EXHIBIT 10.1 - STOCK PURCHASE AGREEMENT BY AND AMONG SUN ONE PRICE AND
ONE PRICE CLOTHING STORES
STOCK PURCHASE AGREEMENT
-by and among-
SUN ONE PRICE, LLC
a Delaware limited liability company,
and
ONE PRICE CLOTHING STORES, INC.,
a Delaware corporation,
Dated: June 18, 2003
TABLE OF CONTENTS
Page
Article I DEFINED TERMS........................................................1
Article II PURCHASE AND SALE OF SHARES; CONSIDERATION; CLOSING.................7
2.1 Purchase and Sale of Shares.................................7
2.2 Payment of the Purchase Price...............................7
2.3 Closing.....................................................8
Article III REPRESENTATIONS AND WARRANTIES OF PURCHASER........................8
3.1 Organization................................................8
3.2 Authorization; Noncontravention.............................8
3.3 Litigation..................................................8
3.4 Private Placement...........................................8
3.5 Legends.....................................................9
3.6 Brokers and Finders.........................................9
3.7 NASDAQ Listing..............................................9
Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................9
4.1 Corporate Organization.....................................10
4.2 Authorization; Noncontravention............................10
4.3 Capitalization.............................................11
4.4 Officers and Directors.....................................12
4.5 SEC Reports................................................12
4.6 Financial Information......................................13
4.7 No Undisclosed Liabilities.................................13
4.8 Inventory and Supplies.....................................13
4.9 Accounts Receivable........................................13
4.10 Property...................................................14
4.11 Contracts..................................................15
4.12 Intellectual Property......................................17
4.13 Legal Proceedings..........................................19
4.14 Licenses and Compliance with Law...........................19
4.15 Environmental Matters......................................19
4.16 Labor and Employment Matters...............................20
4.17 Taxes......................................................20
4.18 Employee Benefit Plans.....................................22
4.19 Relationships with Suppliers...............................24
4.20 Absence of Changes.........................................24
4.21 Insurance..................................................26
4.22 Affiliate Transactions.....................................26
4.23 Bank Accounts..............................................27
4.24 Product Warranties, Defects and Liabilities................27
4.25 Accounts Payable and Accrued Expenses......................27
4.26 Brokers and Finders........................................27
4.27 Rights Plan................................................27
Article V COVENANTS 28
5.1 General....................................................28
5.2 Maintenance of Business....................................28
5.3 Operation of Business......................................28
5.4 Access.....................................................29
5.5 Landlord Estoppels.........................................29
5.6 No-Shop....................................................29
5.7 Notification of Certain Matters............................30
Article VI CONDITIONS PRECEDENT TO THE TRANSACTION............................30
6.1 Conditions Precedent to Purchaser's Obligation to Close....30
6.2 Conditions Precedent to the Company's Obligation to Close..34
Article VII INDEMNIFICATION...................................................34
7.1 By the Company.............................................34
7.2 By Purchaser...............................................35
7.3 Indemnification Amounts....................................35
7.4 Notice of and Defense Against Claims.......................36
7.5 Manner of Payment by the Company...........................37
Article VIII TERMINATION......................................................38
8.1 Termination by Mutual Consent and Automatic Termination....38
8.2 Termination by Purchaser...................................38
8.3 Termination by the Company.................................38
8.4 Automatic Termination......................................38
8.5 Effect of Termination......................................38
Article IX MISCELLANEOUS......................................................39
9.1 Further Assurances.........................................39
9.2 Publicity..................................................39
9.3 Confidentiality............................................40
9.4 No Waiver..................................................40
9.5 Entire Agreement...........................................40
9.6 Governing Law..............................................40
9.7 Assignment.................................................40
9.8 Fees and Expenses..........................................41
9.9 Amendment and Waiver.......................................41
9.10 Paragraph Headings.........................................41
9.11 Notices....................................................41
9.12 Unenforceability, Severability.............................42
9.13 Specific Performance.......................................42
9.14 Counterparts...............................................42
9.15 Insurance..................................................42
Schedules
Schedule 4.1 Corporate Organization
Schedule 4.2 Authorization; Noncontravention
Schedule 4.3 Capitalization
Schedule 4.4 Officers and Directors
Schedule 4.5 SEC Reports
Schedule 4.7 Undisclosed Liabilities
Schedule 4.8 Inventory
Schedule 4.9 Accounts Receivable
Schedule 4.10 Property
Schedule 4.11 Contracts
Schedule 4.12 Intellectual Property
Schedule 4.13 Legal Proceedings
Schedule 4.14 Compliance With Law
Schedule 4.15 Environmental Matters
Schedule 4.16 Labor and Employment Matters
Schedule 4.17 Taxes
Schedule 4.18 Employee Benefit Plans
Schedule 4.19 Customers and Suppliers
Schedule 4.20 Absence of Changes
Schedule 4.21 Insurance
Schedule 4.22 Affiliate Transactions
Schedule 4.23 Bank Accounts
Schedule 4.24 Product Warranties
Schedule 4.25 Accounts Payable
Schedule 4.26 Brokers and Finders of the Company
Schedule 4.27 Rights Plan
Schedule 6.1(l) Officer Appointments
Schedule 6.1(u) Vendor Trade Payables
Schedule 6.1(w) Term Sheets
Schedule 7.3 Indemnification
Exhibits
Exhibit A - Form of Warrant
Exhibit B - Form of Amended and Restated By-Laws
Exhibit C - Form of Stockholders Agreement
Exhibit D - Form of Registration Rights Agreement
Exhibit E - Form of Management Services Agreement
Exhibit F - Form of Certificate of Designation
Exhibit G - Form of Employment Agreement with Xxxxxxx Xxxxxx
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
the 18th day of June, 2003, by and among SUN ONE PRICE, LLC, a Delaware limited
liability company (the "Purchaser"), and ONE PRICE CLOTHING STORES, INC., a
Delaware corporation (the "Company"). Capitalized terms not defined when used
are defined in Article I hereof.
WHEREAS, the Company desires to issue and sell, and Purchaser
desires to purchase, in exchange for cash, 5,119,101 shares of the Company's
Common Stock, par value $0.01 per share ("Common Stock"), 100 shares of the
Company's Series A Preferred Stock, par value $0.01 per share ("Preferred
Stock"), and a warrant (the "Warrant") to purchase shares of Common Stock in
substantially the form attached hereto as Exhibit A, upon the terms and subject
to the conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants,
conditions and promises contained herein, the parties hereby agree as follows:
Article I
DEFINED TERMS
As used in this Agreement, the following terms have the
following meanings:
"Affiliate" with respect to any Person, means any Person
controlling, controlled by or under common control with such Person.
"Amended Bylaws" has the meaning given to such term in Section
6.1(o) of this Agreement.
"Amendment" has the meaning given to such term in Section
6.1(w) of this Agreement.
"Balance Sheet" has the meaning given to such term in Section
4.6 of this Agreement.
"Balance Sheet Date" has the meaning given to such term in
Section 4.6 of this Agreement.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et seq.),
and all rules and regulations issued thereunder.
"Certificate of Incorporation" means the Restated Certificate
of Incorporation of the Company.
"Claim Notice" shall have the meaning set forth in Section
7.4(b) of this Agreement.
"Closing" has the meaning given to such term in Section 2.3 of
this Agreement.
"Closing Date" has the meaning given to such term in Section
2.3 of this Agreement.
"COBRA" has the meaning given to such term in Section 4.18(e)
of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" has the meaning given to such term in the
recitals to this Agreement.
"Company" has the meaning given to such term in the preamble
to this Agreement.
"Company Benefit Plans" has the meaning given to such term in
Section 4.18 of this Agreement.
"Company Intellectual Property" has the meaning given to such
term in Section 4.12(a) of this Agreement.
"Company Sale" has the meaning given to such term in Section
5.6 of this Agreement.
"Company Transaction" means any (a) recapitalization,
reorganization, liquidation or dissolution of the Company or any of its
Subsidiaries, (b) any sale of all or any substantial portion of the assets of
the Company and its Subsidiaries, (c) any merger or other business combination
involving the Company and its Subsidiaries or (d) any sale of any of the capital
stock of or other equity interests in the Company or its Subsidiaries, other
than by the Company pursuant to employee stock options issued under the Company
Benefit Plans.
"Congress" means Congress Financial Corporation (Southern).
--------
"Dispute Notice" shall have the meaning set forth in Section
7.4(b) of this Agreement.
"Environmental Requirements" means all federal, state, local
and foreign statutes, laws, rules, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, whenever in
effect, concerning public health and safety, worker health and safety, pollution
or protection of the environment, including without limitation all those
relating to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, Release, threatened Release, control, or cleanup of any Hazardous
Substances (including without limitation CERCLA and analogous state laws).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all rules and regulations issued thereunder.
"ERISA Affiliate" has the meaning given to such term in
Section 4.18(c) of this Agreement.
"Estoppel Certificates" has the meaning given to such term in
Section 5.5 of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all rules and regulations issued thereunder.
"First Amended Certificate" has the meaning given to such term
in Section 6.1(t) of this Agreement.
"GAAP" means United States generally accepted accounting
principles, consistently applied.
"Hazardous Substances" means any pollutants, contaminants or
chemicals, and any industrial, toxic or otherwise hazardous materials,
substances or wastes with respect to which liability or standards of conduct are
imposed under any Environmental Requirements, including without limitation,
noise, odors, radiation, petroleum and petroleum-related substances, products,
by-products and wastes, asbestos, urea formaldehyde and lead-based paint.
"Indebtedness" means, at a particular time, without
duplication, (i) any obligation for borrowed money or issued in substitution for
or exchange of indebtedness for borrowed money, (ii) any obligation evidenced by
any note, bond, debenture or other debt security, (iii) any obligation for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business), (iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any obligation guaranteed in any manner by a
Person (including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) any obligations under capitalized or synthetic
leases (in accordance with GAAP) with respect to which a Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or with respect
to which obligations a Person assures a creditor against loss, (vii) any
obligation secured by a Lien on a Person's assets, and (viii) any fees,
penalties, premiums or accrued and unpaid interest with respect to the foregoing
(in the case of prepayments or otherwise).
"Intellectual Property" means all of the following in any
jurisdiction throughout the world: (i) patents, patent applications, patent
disclosures and inventions; (ii) Internet domain names, trademarks, service
marks, trade dress, trade names, slogans, logos and corporate names and all
translations, adaptations, derivations and combinations of the foregoing and
registrations and applications for registration thereof together with all of the
goodwill associated therewith; (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof;
(iv) mask works and registrations and applications for registration thereof; (v)
computer software (including, without limitation, source code, executable code,
data, databases and documentation); (vi) trade secrets and other confidential
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, financial and marketing plans and customer and supplier lists and
information); (vii) other intellectual property rights; and (viii) copies and
tangible embodiments thereof (in whatever form or medium).
"IRS" has the meaning given to such term in Section 4.18(a) of
this Agreement.
"Knowledge", with respect to the Company, means the actual
knowledge of any director or officer of the Company and its Subsidiaries who are
identified on Schedule 4.4 of this Agreement, including facts of which directors
and officers, in the reasonably prudent exercise of their duties, should be
aware.
"Latest Balance Sheet" has the meaning given to such term in
Section 4.6 of this Agreement.
"Latest Balance Sheet Date" has the meaning given to such term
in Section 4.6 of this Agreement.
"Leased Real Property" has the meaning given to such term in
Section 4.10 of this Agreement.
"Lien" means any mortgage, pledge, hypothecation, lien
(statutory or otherwise), preference, priority, security interest, Tax, security
agreement, easement, covenant, restriction or other encumbrance of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement and any lease having substantially the same effect as any of the
foregoing and any assignment or deposit arrangement in the nature of a security
device).
"Loan and Security Agreement" means that certain Loan and
Security Agreement by and among Congress as lender and the Company and One Price
Clothing of Puerto Rico, Inc., as borrowers, dated as of March 26, 1996, as
amended.
"Losses" means any loss, liability, demand, claim, action,
cause of action, cost, damage, deficiency, Tax, penalty, fine or expense,
whether or not arising out of third-party claims (including interest, penalties,
reasonable attorneys' fees and expenses and all amounts paid in investigation,
defense or settlement of any of the foregoing).
"Material Adverse Effect" or "Material Adverse Change" means a
material and adverse effect, change or development upon the business or the
operations, assets, liabilities, financial condition, value, operating results,
cash flow, net worth or employee, customer or supplier relations of the Company
and its Subsidiaries, taken as a whole.
"Online Data Room" means the files and documents located on
the internet at xxxxx://xxxxxxxxxx.xxxx.xxx/XxxxxXxxxx/xxxxxxxx/Xxxx.xxx/x_Xxx/
4df38292d748069d0525670800167212/?OpenDocument
and maintained by Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx, PLLC.
"Owned Real Property" has the meaning given to such term in
Section 4.10 of this Agreement.
"Permit" means any permit, certificate, license, approval,
registration or authorization issued pursuant to any federal, state, local or
foreign law, rule or regulation.
"Permitted Encumbrances" means (a) real estate Taxes,
assessments and other governmental levies, fees or charges imposed with respect
to the Owned Real Property which are not due and payable as of the Closing Date,
or which are being contested in good faith and for which appropriate reserves
have been set forth on the Latest Balance Sheet, (b) mechanics liens and similar
liens for labor, materials or supplies incurred in the ordinary course of
business for amounts which are not due and payable and which could not,
individually or in the aggregate, materially effect the Company or its assets,
(c) zoning, building codes and other land use laws regulating the use or
occupancy of the Real Property or the activities conducted thereon which are
imposed by any governmental authority having jurisdiction over the Real Property
which are not violated by the current use or occupancy of the Real Property or
the operation of the Company's and its Subsidiaries' business thereon, (d)
easements, covenants, conditions, restrictions and other similar matters of
record affecting title to the Real Property that do not, in any material
respect, detract from the value thereof or do not interfere with or impair the
present use or occupancy of the Real Property subject thereto in the operation
of the Company's or its Subsidiaries' business conducted thereon, and (e) Liens
created in connection with the Senior Indebtedness, including any renewals,
extensions, refinancings, deferrals, restructurings, amendments and
modifications thereto.
"Person" includes, but is not limited to, any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated association,
corporation, limited liability company, entity or governmental entity (whether
federal, state, county, city or otherwise and including any instrumentality,
division, agency or department thereof).
"Preferred Stock" has the meaning given to such term in the
recitals to this Agreement.
"Proceeding" means any action, suit, proceeding, claim,
arbitration, charge, complaint, inquiry, audit, investigation or request for
information relating to any potential claim or investigation.
"Proposal" has the meaning given to such term in Section 5.6
of this Agreement.
"Purchase Price" has the meaning given to such term in Section
2.1(b) of this Agreement.
"Purchaser" has the meaning given to such term in the preamble
to this Agreement.
"Real Property" means the Owned Real Property and the Leased
Real Property.
"Release" has the meaning given to such term in CERCLA.
"SEC Documents" has the meaning given to such term in Section
4.5(a) of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
and all rules and regulations issued thereunder.
"Senior Indebtedness" means the Indebtedness of the Company
and its Subsidiaries incurred pursuant (i) the Loan and Security Agreement, (ii)
that certain Mortgage and Security Agreement by and between First Union National
Bank and One Price Realty, Inc. and/or (iii) that certain Amended and Restated
Credit Agreement by and between Carolina First Bank and the Company and certain
Subsidiaries, including any renewals, extensions, refinancings, deferrals,
restructurings, amendments and modifications thereof.
"Shareholder Rights Agreement" means that certain Amended and
Restated Shareholder Rights Agreement, dated as of October 25, 2000, by and
between the Company and Continental Stock Transfer & Trust Company, as amended.
"Shares" has the meaning given to such term in Section 2.1(a)
of this Agreement.
"Subsidiary" of a Person means any corporation, partnership,
limited liability company, association or other business entity of which (i) if
a corporation, a majority of the total voting power of shares of stock entitled
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a partnership, limited liability company,
association or other business entity, either (A) a majority of the partnership
or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof, or (B) such Person is a general partner,
managing member or managing director of such partnership, limited liability
company, association or other entity.
"Superior Proposal" has the meaning given to such term in
Section 5.6 of this Agreement.
"SWDA" means the Solid Waste Disposal Act if 1965, as amended
(42 U.S.C. ss. 6901 et seq.) and all rules and regulations issued thereunder.
"Tangible Personal Property" shall have the meaning set forth
in Section 4.10(c) of this Agreement.
"Tax" and, with correlative meaning, "Taxes" mean with respect
to any Person (a) all federal, state, local, foreign and other taxes,
assessments or other government charges, including, without limitation, any
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license,
registration, recording, documentary, conveyancing, gains, intangibles,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property (real and personal), environmental or windfall profit tax, custom duty
or other tax, governmental fee or other like assessment, charge, or tax of any
kind whatsoever, together with any interest, penalty, addition to tax or
additional amount imposed by any Taxing Authority responsible for the imposition
of any such tax (domestic or foreign) and (b) liability for the payment of any
amounts of the type described in clause (a) above relating to any other Person
as a result of being party to any agreement to indemnify such other Person,
being a successor or transferee of such other Person, or being a member of the
same affiliated, consolidated, combined, unitary or other group with such other
Person.
"Tax Authority" means any governmental authority responsible
for the determination, assessment or collection of any Taxes or the
administration of any laws, regulations or administrative requirements relating
to any Taxes.
"Tax Proceeding" means any Proceeding related to Taxes.
"Tax Returns" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting schedules, statements or information) filed or required to be filed
in connection with the determination, assessment or collection of any Taxes of
any party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
Article II
PURCHASE AND SALE OF SHARES; CONSIDERATION; CLOSING
2.1 Purchase and Sale of Shares.
(a) Subject to the terms and conditions set forth in this Agreement, the Company
hereby agrees to sell, transfer, convey, assign and deliver to Purchaser at the
Closing, and Purchaser hereby agrees to purchase, accept and acquire from the
Company at the Closing, 5,119,101 shares of the Common Stock, 100 shares of the
Preferred Stock, and the Warrant (the Common Stock, Preferred Stock and Warrant
to be sold to Purchaser hereunder shall herein be called the "Shares"), free and
clear of all Liens.
(b) As consideration in full for its acquisition of the Shares, Purchaser shall
pay an aggregate purchase price of $7,000,000 (the "Purchase Price").
2.2 Payment of the Purchase Price. At the Closing, Purchaser shall cause the
Purchase Price to be paid by wire transfer of immediately available funds to an
account specified by the Company. The Company shall provide Purchaser with wire
transfer instructions for such account no later than three (3) business days
prior to the Closing Date. At the Closing, the Company shall deliver or cause to
be delivered to Purchaser the certificates representing the Shares, free and
clear of all Liens.
2.3 Closing. Subject to the fulfillment of the conditions precedent set forth
herein, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Xxxxxxxx & Xxxxx, 000 Xxxx
Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, at 10:00 a.m. Central Standard Time on
a date that is no later than one business day after the date on which the
conditions precedent set forth herein have been satisfied or waived (other than
conditions to be satisfied on the Closing Date) (such date, the "Closing Date"),
or at such other time, date or location as mutually agreed upon by the parties.
Article III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as
follows:
3.1 Organization. Purchaser is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware, with full
power to own its assets and to carry on its business as it is now being
conducted. Purchaser has the full power and authority to execute and deliver
this Agreement and the other agreements and instruments contemplated herein and
to perform its obligations hereunder and thereunder.
3.2 Authorization; Noncontravention. The execution, delivery and performance by
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by Purchaser and no
other act or proceeding on the part of Purchaser is necessary to authorize the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser and this Agreement constitutes a valid and binding
obligation of Purchaser, enforceable in accordance with its terms. Purchaser is
not subject to nor obligated under its certificate of formation or operating
agreement, or any applicable law, rule or regulation of any governmental
authority, or any agreement, instrument, license or permit, or subject to any
order, writ, injunction or decree, which would be breached or violated by its
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby. No permit, consent, approval or authorization
of, or declaration to or filing with, any governmental or regulatory authority
or any other Person is required in connection with the execution, delivery or
performance of this Agreement by Purchaser or the consummation by Purchaser of
the transactions contemplated hereby.
3.3 Litigation. There are no actions or suits against Purchaser pending, or to
the knowledge of Purchaser, threatened which seek to, and Purchaser is not
subject to any judgments, decrees or orders which, individually or in the
aggregate, would, enjoin or rescind the transactions contemplated by this
Agreement or otherwise prevent Purchaser from, complying with the terms and
provisions of this Agreement.
3.4 Private Placement.
(a) Purchaser understands that the offering and sale of the Shares by the
Company to Purchaser are intended to be exempt from registration under the
Securities Act.
(b) The Shares to be acquired by Purchaser pursuant to this Agreement are being
acquired for its own account and without a view to making a distribution thereof
in violation of the Securities Act.
(c) Purchaser has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares and Purchaser is capable of bearing the economic risks of such
investment, including a complete loss of its investment in the Shares.
(d) Purchaser is an "accredited investor" as such term is defined in Regulation
D under the Securities Act.
3.5 Legends. Purchaser understands that each instrument evidencing the
Shares may bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF WITHOUT EFFECTIVE
REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM."
3.6 Brokers and Finders. Purchaser has not employed any broker, agent or finder
or agreed to incur any liability for any brokerage fees, agents' commissions or
finders' fees in connection with the transactions contemplated hereby.
3.7 NASDAQ Listing. Within sixty (60) days of the date that the Company informs
the Purchaser that the Company has met the initial listing criteria for the
NASDAQ SmallCap Market or NASDAQ National Market, Purchaser will use
commercially reasonable efforts to cause any of its employees or officers who
are members of the Company's board of directors to consider whether it is in the
best interests of the Company to apply for inclusion of the Common Stock on the
NASDAQ SmallCap Market or NASDAQ National Market; provided, however, the parties
hereto agree and acknowledge that nothing in this Section 3.7 shall require any
Person to violate any of his, her or its fiduciary duties and neither Purchaser
nor any of its Affiliates, officers, directors, stockholders, employees,
attorneys, partners, members, managers, agents (whether or not such Persons are
members of the Company's board of directors) shall be required to approve or
take any action that such Person reasonably believes would violate his, her or
its fiduciary duties or would not be in the best interests of the Company
(taking into account, among other considerations, the Company's financial
condition).
Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as
follows:
4.1 Corporate Organization.
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own its assets and to conduct its business, as such business is now
being conducted. The Company is duly qualified or licensed to conduct its
business and is in good standing in each jurisdiction in which the conduct or
nature of its business or the ownership, leasing, using or holding of its
properties makes such qualification or good standing necessary, except such
jurisdictions where the failure to be so qualified or in good standing,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Schedule 4.1 sets forth each jurisdiction in which the
Company is qualified to do business as a foreign corporation.
(b) Schedule 4.1 sets forth each direct and indirect Subsidiary of the Company,
together with its jurisdiction of incorporation or formation. Each Subsidiary of
the Company is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, with full power and
authority to own its assets and to conduct its business, as such business is now
being conducted. Each Subsidiary of the Company is duly qualified or licensed to
conduct its business and is in good standing in each jurisdiction in which the
conduct or nature of its business or the ownership, leasing, using or holding of
its properties makes such qualification or good standing necessary, except such
jurisdictions where the failure to be so qualified or in good standing,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Schedule 4.1 sets forth each jurisdiction in which each
Subsidiary of the Company is qualified to do business as a foreign corporation.
(c) Except as set forth on Schedule 4.1, no Person other than the Company or a
Subsidiary of the Company owns or has any agreement to buy any shares of capital
stock or other equity interests in any Subsidiary of the Company. Except as set
forth on Schedule 4.1, neither the Company nor any Subsidiary of the Company
owns or has any agreement to buy any shares of capital stock or other equity
interests in any Person (other than a Subsidiary of the Company).
4.2 Authorization; Noncontravention. The execution, delivery and performance of
this Agreement and all of the other agreements and instruments contemplated
hereby to which the Company is a party have been duly authorized by the Company,
and no other corporate act or other proceeding on the part of the Company, its
board of directors or stockholders is necessary to authorize the execution,
delivery or performance of this Agreement or the other agreements contemplated
hereby and the consummation of the transactions contemplated hereby or thereby.
This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms, and each of the other agreements and instruments
contemplated hereby to which the Company is a party, when executed and delivered
by the Company, in accordance with the terms hereof and thereof, shall each
constitute a valid and binding obligation of the Company, enforceable against it
in accordance with its respective terms. Except as set forth on Schedule 4.2,
the execution and delivery by the Company of this Agreement and all of the other
agreements and instruments contemplated hereby to which the Company is a party
and the fulfillment of and compliance with the respective terms hereof and
thereof by the Company do not and shall not (a) conflict with or result in a
breach of the terms, conditions or provisions of, (b) constitute a default under
(whether with or without the passage of time, the giving of notice or both), (c)
result in the creation of any Lien upon the Company's capital stock or assets
pursuant to, (d) give any third party the right to modify, terminate or
accelerate any obligation under, (e) result in a violation of, or (f) require
any authorization, consent, approval, exemption or other action of or by or
notice or declaration to, or filing with, any third party or any court or
administrative or governmental body or agency pursuant to the Company's or any
of its Subsidiaries' constituent documents, or any law, statute, rule or
regulation to which the Company or any of its Subsidiaries is subject, or any
material agreement, material instrument, material license, material Permit,
order, judgment or decree to which the Company or any of its Subsidiaries is
subject. Neither the Company nor any of its Subsidiaries is a party to or bound
by any written or oral agreement or understanding with respect to a Company
Transaction other than this Agreement, and the Company and its Subsidiaries have
terminated all discussions with other Persons (other than with Purchaser and its
Affiliates) regarding any Company Transaction.
4.3 Capitalization.
(a) Immediately prior to the Closing, the entire authorized capital stock of the
Company consists solely of (i) 10,000,000 shares of Common Stock, of which
3,014,753 shares are issued and outstanding and (ii) 500,000 shares of preferred
stock, of which none of which are issued and outstanding. Immediately following
the Closing, the entire authorized capital stock of the Company will consist
solely of (i) 10,000,000 shares of Common Stock, of which 8,133,854 shares are
issued and outstanding and (ii) 500,000 shares of preferred stock, of which 100
shares of Preferred Stock are issued and outstanding. All of the outstanding
shares of Common Stock and Preferred Stock are duly authorized, validly issued
(including, without limitation, issued in compliance with all applicable United
States federal securities laws, and to the Company's Knowledge, issued in
compliance with all applicable state securities laws), fully paid and
non-assessable.
(b) Except as set forth on Schedule 4.3 hereto, there are no outstanding
options, warrants, rights to acquire or subscribe to, or calls or commitments of
any character whatsoever to which the Company is a party or may be bound,
requiring the issuance or sale of shares of any class of capital stock or other
equity securities in the Company or securities or rights convertible into or
exchangeable for such shares or other equity securities in the Company, and
there are no contracts, commitments, understandings or arrangements for which
the Company is or may become bound to issue additional shares of capital stock
or other equity securities or options, warrants or rights to acquire or
subscribe to any additional shares of any class of capital stock or other equity
securities or securities convertible into or exchangeable for such shares or
other equity securities in the Company. Schedule 4.3 hereto sets forth the
exercise price or conversion price, as applicable, of each option, warrant or
other security or instrument required to be set forth on Schedule 4.3 pursuant
to the immediately prior sentence. None of the issued and outstanding Common
Stock or Preferred Stock has been issued in violation of any purchase option,
call, right of first refusal, preemptive, subscription, or similar right under
any provision of applicable law, the Certificate of Incorporation or by-laws of
the Company, or any contract, agreement or instrument to which the Company is
subject or by which it is bound (other than this Agreement). The Company is not
a party to any agreement granting to any Person any stock appreciation or other
similar right with respect to the capital stock or other equity securities of
the Company. There is no existing arrangement that requires or permits any
shares of the capital stock of the Company to be voted by or at the discretion
of anyone other than the record owner thereof and there are no proxies providing
for such a voting arrangement. Except for restrictions imposed by applicable
securities laws, there are no restrictions of any kind on the transfer of any of
the outstanding shares of capital stock of the Company.
(c) As a result of the transaction contemplated by this Agreement, after the
Closing hereunder, (i) Purchaser shall own 62.936% of the issued and outstanding
Common Stock (including any common stock, if any, issued to any the Company's
vendors in connection with the transactions contemplated hereby), (ii) Purchaser
shall own one-hundred percent (100%) of the issued and outstanding preferred
stock of the Company and (iii) Purchaser shall own eighty-five percent (85%) of
the issued and outstanding Common Stock, assuming full conversion of the
Preferred Stock but excluding the conversion and exercise of any other
securities or instruments (whether or not currently vested, convertible or
exercisable) convertible or exercisable into shares of Common Stock.
(d) As a result of the transaction contemplated by this Agreement, after the
Closing as outstanding options, warrants (including any warrants, if any, issued
to any of the Company's vendors in connection with the transactions contemplated
hereby) and other securities or instruments convertible or exercisable into
shares of Common Stock (other than the Warrant) (whether or not currently
vested, convertible or exercisable) are converted into the capital stock of the
Company, Purchaser shall have the right to continue to own eighty-five percent
(85%) of the issued and outstanding Common Stock pursuant to the terms of the
Warrant.
4.4 Officers and Directors. Schedule 4.4 sets forth each officer and director of
the Company and each Subsidiary of the Company, including their title.
4.5 SEC Reports.
-----------
(a) Except as set forth in Schedule 4.5, the Company has filed all required
forms, reports and documents with the Commission since January 1, 2001,
including all exhibits thereto (collectively, the "SEC Documents"), each of
which complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act as in effect on the dates so filed. Except
as set forth in Schedule 4.5, none of the SEC Documents (as of their respective
filing dates or, if amended, as of the date of the last such amendment filed
prior to the date hereof) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements made therein not misleading.
(b) There are no facts that could, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect and that have not been disclosed
in the SEC Documents or this Agreement (including the Schedules hereto) other
than the transactions contemplated hereby.
(c) None of the Subsidiaries of the Company is now, or has in the past been,
required to file any forms, reports or documents with the Commission or any
similar foreign agency.
4.6 Financial Information. The audited consolidated balance sheets of the
Company and its Subsidiaries as at February 2, 2002 and February 1, 2003 (said
February 1, 2003 balance sheet being referred to herein as the "Balance Sheet"
and February 1, 2003 being referred to herein as the "Balance Sheet Date") and
the related audited consolidated statements of operations, cash flows and
stockholders' equity of the Company and its Subsidiaries for the fifty-two (52)
week periods then ended, together with the notes and schedules thereto and
accompanied by the reports thereon of Deloitte & Touche LLP, a copy of each of
which has been delivered to Purchaser, fairly present the financial condition of
the Company and its Subsidiaries as of the respective dates of such balance
sheets and the results of their operations, cash flows and stockholders' equity
for the periods covered by such statements and have been prepared in accordance
with GAAP. The unaudited consolidated balance sheet of the Company and its
Subsidiaries at May 3, 2003 (said balance sheet being referred to herein as the
"Latest Balance Sheet" and May 3, 2003 being referred to herein as the "Latest
Balance Sheet Date") and the related unaudited consolidated statement of
operations, cash flows and stockholders' equity of the Company and its
Subsidiaries for the thirteen (13) week period then ended, a copy of each of
which has been delivered to Purchaser, fairly present the financial condition of
the Company and its Subsidiaries and the results of their operations, cash flows
and stockholders' equity as of the date and for the thirteen (13) week period
then ended, and have been prepared in accordance with GAAP, except that they do
not contain all the footnote disclosures required by GAAP and except for normal
year-end audit adjustments (none of which would, individually or in the
aggregate, to the Knowledge of the Company, be material).
4.7 No Undisclosed Liabilities. Except as set forth on Schedule 4.7, the Company
and its Subsidiaries do not have any liabilities, other than those set forth in
the Latest Balance Sheet and those incurred thereafter in the ordinary course of
business consistent with past practice (other than liabilities for breach of
contract, breach of warranty, tort, infringement, violation of law, claim or
lawsuit). Other than the Senior Indebtedness and except as set forth on Schedule
4.7, the Company and its Subsidiaries have not incurred any Indebtedness that is
currently outstanding.
4.8 Inventory and Supplies. Except as set forth on Schedule 4.8, all the
inventory of the Company and its Subsidiaries was acquired in the ordinary
course of business and consists of items that are good and merchantable and of a
quality and quantity usable and saleable in the ordinary course of business,
except to the extent of reserves, allowances and write-downs reflected in the
Latest Balance Sheet. Inventories are valued, according to GAAP, at the lower of
cost (computed using the first-in, first-out (FIFO) retail method) or market.
The Company and its Subsidiaries has good and marketable title to each item of
inventory, free and clear of all Liens, except Permitted Encumbrances.
4.9 Accounts Receivable. Except as set forth on Schedule 4.9, all accounts and
notes receivable reflected on the Latest Balance Sheet (net of allowances for
doubtful accounts as reflected thereon and as determined in accordance with
GAAP) (a) are or shall be valid and current (and not subject to any valid
counterclaims or setoffs) and (b) resulted from a bona fide sale to a customer
in the ordinary course of business on commercially reasonable terms, the amount
of which was actually due on the date thereof and (c) are or shall be current
and collectible at the aggregate recorded amount therefor as shown on the Latest
Balance Sheet. The Company and its Subsidiaries has good and marketable title to
each such account and note receivable, free and clear of all Liens, except
Permitted Encumbrances.
4.10 Property.
(a) Real Property Leases. Schedule 4.10 contains a description of all real
property leased, licensed to or otherwise used or occupied by the
Company and its Subsidiaries (collectively, the "Leased Real Property")
including the address thereof, the annual fixed rental, the expiration
of the term, any extension options, any security deposits, and any
early termination or other exit provisions (and a description thereof).
A true and correct copy of each such lease, license and/or occupancy
agreement, and any amendments thereto, with respect to the Leased Real
Property (each a "Real Property Lease", and collectively, the "Real
Property Leases") has been made available at the Company's offices, and
the information relating to the Real Property Leases set forth on
Schedule 4.10 has been delivered, to Purchaser, and no changes have
been made thereto since the date hereof. All of the Leased Real
Property is used or occupied by the Company or its Subsidiaries
pursuant to a Real Property Lease. To the Company's Knowledge, the
Company and its Subsidiaries have a valid and enforceable leasehold
interest in the Leased Real Property, free and clear of all Liens,
other than Permitted Encumbrances and other than as described in
Schedule 4.10. To the Company's Knowledge, except as set forth on
Schedule 4.10, each Real Property Lease is valid, binding and
enforceable in accordance with its terms and is in full force and
effect. To the Company's Knowledge, except as set forth on Schedule
4.10, there are no existing defaults by the Company or its Subsidiaries
or, to the Knowledge of the Company, the lessor under any of the Real
Property Leases and, to the Knowledge of the Company, no event has
occurred which (with notice, lapse of time or both) could reasonably be
expected to constitute a default or material breach under any of the
Real Property Leases by any party or give any party the right to
terminate, accelerate or materially modify any Real Property Lease.
(b) Owned Real Property. Schedule 4.10 sets forth a list of all real
property owned by Company and its Subsidiaries (the "Owned Real
Property"). With respect to each parcel of Owned Real Property: (i) the
Company or a Subsidiary has good and marketable title, free and clear
of all Liens, except for Permitted Encumbrances; (ii) except as
provided in Schedule 4.10, there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any
Person the right of use or occupancy of any portion of such Owned Real
Property; (iii) there are no outstanding options or rights of first
refusal to purchase such Owned Real Property, or any portion thereof or
interest therein; and (iv) neither the Company nor any Subsidiary is a
party to any agreement or option to purchase any real property or
interest therein. In addition, all utilities currently servicing the
Owned Real Property are installed, connected and operating, with all
charges paid in full.
(c) Tangible Personal Property. Schedule 4.10 hereto lists, as of the
Latest Balance Sheet Date, by categories, all equipment, machinery, and
other similar tangible personal property, with an individual original
cost of $25,000 or more, owned or leased by the Company and its
Subsidiaries (the "Tangible Personal Property"). Except as set forth on
Schedule 4.10, the Company and its Subsidiaries have good and
marketable title to, and are in possession of all items of Tangible
Personal Property used in their business (other than leased property),
whether or not listed on Schedule 4.10 hereto, and such property is
free and clear of all Liens, other than Permitted Encumbrances. Except
as set forth on Schedule 4.10, the buildings, machinery, equipment and
other tangible assets that the Company and its Subsidiaries owns and
leases are free from material defects (patent and latent), have been
maintained in accordance with normal industry practice, and are in good
operating condition and repair (subject to normal wear and tear).
(d) Absence of Violations. Except as set forth on Schedule 4.10 hereto:
(i) To the Knowledge of the Company, none of the Owned Real Property or
Leased Real Property is in material violation of any law or any
building, zoning, or other ordinance, code, rule or regulation.
(ii) To the Knowledge of the Company, the condition and use of the Owned
Real Property conform to each applicable certificate of occupancy and
all other Permits required to be issued in connection with the Owned
Real Property. To the Knowledge of the Company, the Company and its
Subsidiaries have obtained all material Permits necessary for the
operation of the business of the Company and its Subsidiaries on the
Owned Real Property.
(e) Reassessments. Except as set forth in Schedule 4.10, there is not now
pending nor, to the Knowledge of the Company, contemplated any
reassessment of any parcel included in the Owned Real Property which
would result in a change in the sums and charges payable by the Company
or any of its Subsidiaries under any agreement relating to the Owned
Real Property or otherwise.
(f) No Condemnation. Except as set forth in Schedule 4.10, there is no
pending condemnation, expropriation, eminent domain, or similar
proceeding affecting all or any portion of the Owned Real Property or,
to the Knowledge of the Company, any Leased Real Property. Neither the
Company nor any Subsidiary has received any written or oral notice of
any of the same, and the Company has no Knowledge that any such
proceeding is contemplated.
(g) No Flood Hazard Area. No portion of the Owned Real Property is located
in an area designated by any governmental entity as a flood hazard
area.
(h) Mechanics' Liens. To the Knowledge of the Company, no work has been
performed or is in progress at, and no materials have been furnished
to, the Owned Real Property which, though not presently the subject of,
might give rise to, mechanics', material suppliers', or other similar
Liens against the Company's or any Subsidiary's interest in the Owned
Real Property or any portion thereof. If any Lien, other than a
Permitted Encumbrance, for such work is filed before or after the
Closing hereunder, the Company shall discharge promptly the same at the
Company's sole cost.
4.11 Contracts.
(a) Except as set forth on Schedule 4.11, neither the Company nor any of
its Subsidiaries is a party to or bound by any written or oral:
(i) pension, profit sharing, stock option, employee stock purchase, bonus
or other plan or arrangement providing for deferred or other
compensation to employees, former employees or consultants, or any
other employee benefit plan or arrangement, or any collective
bargaining agreement or any other contract with any labor union, or
severance agreements, programs, policies or arrangements;
(ii) contract for the employment of any officer, employee or other Person on
a full-time, part-time, consulting or other basis or relating to loans
to officers, directors or Affiliates;
(iii) contract under which the Company or any of its Subsidiaries has
advanced or loaned any other Person amounts exceeding $25,000 in the
aggregate;
(iv) agreement or indenture relating to Indebtedness of the Company or any
of its Subsidiaries;
(v) lease or agreement under which the Company or any of its Subsidiaries
is lessee of or holds or operates any property, real or personal, owned
by any other Person, except for any lease of real or personal property
under which the aggregate annual rental payments do not exceed $25,000;
(vi) lease or agreement under which the Company or any of its Subsidiaries
is lessor of or permits any other Person to hold or operate any
property, real or personal, owned or controlled by the Company or any
of its Subsidiaries;
(vii) contract or group of related contracts with the same Person or group of
affiliated Persons the performance of which involves consideration in
excess of $50,000, other than purchase and sales orders incurred in the
ordinary course of business;
(viii) assignment, license, indemnification or agreement with respect to any
intangible property (including any Company Intellectual Property);
(ix) warranty agreement with respect to its services rendered or its
products sold or leased;
(x) agreement under which it has granted any Person any registration rights
(including demand or piggyback registration rights);
(xi) sales, distribution, supply or franchise agreement that involves
payments in excess of $50,000;
(xii) agreement with a term of more than six months which is not terminable
by the Company or any of its Subsidiaries upon less than 30 days'
notice without penalty and involves a consideration in excess of
$50,000;
(xiii) contract regarding voting, transfer or other arrangements related to
the Company's capital stock or warrants, options or other rights to
acquire any of the Company's capital stock;
(xiv) contract or agreement prohibiting it from freely engaging in any
business or competing anywhere in the world; or
(xv) any other agreement which is material to their operations and business
prospects or involves a consideration in excess of $50,000.
(b) All of the agreements and instruments set forth or required to be set
forth on Schedule 4.11 are valid, binding and enforceable in accordance
with their respective terms and shall be in full force and effect
without penalty in accordance with their terms upon consummation of the
transactions contemplated hereby. Except as set forth on Schedule 4.11,
(i) to the Knowledge of the Company, the Company and its Subsidiaries
have performed all obligations required to be performed by them and are
not in default under or in breach of nor in receipt of any claim of
default or breach under any agreement or instrument to which they are
subject; (ii) to the Knowledge of the Company, no event has occurred
which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by the Company or
any of its Subsidiaries under any agreement or instrument to which the
Company or any of its Subsidiaries is subject; (iii) neither the
Company nor any of its Subsidiaries has any present expectation or
intention of not fully performing all such obligations; (iv) no
agreement or instrument to which the Company or any of its Subsidiaries
are bound is currently subject to or, to the Knowledge of the Company,
is expected to be subject to cancellation or any other material
modification by the other party thereto or is subject to or is expected
to be subject to any penalty, right of set-off or other charge by the
other party thereto for late performance or delivery; (v) to the
Knowledge of the Company, there is no breach or anticipated breach by
the other parties to any agreement, instrument or commitment to which
the Company and its Subsidiaries are parties, and (vi) the Company and
its Subsidiaries have not subleased, licensed, or otherwise granted any
Person the right to use or occupy any Leased Real Property or any
portion thereof. Except as set forth on Schedule 4.11, neither the
Company nor any of its Subsidiaries is a party to any contract,
agreement or commitment the performance of which could reasonably be
expected to have a Material Adverse Effect.
4.12 Intellectual Property.
(a) Schedule 4.12 contains a complete and accurate list of all Intellectual
Property for which there is a registration or application for registration and
all material unregistered Intellectual Property that is owned by the Company or
one of its Subsidiaries or is used by the Company or one of its Subsidiaries in
the conduct of their business. Schedule 4.12 also contains a complete and
accurate list of all licenses and other rights granted by the Company or any of
its Subsidiaries to any other Person with respect to any Intellectual Property
and all licenses and other rights granted by any other Person to the Company or
any of its Subsidiaries with respect to any Intellectual Property, in each case
identifying the subject Intellectual Property. Except as set forth on Schedule
4.12, the Company or one of its Subsidiaries owns and possesses all right, title
and interest to all of the Intellectual Property set forth on Schedule 4.12 and
owns and possesses, or has a valid and enforceable license to use (as set forth
on Schedule 4.12), all other Intellectual Property necessary for the operation
of their business as presently conducted and as presently proposed to be
conducted, free and clear of all Liens, other than Permitted Encumbrances
(collectively, the "Company Intellectual Property"). Except as set forth on
Schedule 4.12, and without limiting the generality of the foregoing, the Company
or one of its Subsidiaries owns and possesses all right, title and interest in
and to all Intellectual Property created or developed by the Company's and its
Subsidiaries' employees and independent contractors or under the direction or
supervision of the Company's and its Subsidiaries' employees or independent
contractors relating to their business or to the actual or demonstratively
anticipated research or development conducted by the Company and its
Subsidiaries. Except as set forth on Schedule 4.12, the loss or expiration of
any Company Intellectual Property has not had and could not reasonably be
expected to have a material effect, and no loss or expiration of any Company
Intellectual Property is pending, or to the Company's Knowledge, threatened or
reasonably foreseeable. The Company and its Subsidiaries have taken all steps
necessary to maintain and protect the Company Intellectual Property and will
continue to maintain and protect all of the Company Intellectual Property prior
to Closing so as not to adversely affect the validity or enforceability thereof.
To the Company's Knowledge, the owners of any Intellectual Property licensed to
the Company and its Subsidiaries have taken commercially reasonable action to
maintain and protect the Intellectual Property which are subject to such
licenses.
(b) Except as set forth on Schedule 4.12, (i) all of the Company Intellectual
Property is valid and enforceable and none of the Company Intellectual Property
has been misused, no claim by any other Person has been made, is currently
outstanding or, to the Company's Knowledge, is threatened, against the Company
or any of its Subsidiaries contesting the validity, enforceability, use or
ownership of any of the Company Intellectual Property and, to the Company's
Knowledge, there is no basis for any such claim, (ii) to the Company's
Knowledge, neither the Company nor any of its Subsidiaries has infringed,
misappropriated or otherwise conflicted with, and the operation of their
respective businesses as currently conducted or as currently proposed to be
conducted will not infringe, misappropriate or conflict with, any Intellectual
Property of any other Person, and to the Company's Knowledge there are no facts
which indicate a likelihood of any of the foregoing and neither the Company nor
any of its Subsidiaries has received any notices regarding any of the foregoing
(including, without limitation, any demands or offers to license any
Intellectual Property from any other Person), (iii) to the Company's Knowledge,
the Company Intellectual Property has not been infringed, misappropriated or
otherwise conflicted with, by other Persons and there are no facts that indicate
a likelihood of any of the foregoing, (iv) there is no restriction on the direct
or indirect transfer of any Company Intellectual Property, (v) the transactions
contemplated by this Agreement will not have a Material Adverse Effect on the
Company's or any of its Subsidiaries' right, title or interest in and to the
Company Intellectual Property and all of such Company Intellectual Property
shall be owned or available for use by the Company and its Subsidiaries
immediately after the Closing on terms and conditions identical to those under
which the Company and its Subsidiaries owned or used the Company Intellectual
Property immediately prior to the Closing, and (vi) the Company and its
Subsidiaries have not agreed to indemnify any other Person for or against any
interference, infringement, misappropriation or other conflict with respect to
Intellectual Property.
(c) The Company's and its Subsidiaries' information technology used in
connection with their respective businesses, whether proprietary, licensed or
otherwise, including without limitation, all software, hardware and systems, is
free from material defects and operational in all material respects, and is
sufficient to support the Company's and its Subsidiaries' respective businesses
as presently conducted and as presently proposed to be conducted as of the date
hereof.
4.13 Legal Proceedings. Except as set forth on Schedule 4.13, there are no
Proceedings instituted by or against the Company or any of its Subsidiaries, or,
to the Knowledge of the Company, threatened against the Company or any of its
Subsidiaries, whether at law, in equity or before any governmental department,
commission, board, agency or instrumentality, domestic or foreign. The Company
and its Subsidiaries are not subject to any order, writ, injunction or decree of
any court or any governmental department, commission, board, agency or
instrumentality, domestic or foreign, having jurisdiction over them and which
names the Company or any of its Subsidiaries.
4.14 Licenses and Compliance with Law.
(a) The Company and its Subsidiaries hold and are in material compliance with,
all material Permits required by them in connection with the conduct of their
business and the ownership, use and operation of their property. Except as set
forth on Schedule 4.14 hereto, all of such material Permits are in full force
and effect and will continue to be in full force and effect in all respects
pursuant to their respective terms for six months after the Closing.
(b) To the Knowledge of the Company, and except as set forth on Schedule 4.14,
the Company and its Subsidiaries have complied and are currently in compliance,
in all material respects, with all applicable laws (including rules,
regulations, ordinances, codes, plans, injunctions, judgments, orders, decrees,
rulings, and changes thereunder) of federal, state, local and foreign
governments (and all agencies and instrumentalities thereof), that may
reasonably be anticipated to assert or claim jurisdiction over them or over any
part of their operations, and no Proceedings or notices have been filed or
commenced against the Company or any of its Subsidiaries alleging any failure to
comply.
4.15 Environmental Matters. Except as set forth on Schedule 4.15:
--------------------- -------------
(a) To the Knowledge of the Company, the Company and its Subsidiaries have
complied and are in compliance, in all material respects, with all Environmental
Requirements.
(b) Without limiting the generality of the foregoing, the Company and its
Subsidiaries have obtained and complied with, and are in material compliance
with, all material Permits that are required pursuant to Environmental
Requirements for the ownership and occupation of their facilities and the
operation of their business (collectively, "Environmental Permits").
(c) Neither the Company nor any of its Subsidiaries has received any written or
oral notice, report or other information regarding any actual or alleged
material violation of Environmental Requirements, or any material liabilities or
potential material liabilities, including any investigatory, remedial or
corrective obligations, relating to any of them or its current or former
facilities arising under Environmental Requirements.
(d) To the Company's Knowledge, none of the following exists at any Owned Real
Property or any Leased Real Property: (i) underground storage tanks owned or
operated by the Company or its Subsidiaries, or (ii) asbestos-containing
material in a damaged or friable condition.
(e) None of the Company or any of its Subsidiaries has treated, stored, disposed
of, arranged for or permitted the disposal of, transported, handled, or Released
Hazardous Substances, or owned, operated or occupied any property or facility
(and no such property or facility is contaminated by any such Hazardous
Substances) in a manner so as to give rise to material liabilities or any
material investigatory, corrective or remedial obligations pursuant to CERCLA,
the SWDA or any other Environmental Requirements.
(f) The Company has furnished to Purchaser all material environmental audits,
reports and other material environmental documents relating to the Owned Real
Property, the Leased Real Property and operations of the Company and its
Subsidiaries which are in its possession, custody or control, a complete list of
which is set forth on Schedule 4.15 hereto.
4.16 Labor and Employment Matters. Except as set forth on Schedule 4.16, (a) to
the Company's Knowledge, no executive officer or other officer set forth on
Schedule 4.4 of the Company or any of its Subsidiaries or any group of employees
of the Company or any of its Subsidiaries have any plans to terminate employment
with the Company or any of its Subsidiaries; (b) the Company and each of its
Subsidiaries have complied, in all material respects, with all laws relating to
the employment of labor (including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other Taxes), and to the Company's Knowledge, neither the Company nor any of its
Subsidiaries has any labor relations problems (including any union organization
or decertification activities, threatened or actual strikes or work stoppages or
material grievances); and (c) neither the Company or any of its Subsidiaries
nor, to the Company's Knowledge, any of their respective employees are subject
to any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company or any of its Subsidiaries, except
for agreements between the Company or its Subsidiaries and their present and
former employees.
4.17 Taxes. Except as set forth on Schedule 4.17 hereto:
----- -------------
(a) The Company and its Subsidiaries have (i) duly and timely filed or caused to
be filed with each relevant Tax Authority each Tax Return that is required to be
filed by or on behalf of them or that includes or relates to them, their income,
sales, assets or business, which Tax Returns are true, correct and complete in
all material respects, (ii) duly and timely paid in full, or caused to be paid
in full, all Taxes due and payable on or prior to the Closing (whether or not
reflected on a Tax Return) and (iii) properly accrued on the Latest Balance
Sheet in accordance with GAAP a provision for the payment of all Taxes due or
claimed to be due or for which the Company and its Subsidiaries otherwise are or
may be liable as of the Latest Balance Sheet Date.
(b) The Company and its Subsidiaries have not requested an extension of time
within which to file any Tax Return in respect of any Tax period which has not
since been filed.
(c) The Company and its Subsidiaries have complied with all applicable laws
relating to the payment, collection or withholding of any Tax, and the
remittance thereof to any and all Tax Authorities.
(d) There is no Lien for Taxes upon any asset or property of the Company and its
Subsidiaries (except for any Lien for any Tax not yet due).
(e) The Company has not filed any waiver or extension of the statute of
limitations for any Tax Proceeding or the assessment or collection of any Tax
for which the Company and its Subsidiaries are or may be liable or with respect
to their income, sales, assets or business.
(f) There is no outstanding subpoena or request for information or documents
from any Tax Authority with respect to any Tax for which the Company and its
Subsidiaries are or may be liable or with respect to their income, sales, assets
or business.
(g) There is no power of attorney in effect relating to any Tax for which the
Company and its Subsidiaries are or may be liable or with respect to their
income, sales, assets or business.
(h) No jurisdiction where the Company and its Subsidiaries does not file a Tax
Return has asserted or threatened to assert any claim that the Company and its
Subsidiaries are required to file a Tax Return for such jurisdiction.
(i) Schedule 4.17 hereto sets forth a list of all jurisdictions in which any Tax
Returns have been filed by or on behalf of the Company and its Subsidiaries, or
with respect to their income, sales, assets or business since January 1, 2000
and a description of each such Tax Return and the period for which it was filed;
and the Company has made available to Purchaser (i) a true, correct and complete
copy of each Tax Return filed prior to the Closing since January 1, 2000, and
(ii) all audit reports, closing agreements, rulings, or technical advice
memoranda relating to any Tax for which the Company and its Subsidiaries are or
may be liable with respect to their income, sales, assets or business.
(j) Neither the Company nor any of its Subsidiaries is a party to any agreement,
contract, arrangement, or plan that has resulted or would result, separately or
in the aggregate, in the payment of (i) any "excess parachute payment" within
the meaning of Code ss. 280G (or any corresponding provision of state, local, or
foreign Tax law) or (ii) any amount that will not be deductible as a result of
ss. 162(m).
(k) Neither the Company nor any of its Subsidiaries has been a United States
real property holding corporation within the meaning of Code ss. 897(c)(2)
during the applicable period specified in Code ss. 897(c)(1)(A)(ii).
(l) Neither the Company nor any of its Subsidiaries is a party to or bound by
any Tax allocation or sharing agreement.
(m) Neither the Company nor any of its Subsidiaries (A) has been a member of an
Affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Company) or (B) has any liability for the
Taxes of any Person (other than any of Company and its Subsidiaries) under
Treasury Regulation ss. 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(n) Neither the Company nor any of its Subsidiaries will be required to include
any item of income in, or exclude any item of deduction from, taxable income for
any (A) change in method of accounting for a taxable period ending on or prior
to the Closing Date; (B) "closing agreement" as described in Code ss. 7121 (or
any corresponding or similar provision of state, local or foreign income Tax
law) executed on or prior to the Closing Date; (C) intercompany transactions
made, or any excess loss account in existence, on or prior to the Closing Date
described in Treasury Regulations under Code ss. 1502 (or any corresponding or
similar provision of state, local or foreign income Tax law); (D) installment
sale or open transaction disposition made on or prior to the Closing Date; or
(E) prepaid amount received on or prior to the Closing Date.
(o) Neither the Company nor any of its Subsidiaries has distributed stock of
another Person, or has had its stock distributed by another Person, in a
transaction that was purported or intended to be governed in whole or in part by
Code ss. 355 or ss. 361.
4.18 Employee Benefit Plans.
(a) Schedule 4.18 hereto contains a true and complete list of each bonus,
incentive compensation, deferred compensation, pension, profit sharing,
retirement, stock purchase, stock option, stock ownership, cafeteria, life,
health, accident, disability, welfare, worker's compensation or other insurance,
severance, separation or other employee benefit plan of any kind, including, but
not limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA (other than a "multiemployer plan" within the meaning of Sections 3(37)
and 4001 (a)(3) of ERISA) established or maintained by the Company and its
Subsidiaries or to which the Company or any of its Subsidiaries contribute to or
has any liability or potential liability (collectively, "Company Benefit
Plans"). With respect to each Company Benefit Plan: the Company has delivered or
made available on the Online Data Room to Purchaser, to the extent applicable to
such Company Benefit Plan, complete and accurate copies of (i) all plan texts
and agreements (including any trusts, insurance contracts and third party
administrative contracts thereto) as currently in effect or as reasonably
requested by Purchaser, (ii) material communications to employees and
governmental agencies during the last three years, (iii) the most recent
determination letter received from the Internal Revenue Service ("IRS") and (iv)
the most recent three (3) years IRS Forms 5500 as filed with the IRS (including
all attachments, schedules and audit reports thereto).
(b) Except as set forth on Schedule 4.18, each Company Benefit Plan that is
intended to be qualified within the meaning of Section 401(a) of the Code has
received a determination from the IRS that such plan is qualified as to form
under Section 401(a) of the Code, or a request for such determination was timely
filed within the applicable remedial amendment period and is pending with the
IRS, and to the Knowledge of the Company, nothing has occurred since the date of
such determination (if any) or filing that could adversely affect the
qualification of such Company Benefit Plan. All such Company Benefit Plans have
been or will be timely amended for the Tax laws commonly known as "GUST" and
"EGTRRA" and each such Company Benefit Plan has been or will be timely submitted
to the IRS for a favorable determination letter within the remedial amendment
period prescribed under GUST.
(c) Neither the Company nor any ERISA Affiliate has any liability or potential
liability with respect to any "employee pension benefit plan" (as such term is
defined in Section 3(2) of ERISA) that is subject to Section 302 of ERISA and or
Section 412 of the Code or any "multiemployer plan" (as such term is defined in
Section 3(37) of ERISA). For purposes of this Section 4.18, "ERISA Affiliate"
shall mean each entity which is treated as a single employer with the Company or
its Subsidiaries under Section 414 of the Code.
(d) Except as set forth on Schedule 4.18 hereto, each Company Benefit Plan and
any related trust agreements, annuity contracts, insurance contracts or other
instruments are in compliance in all material respects both as to form and
operation with their terms and the requirements of ERISA, the Code and all
applicable law. With respect to each Company Benefit Plan, all required or
recommended (in accordance with past practices) payments, premiums
contributions, reimbursements or accruals for all periods (or partial periods)
ending prior to or as of the Closing Date have been made or properly accrued.
Except as set forth on Schedule 4.18 hereto, none of the Company Benefit Plans
has any material unfunded liabilities which are not reflected on the Latest
Balance Sheet.
(e) The Company and each ERISA Affiliate have complied in all material respects
with the health care continuation requirements of Part 6 of Subtitle B of Title
I of ERISA and Section 4980B of the Code ("COBRA"); and neither the Company nor
any ERISA Affiliate has any obligation under any Company Benefit Plan or
otherwise to provide life of health insurance benefits to former employees of
the Company or Subsidiaries or any other person, except as required by COBRA or
other similar applicable law.
(f) The Company and its Subsidiaries have not engaged in, and, to the Knowledge
of the Company, no fiduciary of any such employee benefit plan has engaged in,
any transaction in violation of Section 406 of ERISA or any "prohibited
transaction" (within the meaning of Section 4975 of the Code) for which no
exemption exists under ERISA or the Code.
(g) Except as set forth on Schedule 4.18 hereto, the Company and its
Subsidiaries have not taken any action, and no action or event has occurred that
could cause the Company and its Subsidiaries to incur liability, fines or
penalties under ERISA or the Code in respect of a Company Benefit Plan (other
than routine claims for benefits or normal operations of the plan).
(h) Except as set forth on Schedule 4.18 hereto, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any individual
to severance, separation or termination pay (or similar benefit) or (ii)
accelerate the time of payment, vesting or increase the amount of compensation
due to any such individual.
(i) To the Knowledge of the Company, the Company and its Subsidiaries have not
communicated (whether orally or in writing) generally to employees or
specifically to any employee regarding (i) any future increase of benefit levels
(or creation of new benefits) with respect to any Company Benefit Plan beyond
those reflected in such plans or as required under applicable law or (ii) the
adoption or creation of any new benefit plan program or arrangement.
(j) Each Company Benefit Plan that is subject to laws other than United States
laws has been operated and administered in all respects in accordance with such
applicable laws, and except as set forth on Schedule 4.18, no such plan has any
material unfunded liability that is not reflected on the Latest Balance Sheet.
(k) Neither the Company nor any Subsidiary has any liability with respect to any
"employee benefit plan" (as defined in Section 3(3) of ERISA) solely by reason
of being treated as a single employer under Section 414 of the Code with any
trade, business or entity other than the Company and the Subsidiaries.
4.19 Relationships with Suppliers. Schedule 4.19 hereto sets forth a complete
and correct list of the names and addresses of the twenty (20) largest suppliers
of the Company and each of its Subsidiaries during (a) the 52-week period ended
on the Balance Sheet Date and (b) the 13-week period ended on the Latest Balance
Sheet Date, and the total sales to or purchases from such suppliers made by the
Company and its Subsidiaries during each such period. No such supplier of the
Company and its Subsidiaries has advised the Company and its Subsidiaries,
formally or informally, and the Company does not have any Knowledge, that any
such supplier set forth on Schedule 4.19 hereto intends to terminate,
discontinue or materially reduce its business with the Company and its
Subsidiaries. Neither the Company nor any of its Subsidiaries has had any
rebate, refund or other savings programs in the last three years.
4.20 Absence of Changes. Except as set forth on Schedule 4.20, the business of
the Company and its Subsidiaries has been conducted in the ordinary course
consistent with past practice and there has been no Material Adverse Effect
since the Balance Sheet Date. Except as set forth on Schedule 4.20, since the
Latest Balance Sheet or such earlier date as is set forth below, neither the
Company nor any of its Subsidiaries has:
(a) incurred any Indebtedness or incurred or become subject to any material
liabilities, except current liabilities incurred in the ordinary course of
business consistent with past practice;
(b) discharged or satisfied any material Lien or paid any material obligation or
liability, other than current liabilities paid in the ordinary course of
business;
(c) declared, set aside or made any payment or distribution of cash (including
so-called "tax distributions") or other property to any of its stockholders with
respect to such stockholder's capital stock or otherwise, or purchased, redeemed
or otherwise acquired any shares of its capital stock or other equity securities
(including any warrants, options or other rights to acquire its capital stock or
other equity securities);
(d) mortgaged or pledged any of its properties or assets or subjected them to
any Lien;
(e) sold, assigned, transferred, leased, licensed or otherwise encumbered any of
its tangible assets, except in the ordinary course of business consistent with
past practice, or canceled any material debts or claims;
(f) sold, assigned, transferred, leased, licensed or otherwise encumbered any
Company Intellectual Property, disclosed any proprietary confidential
information to any Person (other than to Purchaser and its Affiliates and other
than in the ordinary course of business consistent with past practice in
circumstances in which it has imposed reasonable confidentiality restrictions),
or abandoned or permitted to lapse any Company Intellectual Property;
(g) made or granted any bonus or any wage or salary increase to any employee
making an annual salary equal to or greater than $75,000 (except as required by
pre-existing contracts described on Schedule 4.11), or made or granted any
increase in any employee benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement or adopted any new employee
benefit plan or arrangement or entered into, amended or terminated any
collective bargaining agreement or other employment agreement;
(h) implemented any plant closing or other layoff of employees that could
implicate the Worker Adjustment and Retraining Notification Act, as amended, or
any similar foreign, state or local law, rule or regulation;
(i) suffered any extraordinary losses or waived any rights of material value
(whether or not in the ordinary course of business or consistent with past
practice) in excess of $50,000 in the aggregate;
(j) made capital expenditures or commitments therefor that amount in the
aggregate to more than $50,000;
(k) delayed or postponed the payment of any accounts payable or commissions or
any other liability or obligation or agreed or negotiated with any party to
extend the payment date of any accounts payable or commissions or any other
liability or obligation or accelerated the collection of (or discounted) any
accounts or notes receivable in excess of $25,000 in the aggregate;
(l) made any loans or advances to, guaranties for the benefit of, or any
investments in, any Person (other than advances to the Company's or its
Subsidiaries' employees in the ordinary course of business consistent with past
practice);
(m) made any charitable contributions or pledges exceeding in the aggregate
$10,000 or made any political contributions;
(n) suffered any damage, destruction or casualty loss exceeding in the aggregate
$25,000, whether or not covered by insurance;
(o) made any change in any method of accounting or accounting policies or made
any write-down in the value of its inventory that is material or that is other
than in the usual, regular and ordinary course of business consistent with past
practice or reversed any accruals (whether or not in the ordinary course of
business or consistent with past practice);
(p) taken any steps to incorporate any Subsidiary;
(q) amended its certificate of incorporation, bylaws or other constituent
documents;
(r) entered into any agreement or arrangement prohibiting or restricting it from
freely engaging in any business or otherwise restricting the conduct of its
business anywhere in the world;
(s) taken any action or failed to take any action that has, had or would
reasonably be expected to have the effect of accelerating to pre-Closing periods
sales to customers or other revenues that would otherwise be expected to take
place or be incurred after the Closing;
(t) entered into, amended or terminated any contract other than in the ordinary
course of business consistent with past practice, entered into any other
material transaction, whether or not in the ordinary course of business or
consistent with past practice, or materially changed any business practice;
(u) implemented any material pricing increases or decreases; or
(v) agreed, whether orally or in writing, to do any of the foregoing.
4.21 Insurance. Schedule 4.21 sets forth each insurance policy (specifying the
insurer, the type of insurance and the policy number) maintained by the Company
and its Subsidiaries on their properties, assets, products, businesses or
personnel. Except as set forth on Schedule 4.21, the Company and its
Subsidiaries have maintained comparable insurance with carriers which, to the
Company's Knowledge, are financially sound and of good reputation continuously
for the past five (5) years and such insurance is, and has been adequate as to
coverage, and in amounts, in accordance with the standards of the industry in
which the Company and its Subsidiaries operate. True and complete copies of all
such policies of the Company and Subsidiaries which are currently in effect have
been delivered by the Company to Purchaser.
4.22 Affiliate Transactions. Except as set forth on Schedule 4.22, no officer,
director, stockholder, employee or Affiliate of the Company or any of its
Subsidiaries or, to the Company's Knowledge, any individual related by blood,
marriage or adoption to any such individual or any entity in which any such
Person or individual owns any beneficial interest, is a party to any agreement,
contract, commitment or transaction with the Company or any of its Subsidiaries
or has any interest in any property used by the Company or any of its
Subsidiaries (including any Intellectual Property).
4.23 Bank Accounts. Schedule 4.23 sets forth: (a) the name of each bank in which
the Company and its Subsidiaries has an account or safe deposit box, the account
number of each such account and the names of all persons authorized to draw
thereon or to have access thereto and (b) the name of each person, corporation,
firm, association or business organization, entity or enterprise holding a
general or special power of attorney from the Company and its Subsidiaries and a
summary of the terms thereof.
4.24 Product Warranties, Defects and Liabilities. Except as set forth on
Schedule 4.24 hereto, each product sold or delivered by the Company and its
Subsidiaries has been in conformity, in all material respects, with all
applicable federal, state, local or foreign laws and regulations, contractual
commitments and all express warranties, and the Company and its Subsidiaries do
not have any liability for replacement or repair thereof or other damages in
connection therewith, except in each case for liabilities reflected on the
Latest Balance Sheet. No product sold or delivered by the Company and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond
their standard terms and conditions of sale for such products, all of which
standard terms and conditions are disclosed on Schedule 4.24 hereto.
4.25 Accounts Payable and Accrued Expenses. The accounts payable, and other
accrued expenses of the Company and its Subsidiaries, represent bona fide
obligations incurred by the Company and its Subsidiaries which arose in the
ordinary course of business. Set forth on Schedule 4.25 hereto is a list of all
accounts payable and other accrued expenses as of the Latest Balance Sheet Date
together with the name of each payee, the relationship (if any) to the Company
and its Subsidiaries, the date each such payment is due and the nature of the
transaction in which it was incurred if other than a trade payable incurred in
the ordinary course of business.
4.26 Brokers and Finders. Except as set forth on Schedule 4.26 hereto, neither
the Company nor any of its Subsidiaries, nor any of their respective officers,
directors, employees, consultants or Affiliates have employed any broker, agent
or finder or incurred any liability for any brokerage fees, agents' commissions
or finders' fees in connection with the transactions contemplated hereby.
4.27 Rights Plan. The First Amendment to the Amended and Restated Shareholder
Rights Agreement (a true and correct copy of which is set forth on Schedule 4.27
hereto) has been duly adopted by the Company's board of directors and all other
necessary corporate or shareholder action (if any), and, neither the acquisition
or ownership of Common Stock, Preferred Stock, the Warrant, or other securities
of the Company by Purchaser, its Affiliates, Xxxxxxxx Street Partners V, or
H.I.G. Sun Partners, Inc. nor the consummation of the transactions contemplated
hereby will cause the issuance of Right Certificates (as defined in Shareholder
Rights Agreement), options, or any securities convertible, exchangeable or
exercisable for shares of Common Stock or other securities of the Company, cause
any of Purchaser, its Affiliates, Xxxxxxxx Street Partners V, or H.I.G. Sun
Partners, Inc. to be an Acquiring Person (as defined in Shareholder Rights
Agreement) or otherwise entitle any Person to any rights or benefits under the
Shareholder Rights Agreement.
Article V
COVENANTS
5.1 General. Subject to the terms of this Agreement, each party shall use
reasonable efforts to take all actions and do all things necessary, proper or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
conditions set forth in Article VI below).
5.2 Maintenance of Business. The Company shall use reasonable efforts to (and
shall cause its Subsidiaries to use reasonable efforts to): (a) maintain their
existence in good standing; (b) maintain their assets in good operating
condition and repair in accordance with past practices (normal wear and tear
excepted); (c) maintain insurance reasonably comparable to that in effect on the
Latest Balance Sheet Date; (d) maintain inventory and supplies at customary and
adequate operating levels consistent with past practice and replace in
accordance with past practice any inoperable, worn out, damaged or obsolete
assets with modern assets of at least comparable quality; (e) maintain their
books, accounts and records in accordance with past custom and practice as used
in the preparation of the Latest Balance Sheet and the financial statements
described in Section 4.6 above and provide accruals for Taxes, obsolete
inventory, vacation and other items to the full extent required under GAAP; (f)
make capital expenditures in a manner consistent with past practice; (g) perform
all of their obligations under agreements related to or affecting their assets,
properties and rights and (h) maintain in full force and effect the existence of
all of their Intellectual Property.
5.3 Operation of Business. The Company shall (and shall cause its Subsidiaries
to) operate their business only in the usual and ordinary course of business
consistent with past practice and use reasonable efforts to preserve the
goodwill and organization of their business and the relationships with their
customers, suppliers, employees and other Persons having business relations with
the Company and its Subsidiaries. Without limiting the generality of the
foregoing, prior to the Closing, the Company shall not (and shall not permit any
of its Subsidiaries to):
(a) take or omit to take any action that would require disclosure under Section
4.20 above or that would otherwise result in a breach of any of the
representations, warranties or covenants made by the Company in this Agreement;
(b) take any action or omit to take any action which act or omission could
reasonably be anticipated to have a Material Adverse Effect; or
(c) enter into any transaction, arrangement or contract with any Person except
on arm's length basis in the ordinary course of business consistent with past
customs and practices; provided, that, the Company may enter into an employment
agreement with Xxxxxxx Xxxxxx in form and substance of Exhibit G attached
hereto.
Notwithstanding the foregoing, nothing in this Section 5.3 shall prohibit the
Company from taking any action or omitting to take any action as required or as
expressly contemplated by this Agreement.
5.4 Access. From and after the date hereof, the Company will on reasonable
notice (a) give Purchaser and its authorized representatives access, during
normal business hours, to the books, records, properties and personnel of the
Company and its Subsidiaries, and (b) permit Purchaser to make such inspections,
including without limitation soil and groundwater tests, as it may reasonably
request. No investigation conducted by Purchaser or its representatives or
agents or disclosure of any such information to Purchaser shall in any way
diminish, modify or alter the representations, warranties or covenants of the
Company or the liability of the Company for any misrepresentation or breach of
any representation, warranty or covenant hereunder or the conditions to Closing
contained in Article VI hereof. The Company shall take any action reasonably
requested by Purchaser to allow Purchaser to contact the Company's customers and
suppliers.
5.5 Landlord Estoppels. The Company shall use commercially reasonable efforts to
obtain and deliver to Purchaser a landlord estoppel certificate with respect to
each of the Leased Real Property having change of control or similar provisions
in their respective leases, dated no more than 30 days prior to the Closing
Date, in form and substance satisfactory to Purchaser (the "Estoppel
Certificates").
5.6 No-Shop. From and after the date hereof and continuing until the Closing or
the earlier termination of this Agreement pursuant to Article VIII hereof, the
Company hereby covenants and agrees that it will not, and will not authorize or
permit any officer, director, employee or agent of the Company, any of its
Subsidiaries or any of their respective Affiliates to, or authorize or permit
any investment banker, attorney, accountant or other representative retained by
the Company, any of its Subsidiaries or any of their Affiliates to, directly or
indirectly, without the written consent of Purchaser (i) solicit or discuss any
possible merger, sale, restructuring or refinancing or other disposition
(involving assets, capital stock or otherwise) of all or any material part of
the Company or its Subsidiaries (a "Company Sale"), with any party other than
Purchaser or (ii) following receipt of an unsolicited Company Sale proposal (a
"Proposal"), approve, endorse or recommend such a Proposal; provided that, if
and to the extent that (A) the Company's Board of Directors concludes in good
faith, after consultation with the Company's legal counsel, that such a Proposal
is, or could reasonably be expected to lead to, a Superior Proposal (as
hereinafter defined), (B) the Company's Board of Directors concludes in good
faith, after consultation with the Company's legal counsel, that the failure to
approve, endorse or recommend such a Proposal would be inconsistent with the
fiduciary duties of the Company's Board of Directors under applicable law and
(C) if Purchaser does not within three (3) business days after Purchaser's
receipt of such notice (as provided for below) deliver in writing to the Company
an improved Proposal that the Company's Board of Directors determines in good
faith, after consultation with the Company's legal counsel, to be at least as
valuable to the Company's stockholders as the competing Superior Proposal, then
the Company may terminate this Agreement in accordance with Article VIII hereof
and, upon such termination, may approve, endorse or recommend such Proposal, as
applicable. Upon its receipt thereof, except to the extent prohibited by
nondisclosure agreements in effect as of the date hereof, the Company shall
promptly provide Purchaser with a copy of any written Proposal received by it,
which statement shall include the identity of the parties making the Proposal
and the terms thereof, and shall promptly advise Purchaser of any material
modification or proposed modification thereto. Nothing contained in this
Agreement shall prohibit the Company or its Board of Directors from taking and
disclosing to the Company's stockholders a position with respect to a tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act or from making any disclosure required by applicable law.
For purposes herein "Superior Proposal" shall mean a bona fide written Proposal
which the Company's Board of Directors believes in good faith, after
consultation with the Company's financial advisor and taking into account all
factors deemed relevant by the Company's Board of Directors, including the
likelihood that any transaction will be consummated, is more favorable to the
Company's stockholders as compared to the transactions contemplated in this
Agreement (including any alternative proposal offered by Purchaser in response
thereto). Purchaser agrees that nothing herein shall prohibit the Company from
taking any reasonable and necessary action in order to satisfy the conditions
set forth in Sections 6.1(u) and 6.1(w).
5.7 Notification of Certain Matters. Each party hereto will promptly notify each
other party hereto of (i) the occurrence, or failure to occur, of any event the
occurrence or failure of which could reasonably be expected to cause any of
their respective representations or warranties contained in this Agreement to be
untrue or incorrect at any time from the date hereof to the Closing Date, and
(ii) any failure on their respective parts or on the part of any of their
respective officers, directors, partners, employees, representatives, Affiliates
or agents, if any, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by each of them under this Agreement;
provided, however, that no such notification will alter or otherwise affect such
representations, warranties, covenants, conditions or agreements.
Article VI
CONDITIONS PRECEDENT TO THE TRANSACTION
6.1 Conditions Precedent to Purchaser's Obligation to Close. Notwithstanding any
other provision herein, the obligations of Purchaser to consummate the
transactions contemplated hereunder are, at the option of Purchaser, subject to
the satisfaction of each of the conditions set forth below:
(a) Agreements and Conditions. On or before the Closing Date, the Company shall
have complied with and duly performed all agreements and obligations to be
complied with or performed by it on or before the Closing Date pursuant to or in
connection with this Agreement.
(b) Representations and Warranties. The representations and warranties of the
Company contained in this Agreement that are not qualified by materiality,
Material Adverse Effect or dollar thresholds shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though such representations and warranties had been restated and made on and
as of the Closing Date and the representations and warranties of the Company
that are qualified by materiality, Material Adverse Effect or dollar thresholds
shall be true and correct in all respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
restated and made on and as of the Closing Date.
(c) Opinion of Counsel. Purchaser shall have received opinions of Xxxxxx Xxxxxxx
Xxxxxxxxx & Xxxx, special counsel for the Company, dated as of the Closing Date,
in form and substance reasonably satisfactory to Purchaser and its special
counsel.
(d) No Legal Proceedings. No Proceeding shall have been instituted or threatened
which, in Purchaser's sole judgment, questions or reasonably appears to portend
subsequent questioning of the validity or legality of this Agreement or the
transactions contemplated hereby or seeks to restrict, limit, prohibit or enjoin
(or to obtain damages as a result of) such transactions or may have a Material
Adverse Effect on the Company and its Subsidiaries.
(e) Consents. The Company shall have obtained the consent of each party to all
contracts, leases and agreements (other than lease agreements, for which the
Company shall use reasonable commercial efforts to obtain consents), and all
governmental consents and approvals, which are required in order to consummate
the transactions contemplated by this Agreement (including without limitation,
the consents set forth on Schedule 4.2 hereto).
(f) Compliance Certificates. Purchaser shall have received a certificate, dated
as of the Closing Date and executed by the Chief Executive Officer or Chief
Financial Officer of the Company, certifying that the representations and
warranties made by the Company in this Agreement are true and correct at and as
of the Closing Date and that the Company has fulfilled all conditions to the
Closing provided for in this Agreement to be fulfilled by it.
(g) Tax Certificates. Purchaser shall have received a Certificate of Non-United
States Real Property Holding Company Status for the Company signed under
penalties of perjury. The Company agrees and acknowledges that such certificates
will be retained by Purchaser and will be made available to any Tax Authority
upon request.
(h) Secretary's Certificate of the Company. Purchaser shall have received a
certificate of the Secretary or Assistant Secretary of the Company setting forth
(i) a copy of the unanimous written consent adopted by the board of directors of
the Company approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, (ii) a copy of the
Company's or Certificate of Incorporation certified by the Secretary of State of
the State of Delaware as of a date no more than ten (10) days prior to the
Closing Date, (iii) a copy of the Company's by-laws, together with a signature
and incumbency certificate, and (iv) a certificate of good standing from the
Secretary of State or other equivalent authority in the State of Delaware and
every other state and foreign jurisdiction where the Company is authorized to do
business, as of a date no more than ten (10) days prior to the Closing Date.
(i) Secretary's Certificate of each of the Company's Subsidiaries. Purchaser
shall have received a certificate of the Secretary or Assistant Secretary of
each of the Company's Subsidiaries setting forth (i) a copy of the Subsidiary's
certificate of incorporation (or equivalent) certified by the Secretary of State
or other equivalent authority of the Subsidiary's jurisdiction of formation
dated no more than ten (10) days prior to the Closing Date, (iii) a copy of the
Subsidiary's by-laws (or equivalent), together with a signature and incumbency
certificate, and (iv) a certificate of good standing from the Secretary of State
or other equivalent authority in the Subsidiary's jurisdiction of formation and
every other state and foreign jurisdiction where the Subsidiary is authorized to
do business, as of a date no more than ten (10) days prior to the Closing Date.
(j) No Material Adverse Change. Except as set forth on Schedule 4.20, there
shall not have occurred a Material Adverse Change since the Balance Sheet Date.
(k) Real Estate Documents. With respect to the Owned Real Property, the Company
shall have delivered to Purchaser, at or prior to Closing and at its cost and
expense, ALTA owner's policies of title insurance with an effective date no
earlier than that of the Closing Date (in such form as, and from a title
insurance company, reasonably acceptable to Purchaser) and ALTA surveys dated no
earlier than 30 days prior to Closing (in such form as, and from a surveyor,
reasonably acceptable to Purchaser) showing good and marketable title to the
Owned Real Property, free and clear of Liens except for Permitted Encumbrances,
with such endorsements to the title insurance policies as reasonably requested
by Purchaser. With respect to the Leased Real Property, the Company shall have
delivered to Purchaser all Estoppel Certificates received by the Company
pursuant to Section 5.5 herein.
(l) Resignations and Appointments. Effective as of the Closing, all of the
members of the board of directors of the Company, other than Xxxxxx X. Xxxxxx
and Xxxxx X. Love, shall have resigned from the board of directors of the
Company and all of the members of the board of directors of One Price Realty,
Inc. other than Xxxxxx Xxxxxxx shall have resigned from the board of directors
of One Price Realty, Inc., and the Company shall have taken such action (and
caused One Price Realty, Inc. to take such action) so that (i) Xxxx X. Xxxxx,
Xxxxxx X. Xxxxxx, Xxxx Xxxxxxx, and Xxxxxxxx X. Xxxxx shall be appointed to the
board of directors of the Company, (ii) Xxxx X. Xxxxx and Xxxxxx X. Xxxxxx are
appointed to the Board of Directors of One Price Realty, Inc. and (iii) those
persons listed on Schedule 6.1(l) shall have been appointed officers of the
Company and One Price Realty, Inc., all in accordance with the terms of the
constituent documents of the Company and One Price Realty, Inc. and in
compliance with all applicable law.
(m) Fairness Opinion. The board of directors of the Company shall have received
a fairness opinion from Xxxxxxx & Company, Inc. in form and substance reasonably
satisfactory to Purchaser.
(n) Delist. The Company shall have taken all actions reasonably necessary to
delist the Common Stock from NASDAQ SmallCap Market as of the Closing Date and
to apply to list the Common Stock on the OTC Bulletin Board.
(o) Amended and Restated By-Laws. The Company shall have adopted amended and
restated by-laws (the "Amended Bylaws") in the form of Exhibit B attached
hereto.
(p) Stockholders' Agreement. The Company shall have executed and delivered a
stockholders agreement in the form of Exhibit C hereto.
(q) Registration Rights Agreement. The Company shall have executed and delivered
a registration rights agreement in the form of Exhibit D hereto.
(r) Management Services Agreement. The Company shall have executed and delivered
a management services agreement in the form of Exhibit E hereto.
(s) Certificate of Designation. The Company's board of directors shall have
adopted resolutions approving the certificate of designation in substantially
the form attached hereto as Exhibit F (the "Certificate of Designation") and
such Certificate of Designation shall have been filed with the Secretary of
State of Delaware in accordance with the Delaware General Corporation Law.
(t) First Amended and Restated Certificate of Incorporation. The board of
directors of the Company shall have approved a First Amended and Restated
Certificate of Incorporation of the Company (in form and substance satisfactory
to Purchaser in its sole discretion) (the "First Amended Certificate") and
submitted such First Amended and Restated Certificate of Incorporation for
approval of the Company's stockholders.
(u) Vendor Trade Payables. The Company shall have restructured its current
vendor trade payables on terms and conditions set forth on Schedule 6.1(u).
(v) Broker Payoff Letters. The Company shall have received written confirmation,
reasonably satisfactory to Purchaser, from Clear Thinking Group, Inc. confirming
the amount owed by the Company to it, and providing that, upon receipt of such
amount, none of the Company, its Subsidiary or Purchaser shall have any
obligation to Clear Thinking Group, Inc. in connection with the transactions
contemplated hereby or any future transaction involving the Company or its
Subsidiaries. The Company shall have received written confirmation, reasonably
satisfactory to Purchaser, from Xxxxxxx & Company, Inc. confirming the amount
owed by the Company to it, and providing that, upon receipt of such amount, none
of the Company, its Subsidiary or Purchaser shall have any obligation to Xxxxxxx
& Company, Inc. in connection with the transactions contemplated hereby or any
future transaction involving the Company or its Subsidiaries.
(w) Credit Facilities. The Company shall have amended, in form and substance
reasonably satisfactory to Purchaser (the "Amendment"), the Loan and Security
Agreement. The Parties agree that the Amendment will include terms consistent
with those set forth on those certain Term Sheets attached hereto as Schedule
6.1(w) and other terms and conditions reasonably satisfactory to Purchaser.
(x) Employment Agreement. The Company shall entered into an employment agreement
with Xxxxxxx Xxxxxx in form and substance of Exhibit G attached hereto.
(y) Other Deliveries. Purchaser shall have received such additional documents,
instruments or items of information reasonably requested by it in respect of any
aspect or consequence of the transactions contemplated hereby. All corporate and
other proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement or by the other
agreements referred to herein shall be reasonably satisfactory in form and
substance to Purchaser and its special counsel. Any condition specified in this
Section 6.1 may be waived by Purchaser if such waiver is set forth in a writing
duly executed by Purchaser.
6.2 Conditions Precedent to the Company's Obligation to Close. Notwithstanding
any other provision herein, the obligations of the Company to consummate the
transactions contemplated hereunder are, at the option of the Company, subject
to the satisfaction of each of the conditions set forth below:
(a) Agreements and Conditions. On or before the Closing Date, Purchaser shall
have complied with and duly performed all agreements and obligations to be
complied with or performed by it on or before the Closing Date pursuant to or in
connection with this Agreement.
(b) Representations and Warranties. The representations and warranties of
Purchaser contained in this Agreement that are not qualified by materiality,
Material Adverse Effect or dollar thresholds shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though such representations and warranties had been restated and made on and
as of the Closing Date and the representations and warranties of Purchaser
contained in this Agreement that are qualified by materiality, Material Adverse
Effect or dollar thresholds shall be true and correct in all respects on and as
of the Closing Date with the same force and effect as though such
representations and warranties had been restated and made on and as of the
Closing Date.
(c) No Legal Proceedings. No order shall have been entered against the Company
or any of its Subsidiaries restraining or prohibiting consummation of, the
transactions contemplated by this Agreement.
(d) Fairness Opinion. The board of directors of the Company shall have received
a fairness opinion from Xxxxxxx & Company, Inc. in form and substance reasonably
satisfactory to the board of directors of the Company.
Article VII
INDEMNIFICATION
7.1 By the Company.
--------------
(a) The Company agrees to indemnify, defend and hold harmless Purchaser from and
against (i) any and all Losses, to which Purchaser or its Affiliates may become
subject, arising out of (A) any inaccuracy in any representation or warranty by
the Company in this Agreement, (B) any breach or default in the performance or
observance by the Company of any of the covenants or agreements which it is to
perform or observe hereunder, or (C) any brokerage, finder's fee or the like
incurred as a result of the Company's actions in connection with the
transactions herein contemplated and (ii) any and all actual costs, fees and
expenses (including, without limitation, reasonable legal and accounting fees)
related to, resulting from or arising out of any of the foregoing.
(b) The Company shall not be liable hereunder for any claims made by Purchaser
pursuant to Section 7.1(a)(i)(A) hereof after fifteen (15) months from the
Closing Date. Notwithstanding the foregoing, however, (i) the Company shall be
liable for any claim asserted by Purchaser pursuant to Section 7.1(a)(i)(A) with
respect to a breach of the last sentence of Section 4.8 (Liens on Inventory),
the last sentence of Section 4.9 (Liens on Accounts Receivable), the second
sentence of Section 4.10(b) (title to Real Property), the second sentence of
Section 4.10(c) (title to Personal Property), Section 4.15 (Environmental
Matters), Section 4.17 (Taxes), or Section 4.18 (Employee Benefits) hereof if
such claim is made within thirty (30) days after the expiration of the
applicable statute of limitations and (ii) there shall be no limitation on the
time within which a claim may be made by Purchaser (x) pursuant to Section
7.1(a)(i)(A) with respect to a breach of Section 4.1 (Organization), the first
two sentences of Section 4.2 (Authorization), Section 4.3 (Capitalization),
Section 4.4 (Officers and Directors), the last sentence of Section 4.7
(Indebtedness) or Section 4.25 (Brokers), (y) pursuant to Section 7.1(a)(i)(B)
or (C) hereof or (iii) with respect to any fraudulent act or omission by the
Company.
7.2 By Purchaser.
------------
(a) Purchaser agrees to indemnify, defend and hold harmless the Company from and
against (i) any and all Losses to which they may become subject, arising out of
(A) any inaccuracy in any representation or warranty made by Purchaser in this
Agreement, (B) any breach or default in the performance or observance by
Purchaser of any of the covenants or agreements which it is to perform or
observe hereunder, or (C) any brokerage, finder's fee or the like incurred as a
result of Purchaser's actions in connection with the transactions herein
contemplated; and (ii) any and all actual costs, fees and expenses (including,
without limitation, reasonable legal and accounting fees) related to, resulting
from or arising out of any of the foregoing.
(b) Purchaser shall not be liable hereunder for any claims made by the Company
pursuant to Section 7.2(a)(i)(A) hereof after fifteen (15) months from the
Closing Date. Notwithstanding the foregoing, however, there shall be no
limitation on the time within which a claim may be made by the Company (i)
pursuant to Section 7.2(a)(i)(A) with respect to a breach of the first two
sentences of Section 3.2 (Authorization), (ii) pursuant to Section 7.2(a)(i)(B)
or (C) hereof or (iii) with respect to any fraudulent act or omission by
Purchaser.
7.3 Indemnification Amounts.
(a) Except as otherwise provided in this Section 7.3(a), the Company shall not
have any liability under Section 7.1(a)(i)(A) hereof until the aggregate of all
Losses for which the Company is liable under such section are in excess of
$250,000, at which time the Company shall be liable for the full amount of all
Losses in excess of a $100,000 aggregate deductible; provided, that, for
purposes of this Section 7.3(a), Losses shall be measured without giving effect
to any standard of materiality, Material Adverse Effect or dollar threshold
contained in the representations and warranties of the Company contained in
Article IV; provided, further, the aggregate liability of the Company under this
Article VII shall in no event exceed $3,500,000.00. Notwithstanding the
immediately preceding sentence, the provisions of the immediately preceding
sentence shall not apply to, and the Company shall be liable for the full amount
of, any and all Losses in respect of a breach of any of the representations and
warranties contained in Section 4.1 (Organization), the first two sentences of
Section 4.2 (Authorization), Section 4.3 (Capitalization), Section 4.4 (Officers
and Directors), the last sentence of Section 4.7 (Indebtedness), the last
sentence of Section 4.8 (Liens on Inventory), the last sentence of Section 4.9
(Liens on Accounts Receivable), the second sentence of Section 4.10(b) (title to
Real Property), the second sentence of Section 4.10(c) (title to Personal
Property), Section 4.15 (Environmental Matters), Section 4.17 (Taxes), Section
4.18 (Employee Benefits), Section 4.26 (Brokers), Section 4.27 (Rights Plan), or
any matter set forth on Schedule 7.3 attached hereto.
(b) Except as otherwise provided in this Section 7.3(b), Purchaser shall not
have any liability under Section 7.2(a)(i)(A) hereof until the aggregate of all
Losses for which Purchaser is liable under such section are in excess of
$250,000, at which time Purchaser shall be liable for the full amount of all
Losses in excess of a $100,000 aggregate deductible. Notwithstanding the
immediately preceding sentence, Purchaser shall be liable for the full amount of
any and all Losses in respect of a breach of any of the representations and
warranties contained in the first two sentences of Section 3.2 (Authorization).
(c) Any amount payable pursuant to this Article VII shall be reduced by any
amounts when, as and if actually received by the indemnified party under
insurance policies; provided that, nothing in this Agreement shall require any
indemnified party to file a claim with or otherwise seek insurance coverage for
any Losses it may suffer and for which it is entitled to indemnification
pursuant to this Article VII.
7.4 Notice of and Defense Against Claims.
(a) Promptly after receipt by an indemnified party of notice of the commencement
of any action, such indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party, send notice of the commencement thereof
to the indemnifying party. The failure of the indemnified party to give such
notice shall not relieve the indemnifying party of its obligations under this
Article VII. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, to the extent
that it shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party in
respect of such action for any legal or other expenses subsequently incurred by
the indemnified party after the date such notice is given to such indemnified
party in connection with the defense thereof. The indemnified party, however,
shall have the right, but not the obligation, to participate at its own cost and
expense in such defense by counsel of its own choice. In the event that the
indemnifying party and the indemnified party are named parties in or are subject
to such action and either such party determines based on the written advice of
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the other party or that a
material conflict of interest between such parties may exist in respect of such
action, the indemnifying party may decline to assume the defense on behalf of
the indemnified party or the indemnified party may retain the defense on its own
behalf and in either such case the indemnifying party shall be required to pay
any legal or other expenses, including, without limitation, reasonable
attorneys' fees and disbursements, incurred by the indemnified party in such
defense. If the indemnifying party shall assume the defense of any such action,
the indemnified party shall cooperate with it and the indemnifying party shall
not, without the consent of the indemnified party, consent to the entry of any
judgment or enter into any settlement or compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such action or
claim. Provided the proper notice has been duly given, if the indemnifying party
shall fail promptly and diligently to assume the defense thereof, the
indemnified party may respond to, contest and defend against such action and
make in good faith any compromise or settlement with respect thereto and recover
the entire cost and expense thereof, including, without limitation, reasonable
attorneys' fees and disbursements and all amounts paid or foregone as a result
of such action or the settlement of compromise thereof from the indemnifying
party. The indemnification required hereunder shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills or invoices are received or loss, liability, obligation, damage or
expense is actually suffered or incurred.
(b) Any claim on account of any Loss, liability, obligation, damage or expense
referred to in Sections 7.1, or 7.2 hereof which does not result from a third
party claim shall be asserted by written notice (a "Claim Notice") given by the
indemnified party to the indemnifying party, which Claim Notice shall describe
in reasonable detail the facts and circumstances on which the asserted claim for
indemnification is based. The indemnifying party shall have a period of thirty
(30) days within which to respond thereto. If the indemnifying party does not
respond within such thirty (30) day period, the indemnifying party shall be
deemed to have accepted responsibility to make payment and shall have no further
right to contest the validity of such claim. If the indemnifying party does
respond within such thirty (30) day period and rejects such claim in whole or in
part (a "Dispute Notice"), then the parties shall attempt, as quickly as
practicable, to reach agreement with respect to the matters set forth in such
Claim Notice; provided that the indemnified party shall be free following such
attempt to reach agreement, to pursue such remedies as may be available to such
party under applicable law.
(c) Notwithstanding anything to the contrary set forth in this Agreement, from
and after the time when the aggregate amount of claims paid or potentially
payable by the indemnifying party under this Agreement, which are subject to the
limitations set forth in Section 7.3 above, exceeds or could potentially exceed
such limitation based upon claims paid and pending in accordance with this
Agreement, the indemnified party shall have the right, at its own cost and
expense, to jointly control the defense and settlement of any pending
indemnification claims the liability for which could potentially result in the
aggregate claims exceeding such limitation. At such time as the aggregate amount
of claims subject to such limitation which have been paid or settled (subject to
being paid) exceeds such limitation, the indemnifying party shall no longer have
the right to participate in the control or defense of such claims.
7.5 Manner of Payment by the Company. Except as set forth below, all
indemnification obligations of the Company shall be satisfied by the issuance to
Purchaser of shares of Series B Preferred Stock, par value $0.01 per share, with
an aggregate liquidation value equal to the amount of Losses for which Purchaser
is entitled to be indemnified. Notwithstanding the immediately prior sentence,
if Purchaser is entitled to indemnification because of a breach of the
representations or warranties set forth in (i) Section 4.3(c), then the Company
shall issue additional shares of Common Stock (or, if there is an insufficient
amount of Common Stock authorized and unissued and unreserved, by issuing
additional Preferred Stock) to Purchaser such that immediately after the
Closing, Purchaser shall own eighty-five percent (85%) of the issued and
outstanding Common Stock, assuming full conversion of the Preferred Stock but
excluding the conversion and exercise of any other securities or instruments
(whether or not currently vested, convertible or exercisable) convertible or
exercisable into shares of Common Stock, or (ii) to Section 4.3(d), then the
Company shall immediately amend and restate the Warrant (including Schedule A
thereto) such that Purchaser shall own eighty-five percent (85%) of the issued
and outstanding Common Stock, assuming the full conversion and exercise of all
outstanding securities or instruments (whether or not currently vested,
convertible or exercisable) convertible or exercisable into shares of Common
Stock.
Article VIII
TERMINATION
8.1 Termination by Mutual Consent and Automatic Termination. This Agreement may
be terminated at any time prior to the Closing Date by the mutual written
consent of Purchaser and the Company. This Agreement shall automatically
terminate if the Closing Date has not occurred on or before the thirty-first day
following the date hereof, unless such date is extended by written consent of
the parties hereto.
8.2 Termination by Purchaser. Purchaser may terminate this Agreement by written
notice to the Company at any time prior to the Closing Date if (a) a condition
to the performance of Purchaser set forth in Section 6.1 hereof shall not be
fulfilled on or before the date specified for the fulfillment thereof, unless
such failure is a result of acts or failures to act of Purchaser, (b) the
Company and its Subsidiaries shall have suffered a Material Adverse Effect, and
(c) at any time on or after ten (10) business days following the date hereof,
the Company has (i) not restructured its current vendor trade payables on terms
and conditions satisfactory to Purchaser (in its sole discretion) or (ii)
amended that certain Loan and Security Agreement by and among Congress as lender
and the Company and One Price Clothing of Puerto Rico, Inc., as borrowers, dated
as of March 26, 1996 on terms and conditions satisfactory to Purchaser (in its
sole discretion).
8.3 Termination by the Company. The Company may terminate this Agreement by
written notice to Purchaser at any time prior to the Closing Date (a) if a
condition to the performance of the Company set forth in Section 6.2 hereof
shall not be fulfilled on or before the date specified for the fulfillment
thereof, unless such failure is a result of acts or failures to act of the
Company or (b) as set forth in Section 5.6.
8.4 Automatic Termination. This Agreement shall automatically terminate, and
have no further force and effect, if any party hereto files a voluntary petition
for bankruptcy protection under title 11 of the United States Code. The Company
and Purchaser hereby agree that any termination of this Agreement pursuant to
this Section 8.4 shall not be deemed to be a default or breach of this Agreement
by either party hereto.
8.5 Effect of Termination. In the event of the termination and abandonment
hereof prior to the Closing Date pursuant to the provisions of this Article
VIII, this Agreement shall become void and have no effect (including, without
limitation, Section 5.6), and each party shall pay all of its own expenses
incurred in connection herewith, without any liability on the part of any party
or its partners, directors, officers, stockholders or Affiliates, except for the
confidentiality obligations between the parties described in Section 9.3 hereof;
provided, however, that if this Agreement is terminated and abandoned because
Purchaser or the Company has defaulted under or breached this Agreement or any
representation, warranty or covenant set forth in this Agreement, then the party
so electing to terminate this Agreement shall be entitled to pursue, exercise
and enforce any and all other remedies, rights, powers and privileges available
to it at law or in equity. Notwithstanding anything in this Section 8.5 to the
contrary, if the Company terminates this Agreement pursuant to Section 5.6 or
Section 8.3(b), the Company shall no later than 15 days after the date of such
termination pay to Purchaser (i) an amount in cash equal to Purchaser's actual
out of pocket expenses incurred in connection with the transactions contemplated
by this Agreement (including without limitation, legal fees, accounting fees and
other fees for advisory services) up to a maximum amount of $350,000, and (ii) a
break-up fee in the amount of $1,000,000 in cash.
Article IX
MISCELLANEOUS
9.1 Further Assurances. From and after the Closing Date, the parties hereto
will, without further consideration, execute and deliver such further documents
and instruments and take such other actions as may be necessary or desirable to
carry out the purposes of the Agreement and perfect the transactions
contemplated hereby.
9.2 Publicity. Unless required by law (in which case each of Purchaser and the
Company agree to use reasonable best efforts to consult with the other party
prior to any such disclosure as to the form and content of such disclosure),
after the date hereof and through and including the Closing Date, no press
releases, announcements to the employees, customers or suppliers of the Company
or any of its Subsidiaries or other releases of information related to this
Agreement or the transactions contemplated hereby will be issued or released
without the consent of each of Purchaser and the Company. After the Closing,
Purchaser and the Company may issue any such releases of information without the
consent of any other party hereto. Notwithstanding anything herein to the
contrary, each party hereto (and each Affiliate and Person acting on behalf of
any party hereto) agree that each party hereto (and each employee,
representative, and other agent of any party hereto) may disclose to any and all
Persons, without limitation of any kind, the Tax treatment and Tax structure of
the transaction and all materials of any kind (including opinions or other Tax
analyses) that are provided to any party hereto or any Person relating to such
Tax treatment and Tax structure, except to the extent necessary to comply with
any applicable federal or state securities laws. The parties hereto agree that
the authorization contained in the immediately preceding sentence is not
intended to permit disclosure of any other information, including, without
limitation, (i) any portion of any materials to the extent not related to the
Tax treatment or Tax structure of the transaction, (ii) the identities of
participants or potential participants in the transaction, (iii) the existence
or status of any negotiations, (iv) any pricing or financial information (except
to the extent such pricing or financial information is related to the Tax
treatment or Tax structure of the transaction), or (v) any other term or detail
not relevant to the Tax treatment or the Tax structure of the transaction.
9.3 Confidentiality. Each party hereto agrees that it will, and will advise its
officers, directors, stockholders, attorneys, accountants, consultants and
agents to, keep confidential all non-public information concerning the others
which it has learned in connection with the transactions contemplated by this
Agreement.
9.4 No Waiver. The failure of any of the Company, Purchaser to enforce any
provision hereof on any occasion shall not be deemed to be a waiver of any
preceding or succeeding breach of such provision or any other provision.
9.5 Entire Agreement. This Agreement and the Exhibits and Schedules hereto and
the documents, agreements and certificates delivered pursuant hereto constitute
the entire agreement and understanding of the parties hereto with respect to the
transactions contemplated herein and therein and supersede all previous
agreements, writings, negotiations and commitments.
9.6 Governing Law. This Agreement shall be construed, interpreted and enforced
in accordance with, and shall be governed by, the laws of the State of Delaware
applicable to contracts made and to be performed wholly therein. Each party to
this Agreement: (a) agrees that any legal action or proceeding under this
Agreement shall be brought in the courts of the State of Delaware or in the
United States District Court located in the State of Delaware; (b) irrevocably
submits to the jurisdiction of such courts; (c) agrees not to assert any claim
or defense that it is not personally subject to the jurisdiction of such courts,
that any such forum is not convenient or the venue thereof is improper, or that
this Agreement or the subject matter hereof may not be enforced in such courts;
and (d) agrees to accept service of process on it by certified or registered
mail or by any other method authorized by law.
9.7 Assignment. This Agreement and all of the covenants and agreements contained
herein and rights, interests or obligations hereunder, by or on behalf of any of
the parties hereto, shall bind and inure to the benefit of the respective heirs,
successors and assigns of the parties hereto whether so expressed or not, except
that neither this Agreement nor any of the covenants and agreements herein or
rights, interests or obligations hereunder may be assigned or delegated by the
Company prior to or after the Closing without the prior written consent of
Purchaser. Subject to any applicable securities laws, Purchaser may assign its
rights and obligations hereunder (including its right to purchase the Shares, or
any portion of the Shares), in whole or in part, to any of its Affiliates,
Xxxxxxxx Street Partners V, H.I.G. Sun Partners, Inc., or any of its other
accredited co-investors without the consent of any of the other parties hereto.
In addition, Purchaser may assign its rights and obligations pursuant to this
Agreement, in whole or in part, in connection with any disposition or transfer
of all or any portion of the Company or any of its Subsidiaries or their
business in any form of transaction without the consent of any of the other
parties hereto. Purchaser and, following the Closing, the Company and its
Subsidiaries may assign any or all of their rights pursuant to this Agreement,
including their rights to indemnification, to any of their lenders as collateral
security.
9.8 Fees and Expenses. Each party hereto will pay its own fees and expenses;
provided that, if the transactions contemplated by this Agreement are
consummated, the Company shall pay the fees and expenses (including, without
limitation, the fees and expenses of legal, Tax, accounting, financial and other
advisors) incurred by Purchaser in connection with the negotiation and
preparation of this Agreement and the other agreements and documents
contemplated hereby and the consummation and performance of the transactions
contemplated hereby and thereby. In the event of any Proceeding between any of
the parties hereto concerning this Agreement or the transactions contemplated
hereby, the prevailing party in such Proceeding shall be entitled to
reimbursement from the party opposing such prevailing party of all reasonable
attorneys' fees and costs incurred in connection with such Proceeding.
9.9 Amendment and Waiver. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely), only by the written consent of the
Company and Purchaser. Any agreement on the part of a party to any amendment or
waiver shall only be valid if set forth in an instrument in writing signed on
behalf of such party. Any such amendment or waiver shall not operate as an
amendment or a waiver of any other condition or obligation.
9.10 Paragraph Headings. The paragraph headings herein have been inserted for
convenience of reference only and shall in no way be deemed to affect the
meaning or interpretation of any of the terms or provisions hereof.
9.11 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (i) when personally delivered,
sent by telecopy (with hard copy to follow); (ii) one day after sent by
reputable overnight express courier (charges prepaid), or (iii) five days
following mailing by certified or registered mail, postage prepaid and return
receipt requested. Unless another address is specified in writing, notices,
demands and communications to the parties hereto shall be sent to the addresses
indicated below:
In the case of the Company, to it at:
One Price Clothing Stores, Inc.
Xxx. 000 Xxxxxxxx Xxxx
0000 Xxxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Attn: General Counsel
Fax: (000) 000-0000
with copies (which shall not constitute notice) to:
Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx
One Atlantic Center, Suite 3500
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
In the case of Purchaser, to it at:
Sun One Price, LLC
c/o Sun Capital Partners, Inc.
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxx, Xxxxxx X. Xxxxxx and
C. Xxxxx Xxxxx
Fax: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
9.12 Unenforceability, Severability. If any provision of this Agreement is found
to be void or unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement shall nevertheless be binding upon the parties with
the same force and effect as though the unenforceable part had been severed and
deleted.
9.13 Specific Performance. The parties hereto agree that irreparable damage
would occur if any of the provisions of this Agreement were not performed in
accordance with their specific terms or otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions,
without the posting of any bond or security, to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof, in
addition to any other remedy to which they are entitled at law or in equity.
9.14 Counterparts. This Agreement may be executed in two or more counterparts,
all of which shall be deemed to be one and the same agreement. Any counterpart
may be executed by facsimile signature and such facsimile signature shall be
deemed an original.
9.15 Insurance.
(a) Except as set forth in Sections 9.15(c) and 9.15(d), the Company will at all
times exercise the powers granted to it by First Amended Certificate, Amended
Bylaws, and by applicable law to indemnify and hold harmless to the fullest
extent possible present or former directors or officers of the Company against
any threatened or actual claim, action, suit, proceeding or investigation made
against them arising from their service in such capacities (or service in such
capacities for another enterprise at the request of the Company) prior to, and
including the Closing Date, including, without limitation, with respect to
matters relating to this Agreement.
(b) Purchaser agrees that the Company shall cause to be maintained in effect for
not less than six (6) years from the Closing Date a directors and officers tail
liability insurance policy with respect to all current and former directors and
officers of the Company, in form and substance customary for comparable
insurance policies for current and former directors and officers of comparable
companies; provided, however, that the Company shall not be required to pay in
excess of $700,000 for the tail policy; provided, further, if the Company is not
able to obtain a tail liability policy which will survive for six (6) years from
the Closing Date for $700,000 or less, it shall purchase, after consultation
with the directors of the Company as of the date hereof, a tail policy,
reasonably satisfactory to the directors of the Company as of the date hereof,
for the maximum period and/or coverage obtainable for $700,000.
(c) The parties hereto agree and acknowledge that nothing in this Section 9.15
shall require Purchaser nor any of its Affiliates, officers, directors,
stockholders, employees, attorneys, partners, members, managers, agents (whether
or not such Persons are members of the Company's board of directors) to approve
or take any action that such Person reasonably believes would violate his, her
or its fiduciary duties or would not be in the best interests of the Company
(taking into account, among other considerations, the Company's financial
condition).
(d) The parties hereto agree and acknowledge that nothing in this Section 9.15
shall prevent or restrict (in any way) Purchaser from transferring, selling,
assigning or otherwise disposing of any securities (including, without
limitation, the Common Stock and Preferred Stock) of the Company on terms and
conditions satisfactory to it in its sole discretion.
(e) This Section 9.15 is intended to benefit the current and former directors
and officers of the Company and shall be binding on all successors and assigns
of Purchaser and the Company
* * * * * * * *
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this
Stock Purchase Agreement as of the date first above written.
SUN ONE PRICE, LLC
By: /s/M. Xxxxxx Xxxx
--------------------------
Name: M. Xxxxxx Xxxx
Its: Vice President
ONE PRICE CLOTHING STORES, INC.
By: /s/Xxxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxx
Its: Chief Executive Officer
