1
EXHIBIT 2.4
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
KARTS INTERNATIONAL INCORPORATED
("KARTS INTERNATIONAL"),
USA INDUSTRIES, INC.
(THE "COMPANY")
AND
XXXXX XXXXXXX XXXXX, XXXXXX X. XXXXX, XXXXXX X. XXXXXX
AND XXXXX X. XXXXXX
(THE "SHAREHOLDERS")
OCTOBER 4, 1996
2
TABLE OF CONTENTS
ARTICLE/
SECTION SUBJECT PAGE
------- ------- ----
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I REPRESENTATIONS OF THE COMPANY AND THE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Ownership of USA Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Validity of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Financial Statements and No Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Title to Properties; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.11 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 Restrictive Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.15 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.17 Intellectual Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.18 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.19 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.20 Employment Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.21 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.22 Interests in Clients, Suppliers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.23 Bank Accounts, Powers of Attorney and Compensation of Employees . . . . . . . . . . . . . . . . 7
1.24 No Changes Prior to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.26 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.27 Copies of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.28 Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.29 Investor Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.30 Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.31 Products Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.32 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.33 Customer Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.34 Insider Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.35 Representations as of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II REPRESENTATIONS OF KARTS INTERNATIONAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Existence and Good Standing of Karts International . . . . . . . . . . . . . . . . . . . . . 11
2.2 Restrictive Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(i)
3
2.3 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4 Issuance of the Karts International Shares . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 Representations as of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III SALE OF THE USA SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Sale of the USA Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Cash Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Determination of Amount of Karts International Shares . . . . . . . . . . . . . . . . . . . . 12
3.4 Non-competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV CONDUCT OF BUSINESS; REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Exclusive Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Review of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Review of Karts International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Preserve Accuracy of Representation and Warranties . . . . . . . . . . . . . . . . . . . . . 14
5.2 Passage of Title and Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4 Company Employees and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Covenants Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.7 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.8 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI CONDITIONS TO KARTS INTERNATIONAL'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Opinion of the Company's and the Shareholders' Counsel . . . . . . . . . . . . . . . . . . . 15
6.2 Good Standing and Tax Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Truth of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5 Performance of Agreements/Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6 No Litigation Threatened . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.7 Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.9 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.10 Release of Shareholders' Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.11 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.12 Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.13 Resignation of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII CONDITIONS TO THE SHAREHOLDERS' OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1 Opinion of Karts International's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.2 Truth of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(ii)
4
ARTICLE VIII CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 Actions of the Company and the Shareholders at Closing . . . . . . . . . . . . . . . . . . . 19
8.3 Actions of Karts International at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX SURVIVAL OF REPRESENTATIONS: INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Survival of Representations and Obligations to Indemnify . . . . . . . . . . . . . . . . . . 22
9.2 Indemnification by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.3 Indemnification by Karts International. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.4 Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE X TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 Knowledge of the Company and the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.4 "Person" Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.5 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.8 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.11 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.13 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.14 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.15 Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
EXHIBITS:
Exhibit "A" Balance Sheet dated July 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit "B" Form of Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
SCHEDULES:
Schedule 1.3 States the Company is Qualified To Do Business In . . . . . . . . . . . . . . . . . . . . . . S-1
Schedule 1.4 Authorized Capitalization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Schedule 1.8 Liens, Mortgages and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Schedule 1.9 Description of Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Schedule 1.10 Description of Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Schedule 1.11 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Schedule 1.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
(iii)
5
Schedule 1.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
Schedule 1.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Schedule 1.17 Intellectual Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Schedule 1.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Schedule 1.30 Product Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Schedule 1.32 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13
Schedule 1.33 Customer Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14
Schedule 1.34 Insider Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15
(iv)
6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") dated as of October
4, 1996, is made and entered into by and among Karts International
Incorporated, a Nevada corporation ("Karts International"), USA Industries,
Inc., an Alabama corporation (the "Company"), and Xxxxx Xxxxxxx Xxxxx, Xxxxxx
X. Xxxxx, Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders are the owners and holders of 100 shares of
common stock, no par value per share, of the Company (the "USA Shares");
WHEREAS, the Shareholders desire to sell, and Karts International
desires to purchase, the USA Shares pursuant and subject to the terms and
conditions of this Agreement;
WHEREAS, the Company and Karts International have entered into an
operating agreement (the "Operating Agreement") to facilitate the manufacture
and delivery of fun karts per USA's Vendor's Agreement with Wal-Mart Stores,
Inc.; and
WHEREAS, the Operating Agreement will terminate upon the Closing (as
defined herein) of the transactions contemplated by this Agreement.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
REPRESENTATIONS OF THE COMPANY AND THE SHAREHOLDERS
As a material inducement to Karts International to enter into this
Agreement and perform its obligations hereunder, the Company and the
Shareholders jointly and severally represent, warrant and agree as follows:
1.1 Ownership of USA Shares. The Shareholders are the record and
beneficial owners of the USA Shares, free and clear of all liens, encumbrances,
restrictions and claims of every kind; the Shareholders have full legal right,
power and authority to enter into this Agreement and to sell, assign, transfer
and convey the USA Shares to Karts International pursuant to the terms of this
Agreement; and the delivery to Karts International of duly endorsed
certificates representing the USA Shares pursuant to the provisions of this
Agreement will transfer to Karts International valid title to the USA Shares,
free and clear of all liens, encumbrances, restrictions and claims of every
kind.
1.2 Validity of Transaction. This Agreement and each other
agreement contemplated hereby are valid and legally binding obligations of the
Company and the Shareholders, enforceable in accordance with their respective
terms against the Company and the Shareholders, except as limited by
bankruptcy, insolvency and similar laws affecting creditors generally, and by
general principles of equity. When sold, assigned, transferred and conveyed to
Karts International pursuant to this Agreement, the USA Shares will be duly
authorized, validly issued, fully paid, nonassessable and free of any
preemptive rights of any present shareholder or any future shareholder of the
Company. The execution, delivery and performance of this Agreement and each
STOCK PURCHASE AGREEMENT - Page 1
7
other agreement contemplated hereby have been duly authorized by the Company
and the Shareholders and will not violate any applicable federal or state law,
any order of any court or government agency or the articles or certificate of
incorporation of the Company. The execution, delivery and performance of this
Agreement and each other agreement contemplated hereby will not result in any
breach of or default under, or result in the creation of any encumbrance upon
any of the assets of the Company pursuant to the terms of any agreement by
which the Company or any of its respective assets may be bound. No consent,
approval or authorization of, or registration or filing with any governmental
authority or other regulatory agency, is required for the validity of the
execution and delivery by the Company and the Shareholders of this Agreement or
any documents related thereto.
1.3 Existence and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Alabama. The Company has the power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and is in good standing in each of the states listed in Schedule 1.3
hereto, which are the only jurisdictions in which the character or location of
the properties owned or leased by the Company or the nature of the business
conducted by the Company makes such qualification necessary. The Company has
all necessary power and authority to conduct the business it proposes to
conduct and enter into and perform its obligations under this Agreement. The
Company will deliver to Karts International a Certificate of Officer dated as
of the Closing Date (as hereinafter defined) certifying to the Company's
existence and good standing, the accuracy and completeness of its articles or
certificate of incorporation and its bylaws and the names and signatures of its
officers and agents authorized to execute documents on behalf of Company.
1.4 Capital Stock. The Company has an authorized capitalization
as set forth in Schedule 1.4 hereto, which includes the name and address of
each Shareholder of the Company and the number of USA Shares and any other
securities of the Company owned by such Shareholders. The outstanding USA
Shares have been duly authorized and validly issued and are fully paid and
nonassessable. Neither the Shareholders nor the Company are parties to or
bound by, nor do they have any knowledge of, any outstanding options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans or
other agreements of any character providing for the purchase, issuance or sale
of any shares of the capital stock of the Company, other than as contemplated
by this Agreement. As of the Closing Date, the Company will not be subject to
any obligation, contingent or otherwise, to repurchase or otherwise acquire or
redeem any shares of its capital stock.
1.5 Subsidiaries and Investments. The Company does not own,
directly or indirectly, any of the capital stock of any other corporation or
any equity, profit sharing, participation or other interest in any corporation,
partnership, joint venture or other entity.
1.6 Financial Statements and No Material Changes. The Company has
heretofore furnished Karts International with the unaudited balance sheet of
the Company as of July 31, 1996 and the related statements of income, all
compiled by management of the Company (the consolidated balance sheet of the
Company at July 31, 1996 is hereinafter referred to as the "Balance Sheet").
The entries on the Balance Sheet under Equity that are classified as "Due
to/from Xxxxxx Xxxxxx -- $56,981.57; Xxxxxx Erection -- $17,075.00; and Xxxxxxx
Xxxxx -- $42,887.86" have been reclassified as contributions to equity by such
Shareholders. A true and correct copy of the Balance Sheet, as restated, is
attached hereto as Exhibit "A". The Balance Sheet fairly presents the
financial condition of the Company at the date thereof and, except as
STOCK PURCHASE AGREEMENT - Page 2
8
indicated therein, reflects all claims against and all debts and liabilities of
the Company, fixed or contingent, as at the date thereof and the related
statement of income fairly presents the results of the operations of the
Company and the changes in its financial position for the periods indicated.
Since July 31, 1996 (the "Balance Sheet Date") there has been (i) no material
adverse change in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations, of the Company,
whether as a result of any legislative or regulatory change, revocation of any
license or rights to do business, fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation or act of God or other
public force or otherwise and (ii) no change in the assets or liabilities, or
in the business or condition, financial or otherwise, or in the results of
operations, or prospects, of the Company except in the ordinary course of
business; and to the best knowledge of the Shareholders and the Company, no
fact or condition exists or is contemplated or threatened which might cause
such a change in the future.
1.7 Books and Records. The minute books of the Company, as
heretofore delivered to Karts International and its representatives, contain
accurate records of all meetings of and corporate actions or written consents
by the Shareholders and Board of Directors of the Company, respectively. The
Company does not have any of its records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or
partly dependent upon or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not) that
(including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company. The Company will make
and keep books, records and accounts that in reasonable detail accurately and
fairly reflect the transactions and dispositions of its assets. The Company
will maintain its present system of internal accounting controls. The
Company's present system of internal accounting controls is sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles or any other criteria
applicable to such statements and to maintain accountability for such assets,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals, and
appropriate action is taken with respect to any differences.
1.8 Title to Properties; Encumbrances. The Company has good,
marketable and indefeasible title to all its properties, assets and leasehold
estates, real and personal, as described in the Balance Sheet, and, except as
set forth in Schedule 1.8 hereto, all such properties, both real and personal,
are not subject to any mortgage, lien, pledge, security interest, conditional
sales agreement or encumbrances of any kind.
1.9 Real Property. Schedule 1.9 contains an accurate and complete
legal description of all real property and improvements situated thereon which
is owned by the Company and a description of any mortgage, lien, pledge,
security interest or encumbrance of any kind against the real property and
improvements (the "Mortgage"). All payments due to date on each such Mortgage
have been paid; in each case, the Company is not in default thereunder and no
waiver, indulgence or postponement of the Company's obligations under any such
Mortgage has been granted by the mortgage holder; and there exist no event of
default or event, occurrence, condition or act (including the transactions
contemplated under this Agreement) that, with the giving of notice, the lapse
of time or the happening of any further event or condition, would become a
default under any such Mortgage in any material respect, and, to the best
knowledge of the Shareholders and the Company, all of the covenants to be
performed by the Company under any such Mortgage have been fully performed.
The real property and improvements owned by the
STOCK PURCHASE AGREEMENT - Page 3
9
Company is in the state of good maintenance and repair and is adequate and
suitable for the purposes for which is presently being used by the Company.
1.10 Leases. Schedule 1.10 contains an accurate and complete list
and description of the terms of all leases to which the Company is a party as
lessee or lessor. Each lease set forth in Schedule 1.10 (or required to be set
forth in Schedule 1.10) is in full force and effect; all rents and additional
rents due to date on each such lease have been paid; in each case, the lessee
has been in peaceable possession since the commencement of the original term of
such lease and is not in default thereunder and no waiver, indulgence or
postponement of the lessee's obligations thereunder has been granted by the
lessor; and there exists no event of default or event, occurrence, condition or
act (including the purchase of the USA Shares hereunder) that, with the giving
of notice, the lapse of time or the happening of any further event or
condition, would become a default under such lease. The Company has not
violated any of the terms or conditions under any such lease in any material
respect, and, to the best knowledge of the Shareholders and the Company, all of
the covenants to be performed by any other party under any such lease have been
fully performed. The property leased by the Company is in a state of good
maintenance and repair and is adequate and suitable for the purposes for which
it is presently being used.
1.11 Material Contracts. Except as set forth in Schedule 1.11
hereto, the Company has not been or is not bound by (i) any agreement, contract
or commitment relating to the employment of any person by the Company, or any
bonus, deferred compensation, pension, profit sharing, stock option, employee
stock purchase, retirement or other employee benefit plan, (ii) any agreement,
indenture or other instrument that contains restrictions with respect to
payment of dividends or any other distribution in respect of its capital stock,
(iii) any agreement, contract or commitment relating to capital expenditures,
(iv) any loan or advance to, or investment in, any other Person (as defined in
Section 11.4 herein) or any agreement, contract or commitment relating to the
making of any such loan, advance or investment, (v) any guarantee or other
contingent liability in respect of any indebtedness or obligation of any other
Person (other than the endorsement of negotiable instruments for collection in
the ordinary course of business), (vi) any management service, consulting or
any other similar type contract, (vii) any agreement, contract or commitment
limiting the freedom of the Company to engage in any line of business or to
compete with any other Person, (viii) any agreement, contract or commitment not
entered into in the ordinary course of business that involves $10,000 or more
and is not cancelable without penalty within 30 days, or (ix) any agreement,
contract or commitment that might reasonably be expected to have a potential
adverse impact on the business or operations of the Company. Each contract or
agreement set forth in Schedule 1.11 (or required to be set forth in Schedule
1.11) is in full force and effect, and there exists no default or event of
default or event, occurrence, condition or act (including the purchase of the
USA Shares hereunder) that, with the giving of notice, the lapse of time or the
happening of any other event or condition, would become a default or event of
default thereunder. The Company has not violated any of the terms or
conditions of any contract or agreement set forth in Schedule 1.11 (or required
to be set forth in Schedule 1.11) in any material respect, and, to the best
knowledge of the Shareholders and the Company, all of the covenants to be
performed by any other party thereto have been fully performed. Contracts made
in the ordinary course of business involving less than $10,000 shall be deemed
not to be material for purposes of this Section 1.11.
1.12 Restrictive Documents. Neither the Company nor the
Shareholders are subject to, or a party to, any charter, bylaw, mortgage, lien,
lease, license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, that materially adversely affects the business practices, operations
or
STOCK PURCHASE AGREEMENT - Page 4
10
condition of the Company or any of its assets or property, or that would
prevent consummation of the transactions contemplated by this Agreement,
compliance by the Shareholders or the Company with the terms, conditions and
provisions hereof or the continued operation of the Company's business after
the date hereof or the Closing Date on substantially the same basis as
heretofore operated or that would restrict the ability of the Company to
acquire any property or conduct business in any area.
1.13 Litigation. Except as set forth in Schedule 1.13 hereto,
there are no claims, actions, inquiries, investigations, suits, proceedings or
arbitrations pending or threatened against the Shareholders or the Company, nor
are the Shareholders or the Company aware of any claims, actions, inquiries,
investigations, suits or arbitrations before any governmental agency, court or
tribunal, domestic or foreign, or before any private arbitration tribunal,
threatened or pending against the Shareholders or the Company involving the
Company's properties or business that, if determined adversely to the
Shareholders or the Company, would, individually or in the aggregate, result in
any materially adverse change in the properties, business, management or
business prospects of the Company nor is there any basis for any such action,
suit, proceeding, arbitration, claim, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal naming the Shareholders or the Company and enjoining either the
Shareholders or the Company from taking, or requiring the Shareholders or the
Company to take, any action, or to which the Shareholders, the Company, the
Company's business or properties are bound or subject. Except as disclosed in
Schedule 1.13, there are no unsatisfied adverse judgments or court or
administrative orders (whether or not on appeal) affecting the business of the
Company and there are no judgment creditors asserting any claims, whether or
not meritorious or material, against the Shareholders or the Company. Upon a
breach of the representations and warranties made in this Section 1.13, Karts
International may avail itself to all rights and remedies provided for herein,
including, but not limited to, all rights to indemnification as set forth in
Article IX hereof.
1.14 Taxes. The Company has filed or caused to be filed, within
the times and within the manner prescribed by law, all federal, state and
foreign tax returns and tax reports that are required to be filed by, or with
respect to, the Company. Such returns and reports reflect accurately all
liability for taxes of the Company for the periods covered thereby. All
federal, state, local and foreign income, franchise, sales, use, occupancy,
excise and other taxes and assessments (including interest and penalties)
payable by, or due from, the Company have been fully paid or adequately
disclosed and fully provided for in the books and financial statements of the
Company. The federal income tax liability of the Company has been finally
determined for all fiscal years to and including the fiscal year ended December
31, 1995. Except as set forth and described in Schedule 1.14 hereto, no
examination of any tax return of the Company is currently in progress by any
state or federal administrative or regulatory agency. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable
to any tax return of the Company. The Company will pay and discharge, when
due, (i) all material taxes, assessments and governmental priority claims and
charges imposed upon its properties or upon the income or profits therefrom (in
each case before the same becomes delinquent and before penalties accrue
thereon), and (ii) all claims for labor, materials or supplies that, if unpaid,
might by law become liens upon any of its properties, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings,
and adequate reserves have been set aside on its books with respect thereto, in
accordance with generally accepted accounting principles.
1.15 Liabilities. The Company has no outstanding claims,
liabilities or indebtedness, contingent or otherwise, except as set forth in
the Balance Sheet, other than liabilities incurred
STOCK PURCHASE AGREEMENT - Page 5
11
subsequent to the Balance Sheet Date in the ordinary course of business and a
credit line with Deposit Guaranty National Bank, Hammond, Louisiana Branch
("Deposit Guaranty"). The Company is not in default in respect of the terms or
conditions of any indebtedness.
1.16 Insurance. Set forth in Schedule 1.16 hereto is a complete
list of insurance policies that the Company maintains with respect to its
businesses, properties or employees. Such policies are in full force and
effect free from any right of termination on the part of the insurance
carriers. Such policies, with respect to their amounts and types of coverage,
are adequate to insure fully against risks to which the Company, and its
property and assets are normally exposed, in the operation of its businesses.
True, complete and correct copies of all such policies have been provided to
Karts International on or prior to the date hereof.
1.17 Intellectual Properties. Schedule 1.17 hereto contains an
accurate and complete list of all domestic and foreign letters patent, patents,
patent applications, patent licenses, product license agreements, software
licenses and know-how licenses, trade names, trademarks, copyrights, unpatented
inventions, service marks, trademark registrations and applications, service
xxxx registrations and applications and copyright registrations and
applications owned or used by the Company in the operation of its business
(collectively, the "Intellectual Property"). Unless otherwise indicated in
such Schedule 1.17, the Company owns the entire right, title and interest in
and to the Intellectual Property, trade secrets and technology used in the
operation of its business (including, without limitation, the exclusive right
to use and license the same) and each item constituting part of the
Intellectual Property and trade secrets and technology that is owned by the
Company has been, to the extent indicated in Schedule 1.17, duly registered
with, filed in or issued by, as the case may be, the United States Patent and
Trademark Office or such other government entities, domestic or foreign, as are
indicated in Schedule 1.17; and such registrations, filings and issuances
remain in full force and effect. To the best knowledge of the Shareholders and
the Company, except as stated in such Schedule 1.17, there are no pending or
threatened proceedings or litigation or other adverse claims affecting or with
respect to the Intellectual Property. Schedule 1.17 lists all notices or
claims currently pending or received by either the Company or the Shareholders
during the past two years that claim infringement by the Company or the
Shareholders of any domestic or foreign letters patent, patent applications,
patent licenses and know-how licenses, trade names, trademark registrations and
applications, service marks, copyrights, copyright registrations or
applications, trade secrets or other confidential proprietary information.
Except as set forth in Schedule 1.17, there is, to the best knowledge of the
Shareholders and the Company, no reasonable basis upon which a claim may be
asserted against either the Company or the Shareholders for infringement of any
domestic or foreign letters patent, patents, patent applications, patent
licenses and know-how licenses, trade names, trademark registrations and
applications, common law trademarks, service marks, copyrights, copyright
registrations or applications, trade secrets or other confidential proprietary
information. To the best knowledge of the Shareholders and the Company, except
as indicated on Schedule 1.17, no Person is infringing upon the Intellectual
Property.
1.18 Compliance with Laws. The Company is in compliance in all
material respects with all applicable laws, regulations, orders, judgments and
decrees.
1.19 Accounts Receivable. The amount of all accounts receivable,
unbilled invoices and other debts due or recorded in the records and books of
account of the Company as being due to the Company at the Closing Date (less
the amount of any provision or reserve therefor made in the records and books
of account of the Company) will be good and collectible in full in the ordinary
course of business and, in any event, not later than 60 days after the Closing
Date; and
STOCK PURCHASE AGREEMENT - Page 6
12
none of such accounts receivable or other debts is or will at the Closing Date
be subject to any counterclaim or set-off except to the extent of any such
provision or reserve. There has been no material adverse change since the
Balance Sheet Date in the amount of accounts receivable or other debts due the
Company or the allowances with respect thereto, or accounts payable of the
Company, from that reflected in the Balance Sheet.
1.20 Employment Relations. (i) The Company is in substantial
compliance with all federal, state, provincial or other applicable laws,
domestic or foreign, respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is not engaged in
any unfair labor practice, (ii) no unfair labor practice complaint against the
Company is pending before a labor commissioner or other competent authority,
(iii) there is no labor strike, dispute, slowdown or stoppage actually pending
or threatened against or involving the Company, (iv) no union representation
question exists respecting the employees of the Company, (v) no grievance that
might have an adverse effect upon the Company or the conduct of its businesses
exists, no arbitration proceeding arising out of or under any collective
bargaining agreement is pending, and no claim therefor has been asserted, (vi)
no collective bargaining agreement is currently being negotiated by the
Company, and (vii) the Company has not experienced any material labor
difficulty during the last three years. There has not been, and to the
knowledge of the Company and the Shareholders, there will not be, any material
adverse change in relations with employees of the Company as a result of any
announcement of the transactions contemplated by this Agreement. No key
employee, or group of employees has any plans to terminate employment with the
Company.
1.21 Employee Benefit Plans. The Company has (i) no employee
benefit plans within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not any such
Employee Benefit Plans are otherwise exempt from the provisions of ERISA, or
(ii) no other employee benefit plans or any other foreign pension, welfare or
retirement benefit plans. The Shareholders and the Company have delivered or
caused to be delivered to Karts International and its counsel true and complete
copies of (i) all employee benefit plans as in effect, together with all
amendments thereto that will become effective at a later date, as well as the
latest Internal Revenue Service determination letter obtained with respect to
any such employee benefit plan qualified under Section 401 or 501 of the
Internal Revenue Code of 1986, as amended and (ii) Form 5500 for the most
recent completed fiscal year for each employee benefit plan required to file
such form.
1.22 Interests in Clients, Suppliers, Etc. Neither the
Shareholders nor any officer or director of the Company possesses, directly or
indirectly, any financial interest in, or is a director, officer or employee
of, any corporation, firm, association or business organization that is a
client, supplier, customer, or competitor or potential competitor of the
Company. Ownership of securities of a company whose securities are registered
under the Securities Exchange Act of 1934, as amended, not in excess of one
percent (1%) of any class of such securities shall not be deemed to be a
financial interest for purposes of this Section 1.22.
1.23 Bank Accounts, Powers of Attorney and Compensation of
Employees. Set forth in Schedule 1.23 hereto is an accurate and complete list
showing (i) the name and address of each bank in which the Company has an
account or safe deposit box, the number of any such account or any such box and
the names of all persons authorized to draw thereon or to have access thereto,
(ii) the names of all persons, if any, holding powers of attorney from the
Company and a summary statement of the terms thereof, and (iii) the names of
all persons whose compensation from the Company on the Balance Sheet Date
exceeded an annualized rate of $25,000, together with a
STOCK PURCHASE AGREEMENT - Page 7
13
statement of the full amount paid or payable to each such person for services
rendered during such fiscal year.
1.24 No Changes Prior to Closing Date. During the period from the
Balance Sheet Date to and including the Closing Date, except as expressly
contemplated hereby, the Company will not have (i) incurred any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise),
except in the ordinary course of business and under the credit line with
Deposit Guaranty, (ii) permitted any of its assets to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge
of any kind except as may be required under the Deposit Guaranty credit line,
(iii) sold, transferred or otherwise disposed of any assets except in the
ordinary course of business, (iv) made any capital expenditure or commitment
therefor, except in the ordinary course of business, (v) declared or paid any
dividend or made any distribution on any shares of its capital stock, or
redeemed, purchased or otherwise acquired any shares of its capital stock or
any option, warrant or other right to purchase or acquire any such shares, (vi)
made any bonus or profit sharing distribution or payment of any kind, (vii)
increased its indebtedness for borrowed money, except current borrowings from
banks in the ordinary course of business and the Deposit Guaranty credit line,
or made any loan to any Person, (viii) written off as uncollectible any notes
or accounts receivable, except write-offs in the ordinary course of business
charged to applicable reserves, none of which individually or in the aggregate
is material to the Company, (ix) granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or other
employees, except in the ordinary course of business, (x) canceled or waived
any claims or rights of substantial value, (xi) made any change in any method
of accounting or auditing practice, (xii) otherwise conducted its business or
entered into any transaction, except in the usual and ordinary manner and in
the ordinary course of its business, or (xiii) agreed, whether or not in
writing, to do any of the foregoing. There shall have been no material adverse
change in the financial position, results of operations, business or prospects
of Company since the Balance Sheet Date. The Company shall not have not
consolidated or merged with, nor sold, leased or otherwise disposed of its
properties as an entirety or substantially as an entirety, to any Person.
1.25 Disclosure. None of this Agreement, the financial statements
referred to in Section 1.6 above, or any agreement, schedule, exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing that has been supplied by or on behalf of the Company, the
Shareholders, or by any of the Company's directors or officers, in connection
with the transactions contemplated hereby, contains any untrue statement of a
material fact, or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading. There is no
fact known to the Company or the Shareholders that materially and adversely
affects the business, prospects or financial condition of the Company or its
properties or assets, that has not been set forth in this Agreement or in the
schedules, exhibits or certificates or statements in writing furnished in
connection with the transactions contemplated by this Agreement. There has not
come to the attention of the Company or the Shareholders any facts that
reasonably cause the Company or the Shareholders to believe that any document
connected with the transactions contemplated hereby contain any untrue
statement or a material fact, or omit to state a material fact required to be
stated herein or necessary in order to make the statements herein, in light of
the circumstances existing on the Closing Date, not misleading.
1.26 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of the Company or the Shareholders is, or will be, entitled to
any commission or broker's or finder's fees from any of the parties hereto, or
from any Person controlling, controlled by or under
STOCK PURCHASE AGREEMENT - Page 8
14
common control with any of the parties hereto, in connection with any of the
transactions contemplated herein.
1.27 Copies of Documents. The Shareholders and the Company have
caused to be made available for inspection and copying by Karts International
and its representatives, attorneys and accountants, true, complete and correct
copies of all documents referred to in this Article I or in any schedule or
exhibit furnished by the Shareholders or the Company to Karts International
pursuant to this Agreement. All documents and instruments delivered to Karts
International on the Closing Date in connection with this transaction shall be
satisfactory to Karts International in its sole discretion.
1.28 Purchase for Investment. The Shareholders will acquire the
Karts International Shares (as hereinafter defined) for investment and not with
a view to resale or for distributing all or any part thereof in any transaction
which would constitute a "distribution" within the meaning of the Securities
Act of 1933, as amended (the" Securities Act"). The offering of the Karts
International Shares to the Shareholders was made only through direct, personal
communication between the Shareholders and a duly authorized officer of Karts
International and not through public solicitation or advertising. The
Shareholders acknowledge that Karts International Shares are "restricted
securities" and have not been registered under the Securities Act and that
Karts International is not under any obligation to file a registration
statement with the Securities and Exchange Commission or any state securities
agency with respect to the Karts International Shares.
1.29 Investor Qualifications. The Shareholders (i) have such
knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of their investment in the Karts
International Shares and have the financial ability to assume the monetary risk
associated therewith, (ii) are able to bear the complete loss of their
investment in the Karts International Shares, (iii) have received such other
documents and information as they have requested and have had the opportunity
to ask questions of, and receive answers from, Karts International and its
management concerning Karts International and the terms and conditions of the
offering of Karts International and to obtain additional information, (iv) are
not an entity formed solely to make this investment, and (v) are not relying
upon any statements or instruments made or issued by any person other than
Karts International and its officers in making their decision to invest in the
Karts International Shares.
1.30 Product Warranty. Each product manufactured, sold, leased or
delivered by the Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and the Company does not
have any liability (whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) (and there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against any of them giving rise to any such liability) for
replacement or repair thereof or other damages in connection therewith. Except
as set forth in Schedule 1.30 hereto, no product manufactured, sold, leased or
delivered by the Company is subject to any guaranty, warranty, or other
indemnity.
1.31 Products Liability. Except as set forth in Schedule 1.13
hereto, there is no claim, action, suit, inquiry, proceeding or investigation
by or before any court or governmental or other regulatory or administrative
agency or commission pending or threatened against or involving either the
Shareholders or the Company relating to any product alleged to have been
manufactured or sold by the Company and alleged to have been defective, or
improperly designed or manufactured.
STOCK PURCHASE AGREEMENT - Page 9
15
1.32 Environmental Compliance. Except as set forth in Schedule
1.32, to the best knowledge of the Shareholders and the Company (i) the conduct
of the business at the Company in connection with the ownership, use,
maintenance or operation of any real property which has ever been owned or
leased by the Company, and the conduct of business thereon, complies and
complied with, and the Company is not in violation of, any applicable federal,
state, county or local statutes, laws, regulations, rules, ordinances, codes,
licenses, permits (granted to the Company) or orders (naming the Company) of
any governmental authorities relating to environmental matters, including,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 ("CERCLA"), and any other law, statute, ordinance or
regulation relating to the protection of the public health and/or the
environment, whether promulgated by the United States, any state, municipality
and/or other governmental body, each as amended (hereinafter collectively
referred to as "Environmental Laws"), (ii) the conduct of the business at the
Company is and has at all times been performed in conformance with all
Environmental Laws and regulations pertaining thereto, and all permits or other
documents required for the conduct of the business in accordance with the
Environmental Laws are and at all times have been in full force and effect;
(iii) there are no notices of violation of any Environmental Laws requiring any
work, repairs, construction, capital expenditures or otherwise with respect to
the business of the Company which have been received by the Company, and there
are no writs, notices, injunctions, decrees, orders, liens or judgments
outstanding, no lawsuits based upon either the Environmental Laws or the common
law, claims, proceedings or investigations pending relating to the operations
of the Company with respect to the disposal of hazardous wastes or hazardous
substances by the Company, and (iv) there has been no release (as defined in
CERCLA) of a hazardous substance (as defined in CERCLA) or hazardous waste or
any similar hazardous or toxic materials, substances, pollutants, contaminants
or wastes to the extent prohibited by the Environmental Laws, at or on any
premises which have ever been leased or owned by the Company, nor have such
premises been used at any time by any person as a landfill or a waste disposal
site for any hazardous substances or hazardous wastes.
1.33 Customer Commitments. Schedule 1.33 is a description of all
oral arrangements and written contracts, agreements, understandings,
commitments and the like under the terms of which the Company has agreed to pay
any bonus, rebate, financing, discount, waiver of payment, incentive or the
like, from January 1, 1994 to the Balance Sheet Date, to any of the Company's
customers or their employees.
1.34 Insider Interests. Except as set forth in Schedule 1.34, no
shareholder, employee, officer or director of the Company has any material
interest in any personal or real property, tangible or intangible, including,
without limitation, inventions or other Intellectual Property, used in or
pertaining to the assets or business of the Company.
1.35 Representations as of Closing. The representations and
warranties made by the Company and the Shareholders in this Article I and the
schedules hereto will be correct in all material respects on and as of the
Closing Date with the same force and effect as if such representations and
warranties and schedules had been made on the Closing Date. The liability of
the Company and the Shareholders for their warranties and representations under
this Article I shall terminate three years after the Closing Date.
STOCK PURCHASE AGREEMENT - Page 10
16
ARTICLE II
REPRESENTATIONS OF KARTS INTERNATIONAL
As a material inducement to the Company and the Shareholders to enter
into this Agreement and perform their respective obligations hereunder, Karts
International represents, warrants and agrees as follows:
2.1 Existence and Good Standing of Karts International. Karts
International is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. Karts International has
corporate power and authority to make, execute, deliver and perform this
Agreement, and this Agreement has been duly authorized and approved by all
required corporate action of Karts International. Each person executing this
Agreement on behalf of Karts International is authorized to do so.
2.2 Restrictive Documents. Karts International is not subject to
any charter, by-law, mortgage, lien, lease, agreement, instrument, order, law,
rule, regulation, judgment or decree, or any other restriction of any kind or
character, that would prevent consummation of the transactions contemplated by
this Agreement.
2.3 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Karts International is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated herein.
2.4 Issuance of the Karts International Shares. The delivery to
the Shareholders of the Karts International Shares pursuant to the provisions
of this Agreement will transfer to the Shareholders valid title thereto, free
and clear of all liens, encumbrances, restrictions and claims of every kind,
except as acknowledged by the Shareholders in Section 1.28.
2.5 Representations as of Closing. The representations and
warranties made by Karts International in this Article II will be correct in
all material respects on and as of the Closing Date with the same force and
effect as if such representations and warranties had been made on the Closing
Date. The liability of Karts International for its warranties and
representations under this Article II shall terminate three years after the
Closing Date.
ARTICLE III
SALE OF THE USA SHARES
3.1 Sale of the USA Shares. Subject to the terms and conditions
herein stated, the Shareholders agree to sell, assign, transfer and deliver to
Karts International on the Closing Date, and Karts International agrees to
purchase from the Shareholders on the Closing Date, the USA Shares. The
certificates representing the USA Shares shall be duly endorsed in blank by the
Shareholders transferring the same, with signatures guaranteed by a domestic
commercial bank or trust company, with all necessary transfer tax and other
revenue stamps acquired at the Shareholders' expense affixed and canceled. The
Shareholders agree to cure any deficiencies with respect to the endorsement of
the certificates representing the USA Shares or with respect to the stock power
accompanying any such certificates.
3.2 Cash Payment. In consideration for the purchase by Karts
International of the USA Shares, Karts International shall pay to the
Shareholders by wire transfer or official bank check
STOCK PURCHASE AGREEMENT - Page 11
17
on the Closing Date an aggregate of $250,000 (the "Cash Payment") payable to
the order of each Shareholder as follows:
Number and Percentage Cash Consideration
Name of Shareholder of USA Shares Owned To be Received
------------------- ------------------- --------------
Xxxxx X. Xxxxx 25 Shares - 25% $62,500
Xxxxxx X. Xxxxx 25 Shares - 25% $62,500
Xxxxxx X. Xxxxxx 25 Shares - 25% $62,500
Xxxxx X. Xxxxxx 25 Shares - 25% $62,500
3.3 Determination of Amount of Karts International Shares. As
additional consideration for the purchase of the USA Shares, Karts
International shall issue and deliver to Shareholders at Closing an amount
(rounded to the nearest whole share) of its shares of common stock, par value
$.001 per share, which shall have an aggregate market value equal to $750,000
(the "Stock Amount"). The aggregate number of Karts International Shares to be
issued to the Shareholders shall be determined by dividing the Stock Amount by
the price per share of common stock of Karts International which shall be the
closing bid price per share of Karts International's common stock as reported
on the OTC Bulletin Board System on the business day preceding the Closing
Date. The shares of Karts International's common stock to be issued to the
Shareholders pursuant to this Section 3.3 are referred to herein as the "Karts
International Shares." Each Shareholder shall receive the same percentage of
the Karts International Shares as he/she received of the cash consideration as
set forth in Section 3.2 herein.
3.4 Non-competition Agreements. As further consideration for the
purchase by Karts International of the USA Shares, at the Closing, Karts
International and the Shareholders will enter into a Non-Competition Agreement
in substantially the same form as Exhibit "B" hereto.
ARTICLE IV
CONDUCT OF BUSINESS; REVIEW
4.1 Conduct of Business of the Company. During the period from
the date of this Agreement to the Closing Date, the Company shall conduct its
operations only according to its ordinary and usual course of business, and the
Shareholders and the Company shall use their best efforts to preserve the
Company's business organizations, keep available the services of the Company's
officers and employees and maintain satisfactory relationships with licensors,
suppliers, distributors, clients and others having business relationships with
them. Notwithstanding the immediately preceding sentence, to the Closing Date
and except as may be first approved by Karts International or as is otherwise
permitted or required by this Agreement, the Shareholders and the Company shall
cause (i) the Company's articles or certificate of incorporation and Bylaws to
be maintained in their form on the date of this Agreement, (ii) the
compensation payable or to become payable by the Company to any officer,
employee or agent being paid $25,000 per year or more on the Balance Sheet Date
to be maintained at their levels on the date of this Agreement, (iii) the
Company to refrain from making any bonus, pension, retirement or insurance
payment or arrangement to or with any such persons except those that may have
already been accrued, (iv) the Company to refrain from entering into any
contract or commitment except contracts in the ordinary course of business, and
(v) the Company to refrain from making any change affecting any bank, safe
deposit or power of attorney arrangements of the Company. During the period
from the date of this Agreement to the Closing Date, the Shareholders shall
cause the Company to confer on a regular and frequent basis with one or more
designated representatives of Karts International to
STOCK PURCHASE AGREEMENT - Page 12
18
report material operational matters and to report the general status of ongoing
operations. The Shareholders and the Company shall promptly notify Karts
International of any unexpected emergency or other change in the normal course
of its business or in the operation of its properties and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), adjudicatory proceedings, budget meetings or
submissions involving any material property of the Company, and to keep Karts
International fully informed of such events and permit its representatives
prompt access to all materials prepared in connection therewith.
4.2 Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, the Shareholders and the Company shall refrain
from taking any action to, directly or indirectly, encourage, initiate or
engage in discussions or negotiations with, or provide any information to, any
corporation, partnership, person, or other entity or group, other than Karts
International, concerning any purchase of the USA Shares or any merger, sale of
substantial assets or similar transaction involving the Company.
4.3 Review of the Company. Karts International may, prior to the
Closing Date, through its representatives, review the properties, books and
records of the Company and its financial and legal condition as they deem
necessary or advisable to familiarize themselves with such properties and other
matters. The Shareholders and the Company shall permit Karts International and
its representatives to have, after the date of execution hereof, full access to
the premises and to all the books and records of the Company and to cause the
officers of the Company to furnish Karts International with such financial and
operating data and other information with respect to the business and
properties of the Company as Karts International shall from time to time
reasonably request. In the event of termination of this Agreement, Karts
International shall keep confidential any material information obtained from
the Shareholders or the Company concerning the Company's properties or
operations and business (unless readily ascertainable from public or published
information or trade sources) until the same ceases to be material (or becomes
so ascertainable) and shall return to the Company all copies of any schedules,
statements, documents or other written information obtained in connection
therewith. The Shareholders and the Company shall deliver or cause to be
delivered on the Closing Date, and at such other times and places as shall be
reasonably agreed upon, such additional instruments as Karts International may
reasonably request for the purpose of carrying out this Agreement.
4.4 Review of Karts International. The Company and the
Shareholders may, prior to the Closing Date, through their representatives,
review the properties, books and records of Karts International and its
financial and legal condition as they deem necessary or advisable to
familiarize themselves with such properties and other matters. Karts
International shall permit the Company and their representatives to have, after
the date of execution hereof, full access to the premises and to all the books
and records of the Company and to cause the officers of Karts International to
furnish the Company and Shareholders with such financial and operating data and
other information with respect to the business and properties of Karts
International as the Company and the Shareholders shall from time to time
reasonably request. In the event of termination of this Agreement, the Company
and the Shareholders shall keep confidential any material information obtained
from Karts International concerning Kart International's properties or
operations and business (unless readily ascertainable from public or published
information or trade sources) until the same ceases to be material (or becomes
so ascertainable) and shall return to Karts International all copies of any
schedules, statements, documents or other written information obtained in
connection therewith.
STOCK PURCHASE AGREEMENT - Page 13
19
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preserve Accuracy of Representation and Warranties. Each of
the parties hereto shall refrain from taking any action that would render any
representation or warranty contained herein inaccurate as of the Closing Date.
5.2 Passage of Title and Risk of Loss. Possession and legal and
equitable title and risk of loss with respect to the USA Shares to be
transferred hereunder shall not pass to Karts International until the USA
Shares are transferred to Karts International at the Closing on the Closing
Date.
5.3 Consents. The Company and the Shareholders agree to use their
best efforts to obtain such consents as may be required under any contract,
mortgage, lease, license or other instrument requiring the consent of another
party thereto as a result of the transactions contemplated by this Agreement.
5.4 Company Employees and Benefits. While it is the present
intention of Karts International and the Company to generally maintain the work
force of the Company after Closing, nothing herein shall obligate the Company
or Karts International to make any offer of employment to, or to employ in any
capacity or to continue the employment of, any employee presently employed by
the Company. After Closing, the Company and Karts International intend to
continue the employment of Xxxxx X. Xxxxx as a Vice President of the Company
with an annual salary of $57,500 and the employment of Xxxxxx Xxxxxx as
production Manager of the Company with an annual salary of $42,000. Employees,
including officers of the Company, after Closing will continue to receive the
same or similar health and dental insurance programs that are currently
available from the Company. Current or similar vacation, holiday and other
employee benefits and policies will remain in effect after Closing provided
such benefits and policies are reasonable, usual and customary and based on
prior Company practices. After Closing, stock options for Karts International
common stock shall be granted to employees based on performance and at the sole
discretion of the Board of Directors of Karts International. Nothing herein
shall restrict or prohibit the Company or Karts International, after Closing,
to terminate the employment of any employee or require the Company or Karts
International to provide any employee of the Company or group or classification
of employees any particular level of compensation or benefits. It is
understood between the parties hereto that after Closing the employees of the
Company will be employed solely on an "at will" basis by the Company.
5.5 Continuing Obligations of the Company. The nature of this
Agreement and the obligations of Karts International is that of a purchase of
all the outstanding common stock of the Company and, except as otherwise
expressly provided for in this Agreement, Karts International specifically
assumes no liability or responsibility under any of the Company's benefit
plans, programs, arrangements, agreements, coverages or policies as a successor
employer or otherwise. Karts International shall not, under any circumstances,
be liable for any expense or liability that may arise from employment with or
termination of any employee of the Company. The Company shall recognize and
shall bear the full cost and expense of any entitlement to benefits applicable
to the employees of the Company and persons who have retired or will retire
from such employment prior to the Closing Date, under the Company's benefit
plans, programs, arrangements, agreements, coverages and policies or otherwise.
The Company shall also continue and bear the expense of any such plans,
programs, arrangements, coverages, agreements and
STOCK PURCHASE AGREEMENT - Page 14
20
policies for any employee on paid leave of absence of any type for any reason
as of the Closing Date until the expiration of such leave under the provisions
of the Company's presently existing programs, arrangements, coverages, policies
and plans. The Company intends to continue after Closing the same or similar
health, dental and other benefit plans as currently in effect with the Company.
5.6 Covenants Not to Compete. At the Closing, Karts International
and the Shareholders will enter into a Non-Competition Agreement in
substantially the same form as Exhibit "B" hereto.
5.7 Notification. The Company and the Shareholders shall notify
Karts International immediately in writing if either determines that they
cannot timely fulfill any of their covenants, conditions and responsibilities
to be complied with and performed on or before the Closing Date.
5.8 Schedules and Exhibits. Exhibits and Schedules, as
applicable, shall be brought current to the Closing Date and delivered to Karts
International at Closing.
ARTICLE VI
CONDITIONS TO KARTS INTERNATIONAL'S OBLIGATIONS
The obligations of Karts International hereunder are, at its sole
option, subject to and conditioned upon the satisfaction and fulfillment by the
Company and Shareholders, on or prior to the Closing Date of each of the
following conditions unless waived in writing by Karts International.
6.1 Opinion of the Company's and the Shareholders' Counsel. The
Company and the Shareholders shall have furnished Karts International with an
opinion of XxXxxxxx, Xxxxx & XxXxxxxx, as counsel for the Shareholders and the
Company, dated the Closing Date, in form and substance satisfactory to Karts
International and its counsel, to the effect that:
(a) the Company (i) is a corporation validly existing and
in good standing under the laws of its state of incorporation, (ii) is
duly qualified and licensed under all applicable laws or regulations
to own its assets and properties as now owned and to carry on its
business as now conducted, and (iii) is, to the best knowledge of such
counsel, duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction in which the failure to so
qualify would have a material adverse effect upon its business;
(b) the Company has full corporate power and authority to
execute, deliver and perform this Agreement and the other agreements
contemplated hereby;
(c) the execution, delivery and performance of this
Agreement and the other agreements contemplated hereby by the Company
and the Shareholders have been duly authorized by all necessary
corporate action on the part of the Company and this Agreement and the
other agreements contemplated hereby constitute valid and binding
obligations of the Company and the Shareholders enforceable against
the Company and the Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally or the
availability of equitable remedies;
STOCK PURCHASE AGREEMENT - Page 15
21
(d) the Company's authorized capital stock consists of
(i) 100 shares of common stock, no par value, of which 100 shares are
issued and outstanding and no such shares of capital stock are held in
the treasury of the Company; and all of the USA Shares are duly
authorized, validly issued, fully paid and non- assessable;
(e) the Shareholders own the USA Shares, free and clear
of any adverse claims, and have full power and authority to sell,
transfer and deliver the USA Shares in accordance with the terms of
this Agreement;
(f) there are no existing options, warrants,
subscriptions or other rights to purchase, or securities convertible
into or exchangeable for, the capital stock of the Company and neither
the Company nor the Shareholders are parties to or bound by any
agreement, instrument, arrangement, contract, obligation, commitment
or understanding of any character, whether written or oral, express or
implied, relating to the sale, assignment, conveyance, encumbrance,
transfer or deliver of any capital stock of the Company;
(g) except as disclosed in the schedules hereto, there is
no action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency now pending or threatened
against the Company or affecting the USA Shares or the assets or
business of the Company, and, except as disclosed in the schedules
hereto, the Company is not in default with respect to any judgment,
writ, injunction or decree of any court or governmental
instrumentality or agency or in the performance, observance or
fulfillment of any obligation,, covenant or agreement by which it is
bound or to which the USA Shares or any of the assets of the Company
are subject;
(h) neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated
hereby will conflict with, or result in a breach of the terms,
conditions and provisions of, or constitute a default under, the
certificate or articles of incorporation or bylaws of the Company, or
any agreement, indenture or other instrument under which the Company
or the Shareholders are bound or to which the USA Shares or any of the
assets of the Company are subject, or result in the creation or
imposition of any security interest, lien, charge or encumbrance upon
the USA Shares or any of the assets of the Company;
(i) no consent of any person, corporation, association,
company, partnership or other entity, and no consent, license,
approval or authorization of, or registration or declaration with, any
governmental body, authority, bureau or agency or federal, state or
local court is required in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereby, or to the extent that any such consent or other action may be
required, it has been validly procured or taken;
(j) the Company has good and marketable title to, or
valid and enforceable leasehold estates in, the items of real and
personal property stated in this Agreement to be owned or leased by it
as lessee, in each case free and clear of all liens, encumbrances,
claims, security interests, defects or other equities of any material
nature whatsoever, other than those referred to in this Agreement, and
except as may occur in the ordinary course of the Company's business,
liens for taxes not yet due and payable, and liens, encumbrances,
claims, security interests and defects, the effect of which in the
aggregate is not material to the Company. To the Company's Counsel's
knowledge, the Company's
STOCK PURCHASE AGREEMENT - Page 16
22
current and intended products, services and processes do not infringe
on patents, trademarks, service marks, service names and trade names
held by third parties nor do they infringe upon rights or claimed
rights of any person, corporation or other entity nor is such counsel
aware of any plans contemplated by the Company that would infringe on
trademarks, service marks, service names and trade names held by third
parties; and
(k) to such Company's counsel's knowledge after
investigation, except as and to the extent set forth in this
Agreement, the Company is not under any obligation to pay to any third
party royalties or fees of any kind whatsoever with respect to any
Intangibles developed, employed or used by the Company.
In rendering its opinion, the Company's Counsel may rely upon
(A) opinions of local counsel acceptable to Karts International's
Counsel with respect to matters relating to the laws of any
jurisdiction other than Alabama or the United States of America; and
(B) the certificates of government officials and officers and
directors of the Company as to matters of fact, provided that the
Company's Counsel shall state that they have no reason to believe, and
do not believe, that they are not justified in relying upon such
opinions or such certificates of government officials and officers and
directors of the Company as to matters of fact, as the case may be.
The opinion letter delivered pursuant to this Article 6.1 shall state
that any opinion given therein qualified by the phrase "to the best of
our knowledge" or "to our knowledge" is being given by the Company's
Counsel after due investigation of the matters therein discussed.
6.2 Good Standing and Tax Certificates. The Company and the
Shareholders shall have delivered to Karts International (i) copies of the
Company's certificate or articles of incorporation, including all amendments
thereto, certified by the secretary of state or other appropriate official of
its jurisdiction of incorporation, (ii) certificates from the secretary of
state or other appropriate official of the jurisdiction of incorporation to the
effect that the Company is in good standing or subsisting in such jurisdiction
and listing all charter documents of the Company on file, (iii) a certificate
from the appropriate official in each jurisdiction in which the Company is
qualified to do business to the effect that the Company is in good standing in
such jurisdiction, and (iv) certificates as to the tax status of the Company in
the jurisdiction of incorporation and each other jurisdiction in which the
Company is qualified to do business.
6.3 No Material Adverse Change. Prior to the Closing Date, there
shall be no material adverse change in the assets or liabilities, the business
or condition, financial or otherwise, the results of operations, or prospects
of the Company, whether as a result of any legislative or regulatory change,
revocation of any license or rights to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm, condemnation or act of
God or other public force or otherwise, and the Company and the Shareholders
shall have delivered to Karts International a certificate, dated the Closing
Date, to such effect.
6.4 Truth of Representations and Warranties. The representations
and warranties of the Company and the Shareholders contained in this Agreement
or in any schedule delivered pursuant hereto shall be true and correct on and
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, and the Company and the
Shareholders shall have delivered to Karts International on the Closing Date a
certificate, dated the Closing Date, to such effect.
STOCK PURCHASE AGREEMENT - Page 17
23
6.5 Performance of Agreements/Authorization. Each and all of the
agreements of the Company and the Shareholders to be performed on or before the
Closing Date pursuant to the terms hereof shall have been duly performed, and
the Company and the Shareholders shall have delivered to Karts International a
certificate, dated the Closing Date, to such effect. Karts International shall
have also received (i) a copy of resolutions of the Board of Directors and
Shareholders of the Company authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements, each certified by
the Secretary of the Company as being true and correct copies of the originals
thereof subject to no modifications or amendments, and (ii) a certificate of
the President of the Company and of the Shareholders, dated the Closing Date,
as to the performance of and compliance by the Company and the Shareholders
with all covenants contained herein on and as of the Closing Date and
certifying that all conditions precedent of the Company and the Shareholders to
the Closing date have been satisfied.
6.6 No Litigation Threatened. No action or proceedings shall have
been instituted or, to the best knowledge, information and belief of the
Shareholders and the Company, shall have been threatened before a court or
other government body or by any public authority to restrain or prohibit any of
the transactions contemplated hereby, and the Shareholders and the Company
shall have delivered to Karts International a certificate, dated the Closing
Date, to such effect.
6.7 Non-Competition Agreements. Karts International shall have
entered into a Non-Competition Agreement with the Shareholders substantially in
the form of Exhibit "B" hereto.
6.8 Consents. Written consents as may be required under any
contract, mortgage, lease, license or other instrument requiring consent of
another party thereto as a result of the transactions contemplated by this
Agreement shall have been obtained by the Company and the Shareholders and
delivered to Karts International.
6.9 Governmental Approvals. All governmental and other consents
and approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received.
6.10 Release of Shareholders' Claims. Karts International shall
have received duly executed documents in form satisfactory to Karts
International pursuant to which the Shareholders release, relinquish and waive
any and all claims, demands, causes of action, suits, judgments or
controversies of any kind whatsoever, whether known or unknown, that the
Shareholders may have against the Company as of the Closing Date, for any
reason whatsoever, including without limitation claims by such Shareholders
against the Company with respect to dividends, repayment of loans, violation of
preemptive rights, or payment of salaries or other compensation.
6.11 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto shall be satisfactory in form and substance to Karts International in
its sole discretion, and Karts International shall have received copies of all
such documents and other evidences as Karts International or its counsel may
reasonably request in order to establish the consummation or such transactions
and the taking of all proceedings in connection therewith.
6.12 Due Diligence Review. Karts International and its
representatives and advisors shall have completed a due diligence review of the
business, operations and financial statements of the Company, the results of
which shall be satisfactory to Karts International and its counsel in their
sole discretion.
STOCK PURCHASE AGREEMENT - Page 18
24
6.13 Resignation of Officers. On the Closing Date, each officer
and director of the Company shall deliver to Karts International his/her
executed resignation as an officer and director of the Company effective as of
the Closing Date.
ARTICLE VII
CONDITIONS TO THE SHAREHOLDERS' OBLIGATIONS
The obligations of the Shareholders hereunder are, at their sole
option, subject to and conditioned upon the satisfaction and fulfillment by
Karts International, on or prior to the Closing Date, of each of the following
conditions unless waived in writing by the Shareholders.
7.1 Opinion of Karts International's Counsel. Karts International
shall have furnished the Shareholders with an opinion, dated the Closing Date,
of Looper, Reed, Xxxx & McGraw Incorporated, legal counsel to Karts
International, regarding the authorization of Karts International to consummate
the transactions contemplated by this Agreement, pending litigation, if any,
required consents, if any, and the issuance, delivery and validity of the Karts
International Shares.
7.2 Truth of Representations and Warranties. The representations
and warranties of Karts International contained in this Agreement shall be true
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; and Karts
International shall have delivered to the Shareholders and the Company on the
Closing Date a certificate, dated the Closing Date, to such effect.
7.3 Governmental Approvals. All governmental consents and
approvals, if any, and any other consents necessary to permit Karts
International to consummate the transactions contemplated by this Agreement
shall have been received by Karts International and delivered to the Company
and the Shareholders.
7.4 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Company
and the Shareholders and their counsel.
ARTICLE VIII
CLOSING
8.1 Closing. The consummation of the sale and purchase of the USA
Shares and the other transactions contemplated by and described in this
Agreement shall take place at a closing (the "Closing") to be held on a date as
may be mutually agreed to in writing by the parties hereto, which in no event
shall be later than November 30, 1996 (the "Closing Date"). The Closing shall
be held at the offices of Looper, Reed, Xxxx & XxXxxx Incorporated, 0000 Xxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, or at such other place as may be
mutually agreed to in writing by the parties hereto and at a time mutually
agreed to by the parties hereto. All transactions contemplated by this
Agreement shall be deemed effective as of the Closing Date.
8.2 Actions of the Company and the Shareholders at Closing. At
the Closing, the Company or the Shareholders, as the case shall be, shall
deliver to Karts International the following:
STOCK PURCHASE AGREEMENT - Page 19
25
(a) The Shareholders shall deliver to Karts International
the certificate(s) representing the USA Shares duly endorsed in favor
of Karts International, or accompanied by appropriate stock powers
duly executed in blank.
(b) The Company and the Shareholders shall deliver to
Karts International an opinion letter from XxXxxxxx, Xxxxx & XxXxxxxx,
counsel for the Company and the Shareholders in accordance with the
provisions of Section 6.1 herein.
(c) The Company and the Shareholders shall deliver to
Karts International the written and executed resignations of all
officers and directors of the Company, dated as of the Closing Date.
(d) The Company and the Shareholders shall deliver to
Karts International the minute book, stock issue and transfer records
and the corporate seal of the Company.
(e) The Company and the Shareholder shall have delivered
to Karts International a certificate, which shall be dated as of the
Closing Date and which shall be signed by each Shareholder and the
President and Chief Executive Officer of the Company, certifying (i)
the authority of the Shareholders and the Company to enter into and
consummate the transactions contemplated by this Agreement, (ii) the
authority of the officers of the Company to execute and deliver any
document contemplated by this Agreement on behalf of the Company,
(iii) that the representations and warranties of the Company and the
Shareholders contained in Article I hereof were true and correct when
made and are true and correct as of the Closing Date (except to the
extent that any representation or warranty of the Company or the
Shareholders specifically relates to an earlier date), and (iv) that
each and every covenant and agreement of the Company and the
Shareholders contained in this Agreement to be performed by the
Company or the Shareholders on or prior to the Closing Date has been
performed by the Company or the Shareholders, as the case may be.
(f) The Non-Competition Agreements executed by each
Shareholder in the form attached hereto as Exhibit "B".
(g) Certificates of Incumbency for the officers of the
Company making certifications for Closing dated as of the Closing
Date.
(h) A copy of resolutions duly and unanimously adopted by
the Company's Shareholders and Board of Directors, as required by law,
authorizing and approving the Company's and Shareholders' performance
of the transactions contemplated hereby and the execution and delivery
of the documents described herein, certified as true and in full force
as of the Closing Date by an authorized officer of the Company.
(i) Exhibits and schedules, as applicable, which have
been brought current to the Closing Date.
(j) Good standing and tax certificates as required by
Section 6.2 of this Agreement.
(k) Certificate executed by the President of the Company
and each Shareholder in accordance with Section 6.6 of this Agreement.
STOCK PURCHASE AGREEMENT - Page 20
26
(l) All written consents as may be required under any
contract, mortgage, lease, license or other instrument requiring
consent of another party thereto as a result of the transactions
contemplated by this Agreement.
(m) An executed release by each Shareholder in accordance
with the provisions of Section 6.10 of this Agreement.
(n) Such other instruments and documents as Karts
International reasonably deems necessary to effect the transactions
contemplated hereby.
8.3 Actions of Karts International at Closing. At the Closing,
Karts International shall deliver to the Company or the Shareholders, as the
case shall be, the following:
(a) Karts International shall issue and deliver to the
Shareholders certificates representing the Karts International Shares
in each Shareholder's name and in the amount of Shares as determined
pursuant to Section 3.3 of this Agreement.
(b) Karts International shall deliver to each Shareholder
the cash consideration to be received for the USA Shares in accordance
with Section 3.2 of this Agreement.
(c) Karts International shall deliver to the Shareholders
an opinion letter from Looper, Reed, Xxxx & XxXxxx Incorporated,
counsel for Karts International, in accordance with the provisions of
Section 7.1 of this Agreement.
(d) Certified copies of the resolutions of the Board of
Directors of Karts International authorizing the execution, delivery
and performance of this Agreement and the transactions contemplated
hereby and Certificates of Incumbency for the officers of Karts
International making certifications for Closing dated as of the
Closing Date.
(e) Karts International shall have delivered to the
Company and the Shareholders a certificate, which shall be dated as of
the Closing Date and which shall be signed by a duly authorized
officer of Karts International, certifying (i) the authority of the
Karts International to enter into and consummate the transactions
contemplated by this Agreement, (ii) the authority of the officers of
Karts International to execute and deliver any document contemplated
by this Agreement on behalf of Karts International, (iii) that the
representations and warranties of Karts International contained in
Article II hereof were true and correct when made and are true and
correct as of the Closing Date, and (iv) that each and every covenant
and agreement of Karts International contained in this Agreement to be
performed by Karts International on or prior to the Closing Date has
been performed by Karts International.
(f) All governmental consents and approvals and any other
consents, if any, necessary to permit Karts International to
consummate the transactions contemplated by this Agreement shall be
delivered to the Company and the Shareholders.
(g) Good standing and tax certificates for Karts
International.
(h) Such other instruments and documents as the Company
or the Shareholders reasonably deems necessary to effect the
transactions contemplated hereby.
STOCK PURCHASE AGREEMENT - Page 21
27
ARTICLE IX
SURVIVAL OF REPRESENTATIONS: INDEMNITY
9.1 Survival of Representations and Obligations to Indemnify. The
respective representations and warranties of the Shareholders and Karts
International contained in this Agreement or in any Schedule delivered pursuant
hereto shall survive the purchase and sale of the USA Shares contemplated
hereby. The obligations to indemnify and hold harmless pursuant to this
Article IX shall survive the consummation of the transactions contemplated by
this Agreement.
9.2 Indemnification by the Shareholders. The Shareholders hereby
agrees that notwithstanding any investigation which may have been made by or on
behalf of Karts International prior to the Closing, the Shareholders shall
indemnify, defend and hold harmless Karts International (and any affiliated
party of Karts International) at any time after consummation of the Closing,
from and against all demands, claims, actions, or causes of action,
assessments, losses, damages, liabilities, costs and expenses including,
subject to Section 9.4 below, interest, penalties, court costs, and reasonable
attorneys' fees and expenses asserted against, resulting to, imposed upon or
incurred by Karts International or any affiliated party of Karts International,
directly or indirectly, caused by reason of or resulting from or arising out of
any misrepresentation or any breach or nonfulfillment of any representation,
covenant, warranty or agreement of the Company and/or the Shareholders
contained in this Agreement, in any exhibit, schedule, certificate or financial
statement delivered under this Agreement, or in any agreement made or executed
in connection with the transactions contemplated by this Agreement.
9.3 Indemnification by Karts International. Karts International
agrees to indemnify, defend and hold harmless the Shareholders (and any
affiliated party of the Shareholders), at any time after consummation of the
Closing, from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including,
subject to Section 9.4 below, interest, penalties, court costs and reasonable
attorneys' fees and expenses asserted against, resulting to, imposed upon or
incurred by the Shareholders, directly or indirectly, caused by reason of or
resulting from or arising out of (i) a claim of products liability against the
Company and/or the Shareholders for an incident which occurred prior to the
Closing Date (provided neither the Shareholders nor the Company knew of the
occurrence of such incident prior to or on the Closing Date) and which results
in a settlement or award of damages in excess of stated insurance policy
limits, or (ii) any misrepresentation or any breach or nonfulfillment of any
representation, warranty, covenant and/or agreement of Karts International
contained in this Agreement, in any exhibit, schedule, certificate or financial
statement delivered under this Agreement, or in any agreement made or executed
in connection with the transactions contemplated by this Agreement.
9.4 Defense.
(a) Promptly after the receipt by any person entitled to
indemnification under Section 9.2 and 9.3 herein of notice of (i) any
claim or (ii) the commencement of any action or proceeding, such party
(the "Aggrieved Party") will, if claim with respect thereto is made
against any party obligated to provide indemnification pursuant to
Section 9.2 and 9.3 herein (the "Indemnifying Party"), give such
Indemnifying Party written notice of such claim or the commencement of
such action or proceeding and shall permit the Indemnifying Party to
assume the defense of any such claim or any proceeding or litigation
resulting from such claim, unless the action or proceeding seeks an
injunction or other similar relief against the Aggrieved Party or
there is a conflict of interest between it and the
STOCK PURCHASE AGREEMENT - Page 22
28
Indemnifying Party in the conduct of the defense of such action.
Failure by the Indemnifying Party to notify the Aggrieved Party of its
election to defend any such proceeding or action within a reasonable
time, but in no event more than 15 days after written notice thereof
shall have been given to the Indemnifying Party, shall be deemed a
waiver by the Indemnifying Party of its right to defend such action.
(b) If the Indemnifying Party assumes the defense of any
such claim or litigation resulting therefrom with counsel reasonably
acceptable to the Aggrieved Party, the obligations of the Indemnifying
Party as to such claim shall be limited to taking all steps necessary
in the defense or settlement of such claim or litigation resulting
therefrom and to holding the Aggrieved Party harmless from and against
any losses, damages and liabilities caused by or arising out of any
settlement or any judgment in connection with such claim or litigation
resulting therefrom. The Aggrieved Party may participate, at its
expense, in the defense of such claim or litigation provided that the
Indemnifying Party shall direct and control the defense of such claim
or litigation. The Aggrieved Party shall cooperate and make available
all books and records reasonably necessary and useful in connection
with the defense. The Indemnifying Party shall not, in the defense of
such claim or any litigation resulting therefrom, consent to entry of
any judgment, except with the written consent of the Aggrieved Party,
or enter into any settlement, except with the written consent of the
Aggrieved Party.
(c) If the Indemnifying Party shall not assume the
defense of any such claim or litigation resulting therefrom, the
Aggrieved Party may defend against such claim or litigation in such
manner as it may deem appropriate and reasonably satisfactory to the
Aggrieved Party. The Indemnifying Party shall promptly reimburse the
Aggrieved Party for the amount of all expenses, legal or otherwise, as
incurred by the Aggrieved Party in connection with the defense against
or settlement of such claim or litigation. No settlement of claim or
litigation shall be made without the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. If no
settlement of the claim or litigation is made, the Indemnifying Party
shall promptly reimburse the Aggrieved Party for the amount of any
judgment rendered with respect to such claim or in such litigation and
of all expenses, legal or otherwise, as incurred by the Aggrieved
Party in the defense against such claim or litigation.
(d) The rights to indemnification hereunder shall apply
to claims made by either party against the other whereby written
notice of the claim has been made and delivered within the period of
the applicable statute of limitations.
ARTICLE X
TERMINATION
10.1 Termination Events. This Agreement may be terminated on
written notice, on or before the Closing Date:
(a) By mutual written consent of Karts International, the
Company and the Shareholders;
(b) By Karts International, if the conditions set forth
in Article VI are not satisfied (or are incapable of being satisfied)
in the discretion of Karts International before the close of business
on the Closing Date; or
STOCK PURCHASE AGREEMENT - Page 23
29
(c) By the Shareholders and the Company if the conditions
set forth in Article VII are not satisfied (or are incapable of being
satisfied) in their discretion before the close of business on the
Closing Date.
10.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 10.1 hereof, this Agreement shall forthwith
become null and void, and there shall be no liability on the part of the
parties hereof (or any of their respective officers, directors, employees,
agents, consultants or other representatives), except as provided in Article IX
and Section 11.2 of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Knowledge of the Company and the Shareholders. Where any
representation or warranty contained in this Agreement is expressly qualified
by reference to the knowledge, information and belief of the Shareholders and
the Company, the Shareholders and the Company confirm that they have made due
and diligent inquiry as to the matters that are the subject of such
representations and warranties.
11.2 Expenses. The parties hereto shall pay all of their own
expenses relating to the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses of their respective
counsel, accountants, and financial advisers; provided, however,
notwithstanding anything to the contrary herein, if the Shareholders or the
Company terminate this Agreement, other than in accordance with Section
10.1(c), the Shareholders jointly and severally agree to reimburse Karts
International for its out-of-pocket expenses incurred in connection with this
transaction not to exceed $100,000.
11.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of
the State of Texas.
11.4 "Person" Defined. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or other department or agency
thereof.
11.5 Captions. The Article and Section captions used herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
11.6 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue any press release or make any other public
statement, in each case relating to or connected with or arising out of this
Agreement or the matters contained herein, without obtaining the prior approval
of all parties hereto to the contents and the manner of presentation and
publication thereof.
11.7 Notices. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in person or sent
by telex or by registered or certified mail, postage prepaid, addressed as
follows: If to Karts International, to Karts International Incorporated, 000
Xxxxx Xxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000, Attention: V. Xxxx Xxxxxxxx,
with a copy to its counsel, Looper, Reed, Xxxx & XxXxxx Incorporated, 0000 Xxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, Telephone: (000) 000-0000, Fax: (214)
000-0000; and if to the Shareholders, to Xxxxx Xxxxxxx Xxxxx, 000 Xxxxxxx Xxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxx 00000,
STOCK PURCHASE AGREEMENT - Page 24
30
with a copy to his counsel, XxXxxxxx, Xxxxx & XxXxxxxx, 000 X. Xxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxx 00000, Telephone: (000) 000-0000, Fax: (000) 000-0000, or
such other address as shall be furnished in writing by any such party, and such
notice or communication shall be deemed to have been given as of the date so
delivered, sent by fax or mailed.
11.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
11.9 Counterparts. This Agreement may be executed in two (2) or
more counterparts, all of which taken together shall constitute one instrument.
11.10 Entire Agreement. This Agreement, including the other
documents referred to herein that form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
11.11 Amendments. This Agreement can be waived, amended,
supplemented or modified by written agreement of the parties.
11.12 Severability. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
11.13 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or
on behalf of any Person other than the parties hereto.
11.14 Time of Essence. The mere lapse of time shall have the effect
to constitute of the parties hereto in default to perform any of its
obligations under this Agreement.
11.15 Negotiation. Each party hereto declares that the provisions
of this Agreement and of all documents annexed thereto or referred to therein,
have been negotiated and declares having read this Agreement and those
documents and having understood their scope and nature.
STOCK PURCHASE AGREEMENT - Page 25
31
IN WITNESS WHEREOF, Karts International and the Company has caused
their respective corporate names to be hereunto subscribed by their respective
officers thereunto duly authorized, and the Shareholders have executed this
Agreement, all as of the date first above written.
KARTS INTERNATIONAL INCORPORATED
By: /s/ V. XXXX XXXXXXXX
------------------------------------
V. Xxxx Xxxxxxxx, President
USA INDUSTRIES, INC.
By: /s/ XXXXX X. XXXXX
------------------------------------
Xxxxx X. Xxxxx, President
SHAREHOLDERS
/s/ XXXXX XXXXXXX XXXXX
--------------------------------------
XXXXX XXXXXXX XXXXX
/s/ XXXXXX X. XXXXX
--------------------------------------
XXXXXX X. XXXXX
/s/ XXXXXX X. XXXXXX
--------------------------------------
XXXXXX X. XXXXXX
/s/ XXXXX X. XXXXXX
--------------------------------------
XXXXX X. XXXXXX
STOCK PURCHASE AGREEMENT - Page 26
