EXHIBIT 10.25
AGREEMENT FOR PURCHASE AND SALE
OF
CAPITAL STOCK
OF
SUPERIOR SUPPLY COMPANY
AMONG
PAMECO CORPORATION
XXX X. XXXXXX
AND
XXXXXXX X. XXXXXXXXXX
DATED AUGUST 25, 1997
AGREEMENT FOR PURCHASE AND SALE OF CAPITAL STOCK
OF SUPERIOR SUPPLY COMPANY
THIS AGREEMENT is made and entered into on this 25th day of August,
1997, by and among PAMECO CORPORATION, a Georgia corporation ("PURCHASER"), XXX
X. XXXXXX ("XXXXXX") and XXXXXXX X. XXXXXXXXXX ("XXXXXXXXXX") (Xxxxxx and
Xxxxxxxxxx are referred to herein collectively as the "SHAREHOLDERS" and
individually as a "SHAREHOLDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Superior Supply Company, a Missouri corporation ("COMPANY"),
and the Subsidiaries (as defined in SECTION 3.1) are engaged in the business of
wholesale distribution of heating, ventilating, air conditioning and
refrigeration equipment, parts and supplies (the "COMPANY'S BUSINESS"); and
WHEREAS, the Shareholders collectively own of record and beneficially
100% of the issued and outstanding capital stock of Company (collectively, the
"SHARES"); and
WHEREAS, upon the terms and subject to the conditions contained in
this Agreement, Purchaser desires to purchase the Shares from the Shareholders,
and the Shareholders desire to sell the Shares to Purchaser;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. PURCHASE AND SALE
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1.1 AGREEMENT TO PURCHASE AND SELL THE SHARES. Subject to the
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terms and conditions contained herein, the Shareholders hereby sell, assign,
transfer and convey to Purchaser, and in reliance on and subject to the
representations, warranties, covenants and agreements contained herein,
Purchaser hereby purchases and acquires from the Shareholders the Shares, free
and clear of all Liens (such term and certain other capitalized terms being
defined in ARTICLE 7).
1.2 PURCHASE PRICE. Subject to adjustment as provided in SECTIONS
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1.5 AND 1.6, the aggregate purchase price (the "PURCHASE PRICE") to be paid for
the Shares shall be $7,000,000.
1.3 CLOSING. (a) Consummation of the transactions contemplated in
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this Agreement (the "CLOSING") shall take place at the offices of Xxxxxxxxxx
Xxxxxxxx LLP, 0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, at 10:00 a.m.
Atlanta, Georgia time, on August 25, 1997 (the "CLOSING DATE").
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(b) At Closing:
(i) The Shareholders shall deliver to Purchaser certificates
representing the Shares, duly endorsed for transfer, with all required
stock transfer stamps, if any, affixed.
(ii) Upon delivery of the certificates representing the Shares by the
Shareholders, Purchaser shall pay the Purchase Price as follows:
(A) Purchaser shall deposit $525,000 with First Union
National Bank ("ESCROW AGENT") to be invested, held and disbursed
in accordance with that certain Escrow Agreement, of even date
herewith, among Purchaser, the Shareholders and Escrow Agent, a
copy of which is attached hereto as EXHIBIT A (such sum, together
with all interest thereon and other accretions thereto, the
"ESCROW FUND");
(B) Purchaser and the Shareholders shall instruct UMB Bank,
N.A., to deliver the Xxxxxxx Money (as defined in that certain
Good Faith Escrow Agreement, dated July 28, 1997, among
Purchaser, the Shareholders, and UMB Bank, N.A.) to the
Shareholders; and
(C) Subject to adjustment as provided in the next
paragraph, Purchaser shall pay to the Shareholders by wire
transfer to bank accounts designated by the Shareholders, the
amount of $6,475,000, less the Xxxxxxx Money.
(D) The purchase price to be paid to the Shareholders
pursuant to this SECTION 1.3 shall be adjusted as follows: (i)
if Company's net book value as reflected on the Estimated Closing
Date Balance Sheet (as defined in the following paragraph)
exceeds Company's net book value as reflected on Company's
consolidated balance sheet as of January 31, 1997 (the "JANUARY
31 BALANCE SHEET"), such excess shall be added to the cash
purchase price to be paid at the Closing; or (ii) if Company's
net book value as reflected on the Estimated Closing Date Balance
Sheet is less than Company's net book value as reflected on the
January 31 Balance Sheet, such difference shall be subtracted
from the cash purchase price to be paid at the Closing.
(iii) The parties shall mutually agree upon a consolidated balance
sheet reflecting the assets and liabilities of Company as of the
Closing Date (the "ESTIMATED CLOSING DATE BALANCE SHEET"). Except as
expressly provided in this SECTION 1.3(B), the Estimated Closing Date
Balance Sheet shall be prepared in accordance with GAAP (as defined in
ARTICLE 7). Obsolete Inventory (as defined in ARTICLE 7) of Company
and the Subsidiaries shall not be included on the Estimated Closing
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Date Balance Sheet. Inventory included on the Estimated Closing Date
Balance Sheet shall be valued at the lower of Company's or
Subsidiaries' cost or fair market value on the Closing Date. Tangible
fixed assets shall be included on the Estimated Closing Date Balance
Sheet only if they are identifiable, and those which are identifiable
shall be reflected at their book value (net of depreciation). A
reserve for warranty claims shall be established on the Estimated
Closing Date Balance Sheet in accordance with GAAP, net of an
adjustment for deferred tax assets. No additional reserve will be
established on the Estimated Closing Date Balance Sheet for the
amortization of Company's existing asset "Excess of purchase price
over net assets" which is reflected on the January 31 Balance Sheet.
There will be no adjustment to equity on the Estimated and Closing
Date Balance Sheet, and no income tax reserve will be established on
the Estimated and Closing Date Balance Sheet, with respect to
Company's LIFO reserve. Rebates that Company and the Subsidiaries
expect to receive from manufacturers after the Closing Date with
respect to purchases occurring prior to the Closing Date will be
recorded on the Estimated and Closing Date Balance Sheet as
receivables in accordance with GAAP (the "REBATE RECEIVABLES").
(iv) Purchaser and Xxxxxx shall execute an employment agreement in
the form of EXHIBIT B attached hereto.
(v) Purchaser shall cause Company to pay in full all of the debt of
Company identified on EXHIBIT C and shall cause any personal
guarantees of such debt by the Shareholders to be cancelled.
(vi) Company and the Subsidiaries shall have entered into leases with
the Shareholders with respect to the branches identified on EXHIBIT D,
and the obligations of Company and the Subsidiaries under such leases
shall be guaranteed by Pameco.
(c) All deliveries, payments and other transactions and documents
relating to Closing shall be interdependent and none shall be effective unless
and until all are effective (except to the extent that the party entitled to the
benefit thereof has waived satisfaction or performance thereof as a condition
precedent to Closing).
(d) From time to time and at any time, at Purchaser's reasonable
request, after Closing, and without further consideration, the Shareholders
shall, at their own expense, execute and deliver such further documents and
instruments of conveyance, assignment, and transfer and shall take such further
reasonable actions as may be necessary or desirable, in the opinion of
Purchaser, to transfer and convey to Purchaser all right, title and interest in
and to the Shares, free and clear of all Liens or as may otherwise be necessary
or desirable to carry out the intent of this Agreement.
1.4 PREPARATION OF CLOSING DATE BALANCE SHEET. (a) Within 60 days after
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the Closing Date, Purchaser will prepare and deliver to the Shareholders a
consolidated balance sheet with respect to Company (the "DRAFT BALANCE SHEET")
as of the start of business on the Closing Date, and a written calculation of
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the change in assets and liabilities from the Estimated Closing Date Balance
Sheet (the "CALCULATION"). Purchaser will prepare the Draft Balance Sheet in
accordance with GAAP, with the exceptions noted in SECTION 1.3(B)(III);
provided, however, that the parties acknowledge and agree that (i) the reserve
for warranty claims established on the Estimated Closing Date Balance Sheet
shall not be adjusted, either up or down, on the Closing Date Balance Sheet (as
defined in SECTION 1.4(C)), and (ii) the figure reflected on the Estimated
Closing Date Balance Sheet for reserves for damaged inventory, obsolete
inventory, shrinkage, excess and idle inventory, and discontinued lines shall
not be adjusted, either up or down, on the Closing Date Balance Sheet, although
the inventory figure on the Closing Date Balance Sheet may be adjusted for
purchases and sales through August 22, 1997, and for returned goods.
(b) The Shareholders shall have 15 days after receiving the Draft
Balance Sheet and the Calculation in which to deliver written notice of
objection thereto to Purchaser. Failure to object in writing within such 15 day
period shall constitute the Shareholders' final and binding acceptance of the
Draft Balance Sheet and the Calculation. If Purchaser and the Shareholders
cannot agree upon the Draft Balance Sheet and the Calculation within 15 days
after Purchaser receives the Shareholders' written notice of objection, if any,
they shall retain a nationally recognized accounting firm (other than Ernst &
Young, LLP) to resolve the remaining issues. Such accounting firm's fees and
expenses shall be paid one-half by Purchaser and one-half by the Shareholders.
(c) The determination of such accounting firm will be conclusive and
binding upon the parties and shall be reflected in a final consolidated balance
sheet with respect to Company approved or prepared by such accountants in
accordance with the principles set forth in SECTION 1.3(B)(III). The
consolidated balance sheet of Company as at the start of business on the Closing
Date and the Calculation, whether determined by agreement of the parties or by
such accountants as the case may be, shall be referred to herein as the "CLOSING
DATE BALANCE SHEET."
1.5 PURCHASE PRICE ADJUSTMENTS. (a) Upon final determination of
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the Closing Date Balance Sheet, the Purchase Price shall be adjusted as follows:
(i) if Company's net book value as reflected on the Closing Date Balance Sheet
exceeds Company's net book value as reflected on the Estimated Closing Date
Balance Sheet, Purchaser shall pay to the Shareholders in cash an amount equal
to such excess within five calendar days following the date of the final
determination of the Closing Date Balance Sheet; or (ii) if Company's net book
value as reflected on the Closing Date Balance Sheet is less than Company's net
book value as reflected on the Estimated Closing Date Balance Sheet, the
Shareholders will reimburse Purchaser in cash the amount of such difference
within five calendar days following the date of the final determination of the
Closing Date Balance Sheet, provided that such amount shall be paid first from
the Escrow Fund to the extent thereof, and thereafter by the Shareholders.
(b) Anything herein to the contrary notwithstanding, there shall be no
Purchase Price adjustment, either up or down, pursuant to this SECTION 1.5
unless such adjustment exceeds $25,000, and the maximum Purchase Price
adjustment pursuant to this SECTION 1.5 shall be $200,000.
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1.6 RECEIVABLES. (a) The parties acknowledge and agree that any
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accounts and notes receivables existing on the Closing Date (other than the
Rebate Receivables) which are not collected by Purchaser using commercially
reasonable collection efforts (which shall include sending invoices and other
notices of amounts due, but shall not include the use of outside collection
services) within 90 days after Closing may be deemed uncollectible, and
Purchaser may, upon written notice to the Shareholders, assign such
uncollectible accounts and notes receivables (the "ASSIGNED RECEIVABLES") to the
Shareholders prior to 120 days after Closing, and the Shareholders shall be
entitled to all subsequent collections with respect to such Assigned
Receivables. If Purchaser assigns any accounts and notes receivables to the
Shareholders, the Shareholders shall promptly pay to Purchaser in cash the book
value of such Assigned Receivables as reflected on the Closing Date Balance
Sheet.
(b) If Purchaser has not collected the Rebate Receivables by March
30, 1998, using commercially reasonable collection efforts, Purchaser may, upon
written notice to the Shareholders, assign such uncollectible Rebate Receivables
to the Shareholders, and the Shareholders shall be entitled to all subsequent
collections with respect to such assigned Rebate Receivables. If Purchaser
assigns any Rebate Receivables to the Shareholders, the Shareholders shall
promptly pay to Purchaser in cash the book value of such assigned Rebate
Receivables as reflected on the Closing Date Balance Sheet. If Purchaser's
collection of Rebate Receivables by March 30, 1998, exceeds the amount of Rebate
Receivables reflected on Closing Date Balance Sheet, then Purchaser shall
promptly pay to the Shareholders such excess; provided, however, that in
ascertaining whether rebates received from suppliers relate to periods prior to
or following the Closing, such rebates shall be allocated based upon the volume
of purchases from the applicable supplier between February 1, 1997 and January
31, 1998.
2. ADDITIONAL AGREEMENTS
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2.1 EXPENSES. All expenses incurred by Purchaser in connection
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with the negotiations among the parties, and the authorization, preparation,
execution and performance of this Agreement and the transactions contemplated
hereby, including, without limitation, all fees and expenses of agents, counsel
and accountants for Purchaser, shall be paid by Purchaser. All expenses incurred
by Company and the Shareholders in connection with the negotiations among the
parties, and the authorization, preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including, without
limitation, all fees and expenses of agents, counsel and accountants for Company
and the Shareholders, shall be paid by the Shareholders.
2.2 BROKERS. The Shareholders hereby represent and warrant that no
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broker or finder has acted on their behalf in connection with this Agreement or
the transactions contemplated herein. Purchaser hereby represents and warrants
that no broker (other than Xxxxxx Xxxxxx Inc., whose fee shall be paid by
Purchaser) has acted on its behalf in connection with this Agreement or the
transactions contemplated herein.
2.3 COVENANT AGAINST COMPETITION. (a) In order to induce Purchaser
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to enter into and perform this Agreement, each Shareholder covenants and agrees
that, for a period of five years beginning on the Closing Date, he will not,
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without the prior written consent of Purchaser, for his own account or jointly
with another, directly or indirectly, for or on behalf of any Person (as defined
in ARTICLE 7), as principal, agent, shareholder, participant, partner, promoter,
director, officer, manager, employee, consultant, sales representative or
otherwise, except as an employee or on behalf of Purchaser:
(i) engage or invest in, consult with, or own, control, manage, assist
or otherwise participate in the ownership, control or management of,
or render services or advise to, or lend his name to, any business
engaged in the purchase for resale, sale or distribution within the
Territory (as defined in ARTICLE 7) of heating, ventilating, air
conditioning and refrigeration equipment, parts and supplies
("PRODUCTS");
(ii) solicit or assist in the solicitation of any Person having an
office or place of business within the Territory and to whom Company
or any Subsidiary sold or provided any Products on, or during the two
year period prior to, the date of the Closing Date, for the purpose of
obtaining the patronage of such Person for the purchase of any
Products;
(iii) solicit or induce, or in any manner assist in the solicitation
or inducement of, any Person employed by Company or any Subsidiary (as
defined in SECTION 3.1), as an employee, independent contractor or
otherwise, to leave such employment, whether or not such employment is
pursuant to a contract and whether or not such employment is at will;
or
(iv) use, disclose or reveal to any Person, any Confidential
Information (as defined below) of Company and the Subsidiaries;
provided, however, that for purposes of this SECTION 2.3, with respect
to each Shareholder, Confidential Information shall not include
confidential business information that does not constitute a trade
secret under applicable Law (as defined in ARTICLE 7) upon the
expiration of the fifth anniversary of the Closing Date.
(b) Notwithstanding anything herein to the contrary, it shall not be a
breach of the covenants contained in SECTION 2.3(A) for (i) either Shareholder
to own up to 2% of any class of publicly traded securities of any Person or (ii)
Xxxxxxxxxx Xxxx, P.C. to serve solely as legal counsel to any Person engaged in
the activities described in SECTION 2.3(A).
(c) Although the parties have, in good faith, used their best efforts
to make the provisions of this SECTION 2.3 reasonable in both geographic area
and in duration in light of the financial aspects of the transaction, and it is
not anticipated, nor is it intended, by any party hereto that a Tribunal (as
defined in ARTICLE 7) of competent jurisdiction would find it necessary to
reform the provisions hereof to make it reasonable in both geographic area or in
duration, the parties understand and agree that if a Tribunal of competent
jurisdiction determines it necessary to reform the scope of this SECTION 2.3 in
order to make it reasonable in either geographic area or duration, or otherwise,
then damages, if any, for a breach hereof, as so reformed, would be deemed to
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accrue to Purchaser as of and from the date of such a breach only in so far as
the damages for such breach relate to an action which occurred within the scope
of the geographic area or duration as so reformed.
(d) For purposes of this Agreement, "CONFIDENTIAL INFORMATION" means
any and all technical, business and other information which derives economic
value, actual or potential, from not being generally known to the public,
including, without limitation, technical or nontechnical data, compositions,
devices, methods, techniques, drawings, inventions, processes, financial data,
financial plans, product plans, lists or information concerning actual or
potential customers or suppliers, information regarding business plans and
operations, methods and plans of operation, marketing strategies, sales and
distribution plans or strategies, cost information, pricing strategies, and
acquisition and investment plans of Company and the Subsidiaries.
Notwithstanding any other provision herein, Confidential Information shall not
include any information (i) which is independently developed by a Shareholder
without the use of any Confidential Information; (ii) which was in the public
domain prior to the disclosure thereof; (iii) any information which comes into
the public domain through no fault of a Shareholder; (iv) any information which
is disclosed without restriction to a Shareholder by a third Person having the
legal right to make such disclosure; or (v) any information which is required to
be disclosed by Law or by Order (as defined in ARTICLE 7) of any Tribunal.
2.4 GOVERNMENT FILINGS. The parties shall make, or cause to be
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made, all filings and submissions required to be made to any Government in
connection with the transactions contemplated by this Agreement. Each party
shall furnish to the other parties such necessary information and reasonable
assistance as such other party may reasonably request in connection with its
preparation of necessary filings or submissions to any Government.
2.5 EMPLOYEES. Purchaser agrees to offer continued employment to
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the employees of Company and the Subsidiaries listed on SCHEDULE 2.5, in
accordance with the form of employment agreement attached hereto as EXHIBIT E.
In all other instances, employees of Company and the Subsidiaries will be
offered employment "at will" and will be subject to the terms, conditions and
policies applicable to Pameco's employees generally. Purchaser shall provide
all employees of Company and the Subsidiaries not listed on SCHEDULE 2.5 with
notice of termination and severance benefits, if applicable, in accordance with
Purchaser's policies and practices applicable to its own employees generally;
provided, that to the extent severance benefits are based upon years of service,
an employee will be given credit for years of service with Company and the
Subsidiaries.
2.6 FILING TAX RETURNS; COOPERATION ON TAX MATTERS. (a) Purchaser
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shall prepare or cause to be prepared and file or cause to be filed all Returns
(as defined in SECTION 3.20) for Company and the Subsidiaries for all periods
ending on or prior to the Closing Date which are required or permitted to be
filed after the Closing Date. Purchaser shall permit the Shareholders to review
and comment on each such Return prior to filing. The Shareholders shall
reimburse Purchaser for Taxes of Company and the Subsidiaries with respect to
such periods within fifteen (15) days after payment by Purchaser or Company and
the Subsidiaries of such Taxes to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
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the face of the Closing Date Balance Sheet. If Purchaser has not delivered
copies of the Returns described in this SECTION 2.6(A) to the Shareholders prior
to the final date on which they are required to be filed, subject to applicable
extensions, the Shareholders may, upon ten days advance written notice to
Purchaser, prepare and file such Returns; provided that they shall permit
Purchaser to review and comment on each such Return prior to filing.
(b) Purchaser shall prepare or cause to be prepared and file or cause
to be filed any Returns of Company and the Subsidiaries for Tax periods which
begin before the Closing Date and end after the Closing Date. The Shareholders
shall pay to Purchaser within fifteen (15) days after the date on which Taxes
are paid with respect to such periods an amount equal to the portion of such
Taxes which relates to the portion of such Taxable period ending on the Closing
Date to the extent such Taxes are not reflected in the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of the Closing Date
Balance Sheet. The reserve established on the Estimated Closing Date Balance
Sheet with respect to income taxes shall be calculated as if Superior Supply
Company of Topeka, Inc. and Superior Supply Company of Joplin, Inc. filed
separate federal income tax returns, and consequently, benefit separately from
the graduated rates in the Code applicable to corporations. For purposes of
this SECTION 2.6, in the case of any Taxes that are imposed on a periodic basis
and are payable for a Taxable period that includes (but does not end on) the
Closing Date, the portion of such Tax which relates to the portion of such
Taxable period ending on the Closing Date shall (x) in the case of any Taxes
other than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire Taxable period multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. Any credits relating to a Taxable
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant Taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of Company and the Subsidiaries.
(c) (i) Purchaser and the Shareholders shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Returns pursuant to this SECTION 2.6 and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Purchaser and the Shareholders agree (A) to retain all books and
records with respect to Tax matters pertinent to Company and the Subsidiaries
relating to any Taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
Purchaser or the Shareholders, any extensions thereof) of the respective Taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (B) to give the other party reasonable written notice
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prior to transferring, destroying or discarding any such books and records, and
if the other party so requests, Purchaser or the Shareholders, as the case may
be, shall allow the other party to take possession of such books and records.
(ii) Purchaser and the Shareholders further agree, upon request, to
use their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
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To induce Purchaser to enter into and perform this Agreement, the
Shareholders severally represent, warrant and covenant to Purchaser as follows:
3.1 OWNERSHIP OF SHARES; SUBSIDIARIES. (a) The total authorized
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capital stock of Company consists of 500,000 shares of common stock, par value
$1.00 per share, and 5,000 shares of preferred stock, par value $100 per share.
The Shareholders are the record and beneficial owners of the Shares, free and
clear of all Liens, and upon consummation of the purchase and sale of the Shares
to Purchaser, Purchaser shall be the sole owner of the Shares, free and clear of
all Liens (including, without limitation, free and clear of any adverse claims
of any Persons shown as former shareholders of Company in Company's stock
transfer records). There are no outstanding contracts, demands, commitments or
other agreements or arrangements under which the Shareholders (or either of
them) or Company are or may become obliged to sell, transfer or assign any of
the Shares.
(b) Except as set forth on SCHEDULE 3.1, Company owns beneficially and
of record 100% of the issued and outstanding capital stock (the "SUBSIDIARY
SHARES") of each of the corporations listed on SCHEDULE 3.1 attached hereto
(individually, a "SUBSIDIARY" and collectively, the "SUBSIDIARIES"), free and
clear of all Liens. There are no outstanding contracts, demands, commitments or
other agreements or arrangements under which the Shareholders (or either of
them) or Company are or may become obligated to sell, transfer or assign any of
the Subsidiary Shares. Except for the Subsidiary Shares, neither Company nor
any Subsidiary owns or has an interest, direct or indirect, or any commitment to
purchase or otherwise acquire, any capital stock or other equity interest,
direct or indirect, in any other Person.
(c) The Shares and the Subsidiary Shares are duly authorized, validly
issued, fully paid and nonassessable and were authorized, offered, issued and
sold in accordance with all applicable securities and other Laws and all rights
of the Shareholders and other Persons. No Person has any preemptive rights or
other rights to acquire, or adverse claims, with respect to the capital stock of
Company or any Subsidiary, whether issued and outstanding or otherwise. There
are no outstanding securities convertible into the capital stock or rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreements or arrangements providing for the issuance (contingent or otherwise)
of, or any Actions (as defined in ARTICLE 7) relating to, the capital stock of
Company or any Subsidiary. There are no voting trusts, proxies or other
agreements or understandings with respect to the voting of the Shares or any of
the Subsidiary Shares. Company is not, nor is any Subsidiary, subject to any
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obligation to repurchase or otherwise acquire or retire any of the Shares or any
Subsidiary Shares, and neither Company nor any Subsidiary has any liability for
dividends declared or accrued, but unpaid, with respect to the Shares and the
Subsidiary Shares, respectively. All repurchases or redemptions of Company's
and each Subsidiary's capital stock have been made in accordance with all
applicable Laws, and neither Company nor any Subsidiary has paid any dividend or
made any other distribution or payment in respect of its capital stock to any
Shareholder or other Person within the past year.
3.2 ORGANIZATION, AUTHORITY AND QUALIFICATION. Company and the
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Subsidiaries are corporations duly organized, validly existing and in good
standing under the Laws of the jurisdictions indicated on SCHEDULE 3.2. Company
and the Subsidiaries have offices and places of business at the locations listed
on SCHEDULE 3.2. Company and the Subsidiaries have full corporate power and
authority and are entitled to own or lease their respective properties and to
carry on their businesses as and in all places where such businesses are
conducted and such properties are owned or leased. Except as set forth in
SCHEDULE 3.2, Company and the Subsidiaries are not required to be qualified as
foreign corporations in any jurisdiction. The Shareholders have previously
furnished or made available to Purchaser true, correct and complete copies of
(i) the articles of incorporation and bylaws of Company and the Subsidiaries,
(ii) the minutes and other similar records of meetings of the shareholders of
Company and the Subsidiaries and each of their board of directors, which contain
all records of meetings of, and actions taken in lieu thereof by their
shareholders, and show all corporate actions taken by their shareholders, each
of their board of directors, or any committees thereof, and (iii) Company's and
the Subsidiaries' share transfer records, which reflect fully all issuances,
transfers and redemptions of their shares since the date of their incorporation.
3.3 CAPACITY; INCONSISTENT OBLIGATIONS. (a) Each Shareholder has
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the full right, power, and legal capacity to execute, deliver and perform his
obligations under this Agreement. This Agreement has been duly and validly
executed and delivered by each Shareholder and constitutes the valid and legally
binding obligations of each Shareholder, subject to general equity principles,
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency or similar Laws affecting the rights of creditors
generally.
(b) The execution, delivery and performance of this Agreement will not
(i) result in a violation of Company's or any Subsidiaries' articles of
incorporation or bylaws or any Law or (ii) result in a breach of, conflict with
or default under any term or provision of any indenture, note, mortgage, bond,
security agreement, loan agreement, guaranty, pledge, or other instrument,
contract, agreement or commitment, or any Order, to which Company, any
Shareholder or any Subsidiary is a party or by which any of them or any of their
respective assets and properties, including, without limitation, the Shares and
the Subsidiary Shares, is subject or bound; nor will such actions result in (w)
the creation of any Lien on any Share or any of Company's or the Subsidiaries'
assets or properties, (x) the acceleration or creation of any Liability (as
defined in ARTICLE 7) or obligation of Company or any Subsidiary, (y) the
forfeiture of any right or privilege of Company or any Subsidiary, or (z) the
forfeiture of any right or privilege of any Shareholder which may affect such
Shareholder's ability to perform under this Agreement.
10
3.4 CONSENTS. The execution, delivery and performance by each
--------
Shareholder of this Agreement and the consummation of the transactions
contemplated herein does not (a) require the consent, approval or action of, or
any filing with or notice to, any Government or other Person, or (b) impose any
other term, condition or restriction on Purchaser, Company or the Subsidiaries
pursuant to any business combination or takeover Law.
3.5 LEGAL COMPLIANCE. Neither Company nor any Subsidiary is in
----------------
default under or in violation of (a) its articles of incorporation or bylaws or
(b) any Order. The operations of Company and the Subsidiaries and their
respective predecessors have been conducted in all material respects in
compliance with all applicable Laws. (For purposes of this Section, any
violation of applicable Law that could result in imposition of a fine or other
monetary penalty upon Company or any Subsidiary shall be deemed to be a material
non-compliance.) Company, the Subsidiaries and the Shareholders have not
received any notification of any asserted past or present failure by Company or
any Subsidiary to comply with any applicable Law.
3.6 POSSESSION OF LICENSES. Company and the Subsidiaries possess
----------------------
all franchises, certificates, licenses, permits and other authorizations from
Governments and other Persons, free from burdensome restrictions, that are
necessary for the ownership, maintenance and operation of their properties and
assets and the conduct of their businesses, except where the failure to obtain
such franchises, certificates, licenses, permits and authorizations, would not,
individually or in the aggregate, have a material adverse effect on the
business, assets, properties, Liabilities, affairs, results of operations,
conditions (financial or otherwise), cash flows or prospects of Company or any
Subsidiary, and neither Company nor any Subsidiary is in violation thereof.
3.7 FINANCIAL STATEMENTS. (a) Prior to the date hereof, the
--------------------
Shareholders have delivered to Purchaser copies of Company's consolidated
financial statements and related documents, as identified in SCHEDULE 3.7,
including the audit report thereon of Xxxxxxxx Xxxxxxx Xxxxxx Xxxxx, independent
certified public accountants, for all financial statements relating to the last
three complete fiscal years (collectively, the "FINANCIAL STATEMENTS"),
including, without limitation, for the fiscal year ended January 31, 1997 (the
"REFERENCE DATE"). Except as set forth in SECTION 3.7(B), the Financial
Statements are true and correct in all material respects, have been prepared in
accordance with GAAP consistently applied, present fairly the financial
condition of Company and the Subsidiaries as at the respective dates thereof and
the results of Company's and the Subsidiaries' operations and cash flows for the
periods then ended, and are consistent with the books and records of Company and
the Subsidiaries. The books and records of Company and the Subsidiaries are
currently maintained in accordance with GAAP and are true, correct and complete
in all material respects.
(b) The parties acknowledge and agree that the Financial Statements
have not been prepared in accordance with GAAP in the following respects: (i)
Company has not established a reserve for warranty claims on its balance sheets,
(ii) Company has not amortized an existing asset which is reflected on the
Reference Date Balance Sheet (as defined in SECTION 3.9) as "Excess of purchase
price over net assets", and (iii) the Estimated Closing Date Balance Sheet and
the Closing Date Balance Sheet will include an entry for the Rebate Receivables.
11
3.8 LIABILITIES. Neither Company nor any Subsidiary has any
-----------
Liability, except (a) those reflected on the Estimated Closing Date Balance
Sheet in the amounts reflected thereon (none of which results from, arises out
of, relates to, is in the nature of, or was caused by any breach of contract,
breach of representation or warranty, tort, product liability, infringement or
violation of any Law or Order), and (b) as may be set forth on SCHEDULE 3.8.
3.9 TITLE TO PROPERTIES. Company and the Subsidiaries have good
-------------------
and complete title to all properties and assets reflected on Company's
consolidated balance sheet as of the Reference Date (the "REFERENCE DATE BALANCE
SHEET"), except inventories and other immaterial assets which have been disposed
of in the ordinary course of business since the Reference Date, and on the
Estimated Closing Date Balance Sheet, and all other properties and assets
necessary to conduct their business as currently being conducted and as
conducted during the periods covered by the Financial Statements (other than any
leased property), free and clear of Liens, except as may be set forth in the
notes to the Reference Date Balance Sheet or on SCHEDULE 3.9.
3.10 RECEIVABLES. All notes and accounts receivable shown on the
-----------
Reference Date Balance Sheet and all such receivables shown on the Estimated
Closing Date Balance Sheet are valid and collectible obligations and were not
and are not subject to any offset or counterclaim, except for amounts reserved
against such receivables which are reflected on the Reference Date Balance Sheet
and the Estimated Closing Date Balance Sheet, as applicable.
3.11 INVENTORIES. (a) The inventory of the Company and the
-----------
Subsidiaries is merchantable and conforms in all material respects to all
orders, contracts or commitments for such goods and customary trade standards
for merchantable goods. Each item of inventory reflected on the Reference Date
Balance Sheet and the books and records of Company and the Subsidiaries has been
valued at the lower of cost or market in accordance with GAAP consistently
applied.
(b) All products held by Company and the Subsidiaries for sale to
their customers meet the standards of (i) all applicable Laws and (ii) all
contractual commitments and warranties of Company and the Subsidiaries to their
customers. Neither Company nor any Subsidiary has any Liability, and there is
no basis for any Action, for repair or replacement of any products sold by
Company or the Subsidiaries or other damages in connection therewith, except for
Liabilities and Actions fully covered by manufacturers' warranties. No product
sold or otherwise distributed by Company, the Subsidiaries or their respective
predecessors prior to the date hereof was, nor has Company, the Subsidiaries or
their respective predecessors received any notice claiming the same to be,
hazardous or unsafe in design, specification, material, content, function or
otherwise.
(c) No customer of Company or any Subsidiary has any right to return
any goods for credit or refund pursuant to any oral or written agreement,
understanding or practice which individually or in the aggregate is material,
and neither Company nor any Subsidiary presently has any goods in the possession
of its customers on consignment or a similar basis.
12
3.12 PERSONAL PROPERTY. (a) All machinery, equipment, vehicles,
-----------------
and other items of tangible personal property which are owned or leased by
Company or the Subsidiaries are in good condition and repair, subject to normal
wear and tear, suited for the use intended and are and have been operated in
conformity with all applicable Laws. Except as set forth on SCHEDULE 3.12, there
are no defects or conditions which would cause such tangible personal property
to be or become inoperable or unsafe.
(b) To the Shareholders' knowledge, all lessors of machinery,
equipment or other tangible personal property leased by Company and the
Subsidiaries have performed and satisfied their respective duties and
obligations under such leases. Neither Company nor any Subsidiary has brought
or threatened any Action against any such lessor for failure to perform and
satisfy its duties and obligations thereunder.
3.13 BANK ACCOUNTS AND DEPOSIT BOXES. SCHEDULE 3.13 lists each bank
-------------------------------
in which Company or a Subsidiary maintains an account or safety deposit box, the
account numbers, and the names of all persons authorized to draw thereon or have
access thereto.
3.14 REAL PROPERTY. (a) Neither Company nor any Subsidiary
-------------
currently owns, or previously owned, any parcel of real property. Each parcel
or tract of real property used in connection with the Company's Business is
subject to a written lease or sublease to which Company or a Subsidiary is a
party as lessee or sublessee (individually a "REAL PROPERTY LEASE"). All such
Real Property Leases are valid and in full force and effect in accordance with
their terms. The Shareholders have previously furnished Purchaser with true,
correct and complete copies of all Real Property Leases. There is not, with
respect to any Real Property Lease (i) any default by Company or any Subsidiary,
or any event of default or event which with notice or lapse of time, or both,
would constitute a default by Company or any Subsidiary, or (ii) to the
knowledge of the Shareholders, any existing default by any other party to any
Real Property Lease, or event of default or event which with notice or lapse of
time, or both, would constitute a default by any other party to any Real
Property Lease.
(b) The present use, occupancy and operation of the Leased Real
Property (as defined in ARTICLE 7), and all Improvements (as defined in ARTICLE
7) to the Leased Real Property, by Company and the Subsidiaries are in
compliance with all Laws and private restrictive covenants, and to the
Shareholders' knowledge there has not been any proposed change thereto that
would affect any of the Leased Real Property or its use, occupancy or operation.
There exists no conflict or dispute involving Company or any Subsidiary (or to
the knowledge of the Shareholders, any other Person) with any Government or
other Person relating to any Leased Real Property or the activities thereon. No
portion of the Leased Real Property is subject to any classification,
designation or preliminary determination of any Government or pursuant to any
Law which would restrict its use, development, occupancy or operation in
connection with the Company's Business.
(c) Neither Company, the Subsidiaries or, to the knowledge of the
Shareholders, any other Person, has caused any work or improvements to be
performed upon or made to any of the Leased Real Property for which there
13
remains outstanding any payment obligation that would or might serve as the
basis for any Lien in favor of the Person who performed the work.
(d) To the knowledge of the Shareholders, all requisite certificates
of occupancy and other permits and approvals required of Company and the
Subsidiaries with respect to the Leased Real Property or the Improvements and
the use, occupancy and operation thereof by Company and the Subsidiaries have
been obtained and paid for and are currently in effect and free of restrictions.
3.15 ABILITY TO CONDUCT BUSINESS AND INTELLECTUAL PROPERTY RIGHTS.
------------------------------------------------------------
(a) Company and the Subsidiaries have the means, rights and information
required to offer and sell the products now being offered and sold by them and
to perform the services that are presently being performed by them. Neither
Company nor any Subsidiary is a party to, either as a licensor or licensee, nor
are any of them bound by or subject to, any license agreement for any patent,
process, trademark, service xxxx, trade name, copyright, trade secret or
confidential information. Except as set forth on SCHEDULE 3.15, Company and the
Subsidiaries do not own or use any patents, copyrights, trademarks, service
marks, trade names and applications therefor or registrations thereof. There
are no rights of third parties with respect to any trademark, service xxxx,
trade secret, trade name, patent, patent application, copyright, invention,
device or process which has or could have an adverse effect on the operations of
Company or the Subsidiaries. Company and the Subsidiaries have complied with
all applicable Laws relating to the filing or registration of "fictitious names"
or trade names.
(b) Company and the Subsidiaries have not interfered with, infringed,
misappropriated or otherwise come into conflict with any intellectual property
rights of any other Person, and neither Company, the Subsidiaries or any of
their officers and directors has ever received any charge, complaint, claim,
demand or notice alleging any such interference, infringement, misappropriation
or violation. To the Shareholders' knowledge, no Person has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with the
proprietary inventions, designs, ideas, processes, methods and other know-how or
other intellectual property of Company and the Subsidiaries which are owned or
used in the operation of their business.
3.16 CONTRACTS. (a) All Company Contracts (as defined in ARTICLE
---------
7) have been entered into in the ordinary course of the Company's Business on
commercially reasonable terms, are valid and enforceable in all material
respects in accordance with their terms, are in full force and effect, and will
continue to be valid and enforceable and in full force and effect on identical
terms following the Closing. No Company Contract is likely to result in a loss
to Company or any Subsidiary upon completion of performance, and all Company
Contracts can be fulfilled or performed by Company and the Subsidiaries in
accordance with their respective terms without undue or unusual expenditures of
money or effort. Company and the Subsidiaries have delivered or made available
to Purchaser a true, correct and complete copy of each written Company Contract
and a complete and accurate summary of the material terms of each oral Company
Contract.
14
(b) Company and the Subsidiaries have performed all obligations to be
performed by them as of the date of this Agreement under all Company Contracts.
There are no existing material defaults, events of default or events which, with
the giving of notice or lapse of time or both, would constitute a material
default by Company or any Subsidiary under any Company Contract. No event has
occurred which may hereafter give rise to any right of termination,
acceleration, damages or any other remedy under any Company Contract.
(c) Neither this Agreement, the Closing or the relationship among
Company, the Subsidiaries and Purchaser has caused or is likely to cause the
termination or nonrenewal of any Company Contract.
3.17 INSURANCE. Company and the Subsidiaries have obtained and
---------
maintain insurance policies which provide coverage to insure their assets,
properties and business against such risks and in such amounts as are prudent
and customary in the industry in which they operate, and all such policies are
in full force and effect. Except as set forth on SCHEDULE 3.17, all premiums
due on such policies have been paid, and neither Company nor any Subsidiary has
received any notice of cancellation with respect thereto. Company and the
Subsidiaries do not have any Liability for premiums or for retrospective premium
adjustments for any period through the date hereof. SCHEDULE 3.17 lists the
types, amounts of coverage and deductibles of all such insurance policies, and
true, correct and complete copies thereof have been delivered or made available
to Purchaser.
3.18 CUSTOMERS AND SUPPLIERS. SCHEDULE 3.18 sets forth the names
-----------------------
of any sole source suppliers of significant goods, equipment or services to
Company and the Subsidiaries with respect to which practical alternative sources
of supply are not available, and the names of the top twenty-five customers of
Company and each Subsidiary ("SIGNIFICANT CUSTOMERS"). Neither Company, the
Subsidiaries or the Shareholders are aware, except as disclosed in SCHEDULE 3.18
that: (i) any supplier or Significant Customer of Company or any Subsidiary
intends to discontinue or substantially diminish or change its relationship with
Company or such Subsidiary or the terms thereof, or (ii) any supplier of Company
or any Subsidiary intends to increase prices or charges for goods or services
presently supplied.
3.19 LITIGATION; CONTINGENCIES. No Action is pending or, to the
-------------------------
knowledge of the Shareholders, threatened against, by or affecting Company, the
Subsidiaries, the Shares or the Subsidiary Shares. There are no unsatisfied
judgments or Orders against Company, the Subsidiaries or any Shareholder or any
of their predecessors or to which any of them or their assets and properties are
subject.
3.20 TAXES. Company and the Subsidiaries have, either separately
-----
or as a member of a group of corporations eligible or required to file a
consolidated Tax return, duly and timely filed all federal, state, municipal,
local and foreign, if any, Tax returns and reports (including returns for
estimated tax), and all reports and returns of all other Governments having
jurisdiction with respect to all Taxes (collectively, "RETURNS"); all Returns
show the correct and proper amount due; and the Taxes shown on all Returns and
all Tax assessments received by Company and the Subsidiaries have been paid to
15
the extent that such Taxes or estimates are due. Company and the Subsidiaries
have previously provided true, correct and complete copies of all Returns filed
with respect to the three (3) tax years preceding the date hereof. All Taxes
imposed on Company and the Subsidiaries by any Government (including all
deposits in connection therewith required by applicable Law, and all interest
and penalties thereon) which have become due and payable for all periods through
the date hereof have been paid in full, and adequate reserves for all other
Taxes, whether or not due and payable, and whether or not disputed, have been
set up on the books of Company and the Subsidiaries, and such reserves will be
adequate to pay all Taxes of Company and the Subsidiaries for all periods
through Closing. Except as set forth in SCHEDULE 3.20, there is not now any
proposed assessment against Company or any Subsidiary of additional Taxes of any
kind. Neither Company nor any Subsidiary is a party to any Tax sharing or Tax
allocation agreement, understanding, arrangement or commitment. There is no
dispute or Action concerning any Tax Liability of Company or any Subsidiary
raised by a Government in writing.
3.21 EMPLOYMENT AND LABOR MATTERS. (a) To the Shareholders'
----------------------------
knowledge, no employee, agent, consultant or independent contractor who performs
services on a regular basis for Company or any Subsidiary plans to discontinue
such relationship with Company or such Subsidiary after Closing.
(b) Neither Company nor any Subsidiary is a party to any agreement of
any kind which deals with wages, conditions of employment, benefits or other
matters affecting the employer/employee relationship with any union, labor
organization or employee group. There are no controversies pending, or to the
Shareholders' knowledge, threatened, between Company or any Subsidiary and any
union, labor organization or employee group representing, or seeking to
represent, any of their employees, and there has been no attempt by any union,
labor organization or employee group to organize any employees of Company or the
Subsidiaries at any time in the past five years. Company and the Subsidiaries
have substantially complied with all applicable Laws relating to wages, hours,
health and safety, payment of social security, withholding and other taxes,
maintenance of workers' compensation insurance, labor and employment relations
and employment discrimination.
(c) SCHEDULE 3.21 lists all contracts, agreements or arrangements
(written or oral) concerning the employment of any individual by Company or any
of the Subsidiaries.
3.22 EMPLOYEE BENEFIT MATTERS. (a) SCHEDULE 3.22(A) lists all
------------------------
practices, commitments, arrangements and agreements pursuant to which Company or
any Subsidiary provides, directly or indirectly, any benefits for employees,
including pension, bonus, medical, insurance, profit sharing or any other
employee benefits, under any agreements or Laws. Company and the Subsidiaries
do not now, and did not at any time in the past, sponsor, maintain or contribute
to any employee pension benefit plan, within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Company
and the Subsidiaries are not required to contribute, and have never been
required to contribute, to any multi-employer plan within the meaning of Section
3(37)(A) of ERISA.
(b) SCHEDULE 3.22(B) lists separately all employee welfare benefit
plans within the meaning of Section 3(3) of ERISA maintained by Company or any
16
Subsidiary or to which Company or any Subsidiary contributes or is required to
contribute (collectively, "ERISA PLANS"). True, correct and complete copies of
all ERISA Plans, together with related trusts, insurance contracts, summary plan
descriptions, annual reports and Form 5500 filings for the past three years,
have been delivered or made available to Purchaser.
(c) Each ERISA Plan has been operated and administered in all material
respects in accordance with all applicable Laws, including, without limitation,
ERISA and the Code. Neither Company, the Subsidiaries or the Shareholders or
any of their directors, officers, employees or agents, or to the Shareholders'
knowledge, any "party in interest" or "disqualified person" (as such terms are
defined in Section 3(14) of ERISA and Section 4975 of the Code) has been engaged
in or been a party to any "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code). Each ERISA Plan that is a
group health plan within the meaning of Section 607(1) of ERISA and Section
4980B of the Code is in compliance with the continuation coverage requirements
of Section 601 of ERISA and Section 4980B of the Code. There are no pending
claims or, to the Shareholders' knowledge, threatened claims by or on behalf of
any ERISA Plan, by any employee or beneficiary covered under such ERISA Plan or
by any Government or otherwise involving such ERISA Plan or any of its
fiduciaries (other than for routine claims for benefits).
(d) Neither Company nor any Subsidiary is bound to provide, and none
of them do provide, benefits, including, without limitation, death, health or
medical benefits (whether or not insured), with respect to current or former
employees of Company or such Subsidiary beyond their retirement or other
termination of service with Company or such Subsidiary other than (i) coverage
mandated by applicable Law, (ii) deferred compensation benefits accrued as
Liabilities, or (iii) benefits, the full cost of which is borne by the current
or former employee or his beneficiary.
(e) Except as provided in SECTION 2.5, neither this Agreement nor any
transaction contemplated hereby will (i) entitle any current or former employee,
officer or director of Company or any Subsidiary to severance pay, unemployment
compensation or any similar or other payment, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation or benefits due any
such employee, officer or director.
3.23 ENVIRONMENTAL MATTERS. Company and the Subsidiaries hold all
---------------------
Environmental Permits (as defined in ARTICLE 7) necessary for conducting their
business and operations and have conducted, and are presently conducting, their
respective businesses and operations in full compliance with all applicable
Environmental Laws (as defined in ARTICLE 7) and Environmental Permits,
including, without limitation, all record keeping and filing requirements.
There is no existing or pending Environmental Law with a future compliance date
that will require operational changes, business practice modifications or
capital expenditures at any Leased Real Property (or any other property
presently or formerly owned, operated or controlled by Company or any Subsidiary
or as to which Company or any Subsidiary may bear responsibility or Liability),
or any Improvements thereon. All Hazardous Materials and Solid Waste (as
defined in ARTICLE 7), on, in, or under the Leased Real Property, or owned by
Company or any Subsidiary, wherever located, have been properly removed and
disposed of, and no past or present disposal, discharge, spill or other release
17
of, or treatment, transportation or other handling of Hazardous Materials or
Solid Waste on, in, under or off-site from any Leased Real Property, or adjacent
property, will subject Company, the Subsidiaries or any subsequent owner,
occupant or operator of such Leased Real Property to corrective or compliance
action or any other Liability. There are no presently pending, or to the
Shareholders' knowledge, threatened Actions or Orders against or involving
Company or any Subsidiary (including any other Person for whose acts or
omissions Company or such Subsidiary is responsible) relating to any alleged
past or ongoing violation of any Environmental Laws or Environmental Permits,
nor is Company or any Subsidiary subject to any Liability for any such past or
ongoing violation.
3.24 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Company, the
-------------------------------------
Subsidiaries or any officer, employee or agent of Company or any Subsidiary, nor
any other person acting on behalf of Company or any Subsidiary, has, directly or
indirectly, within the past five years, given or agreed to give any gift or
similar benefit to any person who is or may be in a position to help or hinder
Company's Business (or assist Company or any Subsidiary in connection with any
actual or proposed transaction) which (a) might subject Company or any
Subsidiary to any material damage or penalty in any Action or which might have a
material adverse effect on Company or such Subsidiary or either of their assets
and properties, (b) if not given in the past, might have had a material adverse
effect on Company's Business or the assets and properties of Company or any
Subsidiary, or (c) if not continued in the future, might have a material adverse
effect on Company or any Subsidiary or which might subject Company or such
Subsidiary to material damage or penalty in any Action.
3.25 AGREEMENTS AND TRANSACTIONS WITH RELATED PARTIES. Except as
------------------------------------------------
set forth in SCHEDULE 3.25, neither Company nor any Subsidiary is directly or
indirectly a party to any contract, agreement or lease with, or any other
commitment to, (a) any Person owning, or formerly owning, beneficially or of
record, directly or indirectly, any of the shares of or other equity interest in
Company or any Subsidiary, (b) any Affiliate (as defined in ARTICLE 7) of such a
Person, (c) any director or officer of Company or any Subsidiary, (d) any Person
in which any of the foregoing Persons has, directly or indirectly, at least a 5%
beneficial interest in the capital stock or other type of equity interest of
such Person, or (e) any partnership in which any of the foregoing Persons is a
general partner or has at least a 5% beneficial interest (any or all of the
foregoing being referred to herein as "RELATED PARTIES"). Without limiting the
generality of the foregoing, except as set forth on SCHEDULE 3.25, (x) no
Related Party, directly or indirectly, owns or controls any assets or properties
which are or have been used in Company's Business, and (y) no Related Party,
directly or indirectly, engages in or has any significant interest in or in
connection with any business (i) which is or which within the last three years
has been a competitor, customer or supplier of Company or any Subsidiary or has
done business with Company or any Subsidiary, or (ii) which as of the date
hereof sells or distributes products or services which are similar or related to
the products or services of Company or the Subsidiaries.
3.26 ABSENCE OF CHANGES. Except as expressly provided for in this
------------------
Agreement or as set forth on SCHEDULE 3.26, since the Reference Date:
18
(a) there has been no change in the business, assets, properties,
Liabilities, affairs, results of operations, conditions (financial or
otherwise), cash flows or prospects of Company or any Subsidiary or in their
relationships with suppliers, customers, employees, lessors or others, other
than changes in the ordinary course of business, none of which have had or will
have a material adverse effect on Company or the Subsidiaries in the aggregate
or individually;
(b) there has been no damage, destruction or loss to the assets,
properties, or business of Company or any Subsidiary, whether or not covered by
insurance;
(c) the business of Company and the Subsidiaries has been operated in
the ordinary course and consistent with its prior practices;
(d) the books, accounts and records of Company and the Subsidiaries
have been maintained in the usual, regular and ordinary manner on a basis
consistent with prior years and in accordance with GAAP (except as otherwise
noted herein), and there has been no amendment to the articles of incorporation
or bylaws of Company or any Subsidiary;
(e) there has been no declaration, setting aside or payment of any
dividend or other distribution on or in respect of the capital stock of Company
or any Subsidiary, nor has there been any direct or indirect redemption,
retirement, purchase or other acquisition of any of the capital stock or other
securities of Company or any Subsidiary, other than the redemption of 8,800
shares of common stock of Superior Supply Company of Topeka and 2,500 shares of
common stock of Superior Supply Company of Joplin;
(f) no Liability of Company or any Subsidiary has been discharged or
satisfied, other than in the ordinary course of business and consistent with
prior practice;
(g) there has been no Lien (other than Liens for current Taxes which
are not yet due and payable) created on or in the assets of Company or any
Subsidiary;
(h) there has been no sale, transfer, lease or other disposition of
any asset of Company or any Subsidiary to any Related Party or, except in the
ordinary course of the Company's Business, to any other Person, and no debt to,
or claim or right of, Company or any Subsidiary has been canceled, compromised,
waived or released;
(i) no Liability has been incurred by Company or any Subsidiary,
except in the ordinary course of business and consistent with its prior
practice;
(j) there has been no amendment, termination or waiver of, or any
notice of any amendment, termination or waiver of, any right of Company or any
Subsidiary under any Company Contract or under any franchise, certificate,
license, permit or authorization from any Government;
19
(k) Company and the Subsidiaries have not entered into any agreement,
contract, lease or license outside the ordinary course of business;
(l) Company and the Subsidiaries have not delayed or postponed the
payment of any accounts payable or other Liabilities outside the ordinary course
of business; and
(m) there has been no change in the authorized, issued or outstanding
shares or other securities of Company or any Subsidiary.
3.27 FULL DISCLOSURE. No representation or warranty of the
---------------
Shareholders contained in this Agreement or any instrument, certificate,
agreement or other writing delivered by or on behalf of any Shareholder pursuant
to this Agreement, or in connection with the transactions contemplated herein
contains any untrue or incomplete statement of a material fact or omits to state
a material fact necessary to make the statements contained herein and therein
not misleading. To the Shareholders' knowledge, there is no fact which
adversely affects, or in the future may adversely affect, the business, assets,
properties, liabilities, affairs, actual or anticipated results of operations,
condition (financial or otherwise), cash flows or prospects of Company or the
Subsidiaries which has not been or is not disclosed in this Agreement or in the
other instruments, certificates, agreements and writings furnished to Purchaser
by or on behalf of the Shareholders pursuant to this Agreement or in connection
with the transactions contemplated herein.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
As an inducement to the Shareholders to enter into and perform this
Agreement, Purchaser hereby represents, warrants and covenants to the
Shareholders as follows:
4.1 ORGANIZATION. Purchaser is a corporation duly organized and
------------
validly existing under the Laws of the State of Georgia.
4.2 AUTHORIZATION; NO INCONSISTENT AGREEMENTS. Purchaser has full
-----------------------------------------
corporate power and authority to execute, deliver and perform this Agreement.
This Agreement has been duly and validly executed and delivered by Purchaser and
constitutes its valid and legally binding obligation, subject to general equity
principles, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally.
4.3 INCONSISTENT OBLIGATIONS. The execution, delivery and
------------------------
performance of this Agreement and the consummation of the transactions
contemplated herein will not result in a violation of Purchaser's articles of
incorporation or bylaws or any Law, or in a breach of, conflict with or default
under any indenture, note, mortgage, bond, security agreement, loan agreement,
guaranty, pledge, or other instrument, contract, agreement or commitment, or any
Order, to which Purchaser is a party or by which any of Purchaser's assets or
properties is subject or bound; nor will such actions result in the creation of
any Lien on any of Purchaser's assets or properties, or the acceleration or
creation of any debt of Purchaser.
20
4.4 FULL DISCLOSURE. No representation or warranty of Purchaser
---------------
contained in this Agreement, or in any schedule, instrument, certificate,
agreement or other writing delivered by Purchaser pursuant to this Agreement or
in connection with the transactions contemplated herein contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
5. INDEMNITIES
5.1 INDEMNIFICATION OF PURCHASER. In accordance with and subject
----------------------------
to the provisions of this ARTICLE 5, the Shareholders (collectively, the
"INDEMNITORS") shall, severally, indemnify and hold harmless Purchaser, its
Affiliates and their officers, directors, agents and employees (collectively,
"INDEMNITEES") from and against and in respect of any loss, damage, Liability,
cost and expense, including reasonable attorneys' fees and amounts paid in
settlement (collectively, "INDEMNIFIED LOSSES"), suffered or incurred by any
Indemnitee by reason of, or arising out of:
(a) any misrepresentation or breach of representation or warranty
contained in this Agreement, or any instrument, certificate, agreement or other
writing delivered by or on behalf of any Shareholder pursuant to this Agreement,
or in connection with the transactions contemplated herein, or the breach of any
covenant or agreement of Company, any Subsidiary or any Shareholder contained in
this Agreement, or any instrument, certificate, agreement or other writing
delivered to Purchaser by or on behalf of any Shareholder pursuant to this
Agreement or in connection with the transactions contemplated herein;
(b) all obligations and Liabilities of Company and the Subsidiaries
other than those reflected on the Closing Date Balance Sheet, whether direct or
indirect, fixed or contingent, known or unknown, including, without limitation,
all obligations and Liabilities resulting from or arising out of any default,
performance or non-performance by Company or any Subsidiary under or with
respect to any Company Contract;
(c) all obligations and Liabilities of Company and the Subsidiaries
arising out of the audits disclosed on SCHEDULE 3.20;
(d) all obligations, Liabilities and expenses of Company, the
Subsidiaries and Pameco arising out of the action by Gladstone Management
Services against Superior Supply Company and others (including, without
limitation, any Orders entered therein and any appeals thereof) and the facts
and circumstances giving rise to such claim; and
(e) all Actions, Orders, assessments, fees and expenses incident to
any of the foregoing or incurred in investigating or attempting to avoid the
same or to oppose the imposition thereof, or in enforcing this indemnification.
5.2 PAYMENT. The Indemnitors shall, subject to the provisions of
-------
this SECTION 5.2, reimburse the Indemnitees entitled to recover Indemnified
Losses within 10 days of written demand on the Indemnitors therefor. If the
21
Indemnitors object to any claim made by an Indemnitee hereunder and the
Indemnitee initiates legal action with respect thereto, the Indemnitee agrees to
join all affected parties in such action so that the rights and liabilities of
the parties under this Agreement with respect to such claim may be resolved in
one action. If any claim for Indemnified Losses that does not relate to a claim
or Action by a third party arises after the date hereof, the Indemnitee Agent
(as defined in SECTION 5.3) shall provide written notice thereof to the
Shareholders. The amount and liability for such claim shall be deemed final
unless the Shareholders notify the Indemnitee Agent in writing within 45 days of
their receipt of such written notice that they dispute such claim. The
Indemnitors shall pay or reimburse the Indemnitees, on a pro-rata basis, for any
such Indemnified Loss within 30 days after such loss is deemed final.
5.3 DEFENSE OF CLAIMS . (a) If any claim or Action by a third
-----------------
party arises after the date hereof for which an Indemnitor may be liable under
the terms of this Agreement, then Purchaser, as the agent for Indemnitees (the
"INDEMNITEE AGENT"), shall notify the Shareholders, within a reasonable time
after such claim or Action arises and is known to Purchaser, and shall give the
Indemnitors a reasonable opportunity: (i) to conduct any proceedings or
negotiations in connection therewith and necessary or appropriate to defend the
Indemnitees; (ii) to take all other required steps or proceedings to settle or
defend any such claim or Action; and (iii) to employ counsel to contest any such
claim or Action in the name of the Indemnitees or otherwise.
(b) The expenses of all proceedings, contests or lawsuits with respect
to such claims or Actions shall be borne by the Indemnitors. If the Indemnitors
wish to assume the defense of such claim or Action, then the Shareholders shall
give written notice to the Indemnitee Agent within 30 days after notice from the
Indemnitee Agent of such claim or Action (unless the claim or action reasonably
requires a response in less than 30 days after the notice is given to the
Shareholders, in which event the Shareholders shall notify the Indemnitee Agent
at least 10 days prior to such reasonably required response date), and the
Shareholders shall thereafter assume the defense of any such claim or liability,
through counsel reasonably satisfactory to the Indemnitees; provided that the
Indemnitees may participate in such defense at their own expense. The
Indemnitees shall have the right to control the defense of the claim or Action
unless and until the Indemnitors shall (i) assume the defense of such claim or
Action, and (ii) acknowledge in writing to the Indemnitee Agent that the
Indemnitors shall be obligated under the terms of their indemnity hereunder to
the Indemnitees in connection with such claim or Action.
(c) If the Indemnitors do not assume the defense of, or if after so
assuming the Indemnitors fail to defend, any such claim or Action, then the
Indemnitees may defend against such claim or Action in such manner as the
Indemnitees may deem appropriate; provided, however, that the Indemnitors may
participate in such defense at their own expense; and provided further that the
Indemnitees may not settle such claim or Action without the Indemnitors' prior
written consent, which will not be unreasonably withheld. The Indemnitors shall
promptly reimburse the Indemnitees for the amount of all expenses, legal and
otherwise, reasonably and necessarily incurred by the Indemnitees in connection
with the defense against and settlement of such claim or Action. If no
settlement of such claim or Action is made, the Indemnitors shall satisfy any
22
judgment rendered with respect to such claim or in such Action, before the
Indemnitees are required to do so, and pay all expenses, legal or otherwise,
reasonably and necessarily incurred by the Indemnitee in the defense of such
claim or Action.
(d) If a final non-appealable Order is rendered against the
Indemnitees in any Action covered by the indemnification hereunder, or any Lien
in respect of such Order attaches to any of the assets of the Indemnitees, the
Indemnitors shall immediately upon such entry or attachment pay any amount
required by such Order in full, or discharge such Lien unless, at the expense
and request of the Indemnitors, an appeal is taken under which the execution of
the Order or satisfaction of the Lien is stayed. If and when a final Order is
rendered in any such Action, the Indemnitors shall forthwith pay any amount
required by such Order or discharge such Lien before the Indemnitees are
compelled to do so.
5.4 SURVIVAL. (a) No investigation made heretofore by Purchaser
--------
shall limit or affect the representations, warranties, covenants and indemnities
of the Shareholders hereunder, each of which shall survive any such
investigation. For purposes of the indemnification provided in this ARTICLE 5,
the representations and warranties of the Shareholders contained in this
Agreement, and all certificates, instruments, agreements or other writings
delivered by or on behalf of any Shareholder pursuant to this Agreement or in
connection with the transactions contemplated herein shall survive any
investigation heretofore or hereafter made by Purchaser and the Closing, and
shall continue in full force and effect for the periods specified below (the
"SURVIVAL PERIOD"):
(i) the representations and warranties relating to the reporting,
payment or liability for Taxes or environmental matters shall survive
until the expiration of any applicable statute or period of
limitations, and any extensions thereof; and
(ii) all other representations and warranties of the Shareholders
(other than those contained in SECTIONS 3.1, 3.2, 3.3, AND 3.4, which
shall survive indefinitely) shall be of no further force and effect
upon the third anniversary of the Closing.
(b) Anything herein to the contrary notwithstanding, the Survival
Period shall be extended automatically to include any time period necessary to
resolve a claim for indemnification which was made prior to the expiration of
the Survival Period but not resolved prior to its expiration, but any such
extension shall apply only as to the claims asserted and not so resolved within
the Survival Period. Liability for any such item shall continue until such
claim shall have been finally settled, decided or adjudicated.
5.5 NO LIABILITY OR CONTRIBUTION BY COMPANY. Neither Company nor
---------------------------------------
any Subsidiary shall have any Liability to any Shareholder as a result of any
misrepresentation or breach of representation or warranty contained in this
Agreement, any other agreement or in any schedule or the breach of any covenant
or agreement of any Shareholder contained in this Agreement, any other agreement
or the schedules, and no Shareholder shall have any right of indemnification or
23
contribution against Company or the Subsidiaries on account of any event or
condition occurring or existing prior to or on the date hereof.
5.6 LIMITATION. The maximum liability of the Shareholders in the
----------
aggregate under this Agreement for a breach of the representations and
warranties contained in ARTICLE 3 shall be limited to fifty percent of the
Purchase Price, as adjusted pursuant to SECTIONS 1.5 AND 1.6; provided, however,
that with respect to a breach of the representations and warranties contained in
SECTION 3.20, the maximum liability of the Shareholders shall be limited to the
Purchase Price.
5.7 INDEMNIFICATION OF THE SHAREHOLDERS. Purchaser shall indemnify
-----------------------------------
and hold harmless the Shareholders and their heirs and executors from and
against and in respect of any loss, damage, Liability, cost and expense,
including reasonable attorneys' fees and amounts paid in settlement, suffered or
incurred by either Shareholder or their respective heirs and executors by reason
of, or arising out of: (a) any misrepresentation or breach of representation or
warranty of Purchaser contained in this Agreement, or any instrument,
certificate, agreement or other writing delivered by or on behalf of Purchaser
pursuant to this Agreement, or in connection with the transactions contemplated
herein, or the breach of any covenant or agreement of Purchaser contained in
this Agreement, or any instrument, certificate, agreement or other writing
delivered to either Shareholder by or on behalf of Purchaser pursuant to this
Agreement or in connection with the transactions contemplated herein; and (b)
all Actions, Orders, assessments, fees and expenses incident to any of the
foregoing or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnification. The
maximum liability of Purchaser in the aggregate under this Agreement for a
breach of the representations and warranties contained in ARTICLE 4 shall be
limited to 50% of the Purchase Price, as adjusted pursuant to SECTIONS 1.5 AND
1.6.
6. MISCELLANEOUS
-------------
6.1 NOTICES. All notices and other communications required or
-------
permitted to be given or made hereunder shall be in writing and delivered
personally or sent by pre-paid, first class certified or registered mail, return
receipt requested, or by facsimile transmission, to the intended recipient
thereof at its address or facsimile number set out below. Any such notice or
communication shall be deemed to have been duly given immediately (if given or
made in person or by facsimile confirmed by mailing a copy thereof to the
recipient in accordance with this SECTION 6.1 on the date of such facsimile), or
three days after mailing (if given or made by mail), and in proving same it
shall be sufficient to show that the envelope containing the same was delivered
to the delivery or postal service and duly addressed, or that receipt of a
facsimile was confirmed by the recipient as provided above. The addresses and
facsimile numbers of the parties for purposes of this Agreement are:
24
(i) If to Purchaser: Pameco Corporation
0000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With copies to: Xxxxxxxxxx Xxxxxxxx LLP
Suite 2800
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx Xxxxxxxxx.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(ii) If to the Shareholders: Xxx X. Xxxxxx
0000 Xxxxx Xxxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Xxxxxxx X. Xxxxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With copies to: Xxxxxxxxxx Xxxx, X.X.
000 Xxxxx Xxxxxx Xxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) Any party may change the address(es) or facsimile number(s) to
which notices or other communications to such party shall be delivered, mailed
or transmitted by giving notice thereof to the other parties hereto in the
manner provided herein.
6.2 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.3 GOVERNING LAW. The validity and effect of this Agreement shall
-------------
be governed by and construed and enforced in accordance with the laws of the
State of Georgia, without regard to its conflicts of laws rules.
25
6.4 SUCCESSORS AND ASSIGNS AND SUBSTITUTE PURCHASER. This
-----------------------------------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and
permitted assigns. The Shareholders may not assign, delegate or otherwise
transfer any of their rights or obligations under this Agreement without the
prior written consent of Purchaser. This Agreement may be assigned by Purchaser
to any Affiliate of Purchaser, including any Affiliate of Purchaser formed now
or in the future for the purpose of acquiring the Shares, but no such assignment
shall relieve Purchaser of its obligations hereunder.
6.5 PARTIAL INVALIDITY AND SEVERABILITY. All rights and
-----------------------------------
restrictions contained herein may be exercised and shall be applicable and
binding only to the extent that they do not violate any Law and are intended to
be limited to the extent necessary to render this Agreement legal, valid and
enforceable. If any term of this Agreement, or part thereof, not essential to
the commercial purpose of this Agreement is held to be illegal, invalid or
unenforceable by a Tribunal of competent jurisdiction, then the remaining terms
hereof, or part thereof, shall constitute the agreement of the parties with
respect to the subject matter hereof and all such remaining terms, or parts
thereof, shall remain in full force and effect. To the extent legally
permissible, any illegal, invalid or unenforceable provision of this Agreement
shall be replaced by a valid provision which will implement the commercial
purpose of the illegal, invalid or unenforceable provision.
6.6 WAIVER. Any term or condition of this Agreement may be waived
------
at any time by the party which is entitled to the benefit thereof, but only if
such waiver is evidenced by a writing expressly referring to this Agreement and
signed by such party. No failure on the part of any party hereto to exercise,
and no delay in exercising any right, power or remedy created hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. No waiver by any
party hereto of any breach of or default in any term or condition of this
Agreement shall constitute a waiver of or assent to any succeeding breach of or
default in the same or any other term or condition hereof.
6.7 INTERPRETATION. The parties are equally responsible for the
--------------
content of this Agreement. In any Action which involves the interpretation of
an alleged ambiguity, the language herein shall not be more strictly construed
against one party (as the drafter) than the other.
6.8 ENTIRE AGREEMENT. This Agreement supersedes all prior
----------------
discussions and agreements between the parties with respect to the subject
matter hereof, and this Agreement contains the sole and entire agreement between
the parties with respect to the matters covered hereby. This Agreement shall
not be altered or amended except by an instrument in writing signed by or on
behalf of the party entitled to the benefit of the provision against whom
enforcement is sought.
26
7. DEFINITIONS
7.1 DEFINITIONS. For purposes of this Agreement, the following
-----------
terms have the meanings specified with respect thereto below:
"ACTION" means any action, suit, litigation, complaint, counterclaim,
------
claim, petition, investigation, mediation contest, set-off or administrative
proceeding, whether at law, in equity, in arbitration or otherwise, and whether
conducted by or before any Government, any Tribunal or any other Person.
"AFFILIATE" of any Person means any other Person directly or
---------
indirectly controlling, controlled by, or under direct or indirect common
control with the former person, where "control" means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
another person, whether through the ownership of voting securities, by contract
or otherwise.
"COMPANY CONTRACTS" means all existing written and oral material
-----------------
agreements and commitments of Company and the Subsidiaries, including, without
limitation, all employment and consulting contracts, union contracts,
distributorship agreements, agreements with suppliers and customers, leases,
licenses, employee benefit plans, deferred compensation agreements, indentures,
notes, bonds, mortgages, security agreements, loan agreements, guarantees,
franchise agreements, agreements in respect of the issuance, sale, repurchase or
transfer of the Shares, bonds or other securities, powers of attorney, and any
contract which involves aggregate payments of more than $10,000 or has a term or
requires performance over a period of more than one year, provided that Company
Contracts do not include any purchase or sale order arising in the ordinary
course of business that involves aggregate purchases or sales of less then
$10,000.
"ENVIRONMENTAL LAW" means a Law relating to health, safety or the
-----------------
environment, including, without limitation, a Law relating to the manufacture,
generation, processing, distribution, application, use, treatment, transport or
handling, storage (whether alone or below ground) of, or emissions, discharges,
releases or threatened releases into the environment (including, without
limitation, ambient air, surface water, ground water, soil and subsoil) of,
pollutants, contaminants, petroleum products, chemicals, or industrial waste,
Hazardous Materials, other solids, liquids, gases or wastes (including Solid
Waste), heat, light, noise, radiation, electro-magnetic fields and other forms
of matter or energy of every kind and nature and the proper containment and
disposal of the same, or to occupational or worker safety and health.
"ENVIRONMENTAL PERMITS" means all permits, licenses, certificates,
---------------------
approvals, authorizations, regulatory plans and compliance schedules required by
applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Law, or entered into by agreement of the party to be bound,
relating to activities that affect human health or the environment, including,
without limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
27
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal.
"GAAP" means generally accepted accounting principles, consistently
----
applied.
"GOVERNMENT" means any federal, national, state, provincial, local,
----------
municipal, or foreign government or any department, commission, board, bureau,
agency, instrumentality, unit, or taxing authority thereof.
"HAZARDOUS MATERIAL" means any substance or material, including,
------------------
without limitation, any raw material, commercial product, waste or waste product
that, because of its quantity, concentration, or physical, chemical or
infectious characteristics may cause or significantly contribute to an increase
in mortality or an increase in serious, irreversible or incapacitating illness,
or pose a substantial hazard to human health or the environment, including,
without limitation, all substances and materials designated as hazardous or
toxic under any applicable Environmental Law and including, without limitation,
gasoline, fuel oil and other petroleum products.
"IMPROVEMENTS" means all buildings, structures and other improvements
------------
of any and every nature located on the Leased Real Property and all fixtures
attached or affixed, actually or constructively, to the Leased Real Property or
to any such buildings, structures or other improvements.
"KNOWN," "TO THE KNOWLEDGE OF," "AWARE" or words of similar import
----- ------------------- -----
employed in this Agreement with reference to any individual or entity shall be
conclusively presumed to mean that the individual or entity has made reasonable
and diligent efforts under the circumstances to become knowledgeable; the
knowledge of the Shareholders shall be deemed to be their individual and
collective knowledge (as defined above).
"LAWS" mean all federal, national, international, state, provincial,
----
local, municipal or foreign constitutions, statutes, rules, regulations,
ordinances, acts, codes, legislation, treaties, conventions, judicial decisions,
common law, equity or similar laws or legal requirements as in effect from time
to time.
"LEASED REAL PROPERTY" means all leasehold and similar interests in
--------------------
real property leased from third parties by Company and the Subsidiaries for use
in operation of the Company's Business, and all of Company's and the
Subsidiaries' rights, title and interest in and to all Improvements thereon,
together with all easements, rights-of-way, licenses and other interests
therein.
"LIABILITY" means any liability or obligation whether known or
---------
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due.
28
"LIEN" means any mortgage, pledge, hypothecation, security interest,
----
encumbrance, claim, restriction on use, lien or charge of any kind, or any
rights of others, however evidenced or created (including any agreement to give
any of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof, and the filing of or agreement to give any
financing statement under the lien notice records, Uniform Commercial Code
indices or other similar public records of any jurisdiction).
"OBSOLETE INVENTORY" means $51,000.
------------------
"ORDERS" means any order, writ, judgment, decree, ruling, consent
------
agreement, or award of or by any Tribunal or entered by consent of the party to
be bound.
"PERSON" means an individual, partnership, joint venture, corporation,
------
limited liability company, trust, unincorporated organization, or Government.
"TAXES" means any present or future taxes, levies, imposts, duties,
-----
fees, assessments, deductions, withholdings or other charges of whatever nature,
including, without limitation, income, gross receipts, excise, property, sales,
use, customs, value added, consumption, transfer, license, payroll, employee
income, withholding, social security, and franchise taxes, now or hereafter
imposed or levied by the United States of America, any state, or any Government
or by any department, agency or other political subdivision or taxing authority
thereof or therein, all deposits required in connection therewith, and all
interests, penalties, additions to tax, and other similar liabilities with
respect thereto.
"TERRITORY" means the following states: Arkansas, Kansas, Missouri,
---------
and Oklahoma.
"TRIBUNAL" means any federal, national, state, local, municipal or
--------
foreign court, governmental agency, administrative body or agency, tribunal,
private alternative dispute resolution system, or arbitration panel.
7.2 CONSTRUCTION. As used in this Agreement, unless the context
------------
otherwise requires: (i) references to "article" or "section" are to an article
or section of this Agreement; (ii) references to "exhibits" and "schedules" are
to exhibits and schedules attached hereto, which are incorporated herein by
reference and made a part of this Agreement; (iii) "include", "includes" and
"including" are deemed to be followed by "without limitation" whether or not
they are in fact followed by such words or words of like import; and (iv) the
headings of the various articles, sections and other subdivisions hereof are for
convenience of reference only and shall not modify, define, or limit any of the
terms or provisions hereof.
29
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
it to be executed by their duly authorized officers and agents as of the day and
year first above written. Signatures of the parties transmitted by facsimile
shall be valid and binding for all purposes.
PURCHASER:
PAMECO CORPORATION
By:
--------------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE SHAREHOLDERS:
-----------------------------------------
XXX X. XXXXXX
-----------------------------------------
XXXXXXX X. XXXXXXXXXX
00
