Exhibit 10.19
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made on the 22 day of
October, 1998, by and among MSI/EAGLE SUPPLY, INC., a Delaware corporation
("Buyer"), MASONRY SUPPLY, INC., a Texas corporation ("SELLER,") and XXXX X.
XXXXXX, the sole shareholder of Seller ("SHAREHOLDER"). XXXXX X. XXXXXX, spouse
of Shareholder ("XXX. XXXXXX") has joined in this Agreement for the purposes set
forth below. XXXX, INC., a Texas corporation ("XXXX"), has joined in this
Agreement for the purposes set forth below.
RECITALS
A. Seller is a wholesale and retail seller of masonry materials and
supplies and related products and supplies for commercial and residential
applications, with operations at four primary locations in Texas (the
"BUSINESS").
B. Buyer intends to buy, and Seller intends to sell and assign to Buyer,
the Business and all of Seller's assets, other than certain excluded
non-operating assets specified herein (the "ACQUIRED BUSINESS"), upon the terms
and conditions of this Agreement.
C. Shareholder owns all of the issued and outstanding shares of stock of
Seller and will benefit substantially from the transactions under this
Agreement. In return for such benefits, Shareholder is willing to enter into
this Agreement for the purposes set forth below.
D. Shareholder owns all of the issued and outstanding shares of stock of
XXXX and, but for the joinder of XXXX in this Agreement, Buyer would not have
entered into this Agreement which will benefit Shareholder.
E. Xxx. Xxxxxx acknowledges that she will receive a substantial financial
benefit from the transactions under this Agreement. Accordingly, she is willing
to, and does hereby, enter into this Agreement for the purposes of joining in
any and all representations, warranties, covenants and agreements of Shareholder
under this Agreement.
OPERATIVE TERMS
In consideration of the mutual promises, Buyer, Seller, Shareholder, XXXX
and Xxx. Xxxxxx agree as follows:
1. PURCHASED ASSETS; EXCLUDED ASSETS; ASSUMED LIABILITIES.
1.1 PURCHASED ASSETS. Subject to the terms and conditions of this
Agreement, on the Closing Date (as defined in Section 4.1), Seller will sell and
assign to Buyer, and Buyer will purchase from Seller, the Business, all of
Seller's operating assets and all other assets used or useful in connection with
the Business (other than the Excluded Assets, as defined in Section 1.2),
including, without limitation:
(a) the equipment, vehicles, rolling stock, racks, furniture,
fixtures, fixed assets and leasehold improvements including, without
limitation, those items described in EXHIBIT 1.1(A);
(b) inventories of masonry materials and supplies and related
products and supplies with respect to the Business which are held for
resale (the "INVENTORY");
(c) accounts, manufacturers rebates, and notes receivable held by
Seller and notes, bonds and other evidences of indebtedness of and rights
to receive payments from any person held by or owed to Seller (the
"ACCOUNTS RECEIVABLE"), including, without limitation, those described in
SCHEDULE 5.20(B), other than those listed accounts which were totally
written off as of the Effective Time, and all of Seller's rights in
collateral that secures any or all of the Accounts Receivable or other
indebtedness owed to Seller;
(d) prepaid expenses and security deposits described in EXHIBIT
1.1(D) and all other current assets related to or required in the Business;
(e) all of Seller's rights under the real property leases attached
hereto as SCHEDULE 5.11(B) (the "THIRD PARTY LEASES");
(f) all of Seller's rights under the equipment leases and contracts
attached as SCHEDULE 5.11(C) (the "LEASES AND CONTRACTS");
(g) telephone numbers;
(h) goodwill, customer lists, assumed names, intellectual property
including, without limitation, the trade names, trademarks and service
marks described in SCHEDULE 5.15;
(i) computer hardware and software, and all of Seller's rights under
software licenses;
(j) cash and cash equivalents;
(k) assignable licenses and permits;
(l) business insurance policies including, without limitation, all
proceeds and rights to proceeds with respect thereto (the "BUSINESS
INSURANCE POLICIES");
(m) choses in action, claims, demands and rights in favor of Seller
other than Seller's rights under this Agreement;
(n) books and records; and
(o) all other tangible and intangible assets related to the Business.
Such assets, other than the Excluded Assets, as defined in Section 1.2, are
collectively called the
2
"PURCHASED ASSETS." The Purchased Assets will be sold free and clear of all
security interests, liens, claims, encumbrances, restrictions, reservations,
charges or matters of a like kind (the "ENCUMBRANCES"), except for the items
described in EXHIBIT 1.1 (the "PERMITTED ENCUMBRANCES").
1.2 EXCLUDED ASSETS. The sale and purchase under this Agreement shall not
include the following assets (the "EXCLUDED ASSETS"):
(a) Seller's corporate minute books and tax returns (copies of which
shall be made available to Buyer upon request);
(b) payments representing the Purchase Price, as defined in Section
2.1, and rights of Seller under this Agreement and any instruments or
agreements given by, or entered into with, Buyer pursuant to this
Agreement;
(c) Seller's accounts receivable which have been totally written off
as of the Effective Time; and
(d) the other excluded assets listed on EXHIBIT 1.2(D) (the "OTHER
EXCLUDED ASSETS").
1.3 ASSUMED LIABILITIES. At the Closing, Buyer shall assume:
(a) The accounts payable and accrued expenses of Seller, as of the
Closing Date, that (i) are accrued by Seller in the ordinary course of the
Business, consistent with generally accepted accounting principles
("GAAP"), including trade payables and all accrued expenses related to the
operation and conduct of the Business (including, without limitation,
income taxes payable on the Interim Earnings, as defined in Section 4.3,
and wages payable to Seller's employees, but not including any obligation
under any Benefit Plan, as defined in Section 5.13 or any liability for
state or federal income or franchise taxes accrued as of the Effective Time
which are not paid prior to the Closing), (ii) are not owed to XXXX or
Shareholder (or any Affiliate, as defined in Section 11.1, of Seller, XXXX
or Shareholder) and (iii) did not arise under or pursuant to any contract,
arrangement or relationship with XXXX or Shareholder (or any Affiliate of
Seller, XXXX or Shareholder); and
(b) the obligations of Seller that accrue after the Effective Time,
as defined in Section 4.1, under the Third Party Leases and the Leases and
Contracts, but not as the result of any breach thereof by Seller or act or
omission of Seller that with notice, the passage of time, or both, would
constitute a breach thereof by Seller.
(collectively, the "ASSUMED LIABILITIES"), but in no event shall the Assumed
Liabilities include any liabilities arising out of any tortious acts or any
violations of law, rule or regulation by Seller, Shareholder or any of Seller's
employees, agents, Affiliates or contractors. Except for the Assumed
Liabilities, Buyer will not assume any contracts, leases, debts, obligations or
liabilities of Seller, or arising out of the ownership or operation of the
Business, whether express or implied, contingent or otherwise, or resulting from
any violation of law, rule or regulation, or arising out of any act,
3
omission or transaction of Seller, XXXX, Shareholder or Xxx. Xxxxxx.
1.4 REAL PROPERTY LEASES. At the Closing, as defined in Section 4.1,
Shareholder (or Shareholder and Xxx. Xxxxxx, in the event that Shareholder and
Xxx. Xxxxxx are co-owners or own the property as community property), as
landlord, and Buyer, as tenant, shall enter into a real estate lease with
respect to the following facility:
Masonry Supply, Inc.
0000 Xxxxxxx 000 X.
Xxxxxxxxx, XX 00000
(the "MANSFIELD FACILITY")
The lease with respect to such facility (the "SHAREHOLDER LEASE") shall be
in the form of, and shall contain the terms set forth in, EXHIBIT 1.4. The
premises leased under the Third Party Leases and the Shareholder Lease are
individually and collectively called the "LEASED PREMISES."
1.5 EMPLOYMENT AGREEMENT. At the Closing, Buyer, as employer, and
Shareholder, as employee, shall enter into an employment agreement under which
Shareholder shall be employed as president of Buyer, which employment agreement
shall be in the form of, and shall contain the terms set forth in, EXHIBIT 1.5
(the "XXXXXX EMPLOYMENT AGREEMENT").
1.6 INITIAL PUBLIC OFFERING. If (a) within five (5) years after the
Closing Date, a company controlled by TDA Industries, Inc. ("TDA") files a
Registration Statement (as hereinafter defined) that is declared effective by
the Securities and Exchange Commission (the "SEC") which registers the common
stock of TDA's roofing supply business (the "ROOFING COMPANY") for sale in
connection with an underwritten initial public offering of the Roofing Company's
common stock resulting in gross offering proceeds of at least Ten Million
Dollars ($10,000,000.00) (the "IPO"), (b) the operations of the Acquired
Business are part of the Roofing Company's operation (i) at the time the
Registration Statement is declared effective by the SEC, or (ii) within one (1)
year after the Registration Statement is declared effective by the SEC and
within five (5) years after the Closing Date, and (c) the Acquired Business
earnings before interest, federal income taxes, and amortization of goodwill
("EBITA") from the Effective Time to the effective date of such filing are:
(i) not less than Two Million Dollars ($2,000,000.00) each year (the
"FIRST ALTERNATIVE"); or
(ii) less than Two Million Dollars ($2,000,000.00) each year but not
less than One Million Five Hundred Thousand Dollars
($1,500,000.00) per year (the "SECOND ALTERNATIVE");
(or, in the case of the First Alternative or Second Alternative, not less than a
seasonally adjusted portion of such amount for any partial fiscal year based on
seasonal differences in the Acquired Business EBITA for the thirty-six (36)
months preceding such effective date of such filing), then Buyer shall cause
Seller or its designee to receive One Million Dollars ($1,000,000.00), if the
First Alternative is met, or Seven Hundred Fifty Thousand Dollars ($750,000.00),
if the Second
4
Alternative is met, payable, at the option of the Roofing Company, either in
cash or in common stock of the Roofing Company valued at the price at which such
common stock is sold in the IPO (the "IPO PRICE"). Such common stock, if
delivered to Seller or its designee pursuant to this Section 1.6, shall be
unregistered and appropriately legended (or registered if issued pursuant to an
effective Registration Statement) and issued subject to all normal and customary
agreements typically entered into among the recipient of such common stock, the
underwriters, the Roofing Company, and its principal shareholders entered into
in connection with the IPO, and to a lock-up agreement limited to no more than
24 months from the effective date of the IPO at the discretion of the
underwriters of such IPO, or any greater period of time that may be required by
any regulatory agency, share exchange, or NASDAQ, and subject to compliance with
any requirements or restrictions arising under any applicable state or federal
securities laws or regulations. In the event that Seller or its designee
provides the Roofing Company notice at least thirty (30) days prior to the
anticipated effective date of the IPO that it would prefer to receive the
Roofing Company common stock rather than cash, Buyer shall use reasonable
efforts to cause such stock to be issued to Seller or its designee (subject to
the approval of the underwriters of such IPO and subject to compliance by all
relevant parties with any requirements or restrictions arising under any
applicable state or federal securities laws or regulations). Buyer can give no
assurance that any IPO will ever be consummated or that the value of any shares
of stock issued pursuant to the provisions of Section 1.6 or Section 2.1(b)
hereof would be maintained.
For purposes of this Section, "REGISTRATION STATEMENT" means a registration
statement filed by the Roofing Company with the SEC under the Securities Act of
1933, as amended (the "SECURITIES ACT"), in connection with a public offering of
the Roofing Company's common stock (other than a registration statement filed on
Form S-4 or Form S-8, or any form substituting therefor). The rights of Seller
under the provisions in Section 1.6 and Section 2.1(b) hereof regarding the
possible issuance of stock of the Roofing Company shall be contingent upon
compliance by all relevant parties with all state and federal securities laws
and regulations applicable on the date hereof, at the time such rights are
exercised and at all other times as determined by counsel for all involved
parties and any regulatory agencies having jurisdiction thereover.
For purposes of this Section, the EBITA calculation shall not be charged
with any amortization of goodwill, financing cost or interest cost relating to
the acquisition of the Acquired Business. In the event of acquisitions or the
financing of new branch locations which become part of the business operations
of the Acquired Business in the future, amortization of goodwill expense or
interest expense on borrowed funds relating only to those acquisitions or new
branch locations shall be charged. All costs related to the acquisition of the
Acquired Business shall be (or be deemed to be) capitalized expenses.
1.7 XXXX NON-COMPETE AGREEMENT. At the Closing, XXXX, Shareholder, Xxx.
Xxxxxx and Buyer shall enter into the Purchase and Non-Competition Agreement in
the form of, and containing the terms set forth in, EXHIBIT 1.7 (the
"NON-COMPETE AGREEMENT") pursuant to which XXXX will agree (a) not to compete
with Buyer and the Acquired Business, (b) to help facilitate the direct purchase
by Buyer of all steel and other products and supplies heretofore sold by XXXX to
Seller in connection with the Acquired Business, (c) to disclose to Buyer the
names of
5
XXXX'x customers and accounts which have heretofore purchased products from XXXX
of the type reasonably related to the Acquired Business, and (d) to assign to
Buyer all goodwill of XXXX in its business reasonably related to the Acquired
Business.
2. PURCHASE PRICE AND PAYMENT; ALLOCATION; AND SALES AND TRANSFER TAXES.
2.1 PURCHASE PRICE AND PAYMENT.
(a) The purchase price for the Purchased Assets, subject to
adjustment under the terms of this Agreement (the "PURCHASE PRICE"), shall be
Eight Million Dollars ($8,000,000.00) (the "TENTATIVE PURCHASE PRICE")and shall
be increased by the Adjustment Amount, as defined in Section 2.2, if the
Adjustment Amount is a positive number, or shall be reduced by the Adjustment
Amount, if the Adjustment Amount is a negative number. At the Closing, the
Tentative Purchase Price, after applying the credits and adjustments provided
for in this Agreement (the "ADJUSTED TENTATIVE PURCHASE PRICE"), shall be
payable as follows: (a) Buyer shall pay to Seller, by wire transfer in
immediately available United States funds, the sum of Six Million Dollars
($6,000,000.00) (the "CLOSING CASH AMOUNT"); and (b) Buyer shall issue to
Seller, Buyer's Secured Non-Negotiable Promissory Note, in the form of, and
containing the terms set forth in, EXHIBIT 2.1(B)(1) to this Agreement for the
balance of the Adjusted Tentative Purchase Price (the "PROMISSORY NOTE"). The
Promissory Note shall be secured pursuant to a Security Agreement in the form
of, and containing the terms set forth in, EXHIBIT 2.1(B)(2) (the "SECURITY
AGREEMENT"). Seller shall subordinate its lien and the Promissory Note to
Buyer's other secured financings and third-party borrowings and shall execute
and deliver such subordination agreements as may be requested at the Closing or
thereafter by Buyer's other unaffiliated lenders.
(b) Up to Two Million Dollars ($2,000,000.00) of the principal amount
of the Promissory Note shall be exchangeable at the option of Seller into common
stock of the Roofing Company in the event that the Acquired Business is part of
the Roofing Company which consummates the IPO (as defined in Section 1.6) at any
time during the five years after the Closing Date or becomes a part of the
Roofing Company within one year after the consummation of the IPO and within
five years after the Closing Date. The right to make the aforesaid exchange of
up to Two Million Dollars ($2,000,000.00) of the principal amount of the
Promissory Note shall be available at the time of the consummation of the IPO
(or at the time that the Acquired Business becomes part of the Roofing Company,
if that occurs within one year after the consummation of such IPO and within
five years after the Closing Date) at a price equal to the IPO Price. If the
aforesaid exchange is made, in whole or in part, the shares of stock of the
Roofing Company acquired shall be unregistered and appropriately legended and
subject to all normal and customary agreements among the recipient of such
common stock, the underwriters, the Roofing Company, and its principal
shareholders entered into in connection with the IPO, and to a lock-up agreement
limited to no more than 24 months from the effective date of the IPO at the
discretion of the underwriters of such IPO, or any greater period of time that
may be required by any regulatory agency, share exchange, or NASDAQ, and subject
to compliance with any requirements or restrictions arising under any applicable
state or federal securities laws or regulations, and all other normal terms and
conditions. If the Roofing Company advises Seller that the Acquired Business
may become part of the Roofing Company upon the proposed consummation of such
proposed IPO
6
more than sixty (60) days prior to the anticipated effective date of such
proposed IPO, Seller's right to make an exchange for stock under this Section
shall be contingent upon Seller's giving the Roofing Company notice of Seller's
intent to exercise its right to exchange for stock (and the portion of the
Promissory Note to be so exchanged) not later than fifty (50) days prior to the
anticipated effective date of such proposed IPO.
In the event that the IPO is consummated, Buyer shall prepay the
outstanding principal and any accrued interest on the Promissory Note within 120
days of the consummation of the IPO. Upon payment of the Promissory Note,
Seller's right to make an exchange for shares of common stock of the Roofing
Company sold in the IPO under the terms of this Section 2.1(b) shall terminate.
Buyer can give no assurance that any IPO will ever be consummated or that the
value of any shares of stock issued pursuant to the provisions of Section 1.6 or
Section 2.1(b) hereof would be maintained. The provisions in Section 1.6 and
Section 2.1(b) hereof regarding the possible issuance of stock of the Roofing
Company shall be available only if and to the extent that attorneys for all
parties involved as well as all regulatory agencies having jurisdiction
thereover find that each provision is consistent with all state and federal
securities laws and regulations applicable on the date hereof, at the time such
rights are exercised and at all other times.
2.2 ADJUSTMENT AMOUNT. The Adjustment Amount (which may be a positive or
negative number) will be equal to (a) the amount of the Acquired Net Assets, as
defined in this Section below, less the amount of the Permitted Distributions,
as defined in Section 7.1 (but excluding from the amount of the Permitted
Distributions payments by Seller during the Interim Period (as defined in
Section 4.3(a)) to Shareholder of up to (i) $10,000 a week as salary and (ii)
$16,000 a month as rent on the Mansfield Facility), minus (b) Two Million Four
Hundred Thousand Dollars ($2,400,000.00). For purposes of this Agreement, the
"ACQUIRED NET ASSETS" means (i) the tangible net book value of the Purchased
Assets as of the Effective Time as determined on the Effective Date Balance
Sheet, as defined in Section 2.3(a), minus (ii) the accrued liabilities of
Seller (exclusive of any liability or obligation of Seller for state or federal
income or franchise taxes which are not paid prior to the Closing) as of the
Effective Time, as determined on the Effective Date Balance Sheet, all as
adjusted in accordance with this Agreement and determined as set forth in
Section 2.3(a).
2.3 ADJUSTMENT PROCEDURE.
(a) Seller will prepare and shall cause Xxxxxx, Xxxxxx & Associates
("W&M"), Seller's independent certified public accountants, to audit the balance
sheet of Seller at June 30, 1998 (the "EFFECTIVE DATE BALANCE SHEET"), prepared
in accordance with GAAP, and to compute the Acquired Net Assets. Buyer's
independent certified public accountants, Deloitte & Touche LLP ("D&T") and
representatives of Buyer shall review the audit conducted by W&M. Seller and
Shareholder will arrange for D&T's and Buyer's representatives to have full
access to the W&M audit workpapers and files. The depreciated value of various
tangible personal property purchased by Seller and currently used in the
Acquired Business which were not reflected properly on the books of Seller prior
to the Effective Time (including, without limitation, certain angle iron cutting
equipment at each branch location) shall be included in the calculation of the
Acquired Net Assets (consistent with the requirements of GAAP). In conducting
the audit of the Effective Date Balance
7
Sheet, if W&M determines that the depreciated value of the fixed assets stated
on the balance sheet of Seller prior to the Effective Time is overstated, then
Seller shall have the right to review the depreciated value of certain fixed
assets purchased more than five years ago and still used in the Acquired
Business but not reflected on Seller's financial statements and to add their
depreciated value to the net fixed asset account (consistent with GAAP) to make
up for any such additional depreciation allowance deemed required by W&M.
Seller shall deliver the Effective Date Balance Sheet and the computation of the
Acquired Net Assets to Buyer at the Closing. If, within thirty (30) days
following delivery to Buyer of the Effective Date Balance Sheet and the
computation of the Acquired Net Assets, Buyer has not given Seller notice of
Buyer's objection to the Effective Date Balance Sheet or the computation of the
Acquired Net Assets (such notice, if given, must contain a statement of the
basis of Buyer's objection), then the Effective Date Balance Sheet and the
computation of the Acquired Net Assets, shall be deemed to have been finally
determined for purposes of this Agreement, and the Acquired Net Assets as so
determined will be used in computing the Adjustment Amount. If Buyer gives such
notice of an objection, then the matters as to which Buyer has objected will be
submitted to D&T and W&M (the "ACCOUNTANTS") for resolution, and the Accountants
shall attempt to resolve such matters and determine the Acquired Net Assets. If
the Accountants are unable to agree as to the resolution of such matters and
determine the Acquired Net Assets within thirty (30) days after such matters are
submitted to the Accountants, the Accountants shall select another "Big Five"
accounting firm (New York City or Dallas office) (the "OTHER ACCOUNTANTS") which
will resolve such matters and determine the Acquired Net Assets. Each party
will furnish to the Accountants (and, if applicable, the Other Accountants) such
workpapers and other documents and information relating to the disputed matters
as the Accountants or the Other Accountants may request and are available to
that party (or its independent public accountants), and each party will be
afforded the opportunity to present to the Accountants and the Other Accountants
any material relating to such disputed issues and to discuss such issues with
the Accountants and the Other Accountants. The resolution of such issues under
this Section 2.3(a) by the Accountants or Other Accountants, as the case may be,
as set forth in a notice delivered to both parties by the Accountants or Other
Accountants shall be deemed to be a final determination thereof for purposes of
this Agreement, shall be binding and conclusive on the parties, and the Acquired
Net Assets, as finally determined by the Accountants or Other Accountants, will
be used in computing the Adjustment Amount. Buyer and Seller shall each bear
one-half of the fees of the Other Accountants in connection with the resolution
or attempted resolution of the disputed matters.
(b) On the tenth business day following the final determination of
the Acquired Net Assets under Section 2.3(a) and the Adjustment Amount:
(i) if the Purchase Price is greater than the sum of the Closing
Cash Amount and the original principal amount of the
Promissory Note, Buyer shall pay the difference to Seller
(up to Two Hundred Fifty Thousand Dollars ($250,000.00)) by
wire transfer in immediately available United States funds
(the "ADDITIONAL CASH PAYMENT"), and if such difference
exceeds Two Hundred Fifty Thousand Dollars ($250,000.00),
the Promissory Note shall be amended by Seller and Buyer by
adding such excess to the original principal amount of the
8
Promissory Note; or
(ii) if the Purchase Price is less than the sum of the Closing
Cash Amount and the original principal amount of the
Promissory Note, Seller shall pay (and Shareholder shall
cause Seller to pay) (A) the difference to Buyer (up to Two
Hundred Fifty Thousand Dollars ($250,000.00)) by wire
transfer in immediately available United States funds, and
(B) if such difference exceeds Two Hundred Fifty Thousand
Dollars ($250,000.00), the Promissory Note shall be amended
by Seller and Buyer by reducing the original principal
amount of the Promissory Note by the amount of such excess.
2.4 CONTINGENT PAYMENTS.
(a) BASED ON EBITA. Buyer shall pay to Seller or its designee, as
additional consideration for the sale of the Purchased Assets, the applicable
percentage set forth below of the EBITA of the Acquired Business, on an annual
non-cumulative basis, for each of the fiscal years ending June 30, 1999 through
June 30, 2003:
EBITA FOR PERCENTAGE OF EBITA TO
FISCAL YEAR BE PAID TO SELLER OR
----------- ITS DESIGNEE
------------
Less than $2,000,000.00 0%
$2,000,000.00 - $2,750,000.00 25%
More than $2,750,000.00 35%
For purposes of this Section, the EBITA of the Acquired Business shall not
be charged with any amortization of goodwill, financing cost or interest cost
relating to the purchase of the Acquired Business. In the event of acquisitions
or the financing of new branch locations which become part of the business
operations of the Acquired Business in the future, amortization of goodwill
expense or interest expense related to borrowed funds relating only to those
acquisitions or new branch locations shall be charged. All costs related to the
acquisition of the Acquired Business shall be (or deemed to be) capitalized
expenses. The EBITA of the Acquired Business shall be conclusively determined
annually by Buyer's independent certified public accountants. The contingent
payments of Purchase Price payable pursuant to this Section 2.4(a) is not
contingent upon the employment of Shareholder or any other party to this
Agreement.
(b) BASED ON UNCOLLECTIBILITY OF ACCOUNTS RECEIVABLE.
The bad debt reserve as shown on the Effective Date Balance Sheet shall be
allocated to the specific accounts receivable which are shown thereon in
accordance with SCHEDULE 2.4(B) attached hereto. Accounts receivable with a
face amount up to the amount of the bad debt reserve therefor
9
as shown on the Effective Date Balance Sheet and which arose on or before the
Effective Time and which are acquired by Buyer on the Closing Date and are
subsequently written-off as uncollectible by Buyer, shall be reconveyed to
Seller by Buyer without charge or encumbrance at the time such write-off occurs,
and the face amount of all such accounts receivable reconveyed to Seller (the
"RETURNED ACCOUNTS") net of any bad debt reserve allocated to the Returned
Accounts on the Effective Date Balance Sheet shall be an adjustment to the
Purchase Price. If the amount of the Returned Accounts as of the first
anniversary of the Effective Time exceeds the bad debt reserve allocated to such
Returned Accounts, the original principal amount of the Promissory Note shall be
decreased by such difference. If the amount of the Returned Accounts as of the
first anniversary of the Effective Time is less than such bad debt reserve, the
original principal amount of the Promissory Note shall be increased by such
difference. Any increase or decrease in the amount of interest payable under
the Promissory Note resulting from such adjustment shall be added to or credited
against the first interest payment due after the determination of such
adjustment.
2.5 ALLOCATIONS. The consideration for the Purchased Assets will be
allocated in accordance with the Allocation of Purchase Price Agreement in the
form of, and containing the terms set forth in, EXHIBIT 2.5. Such allocations
will be conclusive and binding on Seller and Buyer for state and federal income
tax purposes, and Seller and Buyer will report such allocations to the Internal
Revenue Service as required by Section 1060 of the Internal Revenue Code of
1986, as amended, and the regulations with respect to that Section.
2.6 SALES AND TRANSFER TAXES. Buyer shall pay all sales and other
transfer taxes and fees arising out of the sale and assignment of the Purchased
Assets to Buyer. Seller shall pay all documentary and other excise taxes with
respect to the Promissory Note and any amendments thereto.
3. CASUALTY AND CONDEMNATION.
3.1 RISK OF LOSS. Until the Closing, the risk of loss or damage to the
Purchased Assets shall be borne by Seller, and if the Purchased Assets or any
portion thereof are stolen or are damaged or destroyed by fire or other casualty
before the Closing and can be restored, repaired or replaced substantially in
the same condition as exists on the date of this Agreement, within ninety (90)
days after such casualty, Seller shall so restore, and Shareholder shall cause
Seller to restore, such Purchased Assets, and the Closing Date shall be delayed
accordingly; but if such uninsured portion of the cost of restoration, repair or
replacement exceeds One Hundred Thousand Dollars ($100,000.00) (and Seller
refuses to restore, repair or replace such Purchased Assets), or such
restoration, repair or replacement cannot be completed within such period, this
Agreement, at the option of Buyer, shall be deemed terminated.
If Buyer elects to purchase the Purchased Assets even though the Purchased
Assets are not restored, repaired or replaced, or the uninsured portion of the
cost of restoration, repair or replacement exceeds One Hundred Thousand Dollars
($100,000.00), Buyer shall be entitled to the benefits of any insurance on the
Purchased Assets to the extent required for such restoration, repair or
replacement. Seller shall not be required to restore, repair or replace the
stolen, damaged or destroyed Purchased Assets if the uninsured portion shall
cost more than One Hundred Thousand
10
Dollars ($100,000.00) or if it will take longer than ninety (90) days to
complete, but, if Buyer elects to go forward with the purchase, Buyer will
receive a credit against the Purchase Price at the Closing for such uninsured
portion of the loss and the restoration and an assignment by Seller of all of
its rights under insurance policies with respect to the stolen, damaged or
destroyed Purchased Assets and all other rights and claims for damages with
respect to such stolen property, damage or destruction.
3.2 CONDEMNATION. If at any time prior to the Closing, the real property
of which the Leased Premises are a part, or any portion thereof, is taken by
eminent domain or if any preliminary steps in any taking by eminent domain of
such real property or the Leased Premises, or any portion thereof, occurs prior
to the Closing, Buyer may, at its option, within ten (10) days after receipt of
notice or knowledge thereof, terminate this Agreement. Seller shall give Buyer
notice of any such taking and all steps preliminary thereto as soon as Seller
becomes aware of them. If Buyer does not elect to so terminate this Agreement,
this Agreement shall remain in full force and effect, and Seller or Shareholder
(or Shareholder and Xxx. Xxxxxx), as the case may be, shall in such event turn
over or credit to Buyer at the Closing all monies received or to be received by
Seller or Shareholder (or Shareholder and Xxx. Xxxxxx), as the case may be, by
reason of such taking, and Seller or Shareholder (or Shareholder and Xxx.
Xxxxxx), as the case may be, shall assign to Buyer all of Seller's or
Shareholder's (or Shareholder's and Xxx. Xxxxxx'x) right, title and interest in
and to any awards (and rights or claims to any such awards) that may be made for
such taking and any additional money that may be payable thereunder.
4. CLOSING.
4.1 CLOSING; CLOSING DATE; AND EFFECTIVE TIME. Subject to the terms and
conditions of this Agreement, the closing of the transactions contemplated by
this Agreement (the "CLOSING") will occur at 9:00 a.m. local time at the offices
of Xxxxxxx Xxxxxx L.L.P., 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, on
October 22, 1998 or on such other date as may be agreed upon in writing by
Seller and Buyer (the "CLOSING DATE"). The sale and purchase under this
Agreement shall, contingent upon the completion of the Closing, be effective as
of 12:01 a.m. on July 1, 1998 (the "EFFECTIVE TIME"), and all transactions with
respect to the Acquired Business after the Effective Time shall be for Buyer's
benefit.
4.2 ACTIONS TO BE TAKEN AT THE CLOSING. At the Closing, the parties will
take all of the following actions and deliver all of the following documents:
(a) Seller will deliver to Buyer the following documents, in each
case in a form acceptable to Buyer in its sole discretion:
(i) a Xxxx of Sale with respect to the tangible Purchased
Assets, transferring to Buyer good and marketable title in
and to such Purchased Assets, free and clear of all
Encumbrances and other matters except for the Permitted
Encumbrances applicable thereto;
(ii) an assignment to Buyer of the Accounts Receivable and all
other indebtedness owed to Seller and all collateral
securing any or all of
11
such Accounts Receivable and all other indebtedness owed
to Seller;
(iii) assignments of all of Seller's rights under the Third
Party Leases;
(iv) assignments of all of Seller's rights under the Leases
and Contracts;
(v) assignments of all of the other Purchased Assets;
(vi) estoppel certificates and consents to assignment signed
by each party (other than Seller) with respect to each of
the Third Party Leases and the Leases and Contracts that
Buyer is taking by assignment under the terms of this
Agreement;
(vii) any subordination agreements required to be delivered
prior to Closing in accordance with Section 2.1;
(viii) the closing statement signed by Seller;
(ix) certificates issued by the Comptroller of Public Accounts
of the State of Texas to the effect that Seller is in
good standing with respect to the payment of franchise,
sales and use taxes in the State of Texas;
(x) certificates of title for each of the motor vehicles
included in the Purchased Assets duly assigned to Buyer,
together with appropriate applications to transfer title
thereto to Buyer, duly executed by Seller; and
(xi) such other instruments, documents and papers to transfer
and vest in Buyer good and marketable title in and to the
Purchased Assets free and clear of all Encumbrances
except for the Permitted Encumbrances applicable thereto.
(b) Seller will give Buyer exclusive possession of the Purchased
Assets.
(c) XXXX and Buyer will enter into the Non-Compete Agreement.
(d) XXXX will deliver the documents of assignment required by the
Non-Compete Agreement.
(e) Buyer will pay the Closing Cash Amount and deliver to Seller the
Promissory Note and Security Agreement in accordance with SECTION 2.1.
(f) Buyer will deliver to Seller the closing statement signed by
Buyer.
(g) Buyer and Shareholder shall enter into the Xxxxxx Employment
Agreement.
(h) Shareholder (or Shareholder and Xxx. Xxxxxx), as the case may be,
and
12
Buyer shall enter into the Shareholder Lease.
(i) Seller, Shareholder, XXXX and Xxx. Xxxxxx, on the one hand, and
Buyer, on the other hand, shall take such other actions and shall execute
and deliver such other instruments, documents and certificates as are
required by the terms of this Agreement or as may be reasonably requested
by the other party or parties in connection with the consummation of the
transactions contemplated by this Agreement.
4.3 DISTRIBUTION OF INTERIM EARNINGS.
(a) The operations of the Acquired Business from the Effective Time
to the Closing Date (the "INTERIM PERIOD") shall be for the account of
Buyer. The pretax earnings of the Acquired Business during the Interim
Period, but not including any earnings or income resulting from the sale of
the Purchased Assets to Buyer or otherwise arising out of the transactions
contemplated by this Agreement, as determined in accordance with GAAP
applied consistently with the accounting principles applied in the
preparation of the 1998 Financial Statements, as defined in Section 5.7
(the "INTERIM EARNINGS"), shall be distributed as follows:
(i) one-half of the Interim Earnings shall be paid by Buyer
to Seller and Buyer shall receive a credit for such
amount as a prepayment of principal on the Promissory
Note; and
(ii) one-half of the Interim Earnings shall be retained by
Buyer.
(b) Buyer shall be responsible for the payment of all federal and
state income taxes on the Interim Earnings and shall hold Seller and
Shareholder harmless therefrom.
(c) The determination of the Interim Earnings shall be made by W&M
and Buyer's internal auditors within thirty (30) days after the Closing
Date. In the event W&M and Buyer's internal auditors cannot agree on such
determination, Buyer and Seller shall engage the Other Accountants, whose
determination shall be conclusive and binding on the parties. The
distributions described in Section 4.3(a) shall be made immediately upon
the final determination of the Interim Earnings.
5. REPRESENTATIONS AND WARRANTIES OF SELLER, XXXX, SHAREHOLDER AND XXX.
XXXXXX. Seller, Shareholder and Xxx. Xxxxxx, jointly and severally, represent
and warrant to Buyer as follows (and XXXX also makes the representations and
warranties as to XXXX set forth in this SECTION 5):
5.1 ORGANIZATION. Seller and XXXX each is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Texas.
Seller and XXXX each has full power to own its assets and to conduct its
business as presently conducted. Neither Seller nor XXXX is required to be
qualified or authorized to transact business as a foreign corporation in any
state or jurisdiction.
13
5.2 AUTHORITY. Seller and XXXX each has all requisite power and authority
to execute and enter into this Agreement and all other agreements and
instruments contemplated hereby to be executed and delivered by Seller and XXXX
at the Closing (together with the agreements required to be executed by
Shareholder pursuant to this Agreement, the "SELLER DOCUMENTS") and to perform
their respective obligations hereunder and thereunder. The execution, delivery
and performance by each of Seller and XXXX of this Agreement and the Seller
Documents to which it is a party have been duly authorized by all necessary
action, corporate or otherwise, by Seller and XXXX and the stockholders of
Seller and XXXX, as the case may be. This Agreement has been duly executed and
delivered by Seller, XXXX, Shareholder and Xxx. Xxxxxx and is the legal, valid
and binding agreement of Seller, XXXX, Shareholder and Xxx. Xxxxxx, enforceable
against Seller, XXXX, Shareholder and Xxx. Xxxxxx, respectively, in accordance
with its terms. The Seller Documents will be, when executed and delivered by
Seller, Shareholder or XXXX, as the case may be, the legal, valid and binding
agreements of Seller, Shareholder or XXXX, as the case may be, enforceable
against Seller, Shareholder or XXXX, as the case may be, in accordance with
their respective terms.
5.3 TITLE AND CONDITION.
(a) The Purchased Assets are owned solely by Seller, and Seller has
good, assignable and marketable title to the Purchased Assets. Attached to
this Agreement as SCHEDULE 5.3(A) is a true, correct and complete list of
Seller's creditors as of September 30, 1998, including, without limitation,
its secured creditors and other creditors having liens on any of its
assets. At the Closing, Buyer shall receive from Seller good, assignable
and marketable title to the Purchased Assets, free and clear of any and all
Encumbrances other than the Permitted Encumbrances.
(b) The tangible Purchased Assets (excluding, for purposes of this
Section 5.3, the Inventory) are in good condition and repair, ordinary wear
and tear excepted. There are no patent or latent defects regarding the
Purchased Assets or the Leased Premises, or any portion thereof, including,
without limitation, burial grounds, archaeological deposits, sink holes, or
other on-site conditions which could reduce the fair market value thereof.
5.4 PURCHASED ASSETS. The Purchased Assets constitute all of the assets
and properties owned by Seller that are used or useful in connection with the
Business.
5.5 NO VIOLATION. Except for the consent of the lessors under the Third
Party Leases and the Leases and Contracts and the consent of Xxxxxx Xxxxxx
regarding the assignment of his covenant not to compete with Seller, neither the
execution or delivery of this Agreement or any of the Seller Documents nor the
consummation of the transactions contemplated hereby or thereby, including,
without limitation, the transfer and assignment of the Purchased Assets to
Buyer, will conflict with or result in the breach of any term or provision of,
or constitute a default under, or result in the creation of, any Encumbrances
upon any of the Purchased Assets pursuant to, or give any third party the right
to accelerate any obligation under, any article provision, bylaw, agreement,
contract, lease, indenture, deed of trust, instrument, order, law or regulation
to which Seller or XXXX is a party or by which Seller, XXXX or any of the
Purchased Assets is in any way
14
bound or obligated.
5.6 GOVERNMENT CONSENTS. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of Seller, XXXX, Shareholder or
Xxx. Xxxxxx in connection with the transactions contemplated by this Agreement.
5.7 FINANCIAL STATEMENTS AND CONDITION.
(a) Seller has delivered to Buyer:
(i) the unaudited balance sheet of Seller as at June 30, 1996
and the audited balance sheet of Seller as at June 30, 1997, and the
related audited statements of operations and retained earnings, and cash
flows for each of the years then ended (the A1996 AND 1997 FINANCIAL
STATEMENTS");
(ii) an audited balance sheet of Seller as at June 30, 1998
(I.E., the Effective Date Balance Sheet) and the related audited statements
of income and retained earnings and cash flows for the year then ended,
including, without limitation, the notes thereto, together with the report
thereon of W&M (the "1998 FINANCIAL STATEMENTS"); and
(iii) unaudited balance sheets as at December 31, 1996 and 1997
and as at September 30, 1998 (the "UNAUDITED BALANCE SHEETS") and the
related unaudited statements of income and retained earnings for the
calendar years 1996 and 1997 and for the nine-month period ended September
30, 1998 (the "UNAUDITED FINANCIAL STATEMENTS").
(b) Each of the financial statements described in this Section, and
the notes thereto, fairly present the financial condition, the results of
operations, and the cash flows of Seller as at the respective dates of, and
for the periods referred to in, such financial statements, all in
accordance with GAAP, subject, in the case of the Unaudited Financial
Statements, to (i) normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be material) and (ii) the
absence of notes (that, if presented, would not differ materially from
those included in the Effective Date Balance Sheet). The financial
statements referred to in this Section 5.7 reflect the consistent
application of GAAP throughout the periods involved. No financial
statements of any entity other than Seller are required by GAAP to be
included in the financial statements of Seller.
(c) The Acquired Net Assets, as of the Effective Time and as of the
Closing Date, less any Permitted Distributions (but excluding from the
amount of the Permitted Distributions payments by Seller during the Interim
Period to Shareholder of up to (i) $10,000 a week as salary and (ii)
$16,000 a month as rent on the Mansfield Facility), is not, and will not
be, less than Two Million Four Hundred Thousand Dollars ($2,400,000.00),
and, as of the Closing Date, the tangible net book value of the Acquired
Business shall equal the sum of the Acquired Net Assets, less any Permitted
Distributions, plus the Interim Earnings, as defined in Section 4.3.
15
(d) The Interim Earnings are greater than zero.
(e) Since the Effective Time, Seller has not paid more than $16,000
per month as rent for the use of the Mansfield Facility.
5.8 ABSENCE OF MATERIAL ADVERSE CHANGE. Since June 30, 1998 there has not
been:
(a) any material adverse change in the financial condition, results
of operations, business, business prospects, personnel, assets or
liabilities (contingent or otherwise) of Seller;
(b) any dividend declared or paid or distribution made, directly or
indirectly to Shareholder or any Affiliate of Seller, Shareholder or Xxx.
Xxxxxx (except for Permitted Distributions as defined in Section 7.1), or
any redemption or repurchase of Seller's capital stock;
(c) any increase in salary or wages, or payment of any bonus,
commission or other compensation to any of the officers, directors,
employees or agents of Seller except as is shown on SCHEDULE 5.12;
(d) any pending or threatened labor disputes or other labor problems
relating to any employees of Seller;
(e) any default (including, without limitation, any event that, with
the giving of notice or passage of time, or otherwise, would cause a
default), termination or threatened termination under, or amendment to, any
agreement, contract, lease, instrument or license to which Seller is a
party or that is applicable to any portion of the Purchased Assets;
(f) any casualty loss, theft, damage or destruction of any of the
Purchased Assets which has resulted, either singly or in the aggregate, in
a loss of Ten Thousand Dollars ($10,000.00) or more, whether or not covered
by insurance;
(g) any condemnation or eminent domain proceeding and, to the
knowledge of Seller or Shareholder, there has been no threatened
condemnation or eminent domain proceeding affecting any of the Purchased
Assets or the Leased Premises;
(h) any sale, assignment or transfer of any assets of Seller, except
in the ordinary course of Seller's business and consistent with its past
practices or except for Permitted Distributions;
(i) any waiver by Seller of any material rights related to Seller or
any of the Purchased Assets;
(j) any other transactions, agreements, contracts or commitments
entered into by Seller or Shareholder affecting Seller or any of the
Purchased Assets, except in the ordinary course of Seller's business and
consistent with its past practices or except for Permitted Distributions;
or
16
(k) any agreement or understanding to do or resulting in any of the
foregoing.
In addition, since the Effective Xxxx Xxxxxx has conducted the Acquired
Business in accordance with the requirements of Section 7.1.
5.9 LITIGATION; INVESTIGATIONS. SCHEDULE 5.9 hereto contains:
(a) a detailed description of all pending (or, to the knowledge of
Seller or Shareholder, threatened) lawsuits, claims, administrative
charges, complaints, proceedings or investigations by any person or
governmental authority against or relating to Seller or any of the
Purchased Assets or to which Seller or any of the Purchased Assets is
subject;
(b) any judgment, order, writ, injunction or decree to which Seller
is subject, or relating to any of the Purchased Assets or the business or
operations of Seller; and
(c) a detailed description of all lawsuits, claims, administrative
proceedings or investigations pending (or, to the knowledge of Seller or
Shareholder, threatened), within the preceding six (6) years, against
Seller, with respect to any of the Purchased Assets or the business or
operations of Seller other than those lawsuits arising out of traffic
accidents which were fully covered by insurance and finally settled.
5.10 COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS. Seller complies with and
has at all times complied with, and the Purchased Assets and Leased Premises and
the use, operation and maintenance thereof by Seller comply with and have at all
times complied with, and neither Seller nor any of the Purchased Assets and
Leased Premises nor the use, operation or maintenance thereof by Seller is in
violation or contravention of, any applicable (including, without limitation,
any tax, environmental, health, safety or employment) statute, law, ordinance,
decree, order, rule or regulation of any governmental or administrative or
quasi-governmental authority, agency or body.
(a) NOTICES OF VIOLATION. Seller has not received any notices during
the last six (6) years from any governmental agency or body claiming any
such violation or contravention other than minor traffic and vehicle
regulatory violations. There are no agreements with, or commitments to,
any governmental, administrative, or quasi-governmental authority, agency
or body affecting or binding on Seller, or with respect to the Purchased
Assets or Leased Premises, in any manner. There is no proposal pending or
threatened for public improvement, assessment, paving agreement, road
expansion or improvement agreement, utility moratorium, use moratorium,
improvement moratorium, or legal, administrative, or other proceeding or
governmental investigation or requirement, formal or informal, pending or,
to the knowledge of Seller or Shareholder, threatened which affects or may
affect the Purchased Assets or the Leased Premises, or which adversely
affects or may affect Seller's ability to perform hereunder, or any other
charge or expense upon or related to the Purchased Assets or the Leased
Premises.
(b) TAXES/ASSESSMENTS. There are no taxes, fees, or assessments of
any kind or nature whatsoever which are presently due or, to the knowledge
of Seller or Shareholder, which will or may become due with respect to the
Purchased Assets or Leased Premises
17
except for ad valorem real property taxes for the current calendar year
which are not yet due and payable. None of the Leased Premises, nor any
portion thereof, is within a "special assessment district" and, to the
knowledge of Seller or Shareholder, no application has been made or
submitted by anyone for the creation thereof or annexation thereby which
affects or may affect any of the Leased Premises.
(c) ZONING AND LAND USE LAWS. Each of the Leased Premises has the
appropriate zoning and other land use classifications, licenses, permits
and authorizations for the current use being made thereof by Seller. There
are no laws, rules, regulations or ordinances or modifications with respect
to zoning or land use in effect or, to the knowledge of Seller or
Shareholder, proposed, which restrict or prevent, or will restrict or
prevent, the use of the Purchased Assets or Leased Premises in
substantially the same manner as such Purchased Assets or Leased Premises,
as the case may be, are currently being used by Seller and as and have been
used by Seller during the preceding twelve (12) months ("BUYER'S INTENDED
USE"); and, further, none of the parcels comprising the Leased Premises
constitutes any non-conforming use.
(d) ADVERSE RESTRICTIONS AND RIGHTS. There are no existing
easements, rights-of-way, or restrictions other than existing zoning and
government regulations affecting the Leased Premises which could adversely
affect or prohibit the use of any of the Leased Premises for Buyer's
Intended Use.
(e) THIRD-PARTY RIGHTS/ENCUMBRANCES. No party other than Buyer has
any right or option to acquire the Purchased Assets or any portion thereof.
(f) ENVIRONMENTAL COMPLIANCE. (i) None of the real property currently
or previously owned, leased, managed, operated or otherwise utilized by
Seller is on any federal or state "Superfund" list or has ever been the
site of any activity or condition that would violate any federal, state,
local or other environmental statute, law, ordinance, decree, order, rule
or regulation, past or present, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, 42 U.S.C. Section 9601 ET SEQ. ("CERCLA"), the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 ET SEQ. ("ARCRA"), the Clean Air
Act, 42 U.S.C. '' 7401 ET SEQ., the Clean Water Act of 1977, 33 U.S.C. ''
1251 the Toxic Substances Control Act, 15 U.S.C. '' 2601 ET SEQ., or any
other federal, state, or local laws relating to air pollution, water
pollution, noise control, or the handling, discharge, disposal, or
recovery, either on-site or off-site (collectively referred to as
"ENVIRONMENTAL LAWS"), of any toxic or hazardous materials, substances,
wastes or other contaminants (including, without limitation, biohazardous
waste), petroleum products or their derivatives (collectively referred to
as "POLLUTANTS"); (ii) no Pollutants have been handled, stored, recycled,
or disposed of (other than supplies and inventories handled, stored,
recycled or disposed of in the ordinary course of business and in
compliance with all applicable laws) or leaked or spilled on, or have
otherwise contaminated, any of the Leased Premises, or any other real
property currently or previously owned, leased or used by Seller, or would
give rise to a cleanup or remediation obligation under or threatened
violation of any such Environmental Law; (iii) to the best of Seller's or
Shareholder's knowledge, the improvements on the Leased Premises contain no
asbestos-containing materials; (iv) to the
18
best of Seller's or Shareholder's knowledge, no electrical transformers,
fluorescent light fixtures with ballast or other equipment containing PCB's
are or were located in the Leased Premises at any time during or prior to
Seller's use thereof; (v) none of the Leased Premises has been used as a
landfill; (vi) there are no incinerators, above or below ground storage
tanks (other than one above-ground fuel tank located on each of the Leased
Premises), septic tanks or cesspools on any of the Leased Premises; and
(vii) Seller has not arranged for the disposal of any Pollutant off the
Leased Premises which would subject Seller or Buyer to liability under any
Environmental Laws.
(g) WASTE DISPOSAL. Seller has disposed of all toxic or hazardous
waste in compliance with the Environmental Laws.
(h) LICENSES. There are no proceedings or investigations pending or,
to the knowledge of Seller or Shareholder, threatened, that could result in
a termination, revocation, suspension or probation with respect to any of
Seller's licenses, permits or authorizations.
5.11 CERTAIN CONTRACTS. The following Schedules to this Agreement contain
true, correct and complete copies of the following agreements, contracts,
leases, instruments, arrangements and commitments (and all amendments,
supplements and modifications thereto) (and, where indicated below, detailed
descriptions of the terms of unwritten agreements, contracts, leases,
instruments, arrangements, and commitments) relating to Seller or by which
Seller or any of the Purchased Assets is in any way bound or obligated:
(a) all supply agreements, contracts or arrangements (SCHEDULE
5.11(A)),
(b) all real estate leases relating to property owned, occupied or
utilized by Seller (the "REAL ESTATE LEASES") (SCHEDULE 5.11(B));
(c) all equipment leases relating to equipment utilized by Seller
(the "EQUIPMENT LEASES") (SCHEDULE 5.11(C));
(d) all agreements with any present director, officer, employee,
agent, representative or affiliate of Seller not otherwise set forth in
SCHEDULE 5.12 (SCHEDULE 5.11(D)),
(e) all insurance policies, or binders and certificates of insurance
in the case of policies not yet received by Seller, relating to the
Purchased Assets, the Leased Premises, or the Business (all of which
policies are in full force and effect) (SCHEDULE 5.11(E).
(f) all profit-sharing, pension, stock option, severance, retirement,
bonus, deferred compensation, group life and health insurance or other
employee benefit plans, trusts, agreements and arrangements, personnel
policies, and employee handbooks, whether or not legally binding, covering
or provided to any employees of Seller (SCHEDULE 5.11(F));
(g) all other agreements, contracts, leases, instruments,
arrangements and
19
commitments relating to or affecting Seller or the Purchased Assets or any
interest therein that are not otherwise disclosed in the above-referenced
Schedules (SCHEDULE 5.11(G)); and
(h) detailed descriptions of the terms of any unwritten agreements,
contracts, leases, instruments, arrangements, or commitments and a list of
proposed agreements, contracts, leases, instruments, arrangements, or
commitments not otherwise referenced in this Section 5.11. (SCHEDULE
5.11(H)).
All of such agreements, contracts, leases, instruments, arrangements, and
commitments referred to above are valid, binding and in full force and effect
and enforceable in accordance with their respective terms and conditions.
Seller has performed all obligations to be performed by it under all such
agreements, contracts, leases, instruments, arrangements and commitments, and
there is no existing default or event of default or event that, with notice or
lapse of time or both, would constitute a default thereunder. There has been no
termination or threatened termination or notice of termination, or default under
any such agreement, contract, lease, instrument, arrangement or commitment.
5.12 EMPLOYEES. SCHEDULE 5.12 hereto contains a true, correct and complete
listing of all of the employees of Seller as of the Effective Time and as of the
date hereof, their current respective positions or job classifications, and
their current respective wage scales or salaries, as the case may be, and other
compensation and benefits. SCHEDULE 5.12 also contains Seller's unemployment
tax rate. Since the Effective Time, Shareholder has not received compensation
from Seller in excess of the rate of Ten Thousand Dollars ($10,000.00) per week.
5.13 EMPLOYEE BENEFIT PLANS. Buyer shall not be subject to any liability
with respect to, or resulting from the termination by Seller of any of its
employees from, any profit-sharing, 401 (k), pension, stock option, vacation
pay, sick pay, personal leave, severance pay, retirement, bonus, deferred
compensation, group life and health insurance or other employee benefit plan,
agreement or commitment of Seller ("BENEFIT PLAN"), whether or not legally
binding, or resulting from the employment by Buyer of any such employee, and
Buyer shall not be responsible for any liability whatsoever under any such
Benefit Plan. Seller does not contribute or have an obligation to contribute to
any multi-employer plan within the meaning of Section 3(37) or 400(a)(3) of
ERISA on behalf of Seller's employees.
5.14 LABOR MATTERS.
(a) Seller has no collective bargaining, union or labor agreements,
contracts or other arrangements with any group of employees, labor union or
employee representatives;
(b) Neither Seller nor Shareholder has any knowledge of any
organization effort currently being made or threatened by or on behalf of
any labor union with respect to employees of Seller;
(c) there are no labor controversies, strikes, work stoppages or
slowdowns pending or, to the knowledge of Seller or Shareholder,
threatened, against Seller;
20
(d) there is no written or oral contract with any of Seller's
employees that cannot be terminated without liability; and
(e) there are no pending or, to the knowledge of Seller or
Shareholder, threatened, lawsuits, proceedings or claims against Seller by
any employees or former employees of Seller with respect to employment
matters of any kind.
5.15 INTANGIBLE RIGHTS. SCHEDULE 5.15 contains a list and copy of all
intangible property relating to the Purchased Assets or Seller or owned by,
licensed by or licensed to Seller, or in which Seller otherwise claims a right,
including, without limitation, all patents, copyrights, trademarks, service
marks, trade names, assumed names, "dba's", fictitious names and registrations
or applications therefor, and trade secrets (collectively, the "INTANGIBLE
RIGHTS") other than user licenses for off-the-shelf computer programs. Any
registrations or applications for the trademarks, service marks, trade names,
brand names and copyrights set forth in SCHEDULE 5.15 are in Seller's name only.
Seller owns and has the right to use all franchises, trademarks, service marks,
assumed names, "dba's", fictitious names, and trade names set forth on SCHEDULE
5.15 in the geographic areas in which such marks and names are currently being
used. Neither any portion of the Intangible Rights nor Seller's ownership or
use thereof infringes on the property rights of any other person nor, to the
knowledge of Seller or Shareholder, do the rights of any other person infringe
on any of the Intangible Rights. No claim, demand or allegations of
infringement relating to the ownership or use of any of the Intangible Rights
set forth in SCHEDULE 5.15 has been received by Seller or Shareholder or, to the
knowledge of Seller or Shareholder, made by any person. Seller has no assumed
names in the State of Texas or any of its counties.
5.16 INSURANCE.
(a) Except as disclosed in SCHEDULE 5.9, there are no pending claims
under any of the policies required to be described in SCHEDULE 5.11(E), and
no events have occurred which would give rise to a right to pursue a claim
under any such policy or arrangement.
(b) There are no outstanding requirements or recommendations which
have been communicated to Seller by any current insurer or underwriter with
respect to Seller's assets or the Business or otherwise which requires or
recommends changes in the conduct of the Business or requires or recommends
any changes, repairs or other work to be done with respect to the Business
or any of Seller's assets.
(c) Seller has not received (i) any refusal of insurance coverage or
any notice that a defense will be afforded under a reservation of rights or
(ii) any notice of cancellation or any other indication that any insurance
policy is no longer in full force or effect or will not be renewed or that
the issuer of any policy is not willing or able to perform its obligations
thereunder.
(d) Seller has paid all premiums due, and has otherwise performed all
of its obligations, under each insurance policy to which Seller is a party
or that provides coverage to Seller or with respect to the Acquired
business or Purchased Assets.
21
(e) Seller has given notice to the insurer of all claims that may be
insured thereby.
(f) Seller has no self-insurance plans or arrangements in effect.
5.17 SHAREHOLDERS AND INTERESTS IN COMPETITORS. Shareholder owns all of
the issued and outstanding shares of stock of Seller and XXXX and no other
person or entity has any rights in or option to acquire any shares of stock,
warrants or other equity interests in Seller or XXXX or to exercise voting or
other rights as to any of Seller's or XXXX'x shares of stock. Except for
beneficial ownership of not more than 5% of the outstanding equity securities of
publicly-held companies, and except for XXXX, neither Seller nor Shareholder,
nor Xxx. Xxxxxx, nor any member of the immediate family of Shareholder or Xxx.
Xxxxxx, nor any officer or director of Seller, nor any person or entity
controlling, controlled by or under common control with Seller or Shareholder
owns, directly or indirectly, an interest in any person or entity that is a
competitor, customer, supplier or landlord of Seller or that otherwise has
business dealings with Seller.
5.18 TAXES. Seller has: (a) filed, when due, with all applicable
governmental agencies, all tax returns, estimates, reports and statements
required to be filed by it, all of which are true and correct; and (b) paid all
taxes required to be paid by it as reflected on such returns, estimates, reports
or statements, or otherwise required to be paid by Seller, including, without
limitation, all income, sales, use, property and transfer taxes, levies, duties,
licenses, registration fees and charges of any nature whatsoever and worker's
compensation and unemployment taxes, and including, without limitation, all
additions or additional amounts thereto, and interest and penalties thereon.
Seller has withheld all taxes required to be withheld under applicable tax laws
and regulations, and such withholdings have either been paid, when due, to the
respective governmental agencies or have been properly set aside in accounts for
such purposes and will be paid, when due, to the applicable governmental
agencies.
5.19 NO OTHER AGREEMENTS. Except as disclosed on SCHEDULE 5.19, neither
Seller, Shareholder nor Xxx. Xxxxxx has entered into any agreement, commitment
or understanding with any other person with respect to the sale, transfer, lease
or other disposition of all or any portion of the Purchased Assets (except for
sales, transfers or leases in the ordinary course of Seller's business and
consistent with its past practices since July 1, 1995 (the "PAST PRACTICES")) or
with respect to a sale, encumbrance or transfer of any stock of Seller.
5.20 ACCOUNTS RECEIVABLE.
(a) All Accounts Receivable of Seller that are, or will be, reflected
on the Effective Date Balance Sheet or the Unaudited Balance Sheets (except
to the extent of collections thereof) represent, and all Accounts
Receivable that will be reflected on the accounting records of Seller as of
the Closing Date (the "INTERIM PERIOD ACCOUNTS RECEIVABLE") will represent,
valid obligations in favor of Seller arising from sales actually made by
Seller in the ordinary course of the Business. Unless paid prior to the
Closing Date, the Accounts Receivable, including, without limitation, the
Interim Period Accounts Receivable, will be as of the Closing Date
collectible in full net of the reserves with respect thereto shown on the
Effective Date Balance Sheet or on SCHEDULE 5.20(B) without any set-
22
off, in the ordinary course. There is no contest, claim, or right of
set-off, or, to the best of Seller's and Shareholder's knowledge, any
threatened contest, claim or right of set-off, or circumstances that with
notice, the lapse of time or both, could result in such a contest, claim or
right of set-off (other than with respect to returns of merchandise in the
ordinary course of the Business), with respect to any Accounts Receivable,
including, without limitation, the Interim Period Accounts Receivable, or
under any contract with any obligor of any Accounts Receivable, including,
without limitation, the Interim Period Accounts Receivable.
(b) SCHEDULE 5.20(B) contains a complete and accurate list of all
Accounts Receivable as of September 30, 1998, which list sets forth the
aging of such Accounts Receivable and describes any collateral that secures
payment of any Accounts Receivable.
(c) No account debtor has withheld payment or threatened to withhold
payment of any Accounts Receivable or Interim Period Accounts Receivable
and, to the best of Seller's and Shareholder's knowledge, none of Seller's
account debtors is insolvent or has filed or had filed against it a
petition in bankruptcy or similar petition and, to the best of Seller's and
Shareholder's knowledge, there are no circumstances that could lead to such
insolvency or bankruptcy filing or similar petition.
5.21 INVENTORY. All Inventory of Seller, whether or not reflected in the
Effective Date Balance Sheet or the unaudited balance sheet at September 30,
1998 consists of a quality and quantity usable and saleable in the ordinary
course of the Business, except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net realizable
value in the Effective Date Balance Sheet. All Inventory not written off has
been valued on Seller's books and records at Seller's net cost, which does not
exceed net realizable value on a first in, first out basis. The quantities of
each item of the Inventory are reasonable with respect to the needs of the
Business.
5.22 NO UNDISCLOSED LIABILITIES. Except for the Assumed Liabilities,
Seller has no liabilities or obligations of any nature (whether known or unknown
and whether absolute, accrued, contingent, or otherwise) for which Buyer will or
could be liable.
5.23 SOLVENCY. Neither Seller nor XXXX is now insolvent, nor will it be
rendered insolvent by any of the transactions contemplated by this Agreement.
In addition, immediately after giving effect to the consummation of the
transactions contemplated by this Agreement (a) each of Seller and XXXX will be
able to pay its debts as they become due, (b) the property of each of Seller and
XXXX does not and will not constitute unreasonably small capital, and Seller and
XXXX will not have unreasonably small capital and will not have insufficient
capital with which to conduct its present or proposed business, and (c) taking
into account all pending and threatened litigation, final judgments against
Seller or XXXX in connection with actions for money damages are not reasonably
anticipated to be rendered at a time when, or in amounts such that, Seller or
XXXX will be unable to satisfy any such judgments promptly in accordance with
their terms (taking into account the maximum probable amount of such judgments
in any such actions and the earliest reasonable time at which such judgments
might be rendered) as well as all other obligations of Seller or XXXX. The cash
available to Seller or XXXX, after taking into account all other
23
anticipated uses of the cash of Seller or XXXX, will be sufficient to pay all
such judgments promptly in accordance with their terms. For purposes of this
Section, "insolvent" means that the sum of the present fair saleable value of
Seller's or XXXX'x assets, as the case may be, does not and will not exceed its
debts and other probable liabilities, and the term "debts" includes any legal
liability of Seller or XXXX, whether matured or unmatured, liquidated or
unliquidated, absolute, fixed or contingent, disputed or undisputed or secured
or unsecured.
5.24 CUSTOMERS AND SUPPLIERS. SCHEDULE 5.24 lists:
(a) each customer that purchased $10,000 or more in goods or services from
Seller or XXXX in calendar year 1997 and for the period from January 1, 1998 to
September 30, 1998, including the customer name and amount purchased in each of
such periods; and
(b) each supplier from whom Seller or XXXX purchased $100,000 or more in
goods or services in calendar year 1997 and for the period from January 1, 1998
to September 30, 1998, including the supplier name and amount purchased by
Seller or XXXX in each of such periods.
5.25 YEAR 2000 COMPLIANCE.
(a) Other than their accounting software, Seller's and XXXX'x
computer systems and applications are Year 2000 compliant (that is, such
systems and applications will be able to perform date sensitive functions
prior to, on and after December 31, 1999).
(b) To the knowledge of each of Seller, XXXX and Shareholder, each
present supplier, vendor or service provider that is material to the
Acquired Business will be Year 2000 compliant, as described in Section
5.25(a), with respect to its own computer systems and applications, except
to the extent that a failure by any supplier, vendor or service provider to
be so Year 2000 compliant could not reasonably be expected to have a
material adverse effect upon the financial condition, results of
operations, business or business prospects of the Acquired Business.
5.26 NO MISREPRESENTATIONS. The representations, warranties and statements
made by Seller, Shareholder and Xxx. Xxxxxx in or pursuant to this Agreement and
the Exhibits and Schedules hereto are true, complete and correct in all respects
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary to make any such representation, warranty or statement,
under the circumstances in which it was made, not misleading. Seller and
Shareholder have disclosed to Buyer all material events, conditions or facts
known to either or both of them that affect the condition or could affect the
condition (financial or otherwise), business or prospects of Seller or the
Acquired Business. None of the information supplied or to be supplied by Seller
or Shareholder for inclusion in any registration statement (or any amendments
thereto) to be filed with the SEC by Buyer or any of its affiliates under the
Securities Act or the Securities Exchange Act of 1934 (the "EXCHANGE ACT") in
connection with Seller, Shareholder, the Acquired Business or the transactions
contemplated by this Agreement (for purposes of this Section and Section 8.10,
the "REGISTRATION STATEMENT"), or any other document to be filed with any
regulatory authority in connection with Seller, Shareholder, the Acquired
Business or the transactions contemplated hereby will, when any such
Registration Statement
24
becomes effective or any such other document is filed, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Seller, as of the Closing Date, as follows:
6.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and with active status under the laws of the State of Delaware. Buyer has full
power to own its properties and to conduct its business as presently conducted.
6.2 AUTHORITY. Buyer has all requisite corporate power and authority to
execute and enter into this Agreement and all other agreements and instruments
contemplated hereby to be executed and delivered by Buyer (the "BUYER
DOCUMENTS") and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by Buyer of this Agreement and the Buyer
Documents have been duly authorized by all necessary action, corporate or
otherwise, by Buyer, and this Agreement has been duly executed and delivered and
is, and the Buyer Documents will be, when executed and delivered by Buyer, the
legal, valid and binding agreements of Buyer, enforceable against Buyer in
accordance with their respective terms, except to the extent that the same may
be limited by insolvency, bankruptcy, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity.
6.3 NO VIOLATION. Neither the execution or delivery of this Agreement or
any of the Buyer Documents nor the consummation of the transactions contemplated
hereby or thereby conflict with or result in the breach of any term or provision
of, or constitute a default under, or give any third party the right to
accelerate any obligation under, any charter provision, bylaw, agreement,
contract, lease, indenture, deed of trust, instrument, order, law, or regulation
to which Buyer is a party or by which Buyer or any of its assets or properties
is in any way bound or obligated.
7. SELLER'S COVENANTS. Seller covenants and agrees as follows, and
Shareholder and Xxx. Xxxxxx, jointly and severally, covenant to cause Seller to
perform such covenants and agreements (all of which covenants and agreements by
Seller, Shareholder and Xxx. Xxxxxx shall be conditions to Buyer's obligations
hereunder):
7.1 CONDUCT OF BUSINESS. From the Effective Time to the Closing, Seller
shall:
(a) except for the making of Permitted Distributions as defined
below, operate in the ordinary course of its business and consistent with
the Past Practices;
(b) use its best efforts to preserve its goodwill and the goodwill of
its customers, franchisors, lessors, suppliers, employees, tenants,
governmental authorities and others having dealings with Seller;
(c) maintain its books of account and records in the usual, regular
and ordinary manner and consistent with its past practices, and furnish
Buyer with a copy of each of
25
Seller's monthly unaudited financial statements within fifteen (15)
business days after the end of the calendar month to which such financial
statements relate;
(d) maintain all licenses, permits, authorizations, certificates,
qualifications, registrations and other governmental approvals that are
required for Seller to carry on its business in good standing;
(e) make capital expenditures and other expenditures necessary for
the maintenance of the Purchased Assets and the Business;
(f) maintain all existing insurance policies and surety bonds,
letters of credit, guaranties and similar instruments and commitments now
in place for the benefit of Seller, the Business or the Purchased Assets;
(g) not assume or incur any liabilities or obligations not in the
ordinary course of its business and consistent with the Past Practices;
(h) not increase the salary, wages, bonus, commission or other
compensation of any officer, director, employee, agent or representative of
Seller or enter into or amend any profit sharing, pension, stock option,
vacation pay, sick pay, personal leave, severance, retirement, bonus,
deferred compensation, group life and health insurance or other employee
benefit or employee benefit plan, trust agreement or arrangement affecting
any such person, or any compensation, separation or consultation agreement
with any such person; and
(i) make no payment or distribution, directly or indirectly, to
Shareholder or any Affiliate of Seller, Shareholder or Xxx. Xxxxxx, other
than the payments or distributions described in EXHIBIT 7.1(I) (the
"PERMITTED DISTRIBUTIONS").
7.2 FULFILLMENT OF CONDITIONS. Seller and Shareholder shall take all
reasonable steps (including, without limitation, the payment of reasonable fees
and expenses related thereto) that are within their power to cause to be
fulfilled the conditions precedent to Buyer's, Seller's or Shareholder's
obligations to consummate the transactions contemplated hereby. Neither Seller
nor Shareholder shall take any action that would cause the conditions to the
obligations of the parties to effect the transactions contemplated hereby not to
be fulfilled including, without limitation, taking or causing to be taken any
action that would cause the representations and warranties made by Seller, XXXX,
Shareholder and Xxx. Xxxxxx herein not to be true, correct and accurate in all
material respects as of the Closing.
7.3 ACCESS AND INFORMATION. Seller shall permit Buyer and its authorized
representatives to have reasonable access, during normal business hours, to:
(a) Seller's assets and all its books, records and documents of or
relating to Seller and its assets, liabilities and obligations, and Seller
shall furnish to Buyer such information, financial records and other
documents with respect to Seller's assets, liabilities and obligations and
Seller's operations and business as Buyer shall reasonably request; and
26
(b) Seller's officers, directors, employees, agents, accountants,
auditors, franchisors, lessors, customers and suppliers, for consultation
or verification of any information obtained by Buyer, and Seller shall use
reasonable efforts to cause such persons or entities to cooperate with
Buyer in such consultation and in verifying such information.
Notwithstanding the foregoing, Buyer shall be entitled to rely on the
representations and warranties of Seller, Shareholder and Xxx. Xxxxxx as if no
investigation had been made.
7.4 LEGAL OR GOVERNMENTAL ACTIONS. If Seller is notified of any legal or
governmental or administrative act or proceeding instituted against or with
respect to Seller, the Purchased Assets, the Leased Premises, or any portion
thereof prior to the Closing, Seller shall promptly give notice thereof to
Buyer.
7.5 UPDATE OF REPRESENTATIONS AND WARRANTIES. Between the date of this
Agreement and the Closing Date, Seller shall give notice to Buyer promptly upon
Seller's or Shareholder's becoming aware of (a) any inaccuracy or breach of a
representation or warranty set forth in Section 5 or in any Exhibit or Schedule
hereto, or (b) any event or state of facts that, if it had occurred or existed
on or prior to the date of this Agreement, would have caused any such
representation or warranty to be inaccurate, and any such notice shall describe
such inaccuracy, event or state of facts in detail.
7.6 COBRA AND HIPAA COMPLIANCE. Seller shall comply fully with the
provisions of the Consolidated Omnibus Budget Reconciliation Act ("COBRA") and
the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") with
respect to Seller's employees whose employment with Seller will terminate in
connection with the transactions under this Agreement.
7.7 PAYMENT OF LIABILITIES. Seller shall pay or otherwise satisfy in the
ordinary course all of Seller's trade payables and shall fully pay or otherwise
satisfy all other claims or liabilities relating to the assets of the Business
other than the Assumed Liabilities.
7.8 CHANGE OF SELLER'S NAME. Immediately following the Closing, Seller shall
change its name to a name which does not include "Masonry Supply" or "MSI" and
is otherwise not confusingly similar to Buyer's current name or "MSI/Eagle
Supply, Inc."
7.9 CERTIFICATE OF INTERIM EARNINGS AND DISTRIBUTIONS. Within thirty (30)
days after the Closing Date, Seller shall furnish to Buyer a certificate setting
forth (a) the Interim Earnings and certifying that such Interim Earnings (i)
have been determined in accordance with GAAP applied consistently with the
accounting principles applied in the preparation of the 1998 Financial
Statements and (ii) fairly present the pretax earnings of the Acquired Business
for the Interim Period and (b) all payments and distributions made by Seller to
Shareholder or any Affiliate of Seller, Shareholder or Xxx. Xxxxxx during the
Interim Period, including, without limitation, all Permitted Distributions.
8. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer under this
Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions, but compliance with any of such conditions may be waived
by Buyer in writing:
27
8.1 REPRESENTATIONS AND WARRANTIES TRUE; CONDITIONS SATISFIED. All
representations and warranties of Seller, XXXX and Shareholder contained in this
Agreement (including, without limitation, the Exhibits and Schedules hereto)
(without giving effect to any updating or corrective information furnished
pursuant to Section 7.5 of this Agreement or otherwise), shall be true and
correct in all material respects at and as of the Closing with the same effect
as though such representations and warranties were made at and as of the
Closing; Seller, XXXX and Shareholder shall have performed and complied with all
of the covenants and agreements and satisfied all of the conditions required by
this Agreement to be performed, complied with or satisfied by any or all of them
at or prior to the Closing; and Buyer shall have received certificates to the
foregoing effect from the president of Seller and from Shareholder.
8.2 LITIGATION. There shall be no pending or threatened litigation in any
court or any proceeding before or by any administrative or governmental
authority to restrain or prohibit or obtain damages or other relief with respect
to this Agreement or the consummation of the transactions contemplated hereby or
as a result of which Buyer could be deprived of any of the material benefits of
the transactions contemplated hereby.
8.3 CLOSING DOCUMENTS. Seller shall have executed and delivered the
documents and items required of Seller in Section 4.2.
8.4 MISCELLANEOUS CONSENTS. Seller shall have secured all contractual and
other third party consents required in connection with the transactions
contemplated by this Agreement in form and substance satisfactory to Buyer.
8.5 EMPLOYEES. Buyer shall have hired such of Seller's employees as Buyer
may desire, in its sole discretion, to hire.
8.6 EXCLUSIVE POSSESSION. Seller shall have delivered to Buyer exclusive
possession of the Purchased Assets, the Leased Premises and the equipment
described in the Leases and Contracts.
8.7 LICENSES AND CONSENTS. Buyer shall have secured all necessary
governmental certificates, approvals, consents and authorizations to purchase
the Purchased Assets and to operate the Purchased Assets and the Leased Premises
for Buyer's Intended Use.
8.8 ACQUISITION REVIEW. The results of Buyer's investigation of Seller,
the Business, the Purchased Assets, the Leased Premises, Seller's operations and
financial condition shall be acceptable to and approved by Buyer in its sole
discretion.
8.9 OPINION OF COUNSEL. Buyer shall have received an opinion letter from
counsel to Seller and Shareholder in the form attached as EXHIBIT 8.9.
8.10 CONSENT LETTERS. Buyer shall have received, in the form of, and
containing the terms set forth in, EXHIBIT 8.10, letters from Seller and W&M,
respectively, agreeing to consent to the inclusion, in any Registration
Statement, of the 1996 and 1997 Financial Statements, and the 1998 Financial
Statements and the opinions of W&M with respect thereto.
28
8.11 EMPLOYMENT AGREEMENTS. Buyer and Shareholder shall have entered into
the Xxxxxx Employment Agreement.
8.12 NON-COMPETE AGREEMENT. Buyer and XXXX shall have entered into the
Non-Compete Agreement.
8.13 NO MATERIAL ADVERSE CHANGE. Since June 30, 1998, there shall not have
been any material adverse change in the financial condition, results of
operations, business, business prospects, personnel, assets or liabilities
(contingent or otherwise) of Seller or XXXX.
8.14 INTERIM EARNINGS. The Interim Earnings shall have been greater than
zero.
8.15 NO CONFLICT. Neither the consummation nor the performance of any of
the transactions contemplated under this Agreement will directly or indirectly
(with or without notice, lapse of time, or both) contravene or conflict with, or
result in a material violation of, or cause Buyer or any Affiliate of Buyer to
suffer any adverse consequence under any law, regulation, rule or order, whether
in effect or proposed.
9. CONDITIONS TO OBLIGATIONS OF SELLER AND SHAREHOLDER. The obligations of
Seller and Shareholder under this Agreement are subject to the satisfaction at
or prior to the Closing of the following conditions, but compliance with any of
such conditions may be waived by Seller in writing:
9.1 REPRESENTATIONS AND WARRANTIES TRUE; CONDITIONS SATISFIED. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects at and as of the Closing with the same
effect as though such representations and warranties were made at and as of the
Closing; Buyer shall have performed and complied with all the covenants and
agreements and satisfied all the conditions required by this Agreement to be
performed, complied with or satisfied by it at or prior to the Closing; and
Seller shall have received a certificate to the foregoing effect from the chief
executive officer or a vice president of Buyer.
9.2 LITIGATION. There shall be no pending or threatened litigation in any
court or any proceeding before or by any administrative or governmental
authority to restrain or prohibit or obtain damages or other relief with respect
to this Agreement or the consummation of the transactions contemplated hereby or
as a result of which Seller could be deprived of any of the material benefits of
the transactions contemplated hereby.
9.3 OPINION OF COUNSEL. Seller shall have received an opinion letter from
Buyer's counsel in the form attached as EXHIBIT 9.3.
9.4 NO CONFLICT. Neither the consummation nor the performance of any of
the transactions contemplated under this Agreement will directly or indirectly
(with or without notice, lapse of time, or both) contravene or conflict with, or
result in a material violation of, or cause Seller or any Affiliate of Seller to
suffer any adverse consequence under, any law, regulation, rule or order,
whether in effect or proposed.
29
10. JOINDER OF XXX. XXXXXX. Whether or not elsewhere explicitly provided in
this Agreement, each representation, warranty, covenant and agreement of
Shareholder in this Agreement shall be deemed to have been made by Shareholder
and Xxx. Xxxxxx jointly and severally.
11. COVENANT NOT TO COMPETE. Seller and Shareholder hereby, jointly and
severally, agree as follows:
11.1 NONCOMPETITION. For a period of five (5) years following the Closing
Date, neither Seller nor Shareholder, nor any person or entity directly or
indirectly owning, owned by, controlling, controlled by or under common
ownership or control with (individually, an "AFFILIATE" and collectively,
"AFFILIATES") Seller or Shareholder, shall, directly or indirectly, on its, his
or their own behalf or on behalf of any competitor of Buyer: (a) engage (whether
as owner, partner, stockholder, joint venturer, manager, employee, investor or
otherwise) in the sale, at wholesale or retail, of any masonry materials or
supplies or other building products or supplies (the "RESTRICTED BUSINESS") in
all counties of the State of Texas and of any other state in which Seller is
transacting business on the Closing Date (the "REFERENCE DATE") or in which
Seller has transacted business at any time during the two years preceding the
Reference Date, and in all areas in the United States in which Buyer transacts
business during such five (5) year period described above (collectively, the
"MARKET"); (b) affiliate with, or own or have a proprietary interest of any kind
in, any business or firm that owns, manages or operates a business that sells at
wholesale or retail any masonry materials or supplies or other building products
or supplies anywhere within the Market; or (c) alone or acting with others,
employ or attempt to employ or solicit for any employment competitive with
Buyer, any of Buyer's employees, whether or not such employees worked for Seller
prior to the Closing, or alone or acting with others, influence or seek to
influence any employee to leave Buyer's employment. Seller and Shareholder also
covenant, jointly and severally, that at no time shall any or either of them
disparage Buyer, any of its affiliated entities, or any of the employees,
directors or officers of Buyer or any of its affiliated entities.
11.2 PAYMENT FOR COVENANTS. As additional consideration to Shareholder for
his covenants under Section 11.1, Buyer shall pay at the Closing One Hundred
Dollars ($100.00) to Shareholder.
11.3 REMEDIES; CURTAILMENT. Seller and Shareholder each agrees that a
breach or violation of the covenants in Section 11.1 by Seller or Shareholder
shall entitle Buyer, as a matter of right, to an injunction issued by any court
of competent jurisdiction, restraining any further or continued breach or
violation of such covenants. Such right to an injunction shall be cumulative
and in addition to, and not in lieu of, any other remedies to which Buyer may be
entitled. Further, during any period in which Seller or Shareholder is in
breach of any of such covenants, the time period of such covenant shall be
extended for an amount of time that Seller or Shareholder is in breach hereof.
In the event of a breach by Seller or Shareholder of the covenants under Section
11.1, without limiting Buyer's remedies with respect to such breach, including,
without limitation, equitable remedies, Buyer shall not be required to make, and
Seller or its designee shall have no right to receive, any further payments
under this Agreement or with respect to any of the transactions described in
this Agreement.
30
The covenants contained in Section 11.1 will be construed as ancillary to
and independent of any other provision of this Agreement, and the existence of
any claim or cause of action of Seller or Shareholder against the Buyer or any
officer, director, or shareholder of Buyer, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by Buyer of the
covenants contained in Section 11.1.
The parties to this Agreement agree that the limitations contained in
Section 11.1 with respect to geographic area, duration and scope of activity are
reasonable. However, if any court shall determine that the geographic area,
duration or scope of activity of any restriction contained in SECTION 11.1 is
unenforceable, it is the intention of the parties that such restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable.
11.4 ASSIGNABILITY. The benefit of the covenants in this Section 11 are
freely assignable by Buyer.
12. INDEMNIFICATION.
12.1 BUYER'S RIGHT TO INDEMNIFICATION. SELLER, SHAREHOLDER AND XXX.
XXXXXX, JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD BUYER AND ITS OFFICERS,
DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS AND REPRESENTATIVES (THE "INDEMNIFIED
PARTIES") HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS,
CONTINGENCIES, DAMAGES, JUDGMENTS, FINES, PENALTIES, AMOUNTS PAID IN SETTLEMENT,
COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL COURT COSTS AND
REASONABLE ATTORNEYS' FEES AND DISBURSEMENTS), WHETHER AS A RESULT OF DIRECT
CLAIMS OR THIRD PARTY CLAIMS (ALOSSES"), THAT THE INDEMNIFIED PARTIES OR ANY OF
THEM MAY SUFFER OR INCUR AS A RESULT OF OR RELATING TO: (A) THE BREACH OR
INACCURACY, OR ANY ALLEGED BREACH OR INACCURACY, OF ANY OF THE REPRESENTATIONS,
WARRANTIES, COVENANTS OR AGREEMENTS MADE BY SELLER, XXXX, SHAREHOLDER OR XXX.
XXXXXX HEREIN (WITHOUT GIVING EFFECT TO ANY UPDATING OR CORRECTIVE INFORMATION
FURNISHED PURSUANT TO SECTION 7.5 OF THIS AGREEMENT OR OTHERWISE) OR IN ANY
ASSIGNMENT, XXXX OF SALE, LEASE OR OTHER INSTRUMENT, DOCUMENT OR PAPER DELIVERED
PURSUANT TO THIS AGREEMENT; (B) ANY LAWSUIT, CLAIM OR PROCEEDING OF ANY NATURE
(OTHER THAN LAWSUITS, CLAIMS OR PROCEEDINGS BROUGHT TO ENFORCE OR COLLECT ANY
ASSUMED LIABILITY) ARISING OUT OF ANY ACT OR TRANSACTION OCCURRING PRIOR TO THE
CLOSING OR ARISING OUT OF FACTS OR CIRCUMSTANCES THAT EXISTED AT OR PRIOR TO THE
CLOSING; (C) ANY INCOME, FRANCHISE, SALES, USE, TRANSFER (INCLUDING, WITHOUT
LIMITATION, MOTOR VEHICLE TRANSFER), EXCISE OR OTHER TAX ARISING UPON THE
CONSUMMATION OF THE PURCHASE AND SALE OF THE PURCHASED ASSETS HEREUNDER OR
ARISING OUT OF OR RESULTING FROM THE OPERATIONS OF SELLER, ANY TRANSACTION OR
ACTIVITY OF SELLER, OR ANY INCOME DERIVED BY SELLER (OTHER THAN THE ASSUMED
LIABILITIES AND SUCH ITEMS BUYER HAS AGREED TO PAY UNDER THIS AGREEMENT); (D)
ANY WAGES, SALARIES, VACATION PAY, SICK PAY, OR PERSONAL LEAVE, OR ACCRUALS WITH
RESPECT THERETO (OTHER THAN THE ASSUMED LIABILITIES), OR OTHER COMPENSATION,
LIABILITIES, OBLIGATIONS, CLAIMS OR CONTINGENCIES OF ANY NATURE DUE OR PAYABLE
AT ANY TIME WHATSOEVER TO ANY CURRENT OR FORMER DIRECTOR, OFFICER, EMPLOYEE,
AGENT OR REPRESENTATIVE OF SELLER, INCLUDING, WITHOUT LIMITATION, ANY CLAIMS
UNDER ANY BENEFIT PLAN OR ARISING PURSUANT TO THE WORKER ADJUSTMENT AND
RETRAINING NOTIFICATION ACT (THE "WARN ACT") (OTHER THAN THE ASSUMED
LIABILITIES); (E) ANY CONTAMINATION ON OR UNDER THE LEASED PREMISES OR IN ANY OF
THE PURCHASED ASSETS CAUSED BY ANYONE (OTHER THAN BUYER OR ITS AGENTS OR
EMPLOYEES) ON OR
31
PRIOR TO THE CLOSING DATE, OR ANY LIABILITY OR OBLIGATION FOR REMEDIATION OR
CLEAN-UP OF ENVIRONMENTAL CONDITIONS AS A RESULT OF SELLER'S OPERATIONS, WHETHER
ON OR UNDER THE LEASED PREMISES OR ELSEWHERE, OR THE ACTIVITIES OF ANY PERSON
(OTHER THAN BUYER) ON OR UNDER THE LEASED PREMISES; (F) THE CONDUCT OF SELLER'S
BUSINESS AND OPERATIONS (OTHER THAN THE ASSUMED LIABILITIES); (G) ANY FAILURE OF
SELLER TO COMPLY WITH ANY FEDERAL, STATE OR LOCAL LAW, REGULATION, RULING OR
ORDINANCE, OR ANY OTHER LEGAL REQUIREMENT, INCLUDING, WITHOUT LIMITATION,
SELLER'S FAILURE TO COMPLY WITH COBRA, HIPAA OR THE WARN ACT; (H) NONCOMPLIANCE
BY BUYER OR SELLER WITH THE BULK TRANSFER PROVISIONS OF THE UNIFORM COMMERCIAL
CODE (OR ANY SIMILAR LAW) OF ANY STATE IN CONNECTION WITH THE SALE AND TRANSFER
OF THE PURCHASED ASSETS TO BUYER OTHER THAN WITH RESPECT TO THE ASSUMED
LIABILITIES; AND (I) ANY LIABILITIES OR OBLIGATIONS OF SELLER NOT BEING
EXPRESSLY ASSUMED BY BUYER PURSUANT TO THIS AGREEMENT.
SELLER, SHAREHOLDER AND XXX. XXXXXX, JOINTLY AND SEVERALLY, SHALL BE
RESPONSIBLE HEREUNDER FOR, AND SHALL INDEMNIFY THE INDEMNIFIED PARTIES FROM AND
AGAINST, ANY AND ALL SUCH LOSSES WHETHER OR NOT IT IS ALLEGED OR PROVEN THAT THE
LOSSES AROSE OUT OF OR RESULTED FROM THE SOLE OR CONCURRENT NEGLIGENCE OR GROSS
NEGLIGENCE OF ANY INDEMNIFIED PARTY, OR THE SOLE OR CONCURRENT STRICT LIABILITY
IMPOSED ON ANY INDEMNIFIED PARTY, OR THE SOLE OR CONCURRENT LIABILITY IMPOSED
VICARIOUSLY ON ANY INDEMNIFIED PARTY, UNDER ANY FEDERAL OR STATE STATUTES OR
REGULATIONS, AT COMMON LAW OR OTHERWISE; PROVIDED, HOWEVER, THAT SELLER,
SHAREHOLDER AND XXX. XXXXXX SHALL NOT BE RESPONSIBLE HEREUNDER FOR ANY LOSSES
TO THE EXTENT THEY ARE FINALLY ADJUDICATED BY A COURT OF COMPETENT JURISDICTION
TO HAVE RESULTED SOLELY FROM THE INDEMNIFIED PARTY'S INTENTIONAL MISCONDUCT.
SELLER, SHAREHOLDER AND XXX. XXXXXX, JOINTLY AND SEVERALLY, SHALL
INDEMNIFY, DEFEND, AND HOLD HARMLESS THE INDEMNIFIED PARTIES AGAINST ALL LOSSES
IN CONNECTION WITH ANY CLAIM, ACTION, SUIT, PROCEEDING, OR INVESTIGATION,
WHETHER CIVIL OR CRIMINAL, ADMINISTRATIVE, OR INVESTIGATIVE ARISING OUT OF OR
UNDER THE FEDERAL SECURITIES LAWS OR ANY STATE BLUE SKY OR SECURITIES LAWS BASED
IN WHOLE OR IN PART ON (I) ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A
MATERIAL FACT CONTAINED IN THE REGISTRATION STATEMENTS AND OTHER DOCUMENTS
DESCRIBED IN SECTIONS 1.6 AND 5.26 (INCLUDING, WITHOUT LIMITATION, ANY AMENDMENT
OR SUPPLEMENT TO SUCH REGISTRATION STATEMENTS OR DOCUMENTS), (II) ANY OMISSION
OR ALLEGED OMISSION TO STATE IN SUCH REGISTRATION STATEMENTS OR DOCUMENTS A
MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING, OR (III) ANY VIOLATION BY SELLER OR SHAREHOLDER OF THE
FEDERAL SECURITIES LAWS OR ANY STATE BLUE SKY OR SECURITIES LAWS IN CONNECTION
WITH SUCH REGISTRATION STATEMENTS OR DOCUMENTS.
IN THE EVENT THAT SELLER, SHAREHOLDER OR XXX. XXXXXX IS IN BREACH OF ANY OF
ITS, HIS OR HER REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS UNDER THIS
AGREEMENT, BUYER SHALL HAVE THE RIGHT, WITHOUT LIMITING ANY OF ITS OTHER
REMEDIES, WHETHER UNDER THIS AGREEMENT OR OTHERWISE, TO SET OFF, AGAINST ANY
PAYMENTS DUE FROM BUYER TO SELLER OR SHAREHOLDER, WHETHER UNDER THE PROMISSORY
NOTE OR OTHERWISE, THE AMOUNT OF ANY CLAIMS BY OR LOSSES OF BUYER WITH RESPECT
TO SUCH BREACH.
NOTWITHSTANDING THE PROVISIONS OF THIS SECTION 12.1, IN THE ABSENCE OF
FRAUD OR BAD FAITH, SELLER, SHAREHOLDER AND XXX. XXXXXX SHALL NOT BE OBLIGATED
TO INDEMNIFY AND HOLD THE INDEMNIFIED PARTIES HARMLESS WITH RESPECT TO ANY
AMOUNTS THAT ARE TAKEN INTO ACCOUNT IN
32
DETERMINING THE ADJUSTMENT AMOUNT.
12.2 SELLER'S RIGHT TO INDEMNIFICATION. BUYER SHALL INDEMNIFY AND HOLD
SELLER AND ITS OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS AND
REPRESENTATIVES HARMLESS FROM ANY AND ALL LOSSES THAT THEY OR ANY OF THEM MAY
SUFFER OR INCUR AS A RESULT OF OR RELATING TO THE BREACH OR INACCURACY, OR ANY
ALLEGED BREACH OR INACCURACY, OF ANY OF THE REPRESENTATIONS, WARRANTIES,
COVENANTS OR AGREEMENTS MADE BY BUYER HEREIN.
12.3 NOTICE OF THIRD PARTY CLAIMS. THE PARTY SEEKING INDEMNIFICATION
HEREUNDER (INDIVIDUALLY, THE "INDEMNITEE" AND COLLECTIVELY, "INDEMNITEES") WITH
RESPECT TO ANY THIRD PARTY CLAIM SHALL PROMPTLY, AND IN ANY EVENT WITHIN 30 DAYS
AFTER NOTICE TO IT (NOTICE TO INDEMNITEE BEING THE SERVICE OF PROCESS UPON
INDEMNITEE OF ANY LEGAL ACTION, OR RECEIPT OF ANY CLAIM IN WRITING) OF ANY CLAIM
AS TO WHICH IT ASSERTS A RIGHT TO INDEMNIFICATION, GIVE NOTICE TO THE PARTY FROM
WHOM INDEMNIFICATION IS SOUGHT WITH RESPECT TO SUCH CLAIM; PROVIDED, HOWEVER,
THAT FAILURE TO GIVE SUCH NOTICE WILL NOT RELIEVE THE INDEMNIFYING PARTY OF ANY
LIABILITY THAT IT MAY HAVE TO INDEMNITEE, EXCEPT TO THE EXTENT THAT THE
INDEMNIFYING PARTY DEMONSTRATES THAT THE DEFENSE OF SUCH CLAIM IS PREJUDICED BY
THE INDEMNITEE'S FAILURE TO GIVE SUCH NOTICE.
12.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made under this Agreement by Seller, Shareholder and Xxx. Xxxxxx, or
Buyer, as the case may be, will survive the Closing.
12.5 LIMITATIONS. Notwithstanding anything to the contrary contained in
this Agreement, in no event shall the aggregate amount of liability of Seller,
Shareholder and Xxx. Xxxxxx for breaches of representation or warranty under
this Agreement exceed the sum of Five Million Five Hundred Fifty Thousand
Dollars ($5,550,000.00).
12.6 FLOOR FOR INDEMNIFICATION. Notwithstanding anything to the contrary
in this Agreement, except for the obligations under Section 12.1 with respect to
breaches of the representations and warranties of Seller, Shareholder and Xxx.
Xxxxxx contained in Sections 5.1, 5.2, 5.3(a), 5.10 and 5.18 (the "EXEMPT
INDEMNIFICATION OBLIGATIONS"), Seller, Shareholder and Xxx. Xxxxxx, as the
indemnitors (the "INDEMNITORS"), will not have any obligation until the
aggregate of all Losses payable by the Indemnitors to the Indemnitees exceeds
Twenty-Four Thousand Dollars ($24,000.00)(the "FLOOR"). Upon the aggregate of
all Losses payable by the Indemnitors (except the Exempt Indemnification
Obligations) exceeding the Floor, Seller, Shareholder and Xxx. Xxxxxx, jointly
and severally, will be liable to the Indemnitees, on a dollar-for-dollar basis,
for the amount above the Floor.
With respect to Losses payable in connection with Exempt Indemnification
Obligations, Seller, Shareholder and Xxx. Xxxxxx, jointly and severally, will be
liable for all of such Losses from the first dollar in any event.
The Adjustment Amount will not constitute a claim under the indemnification
provisions of this Agreement, and will not be subject to the Floor.
33
13. TERMINATION.
13.1 EVENTS OF TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated and abandoned:
(a) at any time prior to the Closing by mutual written consent of
Buyer and Seller;
(b) subject to Section 13.2 below, by either Seller or Buyer if a
condition to its performance hereunder shall not be satisfied or waived in
writing at or prior to the Closing;
(c) by Buyer if a final, non-appealable judgment has been entered
against it or its affiliates restraining, prohibiting, declaring illegal or
awarding substantial damages in connection with the transactions
contemplated hereby;
(d) by Seller if a final, non-appealable judgment has been entered
against it restraining, prohibiting, declaring illegal or awarding
substantial damages in connection with the transactions contemplated
hereby;
(e) by Seller or Buyer, if the Closing does not occur on or before
October 31, 1998; or
(f) by Buyer pursuant to other Sections of this Agreement permitting
Buyer to terminate this Agreement.
13.2 LIMITATION ON RIGHT TO TERMINATE. A party shall not be permitted to
exercise any right of termination pursuant to Section 13.1(b) above if the event
giving rise to the termination right shall be due to the material and willful
failure of the party seeking to terminate this Agreement to perform or observe
any of the covenants or agreements set forth herein to be performed or observed
by such party.
13.3 RIGHTS UPON TERMINATION. If this Agreement is terminated as permitted
under this Section 13, such termination shall be without liability of or to any
party to this Agreement (except pursuant to this Section 13 and to Sections
14.3, 14.4, 14.5 and 14.6, which shall survive such termination). In any such
event, except as otherwise expressly provided in this Agreement, all parties
hereto shall thereupon be relieved of all further obligations to each other
hereunder.
If Seller or Shareholder, on the one hand, or Buyer, on the other hand,
fails to perform any of its or his obligations under this Agreement, then the
other party or parties may elect (a) to terminate this Agreement whereupon all
parties hereto shall be released from any further obligations hereunder, (b) to
seek specific performance of the other party's or parties' obligations
hereunder, or (c) to pursue any and all other remedies available at law or in
equity.
14. MISCELLANEOUS.
14.1 NOTICES. All notices that are required or may be given pursuant to
the terms of this
34
Agreement shall be in writing and shall be sufficient in all respects if given
in writing and delivered personally or by a recognized courier service or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or to such other address as
any party shall provide to the other parties by notice in accordance with this
Section):
IF TO BUYER: MSI/Eagle Supply, Inc.
c/o TDA Industries, Inc.
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx,
Chief Executive Officer
WITH COPY TO: Carlton, Fields, Xxxx,
Xxxxxxxx, Xxxxx & Xxxxxx, P.A.
X.X. Xxx 0000
Xxxxx, Xxxxxxx 00000
(if by mail)
or
Xxx Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxx, Xxxxxxx 00000
(if by hand delivery)
Attention: Xxxxxxxxx X. Xxxxxxx,
Attorney at Law
IF TO SELLER OR XXXX: Masonry Supply, Inc.
0000 Xxxxxxx 000 Xxxxx
Xxxxxxxxx, Xxxxx 00000
(prior to the Closing Date)
Attention: Xx. Xxxx X. Xxxxxx, President
or
c/o Xx. Xxxx X. Xxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
(on or after the Closing Date)
35
WITH COPY TO: Xxxxxxx Xxxxx, Attorney at Law
0000 X. Xxxxxx Xxxxx Xxxxx, Xxxxx X
Xxxxxxxxx, Xxxxx 00000
IF TO SHAREHOLDER OR c/o Xx. Xxxx X. Xxxxxx
XXX. XXXXXX: 00 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
WITH COPY TO: Xxxxxxx Xxxxx, Attorney at Law
0000 X. Xxxxxx Xxxxx Xxxxx, Xxxxx X
Xxxxxxxxx, Xxxxx 00000
Any such notice under this Section shall be deemed to have been given and
received on the day it is personally delivered or delivered by a recognized
courier service or, if mailed, on the fifth day after it is mailed.
14.2 FURTHER ASSURANCES. Each party hereto agrees to execute, without
unreasonable delay, any and all documents and to perform such other acts as may
be reasonably necessary or expedient to further the purposes of this Agreement
and the transactions contemplated hereby. In connection with taking such
actions, each party will provide the other with the same assurances regarding
authority, validity and the other matters to which reference is made in
Section 5 and Section 6 hereof.
14.3 PUBLICITY. Neither Seller nor Shareholder shall issue or make, or
cause to be issued or made, any press release or public announcement or
disclosure concerning the transactions contemplated hereby without the advance
approval in writing of the form and substance thereof by Buyer, unless such
announcement is required by applicable legal requirements.
14.4 ATTORNEYS' FEES. In the event of a dispute between or among the
parties with respect to this Agreement, the prevailing party or parties shall be
entitled to recover the prevailing party's (or parties') reasonable attorneys'
fees and costs, whether incurred during trial, on appeal or in bankruptcy
proceedings.
14.5 EXPENSES. Except as otherwise stated herein, each of the parties
hereto shall, whether or not the transactions contemplated hereby are
consummated, bear its own attorneys', accountants', auditors' or other fees,
costs and expenses incurred in connection with the negotiation, execution and
performance of this Agreement or any of the transactions contemplated hereunder.
In the event the Closing occurs, Buyer shall pay all of the expenses and fees
payable to W&M for its audit of the 1996 and 1997 Financial Statements and the
1998 Financial Statements.
14.6 BROKERS. Seller, Shareholder and Xxx. Xxxxxx, jointly and severally,
(a) represent to Buyer that neither Seller nor Shareholder has incurred nor will
incur any liability for brokerage fees, finder's fees or agent's commissions, in
connection with this Agreement or the transactions
36
contemplated hereby, and (b) agree that they will indemnify and hold harmless
Buyer against all claims for fees, commissions and costs of any broker, finder
or agent engaged by or for any or all of them in connection with the
negotiation, execution or consummation of this Agreement or the transactions
contemplated by this Agreement.
Buyer represents to Seller and Shareholder that Buyer has not incurred and
will not incur any liability for brokerage fees, finders' fees or agent's
commissions in connection with this Agreement or the transactions contemplated
hereby, and Buyer agrees that it will indemnify and hold harmless Seller and
Shareholder against any claims for fees, commissions and costs of any broker,
finder or agent engaged by Buyer in connection with the negotiation, execution
or consummation of this Agreement or the transactions contemplated by this
Agreement.
14.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, all of which together
shall constitute one and the same instrument.
14.8 ASSIGNMENT; AND NO THIRD PARTY BENEFICIARIES. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned or delegated by any of Seller, Shareholder or Buyer without
the prior written consent of the other party or parties; provided, however, that
notwithstanding the foregoing, Buyer may assign this Agreement to any related or
affiliated entity of Buyer or any lender to Buyer. Any assignment or delegation
made in violation of this Agreement shall be null and void. This Agreement is
not intended to confer upon any person (including, without limitation,
employees, customers or suppliers of Seller or Buyer) other than the parties
hereto and any permitted assignee, any rights or remedies hereunder. Nothing in
this Agreement shall be construed to imply any admission of liability or
obligation to any person except the parties to this Agreement.
14.9 ENTIRE AGREEMENT. This Agreement and the documents attached as
Exhibits and Schedules hereto or expressly contemplated hereby contain the
entire understanding of the parties relating to the subject matter contained
herein and supersede all prior written or oral and all contemporaneous oral
agreements and understandings relating to the subject matter hereof. This
Agreement cannot be modified or amended except in writing signed by the party
against whom enforcement is sought.
14.10 EXHIBITS AND SCHEDULES. All Exhibits and Schedules to this
Agreement are incorporated herein by reference and made a part hereof.
14.11 GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the substantive laws of the State
of New York without giving effect to any conflict-of-laws rule or principle that
might result in the application of the laws of another jurisdiction.
14.12 JURISDICTION, VENUE AND WAIVER OF JULY TRIAL. Any action or
proceeding seeking to enforce any provision of, or based on any right arising
out of, this Agreement may be brought
37
against any of the parties in the courts of the State of New York, or, if it has
or can acquire jurisdiction, in the United States District Court for the
Southern District of New York, or the Middle District of Florida, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue therein. If neither the United States District Court for the Southern
District of New York nor the United States District Court for the Middle
District of Florida has or can acquire jurisdiction, then any action or
proceeding seeking to enforce any provision of, or based on any right arising
out of, this Agreement, shall be resolved by binding arbitration before a panel
of three neutral arbitrators in Atlanta, Georgia, or such other mutually agreed
venue under the rules of the American Arbitration Association. THE PARTIES
HERETO ACKNOWLEDGE THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY EXCEED
THE TIME AND EXPENSE FOR A BENCH TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED
BY LAW, TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
14.13 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. All representations, warranties, covenants and agreements made by
the parties hereto in this Agreement or in any certificate or other document
delivered pursuant hereto shall survive the execution of this Agreement and the
Closing.
14.14 HEADINGS. The descriptive headings of the Sections and
Subsections hereof are inserted for convenience only and do not constitute a
substantive portion of this Agreement.
14.15 INVALIDITY. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision of this
Agreement.
14.16 WAIVER. The waiver by any party hereto of any breach, default,
misrepresentation or breach of warranty or covenant hereunder must be in writing
and shall not be deemed to extend to any prior or subsequent breach, default,
misrepresentation or breach of warranty or covenant hereunder and shall not
affect in any way any rights arising by virtue of any such prior or subsequent
occurrence.
14.17 CERTAIN CONSENTS. In the event any of the Leases and Contracts
(individually, a "LEASE" or a "CONTRACT") requires consent to its assignment and
such consent is not obtained prior to the Closing, and Buyer agrees in writing
to proceed with the Closing despite the absence of such consent, then until such
consent has been obtained or the applicable Lease or Contract terminates, the
Lease or Contract shall not be deemed assigned to Buyer but instead Buyer shall
be deemed to be Seller's subcontractor or the parties shall make such other
arrangements as necessary to assure Buyer the benefits of the Lease or Contract.
In that event, Buyer shall perform all obligations of Seller under the
applicable Lease or Contract (except any obligations arising out of a default
prior to the Closing Date or event prior to the Closing Date which with notice,
lapse of time or both would constitute such a default), and Buyer shall be
entitled to all benefits from such Lease or Contract. Seller, Shareholder, and
Xxx. Xxxxxx, jointly and severally, shall indemnify Buyer with respect to all
Losses of Buyer resulting from or arising out of the failure of Seller to obtain
such consent.
38
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day first above written.
WITNESSES:
MSI/EAGLE SUPPLY, INC.
a Delaware corporation ("Buyer")
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
MASONRY SUPPLY, INC.
a Texas corporation ("Seller")
By: /s/ Xxxx X. Xxxxxx
----------------------------------
Xxxx X. Xxxxxx
President
/s/ Xxxx X. Xxxxxx
---------------------------------------
XXXX X. XXXXXX, individually
("Shareholder")
/s/ Xxxxx X. Xxxxxx
---------------------------------------
XXXXX X. XXXXXX, individually
("XXX. XXXXXX")
XXXX, INC.
a Texas corporation ("XXXX")
By: /s/ Xxxx X. Xxxxxx
----------------------------------
Xxxx X. Xxxxxx
President
39
