FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment")
is made as of December 15, 1999, by and among Buyer (as defined in the
Agreement) and the Shareholders (as defined in the Agreement).
RECITALS
A. Each of the parties hereto is a party to that certain Stock Purchase
Agreement dated as of October 27, 1999 (the "Agreement").
B. Each of the parties hereto desires to amend the Agreement as set forth
herein, and desire that, except as set forth in this Amendment, the Agreement
shall remain in full force and effect.
NOW THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Agreement (without regard
to this Amendment).
2. Amendment. The Agreement is hereby amended as follows on and as of, and
only upon, the date hereof:
(a) Section 2.02(a)(i) is hereby amended to read in its entirety as
follows:
"(i) Two Million Dollars ($2,000,000) in cash, subject to adjustment as
provided herein (the "Cash Payment") payable at Closing in accordance with
Schedule 2.02(a)(i);"
(b) Section 2.02(a)(ii) is hereby amended to read in its entirety as
follows:
"(ii) Two Million Six Hundred Thousand Dollars ($2,600,000) in cash
payable within three (3) Business Days of the Closing Date in accordance
with Schedule 2.02(a)(ii);"
(c) Section 2.02(a)(iii) is hereby amended to read in its entirety
as follows:
"(iii) Two Million Eight Hundred Twenty-Two Thousand Nine Hundred
Thirty-Eight Dollars ($2,822,938) in cash payable on March 10, 2000 in
accordance with Schedule 2.02(a)(iii);"
(d) Section 2.02(a)(iv) is hereby amended to read in its entirety as
follows:
"(iv) Seven Hundred Seventy Thousand ($770,000) payable upon the first
anniversary of the Closing Date in accordance with Schedule 2.02(a)(iv);"
(e) The following is hereby added as Section 2.02(a)(v) of the
Agreement:
"(v) One Million Two Hundred Eighteen Thousand Dollars ($1,218,000)
payable upon the second anniversary of the Closing Date in accordance with
Schedule 2.02(a)(v);"
(f) The following sentence is hereby added as Section 2.02(a)(vi) of
the Agreement:
"(vi) One Million Two Hundred Eighteen Thousand Dollars ($1,218,000)
payable upon the third anniversary of the Closing Date in accordance with
Schedule 2.02(a)(vi)."
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(g) The following sentence is hereby added as Section 2.02(a)(vii)
of the Agreement:
"(vii) One Million Seven Thousand Two Hundred Eighty-Nine Dollars
($1,007,289) payable on March 10, 2003 in accordance with Schedule
2.20(a)(vii)."
(h) Section 2.02(b) is hereby amended to read in its entirety as
follows:
"(b) In the event that Buyer fails to pay the amounts due pursuant to
Section 2.02(a)(iii), (iv), (v), (vi) or (vii) within fifteen (15)
Business Days of the dates such cash payments are due Buyer shall deliver
to Shareholders restricted Buyer Common Stock the fair market value of
which is equal to the amount of cash Shareholders would have received
pursuant to Section 2.02(a)(iii), (iv), (v), (vi) or (vii). The Fair
Market Value of Buyer Common Stock shall be computed using the daily
average closing bid price per share of Buyer Common Stock for the ten (10)
trading days immediately preceding the date the applicable cash payment
was to be paid pursuant to Section 2.02."
(i) The following is hereby added as Section 2.02(c) of the
Agreement:
"(c) In the event that Buyer fails to pay the amount due pursuant to
Section 2.02(a)(iii) within fifteen (15) Business Days of the date such
cash payment was due, Buyer may elect, in fulfillment of its obligation to
Shareholders pursuant to Section 2.02(a)(iii), to pay the Shareholders the
following amounts of cash pursuant to Schedule 2.02(a)(iii): (i) on or
prior to September 10, 2000 Buyer shall pay the Shareholders Three Million
One Hundred Five Thousand Two Hundred Thirty-One Dollars and Eighty Cents
($3,105,231.80), and (ii) on or prior to March 10, 2001 Buyer shall pay to
Shareholders Three Million Three Hundred Eight-Seven Five Hundred
Twenty-Five Dollars and Sixty Cents ($3,387,525.60). Buyer shall deliver
to an escrow account (the "Escrow Account"), established by U.S. Bank
Trust, N.A. (the "Escrow Agent") pursuant to an escrow agreement in
accordance with the terms and conditions in this Section 2.02(c),
restricted Buyer Common Stock (the "Escrow Shares") the fair market value
of which is equal to Two Million Eight Hundred Twenty-Two Thousand Nine
Hundred Thirty-Eight Dollars ($2,822,938). The Fair Market Value of the
Buyer Common Stock shall be computed using the daily average closing bid
price per share of Buyer Common Stock for the ten (10) trading days
immediately preceding the date the applicable cash payment was to be paid
pursuant to Section 2.02(a)(iii) hereof. The escrow agreement shall
terminate on the earlier of (i) Xxxxx 00, 0000, (xx) the date on which
Buyer pays the Shareholders the amount of cash due pursuant to Section
2.02(a)(iii) hereof, or (iii) the date on which Buyer exercises the Call
Option (as defined below). In the event that Buyer delivers to the
Shareholders the amount of cash due pursuant to Section 2.02(a)(iii) or
the Call Option (as defined below), the Escrow Shares shall be returned to
Buyer. In the event that prior to March 10, 2001 Buyer does not pay the
cash due pursuant to Section 2.02(a)(iii) or exercise the Call Option (as
defined below), the Escrow Shares shall be delivered to the Shareholders.
In the event that the Fair Market Value of the Escrow Shares on March 10,
2001 is less than Three Million Three Hundred Eighty-Seven Thousand Five
Hundred Twenty-Five Dollars and Sixty Cents ($3,387,525.60), (the "Escrow
Deficit"), Buyer shall deliver to the Shareholders additional shares of
Buyer Common Stock the Fair Market Value of which is equal to the Escrow
Deficit. Any securities, non-cash dividends or other property
distributable in respect of the Escrow Shares shall be delivered to the
Escrow Agent, who shall hold such securities, non-cash dividends or other
property in the Escrow Account. Buyer shall have the right, but not the
obligation, to redeem the Escrow Shares and any securities, non-cash
dividends and other property placed in the Escrow Account (the "Call
Option") as follows: (x) from March 10, 2000 to September 10, 2000, Buyer
shall have the right, but not the obligation, to redeem the Escrow Shares
and any securities, non-cash dividends and other property placed in the
Escrow Account upon payment to the Shareholders of Three Million One
Hundred Five Thousand Two Hundred Thirty-One Dollars and Eighty Cents
($3,105,231.80), and (y) from September 10, 2000 to March 10, 2001, Buyer
shall have the right, but not the obligation, to redeem the Escrow Shares
and any securities, non-cash dividends and other property placed in the
Escrow Account upon payment to the Shareholders of Three Million Three
Hundred Eighty-Seven Thousand Five
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Hundred Twenty-Five Dollars and Sixty Cents ($3,387,525.60). In the event
the Fair Market Value of the Escrow Shares falls below eighty percent
(80%) of the Fair Market Value of the Escrow Shares as of March 10, 2000,
then the Shareholders shall deliver a notice to Buyer of such shortfall
and Buyer shall deliver to the Escrow Agent additional shares of Buyer
Common Stock within thirty (30) days of receipt of the Shareholders'
notice so that the Fair Market Value of the Escrow Shares equals Two
Million Eight Hundred Twenty-Two Thousand Nine Hundred Thirty-Eight
($2,822,938). The fees of the Escrow Agent shall be borne by Buyer."
(j) Section 2.03(a) is hereby amended to read in its entirety as
follows:
"(a) Pre-Closing Calculation of Purchase Price. No less then ten (10) days
prior to the Closing Date Shareholders shall deliver to Buyer (i) the
unaudited balance sheet of the Company (the "Pre-Closing Balance Sheet")
as of September 30, 1999 (the "Pre-Closing Date") and the related
unaudited statements of income, shareholders' equity and cash flows for
the fiscal period then ended, prepared in accordance with GAAP, and (ii)
the Company's Job Analysis and Percentage Completion Schedule ("Completion
Schedule") for the period ended on the Pre-Closing Date. Shareholders
shall make available to Buyer any of the work papers, financial data and
other information used in preparing the Pre-Closing Balance Sheet. The
Cash Payment shall be reduced (but not increased) on a dollar-for-dollar
basis to the extent that the shareholders' equity set forth in the
Pre-Closing Balance Sheet is less than the shareholders' equity set forth
in the June Balance Sheet. In the event that (i) the shareholders' equity
set forth in the June Balance Sheet exceeds the shareholders' equity set
forth in the Pre-Closing Balance Sheet by more than Five Hundred Thousand
Dollars ($500,000) and (ii) Buyer does not elect to limit the total
adjustment to the Purchase Price to Five Hundred Thousand Dollars
($500,000), then the Shareholders shall have the right, in their sole
discretion, to terminate the Agreement without liability or penalty."
(k) Section 2.03(b) is hereby deleted in its entirety.
(l) Section 2.03(c) is hereby deleted in its entirety.
(m) Section 2.03(d) is hereby amended to read in its entirety as
follows:
"(d) Indebtedness Adjustment. Within thirty (30) days after the Closing
Date, Shareholders shall deliver to Buyer a schedule which sets forth the
Company's actual Indebtedness as of the Closing Date, prepared in
accordance with GAAP (the "Final Indebtedness Schedule"). To the extent
the aggregate Indebtedness disclosed in the Final Indebtedness Schedule is
greater than Three Hundred Thirty Thousand ($330,000) (the "Debt Increase
Amount"), the Shareholders shall pay Buyer the amount of the Debt Increase
Amount, if any, on or prior to March 10, 2000. To the extent the aggregate
Indebtedness disclosed in the Final Indebtedness Schedule is less than
Three Hundred Thirty Thousand ($330,000) (the "Debt Decrease Amount"),
Buyer shall pay the Shareholders the amount of the Debt Decrease Amount,
if any, on or prior to March 10, 2000."
(n) Section 2.03(e) is hereby amended to read in its entirety as
follows:
"(e) Objection Notice. Within thirty (30) days after receipt of the Final
Indebtedness Schedule, Buyer shall notify Shareholders in writing (an "Objection
Notice") of any objection to the Final Indebtedness Schedule. If no Objection
Notice is given within such thirty-day period, then the Final Indebtedness
Schedule shall be final and binding on all parties. If an Objection Notice is
delivered, Shareholders shall be permitted to take positions which are different
from positions taken in the Final Indebtedness Schedule as submitted to Buyer,
and Buyer agrees that Shareholders shall not be prejudiced by reason of such
differences."
(o) Section 2.03(f) is hereby amended to read in its entirety as
follows:
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"(f) Dispute Resolution. In the event Buyer provides a timely Objection
Notice, Buyer and Shareholders shall, for a period of five (5) days, use their
best efforts to resolve any differences between the parties as to the
determination of the Final Indebtedness Schedule. In the event Shareholders and
Buyer are not, within the periods described above, able to resolve such
differences, the determination of the Final Indebtedness Schedule shall be
decided by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "Association"). If all of the
parties to this Agreement are unable to agree on a single arbitrator, the
arbitrator shall be a single arbitrator selected by the American Arbitration
Association. Any arbitration proceedings hereunder shall be held in Los Angeles,
California. Such arbitrator shall as promptly as practicable, but in no event
later than ninety (90) days after receipt by Shareholders of the Objection
Notice, make a determination of the Final Indebtedness Schedule. Such
determination shall be final and binding on Buyer and Shareholders. The fees and
expenses of the arbitrator shall be borne fifty percent (50%) by the
Shareholders and fifty percent (50%) by the Buyer."
(p) Section 2.05 shall be amended to read in its entirety as
follows:
"SECTION 2.05. Closing. Unless this Agreement shall have been terminated
pursuant to Section 9.01 hereof, the closing of the purchase and sale of the
Shares contemplated hereby (the "Closing") shall take place at the offices of
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, Twenty-Third Floor, 000 Xxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, at 10:00 A.M. local time on or prior to
December 15, 1999 as promptly as practicable upon satisfaction of the conditions
appearing in Article VI hereof or at such other time and place as Buyer and
Shareholders may mutually establish (such time and date being referred to herein
as the "Closing Date")."
(q) Section 2.06 is hereby deleted in its entirety.
(r) Section 2.07 shall be amended to read in its entirety as
follows:
"SECTION 2.07 Actions Prior to and at the Closing.
(a) At the Closing the Company and Shareholders shall deliver or
cause to be delivered to Buyer:
(i) a certificate or certificates representing the Shares
registered in the name of the Buyer; and
(ii) all of the documents, certificates and instruments
required to be delivered to Buyer pursuant to Section 6.01.
(b) At the Closing Buyer shall deliver or cause to be delivered to
Shareholders:
(i) the Cash Payment; and
(ii) all of the documents, certificates and instruments
required to be delivered to Shareholders pursuant to Section 6.02."
(s) Section 3.04(c) is hereby amended to read in its entirety as
follows:
"(c) Schedule 3.04(c) contains true and complete copies of the Completion
Schedule for each of the periods ending December 31, 1998, June 30, 1999, the
Pre-Closing Date and the date hereof (the "Opening Completion Schedule"). Each
Completion Schedule attached hereto and the Closing Completion Schedule is true,
complete and correct in all respects and has been derived from the accounting
records of the Company and represent only actual, bona fide transactions. The
amount designated as the "balance of
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profit to recognized" on the Completion Schedule for the period ending on the
Pre-Closing Date is equal to or greater than "the balance of profit to be
recognized" on the Completion Schedules for each of the periods ending December
31, 1998 and June 30, 1999."
(t) The following paragraph is hereby added as Section 3.04(e) of
the Agreement:
"(e) The amount of shareholders' equity of the Company, as determined as
of the Pre-Closing Date, has not decreased from the amount of shareholders'
equity in the Company as of the June Balance Sheet. "
(u) Section 6.01(r) is hereby deleted in its entirety.
(v) Section 6.01(s) is hereby deleted in its entirety.
(w) The following paragraph is hereby added as Section 6.02(f) of
the Agreement:
"(f) Buyer and the Shareholders shall have entered into a Pledge Agreement
substantially in the form attached as Annex M hereto."
(x) Section 8.02(a) is hereby amended to read in its entirety as
follows:
"(a) the unaudited balanced sheet of the Company as of the Closing Date
and the related unaudited statements of income, shareholders' equity and cash
flows for the period then ended prepared in accordance with GAAP (the "Closing
Financial Statements") and a Completion Schedule for the period ended on the
Closing Date prepared consistently with all other Completion Schedules delivered
to Buyer;"
(y) Section 8.02(c) is hereby amended to read in its entirety as
follows:
"(c) a certificate executed by each Shareholder certifying that (i)
the Company has no liabilities as of the Closing Date other than those
liabilities recorded in the Closing Financial Statements; (ii) the method use to
recognize profit of the Company in each of the Financial Statements and Closing
Financial Statements is consistent; (iii) no customer deposits, whether
collected or billed and receivable have been recorded as income in the Financial
Statements or the Closing Financial Statements; (iii) income recognized on work
in progress as of the dates of each of the Financial Statements and the Closing
Financial Statements is not overstated as to the percentage of completion or
income earned; (iv) income on "fee based jobs" is recognized in a consistent
manner in all periods of each of the Financial Statements and the Closing
Financial Statements and fees received but not yet earned are not reflected as
earnings and are appropriately reflected as liabilities for unearned income in
each of the Financial Statements and the Closing Financial Statements; (v) the
estimated costs to complete all jobs of the Company in process are not
understated and reflect the Company's best estimate of the total costs to
complete all incomplete work of the Company; (vi) all deposits of the Company to
vendors are appropriately accounted for as current assets; (vii) the
shareholders' equity of the Company has not decreased since the Pre-Closing
Date; and (viii) the amount designated as the "balance of profit to recognized"
on the Completion Schedule for the period ending on the Closing Date is equal to
or greater than "the balance of profit to be recognized" on the Completion
Schedules for each of the periods ending December 31, 1998, June 30, 1999 and
the Pre-Closing Date."
(z) Section 8.12 is hereby amended to read in its entirety as
follows:
"SECTION 8.12 Buyer's Post-Closing Covenant. On or prior to March 10,
2000, Buyer shall obtain the release of Shareholders as guarantors under that
certain Guaranty in favor of Xxxxxxx Xxxxx & Co., Inc. or Xxxxxxx Xxxxx Business
Financial Services ("Xxxxxxx Xxxxx") or will pay all such Indebtedness of
Shareholders to Xxxxxxx Xxxxx."
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(aa) The following sentence is hereby added as Section 8.13 of
the agreement:
"SECTION 8.13. Repayment of Shareholder Debt. On or prior to the earlier
of (i) Xxxxx 00, 0000, (xx) the date that Buyer exercises the Call Option
pursuant to Section 2.02(c), or (iii) Buyer pays Shareholders the amount
of cash owed pursuant to Section 2.02(a)(ii), Xxxxxx and Xxxxx each shall
have repaid all Indebtedness owed to the Company by each of Xxxxxx and
Xxxxx."
(bb) Section 9.01(b) is hereby amended to read in its entirety
as follows:
"(b) by Shareholders, on the one hand, or by Buyer, on the other
hand, by written notice to the other party or parties hereto if the Agreement
shall not have been consummated on or before December 15, 1999 (or such later
date as Buyer and Shareholders may agree), provided that in the case of a
termination under this clause (b), the party or parties terminating this
Agreement shall not then be in material breach of any of its or their
obligations under this Agreement;
(cc) Section 10.02(d)(i) is hereby amended to read in its
entirety as follows:
"(i) First, from a reduction in the amount of the payment due and owing
the Shareholders pursuant to Section 2.02(a)(vi), until the amount of such
payment is exhausted;"
(dd) Section 10.02(d)(ii) is hereby amended to read in its
entirety as follows:
"(ii) Second, from a reduction in the amounts of payments due and owing
the Shareholders pursuant to Sections 2.03(a)(ii), 2.03(a)(iii), 2.03(iv) and
2.03(v) up to Two Hundred Fifty Thousand Dollars ($250,000) per year; and"
(ee) Section 10.02(d)(iii) is hereby amended to read in its
entirety as follows:
"(iii) Third, upon the exhaustion of the amounts of payment due pursuant
to Section 2.02(a)(vi) and after reducing the remaining payments due pursuant to
Sections 2.03(a)(ii), 2.03(a)(iii), 2.03(iv) and 2.03(v) up to Two Hundred Fifty
Thousand Dollars ($250,000) per year, any remaining Indemnifiable Claims under
this Article X shall be recovered from the Shareholders directly."
3. References. All references in the Agreement to "Agreement," "herein,"
"hereof," or terms of like import referring to the Agreement or any portion
thereof are hereby amended to refer to the Agreement as amended by this
Amendment.
4. No Implied Amendments. Except as expressly provided herein, the
Agreement is not being amended, supplemented, or otherwise modified, and the
Agreement shall continue in force and effect in accordance with its terms.
5. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all such
counterparts together shall constitute but one and the same agreement.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
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[SIGNATURE PAGE TO FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Amendment, or caused this Amendment to be executed on its behalf by a
representative duly authorized, as of the date first above written.
INTERIORS, INC.
By:
-----------------------------
Xxx Xxxx
President
-------------------------------
Xxxxx Xxxxxx
-------------------------------
Xxxxxx Xxxxxxxxxx
THE XXXXX FAMILY TRUST
DATED OCTOBER 1, 1997
By:
----------------------------
Xxxx Xxxxx
Trustee
