STOCK PURCHASE AGREEMENT
by and among
WINSLOEW FURNITURE, INC.,
and
XXXXXX X. XXXXXXX and XXXXX X. XXXXXXX,
the stockholders of
Charter Furniture Corporation,
and
CHARTER FURNITURE CORPORATION
dated as of July 21, 2000
TABLE OF CONTENTS
Page
1. Definitions and Interpretation...........................................................................1
------------------------------
(a) Definitions.....................................................................................1
-----------
(b) Additional Defined Terms........................................................................8
------------------------
(c) Interpretation..................................................................................9
--------------
2. Purchase and Sale of Shares; Satisfaction of Funded Indebtedness; Closing...............................10
-------------------------------------------------------------------------
(a) Basic Transaction..............................................................................10
-----------------
(b) Purchase Price.................................................................................10
--------------
(c) Payment at Closing.............................................................................10
------------------
(d) Funded Indebtedness............................................................................10
-------------------
(e) The Closing....................................................................................11
-----------
(f) Deliveries at the Closing......................................................................11
-------------------------
(g) Transfer Taxes.................................................................................13
--------------
(h) Net Working Capital Adjustment.................................................................13
------------------------------
3A. Representations and Warranties of the Sellers as to Seller Matters......................................15
------------------------------------------------------------------
(a) Capacity.......................................................................................15
--------
(b) Binding Obligation.............................................................................15
------------------
(c) Noncontravention...............................................................................15
----------------
(d) Litigation.....................................................................................16
----------
(e) Ownership of Company Common Stock..............................................................16
---------------------------------
(f) Brokers Fees...................................................................................16
------------
3B. Representations and Warranties of the Sellers and Company With Respect to the Company ..................16
--------------------------------------------------------------------------------------
(a) Organization/Power and Authority to Conduct Business...........................................16
----------------------------------------------------
(b) Noncontravention...............................................................................16
----------------
(c) Brokers Fees...................................................................................17
------------
(d) Capitalization.................................................................................17
--------------
(e) Financial Statements...........................................................................17
--------------------
(f) Absence of Certain Developments................................................................18
-------------------------------
(g) Undisclosed Liabilities........................................................................20
-----------------------
(h) Legal Compliance...............................................................................20
----------------
(i) Company Permits................................................................................20
---------------
(j) Tax Matters....................................................................................20
-----------
(k) Certain Business Relationships with the Company................................................22
-----------------------------------------------
(l) Title to Tangible Assets Other than Real Property Interests....................................22
-----------------------------------------------------------
(m) Real Property..................................................................................23
-------------
(n) Intellectual Property..........................................................................23
---------------------
(o) Material Contracts.............................................................................24
------------------
(p) Powers of Attorney.............................................................................24
------------------
(q) Insurance......................................................................................24
---------
(r) Litigation.....................................................................................24
----------
(s) Labor Relations................................................................................25
---------------
(t) Employee Benefits..............................................................................25
-----------------
(u) Environmental, Health and Safety Matters.......................................................27
----------------------------------------
(v) Customers and Suppliers........................................................................27
-----------------------
(w) Inventory......................................................................................28
---------
(x) Accounts Receivable............................................................................28
-------------------
(y) List of Accounts...............................................................................28
----------------
(z) Product Warranty...............................................................................28
----------------
(aa) Product Liability..............................................................................28
-----------------
(bb) Year 2000 Compliance...........................................................................29
--------------------
(cc) Repayment of Seller Loans......................................................................29
-------------------------
(dd) Trustee of 401(k) Plan.........................................................................29
----------------------
(ee) Employee List..................................................................................29
--------------
(ff) Medical, Dental, and Workers' Compensation Claims..............................................29
--------------------------------------------------
(gg) Pre-paid Advertising...........................................................................29
---------------------
(hh) EPCRA Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------------
(ii) Sales Representatives. . . . . . . . . . . . 29
--------------------
4. Representations and Warranties of the Purchaser.........................................................30
-----------------------------------------------
(a) Organization...................................................................................30
------------
(b) Authorization of Transaction; Binding Obligation...............................................30
------------------------------------------------
(c) Noncontravention...............................................................................30
----------------
(d) Brokers Fees...................................................................................31
------------
(e) Acquisition of Shares for Investment...........................................................31
------------------------------------
5. Pre-Closing Covenants...................................................................................31
----------------------
(a) General........................................................................................31
-------
(b) Notices and Consents...........................................................................31
--------------------
(c) Operation of Business..........................................................................31
---------------------
(d) Preservation of Business.......................................................................32
------------------------
(e) Full Access....................................................................................32
-----------
(f) Notice of Developments.........................................................................32
----------------------
6. Post-Closing Covenants..................................................................................32
----------------------
(a) General........................................................................................32
-------
(b) Transition....................................................................................32
----------
(c) Litigation Support.............................................................................32
------------------
(d) Noncompetition.................................................................................33
--------------
(e) Non-Solicitation ..............................................................................34
-----------------
(f) Confidentiality................................................................................34
---------------
(g) ss.338(h)(10) Election; Certain Tax Matters......................................................35
-------------------------------------------
7. Remedies for Breaches of This Agreement.................................................................36
---------------------------------------
(a) Survival of Representations and Warranties.....................................................36
------------------------------------------
(b) Indemnification................................................................................37
---------------
(c) Effect of Knowledge of Breach; Determination of Losses; Treatment of Indemnification Payments..39
---------------------------------------------------------------------------------------------
(d) Enforcement of Escrow Agreement................................................................40
-------------------------------
(e) No Contribution from Company...................................................................40
-----------------------------
(f) Assignment by Purchaser........................................................................40
------------------------
(g) Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
----------------
8. No Shop.................................................................................................40
-------
9. Conditions to Obligation to Close.......................................................................41
---------------------------------
(a) Conditions to Obligation of the Purchaser......................................................41
-----------------------------------------
(b) Conditions to Obligation of the Sellers........................................................42
---------------------------------------
10. Additional Agreements...................................................................................42
---------------------
(a) Sellers' Guarantee of Accounts Receivable......................................................42
-----------------------------------------
(b) Litigation.....................................................................................44
----------
(c) Environmental Matters..........................................................................44
---------------------
(d) Product Returns................................................................................44
---------------
(e) Product Liability Insurance....................................................................44
---------------------------
(f) Software Licenses..............................................................................44
-----------------
11. Termination.............................................................................................45
-----------
(a) Termination of Agreement.......................................................................45
------------------------
(b) Effect of Termination..........................................................................45
---------------------
12. Miscellaneous...........................................................................................46
-------------
(a) No Third-Party Beneficiaries...................................................................46
----------------------------
(b) Entire Agreement...............................................................................46
----------------
(c) Succession and Assignment......................................................................46
-------------------------
(d) Counterparts...................................................................................46
------------
(e) Headings.......................................................................................46
--------
(f) Notices........................................................................................46
-------
(g) Governing Law; Jurisdiction....................................................................47
---------------------------
(h) Amendments and Waivers.........................................................................48
----------------------
(i) Arbitration....................................................................................48
-----------
(j) Equitable Remedies.............................................................................48
------------------
(k) Waiver of Jury Trial...........................................................................49
--------------------
(l) Prevailing Parties.............................................................................49
------------------
(m) Severability...................................................................................49
------------
(n) Expenses.......................................................................................49
--------
(o) Construction...................................................................................49
------------
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made
this 21st day of July, 2000, by and among WINSLOEW FURNITURE, INC., a Florida
corporation ("WinsLoew" or the "Purchaser"), CHARTER FURNITURE CORPORATION, a
California corporation (the "Company"), and the following selling shareholders,
XXXXXX X. XXXXXXX and XXXXX X. XXXXXXX (each individually, a "Seller" and
collectively, the "Sellers"). The Purchaser, the Company, and the Sellers are
each referred to in this Agreement as a "Party" and collectively as the
"Parties."
The Sellers directly own all of the outstanding capital stock
of the Company.
This Agreement contemplates a transaction in which the
Purchaser will purchase from the Sellers, and the Sellers will sell to the
Purchaser, all of the outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties and covenants herein contained, the Parties agree as follows.
1. Definitions and Interpretation.
------------------------------
(a) Definitions. As used in this Agreement, the following terms have
the meaning specified or referred to below:
"Accounts Receivable" means all of the Company's accounts, instruments,
drafts, acceptances and other forms of receivables and all rights earned under
the Company's contracts to sell goods or render services.
"Accrued Commissions" means accrued commissions payable by the Company
calculated in accordance with GAAP applied on a basis consistent with the
preparation of the Financial Statements.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Section 1504 of the Code.
"Authority" means any federal, state, local or foreign governmental
regulatory agency, commission, bureau, authority, court or arbitration tribunal.
"Available Cash" means all Cash held by the Company as of midnight on
the day before the Closing Date less (i) an amount of Cash necessary to cover
outstanding checks (which are not otherwise stale) which have been mailed or
otherwise delivered by the Company but which have not cleared.
"Business Day" means a day which is not a Saturday, Sunday, or a legal
holiday on which banking institutions in the State of California are authorized
to be closed.
"Business of the Company" means the manufacturing, distributing and
selling of upholstered furniture to the hospitality industry.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Changes in Accounting Principles" includes all changes in accounting
principles, policies, practices, procedures or methodologies with respect to
financial statements, their classification or their display, as well as all
changes in practices, methods, conventions or assumptions (unless required by
objective changes in underlying events) utilized in making accounting estimates.
"Charter" and "bylaws", respectively, mean with respect to any
corporation, those instruments that, among other things, (i) define its
existence, as filed or recorded with the applicable Authority, including such
corporation's Articles or Certificate of Incorporation, and (ii) otherwise
govern its internal affairs, in each case as amended, supplemented, or restated.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Common Stock" means the Common Stock, no par value, of the
Company.
"Confidential Information" means data and information relating to the
business of the Company (which may or may not rise to the level of a Trade
Secret) and which has value to the Company and is not generally known to its
competitors. Confidential Information does not include any data or information
that (i) has been voluntarily disclosed to the public by the Company, (ii) has
been independently developed and disclosed by others, or (iii) otherwise enters
the public domain through lawful means.
"Disclosure Schedule" means the Disclosure Schedule accompanying this
Agreement. Any matters disclosed in such Disclosure Schedule shall be deemed to
qualify each and every representation and warranty of the Sellers in this
Agreement to which such matters are relevant.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Employment Agreements" means the Employment Agreements to be entered
into between the Company and Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx,
respectively, at Closing, substantially in the form of Exhibit A hereto.
"Environmental, Health and Safety Requirements" means all federal,
state, local, regional and foreign statutes, regulations and ordinances
concerning workplace health and safety and pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes.
"Environmental Claim' means any written notice or claim by any person
or any Authority alleging potential liability (including potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (i) the presence, release or threatened release
into the environment, of any Material of Environmental Concern at any location,
whether or not owned, leased or operated by the Company, or (ii) any violation,
or alleged violation, of any Environmental, Health and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person that would be aggregated with the
Company under ?414(b), (c), (m) or (o) of the Code.
"Escrow Agreement" means the Escrow Agreement, in the form of Exhibit B
hereto, to be entered into on the Closing Date by the Purchaser, the Sellers and
the Escrow Agent.
"Escrow Account" has the meaning set forth in Paragraph 7(b)(v) below.
"Escrow Agent" has the meaning set forth in Paragraph 7(b)(v) below.
"Escrow Funds" has the meaning set forth in Paragraph 7(b)(v) below.
"Funded Indebtedness" means, with respect to any Person (without
duplication), the aggregate amount (including the current portions thereof) of
(i) all indebtedness of such Person for money borrowed from others, (ii) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (iii) all obligations, contingent or otherwise, of such
Person for the deferred purchase price of assets, property or services other
than trade payables and accrued expenses incurred in and customer deposits
received in the ordinary course of business, (iv) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to the repossession or sale of such property), (v) all obligations of such
Person as lessee under leases that have been, in accordance with GAAP, recorded
as capital leases, (vi) all obligations, contingent or otherwise, of such Person
to purchase, redeem, retire, defease or otherwise acquire for value any capital
stock of such Person or any warrants, rights or options to acquire such capital
stock, valued, in the case of redeemable preferred stock, at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (vii) all indebtedness or obligations of others of the type described
in clauses (i) through (vi) above guaranteed, directly or indirectly, in any
manner by such Person, or in effect guaranteed, directly or indirectly, in any
manner by such Person, through an agreement, contingent or otherwise, to supply
funds to, or in any other manner invest in, the debtor, or to purchase
indebtedness, or to purchase and pay for property if not delivered or to pay for
services if not performed, primarily for the purpose of enabling the debtor to
make payment of the indebtedness or to assure the owners of the indebtedness
against loss, but excluding endorsements of checks and other instruments in the
ordinary course, (viii) all indebtedness or obligations of the type described in
clauses (i) through (vi) above secured by (or for which the holder or obligee
thereof has an existing right, contingent or otherwise, to be secured by) any
Lien upon property owned by such Person, even though such Person has not in any
manner become liable for the payment of such indebtedness or obligations and
(ix) interest expense accrued but unpaid, and all fees and prepayment premiums,
on or relating to any of the foregoing, however, Funded Indebtedness shall in
any event exclude trade accounts payable and accrued expenses of the type
reflected in the Financial Statements.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"IRS" means the Internal Revenue Service.
"Information Technology" means computer software (including all related
source codes, specifications and data, data bases and documentation), computer
firmware, computer hardware (in each case whether general or specific purpose)
and other similar or related items of automated, computerized or software
systems that are used or relied upon by any Person in the conduct of such
Person's trade or business.
"Intellectual Property" means (i) all U.S. and foreign patents and
patent applications and statutory invention registrations, (ii) all trademarks,
service marks, trade dress, logos, trade names, Internet domain names and
corporate names, and all related U.S. and foreign registrations, applications
and renewals, together with all goodwill associated therewith (including all
translations, adaptations, derivations and combinations of the foregoing), (iii)
all copyrights and all related U.S. and foreign registrations, applications and
renewals, (iv) all Trade Secrets and Confidential Information, including
inventions (whether reduced to practice or not and whether patentable or not),
ideas, compositions, know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, business and marketing plans, and
customer and supplier lists and related information) and (v) all Information
Technology.
"Inventory" means all of the inventories of the Company, including raw
materials, work in progress, finished goods, packaging goods and other like
items.
"Knowledge" (and the related phrase "to the Knowledge of") means (i)
with respect to either Seller, the actual knowledge of such Seller that such
representation or warranty is not true and correct to the same extent as
provided in the applicable representation and warranty, after reasonable
investigations and inquiries of the responsible officers of the Company, and
(ii) with respect to the Purchaser, the actual knowledge of Xxxxx Xxxxxx or
Xxxxxxx X. Xxxxxxxxx, Xx. that such representation or warranty is not true and
correct to the same extent as provided in the applicable representation and
warranty, after reasonable investigations and inquiries of the responsible
officers of the Purchaser.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or other
security interest, whether or not related to the extension of credit or the
borrowing of money.
"Loss" or "Losses" means all damages, dues, penalties, fines,
reasonable amounts paid in settlement, Taxes, costs, obligations, losses,
expenses, and fees (including court costs and reasonable attorneys' fees and
expenses), including, as the context may require, any of the foregoing which
arise out of or in connection with any actions, suits, proceedings, hearings,
third party investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees or rulings.
"Material Adverse Change" or "Material Adverse Effect" means any change
or effect that is materially adverse to the business, assets, financial
condition or results of operations of the Company.
"Material Contract" means any contract or agreement whether written or
oral to which the Company is a party, or by which the Company or any of its
assets is bound, and which (a) relates to Funded Indebtedness or is a letter of
credit, pledge, bond or similar arrangement running to the account of or for the
benefit of the Company, (b) relates to the purchase, maintenance or acquisition
of, or sale or furnishing of, materials, supplies, merchandise, machinery,
equipment, parts or any other property or services (excluding any such contract
made in the Ordinary Course of Business and which is expected to be fully
performed within 90 days of the date hereof or which involves revenues or
expenditures of less than $50,000), (c) is a collective bargaining agreement,
(d) obligates the Company not to compete with any business, or which otherwise
restrains or prevents the Company from carrying on any lawful business or which
restricts the right of the Company to use or disclose any information in its
possession (excluding in each case customary restrictive covenants contained in
agreements entered into in the Ordinary Course of Business), (e) relates to (i)
employment, compensation, severance, or consulting between the Company and any
of its officers or directors, or (ii) between the Company and any other
employees or consultants of the Company who are entitled to compensation
thereunder in excess of $35,000 per annum, (f) is a lease or sublease of real
property, or a lease, sublease or other title retention agreement or conditional
sales agreement involving annual payments in excess of $25,000 individually or
$100,000 in the aggregate for any machinery, equipment, vehicle or other
tangible personal property (whether the Company is a lessor or lessee), (g) is a
contract for capital expenditures or the acquisition or construction of fixed
assets for or in respect of any real property involving payments to be made
after the date hereof in excess of $50,000, (h) is a contract granting any
Person a Lien on any of the assets of the Company, in whole or in part (other
than Permitted Liens), (i) is a contract by which the Company retains any
manufacturer's representatives, broker or other sales agent, distributor or
representative or through which the Company is appointed or authorized as a
sales agent, distributor or representative, (j) is a joint venture or
partnership contract or a limited liability company operating agreement with any
Seller, or with any Affiliate of any Seller, (k) is (i) an agreement for the
storage, transportation, treatment and disposal of any materials subject to
regulation under any Environmental Health and Safety Requirements, or (ii) a
contract for storage, transportation or similar services with carriers or
warehousemen (excluding any such contract entered into in the Ordinary Course of
Business and involving aggregate annual expenditures not exceeding $50,000), (l)
is an agreement or arrangement with any Affiliate of any Seller, or (m) any
other agreement (or group of related agreements) the performance of the
executory portion of which involves consideration in excess of $50,000 or which
cannot be terminated by the Company upon 90 days notice.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products in each case with respect to which liability or standards of
conduct are imposed pursuant to any Environmental, Health and Safety
Requirements.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Net Working Capital at Closing" means the total current assets of the
Company, including Cash (other than Available Cash and marketable securities),
Accounts Receivable (including any 90 and Over Accounts Receivable described in
Section 10(b)), Inventory (valued as described in Section 3B(w) of this
Agreement and Section 3B(w) Disclosure Schedule), prepaid expenses, and
deposits, minus the total current liabilities of the Company (which current
liabilities shall include accounts payable-trade, accrued expenses (including an
accrual for vacation and holidays calculated in accordance with GAAP), customer
deposits and other liabilities but shall exclude the current portion of any
Funded Indebtedness, in each case determined as of the open of business on the
Closing Date and by reference to the amounts set forth on the face (but not the
notes) of the Closing Balance Sheet, subject to the provisions of this
definition and after giving effect to the transactions contemplated in Sections
2(c) and 2(d) below. With respect to any calculation of Net Working Capital at
Closing, except as expressly provided in this Agreement, no Change in Accounting
Principles will be made from those utilized in preparing the Financial
Statements including with respect to the nature of accounts, in determining the
level of reserves or in determining the level of accruals, with the exception of
the accrual for vacation and holidays.
"Net Working Capital Target Amount" means the amount which equals the
sum of $490,000.00 and the wholesale value (to be determined by mutual agreement
of the parties prior to closing) of the Company owned (but not leased) vehicles
listed on the attachment to Section 3B(l) of the Disclosure Schedule entitled
"Charter Vehicles," except for the 1997 GMC plant truck.
"Ordinary Course of Business' means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (i) Liens set forth in the Disclosure Schedule or noted in the
Financial Statements, (ii) Liens for Taxes not yet due and payable and for which
adequate reserves are maintained on the financial statements of the Company as
of the Closing Date in accordance with GAAP, (iii) pledges or deposits to secure
obligations under workers or unemployment compensation Laws or similar
legislation or to secure public or statutory obligations, (iv) mechanic's,
materialman's, supplier's, vendor's or similar Liens arising in the Ordinary
Course of Business securing amounts which are not overdue and for which adequate
reserves are maintained on the financial statements of the Company as of the
Closing Date in accordance with GAAP and (v) deposits to secure the performance
of bids, trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the Ordinary Course of Business.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Restricted Area" means (i) the State of California, and (ii) each of
the other states, territories and possessions of the United States and each of
the other countries and territories of the World in which the Company conducts
or has conducted the Business of the Company during the five years preceding the
Closing Date .
"Restricted Business of the Company" means the manufacturing,
distributing and selling of furniture to the hospitality industry.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Subscription and Shareholders' Agreement" means the Subscription and
Shareholders' Agreement(s) to be entered into among Purchaser, Xxxxxx X. Xxxxxxx
and Xxxxx X. Xxxxxxx (respectively), and Trivest or its affiliates, in the form
of Exhibit C hereto.
"Subsidiary" when used with respect to any Person means any other
Person, whether incorporated or unincorporated, of which (i) more than 50% of
the securities or other ownership interests or (ii) securities or other
interests having by their terms ordinary voting power to elect more than 50% of
the board of directors or others performing similar functions with respect to
such corporation or other organization, is directly owned or controlled by such
Person or by any one or more of its Subsidiaries.
"Tax" or "Taxes" means all federal, state, local and foreign taxes
(including income or profits taxes, premium taxes, excise taxes, sales taxes,
use taxes, gross receipts taxes, franchise taxes, ad valorem taxes, severance
taxes, capital levy taxes, transfer taxes, value added taxes, employment and
payroll-related taxes, property taxes, business license taxes, occupation taxes,
import duties and other governmental charges and assessments), of any kind
whatsoever, including interest, additions to tax and penalties with respect
thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Trade Secrets" means information and data relating to the Company,
without regard to form, whether technical or nontechnical, including but not
limited to formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial plans, product plans
or lists of actual or potential customers or suppliers which is not commonly
known by or available to the public and which (a) derives economic value, actual
or potential, from not being known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its disclosure
or use, and (b) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
"Transaction Documents" means this Agreement and the Employment
Agreement(s), Escrow Agreement, Subscription and Shareholders' Agreement(s),
Purchase Price Calculation Certificate, and the 338(h)(10) election on form
8023.
"Year 2000 Compliant" means, with respect to the Company's Information
Technology, that (i) the information technology is designed to be used prior to,
during and after the calendar year 2000 A.D., (ii) the Information Technology
used during each such time period will accurately receive, provide and process
date/time data (including calculating, comparing and sequencing) from, into and
between the 20th and 21st centuries, including the years 1999 and 2000 and
leap-year calculations and (iii) the Information Technology will not
malfunction, cease to function or provide invalid or incorrect results as a
result of date/time data, in each case to the extent that Information Technology
of third parties, used in combination with the Company's Information Technology,
properly exchanges date/time data with the Company's Information Technology.
(b) Additional Defined Terms. As used in this Agreement, the following
terms have the meanings specified in the Sections referred to below:
Term Section
AAA 12(i)
Accountant 2(h)(ii)
Agreement Preamble
Closing 2(e)
Closing Balance Sheet 2(h)(i)
Closing Date 2(e)
Company Preamble
Company Permits 3B(i)
Defense Counsel 7(b)(iv)
Defense Notice 7(b)(iv)
Employee Benefit Plans 3B(t)
Financial Statements 3B(e)
11
WinsLoew Preamble
Indemnified Parties 7(b)(iv)
Indemnifying Parties 7(b)(iv)
Real Property 3B(m)
Most Recent Financial Statements 3B(e)
Most Recent Fiscal Month End 3B(e)
Most Recent Fiscal Year End 3B(e)
Net Working Capital at Closing 2(h)(i)
Objection Notice 2(h)(ii)
Party(ies) Preamble
Pre-Closing Tax Periods 6(g)(i)
Property 3B(m)
Purchase Price 2(b)
Purchase Price Calculation Certificate 2(c)(i)
Purchaser Preamble
Rules 12(i)
?338(h)(10) Election 6(g)(i)
S Corporation Tax Period 3B(j)(iv)
Shares 2(a)
Sellers Preamble
Seller Transaction Expenses 2(c)(i)
Third Party Claim 7(b)(iv)
(c) Interpretation. As used in this Agreement, the word "including"
means without limitation, the word "or" is not exclusive and the words "herein",
"hereof", "hereby", "hereto" and "hereunder" refer to this Agreement as a whole.
Unless the context otherwise requires, references herein: (i) to Articles,
Sections, Exhibits and Schedules (including the Disclosure Schedule) mean the
Articles and Sections of and the Exhibits and Schedules attached to this
Agreement; (ii) to an agreement, instrument or document means such agreement,
instrument or document as amended, supplemented and modified from time to time
to the extent permitted by the provisions thereof and by this Agreement; and
(iii) to a statute means such statute as amended from time to time and includes
any successor legislation thereto. The Schedules (including the Disclosure
Schedule) and Exhibits referred to herein shall be construed with and as an
integral part of this Agreement to the same extent as if they were set forth
verbatim herein. Titles to Articles and headings of Sections are inserted for
convenience of reference only and shall not be deemed a part of or to affect the
meaning or interpretation of this Agreement.
2. Purchase and Sale of Shares; Satisfaction of Funded Indebtedness;
Closing.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase from the Sellers, and the
Sellers agree to sell to the Purchaser, free and clear of all restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), Liens, claims and demands, all of the shares of Common Stock owned by the
Sellers (the "Shares") as set forth in Section 3B(d) of the Disclosure Schedule
hereto for the consideration specified below in this Section 2.
(b) Purchase Price. The aggregate purchase price to be paid by the
Purchaser for all of the Shares (the "Purchase Price") shall be (i)
$18,500,000.00 minus (ii) the amount of the Company's Funded Indebtedness as of
the open of business on the Closing Date. The Purchase Price payable to the
Sellers at Closing is subject to adjustment as set forth in Section 2(h). The
Purchase Price shall be allocated among the Sellers in accordance with the
applicable percentages reflected in Section 3B(d) of the Disclosure Schedule.
(c) Payment at Closing. On the Closing Date, the Purchaser shall make
payment of the Purchase Price to the Sellers, by wire transfer of immediately
available funds, to an account or accounts designated in writing by the Sellers
prior to the Closing, against delivery by the Sellers to the Purchaser of a
stock certificate or certificates representing all of the Shares, duly endorsed
in blank or accompanied by duly executed assignment documents, sufficient in
form and substance to convey to the Purchaser good title to such Shares, free
and clear of all restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), Liens, claims and demands. The
Sellers may direct the Purchaser to deliver a portion of the Purchase Price to
certain third parties for fees, expenses, costs or other obligations of the
Sellers arising out of or in connection with the transactions contemplated in
this Agreement (the "Seller Transaction Expenses"). The amount so delivered
shall be withheld from the Purchase Price payable at Closing in accordance with
such written directions of the Sellers. At the Closing, the Sellers shall
deliver to the Purchaser a certificate (the "Purchase Price Calculation
Certificate"), in the form of Exhibit D hereto, setting forth (i) the amount of
all Funded Indebtedness of the Company outstanding immediately prior to the
Closing and (ii) the amount of Seller Transaction Expenses (if any).
(d) Funded Indebtedness. On the Closing Date, concurrently with the
Closing, the Purchaser and/or the Company (as determined by the Purchaser) shall
deliver to the holders of Funded Indebtedness an amount sufficient to repay all
Funded Indebtedness outstanding immediately prior to the Closing, with the
result that immediately following the Closing there will be no further
obligations of the Company, monetary or otherwise, with respect to any Funded
Indebtedness outstanding immediately prior to the Closing. Prior to the Closing
Date, the Sellers will provide the Purchaser with customary pay-off letters from
all holders of Funded Indebtedness outstanding immediately prior to the Closing,
and make arrangements reasonably satisfactory to the Purchaser for such holders
to provide to the Purchaser recordable form mortgage and lien releases, canceled
notes, trademark and patent assignments (if applicable) and other documents
reasonably requested by the Purchaser simultaneously with the Closing. If the
Purchaser directs the Company to pay any of the Company's Funded Indebtedness,
the Purchaser shall provide the Company with sufficient funds to do so.
15
(e) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place by the execution and delivery of the
Transaction Documents and other closing items contemplated herein at a location
as the Parties may hereafter agree, or by the execution and delivery of the
Transaction Documents and other closing items contemplated herein by a courier
agreed to by the Parties, on or before the 15th day of August, 2000 (the
"Closing Date"), but no later than August 21, 2000, and shall be effective for
all purposes of this Agreement as of 12:01 a.m., Pacific Daylight Time, on the
Closing Date. Except as otherwise provided herein, all proceedings to be taken
and all documents to be executed at the Closing shall be deemed to have been
taken, delivered and executed simultaneously, and no proceeding shall be deemed
taken nor documents deemed executed or delivered until all have been taken,
delivered and executed.
(f) Deliveries at the Closing. At the Closing:
-------------------------
(i) Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx and the Company
shall execute and deliver their respective Employment
Agreement(s) and Non-Compete and Non-Solicitation
Agreement(s);
(ii) The Purchaser, Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx
(respectively), and Trivest or its affiliate shall execute
and deliver the Subscription and Shareholders' Agreement(s);
(iii) The Sellers shall deliver to the Purchaser (A) a
certificate issued by the Secretary of State of the State of California
and each state (if any) in which the Company is qualified as a foreign
entity, as of a date reasonably acceptable to the Purchaser, as to the
good standing (or existence or non-dissolution, as applicable) of the
Company in such states, and (B) a tax clearance certificate from the
State of California, if and to the extent available, as of a date
reasonably acceptable to the Purchaser;
(iv) The Sellers shall deliver to the Purchaser (A) a copy of
the Company's Charter, as amended to date, certified as of the recent
date by the Secretary of State of the State of California, and (B) all
minute books, stock transfer books, blank stock certificates and
corporate seals of the Company;
(v) The Sellers shall deliver to the Purchaser a certificate
of the Secretary of the Company, dated the Closing Date, in form and
substance reasonably satisfactory to the Purchaser, as to (A) the
Charter of the Company and no amendments thereto since a specified
date, (B) the bylaws of the Company, (C) the resolutions of the
directors of the Company authorizing the execution and performance by
the Company of this Agreement and the transactions contemplated hereby;
and (D) incumbency and signatures of the officers of the Company
executing this Agreement and any other agreement, instrument or
document executed by the Company in connection with this Agreement;
(vi) The Purchaser shall deliver to the Sellers a certificate
issued by the Secretary of State of the State of Florida, as of a date
reasonably acceptable to the Sellers, as to the good standing (or
existence or non-dissolution, as applicable) of the Purchaser in such
state;
(vii) The Purchaser shall deliver to the Sellers a copy of the
Purchaser's Charter, as amended to date, certified as of the recent
date by the Secretary of State of the State of Florida;
(viii) The Purchaser shall deliver to the Sellers a
certificate of the Secretary of the Purchaser, dated the Closing Date,
in form and substance reasonably satisfactory to the Sellers, as to (A)
the Charter of the Purchaser and no amendments thereto since a
specified date; (B) the bylaws of the Purchaser; (C) the resolutions of
the directors of the Purchaser authorizing the execution and
performance of this Agreement and the transactions contemplated hereby;
and (D) incumbency and signatures of the officers of the Purchaser
executing this Agreement and any other agreement, instrument or
document executed by the Purchaser in connection herewith;
(ix) The Sellers shall deliver to the Purchaser the
resignations of all of the directors and officers of the
Company, which resignations shall be effective as of the
Closing;
(x) The Sellers shall deliver to the Purchaser the various
certificates and documents referred to in Section 9(a)
below, and
(xi) The Purchaser shall deliver to the Sellers the various
certificates and documents referred to in Section 9(b) below.
(xii) The Purchaser shall deliver the Purchase Price to the
Sellers in accordance with Section 2(c) above and the Sellers shall
deliver the stock certificates representing the Shares attached to
executed stock transfer powers;
(xiii) The Sellers shall deliver the purchase price
contemplated in the Subscription and Shareholders' Agreement for the
WinsLoew common equity and the Purchaser shall deliver the stock
certificates representing said equity to the Escrow Agent in accordance
with Section 7(b)(v) herein and the Escrow Agreement;
(xiv) The Sellers shall deliver to the Purchaser an opinion
letter from Sellers' attorney in the form of Exhibit E hereto;
(xv) The Purchaser shall deliver to the Sellers an opinion letter
from Purchaser's attorney in the form of Exhibit F hereto;
(xvi) The Purchaser, Sellers, and the Escrow Agent shall execute
and deliver the Escrow Agreement; and
(xvi) The Sellers shall deliver the Purchase Price Calculation
Certificate.
(g) Transfer Taxes. Other than Purchaser's income taxes, the Sellers,
jointly and severally, shall be responsible for the payment of all transfer,
documentary, sales, use, stamp, registration and other such Taxes and fees
(including any penalties and interest), if any, which may be payable with
respect to the transactions contemplated by this Agreement. The Sellers will, at
their own expense, file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees and, if required by applicable law, the Purchaser
will, and will cause the Company to, join in the execution of any such Tax
Returns and other documentation. (Nothing in this Section 2(g) should be
construed to abrogate the Purchaser's obligation to pay the 1.5% California
income tax on the Company's corporate income arising from an election under
Internal Revenue Code Section 338(h)(10) as stated in Section 6(g)(iii) herein).
(h) Net Working Capital Adjustment.
------------------------------
(i) As promptly as practicable, but in no event later than 30
days after the Closing Date, the Purchaser shall prepare and deliver to
the Sellers a balance sheet of the Company as of the open of business
on the Closing Date prepared in accordance with GAAP with no Change in
Accounting Principles from those utilized in preparing the Financial
Statements, with the exception of the accrual for vacation and holidays
(the "Closing Balance Sheet"), together with a schedule setting forth
in reasonable detail the Purchaser's good faith calculation of the Net
Working Capital at Closing.
(ii) The Purchaser and its accountants shall permit the
Sellers and their representatives to have full access to the books,
records and other documents (including work papers) pertaining to or
used in connection with preparation of the Closing Balance Sheet and
the Purchaser's calculation of the Net Working Capital at Closing and
provide the Sellers and their representatives with copies thereof (as
reasonably requested by the Sellers). If the Sellers disagree with the
Purchaser's calculation of the Net Working Capital at Closing as set
forth on the schedule attached to the Closing Balance Sheet or with any
other aspect of the Closing Balance Sheet for any purpose under this
Agreement, the Sellers shall notify the Purchaser in writing of such
disagreement (the "Objection Notice") (such Objection Notice setting
forth the basis for such disagreement in reasonable detail) within 30
Business Days after the Purchaser's delivery of the Closing Balance
Sheet to the Sellers, which time period shall be extended by any delays
resulting from the Purchaser's failure to deliver or make available to
Sellers, at Sellers' request, all necessary materials. The Purchaser
and the Sellers thereafter shall negotiate in good faith to resolve any
such disagreements with respect to the computation of the Net Working
Capital at Closing or any other aspect of the Closing Balance Sheet. If
the Purchaser and the Sellers reach an agreement as to the computation
of the Net Working Capital at Closing, such agreement shall be
conclusive and binding upon the Purchaser and the Sellers and
constitute the Net Working Capital at Closing for purposes of this
Agreement. If the Purchaser and the Sellers are unable to resolve any
such disagreements within 30 Business Days after the delivery of the
Objection Notice to the Purchaser by the Sellers, the Purchaser and the
Sellers shall submit the dispute to a national public accounting firm
(or a successor thereto) jointly selected by the Purchaser and the
Sellers (the "Accountant") for resolution; and at the time of such
submission, the Purchaser and the Sellers shall each disclose to the
other any professional relationships by and between the Sellers and the
Purchasers and its shareholders, directors, and officers, and any such
national accounting firm during the three (3) year period immediately
prior to Closing. If the Purchaser and the Sellers are unable to agree
upon the Accountant, the Accountant shall be a national accounting firm
(or a successor thereto) selected by lot (after the Purchaser and the
Sellers each exclude one such accounting firm). The Purchaser and the
Sellers agree to release the Accountant from any and all claims or
liabilities for any services performed by the Accountant in resolving
any dispute concerning the computation of Net Working Capital at
Closing.
(iii) The Purchaser and the Sellers shall use their respective
best efforts to cause the Accountant to resolve all disagreements with
respect to the Net Working Capital at Closing or otherwise with respect
to the Closing Balance Sheet as soon as practicable, but in any event
shall direct the Accountant to render a determination within 30 days of
its retention. The Accountant shall consider only those items and
amounts in the Closing Balance Sheet which are identified in the
Objection Notice as being items which the Purchaser and the Sellers are
unable to resolve. In resolving any disputed item, the Accountant may
not assign a value to any item greater than the greatest value for such
item claimed by either party or less than the smallest value for such
item claimed by either party. The Accountant's determination shall be
based solely on presentations by the Purchaser and the Sellers (i.e.,
not on independent review), and on the definition of Net Working
Capital included herein. The determination of the Accountant shall be
conclusive and binding upon the Sellers and the Purchaser and
constitute the Net Working Capital at Closing for purposes of this
Agreement.
(iv) The Accountant shall determine the allocation of its
costs and expenses in resolving any disputes relating to the
determination of Net Working Capital at Closing or any other aspect of
the Closing Balance Sheet based upon the percentage which the portion
of the contested amount not awarded to the Purchaser, on the one hand,
or the Sellers, on the other hand, bears to the amount actually
contested by such Parties. For example, if the Sellers claim the Net
Working Capital at Closing is $1,000 greater than the amount determined
by the Purchaser, and the Purchaser contests only $500 of the amount
claimed by the Sellers, and if the Accountant ultimately resolves the
dispute by awarding the Sellers $300 of the $500 contested, then the
costs and expenses of arbitration will be allocated 60% (i.e., 300
divided by 500) to the Purchaser and 40% (i.e., 200 divided by 500) to
the Sellers.
(v) Upon the final determination of the Net Working Capital at
Closing:
(A) if Net Working Capital at Closing is greater than
the Net Working Capital Target Amount, the Purchaser shall pay the
amount of any such excess to the Sellers no later than three Business
Days after the final determination of Net Working Capital at Closing,
by wire transfer of immediately available funds to an account or
accounts designated by the Sellers in writing;
(B) if Net Working Capital at Closing is less than
the Net Working Capital Target Amount, the Sellers, jointly and
severally, shall pay the amount of any such deficiency to the Purchaser
no later than three Business Days after the final determination of Net
Working Capital at Closing, by wire transfer of immediately available
funds to an account designated by the Purchaser in writing; and
(C) if Net Working Capital at Closing is equal to the
Net Working Capital Target Amount, no adjustment shall be made to the
Purchase Price.
All payments made pursuant to this Section 2(h)(v) shall be treated by
all Parties as adjustments to the Purchase Price.
3A. Representations and Warranties of the Sellers as to Seller
Matters. Each Seller, severally and not jointly, represents and
warrants to the Purchaser, as of the date of this Agreement and
as of the Closing Date, as follows:
(a) Capacity. Such Seller has full capacity to execute and deliver this
Agreement and the other Transaction Documents to which he is a party and to
perform his obligations hereunder and thereunder.
41
(b) Binding Obligation. This Agreement constitutes, and the other
Transaction Documents to which such Seller is a party, when executed and
delivered, will constitute the valid and legally binding obligations of such
Seller enforceable in accordance with the terms hereof and thereof, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization and
other similar laws affecting creditors' rights generally and by general
principles of equity, regardless of whether asserted in a proceeding in equity
or at law.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement by such Seller nor the execution and delivery by such Seller of the
other Transaction Documents to which such Seller is a party, nor the
consummation of the transactions contemplated hereby or thereby, will (i)
violate any statute, regulation or rule of any Authority to which such Seller is
subject (except for violations which would not have a Material Adverse Effect or
prevent or materially delay the consummation of the transactions contemplated
hereby), (ii) violate any injunction, judgment, order, decree or ruling of any
Authority to which such Seller is subject or (iii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice under any agreement, contract, lease, license or instrument to which such
Seller is a party or by which such Seller is bound or to which any of such
Seller's assets is subject. Except as set forth under Section 3A(c) of the
Disclosure Schedule, such Seller is not required to give any notice to, make any
filing with, or obtain any authorization, consent or approval of any Authority
in order for such Seller to consummate the transactions contemplated by this
Agreement or this Agreement or the other Transaction Documents to which such
Seller is a party. With respect to any such disclosures listed in Section 3A(c)
of the Disclosure Schedule, the Seller shall, prior to the Closing Date, perform
all acts necessary to consummate the transactions contemplated by this Agreement
or the other Transaction Documents to which such Seller is a party.
(d) Litigation. There are no actions, suits, claims or proceedings
pending or to the best of such Seller's Knowledge threatened against or
involving such Seller or any of his or her assets or properties by or before any
Authority that question the validity of this Agreement or seek to prohibit,
enjoin or otherwise challenge the consummation of the transactions contemplated
hereby. There are no outstanding orders, judgments, injunctions, stipulations,
awards or decrees of any Authority against such Seller or any of his or her
assets or properties which prohibit or enjoin the consummation of the
transactions contemplated hereby.
(e) Ownership of Company Common Stock. Each Seller holds of record and
owns beneficially the number and percentage of the Shares set forth in Section
3B(d) of the Disclosure Schedule and has good title to said number and
percentage of the Shares, free and clear of any restrictions on transfer (other
than restrictions under the Securities Act and state securities laws), liens,
claims, and demands. Such Seller is not a party to any option, warrant, purchase
right, or other contract or commitment that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock of the Company (other than
pursuant to this Agreement). Except as set forth in Section 3A(e) of the
Disclosure Schedule, such Seller is not a party to any voting trusts, proxies,
or other agreements or understandings with respect to the voting of any capital
stock of the Company.
(f) Brokers Fees. Neither such Seller nor any Person acting on his or
her behalf has engaged any broker, finder or intermediary other than Barrington
Associates for or on account of the transactions contemplated by this Agreement
as a result of which any of the Purchaser or the Company will have any legal
responsibility. The Sellers collectively will pay any fees and expenses due and
owing Barrington Associates in connection with the transactions described in
this Agreement out of the Purchase Price payable at Closing under Section 2(c).
3B. Representations and Warranties of the Sellers and Company With Respect to
the Company. The Sellers, jointly and severally, and the Company represent and
warrant to the Purchaser, as of the date of this Agreement and as of the Closing
Date, as follows:
(a) Organization/Power and Authority to Conduct Business. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of California. The Company is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction where such qualification
is required, except where the lack of such qualification would not have a
Material Adverse Effect. Section 3B(a) of the Disclosure Schedule sets forth a
list of each jurisdiction in which the Company is licensed or qualified to do
business as a foreign corporation. The Company has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. The Company does not have any Subsidiary,
and does not own, directly or indirectly, any capital stock or other equity
interests in any corporation, partnership or other entity.
(b) Noncontravention. Neither the execution and the delivery of this
Agreement by the Company, nor the consummation of the transactions contemplated
hereby, will (i) violate any statute, regulation or rule of any Authority to
which the Company is subject (except for violations which would not have a
Material Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated hereby), (ii) violate any injunction, judgment, order,
decree or ruling of any Authority to which the Company is subject or any
provision of the Charter or bylaws of the Company or (iii) except as set forth
under Section 3B(b) of the Disclosure Schedule, conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice under any agreement, contract, lease, license or instrument to which the
Company is a party or by which it is bound or to which any of its assets is
subject. Except as set forth under Section 3B(b) of the Disclosure Schedule, the
Company is not required to give any notice to, make any filing with, or obtain
any authorization, consent or approval of any Authority in order for the Company
to consummate the transactions contemplated by this Agreement or the other
Transaction Documents to which it is a party. With respect to any such
disclosures listed in Section 3B(b) of the Disclosure Schedule, the Company
shall, prior to the Closing Date, perform all commercially reasonable acts
necessary to consummate the transactions contemplated by this Agreement or the
other Transaction Documents to which such Company is a party.
(c) Brokers Fees. Neither the Company nor any Person acting on the
Company's behalf has paid or become obligated to pay any fee or commission to
any broker, finder or intermediary other than Barrington Associates for or on
account of the transactions contemplated by this Agreement. The Sellers
collectively will pay any and all fees and expenses due and owing to Barrington
Associates in connection with the transactions described in this Agreement out
of the Purchase Price payable at Closing under Section 2(c).
(d) Capitalization. The Common Stock constitutes the Company's only
authorized class of capital stock. Section 3B(d) of the Disclosure Schedule sets
forth for the Company (i) the number of shares of authorized Common Stock and
(ii) the number of issued and outstanding shares of Common Stock, the names of
the holders of record thereof, and the number of shares held by each such
holder. All of the issued and outstanding shares of capital stock of the Company
have been duly authorized, are validly issued, fully paid and nonassessable and
were not issued in violation of the preemptive rights of any Person or any
agreement or law by which the Company at the time of issuance was bound. There
are no outstanding or authorized subscriptions, warrants, options or, except for
this Agreement, other agreements or rights of any kind to purchase or otherwise
receive or be issued, or securities or obligations of any kind convertible into,
any shares of capital stock or any other security of the Company; there are no
dividends which have accrued or been declared but are unpaid on the capital
stock of the Company; and are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company.
(e) Financial Statements. Set forth in Section 3B(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) reviewed balance sheets and statements of income and
statements of shareholders equity and cash flows as of and for the fiscal year
ended December 31, 1999 (the "Most Recent Fiscal Year End") for the Company; and
(ii) unaudited balance sheet and statement of income and statement of cash flows
(the "Most Recent Financial Statements") as of and for each of the months in the
year 2000 through June 30, 2000 (the "Most Recent Fiscal Month End") for the
Company. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of the
Company as of such dates and the results of operations of the Company for such
periods; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material, individually
or in the aggregate) and lack footnotes and other presentation items.
(f) Absence of Certain Developments. Except as otherwise contemplated
by this Agreement or as set forth in Section 3B(f) of the Disclosure Schedule,
since the Most Recent Fiscal Month End, the Company has conducted its business
only in the Ordinary Course of Business and there has not been any Material
Adverse Change with respect to the Company. Without limiting the generality of
the foregoing, since that date, except as set forth in the Disclosure Schedule,
the Company has not:
(i) borrowed any amount or incurred any liabilities, except
liabilities incurred in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of or was
caused by any breach of contract, breach of warranty, tort,
infringement or violation of law by the Company or any Seller);
(ii) mortgaged, pledged or subjected to any Lien any of its
assets, except for Permitted Liens, or entered into any conditional
sale or other title retention agreement with respect to any property or
asset;
(iii) sold, assigned or transferred any of its tangible assets,
except for sales of Inventory in the Ordinary Course of Business;
(iv) sold, assigned or otherwise transferred, or abandoned, any
Intellectual Property right or any claim for infringement
thereon;
(v) suffered any extraordinary losses involving more than
$25,000 in the aggregate or canceled, compromised, waived or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business or involving more than $50,000 in the
aggregate;
(vi) made any capital expenditures or commitments therefor in
excess of $10,000 individually or $50,000 in the aggregate;
(vii) entered into any material agreement, contract, lease or
license outside the Ordinary Course of Business;
(viii) suffered any theft, damage, destruction or casualty
loss in excess of $50,000 in the aggregate, individually or in the
aggregate, to its property, whether or not covered by insurance;
(ix) entered into any agreement with any labor union or
association representing any employee, or made any wage or salary
increase or bonus, or increase in any other direct or indirect
compensation, for or to any of its officers or directors (or, other
than in the Ordinary Course of Business, other employees), or otherwise
made any material change in employment terms for any of its directors,
officers and employees;
(x) made any Change in Accounting Principles;
(xi) made any increase in or established any bonus, insurance,
deferred compensation, pension, retirement, profit-sharing, stock
option (including the granting of stock options, stock appreciation
rights, performance awards or restricted stock awards or the amendment
of any existing stock options, stock appreciation rights, performance
awards or restricted stock awards), stock purchase or other employee
benefit plan or agreement or arrangement or modified or obligated
itself to modify or announced its intention to modify, the Company's
personnel policies and practices in any material respect;
(xii) made any payment (including any dividends or other
distributions with respect to the Common Stock) to the Sellers or any
Affiliate of the Sellers (other than compensation otherwise payable in
the Ordinary Course of Business) or forgiven any indebtedness due or
owing from the Sellers or any Affiliate of the Sellers to the Company;
(xiii) reclassified, combined, split, subdivided or redeemed
or otherwise repurchased any capital stock of the Company, or created,
authorized, issued, sold, delivered, pledged or encumbered any
additional capital stock (whether authorized but unissued or held in
treasury) or other securities equivalent to or exchangeable for capital
stock, or granted or otherwise issued any options, warrants or other
rights with respect thereto;
(xiv) acquired or agreed to acquire by merging or
consolidating with, or by purchasing any portion of the capital stock,
partnership interests or assets of, or by any other manner, any
business or any corporation, partnership, limited liability company,
association or other business organization or division thereof;
(xv) made any loan or advance (whether in cash or other
property), or made any investment in or capital contribution to, or
extended any credit to, any Person, except (i) short-term investments
pursuant to customary cash management policies, and (ii) advances to
employees made in the Ordinary Course of Business;
(xvi) made any write-down of the value of Inventory or written
off as uncollectible any Account Receivable except for write-downs and
write-offs in the Ordinary Course of Business consistent with past
practices, none of which would reasonably be expected to result in a
Material Adverse Change;
(xvii) except in the Ordinary Course of Business (A)
liquidated Inventory or accepted product returns, (B) accelerated
receivables, or (C) delayed payables;
(xviii) made or pledged to make any charitable contribution; or
(xix) committed to do any of the foregoing.
(g) Undisclosed Liabilities. To the best of Sellers' Knowledge, the
Company does not have any material liability (whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due, including any liability for
Taxes) and to the best of Sellers' Knowledge, there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against the Company giving rise to any such liability, except
for (i) liabilities set forth on the Financial Statements or in any notes
thereto (but only to the extent such notes quantify any such liabilities), (ii)
executory liabilities under agreements, contracts, leases, licenses and other
arrangements entered into in the Ordinary Course of Business to which the
Company or any of its assets may be bound (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach thereof or
violation of law), (iii) liabilities and other matters reflected in the
Disclosure Schedule, and (iv) liabilities which have arisen in the Ordinary
Course of Business since the Most Recent Fiscal Month End (none of which results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement or violation of law
by the Company or the Sellers). Section 3B(g) of the Disclosure Schedule sets
forth as of the Most Recent Fiscal Month End a true and correct listing of the
indebtedness of the Company described in clauses (i), (ii) and (iii) of the
definition of Funded Indebtedness.
(h) Legal Compliance. Except as set forth in Section 3B(h) of the
Disclosure Schedule, the Company is in compliance with all applicable statutes,
laws, ordinances, rules, orders and regulations of all Authorities, except where
the failure to comply would not have a Material Adverse Effect or prevent or
materially delay the consummation of the transactions contemplated hereby.
Except as set forth in Section 3B(h) of the Disclosure Schedule, since December
31, 1994, the Company has not received any written communication from any
Authority that alleges that the Company is not in compliance with any foreign,
federal, state or local laws, rules or regulations.
(i) Company Permits. The Company holds all permits, licenses,
variances, exemptions, orders and approvals of all Authorities necessary for the
lawful conduct of its business (the "Company Permits"). The Company is in
compliance with the terms of the Company Permits, except where the failure to
comply would not have a Material Adverse Effect. Section 3B(i) of the Disclosure
Schedule sets forth a list of the Company Permits.
(j) Tax Matters.
-----------
(i) Except for any short period S-Corporation returns that may
be required of the Sellers (which will be filed by the Sellers when
due), the Company has filed or will before Closing have filed all Tax
Returns required to have been filed, has paid all Taxes that are due to
be paid pursuant to such returns (whether or not shown as due thereon)
or pursuant to any assessment that has become payable, and has set up a
reserve for the payment of all Taxes not yet due and payable that
adequately covers all periods through the date hereof. All such Tax
Returns are and will be complete and accurate in all material respects
and disclose all Taxes required to be paid by the Company for the
periods covered thereby. Except as set forth in Section 3B(j) of the
Disclosure Schedule:
(A) there is no action, suit, investigation, audit,
claim or assessment pending, or to Sellers' Knowledge proposed
or threatened against the Company with respect to Taxes;
(B) Since December 31, 1996, the federal income tax returns
of the Company have not been examined and adjusted by the
IRS;
(C) the Company has not waived or been requested to
waive any statute of limitations in respect of Taxes and there
is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of
any Taxes;
(D) there are no Liens for Taxes upon any of the
assets of the Company except liens relating to Taxes not
delinquent. All monies the Company is required by applicable
law to collect or withhold from the employees of the Company
for income Taxes, social security and other payroll Taxes, or
from independent contractors, shareholders or other third
parties, have been collected or withheld, and either paid to
the respective governmental agencies, set aside in accounts
for such purpose, or accrued, reserved against and entered
upon the applicable books and financial statements of the
Company;
(E) the Company has not, during the five-year period
ending on the Closing Date, been a personal holding company
within the meaning of Section 541 of the Code; and
(F) the Company has never filed or been included in
any combined or consolidated Tax return with any other person
or been a member of an Affiliated Group filing a consolidated
federal income Tax Return; the Company does not otherwise have
liability for the Tax of any other Person under Treasury
Regulations ?1.1502-6 (or any comparable provisions of state,
local or foreign Tax law) and the Company is not a party to or
bound by any tax sharing agreement, tax indemnity obligation
or similar agreement with respect to Taxes (including any
advance pricing agreement, closing agreement or other
agreement relating to Taxes with any taxing Authority) and is
not otherwise responsible by contract or law (including
theories of successor or transferee liability) or otherwise,
for the Taxes of any other Person.
(ii) As a result of the transactions contemplated by this
Agreement, the Company will not be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code,
without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(iii) The Company has not filed a consent under Section 341(f)
of the Code or any comparable provision of a state statute.
(iv) For all tax periods from August 1, 1996 up to and
including the effective time of the Closing (collectively, the "S
Corporation Tax Period"), the Company has elected (with the consent of
all of its shareholders), in compliance with all applicable legal
requirements, to be taxed under Subchapter S of the Code and
corresponding provisions under any applicable state and local laws, and
such elections are in effect for the Company. No action has been taken
by the Company or any shareholder of the Company that may result in the
revocation of any such elections (other than by reason of the
transactions described herein) and, with respect to the S Corporation
Tax Period, the Company has no liability, absolute or contingent, for
the payment of any income Taxes under the Code or under the laws of
such states or localities which afford tax treatment similar to that
under Subchapter S of the Code, except (A) for the 1.5% California
income tax on the Company's corporate income arising from an election
under Section 338(h)(10) of the Code to be paid by Purchaser pursuant
to Section 6(g)(iii) of this Agreement, and (B) a built-in gain tax
pursuant to Section 1374 of the Code to be paid by the Sellers when
due. Except as set forth in Section 3B(j) of the Disclosure Schedule,
(A) the Company has no "Subchapter C earnings and profits" as defined
in Section 1362(d) of the Code and (B) the Company has no "net
unrealized built-in gain" as such term is defined in Sections
1374(d)(1) and 1374(d)(8) of the Code.
(k) Certain Business Relationships with the Company. Except as set
forth in Section 3B(k) of the Disclosure Schedule and except for normal advances
to employees consistent with past practice, payment of compensation for
employment to employees consistent with past practice, and participation in
Employee Benefit Plans by employees, since December 31, 1996 the Company has not
purchased, acquired or leased any property or services from, or sold,
transferred or leased any property or services to, or loaned or advanced any
money to, or borrowed any money from, or entered into or been subject to any
management, consulting or similar agreement with (i) any officer, director or
shareholder of the Company, or (ii) any of their respective Affiliates. Except
as set forth in Section 3B(k) of the Disclosure Schedule, no Affiliate of the
Company is indebted to the Company for money borrowed or other loans or
advances, and the Company is not indebted to any such Affiliate for money
borrowed or other loans or advances.
(l) Title to Tangible Assets Other than Real Property Interests. Except
as set forth in Section 3B(l) of the Disclosure Schedule, the Company has good
and valid title to, or a valid leasehold interest in, all the tangible assets
(other than real property or interests in real property) used or useful in the
conduct of the Company's business, except Inventory sold since the date hereof
in the Ordinary Course of Business, free and clear of any Liens other than
Permitted Liens. The machinery and equipment used regularly in the conduct of
the Business of the Company are in the aggregate in good operating condition and
repair (subject to normal wear and tear), and are suitable for the purposes for
which they are presently used. Except for interests and rights in property
pursuant to any lease, license or other agreement described in Section 3B(l) of
the Disclosure Schedule or pursuant to any lease, license or other agreement not
required to be described in Section 3B(l) of the Disclosure Schedule and except
for property supplied by any customer or supplier in connection with the
purchase or sale of products or services from or to such customer or supplier in
the Ordinary Course of Business, there is no tangible personal property owned by
any third party which is used by the Company in the operation of its business.
Section 3B(l) of the Disclosure Schedule lists all machinery, equipment,
vehicles, furniture and other tangible personal property of any kind and
description having a present value in excess of $10,000.00 (other than
Inventory) owned or leased by the Company. Notwithstanding any provision of this
Agreement to the contrary, the Purchaser acknowledges that certain art work,
wall displays, plaques and other objects of sentimental value (none of which,
individually or in the aggregate, is material to the operation of the Company's
business and none which will be listed as an asset of the Company on the Closing
Balance Sheet) located at the Company's premises (a list of which is set forth
under Section 3B(l) of the Disclosure Schedule) is, and shall remain, the
personal property of the Sellers.
(m) Real Property. All real property and improvements thereto and
interests in real property and improvements thereto that are owned or leased by
the Company are referred to herein collectively as the "Real Property" or
"Properties", and individually as a "Property". Section 3B(m) of the Disclosure
Schedule identifies all Real Property. Except as set forth on Section 3B(m) of
the Disclosure Schedule, the Company has good and valid title to, or a valid
leasehold interest in, all Real Property in each case free and clear of any
Liens, easements, covenants, rights-of-way and other similar restrictions,
except (i) Permitted Liens and (ii) easements, covenants, rights-of-way and
other similar restrictions of record. There are no pending condemnation,
expropriation, eminent domain or similar proceedings affecting all or any
portion of such Properties and, to the best of Sellers' Knowledge, no such
proceedings are contemplated. There are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of any Property. The
Company enjoys peaceful and undisturbed possession of the Real Property. Except
as set forth on Section 3B(m) of the Disclosure Schedule or otherwise in the
Disclosure Schedule, the Real Property is in compliance with all applicable
local, state and federal laws including, but not limited to, environmental laws,
zoning and land use laws, building codes, safety codes, fire codes, OSHA laws,
and the Americans with Disabilities Act.
(n) Intellectual Property.
---------------------
(i) Section 3B(n)(i) of the Disclosure Schedule identifies
each pending patent application and each registered item of
Intellectual Property owned or used by the Company, and each written
license agreement (excluding off-the-shelf or "shrink-wrap" software
license agreements) pursuant to which the Company has granted to any
third party, or received from any third party a grant of, any rights in
any of the Intellectual Property owned or used by the Company. Except
as set forth in this Agreement or the Disclosure Schedule, the Company
owns, or possesses adequate and enforceable licenses or rights (free of
Liens other than Permitted Liens) to use all Intellectual Property
currently used by the Company, or necessary to permit the Company to
conduct its business as now conducted.
(ii) Except as set forth in Section 3B(n)(ii) of the
Disclosure Schedule, with respect to each item identified in Section
3B(n)(i) of the Disclosure Schedule:
(A) the Company possesses all right, title and
interest thereto, free and clear of any Lien (other than
Permitted Liens), license or other restriction;
(B) such item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(C) no action, suit, proceeding, hearing,
investigation, written claim or written demand is pending or
is, to the best of Sellers' Knowledge, threatened which
challenges the legality, validity, enforceability, use or
ownership of the item;
(D) to the best of Sellers' Knowledge, neither the
Company nor any other party to any license agreement is in
breach or default and no event has occurred which with notice
or lapse of time would constitute a breach or default or
permit termination, modification or acceleration thereunder;
(E) to the best of Sellers' Knowledge, no party to any
license agreement has repudiated any material provision
thereof;
(F) no claims are pending or, to the best of Sellers'
Knowledge, threatened that the Company is infringing on or
otherwise violating the rights of any person with regard to
any such item; and
(G) to the best of Sellers' Knowledge, no person is
infringing on or otherwise violating any right of the Company
with respect to such item.
(o) Material Contracts. Section 3B(o) of the Disclosure Schedule lists
the Material Contracts to which the Company is a party. The Company has made
available to the Purchaser a correct and complete copy of each Material Contract
listed in Section 3B(o) of the Disclosure Schedule. With respect to each such
Material Contract, except as disclosed in Section 3B(o) of the Disclosure
Schedule, to the best of Sellers' Knowledge, (A) the Material Contract is legal,
valid, binding, enforceable and in full force and effect; (B) except as
disclosed in Section 3B(o) of the Disclosure Schedule neither the Company nor
any other party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the Material Contract; (C) no
party has repudiated any provision of the Material Contract, (D) there are no
disputes or forbearance programs in effect with respect to the Material
Contract.
(p) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
(q) Insurance. Section 3B(q) of the Disclosure Schedule describes each
insurance policy maintained by the Company. To the best of Sellers' Knowledge,
all of such insurance policies are in full force and effect and the Company is
not in default with respect to its obligations under any of such insurance
policies. To the best of Sellers' Knowledge, such policies are sufficient for
compliance with all requirements of law and Material Contracts to which the
Company is a party. Since the respective dates of such policies, no notice of
cancellation or non-renewal with respect to any such policy has been received by
the Company. Section 3B(q) of the Disclosure Schedule sets forth a list of all
pending claims with respect to all such policies.
(r) Litigation. Section 3B(r) of the Disclosure Schedule sets forth
each instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree or ruling or (ii) is a party or is to the Sellers'
Knowledge threatened to be made a party, to any action, suit, proceeding,
hearing or investigation of, in or before any Authority.
(s) Labor Relations. The Company is not and has never been a party to a
collective bargaining agreement. Except as set forth in Section 3B(s) of the
Disclosure Schedule, (i) since December 31, 1995, the Company has not been
involved in or threatened with any strike, slowdown or work stoppage, (ii) since
December 31, 1995, the Company has not been involved in or threatened with any
unfair labor practice charge, arbitration, suit or administrative proceeding
relating to labor matters involving its employees, (iii) there are no actions,
proceedings or claims pending or, to the best of Sellers' Knowledge, threatened
against the Company under any laws relating to employment, including any
provisions thereof relating to wages, hours, collective bargaining, withholding
or the payment of social security or other Taxes, and (iv) the Company has
complied with all applicable immigration laws including the provisions of the
Immigration Reform and Control Act of 1986 with respect to all of its employees
hired after November 6, 1986 by verifying their employment eligibility and
having them complete Form I-9.
(t) Employee Benefits. Section 3B(t) of the Disclosure Schedule sets
forth (a) all of the current Employee Pension Benefit Plans, Employee Welfare
Benefit Plans and all other employee benefit, fringe benefit plans and programs
maintained or contributed to by the Company or any ERISA Affiliate with respect
to current or former employees of the Company (the "Employee Benefit Plans").
(i) With respect to each Employee Benefit Plan and except as
disclosed in Section 3B(t) of the Disclosure Schedule:
(A) each such Employee Benefit Plan (and
each related trust, insurance contract or fund)
complies in form and in operation in all material
respects with the applicable requirements of ERISA,
the Code and other applicable laws (including all
reporting and disclosure requirements), and has been
operated in all material respects in accordance with
its terms;
(B) all contributions (including all
employer contributions and employee salary reduction
contributions, if any) which are due have been paid
to each such Employee Benefit Plan which is an
Employee Pension Benefit Plan, and there are no
accumulated funding deficiencies with respect to any
such Employee Pension Benefit Plan;
(C) each such Employee Benefit Plan which is
an Employee Pension Benefit Plan intended to so
qualify under Section 401(a) of the Code so qualifies
and has received a favorable determination letter
from the IRS as to its qualification under Section
401(a) of the Code;
(D) no "prohibited transaction" (as such
term is defined in Section 406 of ERISA or Section
4975 of the Code) has occurred with respect to any
such Employee Benefit Plan which is an Employee
Pension Benefit Plan (or its related trust) which
could subject the Company or any officer, director or
employee of the Company, to any Tax or penalty
imposed under Section 4975 of the Code or liability
under Section 406 of ERISA;
(E) the Company has delivered to the
Purchaser correct and complete copies of the plan
documents and summary plan descriptions, the most
recent determination letter received from the IRS,
the most recent Form 5500 Annual Report and all
accompanying schedules, the most recent actuarial
valuation (if any), and all related trust agreements,
insurance contracts and other funding arrangements
which implement each such Employee Benefit Plan;
(F) no such Employee Benefit Plan which is
an Employee Pension Benefit Plan has been completely
or partially terminated or has been the subject of a
"reportable event" (as defined in Section 4043 of
ERISA) as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan
(other than a Multiemployer Plan) has been
instituted;
(G) the Company has not incurred, and will
not incur as a result of any existing condition or
the transactions contemplated by this Agreement, any
liability to the PBGC (except for required premium
payments, if any), or otherwise under Title IV of
ERISA (including any withdrawal liability) or under
the Code with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit Plan and,
as of the Closing Date, the assets of each such
Employee Pension Benefit Plan are at least equal in
value to the present value of accrued benefits of the
plan, based on actuarial methods, tables and
assumptions reasonably satisfactory to the Purchaser;
and
(H) no action, suit, proceeding, hearing or
investigation with respect to the administration or
the investment of assets of any such Employee Benefit
Plan (other than routine claims for benefits) is
pending or to the Sellers' Knowledge threatened.
(ii) The Company does not contribute to any
Multiemployer Plan or have any liability (including withdrawal
liability) under any Multiemployer Plan.
(iii) The Company does not have any obligation to
provide health or other welfare benefits to former, retired or
terminated employees, except as specifically required under
Section 4980B of the Code. With respect to all of its past and
present employees, the Company has complied in all material
respects with the notice and continuation requirements of Part
6 of Subtitle B of Title I of ERISA and of Section 4980B of
the Code.
(iv) The Company has no liability for or relating to
any Employee Benefit Plan or arrangement sponsored, maintained
or contributed to by an ERISA Affiliate.
(v) The consummation of the transactions contemplated
by this Agreement will not entitle any individual to any
severance pay, and will not accelerate the time of payment or
vesting, or increase the amount of any compensation due to any
individual, and will not be the direct or indirect cause of
any amount payable under any Employee Benefit Plan being
classified as an "excess parachute payment" under Section 280G
of the Code.
(u) Environmental, Health and Safety Matters. Except as
disclosed in Section 3B(u) of the Disclosure Schedule:
(i) The Company has not disposed of or released any substance,
arranged for the disposal of any substance, knowingly exposed any
employee or other individual to any substance or condition, or owned or
operated its businesses or any Property or facility so as to give rise
to any liability or corrective or remedial obligation of the Company
under any Environmental, Health and Safety Requirement.
(ii) The Company is in compliance with all Environmental
Health and Safety Requirements, except where the failure to comply
would not have a Material Adverse Effect, and the Company has not,
since December 31, 1995, received any written communication from any
Authority that alleges that the Company is not in such compliance.
(iii) There is no Environmental Claim pending or, to the best
of Sellers' Knowledge, threatened or recently filed against the Company
or against any Property, nor is there any Environmental Claim against
any Person whose liability for any Environmental Claim the Company has
retained or assumed contractually.
(iv) No underground storage tanks, friable and damaged
asbestos-containing materials, or pcb-containing equipment or fluids
are present on any Property, nor have any said items been removed from
any Property.
(v) No Property presently or heretofore owned, leased or
operated by the Company is currently listed on the National Priorities
List or the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, or on any analogous state list.
(vii) No off-site location at which the Company has disposed
or arranged for the disposal of any waste is listed on the National
Priorities List or on any analogous state list.
(v) Customers and Suppliers. Section 3B(v) of the Disclosure Schedule
contains a complete and accurate list of the names of the 20 largest (by volume
for the year to date 2000) customers and the 20 largest (by volume for the year
to date 2000) suppliers of the Company as of June 30, 2000. The Company
maintains good relations with each of such customers and suppliers and, except
as set forth in Section 3B(v) of the Disclosure Schedule, since June 30, 2000 no
event has to the Sellers' Knowledge occurred that would materially adversely
affect the Company's relations with any such customers or supplier. Except as
set forth in Section 3B(v) of the Disclosure Schedule, since June 30, 2000, no
customer which accounted for more than five percent (5%) of the Company's
aggregate sales revenues during the last twelve months has canceled, terminated
(or made any threat to the Company to cancel or terminate), or materially
decreased its usage of the Company's services or products.
(w) Inventory. Except as disclosed in Section 3B(w) of the Disclosure
Schedule, the Inventory of the Company is merchantable and fit for the purpose
for which it was procured or manufactured and none of such Inventory is
slow-moving, obsolete, damaged or defective. Except as disclosed in Section
3B(w) of the Disclosure Schedule, the Inventory of the Company is valued at the
lower of cost (on a first-in-first-out basis) or market in accordance with GAAP
on a basis consistent with prior periods.
(x) Accounts Receivable. Except as disclosed in Section 3B(x) of the
Disclosure Schedule, all of the Accounts Receivable of the Company are properly
reflected on its books and records and arose from bona fide transactions in the
Ordinary Course of Business, and, to the best of Sellers' Knowledge, are valid
receivables subject to no setoffs or counterclaims. The reserve for bad debts
set forth on the face of the Financial Statements (rather than in any notes
thereto) has been determined in accordance with GAAP on a basis consistent with
the past custom and practice of the Company.
(y) List of Accounts. Section 3B(y) of the Disclosure Schedule sets
forth a list of all bank and securities accounts, and all safe deposit boxes,
maintained by the Company and a listing of the persons authorized to draw
thereon or make withdrawals therefrom or, in the case of safe deposit boxes,
with access thereto.
(z) Product Warranty. Except as disclosed in Section 3B(z) of the
Disclosure Schedule, within the last five years, the products manufactured,
sold, and delivered by the Company have in the aggregate conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties, and, to the best of Sellers' Knowledge, the Company has
no material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) for replacement thereof or
other damages in connection therewith. Within the last five years, substantially
all of the products manufactured, sold, and delivered by the Company are subject
to standard terms and conditions of sale, subject to variations applicable to
specific customer requirements. The reserve for product warranty claims set
forth on the face of the Financial Statements (rather than in any notes thereto)
has been determined in accordance with GAAP on a basis consistent with the past
custom and practice of the Company.
(aa) Product Liability. To the best of Sellers' Knowledge, the Company
has no material liabilities (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due) arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold or delivered by the Company
prior to the Closing (the "Pre-Closing Product Liabilities"). Section 3B(aa) of
the Disclosure Schedule sets forth a true and correct list and brief description
of all product liability claims that have been filed against the Company since
December 31, 1993 and all claims which are currently pending before any
authority.
(bb) Year 2000 Compliance. The Company has undertaken an assessment of its
Information Technology and such Information Technology is Year 2000 Compliant.
(cc) Repayment of Seller Loans. The Sellers have satisfied in full all loans due
and owing from them to the Company, if any, together with all interest accrued
thereon.
(dd) Trustee of 401(k) Plan. Unless the Purchaser requests in writing
prior to Closing the resignation of Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx as
trustees under the Company's 401(k) Plan, Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx
shall remain as trustees under the Company's 401(k) Plan after Closing until the
Purchaser or the Company directs otherwise.
(ee) Employee List. The Company has no employees other than those
listed in Section 3B(ee) of the Disclosure Schedule. Section 3B(ee) of the
Disclosure Schedule sets forth a true and correct list of all employees of the
Company, their dates of hire, accrued vacation and sick leave, and salaries or
hourly wage rates, and identifies any and all inactive employees who are off
work due to workers' compensation leave, family medical leave, leave of absence,
or who are not actively employed for any other reason.
(ff) Medical, Dental, and Workers' Compensation Claims. The Company has
no medical claims, dental claims or worker's compensation claims resulting from
treatment, injuries, conditions or illnesses arising prior to the Closing
("Pre-Closing Claims"), other than those listed in Section 3B(ff) of the
Disclosure Schedule, which are in dispute, have otherwise not been paid in full
or which are not covered by insurance for which premiums have already been paid
by the Company.
(gg) Pre-paid Advertising. All of the pre-paid advertising expenses of
the Company are properly reflected on its books and records and arose from bona
fide transactions in the Ordinary Course of Business. The accrual of the
pre-paid advertising expenses set forth on the face of the Financial Statements
(rather than in any notes thereto) has been determined in accordance with GAAP
on a basis consistent with the past custom and practice of the Company.
(hh) EPCRA Filings. Except as set forth on Section 3B(hh) of the
Disclosure Schedule, the Company is in compliance with the Emergency Planning
and Community Right to Know Act ("EPCRA"), 42 U.S.C. Section 11001 et seq.
(ii) Sales Representatives. Section 3B(ii) of the Disclosure Schedule
contains a complete and accurate list of the names of the Company's sales
representatives as of June 30, 2000. The Company maintains good relations with
each of such sales representatives and, except as set forth in Section 3B(ii) of
the Disclosure Schedule, since June 30, 2000 no event has to the Sellers'
Knowledge occurred that would materially adversely affect the Company's
relations with any such sales representatives. To the Sellers' Knowledge, the
change of control of the Company contemplated by this Agreement will not
materially adversely affect the Company's relations with any such sales
representatives. Except as set forth in Section 3B(ii) of the Disclosure
Schedule, since June 30, 2000, no sales representative which accounted for more
than five percent (5%) of the Company's aggregate sales revenues during the last
twelve months has canceled, terminated (or made any threat to the Company to
cancel or terminate), or materially decreased his or her sales of the Company's
services or products.
4. Representations and Warranties of the Purchaser. The Purchaser represents and
warrants to the Sellers as follows:
(a) Organization. The Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of Florida.
(b) Authorization of Transaction; Binding Obligation. The Purchaser has
full corporate power and authority to execute and deliver this Agreement and the
other Transaction Documents to which it is a party and to perform its
obligations hereunder and thereunder. This Agreement constitutes, and such other
Transaction Documents, when executed and delivered, will constitute the valid
and legally binding obligations of the Purchaser, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization and other similar laws affecting
creditors' rights generally and by general principles of equity, regardless of
whether asserted in a proceeding in equity or at law.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the other Transaction Documents to which the Purchaser is a party,
nor the consummation of the transactions contemplated hereby or thereby, will
(i) violate any statute, regulation or rule of any Authority to which the
Purchaser is subject (except for violations which would not have a Material
Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated hereby), (ii) violate any injunction, judgment, order,
decree or ruling of any Authority to which the Purchaser is subject or any
provision of its Charter or bylaws or other organizational document, as the case
may be, or (iii) except as set forth in Section 4(c) of the Disclosure Schedule
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any agreement, contract, lease, license
or instrument to which the Purchaser is a party or by it is bound or to which
any of its assets is subject. Except as disclosed in Section 4(c) of the
Disclosure Schedule, the Purchaser is not required give any notice to, make any
filing with, or obtain any authorization, consent or approval of any Authority
in order for it to consummate the transactions contemplated by this Agreement or
the other Transaction Documents to which it is a party. Notwithstanding the
foregoing, in order to purchase the Shares herein, the Purchaser and the Sellers
must comply with the applicable waiting period subsequent to the filing of their
respective Xxxx-Xxxxx-Xxxxxx Pre-merger Notification Forms. With respect to any
such disclosures listed in Section 4(c) of the Disclosure Schedule, the
Purchaser shall, prior to the Closing Date, perform all acts necessary to
consummate the transactions contemplated by this Agreement or the other
Transaction Documents to which Purchaser is a party.
(d) Brokers Fees. Neither the Purchaser nor any Person acting on the
Purchaser's behalf has engaged any broker, finder or intermediary for or on
account of the transactions contemplated by this Agreement as a result of which
the Company (unless the Closing shall occur) or the Sellers will have any legal
responsibility.
(e) Acquisition of Shares for Investment. The Purchaser is an
"accredited investor" as defined by Rule 501 under the Securities Act. The
Shares to be purchased by the Purchaser pursuant to this Agreement are being
acquired for investment only and not with a view to any public distribution
thereof, and the Purchaser will not offer to sell or otherwise dispose of the
Shares so acquired by it in violation of any of the registration requirements of
the Securities Act or any comparable state laws.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 9 below).
(b) Notices and Consents. Each of the Parties will give any notices to,
make any filings with, and use commercially reasonable efforts to obtain any
authorizations, consents and approvals of governments and governmental agencies
in connection with consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, each of the Parties
will file any Notification and Report Forms and related material that such Party
may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the Xxxx-Xxxxx-Xxxxxx
Act, will use commercially reasonable efforts to obtain a waiver from the
applicable waiting period, and will make any further filings pursuant thereto
that may be necessary, proper or advisable in connection therewith.
(c) Operation of Business. Without the prior consent of the Purchaser
or except as otherwise contemplated by this Agreement, the Company will not
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 3B(f) above (other than clauses (v) or (viii) of such
section). In addition, the Company will continue to conduct its business in the
Ordinary Course of Business and will not (i) except in the Ordinary Course of
Business liquidate Inventory or accept product returns, (ii) accelerate
receivables, (iii) delay payables, or (iv) change in any material respect the
Company's practices in connection with the payment of payables in respect of raw
materials purchases. Notwithstanding the foregoing, the parties agree that prior
to Closing and without the Purchaser's prior consent the Company may distribute
out of the Company (i) cash dividends to the Sellers, (ii) cash bonuses to the
Company's employees, and (iii) to the Sellers or any other person or entity as
directed by the Sellers the Company owned vehicles and the Company leased
vehicles listed on the attachment to Section 3B(l) of the Disclosure Schedule
entitled "Charter Vehicles," except for the 1997 GMC plant truck. The Sellers
shall be responsible and liable for (i) all taxes and other costs and expenses
resulting from said distributions and (ii) the assumption of the lease
agreements and all obligations to make lease payments thereunder by the
distributees of the leased vehicles which shall be accomplished prior to
Closing.
(d) Preservation of Business. The Company will use commercially
reasonable efforts to maintain its business and properties, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers and employees.
(e) Full Access. Upon reasonable notice, the Company will permit
representatives of the Purchaser to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Company, to the premises, properties, personnel, books, records (including
tax records), contracts and documents of or pertaining to the Company. The
Purchaser reaffirms its obligations under the Confidentiality Agreement between
the Company and Trivest dated May 11, 2000 and shall be bound by such agreement
as an affiliate of Trivest. Notwithstanding anything in this Agreement to the
contrary, Purchaser agrees that prior to the dissemination of any press release
Sellers shall be afforded the opportunity to review and comment on such press
release, and unless required by federal or state securities laws or regulations,
the material terms of this Agreement shall not be released.
(f) Notice of Developments. Each Party will promptly give notice to the
other Party(ies) of its, his or her discovery of any material adverse
development which, had such development been in existence on the date hereof,
would constitute a breach of the representations and warranties contained in
Sections 3A and 3B (in the case of a Seller) or Section 4 (in the case of the
Purchaser). No disclosure by any Party pursuant to this Section 5(f) shall be
deemed to amend or supplement the Disclosure Schedules or to prevent or cure any
misrepresentation or breach of warranty.
6. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing:
(a) General. In the event that at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party may reasonably
request, all at the sole cost and expense of the requesting Party; provided,
however, that the taking of any action necessary to execute or deliver to the
Purchaser any stock powers and such other instruments of transfer as may be
necessary to transfer ownership of the Shares by the Sellers shall be borne by
the Sellers, jointly and severally.
(b) Transition. During the term of the Sellers' covenants not to
compete and covenants not to solicit, whether stated in Sections 6(d) and (e)
hereof or in the Employment Agreement(s) attached hereto as exhibits, the
Sellers will not take any action that is designed or intended to have the effect
of discouraging any lessor, licensor, customer, supplier, sales representative
or other business associate of the Company from maintaining the same business
relationships with the Company after the Closing as it maintained with the
Company prior to the Closing.
(c) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, occurrence,
event, incident, action, failure to act, or transaction on or prior to the
Closing Date involving the Company, each of the Parties will cooperate with the
contesting or defending Party and its or his counsel in the contest or defense,
all at the sole cost and expense of the contesting or defending Party (except to
the extent that the contesting or defending party is entitled to indemnification
therefor under this Agreement).
(d) Noncompetition.
--------------
(i) In order to induce the Purchaser to enter into this
Agreement, each Seller expressly covenants and agrees that, for a
period of five (5) years from and after the Closing Date, such Seller
will not, directly or indirectly, engage in or have any interest in any
sole proprietorship, partnership, corporation, limited liability
company or business or any other Person (other than the Purchaser or
any of its Subsidiaries), whether as an employee, officer, director,
partner, agent, security holder, consultant or otherwise, that directly
or indirectly is engaged in the Restricted Business of the Company in
the Restricted Area; provided, however, that nothing herein shall be
deemed to prevent the Seller from acquiring through market purchases
and owning, solely as an investment, less than five percent in the
aggregate of the equity securities of any class of any issuer whose
shares are registered under Section 12(b) or Section 12(g) of the
Securities Exchange Act, and are listed or admitted for trading on any
United States national securities exchange or are quoted on the
National Association of Securities Dealers Automated Quotations System,
or any similar system of automated dissemination of quotations of
securities prices in common use, so long as such Seller is not a member
of any "control group" (within the meaning of the rules and regulations
of the United States Securities and Exchange Commission) of any such
issuer.
(ii) Each Seller acknowledges and agrees that the covenants
provided for in this Section 6(d) are reasonable and necessary in terms
of time, area and line of business to protect the Purchaser's
legitimate business interests as a buyer of the Common Stock and in
protecting the Company's Trade Secrets. Each Seller further
acknowledges and agrees that such covenants are reasonable and
necessary in terms of time, area and line of business to protect the
Purchaser's other legitimate business interests, which include its
interests in protecting the Company's (i) valuable confidential
business information, (ii) substantial relationships with customers
throughout the Restricted Area and (iii) customer goodwill associated
with the Company's ongoing business. The Sellers expressly authorize
the enforcement of the covenants provided for in this Section 6(d) by
(A) the Purchaser and its Subsidiaries, (B) permitted assigns of the
Purchaser pursuant to clause (i) or (ii) of Section 12(c) hereof and
(C) the Company and any successors to the Company's business. The
covenants provided for in this Section 6(d) shall be construed as a
separate and independent covenant for each of the separate states,
territories and possessions included in the Restricted Area and, with
respect to the State of California, for each of the separate counties
of that state. To the extent that the covenant provided for in this
Section 6(d) may later be deemed by a court to be too broad to be
enforced with respect to its duration or with respect to any particular
activity or geographic area, the court making such determination shall
have the power to reduce the duration or scope of the provision, and to
add or delete specific words or phrases to or from the provision. The
provision as modified shall then be enforced.
(e) Non-Solicitation of Employees, Agents and Independent Contractors.
In order to induce the Purchaser to enter into this Agreement, each Seller
expressly covenants and agrees that for a period of five (5) years from and
after the Closing Date, such Seller will not, directly or indirectly, (i)
solicit for employment or employ or engage as an agent or independent contractor
(or attempt to solicit for employment or employ or engage as an agent or
independent contractor), for himself or herself or on behalf of any sole
proprietorship, partnership, corporation, limited liability company or business
or any other Person (other than the Purchaser or any of its Subsidiaries), any
employee of the Company (whether currently employed or engaged by the Company or
employed or engaged by the Company during the term of this non-solicitation
covenant) or any Person who was an employee, agent or independent contractor of
the Company at any time during the two (2) year period preceding the date
hereof, or (ii) encourage any such employee to leave his or her employment with
the Company or (iii) encourage any such agent or independent contractor to
terminate his, her or its engagement with the Company. The covenants provided
for in this Section 6(e) shall be construed as a separate and independent
covenant for each of the separate states, territories and possessions included
in the Restricted Area and, with respect to the State of California, for each of
the separate counties of that state. To the extent that the covenant provided
for in this Section 6(e) may later be deemed by a court to be too broad to be
enforced with respect to its duration or with respect to any particular activity
or geographic area, the court making such determination shall have the power to
reduce the duration or scope of the provision, and to add or delete specific
words or phrases to or from the provision. The provision as modified shall then
be enforced. Notwithstanding the foregoing, it shall not be a breach of this
covenant if any former, current or future employee, agent or independent
contractor of the Company as set forth in this Section 6(e) responds to general
advertising placed by the Seller or an entity in which the Seller is involved as
set forth in this Section 6(e). It shall be a breach of this covenant, however,
if any such employee, agent or independent contractor is hired as a result of
such general advertising.
(f) Confidentiality. In order to induce the Purchaser to enter into
this Agreement, each Seller expressly covenants and agrees that from and after
the Closing Date, no such Seller nor any of his Affiliates (to the extent any
such Affiliate has received Confidential Information or Trade Secrets) will
disclose, divulge, furnish or make accessible to anyone (other than the
Purchaser or any of its Affiliates or representatives) any Confidential
Information or Trade Secrets, or in any way use any Confidential Information or
Trade Secrets in the conduct of any business; provided, however, that nothing in
this Section 6(f) will prohibit the disclosure of any Confidential Information
or Trade Secrets (i) which is or are required to be disclosed by the Seller or
any such Affiliate in connection with any court action or any proceeding before
any Authority, (ii) in connection with the enforcement of any of the rights of
the Seller hereunder, or (iii) in connection with the defense by the Seller of
any claim asserted against him hereunder; provided, however, that in the case of
a disclosure contemplated by clause (i), no disclosure shall be made until the
Seller shall give notice to the Purchaser of the intention to disclose such
Confidential Information or Trade Secrets so that the Purchaser may contest the
need for disclosure, and the Seller will cooperate (and will cause his
Affiliates and their respective representatives to cooperate) with the Purchaser
in connection with any such proceeding. Notwithstanding any provision of this
Agreement which may be to the contrary (x) the Sellers shall be entitled to use
Confidential Information consisting of databases of contacts and customers for
personal purposes which do not constitute competition with the Company,
including community and charitable affairs, (y) the foregoing provisions
restricting the use of Confidential Information other than Trade Secrets shall
survive the Closing for a period of five years, and (z) the foregoing provisions
restricting the use of Trade Secrets shall survive the Closing for so long as
permitted by the California Uniform Trade Secrets Act.
(g) Section 338(h)(10) Election; Certain Tax Matters.
------------------------------------------------
(i) The Sellers will join with the Purchaser in timely making
an election under Section 338(h)(10) of the Code and Treasury
Regulations Section 1.338(h)(10)-1(d) (and any corresponding elections
under any applicable state and local laws) (collectively, a "Section
338(h)(10) Election") on Form 8023 with respect to the purchase and
sale of the Shares hereunder. The Sellers, jointly and severally, will
be liable for all Taxes of the Company for all periods ending prior to
the open of business on the Closing Date ("Pre-Closing Tax Periods")
(including all Taxes attributable to the making of the Section
338(h)(10) election, as the result of the recognition of any built-in
gain pursuant to the provisions of Section 1374 of the Code, or the
"recapture" of previously deducted items), and the Sellers, jointly and
severally, will indemnify the Purchaser and the Company from and
against any Losses arising out of any failure to pay such Tax.
(ii) The income of the Company will be apportioned to the
period up to the open of business on the Closing Date and the period
from and after the open of business on the Closing Date in accordance
with the provisions of Section 1362(e)(6)(D) of the Code by closing the
books of the Company as of the close of business on the last calendar
day immediately preceding the Closing Date. Taxes (such as property
Taxes) that are imposed on a periodic basis shall be allocated on a per
diem basis. The Sellers will be responsible for preparing and filing
all income Tax Returns of the Company relating to all Pre-Closing Tax
Periods. After the Closing has occurred, the Purchaser will provide, or
cause to be provided, to the Sellers, without charge, any information
that may reasonably be requested by the Sellers in connection with the
preparation of any Tax Returns relating to Pre-Closing Tax Periods. The
Sellers will allow the Purchaser an opportunity to review and comment
on such Tax Returns (including any amended Tax Returns.) The Sellers
will take no new positions on the Tax Returns of the Company that
relate to Pre-Closing Tax Periods that would adversely affect the
Company after the Closing Date.
(iii) Section 6(g)(iii) of the Disclosure Schedule sets forth
an allocation of the "Modified Adjusted Deemed Sales Price," as defined
in Treasury Regulations Section 1.338(h)(10)-1(f), among the assets of
the Company (the "Allocation Schedule"). Under the Allocation Schedule,
the allocation of the Purchase Price will be first to the fair market
value of the Company's assets as of the Closing Date and any excess
Purchase Price will be allocated to goodwill. $100,000 of the Purchase
Price will be allocated as consideration for the Sellers' covenants not
to compete and covenants not to solicit under Sections 6(d) and (e)
hereof. Within 90 days after the Closing Date, the Sellers and the
Purchaser shall exchange completed and executed copies of IRS Form 8023
(or other applicable form), required schedules thereto, and any similar
forms required by any state or local tax authority. If any changes are
required to these forms as a result of information which is first
available after the Closing Date, the Sellers and the Purchaser will in
good faith use commercially reasonable efforts to promptly agree on
such changes. The Purchaser and the Sellers each agree to file all Tax
Returns in accordance with the Allocation Schedule. The Purchaser will
pay when due the 1.5% California income tax on the Company's corporate
income arising from the Section 338(h)(10) Election.
(iv) The Purchaser and the Sellers shall cooperate fully, as
and to the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns pursuant to this Section 6(g)
and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other
Party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding,
and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Sellers shall, and the Purchaser shall cause the Company
to (A) retain all books and records with respect to Tax matters
pertinent to the Company relating to Pre-Closing Tax Periods until the
expiration of the statute of limitations (and, to the extent notified
by the Purchaser or the Sellers, any extensions thereof) of the
respective taxable periods, and to abide by all record retention
agreements entered into with any tax authority, and (B) give the other
Party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other Party so
requests, the Purchaser or the Sellers, as the case may be, shall allow
the other Party to take possession of such books and records.
(v) Notwithstanding anything contained in Section 7(b)(iv)
below or elsewhere in this Agreement to the contrary (but subject to
the provisions of paragraphs (ii), (iii) and (iv) of this Section
6(g)), the Sellers shall have the right to (a) control any audit or
proceeding by any taxing Authority, (B) initiate any claim for refund,
(C) file any amended return, (D) contest, defend against, resolve and
settle any assessment, notice of deficiency or other adjustment or
proposed adjustment of Taxes or (E) otherwise resolve any issues
relating to Losses which the Purchaser or the Company shall incur as a
result of any breach of the Sellers' covenants in Section 2(g) above,
this Section 6(g) or the Sellers' representations and warranties in
Section 3B(j) above and as to which the Purchaser is entitled to
indemnification from the Sellers pursuant to this Agreement ("Tax
Losses"); provided, however, that the Sellers shall consult with the
Purchaser in contesting any such assessment, notice of deficiency or
other adjustment or proposed adjustment of Taxes and shall, in good
faith, consider any reasonable advice from the Purchaser with respect
to any such contest.
7. Remedies for Breaches of This Agreement.
---------------------------------------
(a) Survival of Representations and Warranties. The representations and
warranties of the Sellers contained in Section 3 above and of the Purchaser
contained in Section 4 above shall survive the Closing and continue in full
force and effect subsequent to Closing, subject to the limitation periods
provided in Section 7(b). Any claim for which any Party shall have given proper
notice in accordance with the terms of this Agreement on or prior to the
expiration of the applicable limitation periods under Section 7(b) shall survive
until such claim is resolved pursuant to the terms of this Agreement. To
preserve any claim for breach of any such representation or warranty, the Party
claiming a breach shall be obligated to notify the party claimed to be in breach
in writing of any such breach, or facts that can reasonably be expected to give
rise to such breach, before termination of the applicable limitation period
under Section 7(b) in respect of such representation or warranty; otherwise,
such Party's claim for breach shall be forever barred.
(b) Indemnification.
---------------
(i) Subject to Section 7(a) above and the conditions and
limitations set forth in this Section 7(b), subsequent to the Closing
Date the Sellers shall, jointly and severally, indemnify, defend and
hold harmless the Purchaser from, against and in respect of any Losses
which the Purchaser shall suffer, sustain or become subject to by
virtue of or which arise out of, or result from any breach of the
representations and warranties of the Sellers set forth in Section 3B
above.
(ii) Subject to Section 7(a) above and the conditions and
limitations set forth in this Section 7(b), subsequent to the Closing
Date each Seller shall, severally and not jointly, indemnify, defend
and hold harmless the Purchaser and the Company from, against and in
respect of any Losses which the Purchaser or the Company shall suffer,
sustain or become subject to by virtue of or which arise out of, or
result from, any breach of the representations and warranties of the
Seller set forth in Section 3A above and any breach by the Seller of
his or her covenants and agreements set forth in this Agreement;
provided, however, that such indemnification obligations of the Sellers
with respect to the covenants contained in Sections 2(g) and 6(g) above
shall be joint and several.
(iii) Subject to Section 7(a) above and the conditions set
forth in this Section 7(b), subsequent to the Closing Date the
Purchaser shall indemnify, defend and hold harmless the Sellers and
their respective estates, heirs, personal representatives or successors
from, against and in respect of any Losses which the Sellers shall
suffer, sustain or become subject to by virtue of or which arise out
of, or result from, any breach by the Purchaser of its representations,
warranties covenants and agreements set forth in this Agreement.
(iv) Promptly after the assertion by any third party of any
claim, demand or notice (a "Third Party Claim") against any Person or
Persons entitled to indemnification under this Section 7(b) (the
"Indemnified Parties") that results or may result in the incurrence by
such Indemnified Parties of any Losses for which such Indemnified
Parties would be entitled to indemnification pursuant to this
Agreement, such Indemnified Parties shall promptly notify the parties
from whom such indemnification could be sought (the "Indemnifying
Parties") of such Third Party Claim. Thereupon, the Indemnifying
Parties shall have the right, upon written notice (the "Defense
Notice") to the Indemnified Parties within 30 days after receipt by the
Indemnifying Parties of notice of the Third Party Claim (or sooner if
such claim so requires) to conduct, at their own expense, the defense
against the Third Party Claim in their own names or, if necessary, in
the names of the Indemnified Parties. The Defense Notice shall specify
the counsel the Indemnifying Parties shall appoint to defend such Third
Party Claim (the "Defense Counsel") and the Indemnified Parties shall
have the right to approve the Defense Counsel, which approval shall not
be unreasonably withheld. In the event the Indemnified Parties and the
Indemnifying Parties cannot agree on such counsel within 10 days after
the Defense Notice is given, then the Indemnifying Parties shall
propose an alternate Defense Counsel, which shall be subject again to
the Indemnified Parties' approval which approval shall not be
unreasonably withheld. Any Indemnified Party shall have the right to
employ separate counsel in any such Third Party Claim and/or to
participate in the defense thereof, but the fees and expenses of such
counsel shall not be included as part of any Losses incurred by the
Indemnified Party unless (A) the Indemnifying Parties shall have failed
to give the Defense Notice within the prescribed period, (B) such
Indemnified Party shall have received an opinion of counsel, reasonably
acceptable to the Indemnifying Parties, to the effect that the
interests of the Indemnified Party and the Indemnifying Parties with
respect to the Third Party Claim are sufficiently adverse to prohibit
the representation by the same counsel of both parties under applicable
ethical rules, or (C) the employment of such counsel at the expense of
the Indemnifying Parties has been specifically authorized by the
Indemnifying Parties. The Party or Parties conducting the defense of
any Third Party Claim shall keep the other Parties apprized of all
significant developments and shall not enter into any settlement,
compromise or consent to judgment with respect to such Third Party
Claim unless the Company and the Sellers consent, such consent not to
be unreasonably withheld.
(v) Any amounts payable by the Sellers, or any of them, under
this Section 7(b) shall be satisfied solely by resort to the Escrow
Funds, except for amounts payable as a result of Losses arising out of
Environmental Claims under Section 10(c) and amounts payable pursuant
to the Sellers' guarantee of accounts receivable under Section 10(a),
which amounts shall be paid by the Sellers to the Purchaser without
regard to the Escrow Funds under this Section 7(b)(v), the cap under
Section 7(b)(viii), and the $150,000.00 deductible under Section
7(b)(vii). The Escrow Funds shall consist of $1,850,000 of WinsLoew
common equity to be purchased by the Sellers at Closing pursuant to the
Subscription and Shareholders' Agreement(s) (the "Escrow Funds") and to
be delivered to and held in escrow by SunTrust Bank, Atlanta office, as
escrow agent (the "Escrow Agent") pursuant to the terms of the Escrow
Agreement. As provided in the Escrow Agreement, the Escrow Funds shall
be held in an account (the "Escrow Account") to provide indemnification
to the Purchaser and the Company as provided in Section 7 hereof. To
the extent that the stock constituting the Escrow Funds is used to
satisfy any indemnification by the Sellers under Section 7 hereof, the
stock will be valued at such time as the most recent valuation, but in
no event will the stock be valued at a price less than the purchase
price per share paid at Closing.
(vi) No indemnification will be required under this Section 7
unless the person claiming the right to be indemnified gives notice to
the person from which it is claiming indemnification of the facts the
claimant thinks are the basis for such indemnification within 18 months
subsequent to the Closing Date, with the exception that on any
Environmental Claim under Section 10(c) the claimant shall have 15
years subsequent to the Closing Date to give such notice, and on claims
for breaches of the representations and warranties regarding title to
securities and authority contained in Section 3A, Section 3B(a) and (d)
and claims related to Taxes under Section 2(g), Section 3B(j), and
Section 6(g), the claimant shall have until the expiration of the
applicable statute of limitations to give such notice.
(vii) Except as otherwise stated in this Agreement, no party
will be required to indemnify another party until the aggregate amount
of the agreed to or adjudicated indemnification claims against such
party shall exceed the deductible amount of $150,000, and once
exceeded, the Sellers shall be responsible for all indemnification
claims back to dollar one; provided, that the foregoing limitation will
not apply to payments pursuant to Section 2.
(viii) Notwithstanding any other provision of this Agreement,
the Sellers shall, in the aggregate have no liability to make
indemnification payments under this Agreement in excess of
$1,850,000.00, except for Losses arising out of an Environmental Claim
under Section 10(c) and amounts payable pursuant to the Sellers'
guarantee of accounts receivable under Section 10(a), which Losses and
amounts payable shall not be subject to any monetary limit.
(c) Effect of Knowledge of Breach; Determination of Losses; Treatment of
Indemnification Payments.
(i) The Purchaser and the Company, on the one hand, and the
Sellers, on the other hand, shall not be entitled to indemnification
with respect to a breach of any representation or warranty made by the
other Party(ies) under this Agreement if such Party(ies) can prove by a
preponderance of the evidence that such other Party(ies) had actual
knowledge at any time on or prior to the Closing Date of the events or
conditions constituting or resulting in such breach of such
representation or warranty.
(ii) The amount of any Losses subject to indemnification under
Sections 7(b)(i) and (ii) above shall be calculated net of any amounts
which have been previously recovered by the Purchaser or the Company
under insurance policies or other collateral sources. In the event any
such amounts recovered or recoverable under insurance policies or other
collateral sources are not received before any claim for
indemnification is paid pursuant to this Section 7(b), then the
Purchaser or the Company shall pursue such insurance policies or
collateral sources with reasonable diligence (unless the Purchaser or
the Company shall notify the Sellers that they have elected not to
pursue such insurance policies or collateral sources, in which case,
notwithstanding any provision of this Agreement to the contrary,
neither the Purchaser nor the Company shall be entitled to
indemnification with respect to such Losses), and in the event they
receive any recovery, the amount of such recovery shall be applied
first, to reimburse the Purchaser and the Company for their
out-of-pocket expenses (including reasonable attorneys' fees) expended
in pursuing such recovery, second, to refund any indemnification
payments made by the Sellers which would not have been so paid had such
recovery been obtained prior to such payment, and third, any excess to
the Purchaser. In addition, all Losses subject to indemnification
hereunder shall be calculated net of any tax benefits which have been
actually realized by the Purchaser or the Company as a result thereof
plus the net present value (using a discount factor of 8.5% per annum
and assuming the income tax rates then in effect for any given period
remain unchanged) of tax benefits which are reasonably probable of
realization by the Purchaser or the Company in subsequent tax years.
Purchaser acknowledges that the lessors of the Properties are
considered collateral sources under this paragraph.
(iii) All indemnification payments under this Section 7 shall
be deemed adjustments to the Purchase Price.
(iv) Notwithstanding anything to the contrary contained in
this Agreement, the Purchaser and the Company agree: (A) to pursue,
with reasonable diligence, all collateral sources (including without
limitation the lessors of the Properties) in connection with any Losses
arising from a breach of the representations and warranties of the
Sellers in Section 3B(u) hereof; and (B) to notify the Sellers of the
discovery of such Loss. If, notwithstanding such reasonable diligence,
the Purchaser and the Company have not fully recovered under any such
collateral sources or received reasonable assurance that a full
recovery is forthcoming with respect to such Loss, then, following the
lapse of 180 days following the date of the notice in clause (B) above,
the Purchaser and the Company may pursue their indemnity rights under
Section 7(b) hereof with respect to such Loss.
(d) Enforcement of Escrow Agreement. Notwithstanding any other
provisions contained herein, the costs of enforcement of the Escrow Agreement by
the Purchaser or either Seller shall not constitute Losses hereunder. Rather,
such costs and expenses shall be considered "Litigation Expenses" within the
meaning of the Escrow Agreement and, therefore, paid in accordance with the
terms of the Escrow Agreement.
(e) No Contribution from Company. Each Seller hereby waives any rights
to seek or obtain indemnification or contribution from the Company for Losses
pursuant to Section 7 or the Escrow Agreement as a result of any breach by the
Company of any representation, warranty or covenant (other than covenants to be
performed by the Company after the Closing) contained in this Agreement.
(f) Assignment by Purchaser. Provided that the Closing shall occur, the
Purchaser hereby assigns and transfers to the Company, effective as of the
Closing, all benefits of the Purchaser pursuant to Sections 6 and 7 above.
(g) Exclusive Remedy. The remedies provided in this Section 7
constitute the only and exclusive remedies for recoveries in connection with the
transactions described in this Agreement, whether or not any Losses for which
indemnity is asserted derive from a Third Party Claim.
8. No Shop. From the date of this Agreement until the earlier of (i)
the Closing Date, or (ii) the termination of this Agreement, the Company shall
not, and the Sellers shall cause the Company and their respective officers,
directors, employees and other agents not to, directly or indirectly, take any
action to solicit, initiate or encourage any offer or proposal or indication of
interest in a merger, consolidation or other business combination involving any
equity interest in, or a substantial portion of the assets of the Company, other
than in connection with the transactions contemplated by this Agreement. The
Company and the Sellers shall immediately advise the Purchaser of the terms of
any written offer, proposal or indication of interest that they receive or
otherwise become aware of.
9. Conditions to Obligation to Close.
---------------------------------
(a) Conditions to Obligation of the Purchaser. The obligation of the
Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in Section 3
above that are qualified as to their materiality shall be true
and correct and any such representations and warranties that
are not so qualified shall be true and correct in all material
respects at and as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date
of this Agreement);
(ii) the Sellers and the Company shall have performed and
complied with all of their respective covenants hereunder in all
material respects through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of
any of the transactions contemplated by this Agreement, and no
action, suit, claim or proceeding shall be pending before any
Authority which seeks to prohibit or enjoin the consummation
of the transactions contemplated by this Agreement;
(iv) each of the Sellers shall have delivered to the Purchaser
a certificate to the effect that the conditions specified
above in Section 9(a)(i) and (ii), as they pertain to each
Seller, have been satisfied in all respects;
(v) the Sellers shall have delivered to the Purchaser a
certificate to the effect that the conditions specified above
in Section 9(a)(i) and (ii), as they pertain to the Company,
have been satisfied in all respects;
44
(vi) all applicable waiting periods (and any extensions thereof)
under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or otherwise
been terminated;
(vii) the Sellers shall have delivered to the Purchaser all of
the items under Section 2(f) herein; and
(viii) there shall be no payables or receivables between the
Sellers and the Company or between Affiliates of the Sellers and
the Company.
The Purchaser may waive any condition specified in this Section 9(a) if
it executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at
and as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this
Agreement);
(ii) the Purchaser shall have performed and complied with all of
its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of
any of the transactions contemplated by this Agreement, and no
action, suit, claim or proceeding shall be pending before any
Authority which seeks to prohibit or enjoin the consummation
of the transactions contemplated by this Agreement;
(iv) the Purchaser shall have delivered to the Sellers a
certificate to the effect that each of the conditions
specified above in Section 9(b)(i) and (ii) has been satisfied
in all respects;
(v) all applicable waiting periods (and any extensions
thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired
or otherwise been terminated; and
(vi) the Purchaser shall have delivered to the Seller all of
the items under Section 2(f) herein.
The Sellers may waive any condition specified in this Section 9(b) if
they execute a writing so stating at or prior to the Closing.
10. Additional Agreements.
---------------------
(a) Sellers' Guarantee of Accounts Receivable.
-----------------------------------------
(i) With respect to accounts receivable on the Closing Balance
Sheet which as of the Closing are 90 days or over from the invoice date
thereof (the "90 and Over Accounts Receivable"), the Sellers guarantee
the collectibility of the 90 and Over Accounts Receivable in full minus
any remaining reserve for bad debts included in the Closing Balance
Sheet.
(ii) The Purchaser agrees to use efforts consistent with the
Company's past custom and practice to cause the Company to collect all
90 and Over Accounts Receivable, but shall not be obligated to resort
to litigation. Any sums payable by account debtors on account of any
accounts receivable of such account debtors shall be credited to the
earliest invoices of the Company to such account debtors, unless
specifically directed otherwise by the account debtor. Subject to the
foregoing, to the extent any 90 and Over Accounts Receivable existing
at the Closing are unpaid for a period of 90 days after the Closing,
the Purchaser shall send written notice to the Sellers indicating the
specific account debtors, the amount of the unpaid invoices
representing 90 and Over Accounts Receivable to each such account
debtor and the total of all such unpaid 90 and Over Accounts
Receivable. The Sellers shall pay the Purchaser the amount of all such
unpaid 90 and Over Accounts Receivable minus any remaining reserve for
bad debts included in the Closing Balance Sheet within 30 days of the
receipt of any notice pursuant to this Section 10(a)(ii) on the
condition that the Purchaser shall simultaneously cause the Company to
assign such unpaid 90 and Over Accounts Receivable (the "Assigned
Receivables") to the Sellers. Such assignment shall include the right
to xxx as an assignee of the Company. In the event that after such
assignment the Company receives any payment on the Assigned
Receivables, the Purchaser shall cause the Company to promptly remit
such amount to the Sellers. Thereafter, the Sellers, as owner of the
Assigned Receivables, may take any action the Sellers deem necessary to
collect the Assigned Receivables and any collections shall be the
property of the Sellers. The Purchaser agrees to cooperate and shall
cause the Company to cooperate with the Sellers in any action the
Sellers wishes to take to collect the Assigned Receivables consistent
with the Company's past custom and practice . In the event the
Purchaser does not want to assign any Account Receivable to the Sellers
because it does not want the Sellers to initiate collection action
thereon, the Sellers shall be relieved of any liability under this
Section 10(a) with respect to such 90 and Over Accounts Receivable.
(iii) In the event any 90 and Over Accounts Receivable is
subject to a valid dispute by the account debtor and/or the Purchaser
wishes to grant a discount on any 90 and Over Accounts Receivable, the
Purchaser shall send written notice or notices to the Sellers
indicating the specific account debtors and the amount of the dispute
or discount. The Purchaser shall consult with the Sellers with respect
to the resolution of any dispute and/or the amount of any discount and
shall not settle any such dispute or grant any discount without the
consent of the Sellers, which consent shall not be unreasonably
withheld. Where consent is given to the settlement of any dispute
and/or the granting of any discount, the Sellers shall pay the
Purchaser the difference between the original amount of the 90 and Over
Accounts Receivable and the amount actually received by the Purchaser
after settlement or discount, with payment to be made within 30 days
after the settlement or granting of the discount. Where consent is
withheld by the Sellers, the Purchaser may either assign the 90 and
Over Accounts Receivable, or settle the dispute or grant the discount
at its own expense and the Sellers shall be relieved of any liability
under this Section 10(a) with respect to such 90 and Over Accounts
Receivable.
(iv) Any amounts paid by the Sellers to the Purchaser under
this Section 10(a) shall be paid in cash without regard to the Escrow
Funds under Section 7(b)(v), the cap under Section 7(b)(viii), and the
$150,000.00 deductible under Section 7(b)(vii).
(b) Litigation. Notwithstanding the disclosures made by the Sellers in
Section 3B(r) of the Disclosure Schedule, the Sellers shall be responsible for
and shall pay the Purchaser the full amount of all Losses resulting from the
matters described in Section 3B(r) of the Disclosure Schedule which are not
covered by insurance, subject to the provisions of Section 7. Such litigation
shall be considered to be a "Third Party Claim" and shall be handled in
accordance with the provisions of Section 7(b)(iv) of this Agreement.
(c) Environmental Matters. Notwithstanding the disclosures made by the
Sellers in Section 3B(u) of the Disclosure Schedule, but subject to Section 7(c)
hereof, the Sellers shall be responsible for payment of any and all Losses
relating to any Environmental Claim arising out of the ownership or operation of
the Company prior to the Closing Date. Said Losses shall be paid by the Sellers
to the Purchaser without regard to the Escrow Funds under Section 7(b)(v), the
cap under Section 7(b)(viii), and the $150,000.00 deductible under Section
7(b)(vii).
(d) Product Returns. Notwithstanding the disclosures made by the
Sellers in Section 3B(z) of the Disclosure Schedule, in the event within 18
months subsequent to Closing (i) customers of the Company return any defective
or non-conforming merchandise sold prior to Closing, (ii) the Company is
required to provide any customers with a credit against their accounts
receivable within such 18-month period as a result of the receipt of defective
or non-conforming merchandise sold prior to Closing, or (iii) any product
warranty claims are brought with respect to merchandise sold prior to Closing
which are not covered by insurance, the Sellers shall be required to pay the
Purchaser the amount equal to the sum of (A) the difference between the original
sales price of the returned merchandise and the resale price thereof, (B)
re-work costs and shipping costs (net of any recoveries from shippers), and (C)
the cost of any returned merchandise which was sold prior to Closing and which
is not resold by the Company.
47
(e) Product Liability Insurance. Notwithstanding the disclosures made
by the Sellers in Section 3B(aa) of the Disclosure Schedule, the Sellers shall
cause the Company to have a product liability insurance tail policy in effect as
of the Closing Date insuring the Company against any and all Pre-Closing Product
Liabilities as defined under Section 3B(aa) with respect to injuries to property
or persons occurring subsequent to Closing with the same policy limits as
currently exist per occurrence and in the aggregate. The Sellers shall be
responsible for paying the premiums on said insurance policy and shall maintain
said insurance coverage for the Pre-Closing Product Liabilities until the fifth
(5th) anniversary of the Closing Date.
(f) Software Licenses. Notwithstanding the disclosures made by the
Sellers in Section 3B(i) of the Disclosure Schedule, the Sellers shall perform
all acts necessary to cause the Company to obtain all required computer software
licenses and/or network licenses (the "Licenses") for computer software and/or
networks currently owned or operated by the Company necessary to bring the
Company into compliance with all licensing requirements. In the event that all
necessary licenses have not been obtained as of the Closing, the Sellers shall
be responsible for any and all Losses incurred by the Company after Closing
related to the Company's non-compliance with said licensing requirements
including, but not limited to, the payment of any audit fees, fines, license
fees, user fees, network fees, installation fees, service charges, etc. Said
Losses shall be paid out of the Escrow Funds by the Sellers when the Losses are
incurred by the Company without regard to the $150,000 deductible under Section
7(b)(vii).
11. Termination.
-----------
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Purchaser and the Sellers may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
(ii) the Purchaser or the Sellers may terminate this Agreement
by giving written notice to the other party at any time prior
to the Closing in the event the Company has within the
previous 10 Business Days given the other party any notice
pursuant to Section 5(f) above;
(iii) the Purchaser may terminate this Agreement by giving
written notice to the Sellers (A) at any time prior to the
Closing in the event that the Sellers or the Company have
breached any representation, warranty or covenant contained in
this Agreement in any material respect, the Purchaser has
notified the Sellers of the breach, and the breach has
continued without cure for a period of 30 days after the
notice of breach, (B) at any time prior to the Closing if the
Closing shall not have occurred as of the Closing Date by
reason of the failure of any condition precedent under
Section?9(a) hereof (unless the failure results primarily from
the Purchaser breaching any representation, warranty or
covenant contained in the Agreement), or (C) at any time prior
to the expiration of 45 days from June 8, 2000, the date of
the Sellers' acceptance of the letter of intent, should the
Purchaser not be satisfied, at its sole discretion, with the
results of its due diligence review of the Company; and
(iv) the Sellers may terminate this Agreement by giving
written notice to the Purchaser at any time prior to the
Closing (A) in the event the Purchaser has breached any
material representation, warranty or covenant contained in
this Agreement in any material respect, the Sellers have
notified the Purchaser of the breach, and the breach has
continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have occurred
as of the Closing Date, by reason of the failure of any
condition precedent under Section 9(b) hereof (unless the
failure results primarily from the Sellers or the Company
breaching any representation, warranty or covenant contained
in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 11(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in this Agreement shall survive the
termination of this Agreement.
12. Miscellaneous.
-------------
(a) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(c) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided, however, that, unless expressly prohibited
hereunder, (i) any or all of the rights and interests of the Purchaser hereunder
may be assigned to any purchaser of substantially all of the assets of
Purchaser, (ii) any or all of the rights and interests of the Purchaser
hereunder may be assigned as a matter of law to the surviving entity in any
merger of the Purchaser, and (iii) any or all of the rights and interests of the
Purchaser hereunder may be assigned as collateral security to any lender or
lenders (including any agent for any such lender or lenders) providing financing
to the Purchaser in connection with the transactions contemplated hereby, or to
any assignee or assignees of any such lender, lenders or agent (it being
understood that in any or all of the cases described in clauses (i), (ii) and
(iii) above the Purchaser nonetheless shall remain responsible and liable for
the performance of all of its obligations hereunder).
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
(f) Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given two business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to Seller(s):
Xxxxxx X. Xxxxxxx
00000 Xxxxx Xx.
Xxxxxx Xxxx, XX 00000
(000) 000-0000
Fax: (000) 000-0000
Xxxxx X. Xxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxx Xxxxx, XX 91024(626) 355-0323
Fax: (000) 000-0000
With copies to (which shall not constitute notice to the Sellers):
Xxxx X. Xxxxxx, Esq.
Jeffer, Mangels, Xxxxxx & Xxxxxxx, LLP
2121 Avenue of the Stars
Xxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Fax:(000)000-0000
If to the Purchaser:
WinsLoew Furniture, Inc.
Attention: Xxxxx Xxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
48
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(g) Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of California
(i.e., without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California) Subject to Section 12(i) and the last sentence of this Section
12(g), each of the Parties hereby (i) irrevocably submits to the exclusive
jurisdiction of any state or federal court sitting in Los Angeles County,
California in any action, suit or proceeding arising out of or relating to this
Agreement that by law cannot be resolved by arbitration and agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, (ii) waives, and agrees not to assert in any such suit, action
or proceeding, any claim that (A) such Party is not personally subject to the
jurisdiction of such court or of any other court to which proceedings in such
court may be appealed, (B) such suit, action or proceeding is brought in an
inconvenient forum or (C) the venue of such suit, action or proceeding is
improper, (iii) expressly waives any requirement for the posting of a bond by
the party bringing such suit, action or proceeding and (iv) consents to process
being served in any such suit, action or proceeding by mailing, certified mail,
return receipt requested, a copy thereof to such party at the address in effect
for notices hereunder, and agrees that such services shall constitute good and
sufficient service of process and notice thereof. Nothing in this Agreement
shall affect or limit any right to serve process in any other manner permitted
by law or shall be construed to prevent the Purchaser or the Company from
bringing and pursuing, or in any way limit, the right of the Purchaser or the
Company to bring or pursue, any action arising out of or in connection with
Sections 6(d), (e) or (f) in any jurisdiction where Seller is allegedly
conducting the prohibited activity.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Purchaser and the Sellers. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
49
(i) Arbitration. If the Parties should have a material dispute arising
out of or relating to this Agreement or the Parties' respective rights and
duties (other than a dispute in connection with the determination of the Net
Working Capital at Closing, which shall be resolved in accordance with Section
2(h) above), then the Parties will resolve such dispute in the following manner:
(i) any Party may at any time deliver to the others a written dispute notice
setting forth a brief description of the issue for which such notice initiates
the dispute resolution mechanism contemplated by this Section 12(i); (ii) during
the 45 day period following the delivery of the notice described in clause (i)
above, appropriate representatives of the various Parties will meet and seek to
resolve the disputed issue through negotiation, (iii) if representatives of the
Parties are unable to resolve the disputed issue through negotiation, then
within 30 days after the period described in clause (ii) above, the Parties will
refer the issue (to the exclusion of a court of law) to final and binding
arbitration in Los Angeles County, California in accordance with the then
existing rules (the "Rules") of the American Arbitration Association ("AAA"),
and judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof; provided, however, that the law applicable to
any controversy shall be the law of the State of California, regardless of
principles of conflicts of laws. In any arbitration pursuant to this Agreement,
(A) discovery shall be allowed and governed by Section 1283.05 of the California
Code of Civil Procedure and (B) the award or decision shall be rendered by an
arbitrator appointed by Purchaser and the Sellers. In the event of failure of
Purchaser and the Sellers to agree within 60 days after the commencement of the
arbitration proceeding upon the appointment of the arbitrator, the arbitrator
shall be appointed by the AAA in accordance with the Rules. Upon the selection
of the arbitrator, an award or decision shall be rendered within no more than 45
days. Notwithstanding the foregoing, the request by any Party for preliminary or
permanent injunctive relief, whether prohibitive or mandatory, shall not be
subject to arbitration and may be adjudicated in any jurisdiction where any
Seller is subject to personal jurisdiction and where venue is proper.
(j) Equitable Remedies. Each Seller acknowledges and agrees that the
Purchaser and the Company would not have an adequate remedy at law in the event
any of the provisions of Section 6(d), (e) and (f) of this Agreement are not
performed in accordance with their specific terms or are breached. Accordingly,
notwithstanding anything contrary in this Agreement, each Seller agrees that the
Purchaser and the Company shall be entitled to an immediate injunction or
injunctions to prevent breaches of any provision of any of Section 6(d), (e) and
(f) and to enforce specifically the terms and provisions thereof in any action
instituted in any court of competent jurisdiction. The obligations of the
Sellers under Section 6(d), (e) and (f) of this Agreement shall constitute
covenants that are independent from any obligations that are or in the future
may be owing to the Sellers by the Purchaser or the Company and, accordingly,
shall be enforceable by the Purchaser and the Company notwithstanding any breach
or alleged breach by the Purchaser or the Company of any obligation to the
Sellers.
(k) Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT SUCH PARTY MAY LEGALLY AND
EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING
HEREUNDER.
(l) Prevailing Parties. In the event of any litigation with regard to
this Agreement, the prevailing Party or Parties shall be entitled to receive
from the nonprevailing Party or Parties and the nonprevailing Party or Parties
shall pay all reasonable fees and expenses of counsel for the prevailing Party
or Parties.
(m) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
51
F:\3257\0014\CHARTERSTOCKPURCHASEAGREEMENTCLEANFINAL.DOC
(n) Expenses. Except as provided herein, each Party shall pay all costs
and expenses incident to its or his negotiation and preparation of this
Agreement and to such Party's performance and compliance with all agreements and
conditions contained herein its or his part to be performed or complied with,
including the fees, expenses and disbursements of such Party's counsel and
accountants and other advisors (provided that at any time after Closing, the
Purchaser may cause the Company to reimburse the Purchaser or any of its
Affiliates for any such costs or expenses incurred by it or its Affiliates).
Notwithstanding the foregoing, (i) the Purchaser shall pay all filing fees
payable by the Parties in connection with the filing by the Parties pursuant to
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 and (ii) the Purchaser
acknowledges and agrees that the Company has borne certain of the costs and
expenses of the Sellers (including their legal fees and expenses) in connection
with this Agreement and the transactions contemplated hereby. Neither the
Purchaser nor the Company will have any liability for any such costs or expenses
of the Sellers after the Closing.
(o) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
specification of any dollar amount in the representations and warranties or
otherwise in this Agreement or in the Disclosure Schedule is not intended and
shall not be deemed to be an admission or acknowledgment of the materiality of
such amounts or items, nor shall the same be used in any dispute or controversy
between the parties to determine whether any obligation, item or matter (whether
or not described herein or included in any schedule) is or is not material for
purposes of this Agreement.
SIGNATURES APPEAR ON THE FOLLOWING PAGE
IN WITNESS WHEREOF, the Parties hereto have executed this Stock
Purchase Agreement as of the date first above written.
WINSLOEW FURNITURE, INC.
By:___________________________________
Its:___________________________________
CHARTER FURNITURE CORPORATION
By:___________________________________
Its:___________________________________
Xxxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
