Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DECORATE, INC.
AND
JB Express, INC.
AND
GUILDMASTER, INC.
AND
XXXXX X. XXXXXXX, XXXXX X. XXXXXXX
AND XXX X. XXXXX
Dated May _____, 2001
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 Merger ....................................................2
1.2 Closing .................................................. 2
1.3 Effective Time.............................................2
ARTICLE II
TERMS OF MERGER
2.1 Corporate Charter..........................................2
2.2 By-Laws .................................................. 2
2.3 Directors..................................................3
2.4 Officers 3
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares.......................................3
3.2 Adjustments to Exchange Ratio..............................3
3.3 Fractional Shares..........................................4
3.4 Exchange Procedures........................................4
3.5 Rights of From GuildMaster Shareholders....................4
3.6 Termination of Exchange Fund...............................4
3.7 Lost or Destroyed Shares...................................5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GUILDMASTER
AND GUILDMASTER SHAREHOLDERS
4.1 Organization, Standing, and Power..........................5
4.2 Subsidiaries...............................................5
4.3 Capital Structure..........................................5
4.4 Authority..................................................6
4.5 Financial Statements.......................................7
4.6 Authorizations; Compliance With Applicable Laws............7
4.7 Litigation and Claims......................................9
4.8 Taxes ..................................................9
4.9 Certain Agreements........................................10
4.10 Benefit Plans.............................................10
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4.11 Insurance.................................................12
4.12 Absence of Certain Changes or Events......................12
4.13 Properties, Leases and Other Agreements...................14
4.14 Patents, Trademarks and Trade Names.......................14
4.15 Votes Required............................................15
4.16 Tax Matters...............................................15
4.17 Investment Purpose........................................15
4.18 Conditions of Assets......................................15
4.19 Inventory.................................................15
4.20 Accounts Receivable.......................................15
4.21 Customers.................................................16
4.22 Full Disclosure...........................................16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DECORATE AND JBE
5.1 Organization, Standing and Power..........................16
5.2 Subsidiaries..............................................16
5.3 Capital Structure.........................................16
5.4 Authority.................................................17
5.5 Financial Statements......................................18
5.6 Authorizations; Compliance With Applicable Laws...........18
5.7 Litigation and Claims.....................................19
5.8 Taxes.....................................................20
5.9 Certain Agreements........................................20
5.10 Benefit Plans.............................................21
5.11 Insurance.................................................22
5.12 Absence of Certain Changes or Events......................22
5.13 Properties, Leases and Other Agreements...................24
5.14 Patents, Trademarks and Trade Names.......................24
5.15 Votes Required............................................25
5.16 Tax Matters...............................................25
5.17 Conditions of Assets......................................25
5.18 Inventory.................................................25
5.19 Accounts Receivable.......................................25
5.20 Customers.................................................26
5.21 Full Disclosure...........................................26
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS OF GUILDMASTER
6.1 Affirmative Covenants.....................................26
6.2 Negative Covenants........................................27
6.3 Access and Information....................................28
6.4 Update Disclosure; Breaches...............................29
6.5 Tax Treatment.............................................29
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ARTICLE VII
CERTAIN COVENANTS AND AGREEMENTS OF DECORATE AND JBE
7.1 Affirmative Covenants.....................................29
7.2 Negative Covenants........................................30
7.3 Access and Information....................................31
7.4 Update Disclosure; Breaches...............................32
7.5 Tax Treatment.............................................32
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Brokers and Finders.......................................32
8.2 Additional Agreements; Reasonable Efforts.................32
8.3 Expenses .................................................33
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to Obligations of Decorate and JBE.............33
9.2 Conditions to Obligations of GuildMaster and
GuildMaster Shareholders..................................34
ARTICLE X
TERMINATION
10.1 Termination and Abandonment...............................35
10.2 Effect of Termination.....................................36
10.3 Extension Waiver..........................................36
10.4 Specific Performance and Other Remedies...................36
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by GuildMaster Shareholders...............36
11.2 Indemnification by Decorate and JBE.......................37
11.3 Indemnification Procedure.................................37
11.4 Indemnification Limits....................................37
ARTICLE XII
GENERAL PROVISIONS
12.1 Survival of Representations, Warranties and Agreements....38
12.2 Notices ..................................................38
12.3 Counterparts..............................................38
12.4 Entire Agreement; No Third Party Beneficiaries............38
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12.5 Amendment.................................................39
12.6 Governing Law.............................................39
12.7 Publicity.................................................39
12.8 Assignment................................................39
12.9 Knowledge of the Parties..................................39
12.10 Confidentiality...........................................39
Exhibit "A" Form of Articles of Merger
Exhibit "B" Form of Promissory Note to Xxx X. Xxxxx
Exhibit "C" Form of Employment Agreement of Xxx Xxxxx
Exhibit "D" Form of Employment Agreement of Xxxxx X. Xxxxxxx
Exhibit "E" Form of Promissory Note to Xxxxx X. Xxxxxxx
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), made and entered into the
_______ day of May, 2001, by and among Decorate, Inc., a Missouri corporation
("Decorate"), JB Express, Inc., a Missouri corporation ("JBE"), GuildMaster,
Inc., a Missouri corporation ("GuildMaster") (all of said corporations being
hereinafter sometimes referred to individually as a "Constituent Corporation"
and collectively as the "Constituent Corporations"), and Xxxxx X. Xxxxxxx, Xxxxx
X. Xxxxxxx and Xxx X. Xxxxx (hereinafter sometimes referred to collectively as
the "GuildMaster Shareholders").
W I T N E S S E T H:
WHEREAS, Decorate is a corporation duly organized and existing under
the laws of the State of Missouri, and has on the date hereof an authorized
capital consisting of 1,000,000 shares of common stock, par value of $.01 per
share, of which on the date hereof 315,000 shares are issued and outstanding,
and which is the successor to Xxxxxxxx.xxx, L.L.C., a Missouri limited liability
company (and all references to Decorate in this Agreement shall include both
Decorate, Inc. and Xxxxxxxx.xxx, L.L.C.); and
WHEREAS, JBE is the wholly owned subsidiary of Decorate, and has on the
date hereof an authorized capital stock consisting of 500 shares of common
stock, par value $.01 per share, of which on the date hereof 500 shares are
issued and outstanding, and are held by Decorate; and
WHEREAS, GuildMaster is a corporation duly organized and existing under
the laws of the State of Missouri, and has on the date hereof an authorized
capital consisting of 50,000 shares of common stock, par value of One Dollar
($1.00) per share, of which on the date hereof 50,000 shares are issued and
outstanding, and which are held by the GuildMaster Shareholders; and
WHEREAS, the respective Boards of Directors and shareholders of the
Constituent Corporations are of the opinion that the merger (the "Merger"),
pursuant to this Agreement, of GuildMaster with and into JBE on the terms and
conditions contained herein and in accordance with The General and Business
Corporation Law of Missouri (the "Missouri Corporation Law") is in the best
interests of the Constituent Corporations and their respective shareholders, and
therefore have approved this Agreement and the Merger on the terms and
conditions as set forth in this Agreement. At the effective time of the Merger,
the outstanding shares of common stock of GuildMaster held by the GuildMaster
Shareholders shall be converted into the right to receive shares of common stock
of Decorate, promissory notes of Decorate, or a combination thereof, as set
forth in this Agreement. As a result, shareholders of GuildMaster shall become
shareholders of Decorate, and JBE, as the wholly owned subsidiary of Decorate,
shall continue to conduct, under its corporate charter, the business formerly
conducted by GuildMaster. The transactions contemplated in this Agreement are
subject to the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Merger,
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for federal income tax purposes, shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the GuildMaster Shareholders and the Constituent Corporations
desire to make certain representations, warranties and agreements in connection
with the Merger and to set forth the terms and conditions of the Merger;
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement and
the Missouri Corporation Law, at the Closing Date (as hereinafter defined),
GuildMaster shall be merged with and into JBE (the "Merger"). JBE shall be the
surviving corporation (hereinafter sometimes referred to as the "Surviving
Corporation") resulting from the Merger and shall operate under its corporate
charter. All of the property, rights, privileges, leases and patents of
GuildMaster shall be transferred to and become the property of JBE. The
corporate identity and existence of GuildMaster, separate and apart from JBE,
shall cease on consummation of the Merger.
1.2 Closing. The closing of the Merger (the "Closing") shall take place
at the offices of Neale & Xxxxxx, L.L.P., commencing at 9:00 a.m. (local time)
on a date (the "Closing Date") to be specified by the parties, which, unless all
parties agree, shall be no later than the business day following the
satisfaction or waiver of all conditions to the obligations of the parties to
consumate the transactions contemplated hereby (other than conditions with
respect to actions the respective parties will take at the Closing itself) or
such other date as the parties may mutually determine.
1.3 Effective Time. On or as soon as practicable after the Closing
Date, articles of merger, in the form as attached hereto as Exhibit "A", and
made a part hereof by this reference, shall be prepared and filed in accordance
with the Missouri Corporation Law and the Merger shall be effective upon the
date of the issuance of a certificate of merger by the Secretary of State of the
State of Missouri (said date hereinafter referred to as the "Effective Time" of
the Merger).
ARTICLE II
TERMS OF MERGER
2.1 Corporate Charter. The articles of incorporation of JBE in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation unless otherwise amended or repealed. The name of
the Surviving Corporation shall be JB Express, Inc.
2.2 By-Laws. The By-Laws of JBE in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation until otherwise
amended or repealed.
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2.3 Directors. The directors of JBE in office immediately prior to the
Effective Time shall serve as the directors of the Surviving Corporation from
and after the Effective Time in accordance with the By-Laws of the Surviving
Corporation.
2.4 Officers. The officers of JBE in office immediately prior to the
Effective Time, together with such additional persons as may hereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the By-Laws of the Surviving Corporation.
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. As of the Effective Time, by virtue of the
Merger and without any action on the part of a Constituent Corporation, or the
shareholders of a Constituent Corporation, but subject to adjustment as provided
herein, the shares of the Constituent Corporations shall be converted and
exchanged as follows:
(a) Each share of common stock of Decorate issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(b) Each share of common stock of JBE issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(c) Each share of GuildMaster common stock issued and
outstanding at the Effective Time shall cease to be outstanding, and
shall be automatically cancelled and retired and shall cease to exist,
and shall be converted into and exchanged for the right to receive
common stock of Decorate, fully paid and nonassessable, and a
promissory note from Decorate, as follows:
(i) With respect to 7,500 shares of common stock of
GuildMaster held by Xxx X. Xxxxx, he shall receive the
promissory note of Decorate in the principal amount of Three
Hundred Seventy-Five Thousand Dollars ($375,000.00) (the
"Xxxxx Note") (Fifty Dollars ($50.00) per share), in the form
as attached hereto as Exhibit "B", and made a part hereof by
this reference; and
(ii) With respect to the balance of shares of common
stock of GuildMaster held by Xxx X. Xxxxx, and with respect to
all shares of common stock of GuildMaster held by Xxxxx X.
Xxxxxxx and Xxxxx X. Xxxxxxx, said GuildMaster Shareholders
shall receive 5.252 shares of common stock of Decorate for
each such share of GuildMaster common stock (the "Exchange
Ratio").
3.2 Adjustments to Exchange Ratio. In the event Decorate changes the
number of shares of Decorate common stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date therefore (in
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the case of a stock dividend) or the effective date thereof (in the case of a
stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
3.3 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of GuildMaster common stock exchanged pursuant
to the Merger who would otherwise be entitled to receive a fraction of a share
of Decorate common stock shall receive, in lieu thereof, cash (without interest)
in an amount equal to such fractional part of the share of Decorate common stock
multiplied by the value of one share of Decorate common stock at the Effective
Time. For purposes of this Agreement, the value of one share of Decorate common
stock at the Effective Time shall be $9.52 (subject to adjustment as provided in
Section 3.2 hereof). No such holder shall be entitled to dividends, voting
rights, or any other rights as a shareholder in respect of any fractional
shares.
3.4 Exchange Procedures. At the Closing, Decorate shall deposit with
Husch & Eppenberger, LLC (the "Exchange Agent"), for the benefit of the
GuildMaster Shareholders, the Xxxxx Note, the cash to be paid in lieu of
fractional shares, and certificates dated as of the Closing Date representing
the shares of Decorate common stock (the "Exchange Fund") to be issued and paid
pursuant to Section 3.1 hereof in exchange for the outstanding shares of
GuildMaster common stock. As of the Closing Date, Decorate shall cause the
Exchange Agent to deliver to each GuildMaster Shareholder (i) a letter of
transmittal which will specify that delivery shall be effective, and risk of
loss and title to the GuildMaster certificates shall pass, only upon delivery of
the GuildMaster certificates to the Exchange Agent and which shall be in such
form and have such other provisions as GuildMaster and Decorate may reasonably
specify, and (ii) instructions for use in effectuating the surrender of the
GuildMaster certificates in exchange for certificates representing shares of
Decorate common stock, cash to be paid in lieu of any fractional share, and the
Xxxxx Note. Upon surrender of a GuildMaster Shareholder's GuildMaster
certificate or certificates for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, the holder of such GuildMaster
certificate(s) shall be entitled to receive in exchange therefore, immediately
following said surrender, (1) a certificate representing the applicable number
of whole shares of Decorate common stock, and (2) immediately available funds in
the amount of the cash to be paid in lieu of a fractional share, and (3) the
Xxxxx Note, and the GuildMaster certificate(s) so surrendered shall forthwith be
cancelled.
3.5 Rights of Former GuildMaster Shareholders. At the Effective Time,
the stock transfer books of GuildMaster shall be closed as to holders of
GuildMaster common stock immediately prior to the Effective Time and no transfer
of GuildMaster common stock by any such holder shall thereafter be made or
recognized. Until surrendered in exchange in accordance with the provisions of
Section 3.4 hereof, each certificate theretofore representing shares of
GuildMaster common stock shall from and after the Effective Time represent for
all purposes only the right to receive the consideration provided in Section 3.1
hereof in exchange therefore.
3.6 Termination of Exchange Fund. Any portion of the Exchange Fund that
remains unclaimed by the GuildMaster Shareholders for twelve (12) months after
the Closing Date shall be paid to Decorate. Any shareholders of GuildMaster who
have not theretofore complied with this Article III shall thereafter look only
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to Decorate for payment of their shares of Decorate common stock, the Xxxxx Note
and cash in lieu of any fractional share of Decorate common stock, without any
interest thereon. Notwithstanding the foregoing, neither the Exchange Agent nor
Decorate shall be liable to any former holder of shares of GuildMaster common
stock for any amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar laws.
3.7 Lost or Destroyed Certificates. In the event any GuildMaster
certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such GuildMaster certificate to be
lost, stolen or destroyed and, if required by the Exchange Agent, the execution
and delivery of an indemnity agreement whereby said person shall agree to
indemnify the Exchange Agent and Decorate against any claim that may be made
against it with respect to such GuildMaster certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed GuildMaster certificate the
shares of Decorate common stock and other consideration in an amount as
determined in accordance with Section 3.1 hereof, deliverable in respect thereof
pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GUILDMASTER
AND GUILDMASTER SHAREHOLDERS
GuildMaster and the GuildMaster Shareholders hereby jointly and
severally represent and warrant to Decorate and JBE as follows:
4.1 Organization, Standing, and Power. GuildMaster is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Missouri, and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Copies of the articles of incorporation and by-laws of GuildMaster,
as certified by the secretary of GuildMaster, have heretofore been delivered to
Decorate, and are complete and correct as of the date of this Agreement.
GuildMaster is duly qualified to transact business, and is in good standing as a
foreign corporation in each jurisdiction where the character of its activities
requires such qualification, except where the failure to so qualify would not
have a material adverse effect on the business, assets, financial condition,
results of operations or prospects of GuildMaster taken as a whole (a
"GuildMaster Material adverse Effect").
4.2 Subsidiaries. GuildMaster has no subsidiaries.
4.3 Capital Structure.
(a) As of the date hereof, the authorized capital stock of
GuildMaster consists of 50,000 shares of common stock, par value One
Dollar ($1.00) per share.
(b) As of the date hereof, 50,000 shares of common stock of
GuildMaster are issued and outstanding, and no shares of common stock
are held in treasury. All shares of common stock of GuildMaster are
held by the GuildMaster Shareholders.
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(c) Except as set forth in the GuildMaster Disclosure Letter
(which is a letter delivered by GuildMaster to Decorate concurrently
with this Agreement, and which identifies, as to each matter disclosed
therein, the Section of this Agreement to which the matter relates), as
of the date hereof, GuildMaster has not issued any outstanding bonds,
debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on
which shareholders may vote ("Voting Debt"). All outstanding shares of
GuildMaster capital stock are validly issued, fully paid and
non-assessable and not subject to or issued in violation of any
preemptive rights, and there are no options, warrants, calls, rights,
or agreements of any character whatsoever to which GuildMaster is a
party or by which it is bound obligating GuildMaster to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of
its capital stock or Voting Debt or obligating GuildMaster to grant,
extend or enter into any such option, warrant, call, right, or
agreement. Immediately after the Effective Time, there will be no
option, warrant, call, right or agreement obligating GuildMaster to
issue, deliver or sell, or cause to be issued, delivered or sold, any
shares of its capital stock or Voting Debt or obligating GuildMaster to
grant, extend or enter into any such option, warrant, call, right or
agreement.
(d) GuildMaster has not purchased, redeemed, cancelled or
otherwise acquired any of its capital stock or Voting Debt during the
two (2) years preceding the date hereof, and there are no obligations,
contingent or otherwise, of GuildMaster to repurchase, redeem or
otherwise acquire any shares of its capital stock or Voting Debt.
4.4 Authority.
(a) GuildMaster has all requisite corporate power and
authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement, and
the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of GuildMaster. This
Agreement has been duly executed and delivered by GuildMaster, and
constitutes a valid and binding obligation of GuildMaster and the
GuildMaster Shareholders enforceable in accordance with its terms,
subject to compliance with the provisions of the Missouri Corporation
Law.
(b) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated herein, will not,
conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or
the loss of a benefit under, or the creation of a lien, pledge,
security interest or other encumbrance on assets (any such conflict,
violation, default, right of termination, cancellation or acceleration
loss or creation, a "Violation"), pursuant to the provisions of (i) the
articles of incorporation or by-laws of GuildMaster, or (ii) any loan
or credit agreement, note, mortgage, indenture, lease, GuildMaster
Benefit Plan (as hereinafter defined) or other agreement, obligation,
instrument, permit, franchise, license, judgment, order, decree,
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statute, law, ordinance, rule or regulation applicable to GuildMaster,
or its properties or assets, which Violation would have a GuildMaster
Material Adverse Effect.
(c) Other than in connection with or in compliance with the
provisions of the Missouri Corporation Law or as listed in the
GuildMaster Disclosure Letter, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental entity or other person is required on the part of
GuildMaster in connection with the execution and delivery of this
Agreement or the consummation by GuildMaster of the transactions
contemplated hereby.
4.5 Financial Statements.
(a) The statement of financial condition of GuildMaster as of
December 31, 2000, and the related statements of income, cash flow and
shareholder's equity for the period ending December 31, 2000 (the
"GuildMaster Latest Statement Date"), in the form prepared for
GuildMaster's internal use, copies which have been furnished by
GuildMaster to Decorate, and the statement of financial condition of
GuildMaster, as of March 31, 2001, and the related statements of
income, cash flow and shareholder's equity for the three (3) months
then ended, in the form prepared for GuildMaster's internal use, copies
of which have been furnished by GuildMaster to Decorate (collectively
the "GuildMaster Financial Statements") have been prepared in
accordance with generally accepted accounting principles as utilized in
the GuildMaster Financial Statements applied on a consistent basis
(except as may be indicated therein or in the notes thereto), and
present fairly the financial position of GuildMaster, at the dates and
results of operations, changes in shareholder's equity and cash flows
for the periods stated therein. In the case of interim fiscal periods,
all adjustments, consisting only of normal reoccurring items, which
management of GuildMaster believes necessary for a fair presentation of
such financial information, have been made, none of which will have a
GuildMaster Material Adverse Effect.
(b) Except as and to the extent set forth in the statement of
financial condition of GuildMaster as of March 31, 2001, or in the
notes thereto, GuildMaster has no liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would
be required to be reflected on a statement of financial condition, or
in the notes thereto, prepared in accordance with generally accepted
accounting principles, except for liabilities or obligations incurred
in the ordinary course of business since the GuildMaster Latest
Statement Date that would not, individually or in the aggregate, have a
GuildMaster Material Adverse Effect. Except as set forth in the
GuildMaster Disclosure Letter, GuildMaster has no liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) that are not required to be reflected on a balance sheet, or
in the notes thereto, except for liabilities or obligations that do
not, individually or in the aggregate, have a GuildMaster Material
Adverse Effect.
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4.6 Authorizations; Compliance With Applicable Laws.
(a) GuildMaster holds all authorizations, permits, licenses,
variances, exemptions, orders and approvals of all governmental
entities which are material to the operations of its business (the
"GuildMaster Permits"). All such GuildMaster Permits are in full force
and effect as of the Closing Date, and GuildMaster is in compliance
with the terms of the GuildMaster Permits, except where the failure to
so comply could not reasonably be expected to have a GuildMaster
Material Adverse Effect. Except as disclosed in the GuildMaster
Disclosure Letter, the business of GuildMaster is not now and has not
been, conducted in violation of any domestic (federal, state or local)
law, statute, ordinance or regulation of any governmental entity
(collectively "Laws") except for possible violations which individually
or in the aggregate do not and, insofar as reasonably can be foreseen,
in the future will not, have a GuildMaster Material Adverse Effect.
Except as set forth in the GuildMaster Disclosure Letter, as of the
date hereof, no investigation or review by any governmental entity with
respect to GuildMaster is pending or, to the knowledge of GuildMaster,
threatened, nor has any governmental entity indicated an intention to
conduct the same.
(b) The GuildMaster Disclosure Letter identifies each parcel
of real estate currently owned, leased or otherwise possessed or
controlled by GuildMaster on the date of this Agreement (collectively,
the "GuildMaster Property"). Except as set forth in the GuildMaster
Disclosure Letter, to the knowledge of GuildMaster, none of the
GuildMaster Property owned or leased by GuildMaster for use in the
operation of its business is in violation of any applicable zoning
ordinance or other law, regulation or requirement relating to operation
of any properties used, including, without limitation, applicable
federal, state and local laws, rules and regulations relating to the
environment or to human health and safety associated with the
environment (collectively "Environmental Laws"), other than violations
that, in the aggregate, would not have a GuildMaster Material Adverse
Effect; and GuildMaster has not received any notice of any such
violation, or the existence of any condemnation proceeding with respect
to any GuildMaster Property. Except as set forth in the GuildMaster
Disclosure Letter, to the knowledge of GuildMaster, no Toxic Substances
(as defined below) have been deposited or disposed in, on or under any
GuildMaster Property during the period in which GuildMaster has owned,
occupied, managed, controlled or operated such properties, except to
the extent the same would not have a Material Adverse Effect. Except as
set forth in the Disclosure Letter, to GuildMaster's knowledge, no
portion of the GuildMaster Property has ever been used as a dump or
gasoline service station by any person, including past owners,
occupants and operators of such properties. To the knowledge of
GuildMaster, there are no underground or aboveground storage tanks
(whether or not currently in use) located on or under the GuildMaster
Property, and no underground tank previously located on the GuildMaster
Property has been removed therefrom. To the knowledge of GuildMaster,
there are no conditions or circumstances in connection with the
GuildMaster Property that could reasonably be anticipated to (i) cause
any GuildMaster Property to be subject to any restrictions on
ownership, occupancy, use or transferability under any applicable
Environmental laws, or (ii) materially reduce the value of any
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GuildMaster Property. To the knowledge of GuildMaster, GuildMaster has
not been identified as a potentially responsible party in a matter
arising under any Environmental Laws. For purposes of this Agreement,
(1) "Toxic Substances" shall mean petroleum or petroleum based
substance or waste, solid waste, PCBs, pesticides, herbicides, lead,
radioactive materials, asbestos or asbestos containing materials,
ureaformaldehyde foam installation, or substances defined as "hazardous
substances" or "toxic substances" in any Environmental Laws, and (2)
materials will be considered to be deposited or disposed in, on or
under any real property if such materials have been stored, treated,
recycled, used or accidentally or intentionally spilled, released,
dumped, emitted, or otherwise placed, deposited or disposed of, or used
in any construction, in, on or under such property.
4.7 Litigation and Claims. Except as disclosed in the GuildMaster
Disclosure Letter:
(a) GuildMaster is not subject to any continuing order of, or
written agreement or memorandum or understanding with any governmental
entity, or any judgment, order, writ, injunction, decree or award of
any governmental entity or arbitrator; and
(b) There is no action, suit, litigation, proceeding or
arbitration against or affecting GuildMaster, or to the knowledge of
GuildMaster or the GuildMaster Shareholders, any directors, officers,
employees or agents of GuildMaster (in their respective capacities as
directors, officers, employees or agents) pending or, to the knowledge
of GuildMaster or the GuildMaster Shareholders, threatened, which
would, if adversely determined, have a GuildMaster Material Adverse
Effect or, to the knowledge of GuildMaster or the GuildMaster
Shareholders, any basis therefore.
4.8 Taxes. GuildMaster has filed all tax returns required to be filed
by it, all such returns are true and correct in all material respects and
reflect all amounts due with respect to the periods indicated, and GuildMaster
has paid or has set up an adequate reserve for the payment of, all taxes
required to be paid as shown on such returns, except to the extent such
nonpayment did not result in a GuildMaster Material Adverse Effect. The
GuildMaster Disclosure Letter sets forth, as of the date hereof, the following
information with respect to GuildMaster:
(a) Whether there is an examination pending by the Internal
Revenue Service ("IRS") with respect to GuildMaster and, if so, the tax
years involved,
(b) Whether GuildMaster has executed or filed with the IRS any
agreement which is still in effect extending the period for assessment
and collection of any federal tax, and if so, the tax years covered by
such agreement and the expiration of such extension, and
(c) Whether there are any existing material disputes as to
state or local taxes.
There are no liens for taxes upon the assets of GuildMaster,
except for statutory liens for taxes not yet delinquent or the validity
of which is being contested in good faith by appropriate proceedings
and, in either case, only if adequate reserves therefor have been
9
established on GuildMaster's books in accordance with generally
accepted accounting principles. Except as disclosed in the GuildMaster
Disclosure Letter, GuildMaster is not a party to any action or
proceeding by any governmental authority for assessment and collection
of taxes, and no claim for assessment and collection of taxes has been
asserted against it. For purposes of this Agreement, the term "tax"
shall include all federal, state and local income, profits, franchise,
gross receipts, payroll, sales, employment, use, personal and real
property, withholding, excise and other taxes, duties or assessments of
any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts. GuildMaster has
withheld from its employees (and timely paid to the appropriate
governmental agency) amounts which are proper and accurate in all
material respects for all periods through the date hereof in material
compliance with all tax withholding provisions of applicable federal,
state and local laws (including, without limitation, income, social
security and employment tax withholding for all types of compensation).
4.9 Certain Agreements. Except as disclosed in the GuildMaster
Disclosure Letter, and except for this Agreement, GuildMaster is not a party to
any oral or written (i) consulting or employment agreement or other agreement
providing any term of employment, compensation guarantee, or severance benefit,
(ii) union or collective bargaining agreement, (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
option or stock purchase plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of the transactions
contemplated by this Agreement, (iv) contract, agreement or understanding to
repurchase assets previously sold (or to indemnify or otherwise compensate the
purchaser in respect of such assets) (other than contracts entered into in the
ordinary course of business,), (v) contract containing covenants which limit the
liability of GuildMaster to compete in any line of business or with any person
or which involve any restriction of the geographical area in which, or method by
which, GuildMaster may carry on its business, (vi) any contract, agreement or
other instrument or undertaking which is not terminable by GuildMaster without
additional payment or penalty within sixty (60) days and obligates GuildMaster
for payments or other consideration for a value in excess of $10,000.00, or
(vii) other executory material agreement. Except as set forth in the GuildMaster
Disclosure Letter, GuildMaster is not in Violation of any loan or credit
agreement, note, mortgage, indenture or other agreement, obligation or
instrument applicable to GuildMaster or its properties or assets, except for any
such Violations that would not, individually or in the aggregate, have a
GuildMaster Material Adverse Effect, and neither GuildMaster nor the GuildMaster
Shareholders have knowledge of (i) events that with notice or the passage of
time would constitute a Violation, (ii) a Violation of any third party, or (iii)
intent of any third party to terminate.
4.10 Benefit Plans.
(a) The GuildMaster Disclosure Letter lists (i) each employee
bonus, incentive, deferred compensation, stock purchase, stock
appreciation right, stock option, fringe benefit and severance pay
plan, (ii) each pension, profit sharing, stock bonus, thrift, savings
and employee stock ownership plan, (iii) each health, welfare,
10
disability, vacation, leave, perquisite or executive plan, program,
policy or practice, and (iv) every other employee benefit plan (within
the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (collectively "GuildMaster Benefit
Plans"), which GuildMaster maintains or to which GuildMaster
contributes on behalf of current or former employees. Except as
disclosed in the GuildMaster Disclosure Letter, to the knowledge of
GuildMaster, all of the GuildMaster Benefit Plans listed in the
GuildMaster Disclosure Letter comply with all applicable requirements
of the Internal Revenue Code, ERISA and all other applicable federal
and state laws and regulations, including, without limitation, the
reporting and disclosure requirements of ERISA. Each of the GuildMaster
Benefit Plans that is intended to be a pension, profit sharing, stock
bonus, thrift or savings plan that is qualified under Code ss.401(a),
has been determined by the IRS to so qualify under Code ss.401(a), and,
except as disclosed in the GuildMaster Disclosure Letter, to the
knowledge of GuildMaster, there exists no circumstances that would
adversely affect the qualified status of any GuildMaster Benefit Plan
under that Section. Except as set forth in the GuildMaster Disclosure
Letter, there is no pending or, to the knowledge of GuildMaster,
threatened litigation, governmental proceeding or investigation against
or relating to any GuildMaster Benefit Plan, and to the knowledge of
GuildMaster there is no reasonable basis for any material proceedings,
claims, actions or proceedings against GuildMaster, any GuildMaster
Benefit Plan, or any fiduciary of any GuildMaster Benefit Plan. Except
as set forth in the GuildMaster Disclosure Letter, neither GuildMaster
nor any party in interest (as defined in Section 3(14) of ERISA and
Code ss.4975(e)) nor any GuildMaster Benefit Plan has engaged in a
"prohibited transaction" (as defined in Section 406 of ERISA and Code
ss.4975(c)) since the date on which said Sections became applicable to
such Plan, and no GuildMaster Benefit Plan has engaged in a transaction
involving the purchase or sale of employer securities by such Plan from
or to a "disqualified person" (within the meaning of Code ss.4975),
other than pursuant to an exemption provided therein. All GuildMaster
Benefit Plans that are group health plans, within the meaning of Code
ss.4980B or Section 601 of ERISA, have been operated in material
compliance with the group health plan continuation coverage
requirements of Code ss.4980B and Section 601 of ERISA to the extent
such requirements are applicable.
(b) There has been no amendment to, written interpretation of,
or announcement (whether or not written) relating to, or any change in
employee participation or coverage under, any GuildMaster Benefit Plan
that is not reflected in the text of such GuildMaster Benefit Plan
which would materially increase the expense (whether or not such
expense is recognized under generally accepted accounting principles)
to the employer whose employees are covered by such GuildMaster Benefit
Plan. Except as expressly provided by applicable law or the terms of a
GuildMaster Benefit Plan, no condition exists that would prevent the
amendment or termination of any GuildMaster Benefit Plan with respect
to any employee.
(c) GuildMaster has delivered to Decorate copies of (i) each
GuildMaster Benefit Plan or if no plan document exists, a written
summary of the material terms thereof, (ii) current summary plan
descriptions of each GuildMaster Benefit Plan for which they are
required, (iii) each trust agreement, insurance policy or other
11
instrument relating to the funding of any GuildMaster Benefit Plan,
(iv) the most recent Annual Reports (Form 5500 Series) and accompanying
schedules filed with the IRS or the United States Department of Labor
with respect to each GuildMaster Benefit Plan for which they are
required, (v) the most recent determination letter issued by the IRS
with respect to each GuildMaster Benefit Plan that is intended to
qualify under Code ss.401, (vi) the most recent available financial
statements for each GuildMaster Benefit Plan that has assets, and (vii)
the most recent audited financial statements for each GuildMaster
Benefit Plan for which audited financial statements are required by
ERISA.
(d) The GuildMaster Disclosure Letter describes any obligation
that GuildMaster has to provide health and welfare benefits to retirees
or other former employees or their dependents (other than rights
arising solely under Section 601 of ERISA or Code ss.4980B) including
information as to the number of retirees, other former employees and
dependents entitled to such coverage and their ages.
4.11 Insurance. GuildMaster is presently insured, and during each of
the past five calendar years has been insured, for reasonable amounts with
financially sound and reputable insurance companies against such risks as, to
the knowledge of GuildMaster, companies engaged in the similar business would,
in accordance with good business practice, customarily be insured. GuildMaster
does not have any liability for material unpaid premiums or premium adjustments
not properly reflected on the GuildMaster Financial Statements and no notice of
cancellation or termination has been received by GuildMaster with respect to any
material insurance policy currently in effect. Within the last five years,
except as disclosed in the GuildMaster Disclosure Letter, GuildMaster has not
been refused any insurance with respect to any assets or operations, nor has any
coverage been limited in any material respect as to any assets or operations, by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance during the last five years.
4.12 Absence of Certain Changes or Events. Except as disclosed in the
GuildMaster Disclosure Letter, and except as contemplated by this Agreement,
from and after January 1, 2001 through the date of this Agreement:
(a) GuildMaster has carried on its business in the ordinary
and usual course consistent with past practices;
(b) GuildMaster has not amended its articles of incorporation;
(c) GuildMaster has not issued or sold any of its capital
stock, or issued or sold any corporate debt securities or otherwise
incurred debt which would be classified as long term debt on its
balance sheet;
(d) GuildMaster has not granted any option for the purchase of
its capital stock, effected any stock split, or otherwise changed its
capitalization;
12
(e) GuildMaster has not declared, set aside, or paid a
dividend or other distribution in respect of its capital stock, or,
directly or indirectly, redeemed or otherwise acquired any of its
capital stock;
(f) GuildMaster has not (i) incurred any material obligations
or liability (absolute or contingent), except obligations or
liabilities incurred in the ordinary course of business, or (ii)
mortgaged, pledged, or subjected to lien, claim, security interest,
charge, encumbrance or restriction any of its assets or properties;
(g) GuildMaster has not discharged or set aside any material
lien, mortgage, pledge, claim, security interest, charge, encumbrance,
or restriction or paid any material obligation or liability (absolute
or contingent), other than in the ordinary course of business;
(h) GuildMaster has not sold, assigned, transferred, leased,
exchanged, or otherwise disposed of, other than in the ordinary course
of business, any of its properties or assets;
(i) GuildMaster has not increased the rate of compensation of,
or paid any bonus to, any of its directors or officers, except merit or
promotion increases in accordance with existing policy; entered into
any new, or amended or supplemented any existing, employment,
management, consulting, deferred compensation, severance, or other
similar contract not heretofore provided to Decorate and JBE; adopted,
entered into, terminated, amended or modified any GuildMaster Benefit
Plan in respect of any of its present or former directors, officers or
other employees; or agreed to any of the foregoing;
(j) GuildMaster has not suffered any material damage,
destruction or loss as a result of fire, accident, casualty, labor
trouble, or taking of property by any government or any agency of any
government, flood, or other similar or dissimilar casualty or event or
otherwise, and whether or not covered by insurance;
(k) GuildMaster has not cancelled or compromised any debt to
the extent exceeding $10,000.00 owed to GuildMaster or claim to an
extent exceeding $10,000.00 asserted by GuildMaster;
(l) GuildMaster has not entered, or agreed to enter, into any
agreement or arrangement granting any right of refusal or other
preferential right to purchase any of its material assets, properties
or rights or requiring the consent of any party to the transfer or
assignment of any such material assets, properties or rights;
(m) There has not been any other transaction, commitment,
dispute or other event or condition of any character (whether or not in
the ordinary course of business) individually or in the aggregate
having or which, insofar as reasonably can be foreseen, in the future
is reasonably likely to have, a GuildMaster Material Adverse Effect;
and
13
(n) There has not been any change in the method of accounting
or accounting practices of GuildMaster, except as may be required by
generally accepted accounting principles. Except as set forth in the
GuildMaster Disclosure Letter, GuildMaster has no knowledge of the
announced or anticipated resignation of any executive officer or key
employee of GuildMaster. From and after the date of the latest
GuildMaster Financial Statement, through the date of this Agreement, no
customers of GuildMaster have indicated to GuildMaster that they will
stop or decrease the rate of business done with GuildMaster (except for
changes in the ordinary course of business) such as to, individually or
in the aggregate, have a GuildMaster Material Adverse Effect.
4.13 Properties, Leases and Other Agreements. Except (i) as may be
reflected in the GuildMaster Financial Statements, (ii) for any lien for current
taxes not yet delinquent, and (iii) for such other liens, security interests,
claims, charges, options or other encumbrances or imperfections of title which
do not materially affect the value of personal or real property reflected in the
GuildMaster Financial Statements or acquired since the date of such Financial
Statements and which do not materially interfere with or impair the present and
continued use of such property, GuildMaster has good title, free and clear of
any liens, security interests, claims, charges, options or other encumbrances,
to all of the personal and real property reflected in the GuildMaster Financial
Statements, and all real and personal property acquired since the date of such
Statements, except such real and personal property as has been disposed of in
the ordinary course of business. The GuildMaster Disclosure Letter lists all
acquisitions or dispositions of capital assets planned as of the date of this
Agreement by GuildMaster, other than individual transactions with a value not in
excess of $10,000.00 each. Substantially all of GuildMaster's buildings and
equipment in regular use (including such buildings and equipment as are leased)
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted. The GuildMaster Disclosure Letter contains a brief
description, including terms, of each lease for real or personal property to
which GuildMaster is a party. GuildMaster, as lessee, has a valid and existing
leasehold interest under each of such leases, true and correct copies of which
GuildMaster has delivered to Decorate and JBE. There is not, under any of such
leases relating to real property or any other material leases, any material
existing default by GuildMaster, or, to the knowledge of GuildMaster, any other
party thereto, or any event with notice or lapse of time or both would
constitute such a material default. GuildMaster owns, or has the right to use
pursuant to a valid and enforceable lease, license or similar contractual
arrangement, all of the assets (tangible and intangible) that are used or
required for use in the operation of the business as currently conducted.
4.14 Patents, Trademarks and Trade Names. The GuildMaster Disclosure
Letter sets forth a correct and complete list of (i) all patents, trademarks,
trade names and registered copyrights owned by GuildMaster which are material to
its business taken as a whole (collectively, the "GuildMaster Proprietary
Intellectual Property") and (ii) all patents, trademarks, trade names,
copyrights, technology and processes used by GuildMaster in its business which
are material to its business taken as a whole and are used pursuant to a license
or other right granted by a third party (collectively the "GuildMaster Licensed
Intellectual Property", and together with the GuildMaster Proprietary
Intellectual Property herein referred to as the "GuildMaster Intellectual
Property"). GuildMaster owns or has the right to use pursuant to valid and
effective agreements, all GuildMaster Intellectual Property, and the
consummation of the transactions contemplated hereby will not alter or impair
14
any such rights. No claims are pending or, to the best knowledge of GuildMaster,
threatened against GuildMaster by any person with respect to the use of any
GuildMaster Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement relating to the same. The current use
by GuildMaster of the GuildMaster Intellectual Property does not infringe on the
rights of any person, except for such infringements which in the aggregate could
not reasonably be expected to have a material adverse effect upon GuildMaster's
ownership or use of the GuildMaster Intellectual Property. There are no pending
claims or charges brought by GuildMaster against any person with respect to the
use of any GuildMaster Intellectual Property or the enforcement of any of
GuildMaster's rights relating to the GuildMaster Intellectual Property.
4.15 Votes Required. The execution of this Agreement by the GuildMaster
Shareholders is the only vote of the holders of any class of GuildMaster capital
stock necessary to approve this Agreement and the transactions contemplated
hereby.
4.16 Tax Matters. GuildMaster, to its knowledge, has not taken or
agreed to take any action which would prevent the Merger from qualifying as one
or more reorganizations under Codess.368(a)(1).
4.17 Investment Purpose. The GuildMaster Shareholders are acquiring
shares of Decorate for their own account for investment and without any view to
any distribution thereof. The GuildMaster Shareholders understand that they must
bear the economic risk of their investment in the Decorate shares for an
indefinite period of time as the shares cannot be sold unless subsequently
registered under applicable securities laws or unless an exemption from such
registration is available. The GuildMaster Shareholders have sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of their investment in Decorate common stock,
and are capable of bearing the economic risks of such investment. At Closing the
GuildMaster Shareholders shall execute and deliver investment letters in a form
acceptable to Decorate.
4.18 Condition of Assets. The improvements, equipment, furniture,
fixtures, inventory and tangible personal property owned, leased or held by
GuildMaster for use in its business and operations are in the aggregate in such
condition and repair as are consistent with and suitable for their present uses
and there are no defects in of the assets used in the business and operations of
GuildMaster which individually or in the aggregate would have, or could
reasonably be expected to have, a GuildMaster Material Adverse Effect.
4.19 Inventory. All inventories of GuildMaster are of good, useable and
merchantable quality in all material respects and, except as set forth in the
GuildMaster Disclosure Letter, do not include obsolete or discontinued items.
All inventories that are finished goods are saleable as current inventories at
the current prices thereof in the ordinary course of business.
4.20 Accounts Receivable. All receivables of GuildMaster (including
accounts receivable, loan receivable and advances) which are reflected in the
GuildMaster Financial Statements, and all such receivables which shall have
arisen since the date thereof, have arisen only from bona fide transactions in
the ordinary course of GuildMaster's business and shall be (or have been) fully
15
collected when due, or in the case of each such account receivable within ninety
(90) days after it arose, without resort to litigation, in the aggregate face
amounts thereof except to the extent of the normal allowance for doubtful
accounts with respect to accounts receivable computed as a percentage of sales
consistent with GuildMaster's prior practices as reflected on the GuildMaster
Financial Statements.
4.21 Customers. GuildMaster has not received any notice or has reason
to believe that any significant customer of GuildMaster (a) has ceased, or will
cease, to use the products, goods or services of GuildMaster, (b) has
substantially reduced or will substantially reduce, the use of products, goods
or services of GuildMaster, or (c) has sought, or is seeking, to reduce the
price it will pay for products, goods or services of GuildMaster, including in
each case after the consummation of the transactions contemplated hereby.
4.22 Full Disclosure. The representation and warranties of GuildMaster
and the GuildMaster Shareholders contained in this Agreement do not omit any
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading. There is no fact
known to GuildMaster or the GuildMaster Shareholders which has not been
disclosed to Decorate pursuant to this Agreement and the GuildMaster Disclosure
Letter, all taken as a whole, which would reasonably be expected to have a
GuildMaster Material Adverse Effect on the ability of Decorate, JBE or
GuildMaster to consummate the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DECORATE AND JBE
Decorate and JBE hereby represent and warrant to GuildMaster and the
GuildMaster Shareholders as follows:
5.1 Organization, Standing and Power. Decorate and JBE are corporations
duly organized, validly existing and in good standing under the laws of the
State of Missouri, and have all requisite power and authority to own, lease and
operate their properties and to carry on their business as now being conducted.
Copies of the articles of incorporation and by-laws of Decorate and JBE, as
certified by the respective secretaries of Decorate and JBE, have heretofore
been delivered to GuildMaster, and are complete and correct as of the date of
this Agreement. Decorate and JBE are duly qualified to transact business, and
are in good standing as foreign corporations in each jurisdiction where the
character of their activities requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the business,
assets, financial condition, results of operations or prospects of Decorate and
JBE taken as a whole (a "Decorate Material Adverse Effect").
5.2 Subsidiaries. Decorate has no subsidiaries except JBE, which is
wholly owned by Decorate.
16
5.3 Capital Structure.
(a) As of the date hereof, the authorized capital stock of
Decorate consists of 1,000,000 shares of common stock, par value $.01
per share, and the authorized capital stock of JBE consists of 500
shares of common stock, par value $.01 per share.
(b) As of the date hereof, 315,000 shares of common stock of
Decorate are issued and outstanding, and no shares of common stock of
Decorate are held in treasury, and 500 shares of JBE are issued and
outstanding, and no shares of common stock of JBE are held in
treasury..
(c) Except as set forth in the Decorate Disclosure Letter
(which is a letter delivered by Decorate and JBE to GuildMaster within
ten (10) days after the date hereof, the receipt whereof to be
acknowledged by GuildMaster, and which identifies, as to each matter
disclosed therein, the Section of this Agreement to which the matter
relates), as of the date hereof, Decorate and JBE have not issued any
outstanding bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into securities having the right to vote)
on any matters on which shareholders may vote ("Voting Debt"). All
outstanding shares of Decorate and JBE capital stock are validly
issued, fully paid and non-assessable and are not subject to or issued
in violation of any preemptive rights, and there are no outstanding
options, warrants, calls, rights, commitments or agreements of any
character whatsoever to which Decorate or JBE is a party or by which it
is bound obligating Decorate or JBE to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or
any Voting Debt securities of Decorate or JBE obligating Decorate or
JBE to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. The shares of Decorate common stock to
be issued pursuant to or as specifically contemplated by this Agreement
will be validly issued, fully paid and non-assessable and not subject
to preemptive rights.
(d) Neither Decorate nor JBE has purchased, redeemed,
cancelled or otherwise acquired any of its capital stock or Voting
Debt, except as disclosed in the Decorate Disclosure Letter, and there
are no obligations, contingent or otherwise, of Decorate or JBE to
repurchase, redeem or otherwise acquire any shares of their capital
stock or Voting Debt.
5.4 Authority.
(a) Decorate and JBE have all requisite corporate power and
authority to enter into this Agreement and the Merger and to consummate
the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Decorate and JBE. This
Agreement has been duly executed and delivered by Decorate and JBE and
constitutes valid and binding obligations of Decorate and JBE
enforceable in accordance with its terms, subject to compliance with
the provisions of the Missouri Corporation Law.
17
(b) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not,
result in any Violation pursuant to any provision of (i) the articles
of incorporation or by-laws of Decorate or JBE, or (ii) any loan or
credit agreement, note, mortgage, indenture, lease, Benefit Plan
maintained by Decorate or JBE or other agreement, obligation,
instrument, permit, franchise, license, judgment, order, decree,
statute, law ordinance, rule or regulation applicable to Decorate or
JBE or their respective properties or assets, which Violation would
have a Decorate Material Adverse Effect.
(c) Other than in connection or in compliance with the
provisions of Missouri Corporation Law or as listed in the Decorate
Disclosure Letter, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity or
other person is required on the part of Decorate or JBE in connection
with the execution and delivery of this Agreement or the consummation
by Decorate or JBE of the transactions contemplated hereby.
5.5 Financial Statements.
(a) The balance sheet of Decorate as of December 31, 2000 and
the related statements of income, consolidated statements of cash flows
and statements of members' or stockholders' equity for the period ended
December 31, 2000 (the "Decorate Latest Statement Date"), copies of
which have been furnished by Decorate to GuildMaster; and the balance
sheet of Decorate as of March 31, 2001 and the related statement of
income, statement of cash flows and statement of members' or
stockholders' equity for the three (3) months then ended in the form
prepared for Decorate's internal use, copies of which have been
furnished by Decorate to GuildMaster (collectively, the "Decorate
Financial Statements"), have been prepared in accordance with generally
accepted accounting principles as utilized in the Decorate Financial
Statements applied on a consistent basis (except as may be indicated
therein or in the notes thereto), and present fairly the financial
condition of Decorate and JBE at the dates, and the results of
operations, changes in stockholders' equity and cash flows for the
periods, stated therein. In the case of interim fiscal periods, all
adjustments, consisting only of normal recurring items, which
management of Decorate and JBE believe necessary for a fair
presentation of such financial information, have been made, none of
which could reasonably be expected to have a Decorate Material Adverse
Effect.
(b) Except as and to the extent set forth on the balance
sheets of Decorate, as of March 31, 2001, or in the notes thereto,
Decorate and JBE have no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet, or in the notes thereto,
prepared in accordance with generally accepted accounting principles,
except for liabilities or obligations incurred in the ordinary course
of business since the Decorate Latest Statement Date that would not,
individually or in the aggregate, have a Decorate Material Adverse
Effect. Except as disclosed in the Decorate Disclosure Letter, Decorate
and JBE have no liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that are not required to be
18
reflected on a balance sheet, or in the notes thereto, except for
liabilities or obligations that do not, individually or in the
aggregate, have a Decorate Material Adverse Effect.
5.6 Authorizations; Compliance with Applicable Laws.
(a) Decorate and JBE hold all authorizations, permits,
licenses, variances, exemptions, orders and approvals of all
governmental entities which are material to the operation of the
business of Decorate and JBE taken as a whole (the "Decorate Permits").
All such Decorate Permits are in full force and effect as of the
Closing Date, and Decorate and JBE are in compliance with the terms of
the Decorate Permits, except where the failure so to comply could not
reasonably be expected to have a Decorate Material Adverse Effect.
Except as disclosed in the Decorate Disclosure Letter, the businesses
of Decorate and JBE are not being conducted in violation of any Laws,
except for possible violations which individually or in the aggregate
do not, and, insofar as reasonably can be foreseen, in the future will
not, have a Decorate Material Adverse Effect. Except as set forth in
the Decorate Disclosure Letter, as of the date hereof, no investigation
or review by a governmental entity with respect to Decorate or JBE that
would cause a Decorate Material Adverse Effect is pending or, to the
knowledge of Decorate or JBE, threatened, nor has any governmental
entity indicated an intention to conduct the same.
(b) The Decorate Disclosure Letter identifies each parcel of
real estate currently owned, leased or otherwise possessed or
controlled by Decorate and JBE (collectively the "Decorate Property").
Except as set forth in the Decorate Disclosure Letter, to Decorate's
and JBE's knowledge, none of the Decorate Property owned or leased by
them for use in the operation of their business is in violation of any
applicable zoning ordinance or other law, regulation or requirements
relating to the operation of any properties used, including, without
limitation, Environmental Laws, other than violations that, in the
aggregate with any other conditions described in this Section 5.6(b),
would not have a Decorate Material Adverse Effect; and neither Decorate
nor JBE has received any notice of any such violation, or the existence
of any condemnation proceeding with respect to any Decorate Property.
Except as set forth in the Decorate Disclosure Letter, to the knowledge
of Decorate and JBE, no Toxic Substances have been deposited or
disposed of in, on or under any Decorate Property during the period in
which Decorate or JBE has owned, occupied, managed, controlled or
operated such properties, except to the extent the same, in the
aggregate with any other conditions described in this Section 5.6(b)
would not have a Decorate Material Adverse Effect. Except as set forth
in the Decorate Disclosure Letter, to Decorate's and JBE's knowledge,
no portion of the Decorate Property has ever been used as a dump or
gasoline service station by any person, including past owners,
occupants and operators of such properties. To the knowledge of
Decorate and JBE, there are no underground or above ground storage
tanks (whether or not currently in use) located on or under the
Decorate Property, and no underground tanks previously located on the
Decorate Property has been removed therefrom. To the knowledge of
Decorate and JBE, there are no conditions or circumstances in
connection with the Decorate Property that could reasonably be
anticipated to (i) cause any Decorate Property to be subject to any
19
restrictions on ownership, occupancy, use or transferability under any
applicable Environmental Laws; or (ii) materially reduce the value of
any Decorate Property. To the knowledge of Decorate and JBE, neither
Decorate nor JBE has been identified as a potentially responsible party
in a matter arising under any Environmental Laws.
5.7 Litigation and Claims. Except as disclosed in the Decorate
Disclosure Letter, (a) neither Decorate, JBE nor any Decorate Property is
subject to any continuing order of, or written agreement or memorandum of
understanding with any governmental entity, or any judgment, order, writ,
injunction, decree or award of any governmental entity or arbitrator, and (b)
there is no action, suit, litigation, proceeding or arbitration against or
affecting Decorate or JBE, or, to the knowledge of Decorate or JBE, any
directors, officers, managers, employees or agents of Decorate or JBE (in their
respective capacities as directors, officers, managers, employees or agents)
pending or, to the knowledge of Decorate or JBE, threatened, which would, if
adversely determined, have a Decorate Material Adverse Effect or, to the
knowledge of Decorate or JBE, any basis therefor.
5.8 Taxes. Decorate and JBE have filed all tax returns required to be
filed by them, all such returns are true and correct in all material respects
and reflect all amounts due with respect to the periods indicated, and Decorate
and JBE have paid or has set up an adequate reserve for the payment of all taxes
required to be paid by them, except to the extent which nonpayment did not
result in a Decorate Material Adverse Effect. The Decorate Disclosure Letter
sets forth, as of the date hereof, the following information with respect to
Decorate and JBE:
(a) Whether there is an examination pending by the IRS with
respect to Decorate or JBE and, if so, the tax years involved;
(b) Whether Decorate or JBE has executed or filed with the IRS
any agreement which is still in effect extending the period for
assessment and collection of any federal tax and, if so, the tax years
covered by such agreement and the expiration date of such extension;
and
(c) Whether there are any existing material disputes as to
state or local taxes. There are no liens for taxes upon the assets of
Decorate or JBE, except for statutory liens for taxes not yet
delinquent or the validity of which is being contested in good faith by
appropriate proceedings and, in either case, only if adequate reserves
therefor have been established on Decorate's or JBE's books in
accordance with generally accepted accounting principles. Except as
disclosed in the Decorate Disclosure Letter, neither Decorate nor JBE
is a party to any action or proceeding by any governmental authority
for assessment and collection of taxes, and no claim for assessment and
collection of taxes has been asserted against them. Decorate and JBE
have withheld from their employees (and timely paid to the appropriate
governmental agency) amounts which are proper and accurate in all
material respects for all periods through the date hereof in material
compliance with all tax withholding provisions of applicable federal,
state, and local laws (including without limitation income, social
security and employment tax withholding for all types of compensation).
20
5.9 Certain Agreements. Except as disclosed in the Decorate Disclosure
Letter, and except for this Agreement and the agreements expressly contemplated
hereby, neither Decorate nor JBE is a party to any oral or written (i)
consulting or employment agreement or other agreement providing any term of
employment, compensation guarantee, or severance benefit, (ii) union or
collective bargaining agreement, (iii) agreement or plan, including any stock
option plan, stock appreciation right plan, restricted stock option or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of the transactions contemplated by
this Agreement, (iv) any contract, agreement or other instrument or undertaking
which is not terminable by Decorate or JBE without additional payment or penalty
within sixty (60) days and obligates Decorate or JBE for payments or other
consideration for a value in excess of Ten Thousand Dollars ($10,000.00), (v)
contract, agreement or understanding to repurchase assets previously sold (or to
indemnify or otherwise compensate the purchaser in respect to such assets), (vi)
contract containing covenants which limit the ability of Decorate or JBE to
compete in any line of business or with any person or which involve any
restriction of the geographical area in which, or method by which, Decorate or
JBE may carry on its business, or (vii) other executory material agreement.
Except as set forth in the Decorate Disclosure Letter, neither Decorate nor JBE
is in Violation of any loan or credit agreement, note, mortgage, indenture or
other agreement, obligation or instrument applicable to Decorate, JBE or their
properties or assets, except for any such Violations that would not,
individually or in the aggregate, have a Decorate Material Adverse Effect, and
neither Decorate nor JBE has knowledge of (i) events that with notice or the
passage of time would constitute a Violation, (ii) a Violation of any third
party, or (iii) intent of any third party to terminate.
5.10 Benefit Plans.
(a) The Decorate Disclosure Letter lists (i) each employee
bonus, incentive, deferred compensation, stock purchase, stock
appreciation right, stock option, fringe benefit and severance pay
plan, (ii) each pension, profit sharing, stock bonus, thrift, savings
and employee stock ownership plan, (iii) each health, welfare,
disability, vacation, leave, perquisite or executive plan, program,
policy or practice, and (iv) every other employee benefit plan (within
the meaning of Section 3 of ERISA) (collectively "Decorate Benefit
Plans") which Decorate or JBE maintains or to which Decorate or JBE
contributes on behalf of current or former employees. Except as
disclosed in the Decorate Disclosure Letter, to the knowledge of
Decorate and JBE, all of the Decorate Benefit Plans listed in the
Decorate Disclosure Letter comply with all applicable requirements of
the Internal Revenue Code, ERISA and all other applicable federal and
state laws and regulations, including, without limitation, the
reporting and disclosure requirements of ERISA. Each of the Decorate
Benefit Plans which is intended to be a pension, profit sharing, stock
bonus, thrift or savings plan that is qualified under Code Section
401(a) has been determined by the IRS who so qualify under Code Section
401(a), and, except as disclosed in the Decorate Disclosure Letter, to
the knowledge of Decorate and JBE, there exists no circumstances that
would adversely affect the qualified status of any such Decorate
Benefit Plan under that Section. Except as set forth in the Decorate
Disclosure Letter, there is no pending or, to the knowledge of Decorate
or JBE, threatened litigation, governmental proceeding or investigation
against or relating to any Decorate Benefit Plan, and to the knowledge
of Decorate and JBE, there is no reasonable basis for any material
proceedings, claims, actions or proceedings against Decorate or JBE,
any Decorate Benefit Plan, or any fiduciary of any Decorate Benefit
21
Plan. Except as set forth in the Decorate Disclosure Letter, neither
Decorate, JBE, nor any party in interest (as defined in Section 3(14)
of ERISA and Code Section 4975(e)) nor any Decorate Benefit Plan has
engaged in a "prohibited transaction" (as defined in Section 406 of
ERISA and Code Section 4975(c)), and no Decorate Benefit Plan has
engaged in a transaction involving the purchase or sale of employer
securities by such Plan from or to a "disqualified person" (within the
meaning of Code Section 4975), other than pursuant to an exemption
provided therein. All Decorate Benefit Plans that are group health
plans, within the meaning of Code Section 4980B or Section 601 of
ERISA, have been operated in material compliance with the group health
plan continuation coverage requirements of Code Section 4980B and
Section 601 of ERISA to the extent such requirements are applicable.
(b) There has been no amendment to, written interpretation of,
or announcement (whether or not written) relating to, or any change in
employee participation or coverage under, any Decorate Benefit Plan
that is not reflected in the text of the Decorate Benefit Plan which
would materially increase the expense (whether or not such expense is
recognized under generally accepted accounting principles) to the
employer whose employees are covered by such Decorate Benefit Plan.
Except as expressly provided by applicable law where the terms of a
Decorate Benefit Plan, no condition exists that would prevent the
amendment or termination of any Decorate Benefit Plan with respect to
any employee.
(c) Decorate and JBE have delivered to GuildMaster copies of
(i) each Decorate Benefit Plan or if no plan document exists, a written
summary of the material terms thereof, (ii) current summary plan
descriptions of each Decorate Benefit Plan for which they are required,
(iii) each trust agreement, insurance policy or other instrument
relating to the funding of any Decorate Benefit Plan, (iv) the most
recent Annual Reports (Form 5500 Series) and accompanying schedules
filed with the IRS or the United States Department of Labor with
respect to each Decorate Benefit Plan for which they are required, (v)
the most recent determination letter issued by the IRS with respect to
each Decorate Benefit Plan that is intended to qualify under Code
Section 401, (vi) the most recent available financial statements for
each Decorate Benefit Plan that has assets, and (vii) the most recent
audited financial statements for each Decorate Benefit Plan for which
audited financial statements are required by ERISA.
(d) The Decorate Disclosure Letter describes any obligation
that Decorate and JBE have to provide health and welfare benefits to
retirees or other former employees or their dependents (other than
rights arising solely under Section 601 of ERISA or Code Section 4980B)
including information as to the number of retirees, other former
employees and dependents entitled to such coverage and their ages.
22
5.11 Insurance. Decorate and JBE are presently insured for reasonable
amounts with financially sound and reputable insurance companies against such
risks as, to the knowledge of Decorate and JBE, companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured. Decorate and JBE have no liability for material unpaid premiums or
premium adjustments not properly reflected on the Decorate Financial Statements
and no notice of cancellation or termination has been received by Decorate or
JBE with respect to any material insurance policy currently in effect. Except as
disclosed in the Decorate Disclosure Letter, neither Decorate nor JBE has been
refused any insurance with respect to any assets or operations, nor has any
coverage been limited in any material respect as to any assets or operations, by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance.
5.12 Absence of Certain Changes or Events. Except as disclosed in the
Decorate Disclosure Letter, and except as contemplated by this Agreement, from
and after January 1, 2001 through the date of this Agreement:
(a) Decorate and JBE have carried on their business only in
the ordinary and usual course consistent with past practices,
(b) Neither Decorate nor JBE has amended its articles of
incorporation (other than to effectuate the conversion from
Xxxxxxxx.xxx, L.L.C. to Decorate, Inc.),
(c) Neither Decorate nor JBE has granted any option for the
purchase of its capital stock, effected any stock split, or otherwise
changed its capitalization,
(d) Neither Decorate nor JBE has declared, set aside, or paid
any dividend or other distribution in respect to any of its capital
stock,
(e) Neither Decorate nor JBE has issued or sold any of its
capital stock, or issued or sold any corporate debt securities or
otherwise incurred debt which would be classified as long term on the
balance sheet,
(f) Neither Decorate nor JBE has (i) incurred any material
obligations or liability (absolute or contingent), except obligations
or liabilities incurred in the ordinary course of business, or (ii)
mortgaged, pledged, or subjected to lien, claim, security interest,
charge, encumbrance or restriction any of its assets or properties,
(g) Neither Decorate nor JBE has discharged or set aside any
material lien, mortgage, pledge, claim, security interest, charge,
encumbrance, or restriction or paid any material obligation or
liability (absolute or contingent), other than in the ordinary course
of business,
(h) Neither Decorate nor JBE has sold, assigned, transferred,
leased, exchanged, or otherwise disposed of, other than in the ordinary
course of business, any of its properties or assets,
23
(i) Neither Decorate nor JBE has increased the rate of
compensation of, or paid any bonus to, any of its directors or
officers, except merit or promotion increases in accordance with
existing policies; entered into any new, or amended or supplemented any
existing, employment, management, consulting, deferred compensation,
severance, or other similar contract not heretofore provided to
GuildMaster; adopted, entered into, terminated, amended or modified any
Decorate Benefit Plan in respect to any of its present or former
directors, officers or other employees; or agreed to any of the
foregoing,
(j) Neither Decorate nor JBE has suffered any material damage,
destruction or loss as a result of fire, accident, casualty, labor
trouble, or taking of property by any government or any agency of any
government, flood, or other similar or dissimilar casualty or event or
otherwise, and whether or not covered by insurance,
(k) Neither Decorate nor JBE has cancelled or compromised any
debt to the extent exceeding Ten Thousand Dollars ($10,000.00) owed to
Decorate or JBE or claim to an extent exceeding Ten Thousand Dollars
($10,000.00) asserted by Decorate or JBE,
(l) Neither Decorate nor JBE has entered, or agreed to enter,
into any agreement or arrangement granting any right of refusal or
other preferential right to purchase any of its material assets,
properties or rights or requiring the consent of any party to the
transfer or assignment of any such material assets, properties or
rights,
(m) There has not been any transaction, commitment, dispute or
other event or condition of any character (whether or not in the
ordinary course of business) individually or in the aggregate having or
which, insofar as reasonably can be foreseen, in the future is
reasonably likely to have, a Decorate Material Adverse Effect, and
(n) There has not been any material change in the method of
accounting or accounting practices of Decorate or JBE, except as
required by generally accepted accounting principles. Except as set
forth in the Decorate Disclosure Letter, neither Decorate nor JBE has
knowledge of the announced or anticipated resignation of any executive
officer or key employee of Decorate or JBE. From and after the date of
the latest Decorate Financial Statement, through the date of this
Agreement, no customers of Decorate or JBE have indicated to Decorate
or JBE that they will stop or decrease the rate of business done with
Decorate or JBE (except for changes in the ordinary course of business)
such as to, individually or in the aggregate, have a Decorate Material
Adverse Effect.
5.13 Properties, Leases and Other Agreements. Except (i) as may be
reflected in the Decorate Financial Statements, (ii) for any lien for current
taxes not yet delinquent, and (iii) for such other liens, security interests,
claims, charges, options or other encumbrances and imperfections of title which
do not materially affect the value of personal or real property reflected in the
Decorate Financial Statements or acquired since the date of such Financial
Statements and which do not materially interfere with or impair the present and
continued use of such property, Decorate and JBE have good title, free and clear
24
of any liens, security interests, claims, charges, options or other
encumbrances, to all of the personal and real property reflected in the Decorate
Financial Statements, and all personal and real property acquired since the date
of such Statements, except such personal and real property as has been disposed
of in the ordinary course of business. The Decorate Disclosure Letter lists all
acquisitions or dispositions of capital assets planned as of the date of this
Agreement by Decorate and JBE, other than individual transactions with a value
not in excess of $10,000.00 each. Substantially all Decorate's and JBE's
buildings and equipment in regular use (including such buildings and equipment
as are leased) have been well maintained and are in good and serviceable
condition, reasonable wear and tear excepted. The Decorate Disclosure Letter
contains a brief description, including terms, of each lease for real or
personal property to which Decorate or JBE is a party. Decorate and JBE, as
lessees, have a valid and existing leasehold interest under each of such leases,
true and correct copies of which Decorate and JBE have delivered to GuildMaster.
There is not, under any of such leases relating to real property or any other
material leases, any material existing default by Decorate or JBE, to the
knowledge of Decorate or JBE, any other party thereto, or any event with notice
or lapse of time or both would constitute such a material default. Decorate and
JBE own, or have the right to use pursuant to a valid and enforceable lease,
license or similar contractual arrangement, all of the assets (tangible or
intangible) that are used or required for use in the operation of the business
as currently conducted.
5.14 Patents, Trademarks and Trade Names. The Decorate Disclosure
Letter sets forth a correct and complete list of (i) all patents, trademarks,
trade names and registered copyrights owned by Decorate and JBE which are
material to their business taken as a whole (collectively, the "Decorate
Proprietary Intellectual Property") and (ii) all patents, trademarks, trade
names, copyrights, technology and processes used by Decorate and JBE in their
business which are material to their business taken as a whole and are used
pursuant to a license or other right granted by a third party (collectively the
"Decorate Licensed Intellectual Property", and together with the Decorate
Proprietary Intellectual Property herein referred to as the "Decorate
Intellectual Property"). Decorate and JBE own or have the right to use pursuant
to valid and effective agreements, all Decorate Intellectual Property, and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights. No claims are pending or, to the best knowledge of Decorate and
JBE, threatened against Decorate and JBE by any person with respect to the use
of any Decorate Intellectual Property or challenging or questioning the validity
or effectiveness of any license or agreement relating to the same. The current
use by Decorate and JBE of the Decorate Intellectual Property does not infringe
on the rights of any person, except for such infringements which in the
aggregate could not reasonably be expected to have a material adverse effect
upon Decorate's or JBE's ownership or use of the Decorate Intellectual Property.
There are no pending claims or charges brought by Decorate or JBE against any
person with respect to the use of any Decorate Intellectual Property or the
enforcement of any of Decorate's or JBE rights relating to the Decorate
Intellectual Property.
5.15 Votes Required. The shareholders of Decorate and JBE have approved
this Agreement and the transactions contemplated hereby.
5.16 Tax Matters. To the knowledge of Decorate and JBE, neither
Decorate, JBE, nor any of their affiliates has through the date hereof taken or
25
agreed to take any action that would prevent the Merger from qualifying as one
or more reorganizations under Code Section 368(a)(1).
5.17 Condition of Assets. The improvements, equipment, furniture,
fixtures, inventory and tangible personal property owned, leased or held by
Decorate and JBE for use in their business and operations are in the aggregate
in such condition and repair as are consistent with and suitable for their
present uses and there are no defects in of the assets used in the business and
operations of Decorate or JBE which individually or in the aggregate would have,
or could reasonably be expected to have, a Decorate Material Adverse Effect.
5.18 Inventory. All inventories of Decorate and JBE are of good,
useable and merchantable quality in all material respects and, except as set
forth in the Decorate Disclosure Letter, do not include obsolete or discontinued
items. All inventories that are finished goods are saleable as current
inventories at the current prices thereof in the ordinary course of business.
5.19 Accounts Receivable. All receivables of Decorate and JBE
(including accounts receivable, loan receivable and advances) which are
reflected in the Decorate Financial Statements, and all such receivables which
shall have arisen since the date thereof, have arisen only from bona fide
transactions in the ordinary course of Decorate's or JBE's business and shall be
(or have been) fully collected when due, or in the case of each such account
receivable within ninety (90) days after it arose, without resort to litigation,
in the aggregate face amounts thereof except to the extent of the normal
allowance for doubtful accounts with respect to accounts receivable computed as
a percentage of sales consistent with Decorate's and JBE's prior practices as
reflected on the Decorate Financial Statements.
5.20 Customers. Neither Decorate nor JBE has received any notice or has
reason to believe that any significant customer of Decorate or JBE (a) has
ceased, or will cease, to use the products, goods or services of Decorate or
JBE, (b) has substantially reduced or will substantially reduce, the use of
products, goods or services of Decorate or JBE, or (c) has sought, or is
seeking, to reduce the price it will pay for products, goods or services of
Decorate or JBE, including in each case after the consummation of the
transactions contemplated hereby.
5.21 Full Disclosure. The representations and warranties of Decorate or
JBE contained in this Agreement do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to Decorate or JBE which has
not been disclosed to GuildMaster pursuant to this Agreement, and the Decorate
Disclosure Letter, all taken together as a whole, which would reasonably be
expected to have a Decorate Material Adverse Effect or a material adverse effect
on the ability of Decorate or GuildMaster to consummate the transactions
contemplated hereby.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS OF GUILDMASTER
6.1 Affirmative Covenants. GuildMaster hereby covenants and agrees with
Decorate and JBE that prior to the Effective Time or until the earlier
termination or abandonment of this Agreement in accordance with its terms,
26
unless the prior written consent of Decorate and JBE shall have been obtained
(which consent shall not be unreasonably withheld) and except as otherwise
contemplated herein, it will:
(a) operate its business only in the usual, regular and
ordinary course consistent with past practices;
(b) preserve substantially intact its business organization
and assets (except for acquisitions and dispositions of assets in the
ordinary course of business consistent with past practices, unless
otherwise required by the terms of this Agreement), and maintain its
rights and franchises, and use its reasonable best efforts to retain
the services of its officers and key employees (except that it shall
have the right to terminate the employment of any officer or key
employee in accordance with established employment procedures) and
maintain its relationships with customers;
(c) maintain its corporate existence in good standing and
maintain all books and records in accordance with accounting principles
and practices as utilized in the GuildMaster Financial Statements
applied on a consistent basis, except as may be required to implement
changes in the generally accepted accounting principles;
(d) maintain and keep its properties in as good repair and
condition as at present, except for depreciation due to ordinary wear
and tear;
(e) keep in full force and effect, insurance and bonds
comparable in amount and scope of coverage to that now maintained by
it;
(f) perform in all material respects all obligations required
to be performed by it under all material contracts, leases, and
documents relating to or affecting its assets, properties, and
business; and
(g) conduct its business in a manner but does not violate any
Laws, except for possible violations which individually or in the
aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have a GuildMaster Material Adverse Effect.
6.2 Negative Covenants. Except as specifically contemplated by this
Agreement, from the date hereof unto the Effective Time, GuildMaster shall not
do, without the prior written consent of Decorate and JBE (which shall not be
unreasonably withheld), any of the following:
(a) incur any material liabilities or material obligations,
whether directly or by way of guaranty, including any obligation for
borrowed money whether or not evidenced by a note, bond, debenture or
similar instrument, except in the ordinary course of business
consistent with past practice;
(b) (i) grant any general increase in compensation to its
employees as a class, or to its officers or directors, except in
accordance with past practice, or increases which are not material,
(ii) effect any change in retirement benefits to any class of employees
27
or officers (unless any such change shall be required by applicable
law) which would increase its retirement benefit liabilities, (iii)
adopt, enter into, amend or modify any Benefit Plan, or (iv) enter into
or amend any employment, severance or similar agreements or
arrangements with any directors or officers or former directors or
officers;
(c) declare or pay any dividend on, or make any other
distribution in respect to its outstanding shares of capital stock;
(d) (i) redeem, purchase or otherwise acquire any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options,
warrants, conversion or other rights to acquire any shares of its
capital stock or any such securities or obligations; (ii) merge with or
into any other corporation, permit any other corporation to merge into
it or consolidate with, any other corporation, or effect any
reorganization or recapitalization; (iii) purchase or otherwise acquire
any substantial portion of the assets, or more than 5% of any class of
stock, of any corporation, or other business; (iv) liquidate, sell
dispose of, or encumber any assets or acquire any assets, except in the
ordinary course of its business consistent with past practice; or (v)
split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock;
(e) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale of, any shares of
its capital stock of any class (including shares held in treasury), any
Voting Debt or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, Voting Debt or convertible
securities;
(f) propose or adopt any amendments to its articles of
incorporation or by-laws in any way adverse to Decorate and JBE;
(g) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in
principle with respect to any acquisition of a material amount of
assets or securities or any release or relinquishment of any material
contract rights not in the ordinary course of business;
(h) with respect to properties leased by GuildMaster, renew,
exercise an option to extend, cancel or surrender any lease of real
property or allow any such lease to lapse, without prior consultation
with Decorate and JBE;
(i) change any of its methods of accounting in effect at
December 31, 2000, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year
ending December 31, 2000, except as may be required by law or generally
accepted accounting principles;
(j) take action which would or is reasonably likely to
adversely affect GuildMaster's ability to perform its covenants and
agreements under this Agreement; or
28
(k) agree in writing or otherwise to do any of the foregoing.
6.3 Access and Information. Upon reasonable prior notice, GuildMaster
shall afford to Decorate's and JBE's officers, employees, accountants, counsel
and other representatives, access, from time to time during normal business
hours during the period prior to the Effective Time, to all books, papers and
records relating to the assets, properties, operations, obligations and
liabilities of GuildMaster, including without limitation all books of account,
tax records, minute books of directors' and stockholders' meetings, contracts
and agreements, accountants' work papers, litigation files (other than attorney
work product or materials protected by any attorney-client privilege), documents
relating to assets and title thereto, plans affecting employees, securities
transfer records and stockholder lists, and any books, papers and records
relating to other assets, business activities or prospects in which Decorate or
JBE may have a reasonable interest. During such period, GuildMaster shall
furnish promptly to Decorate and JBE (i) the monthly financial statements of
GuildMaster (as prepared by GuildMaster in accordance with its normal accounting
procedures) promptly after such financial statements are available, (ii) a
summary of any action taken by the Board of Directors, or any committee thereof,
of GuildMaster, (iii) minutes of the GuildMaster Board of Directors meetings and
the reports of management of GuildMaster customarily provided to its Board of
Directors, and (iv) all other information concerning its business, properties
and personnel as Decorate and JBE may reasonably request. During such period,
GuildMaster shall instruct its officers, employees, counsel and accountants to
be available for, and respond to any questions of Decorate's and JBE's officers,
employees, accountants, counsel and other representatives at reasonable hours
and with reasonable notice by Decorate and JBE to such individuals.
6.4 Update Disclosure; Breaches.
(a) From and after the date hereof until the Effective Time,
GuildMaster shall promptly update the GuildMaster Disclosure Letter by
notice to Decorate and JBE to reflect any matters which have occurred
from and after the date hereof which, if existing on the date hereof,
would have been required to be described therein; provided, however,
that no such update shall affect the conditions to the obligation of
Decorate and JBE to consummate the transactions contemplated hereby,
except as provided herein, and any and all changes reflected in any
such update shall be considered in determining whether such conditions
have been satisfied.
(b) GuildMaster shall, in the event it becomes aware of the
impending or threatened occurrence of any event or condition which
would cause or constitute a material breach (or would have caused or
constituted a breach had such event occurred or been known prior to the
date hereof) of any of its representations or agreements contained or
referred to herein or which would cause any of the conditions to the
obligations of any party set forth in Article IX hereof not to be
satisfied, give prompt written notice thereof to Decorate and use its
best efforts to prevent or promptly remedy the same.
6.5 Tax Treatment. GuildMaster will use its best efforts to cause the
Merger to qualify as one or more reorganizations under Code Section 368(a)(1).
29
ARTICLE VII
CERTAIN COVENANTS AND AGREEMENTS OF DECORATE AND JBE
7.1 Affirmative Covenants. Decorate and JBE hereby covenant and agree
with GuildMaster and the GuildMaster Shareholders that prior to the Effective
Time, unless the prior written consent of GuildMaster shall have been obtained
(which consent shall not be unreasonably withheld) and except as otherwise
contemplated herein, they will:
(a) operate their business only in the usual, regular and
ordinary course consistent with past practices;
(b) preserve substantially intact their business organization
and assets (except for acquisitions and dispositions of assets in the
ordinary course of business consistent with past practices unless
otherwise required by the terms of this Agreement), and maintain their
rights and franchises, and use their reasonable best efforts to retain
the services of their officers and key employees (except that they
shall have the right to terminate the employment of any officer or key
employee in accordance with established employment procedures) and
maintain their relationships with customers.
(c) maintain their corporate existence in good standing and
maintain all books and records in accordance with accounting principles
and practices as utilized in the Decorate Financial Statements applied
on a consistent basis, except as may be required to implement changes
in generally accepted accounting principles;
(d) maintain and keep their properties in as good repair and
condition as at present, except for depreciation due to ordinary wear
and tear;
(e) keep in full force and effect, insurance and bonds
comparable in amount and scope of coverage to that now maintained by
them;
(f) perform in all material respects all obligations required
to be performed by them under all material contracts, leases, and
documents relating to or affecting their assets, properties, and
business; and
(g) conduct their business in a manner that does not violate
any Laws, except for possible violations which individually or in the
aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have a Decorate Material Adverse Effect.
7.2 Negative Covenants. Except as specifically contemplated by this
Agreement, from the date hereof until the Effective Time, neither Decorate nor
JBE shall do, or agree or commit to do, without the prior written consent of
GuildMaster (which shall not be unreasonably withheld) any of the following:
30
(a) incur any material liabilities or material obligations,
whether directly or by way of guaranty, including any obligation for
borrowed money whether or not evidenced by a note, bond, debenture or
similar instrument, except in the ordinary course of business
consistent with past practice;
(b) (i) grant any general increase in compensation to its
employees as a class, or to its officers or directors, except in
accordance with past practice, or increases which are not material,
(ii) effect any change in retirement benefits to any class of employees
or officers (unless any such change shall be required by applicable
law) which would increase its retirement benefit liabilities, (iii)
adopt, enter into, amend or modify any Benefit Plan, or (iv) enter into
or amend any employment, severance or similar agreements or
arrangements with any directors or officers or former directors or
officers;
(c) declare or pay any dividend on, or make any other
distribution in respect to its outstanding shares of capital stock;
(d) (i) redeem, purchase or otherwise acquire any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options,
warrants, conversion or other rights to acquire any shares of its
capital stock or any such securities or obligations; (ii) merge with or
into any other corporation, permit any other corporation to merge into
it or consolidate with, any other corporation, or effect any
reorganization or recapitalization; (iii) purchase or otherwise acquire
any substantial portion of the assets, or more than 5% of any class of
stock, of any corporation, or other business; (iv) liquidate, sell
dispose of, or encumber any assets or acquire any assets, except in the
ordinary course of its business consistent with past practice; or (v)
except as provided herein, split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock;
(e) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale of, any shares of
its capital stock of any class (including shares held in treasury), any
Voting Debt or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, Voting Debt or convertible
securities;
(f) propose or adopt any amendments to its articles of
incorporation or by-laws in any way adverse to GuildMaster or the
GuildMaster Shareholders;
(g) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in
principle with respect to any acquisition of a material amount of
assets or securities or any release or relinquishment of any material
contract rights not in the ordinary course of business;
(h) with respect to properties leased by Decorate or JBE,
renew, exercise an option to extend, cancel or surrender any lease of
real property or allow any such lease to lapse, without prior
consultation with GuildMaster;
31
(i) change any of its methods of accounting in effect at
December 31, 2000, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year
ending December 31, 2000, except as may be required by law or generally
accepted accounting principles;
(j) take action which would or is reasonably likely to
adversely affect Decorate's ability to perform its covenants and
agreements under this Agreement; or
(k) agree in writing or otherwise to do any of the foregoing.
7.3 Access and Information. Upon reasonable prior notice Decorate and
JBE shall afford to GuildMaster's officers, employees, accountants, counsel and
other representatives, access, from time to time during normal business hours
during the period prior to the Effective Time, to all books, papers and records
relating to the assets, properties, operations, obligations and liabilities of
Decorate and JBE, including without limitation all books of account, tax
records, minute books of members', directors' and stockholders' meetings,
contracts and agreements, accountants' work papers, litigation files (other than
attorney work product or materials protected by any attorney-client privilege),
documents relating to assets and title thereto, plans affecting employees,
securities transfer records and stockholder lists, and any books, papers and
records relating to other assets, business activities or prospects in which
GuildMaster may have a reasonable interest. During such period, Decorate and JBE
shall furnish promptly to GuildMaster (i) the monthly financial statements of
Decorate (as prepared by Decorate and JBE in accordance with their normal
accounting procedures) promptly after such financial statements are available;
(ii) a summary of any action taken by the Board of Directors, or any committee
thereof, of Decorate and JBE; (iii) minutes of the Decorate and JBE Boards of
Directors meetings and the reports of management of Decorate and JBE customarily
provided to their respective Boards of Directors; and (iv) all other information
concerning its business, properties and personnel as GuildMaster may reasonably
request. During such period, Decorate and JBE shall instruct their officers,
employees, counsel and accountants to be available for, and respond to any
questions of, GuildMaster's officers, employees, accountants, counsel and other
representatives at reasonable hours and with reasonable notice by GuildMaster to
such individuals.
7.4 Update Disclosure; Breaches.
(a) From and after the date hereof until the Effective Time,
Decorate and JBE shall promptly update the Decorate Disclosure Letter
by notice to GuildMaster to reflect any matters which have occurred
from and after the date hereof which, if existing on the date hereof,
would have been required to be described therein; provided, however,
that no such update shall affect the conditions to the obligation of
GuildMaster or the GuildMaster Shareholders to consummate the
transactions contemplated hereby, except as provided herein, and any
and all changes reflected in any such update shall be considered in
determining whether such conditions have been satisfied.
32
(b) Decorate and JBE shall, in the event they become aware of
the impending or threatened occurrence of any event or condition which
would cause or constitute a material breach (or would have caused or
constituted a breach had such event occurred or been known prior to the
date hereof) of any of their representations or agreements contained or
referred to herein or which would cause any of the conditions to the
obligations of any party set forth in Article IX not to be satisfied,
give prompt written notice thereof to GuildMaster and use their best
efforts to prevent or promptly remedy the same.
7.5 Tax Treatment. Decorate and JBE will use their best efforts to
cause the Merger to qualify as one or more reorganizations under Code
ss.368(a)(1). Following the Merger, neither Decorate nor JBE will take any
action the effect of which will prevent the Merger from qualifying as one or
more reorganizations under Code ss.368(a)(1).
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Brokers or Finders. Each of the Constituent Corporations
represents, as to itself, and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, and each of the
Constituent Corporations respectively agrees to indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
affiliate.
8.2 Additional Agreements; Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including cooperating fully with the other party. In case at any
time after the Effective Time any further action is reasonably necessary or
desirable to carry out the purposes of this Agreement or to vest JBE with full
title to all properties, assets, rights and franchises of GuildMaster, the
proper officers and directors of each party to this Agreement shall take all
such necessary action.
8.3 Expenses.
(a) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all fees and expenses of
counsel, accountants, and consultants to the party and its affiliates)
incurred by a party or on its behalf in connection with the
consummation of the transactions contemplated by this Agreement.
(b) Except as otherwise provided herein, all Expenses incurred
by a party in connection with or related to the authorization,
preparation and execution of this Agreement and the Merger, and all
other matters related to the closing of the transactions contemplated
33
hereby, including all fees and expenses of agents, representatives,
counsel and accountants employed by either such party or its
affiliates, shall be borne solely and entirely by the party which has
incurred the same.
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to Obligations of Decorate and JBE. The obligation of
Decorate and JBE to effect the Merger are subject to the satisfaction of the
following conditions, unless waived in writing by Decorate:
(a) Representations and Warranties. (i) Each of the
representations and warranties of GuildMaster and the GuildMaster
Shareholders set forth in this Agreement, without giving effect to any
update to the GuildMaster Disclosure Letter or notice to Decorate and
JBE under Section 6.4 hereof, shall be true and correct as of the date
of this Agreement, and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, and (ii) Decorate and JBE
shall have received a certificate to such effect signed on behalf of
GuildMaster by its chief executive officer.
(b) Performance of Obligations of GuildMaster. GuildMaster
shall have performed in all material respects each of the obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and Decorate and JBE shall have received a certificate to
such effect signed on behalf of GuildMaster by its chief executive
officer.
(c) Consents Under Agreements. GuildMaster shall have obtained
the consent or approval of each person whose consent or approval shall
be required in order to permit the succession by JBE pursuant to the
Merger to any obligation, right or interest of GuildMaster under any
loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except those for which failure to obtain such
consents and approvals would not, individually or in the aggregate,
have a GuildMaster Material Adverse Effect, whether prior to or
following the consummation of the transactions contemplated hereby.
(d) No Material Adverse Change. There shall have been no
material adverse change since the date of this Agreement in the
business, operations, prospects or financial condition of GuildMaster
other than any such change attributable to or resulting from any change
in law or generally accepted accounting principles which impairs both
GuildMaster and Decorate in a substantially similar manner, and
Decorate and JBE shall have received a certificate to such effect
signed on behalf of GuildMaster by its chief executive officer.
(e) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority
shall be pending against Decorate, JBE, GuildMaster or any affiliate,
associate, officer or director of either of them seeking to restrain,
34
enjoin, prevent, change or rescind the transactions contemplated hereby
or questioning the validity or legality of any such transactions.
(f) No Violation of Securities Laws. The consummation of the
transaction contemplated hereby will not violate applicable securities
laws of the United States and applicable states, including Missouri.
9.2 Conditions to Obligations of GuildMaster and GuildMaster
Shareholders. The obligations of GuildMaster and the GuildMaster Shareholders to
effect the Merger are subject to the satisfaction of the following conditions,
unless waived by GuildMaster and the GuildMaster Shareholders:
(a) Representations and Warranties. (i) Each of the
representations and warranties of Decorate and JBE set forth in this
Agreement, without giving effect to any update to the Decorate
Disclosure Letter or notice to GuildMaster pursuant to Section 7.4,
shall be true and correct as of the date of this Agreement and (except
to the extent such representations speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, and (ii)
GuildMaster shall have received a certificate to such effect signed on
behalf of Decorate by their chief executive officers.
(b) Performance of Obligations of Decorate and JBE. Decorate
and JBE shall have performed in all material respects each of the
obligations required to be performed by them under this Agreement at or
prior to the Closing Date, and GuildMaster shall have received a
certificate to such effect signed on behalf of Decorate and JBE by
their chief executive officers.
(c) Consents Under Agreements. Decorate and JBE shall have
obtained the consent or approval of each person whose consent or
approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument, except those for
which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Decorate Material Adverse
Effect whether prior to or following the consummation of the
transactions contemplated hereby.
(d) No Material Adverse Change. There shall have been no
material adverse change since the date of this Agreement in the
business, operations, prospects or financial condition of Decorate or
JBE other than any such change attributable to or resulting from any
change in law, or generally accepted accounting principles which
impairs both GuildMaster, Decorate and JBE in a substantially similar
manner, and GuildMaster shall have received a certificate to such
effect signed on behalf of Decorate and JBE by their chief executive
officers.
(e) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority
shall be pending against Decorate, JBE or GuildMaster or any affiliate,
associate, officer or director or any of them seeking to restrain,
35
enjoin, prevent, change or resend the transactions contemplated hereby
or questioning the validity or legality of any such transactions.
(f) No Violation of Securities Laws. The consummation of the
transaction contemplated hereby will not violate applicable securities
laws of the United States and applicable states, including Missouri.
(g) Employment Agreements. The GuildMaster Shareholders and
Decorate shall have executed and delivered the employment agreements in
the form as attached hereto as Exhibits "C" and "D", and made a part
hereof by this reference.
(h) Repayment of Officer Loan. As of the date hereof,
GuildMaster is indebted to Xxxxx X. Xxxxxxx in the amount of Nine
Hundred Twenty-Five Thousand Dollars ($925,000.00) (the "Xxxxxxx
Indebtedness"). Concurrent with the Merger, Decorate shall execute and
deliver to Xxxxx X. Xxxxxxx its promissory note in the amount of Nine
Hundred Twenty-Five Thousand Dollars ($925,000.00), in the form as
attached hereto as Exhibit "E", and made a part hereof by this
reference (the "Xxxxxxx Note").
ARTICLE X
TERMINATION
10.1 Termination and Abandonment. This Agreement and the Merger may be
terminated at any time prior to the Effective Time:
(a) by mutual agreement of the Board of Directors of
GuildMaster and Decorate;
(b) by Decorate or GuildMaster (i) if there has been a breach
in any material respect of any representation, warranty, covenant or
agreement on the part of GuildMaster, on the one hand, or Decorate or
JBE, on the other hand, as set forth in this Agreement, or (ii) if the
representations and warranties of GuildMaster, on the one hand, or
Decorate or JBE, on the other hand, shall be discovered to have become
materially untrue in the aggregate; or
(c) by Decorate or GuildMaster if the Merger shall not have
occurred by the close of business on or before sixty (60) days from the
date hereof (the "Termination Date").
10.2 Effect of Termination. In the event of termination of this
Agreement by GuildMaster or Decorate as provided in Section 10.1 hereof, this
Agreement and the Merger shall forthwith become void and there shall be no
liability or obligation on the part of a Constituent Corporation or their
respective officers or directors except (a) with respect to Sections 8.1 and 8.3
hereof, and (b) to the extent that such termination results from the willful
breach by a party hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
36
10.3 Extension; Waiver. At any time prior to the Effective Time,
Decorate and GuildMaster, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties of the
other contained herein or in any document delivered by the other pursuant
hereto, and (iii) waive compliance by the other with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
10.4 Specific Performance and Other Remedies. The parties hereto each
acknowledge that the rights of each party to consummate the transactions
contemplated hereby are special, unique and of extraordinary character, and
that, in the event that any party violates or fails or refuses to perform any
covenant or agreement made by it herein, the non-breaching party may be without
an adequate remedy at law. The parties each agree, therefore, that in the event
that either party violates or fails or refuses to perform any covenant or
agreement made by such party herein, the non-breaching party or parties may,
subject to the terms of this Agreement and in addition to any remedies at law
for damages or other relief, institute and prosecute an action in any court of
competent jurisdiction to enforce specific performance of such covenant or
agreement or seek any other equitable relief.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by GuildMaster Shareholders. The GuildMaster
Shareholders shall indemnify, defend and hold Decorate and JBE harmless from and
against any liability, loss, cost, expense (including, without limitation,
attorney fees) or other damage (collectively "Losses") incurred by Decorate and
JBE relating to, arising out of or in connection with any breach of any
representation, warranty or covenant of GuildMaster and the GuildMaster
Shareholders contained in this Agreement. The obligations of the GuildMaster
Shareholders to indemnify and hold Decorate and JBE harmless shall be several
and not joint, and shall be in accordance with their proportionate interests in
GuildMaster immediately prior to the Effective Time. In no event shall the
obligation of the GuildMaster Shareholders under this Section 11.1 exceed, in
the aggregate, the amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00).
11.2 Indemnification by Decorate and JBE. Decorate and JBE shall
indemnify, defend and hold the GuildMaster Shareholders from and against any
Losses incurred by the GuildMaster Shareholders relating to, arising out of or
in connection with any breach of any representation, warranty or covenant of
Decorate or JBE contained in this Agreement. In no event shall the obligation of
Decorate and JBE under this Section 11.2 exceed, in the aggregate, the amount of
Two Million Five Hundred Thousand Dollars ($2,500,000.00).
11.3 Indemnification Procedure. If any party entitled to
indemnification hereunder (each, an "Indemnified Party") receives notice of any
claim or the commencement of any action or proceeding with respect to which the
other party (each, an "Indemnifying Party") is obligated to indemnify pursuant
hereto, the Indemnified Party shall promptly give the Indemnifying Party notice
37
thereof. Such notice shall describe the claim in reasonable detail and shall
indicate the amount (estimated if necessary) of the loss that has been or may be
sustained by the Indemnified Party in connection therewith. The Indemnifying
Party may elect to compromise or defend, at the Indemnifying Party's own expense
and by the Indemnifying Party's own counsel, any such matter involving the
asserted liability of the Indemnified Party. If the Indemnifying Party elects to
compromise or defend such asserted liability, it shall within thirty (30) days
(or sooner, if the nature of the asserted liability so requires) notify the
Indemnified Party of its intent to do so, and the Indemnified Party shall
cooperate, at the expense of the Indemnifying Party, in the compromise of, or
defense against, any such asserted liability. If: (a) the Indemnifying Party
elects not to compromise or defend against the asserted liability; (b) the
Indemnified Party reasonably determines that the Indemnifying Party's counsel
has a conflict of interest with the Indemnified Party or that the Indemnifying
Party or its counsel is not diligently defending the claim; or (c) the
Indemnifying Party fails to notify the Indemnified Party of its election to
compromise or defend such asserted liability as provided herein, then the
Indemnified Party may, if acting in accordance with its good faith business
judgment, pay, compromise or defend such asserted liability at the Indemnifying
Party's expense, and such settlement shall be binding on the Indemnifying Party
for purposes of this Agreement. Notwithstanding the foregoing, neither the
Indemnifying Party or the Indemnified Party may settle or compromise any claim
over the reasonable good faith objection of the other. In any event, the
Indemnifying Party and the Indemnified Party may each participate, at its own
expense, in the defense against the claim. If the Indemnifying Party chooses to
defend any claim, the Indemnified Party shall make available to the Indemnifying
Party any books, records or other documents within its control that are
necessary or appropriate for such defense.
11.4 Indemnification Limits. The Indemnified Party shall not be
entitled to any indemnification under this Agreement for any breach of any
representation or warranty unless and until the claim or claims by the
Indemnified Party for any and all claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and damages to be indemnified by the
Indemnifying Party pursuant to this Agreement for breaches of representations
and warranties exceed an aggregate of Ten Thousand Dollars ($10,000.00), but
shall thereafter be entitled to indemnification for the full amount of any such
claim or claims, including the first Ten Thousand Dollars ($10,000.00) of such
claim or claims.
ARTICLE XII
GENERAL PROVISIONS
12.1 Survival of Representations, Warranties and Agreements. The
covenants and agreements of the parties set forth herein to be performed
following the Effective Time shall survive the Effective Time and remain in full
force and effect until performed or waived by the appropriate parties hereto.
The representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement, but only to the extent specified
below:
(a) Except as set forth in clause (b) below, the
representations and warranties shall survive for a period of three (3)
years following the Closing Date; and
38
(b) The representations and warranties contained in Sections
4.6(b), 4.8, 4.13, 5.6(b), 5.8 and 5.13 shall survive without
limitation.
12.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by nationally
recognized overnight courier service, telecopied (with receipt confirmed) or
mailed by registered or certified mail (return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to GuildMaster or the GuildMaster Shareholders:
GuildMaster, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx X
Xxxxxxxxxxx, XX 00000
(b) if to Decorate or JBE:
Decorate, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx X
Xxxxxxxxxxx, XX 00000
12.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
12.4 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof (b) except as expressly provided herein, is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
12.5 Amendment. This Agreement may not be amended, modified or
supplemented except by written agreement by the parties hereto.
12.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri.
12.7 Publicity. The parties hereto agree that they will consult with
each other concerning any proposed press release or public announcement
pertaining to the Merger and use their best efforts to agree upon the text of
such press release or public announcement prior to the publication of such press
release or the making of such public announcement.
12.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; except that Decorate may assign its rights
hereunder to any financial institution (and its successors and assigns)
extending credit to Decorate in connection with this transaction. Subject to the
39
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
12.9 Knowledge of the Parties. Wherever in this Agreement any
representation or warranty is made upon the knowledge of a party hereto that is
not an individual, such knowledge shall include the knowledge, after due
inquiry, of any executive officer of such party or an executive officer of any
subsidiary thereof.
12.10 Confidentiality. Except for information that is available to the
public, all information concerning GuildMaster and its customers made available
to or in the possession of Decorate or JBE shall be kept as confidential. Except
for information that is available to the public, all information concerning
Decorate and JBE, and their customers made available to or in the possession of
GuildMaster shall be kept as confidential.
IN WITNESS WHEREOF, the Constituent Corporations have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
and the GuildMaster Shareholders have executed this Agreement, all as of the
date first written above.
(Corporate Seal) GUILDMASTER, INC.
ATTEST:
By
----------------------------- -------------------------------
Secretary/Assistant Secretary
"GuildMaster"
JB EXPRESS, INC.
By
------------------------------
"JBE
40
(Corporate Seal) DECORATE, INC.
ATTEST:
By
----------------------------- ------------------------------
Secretary/Assistant Secretary
"Decorate"
----------------------------------
Xxxxx X. Xxxxxxx
----------------------------------
Xxxxx X. Xxxxxxx
----------------------------------
Xxx X. Xxxxx
"GuildMaster Shareholders"
41
EXHIBIT "A"
TO: XXXX XXXXX
Secretary of State
State of Missouri
Corporations Division
X.X. Xxx 000
Xxxxxxxxx Xxxx, XX 00000
ARTICLES OF MERGER OF GUILDMASTER, INC.
INTO JB Express, INC.
Pursuant to the provisions of The General and Business Corporation Law
of Missouri, GuildMaster, Inc., a Missouri corporation ("GuildMaster") and JB
Express, Inc., also a Missouri corporation ("JBE") (GuildMaster and JBE
hereinafter sometimes referred to collectively as the "Constituent
Corporations") certify the following:
1. GuildMaster is hereby merged with and into JBE, so that JBE is the
surviving corporation. The name of the surviving corporation is JB Express, Inc.
2. The Board of Directors of each of the Constituent Corporations has
met, and by resolution adopted by a majority vote of the members of such Boards,
have approved the Plan of Merger as set forth in these Articles.
3. The Plan of Merger thereafter was submitted to a vote at the meeting
of the shareholders of each of the Constituent Corporations, and at such meeting
the following votes were recorded:
(a) GuildMaster has outstanding 50,000 shares of common stock,
par value $1.00 per share, and has no other shares of stock
outstanding. All of its shares of common stock were voted for the Plan
of Merger and none of its shares of common stock was voted against the
Plan of Merger.
(b) JBE has outstanding 500 shares of common stock, par value
$.01 per share, and has no other shares of stock outstanding. All of
its shares of common stock were voted for the Plan of Merger and none
of its shares of common stock was voted against the Plan of Merger.
4. The Plan of Merger consists of the following:
(a) JB Express, Inc., a Missouri corporation, is the surviving
corporation.
A-1
(b) All of the property, rights, privileges, leases and
patents of GuildMaster are to be transferred to and become the property
of JBE, the survivor. The officers and Board of Directors of
GuildMaster and JBE are authorized to execute all deeds, assignments
and documents of every nature that may be needed to effectuate a full
and complete transfer of ownership.
(c) The officers and Board of Directors of JBE shall continue
in office until their successors are duly elected and qualified under
the provisions of the By-Laws of the surviving corporation.
(d) Each share of common stock of JBE issued and outstanding
immediately prior to the merger shall remain issued and outstanding
from and after the merger.
(e) JBE is the wholly owned subsidiary of Decorate, Inc., a
Missouri corporation ("Decorate"). Each share of GuildMaster common
stock issued and outstanding shall cease to be outstanding, and shall
be automatically cancelled and retired and shall cease to exist, and
shall be converted into and exchanged for the right to receive common
stock of Decorate, fully paid and nonassessable, and a promissory note
from Decorate, as follows:
(i) With respect to 7,500 shares of common stock of
GuildMaster held by Xxx X. Xxxxx, he shall receive the
promissory note of Decorate in the principal amount of
$375,000.00 ($50.00 per share); and
(ii) With respect to the balance of shares of common
stock of GuildMaster held by the shareholders of GuildMaster,
said GuildMaster shareholders shall receive 5.252 shares of
common stock of Decorate for each share of GuildMaster common
stock.
5. The Articles of Incorporation of the surviving corporation are not
amended.
IN WITNESS WHEREOF, these Articles of Merger have been executed in
duplicate by the aforementioned corporations as of the day and year hereinafter
acknowledged.
A-2
GUILDMASTER, INC.
(CORPORATE SEAL)
By:
-----------------------------------
ATTEST: [Signature] Date
--------------------------------- ---------------------------------------
Secretary/Assistant Secretary [Print or Type Name]
---------------------------------------
[Title]
"GuildMaster"
JB EXPRESS, INC.
(CORPORATE SEAL)
ATTEST: By:
-----------------------------------
[Signature] Date
--------------------------------- ---------------------------------------
Secretary/Assistant Secretary [Print or Type Name]
---------------------------------------
[Title]
"JBE"
STATE OF MISSOURI )
) ss.
COUNTY OF __________ )
I, __________________________________________, a notary public, do
hereby certify that on the _____ day of _________________, 2001, personally
appeared before me __________________________________, who being by me first
duly sworn, declared that he is the President of GuildMaster, Inc., a Missouri
corporation, that he signed the foregoing documents as the President of the
Corporation, and that the statements therein contained are true.
------------------------------------
Notary Public
My commissions expires:
-----------------------
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STATE OF MISSOURI )
) ss.
COUNTY OF __________ )
I, __________________________________________, a notary public, do
hereby certify that on the _____ day of _________________, 2001, personally
appeared before me __________________________________, who being by me first
duly sworn, declared that he is the President of JB Express, Inc., a Missouri
corporation, that he signed the foregoing documents as the President of the
Corporation, and that the statements therein contained are true.
------------------------------------
Notary Public
My commissions expires:
-----------------------
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EXHIBIT "B"
$375,000.00 Springfield, Missouri
May _____, 2001
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, Decorate, Inc., a Missouri
corporation (hereinafter "Borrower") hereby promises to pay to the order Xxx X.
Xxxxx (hereinafter "Creditor"), the principal sum of Three Hundred Seventy-Five
Thousand Dollars ($375,000.00), with interest thereon from the date hereof at
the rate per annum 1% in excess of the prime rate as quoted in The Wall Street
Journal (the "Prime Rate"), said rate to change as and when said Prime Rate
changes, on the ______ day of May, 2002.
All payments received with respect to this Note shall first be applied
to interest accrued on the principal balance, and the remainder shall be applied
to principal.
Borrower hereby waives presentment, demand for payment, notice of
dishonor, and all other notices and demands in connection with the delivery,
acceptance, performance, default or endorsement of this Note.
In the event of default, Borrower agrees to pay all costs of
collection, including a reasonable attorney fee, if this Note is placed in the
hands of an attorney for collection or if suit is filed thereon.
Borrower shall have the privilege of making cash payments in addition
to those called for in this Note at any time without penalty.
Payments on this Note shall be paid to the Creditor at
_____________________, or such other address as he or any other holder of this
Note may direct in writing.
Pursuant to XXXx.xx. 432.045, the Creditor hereby gives the following
notice to the Borrower:
"Oral agreements or commitments to loan money, extend credit
or to forebear from enforcing repayment of a debt including promises to
extend or renew such debt are not enforceable. To protect you
(borrower(s)) and us (creditor) from misunderstanding or
disappointment, any agreements we reach covering such matters are
contained in this writing, which is the complete and exclusive
statement of the agreement between us, except as we may later agree in
writing to modify it."
B-1
IN WITNESS WHEREOF, the Borrower, by its duly authorized officers, has
executed this Note as of the _______ day of May, 2001.
DECORATE, INC.
By:
--------------------------
B-2
EXHIBIT "C"
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is made this ______ day of
_________________, 2001, by and between Decorate, Inc., a Missouri corporation
("Corporation"), and Xxx X. Xxxxx ("Employee").
WHEREAS, the Corporation is engaged in the manufacturing and marketing
of innovative and fashion-forward decorative accessories, accent furniture,
lamps and wall decor; and
WHEREAS, in accordance with the provisions of that certain Agreement
and Plan of Merger dated May _____, 2001, by and among GuildMaster, Inc., a
Missouri corporation ("GuildMaster"), JB Express, Inc., a subsidiary of the
Corporation ("JBE"), Xxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxx, Xxx X. Xxxxx, and the
Corporation, of even date herewith, GuildMaster has merged with and into JBE,
and following the merger JBE shall operate the business conducted by GuildMaster
prior to the merger; and
WHEREAS, the Corporation desires to retain the services of the Employee
in the capacity of its President;
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Employment. The Corporation agrees to employ the Employee
and the Employee agrees to accept the employment described in this Agreement.
Section 2. Duties. The Employee shall serve as President of the
Corporation, with such duties as are customarily associated with such position.
The Employee shall be responsible for day-to-day operations, strategic planning,
and implementation of the Corporation's business.
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Section 3. Extent of Services. The Employee shall devote the majority
of his working time, attention, and energies to the performance of his duties
described herein. The Employee shall at all times faithfully and to the best of
his ability perform his duties under this Agreement. The duties shall be
rendered at the Corporation's office in Springfield, Missouri, or at such other
place or places and at such times as the needs of the Corporation may from
time-to-time dictate.
Section 4. Term. The Term of this Agreement shall begin on
__________________, 2001 ("Effective Date"), and shall continue for a three (3)
year period (the "Term"). The parties presently anticipate that the employment
relationship may continue beyond this three (3) year term, however, this
Agreement shall not give the Employee any enforceable right to employment beyond
this Term.
Section 5. Compensation.
5.1 Base Compensation. The Employee will receive a base salary of One
Hundred Sixty Thousand Dollars ($160,000.00)per year, payable in equal monthly
installments during the Term of this Agreement. Bonuses will be paid, if at all,
in the sole discretion of the Board of Directors.
5.2. Benefits. The Employee and his immediate family shall receive
medical insurance and other fringe benefits provided to full time employees of
the Corporation.
5.3 Expenses. The Corporation shall reimburse the Employee for
reasonable out-of-pocket expenses incurred by the Employee in fulfilling his
duties. The Corporation shall provide the Employee with suitable office
facilities, equipment, supplies and staff.
5.4 Equity Compensation. In the event the Employee is employed by the
Corporation pursuant to the terms of this Agreement as of the second (2nd)
anniversary date of this Agreement (hereinafter referred to as the
"Determination Date"), as of the Determination Date the Corporation shall issue
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to the Employee shares of Common Stock of the Corporation, fully paid and
non-assessable ("Bonus Shares") having a market value as of the Determination
Date of not less than the following amounts, based upon the cumulative pre-tax
profits of JBE as of the Determination Date:
--------------------------------------- --------------------------------------
Cumulative Pre-Tax Profits of JBE Market Value of Bonus Shares
as of Determination Date to be Issued to Employee
--------------------------------------- --------------------------------------
Less than $700,000.00 -0-
--------------------------------------- --------------------------------------
$700,000.00 - $899,999.00 $100,000.00
--------------------------------------- --------------------------------------
$900,000.00 - $1,099,999.00 $150,000.00
--------------------------------------- --------------------------------------
$1,100,000.00 or More $250,000.00
--------------------------------------- --------------------------------------
The issuance of the Bonus Shares to the Employee shall be governed by
the following general terms and conditions:
5.4.1 Bonus Shares shall be promptly issued to the Employee
after the Determination Date and a certificate or certificates for the
Bonus Shares shall be issued in the Employee's name. The Employee shall
thereupon be a shareholder of all of the shares represented by said
certificate or certificates. As such, the Employee will have all of the
rights of a shareholder with respect to such shares, including the
right to vote them and to receive all dividends and other distributions
with respect to them.
5.4.2 In the event that as of the Determination Date the
shares of the same class as the Bonus Shares are then listed on an
exchange, the Corporation shall take such action as shall be necessary
to cause any Bonus Shares issued pursuant to this Agreement and not
previously listed on said exchange to be listed on said exchange. The
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Corporation may require that, in acquiring any Bonus Shares, the
Employee agree with, and represent to, the Corporation that the
Employee is acquiring such Bonus Shares for the purpose of investment
and with no present intent to transfer, sell or otherwise dispose of
such shares except for such distribution by a legal representative as
shall be required by will or the laws of any jurisdiction in winding up
the estate of the Employee. Such shares shall be transferable
thereafter only if, in the opinion of counsel (who shall be
satisfactory to the Corporation), such transfer at such time complies
with applicable securities laws.
5.4.3 The cumulative pre-tax profits of JBE means the
non-consolidated gross income of JBE through all periods commencing as
of the merger of GuildMaster into JBE, and ending as of the
Determination Date, less all administrative, selling and operating
expenses of every character allocable to JBE as determined in
accordance with generally accepted accounting principals, consistently
applied. The determination of the certified public accountants of the
Corporation as to the cumulative pre-tax profits of JBE shall be
conclusive and binding upon the Corporation and the Employee.
5.4.4 In the event that as of the Determination Date the
shares of the same class as the Bonus Shares are then listed on an
exchange, the "market value" of the Bonus Shares to be issued to the
employee shall be the purchase price on the NASDAQ for the ten (10)
days preceding the Determination Date, or if not then traded or listed
on that system, on the securities trading system or stock exchange on
which the stock is then primarily traded or listed; or if the stock is
not traded or listed on an exchange the average of the reported high
and low price on the Determination Date.
5.4.5 If the Employee dies prior to the Determination Date
while in the employ of the Corporation, the Corporation shall issue to
his estate (or designated beneficiary as provided in Section 5.4.6
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hereof) following the Determination Date a prorata portion of the Bonus
Shares which would have been issued to the Employee had the Employee
remained employed by the Corporation until the Determination Date. The
prorata portion shall be determined by a fraction, the numerator of
which shall be the number of months the Employee was employed by the
Corporation between the date hereof and the Determination Date, and the
denominator of which shall be the number of months between the date
hereof and the Determination Date.
5.4.6 The Employee may file with the Corporation a designation
of a beneficiary or beneficiaries on a form to be provided by the
Corporation, which designation may be changed or revoked by the
Employee's sole action, provided that the change or revocation is filed
with the Corporation on a form provided by it. In the event Bonus
Shares are issuable to the Employee pursuant to the terms and
conditions of this Agreement, but the Employee dies prior to the
issuance of the Bonus Shares, any Bonus Shares to be issued to the
Employee may be delivered to the beneficiary or beneficiaries so
designated by the Employee or, if no beneficiary has been designated or
survives the Employee, shall be delivered to, or in accordance with the
directions of, the surviving spouse of the Employee, or, if there is no
surviving spouse, the personal representative of the Employee's estate.
Section 6. Termination.
6.1 For Cause. The Corporation may terminate the Employee's employment
at any time "for cause" with immediate effect upon delivering written notice to
the Employee. For purposes of this Agreement, "for cause" shall include: (a)
embezzlement, theft, larceny, material fraud, or other acts of dishonesty; (b)
conviction of or entrance of a plea of guilty or nolo contendere to a felony or
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other crime which has or may have a material adverse effect on the Employee's
ability to carry out his duties under this Agreement or upon the reputation of
the Corporation; and (c) any material breach of any of the Employee's
obligations hereunder not cured within fifteen (15) days after written notice
thereof to Employee. Upon termination for cause, the Corporation's sole and
exclusive obligation will be to pay the Employee his compensation earned through
the date of termination, and the Employee shall not be entitled to any
compensation after the date of termination.
6.2 Upon Death. In the event of the Employee's death during the Term of
this Agreement, the Corporation shall be obligated to pay to the Employee's
spouse, if living, or their beneficiary as directed in writing by Employee, the
full amount of compensation due under the balance of the Term of this Agreement,
whether earned or not. Employee's compensation for the full three (3) year Term
shall be secured by Corporation in the event of employee's death, through the
acquisition of a Key-Man Life Insurance Policy (the "Policy") on the life of the
Employee with the Corporation as beneficiary in a death benefit amount not less
than the compensation still unpaid for the remainder of the Term. The Policy
shall be secured from a not less than AA rated Insurance Company as determined
by the Standard & Poors rating system. All expenses associated with the Policy
shall be paid by the Corporation. Payment of the full compensation due in the
event of death shall be paid within ninety (90) days of Employee's death.
6.3 Upon Disability. The Corporation may terminate the Employee's
employment upon the Employee's total disability. The Employee shall be deemed to
be totally disabled if he is unable to perform his duties under this Agreement
by reason of mental or physical illness or accident for a period of three (3)
consecutive months. Upon termination by reason of the Employee's disability, the
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Corporation shall be obligated to pay to Employee all remaining compensation due
to Employee over the full term of this Agreement whether earned or not earned.
Payment of such compensation shall be made to Employee at such times as would be
paid if Employee were not disabled and still employed (i.e. monthly installments
over the remaining term of this Agreement).
6.4 Without Cause. The Corporation may terminate the Employee's
employment without cause at any time during the term of this Agreement, and in
such event, Corporation shall be obligated to pay to Employee all remaining
compensation due to Employee over the full Term of this Agreement whether earned
or not earned, within thirty (30) days from Termination.
6.5 Voluntary Termination by Employee. In the event Employee
voluntarily terminates his employment with Corporation during the Term of this
Agreement, the Corporation's sole and exclusive obligation will be to pay the
Employee his compensation earned through the date of Termination.
Section 7. Covenant Not to Compete.
7.1 Covenant. During Employee's employment with Corporation and in the
event Employee voluntarily terminates his employment with Corporation during the
Term of this Agreement, for a period of two (2) years after the termination
date, the Employee shall not:
7.1.1 directly or indirectly, either individually or as a
principal, partner, agent, employee, employer, joint venturer, or as a
director or officer of any corporation or association, or in any other
manner or capacity whatsoever, engage in, assist or have any active
interest in a business located anywhere in the United States of America
that engages in the manufacturing or importing of innovative and
fashion-forward decorative accessories, accent furniture, lamps and
wall decor, or that otherwise competes with or is substantially similar
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in concept, design, format, or otherwise to the business conducted by
Corporation on the date hereof or at any time during the term of this
covenant, or that provides goods or services, purchases from, or does
business in any manner with Corporation.
7.1.2 directly or indirectly, either individually or as a
principal, partner, agent, employee, employer, joint venturer, or as a
director or officer of any corporation or association, or in any other
manner or capacity whatsoever, (a) divert or attempt to divert from
Corporation any business with any customer or account with which
Employee had any contact or association, which was under the
supervision of Employee, or the identity of which was learned by
Employee as a result of Employee's employment with the Corporation; or
(b) induce any salesperson, distributor, supplier, vendor,
manufacturer, representative, agent jobber or other person transacting
business with the Corporation, or to represent, distribute or sell
services or products in competition with services or products of the
Corporation; or (c) induce or cause any employee of the Corporation to
leave the employ of the Corporation.
Section 8. Waiver. The waiver by the Corporation of the breach of any
provision of this Agreement by the Employee shall not operate or be construed as
a waiver of any subsequent breach by the Employee.
Section 9. Notices. Any notices permitted or required under this
Agreement shall be deemed given upon the date of personal delivery or
forty-eight (48) hours after deposit in the United States mail, postage fully
prepaid, return receipt requested, addressed to the Corporation at:
Decorate, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx X
Xxxxxxxxxxx, Xxxxxxxx 00000
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and addressed to the Employee at:
Xxx X. Xxxxx
__________________________
__________________________
or at any other address as any party may, from time to time, designate by notice
given in compliance with this Section.
Section 10. Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Missouri.
Section 11. Titles and Captions. All section titles or captions
contained in this Agreement are for convenience only and shall not be deemed
part of the context nor effect the interpretation of this Agreement.
Section 12. Entire Agreement. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
Section 13. Agreement Binding. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties hereto.
Section 14. Attorney Fees. In the event an arbitration, suit or action
is brought by any party under this Agreement to enforce any of its terms, or in
any appeal therefrom, it is agreed that the prevailing party shall be entitled
to reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
Section 15. Computation of Time. In computing any period of time
pursuant to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday, or legal holiday, in which event the period shall begin to run
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on the next day which is not a Saturday, Sunday or legal holiday, in which event
the period shall run until the end of the next day thereafter which is not a
Saturday, Sunday, or legal holiday.
Section 16. Pronouns and Plurals. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular,
or plural as the identity of the person or persons may require.
Section 17. Presumption. This Agreement or any section thereof shall
not be construed against any party due to the fact that said Agreement or any
section thereof was drafted by said party.
Section 18. Further Action. The parties hereto shall execute and
deliver all documents, provide all information and take or forbear from all such
action as may be necessary or appropriate to achieve the purposes of this
Agreement.
Section 19. Parties in Interest. Nothing herein shall be construed to
be the benefit of any third party, nor is it intended that any provision shall
be for the benefit of any third party.
Section 20. Savings Clause. If any provision of this Agreement, or the
application of such provision of any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
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DECORATE, INC.
By:
-----------------------------------------
"Corporation"
-----------------------------------------
Xxx X. Xxxxx
"Employee"
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EXHIBIT "D"
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is made this ______ day of
_________________, 2001, by and between Decorate, Inc., a Missouri corporation
("Corporation"), and Xxxxx X. Xxxxxxx ("Employee").
WHEREAS, the Corporation is engaged in the manufacturing and marketing
of innovative and fashion-forward decorative accessories, accent furniture,
lamps and wall decor; and
WHEREAS, in accordance with the provisions of that certain Agreement
and Plan of Merger dated May _____, 2001, by and among GuildMaster, Inc., a
Missouri corporation ("GuildMaster"), JB Express, Inc., a subsidiary of the
Corporation ("JBE"), Xxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxx, Xxx X. Xxxxx, and the
Corporation, of even date herewith, GuildMaster has merged with and into JBE,
and following the merger JBE shall operate the business conducted by GuildMaster
prior to the merger; and
WHEREAS, the Corporation desires to retain the services of the Employee
in the capacity of its Vice-President;
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Employment. The Corporation agrees to employ the Employee
and the Employee agrees to accept the employment described in this Agreement.
Section 2. Duties. The Employee shall serve as Vice President of the
Corporation, with such duties as are customarily associated with such position.
The Employee shall be responsible for product development, strategic planning,
and implementation of the Corporation's business.
D-1
Section 3. Extent of Services. The Employee shall devote the majority
of his working time, attention, and energies to the performance of his duties
described herein. The Employee shall at all times faithfully and to the best of
his ability perform his duties under this Agreement. The duties shall be
rendered at the Corporation's office in Springfield, Missouri, or at such other
place or places and at such times as the needs of the Corporation may from
time-to-time dictate.
Section 4. Term. The Term of this Agreement shall begin on
__________________, 2001 ("Effective Date"), and shall continue for a three (3)
year period (the "Term"). The parties presently anticipate that the employment
relationship may continue beyond this three (3) year term, however, this
Agreement shall not give the Employee any enforceable right to employment beyond
this Term.
Section 5. Compensation.
5.1 Base Compensation. The Employee will receive a base salary of One
Hundred Forty Thousand Dollars ($140,000.00) per year, payable in equal monthly
installments during the Term of this Agreement. Bonuses will be paid, if at all,
in the sole discretion of the Board of Directors.
5.2. Benefits. The Employee and his immediate family shall receive
medical insurance and other fringe benefits provided to full time employees of
the Corporation.
5.3 Expenses. The Corporation shall reimburse the Employee for
reasonable out-of-pocket expenses incurred by the Employee in fulfilling his
duties. The Corporation shall provide the Employee with suitable office
facilities, equipment, supplies and staff.
5.4 Equity Compensation. In the event the Employee is employed by the
Corporation pursuant to the terms of this Agreement as of the second (2nd)
anniversary date of this Agreement (hereinafter referred to as the
"Determination Date"), as of the Determination Date the Corporation shall issue
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to the Employee shares of Common Stock of the Corporation, fully paid and
non-assessable ("Bonus Shares") having a market value as of the Determination
Date of not less than the following amounts, based upon the cumulative pre-tax
profits of JBE as of the Determination Date:
------------------------------------- ------------------------------------------
Cumulative Pre-Tax Profits JBE as Market Value of Bonus Shares to be
of Determination Date Issued to Employee
------------------------------------- ------------------------------------------
Less than $700,000.00 -0-
------------------------------------- ------------------------------------------
$700,000.00 - $899,999.00 $100,000.00
------------------------------------- ------------------------------------------
$900,000.00 - $1,099,999.00 $150,000.00
------------------------------------- ------------------------------------------
$1,100,000.00 or More $250,000.00
------------------------------------- ------------------------------------------
The issuance of the Bonus Shares to the Employee shall be governed by
the following general terms and conditions:
5.4.1 Bonus Shares shall be promptly issued to the Employee
after the Determination Date and a certificate or certificates for the
Bonus Shares shall be issued in the Employee's name. The Employee shall
thereupon be a shareholder of all of the shares represented by said
certificate or certificates. As such, the Employee will have all of the
rights of a shareholder with respect to such shares, including the
right to vote them and to receive all dividends and other distributions
with respect to them.
5.4.2 In the event that as of the Determination Date the
shares of the same class as the Bonus Shares are then listed on an
exchange, the Corporation shall take such action as shall be necessary
to cause any Bonus Shares issued pursuant to this Agreement and not
previously listed on said exchange to be listed on said exchange. The
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Corporation may require that, in acquiring any Bonus Shares, the
Employee agree with, and represent to, the Corporation that the
Employee is acquiring such Bonus Shares for the purpose of investment
and with no present intent to transfer, sell or otherwise dispose of
such shares except for such distribution by a legal representative as
shall be required by will or the laws of any jurisdiction in winding up
the estate of the Employee. Such shares shall be transferable
thereafter only if, in the opinion of counsel (who shall be
satisfactory to the Corporation), such transfer at such time complies
with applicable securities laws.
5.4.3 The cumulative pre-tax profits of JBE means the
non-consolidated gross income of JBE through all periods commencing as
of the merger of GuildMaster into JBE, and ending as of the
Determination Date, less all administrative, selling and operating
expenses of every character allocable to JBE as determined in
accordance with generally accepted accounting principals, consistently
applied. The determination of the certified public accountants of the
Corporation as to the cumulative pre-tax profits of JBE shall be
conclusive and binding upon the Corporation and the Employee.
5.4.4 In the event that as of the Determination Date the
shares of the same class as the Bonus Shares are then listed on an
exchange, the "market value" of the Bonus Shares to be issued to the
employee shall be the purchase price on the NASDAQ for the ten (10)
days preceding the Determination Date, or if not then traded or listed
on that system, on the securities trading system or stock exchange on
which the stock is then primarily traded or listed; or if the stock is
not traded or listed on an exchange the average of the reported high
and low price on the Determination Date.
5.4.5 If the Employee dies prior to the Determination Date
while in the employ of the Corporation, the Corporation shall issue to
his estate (or designated beneficiary as provided in Section 5.4.6
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hereof) following the Determination Date a prorata portion of the Bonus
Shares which would have been issued to the Employee had the Employee
remained employed by the Corporation until the Determination Date. The
prorata portion shall be determined by a fraction, the numerator of
which shall be the number of months the Employee was employed by the
Corporation between the date hereof and the Determination Date, and the
denominator of which shall be the number of months between the date
hereof and the Determination Date.
5.4.6 The Employee may file with the Corporation a designation
of a beneficiary or beneficiaries on a form to be provided by the
Corporation, which designation may be changed or revoked by the
Employee's sole action, provided that the change or revocation is filed
with the Corporation on a form provided by it. In the event Bonus
Shares are issuable to the Employee pursuant to the terms and
conditions of this Agreement, but the Employee dies prior to the
issuance of the Bonus Shares, any Bonus Shares to be issued to the
Employee may be delivered to the beneficiary or beneficiaries so
designated by the Employee or, if no beneficiary has been designated or
survives the Employee, shall be delivered to, or in accordance with the
directions of, the surviving spouse of the Employee, or, if there is no
surviving spouse, the personal representative of the Employee's estate.
Section 6. Termination.
6.1 For Cause. The Corporation may terminate the Employee's employment
at any time "for cause" with immediate effect upon delivering written notice to
the Employee. For purposes of this Agreement, "for cause" shall include: (a)
embezzlement, theft, larceny, material fraud, or other acts of dishonesty; (b)
conviction of or entrance of a plea of guilty or nolo contendere to a felony or
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other crime which has or may have a material adverse effect on the Employee's
ability to carry out his duties under this Agreement or upon the reputation of
the Corporation; and (c) any material breach of any of the Employee's
obligations hereunder not cured within fifteen (15) days after written notice
thereof to Employee. Upon termination for cause, the Corporation's sole and
exclusive obligation will be to pay the Employee his compensation earned through
the date of termination, and the Employee shall not be entitled to any
compensation after the date of termination.
6.2 Upon Death. In the event of the Employee's death during the Term of
this Agreement, the Corporation shall be obligated to pay to the Employee's
spouse, if living, or their beneficiary as directed in writing by Employee, the
full amount of compensation due under the balance of the Term of this Agreement,
whether earned or not. Employee's compensation for the full three (3) year Term
shall be secured by Corporation in the event of employee's death, through the
acquisition of a Key-Man Life Insurance Policy (the "Policy") on the life of the
Employee with the Corporation as beneficiary in a death benefit amount not less
than the compensation still unpaid for the remainder of the Term. The Policy
shall be secured from a not less than AA rated Insurance Company as determined
by the Standard & Poors rating system. All expenses associated with the Policy
shall be paid by the Corporation. Payment of the full compensation due in the
event of death shall be paid within ninety (90) days of Employee's death.
6.3 Upon Disability. The Corporation may terminate the Employee's
employment upon the Employee's total disability. The Employee shall be deemed to
be totally disabled if he is unable to perform his duties under this Agreement
by reason of mental or physical illness or accident for a period of three (3)
consecutive months. Upon termination by reason of the Employee's disability, the
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Corporation shall be obligated to pay to Employee all remaining compensation due
to Employee over the full term of this Agreement whether earned or not earned.
Payment of such compensation shall be made to Employee at such times as would be
paid if Employee were not disabled and still employed (i.e. monthly installments
over the remaining term of this Agreement).
6.4 Without Cause. The Corporation may terminate the Employee's
employment without cause at any time during the term of this Agreement, and in
such event, Corporation shall be obligated to pay to Employee all remaining
compensation due to Employee over the full Term of this Agreement whether earned
or not earned, within thirty (30) days from Termination.
6.5 Voluntary Termination by Employee. In the event Employee
voluntarily terminates his employment with Corporation during the Term of this
Agreement, the Corporation's sole and exclusive obligation will be to pay the
Employee his compensation earned through the date of Termination.
Section 7. Covenant Not to Compete.
7.1 Covenant. During Employee's employment with Corporation and in the
event Employee voluntarily terminates his employment with Corporation during the
Term of this Agreement, for a period of two (2) years after the termination
date, the Employee shall not:
7.1.1 directly or indirectly, either individually or as a
principal, partner, agent, employee, employer, joint venturer, or as a
director or officer of any corporation or association, or in any other
manner or capacity whatsoever, engage in, assist or have any active
interest in a business located anywhere in the United States of America
that engages in the manufacturing or importing of innovative and
fashion-forward decorative accessories, accent furniture, lamps and
wall decor, or that otherwise competes with or is substantially similar
D-7
in concept, design, format, or otherwise to the business conducted by
Corporation on the date hereof or at any time during the term of this
covenant, or that provides goods or services, purchases from, or does
business in any manner with Corporation.
7.1.2 directly or indirectly, either individually or as a
principal, partner, agent, employee, employer, joint venturer, or as a
director or officer of any corporation or association, or in any other
manner or capacity whatsoever, (a) divert or attempt to divert from
Corporation any business with any customer or account with which
Employee had any contact or association, which was under the
supervision of Employee, or the identity of which was learned by
Employee as a result of Employee's employment with the Corporation; or
(b) induce any salesperson, distributor, supplier, vendor,
manufacturer, representative, agent jobber or other person transacting
business with the Corporation, or to represent, distribute or sell
services or products in competition with services or products of the
Corporation; or (c) induce or cause any employee of the Corporation to
leave the employ of the Corporation.
7.1.3 Notwithstanding the above provisions of this current
Section 7, the parties agree and acknowledge that the conduct of the
current activities of Employee and his spouse, Xxxxx X. Xxxxxxx, in
connection with PVI, shall not constitute a violation of this Section
7.
Section 8. Waiver. The waiver by the Corporation of the breach of any
provision of this Agreement by the Employee shall not operate or be construed as
a waiver of any subsequent breach by the Employee.
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Section 9. Notices. Any notices permitted or required under this
Agreement shall be deemed given upon the date of personal delivery or
forty-eight (48) hours after deposit in the United States mail, postage fully
prepaid, return receipt requested, addressed to the Corporation at:
Decorate, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx X
Xxxxxxxxxxx, Xxxxxxxx 00000
and addressed to the Employee at:
Xxxxx X. Xxxxxxx
__________________________
__________________________
or at any other address as any party may, from time to time, designate by notice
given in compliance with this Section.
Section 10. Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Missouri.
Section 11. Titles and Captions. All section titles or captions
contained in this Agreement are for convenience only and shall not be deemed
part of the context nor effect the interpretation of this Agreement.
Section 12. Entire Agreement. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
Section 13. Agreement Binding. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties hereto.
Section 14. Attorney Fees. In the event an arbitration, suit or action
is brought by any party under this Agreement to enforce any of its terms, or in
any appeal therefrom, it is agreed that the prevailing party shall be entitled
D-9
to reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
Section 15. Computation of Time. In computing any period of time
pursuant to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday, or legal holiday, in which event the period shall begin to run
on the next day which is not a Saturday, Sunday or legal holiday, in which event
the period shall run until the end of the next day thereafter which is not a
Saturday, Sunday, or legal holiday.
Section 16. Pronouns and Plurals. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular,
or plural as the identity of the person or persons may require.
Section 17. Presumption. This Agreement or any section thereof shall
not be construed against any party due to the fact that said Agreement or any
section thereof was drafted by said party.
Section 18. Further Action. The parties hereto shall execute and
deliver all documents, provide all information and take or forbear from all such
action as may be necessary or appropriate to achieve the purposes of this
Agreement.
Section 19. Parties in Interest. Nothing herein shall be construed to
be the benefit of any third party, nor is it intended that any provision shall
be for the benefit of any third party.
Section 20. Savings Clause. If any provision of this Agreement, or the
application of such provision of any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
D-10
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
DECORATE, INC.
By:
-------------------------------------
"Corporation"
----------------------------------------
Xxxxx X. Xxxxxxx
"Employee"
D-11
EXHIBIT "E"
$925,000.00 Springfield, Missouri
May ____, 2001
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, Decorate, Inc., a Missouri
corporation (hereinafter "Borrower") hereby promises to pay to the order of
Xxxxx X. Xxxxxxx (hereinafter "Creditor"), the principal sum of Nine Hundred
Twenty-Five Thousand Dollars ($925,000.00), with interest thereon from the date
hereof at the rate per annum 1% in excess of the prime rate as quoted in The
Wall Street Journal (the "Prime Rate"), said rate to change as and when said
Prime Rate changes, on the _____ day of May, 2002.
All payments received with respect to this Note shall first be applied
to interest accrued on the principal balance, and the remainder shall be applied
to principal.
Borrower hereby waives presentment, demand for payment, notice of
dishonor, and all other notices and demands in connection with the delivery,
acceptance, performance, default or endorsement of this Note.
In the event of default, Borrower agrees to pay all costs of
collection, including a reasonable attorney fee, if this Note is placed in the
hands of an attorney for collection or if suit is filed hereon.
Borrower shall have the privilege of making cash payments in addition
to those called for in this Note at any time without penalty.
Payments on this Note shall be paid to the Creditor at
____________________, or such other address as he or any other holder of this
Note may direct in writing.
Pursuant to XXXx.xx. 432.045, the Creditor hereby gives the following
notice to the Borrower:
"Oral agreements or commitments to loan money, extend credit
or to forebear from enforcing repayment of a debt including promises to
extend or renew such debt are not enforceable. To protect you
(borrower(s)) and us (creditor) from misunderstanding or
disappointment, any agreements we reach covering such matters are
contained in this writing, which is the complete and exclusive
statement of the agreement between us, except as we may later agree in
writing to modify it."
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IN WITNESS WHEREOF, the Borrower, by its duly authorized officers, has
executed this Note as of the _______ day of May, 2001.
DECORATE, INC.
By:
-----------------------------
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