PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is entered into this 11th day of
December, 1998, by and among Interiors, Inc., a Delaware corporation (the
"Purchaser"); Xxxx X. Xxxxx, Xxxx X. Xxxxx, the Xxxxxxx Xxxxxxxx Trust, the
Xxxxxxx Xxxxxxxx Jr. Trust, the Xxxxxx Xxxxxxxx Trust, and the Xxxxxxxx 1995
Issue Trust (collectively, the "Shareholders"); and DMB Property Ventures
Limited Partnership, a Delaware limited partnership ("DMB" and, collectively
with the Shareholders, the "Sellers").
RECITALS
A. The Shareholders are the record and beneficial owners of an aggregate
of 411 shares of the issued and outstanding capital stock, no par value, of
Petals, Inc., a Delaware corporation (the "Corporation"), which represents 72 %
of the outstanding capital stock of the Corporation (the "Acquired Shares"). DMB
has funded loans to the Corporation in the aggregate principal amount as of the
date of this Agreement of $2,440,000 (the "Subordinated Debt"), evidenced by
that certain (i) Promissory Note, dated June 27, 1995, as amended, in the
original principal amount of $720,000, the outstanding principal balance of
which as of the date of this Agreement is $720,000, and (ii) Promissory Note,
dated July 15, 1996, as amended, in the original principal amount of $2,000,000,
the outstanding principal balance of which as of the date of this Agreement is
$1,720,000.
B. The Purchaser desires to purchase from the Sellers, and the Sellers
desire to sell to the Purchaser, the Acquired Shares and the Subordinated Debt
on the terms and conditions set forth herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the terms and conditions hereof, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. Purchase and Sale of Shares and Subordinated Debt.
1.1 Purchase and Sale of Shares. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as defined below) the Shareholders
shall sell, assign, transfer, and deliver to the Purchaser, free and clear of
all encumbrances, claims, and restrictions of any kind, and the Purchaser shall
purchase from the Shareholders, the Acquired Shares.
1.2 Purchase of Subordinated Debt. Upon the terms and subject to the
conditions of this Agreement, at the Closing DMB shall sell, assign, transfer
and deliver to the Purchaser, and the Purchaser shall purchase from DMB, all of
DMB's rights and obligations under the Subordinated Debt.
1.3 Xxxxxxx Deposit. Within twenty-four hours of the execution of
this Agreement by the parties hereto and in consideration of Sellers'
exclusivity agreements pursuant to Section 4.2, the Purchaser shall pay to the
Xxxxxxx xxxxxxx money in an amount equal to $100,000 (the "Xxxxxxx Money
Deposit"), which shall be applied against the Cash Payment (as defined below) at
the closing of the purchase and sale of the Acquired Shares and the Subordinated
Debt (the "Closing"). The Xxxxxxx Money Deposit shall be allocated among the
Sellers in the same proportion as the Cash Payment is allocated among the
Sellers.
1.4. Purchase Price. In consideration for the conveyance of the
Acquired Shares and the Subordinated Debt, at the Closing the Purchaser shall
pay to the Sellers the following:
1.4.1 The Purchaser shall pay to the Shareholders for the
Acquired Shares an aggregate of $3,560,000 in cash by wire transfer of
immediately available funds, to be allocated among the Shareholders pro rata
based on the number of Acquired Shares being sold by each.
1.4.2 The Purchaser shall pay to DMB for the Subordinated Debt
$440,000 in cash, plus an amount equal to any accrued but unpaid interest on the
Subordinated Debt, by wire transfer of immediately available funds (with the
$3,560,000 cash paid to the Shareholders, the "Cash Payment") and shall deliver
to DMB a convertible debenture in the principal amount of $2,000,000 (the
"Convertible Debenture") in the form attached to this Agreement as Exhibit A.
1.5 Closing. Unless this Agreement is terminated by the Purchaser
under Sections 4.1 hereof, by the Sellers under Section 4.3 hereof or by either
the Purchaser or the Sellers under Section 4.5 hereof, the Closing of the
transactions described herein shall take place at 10:00 am, local time, at the
Phoenix offices of Xxxxxxxxx Xxxxx, P.C. within three business days after the
expiration of the Due Diligence Period (as defined below) or at such other time
or place as the Purchaser and the Sellers mutually agree.
1.6 Closing Deliveries. At the Closing, the parties shall deliver to
each other the following:
1.6.1 The Shareholders shall deliver to the Purchaser
certificates for the Acquired Shares, duly endorsed for transfer or with stock
powers attached;
1.6.2 DMB shall deliver to the Purchaser a duly executed
assignment of the Subordinated Debt in the form attached to this Agreement as
Exhibit B;
1.6.3 The Purchaser shall deliver to the Sellers the Cash
Payment;
1.6.4 The Purchaser shall deliver to DMB the Convertible
Debenture;
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1.6.5 The Sellers and the Purchaser shall deliver to each
other the certificate described in Section 4.5; and
1.6.6 The Shareholders shall deliver to the Corporation a duly
executed release in favor of the Corporation in the form attached to this
Agreement as Exhibit C.
2. Representations and Warranties of Sellers. The Sellers represent and
warrant to and covenant with the Purchaser as follows:
2.1 Binding Agreement. This Agreement is a valid and binding
obligation of the Sellers, enforceable against the Sellers m accordance with its
terms.
2.2 Ownership of Shares. The Shareholders have good and merchantable
title to the Acquired Shares, free and clear of all liens, charges,
encumbrances, claims, demands, pled,-es, causes of action, rights or interests
of any kind except as provided in Section 4.3 hereof. The Acquired Shares are
validly issued, fully paid, and nonassessable shares of the Corporation.
2.3 Authority. Except as provided in Section 4.3 hereof, Sellers
have the absolute and unrestricted right, power, authority and capacity to
execute and deliver this Agreement and perform their obligations hereunder.
2.4 Investment Intent and Securities law Compliance. DMB will
acquire the Convertible Debenture for its own account for investment purposes
and not with a view to the public resale thereof. DMB is an "accredited"
investor within the meaning of the Securities Act of 1933, as amended (the
'Securities Act") and Rule 501 of Regulation D promulgated thereunder. In
determining to enter into this Agreement, DMB has relied on its own due
diligence investigation of the Purchaser, and acknowledges that except as
expressly set forth herein, no representation or warranty is made by the
Purchaser concerning the Convertible Debenture or the Purchaser.
3. Representations and Warranties of Purchaser. The Purchaser represents
and warrants to and covenants with the Sellers as follows:
3.1 Binding Agreement. This Agreement is a valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms.
3.2 Organization. The Purchaser is a corporation duly organized,
legally existing and in good standing under the laws of the State of Delaware
with full corporate power and authority to carry on its business as it is now
being conducted, and is authorized, qualified and in good standing under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business as it is now being conducted, except where the failure to
be so authorized, qualified or licensed would not have a material adverse effect
on the business of Purchaser.
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3.3 Authority. The Purchaser has duly authorized, through proper
corporate proceedings, the execution, delivery and performance of this
Agreement.
3.4 Delivery of Shares. The shares of common stock of the Purchaser,
when issued and delivered in accordance with the terms of the Convertible
Debenture, shall constitute legally and validly authorized and issued, fully
paid and non-assessable shares of the $.001 par value common stock of Purchaser.
The Purchaser has taken all action necessary to reserve for issuance to DMB
shares of its common stock under the Convertible Debenture. Such shares, when
issued, will have been registered under the Securities Act.
3.5 Investment Intent and Securities Law Compliance. The Purchaser
will acquire the Acquired Shares for its own account for investment purposes and
not with a view to the public resale thereof. The Purchaser is an "accredited"
investor within the meaning of the Securities Act and Rule 501 of Regulation D
promulgated thereunder. In determining to enter into this Agreement, the
Purchaser has relied on its own due diligence investigation of the Corporation,
and acknowledges that except as expressly set forth herein, no representation or
warranty is made by any Seller concerning the Acquired Shares, the Subordinated
Debt or the Corporation.
3.6 Securities Law Filings. The Purchaser has timely filed all
reports, registration statements and other filings required under the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Such reports, registration statements and other filings complied as to form with
the requirements of the Securities Act and the Exchange Act and did not contain
any misstatement of material fact or omit to state any material fact necessary
to make the statements made, in light of the circumstances, not misleading.
4. Additional Agreements of the Parties.
4.1 Due Diligence Review. Purchaser shall have 45 days from the date
hereof in which to conduct its due diligence review of the Corporation (the "Due
Diligence Period"). The Sellers shall provide to the Purchaser reasonable access
to the books, records and personnel of the Corporation in order to facilitate
the Purchaser's review. If at the end of the Due Diligence Period the Purchaser
is not satisfied with its due diligence investigation of the Corporation, the
Purchaser may provide written notice thereof to the Sellers and this Agreement
shall be terminated, in which event Sellers shall promptly refund the Xxxxxxx
Money Deposit to the Purchaser and the parties shall have no further obligations
to each other. In the event that the Purchaser fails to object at the conclusion
of the Due Diligence Period, the Xxxxxxx Money Deposit shall vest in the Sellers
whether or not the transactions contemplated hereby are consummated.
4.2 Exclusivity. During the Due Diligence Period, the Sellers shall
not negotiate with any party, other than the Purchaser or the Purchaser's agents
or representatives, for the transfer, sale or assignment of the Acquired Shares
or the Subordinated Debt.
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4.3 Operation of Business of the Corporation. The Shareholders agree
that during the Due Diligence Period they will cause the Corporation not to take
any of the following actions:
4.3.1 Make any principal payments on the Subordinated Debt;
4.3.2 Make any distributions or payments to any shareholders
of the Corporation not in the ordinary course of business; or
4.3.3 Incur any indebtedness not existing as of the date
hereof (excluding accounts payable and other indebtedness incurred in the
ordinary course of business).
4.4. Bank of New York Credit Agreement. The parties acknowledge that
the transactions contemplated by this Agreement cannot be consummated unless
certain commitments made by the Sellers and DMB to the Bank of New York under
that certain Credit Agreement dated as of October 21, 1994, as amended, between
The Bank of New York and the Corporation (the "Credit Agreement"), are waived by
the Bank of New York or the Credit Agreement is terminated. The Purchaser hereby
agrees to use reasonable efforts to seek such waiver during the Due Diligence
Period, and the Sellers hereby agree to use reasonable efforts to assist in this
process. If the Purchaser is unable to secure such waiver during the Due
Diligence Period, then the Purchaser shall be required concurrently with the
Closing to pay off the debts evidenced by the Credit Agreement in full. Subject
to the Purchaser's termination rights in Sections 4.1 and 4.5 hereof, if the
Purchaser fads to fulfill this obligation, the Sellers may at their option
terminate this Agreement, retain the entire Xxxxxxx Money Deposit and thereafter
the parties shall have no further obligations to each other. The foregoing shall
not affect the Purchaser's right to receive a refund of the Xxxxxxx Money
Deposit if the Purchaser terminates this Agreement under Section 4. 1.
4.5 Offer to Negotiate to Corellis. The parties agree that, pursuant
to that certain Stockholders Agreement, as amended (the "Stockholders
Agreement"), by and among DMB, the Shareholders, and Xxxxxxx X. Xxxxxxx, Xxxx X.
Xxxxxxx, Xxxxxxxxxxx X. Xxxxxxx and Xxxxxxx Xxxxxxx (collectively, the
"Corellis"), the Purchaser shall execute and deliver to the Corellis a written,
binding offer (the "Corelli Offer") to purchase the shares of common stock of
the Corporation owned by the Corellis (the "Corellis Shares") from the Corellis
on the same terms and subject to the same conditions as set forth in this
Agreement, as set forth in the Corelli Offer, attached hereto as Exhibit D. The
Purchaser agrees to issue the Corelli Offer within two business days after the
date hereof. The parties agree that the Corelli Offer shall specifically include
a copy of this Agreement. If some or all of the Corellis choose not to accept
the Corelli Offer, then the Shareholders agree to issue to them the notice
described in Section 2.4(c)(ii) of the Stockholders Agreement.
4.6 Conditions to Closing. It shall be a condition to the obligation
of each of the Purchaser and the Sellers to consummate the transactions
contemplated by this Agreement that the representations and warranties made by
the other herein shall be true and correct in all material respects on the date
of the Closing as if made on such date, and that the covenants and
agreements to be performed by the other herein shall have been performed or
complied with in all material respects as of the date of the Closing. At the
Closing the Purchaser shall deliver to the Sellers, and the Sellers shall
deliver to the Purchaser, a certificate to the effect that the foregoing
conditions have been satisfied.
5. Miscellaneous.
5.1 No Brokers or Other Fees. The Purchaser and the Sellers each
represent and warrant to the other that no broker, finder, investment banker or
other party is entitled to any brokerage, finder or other fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Purchaser or the Sellers, as the case may be.
5.2 Attorneys' Fees. The parties agree that each party shall bear
its own attorneys' fees and costs relating to the negotiation and execution of
this Agreement and all related matters. If any litigation arises in connection
with this Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and related costs and expenses incurred as a result
of the litigation.
5.3 Governing Law; Jurisdiction; Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without giving regard to its conflict of laws provisions. The parties consent to
personal jurisdiction for purposes of this Agreement in the State of Delaware,
and each of them agrees that Delaware shall be the proper venue for any legal
action hereunder.
5.4 Notices. AR notices or other communications required or
permitted hereunder shall be in writing and shall be given by depositing the
same in United States mail, addressed to the party to be notified, postage
prepaid and registered or certified with return receipt requested, by overnight
courier or by delivering the same in person to such party.
(a) If to Shareholders or DMB, addressed to them at:
c/o DMB GP, Inc.
0000 Xxxxx 0x Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Executive Vice President
(b) If to Purchaser, addressed to it at:
Interiors, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Attn: Xxx Xxxx, President and Chief Executive Officer
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5.5 Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforced in accordance with its terms.
5.6 Modification and Waiver. No modification of or amendment to this
Agreement shall be effective unless in writing and signed by the parties. No
waiver shall be effective unless in writing and executed by the party against
whom enforcement of the waiver is sought.
5.7 Ambiguities. This Agreement shall be construed as if the parties
jointly prepared this Agreement, and any uncertainty and ambiguity shall not be
interpreted against any one party.
5.8 Headings. The headings and captions in this Agreement have been
inserted for convenience only and shall not affect the meaning or interpretation
of any provision of this Agreement.
5.9 Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third person to any party to this Agreement.
5.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one instrument.
5.11 Delays or Omissions. No delay or omission to exercise any
right, power, or remedy accruing to any party hereto as a result of any breach
or default by any other party under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed as a waiver of or acquiescence in
any such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach or default occurring before or after that waiver.
5.12 Further Instruments. The parties agree to execute, have
acknowledged, and deliver to each other such other documents and instruments as
may be necessary or appropriate to evidence or to carry out the terms of this
Agreement.
5.13 Survival. All agreements, covenants, representations, and
warranties in this Agreement shall survive the closing of the transactions
contemplated by this Agreement, and any investigation at any time made by or on
behalf of any party.
5.14 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective affiliates, agents,
employees, heirs, executors, administrators, successors and assigns.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date written above.
PURCHASER:
Interiors, Inc.,
a Delaware corporation
By:______________________________________
Its:_____________________________________
SELLERS:
By:______________________________________
Xxxx X. Xxxxx
The Xxxxxxx Xxxxxxxx Trust
By:______________________________________
Xxxxxxx Xxxxxxxx, Trustee
The Xxxxxxx Xxxxxxxx Jr. Trust
By:______________________________________
The Xxxxxx Xxxxxxxx Trust
By:______________________________________
____________, Trustee
The Xxxxxxxx 1995 Issue Trust
By:______________________________________
____________, Trustee
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