SECURITIES EXCHANGE AGREEMENT
SECURITIES EXCHANGE AGREEMENT ("this Agreement") dated as of June 29,
2001, by and between XXXXXXXXXXXX.XXX, INC., a Texas corporation
("Guidelocator"), and the individuals whose names appear on the signature page
hereof, each being a shareholder (the "Shareholders") of Decorate, Inc., a
Missouri corporation ("Decorate").
W I T N E S S E T H:
WHEREAS, as of June 28, 2001, there are 538,210 outstanding shares of
the common stock, $.01 par value of Decorate (the "Decorate Stock"), all of
which are owned beneficially and of record, by the Shareholders who together own
100% of the issued and outstanding shares of Decorate Stock, each owning the
number of shares set forth opposite their respective names on the signature page
hereof.
WHEREAS, Guidelocator proposes to acquire all of the outstanding shares
of Decorate in exchange for the issuance of an aggregate of 7,700,174 shares of
Guidelocator's common stock ("Guidelocator Stock"), representing approximately
77% of the post-closing, issued and outstanding Guidelocator Stock at a closing
provided for in Section 4.3 of this Agreement.
WHEREAS, the Board of Directors of Guidelocator and Decorate have
determined that it is desirable to effect a plan of reorganization meeting the
requirement of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended and the parties intend that the issuance of the Guidelocator Stock and
exchange for the Decorate Stock shall qualify as a "tax free" reorganization as
contemplated by the provisions of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants, agreements, representations and warranties contained herein,
the parties hereto agree as follows:
ARTICLE 1
ISSUANCE AND EXCHANGE OF SHARES
1.1 Issuance and Exchange. At the Closing (defined below) to be held in
accordance with the provisions of Article 2 below and subject to the terms and
agreements set forth herein, Guidelocator agrees to issue to each of the
Shareholders the number of authorized and newly issued shares of Guidelocator
Stock determined as provided in Section 1.2 below for each share of Decorate
Stock owned by them. In consideration for the shares of Guidelocator Stock to be
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exchanged, the Shareholders each shall deliver to Guidelocator stock
certificates evidencing their ownership of Decorate, together with duly executed
stock powers to effectuate the transfer.
1.2 Exchange Ratio.
(a) At the Closing, Guidelocator shall exchange 14.307 shares of
Guidelocator Stock for each share of Decorate Stock in
accordance with the distribution shown on the signature page
hereof and as full consideration for the Decorate Stock.
(b) No fractional shares of Guidelocator's Common Stock will be
issued to any Shareholder. Accordingly, Shareholders who would
otherwise be entitled to receive fractional shares of
Guidelocator's Stock will, upon surrender of their certificate
representing the fractional shares of Decorate Stock, receive
a full share if the fractional share exceeds fifty percent
(50%) and if the fractional share is less than fifty percent
(50%) the fractional share shall be cancelled.
ARTICLE 2
CLOSING
2. Closing.
The consummation of the exchange by the Shareholders (the Closing")
shall occur at the offices of Decorate, Inc., 000 X. Xxxxx, Xxxxx X,
Xxxxxxxxxxx, Xxxxxxxx 00000, on the 28th day of June, 2001, or at such other
place and/or on such other time and date as the parties may agree upon (the
"Closing Date"). If the Closing fails to occur by July 15, 2001, or by such
later date to which the Closing may be extended as provided hereinabove, this
Agreement shall automatically terminate, all parties shall pay their own
expenses incurred in connection herewith, and no party hereto shall have any
further obligations hereunder; provided, however, that no such termination shall
constitute a waiver by any party or parties which is/are not in default of any
of its or their respective representations, warranties or covenants if any other
party or parties is in default of any of its or their respective
representations, warranties or covenants under this Agreement. At the Closing,
as conditions thereto:
2.1 Deliveries by Guidelocator.
Guidelocator shall deliver, or cause to be delivered to the
Shareholders:
(a) As soon after the Closing as is feasibly possible and no later
than June 29, 2001, certificates for the shares of
Guidelocator Stock being exchanged for their respective
accounts, in form and substance reasonably satisfactory to the
Shareholders and their counsel;
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(b) At the Closing, the certificates, resolutions, opinions and
resignations specified in Article 6 below;
(c) At the Closing, all of the books and records of Guidelocator.
2.2 Shareholders' Deliveries.
The Shareholders shall deliver to Guidelocator:
(a) At the Closing, a stock certificate or certificates evidencing
the ownership of each Shareholder, of all shares of Decorate
Stock currently owned by them, respectively, duly endorsed for
transfer to Guidelocator; and
(b) The certificates, resolutions and opinion, specified in
Article 5.
ARTICLE 3A
REPRESENTATIONS OF SHAREHOLDERS
Each Decorate Shareholder hereby represents and warrants as to
himself/herself to Guidelocator as follows (it being acknowledged that
Guidelocator is entering into this Agreement in material reliance upon each of
the following representations and warranties, and that the truth and accuracy of
each, as evidenced by their signature set forth on the signature page,
constitutes a condition precedent to the obligations of Guidelocator hereunder):
3.1A Ownership of Stock. Each Shareholder is the lawful owner of their
shares of Decorate Stock to be transferred to Guidelocator free and clear of all
preemptive or similar rights, liens, encumbrances, restrictions and claims of
every kind and the delivery to Guidelocator of the Decorate Stock pursuant to
the provisions of this Agreement will transfer to Guidelocator valid title
thereto, free and clear of all liens, encumbrances, restrictions and claims of
every kind. To the knowledge of the Shareholder, the shares of Decorate Stock to
be exchanged herein have been duly authorized and validly issued and are fully
paid and nonassessable.
3.2A Authority to Execute and Perform Agreement; No Breach. Each
Shareholder has the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement, and to sell, assign,
transfer and convey the Decorate Stock and to perform fully their respective
obligations hereunder. This Agreement has been duly executed and delivered by
each Shareholder and, assuming due execution and delivery by, and enforceability
against, Guidelocator, constitutes the valid and binding obligation of each
Shareholder enforceable in accordance with its terms, subject to the
qualifications that enforcement of the rights and remedies created hereby is
subject to (i) bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting the rights and
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remedies of creditors, and (ii) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law). No
approval or consent of, or filing with, any governmental or regulatory body, and
no approval or consent of, or filing with, any other person is required to be
obtained by the Shareholders or in connection with the execution and delivery by
the Shareholders of this Agreement and consummation and performance by them of
the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by each
Shareholder and the consummation of the transactions contemplated hereby in
accordance with the terms and conditions hereof by each Shareholder will not:
(a) violate, conflict with or result in the breach of any of the
terms of, or constitute (or with notice or lapse of time or
both would constitute) a default under, any contract, lease,
agreement or other instrument or obligation to which a
Shareholder is a party or by or to which any of the properties
and assets of any of the Shareholders may be bound or subject;
(b) violate any order, judgment, injunction, award or decree of
any court, arbitrator, governmental or regulatory body, by
which a Shareholder or the securities, assets, properties or
business of any of them is bound; or
(c) violate any statute, law or regulation to which Shareholder is
subject.
3.3A Securities Matters. The Shareholders hereby represent, warrant and
covenant to Guidelocator, as follows:
(a) The Shareholders have been advised that the Guidelocator
Shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or any state
securities act in reliance on exemptions therefrom.
(b) The Guidelocator Shares are being acquired solely for the
Shareholder's own account, for investment and are not being
acquired with a view to or for the resale, distribution,
subdivision or fractionalization thereof, the Shareholder's
have no present plans to enter into any such contract,
undertaking, agreement or arrangement and the Shareholders
further understands that the Guidelocator Shares, may only be
resold pursuant to a registration statement under the
Securities Act, or pursuant to some other available exemption;
(c) The Shareholders acknowledge, in connection with the exchange
of the Guidelocator Shares, that no representation has been
made by representatives of Guidelocator regarding its
business, assets or prospects other than that set forth herein
and that it is relying upon the information set forth in the
filings made by Guidelocator pursuant to Section 13 of the
Securities Exchange Act of 1934, as
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amended and such other representations and warranties as set
forth in this Agreement.
(d) The Shareholders agree that the certificate or certificates
representing the Guidelocator Shares will be inscribed with
substantially the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933. The securities have been
acquired for investment and may not be sold, transferred or assigned in
the absence of an effective registration statement for these securities
under the Securities Act of 1933 or an opinion of Guidelocator's
counsel that registration is not required under said Act."
ARTICLE 3
REPRESENTATIONS OF MANAGEMENT SHAREHOLDERS
The Management Shareholders, as indicated on the signature page with a
"MS" next to their name, hereby represent and warrant to Guidelocator as follows
(it being acknowledged that Guidelocator is entering into this Agreement in
material reliance upon each of the following representations and warranties, and
that the truth and accuracy of each, as evidenced by their signature set forth
on the signature page, constitutes a condition precedent to the obligations of
Guidelocator hereunder).
3.1 [Reserved]
3.2 [Reserved]
3.3 Existence and Good Standing. Decorate and its subsidiaries are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdictions in which they are incorporated. Decorate and its
subsidiaries have the power to own or lease their respective properties and
assets and to carry on their businesses as now being conducted. Decorate and its
subsidiaries are duly qualified to do business and are in good standing in the
jurisdictions set forth on Schedule 3.3, which are the only jurisdictions in
which the character or location of the properties owned or leased by Decorate
and its subsidiaries or the nature of the business conducted by Decorate or its
subsidiaries makes such qualification necessary.
3.4 Capital Stock. Decorate has an authorized capitalization consisting
of 1,000,000 shares of Common Stock, $.01 par value, of which 538,210 shares are
issued and outstanding and no shares of Common Stock are held in Decorate's
treasury. All such outstanding shares have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth as Schedule 3.4
attached hereto, there are no outstanding options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements,
commitments or arrangements of any character providing for the purchase,
subscription, issuance or sale of any
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shares of the capital stock of Decorate, other than the exchange of the Decorate
Shares as contemplated by this Agreement.
3.5 Financial Statements and No Material Changes. Annexed hereto as
Schedule 3.5 are the audited balance sheets, income statements and statements of
cash flows of Decorate and its subsidiaries as of December 31, 2000 (the
"Financial Statements").
The Financial Statements were carefully prepared from the books and
records of Decorate, and contain the footnotes which are required in audited
financial statements, present fairly the financial position, assets and
liabilities of Decorate and the results of its operations, for the respective
periods indicated and reflect all necessary accruals, all in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis.
The Financial Statements contain all adjustments (consisting of only normal
recurring accruals) required to be made by GAAP, subject to normal year-end
adjustments.
Since December 31, 2000 there has been (a) no material adverse change
in the assets or liabilities, or in the business or condition, financial or
otherwise, or in the results of operations or prospects, of Decorate whether as
a result of any legislative or regulatory change, revocation of any license or
rights to do business, fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation or act of God or other public force or
otherwise and (b) no material adverse change in the assets or liabilities, or in
the business or condition, financial or otherwise, or in the results of
operations or prospects, of Decorate and to the best knowledge, information and
belief of Decorate, no fact or condition exists or is contemplated or threatened
which might cause such a change in the future.
3.6 Books and Records. The minute books of Decorate, all the contents
of which have been previously made available to Guidelocator and their
representatives, contain accurate records of all meetings of, and corporate
action taken by (including action taken by written consent) the shareholders and
Board of Directors of Decorate. Except as set forth on Schedule 3.6 attached
hereto, Decorate does not have any of its respective records, systems, controls,
data or information recorded, stored, maintained, operated or otherwise wholly
or partly dependent upon or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not) which
(including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of Decorate.
3.7 Title to Properties; Encumbrances.
(a) Except as set forth on Schedule 3.7 attached hereto, Decorate
and its subsidiaries have good, valid and marketable title to
(a) all of its properties and assets (real and personal,
tangible and intangible), including, without limitation, all
of the properties and assets reflected in the balance sheet
included as part of the Financial Statements, except as
indicated in the Schedules hereto; and (b) all of the
properties and assets purchased by Decorate or its
subsidiaries since December 31, 2000 all of which purchases as
of a date not more than two days
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prior to the date of this Agreement, have been set forth on
Schedule 3.7 attached hereto; in each case subject to no
encumbrance, lien, charge or other restriction of any kind or
character, except for (i) liens reflected in the balance
sheet, included as part of the Financial Statements; (ii)
liens consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on
the use of real property or irregularities in title thereto
which do not materially detract from the value of, or impair
the use of, such property by Decorate in the operation of its
business; (iii) liens for current taxes, assessments or
governmental charges or levies on property not yet due and
delinquent; and (iv) liens described on Schedule 3.7 attached
hereto (liens of the type described in clause (i), (ii) and
(iii) above are hereinafter sometimes referred to as
"Permitted Liens").
(b) The rights, properties and other assets presently owned,
leased or licensed, by Decorate and its subsidiaries reflected
on the balance sheet included in the Financial Statements or
acquired since December 31, 2000 include all rights,
properties and other assets necessary to permit Decorate to
conduct its business in the same manner as its business has
heretofore been conducted. All such properties and assets
owned or leased by Decorate are in satisfactory condition and
repair, other than ordinary wear and tear.
No structure or improvement on the real property leased by
Decorate, whether now existing or intended to be constructed
pursuant to existing plans and specifications, violates, or if
completed would violate, any applicable zoning or building
regulations or ordinances or similar federal, state or
municipal law.
3.8 Leases. Schedule 3.8 attached hereto, contains an accurate and
complete list and description of the terms of all leases to which either
Decorate or any of its subsidiaries is a party (as lessee or lessor). Each lease
listed on Schedule 3.8 (or required to be set forth on Schedule 3.8) is in full
force and effect; all rents and additional rents due to date on each such lease
have been paid; in each case, the lessee has been in peaceable possession since
the commencement of the original term of such lease and is not in default
thereunder and no waiver, indulgence or postponement of the lessee's obligations
thereunder has been granted by the lessor; and there exists no event of default
or event, occurrence, condition or act (including the consummation of the
transactions contemplated hereby) which, with the giving of notice, the lapse of
time or the happening of any further event or condition, would become a default
under such lease. Neither Decorate nor any of its subsidiaries has violated any
of the terms or conditions under any such lease in any material respect, and, to
the best knowledge, information and belief of Decorate, all of the covenants to
be performed by any other party under any such lease have been fully performed.
The property leased by Decorate or any of its subsidiaries in a state of good
maintenance and repair and is adequate and suitable for the purposes for which
it is presently being used.
3.9 Material Contracts. Except as set forth on Schedule 3.9 attached
hereto, neither Decorate or its subsidiaries has nor is bound by:
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(a) any agreement, contract or commitment relating to the
employment of any person by Decorate or its subsidiaries, or
any bonus, deferred compensation, pension, profit sharing,
stock option, employee stock purchase, retirement or other
employee benefit plan;
(b) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock;
(c) any loan or advance to, or investment in, any individual,
partnership, joint venture, corporation, trust, unincorporated
organization, government or other entity (each a "Person") or
any agreement, contract or commitment relating to the making
of any such loan, advance or investment;
(d) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person (other than the
endorsement of negotiable instruments for collection in the
ordinary course of business);
(e) any management service, consulting or any other similar type
contract;
(f) any agreement, contract or commitment limiting the freedom of
Decorate or any subsidiary to engage in any line of business
or to compete with any Person;
(g) any agreement, contract or commitment not entered into in the
ordinary course of business which involves $250,000 or more
and is not cancelable without penalty or premium within 30
days; or
(h) any agreement, contract or commitment which might reasonably
be expected to have a potential adverse impact on the business
or operations of Decorate or any subsidiary; or
(i) any agreement, contract or commitment not reflected in the
Financial Statement under which Decorate or any subsidiary is
obligated to make cash payments of, or deliver products or
render services with a value greater than $100,000
individually or $300,000 in the aggregate, or receive cash
payments of, or receive products or services with a value
greater than $100,000 individually or $300,000 in the
aggregate, and any other agreement, contract or commitment
which is material to the conduct of the business of Decorate.
Each contract or agreement set forth on Schedule 3.9 (or not required
to be set forth on Schedule 3.9) is in full force and effect and there exists no
default or event of default or event, occurrence, condition or act (including
the consummation of the transactions contemplated hereby) which, with the giving
of notice, the lapse of time or the happening of any other event or
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condition, would become a default or event of default thereunder. Neither
Decorate or any subsidiary has violated any of the terms or conditions of any
contract or agreement set forth on Schedule 3.9 (or not required to be set forth
on Schedule 3.9) in any material respect, and, to the best knowledge,
information and belief of Decorate, all of the covenants to be performed by any
other party thereto have been fully performed. Except as set forth on Schedule
3.9, the consummation of the transactions contemplated hereby does not
constitute an event of default (or an event, which with notice or the lapse of
time or both would constitute a default) under any such contract or agreement.
3.10 Restrictive Documents. Except as set forth on Schedule 3.10
attached hereto, neither Decorate or any subsidiary, nor Shareholder is subject
to, or a party to, any charter, by-law, mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule, ordinance, regulation, order,
judgment or decree, or any other restriction of any kind or character, which
could materially adversely affect the business practices, operations or
condition of Decorate or any of its assets or property ("Decorate's Property",
which for the purposes of this Agreement includes the assets and property of all
of Decorate's subsidiaries), or which would prevent consummation of the
transactions contemplated by this Agreement, compliance by the Shareholders with
the terms, conditions and provisions hereof or the continued operation of
"Decorate's Business" (which for the purpose of this Agreement includes the
business of Guildmaster, Inc.) after the date hereof or the Closing Date (as
hereinafter defined) on substantially the same basis as heretofore operated or
which would restrict the ability of Decorate to conduct business in any area.
3.11 Litigation. Except as set forth on Schedule 3.11 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the best knowledge,
information and belief of the Shareholders any investigation by) any
governmental or other instrumentality or agency, pending, or, to the best
knowledge, information and belief of Decorate or any subsidiary, threatened,
against or affecting Decorate or any subsidiary, or any of their respective
properties or rights, or against the Shareholders, or any officer, director or
employee of a Shareholder other than such items which are insignificant and
immaterial and which do not adversely affect (i) the right or ability of
Decorate's Business to carry on business as now conducted; (ii) the condition,
whether financial or otherwise, or properties of Decorate; or (iii) the
consummation of the transactions contemplated hereby and the Shareholders do not
know of any valid basis for any such action, proceeding or investigation. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, governmental or regulatory body or arbitration tribunal by which either
the Shareholders or Decorate, or any officer, director or employee of Decorate,
or the securities, assets, properties or business of any of them is bound, other
than any such items which are insignificant and immaterial and which do not and
will not adversely affect (i) the right of Decorate to carry on its business as
now conducted and as proposed to be conducted by Guidelocator after the
consummation of the transactions contemplated by this Agreement; (ii) the
condition, whether financial or otherwise, or properties of Decorate; or (iii)
the consummation of the transactions contemplated hereby.
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3.12 Taxes. Except as set forth on Schedule 3.12, Decorate and every
member of the consolidated group of which Decorate is a part has filed or caused
to be filed, within the times and within the manner prescribed by law, all
federal, state, local and foreign tax returns and tax reports which are required
to be filed by, or with respect to, Decorate. Such returns and reports reflect
accurately all liability for taxes of Decorate for the periods covered thereby.
Except as set forth on Schedule 3.12, all federal, state, local and foreign
income, profits, franchise, employment, sales, use, occupancy, excise and other
taxes and assessments, stock and transfer taxes (including interest and
penalties) payable by, or due from, Decorate and any member of the consolidated
group of which Decorate is a part, have been fully paid and fully provided for
in the books and financial statements of Decorate. No examination of any tax
return of Decorate or any member of a consolidated group of which Decorate is a
part, is currently in progress. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any tax return of
Decorate. Schedule 3.12 attached hereto lists all tax sharing contracts,
agreements or arrangements to which Decorate is a party and all such contracts,
agreements and arrangements have been terminated prior to the Closing Date with
no liability or obligation to Decorate.
3.13 Liabilities. Except as set forth on Schedule 3.13, Decorate on a
consolidated basis has no outstanding claims, liabilities or indebtedness,
contingent or otherwise, which are not properly reflected in the Financial
Statements in a manner consistently with past practice, other than liabilities
incurred subsequent to December 31, 2000 in the ordinary course of business not
exceeding $250,000 individually or $500,000 in the aggregate; the reserves
reflected in the Financial Statements are adequate, appropriate and reasonable.
Decorate is not in default in respect of the terms or conditions of any
indebtedness, except where such default would not have a material adverse effect
on the business assets or prospects of Decorate.
3.14 Insurance. Set forth on Schedule 3.14, attached hereto, is a brief
description of insurance policies (specifying the insurer, the policy number or
coverage note number with respect to binders and the amount of any deductible,
describing the pending claims if such claims exceed the applicable policy
limits) which Decorate and any member of its consolidated group maintain with
respect to its business, properties or employees. Such policies are valid,
binding and, to our knowledge, enforceable in accordance with their terms and
are in full force and effect and are free from any right of termination on the
part of the insurance carriers. Such policies, with respect to their amounts and
types of coverage, are adequate to insure fully against risks to which Decorate
and any member of its consolidated group and their respective property and
assets are normally exposed in the operation of their businesses. Neither
Decorate nor any member of its consolidated group is in default with respect to
any material provision in any such policy or binder and has not failed to give
any notice or present any claim under any such policy or binder in due and
timely fashion, and neither Decorate nor any member of its consolidated group
has received any notice of cancellation or non-renewal with respect to any such
policy or binder. Except for claims set forth on Schedule 3.14, there are no
outstanding unpaid claims under any such policy or binder which have gone unpaid
for more than 45 days or as to which the carrier has disclaimed liability.
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3.15 Intellectual Properties. The operation of the business of Decorate
or any member of its consolidated group requires no rights under Intellectual
Property (as hereinafter defined) other than rights under Intellectual Property
listed on Schedule 3.15 attached hereto, and rights granted to Decorate or any
member of its consolidated group pursuant to agreements listed on Schedule 3.15.
Within the three year period immediately prior to the date of this Agreement,
neither the business of Decorate or any member of its consolidated group made
use of Intellectual Property rights other than rights under Intellectual
Property listed on Schedule 3.15 and rights granted to Decorate or any member of
its consolidated group pursuant to agreements listed on Schedule 3.15. Except as
otherwise set forth on Schedule 3.15, either Decorate or any member of its
consolidated group owns all right, title and interest in the Intellectual
Property listed on Schedule 3.15 including, without limitation, exclusive rights
to use and license the same. Each item of Intellectual Property listed on
Schedule 3.15 has been duly registered with, filed in, or issued by the
appropriate domestic or foreign governmental agency, to the extent required, and
each such registration, filing and issuance remains in full force and effect.
Except as set forth on Schedule 3.15, no claim adverse to the interests of
Decorate or any member of its consolidated group in the Intellectual Property or
agreements listed on Schedule 3.15 has been made in litigation. To the best
knowledge, information and belief of the Shareholders, no such claim has been
threatened or asserted, no basis exists for any such claim, and no Person has
infringed or otherwise violated the rights of Decorate or any member of its
consolidated group in any of the Intellectual Property or agreements listed on
Schedule 3.15. Except as set forth on Schedule 3.15, no litigation is pending
wherein Decorate or any member of its consolidated group is accused of
infringing or otherwise violating the Intellectual Property right of another, or
of breaching a contract conveying rights under Intellectual Property. To the
best knowledge, information and belief of the Shareholders, no such claim has
been asserted or threatened against Decorate or any member of its consolidated
group, nor are there any facts that would give rise to such a claim. For
purposes of this Section 3.15, "Intellectual Property" means domestic and
foreign patents, patent applications, registered and unregistered trade marks
and service marks, trade names, registered and unregistered copyrights, computer
programs, data bases, trade secrets and proprietary information. Shareholders
will transfer any Intellectual Property owned by it and used in Decorate or any
member of its consolidated group's Business to Guidelocator.
3.16 Compliance with Laws. Neither Decorate nor any member of its
consolidated group, nor to the knowledge of Decorate, the Shareholders, any
officer, director or employee of Decorate or any member of its consolidated
group is in violation of any applicable order, judgment, injunction, award or
decree, related to, arising out of or affecting the business or operations of
Decorate or any member of its consolidated group or their respective properties
or assets, the violation of which would have a material adverse effect on the
business assets or prospects of Decorate. Neither the Shareholders, Decorate nor
any member of its consolidated group, nor to the knowledge of Decorate, any
officer, director or employee of either Decorate or any member of its
consolidated group is in violation of any federal, state, local or foreign law,
ordinance, regulation or any other requirement of any governmental or regulatory
body, court or arbitrator (including, without limitation, laws relating to the
environment and OSHA and the Americans with Disabilities Act) other than
insignificant or immaterial violations which do not and will not adversely
affect (i) Decorate's Business or Property; (ii) the business proposed to be
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conducted by Guidelocator after the consummation of the transactions
contemplated by this Agreement; or (iii) the consummation of the transactions
contemplated by this Agreement. Each permit, license, order or approval of any
governmental or regulatory body or other applicable authority ("Permits") that
is material to the conduct of Decorate's Business is in full force and effect,
no violations are or have been recorded in respect of any permit and no
proceeding is pending or, to the knowledge of the Shareholders or Decorate,
threatened, to revoke or limit any Permit, which revocation or limitation could
have an adverse effect on Decorate's Business or Property or the business to be
conducted by Guidelocator after the consummation of the transactions
contemplated by this Agreement. Schedule 3.16 contains a list of all Permits.
Except as set forth on Schedule 3.16, no approval or consent of any person is
needed in order that the Permits continue in full force and effect following the
consummation of the transactions contemplated by this Agreement.
3.17 Employment Relations.
(a) Decorate and each member of its consolidated group is in
compliance with all Federal, state or other applicable laws,
domestic or foreign, respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and has not and is not engaged in any unfair labor
practice;
(b) no unfair labor practice complaint against Decorate or any
member of its consolidated group is currently pending before
the National Labor Relations Board nor has such a complaint
been pending in the last two years;
(c) there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or involving Decorate
or any member of its consolidated group nor has one existed
during the last two years;
(d) no representation question exists respecting the employees of
Decorate or any member of its consolidated group;
(e) no grievance which might have an adverse effect upon Decorate
or any member of its consolidated group or the conduct of
Decorate's Business exists, no arbitration proceeding arising
out of or under any collective bargaining agreement is pending
and no claim therefor has been asserted;
(f) Neither Decorate nor any member of its consolidated group is a
party to, nor does there otherwise exist, any union,
collective bargaining agreement or similar agreement with
respect to the employees of Decorate or any member of its
consolidated group and no collective bargaining agreement or
similar agreement is currently being negotiated by Decorate or
any member of its consolidated group; and
12
(g) Neither Decorate nor any member of its consolidated group has
experienced any labor difficulty during the last two years.
There has not been, and to the best knowledge, information and
belief of the Shareholders there will not be, any adverse
change in relations with employees of Decorate or any member
of its consolidated group as a result of any announcement of
the transactions contemplated by this Agreement.
3.18 Employee Benefit Plans.
(a) Schedule 3.18 contains a complete list, as of May 31, 2001, of
all employees, including their names, birthdates, job titles,
base salaries and dates of hire. Schedule 3.18 contains a true
and complete list and accurate description of each employee
welfare benefit plan (an "Employee Welfare Plan"), as defined
in Section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), maintained currently or at any
time by Decorate or any other organization which as of the
Closing Date is a member of a controlled group of
organizations within the meaning of Section 414(b), (c), (m)
or (o) of the Internal Revenue Code of 1986, as amended, (the
"Code"), of which Decorate is a member (an "ERISA Affiliate"),
or to which Decorate or any ERISA Affiliate contributes or is
required to contribute or contributed or was required to
contribute at any time. Schedule 3.18 contains a true and
complete list and accurate description of each employee
pension benefit plan, as defined in Section 3(2) of ERISA (an
"Employee Pension Plan"), maintained currently or at any time
by Decorate or any ERISA affiliate or to which Decorate or any
ERISA Affiliate contributes or is required to contribute or
contributed or was required to contribute at any time. The
Employee Welfare Plans, the Employee Pension Plans and the
other plans listed on Schedule 3.18 are collectively referred
to herein as the "Plans." Neither Decorate nor any ERISA
Affiliate has maintained at any time, nor does it contribute
to or has it contributed to or is or was required to
contribute to: (i) any multi-employer plan (as defined in
Section 3(37) of ERISA); or (ii) any funded or unfunded
medical, health or life insurance plans or arrangements for
current or future retirees or terminated employees.
(b) With respect to each current Plan, Guidelocator has been
provided heretofore with true and complete copies of: (i) all
Plan documents and all documents or instruments establishing
or constituting any related trust, annuity contract or other
funding instrument, and any amendments thereto; (ii) the most
recent determination letter received from the IRS; (iii) the
most recent financial statement; (iv) the most recent IRS Form
5500; and (v) written descriptions of all non-written
agreements relating to the Plans. All current Plans, all Plan
documents and all documents or instruments establishing or
constituting any related trust, annuity contract or other
funding instrument, and any amendments thereto, comply in all
material respects with the provisions of ERISA and the Code
and applicable laws, rules and regulations. All necessary
governmental
13
approvals for all current Plans have been obtained and
favorable determinations as to the qualification under the
Code of each of the current Plans, and for any Code Section
501(c)(9) trust maintained in connection with any current
Employee Welfare Plan, and each amendment thereto, have been
made by the IRS, or have been applied for and no event has
occurred and no facts or circumstances exist that may cause
the loss of any such qualification or may cause any such
application to be denied.
(c) Except as set forth on Schedule 3.18, the administration of
all Plans has been consistent with, and in compliance in all
material respects with, applicable requirements of the Code
and ERISA, including, without limitation, compliance on a
timely basis with all requirements for reporting, disclosure
and requirements for the continuation of group health
insurance. Neither Decorate, any ERISA Affiliate nor any Plan
fiduciary (as defined in Section 3(21) of ERISA), with respect
to any Plan, has engaged in any transaction or acted or failed
to act in any manner that violates Section 404 or 406 of ERISA
or engaged in any prohibited transaction (as defined in
Section 4975(c)(1) of the Code) for which there exists neither
a statutory nor regulatory exemption or for which an exemption
has not been obtained. All obligations required to be
performed by Decorate or any ERISA Affiliate under each Plan
have been performed, and Decorate is not in violation of the
terms of any Plan, nor does Decorate or the Shareholders have
any knowledge of any existing violation by any other party of
any term or requirement of or applicable to any current Plan.
All contributions required by law to have been made under any
Plan, or to any trusts or funds established thereunder or in
connection therewith, have been made by the due dates thereof
(including any valid extensions).
(d) No claims, suits or other proceedings are pending or
threatened, and no facts or circumstances exist that could
provide a basis for any such claim, suit or other proceeding,
by any of Decorate's or any ERISA Affiliate's current or
former employees, any participant (as defined in Section 3(7)
of ERISA) to any Plan maintained at any time by Decorate or
any ERISA Affiliate to which Decorate contributes or has
contributed or is or was required to contribute, any fiduciary
of any Plan, any beneficiary (as defined in Section 3(8) of
ERISA) of any such person or by any governmental body, agency
or instrumentality thereof relating to or affecting any Plan,
other than usual and ordinary claims for benefits by eligible
persons. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby
will constitute: (i) a termination of employment or other
event entitling any person to any additional or other
benefits, or that would otherwise modify any benefits or the
vesting of any benefits, under any Plan maintained at any time
by Decorate or any ERISA affiliate, or to which Decorate or
any ERISA Affiliate contributes or has contributed or is or
was required to contribute; or (ii) a violation of Section 404
or 406 of ERISA or a prohibited transaction (as defined in
Section 4975(c)(1) of the
14
Code) for which there exists neither a statutory nor
regulatory exemption or for which an exemption has not been
obtained.
(e) Neither Decorate nor any ERISA Affiliate maintains any Plans
that are subject to the requirements of Section 412 of the
Code.
3.19 Environmental Laws and Regulations.
(a) Neither Decorate nor any member of its consolidated group has
generated, transported or disposed of any hazardous material
(defined below) during the past three years.
(b) Neither Decorate nor any member of its consolidated group has
Hazardous Materials at any site or facility owned or operated
presently or at any previous time by Decorate or any member of
its consolidated group.
Decorate and its subsidiaries are in compliance in all material
respects with all applicable federal, state and local laws and regulations
relating to product registration, pollution control and environmental
contamination including, but not limited to, all laws and regulations governing
the generation, use, collection, discharge, or disposal of Hazardous Materials
and all laws and regulations with regard to record keeping, notification and
reporting requirements respecting Hazardous Materials. Neither Decorate nor any
of its subsidiaries has been alleged to be in violation of, and has not been
subject to any administrative or judicial proceeding pursuant to, such laws or
regulations either now or any time during the past three years. There are no
facts or circumstances which Decorate or the Shareholders reasonably expects
could form the basis for the assertion of any Environmental Claim (as defined
below) against Decorate or any member of its consolidated group relating to
environmental matters including, but not limited to, any Environmental Claim
arising from past or present environmental practices asserted under CERCLA (as
defined below) and RCRA (as defined below), or any other federal, state or local
environmental statute, which Decorate or the Shareholders believes might have an
adverse effect on the business, results of operations, financial condition or
prospects of Decorate and its subsidiaries taken as a whole.
For purposes of this Section 3.19, the following terms shall have the
following meanings: (A) "Hazardous Materials" shall mean materials defined as
"hazardous substances", "hazardous wastes" or "solid wastes" in (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. xx.xx. 9601--5657, and any amendments thereto ("CERCLA"); (ii) the
Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.6901-6987 and any
amendments thereto ("RCRA"); and (iii) any similar federal, state or local
environmental statute; and (B) "Environmental Claim" shall mean any and all
claims, demands, causes of actions, suits, proceedings, administrative
proceedings, losses, judgments, decrees, debts, damages, liabilities, court
costs, attorneys' fees and any other expenses incurred, assessed or sustained by
or against Decorate.
15
3.20 [Reserved]
3.21 No Changes Since the December 31, 2000 Balance Sheet Date. Since
the December 31, 2000 Balance Sheet Date, Decorate has not on a consolidated
basis:
(a) incurred any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise), except
liabilities and obligations in the ordinary course of business
and consistent with past practice, resulting in an increase
for the liabilities shown on the December 31, 2000 Balance
Sheet of more than $100,000 in the aggregate;
(b) permitted any of its material assets to be subjected to any
mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind (other than Permitted
Liens);
(c) sold, transferred or otherwise disposed of any material assets
except inventory sold in the ordinary course of business and
consistent with past practice;
(d) made any single capital expenditure or commitment therefor, in
excess of $50,000 or made aggregate capital expenditures and
commitments therefor in excess of $100,000;
(e) except as set forth on Schedule 3.21(e), declared or paid any
dividend or made any distribution on any shares of its capital
stock, or redeemed, purchased or otherwise acquired any shares
of its capital stock or any option, warrant or other right to
purchase or acquire any such shares;
(f) except as set forth on Schedule 3.21(f), made any bonus or
profit sharing distribution or payment of any kind;
(g) increased its indebtedness for borrowed money, or made any
loan to any Person;
(h) written off as uncollectible any notes or accounts receivable,
except immaterial write-downs or write-offs in the ordinary
course of business and consistent with past practice which do
not exceed $100,000 in the aggregate charged to applicable
reserves, and none of which individually or in the aggregate
is material to Decorate on a consolidated basis;
(i) granted any increase in the rate of wages, salaries, bonuses
or other remuneration or benefits of any executive employee or
other employees or consultants, and no such increase is
customary on a periodic basis or required by agreement or
understanding except as set forth on Schedule 3.18 and 3.21;
(j) canceled or waived any claims or rights of substantial value;
16
(k) made any change in any method of accounting or auditing
practice;
(l) otherwise conducted its business or entered into any
transaction, except in the usual and ordinary manner and in
the ordinary course of business and consistent with past
practices;
(m) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other
than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of
liabilities and obligations reflected and reserved against in
Decorate's December 31, 2000 Balance Sheet Date or incurred in
the ordinary course of business and consistent with past
practice since the December 31, 2000 Balance Sheet Date;
(n) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets (real, personal or mixed,
tangible or intangible to, or entered into any agreement or
arrangement of any kind with, any of its officers, directors
or shareholders or any affiliate or associate of its officers,
directors or shareholders, except compensation to officers at
rates not exceeding the rate of compensation in effect as of
the December 31, 2000 Balance Sheet Date;
(o) suffered any material adverse changes in its working capital,
financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves, business operations or
prospects; or
(p) agreed, whether or not in writing, to do any of the foregoing.
3.22 [Reserved]
3.23 Certain Business Practices. No officer, director, shareholder,
employee, agent or other representative of Decorate or any member of its
consolidated group, or any person acting on behalf of Decorate, has directly or
indirectly, within the past two years, given or agreed to give any illegal,
unethical or improper gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder Decorate or any member of its consolidated group in connection with an
actual or proposed transaction.
3.24 Subsidiaries. Except as set forth on Schedule 3.24, Decorate has
no subsidiaries or interest in any corporation, partnership, joint venture or
other entity. Each subsidiary listed on Schedule 3.24 is wholly owned by
Decorate.
3.25 Disclosure. To the best of Shareholder's knowledge and belief,
neither this Agreement, nor the Financial Statements referred to in Section 3.5
hereof, any Schedule, Exhibit or certificate attached hereto or delivered in
accordance with the terms hereof or any document
17
or statement in writing which has been supplied by or on behalf of the
Shareholders or by or on behalf of any of Decorate's directors or officers in
connection with the transactions contemplated by this Agreement contains any
untrue statement of a material fact, or omits any statement of a material fact
necessary in order to make the statements contained herein or therein not
misleading. There is no fact known to the Shareholders or Decorate which could
materially and adversely affect the business, prospects or financial condition
of Decorate or any member of its consolidated group or their respective
properties or assets, which has not been set forth in this Agreement, the
Financial Statements referred to in Section 3.5 hereof (including the footnotes
thereto), any Schedule, Exhibit or certificate attached hereto or delivered in
accordance with the terms hereof or any document or statement in writing which
has been supplied by or on behalf of the Shareholder or by or on behalf of any
of Decorate's directors or officers in connection with the transactions
contemplated by this Agreement.
3.26 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Shareholders or Decorate is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated by this
Agreement.
3.27 Copies of Documents. The Shareholders have caused to be made
available for inspection and copying by Guidelocator and its advisers, true,
complete and correct copies of all documents referred to in this Article 3 or in
any Schedule attached hereto.
ARTICLE 4
REPRESENTATIONS OF GUIDELOCATOR
Guidelocator represents, warrants and agrees as follows:
4.1 Organization and Corporate Power. Guidelocator is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas, and is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction in which such qualification is required
and where the failure to be so qualified would have a materially adverse effect
upon Guidelocator. Guidelocator has all requisite corporate power and authority
to conduct its business as now being conducted and to own and lease the
properties which it now owns and leases. Guidelocator's Articles of
Incorporation as amended to date, certified by the Secretary of State of Texas,
and the By-laws of Guidelocator as amended to date, certified by the President
and the Secretary of Guidelocator, which have been delivered to the Shareholders
prior to the execution hereof, are true and complete copies thereof as in effect
as of the date hereof.
4.2 Authorization. Guidelocator has full power, legal capacity and
authority to enter into this Agreement, to execute all attendant documents and
instruments necessary to consummate the transaction herein contemplated, and to
exchange the Guidelocator Shares with
18
the Shareholders, and to perform all of its obligations hereunder. This
Agreement and all other agreements, documents and instruments to be executed in
connection herewith have been effectively authorized by all necessary action,
corporate or otherwise, on the part of Guidelocator, which authorizations remain
in full force and effect, have been duly executed and delivered by Guidelocator,
and no other corporate proceedings on the part of Guidelocator are required to
authorize this Agreement and the transactions contemplated hereby, except as
specifically set forth herein. This Agreement constitutes the legal, valid and
binding obligation of Guidelocator and is enforceable with respect to
Guidelocator in accordance with its terms, except as enforcement hereof may be
limited by bankruptcy, insolvency, reorganization, priority or other laws of
court decisions relating to or affecting generally the enforcements of
creditors' rights or affecting generally the availability of equitable remedies.
Neither the execution and delivery of this Agreement, nor the consummation by
Guidelocator of any of the transactions contemplated hereby, or compliance with
any of the provisions hereof, will (i) conflict with or result in a breach or,
violation of, or default under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, lease, credit agreement or other
agreement, document, instrument or obligation (including, without limitation,
any of its charter documents) to which Guidelocator is a party or by which
Guidelocator or any of its assets or properties may be bound, or (ii) violate
any judgment, order, injunction, decree, statute, rule or properties of
Guidelocator. No authorization, consent or approval of any public body of
authority or any third party is necessary for the consummation by Guidelocator
of the transactions contemplated by this Agreement.
4.3 Capitalization. The authorized capital stock of Guidelocator
consists of 10,000,000 shares of Common Stock and 2,000,000 shares of Preferred
Stock. As of the date of Closing there will be 1,424,000 shares of
Guidelocator's Common Stock issued and outstanding after the taking into account
the redemption of 1,150,000 shares owned by Xx. Xxxx X. Xxxxxxx, Guidelocator's
President, discussed in Section 5.11 below. No shares of Preferred Stock are now
or will, at the time of closing be issued and outstanding. As of the date of
Closing, the Board of Directors will have duly authorized a change in the state
of incorporation of Guidelocator from Texas to Delaware by approving a Plan of
Reorganization and Merger providing for Guidelocator to merge into a wholly
owned Delaware subsidiary, Decorize, Inc., which, among other things will cause
Guidelocator's name to change to Decorize, Inc., increase the number of
authorized shares of Common Stock from 10,000,000 to 50,000,000 and increase the
number of authorized shares of Preferred Stock from 2,000,000 to 10,000,000. All
of the outstanding shares of Guidelocator's Common Stock have been, all of
Guidelocator's Common Stock to be issued and sold to each Shareholder pursuant
to this Agreement, when issued and delivered as provided herein will be duly
authorized, validly issued, fully paid and non-assessable and free of preemptive
or similar rights. There are no options, warrants, rights, agreements or
commitments of any character obligating Guidelocator contingently or otherwise
to issue any shares or to register any shares of its capital stock under any
applicable federal or state securities laws.
19
4.4 Financial Statements.
(a) Guidelocator's financial statements contained in its Form
10-KSB filing for the fiscal year ended June 30, 2000, its
Form 10-QSB filings for the periods ended September 30, 2000,
December 31, 2000 and March 31, 2001, (collectively
"Guidelocator's Financial Statements") are complete in all
material respects and have been prepared in accordance with
generally accepted accounting principles applied on a
consistent basis throughout the periods indicated.
Guidelocator's Financial Statements accurately set out and
describe the financial condition and operating results of
Guidelocator as of the dates, and for the periods indicated
therein, subject, in the case of financial statements as of
and for the periods ended September 30, 2000, December 31,
2000 and March 31, 2001, to normal year-end audit adjustments.
Except as set forth in Guidelocator's Financial Statements,
Guidelocator has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of
business subsequent to March 31, 2001 and (ii) obligations
under contracts and commitments incurred in the ordinary
course of business and not required under generally accepted
accounting principles to be reflected in Guidelocator's
Financial Statements. Guidelocator maintains and will continue
to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting
principles.
(b) The unaudited balance sheet of Guidelocator as of March 31,
2001 and related income statement for the six months ended
March 31, 2001 (the "Guidelocator's Interim Financial
Statements") are annexed hereto as Schedule 4.4.
Guidelocator's Interim Financial Statements were carefully
prepared from the books and records of Guidelocator, and
although Guidelocator's Interim Financial Statements are not
audited and do not contain the footnotes which would be
required in audited financial statements, present fairly the
financial position, assets and liabilities of Guidelocator and
the results of its operations, for the respective periods
indicated and reflect all necessary accruals, all in
conformity with GAAP applied on a consistent basis. The
Financial Statements contain all adjustments (consisting of
only normal recurring accruals) required to be made by GAAP,
subject to normal year-end adjustments.
(c) Since March 31, 2001 there has been (x) no material adverse
change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of
operations or prospects, of Guidelocator whether as a result
of any legislative or regulatory change, revocation of any
license or rights to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise
and (y) no material adverse change in the assets or
liabilities, or in the business or condition, financial or
otherwise, or in the results of operations or prospects, of
Guidelocator and to the best knowledge, information and belief
of Guidelocator, no fact or condition exists or is
contemplated or threatened which might cause such a change in
the future.
20
4.5 Subsidiaries. Guidelocator has no subsidiaries and no investments,
directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever.
4.6. Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the most recent balance sheet included in the
Company's Financial Statements, Guidelocator has no liability(s) or
obligation(s) (whether accrued, to become due, contingent or otherwise) which
individually or in the aggregate could have a materially adverse effect on the
business, assets, properties, condition (financial or otherwise) or prospects of
Guidelocator. There are no material changes in the business of Guidelocator.
4.7 No Pending Material Litigation or Proceedings. There are no
actions, suits or proceedings pending or, to the best of Guidelocator's
knowledge, threatened against or affecting Guidelocator (including actions,
suits or proceedings where liabilities may be adequately covered by insurance)
at law or in equity or before or by any federal, state, municipal or other
governmental department, commission, court, board, bureau, agency or
instrumentality, domestic or foreign, or affecting any of the officers or
directors of Guidelocator in connection with the business, operations or affairs
of Guidelocator, which might result in any adverse change in the business,
properties or assets, or in the condition (financial or otherwise) of
Guidelocator, or which might prevent the sale of the transactions contemplated
by this Agreement. Guidelocator is not subject to any voluntary or involuntary
proceeding under the United States Bankruptcy Code and has not made an
assignment for the benefit of creditors.
4.8 Disclosure. Neither this Agreement, nor any certificate, exhibit,
or other written document or statement, furnished to the Shareholders by
Guidelocator in connection with the transactions contemplated by this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to be stated in order to make the
statements contained herein or therein not misleading.
4.9 Tax Returns and Payments. All tax returns and reports, including,
without limitation, all foreign returns and reports, of Guidelocator required by
law to be filed have been duly filed, and all taxes, assessments, fees and other
governmental charges heretofore levied upon any properties, assets, income or
franchises of Guidelocator which are due and payable have been paid, except as
otherwise reflected in the Financial Statements. No extension of time for the
assessment of deficiencies in any federal or state tax has been requested of or
granted by Guidelocator.
4.10 Compliance with Law and Government Regulations. Guidelocator is in
compliance with all applicable statutes, regulations, decrees, orders,
restrictions, guidelines and standards, whether mandatory or voluntary, imposed
by the United States of America, any state, county, municipality or agency of
any thereof, and any foreign country or government to which Guidelocator is
subject. Without limiting the generality of the foregoing, Guidelocator has
filed all reports and statements required to be filed pursuant to the Securities
Act of 1933 (the "1933 Act") and Securities Exchange Act of 1934 (the "1934
Act") including all periodic reports
21
required under the Section 13 or 15 of the Exchange Act and Form SR reports
under Rule 463 of the Securities Act of 1933. Each of such reports was complete,
did not contain any material misstatement of or omit to state any material fact.
Exhibit 4.10 attached hereto are true and correct copies of all correspondence
between Guidelocator and (i) the SEC; (ii) state securities authorities; and
(iii) its independent certified public accounting firm.
4.11 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of Guidelocator is, or will be, entitled to any commission or broker's
or finder's fees from any of the parties hereto or from any Person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated herein.
ARTICLE 5
CONDITIONS TO GUIDELOCATOR'S OBLIGATIONS
The exchange of the Decorate Shares by Guidelocator on the Closing Date
is conditioned upon satisfaction, on or prior to such date, of the following
conditions:
5.1 Opinion of Decorate's Counsel. Decorate shall have furnished
Guidelocator with a favorable opinion, dated the Closing Date, of Decorate's
counsel, in form and substance satisfactory to Guidelocator and their counsel,
to the effect set forth in Schedule 5.1 attached hereto.
5.2 Good Standing and Other Certificates. Decorate and each member of
its consolidated group, as the case may be, shall have delivered to
Guidelocator:
(a) copies of certificates of incorporation, all amendments
thereto, in each case certified by the Secretary of State or
other appropriate official of its jurisdiction of
incorporation;
(b) a certificate from the Secretary of State or other appropriate
official of their respective jurisdictions of incorporation to
the effect that Decorate and each member of its consolidated
group are in good standing or subsisting in such jurisdiction
and listing all charter documents including all amendments
thereto, on file;
(c) a copy of the By-Laws of Decorate and each member of its
consolidated group, certified by the respective Secretary of
each entity as being true and correct and in effect on the
Closing Date.
(d) a resolution of Decorate's Board of Directors certified by
their respective Secretary approving the transactions
contemplated hereby and authorizing the
22
President and Secretary of each entity to execute this
Agreement and all documents necessary to consummate the sale
of the Shares.
5.3 Officer Certificate. Decorate shall deliver a certificate of its
President stating the following:
(a) Certain Agreements. Except as listed on Schedule 3.9 hereto
there are no management or consulting agreements with any
third parties to provide these services to Decorate or any
member of its consolidated group.
(b) No Material Adverse Change. Prior to the Closing Date, there
shall be no material adverse change in the assets or
liabilities, the business or condition, financial or
otherwise, the results of operations, or prospects of Decorate
or any member of its consolidated group, whether as a result
of any legislative or regulatory change, revocation of any
license or rights to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise.
(c) Truth of Representations and Warranties. The representations
and warranties of Decorate contained in this Agreement or in
any Schedule attached hereto shall be true and correct on and
as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such
date.
(d) Performance of Agreements. All of the agreements of Decorate
or any member of its consolidated group to be performed on or
before the Closing Date pursuant to the terms hereof shall
have been duly performed.
(e) No Litigation Threatened. No action or proceedings shall have
been instituted or threatened before a court or other
government body or by any public authority to restrain or
prohibit any of the transactions contemplated hereby.
5.4 Chief Financial Officer's Letter. Guidelocator shall have received
a letter, dated the Closing Date, from Decorate's Chief Financial Officer, in
form and substance satisfactory to them, to the effect set forth in Exhibit 2
attached hereto.
5.5 Governmental Approvals. All governmental and other consents and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received.
5.6 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be satisfactory in form and substance to Guidelocator and their counsel,
and Guidelocator shall have received copies of all such documents and other
evidences as they or their counsel may reasonably request in order
23
to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
5.7 Audited Financial Statements. The completion and delivery of
Decorate's consolidated financial statements together with an unqualified
auditors report.
5.8 Private Placement. Simultaneously with the Closing, Guidelocator
shall issue an aggregate of 876,000 shares of common stock to certain investors
in connection with a private placement of common stock whereby $700,000 will be
provided to the combined entity of which $230,000 has already been invested in
Decorate and the balance of $470,000 will be paid at Closing.
5.9 Closing. The transactions contemplated by this Agreement shall have
been consummated by June 29, 2001.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF
THE SHAREHOLDERS AND DECORATE
The obligations of the Shareholders and Decorate on the Closing Date
are conditioned upon satisfaction, on or prior to such date, of the following
conditions:
6.1 Opinion of Guidelocator's Counsel. Guidelocator shall have
furnished the Shareholders and Decorate with an opinion, dated the Closing Date,
of their counsel; to the effect set forth in Exhibit 4 attached hereto.
6.2 Good Standing Certificates. Guidelocator shall have delivered to
the Shareholders:
(a) copies of the Certificate of Incorporation of Guidelocator,
including all amendments thereto, certified by the Secretary
of State of the State of Texas; and
(b) certificates from the Secretary of State of the State of Texas
to the effect that Guidelocator is in good standing in such
State and listing all charter documents, including all
amendments thereto, of Guidelocator on file.
6.3 Truth of Representations and Warranties. The representations and
warranties of Guidelocator contained in this Agreement shall be true and correct
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and
Guidelocator shall have delivered to Decorate a certificate, dated the Closing
Date, to such effect.
24
6.4 Governmental Approvals. All governmental consents and approvals, if
any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received. It is understood that Guidelocator will
be required to cooperate with Decorate to seek necessary regulatory approvals
for the change in ownership and control of Decorate and its subsidiaries.
6.5 Performance of Agreements. All of the agreements of Guidelocator to
be performed on or before the Closing Date pursuant to the terms hereof shall
have been duly performed, and Guidelocator shall have delivered to Decorate a
certificate, dated the Closing Date, to such effect.
6.6 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Decorate and its
counsel, and Decorate shall have received copies of all such documents and other
evidences as they or their counsel may reasonably request in order to establish
the consummation of such transactions and the taking of all proceedings in
connection therewith.
6.7 Forgiveness of Indebtedness. Each of Guidelocator's officers,
directors and 10% shareholders shall have waived all right, title and interest
to the indebtedness due by Guidelocator to them through the date of Closing.
6.8 Employment Contracts. Xx. Xxxx Xxxxxxx shall have acknowledged in
writing that there is no employment contract between her and Guidelocator.
6.9 Redemption Shares. Xx. Xxxxxxx shall deliver 1,150,000 shares of
Guidelocator to be redeemed and returned to the status of authorized but
unissued shares of Guidelocator.
6.10 Board Representation. At Closing, all directors of Guidelocator
shall resign and not less than two persons designated by Decorate shall be
appointed to the Board of Directors of Guidelocator.
6.11 Private Placement. Simultaneously with the Closing, the
transactions contemplated by Section 5.8 shall have been consummated.
6.12 Closing. The transactions contemplated by this Agreement shall
have been consummated by June 29, 2001.
25
ARTICLE 7
SURVIVAL OF REPRESENTATIONS; INDEMNITY; SET-OFF
7.1 Survival of Covenants and Agreements. The respective
representations, warranties, covenants and agreements of the Shareholders,
Decorate and Guidelocator contained in this Agreement, or any Schedule attached
hereto or any agreement or document delivered pursuant to this Agreement shall
survive for a period of twelve months from the consummation of the transactions
contemplated hereby; provided, however, that the representations, warranties and
agreements made with regard to taxes and ERISA matters shall survive until the
applicable statutes of limitations have expired; and provided further, however,
that with respect to any covenant, term or provision to be performed hereunder
or in any of the Schedules hereto or any documents or agreements delivered
hereunder, the right of indemnification under this Article 7 shall survive until
such covenant, term or provision has been fully paid, performed or discharged.
7.2 Indemnification.
(a) Decorate agrees to indemnify and hold Guidelocator and their
officers, directors, shareholders, employees, affiliates and
agents harmless from damages, losses, liabilities,
assessments, judgments, costs or expenses (including, without
limitation, penalties, interest and reasonable counsel fees
and expenses), (each a "Claim"), in excess of $100,000 in the
aggregate, but not exceeding $350,000, as a result of or
arising out of the breach of any representation or warranty
made by the Shareholders and/or Decorate or the failure of any
representation or warranty made by Shareholders and/or
Decorate in this Agreement or in any Schedule attached hereto
or any document or agreement delivered hereunder to be true
and correct in all respects as of the date of this Agreement
and as of the Closing Date or the non-performance by the
Shareholders and/or Decorate of any covenant, term or
provision to be performed by it hereunder or in any of the
documents or agreements delivered hereunder which may be
imposed or sought to be imposed on Guidelocator or Decorate.
(b) Guidelocator agrees to indemnify and hold the Shareholders and
Decorate and each of their officers, directors, shareholders,
employees, affiliates and agents harmless from damages, losses
or expenses (including, without limitation, reasonable counsel
fees and expenses) in excess of $100,000 in the aggregate, but
not exceeding $350,000, suffered or paid, directly or
indirectly, as a result of or arising out of the failure of
any representation or warranty made by Guidelocator in this
Agreement to be true and correct in all respects as of the
date of this Agreement and as of the Closing Date.
(c) Guidelocator's and Decorate's right to indemnification as
provided in this Section 7.2 shall not be eliminated, reduced
or modified in any way as a result of the fact that (i)
Guidelocator or Decorate has notice of a breach or inaccuracy
of any
26
representation, warranty or covenant contained herein; (ii)
Guidelocator has been provided with access, as requested by
Guidelocator, to officers and employees of Decorate or any
member of its consolidated group and such of Decorate's books,
documents, contracts and records as has been provided to
Guidelocator in response to Guidelocator's requests.
7.3 Conditions of Indemnification.
(a) A party entitled to indemnification hereunder (the
"Indemnified Party") shall notify the party or parties liable
for such indemnification (the "Indemnified Party") in writing
of any Claim or potential liability for Taxes ("Tax Claim")
which the Indemnified Party has determined has given or could
give rise to a right of indemnification under this Agreement.
Such notice shall be given within a reasonable (taking into
account the nature of the Claim or Tax Claim) period of time
after the Indemnified Party has actual knowledge thereof. The
Indemnifying Party shall satisfy its obligations under this
Article 7 within forty days after receipt of subsequent
written notice from the Indemnified Party if an amount is
specified therein, or promptly following receipt of subsequent
written notice or notices specifying the amount of such Claim
or Tax Claim additions thereto; provided, however, that for so
long as the Indemnifying Party is in good faith defending a
Claim or Tax Claim pursuant to Section 7.3(b) hereof, its
obligation to indemnify the Indemnified Party with respect
thereto shall be suspended (other than with respect to any
costs, expenses or other liabilities incurred by the
Indemnified Party prior to the assumption of the defense by
the Indemnifying Party). Failure to provide a notice of Claim
or Tax Claim within the time period referred to above shall
not constitute a defense to a Claim or Tax Claim or release
the Indemnifying Party from any obligation hereunder to the
extent that such failure does not prejudice the position of
the Indemnifying Party.
(b) If the facts giving rise to any such indemnification involve
any actual, threatened or possible Claim or demand or Tax
Claim by any person not a party to this Agreement against the
Indemnified Party, the Indemnifying Party shall be entitled to
contest or defend such Claim or demand Tax Claim at its
expense and through counsel of its own choosing, which counsel
shall be reasonably acceptable to the Indemnified Party, such
right to contest or defend shall only apply if the
Indemnifying Party gave written notice of its intention to
assume the contest and defense of such Claim or demand Tax
Claim to the Indemnified Party as soon as practicable, but in
no event more than thirty days after receipt of the notice of
Claims or Tax Claim, and provided the Indemnified Party with
appropriate assurances as to the creditworthiness of the
Indemnifying Party, and that the Indemnifying Party will be in
a position to pay all fees, expenses and judgments that might
arise out of such Claim or demand Tax Claim. The Indemnified
Party shall have the obligation to cooperate in the defense of
any such Claim or demand Tax Claim and the right, at its own
expense, to participate in the defense of any
27
Claim or Tax Claim. So long as the Indemnifying Party is
defending in good faith any such Claim or demand Tax Claim
asserted by a third party against the Indemnified Party, the
Indemnified Party shall not settle or compromise such Claim or
demand Tax Claim. The Indemnifying Party shall have the right
to settle or compromise any such Claim or demand Tax Claim
without the consent of the Indemnified Party at any time
utilizing its own funds to do so if in connection with such
settlement or compromise the Indemnified Party is fully
released by the third party and is paid in full any
indemnification amounts due hereunder. The Indemnified Party
shall make available to the Indemnifying Party or its agents
all records and other materials in the Indemnified Party's
possession reasonably required by it for its use in contesting
any third party Claim or demand Tax Claim and shall otherwise
cooperate, at the expense of the Indemnifying Party, in the
defense thereof in such manner as the Indemnifying Party may
reasonably request. Whether or not the Indemnifying Party
elects to defend such Claim or demand Tax Claim, the
Indemnified Party shall have no obligation to do so.
7.4 Exclusivity of Remedies. The remedies provided in this Article 7
are exclusive of any other rights or remedies available to a party or other
person, at common law, by statute or in equity.
7.5 Limitations on Liability of Shareholders. Notwithstanding any
provision in this Agreement to the contrary, no Shareholder of Decorate shall
have any liability or obligation whatsoever arising out of or in connection with
any alleged breach of a representation, warranty or covenant by such person
contained herein (whether asserted pursuant to an indemnity claim under the
Agreement, or pursuant to common, decisional or statutory law or equity) in
excess of the consideration actually receive by such Shareholder hereunder. In
the event that a Shareholder of Decorate shall be determined by a court of
competent jurisdiction to have any liability arising out of or in connection
with any alleged breach of a representation, warranty or covenant by such
Shareholder, such Shareholder shall be entitled to satisfy such obligation fully
by delivery to Guidelocator of all or a portion of the shares of Guidelocator
Stock received by such Shareholder hereunder.
ARTICLE 8
MISCELLANEOUS
8.1 Knowledge of the Shareholders, Decorate or Guidelocator. Where any
representation or warranty contained in this Agreement is expressly qualified by
reference to the knowledge, information and belief of the Shareholders, Decorate
or Guidelocator and the Shareholders and Guidelocator, as the case may be,
confirm that they have made due and diligent inquiry as to the matters that are
the subject of such representations and warranties.
28
8.2 Expenses. The parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers.
8.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of Missouri applicable to agreements executed and to be performed solely
within such State without regard to conflicts of laws.
8.4 Jurisdiction. Any judicial proceeding brought against any of the
parties to this Agreement on any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of Missouri, or
in the United States District Court for the Springfield area, and, by execution
and delivery of this Agreement, each of the parties to this Agreement accepts
the exclusive jurisdiction of such courts, and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Agreement. The prevailing
party or parties in any such litigation shall be entitled to receive from the
losing party or parties all costs and expenses, including reasonable counsel
fees, incurred by the prevailing party or parties.
8.5 Captions. The Article and Section captions used herein for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
8.6 Publicity. Except as otherwise required by law, none of the parties
hereto shall issue any press release or make any other public statement, in each
case relating to, connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of Guidelocator and
Decorate to the contents and the manner of presentation and publication thereof.
The parties hereto agree that the execution of this Agreement requires the
release of information to the financial press concerning this acquisition and
accordingly agree to promptly issue a press release mutually acceptable to
Decorate and Guidelocator and to file a Form 8-K report with the Securities and
Exchange Commission containing this agreement and all exhibits and schedules
hereto.
8.7 Notices. Any notice or other communication required or permitted
hereunder shall be deemed sufficiently given when delivered in person, one
business day after delivery to a reputable overnight carrier, four business days
if delivered by registered or certified mail, postage prepaid or when sent by
telecopy with a copy following by hand or overnight carrier or mailed, certified
or registered mail, postage prepaid, addressed as follows:
If to Decorate:
Decorate, Inc.
000 X. Xxxxx, Xxxxx X
Xxxxxxxxxxx, Xxxxxxxx 00000
29
with a required copy to:
Xxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
If to Guidelocator:
Xxxxxxxxxxxx.xxx, Inc.
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx 00000
With a copy to:
Xxxxxx Xxxxxxxxx, Esq.
Xxxxxx & Xxxxxxxxx, P.C.
Three Riverway, 00xx Xxxxx
Xxxxxxx, XX 00000
8.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
8.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
8.10 Entire Agreement. This Agreement, including the Schedules hereto
and the other documents referred to herein which form a part hereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
8.11 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by Guidelocator, the Shareholders and Decorate.
8.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
8.13 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereof.
30
8.14 Cooperation After Closing.From and after the Closing Date, each of
the parties hereto shall execute such documents and other papers and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby.
ARTICLE 9
COVENANTS
9.1 Access to Information. Each of Decorate and Guidelocator agrees
that, prior to the Closing Date, the other party hereto shall be entitled,
through its officers, employees and representatives (including, without
limitation, its legal and financial advisors and accountants), to make such
investigation of the properties, businesses and operations of Decorate or
Guidelocator and their respective subsidiaries, as applicable, and such
examination of the books, records and financial condition of Decorate or
Guidelocator (and their respective subsidiaries), as applicable, as such other
party reasonably requests and to make copies of such books and records. Any such
investigation and examination shall be conducted during regular business hours
and under reasonable circumstances, and each of Decorate and Guidelocator shall
cooperate, and shall cause their respective subsidiaries to cooperate, fully
therein. No investigation by Decorate or Guidelocator prior to or after the date
of this Agreement shall diminish or obviate any of the representations,
warranties, covenants or agreements of the other party thereto contained in this
Agreement or any other agreements or certificates in connection with the
transactions contemplated by this Agreement. In order that each of Guidelocator
and Decorate may have full opportunity to make such physical, business,
accounting and legal review, examination or investigation as it may reasonably
request of the affairs of Decorate or Guidelocator (and their respective
subsidiaries), as applicable, Decorate and Guidelocator shall cause the
officers, employees, consultants, agents, accountants, attorneys and other
representatives of Decorate or Guidelocator, as applicable, to cooperate fully
with such representatives in connection with such review and examination.
9.2 Conduct of Guidelocator's and Decorate's Respective Businesses
Pending the Closing.
(a) Prior to the Closing Date, except as otherwise expressly
contemplated by this Agreement, Decorate and the members of
its consolidated group shall and Guidelocator shall, and shall
cause its subsidiaries to:
(i) conduct its business only in the ordinary course
consistent with past practice;
(ii) use its best efforts to (A) preserve its present
business operations, organization (including, without
limitation, management and the sales
31
force) and goodwill, and (B) preserve its present
relationship with Persons having business dealings
with it;
(iii) maintain (A) all its assets and properties in their
current condition, ordinary wear and tear excepted,
and (B) insurance upon all of its properties and
assets in such amounts and of such kinds comparable
to that in effect on the date of this Agreement;
(iv) (A) maintain its books, accounts and records in the
ordinary course of business consistent with past
practices, (B) continue to collect accounts
receivable and pay accounts payable utilizing normal
procedures and without discounting or accelerating
payment of such accounts (other than in the ordinary
course of business), and (C) comply with all
contractual and other obligations applicable to its
operations; and
(v) comply in all material respects with applicable Laws.
(b) Prior to the Closing Date, except as otherwise expressly
contemplated by this Agreement, Decorate and the members of
its consolidated group shall not and Guidelocator shall not,
and shall cause its subsidiaries not to:
(i) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock;
(ii) transfer, issue, sell or dispose of any shares of its
capital stock or other securities of itself or its
subsidiaries or grant options, warrants, calls or
other rights to purchase or otherwise acquire shares
of the capital stock or other securities of itself or
any of its subsidiaries;
(iii) effect any recapitalization, reclassification, stock
split or like change in its capitalization except as
contemplated by this Agreement;
(iv) amend its certificate of incorporation, by-laws,
memorandum or articles of association or similar
organizational documents, except that Guidelocator
may amend its certificate of incorporation solely for
the purposes of authorizing additional Shares as
contemplated by this Agreement, or changing the name
of Guidelocator so as to add the words "Decorize"
thereto;
(v) (A) materially increase the annual level of
compensation of any employee, (B) increase the annual
level of compensation payable or to become payable by
it or any of its subsidiaries to any of their
respective executive officers, (C) grant any bonus,
benefit or other direct or indirect compensation to
any employee, director or consultant, other than in
the
32
ordinary course consistent with past practice, (D)
increase the coverage or benefits available under any
(or create any new) severance pay, termination pay,
vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus
or other incentive compensation, insurance, pension
or other employee benefit plan or arrangement made
to, for, or with any of its or its subsidiaries'
directors, officers, employees, agents or
representatives or otherwise modify or amend or
terminate any such plan or arrangement;
(vi) except (A) for trade payables and (B) for pledges of
assets and indebtedness for borrowed money which do
not exceed, individually or in the aggregate,
$1,000,000 (it being understood that (1) such amount
shall not include indebtedness existing or assets
pledged prior to the date of this Agreement and (2)
the transaction value of any asset pledges shall be
deemed to be equal to the fair market value of the
assets pledged in such transaction), borrow monies of
any reason or draw down on any line of credit or debt
obligation, or become the guarantor, surety, endorser
or otherwise liable for any debt, obligation or
liability (contingent or otherwise) of any other
Person;
(vii) except as may be permitted pursuant to clause (vi)
above, subject to any lien (except for leases that do
not materially impair the use of the property subject
thereto in their respective businesses as presently
conducted and in the ordinary course of business),
any of its properties or assets (whether tangible or
intangible);
(viii) acquire any material properties or assets or sell,
assign, transfer, convey, lease or otherwise dispose
of any of its material properties or assets (except
for fair consideration in the ordinary course of
business consistent with past practice);
(ix) cancel or compromise any debt or claim or waive or
release any material right except in the ordinary
course of business consistent with past practice;
(x) enter into any commitment for capital expenditures in
excess of $25,000 for any individual commitment and
$100,000 for all commitments in the aggregate;
(xi) enter into, modify or terminate any labor or
collective bargaining agreement or, through
negotiation or otherwise, make any commitment or
incur any liability to any labor organization;
33
(xii) enter into any transaction or make or enter into any
Contract which by reason of its size or otherwise is
not in the ordinary course of business consistent
with past practice.
(xiii) transfer any funds or assets to any of its officers
and directors, which funds and assets are, in the
aggregate, worth in excess of $25,000, except for the
purchase of goods and services from any such officer
or director in the ordinary course of business at the
fair market value for such goods and services;
(xiv) agree to do anything prohibited by this Section 9.2
or anything which would make any of the
representations and warranties of Guidelocator or the
Decorate in this Agreement or Guidelocator Documents
or Decorate Documents untrue or incorrect in any
material respect as of any time through and including
the Closing Date.
9.3 Consents and Approvals.
(a) Decorate and Guidelocator shall use their respective best
efforts, and shall cooperate with each other, to obtain at the
earliest practicable date all consents and approvals required
to consummate the transactions contemplated by this Agreement;
provided, however, that neither Decorate nor Guidelocator
shall be obligated to pay any consideration (except for filing
fees) therefor to any third party from whom consent or
approval is requested.
(b) Promptly following the date of this Agreement, Guidelocator
shall prepare an information statement and related
solicitation materials relating to taking corporate actions
without the benefit of a meeting to approve the issuance of
Guidelocator Shares pursuant hereto (such information
statement, as amended or supplemented from time to time, being
hereinafter referred to as the "Information Statement"), and
shall use its best efforts to cause the Information Statement
to be mailed to its stockholders at such time and in such
manner as permits the notification to be sent as promptly as
practicable. Decorate shall furnish all information as may be
reasonably requested by Guidelocator and, in any case, as
required with respect to Guidelocator by Regulation 14A under
the Securities Exchange Act of 1934, as amended, for inclusion
in the Information Statement. The information provided by
Guidelocator and Decorate, respectively, for use in the
Information Statement shall, on the date when the Information
Statement is first mailed to Guidelocator's stockholders, be
true and correct in all material respects and shall not omit
to state any material fact required to be stated therein or
necessary in order to make the statements contained therein
not misleading, and Guidelocator and Decorate each agree to
promptly correct any information provided by it for use in the
Information Statement which shall have become false or
misleading.
34
(c) Guidelocator shall notify its shareholders that the Board of
Directors has approved, among other matters, the issuance of
the Guidelocator Shares pursuant hereto. Guidelocator's Board
of Directors, shall vote their respective stock for approval
of the foregoing; provided, however, that if Guidelocator's
Board of Directors determines, in its good faith judgment
after consultation with independent legal counsel, that it is
necessary to do so in order to comply with its fiduciary
duties to stockholders under applicable law, Guidelocator's
Board of Directors may withdraw their votes. The Information
Statement shall comply as to form in all material respects
with all applicable requirements of the Securities Exchange
Act of 1934, as amended, and no amendment or supplement to the
Information Statement shall be made by Guidelocator without
the prior written approval of Decorate unless Guidelocator
determines such amendment or supplement is required by law.
10.4 Other Actions.
(a) Each of Decorate and Guidelocator shall use its best efforts
to (i) take all actions necessary or appropriate to consummate
the transactions contemplated by this Agreement and (ii) cause
the fulfillment at the earliest practicable date of all of the
conditions to their respective obligations to consummate the
transactions contemplated by this Agreement.
(b) Guidelocator shall use its best efforts to assure that, prior
to the Closing, the Guidelocator Shares have remained quoted
on the NASDAQ OTC-Bulletin Board, subject to official notice
of issuance.
(c) Guidelocator shall use its best efforts to assure that, prior
to the closing:
(i) Each of Guidelocator's officers directors and 10%
shareholders shall have waived the right, title and
interest to the indebtedness due by Guidelocator to
them, if any, through the date of Closing.
(ii) Xx. Xxxx Xxxxxxx agrees to the cancellation of her
employment agreement and waives any unpaid salary
through the date of Closing.
(iii) Xx. Xxxx Xxxxxxx delivers to Guidelocator
certificates representing 1,150,000 shares of
Guidelocator's common stock for redemption.
(d) Except for options granted under a stock option plan, for six
(6) months from Closing, the combined entity will not issue
any shares of common stock or derivative securities
convertible or exercisable into common stock at a purchase
price less than $.75 per share.
35
(e) The combined entity shall use its best efforts to raise an
additional $280,000 of equity or long term debt at a price of
no less than the $.75 per share described in Section 5.12.
(f) The combined entity acknowledges that 350,000 shares shall be
retained by Xx. Xxxx X. Xxxxxxx subject to certain agreements
of third parties. These shares will be eligible for sale,
pursuant to Rule 144(k), 90 days from the Closing of this
transaction and the combined entity hereby agrees to accept
the legal opinion in respect to the sale of these shares
pursuant to Rule 144(k) of Xxxxxx & Xxxxxxxxx P.C. and will
promptly facilitate such removal of the restrictive legend no
more than five business days upon receipt of said opinion,
unless contractual restrictions apply.
10.5 Publicity. Neither Decorate nor Guidelocator shall issue any press
release or public announcement concerning this Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other
party hereto, which approval will not be unreasonably withheld or delayed,
unless, in the sole judgment of Guidelocator or Decorate, disclosure is
otherwise required by applicable Law or by the applicable rules of any stock
exchange on which Guidelocator or Decorate (or any Affiliates thereof) lists
securities; provided that, to the extent required by applicable Law, the party
intending to make such release shall use commercially reasonable efforts
consistent with such applicable Law to consult wit the other party with respect
to the text thereof.
10.6 Tax and Accounting Matters. Within 60 days following the date
hereof, Decorate will deliver to Guidelocator (i) the Interim Statements,
together with an unqualified audit report thereon by Decorate's independent
public accountants and (ii) an unaudited pro forma consolidated balance sheet of
Decorate and its subsidiaries as of March 31, 2001 after giving effect to the
transactions contemplated by this Agreement.
[SIGNATURE PAGE TO FOLLOW]
36
IN WITNESS WHEREOF, each of Guidelocator, the Shareholders and Decorate
have executed this Agreement, all as of the day and year first above written.
XXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxxx
---------------------------
Title: President
DECORATE, INC.
By: /s/ Xxx Xxxxx
----------------------------
Title: President
THE SHAREHOLDERS: No. of Shares of Decorate
/s/ Xxx Xxxxxxx 205,745
---------------------------------------
Xxx Xxxxxxx (MS)
/s/ Xxx Xxxxx 166,355
---------------------------------------
Xxx Xxxxx (MS)
/s/ Xxxx Xxxxxx 3,722
---------------------------------------
Xxxx Xxxxxx
/s/ X. Xxxxxx 1,861
---------------------------------------
X. Xxxxxx
/s/ Xxxxx Xxxxxxx 931
---------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxx Xxxxx 372
---------------------------------------
Xxxxx Xxxxx
37
THE SHAREHOLDERS: No. of Shares of Decorate
/s/ Xxxxxx Xxxx 186
---------------------------------------
Xxxxxx Xxxx
/s/ Calvan Teh 186
---------------------------------------
Calvan Teh
/s/ Xxxxxx Xxxxxxx 140
---------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxxxx 93
---------------------------------------
Xxxxxxx Xxxxxxxxx
/s/ Xxxxx Xxxxxx 931
---------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxx 93
---------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxx Xxxx 95
---------------------------------------
Xxxx Xxxx
/s/ Xxxxx Xxxxxx 22,500
---------------------------------------
Xxxxx Xxxxxx
/s/ Xxxx Xxxxxxxxxxxxx 10,000
---------------------------------------
Xxxx Xxxxxxxxxxxxx
/s/ Xxxxxx Xxxxxxx 10,000
---------------------------------------
Xxxxxx Xxxxxxx
38
THE SHAREHOLDERS: No. of Shares of Decorate
/s/ Xxxx XxXxxxx 2,500
---------------------------------------
Xxxx XxXxxxx
/s/ Xxx Xxxxxx 2,500
---------------------------------------
Xxx Xxxxxx
Xxxxxxx Family Partners, Ltd.
By: /s/ Xxxxx Xxxxxxx 15,000
------------------------------------
/s/ Xxxxxx Xxxxxx 10,000
---------------------------------------
Xxxxxx Xxxxxx
/s/ Xx Xxxxxxx 20,000
---------------------------------------
Xx Xxxxxxx
Xxxxxxxx Partners, Ltd.
By: /s/ Xxxx XxXxxxxx 22,500
------------------------------------
/s/ Xxx Xxxxxxx 20,000
---------------------------------------
Xxx Xxxxxxx
/s/ Xxxx Xxxxxxx 22,500
---------------------------------------
Xxxx Xxxxxxx
-------
Total 538,210
=======
39
