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EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
by and between
XXXXXXXXX CORPORATION OF AMERICA,
XXXXXXXXX CORPORATION,
SOUTHERN CALIFORNIA RELOCATIONS, INC.
and
XXXXXXX XXXXXXXXX
March 31, 1998
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made this 31st day of March, 1998
(the "Agreement") by and among Southern California Relocations, Inc., a
California corporation ("Seller"), Xxxxxxx XxxXxxxxx, a resident of the State
of California, XxxxxXxxx Corporation of America, a Maryland corporation
("Buyer"), and XxxxxXxxx Corporation, a publicly owned Maryland corporation
("XxxxxXxxx").
WHEREAS, Seller is engaged in, among other activities, the business of
providing interim housing in units located at properties throughout the United
States (the "interim housing business");
WHEREAS, Buyer desires to purchase, and Seller desires to sell, the
Business of Seller (as defined below) upon the terms and conditions set forth
herein;
WHEREAS, as a condition to purchasing the Business and executing this
Agreement, Buyer has requested that each of Seller and Xxxxxxx XxxXxxxxx
execute a Non-Competition Agreement in the form attached hereto as Exhibit A
(the "Non-Competition Agreement"), and each of Seller and Xxxxxxx XxxXxxxxx has
agreed to do so; and
WHEREAS, as a condition to purchasing the Business and executing this
Agreement, Buyer has requested that each of Xxxxxxx XxxXxxxxx and the Company's
key sales officers listed on Schedule A execute employment agreements with the
Buyer (the "Employment Agreements"), and each of Xxxxxxx XxxXxxxxx and the said
officers have agreed to do so.
NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
SALE OF BUSINESS
1.1 SALE AND PURCHASE OF BUSINESS. Subject to the terms and
conditions of this Agreement, Seller shall deliver, transfer and convey to
Buyer, and Buyer shall purchase and pay for, the Business and the
Non-Competition Agreements. The Business is being sold "as is" with all faults
and conditions and no representations and warranties, express or implied,
except as set forth in this Agreement. The term "Business" means:
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(a) the list of interim housing customers of Seller,
which is attached hereto as Schedule 1.1(a);
(b) the on-going leases and contracts of Seller with its
customers, the underlying property leases with property owners for
such customer leases and contracts, and the on-going office property
leases of Seller, all as of the Closing Date (all such contracts and
leases are hereinafter referred to as the "Assumed Contracts," all of
which are listed on Schedule 1.1(b) attached hereto);
(c) all equipment (including computer equipment),
fixtures, furniture and other tangible assets of Seller listed on
Schedule 1.1(c) attached hereto (the "Tangible Property");
(d) the right to use in perpetuity the Seller's 800
telephone numbers and telephone numbers relating to the Seller's
corporate offices in Redwood City, California and any other regional
office phone numbers to the extent assignable;
(e) all rights to use trademarks, service marks, trade
names and all other intellectual property rights of Seller, including
the right to use in perpetuity the name Relocations Services, Inc.
(all such intellectual property rights are hereinafter referred to as
the "Trademarks");
(f) all rights pursuant to the non-competition agreements
with the Seller's employees listed on Schedule 1.1(f) attached hereto
or obtained pursuant to Section 5.1(d) of this Agreement; and
(g) the Service Contracts (as defined in Section 1.2
below, all of which are listed on Schedule 1.1(g) attached hereto).
The term "Business" does not include:
(h) any and all amounts prepaid by Seller for any period
after the Effective Time (as defined in Section 2.2 below), which
includes payments for rental of real property, furniture and
housewares, and all of the related underlying contracts for the
provision of services such as electric usage, cable, insurance,
televisions, service, water, sewer and telephone; and
(i) any amounts billed by Seller but not received by
Seller prior to the Effective Time for any period before the Effective
Time, which includes payments for rental of real property, furniture
and housewares, and all of the related underlying contracts for the
provision of services such as electric usage, cable, insurance,
televisions, service, water, sewer and telephone.
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It is understood that the sale of the Business to Buyer pursuant to
this Agreement does not involve the sale of real property.
1.2 ASSIGNMENT OF SERVICE CONTRACTS. With respect to the Assumed
Contracts (other than the on-going office property leases of Seller), Seller
shall, on the closing date set forth in Section 2.2 (the "Closing Date"),
assign to Buyer all of the related underlying contracts for the rental of
furniture and housewares and all of the related underlying contracts for the
provision of electric usage, cable television service, water, sewer, telephone
service and so on (all such contracts are referred to hereinafter the "Service
Contracts"). Upon such assignment, and subject to the adjustments to the
Closing Date Payment (as defined in Section 2.1) made pursuant to Section 2.3
herein and the subsequent payments made under Section 2.4(a), Buyer shall (a)
be entitled to all of Seller's rights (including the right to the return of all
security deposits, if any, paid by Seller), (b) assume all of Seller's
obligations arising after the Effective Time (as defined in Section 2.2), and
(c) make all further payments due under the terms of the Service Contracts that
accrue from and after the Effective Time, as if the named party to each Service
Contract were the Buyer.
1.3 NON-ASSIGNABLE SERVICE CONTRACTS. The parties hereto
recognize that it may be impossible or impractical for Seller to assign all of
the Service Contracts. A Service Contract that is impossible or impractical to
assign shall be referred to hereinafter as a "Non-Assignable Service Contract".
Seller agrees that Non-Assignable Service Contracts shall not be extended
beyond their initial expiration dates. With respect to each Non-Assignable
Service Contract, and subject to the adjustments to the Closing Date Payment
(as defined in Section 2.1) made pursuant to Section 2.3 herein and the
subsequent payments made under Section 2.4(a), the following shall apply as of
the Closing Date and thereafter: (a) Seller shall assign to Buyer its economic
rights and obligations with respect to such Non-Assignable Service Contracts;
(b) Seller shall remain legally obligated under the terms of such
Non-Assignable Service Contracts; (c) Buyer shall be entitled to all of
Seller's rights (including the right to the return of security deposits, if
any, paid by Seller), and shall assume all of Seller's financial obligations
arising after the Effective Time and make all further payments due by Seller
under the terms of the Non-Assignable Service Contracts which accrue from and
after the Effective Time; and (d) Buyer shall indemnify and hold Seller
harmless for any claim made against Seller due to the non-payment or
non-performance by Buyer of any financial or other obligation assumed by Buyer
hereunder with respect to each such Non-Assignable Service Contract. Seller
and Xxxxxxx XxxXxxxxx shall remain jointly and severally liable for and shall
indemnify and hold Buyer harmless for any claim made against Buyer with respect
to the non-performance or non-payment of any financial or other obligation of
Seller with respect to a Non-Assignable Service Contract which accrued prior to
the Effective Time.
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1.4 ASSUMPTION OF LIABILITIES. Buyer shall assume the obligations
and liabilities of Seller with respect to the Business that arise on or after
the Effective Time (the "Assumed Liabilities"). Buyer shall not assume, and
Seller shall remain liable for, all of Seller's obligations, liabilities and
expenses incurred with respect to the Business or the conduct of the Business
which have arisen or accrued prior to the Effective Time (the "Retained
Liabilities"), including the accrued vacation of Seller's employees as of the
Effective Time.
ARTICLE II
PURCHASE PRICE AND CLOSING
2.1 PURCHASE PRICE. The combined Purchase Price for both the
Business being sold to Buyer and the Non-Competition Agreement shall be
composed of Four Million Six Hundred Twenty One Thousand Dollars ($4,621,000),
payable (i) $3,465,750 in cash, $3,365,750 of which shall be paid on the
Closing Date (the "Closing Date Payment") and $100,000 of which will be held in
escrow in accordance with Section 2.2(e) below (the "Escrowed Amount") and (ii)
$1,155,250 by the issuance to Seller of 94,693 shares of common stock of
XxxxxXxxx (the "Purchase Shares," defined as $1,155,250 divided by the average
closing price per share of XxxxxXxxx'x common stock for the five trading days
prior to the Closing Date), subject to the proration adjustments to the Closing
Date Payment set forth in Section 2.3 hereof and any payments made pursuant to
Section 2.4 hereof. The Purchase Shares shall have the "piggyback"
registration rights provided in Section 4.5 hereto. The Purchase Price is
payable as set forth in Section 2.2 of this Agreement.
2.2 CLOSING; PAYMENT OF PURCHASE PRICE; ESCROW.
(a) The sale and purchase of the Business and
Non-Competition Agreement (the "Closing") shall occur on or before
March 31, 1998 (the "Closing Date"). The Closing will be effective,
and amounts due and payable on Assumed Contracts and Service Contracts
(including the Non-Assignable Service Contracts) shall be prorated
between Buyer and Seller as set forth in Section 2.3 hereof, as of
12:01 a.m. on April 1, 1998 (the "Effective Time").
(b) The documents to be transferred and the payments to
be made in connection with the transactions contemplated by this
Agreement shall occur at the offices of Buyer in Gaithersburg,
Maryland or at such other location as may be agreed to by the parties,
at 10:00 a.m. on the Closing Date, or at such other time and date as
shall be mutually agreed upon by the parties.
(c) At the Closing, Seller and Xxxxxxx XxxXxxxxx shall
deliver to Buyer and XxxxxXxxx the documents set forth in Article VIII
hereof and Buyer
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and XxxxxXxxx shall deliver to Seller and Xxxxxxx XxxXxxxxx the
documents set forth in Article VII hereof.
(d) At the Closing, Buyer shall pay the Closing Date
Payment, as adjusted pursuant to Section 2.3 hereof, and deliver the
Purchase Shares in the following manner:
(i) Buyer will deliver to Seller the Closing Date
Payment by wire transfer of immediately available funds to the
account designated by Seller to Buyer prior to the Closing;
and
(ii) XxxxxXxxx shall deliver to Seller a stock
certificate, bearing the following restrictive legend,
representing the Purchase Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
SUCH SHARES OF STOCK MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF WITHOUT EITHER (I) AN OPINION
OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION OR
QUALIFICATION UNDER THE FEDERAL SECURITIES ACT OF
1933, AS AMENDED, AND ALL APPLICABLE STATE SECURITIES
LAWS; OR (II) SUCH REGISTRATION OR QUALIFICATION
(e) The Escrowed Amount shall be deposited in an escrow
account (the "Escrow Account") with an escrow agent (the "Escrow
Agent") acceptable to each of Buyer and Seller. Such deposit shall be
made pursuant to an escrow agreement in the form attached hereto as
Exhibit B (the "Escrow Agreement"), which shall be made by and among
Buyer, Seller and the Escrow Agent at the Closing Date. The Escrowed
Amount shall be available to pay any amounts due to Buyer under
Sections 2.4(a) and 2.4(b) hereof. Payment of any amounts due to
Buyer shall be made from the Escrow Account in the manner and at as
such times as the Escrow Agreement and Section 2.4 hereof provide.
The release of any remaining Escrowed Amount, together with interest
thereon, shall be made to Seller by certified or cashier's check
within ten (10) days after the last amount due to Buyer is calculated
under Section 2.4 below or at an earlier time if Buyer and Seller so
agree.
2.3 PRORATIONS AND PREPAYMENTS. Amounts due or payable or prepaid
on Assumed Contracts and Service Contracts (including the Non-Assignable
Service Contracts), whether collection occurs prior to or after the Closing
Date, shall be
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prorated as of the Effective Time based on a 365 day year. Seller is not
selling to Buyer and Buyer is not purchasing any of Seller's accounts
receivable for amounts due to Seller prior to the Effective Time. At Closing,
and subject to the payments to be made after Closing as provided in Section
2.4(a), the following adjustments to the Closing Date Payment and no other
shall be made:
(a) the Closing Date Payment shall be increased in an
amount equal to all amounts prepaid by Seller in connection with the
Assumed Contracts or the Service Contracts for any period after the
Effective Date, all of which amounts are listed in Schedule 2.3
attached hereto (including payments for rental of real property,
furniture and housewares, and all of the related underlying contracts
for the provision of services such as electric usage, insurance,
cable, television service, water, sewer and telephone);
(b) the Closing Date Payment shall be increased in an
amount equal to all of the security deposits paid by Seller and not
received by Seller prior to the Effective Date in connection with the
Assumed Contracts or the Service Contracts, all of which deposits are
listed in Schedule 2.3;
(c) the Closing Date Payment shall be decreased in an
amount equal to all amounts received by Seller in connection with the
Assumed Contracts or the Service Contracts for any period after the
Effective Date, all of which amounts are listed in Schedule 2.3; and
(d) the Closing Date Payment shall be decreased in an
amount equal to all of the outstanding deposits received by Seller
prior to the Effective Date for any period after the Effective Date in
connection with the Assumed Contracts or the Service Contracts, all of
which deposits are listed in Schedule 2.3 attached hereto.
Other than payments required by Section 2.3(a) through (d) above, any
uncollected receivables or other amounts due to Seller from third parties after
Closing that relate to the operation of the Company prior to the Effective Time
shall be collected by Buyer, using its best efforts, and shall be paid to
Seller in accordance with Section 2.4(a) below. If Buyer is unable to collect
any such amounts due to Seller ninety (90) days after the Effective Time,
Seller and Xxxxxxx XxxXxxxxx shall have the right to pursue collection
directly.
2.4 PAYMENTS FOLLOWING CLOSING.
(a) Following the Closing, Buyer and Seller shall each
make payments to the other in accordance with this Section 2.4(a) for
(i) any amounts received by either Buyer or Seller after the Closing
Date, which amounts would have been subject to prorations under
Section 2.3 above if
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such amounts had been received before the Closing Date, (ii) any
amounts which should have been included in Schedule 2.3 but were
mistakenly omitted on the Closing Date, and (iii) any amounts due to
Seller under the last paragraph of Section 2.3 above; PROVIDED that
any payments due to Buyer shall be drawn first from the Escrow
Account. To determine the amount of the required payments under this
Section 2.4(a), Buyer and Seller agree to perform the following:
(1) an interim accounting of all payments
required (an "Interim Accounting") within thirty (30) days of
the Closing Date. To the extent that the Interim Accounting
indicates that payments are required from Buyer, Buyer shall,
within fifteen (15) days thereafter, pay to Seller such
required payments. To the extent that the Interim Accounting
indicates that payments are required from Seller, Buyer shall
be paid from the Escrow Account within fifteen (15) days
thereafter in the manner provided in the Escrow Agreement, or,
if Seller objects to such payment in a timely manner as
provided in the Escrow Agreement, then Buyer shall be paid in
accordance with the terms of the Escrow Agreement. If the
Escrowed Amount remaining in the Escrow Account is
insufficient to cover the required payments, Seller must make
the required payments from another source by certified or
cashier's check.
(2) a final accounting of all payments required
(a "Final Accounting") within sixty (60) days of the Closing
Date. To the extent that the Final Accounting indicates
that payments are required from Buyer, Buyer shall, within
fifteen (15) days thereafter, pay to Seller such required
payments. To the extent that the Final Accounting indicates
that payments are required from Seller, Buyer shall be paid
from the Escrow Account within fifteen (15) days thereafter in
the manner provided in the Escrow Agreement, or, if Seller
objects to such payment in a timely manner as provided in the
Escrow Agreement, then Buyer shall be paid in accordance with
the terms of the Escrow Agreement. If the Escrowed Amount
remaining in the Escrow Account is insufficient to cover the
required payments, Seller must make the required payments from
another source by certified or cashier's check. If the Escrow
Account no longer exists, and Seller objects in writing to the
Final Accounting within fifteen (15) days of receipt of a
written notice by Buyer of any amount due, then the matter
shall be submitted to binding arbitration in accordance with
Section 2.4(c). In the event and to the extent that Buyer or
Seller become aware following the Final Accounting of
additional payments that need to be made, such party shall
promptly notify the other of such payments, and Buyer and
Seller agree that any amount needing to be paid from one to
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the other shall be promptly paid by the responsible party to
the other, provided that any payments due to Buyer shall be
drawn first from the Escrow Account in the manner provided in
the Escrow Agreement. If the Escrowed Amount remaining in the
Escrow Account is insufficient to cover the required payments,
Seller must make the required payments from another source by
certified or cashier's check. If the Escrow Account no longer
exists, and Seller objects in writing within fifteen (15) days
of receipt of a written notice by Buyer of any amount due to
Buyer, then the matter shall be submitted to binding
arbitration in accordance with Section 2.4(c).
(b) Seller and Xxxxxxx XxxXxxxxx shall pay Buyer to the
extent that (x) the Bad Debts (defined as the receivables generated,
directly or indirectly, from, by or through "Existing Contracts" (as
defined below) during a period of up to a maximum of 18-months
beginning at the Effective Time (the "Receivable Guarantee Period")
that have not been collected by the date ninety (90) days after the
date of invoice of each receivable) exceed (y) $________ (0.55% of
Seller's gross revenue billed subsequent to April 1, 1998 for those
contracts that are assumed as of April 1, 1998), PROVIDED that Buyer
shall use its normal billing and collecting practices with respects to
any receivables generated, directly or indirectly, from, by or through
Existing Contracts. To calculate the amount due to Buyer, if any,
Buyer, Seller and Xxxxxxx XxxXxxxxx agree to perform an accounting of
the extent of the Bad Debts as of the last day of the Receivable
Guarantee Period. Any amount due under this Section 2.4(b) shall be
paid to Buyer within fifteen (15) days after the end of the Receivable
Guarantee Period from the Escrow Account in the manner provided in the
Escrow Agreement, or, if Seller objects to such payment in a timely
manner as provided in the Escrow Agreement, then Buyer shall be paid
in accordance with the terms of the Escrow Agreement. If the Escrowed
Amount remaining in the Escrow Account is insufficient to cover the
required payments, Seller or Xxxxxxx XxxXxxxxx must make the required
payments from another source by certified or cashier's check. If the
Escrow Account no longer exists, and Seller or Xxxxxxx XxxXxxxxx
object in writing to Buyer's calculation of any amount due to Buyer
within fifteen (15) days of receipt of notice of a written notice by
Buyer, then the matter shall be submitted to binding arbitration in
accordance with Section 2.4(c). If Seller or Xxxxxxx XxxXxxxxx do not
timely object to the calculation of the amount due under this Section
2.4(b), then Buyer may offset the amount due from any compensation or
other amounts owed by Buyer to Seller or Xxxxxxx XxxXxxxxx or pursue
payment from Seller and Xxxxxxx XxxXxxxxx by other means. For
purposes of this Section 2.4(b), the term "Existing Contract" shall
mean every contract of Seller pursuant to which any tenant or customer
of, and any person or corporation that referred tenants or customers
to, Seller is renting interim accommodations from Seller.
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(c) If Seller or Xxxxxxx XxxXxxxxx timely deliver an
objection to a calculation of any amount due to Buyer pursuant to
Sections 2.4(a)(2) or 2.4(b), or if Buyer and Seller or Xxxxxxx
XxxXxxxxx disagree as to any amount due to Seller or Xxxxxxx XxxXxxxxx
under Section 2.4(a), then the matter shall be submitted to binding
arbitration in Palo Alto, California. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. Judgment upon an
arbitration award may be entered by any court of competent
jurisdiction. Each party shall bear its own costs and expenses
(including legal fees) of such arbitration. Payment of any amounts
due as a result of any arbitration award shall immediately be made by
the party owing such amount by certified or cashier's check.
Notwithstanding the submission of any matter to arbitration, Buyer,
Seller and Xxxxxxx XxxXxxxxx may agree in writing at any time to
settle the matter in dispute and to cancel any on-going arbitration
proceedings.
2.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Non-Competition Agreement and the various components of the
Business, including, among others, the Assumed Contracts, the Service Contracts
and the Tangible Property, all as set forth on Schedule 2.5. Buyer and Seller
agree to file all tax returns, including Federal Form 8594, in a manner which
is consistent with such allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND XXXXXXX XXXXXXXXX
Seller and Xxxxxxx XxxXxxxxx represent and warrant as follows:
3.1 INCORPORATION AND CORPORATE POWER; AUTHORIZATION, NO CONFLICTS.
(a) Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of California and has
all requisite corporate power and authority and all authorizations, licenses,
permits and certifications necessary to carry on the Business as now being
conducted. Seller is qualified as a foreign corporation to do business in
every jurisdiction in which the nature of its business or its ownership of
property requires it to be qualified and in which the failure to be so
qualified would have a material adverse effect on the financial or operating
condition of the Business.
(b) Seller has the power, capacity and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated herein. The execution, delivery and performance of this Agreement
and any related
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agreement by Seller have been duly and validly authorized by the Board of
Directors of Seller and by all other necessary corporate action on the part of
Seller. This Agreement and any related agreements constitute the legally valid
and binding obligations of Seller and Xxxxxxx XxxXxxxxx, enforceable against
Seller and Xxxxxxx XxxXxxxxx in accordance with their respective terms. The
execution, delivery and performance of this Agreement by Seller and Xxxxxxx
XxxXxxxxx and the execution, delivery and performance of any related agreements
and the consummation of the contemplated transactions by Seller and Xxxxxxx
XxxXxxxxx will not violate or constitute a breach or default, whether upon
lapse of time and/or the occurrence of any act or event or otherwise, under the
Articles of Incorporation or Bylaws of Seller or any other contract, commitment
or arrangement of Seller and Xxxxxxx XxxXxxxxx, or result in the imposition of
any encumbrance against any of the Assumed Contracts or the Service Contracts
or, to the best knowledge of Seller and Xxxxxxx XxxXxxxxx, violate any
applicable law.
3.2 ASSUMED CONTRACTS, SERVICE CONTRACTS AND TANGIBLE PROPERTY.
(a) Schedule 1.1(b) contains an accurate and complete
list of all the Assumed Contracts and Schedule 1.1(g) contains an
accurate and complete list of all the Service Contracts. To the best
knowledge of Seller and Xxxxxxx XxxXxxxxx, (i) each Assumed Contract
and each Service Contract is valid and in full force and effect; (ii)
Seller has duly performed all of its obligations thereunder; and (iii)
no breach or default, alleged breach or default, or event which would
(with the passage of time, notice or both) constitute a breach or
default thereunder by Seller or any other party or obligor with
respect thereto, has occurred or, as a result of this Agreement or
consummation of the transactions contemplated by this Agreement, will
occur. Consummation of the transactions contemplated by this
Agreement will not (and will not give any person a right to) terminate
or modify any rights of, or accelerate or augment any obligation of,
Seller under any of such Assumed Contract or Service Contract.
(b) With respect to any lease which is an Assumed
Contract (a "Lease"), in addition to the representations set forth in
Section 3.2(a) above, Seller represents itself to be the absolute
owner of each such Lease with the absolute right and title to assign
such Lease, the rents, income and profits due to Seller or to become
due to Seller thereunder, and all security deposits and prepaid rents
held by Seller with respect thereto. In addition, (i) all Leases are
valid and in full force and have not been modified, amended or
terminated, except as stated herein; (ii) there are no outstanding
assignments or pledges by Seller of any Lease, the rents, income and
profits due or to become due thereunder or any security deposits with
respect thereto; and (iii) each lessee is in possession and paying
rent and other charges as required under its Lease.
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(c) Schedule 1.1(c) contains an accurate and complete
list of all the Seller's Tangible Property.
3.3 TITLE TO ASSETS. Seller has, and will continue to have at
the Closing Date, good and marketable title to all the Assumed Contracts, the
Service Contracts and the Tangible Property. Except with respect to the
Non-Assignable Service Contracts, Seller has the right, power, and authority to
sell, convey, assign, transfer and deliver the Assumed Contracts, the Service
Contracts and the Tangible Property to Buyer in accordance with the terms of
this Agreement.
3.4 LEGAL MATTERS. There is no suit, action, arbitration, legal,
administrative or other proceeding or governmental investigation instituted
against or, to the best knowledge of Seller and Xxxxxxx XxxXxxxxx, pending or
threatened against Seller or Xxxxxxx XxxXxxxxx, or Seller's assets. There is
no judgment, order, injunction, or award or decree of any court, governmental
authority, or regulatory agency to which Seller or Xxxxxxx XxxXxxxxx is
subject, and neither Seller nor Xxxxxxx XxxXxxxxx have received notice that
Seller is in violation of any federal, state or local law or regulation
including, without limitation, those relating to labor, antitrust, civil rights
or equal protection of the law.
3.5 BROKERS. No brokers, finders or other persons (other than
Seller or existing employees of Seller) have been engaged, or brokers' fees,
finders' fees, or commissions been incurred, by Seller or Xxxxxxx XxxXxxxxx in
connection with the transactions contemplated by this Agreement.
3.6 PERIOD PRECEDING EXECUTION OF AGREEMENT. Since the date of
the Latest Financial Statements (as defined in Section 3.13), there has not
been to the best of Seller or Xxxxxxx XxxXxxxxx'x knowledge:
(a) any damage, destruction, or loss, whether or not
covered by insurance, materially and adversely affecting Seller or the
Business;
(b) any pledge by Seller of the Assumed Contracts,
Service Contracts or the Tangible Property; or
(c) any notice received by Seller that a contract is in
default.
3.7 SUPPLEMENTS TO SCHEDULES. From time to time after the date of
this Agreement and prior to Closing, Seller and Xxxxxxx XxxXxxxxx shall
promptly inform Buyer in writing and supplement or amend any Schedules or
Exhibits to this Agreement, if any matter arises which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in any Schedule or Exhibit or if it becomes necessary to
correct any information in such Schedule or Exhibit which has become inaccurate
in any material respect.
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3.8 REASONABLE EFFORTS. Seller and Xxxxxxx XxxXxxxxx from the
date of this Agreement until the Closing Date will (i) use reasonable efforts
to obtain any consent, authorization or approval of, or exemption by, any
governmental authority or agency, or third party required to be obtained by it
in connection with this Agreement or the taking of any action in connection
with the consummation hereof, (ii) duly comply with all applicable laws as may
be required for the valid and effective sale and transfer of the Business and
for the performance of all of the acts and all things contemplated by this
Agreement and (iii) take all reasonable actions necessary and appropriate to
preserve and protect the value of the Business.
3.9 NOTIFICATION. Prior to the Closing, Seller, and Xxxxxxx
XxxXxxxxx shall give prompt notice to Buyer of (i) any event or alleged event
which would constitute a default under this Agreement or which would cause any
warranty or representation of Seller or Xxxxxxx XxxXxxxxx under this Agreement
to be untrue or misleading, or (ii) any notice or other communication from any
third party alleging that the consent from any such third party is or may be
required with respect to the transactions contemplated in this Agreement.
3.10 NO NEGOTIATIONS OUTSIDE AGREEMENT. Prior to Closing or the
termination of this Agreement, Seller and Xxxxxxx XxxXxxxxx, and their agents
and representatives, will not discuss a possible merger, sale or other
distribution of all or any part of the Business (a "Sale") with any other
person or provide any information to any other person regarding Seller, other
than (i) information provided to legal counsel, investment advisors,
accountants and other representatives acting in a fiduciary capacity or (ii)
information which is traditionally provided in the regular course of Seller's
business operations to third parties where Seller has no reason to believe that
such information may be utilized to evaluate a possible Sale. Seller and
Xxxxxxx XxxXxxxxx represents that neither Seller nor Xxxxxxx XxxXxxxxx is a
party to or bound by any Agreement with respect to a Sale other than this
Agreement.
3.11 INTELLECTUAL PROPERTY RIGHTS. Seller owns and possesses all
right, title and interest, or holds a valid license, in and to trademarks,
service marks, trade names, corporate names, trade secrets, know-how or other
intellectual property rights owned by, licensed to or otherwise controlled by
the Seller or used in, developed for use in or necessary to the conduct of the
Seller's Business as now conducted or planned to be conducted. Seller does not
license to third parties any of its intellectual property. Neither Seller nor
Xxxxxxx XxxXxxxxx has received any notice of, nor are there any facts known to
the Seller or Xxxxxxx XxxXxxxxx which indicate a likelihood of, any
infringement or misappropriation by, or conflict from, any third party with
respect to the Seller's intellectual property rights; no claim by any third
party contesting the validity of any of the Seller's intellectual property
rights has been made, is currently outstanding or, to the best knowledge of the
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Seller and Xxxxxxx XxxXxxxxx, is threatened; and neither the Seller nor Xxxxxxx
XxxXxxxxx have received any notice of any infringement, misappropriation or
violation by the Seller of any intellectual property rights of any third
parties and the Seller has not infringed, misappropriated or otherwise violated
any such intellectual property rights.
3.12 CUSTOMERS AND SUPPLIERS. Schedule 3.12 lists the ten largest
customers and suppliers of the Business for the fiscal year ended December 31,
1997 and sets forth opposite the name of each such customer or supplier the
approximate percentage of net sales or purchases by the Seller attributable to
such customer or supplier for such period. Since December 31, 1997, no
customer or supplier listed on Schedule 3.12, and in particular Intel and State
Farm, has indicated that it will stop doing business with, or significantly
decrease the rate of business done with, the Seller.
3.13 FINANCIAL STATEMENTS. Seller and Xxxxxxx XxxXxxxxx have
delivered to Buyer (a) balance sheets relating to the Seller as at December 31,
1995 and December 31, 1996 and statements of income for the fiscal periods then
ended; and (b) a balance sheet relating to the Seller as at December 31, 1997
(the "Latest Balance Sheet") and statements of income for the period then ended
(the documents provided under this Section 3.13(b) are hereinafter referred to
as the "Latest Financial Statements," and the documents provided under Sections
3.13(a) and (b) are hereinafter referred to as the "Financial Statements").
True and correct copies of the Financial Statements are attached hereto as
Exhibit C. All such Financial Statements are true, correct and accurate in all
respects and have been compiled in accordance with statements on standards for
accounting and review services issued by the American Institute of Certified
Public Accountants.
3.14 TAX MATTERS.
(a) Each of Seller and any subsidiary, any affiliated,
combined or unitary group of which the Company or any subsidiary is or was a
member, any "Plans" (as defined in Section 3.16(b) hereof), as the case may be
(each, a "Tax Affiliate" and, collectively, the "Tax Affiliates"), has: (i)
timely filed (or has had timely filed on its behalf) all returns, declarations,
reports, estimates, information returns, and statements ("Returns") required to
be filed or sent by it in respect of any "Taxes" (as defined in subsection (f)
below) or required to be filed or sent by it by any taxing authority having
jurisdiction; (ii) timely and properly paid (or has had paid on its behalf) all
Taxes shown to be due and payable on such Returns; (iii) established on its
Latest Balance Sheet, in accordance with generally accepted accounting
principles, reserves that are adequate for the payment of any Taxes not yet due
and payable; (iv) complied with all applicable laws, rules, and regulations
relating to the withholding of Taxes and the payment thereof (including,
without
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limitation, withholding of Taxes under Sections 1441 and 1442 of the Internal
Revenue Code of 1986, as amended (the "Code"), or similar provisions under any
foreign laws), and timely and properly withheld from individual employee wages
and paid over to the proper governmental authorities all amounts required to be
so withheld and paid over under all applicable laws.
(b) There are no liens for Taxes upon any of the assets,
except liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted
or assessed against Seller or the Tax Affiliates that has not been resolved and
paid in full. No waiver, extension or comparable consent given by Seller or
the Tax Affiliates regarding the application of the statute of limitations with
respect to any Taxes or Returns is outstanding, nor is any request for any such
waiver or consent pending. There has been no Tax audit or other administrative
proceeding or court proceeding with regard to any Taxes or Returns, nor is any
such Tax audit or other proceeding pending, nor has there been any notice to
Seller by any Taxing authority regarding any such Tax, audit or other
proceeding, or, to the best knowledge of Seller, is any such Tax audit or other
proceeding threatened with regard to any Taxes or Returns. Seller does not
expect the assessment of any additional Taxes on Seller or the Tax Affiliates
and is not aware of any unresolved questions, claims or disputes concerning the
liability for Taxes on Seller or the Tax Affiliates which would exceed the
estimated reserves established on its books and records.
(d) Neither Seller nor any Tax Affiliate is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code and the consummation of the transactions
contemplated by this Agreement will not be a factor causing payments to be made
by Seller or any Tax Affiliate that are not deductible (in whole or in part)
under Section 280G of the Code.
(e) Neither Seller nor any Tax Affiliate has requested any
extension of time within which to file any Return, which Return has not since
been filed.
(f) For purposes of this Agreement, the term "Taxes" means
all taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise, estimated, severance, stamp,
occupation, property, or other taxes, customs duties, fees, assessments, or
charges of any kind whatsoever, including, without limitation, all interest and
penalties thereon, and additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign, upon Seller or any Tax Affiliate.
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3.15 EMPLOYEES. Except as set forth in the Disclosure Schedule
under the caption referencing this Section 3.15, and only with respect to
employees of Seller who perform functions in connection with the Business: (a)
to the best knowledge of Seller and Xxxxxxx XxxXxxxxx, no employee of Seller
and no group of the Seller's employees has any plans to terminate his or her
employment; (b) Seller has complied 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; (c) Seller has no material labor relations problem pending and its labor
relations are satisfactory; (d) there are no workers' compensation claims
pending against Seller nor is Seller aware of any facts that would give rise to
such a claim; (e) to the best knowledge of Seller, no employee of Seller is
subject to any secrecy or non-competition agreement or any other agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the Business; and (f) no employee or former employee of Seller has any claim
with respect to any intellectual property rights of Seller set forth under the
caption referencing Section 4.18 hereof in the Disclosure Schedule.
3.16 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in the Disclosure Schedule under the
caption referencing Section 3.16 hereof in the Disclosure Schedule, with
respect to all employees and former employees of Seller who perform or
performed functions in connection with the Business and all dependents and
beneficiaries of such employees and former employees: (i) Seller does not
maintain or contribute to any nonqualified deferred compensation or retirement
plans, contracts or arrangements; (ii) Seller does not maintain or contribute
to any qualified defined contribution plans (as defined in Section 3(34) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 414(i) of the Code; (iii) Seller does not maintain or contribute to any
qualified defined benefit plans (as defined in Section 3(35) of ERISA or
Section 414(j) of the Code); and (iv) Seller does not maintain or contribute to
any employee welfare benefit plans (as defined in Section 3(1) of ERISA).
(b) To the extent required (either as a matter of law or to
obtain the intended tax treatment and tax benefits), all employee benefit plans
(as defined in Section 3(3) of ERISA) which Seller does maintain or to which it
does contribute (collectively, the "Plans") comply in all material respects
with the requirements of ERISA and the Code. With respect to the Plans, (i)
all required contributions which are due have been made and a proper accrual
has been made for all contributions due in the current fiscal year; (ii) there
are no actions, suits or claims pending, other than routine uncontested claims
for benefits; and (iii) there have been no prohibited transactions (as defined
in Section 406 of ERISA or Section 4975 of the Code).
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(c) Buyer has received true and complete copies of (i) the
most recent determination letter, if any, received by Seller from the Internal
Revenue Service regarding the Plans which Seller maintains or to which it
contributes and any amendment to any Plan made subsequent to any Plan
amendments covered by any such determination letter; (ii) the most recent
financial statements and annual report or return for the Plans; and (iii) the
most recently prepared actuarial valuation reports.
(d) Seller does not contribute (and has not ever contributed)
to any multi-employer plan, as defined in Section 3(37) of ERISA. Seller has
no actual or potential liabilities under Section 4201 of ERISA for any complete
or partial withdrawal from a multi-employer plan. Seller has no actual or
potential liability for death or medical benefits after separation from
employment, other than (i) death benefits under the employee benefit plans or
programs (whether or not subject to ERISA) set forth under the caption
referencing this Section 4.19 in the Disclosure Schedule and (ii) health care
continuation benefits described in Section 4980B of the Code.
(e) Neither Seller nor any of its directors, officers,
employees or other "fiduciaries", as such term is defined in Section 3(21) of
ERISA, has committed any breach of fiduciary responsibility imposed by ERISA or
any other applicable law with respect to the Plans which would subject Seller,
Buyer, Buyer's subsidiaries or any of their respective directors, officers or
employees to any liability under ERISA or any applicable law.
(f) Seller has not incurred any liability for any tax or
civil penalty or any disqualification of any employee benefit plan (as defined
in Section 3(3) of ERISA) imposed by Sections 4980B and 4975 of the Code and
Part 6 of Title I and Section 502(i) of ERISA.
3.17 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed or
recorded on the Latest Balance Sheet, the Seller has no obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
or to become due and whether or not insured) arising out of transactions or
events heretofore entered into, or any action or inaction, or any state of
facts existing, with respect to or based upon transactions or events heretofore
occurring, except for liabilities which have arisen after the date of the
Latest Balance Sheet arising in the ordinary course of business.
3.18 NO MATERIAL ADVERSE CHANGES. Since the date of the Latest
Financial Statements, there has been no material adverse change in customer,
employee or supplier relations, or the business condition of Seller.
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3.19 LIMITATIONS REGARDING REPRESENTATIONS AND WARRANTIES. As
used in this Agreement or in any other agreement, document, certificate or
instrument delivered by Seller or Xxxxxxx XxxXxxxxx to Buyer, the phrase "to
the best of Seller's and/or Xxxxxxx XxxXxxxxx'x actual knowledge", "to the best
of Seller's and/or Xxxxxxx XxxXxxxxx'x knowledge" or any similar phrase shall
mean the knowledge, after due inquiry, of Xxxxxxx XxxXxxxxx and each and every
officer and director of Seller. Buyer agrees to inform Seller promptly in
writing if it discovers that any representation or warranty of Seller or
Xxxxxxx XxxXxxxxx is inaccurate in any material respect, or if it believes that
Seller or Xxxxxxx XxxXxxxxx has failed to deliver to Buyer any document or
material which it or she is obligated to deliver hereunder.
3.20 DISCLOSURE. Neither this Agreement nor any other agreement,
document, certificate or instrument nor the Financial Statements delivered by
Seller or Xxxxxxx XxxXxxxxx to Buyer, taken as a whole, contains any untrue
statement of a material fact regarding the Seller or its Business or any of the
other matters dealt with in this Article III relating to the Seller, the
Business or the transactions contemplated by this Agreement. There is no fact
specific to the Business that has not been disclosed to Buyer of which Seller
or Xxxxxxx XxxXxxxxx or any officer or director of the Seller is aware which
could materially affect adversely the Business, including operating results,
assets, customer relations and employee relations, of the Business.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents, warrants, and covenants as follows:
4.1 AUTHORITY; APPROVAL OF TRANSACTIONS. Buyer has the power,
capacity and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance
of this Agreement and any related agreement by Buyer have been duly and validly
authorized by the Board of Directors of Buyer and by all other necessary
corporate action on the part of Buyer. This Agreement and any related
agreements constitute the legally valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms. The
execution, delivery and performance of this Agreement by Buyer and the
execution, delivery and performance of any related agreements and the
consummation of the contemplated transactions by Buyer will not violate or
constitute a breach or default, whether upon lapse of time and/or the
occurrence of any act or event or otherwise, under the Articles of
Incorporation or Bylaws of Buyer or any other contract, commitment or
arrangement of Buyer, or violate any law.
4.2 LEGAL MATTERS. There is no suit, action, arbitration, legal,
administrative or other proceeding or governmental investigation pending or, to
the best knowledge of Buyer, threatened against or related to it which might
adversely affect or restrict its ability to consummate the transactions
contemplated hereby.
4.3 BROKERS. No brokers, finders or other persons have been
engaged, or brokers' fees, finders' fees or commissions incurred, by Buyer in
connection with the transactions contemplated by this Agreement.
4.4 REASONABLE EFFORTS. From the date of this Agreement until
the Closing, Buyer will (i) use reasonable efforts to obtain any consent,
authorization or approval of, or exemption by, any governmental authority or
agency, or third party required to be obtained by it in connection with this
Agreement for the taking of any action in connection with the consummation
hereof and (ii) duly comply with all applicable laws as may be required for the
performance of all acts and all things contemplated by this Agreement.
4.5 PIGGYBACK REGISTRATION RIGHTS. The Purchase Shares shall have
the following piggyback registration rights:
(a) If XxxxxXxxx shall propose to file a registration
statement with the Securities and Exchange Commission under the
Securities Act of 1933, as
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amended (the "Securities Act") (except registrations on such Forms or
similar form(s) solely for registration of securities in connection
with an employee benefit plan, dividend reinvestment or stock option
plan or a merger or consolidation), covering an underwritten public
offering of XxxxxXxxx'x Common Stock within two years from the date of
this Agreement, XxxxxXxxx will notify the Seller and Xxxxxxx XxxXxxxxx
in writing at least thirty days prior to each such filing and will
include in the registration statement (to the extent permitted by
applicable regulation), but on one occasion only (except as otherwise
set forth in the last sentence of this Section 4.5(a) below) under
this Section 4.5, the Purchase Shares to the extent requested by
Seller and Xxxxxxx XxxXxxxxx, which request must made in writing
within ten days after the receipt of any such notice. If the
registration statement filed pursuant to the thirty day notice has not
become effective within six months following the date such notice is
given to Seller and Xxxxxxx XxxXxxxxx, XxxxxXxxx must again notify
Seller and Xxxxxxx XxxXxxxxx in the manner provided above.
Notwithstanding, the number of Purchase Shares proposed to be
registered thereby shall be reduced upon the request of the managing
underwriter(s) of such offering. If, as a result of such a request by
the managing underwriter(s), less than all of the Purchase Shares are
registered, Seller and Xxxxxxx XxxXxxxxx shall be entitled for a
period of two years following such registration to another one-time
right to register the remaining Shares in accordance with the
provisions of this Section 4.5.
(b) All expenses of any such registration statement
referred to in this Section 4.5, except the fees of counsel to Seller
and Xxxxxxx XxxXxxxxx (unless Seller and Xxxxxxx XxxXxxxxx use
XxxxxXxxx'x counsel, in which case XxxxxXxxx shall pay for such fees),
underwriting commission or discounts, filing fees, and any transfer or
other taxes applicable to such Purchase Shares, shall be borne by
XxxxxXxxx.
(c) Except as provided in Section 4.5(a) above, upon
effectiveness of a registration statement which includes some or all
of the Purchase Shares, the rights under this Section 4.5 shall
terminate. The rights under this Section 4.5 shall be available
exclusively to Seller and Xxxxxxx XxxXxxxxx, her heirs and the
personal representatives of her estates, and shall not be available to
any transferee or purchaser of the Purchase Shares other than Xxxxxxx
XxxXxxxxx.
(d) XxxxxXxxx will furnish the Seller and Xxxxxxx
XxxXxxxxx with a reasonable number of copies of any prospectus
included in such filings and will amend or supplement, at XxxxxXxxx'x
expense, the same as required during the period of required use
thereof.
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(e) In the case of the filing of any registration
statement, and to the extent permissible under the Securities Act, and
controlling precedent thereunder, XxxxxXxxx, Seller and Xxxxxxx
XxxXxxxxx shall provide cross indemnification agreements to each other
in customary scope, including but not limited to any losses, claims,
damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Securities Exchange Act of 1934,
as amended, or other federal or state laws, of covering the accuracy
and completeness of the information furnished by each.
(f) Seller and Xxxxxxx XxxXxxxxx agree to cooperate with
XxxxxXxxx in the preparation and filing of any such registration
statement, and in furnishing of information concerning the Seller and
Xxxxxxx XxxXxxxxx for inclusion therein, or in any efforts by
XxxxxXxxx to establish that the proposed sale is exempt under the
Securities Act as to any proposed distribution.
ARTICLE V
COVENANTS OF SELLER AND XXXXXXX XXXXXXXXX
5.1 CONDUCT OF THE BUSINESS. Seller and Xxxxxxx XxxXxxxxx agree
to observe each term set forth in this Section 5.1 and agree that, from the
date hereof until the Closing Date, unless otherwise consented to by Buyer in
writing:
(a) Seller and Xxxxxxx XxxXxxxxx shall not, directly or
indirectly, sell, pledge, dispose of or encumber any part of the Business,
except in the ordinary course of business.
(b) The Business shall be conducted only in, and Seller and
Xxxxxxx XxxXxxxxx shall not take any action except in, the ordinary course of
Seller's business, on an arm's-length basis and in accordance in all material
respects with all applicable laws, rules and regulations and Seller's past
custom and practice;
(c) Seller and Xxxxxxx XxxXxxxxx shall not, directly or
indirectly, do or permit to occur any of the following insofar as they relate
to Business: (i) acquire (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership, joint venture or
other business organization or division or material assets thereof; (ii) incur
any indebtedness for borrowed money or issue any debt securities except the
borrowing of working capital in the ordinary course of business and consistent
with past practice; (iii) permit any accounts payable owed to trade creditors
to remain outstanding more than 60 days; (iv) accelerate, beyond the normal
collection cycle, collection of accounts receivable; or (v) enter into or
propose to enter into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 5.1(c);
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(d) Seller and Xxxxxxx XxxXxxxxx shall not, directly or
indirectly, (i) enter into or modify any employment, severance or similar
agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any officers or directors or consultants
(except for bonuses paid to certain of Seller's employees in the amounts listed
in Schedule 5.1(d)); or (ii) in the case of employees, officers or consultants
who earn in excess of $50,000 per year, take any action with respect to the
grant of any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits payable in effect on the date hereof
(except for bonuses paid to certain of Seller's employees in the amounts listed
on Schedule 5.1(d)); PROVIDED, HOWEVER, that if certain employees listed on
Schedule 5.1(d) either do not have non-competition agreements with Seller or
have non-competition agreements with Seller that cannot be assigned to Buyer as
part of the Business, then Seller or Xxxxxxx XxxXxxxxx must require such
employees, as consideration for receiving their bonuses, to execute
non-competition agreements with Seller, in form satisfactory to Buyer, which
non-competition agreements shall be assignable and assigned to Buyer at the
Effective Time as part of the Business.
(e) Seller and Xxxxxxx XxxXxxxxx shall not adopt or amend any
bonus, profit sharing, compensation, pension, retirement, deferred
compensation, employment or other employee benefit plan, trust, fund or group
arrangement for the benefit or welfare of any employees or affiliates;
(f) Seller shall not cancel or terminate its current
insurance policies covering the Business, or cause any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated or lapsed policies for substantially
similar premiums are in full force and effect;
(g) Seller and Xxxxxxx XxxXxxxxx shall (i) use their best
efforts to preserve intact the organization and goodwill of the Business, keep
available the services of Seller's officers and employees as a group and
maintain satisfactory relationships with suppliers, distributors, customers and
others having business relationships with Seller in connection with the
Business; (ii) confer on a regular and frequent basis with representatives of
Buyer to report operational matters and the general status of ongoing
operations with respect to the Business; (iii) not intentionally take any
action which would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue at the Closing;
(iv) notify Buyer of any emergency or other change in the normal course of the
Business or in the operation of the properties of the Business and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such emergency,
change, complaint, investigation or hearing would be material, individually or
in the aggregate, to the business, operations or financial condition of Seller
or to
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Seller's or Buyer's ability to consummate the transactions contemplated by this
Agreement; and (v) promptly notify Buyer in writing if Seller or Xxxxxxx
XxxXxxxxx shall discover that any representation or warranty made by it in this
Agreement was when made, or has subsequently become, untrue in any respect;
(h) Seller shall (i) file any Tax returns, elections or
information statements with respect to any liabilities for Taxes of Seller or
other matters relating to Taxes of Seller which affect the Business and
pursuant to applicable law must be filed prior to the Closing Date; (ii)
promptly upon filing provide copies of any such Tax returns, elections or
information statements to Buyer; (iii) make any such Tax elections or other
discretionary positions with respect to taxes taken by or affecting Seller only
upon prior consultation with and consent of Buyer; and (iv) not amend any
Return;
(i) Neither Seller nor Xxxxxxx XxxXxxxxx shall make any
election with respect to taxes, change an annual accounting period, adopt or
change any accounting method or file any amended return, report or form, if
such election, adoption, change or filing would have the effect of increasing
the Tax liability of the Buyer with respect to any period ending after the
Closing Date.
5.2 CONDITIONS. Seller and Xxxxxxx XxxXxxxxx shall take all
commercially reasonable actions necessary to cause the conditions set forth in
Article VIII to be satisfied and to consummate the transactions contemplated
herein as soon as reasonably possible after the satisfaction thereof.
5.3 COOPERATION WITH AUDIT; AUDIT COST. Seller and Xxxxxxx
XxxXxxxxx shall cooperate in any audit conducted by Buyer's accountants that
may be necessary in connection with any filing of Form 8-K with the Securities
and Exchange Commission. Buyer shall pay the costs of Buyer's accountants in
any analysis and reviews Buyer may perform as to Seller's financial statements
and any audit Buyer may conduct as described in the preceding sentence.
ARTICLE VI
COVENANTS OF BUYER
Buyer covenants and agrees with Seller and Xxxxxxx XxxXxxxxx
as follows:
6.1 CONDITIONS. Buyer shall take all commercially reasonable
actions necessary to cause the conditions set forth in Article VII to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof.
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ARTICLE VII
CONDITIONS TO SELLER'S AND
XXXXXXX XXXXXXXXX'X OBLIGATION TO CLOSE
Seller's and Xxxxxxx XxxXxxxxx'x obligations hereunder are subject to
the fulfillment prior to or at Closing of each of the following conditions, the
performance of any of which may be waived in writing by Seller and Xxxxxxx
XxxXxxxxx.
7.1 REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING. Buyer's
representations and warranties, contained in this Agreement, shall be true in
all material respects at Closing as though such representations and warranties
were made as of such time.
7.2 COMPLIANCE. Buyer shall have performed and complied in all
material respects with all covenants, agreements and conditions required by
this Agreement to be performed and complied with by Buyer prior to or at
Closing.
7.3 ASSIGNMENT AND ASSUMPTION AGREEMENT. Buyer shall have
executed and delivered to Seller an Assignment and Assumption Agreement,
attached hereto as Exhibit D, whereby Seller assigns the Business to Buyer and
Buyer assumes the Assumed Liabilities from Seller.
7.4 CLOSING DOCUMENTS. On the Closing Date, Buyer and XxxxxXxxx
shall have delivered to Seller and Xxxxxxx XxxXxxxxx the following Closing
Documents:
(a) an executed copy of each of this Agreement and any
other agreement, document, certificate or instrument delivered by
Buyer;
(b) a certificate executed by Buyer, dated the Closing
Date, stating that the covenants set forth in Sections 7.1 and 7.2
above have been satisfied;
(c) the stock certificate or certificates issued to
Seller representing the Purchase Shares, which certificates shall
include the restrictive legend set forth in Section 2.2(d)(ii) of this
Agreement;
(d) such other certificates, documents and instruments as
Seller and Xxxxxxx XxxXxxxxx reasonably request related to the
transactions contemplated hereby;
(e) a copy of the text of the resolutions adopted by the
board of directors of Buyer and XxxxxXxxx authorizing the execution,
delivery and performance of this Agreement and the consummation of all
of the
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transactions contemplated by this Agreement, along with a certificate
executed by the secretary of Buyer and XxxxxXxxx certifying to Seller
that such copies are true, correct and complete copies of such
resolutions and that such resolutions were duly adopted and have not
been amended or rescinded;
(f) incumbency certificates executed on behalf of Buyer
and XxxxxXxxx by its corporate secretary certifying the signature and
office of each officer of Seller executing this Agreement and any
other agreement, document, certificate or instrument delivered by
Seller;
(g) the two-year employment agreement between Xxxxxxx
XxxXxxxxx and Buyer referred to in Section 8.5 hereof in the form
attached hereto as Exhibit E; and
(h) an opinion from counsel to XxxxxXxxx as to the
legality of the Purchase Shares in the form attached hereto as Exhibit
F.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligations hereunder are subject to the fulfillment prior to
or at Closing of each of the following conditions, the performance of any of
which may be waived in writing by Buyer.
8.1 REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING. The
representations and warranties of Seller and Xxxxxxx XxxXxxxxx contained in
this Agreement, or in any other agreement, document, certificate or instrument
delivered by Seller or Xxxxxxx XxxXxxxxx to Buyer, shall be true in all
material respects at Closing as though such representations and warranties were
made as of such time.
8.2 COMPLIANCE. Seller and Xxxxxxx XxxXxxxxx shall have
performed and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed and complied with by
it or her prior to or at Closing.
8.3 DUE DILIGENCE RESULTS. Nothing shall have come to the
attention of Buyer or its agents in the course of its due diligence
investigation, pursuant to Section 10.1 or otherwise, which demonstrates that
any representation or warranty of Seller or Xxxxxxx XxxXxxxxx is inaccurate or
incomplete.
8.4 NON-COMPETITION AGREEMENTS. Seller and Xxxxxxx XxxXxxxxx
shall have executed and delivered to Buyer the Non-Competition Agreements, the
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execution and delivery of such agreements being a material inducement to Buyer
to enter into this Agreement.
8.5 EMPLOYMENT AGREEMENTS. Xxxxxxx XxxXxxxxx shall have executed
and delivered to Buyer a two-year employment agreement in the form attached
hereto as Exhibit E, and the individuals listed in Schedule A shall have
executed and delivered to Buyer employment agreements of at least one year with
Buyer, all of which shall be satisfactory to Buyer.
8.6 NO MATERIAL ADVERSE CHANGES. Since the date of this
Agreement, there has been no material adverse change in customer, employee or
supplier relations, or the business condition of Seller.
8.7 NO RELATED LITIGATION. There is no instituted or pending
action or proceeding before any court or governmental authority or agency,
domestic or foreign, or, to the best of Seller's or Xxxxxxx XxxXxxxxx'x
knowledge, threatened action or proceeding, to which the Seller or Xxxxxxx
XxxXxxxxx are a party (i) challenging or seeking to make illegal, or to delay
or otherwise directly or indirectly restrain or prohibit, the consummation of
the transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by Buyer of all or a material portion of the business or
assets of Seller, (iii) seeking to invalidate or render unenforceable any
material provision of this Agreement or any of the agreements related to this
Agreement, or (iv) otherwise relating to the transactions contemplated hereby.
8.8 ASSIGNMENT AND ASSUMPTION AGREEMENT. Seller shall have
executed and delivered to Buyer an Assignment and Assumption Agreement whereby
Seller assigns the Business to Buyer and Buyer assumes the Assumed Liabilities
from Seller.
8.9 CLOSING DOCUMENTS. On the Closing Date, Seller and Xxxxxxx
XxxXxxxxx have delivered to Buyer the following Closing Documents:
(a) an executed copy of each of this Agreement, the
Non-Competition Agreements and the Employment Agreements, and any
other agreement, document, certificate or instrument delivered by
Seller or Xxxxxxx XxxXxxxxx;
(b) certificates executed by Seller and Xxxxxxx
XxxXxxxxx, dated the Closing Date, stating that the covenants set
forth in Sections 8.1 and 8.2 above have been satisfied;
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(c) any consents required to properly assign the Assumed
Contracts and the Service Contracts to Buyer, to the extent
obtainable;
(d) a copy of the text of the resolutions adopted by the
board of directors of Seller authorizing the execution, delivery and
performance of this Agreement and the consummation of all of the
transactions contemplated by this Agreement, along with a certificate
executed by the secretary of Seller certifying to Buyer that such
copies are true, correct and complete copies of such resolutions and
that such resolutions were duly adopted and have not been amended or
rescinded;
(e) incumbency certificates executed on behalf of Seller
by its corporate secretary certifying the signature and office of each
officer of Seller executing this Agreement and any other agreement,
document, certificate or instrument delivered by Seller;
(f) all documents necessary to vest in Buyer clear and
good title to all the Tangible Property;
(g) all documents necessary to assign to Buyer all of
Seller's economic rights under the Non-Assignable Service Contracts;
(h) non-competition agreements between Seller and certain
of its employees obtained pursuant to Section 5.1(d) above; and
(i) such other certificates, documents and instruments as
Buyer reasonably requests related to the transactions contemplated
hereby.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLER AND XXXXXXX XXXXXXXXX. In addition
to any other indemnification contained in this Agreement, Seller and Xxxxxxx
XxxXxxxxx jointly and severally covenant and agree with Buyer to indemnify
Buyer and XxxxxXxxx Corporation (its parent company), their directors,
officers, shareholders, agents, advisors and lenders and their successors and
assigns, and hold them harmless from, against, and in respect of any and all
costs, losses, claims, liabilities, fines, penalties, damages, and expenses
(including interest which may be imposed in connection therewith, court costs,
and reasonable fees and disbursements of counsel) (collectively, "Damages"),
incurred by any of them in connection with:
(a) any misrepresentation, omission or breach of any of
the representations, warranties, covenants or agreements made by
Seller or
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Xxxxxxx XxxXxxxxx in this Agreement, in the Exhibits or Schedules
hereto, or any agreements delivered in connection with the
transactions contemplated hereby; or
(b) the Retained Liabilities.
9.2 INDEMNIFICATION BY BUYER. In addition to any other
indemnification contained in this Agreement, Buyer covenants and agrees with
Seller and Xxxxxxx XxxXxxxxx to indemnify Xxxxxxx XxxXxxxxx and Seller, its
directors, officers, shareholders, agents, advisors and lenders and their
successors and assigns, and hold them harmless from, against, and in respect of
any and all costs, losses, claims, liabilities, fines, penalties, damages, and
expenses (including interest which may be imposed in connection therewith,
court costs, and reasonable fees and disbursements of counsel) (collectively,
"Damages"), incurred by any of them in connection with:
(a) any misrepresentation, omission or breach of any of
the representations, warranties, covenants or agreements made by Buyer
in this Agreement or in any agreement delivered in connection with the
transactions contemplated hereby; or
(b) the Assumed Liabilities.
9.3 RIGHT TO DEFEND, ETC. Within seven (7) days after the written
assertion against a party which is protected by the indemnification provisions
of Sections 9.1 and 9.2 above (an "Indemnified Party") by a third person of a
claim or liability which would entitle the Indemnified Party to Damages, the
Indemnified Party shall give written notice of the claim to the party obligated
to indemnify it ("Indemnifying Party"). Failure to give such notice, or any
delay prejudicial to the interests of the Indemnifying Party, shall relieve the
Indemnifying Party of any obligation of indemnification with respect to such
claim or liability to the extent the Indemnifying Party is in fact prejudiced
by such failure or delay. Upon receipt of timely notice, the Indemnifying
Party shall undertake the responsibility for the defense of such claim, at its
own expense. If, within seven (7) days after delivery of the notice of claim by
the Indemnified Party, the Indemnifying Party fails to advise the Indemnified
Party of its agreement to contest and defend against any such claim, or if the
Indemnifying Party does not participate in such litigation, proceedings, or
settlement negotiations, for any reason, then the Indemnified Party shall have
the right, at the Indemnifying Party's expense, to take such action as it deems
appropriate to defend, contest, settle, or compromise any such claim or
liability, and the Indemnifying Party agrees to be bound by any and all
rulings, judgments, compromises, and settlements reached by the Indemnified
Party in good faith, in the same manner as if it has participated therein.
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9.4 PAYMENT.
(a) Each Indemnifying Party agrees to reimburse each
Indemnified Party within thirty (30) days after presentation of an
itemized statement of Damages incurred by such Indemnified Party.
(b) If payment is not made within such thirty (30) day
period, the Indemnified Party may offset such Damages against any
amounts owed by it to the Indemnifying Party.
9.5 SETTLEMENT. Except as otherwise provided in this Agreement, no
Indemnified Party shall be entitled to indemnification under this Article VII
if such Indemnified Party voluntarily makes any payment in respect of, settles,
or offers to settle, or consents to any compromise or admits liability with
respect to, any third- party claim without the prior consent (which consent
shall not be unreasonably withheld) of the Indemnifying Party.
ARTICLE X
MISCELLANEOUS
10.1 INVESTIGATION OF SELLER'S RECORDS. Buyer may at any time
prior to Closing, through its representatives, accountants or counsel, make
such investigation of Seller's records relating to the Business as Buyer deems
reasonably necessary or advisable, and its representatives shall have access to
both Seller's premises and to such books, records and documents as Buyer shall
reasonably request. Buyer shall be furnished such operating data and other
information as it may reasonably request. Such investigation shall be at
Buyer's expense.
10.2. CONFIDENTIALITY. The parties to this Agreement agree that this
Agreement and the transactions contemplated by this Agreement, as well as any
other agreements between any of the same parties with respect to the
transactions contemplated by this Agreement, and any information provided to
Buyer by Seller or Xxxxxxx XxxXxxxxx regarding the leases subject to this
Agreement or regarding the transactions contemplated by this Agreement, shall
be held in strict confidence by each party hereto prior to the Closing;
provided, however that the parties to this Agreement agree that the
confidentiality required by this Section 10.2 shall not be breached as a result
of any filings made by Buyer or XxxxxXxxx Corporation with the Securities and
Exchange Commission.
10.3 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to Closing: (a) by unanimous consent
of Seller and Buyer; or (b) by Buyer if, as a result of its investigation made
pursuant to Section 10.1, Buyer in its sole discretion determines not to
proceed to Closing on this
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Agreement. Except as otherwise provided herein, termination of this Agreement
pursuant to this Section 10.3 shall terminate all obligations of the parties
hereunder.
10.4 REMEDIES FOR BREACH OF CONTRACT. In the event of a breach by
any party to this Agreement of any of its provisions, the non-breaching party
shall be entitled to (a) injunctive relief, in whole or in part and from time
to time, as more fully described below and (b) to seek actual damages. The
parties acknowledge that remedies at law for any breach of the provisions of
this Agreement will be inadequate and, accordingly, that the non-breaching
party shall, in addition to all other available remedies (including, without
limitation, seeking such monetary damages as can be shown to have been
sustained by reason of such breach, subject to the limitation set forth in the
preceding sentence), be entitled to injunctive or other equitable relief; and
the parties to this Agreement further agree that they shall not plead or
otherwise defend any claim of breach or threatened breach on grounds of
adequate remedy at law in an action by the non-breaching party for injunctive
relief. Injunctive relief and the right to seek actual damages (subject to
the limitation set forth above) shall be cumulative and nonexclusive remedies
and shall be in addition to any other remedy to which a non-breaching party
hereunder is entitled.
10.5 RISK OF LOSS. If, prior to Closing, furniture located
pursuant to any rental contract between Seller and another party in units
subject to leases or rentals assigned pursuant this Agreement is destroyed or
damaged, such loss shall be borne, as between Buyer and Seller, solely by
Seller.
10.6 SALES TAXES. Seller shall pay or have reduced from the
Purchase Price otherwise payable to Seller all sales, transfer, excise and
documentary taxes, and all recordation and filing fees, if any, payable in
connection with the transactions contemplated hereby.
10.7 GOVERNING LAW; VENUE. All questions concerning the
construction, validity and interpretation of this Agreement and the performance
of the obligations imposed by this Agreement will be governed by the internal
laws, and not the law of conflicts, of the State of California. The parties
hereto further agree that any action brought to enforce any right or obligation
under this Agreement shall be subject to the exclusive jurisdiction of the
Courts of the State of California.
10.8 TIME IS OF THE ESSENCE. Time is material and of the essence
with regard to the performance of all obligations and the payment of all sums
pursuant to this Agreement.
10.9 EXPENSES. Each party will pay all of its expenses in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder, and the consummation of the transactions contemplated by
this Agreement.
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10.10 HEADINGS. The headings set forth herein are for convenience
only and shall not be used in interpreting the text of the sections in which
they appear.
10.11 INCORPORATION OF EXHIBITS AND SCHEDULES. Each of the Exhibits
and Schedules attached hereto is by this reference incorporated herein and made
a part of this Agreement.
10.12 NOTICES. Any notice or other communication required, permitted
or desirable hereunder, shall be sufficiently given if sent to a party by
facsimile to the facsimile number shown below for such party or if sent to a
party by certified United States mail to the address shown below for such
party.
SELLER: Relocation Services, Inc.
000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xx. Xxxxxxx XxxXxxxxx
Facsimile Number: (000) 000-0000
XXXXXXX
XXXXXXXXX:
Facsimile Number: (000) 000-0000
With Copy To: Xxxxx X. Xxxxxxxx, Esq.
The Benice Group
X.X Xxx 00000
Xxxxxx, XX 00000-0000
Facsimile Number: (000) 000-0000
BUYER and
XXXXXXXXX: Xxxx X. Xxxxxxxx, President
XxxxxXxxx Corporation of America
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
With Copy To: Xxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
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10.13 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the parties hereto.
10.14 NO ASSIGNMENT WITHOUT APPROVAL. This Agreement shall not be
assigned by the Buyer or Xxxxxxx XxxXxxxxx without the prior written approval
of the other parties to this Agreement.
10.15 ENTIRE AGREEMENT. This Agreement and the Exhibits and
Schedules attached hereto, sets forth the entire agreement and understanding of
the parties, and there are no other prior or contemporaneous written or oral
agreements, undertakings, promises, warranties, or covenants not specifically
referred to, attached hereto or contained herein. This Agreement cannot be
waived, modified or changed except by a writing signed by all of the parties
hereto.
10.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and/or by facsimile signature, any one of which need not contain
the signatures of more than one party, but each of which shall constitute an
original and all such counterparts taken together shall constitute one and the
same instrument.
10.17 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
10.18 ATTORNEYS' FEES. In any action brought by any of the other
parties to this Agreement in connection with this Agreement and the
transactions contemplated hereby, the prevailing party in such action shall be
entitled to recover from the other party reasonable attorneys' fees, costs and
expenses.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal on the day and year first above written.
BUYER SELLER
XXXXXXXXX CORPORATION SOUTHERN CALIFORNIA
OF AMERICA RELOCATIONS, INC.
By: /s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxxxx XxxXxxxxx
---------------------------------- ----------------------------------
Xxxx X. Xxxxxxxx, Xxxxxxx XxxXxxxxx
President President
XXXXXXXXX CORPORATION XXXXXXX XXXXXXXXX
By: /s/ Xxxx X. Xxxxxxxx /s/ Xxxxxxx XxxXxxxxx
----------------------------------- -------------------------------------
Xxxx X. Xxxxxxxx,
President
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