EXHIBIT 10.10
STOCK PURCHASE AGREEMENT BY AND BETWEEN
THE XXXX GROUP, LTD. AND HOMELIFE, INC.
DATED JULY 23, 1996
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated the 23rd
day of July, 1996, among the undersigned shareholders (collectively, the
"Xxxx SHAREHOLDERS", and, individually, a "Xxxx SHAREHOLDER") of The Xxxx
Group, Ltd. ("XXXX"), a Michigan corporation having its principal office at
00000 Xxxxxxxxx Xx., Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, the undersigned
shareholders (collectively, the "GUARDIAN SHAREHOLDERS", and, individually, a
"Guardian SHAREHOLDER") of Guardian Home Warranty Corp. ("GUARDIAN"), a
Michigan corporation having its principal office at 00000 Xxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, and HomeLife, Inc. ("HOMELIFE"), a
Nevada corporation having its principal office at 0000 Xxxxxxx Xxxxx, Xxxxx
000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000.
The Xxxx Shareholders own the issued and outstanding shares of the
common stock of Xxxx set forth next to their respective names on EXHIBIT A-1
(the "XXXX SHARES"). The Guardian Shareholders own the issued and
outstanding shares of the common stock of Guardian set forth next to their
respective names on EXHIBIT A-2 (the "GUARDIAN Shares"). The Xxxx Shares and
the Guardian Shares are collectively referred to as the "Shares". The Xxxx
Shareholders and the Guardian Shareholders are collectively referred to as
the "SHAREHOLDERS" and, individually, as a "SHAREHOLDER".
HomeLife desires to purchase from the Xxxx Shareholders, and the
Xxxx Shareholders desire to sell to HomeLife, all of the Xxxx Shares for the
purchase price set forth in Article I and upon the terms set forth below.
HomeLife further desires to purchase certain additional shares of the common
stock of Guardian, and the Guardian Shareholders desire to undertake to
perform such actions as are necessary to issue such shares. The Xxxx
Shareholders further desire to terminate the Shareholders' Stock Purchase
Agreement (as amended from time to time, the "XXXX SHAREHOLDERS AGREEMENT")
dated March 11, 1993, among Xxxx and the Xxxx Shareholders a party thereto.
The Guardian Shareholders further desire to terminate the Shareholders' Stock
Purchase Agreement (as amended from time to time, the "GUARDIAN SHAREHOLDERS
AGREEMENT") dated September 8, 1993, among Guardian and the Guardian
Shareholders a party thereto.
In consideration of the mutual covenants, agreements,
representations and warranties herein contained, and intending, to be legally
bound, HomeLife and the Shareholders agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 COMMITMENT TO SELL. In reliance upon HomeLife's representations
and warranties contained herein, and upon the terms set forth in this
Agreement, on the Closing Date (as defined below), the Shareholders shall
sell, assign and deliver to HomeLife the Shares.
1.2 COMMITMENT TO PURCHASE.
(a) In reliance upon the Shareholders' representations and
warranties contained herein, and upon the terms set forth in this Agreement,
on the Closing Date, HomeLife shall purchase the Shares from the Shareholders
and, in full consideration therefor, shall pay to the Shareholders the
Purchase Price (AS defined below).
(b) The Purchase Price for 100% of the outstanding common
stock of Xxxx shall consist of the sum of $500,000 (as adjusted as set forth
below, the "CASH PORTION ") and 60,000 shares of HomeLife's common stock (the
"Initial Shares" and, collectively with the Cash Portion and as adjusted, the
"PURCHASE PRICE"), with an intended aggregate value of $800,000. The Cash
Portion shall be increased by $11,290.32 for every Xxxx franchise office over
65 existing in Michigan on the Closing Date; the Cash Portion shall be
decreased by $11,290.32 for every Xxxx franchise office in Michigan less
than 65 on the Closing Date.
(c) The Purchase Price was established based on 81,000
shares of Xxxx common stock being sold to HomeLife hereunder, constituting
100% of the issued and outstanding shares of Xxxx, and shall be appropriately
adjusted to the extent that the Xxxx Shares comprise less than 100% of the
issued and outstanding shares of Xxxx. Thus, the Purchase Price allocated to
each share of Xxxx common stock shall consist of Six and 17/100 Dollars
($6.17) plus seventy-four one-hundredths (.74) of one share of the Initial
Shares, all subject to adjustment as described in Sections
1.2(b) and 1.3.
1.3 ADJUSTMENT TO PURCHASE PRICE. (a) If the average closing price
of HomeLife's common stock for the ninety (90) trading days following such
stock being approved for trading on a national securities trading service,
with an average daily trading volume of five hundred (500) shares (the
"CLOSING PRICE"), is not at least $5.00 per share, HomeLife shall promptly
issue to each Xxxx Shareholder, at such Shareholder's option, either (i)
additional shares of HomeLife's common stock sufficient to provide each Xxxx.
Shareholder with shares of HomeLife's common stock (including the Initial
Shares), valued at the Closing Price, worth an amount equal to the product of
their portion of the Initial Shares multiplied by $5.00 per share (the
"Initial Share Value"), or (ii) cash (the "CASH PAYMENT") which, together
with the Initial Shares held by such Shareholder, valued at the Closing,
Price, will have an aggregate value equal to the Initial Share Value, and the
Purchase Price shall be so adjusted. If the Closing Price cannot be
calculated due to the stock failing to trade at the required volume, HomeLife
and the Xxxx Shareholders shall establish a mutually acceptable method of
valuing the HomeLife common stock and, promptly thereafter, make the
adjustment, if necessary, set forth in the prior sentence.
(b) Xxxxxx Xxxxxxxx guarantees the prompt payment by
HomeLife of the Cash Payment, if any, required to be made under Section
1.3(a).
1.4 PAYMENT OF PURCHASE PRICE. The Cash Portion of the Purchase Price be
paid as follows:
(a) At the Closing, HomeLife shall contribute to Xxxx an
amount equal to $120,000 in addition to the deposit paid by HomeLife to Xxxx
in May, 1996 in the amount of $120,000 (the "DEPOSIT "), for a total of
$240,000 (the principal amount of all shareholder loans then owed by Xxxx to
the Xxxx Shareholders (the "XXXX SHAREHOLDER LOANS")), in return for Xxxx
issuing 19,000 shares of its common stock to HomeLife. The Xxxx Shareholders
shall cause Xxxx to declare the Xxxx. Shareholder Loans to be due and
payable, and shall repay all outstanding principal and accrued interest on
the Xxxx. Shareholder Loans by certified or cashier's check or by such other
method as the Xxxx Shareholders and HomeLife may agree. No further interest
shall accrue on the Xxxx Shareholder Loans from and after the Closing Date.
(b) At the Closing, HomeLife shall contribute to Guardian
an amount equal to $47,017.26 (the principal amount of all shareholder loans
then owed by Guardian to the Guardian Shareholders (the "GUARDIAN SHAREHOLDER
LOANS"), in return for Guardian issuing 34,000 shares of its common stock to
HomeLife. The Guardian Shareholders shall cause Guardian to declare the
Guardian Shareholder Loans to be due and payable, and shall repay all
outstanding principal and accrued interest on the Guardian Shareholder Loans
by certified or cashier's check or by such other method as the Guardian
Shareholders and HomeLife may agree. No further interest shall accrue on the
Guardian Shareholder Loans from and after the Closing Date.
(c) Each Xxxx Shareholder who also owns Guardian Shares
shall receive $11,965.32 for all Xxxx Shares held by such Xxxx Shareholder.
Each Xxxx Shareholder who does not own Guardian Shares shall receive
$9,572.26 for all Xxxx Shares held by such Xxxx. Shareholder. Such amounts
shall be paid to the Xxxx. Shareholders by Noon, Detroit, Michigan, time on
the Closing Date by certified or cashier's check or by such other method as
the Xxxx Shareholders and HomeLife may agree.
(d) The Initial Shares shall be delivered to the Xxxx
Shareholders at the Closing, registered in the names set forth on EXHIBIT
A-1. with each Xxxx Shareholder receiving the number of shares of
HomeLife's common stock determined in accordance with Section 1.2(c).
1.5 THE CLOSING. The closing (the "CLOSING") will take place at
10:00 a.m., Detroit, Michigan, time on August 19, 1996, or at such other time
as the parties may agree, but in no event later than the Termination Date (as
defined in Section 8.1). The Closing shall occur at the office of Dickinson,
Wright, Moon, Van Dusen & Xxxxxxx, 000 Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx,
Xxxxxxxx 00000, upon fulfillment of all the conditions set forth in Article
VI which have not been waived by HomeLife, and all the conditions set forth
in Article VII which have not been waived by the Shareholders. The date on
which the Closing is held is referred to as the "CLOSING DATE".
1.6 EXECUTING AGREEMENT BY SHAREHOLDERS. As set forth in Section
9.8, this Agreement may be executed in counterparts. Upon executing this
Agreement, each Shareholder shall deliver into escrow all certificates
representing Xxxx Shares and Guardian Shares (if any) being sold hereunder,
duly endorsed in blank for transfer or accompanied by duly executed
assignments separate from certificate, to Dickinson, Wright, Moon, Van Dusen
& Xxxxxxx (the "Firm"). The Firm shall hold such certificates in escrow
pending the Closing, at which time such certificates and associated
assignments shall be delivered to HomeLife in accordance with this Agreement.
If the Closing does not occur and this Agreement is terminated, the Firm
shall return such certificates and associated assignments to the respective
Shareholders.
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
The Shareholders, jointly and severally (except for Section 2.4, as
to which each Shareholder severally represents and warrants), represent and
warrant to HomeLife that:
2.1 ORGANIZATION AND GOOD STANDING. Each of Xxxx and Guardian is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Michigan, and has full power and authority to own its
properties and to carry on its business as now conducted.
2.2 CHARTER AND BYLAWS. (a) EXHIBIT B-1. contains true, correct and
complete copies of the Articles of Incorporation, certified as of a recent
date by the Michigan Secretary of State, and of the Bylaws of Xxxx, as
amended through and including the date of this Agreement, certified as of the
date hereof by the Secretary of Xxxx.
(b) EXHIBIT B-2 contains true, correct and complete copies
of the Articles of Incorporation, certified as of a recent date by the
Michigan Secretary of State, and of the Bylaws of Guardian, as amended
through and including the date of this Agreement, certified as of the date
hereof by the Secretary of Guardian.
2.3 CAPITALIZATION. (a) The authorized capital stock of Xxxx consists of
100,000 shares of common stock, $1.00 par value, of which 90,000 shares are
validly issued and outstanding, and of which 81,000 shares shall be validly
issued and outstanding at Closing. All of the Xxxx Shares are validly issued,
fully paid and nonassessable. There are no dividends owing or dividends which
have been declared but not paid with respect to the Xxxx Shares. Xxxx does
not have any subsidiaries and does not own any interest in any other person.
(b) The authorized capital stock of Guardian consists of
60,000 shares of common stock, $1.00 par value, of which 9,500 shares are
validly issued and outstanding, and of which 8,500 shares shall be validly
issued and outstanding at Closing. All of the Guardian Shares are validly
issued, fully paid and nonassessable. There are no dividends owing or
dividends which have been declared but not paid with respect to the Guardian
Shares. Guardian does not have any subsidiaries and does not own any interest
in any other person.
2.4 TITLE AND AUTHORITY, INVESTMENT REPRESENTATION.
(a) Each Xxxx Shareholder is the absolute owner of the Xxxx
Shares, in the respective amounts set forth opposite each such Xxxx
Shareholder's name under "Number of Shares Owned" on EXHIBIT A-1 of this
Agreement, free, clear and discharged of and from any and all liens or other
encumbrances, and each Xxxx Shareholder has full right, power and authority
to execute and deliver this Agreement and to perform his, her or its
respective obligations under this Agreement. Upon delivery of all of the Xxxx
Shares owned by the Xxxx Shareholders at the Closing, duly endorsed for
transfer, HomeLife will be the absolute owner of all the Xxxx Shares so
delivered, free and clear of and from any and all liens and encumbrances.
This Agreement is the legal, valid and binding obligation of each Xxxx
Shareholder and is enforceable in accordance with its terms, except as the
enforcement of this Agreement may be limited by laws of general application
relating to bankruptcy, insolvency and the relief of debtors.
(b) Each Guardian Shareholder is the absolute owner of the
Guardian Shares, in the respective amounts set forth opposite each such
Guardian Shareholder's name under "Number of Shares Owned" on EXHIBIT A-2 of
this Agreement, free, clear and discharged of and from any and all liens or
other encumbrances, and each Guardian
Shareholder has full right, power and authority to execute and deliver this
Agreement and to perform his, her or its respective obligations under this
Agreement. Upon delivery of all of the Guardian Shares owned and transferred
hereunder by the Guardian Shareholder at the Closing, duly endorsed for
transfer, HomeLife will be the absolute owner of all the Guardian Shares so
delivered, free and clear of and from any and all liens and encumbrances.
This Agreement is the legal, valid and binding obligation of each Guardian
Shareholder and is enforceable in accordance with its terms, except as the
enforcement of this Agreement may be limited by laws of general application
relating to bankruptcy, insolvency and the relief of debtors.
(c) Each Shareholder is acquiring the common stock of
HomeLife included within its portion of the Purchase Price for investment and
not with a view to, or for resale in connection with, any distribution of
such shares. Each Shareholder's residence address7 is-as set forth next to
its name on EXHIBIT A-1 AND Exhibit A-2.
2.5 NO COMMITMENT TO ISSUE CAPITAL STOCK OR RIGHTS TO ACQUIRE
CAPITAL STOCK. Except as set forth in Section 1.4, and except as described in
Schedule 2.5, none of the Shareholders nor either of Xxxx or Guardian has
entered into any contract or agreement or made any commitment to purchase,
redeem, sell or otherwise transfer or issue any shares of either Xxxx'x or
Guardian's capital stock, nor are there any outstanding options,
subscriptions, warrants, conversion rights or similar rights of any kind
convertible into any shares of Xxxx'x or Guardian's capital stock.
2.6 ABILITY TO CARRY OUT AGREEMENT. Except for the Xxxx Shareholders
Agreement and the Guardian Shareholders Agreement (which are addressed under
Section 4.4 and 4.5, respectively), the execution and delivery of this
Agreement and the performance by the Shareholders of their respective
obligations hereunder will not conflict with, violate or result in any breach
of or constitute a default under any provisions of the Articles of
Incorporation or Bylaws of either of Xxxx or Guardian, or of any mortgage,
lease, contract, franchise agreement, license, permit, instrument, order,
judgment, law, regulation or any other restriction to which either Xxxx or
Guardian is a party or by which either Xxxx or Guardian is bound. No consent
of any governmental authority or other third party is required to be obtained
by either Xxxx or Guardian in connection with the Shareholders' execution,
delivery or performance of this Agreement.
2.7 FINANCIAL STATEMENTS.
(a) Xxxx'x balance sheet as of the end of, and related
statements of income, retained earnings and cash flow for, the fiscal year
ended December 31, 1995 (the "FINANCIAL STATEMENT Date"), compiled by Post,
Xxxxxx, Xxxx and Xxxx (the "ACCOUNTANTS"), are referred to herein as the
"Xxxx FINANCIAL STATEMENTS". The Xxxx Financial Statements (i) present
fairly, in all material respects, the financial position of Xxxx at the
Financial Statement Date, and (ii) were prepared in conformity with generally
accepted accounting principles in a manner consistent with Xxxx'x historic
accounting practice applied on a consistent basis, except as otherwise
indicated.
(b) Xxxx'x balance sheet as of May 31, 1996, and related
statements of income, retained earnings and cash flow for the five months
ended May 31, 1996, are attached as Exhibit C-1 and are referred to herein as
the "XXXX INTERIM FINANCIAL STATEMENTS". The Xxxx Interim Financial
Statements (i) present fairly, in all material respects, the financial
position of Xxxx at May 31, 1996, and (ii) were prepared in conformity with
generally accepted accounting principles in a manner consistent with Xxxx'x
historic accounting practice applied on a consistent basis, subject to
year-end closing adjustments.
(c) Guardian's balance sheet as of the end of, and related
statements of income, retained earnings and cash flow for, the fiscal year
ended the Financial Statement Date, compiled by the Accountants, are referred
to herein as the "Guardian FINANCIAL STATEMENTS", and collectively with the
Xxxx Financial Statements, as the "FINANCIAL STATEMENTS". The Guardian
Financial Statements (i) present fairly, in all material respects, the
financial position of Guardian at the Financial Statement Date, and (ii) were
prepared in conformity with generally accepted accounting principles in a
manner consistent with Guardian's historic accounting practice applied on a
consistent basis, except as otherwise indicated.
(d) Guardian's balance sheet as of May 31, 1996, and
related statements of income, retained earnings and cash flow for the five
months ended May 31, 1996, are attached as Exhibit C-2 and are referred to
herein as the "GUARDIAN INTERIM FINANCIAL STATEMENTS". The Guardian Interim
Financial Statements (i) present fairly, in all material
respects, the financial position of Guardian at May 31, 1996, and (ii) were
prepared in conformity with generally accepted accounting principles in a
manner consistent with Guardian's historic accounting practice applied on a
consistent basis, subject to year-end closing adjustments.
2.8 UNREPORTED AND CONTINGENT LIABILITIES. Except (a) as set forth
in the Financial Statements, (b) for liabilities of a type reflected on the
Financial Statements or that have arisen in the ordinary course of business
following the Financial Statement Date, (c) for customary obligations and
liabilities arising under contracts, leases and purchase orders made by
either Xxxx or Guardian in the ordinary course of its business, and (d) the
liabilities set forth on Schedule 2.8, neither Xxxx nor Guardian has any
material liabilities or obligations, whether accrued, absolute, fixed, known
or unknown, contingent or otherwise, existing, arising out of or relating to
any transaction entered into, or state of facts existing, on or prior to the
date of this Agreement.
2.9 LICENSES AND PERMITS. Each of Xxxx and Guardian possesses all
material licenses or permits necessary to conduct its respective business as
now operated. Such licenses and permits are valid and in full force and
effect. No action or claim is pending, or, to the knowledge of any
Shareholder, threatened, to revoke or terminate any such licenses or permits
or declare any of them invalid in any respect.
2.10 LITIGATION . Except as set forth on Schedule 2.10, there is not
pending against either of Xxxx or Guardian, or, to the knowledge of any
Shareholder, threatened against either of Xxxx or Guardian, any claim,
action, suit, arbitration proceeding, governmental proceeding or
investigation or other proceeding of any character, including without
limitation any proceeding by any franchisee of Xxxx.
2.11 COMPLIANCE WITH LAWS GENERALLY. Each of Xxxx. and Guardian has
substantially complied with all laws, rules, regulations and ordinances
materially affecting its respective business. Except for laws, rules,
regulations or ordinances that are or are to be of general applicability,
there are no existing or, to the knowledge of the Shareholders, proposed
laws, rules, regulations or ordinances of such a nature as could be
reasonably expected to materially adversely affect the continued conduct of
either of Xxxx'x or Guardian's businesses in the manner presently conducted.
2.12 TRADEMARKS, ETC. (a) Attached hereto as Exhibit D-1 is a list
of all copyrights, trade names and material trademarks and trade secrets as
to which Xxxx claims an ownership interest or as to which Xxxx is a licensee
or licensor (the "XXXX INTELLECTUAL PROPERTY"). Xxxx has good and marketable
title to or possesses adequate licenses or other valid rights to use the Xxxx
Intellectual Property, free and clear of all liens, charges, claims and other
encumbrances, subject only to such encumbrances of record and such other
imperfections of title, encumbrances and encroachments which in the aggregate
do not materially impair the value of such Xxxx Intellectual Property or
materially impair Xxxx'x operations, PROVIDED, HOWEVER, that Xxxx'x right to
use the "Red Carpet" trademark and related trademarks, trade names, service
marks, logos, advertising and commercial symbols (collectively, the "Red
Carpet Marks") is governed by an Agreement dated May 7, 1996 (the "S&S
Agreement"), among S&S Acquisition Corporation ("S&S"), National Real
Estate Services (a division of S&S), and Xxxx, under which Xxxx'x right to
use the Red Carpet Marks expires on June 30, 2012, and is further subject to
the right of the person or persons identified in Section 5.7 of the S&S
Agreement to use the Red Carpet Marks in St. Xxxxxx, Michigan. To the
knowledge of the Xxxx Shareholders, the use of the Xxxx Intellectual Property
does not misappropriate, infringe upon or conflict with any patent,
copyright, trade name, trade secret or trademark of any third party. No party
has filed a claim (or, to the knowledge of any Xxxx Shareholder, threatened
to file a claim) against Xxxx alleging that it has violated, infringed on or
otherwise improperly used the intellectual property rights of such party and
Xxxx has not violated or infringed any trademark, trade name, service xxxx,
service name, copyright or trade secret held by others.
(b) Attached hereto as Exhibit D-2 is a list of all
copyrights, trade names and material trademarks and trade secrets as to which
Guardian claims an ownership interest or as to which Guardian is a licensee
or licensor (the "GUARDIAN INTELLECTUAL PROPERTY "). Guardian has good and
marketable title to or possesses adequate licenses or other valid rights to
use the Guardian Intellectual Property, free and clear of all liens, charges,
claims and other encumbrances, subject only to such encumbrances of record
and such other imperfections of title, encumbrances and encroachments which
in the aggregate do not materially impair the value of such Guardian
Intellectual Property or materially impair Guardian's operations. Except as
set forth in Schedule 2.12(b), to the knowledge of the Guardian Shareholders,
the use of the Guardian Intellectual Property does not misappropriate,
infringe upon or conflict with any patent, copyright, trade
name, trade secret or trademark of any third party, and no party has filed a
claim (or, to the knowledge of any Guardian Shareholder, threatened to file a
claim) against Guardian alleging that it has violated, infringed on or
otherwise improperly used the intellectual property rights of such party and
Guardian has not violated or infringed any trademark, trade name, service
xxxx, service name, copyright or trade secret held by others.
(c) HomeLife acknowledges that Guardian's use of the term
"Guardian" as part of its corporate name and trade name is being challenged,
as described on Schedule 2.12(b). HomeLife nevertheless desires to complete
this transaction, and accepts that Guardian may not be permitted to use such
term in its corporate name and trade name and that Guardian's corporate name
and trade name may have to be changed at some time.
2.13 REPRESENTATIONS AND WARRANTIES AS OF THE CLOSING DATE. Each of
the representations and warranties made by the Shareholders hereunder shall
be deemed to have been made again on and as of the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOMELIFE
HomeLife represents and warrants to the Shareholders that:
3.1 CORPORATE ORGANIZATION. HomeLife is a corporation validly
existing and in good standing under the laws of Nevada.
3.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. HomeLife has all
requisite corporate power and authority to enter into this Agreement, and to
perform the obligations required to be performed by it thereunder. All
corporate proceedings required by HomeLife's charter documents or otherwise
required by law for the execution and delivery of this Agreement and for the
consummation of the transactions provided for therein have been duly taken.
This Agreement has been duly and validly executed and delivered by HomeLife
and is enforceable against HomeLife in accordance with its terms, except as
the enforceability may be limited by laws of general application relating to
bankruptcy, insolvency and debtors' relief, and by the general principles of
equity.
3.3 ABILITY TO CARRY OUT AGREEMENT. The execution and delivery of
this Agreement by HomeLife and the performance by HomeLife of its obligations
thereunder will not conflict with, violate or result in any breach of or
constitute a default under any provisions of HomeLife's Articles of
Incorporation or Bylaws, or of any of the provisions of any material
mortgage, lease, contract, franchise agreement, license, permit, instrument,
order, judgment, law, regulation or any other restriction of any kind or
character to which HomeLife is a party or by which it is bound. No consent of
any governmental authority or other third party is required to be obtained on
the part of HomeLife in connection with HomeLife's execution, delivery or
performance of this Agreement.
3.4 INVESTMENT REPRESENTATION. HomeLife is acquiring the Shares for
investment and not with a view to, or for resale in connection with, any
distribution of the Shares.
3.5 REPRESENTATIONS AND WARRANTIES AS OF CLOSING DATE. Each of the
representations and warranties made by HomeLife hereunder shall be deemed to
have been made again on and as of the Closing Date.
ARTICLE IV
COVENANTS
4.1 AFFIRMATIVE COVENANTS OF HOMELIFE. HomeLife covenants and
agrees that, following the Closing:
(a) It shall permit each Xxxx franchisee to determine for
itself, subject to its existing contractual obligations, whether to remain a
Red Carpet Xxxx agency or to become a HomeLife agency, subject to the Xxxx
franchisees satisfying and continuing to satisfy the respective franchisor's
eligibility standards. Those Xxxx franchisees which elect to remain a Red
Carpet Xxxx agency may do so during the remaining term of their respective
existing written contracts with Xxxx, including any options which they may
exercise, and thereafter with the express written consent of HomeLife, which
consent shall not be unreasonably withheld. The intended operating format of
HomeLife
shall be in accordance with Schedule 4.1(a). Subject to satisfying HomeLife's
eligibility standards, any Xxxx franchisee which elects to remain a Red
Carpet Xxxx agency may convert to a HomeLife agency upon completing all
appropriate documentation as reasonably required by HomeLife and paying a
transfer fee of Two Dollars ($2.00).
(b) In order to provide stability in the operations of Xxxx
and Guardian and to assist in complying with state and Federal Securities
laws, the HomeLife shares being issued as part of the Purchase Price will be
restricted securities and the certificates representing such shares will
contain an appropriate legend. If, at any time after one year from the
Closing Date, any Shareholder desires to sell or otherwise transfer its
HomeLife shares received hereunder within the United States, HomeLife will,
at its expense and as expeditiously as reasonably possible, use its best
efforts to cause such shares to be duly registered or exempted from
registration under any appropriate state or Federal securities law.
(c) HomeLife shall vote its Guardian common stock in favor
of a nominee or nominees to the Guardian Board of Directors submitted by the
Guardian Shareholders to hold not more than twenty percent (20 %), but not
fewer than one (1), of the seats on the Guardian Board of Directors for so
long as Guardian Shareholders retain their common stock of Guardian following
the Closing. The Guardian nominees shall be submitted to HomeLife in a
certificate signed by Guardian Shareholders holding at least 75 % of the
Guardian common stock then held by the Guardian Shareholders, and shall meet
all reasonable qualification requirements for Board membership established
under Guardian's bylaws and applicable law.
4.2 AFFIRMATIVE COVENANTS OF SHAREHOLDERS.
(a) Each of the Shareholders covenants and agrees that from
the date of this Agreement to the Closing Date, it shall use its best efforts
in its capacity as a shareholder to cause each of Xxxx and Guardian to, and
shall not individually take any action which would not permit each of Xxxx
and Guardian to:
(i) carry on its business in a manner consistent with prior
practice and only in the usual and ordinary course, and use its best efforts
to preserve its business organization intact and conserve the good will and
relationships of its franchisees, customers, suppliers and others having
business relations with it;
(ii) duly and timely file or cause to be filed all reports
and returns required to be filed with any governmental body, agency or
authority and promptly pay or cause to be paid when due all taxes,
assessments and governmental charges, including interest and penalties levied
or assessed, unless diligently contested in good faith by appropriate
proceedings; and
(iii) maintain in full force and effect all existing
policies of insurance except for replacements or renewals in the ordinary
course of business.
4.3 NEGATIVE COVENANTS OF THE SHAREHOLDERS.
(a) Each of the Shareholders covenants and agrees that from
the date of this Agreement to the Closing Date, it shall not permit either of
Xxxx or Guardian to:
(i) amend its charter documents;
(ii) authorize for issuance, issue or deliver any
additional shares of its capital stock or securities convertible into or
exchangeable for shares of its capital stock, or issue or grant any right,
option or other commitment for the issuance of shares of its capital stock or
of such securities, or split, combine or reclassify any shares of its capital
stock, except for the shares of Xxxx and Guardian to be issued to HomeLife
on the Closing Date in accordance with Section 1.4, and except for those
shares described on Schedule 2.5;
(iii) declare or pay any dividends or other distributions
of any kind to any Shareholder or directly or indirectly purchase, retire or
redeem or otherwise acquire from any Shareholder any shares of its capital
stock or make any payment of principal on any of the Shareholder Loans,
except for those shares described on Schedule 2.5;
(iv) incur any liability, commitment or obligation, except
unsecured current and trade liabilities and other unsecured liabilities
incurred in the ordinary course of business, and except as permitted under
Section 9.1;
(v) borrow, or agree to borrow, any funds;
(vi) sell, transfer or otherwise dispose of assets, except
for the sale or disposition of obsolete or damaged tangible personal property
and except for the sale of inventory and other assets in the ordinary course
of business; or
(vii) mortgage, pledge or encumber any of its assets or
guaranty the obligations of any party.
(b) Each of the Xxxx Shareholders covenants for itself only
that, from the date hereof until the Closing Date, it shall not enter into
discussions with any third party with regard to the possible sale of Xxxx,
nor disclose any information regarding this Agreement or the transactions
contemplated hereby without HomeLife's prior approval. Each of the Guardian
Shareholders covenants for itself only that, from the date hereof until the
Closing Date, it shall not enter into discussions with any third party with
regard to the possible sale of Guardian, nor disclose any information
regarding this Agreement or the transactions contemplated hereby without
HomeLife's prior approval.
4.4 TERMINATION OF XXXX SHAREHOLDERS AGREEMENT. The Xxxx
Shareholders, representing two-thirds (2/3) or more of the shares of Xxxx set
forth in Schedule "A" to the Xxxx. Shareholders Agreement, and acting in
accordance with Section 12.A of the Xxxx Shareholders -Agreement, hereby
terminate the Xxxx Shareholders Agreement, PROVIDED, HOWEVER, that this
termination is contingent upon the Closing occurring and shall only be
effective if and at the time that the Closing occurs.
4.5 TERMINATION OF GUARDIAN SHAREHOLDERS AGREEMENT. The Guardian
Shareholders, representing two-thirds (2/3) or more of the shares of Guardian
set forth in Schedule "A" to the Guardian Shareholders Agreement, and acting
in accordance with Section 12.A of the Guardian Shareholders Agreement,
hereby terminate the Guardian Shareholders Agreement, PROVIDED, HOWEVER, that
this termination is contingent upon the Closing, occurring, and shall only be
effective if and at the time that the Closing occurs.
4.6 GRANT OF IRREVOCABLE PROXY. From and after the Closing, each
Xxxx Shareholder hereby grants to HomeLife an irrevocable proxy to act on
its behalf in connection with any matters which thereafter come before the
shareholders of Xxxx. The Xxxx Shareholders, representing two-thirds (2/3) or
more of the shares of Xxxx, hereby amend Article III, Section 3 of the Bylaws
of Xxxx to delete the word "notarized" from the first sentence thereof,
PROVIDED, however, that this amendment is contingent upon the Closing
occurring and shall only be effective if and at the time that the Closing
occurs.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION BY SHAREHOLDERS. From and after the Closing, the
Shareholders shall indemnify, defend and hold HomeLife and its permitted
successors and assigns (a "HOMELIFE INDEMNIFIED PARTY" or, collectively,
"HOMELIFE INDEMNIFIED PARTIES") harmless from and against all losses,
damages, liabilities or expenses (including., reasonable attorneys' fees and
expenses) ("LOSS" or "LOSSES") suffered by a HomeLife Indemnified Party that
result, directly or indirectly, from any breach of a representation and
warranty contained in Article II, but each Shareholder shall be liable
hereunder only to the extent of its pro rata share of any Loss.
5.2 INDEMNIFICATION BY HOMELIFE. From and after the Closing,
HomeLife, Xxxx and Guardian, jointly and severally, shall indemnify, defend
and hold the Shareholders and their respective permitted successors and
assigns (a "SHAREHOLDER INDEMNIFIED PARTIES" or, collectively, "SHAREHOLDER
INDEMNIFIED PARTIES") harmless from and against all Losses (as defined in
Section 5.1) that result, directly or indirectly, from (i) any breach of a
representation and warranty contained in Article III.
5.3 NOTICE AND DEFENSE. If a HomeLife Indemnified Party or
Shareholder Indemnified Party seeking
indemnification (the "INDEMNIFIED PARTY") desires to make a claim against a
party for indemnification (the "INDEMNIFYING PARTY") under this Article V,
the Indemnified Party will, within thirty (30) days after the Indemnified
Party becomes aware of a claim by notice or knowledge, notify the
Indemnifying Party in writing of any claim or demand as to which the
Indemnified Party is entitled to claim indemnification, the section under
this Agreement with respect to which such claim is being made and, to the
extent known, the amount and circumstances surrounding such claim. In the
event the claim is a third party claim against an Indemnified Party or
involves a claim by or liability involving a governmental authority, the
Indemnifying Party shall have the right to employ counsel of its choice to
defend any such claim or demand.
5.4 LIMITATION ON LOSSES. Notwithstanding anything herein to the
contrary, the terms "Loss" and "Losses" shall not include any indirect,
consequential or punitive damages or liabilities incurred by any Indemnified
Party, and shall be calculated after considering all tax effects, insurance
proceeds, and other benefits received or receivable by the Indemnified Party.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF HOMELIFE
6.1 CONDITIONS PRECEDENT. HomeLife's obligation to purchase the Xxxx
Shares under this Agreement is subject to the fulfillment on or before the
Closing Date of each of the following conditions:
(a) MINIMUM NUMBER OF SHARES. The Xxxx Shares to be sold by
the Xxxx Shareholders hereunder and deposited under Section 1.6 shall
constitute 80 % of the issued and outstanding, common stock of Xxxx held by
the Xxxx Shareholders (exclusive of any shares issued to HomeLife under
Section 1.4). Notwithstanding the foregoing, HomeLife reserves the right to
proceed with purchasing the Xxxx Shares under this Agreement if the Xxxx
Shares to be sold by the Xxxx. Shareholders constitute at least 67 % of the
issued and outstanding common stock of Xxxx (exclusive of any shares issued
to HomeLife under Section 1.4).
(b) REPRESENTATIONS, WARRANTIES, AND COVENANTS. The
representations and warranties of the Shareholders set forth herein shall be
accurate in all material respects on and as of the Closing Date to the same
extent as if made on and as of such date, and each Shareholder shall have
complied in all material respects with or performed in all material respects
all agreements, covenants and conditions on its part to be performed or
complied with on or prior to the Closing Date.
(c) LEGAL ACTIONS. No suit, action or other proceeding by
any third party shall be pending -before any court or governmental body,
agency or authority seeking to restrain or prohibit, or to obtain damages or
other relief in connection with, this Agreement or the consummation of the
transactions contemplated hereby or which is likely to materially adversely
affect the value of the assets or business of either of Xxxx or Guardian.
(d) CONSENTS. HomeLife shall have received duly executed
copies of any consents relating to the consummation of the transactions
contemplated by this Agreement that are required by any governmental body,
agency or authority.
(e) DELIVERIES. There shall have been delivered to HomeLife:
Notes (if any);
(i) Certificates representing the Xxxx. Shares, duly
endorsed for transfer to HomeLife or accompanied by a duly executed stock
power;
(ii) Certificates representing the Guardian Shares, duly
endorsed for transfer to HomeLife or accompanied by a duly executed stock
power;
(iii) A certificate, signed by the Executive Vice
President of Xxxx, certifying as to the number of franchise offices operating
under the Xxxx name within Michigan as of the Closing Date;
(iv) The Xxxx Shareholder Notes and the Guardian Shareholder
(v) A cross-receipt, signed by each of the Shareholders,
evidencing that such Shareholder has received all consideration to be
delivered to it hereunder at the time of the Closing; and
(vi) Such other items as HomeLife may reasonably request.
(f) NO ADVERSE MATERIAL CHANGE. There shall have occurred
no material adverse chance in the business or financial condition of Xxxx and
Guardian from that disclosed in the Xxxx Interim Financial Statements and the
Guardian Interim Financial Statements, respectively.
(g) STOCK REDEMPTIONS. The redemption of the Xxxx and
Guardian common stock held by Xxxxx and Xxxxxx Xxxxx and Xxxxx and Xxxx
Xxxxxxxx shall have been completed under the terms disclosed to HomeLife.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDERS
7.1 CONDITIONS PRECEDENT. The duty of the Shareholders to sell their
respective Shares under this Agreement is subject to the fulfillment, on or
before the Closing Date, of each of the following conditions:
(a) REPRESENTATIONS, WARRANTIES, AND COVENANTS. The
representations and warranties made by HomeLife herein shall be accurate in
all material respects on and as of the Closing Date to the same extent as if
made on and as of such date and HomeLife shall have complied in all material
respects with or performed in all material respects all agreements, covenants
and conditions on its part to be performed or complied with on or prior to
the Closing Date.
(b) LEGAL ACTIONS. No suit, action or other proceeding by
any third party shall be pending before any court or governmental agency
seeking to restrain or prohibit, or to obtain damages or other relief in
connection with, this Agreement or the consummation of the transactions
contemplated hereby.
(c) DELIVERIES. HomeLife shall have delivered to the
Shareholders (or to Xxxx or Guardian, in accordance with Section 1.4):
(i) The Cash Portion and the Initial Shares;
(ii) A certificate by the Secretary of HomeLife as to the
due adoption by the Board of Directors of HomeLife of the required corporate
resolutions authorizing the execution, delivery and performance of this
Agreement by HomeLife and the consummation of the transactions contemplated
thereby; and (v) A cross-receipt, signed by HomeLife in favor of each
Shareholder, evidencing that HomeLife has received from such Shareholder all
consideration to be delivered to it hereunder at the time of the Closing.
(d) STOCK REDEMPTIONS. The redemption of the Xxxx and
Guardian common stock held by Xxxxx and Xxxxxx Xxxxx and Xxxxx and Xxxx
Xxxxxxxx shall have been completed under the terms disclosed to HomeLife.
ARTICLE VIII
TERMINATION
8.1 TERMINATION.
(a) This Agreement and the transactions contemplated herein
may be terminated and abandoned at any time prior to the Closing Date by the
mutual consent of HomeLife and the Shareholders or independently by HomeLife
or the Shareholders if the Closing has not occurred by September 30, 1996
(the "TERMINATION DATE"), and the party terminating this Agreement is not in
breach of the terms of this Agreement.
(b) This Agreement may be terminated by the Shareholders
if, at any time prior to the Closing, there shall occur a material breach of
any of the representations, warranties or covenants of HomeLife contained
herein.
(c) This Agreement may be terminated by HomeLife if, at any
time prior to the Closing, there shall occur a material breach of any of the
representations, warranties or covenants of the Shareholders contained herein.
(d) In the case of termination of this Agreement under
either subsection (a) or subsection (c) above, Xxxx shall immediately return
to HomeLife in full the Deposit in the amount of $120,000, without interest.
8.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
under the provisions set forth above, no party hereto shall have any
obligation to any other party thereafter arising out of this Agreement;
PROVIDED, HOWEVER, that (a) if any Shareholder fails or refuses to tender
full performance of its obligations under this Agreement other than due to a
failure of a condition set forth in Article VII and as a result thereof
HomeLife terminates this Agreement, HomeLife shall be entitled to exercise
and pursue all legal or equitable rights or remedies which it may have
against such Shareholder by reason of any breach of this Agreement by the
Shareholders; and (b) if HomeLife fails or refuses to tender full performance
of its obligations under this Agreement other than a failure of a condition
set forth in Article VI and as a result thereof any Shareholder terminates
this Agreement, such Shareholder shall be entitled to exercise and pursue all
legal or equitable rights or remedies which it may have against HomeLife by
reason of any breach of this Agreement by HomeLife.
ARTICLE IX
MISCELLANEOUS
9.1 EXPENSES. The Shareholders, on the one hand, and HomeLife, on
the other hand, shall each pay their own expenses in connection with the
negotiations leading up to and the preparation of this Agreement and the
consummation of the transactions provided for herein, including without
limitation fees and expenses of their respective legal counsel, accountants
and other outside experts retained by it to conduct due diligence, provided,
HOWEVER, that the Shareholders may cause Xxxx and Guardian to pay legal
fees, not exceeding $25,000 in the aggregate, incurred by Xxxx or Guardian
in connection with this transaction.
9.2 SURVIVAL. The representations made by the Shareholders in
Article II shall survive for a period of two years after the Closing Date,
and the representations made by HomeLife in Article III shall survive for a
period of two years after the Closing Date, PROVIDED, HOWEVER, that any
representation made by HomeLife herein regarding the HomeLife common stock
shall survive for a period of three years after the Closing Date.
9.3 BENEFITS AND BURDENS; ASSIGNMENT. This Agreement shall inure to
the benefit of and shall be binding upon the Shareholders and HomeLife, and
the respective successors and permitted assigns of the Shareholders and
HomeLife; PROVIDED, HOWEVER, that this Agreement may only be assigned by
HomeLife to an affiliate entity, and in such event HomeLife shall not be
released from its obligations hereunder.
9.4 AMENDMENT. This Agreement may be amended only by an instrument
in writing signed by the Shareholders and by HomeLife.
9.5 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing
(including telecommunications) and shall be deemed to have been duly given
upon receipt if personally delivered or sent by (i) telecopy or other wire
transmission with request for assurance of receipt; or (ii) Federal Express
or other overnight air express and receipted for by the recipient or an agent
of the recipient; or (iii) by United States Postal Service, postage prepaid.
All notices delivered to a party to this Agreement shall be sent to the
addresses set forth in the first paragraph of this Agreement or on EXHIBIT
A-1 or EXHIBIT A-2, or to such other address or to such other person or
persons designated in writing by such party or counsel, as the case may be.
9.6 ENTIRE UNDERSTANDING. This Agreement and all Exhibits referred
to herein represent the entire understanding of the parties with respect to
the subject matter herein and supersedes all correspondence, memoranda,
conversations
or other communications with respect thereto.
9.7 HEADINGS. The section headings in this Agreement are intended
solely for convenience and shall be given no effect in the construction and
interpretation hereof.
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument, and, when signed by
all of the parties hereto, shall become legally binding on such parties
effective as of the date set forth at the beginning of this Agreement.
9.9 GOVERNING LAW. This Agreement shall be governed by and
interpreted under the laws of the State of Michigan applicable to contracts
made and to be performed entirely within such State and without giving effect
to the choice of law principles of such State.
9.10 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
9.11 TIME. Time is of the essence under this Agreement.
IN WITNESS WHEREOF, the parties have executed or causes to be
executed this Agreement effective as of the day and year first above written.
HOMELIFE, INC.
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------
Xxxxxx Xxxxxxxx
Its: Chairman
/s/ Xxxxx X. Suit
----------------------------------
Xxxxx X. Suit
/s/ Xxxxxxx X. Suit /s/ Xxxxxx X. Xxxxxxxx
----------------------------- ---------------------------------------
Xxxxxxx X. Suit Xxxxxx X. Xxxxxxxx
/s/ Xxxxx X. Rock /s/ Xxxxxx X. Xxxxxx
----------------------------- ---------------------------------------
Xxxxx X. Rock Xxxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxxxx /s/ Xxxxxx X. Xxxxx
----------------------------- ---------------------------------------
Xxxxx X. Xxxxxxxx Xxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxx /s/ Xxxxxx Xxxxxx
----------------------------- ---------------------------------------
Xxxxx X. Xxxxx Xxxxxx Xxxxxx
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxx X. Keep
----------------------------- ---------------------------------------
Xxxxxx X. Xxxxxxx Xxxx X. Keep
/s/ Xxxxxx X. Gootlieb /s/ Xxxxxxxxx X. Xxxx
----------------------------- ---------------------------------------
Xxxxxx X. Gootlieb Xxxxxxxxx X. Xxxx
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
----------------------------- ---------------------------------------
Xxxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxxx
----------------------------- ---------------------------------------
Xxxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx
/s/ D. Xxxxxxx Xxxxxx /s/ Xxxxxxxx X. Xxxxxx
----------------------------- ---------------------------------------
D. Xxxxxxx Xxxxxx Xxxxxxxx X. Xxxxxx
/s/ Xxxxxx Xxxxxx /s/ Xxxxxxx X. Xxxxx, XX.
----------------------------- ---------------------------------------
Xxxxxx Xxxxxx Xxxxxxx X. Xxxxx, Xx.
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxxxx Xxxxx
----------------------------- ---------------------------------------
Xxxxxx X. Xxxxxxx Xxxxxx Xxxxx
/s/ Xxxxx Xxxxxx /s/ Xxxxxxx X. Xxxxxxxxxx, XX.
----------------------------- ---------------------------------------
Xxxxx Xxxxxx Xxxxxxx X. Xxxxxxxxxx, Xx.
/s/ Xxxxxx Xxxxxxxx /s/ Xxxxxx Xxxxxxxx
----------------------------- ---------------------------------------
Xxxxxx Xxxxxxxx Xxxxxx Xxxxxxxx
/s/ Xxxxxx X. Xxxx /s/ Xxxx Xxxxx Xxxxx-Xxxx
----------------------------- ---------------------------------------
Xxxxxx X. Xxxx, as Co-trustee Xxxx Xxxxx Xxxxx-Xxxx, as Co-trustee
For the purpose of assuming his guarantee obligation under Section 1.3(b)
/s/ Xxxxxx Xxxxxxxx
-----------------------------
Xxxxxx Xxxxxxxx
