1
EXHIBIT 10.57
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
THE XXXXX GROUP, INC.
A DELAWARE CORPORATION
(BUYER)
XXXXXX X. XXXXX, INDIVIDUALLY
(SELLER)
AND
GLASSMARKS, INC.
A WASHINGTON CORPORATION,
(COMPANY)
DATED AS OF JULY 24, 1998
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TABLE OF CONTENTS
PAGE
PREAMBLE........................................................................................................ 1
ARTICLE 1-SALE OF STOCK......................................................................................... 1
ARTICLE 2-CONSIDERATION AND MANNER OF PAYMENT................................................................... 2
2.1 PURCHASE PRICE................................................................................ 2
2.2 PAYMENT OF PURCHASE PRICE..................................................................... 2
2.3 NO LIABILITIES................................................................................ 2
ARTICLE 3-SELLER'S REPRESENTATIONS AND WARRANTIES............................................................... 2
3.1 SELLER PARTIES AUTHORITY...................................................................... 2
3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY................................................. 3
3.3 SUBSIDIARIES.................................................................................. 3
3.4 ARTICLES OF INCORPORATION, BYLAWS, OFFICERS AND DIRECTORS..................................... 3
3.5 CAPITAL STOCK................................................................................. 3
3.6 OPTIONS, ETC.................................................................................. 3
3.7 TITLE TO COMPANY SHARES....................................................................... 4
3.8 FINANCIAL STATEMENTS.......................................................................... 4
3.9 ABSENCE OF UNDISCLOSED LIABILITIES............................................................ 4
3.10 INVENTORIES, ACCOUNTS RECEIVABLE AND PAYABLE.................................................. 4
3.11 TAXES......................................................................................... 4
3.12 MATERIAL CONTRACTS............................................................................ 4
3.13 REAL PROPERTY................................................................................. 5
3.14 PERSONAL PROPERTY............................................................................. 5
3.15 LITIGATION.................................................................................... 5
3.16 COMPLIANCE WITH APPLICABLE LAWS............................................................... 5
3.17 INTELLECTUAL PROPERTY......................................................................... 5
3.18 TRANSACTION NOT A BREACH...................................................................... 6
3.19 CONDUCT OF BUSINESS........................................................................... 7
3.20 INSURANCE POLICIES............................................................................. 8
3.21 BANK ACCOUNTS.................................................................................. 8
3.22 LICENSES AND PERMITS........................................................................... 8
3.23 EMPLOYEE BENEFIT PLANS......................................................................... 8
3.24 HEALTH, SAFETY AND ENVIRONMENT................................................................. 9
3.25 SALARIES....................................................................................... 9
3.26 PERSONNEL AGREEMENTS, PLANS AND ARRANGEMENTS................................................... 9
3.27 WORKERS COMPENSATION.......................................................................... 10
3.28 CUSTOMERS..................................................................................... 10
3.29 AFFILIATE TRANSACTIONS........................................................................ 10
3.30 FRANCHISE REGULATIONS......................................................................... 10
(i)
3
3.31 NO MISREPRESENTATION.......................................................................... 10
ARTICLE 4-BUYER'S REPRESENTATIONS AND WARRANTIES................................................................ 10
4.1 ORGANIZATION.................................................................................. 10
4.2 AUTHORIZATION................................................................................. 10
4.3 TRANSACTION NOT A BREACH...................................................................... 11
4.4 XXXXX GROUP SHARES............................................................................ 11
4.5 NO MISREPRESENTATION.......................................................................... 11
ARTICLE 5-CLOSING............................................................................................... 11
5.1 TIME AND PLACE................................................................................ 11
5.2 DELIVERIES OF THE SELLER...................................................................... 11
5.3 DELIVERIES OF BUYER........................................................................... 12
5.4 LIEN SEARCHES................................................................................. 13
5.5 POST-CLOSING MATTERS...........................................................................13
ARTICLE 6-COVENANT NOT TO COMPETE............................................................................... 13
6.1 SELLER'S KNOWLEDGE.............................................................................13
6.2 NON-COMPETE................................................................................... 14
6.3 NON-SOLICITATION.............................................................................. 14
6.4 INTERFERENCE WITH RELATIONSHIPS............................................................... 14
6.5 CONFIDENTIAL INFORMATION...................................................................... 14
6.6 PROPERTY OF THE COMPANY/BUSINESS.............................................................. 15
6.7 BLUE-PENCIL................................................................................... 15
6.8 REMEDIES...................................................................................... 15
ARTICLE 7-POST-CLOSING COVENANTS................................................................................ 15
7.1 INDEMNIFICATION............................................................................... 15
7.2 LIABILITY FOR TAXES........................................................................... 19
7.3 REGISTRATION OF XXXXX GROUP SHARES............................................................ 20
7.4 SETOFF........................................................................................ 20
ARTICLE 8-MISCELLANEOUS......................................................................................... 20
8.1 NOTICES, CONSENTS, ETC........................................................................ 20
8.2 PUBLIC ANNOUNCEMENTS.......................................................................... 21
8.3 SEVERABILITY.................................................................................. 21
8.4 AMENDMENT AND WAIVER.......................................................................... 21
8.5 DOCUMENTS..................................................................................... 21
8.6 COUNTERPARTS.................................................................................. 21
8.7 EXPENSES...................................................................................... 22
8.8 CONSTRUCTION.................................................................................. 22
8.9 HEADINGS...................................................................................... 22
8.10 ASSIGNMENT.................................................................................... 22
(ii)
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8.11 DEFINITIONS................................................................................... 22
8.12 ENTIRE AGREEMENT.............................................................................. 24
8.13 THIRD PARTIES................................................................................. 24
8.14 INTERPRETATIVE MATTERS........................................................................ 25
8.15 KNOWLEDGE..................................................................................... 25
8.16 NO STRICT CONSTRUCTION........................................................................ 25
EXHIBITS
SCHEDULES
(iii)
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GLOSSARY OF DEFINED TERMS
"Affiliate"...................................................................................Section 8.11
"Affiliate Transactions"......................................................................Section 3.29
"Agreement"...................................................................................Introduction
"Asset Purchase Agreement" .................................................................. Section 8.11
"Business"........................................................................................Preamble
"Buyer".......................................................................................Introduction
"Buyer Indemnified Party"....................................................................Section 7.1.1
"Buyer Taxes"...............................................................................Section 7.2(a)
"Closing"......................................................................................Section 5.1
"Closing Date".................................................................................Section 5.1
"Code"........................................................................................Section 8.11
"Company".....................................................................................Introduction
"Company Liabilities"..........................................................................Section 2.3
"Company Shares"..................................................................................Preamble
"Confidential Information".....................................................................Section 6.5
"Current Liabilities"..........................................................................Section 2.3
"Defense Counsel"............................................................................Section 7.1.3
"Defense Notice".............................................................................Section 7.1.3
"Xxxxx Group".................................................................................Introduction
"Xxxxx Group Shares".........................................................................Section 2.2.3
(iv)
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"Employee Benefit Plans"......................................................................Section 3.23
"Environmental and Safety Requirements".....................................................Section 3.24.1
"ERISA".......................................................................................Section 8.11
"Excluded Liabilities".........................................................................Section 2.3
"Financial Statements".........................................................................Section 3.8
"Franchised Business".........................................................................Section 8.11
"Franchisee"..................................................................................Section 8.11
"Franchisee Affiliate"........................................................................Section 8.11
"GAAP"........................................................................................Section 8.11
"GDC Business"....................................................................................Preamble
"Hazardous Wastes"............................................................................Section 8.11
"Indemnified Party"..........................................................................Section 7.1.3
"Indemnifying Party".........................................................................Section 7.1.3
"Leased Real Property"........................................................................Section 3.13
"Liens".......................................................................................Section 8.11
"Losses".....................................................................................Section 7.1.1
"Material Contracts"..........................................................................Section 3.12
"Permits".....................................................................................Section 3.22
"Person"......................................................................................Section 8.11
"Plan Affiliate"..............................................................................Section 8.11
"Proprietary Rights"..........................................................................Section 8.11
"Purchase Price"...............................................................................Section 2.1
(v)
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"Restricted Period"............................................................................Section 6.2
"Rules"....................................................................................Section 3.18(a)
"Seller"......................................................................................Introduction
"Seller Indemnified Party"...................................................................Section 7.1.2
"Seller Parties".................................................................................Article 3
"Seller Taxes"..............................................................................Section 7.2(a)
"Tax".........................................................................................Section 8.11
"Tax Returns".................................................................................Section 8.11
"Term Note"..................................................................................Section 2.2.2
"Trademarks" .................................................................................Section 8.11
"Territory"....................................................................................Section 6.2
"Third Party Claim"..........................................................................Section 7.1.3
"Transaction Documents".......................................................................Section 8.11
(vi)
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("AGREEMENT"), dated as of July 24, 1998,
by and among THE XXXXX GROUP, INC., a Delaware corporation "XXXXX GROUP" or
"BUYER"), GLASSMARKS, INC., a Washington corporation (the "Company"), and XXXXXX
X. XXXXX, an individual and the sole director and shareholder of the Company
(the "Seller"). Certain capitalized terms used herein shall have the meaning
given such terms in SECTION 8.11 below.
PREAMBLE
A. The Company is and has been a corporation engaged in the licensing
(the "BUSINESS") of certain trademarks (the "Trademarks" as defined below in
SECTION 8.11) directly and indirectly to the Company's Affiliate, Glass Doctor
Corporation ("GDC"), in connection with GDC's business of awarding Franchises
for replacement glass installation service businesses trading under the name
Glass Doctor to Glass Doctor Franchisees and supporting such Franchisees (the
"GDC BUSINESS"). After the closing of the transactions contemplated hereby, the
Business of the Company will include the business of awarding Franchises for
replacement glass installation service businesses trading under the name Glass
Doctor to Glass Doctor Franchisees and supporting such Franchisees.
B. Seller owns all of the issued and outstanding shares of the capital
stock of the Company (the "COMPANY SHARES").
C. Seller wishes to sell to Xxxxx Group, and Xxxxx Group wishes to
purchase from Seller, the Company Shares, all on the terms and conditions
hereinafter set forth, and Seller and the Company desire to enter into certain
agreements with the Xxxxx Group in connection therewith.
NOW, THEREFORE, in consideration of the mutual covenants of the parties
as hereinafter set forth and other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the parties hereto hereby
agree as follows:
ARTICLE 1
SALE OF STOCK
Seller, in reliance upon the representations and warranties of Xxxxx
Group contained herein and on the terms and conditions herein set forth, hereby
agrees to sell, assign, transfer, convey and deliver to Xxxxx Group at the
Closing all of his right, title and interest in and to all of the Company
Shares. Xxxxx Group, in reliance upon the representations and warranties of
Seller contained herein and on the terms and conditions hereinafter set forth,
hereby agrees to purchase the Company Shares from Seller at the Closing for a
purchase price as provided in ARTICLE 2 hereof.
ARTICLE 2
CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price. The aggregate purchase price for the Company
Shares (the "PURCHASE PRICE") is Five Million Three Hundred Thirty Six Thousand
Six Hundred Sixty Six Dollars (U.S.$5,336,666) to be paid as provided for in
SECTION 2.2.
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2.2 Payment of Purchase Price. The Purchase Price shall be paid at
the Closing as follows:
2.2.1 Cash. Xxxxx Group will pay to the Seller, by certified
check or wire transfer of immediately available funds to the Shareholder's
designated bank account, an amount equal to Two Million Seven Hundred Fifty
Thousand Dollars (U.S.$2,750,000).
2.2.2 Term Note. Xxxxx Group will execute and deliver to the
Seller a promissory note (the "TERM Note") in the original principal amount of
One Million Nine Hundred Thousand Dollars (U.S.$1,900,000) bearing interest at
five and one-half percent (5.5%) per annum, with principal and interest payable
quarterly and the remaining balance to be paid in full on the fourth anniversary
of the origination date of the Term Note. A form of the Term Note is attached
hereto as Exhibit 2.2.2.
2.2.3 Xxxxx Group Shares. Xxxxx Group will issue to Seller three
hundred thirty three thousand, three hundred thirty three (333,333) fully-paid
and nonassessable shares of Xxxxx Group Common Stock, par value One Cent
(U.S.$.01) per share ("XXXXX GROUP SHARES").
2.3 No Liabilities. On the Closing Date but prior to the execution
of the Asset Purchase Agreement (as defined in SECTION 8.11), the Company will
not have or incur any liability of any kind or any nature whatsoever except for
the liabilities and obligations set forth in Schedule 2.3 ("COMPANY
LIABILITIES"). Any other liability not identified in Schedule 2.3 shall be
deemed an "Excluded Liability."
ARTICLE 3
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller and the Company (collectively, "SELLER PARTIES") hereby
represent and warrant to Buyer as of the Closing Date hereof as follows:
3.1 Seller Parties Authority. The Company has full corporate power,
right and authority and the Seller has full legal power, right and authority, to
enter into and perform his or its respective obligations under this Agreement
and each of the Transaction Documents to which it or he is a party. This
Agreement and each of the Transaction Documents to which a Seller Party is a
party have been duly executed and delivered by each Seller Party that is a party
thereto, and constitute the valid and binding obligations, enforceable against
each Seller Party that is a party thereto in accordance with their respective
terms. No permits, approvals or consents of or notifications to (a) any
governmental entities or (b) any other Persons are necessary in connection with
the execution, delivery and performance by each Seller Party of this Agreement
and the Transaction Documents to which such Seller Party is a party and the
consummation by such Seller Party of the transactions contemplated hereby and
thereby.
3.2 Organization and Qualification of the Company. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Washington. The Company has full corporate power and
authority to carry on its businesses as it is now being conducted and to own or
hold under lease the properties and assets it now owns or holds under lease.
There are no other jurisdictions in which its conduct of the Business or its
ownership of assets requires such
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qualification under applicable law. All of the jurisdictions in which the
Company is licensed or qualified to conduct business are set forth in Schedule
3.2. Except as set forth in Schedule 3.2, the minute books of the Company
contain complete and correct copies of the minutes of each meeting and each
action by written consent of its Boards of Directors or shareholders and the
stock ledger of the Company contains a complete and correct record of all
issuances and transfers of capital stock of the Company. True and complete
copies of such corporate minute books and records have been delivered to Buyer's
counsel.
3.3 Subsidiaries. The Company does not have, directly or indirectly,
any ownership in any Person.
3.4 Articles of Incorporation, Bylaws, Officers and Directors.
Complete and correct copies of the Company's charter documents and all
amendments thereof to date, certified by the Secretary of State of Washington,
and the bylaws as amended to date, certified by an officer of the Company have
been or are being delivered to Xxxxx Group prior to or at the Closing. Schedule
3.4 contains a complete and correct list of all of the officers and directors of
the Company immediately prior to the Closing.
3.5 Captial Stock. The Company has five hundred thousand (500,000)
shares of Common Stock authorized, of which one hundred (100) shares are issued
and outstanding. All of the issued and outstanding shares of capital stock of
the Company comprise the Company Shares and are owned by the Seller.
3.6 Options, etc. Other than the Company Shares, the Company does
not have outstanding any stock or other securities convertible into or
exchangeable for shares of its capital stock or containing profit participation
features, and the Company does not have outstanding any options, warrants or
rights to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock and there is
no obligation, commitment or agreement of any character to which any Seller
Party is a party, by which the Company is obligated to issue, deliver or sell or
cause to be issued, delivered or sold, additional shares of capital stock of the
Company or obligating Company to grant, extend, accelerate the vesting of or
enter in to any such option, warrant, equity security, call right, commitment or
agreement. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any warrants, options or other rights to acquire its capital
stock. There are no voting agreements, voting trusts or other agreements
(including, without limitation, contractual or statutory preemptive rights or
cumulative voting rights), commitments or understandings with respect to the
voting or transfer of the capital stock of the Company.
3.7 Title to Company Shares. Seller is the beneficial and record
owner of all the outstanding Company Shares, free and clear of any Liens
whatsoever, other than any transfer restrictions that may apply under federal
and state securities laws. The Seller has good and marketable title to the
Company Shares. Upon consummation of the transactions provided for in this
Agreement in accordance with the terms hereof, Xxxxx Group will hold good and
marketable title to all of the Company Shares, free and clear of any Liens
whatsoever, other than transfer restrictions under federal and state securities
laws.
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3.8 Financial Statements. No financial statements or drafts of
financial statements currently exist nor have ever been prepared for the
Company.
3.9 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 2.3, prior to the execution of the Asset Purchase Agreement (as defined
in SECTION 8.11), the Company has no material debts, liabilities or obligations
of any nature arising out of (i) transactions or series of transactions entered
into at or prior to the Closing, (ii) action or inaction at or prior to the
Closing, or (iii) any state of facts or condition existing at or prior to the
Closing, regardless of whether such liability or obligation is accrued,
absolute, asserted, contingent, direct, indirect, perfected, or due or to become
due, or to the Seller's knowledge, inchoate or unliquidated.
3.10 Inventories, Accounts Receivable and Payable
(a) Inventories. The Company has never had and does not
currently have any inventory.
(b) Accounts Receivable. Schedule 3.10-B sets forth a correct
and complete list of the Company's total accounts receivable on the
Closing Date. All such accounts receivable are valid and have arisen in
the ordinary course of business and, to Seller's knowledge, are not
subject to any counterclaim or set-off.
(c) Accounts Payable. Schedule 3.10-C sets forth a correct and
complete list of the Company's total accounts payable on the Closing
Date. The Company's accounts payable have arisen in bona-fide arms
length transactions in the ordinary course of the Company's business
consistent with past practice.
3.11 Taxes. All Taxes due and payable by the Company through the
Closing Date have been paid in full. The Company has timely filed all federal,
state, county, local and foreign tax returns which it is required to have filed,
and such returns are complete and correct in all material respects. Any
deficiencies proposed as a result of any governmental audits have been paid or
settled, and there are no present disputes as to Taxes payable by the Company.
There are no unexpired waivers by the Company of any statute of limitations with
respect to any Taxes, and no Seller Party is a party to or has been named in any
filing, action or proceeding by any governmental authority for the collection or
assessment of Taxes.
3.12 Material Contracts. Schedule 3.12 is a correct and complete
list of every material written contract, agreement, relationship or commitment,
and to Seller's knowledge, every material oral contract, commitment, agreement
or relationship, to which the Company is a party or by which the Company is
bound and which cannot be cancelled with thirty (30) days notice or less without
penalty or obligation (the "MATERIAL CONTRACTS"), correct and complete copies of
which previously have been furnished to Buyer. Except as set forth on Schedule
3.12, the Company is not in default, and no event has occurred which with the
giving of notice or the passage of time or both would constitute a default by
the Company, under any Material Contracts or any other obligation owed by the
Company, and, no event has occurred that is known or that should be known to
Seller or the Company, which with the
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giving of notice or the passage of time or both would constitute such a default
by any party to any such Material Contract or obligation.
3.13 Real Property. The Company does not own or lease any real
property and, therefore, is not required to possess any permits, licenses and
certificates, or file notices or applications, otherwise required in connection
with the ownership or leasing of real property.
3.14 Personal Property. Other than the intellectual property set
forth in Schedule 3.17, the Company owns no personal property. The property
listed on Schedule 3.17 constitutes all property, rights and assets necessary
for the conduct by the Company of the Business as now conducted or currently
proposed to be conducted. Except as set forth in Schedule 3.17, none of the
personal property listed on Schedule 3.17 is held under any lease, license,
security agreement, conditional sales contract or other title retention or
security arrangement.
3.15 Litigation. Except as set forth in Schedule 3.15, there is
no suit, action, proceeding, investigation, claim or order pending or, to the
knowledge of Seller, threatened against any Seller Party or any Affiliate (or
any of the officers, directors or key employees of the Company or any Affiliate
with respect to its respective business), or to which either Seller Party is
otherwise a party, which if adversely determined would adversely affect the
Company, its assets or the Business, before any court, or before any
governmental department, commission, board, agency, or instrumentality; nor, is
there any reasonable basis that is known or that should be known to Seller or
the Company for any such action, proceeding or investigation. Neither the
Company nor the Seller is subject to any judgment, order or decree of any court
or governmental agency; nor has received any opinion or memorandum or legal
advice from legal counsel retained by either Seller Party to the effect that any
one of them is exposed, from a legal standpoint, to any liability which may be
material to its business; and the Company is not engaged in any legal action to
recover monies due it or for damages sustained by it. Except as set forth on
Schedule 3.15, there were no litigation matters to which Seller (relating to the
assets and properties of the Company or the Business), the Company or any
Affiliate was a party during the three (3) years preceding the date of this
Agreement.
3.16 Compliance with Applicable Laws. No Seller Party is in
violation of any law, regulation or requirement applicable to it or the conduct,
ownership, use, occupancy or operation of the Business, nor has any Seller Party
received notice (written or oral) of any such violation.
3.17 Intellectual Property. Schedule 3.17 contains a complete and
correct list of all patented or registered Proprietary Rights owned by the
Company and all pending patent applications and applications for the
registration of other Proprietary Rights owned, licensed or filed by the
Company. Schedule 3.17 also contains a complete and correct list of all trade or
corporate names used by the Company, a complete and correct list of all
copyrighted materials and the dates such copyrights attached to such materials
(based either on statutory or common law) and a complete and correct list of all
licenses, franchises, area development rights and other rights granted by the
Company to any third party with respect to Proprietary Rights and licenses and
other rights granted by any third party to the Company. Except as set forth on
Schedule 3.17, (a) the Company owns and possesses all right, good title and
interest in and to (free and clear of any Liens, except for Liens for current
Taxes not yet due and payable), or has a valid license to use, all of the
Trademarks necessary for the operation of the
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Business and the operation by GDC of the GDC Business, as each is presently
conducted; (b) no claim by any third party contesting the validity,
enforceability, use or ownership of any Trademarks has been made, is currently
outstanding or, to the knowledge of Seller, threatened, and, to the knowledge of
Seller, there is no reasonable basis for any such claim; (c) neither Seller
Party nor any registered agent of either Seller Party has received any notices
of, nor is aware of any reasonable basis for an allegation of, any infringement
or misappropriation by, or conflict with, any third party with respect to such
Trademarks or any other Proprietary Rights, nor has Seller or any registered
agent received any claims of infringement or misappropriation of or other
conflict with any Trademarks or other Proprietary Rights of any third party; and
(d) to the knowledge of each Seller Party, neither the Seller, the Company nor
any Affiliate has infringed, misappropriated or otherwise violated any
Trademarks or other Proprietary Rights of any third parties, and Seller is not
aware of any infringement, misappropriation or conflict which will occur as a
result of the continued operation of the Company's business as presently
conducted.
3.18 Transaction Not a Breach. Neither the execution and delivery of
this Agreement and the Transaction Documents by any Seller Party nor the
performance by any of them of the transactions contemplated hereby or thereby
will:
(a) violate or conflict with or result in a breach of any
provision of any law, statute, rule, regulation, order, permit,
judgment, injunction, decree or other decision (collectively, "RULES")
of any court or other tribunal or any governmental entity or agency
binding on Seller or the Company or their respective properties, or
conflict with or result in the breach of any of the terms, conditions
or provisions thereof;
(b) constitute a default under the charter documents or the
bylaws of the Company or GDC or of any Material Contract listed or
required to be listed on Schedule 3.12;
(c) constitute an event which would permit any party to
terminate, or accelerate the maturity of any indebtedness or other
obligation under, any lease or other Material Contract listed or
required to be listed on Schedule 3.12;
(d) result in the creation or imposition of any Lien upon the
Company's capital stock or assets; or
(e) require any authorization, consent, approval, exemption or
other action by or notice to any court or administrative or
governmental body pursuant to the charter or bylaws of the Company, GDC
or any Rules.
3.19 Conduct of Business
3.19.1 Conduct in Ordinary Course. Except as set forth on
Schedule 3.19 or otherwise provided in this Agreement, since March 31, 1998, the
Company has conducted its business only in the ordinary course of business
consistent with past custom and practice, and has incurred no liabilities other
than in the ordinary course of business consistent with past custom and practice
and there has been no material adverse change in the assets, condition
(financial or otherwise), operating
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results, employee or customer relations, business activities or business
prospects of the Company. Without limitation of the foregoing and except as
described herein or set forth on Schedule 3.19, since March 31, 1998, each of
Seller and Company has not:
(a) sold, assigned or transferred any of his or its assets
related to or used in the Business, or mortgaged, pledged or subjected
them to any Lien, charge or other restriction, except for Liens for
current property taxes not yet due and payable;
(b) sold, assigned, transferred, abandoned or permitted to
lapse any licenses or permits which, individually or in the aggregate,
are material to the Business or any portion thereof, or any of the
Proprietary Rights or other intangible assets, or disclosed any
material proprietary confidential information to any person, granted
any license or sublicense of any rights under or with respect to any
Proprietary Rights;
(c) made or granted any increase in, or amended or terminated,
any existing plan, program, policy or arrangement, including, without
limitation, any Employee Benefit Plan or arrangement or adopted any new
Employee Benefit Plan or arrangement, or entered into any new
collective bargaining agreement or multiemployer plan;
(d) conducted its cash management customs and practices
(including the timing of collection of receivables and payment of
payables and other current liabilities) and maintained its books and
records other than in the usual and ordinary course of business
consistent with past custom and practice;
(e) made any loans or advances to, or guarantees for the
benefit of, or entered into any transaction with any employee, officer
or director;
(f) suffered any extraordinary loss, damage, destruction or
casualty loss to the Business or waived any rights of material value,
whether or not covered by insurance and whether or not in the ordinary
course of business;
(g) declared, set aside or paid any dividend or distribution
of cash or other property to any stockholder or purchased, redeemed or
otherwise acquired any shares of its capital stock, or made any other
payments to any stockholder;
(h) amended or authorized the amendment of its charter
documents or bylaws;
(i) entered into any other material transaction, other than in
the ordinary course of business consistent with past custom and
practice; or
(j) committed to any of the foregoing.
3.19.2 No Illegal Payments. The Company has not at any time
made or committed to make any payments for illegal political contributions or
made any bribes, kickback payments or other illegal payments.
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3.19.3 Operation of Franchised Businesses. Immediately prior
to Closing, neither Seller nor any Affiliate operates any Franchised Businesses
directly or indirectly except through SEL, Inc., an Affiliate of Seller and the
Company, in the Atlanta metropolitan area.
3.20 Insurance Policies. Schedule 3.20 is a correct and complete
list and description, including policy numbers, of all insurance policies owned
by the Company or by its Affiliates under which the Company is insured, correct
and complete copies of which policies or binders have previously been delivered
to Xxxxx Group. Such policies are in full force and effect, and the Company is
not in default under any of them. The Company has not received any notice of
cancellation or intent to cancel or increase or intent to increase premiums with
respect to such insurance policies nor, to the knowledge of Seller, is there any
basis for any such action. Schedule 3.20 also contains a list of all pending
claims with any insurance company and any instances within the previous three
years of a denial of coverage of the Company by any insurance company.
3.21 Bank Accounts. The Company has not maintained and does not
currently maintain any bank accounts.
3.22 Licenses and Permits. The Company holds or can obtain without
undue expense or delay, all the permits, licenses, including, without
limitation, licenses, franchises and approvals of governmental authorities and
agencies necessary or material for the current conduct, ownership, use,
occupancy or operation of its Business, all of which are identified on Schedule
3.22 ("PERMITS"). The Company is in compliance in all material respects with
such Permits, all of which are in full force and effect, and neither the Company
nor the Seller has received any notices (written or oral) to the contrary.
3.23 Employee Benefit Plans. Except as set forth in Schedule 3.23,
neither the Company nor any Plan Affiliate has, for the benefit of and
participation of any current or past Company employees or beneficiaries,
maintained, sponsored, adopted, made contributions to or obligated itself to
make contributions to or to pay any benefits or grant rights under or with
respect to any "Employee Pension Benefit Plan" (as defined in Section 3(2) of
ERISA), "Employee Welfare Benefit Plan" (as defined in Section 3(1) of ERISA),
"multi-employer plan" (as defined in Section 3(37) of ERISA), plan of deferred
compensation, medical plan, life insurance plan, long-term disability plan,
dental plan or other plan, personnel policy (including but not limited to
vacation time, holiday pay, bonus programs, moving expense reimbursement
programs and sick leave), excess benefit plan, bonus or incentive plan
(including but not limited to stock options, restricted stock, stock bonus and
deferred bonus plans), salary reduction agreement, change-of-control agreement,
employment agreement, consulting agreement or any other benefit, program or
contract (collectively, "EMPLOYEE BENEFIT PLANS"), whether or not written or
pursuant to a collective bargaining agreement, which could give rise to or
result in the Company or such Plan Affiliate having any debt, liability, claim
or obligation of any kind or nature, whether accrued, absolute, contingent,
direct, indirect, known or unknown, perfected or inchoate or otherwise and
whether or not due or to become due. Correct and complete copies of all Employee
Benefit Plans previously have been furnished to Xxxxx Group. The Employee
Benefit Plans are in compliance with governing documents and agreements and with
applicable laws.
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3.24 Health, Safety and Environment
3.24.1 Compliance with Environmental and Safety Requirements.
The Company is in compliance with all applicable federal, state and local laws,
rules, regulations, ordinances and requirements relating to public health and
safety, transportation, worker health and safety and pollution and protection of
the environment, all as amended or hereafter amended ("ENVIRONMENTAL AND SAFETY
REQUIREMENTS").
3.24.2 No Hazardous Wastes. The Company has never generated,
transported, treated, stored, or disposed of any Hazardous Wastes at any site,
location or facility, except in compliance with Environmental and Safety
Requirements, and no such Hazardous Wastes are present on, in or under the
Leased Real Property, and the Leased Real Property does not contain (including
without limitation, containment by means of any underground storage tank) any
Hazardous Waste, except in compliance with Environmental and Safety
Requirements.
3.24.3 No Actions or Proceedings. There are no pending or
threatened actions or proceedings against or involving the Company (or notices
of potential actions or proceedings) from any governmental agency or any other
entity regarding any matter relating to health, safety or protection of the
environment.
3.24.4 Other Condition. No facts, events or conditions with
respect to the past or present operations or facilities of the Company exist
which could reasonably be expected to interfere with or prevent continued
compliance with, or could give rise to any common law or statutory liability or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation against or involving the Company under any Environmental and
Safety Requirement based on any such fact, event or circumstance, including,
without limitation, liability for cleanup costs, personal injury or property
damage.
3.25 Salaries. The Company has never had nor does it now have any
employees.
3.26 Personal Agreements, Plans and Arrangements. Except as listed
in Schedule 3.25 and 3.26, the Company is not a party to or obligated with
respect to any outstanding contracts with current or former employees, agents,
consultants, or advisers of the Company or GDC. The Company and each of its
Affiliates has complied in all material respects with all applicable laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes. Except as set forth in Schedule 3.26 there are no
administrative charges or court complaints pending or, to the knowledge of
Seller, threatened against the Company or any Affiliate before the U.S. Equal
Employment Opportunity Commission or any state or federal court or agency
concerning alleged employment discrimination or any other matters relating to
the employment of labor.
3.27 Workers Compensation. The Company has never had nor does it now
have any expenses, obligations, duties and liabilities relating to any claims by
employees and former employees (including dependents and spouses) of the Company
(or its predecessors) and, therefore, to the knowledge of Seller, no claims,
injuries, fact, event or condition exists which would give rise to a
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material claim by employees and former employees (including dependents and
spouses) of the Company under any workers compensation laws, regulations,
requirements or programs.
3.28 Customers. The Company does not have nor has it ever had any
customers who have purchased services and/or goods from the Company.
3.29 Affiliate Transactions. Schedule 3.29 sets forth the parties to
and the date, nature and amount of each transaction involving the transfer of
any cash, property or rights to or from the Company from, to or for the benefit
of any Affiliate or former Affiliate of the Company ("AFFILIATE TRANSACTIONS")
during two year period preceding the date of this Agreement and existing
commitments of the Company to engage in the future in any Affiliate
Transactions. Each Affiliate Transaction was effected on terms equivalent to
those which would have been established in an arms-length negotiation, except as
disclosed on Schedule 3.29.
3.30 Franchise Regulations. To the extent applicable, each of the
Seller Parties has complied with any and all federal and state laws and
regulations governing the offer and sale of franchises and business
opportunities, and all state laws governing the Company's or GDC's relationship
with Franchisees and licensees.
3.31 No Misrepresentation. None of the representations and warranties
of Seller set forth in this Agreement, in any of the certificates, schedules,
lists, documents, exhibits, or other instruments delivered, or to be delivered,
to Xxxxx Group by Seller, his Affiliates or representatives, as contemplated by
any provision hereof (including, without limitation, the Transaction Documents),
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained herein or therein not misleading.
There is no material fact that is known or that should be known by Seller or the
Company, which has not been disclosed to Xxxxx Group and which materially
adversely affects or could reasonably be anticipated to materially adversely
affect the Business or Seller's ability to consummate the transactions
contemplated hereby.
ARTICLE 4
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer hereby represents and warrants to Seller as of the Closing Date
as follows:
4.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.2 Authorization. Buyer has full power, right and authority to
enter into and perform its obligations under this Agreement and each of the
Transaction Documents to which it is a party. The execution, delivery and
performance of this Agreement and each of the Transaction Documents to which it
is a party by Buyer have been duly and properly authorized by all requisite
corporate action in accordance with applicable law and with the Certificate of
Incorporation and bylaws of Buyer. This Agreement and each of the Transaction
Documents to which Buyer is a party have been duly executed and delivered by
Buyer and are the valid and binding obligations of Buyer and are enforceable
against Buyer in accordance with their respective terms. No permits, approvals
or consents of or notifications
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to (i) any governmental entities or (ii) any other Persons are necessary in
connection with the execution, delivery and performance by Buyer of this
Agreement and the Transaction Documents and the consummation by Buyer of the
transactions contemplated hereby or thereby.
4.3 Transaction Not a Breach. The execution, delivery and performance
of this Agreement and the Transaction Documents by Buyer will not violate and
conflict with, or result in the breach of any of the terms, conditions, or
provisions of Buyer's Certificate of Incorporation or Bylaws or of any contract,
agreement, mortgage, or other instrument or obligation of any nature to which
Buyer is a party or by which Buyer is bound.
4.4 Xxxxx Group Shares. When issued hereunder, the Xxxxx Group
Shares will be duly authorized, validly issued, fully paid and nonassessable,
except as may be provided in the Lock-up and Registration Rights Agreement
referred to in Section 7.3 hereto.
4.5 No Misrepresentation. None of the representations and warranties
of Buyer set forth in this Agreement or in any of the certificates, schedules,
lists, documents, exhibits, or other instruments delivered, or to be delivered,
to the Seller as contemplated by any provision hereof (including, without
limitation, the Transaction Documents), contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE 5
CLOSING
5.1 Time and Place. The closing of the transactions that are the
subject of this Agreement (the "CLOSING") shall occur via mail on July 24, 1998
(the "CLOSING DATE") or at such other time or in such other manner as the
parties hereto shall mutually agree.
5.2 Deliveries of the Seller. At the Closing, Seller will execute
and deliver or cause to be executed and delivered to Buyer:
(a) Certificates representing the Company Shares, with duly
executed assignments separate from certificates attached thereto;
(b) Certificates of Good Standing, dated not more than thirty
(30) days prior to the Closing Date, with respect to the Company,
issued by the Secretary of State of Washington and by the Secretary of
State of each jurisdiction in which the Company is qualified to do
business as a foreign corporation, as set forth in Schedule 3.2 (with
telephonic confirmation on the Closing Date).
(c) any required third-party consents, filings, and
certificates from Seller or any third party (including any governmental
authority or agency) relating to the sale of the Company Shares;
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(d) an opinion of Seller's counsel dated as of the Closing
Date, in form and substance satisfactory to Buyer, a form of which is
attached hereto as Exhibit 5.2-D;
(e) a Secretary's Certificate of the Company, together with a
certified copy of the Company's Certificate of Incorporation, and
copies of the Bylaws and the resolutions of the Board of Directors of
the Company authorizing the execution and delivery of this Agreement
and the Transaction Documents and the performance of the Company's
obligations hereunder and thereunder, each such item certified by the
secretary of the Company as having been duly and validly adopted and in
full force and effect;
(f) the written resignation of all the officers and directors
of the Company, effective as of the Closing;
(g) a duly executed Trademark License Termination Agreement
executed by Seller's Affiliate, Glass Doctor, Inc., in the form
attached hereto as Exhibit 5.2-G;
(h) a fully executed Asset Purchase Agreement;
(i) an Amendment from each Franchisee and licensee of the
Seller, in a form acceptable to Xxxxx Group (except for the Franchisees
operating in Arizona and Broward County, Florida);
(j) all minute books, stock ledgers and similar corporate
records of the Company;
(k) a Release in the form attached hereto as Exhibit 5.2-K
executed by Seller and his Affiliates; and
(l) such other documents and instruments as Buyer or its
counsel reasonably shall deem necessary to consummate the transactions
contemplated hereby.
All documents delivered to Buyer shall be in form and substance
reasonably satisfactory to Xxxxxx Xxxxxx & Xxxxx, counsel for Buyer.
5.3 Deliveries of Buyer. At the Closing, Buyer will deliver to
Seller simultaneously with the delivery of the items referred to in SECTION 5.2
above:
(a) the payment of the cash portion of the Purchase Price;
(b) the certificates representing the Xxxxx Group Shares;
(c) duly executed copies of the Lock-Up and Registration
Rights Agreement and Term Note as provided in SECTION 2.2;
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(d) within ten (10) days of Closing, a Certificate of Good
Standing dated no later than July 29, 1998, with respect to Buyer,
issued by the Secretary of State of Delaware;
(e) a Secretary's Certificate of the Buyer, together with a
certified copy of the Buyer's Certificate of Incorporation, and copies
of the Bylaws and the resolutions of the Board of Directors of the
Buyer authorizing the execution and delivery of this Agreement and the
Transaction Documents and the performance of the Buyer's obligations
hereunder and thereunder, each such item certified by the secretary of
the Buyer as having been duly and validly adopted and in full force and
effect; and
(f) an opinion of Buyer's counsel dated as of the Closing
Date, and such other documents and instruments as Seller or his counsel
reasonably shall deem necessary to consummate the transactions
contemplated hereby.
All documents delivered to Seller shall be in form and substance
reasonably satisfactory to the counsel for Seller.
5.4 Lien Searches. Within ten (10) days of Closing, Seller shall
provide Buyer with the results of all lien searches (including UCC, tax,
judgment and other relevant searches) showing that there were no financing
statements, judgments, taxes or other Liens outstanding against the Company or
any of its assets as of the Closing Date, except those contained in Schedule
3.14, in form and manner required by Buyer or its lenders.
5.5 Post-Closing Matters. Within fifteen (15) days of Closing, all
matters identified in Schedule 5.5, items 1 through 9, shall be resolved and all
actions to be taken shall be completed to the reasonable satisfaction of Xxxxx
Group. In the event that such matters are not resolved or all such actions are
not taken, for each day beyond the fifteenth day after Closing that items remain
unresolved or actions remain untaken, Xxxxx Group shall postpone the first
installment due under the Term Note by one (1) day.
ARTICLE 6
COVENANT NOT TO COMPETE
6.1 Seller's Knowledge. Seller agrees and acknowledges that in
order to assure that the Company will retain its value as a "going concern," it
is necessary that Seller undertake not to utilize his present special knowledge
of the Company's Business and the GDC Business to compete with the Company or
any of the Company's Franchisees or licensees after the acquisition, except as
permitted under any new Franchise Agreement between the Company or an Affiliate
of Xxxxx Group and the Seller or any Franchise Affiliate of the Seller. Seller
further acknowledges that (a) Buyer will be engaged in the Business and the
offering, sale and support of Franchised Businesses; (b) Seller possesses
extensive knowledge and a unique understanding of the Business and the GDC
Business as well as (subsequent to the transactions contemplated by this
Agreement) the proprietary and confidential information concerning Buyer and the
Business and the GDC Business; (c) the agreements and covenants contained in
this SECTION 6.1 are essential to protect Buyer and the value of the Business
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and are a condition precedent to Buyer's willingness to purchase and pay for the
Company Shares and to enter into Franchise Agreements with Franchise Affiliates;
(d) Buyer would be irreparably damaged if Seller were to provide services or any
products to any person or entity in violation of the provisions of this
Agreement; (e) Seller has a means to support himself and his dependents other
than by engaging in the Business and the GDC Business and the provisions of this
SECTION 6.1 will not impair such ability.
6.2 Non-Complete. Seller hereby agrees that for the five (5) year
period beginning on the Closing Date (the "RESTRICTED Period"), he shall not
engage in or own any interest in any business, including any existing Affiliate,
that engages in or owns, invests in, operates, manages or controls any venture
or enterprise that directly or indirectly engages or proposes to engage in the
Business, the GDC Business or any similar glass installation and repair business
within the United States, including its territories and possessions (the
"TERRITORY"), except pursuant to a Franchise Agreement with the Company or an
Affiliate of the Buyer.
6.3 Non-Solicitation. Without limiting the generality of the
provisions of SECTION 6.2, Seller hereby agrees that, during the Restricted
Period, he will not and he will not permit any of his Affiliates to directly or
indirectly, solicit, or participate as an employee, agent, consultant,
stockholder, director, partner or in any other individual or representative
capacity, in any business which solicits business from any person, firm,
corporation or other entity which was a customer of the Company or an Affiliate
of the Buyer or its franchisees (existing or future) or licensees during the
two-year period preceding the Closing Date of this Agreement and/or during the
Restricted Period, or from any successor in interest to any such person, firm,
corporation or other entity for the purpose of securing business or contracts
related to the Business or the GDC Business, except pursuant to a Franchise
Agreement.
6.4 Interference with Relationships. During the Restricted Period,
Seller shall not and shall not permit any Affiliate to, directly or indirectly,
as employee, agent, consultant, stockholder, director, co-partner or in any
other individual or representative capacity: (i) without the prior written
consent of Buyer, employ or engage, recruit or solicit for employment or
engagement, any person who currently is or was employed by Buyer, the Company or
GDC, or otherwise seek to influence or alter any such person's relationship with
Buyer, the Company or GDC, except for any former employee who is terminated by
the Company, Buyer, GDC or an Affiliate of Buyer at least six months prior to
the commencement of such employment with Seller or Affiliate or (ii) solicit or
encourage any present or future customer, supplier or Franchisee or licensee of
the Company (or Buyer with respect to the Business) to terminate or otherwise
alter his, her or its relationship with the Company or the Buyer.
6.5 Confidential Information. During the Restricted Period and
thereafter, Seller shall and shall cause its Affiliates to, keep secret and
retain in strictest confidence, and not, without the prior written consent of
Buyer, furnish, make available or disclose to any third party or use for the
benefit of himself or any third party, any Confidential Information. As used in
this Agreement, "CONFIDENTIAL INFORMATION" shall mean any information relating
to the business or affairs of, Buyer, the Company or the Business or the GDC
Business, including but not limited to information relating to financial
statements, customer identities, potential customers, employees, franchisees,
suppliers, servicing methods, equipment, programs, strategies and information,
analyses, profit margins, or other
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proprietary information used by Buyer and/or the Company in connection with the
Business; provided, however, that Confidential Information shall not include any
information which is in the public domain or becomes known in the industry
through no wrongful act on the part of Seller. Seller acknowledges that the
Confidential Information is vital, sensitive, confidential and proprietary to
Buyer and the Company.
6.6 Property of the Company/Business. All manuals, memoranda, notes,
lists, records and other documentation or papers (and all copies thereof),
including such items stored in computer memories, or microfiche or by any other
means, which, indirectly by ownership of Stock in the Company, will become
Buyer's property (after the consummation of transactions contemplated by this
Agreement), are and shall be Buyer's or the Company's property and shall be
delivered to Buyer or the Company promptly on the request of Buyer. Seller
acknowledges that any such items are and have been a "work for hire" and any
copyrights in any of the foregoing are property of the Company.
6.7 Blue-Pencil. If any court of competent jurisdiction shall at
any time deem the term of this Agreement or any particular restrictive covenant
contained in this ARTICLE 6.1 too lengthy or the Territory too extensive, the
other provisions of this ARTICLE 6.1 shall nevertheless stand, the Restricted
Period herein shall be deemed to be the longest period permissible by law under
the circumstances and the Territory herein shall be deemed to comprise the
largest territory permissible by law under the circumstances. The court in each
case shall reduce the time period and/or Territory to permissible duration or
size.
6.8 Remedies. Seller acknowledges and agrees that the covenants set
forth in this ARTICLE 6.1 are reasonable and necessary for the protection of
Buyer's business interests, that irreparable injury will result to Buyer if
Seller breaches any of the terms of said restrictive covenants, and that in the
event of actual or threatened breach of any such restrictive covenants, Buyer
will have no adequate remedy at law. Seller accordingly agrees that in the event
of any actual or threatened breach by himself or any Affiliate of any of the
covenants set forth in this ARTICLE 6.1, Buyer shall be entitled to immediate
temporary injunctive and other equitable relief, including suspension of
payments under the Term Note, without bond and without the necessity of showing
actual monetary damages, subject to hearing as soon thereafter as possible.
Nothing contained herein shall be construed as prohibiting Buyer from pursuing
any other remedies available to it for such breach or threatened breach,
including the recovery of any damages which it is able to prove.
ARTICLE 7
POST-CLOSING COVENANTS
7.1 Indemnification
7.1.1 Indemnification by Seller. From and after the Closing,
Seller agrees to indemnify, defend and save Buyer and the Company and their
respective Affiliates and Plan Affiliates, and each of their respective
officers, directors, employees, agents, Employee Benefit Plans, and fiduciaries,
plan administrators or other parties dealing with any such plans (each, a "BUYER
INDEMNIFIED PARTY"), forever harmless from and against, and to promptly pay to a
Buyer Indemnified Party or reimburse a Buyer Indemnified Party for, any and all
liabilities (whether contingent, fixed or
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unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interest, fines, penalties, actual or punitive damages or costs
or expenses of any and all investigations, proceedings, judgments, environmental
analyses, remediations, settlements and compromises (including reasonable fees
and expenses of attorneys, accountants and other experts) (individually and
collectively, the "LOSSES") sustained or incurred by any Buyer Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation or
warranty made herein or in the Transaction Documents by Seller or any
one of or its respective Affiliates or non-compliance with or breach by
any of them of any of the covenants or agreements contained in this
Agreement or the Transaction Documents to be performed by Seller, or
any of its respective Affiliates;
(b) any violations of or obligations under any Environmental
and Safety Requirements by or of the Company or any of its Affiliates
to the extent existing or arising on or prior to the Closing Date;
(c) any action, demand, proceeding, investigation or claim
(whenever made) by any third party (including governmental agencies)
against or affecting Buyer or the Company which, if successful, would
give rise to, evidence or demonstrate the existence of or relate to a
misrepresentation or breach of any of the representations, warranties
or covenants of Seller or its Affiliates;
(d) any action, demand, proceeding, investigation or claim
(whenever made) by any third party against or affecting Buyer or the
Company relating to any personal injury or property damage caused, or
alleged to be caused, by any goods sold, delivered or serviced by the
Company prior to the Closing;
(e) any assertion against the Company or Buyer of Excluded
Liabilities; or
(f) any claim for payment of fees and/or expenses as a broker
or finder in connection with the origin, negotiation, execution or
consummation of this Agreement based upon any alleged agreement between
the claimant and the Seller, or the Company.
7.1.2 Indemnification by Buyer. From and after the Closing,
Buyer and the Company, jointly and severally, agree to indemnify, defend and
save Seller and their respective Affiliates, and their respective officers,
directors, employees, trustees and agents (each, a "SELLER INDEMNIFIED PARTY")
forever harmless from and against, and to promptly pay to a Seller Indemnified
Party or reimburse a Seller Indemnified Party for, any and all Losses actually
sustained or incurred by any Seller Indemnified Party relating to, resulting
from, arising out of or otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or
warranty made herein or in the Transaction Documents by Buyer, or
non-compliance with or breach by Buyer of any of
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the covenants or agreements contained in this Agreement or the
Transaction Documents to be performed by Buyer or any of its
Affiliates;
(b) any action, demand, proceeding, investigation or claim
(whenever made) by any third party (including governmental agencies)
against or affecting Seller or its Affiliates which, if successful,
would give rise to or evidence the existence of or relate to a
misrepresentation or breach of any of the representations, warranties
or covenants of Buyer; or
(c) any claim for payment of fees and/or expenses as a broker
or finder in connection with the origin, negotiation, execution or
consummation of this Agreement based upon any alleged agreement between
the claimant and Buyer.
7.1.3 Indemnification Procedure for Third Party Claims. In the
event that subsequent to the Closing any person or entity entitled to
indemnification under this Agreement (an "INDEMNIFIED PARTY") asserts a claim
for indemnification or receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity that is not a party to
this Agreement or an Affiliate of a party to this Agreement (including, but not
limited to any domestic or foreign court or governmental authority, federal,
state or local) (a "THIRD PARTY CLAIM") against such Indemnified Party, against
which a party to this Agreement is required to provide indemnification under
this Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice together with a statement of any available information regarding
such claim to the Indemnifying Party within sixty (60) days after learning of
such claim (or within such shorter time as may be necessary to give the
Indemnifying Party a reasonable opportunity to respond to such claim). The
Indemnifying Party shall have the right, upon written notice to the Indemnified
Party (the "DEFENSE NOTICE") within thirty (30) days after receipt from the
Indemnified Party of notice of such claim, which notice by the Indemnifying
Party shall specify the counsel it will appoint to defend such claim ("DEFENSE
COUNSEL"), to conduct at its expense the defense against such claim in its own
name, or if necessary in the name of the Indemnified Party; provided, however,
that the Indemnified Party shall have the right to approve the Defense Counsel,
which approval shall not be unreasonably withheld, and in the event the
Indemnifying Party and the Indemnified Party cannot agree upon such counsel
within ten (10) days after the Defense Notice is provided, then the Indemnifying
Party shall propose an alternate Defense Counsel, which shall be subject again
to the Indemnified Party's reasonable approval. If the parties still fail to
agree on Defense Counsel, then, at such time, each of the Indemnifying and
Indemnified Parties shall choose an arbitrator who, in turn shall select a third
arbitrator, and the three arbitrators shall select Defense Counsel.
(a) In the event that the Indemnifying Party shall fail to
give the Defense Notice, it shall be deemed to have elected not to
conduct the defense of the subject claim, and in such event the
Indemnified Party shall have the right to conduct such defense in good
faith and to compromise and settle the claim without prior consent of
the Indemnifying Party and the Indemnifying Party will be liable for
all costs, expenses, settlement amounts or other Losses reasonably paid
or incurred in connection therewith.
(b) In the event that the Indemnifying Party does deliver a
Defense Notice and thereby elects to conduct the defense of the subject
claim, the Indemnified Party will cooperate
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with and make available to the Indemnifying Party such assistance and
materials as it may reasonably request, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at
its expense to participate in the defense assisted by counsel of its
own choosing, provided that the Indemnified Party shall have the right
to compromise and settle the claim only with the prior written consent
of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed.
(c) Without the prior written consent of the Indemnified
Party, the Indemnifying Party will not enter into any settlement of any
Third Party Claim or cease to defend against such claim, if pursuant to
or as a result of such settlement or cessation, (i) injunctive or other
equitable relief would be imposed against the Indemnified Party, or
(ii) such settlement or cessation would lead to liability or create any
financial or other obligation on the part of the Indemnified Party for
which the Indemnified Party is not entitled to indemnification
hereunder.
(d) The Indemnifying Party shall not be entitled to control,
and the Indemnified Party shall be entitled to have sole control over,
the defense or settlement of any claim to the extent that claim seeks
an order, injunction or other equitable relief against the Indemnified
Party which, if successful, could materially interfere with the
business, operations, assets, condition (financial or otherwise) or
prospects of the Indemnified Party (and the reasonable cost of such
defense shall constitute an amount for which the Indemnified Party is
entitled to indemnification hereunder).
(e) If a decision is made to settle a Third Party Claim, which
offer the Indemnifying Party is permitted to settle under this SECTION
7.1.3, and the Indemnifying Party desires to accept and agree to such
offer, the Indemnifying Party will give written notice to the
Indemnified Party to that effect. If the Indemnified Party fails to
consent to such firm offer within fifteen (15) calendar days after its
receipt of such notice, the Indemnified Party may continue to contest
or defend such Third Party Claim and, in such event, the maximum
liability of the Indemnifying Party as to such Third Party Claim will
not exceed the amount of such settlement offer, plus costs and expenses
paid or incurred by the Indemnified Party through the end of such
fifteen (15)-day period.
(f) Any judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to
which the Indemnified Party is entitled to prompt indemnification
hereunder.
7.1.4 Failure to Give Timely Notice. A failure by an
Indemnified Party to give timely, complete or accurate notice as provided in
SECTION 7.1.3 will not affect the rights or obligations of any party hereunder
except and only to the extent that, as a result of such failure, any party
entitled to receive such notice was deprived of its right to recover any payment
under its applicable insurance coverage or was otherwise directly and materially
damaged as a result of such failure to give timely notice.
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7.1.5 Survival of Representations, Warranties and Covenants;
Limits on Indemnification Obligations. Notwithstanding any right of Buyer to
fully investigate the affairs of Seller and the Business, and notwithstanding
any knowledge of facts determined or determinable by Buyer pursuant to such
investigation or right of investigation, Buyer has the right to rely fully upon
the representations, warranties, covenants and agreements of Seller contained in
this Agreement or in any certificate delivered pursuant to any of the foregoing.
All such representations, warranties, covenants and agreements shall survive the
execution and delivery of this Agreement for a period of three years from the
Closing Date. The maximum liability of Seller to indemnify the Buyer Indemnified
Parties pursuant to this SECTION 7.1 and the maximum liability of Buyer to
indemnify Seller Indemnified Parties pursuant to this SECTION 7.1 shall, in each
case, be limited to an aggregate amount equal to the Purchase Price plus the
"purchase price" defined in and paid pursuant to the Asset Purchase Agreement
(this sum is referred to herein as the "Aggregate Purchase Price"); provided,
however, that the total aggregate indemnification under this Agreement and the
Asset Purchase Agreement shall not exceed the Aggregate Purchase Price. An
Indemnified Party shall be entitled to seek indemnification pursuant to this
SECTION 7.1: (i) on December 31 and June 30 of each year; and (ii) when the
aggregate amount of all such Losses claimed directly and pursuant to Third Party
Claims under this Agreement and the Asset Purchase Agreement exceeds an amount
equal to Twenty-Five Thousand Dollars ($25,000), at either of which points the
Indemnifying Party shall be liable to the Indemnified Parties for the entire
amount of all such Losses claimed.
7.2 Liability for Taxes. The following provisions shall govern the
allocation of responsibility as between Buyer and Seller for certain tax matters
following the Closing Date:
(a) Allocation of Taxes. Seller shall be responsible for all
Taxes imposed on the Company or any Affiliated Group in which the
Company is or was a member for all taxable periods, or portions of
taxable periods, ending on or before the Closing Date in excess of
those Taxes accrued as a liability, and included in Company Liabilities
as set forth in Schedule 2.3 (the "SELLER TAXES"). Buyer shall be
responsible for all Taxes imposed on the Company for all taxable
periods, or portions of taxable periods, after the Closing Date and for
those Taxes accrued as a liability, and included in Company Liabilities
as set forth in Schedule 2.3 (the "BUYER TAXES"). Whenever in
accordance with this SECTION 7.2, Buyer shall be required to pay Seller
the Buyer Taxes or Seller shall be required to pay Buyer the Seller
Taxes, subject to the parties' right to dispute the amount of such
Taxes with the appropriate taxing authority, such payments shall be
made the later of ten (10) days after requested or ten (10) days before
the requesting party is required to pay or cause to be paid the related
Tax liability. Where the Seller Taxes are calculated on the basis of a
period which includes the day after the Closing Date, such Seller Taxes
shall be calculated on the basis of the taxable income of the Company
as though the taxable year of the Company terminated at the close of
business on day prior to the Closing Date.
(b) Returns for Tax Periods Ending On or Before the Closing
Date. Buyer shall file (or cause to be filed) any Tax Returns of the
Company for Tax periods beginning before the Closing Date for which Tax
Returns shall not have been filed before the Closing Date. Such Tax
Returns shall be prepared by Buyer on a basis consistent with past
practice to the extent
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such past practice is consistent with all federal, state, local and
foreign Tax laws, rules and regulations.
(c) Returns for Tax Periods Beginning After the Closing Date.
Buyer shall file (or cause to be filed) any Tax Returns of the Company
for Tax periods which begin after the Closing Date.
7.3 Registration of Xxxxx Group Shares. Subject to applicable
securities laws, Seller is hereby granted piggyback and one-time demand
registration rights with respect to the Xxxxx Group Shares, provided, however,
that such rights shall be subject to that certain Lock-Up and Registration
Rights Agreement executed by the Seller, a form of which is attached as Exhibit
7.3.
7.4 Setoff. In addition to and not as a limitation of any of the
other remedies available to Buyer and the Company hereunder, Buyer shall be
entitled to offset against the principal amount remaining on the Term Note any
indemnifiable Losses that are liquidated in amount and as to which there is no
reasonable dispute regarding their classification as indemnifiable Losses,
including Excluded Liabilities or otherwise. In the event of such a setoff, the
quarterly payments of principal and interest shall be recalculated based upon
the new principal balance remaining after necessary deductions.
ARTICLE 8
MISCELLANEOUS
8.1 Notices, Consents, etc. Any notices, consents or other
communication required to be sent or given hereunder by any of the parties shall
in every case be in writing and shall be deemed properly served if (a) delivered
personally, (b) sent by registered or certified mail, in all such cases with
first class postage prepaid, return receipt requested, (c) delivered by a
recognized overnight courier service, or (d) sent by facsimile transmission to
the parties at the addresses as set forth below or at such other addresses as
may be furnished in writing.
(a) If to Seller: Xxxxxx X. Xxxxx
26813 000xx Xxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
1230 Peachtree Street, N.E.
Suite 3100, Promenade II
Xxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
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(b) If to Xxxxx Group: The Xxxxx Group, Inc.
0000 X. Xxxxxxxxxx Xxxxx Xxxxx
Xxxx, Xxxxx 00000
Attention: General Counsel
Tel: 000-000-0000
Fax: 000-000-0000
with a copy to: Xxxx X. Xxxxxxxxx, Esq.
Xxxxxx Xxxxxx & Xxxxx
0000 Xxxxxx Xxxxxxxxx Xxxxxx, XX
Xxxxx 000, Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Date of service of such notice shall be (i) the date such notice is personally
delivered, (ii) three days after the date of mailing if sent by certified or
registered mail, (iii) one day after date of delivery to the overnight courier
if sent by overnight courier or (iv) the next succeeding business day after
transmission by facsimile.
8.2 Public Announcements. No party shall make any public
announcement or filing with respect to the transactions provided for herein
without the prior consent of the other parties hereto subject to applicable
disclosures required to be made by Buyer under federal securities law. To the
extent reasonably feasible, any press release or other announcement or notice
regarding the transactions contemplated by this Agreement shall be made jointly
by the parties.
8.3 Severability. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision.
8.4 Amendment and Waiver. This Agreement may be amended, or any
provision of this Agreement may be waived, provided that any such amendment or
waiver will be binding on Buyer only if such amendment or waiver is set forth in
a writing executed by Buyer, and provided that any such amendment or waiver will
be binding upon Seller only if such amendment or waiver is set forth in a
writing executed by Seller. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other breach.
8.5 Documents. Each party will execute all documents and take such
other actions as any other party may reasonably request in order to consummate
the transactions provided for herein and to accomplish the purposes of this
Agreement.
8.6 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
hereto and delivered to the other.
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8.7 Expenses. Except as paid prior to the date hereof or otherwise
specifically provided herein, each of the parties shall pay all costs and
expenses incurred or to be incurred by it, him or her, as the case may be, in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement.
8.8 Construction. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of Texas, without giving effect to provisions thereof regarding
conflict of laws.
8.9 Headings. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
8.10 Assignment. This Agreement is intended to bind and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. This Agreement will not be assignable or
delegable by any party without the prior written consent of the other parties;
provided, however, that nothing in this Agreement will limit Buyer's ability to
assign its rights or delegate its responsibilities, liabilities, and obligations
under this Agreement to any person at any time without the consent of the other
parties, except that Buyer shall not be released from any payment obligation and
shall remain liable to Seller for any such payment obligation to the same extent
as any assignee.
8.11 Definitions. For purposes of this Agreement, the following
terms have the meaning set forth below:
"AFFILIATE" means an affiliate as defined in Rule 405 under
the Securities Act of 1933, as amended, and includes any past and
present Affiliate of a Person. With respect to Seller, Affiliate also
includes, but is not limited to, the following entities: Just Ask,
Inc., Glass Doctor Corporation, Royalties International, LLC, Marketing
Promotion, Inc., SEL, Inc., Glass Doctor, Inc., Glass Doctor of
Maryland, Inc., Oklahoma Glass Company, Glass Doctor of Texas, Inc.,
Glass Doctor of Arizona, Inc., Glass Doctor of Pennsylvania, Inc.,
Glass Doctor of Washington, Inc., Glass Doctor of Nevada, Inc., Glass
Doctor of Utah, Inc., and Wendroff Management, Inc.,
"ASSET PURCHASE AGREEMENT" means that certain Asset Purchase
Agreement among Buyer, the Company, GDC, and Seller.
"CODE" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employment Retirement Income Security Act
of 1974, as amended.
"FRANCHISED BUSINESS" means a glass replacement installation
services business of the type described in GDC's Uniform Franchise
Offering Circular, dated January 20, 1998
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("UFOC") doing business as "Glass Doctor" or similar name and using the
trademarks described in the UFOC or similar marks.
"FRANCHISEE" means any Person awarded the right to operate a
Franchised Business, and any Person awarded such right subsequent to
this Agreement.
"FRANCHISEE AFFILIATE" means an Affiliate of the Company
and/or the Seller which currently operates or has been awarded the
right to operate a business similar to the Franchised Business.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board (or any successor authority) that are applicable as of the date
of determination, consistently applied.
"HAZARDOUS WASTES" means (A) hazardous materials, hazardous
substances, extremely hazardous substances or hazardous wastes, as
those terms are defined by the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. `9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. `6901 et seq., and any other
Environmental and Safety Requirements; (B) petroleum, including without
limitation, crude oil or any fraction thereof which is liquid at
standard conditions of temperature and pressure (60 degrees Fahrenheit
and 14.7 pounds per square inch absolute); (C) any radioactive
material, including, without limitation, any source, special nuclear,
or by-product material as defined in 42 U.S.C. "2011 et seq.; (D)
asbestos in any form or condition; and (E) any other material,
substance or waste to which liability or standards of conduct may be
imposed under any Environmental and Safety Requirements.
"LIENS" means any claims, liens, charges, restrictions,
options, preemptive rights, mortgages, hypothecations, assessments,
pledges, encumbrances or security interests of any kind or nature
whatsoever.
"PERSON" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated association,
corporation, entity or government (whether Federal, state, county, city
or otherwise, including, without limitation, any instrumentality,
division, agency or department thereof).
"PLAN AFFILIATE" means any person or entity with which the
Company constitutes (or has ever constituted) all or part of a
controlled group of corporations, a group of trades or businesses under
common control or an affiliated service group, as those terms are
defined in Section 414 of the Code.
"PROPRIETARY RIGHTS" means all patents, patent applications,
patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); the Trademarks and all other
trademarks, service marks, trade dress, trade names and corporate
names; all
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registered and unregistered statutory and common law copyrights; all
registrations, applications and renewals for any of the foregoing; all
trade secrets, confidential information, ideas, formulae, compositions,
know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications,
designs, plans, improvements, proposals, technical and computer data,
documentation and software, financial, business and marketing plans,
and franchisee, customer and supplier lists and related information and
all other proprietary rights.
"TAX" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property,
capital stock, social security, unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; the foregoing shall
include any transferee or secondary liability for a Tax and any
liability assumed by agreement or arising as a result of being (or
ceasing to be) a member of any Affiliated Group (or being included (or
required to be included) in any Tax Return relating thereto).
"TAX RETURNS" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related
or supporting Schedules, statements or information) filed or required
to be filed in connection with the determination, assessment or
collection of any Taxes of any party or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
"TRADEMARKS" means the registered marks:
"Glass Doctor" Nos. 0886720 and 1,066,929
Glass Doctor Logo No. 1,066,930
"We Fix Your Panes" No. 1,075,590
"TRANSACTION DOCUMENTS" means all agreements and instruments
contemplated by and being delivered pursuant to or in connection with
this Agreement.
8.12 Entire Agreement. This Agreement, the Preamble and all the
Schedules attached to this Agreement (all of which shall be deemed incorporated
in the Agreement and made a part hereof) set forth the entire understanding of
the parties with respect to the subject matter hereof, and shall not be modified
or affected by any offer, proposal, statement or representation, oral or
written, made by or for any party in connection with the negotiation of the
terms hereof, and may be modified only by instruments signed by all of the
parties hereto.
8.13 Third Parties. Nothing herein expressed or implied is intended
or shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement and their respective permitted successors and
assigns, any rights or remedies under or by reason of this Agreement.
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8.14 Interpretative Matters. Unless the context otherwise requires,
(a) all references to Articles, Sections or Schedules are to Articles, Sections
or Schedules in this Agreement, (b) each accounting term not otherwise defined
in this Agreement has the meaning assigned to it in accordance with GAAP, and
(c) words in the singular or plural include the singular and plural and pronouns
stated in either the masculine, the feminine or neuter gender shall include the
masculine, feminine and neuter and the term "including" shall mean by way of
example and not by way of limitation.
8.15 Knowledge. Where any representation or warranty of Seller
contained in this Agreement is expressly qualified by reference "to the
knowledge of," it refers to the knowledge of Seller and/or the directors,
officers and senior managers of the Company and its Affiliates as to the
existence or absence of facts that are the subject of such representations and
warranties after consultation with and due inquiry of all of the directors,
officers and senior managers of the Company which is assumed to have been made
and acknowledged by Seller, it being understood that Seller has not made any
other independent investigation or consulted with any outside third parties,
other than the Company's accountants and legal counsel.
8.16 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELLER:
----------------------
Xxxxxx X. Xxxxx
COMPANY: BUYER:
GLASSMARKS, INC. THE XXXXX GROUP, INC.
By: By:
---------------------------- ----------------------------
Xxxxxx X. Xxxxx, President Xxxxxx Xxxxxxx, President &
CEO
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EXHIBITS
Exhibit 2.2.2 Term Note
Exhibit 5.2-D Form of Opinion
Exhibit 5.2-G Form of Trademark License Termination Agreement
Exhibit 5.2-K Form of Release
Exhibit 7.3 Form of Lock-Up and Registration Rights Agreement
SCHEDULES
Schedule 2.3 Liabilities and Obligations
Schedule 3.2 Jurisdictions Where Qualified
Schedule 3.4 Officers and Directors
Schedule 3.9 Liabilities
Schedule 3.10-B Accounts Receivable
Schedule 3.10-C Accounts Payable
Schedule 3.12 Material Contracts
Schedule 3.13 Leased Real Property
Schedule 3.14 Personal Property
Schedule 3.15 Litigation
Schedule 3.17 Intellectual Property
Schedule 3.19 Conduct in Ordinary Course
Schedule 3.20 Insurance Policies
Schedule 3.21 Bank Accounts
Schedule 3.22 Licenses and Permits
34
Schedule 3.23 Employee Benefit Plans
Schedule 3.24 Hazardous Wastes
Schedule 3.25 Salaries
Schedule 3.26 Personnel Agreements, Plans and Arrangements
Schedule 3.27 Workers' Compensation
Schedule 3.29 Affiliate Transactions
