EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), is executed this 19th day
of September, 2001, by and between Enviroq Corporation ("Enviroq"), a Florida
corporation, and Replico Development Company, Inc. ("Replico"), a Pennsylvania
corporation (hereinafter, Enviroq and Replico are individually referred to as
"Seller" and collectively referred to as the "Sellers"), and Sprayroq of Ohio,
Inc., an Ohio corporation, or its assigns (the "Purchaser").
RECITALS:
WHEREAS, Sprayroq, Inc., a Florida corporation (the "Company"),
provides state-of-the-art spray-applied resinous materials and related equipment
for the reconstruction of manholes and other underground infrastructure (the
"Business") from leased facilities located at 0000 Xxxxx Xxxxx, Xxxxxxxxxx,
Xxxxxxx 00000 (the "Facility");
WHEREAS, Sellers each own 100 shares of the issued and outstanding
common stock of the Company (collectively, the "Stock"), which Stock
collectively constitutes all of the issued and outstanding capital stock of the
Company of all classes; and
WHEREAS, Sellers desire to sell, and Purchaser desires to purchase, the
Stock upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements hereinafter contained, the parties agree as follows:
ARTICLE 1. PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale of Stock. Sellers shall fully and completely
sell, transfer, assign and convey the Stock to Purchaser at the Closing (as
hereafter defined), and Purchaser shall purchase and acquire the Stock from
Sellers at the Closing.
ARTICLE 11. PURCHASE PRICE
2.1 Purchase Price. Based upon the Company's December 31, 2000 balance
sheet, a copy of which is included in Schedule 3.1.6, and subject to adjustments
as provided in Section 2.3, the purchase price for the Stock shall not exceed
One Million Seven Hundred Thousand and No/100 Dollars ($1,700,000) (the
"Purchase Price") which shall be paid as follows:
(a) By issuance, at Closing, to each of the Sellers by
Purchaser of a subordinated promissory note in the amount of One
Hundred Fifty Thousand and No/100 Dollars ($150,000) (collectively, the
"Seller Notes") in the form of Schedules 2.1 (a) and (b) and more fully
described in Section 2.2 below; and
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(b) by payment of One Million Two Hundred Thousand and No/100
Dollars ($1,200,000) in cash or other immediately available funds from
Purchaser to Sellers at Closing.
(c) by payment to each Seller of twenty five percent (25%) of
the "Calculated Amount" (as defined and set forth below) based upon the
annual, incremental and collected net sales of the Company in excess of
Two Million Dollars ($2,000,000) for the immediately preceding year,
commencing with the 1st anniversary of Closing and for each twelve
month period thereafter ending on the 5th anniversary of Closing,
where "Calculated Amount" is determined in accordance with the
following table:
Net Sales for Current Year Ending on said Calculated Amount
Anniversary Percentage of Incremental Sales
------------------------------------------------------------------------------------
First $ 100,000 over $2,000,000 3% of increment
------------------------------------------------------------------------------------
From $ 100,000 to $200,000 over $2,000,000 4% of increment
------------------------------------------------------------------------------------
From $200,0OO to $300,000 over $2,000,000 5% of increment
------------------------------------------------------------------------------------
From $300,000 to $400,000 over $2,000,000 6% of increment
------------------------------------------------------------------------------------
From $400,000 to $500,000 over $2,000,000 7% of increment
------------------------------------------------------------------------------------
From $500,000 to $600,000 over $2,000,000 8% of increment
------------------------------------------------------------------------------------
From $600,000 to $700,000 over $2,000,000 9% of increment
------------------------------------------------------------------------------------
Over $700,000 over $2,000,000 10% of increment
------------------------------------------------------------------------------------
For example, assume annual, incremental and collected net
sales for a current year, as set forth herein, equal Two Million Five
Hundred Thousand Dollars ($2,500,000), then the Calculated Amount shall
be Twenty Five Thousand Dollars ($25,000) for that year.
Notwithstanding the foregoing, payments made to Sellers
pursuant to this Section 2.1 (c) may, in the aggregate, be less than
Two Hundred Thousand Dollars ($200,000), but in all events, shall not,
in the aggregate, exceed Two Hundred Thousand Dollars ($200,000). The
Company's "net sales" shall be defined as collected gross sales less
any taxes, shipping charges, discounts and returns. After the 5th
anniversary of closing, the Calculated Amount shall be terminated and
no longer calculated.
2.2 Seller Notes. The Seller Notes as set forth in Section 2.1 (a)
above shall each be payable as follows:
The principal amount of the Seller Notes shall be payable in one lump
sum on the 5th anniversary of Closing, except that each Seller shall be entitled
to an advanced payment of principal equal to twenty five percent (25%) of the
Calculated Amount (as defined and set forth in Section 2.1 (c)) based upon the
annual, incremental and collected "net sales" (as defined in Section 2.1(c)
above) of the Company in excess of Two Million Dollars ($2,000,000) for the
immediately preceding year, commencing with the 1st anniversary of Closing and
for each twelve month period thereafter ending on the 5th anniversary of
Closing. The Seller Notes will carry interest fixed at seven percent (7%) per
annum, payable annually, commencing on the 1st anniversary of Closing. The
Seller Notes may be prepaid at any time without penalty. The Seller Notes shall
be collateralized by all of the assets of the Company by Purchaser causing the
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Company to execute a Security Agreement in substantially the form attached
hereto as Schedule 2.2, but said Seller Notes and the collateralization granted
by said Security Agreement shall be subordinate to all senior lender and
mezzanine financing obtained by Purchaser and the Company to finance the
acquisition of the Stock as set forth herein, the operations of the Business,
and any security given to said senior and mezzanine lenders in connection with
the foregoing.
2.3 Adjustment to Cash Portion of the Purchase Price. On the day before
the Closing, Sellers, with the assistance of Purchaser, shall prepare a closing
balance sheet, setting forth the Net Working Capital (as defined below) as of
the Closing Date (the "Closing Balance Sheet"). Adjustments to the Purchase
Price on the Closing Date will be determined based on the Net Working Capital on
the Closing Date compared to the Net Working Capital on December 31, 2000. For
purposes of this Section, "Net Working Capital" means the Company's current
assets less current liabilities.
The cash portion of the Purchase Price payable at Closing, and the
Purchase Price, shall be reduced dollar-for-dollar if, and to the extent that,
Net Working Capital as determined from the Closing Balance Sheet is less than
Three Hundred Sixty One Thousand Eight Hundred Twelve and No/100 Dollars
($361,812). Conversely, the cash portion of the Purchase Price payable at
Closing, and the Purchase Price, shall be increased dollar-for-dollar if, and to
the extent that, Net Working Capital as determined from the Closing Balance
Sheet is greater than Three Hundred Sixty One Thousand Eight Hundred Twelve and
No/100 Dollars ($361,812).
It is also understood that Purchaser shall not be obligated to pay off
or assume any short-term and/or long-term bank and/or lender debt of the
Company (as set forth on Schedule 3.1.6). If and to the extent that Purchaser
shall pay off or assume any such indebtedness, then the Purchase Price and the
cash to be paid at Closing to the Sellers shall be reduced by the amount of any
such pay off or assumption of debt.
2.4 Valuation of Inventory. For purposes of preparing the Closing
Balance Sheet, the inventory quantities and valuation shall be determined as
follows:
(a) Quantities. A physical inventory of the Business shall be
conducted by the Company on the day immediately preceding the Closing
Date, and such inventory shall be reflected in the Closing Balance
Sheet. Purchaser and its representatives shall have the right to review
and verify such inventory quantities, including the right to take
physical counts on the date of the physical inventory, and the books
and records of the Business related thereto. Subject to verification by
Purchaser, such books and records shall be the basis for determining
such quantities of Inventory on the Closing Balance Sheet.
(b) Valuation. The Inventory shall be valued using a weighted
average calculation consistent with the Company's prior practice, kept
in the ordinary course of business and in accordance with generally
accepted accounting principles, subject to reasonable adjustment for
excess, obsolete or otherwise unusable inventory not previously
reserved for. Items historically excluded from Inventory, including,
but not limited to, supplies, shall be excluded for purposes of
determining the value of the Inventory at Closing.
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2.5 Valuation of Accounts Receivable. The accounts receivable to be
purchased hereunder by Purchaser shall be all of the Company's trade accounts
receivable as they exist on the Closing Balance Sheet (the "Accounts
Receivable"). Sellers shall cause all receivables from Sellers or other officers
and directors of the Company other than the intercompany debt referred to in
Section 5.4 hereof to be repaid at or prior to Closing.
2.6 Accounts Receivable Guaranty. Each Seller hereby jointly and
severally, guarantees to the Company, except to the extent of any reserve for
doubtful accounts shown on the Closing Balance Sheet and which is also reflected
in any Net Working Capital adjustment (the "Reserve"), (which guaranty shall
survive Closing) payment of that percentage of the Accounts Receivable equal to
such Seller's percentage ownership of the Stock as follows:
(a) Any Accounts Receivable remaining unpaid ninety (90) days
after Closing will, to the extent that such unpaid part of the Accounts
Receivable exceeds the Reserve, be assigned to the Sellers, at which
time they will remit payments to Purchaser for the face value of such
receivables assigned to Sellers free and clear of lien or other
encumbrance arising on or after the Closing. In the event Sellers have
had their interest payments offset by Purchaser and/or Sellers have
remitted payments to Purchaser for such purchased receivables as set
forth herein, and Sellers and/or Purchaser collect such amounts that
have been specifically offset or remitted, then and in such event,
Purchaser shall immediately pay Sellers, or Sellers shall retain such
specific amounts that have been collected (whether by Sellers or
Purchaser).
(b) Purchaser shall cause the Company to use its reasonable
best efforts to collect the Accounts Receivable, which shall not be
deemed to include instituting litigation or using a collection agency.
Collections from customers of any accounts receivable after the Closing
Date ("New Receivables") shall be credited to Accounts Receivable or to
New Receivables in the order that the receivables from such customer
were created unless otherwise specified by the customer due solely to a
problem or dispute related to such order. The amount of such
uncollected Accounts Receivable described in this Section shall be paid
to the Company as soon as practicable but in all events no later than
seven (7) days after the Company's assignment of said Accounts
Receivable to Sellers.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sellers. Each Seller and the
Company, severally and not jointly, represents and warrants to Purchaser as
follows:
3.1.1 Good Title. Such Seller has good and marketable title to
the Stock owned by such Seller, free and clear of any and all covenants,
conditions, restrictions, voting trust arrangements, liens, pledges, warrants,
charges, encumbrances, options, and any other adverse claims or rights
whatsoever (collectively, "Liens"), and that the Sellers' stock, in the
aggregate, constitutes one hundred percent (100%) of all of the issued and
outstanding capital stock of the Company, in all classes.
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3.1.2 Authority. Such Seller and the Company have the full
right, power, and authority to enter in to this Agreement and to consummate the
transactions contemplated hereby. Upon consummation of the transactions
contemplated hereby, such Seller will have sold and Purchaser will have acquired
one hundred percent (100%) of the Stock of the Company owned by such Seller, of
all classes, as set forth herein, and Purchaser will have acquired such Stock
free and clear of all covenants, conditions, restrictions, voting trust
arrangements, liens, pledges, warrants, charges, encumbrances, options, and any
other adverse claims or rights whatsoever. This Agreement and all other
agreements to be executed by such Seller and the Company in connection herewith
have been (or upon execution will have been) duly executed and delivered by such
Seller and the Company, have been effectively authorized by all necessary
action, corporate or otherwise, and constitute (or upon execution will
constitute) legal, valid, and binding obligations of such Seller and the
Company.
3.1.3 Agreement Not in Breach of Other Instruments. Neither
such Seller, nor the Company, is a party to, subject to or bound by any
agreement or judgment, order, writ, prohibition, injunction or decree of any
court or other governmental body which would prevent the execution and delivery
of this Agreement by such Seller, or the Company, or the transfer, conveyance
and sale of one hundred percent (100%) of the Stock owned by such Seller
pursuant to the terms hereof.
3.1.4 Organization and Good Standing. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Florida. It has full corporate power to carry on its business as it is now
conducted and is entitled to own, lease or operate the properties and assets it
now owns, leases, or operates. It is qualified to do business and is in good
standing in each jurisdiction in which its failure so to qualify or be in good
standing could have a material adverse affect on its financial condition or
business.
3.1.5 Capitalization. The Company's authorized capitalization
is as set forth on Schedule 3.1.5 attached hereto. The Stock, both now and at
Closing, constitutes all of the Company's issued and outstanding capital stock
of all classes. The Stock has been validly authorized and issued and is validly
outstanding, fully paid and nonassessable. There are no outstanding options,
warrants pledges, conversion rights, or rights to purchase capital stock or
other securities from the Company nor is the Company otherwise required to issue
any shares of capital stock or any other securities.
3.1.6 Financial Statements. Schedule 3.1.6 sets forth the
compiled balance sheets and income statements of the Company at December 31,
2000, and unaudited quarterly balance sheets and income statements of the
Company at March 31, 2001, June 30, 2001 and the quarter end or month-end
immediately prior to Closing. Said financial statements (i) were prepared in
accordance with the books and records of the Company and generally accepted
accounting principles; and (ii) fairly present the Company's financial condition
and its assets and liabilities in all material respects (whether absolute,
accrued, contingent or otherwise) and the results of its operations as of the
relevant date of each statement.
3.1.7 Absence of Certain Changes. Except as disclosed in
Schedule 3.1.7, and except as specifically contemplated hereunder, since
December 31, 2000 there has not been (i) any
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transaction by the Company not in the ordinary course of business, (ii) any
material adverse change in the Company's operations, financial condition,
assets, or liabilities; (iii) any damage, destruction, or loss, whether or not
covered by insurance, materially adversely affecting the Company's properties;
(iv) any sale or transfer of any of the Company's assets other than sales of
inventory in the ordinary course of business; (v) any amendment, modification or
termination of the Company's Articles of Incorporation or Bylaws (or any
instrument similar in purpose and intent to such documents); (vi) any alteration
in the manner of keeping the Company's books, accounts or records or in the
accounting practices therein reflected; (vii) any transaction wherein the
Company has incurred any material obligations or liabilities not in the ordinary
course of business consistent with past practice (whether absolute, accrued,
contingent, or otherwise and whether due or to become due), or incurred any
single obligation or liability (whether absolute, accrued, contingent, or
otherwise and whether due or to become due) that exceeds $ 10,000 (counting
obligations and liabilities arising from one transaction or a series of similar
transactions, and all periodic installments or payments under any lease or other
agreement providing for periodic installments or payments, as a single
obligation or liability); (viii) any increase in compensation of employees
(including, without limitation, any increase pursuant to any bonus (whether paid
or declared), pension, deferred compensation, added employee benefits,
profit-sharing or other plan or commitment), or any increase in any such
compensation payable to or to become payable to any officer or employee, and no
such increase is required; (ix) any capital expenditures or commitments (and
anticipated capital expenditures or commitments) in the aggregate in excess of
$10,000 for additions to property, plant, furniture, fixtures, or equipment; or
(x) any agreement, whether in writing or otherwise, to take any action described
in this Section 3.1.7.
3.1.8 Subsidiaries and Affiliates. The Company does not have,
directly or indirectly, an equity investment or other investment convertible
into an equity investment in any corporation, partnership, joint venture, or
other business entity, nor has The Company subscribed to purchase any such
investment.
3.1.9 Charter Documents. Attached hereto as Schedules 3-1.9-A
and 3.1.9-B, respectively, are true and correct copies of the Company's
Articles of Incorporation and Bylaws, as amended, and in each case as in effect
on the date hereof.
3.1.10 Personal Property of the Company. Except as set forth
on Schedule 3.1.10(a), the Company solely owns and has the unencumbered right to
use all of the personal properties and assets, tangible and intangible, now used
by it in the operation of the Business.
(a) Schedule 3.1.10(b) attached hereto sets forth a list of
all motor vehicles and other tangible personal property leased by the
Company and a list of the leases relating thereto. Sellers is herewith
delivering copies of all such leases to Purchaser.
(b) Except as set forth on Schedule 3.1.10(c), all tangible
and intangible personal property of The Company (whether owned or
leased) is located at the Facility.
3.1.11 Real Property and Leaseholds. The Company does not have
legal or beneficial ownership of any real property. Schedule 3.1.11 attached
hereto identifies each lease of real property under which The Company is either
a lessee, sublessee or sublessor (collectively the
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"Leases"). With regard to Leases:
(a) Each of the Leases is a valid and binding obligation of
the Company and, to such Seller's and the Company's knowledge, is a
valid and binding obligation of each other party thereto; and
(b) Except as disclosed on the attached Schedule 3.1.11, the
Company is not, and such Seller does not have any knowledge that any
party to any such Lease is, in default with respect to any material
term or condition thereof, and neither the Company nor such Seller has
any knowledge that any event has occurred which through the passage of
time or the giving of notice, or both, would constitute a default
thereunder.
3.1.12 Intangible Personal Property. There is listed in
Schedule 3.1.12(i) attached hereto (i) an identification of all patents, patents
pending, design patents, design patents pending, copyrights, tradenames, service
marks, service xxxx registrations, trademarks, trademark registrations,
applications for any of the foregoing, computer software programs, proprietary
mixtures and formulas used to produce the resinous materials used in the
Business and any other item of intellectual property (the "intangible personal
property") used in the Business. Except as set forth in Schedule 3.1.12 (ii),
all such intangible personal property is solely owned by the Company and no
other person or entity has any right to use or has had access to the same.
(a) The Company has the right and authority to use such items
of intangible personal property in connection with its business as
presently conducted and such use does not conflict with, infringe upon
or violate any intellectual property or other rights of any other
person or entity; Without limiting the foregoing, the Company has
obtained all required assignments and other documents to vest in
Company all right, title and interest in and to the intangible personal
property from Sellers and all third persons, including, but not limited
to any inventors, employees or contractors.
(b) There are no outstanding, nor to such Seller's and the
Company's knowledge, any threatened disputes with respect to any
licenses or similar agreements or arrangements described in Schedule
3.1.12 that would be reasonably likely to have a material adverse
effect on the Company;
(c) The Company's business does not conflict with any valid
patents, trademarks, service marks, tradenames, or other intellectual
property rights of others in any way likely to materially and adversely
affect the Company's business, assets, or financial condition; and
(d) To such Seller's knowledge, no other person or entity is
infringing upon any of such Seller's or the Company's right under such
intangible personal property.
(e) As of Closing, all intangible personal property will be
transferred to the Company, and no other person, except licensees
authorized by the Company, shall have any right, interest or claim to
such intangible personal property.
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(f) Company has not applied for a copyright registration, U.S.
letters patent or other patent registration, or federal or state
trademark registration for any of the intangible personal property
except as disclosed in Schedule 3.1.12(f) hereto. Company agrees that
it will assist Purchaser, to the extent reasonably requested by
Purchaser and at Purchaser's sole cost and expense, in connection with
the registration or the protection of the intangible personal property,
including, but not limited to the execution of reasonable assignments,
applications, or other documents to be filed with any governmental
authority.
(g) Company has obtained all necessary consents and permission
with respect to the use of the name and/or likeness of any and all
persons appearing in any of the intangible personal property or any
other materials used by Company in its advertising, public relations,
promotion, or other activities, and Company may rightfully use such
names and/or likenesses of all such persons without any restrictions
whatsoever and without any further obligation for compensation to such
persons.
(h) SprayWall was invented for the Company by Xxxx Xxxxxx and
Xxxxxx Xxxxxxx, all employees of the joint venture formed pursuant to
the Joint Venture Agreement, dated January 30, 1991, between Enviroq
Resin Development, Inc. and Replico, which Joint Venture is now the
Company.
(i) SprayShield was invented for the Company by Xxxxx Xxxxxx,
Xxxxxx Xxxxxxx and Xxxx Xxxxxx, while the same were employees of the
Company during 1992.
3.1.13 Compliance with Law. To the Company's and such Seller's
knowledge, the Company has conducted, and is now conducting, the Business and
using its assets in compliance with all applicable Federal, state or local laws,
statutes and regulations, including, without limitation, environmental and
occupational health and safety laws, statutes and regulations, the enforcement
of which, if the Business were not so conducted or the assets were not so used,
would have a material and adverse affect upon the Business or the assets of the
Company; and neither such Seller nor the Company has received any notice of any
violations of any such laws, statutes or regulations during the thirty-six (36)
months prior to Closing.
3.1.14 Litigation and Other Claims.
(a) As of the date hereof, except as set forth on Schedule
3.1.14(a), there is no lawsuit, legal action, governmental
investigation or other proceeding pending or, to the knowledge of such
Seller or the Company, threatened against or affecting the Company, nor
is the Company the subject of any judgment, decree or order entered in
any lawsuit or other proceeding, that in either case, would be
reasonably likely to have a material adverse effect on the Company.
Moreover, such Seller and/or the Company is (are) not aware of any
facts or circumstances that exist which could result in any such
lawsuit, legal action, governmental investigation or other proceeding.
(b) Schedule 3,1.14(b) briefly describes all lawsuits, legal
actions, governmental investigations or other proceedings in which the
Company and/or Sellers was a party during the three years prior to the
date hereof.
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(c) Warranties and Returns. The Company's written warranty for
products of the Business is attached hereto as Schedule 3.1.14(c), and
such warranty is the sole authorized warranty of the Company with
respect to its products. Schedule 3.1.14(c) also sets forth the amount
of quality-related returns incurred by the Company with respect to the
Business for the 3-year period through the end of the month immediately
prior to Closing, expressed in annual dollar amounts and on a
percentage of sales on an annual basis. Schedule 3.1.14(c) also sets
forth the Company's product return policy for its products.
(d) Workers Compensation Claims. Schedule 3.1.14(d) describes
all workers compensation claims pending as of the date hereof which
have been made against the Company alleging entitlement to a remedy by
reason of on-the-job injuries or occupational diseases; all such
workers compensation claims made against the Company during the three
(3) years prior to the date hereof; and all current written notices
which could reasonably be expected to involve the institution of such a
workers compensation claim against the Company.
(e) Product Recalls. Schedule 3.1.14(e) describes all product
recalls undertaken by the Company within the three (3) years prior to
the date hereof, that are currently being undertaken by the Company or
that are scheduled to be undertaken; all current notices from any
governmental authority relating to the recall of products manufactured
by the Company; and all current written notices from any third party
stating a claim against the Company, that if adversely determined,
could reasonably be expected to involve a recall of products
manufactured by the Company. The Company does not anticipate
instituting a recall of any of its products.
3.1.15 Tax Matters. The Company has duly filed or been
included in all tax reports and returns required to be filed by it prior to the
date hereof, and, at Closing, shall have duly filed or been included in all tax
reports and returns required to be filed by it prior to Closing (and all such
tax returns are true and correct in all material respects) and thereafter, with
respect to all tax periods prior to Closing, such Seller shall duly include the
Company in all tax reports and returns required for such periods or shall cause
such reports and returns to be duly filed on behalf of the Company, all in the
ordinary course; and, except as listed in Schedule 3.1.15 attached hereto, all
taxes and other charges due or claimed to be due from it by Federal, state, or
local taxing authorities (including, without limitation, those due in respect of
its properties, income, franchise, licenses, sales, and payrolls) have been paid
by or on behalf of the Company or such Seller will cause the same to be paid on
behalf of the Company when required by law (and adequate provision for the
payment of the same has been made in the books and records of the Company);
since December 31, 2000, the Company has not incurred any tax liabilities other
than in the ordinary course of business; except as listed on Schedule 3.1.15,
there are no tax liens upon any of the properties or assets, real, personal, or
mixed, tangible or intangible, of the Company (other than liens for current
taxes not yet due or taxes being disputed by the Company in good faith and shall
be listed in Schedule 3.1.15); and there are not pending questions relating to,
or claims asserted for, taxes or assessments against the Company, and there is
no basis for any such question or claim. There is no unassessed tax deficiency
proposed or, to the knowledge of such Seller, threatened against the Company.
There are no agreements, waivers, or other arrangements providing for extension
of time with respect to
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the assessment or collection of any tax against the Company, nor are there any
actions, suits, proceedings, investigations or claims pending against the
Company in respect of any tax, or any matter under discussion with any Federal,
state or local authority relating to any taxes. The Company is a C corporation
for federal and state tax purposes. Moreover, neither such Seller nor the
Company is aware of any facts or circumstances which could reasonably be likely
to lead to any actions, suits, proceedings, investigations or claims being
instituted against the Company in respect of any tax by any Federal, state or
local authority relating to any taxes.
Neither such Seller nor the Company has taken, or will take prior to
Closing, any action(s) which would prohibit and/or restrict the Company from
making a Subchapter S Subsidiary election for federal income tax purposes.
Without limiting the foregoing, the Company has not previously made a Subchapter
S election of any kind, or if such an election has ever been made, to such
Seller's knowledge, there are no limitations or restrictions that would prohibit
the Company from electing Subchapter S status now or Subchapter S Subsidiary
status after Closing.
3.1.16 Insurance. The policies of fire, liability, worker's
compensation, product liability, and other forms of insurance described in
Schedule 3.1.16 attached hereto are in effect with respect to the Company; will
remain in effect through the respective dates set forth in Schedule 3.1.16
attached hereto; are valid, outstanding, and enforceable policies; and provide
reasonably adequate insurance coverage for the property, assets, and operations
of the Company.
3.1.17 Labor and Employment Matters. Except as set forth in
Schedule 3.1.17 attached hereto, there is no (i) collective bargaining agreement
or other labor agreement to which Company is a party or by which it is bound;
(ii) employment agreement between the Company and any individual employee; (iii)
employee profit sharing, defined contribution or benefit, bonus, stock option,
stock purchase, retainer, retirement, welfare, or incentive plan or contract to
which the Company is a party or by which it is bound; or (iv) plan or agreement
under which "fringe benefits" (including, but not limited to, vacation plans or
programs, sick leave or programs and related benefits) are afforded to any
employees of the Company. Except as set forth in Schedule 3.1.17, the Company
has made no commitment, whether formal or informal, and whether legally binding
or not, to establish a new or modify an existing plan, agreement, or arrangement
of the type described at (iii) and (iv) above. Except as set forth in Schedule
3.1.17, with respect to any such existing agreement, plan or contract, the
Company is not in default with respect to any material term or condition
thereof, nor has any event occurred which through the passage of time or the
giving of notice, or both, would constitute a material default thereunder by the
Company or would cause the acceleration thereunder of any material obligation of
the Company. Except as set forth in Schedule 3.1.17, the Company has withheld
and paid to the appropriate governmental authorities or is holding for payment
not yet due to such authorities all amounts required to be withheld from such
employees; and the Company is not liable for any arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing. Except
as set forth in Schedule 3.1.17, there is no unfair labor practice complaint
against the Company pending before the National Labor Relations Board or any
state or local agency, pending complaint or investigation involving the Company
before the wage and hour division of the U.S. Department of Labor, labor strike
or other material labor trouble, material labor grievance or pending
representation question involving the Company. Moreover, neither such Seller
nor the Company is aware of any facts or circumstances which could reasonably be
likely to lead to any actions, suits, proceedings, investigations or claims
being
10
instituted against the Company in respect of any labor and employment matter by
any Federal, state or local authority or any employee or beneficiary.
3.1.18 Pension and Employee Benefit Plans
(a) Except as set forth on Schedule 3.1.18, all accrued
obligations of the Company applicable to its employees, whether arising
by operation of law, by contract or past system, for payment by the
Company to trusts or other funds or to any governmental agency, with
respect to unemployment compensation benefits, social security benefits
or any other similar benefits for such employees with respect to
employment of such employees through the date of Closing have been paid
or will be paid as of Closing. All obligations of the Company with
respect to such employees for salaries, vacation and holiday pay, sick
pay, bonuses, and other forms of compensation payable to such employees
in respect of the services rendered by any of them that are due prior
to Closing have been paid or will be paid as of Closing.
(b) Except as set forth on Schedule 3.1.18 attached hereto,
the Company has not adopted an employee pension benefit plan within the
meaning of Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), covered by Part 2 of Title I of ERISA,
and has no obligation to pay any pension or retirement allowance to any
person.
(c) The Company is not a participating employer in any
employee pension benefit plan under which more than one employer makes
contribution as described in Section 4063 and 4064 of ERISA or a
multi-employer plan as defined in Section 4001(a)(3) of ERISA.
(d) The Company has complied in all material respects with
ERISA, as amended, and with the applicable regulations and published
interpretations under ERISA. No "reportable event" (as defined in
Section 4043(B) of ERISA) has occurred with respect to any benefit plan
of the Company, and the Company has no unfunded liability in relation
to any such benefit plan.
(e) The Company has not terminated any employee pension
benefit plan nor received any notice from the Pension Benefit Guaranty
Corporation ("PBGC") with respect to the intent of the PBGC to
institute involuntary termination proceedings of any such plan of the
Company's or in which the employees of the Company participate.
3.1.19 No Consents. Except as set forth on Schedule 3.1.19, no
consent, approval, authorization or order of any governmental agency or body or
other third party is required for the consummation of the transactions
contemplated pursuant to this Agreement.
3.1.20 Permits. Schedule 3.1.20 lists all effective
governmental licenses, permits and approvals in effect on the date hereof
issued in the name of or to The Company, which are material to the conduct of
its business or operations or the ownership of any of its assets. There are no
other licenses, permits or approvals necessary to operate the Business.
11
3.1.21 Certain Disclosures. Except as set forth in Schedule
3.1.21:
(a) The Company has not given any power of attorney to any
person or entity;
(b) Other than W. Xxxx Belle, Xxxx Xxxxxx, Xxxxxx X. Xxxxxx
and Xxxxxxxx Xxxxxx, with annual salaries of $71,662.00, $62,000.00,
$58,000.00 and $26,000.00, respectively, the Company has no officer,
employee, agent, consultant or representative to whom it is paying
compensation at an annual rate of more than $20,000, or hourly rate of
more than $ 10.00;
(c) The Company's Accounts Receivable, as set forth on the
Closing Balance Sheet, represent sales actually made, services actually
rendered or expenses actually incurred on behalf of a customer, and for
which the customer has an obligation to pay or reimburse the Company,
in the ordinary course of business and in the aggregate are current
and, subject to the Reserve, collectible;
(d) The inventories of the Company are useable and saleable in
the ordinary course of business, consistent with past practice (except
for slow-moving, damaged or obsolete items and materials of below
standard quality, all of which have been written down to net realizable
market value or in respect of which adequate reserves have been
provided, in each case as reflected on the Balance Sheet and which are
reflected in Net Working Capital);
(e) There are no guaranties of any corporate obligation of
the Company and the Company had not guaranteed and is not in any manner
liable, directly or contingently, for any obligation of any other
person or entity;
(f) Since December 31, 2000, the Company has not made any
commitment to extend any credit or advance any funds, other than in the
ordinary course of business and as reflected on the Closing Balance
Sheet;
(g) The Company has not entered into or given any "negative
pledge" whereby it has agreed not to subject any of its assets to a
security interest or lien;
(h) The Company has not changed its name, been the surviving
entity of a merger or consolidation, or acquired all or substantially
all of the assets of any person or entity; and
(i) Each item of machinery and equipment, consistent with the
age thereof, is in good operating condition, normal wear and tear
excepted.
3.1.22 Certain Contracts In Effect. Except as set forth on
Schedule 3.1.22:
(a) The Company is not a party to any "consulting", "supply"
or "requirements", or "non-compete" agreement nor is the Company bound
by or purported to be bound by an
12
agreement restricting it from carrying on the Business in any geographical
location or in any manner;
(b) The Company is not a party to any "nondisclosure",
"confidentiality", or other contract or agreement relating to trade
secrets or proprietary or confidential information; and
(c) The Company does not have any outstanding contracts or
commitments with officers, employees, agents, consultants, affiliates,
or representatives that are not cancelable by it on notice of not
longer than thirty (30) days and without liability, penalty or premium.
3.1.23 Contracts In Effect. With respect to any contracts,
agreements, commitments and leases of the Company (all of which are listed in
Schedule 3.1.23 (the "Contracts")):
(a) Such Seller and the Company do not have any knowledge that
any of such Contracts is not a valid and binding agreement of any other
party thereto;
(b) Such Seller and the Company have no reason to believe that
all of the material obligations under the Contracts which remain to be
performed after the date hereof cannot be performed when due; and
(c) There has not occurred a material default under any
Contract on the part of the Company which has not been waived by all
appropriate parties or cured within any applicable grace period; such
Seller and the Company do not have any knowledge that a default under
any Contract on the part of any other party thereto has occurred; and
such Seller and the Company do not have any knowledge that an event has
occurred which with the giving of notice or the lapse of time, or both,
would constitute a material default under any of the Contracts by any
party.
3.1.24 Certain Environmental Matters. The Company has not
disposed of any hazardous or toxic wastes, either at the real property leased by
it or any location where it transacts Business, including, but not limited to,
the Facility (as described on Schedule 3.1.24); to the Company's and such
Seller's knowledge, there is no material or friable asbestos or
asbestos containing material (ACM) at the Facility; there are no underground
storage tanks at the Facility, and the Company has not received any written
notice from the Environmental Protection Agency ("EPA") of the US., the State of
Alabama or from any other county or local environmental agency alleging that it
is in violation of any applicable environmental law, statute, or regulation or
for the purposes of engaging in an inspection of any such premises. Moreover,
neither the Company nor such Seller is aware of any facts or circumstances which
could reasonably be likely to lead to any actions, suits, proceedings,
investigations or claims being instituted against the Company in respect of any
Environmental Law by any Federal, state or local authority. "Environmental law"
shall be construed broadly and shall mean and include all statutes, regulations
or rules promulgated by any environmental authority having jurisdiction over the
premises or the operations thereon and shall include, without limitation, all
laws relating to air emissions or permits, the use, storage or disposal of
hazardous and toxic substances, the discharge or treatment of effluents and/or
storm water,
13
CERCLA, XXXX, NPDES, RCRA, etc. Toxic and hazardous waste shall mean all
substances defined as hazardous or toxic by any environmental authority having
jurisdiction over the premises and the operations thereon.
3.1.25 Indebtedness to and from Officers, Employees, Directors
and Shareholders. Except as listed in Schedule 3.1.25 attached hereto, the
Company is not indebted to any person who is an officer, employee, director, or
shareholder of the Company, or any affiliate thereof, in any amount whatsoever
other than for salaries for services rendered since the start of such person's
current pay period and for reimbursable business expenses, nor is any such
officer, director, or shareholder of the Company indebted to the Company except
for advances made in the ordinary course of business to meet anticipated
reimbursable business expenses to be incurred.
3.1.26 Bank Accounts. Schedule 3.1.26 attached hereto sets
forth a true and correct list of all bank accounts, safe deposit boxes, and bank
vault arrangements maintained by the Company, the authorized signatories thereon
and the maximum amounts which such signatories may withdraw from said bank
accounts in any single transaction.
3.1.27 All Assets and Liabilities. Except as otherwise
specifically set forth herein, the Company owns all properties and assets, real,
personal, and mixed, tangible and intangible, and is a party to all easements
necessary to permit it to carry on the Business as presently conducted. The
Company has no (and the Purchaser is not assuming) liabilities or obligations
except those set forth on the Closing Balance Sheet accepted by Purchaser.
3.1.28 Joint Venture and Other Relevant Shareholder
Agreements. As of Closing, the following agreements will be terminated: (1)
Joint Venture Agreement by and between Replico and Enviroq Resin Development,
Inc., dated January 30, 1991; (ii) the Assignment and Assumption Agreement by
and between Replico and the Company, dated March 25, 1992, and (iii) the
Stockholder Agreement by and between Replico, Enviroq and the Company dated
March 25, 1992.
3.1.29 Terminated Japanese License Agreements. The Company and
such Seller warrant and represent that neither Toa Grout Kogyo Company, LTD. or
Mitsui Toatsu Chemicals, Inc. directly or indirectly, will compete with the
Company, except in Japan.
3.1.30 No Omissions. There is no fact peculiar to the Company,
its assets or business which such Seller and the Company have not disclosed to
Purchaser in writing which materially adversely affects nor, so far as such
Seller can now foresee, will materially adversely affect the Company. No
statement of fact including the representations and warranties of Sellers and
the Company contained in this Agreement or in any document delivered pursuant
hereto contains or will contain any untrue statement of material fact or omits
or will omit to state any material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which made, not
misleading.
14
3.2 Representation and Warranties of Purchaser. Purchaser
represents and warrants to Sellers as follows.
3.2.1 Authority. Purchaser is duly organized, validly
existing and in good standing under the laws of its state of organization.
Purchaser has full right, power, and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. This Agreement and all other
agreements to be executed by Purchaser in connection herewith have been (or upon
execution will have been) duly executed and delivered by Purchaser, have been
effectively authorized by all necessary action, corporate or otherwise, and
constitute (or upon execution will constitute) legal, valid, and binding
obligations of Purchaser.
3.2.2 Agreement Not to Breach Other Instrument. The
execution and delivery of this Agreement by Purchaser and the consummation of
the transactions contemplated hereby and the fulfillment of the terms hereof
will not result in a breach of any of the terms or provisions of, or constitute
a default under, or conflict with, any judgment, decree, order or award of any
court, governmental body, or arbitrator, or, to the best of Purchaser's
knowledge, any law, rule, or regulation applicable to Purchaser.
3.2.3 Regulation Approval. No consent, approval,
authorization or order of any governmental agency or body or other third party
is required for the consummation of the transactions contemplated by Purchaser
pursuant to this Agreement.
3.2.4 Corporate Purchase. If this Agreement is assigned to
a corporation or another entity by Purchaser (which Sellers hereby consent to),
such corporation or other entity shall be duly organized, validly existing and
in good standing under the laws of its state of organization. It shall have full
corporate power to carry on its business and shall be entitled to own, lease, or
operate the properties and assets it owns, leases, or operates. It shall be
qualified to do business and be in good standing in each jurisdiction in which
its failure so to qualify could have a material adverse affect on its financial
condition or business.
3.2.5 Litigation. There is no lawsuit, legal action or
other proceeding pending or, to the knowledge of Purchaser, threatened against
or affecting Purchaser, nor is Purchaser subject to any judgment, decree or
order entered in any lawsuit or other proceeding brought against it, that would
in any way interfere with Purchaser's ability to perform this Agreement.
3.2.6 No Omissions. No statement of fact including the
representations and warranties of Purchaser contained in this Agreement or in
any document delivered pursuant hereto contains or will contain any untrue
statement of material fact or omits or will omit to state any material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which it made, not misleading.
3.3 Finders. Purchaser and Sellers each represent and warrant that
they have not taken any action that directly or indirectly would obligate the
other to anyone acting as a broker, finder, financial advisor or anyone in any
similar capacity in connection with this Agreement or any of the transactions
contemplated hereby. Sellers have engaged Xxxxxx Xxxxxxx of Corporate Finance
Associates, 00000 Xxxxxxxx Xxxx Xxxxxxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000
("Broker"), as broker for
15
the sale of the Stock of the Company, and Sellers shall be solely responsible
for the payment of any fees or expenses due said Broker, including any amounts,
which may become due from the Company to Broker.
ARTICLE IV. PRE-CLOSING AGREEMENTS
4.1 Negative Covenants of the Company. Between the date hereof and
Closing, unless otherwise provided herein, the Company will not, and Sellers
will not, on behalf of themselves or the Company, without the written consent of
Purchaser:
(a) sell or otherwise dispose of any of the Company's
assets, other than inventory, in the ordinary course of business;
(b) order or purchase any property other than supplies
and materials in the ordinary course of business;
(c) make any commitment to extend any credit or advance
any funds, or make any commitment or incur any obligation to borrow
funds from any source except in respect of obligations of the Company
incurred in the ordinary course of business;
(d) change the Articles of Incorporation or Bylaws of the
Company, except as may be necessary to conform with the requirements of
this Agreement; or increase the rate of compensation payable by the
Company to any officer or employee or pay any bonus or similar payment
to any officer or employee;
(e) convey, transfer, issue or sell or enter into any
agreement to convey, transfer, issue or sell any additional capital
stock or other securities of the Company;
(f) take any act or fall to take any act which would
cause a representation or warranty contained herein to be untrue; or
(g) make any commitment or agreement to do any of the
foregoing, other than enter into license agreements with respect to the
Company's intangible personal property which are entered into in the
ordinary course of business and which shall be listed on an updated
Schedule 3.1.12(ii) to be delivered at Closing.
4.2 Operations Prior to Closing Date between the date hereof and
Closing, Sellers and the Company will:
(a) provide Purchaser, at Purchaser's expense, with full
access, during the Company's normal business hours to all properties,
books and records and employee(s) of or relating to Company as
Purchaser may reasonably request;
(b) cause the Company to operate, maintain and manage its
business and assets in the ordinary course of business; and
16
(c) keep the business organization of the Company intact,
the services of the Company's officers, and employees available, both
insofar as practicable and preserve the goodwill of all persons and
entities having business relations with the Company on a best efforts
basis.
(d) identify on Schedule 4.2 all individuals and entities
who were involved in, or who have knowledge of, the research,
development, production, mixture and formulas of the spray-applied
resinous materials that the Company sells and licenses as part of its
Business.
4.3 Conditions Precedent to Seller's Obligations. The following
shall be conditions precedent to Sellers' obligations to consummate the
transactions contemplated hereunder, each of which may be waived by Seller in
writing:
(a) that the Article III representations and warranties
of Purchaser shall be true and correct in all material respects at
Closing and a certificate to that effect shall have been delivered by
Purchaser at Closing;
(b) the terms, conditions and covenants to be complied
with and performed by Purchaser at or before Closing shall have been
complied with or performed in all material respects and a certificate
to that effect shall have been delivered by Purchaser at Closing; and
(c) that Purchaser, Sellers and The Company shall have
executed and delivered the Related Agreements (as defined in Section
6.4 below) to which each is a party in the forms attached hereto.
4.4 Conditions Precedent to Purchaser's Obligations. The following
shall be conditions precedent to Purchaser's obligations to consummate the
transactions contemplated hereunder, each of which may be waived by Purchaser in
writing:
(a) that the Article III representations and warranties
of Sellers shall be true and correct in all material respects at
Closing and a certificate to such effect shall have been delivered by
Sellers at Closing,
(b) the terms, conditions and covenants to be complied
with and performed by Sellers at or before Closing shall have been
complied with or performed in all material respects and a certificate
to such effect shall have been delivered by Sellers at Closing;
(c) that Purchaser, Sellers and the Company shall have
executed and delivered the Related Agreements (as defined in Section
6.4 below) to which each is a party in the forms attached hereto;
(d) that Purchaser, on behalf of the Company, shall have
negotiated and entered into employment agreements with such current
employees of the Company (including, but
17
not limited to, Xxxxxxx X. Belle, Xxxxxxx Xxxxxx and Xxxxxxx X. Xxxxxx)
as the Purchaser, in its sole discretion, deems reasonably necessary to
the continuation of the Company, upon such terms and conditions as the
Purchaser shall deem reasonably acceptable, including, without
limitation, provisions regarding (i) a salary, subject to annual
increases and bonus amounts (as agreed and set forth in the employment
agreement), (ii) termination upon death or disability of the employee
and granting the Company a right to terminate for "cause" (to be
defined in the employment agreement), and (iii) non-competition
covenants;
(e) prior to Closing, Purchaser shall have obtained for
itself and the Company a financing commitment or commitments for
financing Purchaser's purchase of the Stock, the payoff of the
Guarantied Indebtedness, and the operations of the Company, all upon
terms and conditions reasonably acceptable to Purchaser;
(f) that Purchaser shall have conducted (at Purchaser's
expense) all reasonable due diligence of the Company to be undertaken
by Purchaser and his counsel and auditors, and such due diligence shall
not have disclosed any event, condition or state of facts that would be
reasonable likely to have a material adverse effect on the Company;
(g) that Sellers, and all other parties listed on any
schedules to this Agreement as having any right to any property of the
Company, intangible or tangible, real or personal, or mixed, will have
assigned to the Company all of their and their affiliates' fight, title
and interest in and to said property, all to Purchaser's reasonable
satisfaction;
(h) that Sellers shall have delivered to Purchaser an
unaudited balance sheet and income statement of the Company dated as of
the Closing Date, which financial statements must be in accordance with
Section 3.1.6 above;
(i) That neither the Business nor the Company's assets
shall have been materially and adversely affected in any way as a
result of fire, explosion, earthquake, disaster, accident, change of
utility or rail service, any action of a government agency or a
subdivision thereof, flood, riot, civil disturbance, uprising, acting
of armed forces, act of God or any other force majeure cause; and
(j) that there shall not have been and there shall not
reasonably be anticipated any material adverse change in the Business,
financial condition or operations, customers or prospects, of the
Company.
(k) that Sellers, on behalf of the Company, shall have
negotiated and entered into a Non-Competition and Confidentiality
Agreement with Xxxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxxx and
Intrepid Capital Corporation, all on terms and conditions acceptable to
Purchaser.
18
ARTICLE V. CLOSING
5.1 The Closing. The closing (the "Closing") of the transactions
contemplated hereby shall take place on or before October 17, 2001, but in all
events no later than October 31, 2001, at the Facility effective as of the
opening of business on such date (the "Closing Date"), or at such other date,
time or place as the parties may mutually agree.
5.2. Sellers' Obligation's. At the Closing, Sellers shall deliver
the following to Purchaser, all in form and substance reasonably satisfactory to
Purchaser:
(a) certificates duly endorsed to Purchaser for all of
the Stock, together with duly endorsed stock powers;
(b) resignations of all officers and directors of The
Company, except those retained by Purchaser as set forth in Section 4.4
(e);
(c) the original and current corporate minute book, stock
records, and corporate seal of The Company,
(d) the original and current insurance policies for The
Company as described on Schedule 3.1.16 attached hereto;
(e) a legal opinion from Xxxxxx & Xxxxxx LLP, in form and
substance reasonably satisfactory to Purchaser as to the matters set
forth in Article III.
(f) such other instruments of transfer as shall be
appropriate, dated as of Closing, conveying and transferring the Stock
to Purchaser;
(g) any necessary consents to the contemplated transfers,
all in accordance with and as provided in this Agreement;
(h) certificates as required by Sections 4.4(a) and (b);
(i) execution and delivery to Purchaser and the Company
of the Related Agreements; and
(j) resolutions of Sellers' Boards of Directors and
shareholders, certified by Sellers' corporate secretaries as being in
full force and effect and in compliance with the Sellers' Articles of
Incorporation and Code of Regulations (or equivalent charter document),
evidencing that this Agreement and the transactions contemplated
hereunder are the duly authorized corporate actions of Sellers.
(k) an Employee Acknowledgement from each current
employee of the Company in substantially the Form attached hereto as
Schedule 5.2 (k)
19
5.3 Purchaser's Obligations. At the Closing, Purchaser shall pay
the purchase price for the Stock as provided in Section 2.1, including the
execution and delivery of the Seller Notes and delivery of immediately available
funds to the accounts of Sellers. Purchaser shall further deliver the following
to Sellers, all in form and substance reasonably satisfactory to Sellers:
(a) resolutions of Purchaser's Board of Directors,
certified by Purchaser's corporate secretary as being in full force and
effect and in compliance with the Purchasers Articles of Incorporation
and Code of Regulations (or equivalent charter document), evidencing
that this Agreement and the transactions contemplated hereunder are the
duly authorized corporate actions of Purchaser;
(b) execution and delivery to Sellers of the Related
Agreements;
(c) certificates as required by Sections 43(a) and (b);
(d) a legal opinion of Xxxxxxx, Xxxxx & Diamond, LLC in
form and substance reasonably satisfactory to Sellers as to matters set
forth in Article III; and
(e) the Enviroq Note (as hereafter defined).
5.4 Conversion of Enviroq Intercompany Payable to Note Payable.
The amount of intercompany debt owed to Enviroq Corporation by the Company at
Closing shall be converted to an unsecured note payable (the "Enviroq Note") in
the form of Schedule 5.4 at Closing. The Enviroq Note shall not exceed One
Hundred Ninety Five Thousand and No/100 Dollars ($195,000), regardless of the
amount set forth as such on the Closing Balance Sheet. Any excess shall be
forgiven as part of the consideration for the purchase of the Stock herein, and
Enviroq shall execute a document reasonably acceptable to Purchaser
acknowledging said agreement. The Enviroq Note shall be evidenced by a
Promissory Note from the Company to Enviroq which the principal shall be payable
in one lump sum on the 5th anniversary of Closing; but accruing interest at a
fixed rate of seven percent (7%) per annum, payable annually commencing on the
1st anniversary of Closing and continuing each anniversary of Closing
thereafter. The Enviroq Note may be prepaid at any time without penalty and
shall be subordinate to (i) all debt senior to the Seller Notes and (ii) the
Seller Notes.
ARTICLE VI, COVENANTS
6.1 Indemnification.
(a) From and after the Closing Date, Sellers shall,
severally and not jointly, defend, indemnify and save Purchaser
harmless from and against any and all damages, losses, lawsuits,
liabilities and claims, and costs and expenses (including reasonable
attorney's fees) incurred in connection therewith (collectively, the
"Losses"), resulting from or arising Out of (i) any material breach of
any agreement, covenant or obligation of Sellers contained herein or in
any document or instrument delivered pursuant thereto, (ii) any breach
of any representation or warranty of Sellers contained at said Sections
3.1.1 through 3.1.28 and (iii) my material misrepresentation contained
in any statement or certificate
20
furnished by Sellers pursuant to this Agreement,
(b) From and after the Closing Date, Purchaser shall
defend, indemnify and save Sellers harmless from and against any and
all Losses resulting from or arising out of (i) any material breach of
any agreement, covenant or obligation of Purchaser contained herein or
in any document or instrument delivered pursuant hereto, (ii) any
material breach of any representation or warranty of Purchaser
contained at said Sections 3.2.1 through 3.2.6 herein, or (iii) any
material misrepresentation contained in any statement furnished by
Purchaser pursuant to this Agreement.
(c) Promptly after any service of process by any third
person in any litigation in respect of which indemnity may be sought
hereunder, Purchaser and Sellers, as applicable (the "First Party"),
will notify the other party (the "Second Party) of such litigation and
the Second Party shall undertake the defense of the First Party. The
First Party may monitor any such matter at its own expense. Similar
prompt notice will be given in the case of a party's (i) receipt of any
other claim or (ii) actual recognition of a set of facts which might
reasonably be thought to result in a request for indemnification. If
the Second Party refuses to undertake to indemnify the First Party for
any matter within the scope of the Second Party's indemnification under
this Section 6.1 and for which notice was given, all decisions
concerning compromise and settlement shall be reasonably made by the
First Party for the account of the Second Party.
(d) The indemnity obligations hereunder shall survive for
the following periods:
(i) as it relates to any tax and environmental
related matters for the relevant statute of limitations
governing the same;
(ii) as to title of any real and/or personal
property, whether tangible or intangible, indefinitely; and
(iii) for all other matters, two (2) years from the date of
closing.
(iii) for all other matters, two (2) years from
the date of closing.
(e) Notwithstanding anything to the contrary herein, (i)
no party hereto shall have any liability with respect to any Losses
under this Section 6.1 until the total of all such Losses exceeds
$25,000.00, in which event such indemnifying party shall be obligated
to indemnify only for Losses in excess of such amount, and (ii) in no
event shall the aggregate liability under this Section 6.1 exceed the
Purchase Price.
(f) In case any event shall occur which would otherwise
entitle a party hereto to assert a claim for indemnification, no Losses
shall be deemed to have been sustained by such party to the extent of
(a) any tax savings realized by such party with respect thereto, or (b)
any proceeds received by such party from any insurance policies with
respect thereto, unless there may be an offsetting subrogation which
would nullify any such coverage.
21
6.2 Use of the Company Name. On and after Closing, Sellers shall
not, directly or indirectly, voluntarily or involuntarily, use or make available
the use of the names "Sprayroq," "SprayWall," or "SprayShield" as a trademark,
service xxxx, business name or corporate name, or any other use of the names in
business. Use of such names shall solely be an asset of Company.
6.3 Records. The parties recognize that Sellers and their
respective accountants and attorneys may require access to and copies of certain
of the Company's records after Closing. Accordingly, Sellers and their
respective attorneys and accountants shall have reasonable access to the
Company's business records during ordinary business hours upon reasonable notice
to Purchaser. Sellers and their respective attorneys and accountants shall
further be entitled to make copies of such records at their expense so long as
they agree to keep any nonpublic information therein confidential excepting such
disclosures as are required by law. Purchaser may, however, destroy any business
records of The Company in accordance with generally accepted accounting and
record retention policies.
6.4 Related Agreements. The parties agree that certain
arrangements relating to the purchase and sale of the Stock as contemplated by
this Agreement are contained in the following, each of which will be executed
and delivered by the parties thereto on or before the Closing Date (the "Related
Agreements"):
(a) "Non-Competition and Confidentiality Agreement" means
those non-competition and confidentiality agreement by and between
Sellers and the Company, and the Company and Xxxxxxx Xxxx, all on terms
and conditions acceptable to the Company.
(b) "Employment Agreement(s)" means that or those
employment agreement(s) between the Company and one of more of its
current employees as required by Purchase pursuant to Section 4.4(d)
hereof, and
ARTICLE VII, TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by mutual consent of Purchaser and Seller; or
(b) by either Purchaser or Sellers:
(i) if a court of competent jurisdiction or governmental
authority shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling the parties hereto shall
use their best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall
have become final and non-appealable; or
22
(ii) If the Closing shall not have occurred on or before
November 1, 2001, provided that the right to terminate this Agreement
shall not be available to any party whose breach of this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur
on or before such date; or
(c) by Purchaser if any material condition in
Section 4.4 becomes impossible of performance or
has not been satisfied in full or previously
waived by Purchaser in writing at or prior to
the Closing Date; and
(d) by Sellers if any material condition in Section
4.3 becomes impossible of performance or has not
been satisfied in full or previously waived by
Sellers in writing at or prior to the Closing
Date.
7.2 Procedure. and Effect of Termination. In the event of the
termination and abandonment of the transactions contemplated hereby pursuant to
Section 7.1, written notice thereof shall forthwith be given to the other party
to this Agreement, and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as provided herein, no party
hereto shall have any liability or further obligation to any other party to this
Agreement resulting from such termination.
ARTICLE VIII. MISCELLANEOUS
8.1 Notice. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when personally delivered or telecopied, one (1) business day after
being sent by an overnight express service such as Federal Express, fee prepaid,
or three (3) business days after being mailed by certified first class mail,
return receipt requested, postage prepaid, and in each case addressed:
If to Sellers to: Enviroq Corporation
c/o Intrepid Capital Corporation
0000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxx, President
Telecopier: (000) 000-0000
With a copy to: Xxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxx, Esq.
Telecopier: (000) 000-0000
23
If to Purchaser to: Sprayroq of Ohio, Inc.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxx, Chairman
Telecopier: (000) 000-0000
With a copy to: Xxxxxxx, Manna & Diamond, LLC
00 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxx 00000
Attn: Xxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
8.2 Waivers. Any waiver by Sellers or Purchaser of any breach of
or failure to comply with arty provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision,
or a waiver of any other breach of, or failure to comply with, any other
provision of this Agreement. This Agreement may not be amended or terminated
orally but only by an instrument in writing duly executed by the parties hereto.
8.3 Complete, Agreement. Except as set forth in any
contemporaneous written instruments signed by each of the parties hereto, this
Agreement sets forth the entire understanding of the parties hereto and
supersedes all prior and contemporaneous agreements, arrangements,
communications, representations or warranties, whether oral or written (except
any that might be contained in the Related Agreements, the Seller Notes and the
Enviroq Note), by any officer, employee or representative of any party. Any term
or provision of this Agreement which is determined to be unenforceable or
invalid shall be limited and the remainder of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
8.4 Expenses. Except as otherwise provided in this Agreement, each
party shall bear and pay its own expenses and taxes incurred in connection with
the transactions referred to in this Agreement.
8.5 Exhibits and Schedules. The Exhibits and Schedules attached
hereto and referred to herein are a part of this Agreement for all purposes and
shall be attached prior to Closing in a form acceptable to Purchaser.
8.6 Publicity. Prior to closing, any public announcements with
respect hereto or the transactions contemplated hereby shall be made at such
time and in such manner as Sellers and Purchaser shall mutually agree.
Notwithstanding the foregoing, the parties hereto acknowledge and agree that
they or their affiliates may, without the others' prior consent, issue such
statements as may be required by applicable law, in which case the issuing party
shall consult with the other parties hereto upon the nature, content and form of
such press release or public statement.
8.7 Further Assurance. After Closing, Sellers shall from time to
time, at Purchaser's request, execute and deliver such other instruments of
conveyance and transfer and take such other action as Purchaser shall reasonably
request so as to more effectively convey and transfer the Stock to Purchaser and
convey and transfer all intangible personal property to the Company.
24
8.8 Assignment. Neither Purchaser nor Sellers may assign this
Agreement without the written consent of the other party; provided, however,
Purchaser may assign this Agreement to one or more of its affiliates without
said consent. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
8.9 Survival. This Agreement and the parties' agreements,
covenants, warranties, representations, obligations and liabilities hereunder
shall survive the Closing based upon the following schedule
(i) as it relates to any tax and environmental related
matters for the relevant statute of limitations
governing the same;
(ii) as to title of any real and/or personal property,
whether tangible or intangible, indefinitely; and
(iii) for all other matters, two (2) years from the (late
of closing
8.10 Delivery of Property Received after Closing. From and after
the Closing, Sellers shall promptly transfer and deliver to Purchaser, from time
to time, any cash or other property which Sellers may receive which belongs to
the Company.
8.11 Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. The parties specifically acknowledge that Purchaser may assign this
Agreement. The foregoing notwithstanding, Sellers shall have no right to assign
this Agreement.
8.12 Governing law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and construed in accordance with
Ohio law.
8.13 Sellers' Knowledge. "To such Seller's knowledge" or words of
like import shall mean to such party's knowledge, information and belief after a
reasonable inquiry that, in the case of Sellers, should include reasonable
inquiry of appropriate personnel of the Company.
8.14 No Presumption. The parties acknowledge and agree that this
Agreement was jointly prepared and that there shall be no presumption of
construction against either party as the drafter of this Agreement.
8.15 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but which shall
constitute one and the same instrument. Signatures via Facsimile shall be deemed
original signatures. It shall not be necessary for every party to sip each
counterpart but only that each party shall sign at least one such counterpart.
8.16 Duties-of-Sellers. All agreements, representations,
warranties, covenants, obligations and liabilities of Sellers contained or
referenced in this Agreement and/or the Related Agreements, except for the
Accounts Receivable guaranty set forth in Section 2.6, are several and not
joint.
(Signatures intentionally appear on following page.)
25
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be
executed and delivered by their respective duly authorized officers, effective
as of the date first above written.
SELLERS:
Enviroq Corporation
By /s/ Xxxxxxx X. Xxxx
----------------------------
Its: President
----------------------------
Replico Development Company, Inc.
By: Xxxxxx X. Xxxxxx
----------------------------
Its: CEO
----------------------------
PURCHASER,
Sprayroq of Ohio, Inc.
By /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Its: President
----------------------------
26
SCHEDULE 2.1(A
THE INDEBTEDNESS AND LIENS CREATED HEREUNDER AND ALL EXTENSIONS, RENEWALS,
REPLACEMENTS AND MODIFICATIONS THEREOF ARE SUBORDINATE TO THE INDEBTEDNESS AND
LIENS OF WESTFIELD BANK, FSB, DESCRIBED IN A SUBORDINATION AGREEMENT DATED
OCTOBER 30, 2001, BY AND BETWEEN ENVIROQ CORPORATION, REPLICO DEVELOPMENT
COMPANY, INC., AND SPRAYROQ OF OHIO, INC.
SUBORDINATED PROMISSORY NOTE
$150,000 Jacksonville Beach, Florida
October 30, 2001
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, SPRAYROQ OF OHIO, INC., an Ohio corporation ("Borrower"), hereby
promises to pay to the order of Replico Development Company, Inc., a
Pennsylvania corporation ("Payee"), at 000 Xxxxxxxx Xxxxx Xxxx, Xxxxx,
Xxxxxxxxxxxx 00000, the sum of One Hundred Fifty Thousand Dollars ($150,000)
plus interest from the date hereof on the unpaid principal balance hereof from
time to time outstanding at a rate of interest equal to seven percent (7%) per
annum, computed annually.
Interest hereon shall be payable annually commencing November 1, 2002,
and shall be payable each November 1st thereafter until this Subordinated
Promissory Note is paid in full. The principal hereof shall be paid in one lump
sum on November 1, 2006, except that Payee shall be entitled to an advanced
payment of principal equal to twenty five percent (25%) of the "Calculated
Amount" as defined and set forth below which is based upon the annual,
incremental and collected "net sales" of the Borrower in excess of Two Million
Dollars ($2,000,000) for the immediately preceding year, commencing with
November 1, 2002, and for each twelve month period thereafter ending on November
1, 2006. Borrower's "net sales" shall be defined as collected gross sales less
any taxes, shipping charges, discounts and returns.
Net Sales for Current Year Ending on said Calculated Amount:
Anniversary Percentage of Incremental Sales
----------------------------------------- -------------------------------
First $100,000 over $2,000,000 3% of increment
From $100,000 to $200,000 over $2,000,000 4% of increment
From $200,000 to $300,000 over $2,000,000 5% of increment
From $300,000 to $400,000 over $2,000,000 6% of increment
From $400,000 to $500,000 over $2,000,000 7% of increment
From $500,000 to $600,000 over $2,000,000 8% of increment
From $600,000 to $700,000 over $2,000,000 9% of increment
$700,000 or more over $2,000,000 10% of increment
1
For example, assume annual, incremental and collected net sales for a
current year, as set forth, herein equal Two Million Five Hundred Thousand
Dollars ($2,500,000), then the Calculated Amount shall be Twenty Five Thousand
Dollars ($25,000) for that year.
Borrower shall deliver to Payee within Forty-Five (45) days after the
end of each calendar quarter beginning with the calendar quarter ending December
31, 2001, an unaudited balance sheet of Borrower as of the end of such quarter
and unaudited statements of operations and of cash flows of the Borrower for
such quarter and for the current fiscal year to the end of such quarter, signed
by the Borrower's chief financial officer or other officer acting in a similar
capacity.
In any event, all outstanding principal and accrued but unpaid interest
hereof shall be due and payable on or before November 1, 2006. Payments
hereunder shall be considered timely made hereunder if received no later than
the fifth day following the due date.
This Subordinated Promissory Note may be prepaid from time to time, in
whole or in part, without penalty or premium.
Anything in this Subordinated Promissory Note to the contrary
notwithstanding, the indebtedness evidenced by this Subordinated Promissory
Note, including both principal and interest, shall be subordinate and junior to
all indebtedness of the Borrower and the Borrower's subsidiary, Sprayroq, Inc.,
a Florida corporation ("Sprayroq"), for the payment of the purchase price of the
capital stock of Sprayroq and Sprayroq's reasonable working capital purposes
(except such indebtedness of the Borrower or Sprayroq which, by its terms, is
subordinate or junior in any respect to the indebtedness evidenced hereby),
whether outstanding at the date hereof or incurred after the date hereof. Such
indebtedness of the Borrower and Sprayroq to which this Subordinated Promissory
Note is subordinate or junior is collectively referred to as "Senior Debt."
Payees shall execute such documents as said Senior Debt holders may reasonably
require to evidence this subordination.
The obligation evidenced by this Subordinated Promissory Note is
secured by a Security Agreement of even date herewith executed by Sprayroq in
favor of Payees (the "Security Agreement"). Reference is made to the Security
Agreement for a description of the collateral, the nature and extent of the
security, and the rights and obligations of the Borrower, Sprayroq, the Payees,
and any holder in respect of such security.
The occurrence and continuation of any one of the following events
(each an "Event of Default") shall constitute a default hereunder: (i) Borrower
shall fail to pay any principal of or interest on this Subordinated Promissory
Note within ten (10) calendar days after its scheduled due date; (ii) Borrower
shall violate any representation, warranty, covenant or agreement set forth in
this Subordinated Promissory Note or that certain Stock Purchase Agreement dated
as of September 19, 2001, to which this Subordinated Promissory Note is
attached as an exhibit (other than payment when due of principal or interest on
this Subordinated Promissory Note), and
2
Borrower shall fail to cure such violation within ten (10) calendar days after
written notice thereof from Payee; or (iii) Borrower shall make a general
assignment for the benefit of creditors, file a petition in bankruptcy, be
adjudicated insolvent or bankrupt, petition a court for the appointment of any
receiver or trustee for Borrower or any substantial part of its property,
commence any proceeding relating to Borrower under any arrangement or debt
readjustment law or statute of any jurisdiction whether now or hereafter in
effect or there shall be commenced against Borrower any such proceeding which
remains undismissed for thirty (30) calendar days, or Borrower by any act shall
indicate consent to, approval of or acquiescence in any such proceeding or the
appointment of any receiver or trustee for it or any substantial part of its
property, or shall suffer any such receivership or trusteeship to continue
undischarged for thirty (30) calendar days. If an Event of Default occurs and is
continuing, then, at Payee's option, Payee may declare the entire principal
amount outstanding hereunder, together with interest thereon, immediately due
and payable. The rights, remedies, powers and privileges provided for herein are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
No waiver by Payee of any default shall be effective unless in writing,
nor shall it operate as a waiver of any other default or of the same default on
a future occasion. No delay or omission by Payee in exercising any of its
rights, remedies, powers and privileges hereunder or at law and no course of
dealing between Payee and Borrower or any other person shall be deemed a waiver
by Payee of any of such rights, remedies, powers and privileges even if such
delay or omission is continuous or repeated, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise thereof by Payee or the exercise of any other right, remedy, power or
privilege by Payee. Borrower waives demand, presentment, protest, notice of
protest and notice of dishonor.
If this Subordinated Promissory Note is placed in the hands of any
attorney for collection, or if collected by suit or through any bankruptcy or
other legal proceedings, Borrower hereby agrees to pay all expenses incurred
reasonably by the Payee of this Subordinated Promissory Note, including, without
limitation, attorneys' fees, all of which shall become a part of the principal
hereof.
Each provision of this Subordinated Promissory Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Subordinated Promissory Note shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Subordinated Promissory Note.
This Subordinated Promissory Note shall be binding upon and inure to
the benefit of Borrower and Payee and their respective successors and assigns.
Notwithstanding the foregoing, no assignment of this Subordinated Promissory
Note shall be permitted hereunder without the prior written consent of the
non-assigning party.
Any provision of this Subordinated Promissory Note may be amended,
waived or modified only upon the written consent of Borrower and Payee.
3
This Subordinated Promissory Note may be transferred, negotiated and
assigned with the prior consent of Borrower, which shall not be unreasonably
withheld or delayed; provided, however, that any right of Borrower to set-off,
counterclaim and deduction that Borrower may have against Payee shall transfer,
be assigned and be valid against any subsequent holder.
This Subordinated Promissory Note shall be governed by and construed in
accordance with the laws of the State of Florida.
SPRAYROQ OF OHIO, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
4
SCHEDULE 2.1(B)
THE INDEBTEDNESS AND LIENS CREATED HEREUNDER AND ALL EXTENSIONS, RENEWALS,
REPLACEMENTS AND MODIFICATIONS THEREOF ARE SUBORDINATE TO THE INDEBTEDNESS
AND LIENS OF WESTFIELD BANK, FSB, DESCRIBED IN A SUBORDINATION AGREEMENT
DATED OCTOBER 30, 2001, BY AND BETWEEN ENVIROQ CORPORATION, REPLICO
DEVELOPMENT COMPANY, INC., AND SPRAYROQ OF OHIO, INC.
SUBORDINATED PROMISSORY NOTE
$150,000 Jacksonville Beach, Florida
October 30, 2001
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, SPRAYROQ OF OHIO, INC., an Ohio corporation ("Borrower"), hereby
promises to pay to the order of Enviroq Corporation, a Florida corporation
("Payee"), at 0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxxx Xxxxx, Xxxxxxx
00000, the sum of One Hundred Fifty Thousand Dollars ($150,000) plus interest
from the date hereof on the unpaid principal balance hereof from time to time
outstanding at a rate of interest equal to seven percent (7%) per annum,
computed annually.
Interest hereon shall be payable annually commencing November 1, 2002,
and shall be payable each November 1st thereafter until this Subordinated
Promissory Note is paid in full. The principal hereof shall be paid in one lump
sum on November 1, 2006, except that Payee shall be entitled to an advanced
payment of principal equal to twenty five percent (25%) of the Calculated
Amount set forth below which is based upon the annual, incremental and
collected "net sales" of the Borrower in excess of Two Million Dollars
($2,000,000) for the immediately preceding year, commencing with November 1,
2002, and for each twelve month period thereafter ending on November 1, 2006.
Borrower's "net sales" shall be defined as collected gross sales less any
taxes, shipping charges, discounts and returns.
Net Sales for Current Year Ending on said Calculated Amount:
Anniversary Percentage of Incremental Sales
First $100,000 over $2,000,000 3% of increment
From $100,000 to $200,000 over $2,000,000 4% of increment
From $200,000 to $300,000 over $2,000,000 5% of increment
From $300,000 to $400,000 over $2,000,000 6% of increment
From $400,000 to $500,000 over $2,000,000 7% of increment
From $500,000 to $600,000 over $2,000,000 8% of increment
From $600,000 to $700,000 over $2,000,000 9% of increment
$700,000 or more over $2,000,000 10% of increment
1
For example, assume annual, incremental and collected net sales for a
current year, as set forth, herein equal Two Million Five Hundred Thousand
Dollars ($2,500,000), then the Calculated Amount shall be Twenty Five Thousand
Dollars ($25,000) for that year.
Borrower shall deliver to Payee within Forty-Five (45) days after the
end of each calendar quarter beginning with the calendar quarter ended December
31, 2001, and unaudited balance sheet of Borrower as of the end of such quarter
and unaudited statements of operations and of cash flows of the Borrower for
such quarter and for the current fiscal year to the end of such quarter, signed
by the Borrower's chief financial officer or other officer acting in a similar
capacity.
In any event, all outstanding principal and accrued but unpaid
interest hereof shall be due and payable on or before November 1, 2006.
Payments hereunder shall be considered timely made hereunder if received no
later than the fifth day following the due date.
This Subordinated Promissory Note may be prepaid from time to time, in
whole or in part, without penalty or premium.
Anything in this Subordinated Promissory Note to the contrary
notwithstanding, the indebtedness evidenced by this Subordinated Promissory
Note, including both principal and interest, shall be subordinate and junior to
all indebtedness of the Borrower and the Borrower's subsidiary, Sprayroq, Inc.,
a Florida corporation ("Sprayroq"), for the payment of the purchase price of
the capital stock of Sprayroq and Sprayroq's reasonable working capital
purposes (except such indebtedness of the Borrower or Sprayroq which, by its
terms, is subordinate or junior in any respect to the indebtedness evidenced
hereby), whether outstanding at the date hereof or incurred after the date
hereof. Such indebtedness of the Borrower and Sprayroq to which this
Subordinated Promissory Note is subordinate or junior is collectively referred
to as "Senior Debt." Payees shall execute such documents as said Senior Debt
holders may reasonably require to evidence this subordination.
The obligation evidenced by this Subordinated Promissory Note is
secured by a Security Agreement of even date herewith executed by Sprayroq in
favor of Payees (the "Security Agreement"). Reference is made to the Security
Agreement for a description of the collateral, the nature and extent of the
security, and the rights and obligations of the Borrower, Sprayroq, the Payees,
and any holder in respect of such security.
The occurrence and continuation of any one of the following events
(each an "Event of Default") shall constitute a default hereunder: (i) Borrower
shall fail to pay any principal of or interest on this Subordinated Promissory
Note within ten (10) calendar days after its scheduled due date; (ii) Borrower
shall violate any representation, warranty, covenant or agreement set forth in
this Subordinated Promissory Note or that certain Stock Purchase Agreement
dated as of September 19, 2001, to which this Subordinated Promissory Note is
attached as an exhibit (other
2
than payment when due of principal or interest on this Subordinated Promissory
Note), and Borrower shall fail to cure such violation within ten (10) calendar
days after written notice thereof from Payee; or (iii) Borrower shall make a
general assignment for the benefit of creditors, file a petition in bankruptcy,
be adjudicated insolvent or bankrupt, petition a court for the appointment of
any receiver or trustee for Borrower or any substantial part of its property,
commence any proceeding relating to Borrower under any arrangement or debt
readjustment law or statute of any jurisdiction whether now or hereafter in
effect or there shall be commenced against Borrower any such proceeding which
remains undismissed for thirty (30) calendar days, or Borrower by any act shall
indicate consent to, approval of or acquiescence in any such proceeding or the
appointment of any receiver or trustee for it or any substantial part of its
property, or shall suffer any such receivership or trusteeship to continue
undischarged for thirty (30) calendar days. If an Event of Default occurs and
is continuing, then, at Payee's option, Payee may declare the entire principal
amount outstanding hereunder, together with interest thereon, immediately due
and payable. The rights, remedies, powers and privileges provided for herein
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
No waiver by Payee of any default shall be effective unless in
writing, nor shall it operate as a waiver of any other default or of the same
default on a future occasion. No delay or omission by Payee in exercising any
of its rights, remedies, powers and privileges hereunder or at law and no
course of dealing between Payee and Borrower or any other person shall be
deemed a waiver by Payee of any of such rights, remedies, powers and privileges
even if such delay or omission is continuous or repeated, nor shall any single
or partial exercise of any right, remedy, power or privilege preclude any other
or further exercise thereof by Payee or the exercise of any other right,
remedy, power or privilege by Payee. Borrower waives demand, presentment,
protest, notice of protest and notice of dishonor.
If this Subordinated Promissory Note is placed in the hands of any
attorney for collection, or if collected by suit or through any bankruptcy or
other legal proceedings, Borrower hereby agrees to pay all expenses incurred
reasonably by the Payee of this Subordinated Promissory Note, including,
without limitation, attorneys' fees, all of which shall become a part of the
principal hereof.
Each provision of this Subordinated Promissory Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Subordinated Promissory Note shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Subordinated Promissory
Note.
This Subordinated Promissory Note shall be binding upon and inure to
the benefit of Borrower and Payee and their respective successors and assigns.
Notwithstanding the foregoing, no assignment of this Subordinated Promissory
Note shall be permitted hereunder without the prior written consent of the
non-assigning party.
3
Any provision of this Subordinated Promissory Note may be amended,
waived or modified only upon the written consent of Borrower and Payee.
This Subordinated Promissory Note may be transferred, negotiated and
assigned with the prior consent of Borrower, which shall not be unreasonably
withheld or delayed; provided, however, that (i) Payee may transfer and assign
this Subordinated Promissory Note to its parent, Intrepid Capital Corporation,
without such prior consent of Borrower, and (ii) that any right of Borrower to
set-off, counterclaim and deduction that Borrower may have against Payee shall
transfer, be assigned and be valid against any subsequent holder.
This Subordinated Promissory Note shall be governed by and construed
in accordance with the laws of the State of Florida.
SPRAYROQ OF OHIO, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
4
SCHEDULE 2.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is entered into on the day of
October, 2001, between Sprayroq, Inc., a Florida corporation (the "Company"),
0000 Xxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000, and Enviroq Corporation, a Florida
corporation ("Enviroq"), and Replico Development Company, Inc., a Pennsylvania
corporation ("Replico") (Enviroq and Replico are hereinafter individually
referred to as the "Secured Party", and collectively as the "Secured Parties"),
located at 0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxxx Xxxxx, Xxxxxxx
00000.
For value received, the Company grants to the Secured Party a security
interest in the following described property (the "Collateral"):
All property of the Company of every kind, wherever located, now or
hereafter existing, including, without limitation, all machinery,
equipment, furniture, supplies, inventory, accounts, accounts
receivable, contract rights, chattel paper, instruments, deposit
accounts, general intangibles, wherever located, now or hereafter
existing, and all products and proceeds of any and all of the
foregoing, including insurance proceeds.
To have and to hold, the collateral unto said Secured Parties as provided
herein, to secure the payment of those certain $150,000 Subordinated Promissory
Notes, each of even date herewith (collectively, the "Notes") executed by SR
Holdings, Inc., an Ohio corporation ("Borrower"), the Company's parent, and
payable to the order of each Secured Party, respectively.
The Company warrants and covenants that:
1. (a) The Collateral is to be used in a business other than
farming operations.
(b) Some of the Collateral is accounts, and the records
concerning the accounts are or will be kept at 0000 Xxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxx 00000, which is Company's chief place of business.
(c) The Collateral will be kept at Company's address
given in Section 1(b) above.
2. Except for the security interest granted by this Agreement
and certain other liens securing Senior Debt (as defined in the Notes), the
Company has, or on acquisition will have, full title to the Collateral free
from any lien, security interest, encumbrance or claim, and the Company will,
at the Company's cost and expense, defend any action that may effect the
Secured Party's security interest in, or the Company's title to, the
Collateral. The security interest granted herein is junior and subordinate to
all liens granted to secure such Senior Debt, regardless of the respective
dates of perfection of such security interests.
3. Except for the Collateral securing the Senior Debt, the
Company will not, without the prior written consent of the Secured Party,
directly or indirectly, sell, contract to sell, lease, encumber, pledge, grant
a security interest in, or dispose of the Collateral or any interest in it
until this Agreement and all debts secured by it have been fully satisfied. The
Company shall however be permitted to sell any and all of its inventory and use
any and all of its supplies in the ordinary course of its business.
4. The Company will execute and file all necessary Financing
Statements in forms reasonably satisfactory to the Secured Party and will
further execute all other instruments deemed reasonably necessary by the
Secured Party.
5. The Company will insure the Collateral with companies
reasonably acceptable to the Secured Party against casualties and in amounts
that the Secured Party shall reasonably require.
6. The Company will keep the Collateral in good order and repair
and will not waste or destroy the Collateral or any part thereof. The Company
will not use the Collateral in violation of any statute or ordinance, and the
Secured Party will have the right to examine and inspect the Collateral at any
reasonable time after providing Company with reasonable written notice.
7. The Company will pay promptly when due all taxes and
assessments on the Collateral or for its use and operation.
8. The Company will keep the Collateral at the addresses shown
above and will not remove the Collateral from those addresses without the
Secured Party's prior written consent, which consent shall not be unreasonably
withheld or delayed.
9. The Company grants to the Secured Party a security interest
in and to all proceeds, increases, substitutions, replacements, additions, and
accessions to the Collateral, including insurance proceeds.
10. At the option of the Secured Party, the Secured Party may
discharge taxes, liens, interest, or perform or cause to be performed for and
on behalf of the Company any actions, obligations, or covenants that such
Company has failed or refused to perform, and may pay for the repair,
maintenance, and preservation of the Collateral, and all sums so expended,
including, but not limited to, reasonable attorneys' fees, court costs, agents'
fees, or commissions, or any other costs or expenses, shall bear interest from
the date of payment by the Secured Party at the annual interest rate provided
in the Notes and shall be payable at the place designated in the Notes and
shall constitute additional indebtedness secured hereby.
11. The Company will notify the Secured Party in writing no later
than thirty (30) calendar days prior to making any change in the Company's chief
place of business or place where records concerning the Collateral are kept.
12. In performing any act under this Agreement, time shall be of
the essence. The Secured Party's acceptance of partial or delinquent payments,
or the failure of the Secured Party to exercise any right or remedy, shall not
be a waiver of any obligation of the Company or right of the
2
Secured Party or constitute a waiver of any other similar default that occurs
later.
13. The Company shall be in default under this Agreement upon the
occurrence of any of the following events or conditions:
(a) the failure of the Borrower or the Company to pay
within ten (10) days after the due date of any amount payable by the
Borrower to the Secured Party under the Note;
(b) any warranty, representation, or statement made or
furnished to the Secured Party or on behalf of the Company proves to
have been false in any material respect when made or furnished;
(c) any event that results in the acceleration of the
maturity of the indebtedness of Company to others under any indenture,
agreement, or undertaking;
(d) loss, theft, substantial damage, destruction, sale
or encumbrance to or of any of the Collateral, or the making of any
levy, seizure, or attachment of or on the Collateral;
(e) the termination of Company's existence, whether by
means of dissolution, merger, consolidation, or otherwise, Company's
insolvency or business failure, the appointment of a receiver for any
part of the Collateral, any assignment for the benefit of creditors,
or the commencement of any proceeding under any bankruptcy or
insolvency law by or against the Company or any guarantor or surety
for the Company, except for proceedings brought against Company which
are withdrawn or dismissed within thirty (30) days of their filing;
and
(f) the occurrence of an Event of Default (as defined on
the Notes).
15. On the occurrence of any event of default, and at any later
time as long as said default remains uncured, but subject to the rights of the
holders of all Senior Debts:
(a) Either Secured Party, in its sole discretion and
without obligation to resort to any other security, right or remedy
granted under any other agreement or instrument, shall have the right
to, in addition to all rights, powers and remedies of secured parties
pursuant to the Code (as hereafter defined), and, in addition to any
and all rights which Secured Party may have at law or in equity, at
any time and from time to time, (i) cause any or all of the Collateral
in which a security interest was granted pursuant hereto to be
transferred jointly to the Secured Parties (with each Secured Party
having an undivided interest equal to each Secured Party's
proportionate share of the total indebtedness represented by the
Notes) and/or (ii) upon the unanimous consent of both Secured Parties,
sell, resell, assign and deliver, in their sole discretion, any or all
of the Collateral or any other security for the Notes (whether in
whole or in part and at the same or different times) and all right,
title and interest, claim and demand therein and right of redemption
thereof, at public or private sale, for cash or upon credit, and in
connection therewith the Secured Parties may grant options and may
impose reasonable conditions, with Company hereby waiving and
releasing any and all rights of redemption. If all or any of the
3
Collateral is sold by the Secured Parties upon credit, the Secured
Parties shall not be liable for the failure of the purchaser to
purchase or pay for the same and, in the event of any such failure,
the Secured Parties may resell such Collateral. It is expressly agreed
that the Secured Parties may exercise their rights with respect to
less than all of the Collateral, leaving unexercised their rights with
respect to the remainder of the Collateral; provided, however, that
such partial exercise shall in no way restrict or jeopardize the
Secured Parties' right to exercise their rights with respect to all or
any other portion of the Collateral at a later time or times. The
proceeds of the sale of the Collateral shall be distributed to the
Secured Parties as more particularly set forth in Section 16 below.
(b) Company hereby irrevocably authorizes and empowers
the Secured Parties and assigns and transfers unto them, and
constitutes and appoints the Secured Parties and any of their assigns
Company's true and lawful attorney-in-fact, and as its agent,
irrevocably, with full power of substitution for Company and in its
name, in order to more fully vest in the Secured Parties the rights
and remedies provided for herein, and Company further authorizes and
empowers the Secured Parties and any of their assigns, as Company's
attorney-in-fact, and as its agent, irrevocably, with full power of
substitution for Company and in its name, to proceed from time to time
in Company's name in any statutory or non-statutory proceeding
affecting the Collateral, and the Secured Parties, their assigns or
their respective nominees may (i) execute and file proof of claim for
the Collateral and vote such claims for all or any portion of the
Collateral (x) for or against proposal or resolution, (y) for a
trustee or trustees or for a receiver or receivers or for a committee
of creditors and/or (z) for the acceptance or rejection of any
proposed arrangement, plan or reorganization, composition or
extension, and the Secured Parties or their nominees may receive any
payment or distribution and give acquittance therefor and may
exchange or release any portion or all of the Collateral; and (ii)
upon the unanimous consent of all of the Secured Parties, endorse any
draft or other instrument for the payment of money, execute releases
and negotiate settlements relating to the Collateral. Nothing
contained in the foregoing provisions of this Section 15(b) shall be
deemed or construed to be a limitation on, or waiver by the Secured
Parties of, any of the Secured Parties' other rights or remedies
hereunder or under the Notes or that certain Stock Purchase Agreement
of even date herewith among the Secured Parties and Company, among
others. The Secured Parties shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible
for any failure to do so or delay in so doing. The foregoing power-of-
attorney is irrevocable and coupled with an interest, and any similar
or dissimilar powers heretofore given by Company to any other person or
entity are hereby revoked. The power-of-attorney granted herein shall
terminate automatically upon the termination of this Agreement in
accordance with the terms hereof.
(c) Upon the unanimous consent of all the Secured
Parties, the Secured Parties may, at such time and from time to time
thereafter, without notice to, or assent by, Company or any other
person or entity (to the extent permitted by law), but without
affecting any of the obligations secured hereby, in the name of
Company or in the name of the Secured Parties, (i) notify any other
party to make payment and performance directly to the Secured Parties,
(ii) extend the time of payment and performance of,
4
compromise or settle for cash, credit or otherwise, and upon any terms
and conditions, any obligations owing to Company, or claims of Company
relating to the Collateral, (iii) file any claims or commence,
maintain or discontinue any actions, suits or other proceedings deemed
by the Secured Parties reasonably necessary or advisable for the
purpose of collecting upon or enforcing any rights relating to the
Collateral, and (iv) execute any instrument and do all other things
deemed reasonably necessary and proper by the Secured Parties to
protect and preserve and realize upon the Collateral or any portion
thereof and the other rights contemplated hereby.
(d) Pursuant to the power-of-attorney provided for
above, and upon the unanimous consent of the Secured Parties, the
Secured Parties may reasonably take any action and exercise and
execute any instrument which they may deem necessary or advisable to
accomplish the purposes hereof. Without limiting the generality of the
foregoing, the Secured Parties shall have the right and power, upon
the unanimous consent of the Secured Parties, to receive, endorse and
collect all checks and other orders for the payment of money made
payable to Company representing any interest, payment of principal or
other distribution payable in respect of the Collateral or any part
thereof, and for and in the name, place and stead of Company, to
execute endorsements, assignments or other instruments of conveyance
or transfer in respect of any property which is or may become a part
of the Collateral hereunder.
(e) Without limiting any other provision of this
Agreement, and without waiving or releasing Company from any
obligation or default hereunder, the Secured Parties shall have the
right, but not the obligation, to perform any act or take any
appropriate action, as they, in their reasonable judgment, may deem
necessary to cure an event of default or cause any term, covenant,
condition or obligation required under this Agreement to be performed
or observed by Company to be promptly performed or observed on behalf
of Company or to protect the security of this Agreement. All
reasonable amounts advanced by, or on behalf of, the Secured Parties
in exercising their rights under this Section 15(e) (including, but
not limited to, reasonable legal expenses and disbursements incurred
in connection therewith), together with interest thereon at the
interest rate specified under the Notes from the date of each such
advance, shall be payable by Company to the Secured Parties upon
demand therefor and shall be secured by the Collateral.
(f) Notwithstanding any terms contained in this Section
15 to the contrary, each Secured Party, in its sole discretion, shall
have the right and power to do all things deemed reasonably necessary
and proper by it to protect and preserve the Collateral or any portion
thereof as provided above without the unanimous consent of the Secured
Parties.
16. No demand, advertisement or notice, all of which are hereby
expressly waived by Company, shall be required in connection with any sale or
other disposition of all or any part of the Collateral, pursuant to Section 15
above, except that the Secured Parties shall give Company at least five (5)
days' prior written notice of the time and place of any public sale or of the
time and the place at which any private sale or other disposition is to be
made, which notice Company
5
hereby agrees is reasonable, all other demands, advertisements and notices
being hereby waived. To the extent permitted by law, the Secured Parties shall
not be obligated to make any sale of the Collateral if they shall determine not
to do so, regardless of the fact that notice of sale may have been given, and
the Secured Parties may without notice or publication adjourn any public or
private sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. Upon each public or private sale
of any portion of or all of the Collateral, unless prohibited by any applicable
statute which cannot be waived, any Secured Party (or its nominee or designee)
may purchase any or all of the Collateral being sold, free and clear of and
discharged from any trusts, claims, equity or right of redemption of Company,
all of which are hereby waived and released to the extent permitted by law, and
may make payment therefor by credit against any of the obligations secured
hereby in lieu of cash or any other obligations. In the case of any sale,
public or private, of any portion of or all of the Collateral, Company shall be
responsible for the payment of all reasonable costs and expenses related to the
sale and delivery, including, without limitation, reasonable attorneys' fees
and disbursements and any tax imposed thereon other than taxes imposed on any
income of the Secured Parties. The proceeds of the sale of the Collateral shall
be available to cover such costs and expenses, and, after deducting such costs
and expenses from the proceeds of the sale, the Secured Parties shall apply any
residue to the payment of a pro-rata amount of each of the Notes, where
"pro-rata amount" shall mean, with respect to each Secured Party, the aggregate
of amount of such residue multiplied by a fraction, the numerator of which
shall be the outstanding principal balance under such Secured Party's Note at
the time of the application of such residue, and the denominator of which shall
be the aggregate principal balance outstanding under both of the Notes at the
time of the application of such residue. Company shall be obligated for any
deficiency that occurs under the Notes if the proceeds of such sale of the
Collateral shall be insufficient to satisfy the obligations of Company
hereunder.
17. Upon any sale of the Collateral, or any portion thereof, by
the Secured Parties hereunder (whether by virtue of the power of sale herein
granted, pursuant to judicial process or otherwise), the receipt of the Secured
Parties, or the agent of the Secured Parties making the sale, of proceeds of
the sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold, and such purchaser or purchasers, unless such purchaser is
a Secured Party, shall not be obligated to see to the application of any part
of the purchase money paid over to the Secured Parties or agent or be
answerable in any way for the misapplication or non-application thereof.
18. This Agreement shall be construed under and in accordance
with the Uniform Commercial Code (the "Code") and other applicable laws of the
State of Florida.
19. This Agreement shall be binding on and inure to the benefit
of the parties and their respective heirs, executors, administrators, legal
representatives, successors, and assigns as permitted by this Agreement.
20. In case any one or more of the provisions contained in this
Agreement shall for any reason be held invalid, illegal, or unenforceable in
any respect, the invalidity, illegality, or unenforceability shall not affect
any other provision of this Agreement and this Agreement shall be construed as
if the invalid, illegal, or unenforceable provision had never been contained
herein.
6
21. All terms used herein that are defined in the Code as adopted
in Florida shall have the same meaning herein as in the Code.
22. The rights and obligations of (a) Enviroq may be assigned to
its parent, Intrepid Capital Corporation, and (b) the Secured Parties may be
assigned otherwise than as set forth in Section 22 (a) hereof only upon the
prior consent of the Company, which shall not be unreasonably withheld or
delayed; provided, however, that any right of the Company to set-off,
counterclaim and deduction which the Company may have against the original
Secured Parties shall transfer to any such assignees.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as
duly authorized officers of the Company and the Secured Party effective as of
the date first above written.
"COMPANY"
SPRAYROQ INC.
By:
----------------------------------------
Its:
---------------------------------------
"SECURED PARTY"
ENVIROQ CORPORATION
By:
----------------------------------------
Its:
---------------------------------------
REPLICO DEVELOPMENT COMPANY, INC.
By:
----------------------------------------
Its:
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SCHEDULE 5.4
THE INDEBTEDNESS AND LIENS CREATED HEREUNDER AND ALL EXTENSIONS,
RENEWALS, REPLACEMENTS AND MODIFICATIONS THEREOF ARE SUBORDINATE TO
THE INDEBTEDNESS AND LIENS OF WESTFIELD BANK, FSB, DESCRIBED IN A
SUBORDINATION AGREEMENT DATED OCTOBER 30, 2001, BY AND BETWEEN ENVIROQ
CORPORATION, REPLICO DEVELOPMENT COMPANY, INC, AND SPRAYROQ OF OHIO,
INC.
SUBORDINATED
PROMISSORY NOTE
$173,918.90 Jacksonville Beach, Florida
October 30, 2001
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, SPRAYROQ OF OHIO, INC., a Florida corporation ("Borrower"),
hereby promises to pay to the order of Enviroq Corporation ("Payee"), a Florida
corporation, at 0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxxx Xxxxx, Xxxxxxx
00000, the sum of One Hundred Seventy Three Thousand Nine Hundred Eighteen and
Ninety Dollars ($173,918.90) plus interest from the date hereof on the unpaid
principal balance hereof from time to time outstanding at a rate of interest
equal to seven percent (7%) per annum, computed annually.
Interest hereon shall be payable annually commencing November 1, 2002,
and shall continue on each November 1st thereafter until this Subordinated
Promissory Note is paid in full. The principal hereof shall be paid in one lump
sum due on November 1, 2006. In any event, all outstanding principal and
accrued but unpaid interest hereof shall be due and payable on or before
September 30, 2006. Payments hereunder shall be considered timely made
hereunder if received no later than the fifth day following the due date.
This Subordinated Promissory Note may be prepaid from time to time, in
whole or in part, without penalty or premium.
Anything in this Subordinated Promissory Note to the contrary
notwithstanding, the indebtedness evidenced by this Subordinated Promissory
Note, including both principal and interest, shall be subordinate and junior to
all indebtedness of the Borrower and the Borrower's parent, Sprayroq of Ohio,
an Ohio corporation ("SRH") obtained for the payment of the purchase price of
the capital stock of Borrower, including, but not limited to, the indebtedness
evidenced by those certain Subordinated Promissory Notes, each dated or even
date herewith, executed and delivered by SRH in favor of payee and Replico
Development corporation, a Pennsylvania
1
corporation, and for Borrower's reasonable working capital purposes (except
such indebtedness of the Borrower or SRH which, by its terms, is subordinate or
junior in any respect to the indebtedness evidenced hereby), whether
outstanding at the date hereof or incurred after the date hereof. Such
indebtedness of the Borrower and SRH to which this Subordinated Promissory Note
is subordinate or junior is collectively referred to as "Senior Debt." Payee
shall execute such documents as said Senior Debt holders may reasonably require
to evidence this subordination.
The occurrence and continuation of any one of the following events
(each an "Event of Default") shall constitute a default hereunder: (i) Borrower
shall fail to pay any principal of or interest on this Subordinated Promissory
Note within ten (10) calendar days after its scheduled due date; (ii) Borrower
shall violate any representation, warranty, covenant or agreement set forth in
this Subordinated Promissory Note or that certain Stock Purchase Agreement
dated as of September 19, 2001, to which this Subordinated Promissory Note is
attached as an exhibit (other than payment when due of principal or interest on
this Subordinated Promissory Note), and Borrower shall fail to cure such
violation within ten (10) calendar days after written notice thereof from
Payee; or (iii) Borrower shall make a general assignment for the benefit of
creditors, file a petition in bankruptcy, be adjudicated insolvent or bankrupt,
petition a court for the appointment of any receiver or trustee for Borrower or
any substantial part of its property, commence any proceeding relating to
Borrower under any arrangement or debt readjustment law or statute of any
jurisdiction whether now or hereafter in effect or there shall be commenced
against Borrower any such proceeding which remains undismissed for thirty (30)
calendar days, or Borrower by any act shall indicate consent to, approval of or
acquiescence in any such proceeding or the appointment of any receiver or
trustee for it or any substantial part of its property, or shall suffer any
such receivership or trusteeship to continue undischarged for thirty (30)
calendar days. If an Event of Default occurs and is continuing, then, at
Payee's option, Payee may declare the entire principal amount outstanding
hereunder, together with interest thereon, immediately due and payable. The
rights, remedies, powers and privileges provided for herein are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
No waiver by Payee of any default shall be effective unless in
writing, nor shall it operate as a waiver of any other default or of the same
default on a future occasion. No delay or omission by Payee in exercising any
of its rights, remedies, powers and privileges hereunder or at law and no
course of dealing between Payee and Borrower or any other person shall be
deemed a waiver by Payee of any of such rights, remedies, powers and privileges
even if such delay or omission is continuous or repeated, nor shall any single
or partial exercise of any right, remedy, power or privilege preclude any other
or further exercise thereof by Payee or the exercise of any other right,
remedy, power or privilege by Payee. Borrower waives demand, presentment,
protest, notice of protest and notice of dishonor.
If this Subordinated Promissory Note is placed in the hands of any
attorney for collection, or if collected by suit or through any bankruptcy or
other legal proceedings, Borrower hereby agrees to pay all expenses incurred
reasonably by the Payee of this Subordinated Promissory Note, including,
without limitation, attorneys' fees, all of which shall become a part of the
principal hereof.
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Each provision of this Subordinated Promissory Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Subordinated Promissory Note shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Subordinated Promissory Note.
This Subordinated Promissory Note supersedes and replaces in full the
Consolidated Note, by and between Borrower and Payee, dated October 21, 1996,
in the face amount of $840,249.
This Subordinated Promissory Note shall be binding upon and inure to
the benefit of Borrower and Payee and their respective successors and assigns.
Any provision of this Subordinated Promissory Note may be amended,
waived or modified only upon the written consent of Borrower and Payee.
This Subordinated Promissory Note may be transferred, negotiated and
assigned with the prior consent of Borrower, which shall not be unreasonably
withheld or delayed; provided, however, that (i) Payee may transfer and assign
this Subordinated Promissory Note to its parent, Intrepid Capital Corporation,
without such prior consent of Borrower, and (ii) that any right of Borrower to
set-off, counterclaim and deduction that Borrower may have against Payee shall
transfer, be assigned and be valid against any subsequent holder.
This Subordinated Promissory Note shall be governed by and construed in
accordance with the laws of the State of Florida.
SPRAYROQ, INC.
By:
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Name:
--------------------------------
Title:
--------------------------------