser:
(a) Representations and Warranties; Performance of Obligations.
----------------------------------------------------------
The representations and warranties of Sellers and Shareholders made to Purchaser
set forth in Section 3 hereof and in all agreements, documents and instruments
executed and delivered pursuant hereto or in connection with the Closing shall
be true and correct in all material respects as of the date hereof and as of the
Closing Date as though made on and as of the Closing Date. Sellers and
Shareholders shall have performed in all material respects the agreements and
obligations necessary to be performed by each under this Agreement prior to the
Closing Date.
(b) Certificates and Deliveries by Sellers. Purchaser shall have
--------------------------------------
received (i) a certificate dated the Closing Date, executed by each Seller and
Shareholder, providing as attachments (A) copies of resolutions approved by the
shareholders and the boards of directors of each Seller, or consents of its
partners, as the case may be, certifying that the resolutions or consents
attached to said certificate were duly adopted by the shareholders and the
boards of directors or partners, as the case may be, of each Seller, and that
such resolutions or consents remain in full force and effect, authorizing and
approving the execution by each Seller of this Agreement and other documents
related to this transaction and approving the consummation by each Seller of the
transactions contemplated by such agreements and documents and (B) with respect
to Enviro-Safe, certified Articles of Incorporation and bylaws, (ii) a
certificate duly executed by each Seller and Shareholder certifying that each of
the representations and warranties relating to such entity or individual set
forth in Section 3 hereof and in all agreements, documents and instruments
executed pursuant hereto or in connection with the Closing shall be true and
correct in all material respects as of the Closing Date, and that all
obligations to have been performed or complied with by each such Seller and
Shareholder prior to the Closing Date have been complied with, and (iii) a
certificate dated the Closing Date, executed by each Seller and Enviro-Safe,
providing as attachments Certificates of Good Standing for each Seller (or the
equivalent in the case of
-30-
Xxxxxx Partnership) certified by the appropriate state official in each state in
which each Seller is qualified, dated no earlier than ten (10) days prior to the
Closing Date.
(c) No Injunction. No preliminary or permanent injunction or
-------------
order that would prohibit or restrain the consummation of the transactions
contemplated hereunder shall be in effect, and no Governmental Entity or other
Person shall have commenced or threatened to commence an action or proceeding
seeking to enjoin the consummation of such transactions or to impose liability
on the parties hereto in connection therewith.
(d) Authorizations. Each Seller, Xxxxxx Partnership and
--------------
Enviro-Safe shall have obtained all Authorizations necessary or required in
connection with the operation of its business.
(e) Consents and Approvals. Each Seller, Xxxxxx Partnership and
----------------------
Enviro-Safe shall have received all consents and approvals required to be
obtained in connection with the consummation of the transactions contemplated
hereunder, including, without limitation, all consents applicable to the Leased
Real Property, Authorizations, Permits, Furniture & Equipment and Contracts.
(f) Xxxx of Sale. Each Seller shall have executed and delivered
------------
to Purchaser a Xxxx of Sale in form and substance satisfactory to Purchaser.
(g) Opinion of Counsel to Sellers and Shareholders. Purchaser
----------------------------------------------
shall have received the opinion of Akerman, Senterfitt & Xxxxxx, P.A., counsel
to Sellers and Shareholders, dated the Closing Date, in form and substance
satisfactory to Purchaser.
(h) Assignment of Partnership Interests. JLovell and WLovell
-----------------------------------
shall have executed and delivered to Purchaser an Assignment of Partnership
Interest with respect to the transfer of the partnership interests in Xxxxxx
Partnership, in form and substance satisfactory to Purchaser.
(i) Stock Certificates. Each of JLovell and WLovell shall have
------------------
executed and delivered certificates representing all of the issued and
outstanding shares of capital stock of Enviro-Safe, properly endorsed for
transfer to Purchaser or accompanied by stock assignments separate from
certificates transferring ownership of their respective shares of Enviro-Safe
stock to Purchaser.
(j) Termination of Liens. Each Seller, Xxxxxx Partnership and
--------------------
Enviro-Safe shall have paid off all indebtedness for borrowed money, including
indebtedness for liens covering the Acquired Assets, and received all necessary
UCC terminations and terminations of mortgages and deeds of trust related to the
Acquired Assets, or Purchaser shall have received a title insurance commitment
marked-up at Closing to insure over all such mortgages or deeds of trust.
(k) No Material Adverse Change. Purchaser shall be satisfied in
--------------------------
its reasonable discretion that there has been no material adverse change in the
business,
-31-
operations or financial condition, value or prospects of each Seller since
December 31, 1999, including, without limitation, any change in the relationship
between Sellers and Home Depot; provided, however, that to the extent the
representations and warranties in this Agreement made by Sellers and
Shareholders are incorrect, but subject to cure, such change shall not be deemed
to be a material adverse change so long as such change is cured within the
earlier of (a) ten (10) days after notice thereof to Sellers or (b) March 31,
2000.
(l) Transfer of Excluded Real Property. Xxxxxx Partnership, at
----------------------------------
the expense of the Shareholders, shall have transferred ownership of the real
property described in Schedule 6.1(l) to WLovell, JLovell or their designee
prior to Closing.
(m) Real Property. Xxxxxx Partnership and Purchaser shall
-------------
execute and deliver any and all documents and perform any and all acts
reasonably necessary or appropriate as may be required by the parties hereto in
order to consummate the sale or vesting of the Real Property to or in Purchaser.
(n) Title Report. Purchaser shall have received ALTA Extended
------------
Coverage Owner's Policies of Title Insurance with those endorsements reasonably
required by Purchaser, including, but not limited to, endorsements for access,
zoning, survey and contiguity to the extent permitted by the law of the
jurisdictions in which the Real Property is located, insuring Purchaser in an
aggregate amount satisfactory to Purchaser and showing title to the Real
Property to be vested in Purchaser, subject to the Permitted Liens and other
exceptions approved by Purchaser (the "Title Policies") and legible copies of
all documents of record listed in the Title Policies (the "Underlying
Documents").
(o) Surveys. Sellers have delivered to Purchaser, prepared at
-------
Purchaser's expense, a survey of each parcel of the Real Property which is
adequate for the issuance of the Title Policies (the "Surveys").
(p) Environmental Audit. Purchaser shall have received the
-------------------
results of a Phase I environmental audit on the Real Property and any Phase II
audits reasonably determined by Purchaser to be necessary due to the results of
such Phase I audit (collectively, the "Environmental Audits"), which results
shall be satisfactory to Purchaser.
(q) Financing. The lenders of Purchaser shall not have refused
---------
to make loans sufficient to pay the Purchase Price and to provide reasonable
working capital for the Purchased Operations, or impose upon Purchaser terms and
conditions not reasonably acceptable to Purchaser in connection with such loans.
(r) Assignment and Assumption Agreement. Sellers shall have
-----------------------------------
executed an assignment and assumption agreement, in form and substance
satisfactory to Purchaser.
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(s) Assignment of Permits. Sellers shall have assigned all
---------------------
permits necessary for the operation of the Purchased Operations to Purchaser,
including, without limitation, all water permits, in form and substance
satisfactory to Purchaser.
(t) Shareholder Loans. All loans from Shareholders to
-----------------
Enviro-Safe shall be forgiven or repaid prior to Closing. JLovell and WLovell
shall be entitled to remove from Enviro-Safe prior to the Closing all then
existing cash (ie. after satisfaction of loans from the Shareholders and
--
reserving sufficient cash to cover outstanding checks).
6.2 Conditions to Obligations of Sellers and Shareholders. The
-----------------------------------------------------
obligations of Sellers and Shareholders to consummate the sale of the Acquired
Assets, the partnership interests of Xxxxxx Properties, and the capital stock of
Enviro-Safe pursuant to this Agreement are subject to the satisfaction, at or
before the Closing, of the following conditions, any of which may be waived by
Sellers or Shareholders:
(a) Representations and Warranties; Performance of Obligations.
----------------------------------------------------------
The representations and warranties of Purchaser set forth in Section 4 hereof
and in all agreements, documents and instruments executed and delivered pursuant
hereto or in connection with the Closing shall be true and correct in all
material respects as of the date hereof and as of the Closing Date as though
made on and as of the Closing Date. Purchaser shall have performed in all
material respects the agreements and obligations necessary to be performed by
Purchaser under this Agreement prior to the Closing Date.
(b) Certificates and Deliveries by Purchaser. Sellers and
----------------------------------------
Shareholders shall have received (i) a certificate dated the Closing Date,
executed by Purchaser, and providing as an attachment a copy of the resolutions
approved by the board of directors of Purchaser, certifying that the resolutions
as attached to said certificate were duly adopted by the board of directors of
Purchaser and that such resolutions remain in full force and effect, authorizing
and approving the execution by Purchaser of this Agreement and other documents
related to this transaction and approving the consummation by Purchaser of the
transactions contemplated by such agreements and documents, (ii) a certificate
duly executed by Purchaser certifying that each of the representations and
warranties relating to such entity or individual set forth in Section 4 hereof
and in all agreements, documents and instruments executed pursuant hereto or in
connection with the Closing shall be true and correct in all material respects
as of the Closing Date, and that all obligations to have been performed or
complied with as a condition to Sellers' and Shareholders' closing obligations
have been complied with and (iii) Purchaser's Resale and Exemption Certificate
with respect to Florida sales tax executed by Purchaser.
(c) No Injunction. No preliminary or permanent injunction or
-------------
order that would prohibit or restrain the consummation of the transactions
contemplated hereunder shall be in effect, and no Governmental Entity or other
Person shall have commenced or threatened to commence an action or proceeding
seeking to enjoin the
-33-
consummation of such transactions or to impose liability on the parties hereto
in connection therewith.
(d) Consents and Approvals. Purchaser shall have received all
----------------------
consents and approvals required to be obtained in connection with the
consummation of the transactions contemplated hereunder.
(e) Assignment and Assumption Agreement. Purchaser shall have
-----------------------------------
executed and delivered to each Seller an assignment and assumption agreement, in
form and substance satisfactory to Sellers.
(f) Payment of Purchase Price. The Purchase Price as provided
-------------------------
under Section 2.1 shall be paid to the Sellers.
(g) Tax Indemnification Agreement. If documentary excise taxes
-----------------------------
are not paid by Purchaser to the Florida Department of Revenue with respect to
the transfer to Purchaser of the general partnership interests in Xxxxxx
Properties, Purchaser shall have executed and delivered to WLovell, JLovell and
the law firm of Akerman, Senterfitt & Xxxxxx, P.A. ("Akerman, Senterfitt") a Tax
Indemnification Agreement substantially in the form attached as Schedule 6.2(g),
for the benefit of WLovell and JLovell, Akerman, Senterfitt, and, as third-party
beneficiaries, the Sellers and Lawyers Title Insurance Corporation.
(h) Closing Costs. Upon the Closing, Purchaser shall pay (i) the
-------------
documentary stamp taxes, surtax and transfer taxes, sales and use taxes due on
the assignment, transfer or conveyance of the Acquired Assets (including, but
not limited to, the assignment of the partnership interests of Xxxxxx
Partnership to, and the vesting of the title to the Acquired Real Property in,
Purchaser), (ii) the cost of the title commitment and the premiums on the Title
Policies and any endorsements required by Purchaser, (iii) the cost of the
Environmental Audits, (iv) the cost of the Surveys and (v) the cost of filing
UCC termination statements on the Acquired Assets, other than those filed in
connection with the termination of Liens against the Real Property
(collectively, the "Closing Costs").
(i) Opinion of Counsel to Purchaser. Sellers and Shareholders
-------------------------------
shall have received the opinion of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP,
counsel to Purchaser, dated the Closing Date, in form and substance
satisfactory to Sellers and Shareholders.
6.3 Post-Closing Obligations.
------------------------
(a) Name Change. Within ten (10) days after the Closing Date,
-----------
each Seller shall file with the Secretary of State of its state of incorporation
or formation and each state in which it is qualified to do business, necessary
documents to change the name of such Seller to a name which does not contain the
words: "Xxxxxx" or "Botanical." Sellers represent and warrant to Purchaser that
during the period following the Closing Date until Sellers have changed their
names to names which do not contain such words or any combination of the same,
Sellers will operate only as holding companies and will not
-34-
manufacture, market, sell or distribute products or allow any other person or
entity to license or otherwise use any of Sellers' rights to such names. To the
extent Purchaser is not legally prohibited from doing so, after the Closing Date
and until at least the expiration of the period for which the Earn-Out will be
calculated pursuant to Section 2.2, Purchaser shall continue to use the product
names used in connection with the Purchased Operations.
(b) Release of Guarantees. Purchaser shall use reasonable
---------------------
efforts to obtain releases of Shareholders from the guarantees listed on
Schedule 6.3(b) hereto.
(c) Section 338(h)(10) Election. JLovell, WLovell and Purchaser
---------------------------
shall join in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign tax law) with respect to
the acquisition of shares of capital stock of Enviro-Safe by Purchaser pursuant
to this Agreement (the "Election"). In connection with the Election, JLovell and
WLovell shall each be responsible for the payment of any individual income tax
liability arising from the Election, and JLovell and WLovell shall be
responsible for the payment of all other federal, state and local taxes arising
from the Election (including taxes required to be paid on behalf of JLovell and
WLovell including, without limitation, Florida corporation, withholding taxes
and any built-in gain tax arising under Section 1374 of the Code). JLovell and
WLovell shall be responsible for filing the final S corporation tax returns for
Enviro-Safe reporting the "deemed sale" of Enviro-Safe's assets, which final
return shall be prepared at the expense of JLovell and WLovell. All income of
JLovell and WLovell through the day of the Closing, inclusive of income
attributable to the Election, shall be reflected on Enviro-Safe's final IRS Form
1120S, which shall pass all income through to JLovell and WLovell for inclusion
in their respective individual state and federal income tax returns. The parties
agree to prepare and timely file IRS Form 8023, and all attachments required to
be filed therewith pursuant to applicable Treasury Regulations, on the basis of
allocations made pursuant to the following provisions of this Section 6.3(c) and
to cooperate with each other in the preparation of each other's forms. The
parties shall determine by their mutual agreement in good faith (i) the amount
of the "adjusted grossed-up basis" ("AGUB") for Enviro-Safe under Purchaser's
ownership; and (ii) the amount of the "modified aggregate deemed sales price" of
the Acquired Assets of Enviro-Safe under the ownership of JLovell and WLovell.
The Parties shall prepare a schedule of values, which shall be determined by
their mutual agreement in good faith in accordance with Section 2.7 hereof, that
shall allocate the AGUB for Enviro-Safe under Purchaser's ownership among
aggregate assets purchased pursuant to this Agreement, in accordance with
Section 338(b)(5) of the Code and the Treasury Regulations promulgated
thereunder (the "Allocations"). Enviro-Safe and JLovell and WLovell each shall
calculate gain or loss, if any, resulting from the Election in a manner
consistent with the Allocations and shall not take any position inconsistent
with the Allocations in any tax return or otherwise. The parties shall allocate
the AGUB for Enviro-Safe among Enviro-Safe's assets in a manner consistent with
the Allocations and shall not take any position inconsistent with the
Allocations in any tax return or otherwise.
-35-
(d) Payment of Audit Fees and Expenses. Purchaser shall be
----------------------------------
responsible for the Closing Costs and the amount by which the fees and expenses
of Deloitte & Touche, LLP related solely to the 1999 year-end audit of the
Sellers exceeds the amount that Deloitte & Touche, LLP charged for the 1998
audit of Sellers (which audit did not include an audit of Xxxxxx Partnership).
(e) Parent Guaranty. Subject to the following sentence, Parent
---------------
shall execute a guaranty to guarantee the obligations of Purchaser under this
Agreement, such guaranty to be in form and substance satisfactory to Parent,
Sellers and Shareholders. Parent shall use reasonable efforts to obtain all
necessary consents and authorizations to enter into such guaranty.
(f) Letter Agreement. Attached hereto as Schedule 6.3(f) is a
----------------
letter reflecting the understanding of the parties with respect to certain
operational matters.
(g) Payroll. On or immediately after the Closing Date, Purchaser
-------
shall reimburse Xxxxxx Farms for the amount of payroll obligations disbursed by
Xxxxxx Farms to its employees on the Closing Date.
Section 7. INDEMNIFICATION.
---------------
7.1 Survival Provisions.
-------------------
(a) The representations and warranties, covenants and agreements
of the parties hereto contained in this Agreement shall survive the Closing and
the consummation of the transactions contemplated hereby (and any examination,
or knowledge of, or investigation by or on behalf of any party hereto).
(b) Claims for indemnification pursuant to this Section 7 must be
made by delivery of written notice to the party against whom the indemnification
claim is made, setting forth in general terms the basis for the indemnification
claim, no later than two (2) years after the Closing Date (the "Claims Period");
provided, however, that claims for indemnification for Damages arising from any
breach of the representations and warranties contained in Section 3.19
(Government Payments) may be made at any time within seven (7) years after the
Closing Date, and claims for indemnification for Damages (i) arising from any
breach of the covenants, representations and warranties contained in Sections
3.1 (Capitalization), 3.4 (Execution and Delivery), 3.9 (Property;
Encumbrances), 3.21 (Employee Benefit Matters), 3.30 (Hazardous Materials), (ii)
relating to Excluded Liabilities, or (iii) to the extent any covenant,
representation or warranty was given fraudulently may be made at any time and
shall not be subject to the Claims Period limitation. Notwithstanding the
foregoing, the Claims Period shall expire earlier than such periods of time in
the event that both of the following occurs (a "Definitive Purchaser Default"):
(i) an arbitrator rules pursuant to Section 11.13 hereof that Purchaser has
failed to make one or more Earn-Out payments
-36-
required under Section 2.2 hereof, and (ii) such failure continues for more than
ten (10) days past the expiration of any appeal rights of Purchaser with respect
to such ruling.
7.2 Indemnification.
---------------
(a) Subject to Section 7.3, Sellers and Shareholders jointly and
severally hereby covenant and agree to defend, indemnify and hold harmless
Purchaser and its Affiliates including, without limitation, each of their
respective stockholders, officers, directors, employees, agents and
representatives (collectively, the "Purchaser Indemnitees") from and against any
and all claims, actions, losses, obligations, costs, expenses, settlement
payments, awards, damages, judgments, fines, penalties and other liabilities of
any kind or nature whatsoever, including without limitation reasonable
attorneys', accountants' and experts' fees, but specifically excluding any of
the foregoing for which Purchaser's or such Affiliate's insurance company has
paid or committed to pay (collectively, "Damages") arising out of or resulting
from: (i) any inaccuracy in or breach of any representation or warranty made by
Sellers or Shareholders in this Agreement or in any writing delivered pursuant
to this Agreement or at the Closing; (ii) the failure of Sellers or Shareholders
to perform or observe any covenant, agreement or condition to be performed or
observed by such Persons pursuant to this Agreement or any agreement delivered
pursuant to this Agreement or at the Closing; (iii) any liability or other
obligation of Sellers not a part of the Assumed Liabilities; (iv) any
liabilities of Xxxxxx Partnership; and (v) any liabilities, damages or other
obligations related to or arising from any matter or liability identified as an
Excluded Asset on Schedule 1.1(b), including but not limited to, any liability,
damages or other obligations related to the pending litigation between Botanical
Research Corp. and Shareholders or Sellers and any claims, suits or other
litigation arising out of the facts pertaining to such litigation.
(b) Purchaser hereby covenants and agrees to defend, indemnify
and hold harmless the Sellers and each of their respective Affiliates including,
without limitation, each of their respective partners, stockholders, officers,
directors, employees, agents and representatives (collectively, the "Seller
Indemnitees") from and against any and all Damages arising out of or resulting
from: (i) any inaccuracy in or breach of any representation or warranty made by
Purchaser in this Agreement or in any writing delivered pursuant to this
Agreement or at the Closing; and (ii) the failure by Purchaser to perform or
observe any covenant, agreement or condition to be performed or observed by
Purchaser pursuant to this Agreement or any agreement delivered pursuant to this
Agreement or at the Closing.
7.3 Limitations on Indemnification.
------------------------------
(a) Sellers' and Shareholders' indemnification obligations in
Section 7.2(a)(i) and (ii) shall not exceed an aggregate amount equal to
$9,000,000 (the "Cap Amount").
(b) Notwithstanding any other provision of this Section 7 to the
contrary, any Damages incurred by any Purchaser Indemnitee shall not be subject
to the Cap Amount to the extent they arise from (i) a breach of any of the
representations and
-37-
warranties contained in Section 3.1 (Capitalization), warranties contained in
Section 3.1 (Capitalization), Section 3.4 (Execution and Delivery), 3.9
(Property, Encumbrances), 3.21 (Employee Benefit Matters), or 3.30 (Hazardous
Materials), (ii) a breach of any representation or warranty which was given
fraudulently, or (iii) a breach of Section 8 hereof.
(c) Notwithstanding the terms of Section 7.2 (a), Sellers and
Shareholders shall not be liable for the first $350,000 (the "Threshold Amount")
in aggregate Damages sustained by Purchaser Indemnitees pursuant to Section
7.2(a)(i) or (ii); provided Purchaser Indemnitees shall be entitled to
indemnification for such Threshold Amount of Damages, as well as any amounts in
excess thereof, in the event Damages to Purchaser Indemnitees exceed such
Threshold Amount; provided further that the Threshold Amount shall not apply to
amounts owed under Section 7.2(a)(iii), (iv) or (v) to breaches of Section 8
hereof.
7.4 Third Party Claims.
------------------
(a) If any party entitled to be indemnified pursuant to Section
7.2 (an "Indemnified Party") receives notice of the assertion by any third party
of any claim or of the commencement by any such third party of any Action (any
such claim or Action being referred to herein as an "Indemnifiable Claim") with
respect to which another party hereto (an "Indemnifying Party") is or may be
obligated to provide indemnification, the Indemnified Party shall promptly
notify the Indemnifying Party in writing (the "Claim Notice") of the
Indemnifiable Claim; provided, that the failure to provide such notice shall not
relieve or otherwise affect the obligation of the Indemnifying Party to provide
indemnification hereunder, except to the extent that any Damages directly
resulted or were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after
receipt of the Claim Notice (unless the claim or Action requires a response
before the expiration of such 30-day period, in which case the Indemnifying
Party shall have until the date that is ten (10) days before the required
response date) to acknowledge responsibility and undertake, conduct and control,
through counsel of its own choosing, and at its expense, the settlement or
defense thereof, and the Indemnified Party shall cooperate with the Indemnifying
Party in connection therewith; provided, that (i) the Indemnifying Party shall
permit the Indemnified Party to participate in such settlement or defense
through counsel chosen by the Indemnified Party, provided that the fees and
expenses of such counsel shall not be borne by the Indemnifying Party, and (ii)
the Indemnifying Party shall not settle any Indemnifiable Claim without the
Indemnified Party's consent if the settlement requires the Indemnified Party to
admit wrongdoing, pay any fines or refrain from any action. So long as the
Indemnifying Party is vigorously contesting any such Indemnifiable Claim in good
faith, the Indemnified Party shall not pay or settle such claim without the
Indemnifying Party's consent, which consent shall not be unreasonably withheld.
(c) If the Indemnifying Party does not notify the Indemnified
Party within thirty (30) days after receipt of the Claim Notice (or before the
date that is ten (10) days before the required response date, if the claim or
Action requires a response
-38-
before the expiration of such 30-day period), that it before the expiration of
such 30-day period), that it acknowledges responsibility and elects to undertake
the defense of the Indemnifiable Claim described therein, the Indemnified Party
shall have the right to contest, settle or compromise the Indemnifiable Claim in
the exercise of its reasonable discretion; provided, that the Indemnified Party
shall notify the Indemnifying Party of any compromise or settlement of any such
Indemnifiable Claim.
(d) Anything contained in this Section 7.4 to the contrary
notwithstanding, Sellers shall not be entitled to assume the defense for any
Indemnifiable Claim (and shall be liable for the reasonable fees and expenses
incurred by the Indemnified Party in defending such claim) if the Indemnifiable
Claim seeks an order, injunction or other equitable relief or relief for other
than money damages against Purchaser which Purchaser determines, after
conferring with its counsel, cannot be separated from any related claim for
money damages and which, if successful, would adversely affect the business,
properties or prospects of Purchaser; provided, however, if such equitable
relief portion of the Indemnifiable Claim can be so separated from that for
money damages, Sellers shall be entitled to assume the defense of the portion
relating to money damages.
7.5 Representative. Notwithstanding any other provision contained
--------------
herein, the Representative shall be given and shall give all notices, take all
actions, and make all decisions under Section 7.1 through Section 7.6 hereof on
behalf of the Sellers and Shareholders and all such notices, actions and
decisions shall be binding upon all Sellers.
7.6 Other Agreements; Offset Rights. The provisions of Sections 7.1
-------------------------------
through 7.5 shall not apply to any breaches of a non-competition agreement, non-
disclosure agreement or employment agreement executed by Xxxxx. Any payments due
by Purchaser to any Seller or Shareholder hereunder may, at Purchaser's
election, be offset against any amounts owed by any Seller or Shareholder to
Purchaser or a Purchaser Indemnitee. Any payments due by any Seller or
Shareholder to Purchaser or a Purchaser Indemnitee hereunder may, at such
Seller's or Shareholder's election, be offset against any amounts owed by
Purchaser to such Seller or Shareholder hereunder. In the event any party
intends to exercise its offset right, to the extent the amount to be offset has
not been finally determined or agreed to by the parties, such amount shall be
placed by the party exercising its offset rights in an interest bearing escrow
account with Chicago Title Company, and the principal and interest thereon shall
be disbursed only after such rights have been finally determined under the
provisions of Section 11.13 hereof or agreed to by the parties hereto.
7.7 Exclusive Rights. Except in the case of (i) fraud, or (ii) suits
----------------
for specific performance, the rights contained in this Section 7 are the sole
and exclusive rights of the parties with respect to any breach of this Agreement
by any party hereto.
7.8 Guarantees. Purchaser hereby agrees to defend, indemnify and hold
----------
harmless the Shareholders from any liabilities arising from the Shareholders'
guarantees referenced on Schedule 6.3(b) hereof.
-39-
Section 8. COVENANTS NOT TO COMPETE.
------------------------
8.1 Covenant Not to Compete. Each Seller and Shareholder hereby
-----------------------
agrees, individually, for itself and himself, and not jointly and severally,
that until the earlier of (i) a period of five (5) years following the Closing
Date, or (ii) the occurrence of a Definitive Purchaser Default, neither that
Seller or Shareholder nor any of its or his Affiliates will, directly or
indirectly, own, manage, operate, join, control or participate in the ownership,
management, operation or control of, or be connected as a shareholder, member,
manager, director, officer, employee, partner, consultant or otherwise with, any
profit or non-profit business, firm, entity or organization, which, directly or
indirectly, competes with the Purchased Operations in any county or city in the
United States or Canada; provided that the foregoing shall not apply to (a) any
Seller's or Shareholder's beneficial or legal ownership of less than five
percent (5%) of the outstanding securities of any class of a public company, (b)
loans from Xxxxx to Pure Beauty Farms, Inc. ("Pure Beauty") not to exceed
$400,000 in the aggregate or (c) Xxxxx' ownership (either directly or through a
trust) of the real property currently used by Pure Beauty. Purchaser
acknowledges that it is aware that Pure Beauty is owned and operated by
relatives of Xxxxx. Notwithstanding the foregoing, all Shareholders, including
Xxxxx, and the Sellers agree to hold in confidence and not disclose to third
parties or use for their own benefit, or the benefit of others, the trade
secrets or confidential information of Sellers, Lovell Partnership or Enviro-
Safe. Each Seller and Shareholder acknowledges that Purchaser has legitimate
business interests and that the protection of these interests justifies this
restrictive covenant. The legitimate business interests include, but are not
limited to, trade secrets, valuable confidential business and professional
information that otherwise does not qualify as trade secrets; extraordinary or
specialized training; substantial relationships with specific prospective and
existing customers; and customer/client goodwill associated with a specific
geographic location, an ongoing business by way of a trade name or trademark and
a specific marketing or trade area. Each Seller and Shareholder acknowledges
further that his or its role with the operation sold to Purchaser hereunder
makes him or it uniquely aware of and a part of the legitimate business
interests acquired by Purchaser.
8.2 No Solicitation. Each Seller and Shareholder hereby agrees until
---------------
the earlier of (i) a period of five (5) years following the Closing Date, or
(ii) the occurrence of a Definitive Purchaser Default, no Seller, Shareholder
nor any Affiliate of any such Person shall (i) solicit or attempt to influence
any of Purchaser's current or future employees to become employees or render
services to any business or employer other than Purchaser; provided, however,
such provisions shall not prohibit WLovell and JLovell from having Xxxxxxx
Xxxxxx provide services which are unrelated to the nursery business in an amount
and manner which will not adversely impact her ability to perform her job for
Purchaser, or (ii) solicit or attempt to influence any of Purchaser's current or
future customers or clients to purchase goods or services from a competitor of
Purchaser if such purchase could cause a diminution of Purchaser's sales to such
customer or client.
8.3 Severability. In the event any of the covenants in this Section 8
------------
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too great a period of time, or over too great a
geographical area, or by
-40-
reason of its being too extensive in any other respect, it shall be interpreted
to extend only over the maximum period of time for which it may be enforceable,
and/or over the maximum geographical area as to which it may be enforceable
and/or to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action.
8.4 Specific Performance. Each Seller and Shareholder acknowledges
--------------------
that a breach of the covenants contained in this Section 8 will cause
irreparable damage to Purchaser, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such breach will be inadequate.
Accordingly, each such Person agrees that if any such Person breaches the
covenants contained in this Section 8 in addition to any other remedy which may
be available at law or in equity, Purchaser shall be entitled to specific
performance and injunctive relief, without, in the event of a final judgment,
posting a bond or other security.
8.5 Breaches by Others. Notwithstanding anything contained herein to
------------------
the contrary, no party hereto shall be liable for the breach by any other party
of the covenants of such other party contained in this Section 8.
Section 9. CONDUCT OF BUSINESS PENDING CLOSING. During the period
-----------------------------------
commencing on the date hereof and continuing through the Closing Date, the
Shareholders covenant and agree to cause the Sellers to conduct their business
as follows (except as otherwise expressly contemplated by this Agreement or as
otherwise consented to by Purchaser in writing):
9.1 Qualification. Sellers shall maintain all qualifications to
-------------
transact business and remain in good standing in their state of incorporation or
formation and in the foreign jurisdictions where each is qualified to do
business.
9.2 Ordinary Course. Each Seller shall conduct its business in, and
---------------
only in, the Ordinary Course and, to the extent consistent with such business,
shall preserve intact its current business organizations, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers and others having business dealings with it to the end
that its goodwill and going business value shall be unimpaired at the Closing
Date. Sellers shall maintain their accounts receivable, inventory, accounts
payable and accrued expenses at normal levels for the time of year of the
Closing and shall refrain from taking any action to (i) accelerate collection of
their accounts receivable, (ii) reduce inventory, (iii) defer payment of
accounts payable or accrued expenses or (iv) defer maintenance or capital
expenditures. Each Seller shall maintain its properties and assets in good
condition and repair.
9.3 Organic Changes. No Seller shall (a) amend its Articles or
---------------
Certificate, as the case may be, of Incorporation, Bylaws or partnership
agreement (or equivalent documents), (b) acquire by merging or consolidating
with, or agreeing to merge or consolidate with, or purchase substantially all of
the stock or assets of, or otherwise acquire any business or any corporation,
partnership, association or other business organization or division thereof, (c)
enter into any partnership or joint venture,
-41-
(d) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock or other securities or purchase or redeem, directly
or indirectly, any shares of its capital stock or other securities, (e) issue or
sell any shares of its capital stock or other securities or any options,
warrants or other rights to purchase any such shares or other securities or any
securities convertible into or exchangeable for such shares, (f) liquidate or
dissolve, or (g) obligate itself to do any of the foregoing.
9.4 Indebtedness. Except as provided in this Agreement, no Seller
------------
shall incur any indebtedness for borrowed money, sell any debt securities or
lend money to or guarantee the indebtedness of any Person other than in the
Ordinary Course. No Seller shall restructure or refinance its existing
indebtedness.
9.5 Accounting. No Seller shall make any change in the accounting
----------
principles, methods, records or practices followed by it or depreciation or
amortization policies or rates theretofore adopted by it.
9.6 Compliance with Legal Requirements. Each Seller shall comply
----------------------------------
promptly with all Legal Requirements applicable to it and its operations.
9.7 Disposition of Assets. No Seller shall sell, transfer, license,
---------------------
lease or otherwise dispose of, or suffer or cause the encumbrance by any Lien
upon, any of its properties or assets, tangible or intangible, or any interest
therein, except for sales of inventory in the Ordinary Course.
9.8 Compensation. No Seller shall (a) adopt or amend in any material
------------
respect any collective bargaining, bonus, profit-sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other plan,
agreement, trust, fund or arrangement for the benefit of employees (whether or
not legally binding) other than to comply with any Legal Requirement or (b)
except in the Ordinary Course, pay, or make any accrual or arrangement for
payment of, any increase in compensation, bonuses or special compensation of any
kind, or any severance or termination pay to, or enter into any employment or
loan or loan guarantee agreement with, any current or former officer, director,
employee or consultant of such Seller.
9.9 Modification or Breach of Agreements; New Agreements. No Seller
----------------------------------------------------
shall terminate or modify, or commit or cause or suffer to be committed any act
that will result in any breach or violation of or constitute a default under
(with or without notice or passage of time, or both) or otherwise give any
Person a basis for nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement, instrument,
arrangement or understanding, written or oral, disclosed in this Agreement or
the Schedules hereto. No Seller shall become a party to any contract or
commitment other than in the Ordinary Course. Each Seller shall meet all of its
contractual obligations in accordance with their respective terms.
9.10 Capital Expenditures. No Seller shall purchase, or enter into any
--------------------
contract to purchase, any capital assets in an amount for any contract exceeding
$100,000.
-42-
9.11 Maintain Insurance. Each Seller shall maintain its Policies in
------------------
full force and effect and shall not do or permit to be done any act by which any
of the Policies may be suspended, impaired or canceled.
9.12 Discharge. No Seller shall cancel, compromise, release or
---------
discharge any claim of such Seller upon or against any Person or waive any right
of such Seller of material value, and shall not discharge any Lien upon any
asset of the such Seller or compromise any debt or other obligation of such
Seller to any Person other than Liens, debts or obligations with respect to
current liabilities of such Seller.
Section 10. TERMINATION.
-----------
10.1 Grounds for Termination. This Agreement may be terminated at any
-----------------------
time prior to the Closing:
(a) by mutual written agreement of the Sellers and Purchaser;
(b) by either (i) Purchaser or (ii) Sellers, if the Closing shall
not have been consummated on or before March 31, 2000; provided that the right
to terminate this Agreement under this Section 10.1(b) shall not be available to
any party whose failure or whose Affiliate's failure to perform any material
covenant or obligation under this Agreement is the cause of such delay;
(c) by either (i) Purchaser or (ii) Sellers, if there shall be
any law or regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction;
(d) by Purchaser, provided Purchaser is not then in breach of any
of its obligations hereunder, if either (i) Sellers fail to perform any covenant
in this Agreement when performance thereof is due and does not cure the failure
within twenty (20) business days after Purchaser delivers written notice
thereof, or (ii) any other condition in Section 6.1 has not been satisfied and
is not capable of being satisfied prior to the date specified in Section
10.1(b); or
(e) by Sellers, provided that Sellers are not then in breach of
any of their obligations hereunder, if (i) Purchaser fails to perform any
covenant of this Agreement when performance thereof is due and does not cure the
failure within twenty (20) business days after notice by Sellers thereof, or
(ii) any condition in Section 6.2 has not been satisfied and is not capable of
being satisfied prior to the date specified in Section 10.1(b).
The party desiring to terminate this Agreement pursuant to this
Section 10.1 shall give written notice of such termination to the other party.
10.2 Effect of Termination. If this Agreement is terminated as
---------------------
permitted by Section 10.1, such termination shall be without liability (subject
to Section
-43-
11.3) of any party (or any shareholder, director, officer, partner, employee,
agent, consultant or representative of such party) to this Agreement. The
provisions of Section 11.13 shall survive any termination of this Agreement.
Section 11. GENERAL PROVISIONS.
------------------
11.1 Notices. All notices and other communications under or in
-------
connection with this Agreement shall be in writing and shall be deemed given (a)
if delivered personally, upon delivery, (b) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three days after being mailed, or (c) if given by telecopy, upon confirmation
of transmission by telecopy, in each case to the parties at the following
addresses:
(a) If to Purchaser, addressed to:
Xxxxx Nurseries, Inc.
00000 Xxxxxxx Xxxx
Xxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
With a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
(b) If to Sellers, addressed to:
Xxxxxx Xxxxxx
000 Xxxxxx Xxxxxxx
Xxxxx Xxxxxx, XX 00000
With a copy to:
Akerman, Senterfitt & Xxxxxx, P.A.
0 X.X. 0xx Xxxxxx, 00xx Xxxxx
Xxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxxxx
-44-
(c) If to Shareholders, addressed to:
Xxxxxx Xxxxxx
000 Xxxxxx Xxxxxxx
Xxxxx Xxxxxx, XX 00000
With a copy to:
Akerman, Senterfitt & Xxxxxx, P.A.
0 X.X. 0xx Xxxxxx, 00xx Xxxxx
Xxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxxxx
11.2 Severability. If any term or provision of this Agreement or the
------------
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable such term or provision in any
other jurisdiction, the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or enforceable.
11.3 Expenses. Each party will bear the costs of its agents,
--------
attorneys, accountants, investment bankers, travel, lodging and entertainment
and associated expenses except as provided in this Agreement. Notwithstanding
the foregoing, Sellers shall be responsible for any brokers' or finders'
commission or fee of Sellers (including the fees and costs of Performance Group)
and for all of Sellers' and Shareholders' tax (except to the extent expressly
provided hereby) and legal costs related to this Agreement and the transactions
contemplated hereby (including without limitation with respect to this
Agreement, and all related matters) and Purchaser shall be responsible for the
Closing Costs and the amount by which the fees and expenses of Deloitte &
Touche, LLP related solely to the 1999 year end audit of the Sellers exceeds the
amount that Deloitte & Touche charged for the 1998 audit of Sellers (which audit
did not include an audit of Xxxxxx Partnership).
11.4 Public Announcements. After the Closing, Purchaser shall be
--------------------
permitted to issue a press release or otherwise make any public statement with
respect to the transactions contemplated by this Agreement that is consented to
by Shareholders or required by law, but specifically excluding the amount of the
Purchase Price and the Earn-Outs, Schedules to this Agreement and other
information and documents delivered by Sellers and Shareholders hereunder.
11.5 Third-Party Rights. Notwithstanding any other provision of this
------------------
Agreement, and except as expressly provided in Section 7 hereof, this Agreement
shall not create benefits on behalf of any other Person not a party to this
Agreement (including without limitation any broker or finder), and this
Agreement shall be effective only as between the parties hereto, their
successors and permitted assigns.
-45-
11.6 Entire Agreement. This Agreement, including the exhibits and
----------------
schedules attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto with respect of its subject matter
and supersedes all prior and contemporaneous agreements and understandings, oral
and written, between the parties with respect to such subject matter, including
without limitation the letter of intent among the parties hereto.
11.7 Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. This Agreement and the rights and obligations
hereunder shall not be assignable by any party, including each Seller and
Shareholder, without the written consent of the other parties and any such
purported assignment by any party without such consent shall be void, except
that any or all rights of any party hereto to receive the performance of the
obligations of any other party hereto and rights to assert claims against such
other party in respect of any inaccuracy in or breach of any representations,
warranties or covenants of such other party, may be assigned by such party to
any Affiliate(s) or owner(s) of such party.
11.8 Counterparts. This Agreement may be executed in one or more
------------
counterparts, including electronically transmitted counterparts, each of which
shall be deemed an original, but all such counterparts together shall constitute
but one and the same Agreement.
11.9 Recitals, Schedules and Exhibits. The recitals, schedules,
--------------------------------
exhibits and annexes to this Agreement are incorporated herein and made a part
hereof as if fully set forth at length herein.
11.10 Construction. The article, section and subsection headings used
------------
herein are inserted for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement. As used in this Agreement, the
masculine, feminine or neuter gender, and the singular or plural, shall be
deemed to include the others whenever and wherever the context so requires.
11.11 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws (and not the law of conflicts) of the State
of Florida.
11.12 Attorneys' Fees. In the event of any dispute related to or based
---------------
upon this Agreement, the prevailing party shall be entitled to recover from the
other party its reasonable attorneys' fees and costs.
11.13 Arbitration.
-----------
(a) Any controversy, claim or dispute involving the parties (or
their affiliated persons) directly or indirectly concerning this Agreement or
the subject matter hereof, including, without limitation, any issues and matters
arising under the federal and state securities laws and questions concerning the
scope and applicability of this Section 11.13 shall be finally settled by
arbitration held in Miami-Dade County,
-46-
Florida by one arbitrator in accordance with the rules of commercial arbitration
then followed by the American Arbitration Association or any successor to the
functions thereof. The arbitrator shall apply Florida law in the resolution of
all controversies, claims and disputes and shall have the right and authority to
determine how his or her decision or determination as to each issue or matter in
dispute may be implemented or enforced subject to the provisions of Section 7.7
hereof. Any decision or award of the arbitrator shall be final and conclusive on
the parties to this Agreement and their respective Affiliates, and there shall
be no appeal therefrom other than from gross negligence or willful misconduct.
(b) The parties hereto agree that any action to compel
arbitration pursuant to this Agreement may be brought in the appropriate Miami-
Dade County, Florida court and in connection with such action to compel the laws
of the State of Florida shall control. Application may also be made to such
court for confirmation of any decision or award of the arbitrator, for an order
of the enforcement and for any other remedies which may be necessary to
effectuate such decision or award. The parties hereto hereby consent to the
jurisdiction of the arbitrator and of such court and waive any objection to the
jurisdiction of such arbitrator and court.
(c) Notwithstanding the foregoing provisions of this Section
11.13, nothing contained herein shall require arbitration of any issue arising
under this Agreement for which injunctive relief is successfully sought by any
party hereto. Any action, suit or other proceeding initiated by any Seller,
Shareholder or Purchaser against any other party pursuant to this clause (c) may
be brought in any Federal or state court in Miami-Dade County, Florida having
jurisdiction over the subject matter thereof as the party bringing such action,
suit or proceeding shall elect. Each Seller, Shareholder, Parent and Purchaser
hereby submit themselves to the jurisdiction of any such court and agree that
service of process on them in any such action, suit or proceeding may be
effected by the means by which notices are to be given to it under this
Agreement.
-47-
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the date first above set forth.
PURCHASER:
XXXXX NURSERIES, INC.,
a California corporation
By:_________________________
Its:________________________
PARENT:
XXXXX HORTICULTURE, INC.
a Delaware corporation
By:_________________________
Its:________________________
SELLERS:
XXXXXX FARMS, INC.,
a Florida corporation
By:_________________________
Its:________________________
BOTANICAL FARMS, INC.,
a Florida corporation
By:_________________________
Its:________________________
-48-
SHAREHOLDERS:
_________________________
XXXXXX X. XXXXXX III
_________________________
XXXXXXX X. XXXXXX
_________________________
XXXXXXX X. XXXXX
_________________________
XXXXXXX X. XXXXXX, AS TRUSTEE OF
THE TRACE XXXXXX FAMILY
INVESTMENT TRUST
-49-
INDEX OF DEFINED TERMS
------------------------------------------------------------------------------------------
Term Section
---- -------
------------------------------------------------------------------------------------------
Acquired Assets 1.1(a)
------------------------------------------------------------------------------------------
Acquired Improvements 1.2(b)
------------------------------------------------------------------------------------------
Acquired Land 1.2(a)
------------------------------------------------------------------------------------------
Acquired Leased Real Property 1.2(d)
------------------------------------------------------------------------------------------
Acquired Real Property 1.2(c)
------------------------------------------------------------------------------------------
Act 3.37(a)
------------------------------------------------------------------------------------------
Action 3.18(b)
------------------------------------------------------------------------------------------
Additional Purchase Price 2.3
------------------------------------------------------------------------------------------
Adjusted EBITDA 2.2
------------------------------------------------------------------------------------------
Affiliate 3.26
------------------------------------------------------------------------------------------
Agreement Preamble
------------------------------------------------------------------------------------------
AGUB 6.3(c)
------------------------------------------------------------------------------------------
Akerman, Senterfitt 6.2(g)
------------------------------------------------------------------------------------------
Allocations 6.3(c)
------------------------------------------------------------------------------------------
Assumed Liabilities 1.1(c)
------------------------------------------------------------------------------------------
Authorizations 1.1(a)(vii)
------------------------------------------------------------------------------------------
Balance Sheets 3.6
------------------------------------------------------------------------------------------
Balance Sheet Date 3.6
------------------------------------------------------------------------------------------
Benefit Plans 3.21(a)
------------------------------------------------------------------------------------------
Botanical Farms Preamble
------------------------------------------------------------------------------------------
Business Rights 1.1(a)(i)
------------------------------------------------------------------------------------------
Cap Amount 7.3(a)
------------------------------------------------------------------------------------------
Claim Notice 7.4(a)
------------------------------------------------------------------------------------------
Claims Period 7.1(b)
------------------------------------------------------------------------------------------
Closing 6
------------------------------------------------------------------------------------------
Closing Costs 6.2(h)
------------------------------------------------------------------------------------------
Closing Date 6
------------------------------------------------------------------------------------------
COBRA 3.21(f)
------------------------------------------------------------------------------------------
Code 2.2(a)(iii)
------------------------------------------------------------------------------------------
Common Stock 3.1(a)
------------------------------------------------------------------------------------------
Company Securities 3.1(b)
------------------------------------------------------------------------------------------
Contracts 1.1(a)(v)
------------------------------------------------------------------------------------------
Control 3.26
------------------------------------------------------------------------------------------
Damages 7.2(a)
------------------------------------------------------------------------------------------
Definitive Purchaser Default 7.1(b)
------------------------------------------------------------------------------------------
Earn-Out 2.2
------------------------------------------------------------------------------------------
Election 6.3(c)
------------------------------------------------------------------------------------------
-1-
------------------------------------------------------------------------------------------
Employer benefit plans 3.21(a)
------------------------------------------------------------------------------------------
Environmental Audits 6.1(p)
------------------------------------------------------------------------------------------
Enviro-Safe Recitals
------------------------------------------------------------------------------------------
ERISA 3.21(a)
------------------------------------------------------------------------------------------
Estimated Additional Purchase Price 2.3(c)
------------------------------------------------------------------------------------------
Excluded Assets 1.1(d)
------------------------------------------------------------------------------------------
Excluded Liabilities 1.2(d)
------------------------------------------------------------------------------------------
Final Additional Purchase Price 2.3(d)
------------------------------------------------------------------------------------------
Financial Statements 3.6
------------------------------------------------------------------------------------------
Furniture & Equipment 1.1(a)(ix)
------------------------------------------------------------------------------------------
Furniture and Equipment 1.2(a)(viii)
------------------------------------------------------------------------------------------
GAAP 3.6
------------------------------------------------------------------------------------------
Government Payments 3.19
------------------------------------------------------------------------------------------
Government Returns 3.19
------------------------------------------------------------------------------------------
Governmental Entity 3.18(a)
------------------------------------------------------------------------------------------
Hazardous Material 3.30(a)
------------------------------------------------------------------------------------------
Indebtedness 3.17
------------------------------------------------------------------------------------------
Indemnifiable Claim 7.4(a)
------------------------------------------------------------------------------------------
Indemnified Party 7.4(a)
------------------------------------------------------------------------------------------
Indemnifying Party 7.4(a)
------------------------------------------------------------------------------------------
Independent Accountants 2.2(c)
------------------------------------------------------------------------------------------
Information Technology 3.33
------------------------------------------------------------------------------------------
Intellectual Property Rights 3.14
------------------------------------------------------------------------------------------
Inventory 1.1(a)(x)
------------------------------------------------------------------------------------------
JLovell Preamble
------------------------------------------------------------------------------------------
Knowledge 3
------------------------------------------------------------------------------------------
Knowledge of Sellers 3
------------------------------------------------------------------------------------------
Leased Real Property 1.2(d)
------------------------------------------------------------------------------------------
Legal Requirement 3.5
------------------------------------------------------------------------------------------
Liabilities Excluded by Purchaser 1.1(d)
------------------------------------------------------------------------------------------
Lien 3.5
------------------------------------------------------------------------------------------
Xxxxxx Farms Preamble
------------------------------------------------------------------------------------------
Xxxxxx Partnership Recitals
------------------------------------------------------------------------------------------
Material Adverse Effect 3.8(f)
------------------------------------------------------------------------------------------
Material Contracts 3.24
------------------------------------------------------------------------------------------
Objection Notice 2.3(d)
------------------------------------------------------------------------------------------
Ordinary Course 3.7
------------------------------------------------------------------------------------------
Ordinary Income Items 2.3(c)
------------------------------------------------------------------------------------------
Original Shares 2.4
------------------------------------------------------------------------------------------
Other Agreements 3.4
------------------------------------------------------------------------------------------
-2-
------------------------------------------------------------------------------------------
Parent Preamble
------------------------------------------------------------------------------------------
Permits 3.22(a)
------------------------------------------------------------------------------------------
Permitted Liens 3.9
------------------------------------------------------------------------------------------
Person 3.26
------------------------------------------------------------------------------------------
Policies 3.16
------------------------------------------------------------------------------------------
Prohibited Transaction 3.21(g)
------------------------------------------------------------------------------------------
Proposed EBITDA Modification 2.2(b)
------------------------------------------------------------------------------------------
Proprietary Information 3.14
------------------------------------------------------------------------------------------
Purchased Operations 2.2
------------------------------------------------------------------------------------------
Purchased Operations Financials 2.2(a)(i)
------------------------------------------------------------------------------------------
Purchase Price 2.1(a)
------------------------------------------------------------------------------------------
Purchaser Preamble
------------------------------------------------------------------------------------------
Purchaser Indemnitees 7.2(a)
------------------------------------------------------------------------------------------
Purchaser's 2000 Adjusted EBITDA 2.2(a)(ii)
------------------------------------------------------------------------------------------
Representative 2.5
------------------------------------------------------------------------------------------
Seller Indemnitees 7.2(b)
------------------------------------------------------------------------------------------
Sellers Preamble
------------------------------------------------------------------------------------------
Sellers' Improvements 1.1(a)(ii)(b)
------------------------------------------------------------------------------------------
Sellers' Land 1.1(a)(ii)(a)
------------------------------------------------------------------------------------------
Sellers' Leased Real Property 1.1(a)(iii)
------------------------------------------------------------------------------------------
Sellers' Real Property 1.1(a)(ii)
------------------------------------------------------------------------------------------
Shortfall 2.3(b)
------------------------------------------------------------------------------------------
Structures 3.11(a)
------------------------------------------------------------------------------------------
Surveys 6.1(n)
------------------------------------------------------------------------------------------
Threshold Amount 7.3(c)
------------------------------------------------------------------------------------------
Title Policies 6.1(m)
------------------------------------------------------------------------------------------
Trust Preamble
------------------------------------------------------------------------------------------
Underlying Documents 6.1(m)
------------------------------------------------------------------------------------------
WLovell Preamble
------------------------------------------------------------------------------------------
Xxxxx Preamble
------------------------------------------------------------------------------------------
Year 2000 Limitation 2.2(e)
------------------------------------------------------------------------------------------
-3-
Schedule 2.2
Xxxxxx Farms (a division of Xxxxx Nurseries Inc.)
Adjusted EBITDA Calculation for Xxxxxx Farms (including
combined companies and partnership)
For twelve months ending December 31 and prepared according
to generally accepted accounting principles
For the 12 months ending
December 31
Income from operations before income and
franchise taxes, other non-operating income
and expenses, interest income, interest
expense, and gains/losses on the disposition
of property. Compensation expense for Xxxxx
for calendar year 2000 shall be determined
as though he were employed during the entire
year 2000 pursuant to the Employment
Agreement to be entered into between Xxxxx
and Purchaser.
$
-------------------------
Plus:
Xxxxx Nurseries, Inc. and Xxxxx Horticulture,
Inc. corporate charges allocated and charged
to Xxxxxx Farms and combined companies (but
not including expenses allocated to Xxxxxx
Farms for insurance coverage provided by
Xxxxx Nurseries, Inc. or Xxxxx Horticulture --------------------------
Inc.)
Depreciation expense --------------------------
Goodwill amortization expense and other
amortization expense --------------------------
Compensation expensed for Xxxxxx and Xxxxxxx
Xxxxxx from January 1, 2000 through the
Closing Date. --------------------------
Adjusted EBITDA --------------------------
All above amounts are based on operating results for the twelve-month period
ending December 31 and prepared according to generally accepted accounting
principles.
Schedule 2.2
(continued)
In the calculation of Adjusted EBITDA for the calendar year 2000, the
opening inventory amount as of January 1, 2000 shall equal inventory amounts as
reflected in the 1999 year-end audit of Sellers by Deloitte and Touche, LLP, as
reduced, in Purchaser's discretion, to reflect inventory valuation methods
consistent with those of Purchaser and/or Parent on a company-wide basis
("Opening Inventory Amount"). This Opening Inventory Amount shall also be used
in part to value inventory as of the Closing Date for purposes of determining
the Additional Purchase Price in accordance with Section 2.3.
The Purchaser shall provide written notice to Sellers of the Opening
Inventory Amount at the time Purchaser provides the calculation of a proposed
Additional Purchase Price to Sellers in accordance with Section 2.3(d) of the
Agreement, and the Sellers may object to the calculation of the Opening
Inventory Amount in the time and manner set forth in that Section 2.3(d), and
any disagreement with respect to that Amount shall be resolved in the manner set
forth in Section 2.3(e).
Deliveries of inventory to customers in the year 2000 and on or before
the Closing Date will be considered sales in 2000 and reflected in Adjusted
EBITDA for that year. The methodology for the costing of inventory used in
determining the Additional Purchase Price shall be employed in determining the
cost of inventory for the periods ending December 31, 2000 and December 31,
2001. Inventory amounts at December 31, 2000 and December 31, 2001 will be
based upon an audit as of those dates.
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Schedule 4.6
Third Party Approvals
Consent of Purchaser's Lenders
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