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EXHIBIT 10.19
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") made and entered into
as of January 9, 1998 by and among AUTHENTIC SPECIALTY FOODS, INC., a Texas
corporation (the "Purchaser"), THE TORTILLA KING, INC., a Texas corporation
(the "Company"), XXXXXXXX XXXXX, XX. and XXXXX X. XXXXX (collectively, the
"Stock Sellers"), and the SBJ TRUST dated April 27, 1993 between Xxxxxxxx
Xxxxx, Xx. and Xxxxx X. Xxxxx, as Grantors and Trustees (the "SBJ Trust," and
together with the Stock Sellers, the "Sellers").
W I T N E S S E T H:
WHEREAS, all of the outstanding shares of common stock, no par value
(the "Common Stock"), of the Company are owned of record and beneficially by
the Stock Sellers in the respective amounts set forth on Appendix I attached
hereto;
WHEREAS, the real property and improvements described on Appendix II
(the "Related Assets") are currently owned by SBJ Trust;
WHEREAS, the Stock Sellers desire to sell, and the Purchaser desires
to purchase, all of the outstanding Common Stock, and SBJ Trust desires to
transfer to sell to the Company all of the Related Assets, in each case on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of and subject to the mutual
agreements, terms and conditions herein contained, the parties hereto agree as
follows:
ARTICLE I
SALE OF SHARES AND TRANSFER OF RELATED ASSETS
1.1 Purchase Price. At the Closing (as defined below), the Stock
Sellers will sell, transfer, convey and deliver to the Purchaser all of the
outstanding shares of Common Stock (the "Shares"), as evidenced by the delivery
of a certificate or certificates evidencing the Shares, accompanied by duly
executed stock powers, and the SBJ Trust will sell, transfer, convey and
deliver to the Company the Related Assets in accordance with the provisions of
Section 4.9, in exchange for the following aggregate consideration: (a)
$5,000,000, payable at the Closing by wire transfer or other delivery of
immediately available funds, in the respective amounts set forth on Appendix I,
and (b) 240,626 shares in the aggregate of common stock, par value $1.00 per
share (the "Purchaser Common Stock") registered in the names of the Sellers in
the respective percentages set forth on Appendix I.
1.2 Section 338(h)(10) Elections. The Sellers agree that, if
requested by the Purchaser within the time period prescribed by law for the
filing thereof, the Stock Sellers, in their capacity as all of the shareholders
of the Company immediately before the Closing, shall join the Purchaser in
making a timely, irrevocable and effective election under section 338(h)(10) of
the Code (and Treasury Regulation section 1.338(h)(10)-1) and a similar
election under any applicable state income tax law (collectively, the "Section
338(h)(10) Elections") with respect to the Purchaser's purchase of the Shares.
To facilitate such election, at the Closing the Stock Sellers shall deliver to
the Purchaser an Internal Revenue Service Form 8023 and any similar forms under
applicable state
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income tax law (the "Forms") with respect to the Purchaser's purchase of the
Shares, which Forms shall have been duly executed by each of the Stock Sellers.
If the Purchaser determines to make the Section 338(h)(10) Elections with
respect to its purchase of the Shares, the Purchaser shall cause the Forms to
be duly executed by an authorized person for the Purchaser, shall complete the
schedules required to be attached thereto, shall provide a copy of the executed
Forms and schedules to the Seller Representative, and shall duly and timely
file the Forms as prescribed by Treasury Regulation section 1.338(h)(10)-1 or
the corresponding provisions of applicable state income tax law.
1.3 No Assumption of Liabilities in connection with Related
Assets. Neither the Company nor the Purchaser shall assume or otherwise be
liable for, and shall be indemnified with respect to in accordance with the
provisions of Section 7.2 hereof, all other liabilities and obligations in
connection with the Related Assets.
1.4 Closing. The closing ("Closing") of the sale and purchase of
the Shares and the Related Assets shall take place at the offices of Cullen,
Carsner, Xxxxxxx & Xxxxxx, L.L.P., 000 Xxxxx Xxxx Xxxxxx, Xxxxxxxx, Texas, at
10:00 a.m. on January 9, 1998, or at such other place, time and date upon which
the parties hereto may agree (the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE COMPANY
The Sellers and the Company jointly and severally warrant and
represent to the Purchaser as follows:
2.1 Organization, Qualification and Capacity. The Company (i) is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas with corporate power and authority to own, operate
and lease its properties and to carry on its business as now conducted and as
contemplated to be conducted, and (ii) except as otherwise set forth on
Schedule 2.1, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the character of its properties
or the nature of its business makes such qualification necessary, which
jurisdictions are listed on Schedule 2.1. Each Seller has full power and
authority to enter into this Agreement and the capacity and authority to make
the representations, warranties, covenants and agreements herein.
2.2 Capital Stock. The authorized capital stock of the Company
consists solely of 1,000,000 shares of Common Stock, 1,000 of which shares are
validly issued and outstanding, fully paid and nonassessable and the remainder
of which are unissued. All of the issued and outstanding capital stock of the
Company is owned beneficially and of record by the Stock Sellers, free and
clear of any pledge, lien, charge, encumbrance or other adverse claim. There
are no outstanding or authorized subscriptions, options, warrants, rights,
conversion rights, preemptive rights, rights of first refusal or other
agreements or commitments obligating the Company to issue or purchase shares of
its capital stock or any security convertible into capital stock or obligating
any Seller or the Company to purchase, sell or transfer any capital stock of
the Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the Common Stock. Set forth on
Schedule 2.2 is a true, complete and correct copy of the Company's stock
ledger, which fully and
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fairly describes all transactions involving any shares of capital stock of the
Company, including without limitation issuances, repurchases and transfers of
capital stock.
2.3 Subsidiaries. The Company has no subsidiaries (as hereinafter
defined).
2.4 Governmental Authorizations. The Company holds, and after the
consummation of the transactions contemplated hereby will hold, such licenses,
permits, consents, authorizations and orders of such Governmental Authorities
(as hereinafter defined) as are necessary to carry on its business as presently
being conducted, and such licenses, permits, consents, authorizations and
orders are in full force and effect and have been and are being fully complied
with by the Company. Schedule 2.4 lists and briefly describes all such
licenses, permits, consents, authorizations, and orders.
2.5 Financial Statements.
(a) Attached as Schedule 2.5 are copies of the balance
sheet of the Company as of December 31, 1997 (such date being referred
to herein as the "Statement Date") and the related statements of
income and statements of cash flows of the Company for each of the
months in the one year then ended (the "Financial Statements"). The
Financial Statements (including the notes thereto) have been prepared
in accordance with generally accepted accounting principles
consistently applied, present fairly the financial condition of the
Company as of the Statement Date, are correct and complete, and are
consistent with the books and records of the Company (which books and
records are correct and complete).
(b) Except for pending litigation fully described in
Schedule 2.8, there are no debts, liabilities or other obligations of
any nature, whether accrued, absolute, contingent or otherwise, of the
Company as of the Statement Date that are not reflected in the
Financial Statements.
2.6 No Adverse Changes. Except as disclosed in Schedule 2.6,
since the Statement Date, there have been no (a) material adverse changes
(whether or not within the control of the Company or the Sellers) in the
results of operations, business, prospects or financial condition of the
Company from that set forth in the Financial Statements, (b) events or
conditions (whether or not within the control of the Company or the Sellers)
affecting the assets, properties, contracts with suppliers or customers,
business, prospects or operations of the Company from that in effect on the
Statement Date or (c) material adverse changes (whether or not within the
control of the Sellers) to, or relating to, the Related Assets.
2.7 Properties.
(a) Schedule 2.7(a) Part I set forth a brief description
of (i) all real property (other than leaseholds) reflected in the
Financial Statements purported to be owned by the Company on the
Statement Date or real property (other than leaseholds) in which the
Company purports to have an interest on such date including real
property (other than leaseholds) sold after such date, which property,
however, shall be designated as sold, (ii) all real property (other
than leaseholds) acquired by the Company after the Statement Date, and
(iii) all real property (other than leaseholds) charged off any of the
financial records of the Company but
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still owned by the Company (collectively, the "Fee Property"). Except
as set forth on Schedule 2.7(a) Part I, the Company has good and
indefeasible title to the Fee Property, free of any mortgage, pledge,
lien, charge, encumbrance or other adverse claim and there are no
outstanding opinions or rights of first refusal to purchase any of the
Company's real properties or any portion thereof. The Company has
good title to all other properties and assets reflected in the
Financial Statements as of the Statement Date, or purported to have
been acquired by the Company after such date or used in connection
with the business of the Company (excepting, however, property and
other assets sold or otherwise disposed of in the ordinary course of
business subsequent to such date), and, except as set forth on
Schedule 2.7(a) Part I, are free of any mortgage, pledge, lien,
charge, encumbrance or other adverse claim. Schedule 2.7(a) Part II
sets forth a brief description (including without limitation the total
amount of rent and other payments actually payable with respect
thereto) of all real property, building and facilities leased by the
Company (collectively, the "Leases"). Except as fully described on
Schedule 2.7(a) Part II, the Company enjoys peaceful and undisturbed
possession under all Leases. Except as set forth on Schedule 2.7(a)
Part II, any of property subject to any Lease that is owned by any
Seller (or any affiliate thereof) is free of any mortgage, pledge,
lien, charge, encumbrance or other adverse claim. Except as set forth
in Schedule 2.7(a), there is no other real property, buildings or
facilities owned, used or occupied by Company.
(b) All of the Related Assets (and the current owner
thereof) are listed and described separately on Appendix II attached
hereto. SBJ Trust has good and indefeasible title to all real
property, and good title to all other property, included in the
Related Assets. The Related Assets are used for purposes relating to
operation of the business of the Company and for no other purpose.
Except for the Related Assets described on Appendix II and leased
facilities, as described on Schedule 2.7(a), there are no other assets
or rights (contractual or otherwise) relating to the business, assets,
prospects or operations of the Company in which any Seller, SBJ Trust
or any affiliate of Seller or SBJ Trust has any rights whatsoever.
Except for the provisions of Sections 2.7(b) and 4.9 and any other
provision referring to such section or compliance therewith, for the
purposes of this Agreement, all of the representations, warranties and
covenants made by Sellers or Company with respect to the Company's
assets or business shall also be made to the Related Assets as if they
had been owned by the Company since the earliest time that they were
owned by any Seller or any affiliate thereof.
(c) There are no parties in possession of any portion of
any real property purported to be owned or leased by the Company or
included in the Related Assets (each a "Real Property") as lessees,
licensees, tenants at sufferance, trespassers or otherwise, other than
the Company.
(c) There is no pending or, to the best of Sellers'
knowledge, threatened condemnation or similar proceeding or special
assessment affecting any Real Property, or any part thereof, nor has
any Seller or the Company received notification that any such
proceeding or assessment is contemplated by any Governmental
Authority. Neither (i) the location, occupancy, operation or use of
any Real Property (including the buildings, improvements, fixtures and
equipment forming a part thereof) nor (ii) the construction of any
Real Property violates any applicable law, statute, ordinance, rule,
regulation, order or
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determination of any Governmental Authority or any board of fire
underwriters (or other body exercising similar functions), or any
restrictive covenant or deed restriction (recorded or otherwise)
affecting any of the Real Property, including, without limitation, all
applicable zoning ordinances and building codes, flood disaster laws
and health laws and regulations (hereinafter sometimes collectively
called "Applicable Laws").
(e) No Real Property is within any area determined by the
Department of Housing and Urban Development to be flood prone under
the Federal Flood Disaster Protection Act of 1973.
(f) (i) There are no unpaid and presently due charges,
debts, liabilities, claims or obligations arising from the
construction, occupancy, ownership, use or operation of any Real
Property, or the business operated thereon, that could give rise to
any mechanic's or materialmen's or other statutory lien (A) against
such Real Property or any part thereof (including any Real Property
estate therein), or (B) for which the Company will be responsible, and
(ii) the Company has not entered into any agreement the performance of
which could give rise to a lien or other encumbrance against the Real
Property.
(g) There exists no action or proceeding to modify or
terminate the present zoning, if any, of any Real Property.
(h) There exists no judicial, quasi-judicial,
administrative or other proceeding or court order, building code
provision, deed restriction or restrictive covenant (recorded or
otherwise) or other private or public limitation that to the best of
Sellers' knowledge could in any way impede or adversely affect the use
of such Real Property by the Company as currently used.
(i) Each Real Property is connected to and serviced by
water, septic tank or sewage disposal (as applicable), gas, telephone
and electric facilities that are adequate for current use of such Real
Property and is in compliance with all Applicable Laws. All public
utilities required for the operation of such Real Property enter such
Real Property through adjoining public streets or, if they pass
through adjoining private land, do so in accordance with valid public
easements. Each Real Property abuts on and has direct vehicular
access to a public road, or has access to a public road via a
permanent, irrevocable appurtenant easement.
(j) To the best of Sellers' knowledge there is not any
(A) change contemplated in any Applicable Laws, (B) judicial or
administrative action, (C) action by adjacent landowners, (D)
administrative action, (E) natural or artificial conditions upon such
Real Property, or (F) significant adverse fact or condition relating
to such Real Property or its current use by the Company, that would
prevent, limit, impede or render more costly the Company's use of such
Real Property.
(k) Permanent certificates of occupancy, all licenses,
permits, authorizations and approvals required by all governmental
authorities having jurisdiction, and the requisite certificates of the
local board of fire underwriters (or other body exercising similar
functions)
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have been issued for such buildings and improvements constituting a
part of each Real Property and have been paid for and all of the
foregoing are in full force and effect.
(l) Each Real Property, including building and
improvements, is in good condition and repair. The equipment and
other personal property used in connection with the Company's business
and operations (i) is in good condition and repair, subject only to
normal wear and tear, (ii) is free of any patent structural defects or
(to the best of Seller's knowledge) latent structural defects, (iii)
is suitable for the purpose for which it is presently used, and (iv)
has been maintained in accordance with industry practice and
manufacturer's recommended guidelines.
(m) No commitments have been made by the Company, any
Seller or other person to any Governmental Authority, utility company,
school board, church or other religious body, or any homeowners or
homeowners' association, or any other organization, group or
individual, relating to any Real Property that would impose an
obligation upon the Purchaser or its successors or assigns to make any
contribution or dedication of money or land or to construct, install
or maintain any improvements of a public or private nature on or off
such Real Property. Each Real Property's compliance with all
Applicable Laws does not depend on, and no zoning, subdivision or
other governmental approval for such Real Property depends on, any
Real Property, or rights appurtenant thereto, other than such Real
Property. No Governmental Authority has imposed any requirement that
any developer of any Real Property pay directly or indirectly any
special fees or contributions or incur any expenses or obligations in
connection with any development of such Real Property or any part
thereof. The provisions of this subparagraph shall not apply to any
regular or nondiscriminatory local real estate or school taxes
assessed against any such Real Property.
(n) Each of the Leases is valid and subsisting and in
full force and effect in accordance with its terms, provisions and
conditions and constitutes the legal, valid, binding and enforceable
obligation of the Company and the landlord thereunder; no party
thereto is in default thereunder and no event has occurred that, with
notice or lapse of time or both, would constitute a default; all
initial installation work, if any, has been fully performed, paid for
and accepted. No landlord has given any notice to the Company or
Sellers of intention of instituting litigation with respect to any
Lease. True, complete and correct copies of each of the Leases as
currently in effect have been delivered to the Purchaser, and the
Company is not subject to any obligation to or for the benefit of the
landlord with respect any of the related Real Property except as fully
set forth in such Leases.
2.8 Litigation, Judgments, Etc. Except as fully described in
Schedule 2.8, there are no actions, suits, proceedings or investigations
pending or, to the best of Sellers' knowledge, threatened against or affecting
the Company or its assets in any court or before or by any federal, state or
other Governmental Authority, or before any arbitrator, and the Sellers have no
reason to believe that any such action, suit, proceeding or investigation will
be brought or threatened against the Company or its assets. Each of the
incidents giving rise to the matters listed on Schedule 2.8 is fully covered by
insurance (subject only to the applicable deductibles described on Schedule
2.22), is being defended by the applicable insurance carrier and its counsel,
and no such insurance carrier has given the Company notice of any reservation
of rights with respect to any of the foregoing. The Company is not in default
with respect to any judgment, order, writ, injunction, decree or award
applicable to it
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of any court or other Governmental Authority or arbitrator having jurisdiction
over it and all such judgments, orders, writs, injunctions, decrees and awards
are described in Schedule 2.8. Except as fully described in Section 2.10,
Section 2.12, Section 2.13 or in any disclosure schedule related thereto, the
Company is not in default with respect to any rule or regulation applicable to
it of any Governmental Authority having jurisdiction over it, or in violation
of any law or statute.
2.9 Intellectual Property.
(a) Marks. Schedule 2.9(a) lists all foreign and
domestic trademarks, service marks, trade dress, and trade names
(collectively, the "Marks"), and registrations therefor, used by
Company in connection with the conduct of business now being
conducted. Except as disclosed in Schedule 2.9(a) Company is the sole
owner of all right, title and interest in the Marks and, to the best
of Sellers' knowledge, there exist no facts that would invalidate the
Marks in the areas in which business is presently being conducted.
Except as disclosed on Schedule 2.9(a), to the best of Sellers'
knowledge, the Marks, as currently being used, do not infringe upon
any rights of a third party. Neither the Company nor any Seller has
received notice from a third party asserting that one or more of the
Marks are infringing, or would infringe if used in a geographic area
outside the area in which the Company's business is presently
conducted. Except as disclosed on Schedule 2.9(a), to the best of
Sellers' knowledge, there are no third party uses of the Marks or
colorable imitations thereof. Neither the Company, any Seller or any
of their affiliates, nor, to the best of Sellers' knowledge, any other
person has granted any rights or license whatsoever with respect to
the use of the Marks "Tortilla King" or "El Rey" or any derivation
thereof, or any other. Except as set forth on Schedule 2.9(a),
neither any Seller nor any affiliate of the Company has any rights or
license with respect to any of the Marks. Any rights or licenses that
any Seller or any affiliate of the Company has will be transferred to
the Company at or prior to the Closing for no additional
consideration. No rights in any of the Marks listed in Schedule
2.9(a) will be affected in any way by virtue of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
No Xxxx is the subject of any pending, or to the best of Sellers'
knowledge, threatened, litigation, arbitration, interference or
protest proceeding.
(b) Patents. There are no foreign or domestic patents or
applications therefor used in the conduct of the business as now
conducted or in which the Company has rights (collectively, the
"Patents"). No patent rights other than those granted to the Company
by its purchase of equipment are necessary to conduct the business of
the Company as now conducted.
(c) Copyrights. There are no foreign or domestic
copyright registrations or applications for registration thereof used
in the conduct of the business of the Company as now conducted or in
which the Company has rights. All copyrights used in the conduct of
the business as now conducted, including all copyrights with respect
to advertising, software and photographs (collectively, the
"Copyrights"), are solely owned by the Company. Neither Company nor
any Seller has received any notice from a third party asserting any
allegations of infringement of any Copyrights. Neither the Company
nor any Seller has sold, licenced or transferred to any Seller,
employee or other person or entity any rights to any of the
Copyrights.
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(d) Trade Secrets. All trade secrets confidential
information and know-how used in the conduct of the business as now
conducted, including but not limited to customer information and
supplier information, are owned by the Company and can be used or sold
by the Company without infringing trade secret or other rights of
others. Schedule 2.9(d) contains a list of all current employees who
have (or could reasonably be expected to have) knowledge of the trade
secrets, confidential information and know-how. Each such employee
has executed agreements for maintaining the confidentiality of the
trade secrets, confidential information and know-how, which are in
full force and effect. Neither the Company nor any Sellers have sold,
licensed or otherwise transferred to any Seller, employee or any other
person any right to use or disclose any trade secret confidential
information and know-how. All such trade secrets, confidential
information and know-how are presently valid and protectable and none
of the trade secrets, confidential information and know-how are a part
of the public domain.
(e) All working requirements and all fees, annuities and
other payments that are due on or before the Closing for any foreign
or domestic Marks, Patents, and Copyright and all application and/or
registrations therefore have been met or paid.
(f) The Company has the right to use, free and clear of
the rightful claims by others all foreign and domestic Marks, Patents
and Copyrights and all applications and/or registrations therefore, as
well as all trade secrets confidential information and know-how used
or having been used in the conduct of the business of the Company as
now conducted.
2.10 Environmental and Health Laws.
(a) The Company is not in violation of any Environmental
Laws (as hereinafter defined) or any order or requirement of any court
or Governmental Authority to the extent pertaining to health or the
environment, nor are the operations or assets of the Company subject
to any remedial obligations (except for customary closure obligations)
under any Environmental Law;
(b) Without limitation of clause (a) above, the Company
is not subject to any existing, pending or, to the best of Sellers'
knowledge, threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority under any
Environmental Law and neither the Company nor the Sellers have reason
to believe that any such action, suit, investigation, inquiry or
proceeding will be brought against the Company;
(c) All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed by the
Company under any Environmental Law, including without limitation
those relating to the treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been
duly obtained or filed, and the Company is in compliance with the
terms and conditions of all such notices, permits, licenses and
similar authorizations;
(d) Since the effective date of the relevant requirements
of RCRA (as hereinafter defined) all hazardous substances or solid
wastes generated by the Company or at any property currently or
heretofore owned or leased by the Company, including, but not limited
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to, the Real Property and requiring disposal have been, to the extent
required by any Environmental Law, transported only by carriers
maintaining valid authorizations under RCRA and any other
Environmental Laws and treated and disposed of only at treatment,
storage and disposal facilities maintaining valid authorizations under
RCRA and any other Environmental Law, and, to the best of Sellers'
knowledge, such carriers and facilities have been and are operating in
compliance with such authorizations and to the best of Sellers'
knowledge are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws;
(e) There are no underground storage tanks or other
underground containers on or under any of the Company's assets or
operations;
(f) Without limiting the foregoing, there is no liability
to any third party in connection with any release or threatened
release of any hazardous substances, solid wastes, petroleum and
petroleum products into the environment as a result of or with respect
to the Company's assets or operations; and
(g) Copies of all environmental reports and records
possessed by Sellers or the Company that address the environmental
condition of any property currently or heretofore owned or leased by
the Company (including, but not limited to, the Real Property) or
other assets of the Company or environmental compliance or liability
concerns affecting the business of the Company are attached hereto as
Schedule 2.10(g).
For purposes of this Agreement, the term "Environmental Laws" shall
mean any and all laws, statutes, ordinances, rules, regulations, orders or
determinations of any Governmental Authority pertaining to health or the
environment currently or hereafter in effect in any and all jurisdictions in
which the Company's assets are located or in which its operations are
conducted, including without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, the Federal Water Pollution Control Act, as amended,
the Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the
Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, any state laws pertaining to the handling of
wastes or the use, maintenance, and closure of pits and impoundments, and other
environmental conservation or protection laws. For purposes of this Agreement,
the terms "hazardous substance" and "release" (or "threatened release") have
the meanings specified in CERCLA, and the terms "solid waste" and "disposal"
(or "disposed") have the meanings specified in RCRA; provided, however, that to
the extent the laws of the state in which the property is located or the
operations are conducted establish a meaning for "hazardous substance,"
"release," "solid waste" or "disposal" that is broader than that specified in
either CERCLA or RCRA, such broader meaning shall apply. For purposes of this
Agreement, the term "Governmental Authority" includes the United States, the
state, county, city and political subdivisions in which the Company's
operations or assets are located or which exercises jurisdiction over any of
the Company or its operations or assets, and any agency, department,
commission, board, bureau or instrumentality or any of them that exercises
jurisdiction over the Company or its operations or assets.
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2.11 Additional Schedules. Schedule 2.11 contains the following
separate schedules and has attached the following documents:
(a) Copies of all currently effective contracts or
options relating to the acquisition by the Company of any operating
business.
(b) Copies of all currently effective contracts for the
performance of services involving aggregate annual receipts or
payments by the Company in excess of $10,000.
(c) Copies of all currently effective contracts for the
purchase, sale, lease or exchange of real or personal property
involving aggregate receipts or payments by the Company in excess of
$10,000.
(d) Copies of all currently effective contracts for
construction on or improvement of any Real Property (and all
documentation relating thereto) involving aggregate receipts or
payments by the Company in excess of $10,000.
(e) A schedule, as of the Statement Date, of the trade
and accounts receivable of the Company in excess of $10,000 showing
separately for each such receivable its age denominated by an
appropriate classification.
(f) Except as otherwise delivered pursuant to clause (g)
or (j), copies of all currently effective agreements or arrangements
with regard to the payment of compensation (including without
limitation bonuses), profit-sharing, pension, vacation, retirement or
other compensation benefits to, or providing for the indemnification
of, current or former directors, officers or employees of the Company
whose compensation exceeds $40,000 per year, regardless of whether
said agreements or arrangements are legally binding (a schedule
setting forth the name or identification of each current or former
director, officer or employee of the Company who is currently being
paid or who is entitled to compensation (other than at hourly rates)
benefits that in the aggregate exceed $10,000 per year and the rate or
amounts thereof is set forth in Schedule 2.18); and all currently
effective written contracts or commitments with unions or other groups
or otherwise with respect to wages, working conditions, work rules or
employee benefits.
(g) A summary of all material statements of practice
followed by the Company with regard to the payment of compensation
(including without limitation bonuses), profit-sharing, pension,
vacation, retirement or other compensation benefits to current or
former directors, officers or employees of the Company whose
compensation exceeds $40,000 per year, whether or not said practices
are legally binding; and all currently effective material contracts or
commitments with unions or other groups or otherwise with respect to
wages, bonuses, working conditions, work rules or employee benefits
that were not required to be delivered pursuant to subparagraph (f) or
(j).
(h) Copies of all complaints and other pleadings (and
settlement documents and releases) relating to threatened, pending or
settled litigation or governmental proceedings or claims set forth on
Schedule 2.8.
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(i) A schedule listing and itemizing all current and
forecasted depreciation expenses of the Company or assets owned on the
Statement Date or acquired by the Company since such date.
(j) Copies of all pension, profit sharing, retirement,
bonus or stock option or stock purchase plans or hospitalization,
sickness and accident or other fringe benefit plans or programs of the
Company currently in effect with respect to employees or others.
(k) Copies of all currently effective contracts, notes,
financing statements, mortgages, deeds of trust and other instruments
relating to the borrowing of money or the guaranty of any obligation
for the borrowing of money and of all currently effective letters of
credit to which the Company is a party or otherwise liable or that
relate to the Company or its assets (whether contingently or
absolutely).
(l) Copies of all other currently effective contracts
material to the business and operations of the Company, regardless of
whether made in the ordinary course of business.
(m) Copies of all currently effective contracts
containing covenants limiting the freedom of the Company to compete in
any line of business or with any person in any geographical area.
(n) Copies of all currently effective contracts requiring
the payment to any person of any royalty or similar commission or fee
in excess of $10,000 per annum, of the Company not delivered pursuant
to subparagraph (g) above.
(o) Copies of all currently effective contracts to which
both (X) the Company, on one hand, and (Y) any Seller or any of its
officers, directors, partners or affiliates other than the Company, on
the other hand, are parties not otherwise delivered pursuant to this
Section 2.11.
The Company is not, and but for a requirement that notice be given or that a
period of time elapse or both would not be, in default under any contract,
agreement, lease or other instrument to which it is a party or by which it or
its properties is bound. All of the purportedly currently effective contracts,
agreements, understandings, licenses, franchises, permissions and commitments,
whether or not attached to a schedule to this Agreement, of the Company are in
good standing, valid and effective and the Company has, in the ordinary course
of business, paid all amounts due thereunder and has satisfied in full all the
liabilities and obligations with respect thereto and, no party other than the
Company is in default under any such contract, agreement, understanding,
franchise, permission or commitment.
2.12 Taxes.
(a) (i) All returns and reports ("Tax Returns") of or
with respect to any Tax (as hereinafter defined) that are required to
be filed on or before the Closing Date by or with respect to the
Company or the assets or business of the Company have been or will be
duly and timely filed (except as set forth on Schedule 2.12), (ii) all
items of income, gain, loss, deduction and credit or other items
required to be included in each such Tax Return have
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been or will be so included and all information provided in each such
Tax Return is true, correct and complete, (iii) all Taxes that have
become or will become due with respect to the period covered by each
such Tax Return (whether or not shown on such Tax Return) have been or
will be timely paid in full, (iv) all withholding Tax requirements
imposed on or with respect to the Company or its business have been or
will be satisfied in full in all respects, and (v) no penalty,
interest or other charge is or will become due with respect to the
late filing of any such Tax Return or late payment of any such Tax.
For purposes of this Agreement, "Taxes" shall mean any federal, state,
local, foreign and other taxes, assessments, fees and other
governmental charges, including without limitation income, gross
receipts, net proceeds, alternative or add-on minimum, ad valorem,
value added, turnover, sales, use, property (tangible and intangible),
stamp, lease, user, excise, duty, franchise, transfer, license,
withholding, payroll, employment, fuel, excess profits, occupational,
interest equalization, windfall profit, severance, and other similar
governmental charges (including interest and penalties).
(b) No Tax Returns of or with respect to the Company or
its business have been audited by the applicable Governmental
Authority.
(c) There is no claim against the Company or its assets
or business for any Taxes, and no assessment, deficiency or adjustment
has been asserted or proposed with respect to any Tax Return of or
with respect to the Company or its business.
(d) There is not in force any extension of time with
respect to the due date for the filing of any Tax Return of or with
respect to the Company or its assets or business or any waiver or
agreement for any extension of time for the assessment or payment of
any Tax of or with respect to the Company or its assets or business.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Financial Statements are sufficient to cover
the payment of all Taxes, whether or not assessed or disputed, which
are, or are hereafter found to be, or to have been, due by or with
respect to the Company and its assets or business up to and through
the periods covered thereby.
(f) Neither the execution or deliver of this Agreement,
nor the performance by any party of its obligations hereunder has
resulted or will result in the imposition of any Tax (or the
requirement to file any Tax Return) on the Company or any shareholder
of the Company (other than the Sellers).
2.13 Employee Benefit Plans. Schedules 2.11(f), Schedule 2.11(g)
or Schedule 2.11(j) set forth all employee benefit plans within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") sponsored, maintained or contributed to by the Company for the
benefit of the employees of the Company ("Plans"), or has been so sponsored,
maintained or contributed to within six years prior to the Closing Date.
Except as otherwise set forth Schedule 2.11(f), Schedule 2.11(g) or Schedule
2.11(j), (a) all reports and disclosures relating to the Plans required to be
filed with or furnished to governmental agencies, Plan participants or Plan
beneficiaries have been filed or furnished in accordance with applicable law in
a timely manner, and each Plan has been administered in substantial compliance
with its governing documents and applicable law, (b) each of the Plans intended
to be qualified under Section 401 of the Code, satisfies
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the requirements of such Section and has received a favorable determination
letter from the Internal Revenue Service regarding such qualified status and
has not, since receipt of the most recent favorable determination letter, been
amended or operated in a way that would adversely affect such qualified status,
and (c) no act, omission or transaction has occurred which would result in
imposition on the Company of (i) breach of fiduciary duty liability damages
under Section 409 of ERISA, (ii) a civil penalty assessed pursuant to
subsections (c), (i) or (l) of Section 502 of ERISA or (iii) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code. Further, there is no Plan
sponsored, maintained or contributed to by the Company, or that has been
sponsored, maintained or contributed to by the Company that is subject to Title
IV of ERISA, and there is no employee benefit plan, within the meaning of
Section 3(3) of ERISA, which is not listed in Schedule 2.11(f), Schedule
2.11(g) or Schedule 2.11(j), and which is sponsored, maintained or contributed
to, or has been sponsored, maintained or contributed to by any corporation,
trade, business or entity under common control with the Company, within the
meaning of Section 414(b), (c) or (m) of the Code or Section 4001 of ERISA.
The termination of any Plans will not violate any law, rule or regulation and
will not result in (and has not resulted in) any liability to the Company
(other than resulting solely from reasonable expenses incurred to terminate any
such plan). Schedule 2.13 sets forth by number and employment classification
the approximate numbers of employees employed by the Company as of the date of
this Agreement, and none of said employees are subject to union or collective
bargaining agreements with the Company. The Company has not at any time on or
after January 1, 1997 had or, to the knowledge of Sellers, been threatened with
any work stoppages or other labor disputes or controversies with respect to its
employees which had a material adverse effect on the Company.
2.14 Authorization of Agreement - No Violation - No Consents.
Each of the Sellers and the Company has full power and authority to enter into
this Agreement and the other documents delivered pursuant to this Agreement
(collectively, the "Documents") to the extent each is a party thereto and the
capacity and authority to make the representations, warranties, covenants and
agreements herein or therein. Except as set forth on Schedule 2.14, neither
the execution or delivery of the Documents nor the consummation of the
transactions contemplated herein or therein (a) will conflict with or result in
a breach, default or violation of (i) any of the terms, provisions or
conditions of the Articles of Incorporation or Bylaws of the Company (copies of
all of which organization documents are attached as Schedule 2.14) or (ii) any
agreement, document, instrument, judgment, decree, order, governmental permit,
certificate, license, law, statute, rule or regulation to which any Seller or
the Company is a party or to which it is subject (including without limitation
the trust agreement and/or declaration of trust forming SBJ Trust), (b) will
result in the creation of any lien, charge or other encumbrance on any property
or assets of the Company, or (c) will require any Seller or the Company to
obtain the consent of any private nongovernmental third party not already
obtained. Except as expressly contemplated by the Documents, no consent,
action, approval or authorization of, or registration, declaration or filing
with, any governmental department, commission, agency or other instrumentality
or any other person or entity is required to authorize, or is otherwise
required in connection with, the execution and delivery of the Documents by any
Seller or the Company or their performance of the terms of the Documents or the
validity or enforceability of the Documents. This Agreement and each Document
delivered pursuant hereto constitutes the legal, valid and binding obligation
of the Company and each Seller (to the extent a party thereto) enforceable
against each such person in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights generally and to the principles of equity (whether
enforcement is sought in a proceeding in equity or at law).
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2.15 Brokerage Agreements. None of any Seller or the Company has
entered (directly or indirectly) into any agreement, with any person, firm or
corporation for the payment of any commission, brokerage or "finder's fee" in
connection with the transactions contemplated herein.
2.16 Accounts Receivable. All accounts and notes receivable of
the Company in excess of $10,000 arose in the ordinary and usual course of
business, represent valid obligations subject to no set-offs or counterclaims,
and either have been collected or are collectible (subject only to bankruptcy
stays sought by account debtors) in the ordinary and usual course of business
in the aggregate recorded amounts as reflected in the books of account of the
Company in accordance with their terms.
2.17 Banks. Schedule 2.17 sets forth (a) the name of each bank,
trust company, stock and other broker with which the Company has an account,
credit line, or safe deposit box or vault or maintains any relations, (b) the
names of all persons authorized to draw thereon or to have access to any safe
deposit box or vault, (c) the purpose of each such account, safe deposit box or
vault, and (d) the names of all persons authorized by proxies, powers of
attorney or like instruments, to act on behalf of the Company in matters
concerning any of its business or affairs.
2.18 Directors, Officers and Key Employees. Schedule 2.18
contains a true and complete list of the name, address and salary, as well as
the title or functional position, of each current director and officer of the
Company, and each other current employee, consultant, representative, salesman
or agent employed or under contract with the Company who received or accrued or
on an annualized basis would have received or accrued aggregate direct cash
remuneration as reflected on such person's Form W-2 at the rate of $40,000 or
more per annum from the Company in respect of the 24 months ended on the
Statement Date. Except as set forth on Schedule 2.18, none of the persons
listed on Schedule 2.18 has received any wage or salary increase or bonus since
the Statement Date, nor have any such increases or bonuses been adopted since
the Statement Date. Neither any Seller, the Company nor, to the best of
Sellers' knowledge, any of the officers or directors of the Company has ever
been convicted of a felony. None of any Seller or any of the persons set forth
on Schedule 2.18, and no relative or affiliate known to any Seller or the
Company of any such person has had in the last five years any transaction with
the Company involving the receipt by or payment by the Company of more than
$10,000 in cash, property or services or the increase in the debt or other
liabilities of the Company, except in the ordinary course of their employment
as set forth in Schedule 2.18 or as otherwise set forth on Schedule 2.18.
2.19 Suppliers and Customers. Schedule 2.19 sets forth the 20
most significant third party suppliers and the 20 most significant third party
customers of the Company (in terms of payments to or by such persons) during
the twelve-month period ended the Statement Date. The relationships of the
Company with its suppliers and customers are satisfactory, and no Seller is
aware of any intention by any such customer or supplier to terminate its
relationship with the Company or to reduce the amount of business conducted
with the Company.
2.20 No Material Omissions. Neither this Agreement nor any of the
documents delivered in connection therewith contains any untrue statement of a
material fact, nor does this Agreement or any such document omit to state any
fact necessary to make the statements contained therein not misleading in light
of the circumstances under which they were made. There is no fact that would
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materially adversely affect the operations, business, assets or prospects of
the Company that has not been disclosed in this Agreement or any Schedule
hereto.
2.21 Outstanding Debt. Except as disclosed on Schedule 2.21 or the
Financial Statements or incurred in the ordinary course of business since the
Statement Date, the Company has no outstanding debt, payables, liabilities or
liens of any kind, whether fixed, contingent, matured or unmatured. All such
debt, payables, liabilities or liens incurred as described above in the
ordinary course of business and existing on December 31, 1997 are listed on
Schedule 2.21.
2.22 Insurance. Schedule 2.22 Part I sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation and bond and surety
arrangements) related to the Company or its assets:
(a) the name, address, and telephone number of the agent,
(b) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(c) the policy number and period of coverage;
(d) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(e) a description of any retrospective premium
adjustments or other loss-sharing arrangements.
True and complete copies of each such insurance policy are attached as
Schedule 2.22 Part II.
2.24 Inventory. The Company's inventory (including raw materials
and work-in-progress): (i) were acquired in the ordinary course of business
consistent with past practice; (ii) are of a quality, quantity, and condition
useable or saleable in the ordinary course of business within the Company's
normal inventory turnover experience; and (iii) are valued in accordance with
generally accepted accounting principles. The Company does not have any
liability with respect to the return or repurchase of any goods in the
possession of any customer outside the ordinary course of business.
2.25 Compliance with Laws. (a) The Company is in compliance with
all laws, regulations and orders applicable to it, its respective business and
operations (as conducted by it now and in the past), and its properties and
assets (in each case owned or used by it now or in the past). The Company has
not been cited, fined or otherwise notified of any asserted past or current
material failure to comply with any laws, regulations or orders and no
proceeding with respect to any such material violation is pending or, to the
Sellers' knowledge, threatened. The Company has not made any payment of funds
in connection with its business that is prohibited by law, and no funds have
been set aside to be used in connection with its business for any payment
prohibited by law.
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(b) The Company has complied with the terms and provisions of the
Immigration Reform and Control Act of 1986, as amended (the "Immigration Act").
With respect to each Employee (as defined in 8 C.F.R. 274a.1(f)) of the Company
for whom compliance with the Immigration Act as employer is required, the
Company has on file a true, accurate and complete copy of (i) each Employee's
Form I-9 (Employment Eligibility Verification Form) and (ii) all other records,
documents or other papers prepared, procured and/or retained by the Company
pursuant to the Immigration Act. The Company has not been cited, fined, served
with a Notice of Intent to Fine or with a Cease and Desist Order, nor has any
action or administrative proceeding been initiated or, to the knowledge of the
Sellers, threatened against the Company, by the Immigration and Naturalization
Service by reason of any actual or alleged failure to comply with the
Immigration Act.
(c) The Company is not subject to any contract, decree or
injunction that restricts the continued operation of any business or the
expansion thereof to other geographical areas, customers and suppliers or lines
of business.
2.26 Status of Securities. Each Stock Seller represents and
warrants that they have received a copy of the Purchaser's Prospectus dated
August 27, 1997 of the Purchaser (the "Prospectus") and Quarterly Report on
Form 10-Q/A filed with the Securities and Exchange Commission on November 21,
1997, and have reviewed such documents carefully. Each Stock Seller further
represents and acknowledges that the issuance to such person of shares of
Purchaser Common Stock pursuant to the terms of this Agreement has not been
registered or qualified under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities or "blue sky" laws. Each Stock
Seller further represents and acknowledges that such securities may not be
sold, transferred or otherwise disposed of without an effective registration
statement under the Securities Act and compliance with applicable state
securities and "blue sky" laws, or an applicable exemption therefrom, and that
the certificates for such shares shall bear a restrictive legend to such
effect. Each Stock Seller represents to the Company that such person is taking
such shares for investment and not with a view to distribution, within the
meaning of the Securities Act. Without limiting the generality of the
foregoing, each Stock Seller agrees that it will not offer, issue, sell,
transfer, grant options to purchase or otherwise dispose of, for value or
otherwise, directly or indirectly, any shares of Purchaser Common Stock or
other equity securities of the Purchaser prior to February 23, 1998.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
3.1 Organization and Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, with corporate power and authority to own, operate
and lease its properties and to carry on its business as now conducted and as
contemplated to be conducted, and is not required to qualify to do business as
a foreign corporation in any jurisdiction.
3.2 Authorization of Agreement - No Violation - No Consents. The
Purchaser has full power and authority to enter into the Documents (to the
extent a party thereto) and to make the representations, warranties, covenants
and agreements made herein and therein. Except as expressly
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provided in this Agreement, neither the execution or delivery of the Documents
by the Purchaser nor the consummation of the transactions contemplated herein
by the Purchaser (a) will conflict with or result in a breach, default or
violation of (i) any of the terms, provisions or conditions of the articles of
incorporation or bylaws of the Purchaser or (ii) any agreement, document,
instrument, judgment, decree, order, governmental permit, certificate, license,
law, statute, rule or regulation to which the Purchaser is a party or to which
it is subject, (b) will result in the creation of any lien, charge or other
encumbrance on any property or assets of the Purchaser or (c) will require the
Purchaser to obtain the consent of any private nongovernmental third party. No
consent, action, approval or authorization of, or registration, declaration or
filing with, any governmental department, commission, agency or other
instrumentality or any other person or entity is required to authorize, or is
otherwise required in connection with, the execution and delivery of the
Documents by the Purchaser or its performance of the terms hereof by the
Purchaser or the validity or enforceability hereof or thereof against the
Purchaser. This Agreement and the Documents delivered by the Purchaser
pursuant hereto constitute the legal, valid and binding obligations of the
Purchaser enforceable against the Purchaser in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting creditors' rights generally and to the
principles of equity (whether enforcement is sought in a proceeding in equity
or at law).
3.3 Brokerage Agreements. The Purchaser has not entered
(directly or indirectly) into any agreement under which Seller or any affiliate
of Seller could be liable with any person, firm or corporation providing for
the payment of any commission, brokerage or "finder's fee" in connection with
the transactions contemplated herein.
ARTICLE IV
COVENANTS OF THE COMPANY AND THE SELLERS
Each of the Company and the Sellers further agrees, jointly and
severally, except as set forth in or contemplated by this Agreement or as
otherwise approved by the Purchaser in writing, that from the date hereof
through the Closing Date:
4.1 Conduct of Business of the Company Prior to the Closing Date.
(a) The business of the Company shall be operated only in
the ordinary course of business and consistent with past practice, and
consistent with such operation, the Company and the Sellers will use
all reasonable efforts to preserve intact the present organization of
the Company and the relationships of the Company with persons having
relationships with them;
(b) No change shall be made in the Articles of
Incorporation or Bylaws of the Company;
(c) No change shall be made in the number of shares of
authorized or issued capital stock of the Company; nor shall any
option, warrant, call, right, commitment, conversion right, right of
first refusal, or agreement of any character be granted or made by the
Company relating to the authorized or issued capital stock thereof;
nor shall the Company issue, grant or sell any securities or
obligations convertible into shares of the capital stock
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of the Company; nor shall the Company make any declaration, setting
aside or payment of any dividend or distribution of assets of any kind
in respect of its capital stock, nor repurchase or agree to repurchase
any share of such capital stock;
(d) The Company shall not settle any tax claims
(including interest and penalties);
(e) The Company shall duly comply with all laws
applicable to the Company and all laws applicable to the transactions
contemplated by this Agreement;
(f) Except as fully reflected in the Financial Statements
and except in the ordinary course of business, the Company shall not
(i) incur any indebtedness in addition to any indebtedness outstanding
on the date hereof or renew or extend any indebtedness outstanding on
the date hereof; (ii) enter into any agreement requiring the
maintenance of a specified net worth; (iii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other
individual, firm or corporation, except for the endorsement of checks
for collection in the ordinary course of business; or (iv) make any
loans, advances or capital contributions to, or investments in, any
other individual, firm or corporation, except in connection with
normal relocations, travel advances or other advances which in the
aggregate are not in excess of $10,000;
(g) The Company shall not (i) increase the compensation
payable or to become payable by the Company to any officer, employee,
or director thereof, or increase any bonus, insurance, pension or
other employee benefit plan, or increase any payment plan, payment or
arrangement made to, for or with any officer, employee, or director
(other than a bonus of up to $25,000 for 1997 for Xxx Xxxxx) or (ii)
commit itself (A) to any additional pension, profit-sharing, bonus,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or
other employee benefit plan, agreement or arrangement, or to any
employment or material consulting agreement with or for the benefit of
any person or (B) to amend any of such plans or any of such agreements
in existence on the date hereof (other than amendments required by law
to preserve the qualified status of a Plan), (iii) engage in any
transaction (either acting alone or in conjunction with Sellers, any
Plan or trust created thereunder) in connection with which the Company
could be subjected (directly or indirectly) to either a civil penalty
assessed pursuant to subsections (c), (i) or (1) of Section 502 of
ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the
Code, (iv) terminate any Plan in a manner, or take any other action
with respect to any Plan, that could result in the liability of the
Company to any person, (v) take any action that could adversely affect
the qualification of any Plan or its compliance with the applicable
requirements of ERISA, (vi) fail to make full payment when due of all
amounts that, under the provisions of any Plan, any agreement relating
thereto or applicable law, the Company is required to pay as
contributions thereto or (vii) fail to file, on a timely basis, all
reports and forms required by federal regulations with respect to any
Plan;
(h) The Company shall not, except in the ordinary course
of business, sell, transfer, mortgage, or otherwise dispose of, or
encumber, or agree to sell, transfer, mortgage or otherwise dispose of
or encumber, any properties, real, personal or mixed, tangible or
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intangible, which have a value on the books of the Company, either
individually or in the aggregate, in excess of $10,000;
(i) The Company shall not enter into any other agreement,
commitment or contract, except agreements, commitments or contracts
for the purchase, sale or lease of products or services in the
ordinary course of business, consistent with past practice and not in
excess of current requirements;
(j) Except as fully reflected in the Financial Statements
or on Schedule 4.1(j), the Company shall not make any single capital
expenditure, capital addition or capital improvement in an amount
exceeding $10,000 for any single facility;
(k) Without limiting the provisions of Section 4.5
hereof, none of the Company, the Sellers or the officers or directors
of the Company may approve, recommend or undertake, with the Company
as the surviving, disappearing or acquiring corporation, any merger,
consolidation, share exchange, acquisition of all or substantially all
of the assets, tender offer or other takeover transaction or enter
into any negotiations with, or furnish or cause to be furnished, any
information concerning its business, properties or assets to, any
person (other than the Purchaser) that the Company or any of such
officers or directors knows to be interested in any such transaction;
(l) The Company shall not take, or permit to be taken,
any action or do, or permit to be done, anything in the conduct of the
business of the Company that would be contrary to or in breach of any
of the terms or provisions of this Agreement or that would cause any
of the representations contained herein to be or to become untrue;
(m) The Company shall not settle any claim, action or
proceeding existing on or commenced after the date hereof or waive any
right against a third party;
(n) The Company shall not make any loan or advance to any
officer, director, employee, consultant, representative, salesman or
agent of the Company involving more than $10,000 in the aggregate or
make any other loan or advance;
(o) The Company shall not pay or commit to pay any
commission or other amount to any director or officer of the Company
or any employee, consultant, representative, salesman or agent of the
Company or any relative or affiliate of any of them except in
accordance with employment contracts or arrangements entered into in
the ordinary or usual course of business;
(p) The Company shall not make any unlawful payment to
governmental or quasi-governmental officials or, except as fully
described on Schedule 2.11(m), payments to customers or suppliers for
the sharing of fees or rebating of charges or reciprocal practices;
(q) Except as provided in Section 6.1(h), none of any
Seller or any of the persons set forth on Schedule 2.18, and no
relative or affiliate known to any Seller or the Company of any such
person shall enter into any transaction with the Company involving the
receipt by or payment by the Company of more than $10,000 in cash,
property or services or the
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increase in the debt or other liabilities of the Company, except in
the ordinary course of their employment or as set forth on Schedule
2.18; and
(r) Except as fully described on Schedule 4.1(r) or as
provided in Section 6.1(h), the Company or the Sellers shall not amend
any Lease or any instrument affecting the Real Property.
4.2 Obtaining Consents. The Sellers and the Company will use all
reasonable efforts to obtain, and to assist the Purchaser in obtaining, all
consents, resignations, authorizations and approvals and making all filings
necessary for the consummation of the transactions contemplated by this
Agreement.
4.3 Access by the Purchaser to the Company. During the period
from the date of this Agreement to the Closing Date or the prior termination of
this Agreement pursuant to Section 6.3, the Purchaser and its employees,
representatives and agents shall be given access to the facilities, properties,
personnel, books and records of the Company for the purpose of conducting an
investigation of its financial condition, corporate status, business,
properties and assets; provided, however, that such investigation shall be
conducted in a manner that does not interfere with normal operations of the
Company. The Company will cause the employees, counsel, accountants and other
representatives of the Company to be available to the Purchaser and its
employees and agents at all reasonable times for such purposes.
4.4 Confidentiality. None of the Company, any Seller or any
employee or other representative or agent of the Company or any Seller will
disclose or use any information obtained in the course of the negotiation of
this Agreement or otherwise or set forth in any schedule hereto, except (a) in
connection with the consummation hereof, (b) as required by law, (c) as may be
necessary to the prosecution or defense of any claim or suit brought to enforce
rights under this Agreement, or (d) to the extent that the same may become
public other than through the action of the Company or any Seller or the
representatives, agents or employees of the Company or any Seller. If the
transactions contemplated hereby are not consummated and this Agreement
terminates, the Company, any Seller, their employees and other representatives
and agents promptly will return all copies of documents, contracts or records
and other properties furnished by the Purchaser or its affiliates pursuant to
this Agreement.
4.5 Exclusive Agreement. Except to the extent otherwise expressly
contemplated by this Agreement, unless this Agreement is terminated prior to
Closing, none of Sellers, the Company nor any affiliate thereof will directly
or indirectly (a) encourage, solicit or engage in discussions or any
negotiations with, or provide any information to, any person or entity (other
than the Purchaser or affiliates of the Purchaser) concerning any possible
disposition of any of the Company or any asset thereof or of any Related Asset
(unless and to the extent that such property or asset would be expressly
permitted by this Agreement to be disposed of), or (b) do anything or enter
into any agreement or take any action that by its terms or effect could
reasonably be expected to adversely affect the ability of the parties to
consummate the transactions contemplated by this Agreement on the terms and
conditions set forth herein or that would be contrary to or breach any of the
terms or provisions of this Agreement or that would cause any of the
representations or warranties contained herein to be or become untrue in any
material respect.
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4.6 Satisfaction of Closing Conditions. The Company and Sellers
shall use all reasonable efforts to satisfy the conditions to Closing set forth
in Article VI relating to any Seller or the Company in an expeditious manner.
4.7 Delivery of Documents at Closing. At the Closing, subject to
satisfaction of the conditions set forth in Article VI, Sellers and the Company
shall execute and deliver to the Purchaser all documents required to be
delivered pursuant to Section 6.1.
4.8 Real Property Matters. Within seven days after the date of
this Agreement, Sellers shall deliver or cause to be delivered to the Purchaser
the following:
(a) Owner policies of title insurance covering all Real
Property owned by the Company or SBJ Trust, if a Related Asset,
including, without limitation, the property at 000 Xxxxxx Xxxxx,
Xxxxxxxx, Xxxxx (the "Facility"), insuring the Company or SBJ Trust,
if a Related Asset has fee simple title thereto, up to the fair market
value thereof, subject only to the encumbrances set forth in Schedule
2.7(a) (the "Existing Title Policies"), together with legible copies
of all documents listed in such title policies as exceptions to title.
If an Existing Title Policy has not been issued for any tract
constituting a part of a Related Asset, then the Sellers shall
deliver, at Sellers' sole cost and expense, to the Purchaser a
commitment from an underwriter reasonably acceptable to the Purchaser
to issue a Texas-form owner policy of title insurance in respect of
each such Real Property, insuring the Company owns the Real Property
in question free of all claims (other than those set forth on Schedule
2.7(a)) up to the fair market value thereof (each, a "Title
Commitment"), together with legible copies of all documents listed in
such Title Commitment as exceptions to title.
(b) Surveys of each tract of Real Property (the
"Surveys") consisting of a plat and field notes prepared by a licensed
surveyor reasonably acceptable to the Purchaser, each of which shall
(i) reflect the actual dimensions of, and area within, the Real
Property in question, the locations of all easements, setback lines,
encroachments or overlaps thereon or thereover, (ii) identify by
recording reference all easements, setback lines, and other matters
referred to in the Existing Title Policy or Title Commitment (as
applicable) therefor, (iii) be certified to the Company; (iv) reflect
any area within the Real Property that has been designated by the
Federal Insurance Administration, the Army Corps of Engineers, or any
other Governmental Authority as being subject to special or increased
flood hazards, and (v) in general, comply with the requirements of the
Texas Surveyor's Association for Category 1A Condition II surveys.
All encroachments or other survey defects shall be cured or insured
prior to Closing.
4.9 Sale of Related Assets. At or prior to the Closing, SBJ Trust
will sell, transfer, convey and deliver, all of their rights, ownership and
interest in all of the Related Assets to the Purchaser, free and clear of any
mortgage, pledge, lien, charge, encumbrance or other adverse claim. Such
transfer shall be effected pursuant to conveyance documents, with a general
warranty of title, in form and substance satisfactory to the Purchaser in its
reasonable judgment. Contemporaneously with the foregoing transfer of any
Related Asset, any leases, licenses, notes or other obligations between the
Company and any Seller not provided for in this Agreement or fully disclosed on
any Schedule to this Agreement shall be terminated as of such date, for no
additional consideration, and with no remaining obligations or liabilities for
the Company after such date.
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4.10 Transfer of Marks. At or prior to the Closing, any rights or
licenses that any Seller or any affiliate of the Company has will be
transferred to the Company for no additional consideration, and any such Seller
or affiliate will execute and deliver to the Company such instruments of
transfer as shall be requested by the Purchaser, in each case in form and
substance satisfactory to the Purchaser in its reasonable judgment (the "Marks
Conveyance Instruments").
ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser further agrees, except as set forth in or contemplated
by this Agreement or as otherwise approved by the Sellers in writing, as
follows:
5.1 Obtaining Consents. The Purchaser will use all reasonable
efforts to obtain all consents, authorizations and approvals and making all
filings necessary for the consummation of the transactions contemplated by this
Agreement.
5.2 Confidentiality. Until the transactions contemplated hereby
have been consummated (and if for any reason such transactions are not
consummated for a period of one year after the effective date hereof), neither
the Purchaser nor any employee or other representative or agent of the
Purchaser will disclose or use any information obtained in the course of its
investigation under Section 4.3, the negotiation of this Agreement or otherwise
or set forth in any schedule hereto, except (a) in connection with the
consummation hereof, (b) as required by law, (c) as may be necessary to the
prosecution or defense of any claim or suit brought to enforce rights under
this Agreement, (d) to the extent that the same may become public other than
through the action of the Purchaser, or the representatives, agents or
employees of the Purchaser or (e) in connection with the negotiation and
consummation of the sale of securities of the Purchaser or any of its
affiliates to investors, provided that such investors agree to keep such
information confidential on the terms set forth herein. If the transactions
contemplated hereby are not consummated and this Agreement terminates, the
Purchaser, its employees and other representatives and agents promptly will
return all copies of documents, contracts or records and other properties
furnished by Sellers or Company pursuant to this Agreement.
5.3 Satisfaction of Closing Conditions. The Purchaser shall use
all reasonable efforts to satisfy the conditions to Closing set forth in
Article VI relating to the Purchaser in an expeditious manner.
5.4 Delivery of Documents at Closing. At the Closing, subject to
satisfaction of the conditions set forth in Article VI, the Purchaser shall
execute and deliver to the Sellers the documents contemplated to be delivered
pursuant to Section 6.2.
5.5 Distribution of Amounts to Pay Taxes. The Purchaser
acknowledges that, the Company is an S Corporation (within the meaning of the
Code) and that the Sellers will have taxable income based upon their respective
share of the income of the Company for 1997 ("S Corporation Income"). The
Purchaser further acknowledges that effective as of the Closing Date, the Board
of Directors of the Company has declared a dividend to the Sellers equal to (a)
the amount of federal income taxes payable by the Sellers to the extent
directly related to the S Corporation Income for
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1997 (which for purposes of clarity does not include any income or gain
resulting from the transactions contemplated by this Agreement) less (b) any
amounts distributed by the Company to either or both of the Sellers subsequent
to January 1, 1997 (including without limitation the distribution of $52,500
made to Xxxxxxxx Xxxxx, Xx. in October 1997); provided, however, that the
amount set forth in clause (a) shall in no event be greater than $250,000.
Such dividend will be payable by the Company within ten business days following
the determination by the Company and/or its auditors of the amount set forth in
clause (a).
ARTICLE VI
CONDITIONS TO THE CLOSING; TERMINATION
6.1 Conditions to Obligation of the Purchaser. The obligation of
the Purchaser to effect the transactions contemplated by this Agreement is
subject to the satisfaction (or waiver in writing by the Purchaser) of each of
the following conditions:
(a) Representations and Warranties of the Company and the
Sellers to be True. (i) The representations and warranties of the
Company and the Sellers hereunder shall be made again at the Closing
and shall be true and correct as of the Closing, except to the extent
expressly contemplated by this Agreement, (ii) the Company and the
Sellers shall have performed all covenants required of them by this
Agreement as of the Closing and (iii) the Company and the Sellers
shall have furnished the Purchaser at the Closing with a certificate
of the Sellers and the President of the Company to such effect, as
well as to the effect that all of the conditions contemplated by this
Section 6.1 have been satisfied as of the Closing Date.
(b) Third Party Consents. The Company and the Sellers
shall have obtained all required consents to the transactions
contemplated by this Agreement from the parties to material contracts,
agreements, understandings, franchises, permissions and commitments of
the Company and the Sellers.
(c) Statutory Requirements; Litigation. All statutory
requirements for the valid consummation of the transactions
contemplated herein shall have been fulfilled and all necessary
governmental consents, approvals or authorizations shall have been
obtained, and there shall not be any actual or threatened litigation
(including any investigation by any Governmental Authority) to
restrain or invalidate the transactions contemplated herein, the
defense of which would, in the judgment of the Purchaser, made in good
faith and based upon the advice of counsel, involve expense or lapse
of time that would be materially adverse to the interests of the
Purchaser.
(d) Stock Certificates. The Stock Sellers shall have
delivered to the Purchaser at the Closing one or more stock
certificates representing the Shares in good delivery form and
accompanied by duly executed stock powers evidencing all of the Common
Stock.
(e) Lease Agreement. The Company and SBJ Trust shall
have executed and delivered to each other a Lease Agreement in the
form of Exhibit A attached hereto (the "Lease Agreement").
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(f) Officers and Directors. The Company and the Sellers
shall have delivered to the Purchaser resignations for each director
and officer of the Company (other than Xxxxxxxx Xxxxx, Xx.), which
resignations shall be effective contemporaneously with the closing of
the purchase by the Purchaser of the Common Stock.
(g) Real Property. The Sellers shall have delivered to
the Purchaser the following documents:
(i) General Warranty Deed. A general warranty
deed from SBJ Trust to the Company with respect to the Related
Assets, as contemplated by Section 4.9, together with such
other instruments of transfer as shall be reasonably requested
by the Purchaser in connection with the transfer of the
Related Assets.
(ii) Removal of Existing Tenants. Evidence
satisfactory to the Purchaser in its reasonable judgment that,
no person other than the Company occupies any portion of any
of the Leaseholds or has any rights to occupy any portion of
any of the Leaseholds.
(iii) Owner Policy of Title Insurance. A
Texas-form owner policy of title insurance for the Related
Assets for which a Title Commitment was delivered to the
Purchaser pursuant to Section 4.8 hereof, in an amount equal
to the fair market value of such Real Property insuring the
Company owns the Real Property in question or leasehold estate
therein (as applicable) subject only to the exceptions to
title set forth in the applicable Title Commitment that are
acceptable to the Purchaser in its reasonable judgment.
(h) Repayment of Amounts Owed to the Company by the
Sellers. Any amounts owed by any Seller (or any affiliate or family
member thereof) to the Company shall be repaid in full at or prior to
the Closing.
(i) Employment Agreements. The Company and each of
Xxxxxxxx Xxxxx, Xx., Xxxxx Xxxxx and Xxx Xxxxx shall have entered into
employment agreements in the form attached hereto as Exhibit B
(collectively, the "Employment Agreements"), and Xxxx Xxxxx shall have
entered into an advisory agreement with the Company in a form that is
substantially similar to the Employment Agreements.
(j) Marks Conveyance Instruments. At or prior to the
Closing, the Sellers and any affiliates of the Company shall have
delivered to the Company any Marks Conveyance Instruments required to
be delivered pursuant to Section 4.10 hereof.
6.2 Conditions to Obligations of the Sellers and the Company. In
addition to the satisfaction of the conditions referred to in subparagraph (b)
of Section 6.1 hereof, the obligations of the Company and the Sellers to effect
the transactions contemplated by this Agreement shall be subject to the
satisfaction (or waiver in writing by the Sellers) of each of the following
conditions
(a) Representations and Warranties of the Purchaser to Be
True. (i) The representations and warranties of the Purchaser
hereunder shall be made again at the Closing
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and shall be true and correct as of the Closing, except to the extent
expressly contemplated by this Agreement, (ii) the Purchaser shall
have performed all covenants required of it by this Agreement as of
the Closing and (iii) the Purchaser shall have furnished the Company
and the Sellers at the Closing with a certificate of an executive
officer of the Purchaser to such effect, as well as to the effect that
all of the conditions contemplated by this Section 6.2 have been
satisfied as of the Closing Date.
(b) Statutory Requirements; Litigation. All statutory
requirements for the valid consummation of the transactions
contemplated herein shall have been fulfilled and all necessary
governmental consents, approvals or authorizations shall have been
obtained and there shall not be any actual or threatened litigation
(including any investigation by any Governmental Authority) to
restrain or invalidate the transactions contemplated herein, the
defense of which would, in the judgment of the Sellers, made in good
faith and based upon the advice of counsel, involve expense or lapse
of time that would be materially adverse to the interests of the
Sellers.
(c) Payment of Purchase Price. The Purchaser shall have
paid the cash purchase price for the shares of Common Stock to be paid
at the Closing as specified in Section 1.1 hereof and shall have
delivered certificates for shares of Purchaser Common Stock registered
in the names of the Sellers, in each case in the respective amounts
set forth on Appendix I.
(d) Lease Agreement. The Company and SBJ Trust shall
have executed and delivered to each other the Lease Agreement.
(e) Employment Agreements. The Company and each of
Xxxxxxxx Xxxxx, Xx., Xxxxx Xxxxx and Xxx Xxxxx shall have entered into
the Employment Agreements, and the Company shall have entered into an
advisory agreement with Xxxx Xxxxx in a form that is substantially
similar to the Employment Agreements.
(f) Repayment of Certain Indebtedness. The Company
and/or the Purchaser shall have arranged for the repayment of all
amounts outstanding under the promissory notes that are described on
Schedule 2.11(k), but only to the extent described thereon.
6.3 Termination of Agreement. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated herein may be
terminated at any time before the Closing as follows:
(a) Mutual Consent. By the mutual consent of the Sellers
and the Purchaser.
(b) Expiration Date. By any of the Sellers or the
Purchaser if the Closing shall not have occurred on or before January
31, 1997; provided, however, that no party hereto can terminate this
Agreement pursuant to this clause 6.3(b) if at such time such party is
in breach of any provision of this Agreement.
6.4 Effect of Termination and Failure of Conditions. In the event
of termination of this Agreement as provided in Section 6.3, or of the failure
of a condition resulting in the Purchaser, the Company or the Sellers not
performing its or their obligations hereunder pursuant to the terms of
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Section 6.1 or 6.2, as the case may be, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto with
respect thereto except (i) the provisions of Sections 4.4 and 5.2 shall survive
any such termination and (ii) nothing herein shall relieve any party from
liability for any breach hereof.
ARTICLE VII
ADDITIONAL AGREEMENTS OF THE PARTIES
7.1 Survival of Representations and Warranties.
(a) All statements contained in any certificate,
schedule, exhibit, financial statement or other document or instrument
delivered by or on behalf of any party hereto pursuant to or in
connection with this Agreement for the purposes of this Agreement
shall be deemed to be representations and warranties hereunder.
Except to the extent otherwise provided in paragraph (b) below, the
representations, warranties and covenants hereunder shall survive the
Closing and any investigation of any of the parties with respect
thereto indefinitely.
(b) The representations hereunder shall survive the
Closing for the following periods after the Closing Date:
(i) The representations and warranties set forth
in Sections 2.2 and 2.10, and all of the covenants set forth
in this Agreement, shall survive without limitation as to
time.
(ii) The representations and warranties set forth
in Sections 2.12 and 2.13 shall survive until one day after
the expiration of the applicable statute of limitations
(including all extensions).
(iii) All other representations shall survive for
two years and one day.
The date of expiration of any representation or warranty shall
be referred to herein as the "Termination Date". Representations and
warranties under this Agreement shall be of no further force or effect
after the applicable Termination Date; provided, however, that there
shall be no such termination of any representation or warranty with
respect to a bona fide claim asserted with respect thereto prior to
such date in accordance with the terms of Section 7.2.
7.2 Indemnification.
(a) Indemnification by Sellers for Claims Relating to
Occurrences or Conditions Prior to Closing. Sellers jointly and
severally agree to defend, indemnify, protect, save and hold harmless
the Purchaser, the Company, and their affiliates, successors, assigns,
officers, directors and controlling persons (collectively, the
"Purchaser Indemnitees") from and against any and all demands, claims,
actions, causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, litigation costs
and all attorneys'
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and experts' fees and expenses (collectively, the "Losses") relating
to (i) the ownership, condition, operation or conduct of the business
of the Company and its operations and business and (ii) the Related
Assets and arising or accruing on or prior to the Closing Date.
(b) Breaches of Representations, Warranties, Covenants or
Agreements. Sellers jointly and severally agree to defend, indemnify
and hold harmless the Purchaser Indemnitees from and against any and
all Losses asserted against, resulting from, imposed upon or incurred
by any of the Purchaser Indemnitees by, or arising out of, or as a
result of, any of the representations, warranties, covenants or
agreements of Sellers or the Company contained in this Agreement or
any certificate or instrument delivered by any Seller or the Company
pursuant to the terms hereof being incorrect, untrue or breached.
Subject to the foregoing, the Purchaser Indemnitees shall have the
right to indemnification under this Section 7.2(b) in accordance with
its terms, regardless of whether any of them could alternatively
receive indemnification with respect thereto under Section 7.2(a)(i).
The Purchaser agrees to defend, indemnify and hold harmless the Seller
Indemnitees from and against any and all Losses asserted against,
resulting from, imposed upon or incurred by any of the Seller
Indemnitees by, or arising out of, or as a result of, any of the
representations, warranties, covenants or agreements of the Purchaser
contained in this Agreement or any certificate or instrument delivered
by the Purchaser pursuant to the terms hereof being incorrect, untrue
or breached. Subject to the foregoing, the Seller Indemnitees shall
have the right to indemnification under this Section 7.2(b) in
accordance with its terms, regardless of whether any of them could
alternatively receive indemnification with respect thereto under
Section 7.2(a)(ii). Notwithstanding the foregoing provisions of this
clause (b), Sellers and/or the Purchaser shall have liability pursuant
to this Section 7.2(b) arising out of representations and warranties
being incorrect or untrue or covenants or agreements breached only
with respect to Losses arising out of or as a result of a breach or
untruth described in a Claim Notice given to Sellers or the Purchaser,
respectively, in accordance with the provisions hereof on or prior to
the applicable Termination Date, if any.
(c) Express Negligence Acknowledgment. Without limiting
or enlarging the scope of the indemnification obligations set forth in
this Agreement, AN INDEMNIFIED PARTY WILL BE ENTITLED TO
INDEMNIFICATION IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT
REGARDLESS OF WHETHER THE LOSS GIVING RISE TO SUCH INDEMNIFICATION
OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT, OR COMPARATIVE
NEGLIGENCE, FAULT, OR STRICT LIABILITY OF SUCH INDEMNIFIED PARTY.
(d) Assertion of Claims. All claims for indemnification
by any of the Seller Indemnitees or any of the Purchaser Indemnitees
under Section 7.2(a) or any other provision of this Agreement or any
Document shall be asserted and resolved as follows:
(i) Any person claiming indemnification hereunder
is hereinafter referred to as the "Indemnified Party" and any
person against whom such claims are asserted hereunder is
hereinafter referred to as the "Indemnifying Party." In the
event that any Losses are asserted against or sought to be
collected from an Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness and in
writing notify the Indemnifying Party of the Losses,
specifying the nature of and specific
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basis for such Losses and the indemnity claim and the amount
or the estimated amount thereof to the extent then feasible
and enclosing a copy of all papers (if any) served with
respect to the claim (the "Claim Notice"). The Indemnifying
Party shall not be obligated to indemnify the Indemnified
Party with respect to any such Losses if the Indemnified Party
fails to notify the Indemnifying Party thereof in accordance
with the provisions of this Agreement in reasonably sufficient
time so that the Indemnifying Party's ability to defend
against the Losses is not prejudiced, but only to the extent
such notification within such time period is practicable. The
Indemnifying Party shall have 30 days from the date the Claim
Notice is given in accordance with the notice provisions
hereof (the "Notice Period") to notify the Indemnified Party
(x) whether it disputes the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such
Losses and (y) whether it desires, at the sole cost and
expense of the Indemnifying Party, to defend the Indemnified
Party against such Losses; which election to defend may be
made without prejudicing the Indemnifying Party as to its
liability hereunder, other than with respect to the costs of
defense. Notwithstanding the foregoing, any Indemnified Party
is hereby authorized prior to and during the Notice Period to
file any motion, answer or other pleading that it shall deem
necessary or appropriate to protect its interests or those of
the Indemnifying Party (and of which it shall have given
notice and opportunity to comment to the Indemnifying Party)
and that is not prejudicial to the Indemnifying Party. (A) In
the event that the Indemnifying Party notifies the Indemnified
Party within the Notice Period that it desires to defend the
Indemnified Party against such Losses and except as
hereinafter provided, the Indemnifying Party shall have the
right to defend by all appropriate proceedings, and with
counsel of its own choosing, which proceedings shall be
promptly settled or prosecuted by them to a final conclusion.
If the Indemnified Party desires to participate in, but not
control, any such defense or settlement it may do so at its
sole cost and expense. If requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Losses
that the Indemnifying Party elects to contest, or, if
appropriate and related to the claim in question, in making
any counterclaim against the person asserting the third party
Losses, or any cross-complaint against any person. No claim
with respect to which the Indemnifying Party has admitted its
liability may be settled or otherwise compromised without the
prior written consent of the Indemnifying Party. Any party
settling or compromising a claim in violation of the preceding
sentence shall be solely liable for the amount of the
settlement or compromise. (B) If the Indemnifying Party does
not notify the Indemnified Party within 30 days after the
receipt of a Claim Notice that it elects to undertake the
defense thereof, the Indemnified Party shall have the right to
defend at the expense of the Indemnifying Party the claim with
counsel of its choosing reasonably satisfactory to the
Indemnifying Party, subject to the right of the Indemnifying
Party to assume the defense of any claim at any time prior to
settlement or final determination thereof. Any such defense
shall be prosecuted promptly and vigorously by the Indemnified
Party. In the case of either (A) or (B), if the Indemnifying
Party has not yet admitted its liability for a claim, the
Indemnified Party shall send a written notice to the
Indemnifying Party of any proposed settlement of any claim
received by the Indemnified Party. The Indemnifying Party
shall have an option for 30 days
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following receipt of such notice to (i) admit liability for
the claim if it has not already done so and (ii) if liability
has been admitted, reject, in its reasonable judgment, the
proposed settlement. Failure to reject such settlement within
such 30-day period shall be deemed an acceptance of such
settlement. If the Indemnified Party settles any such claim
over the objection of the Indemnifying Party, the Indemnified
Party shall thereby waive any right to indemnity therefor,
unless the Indemnifying Party has not prior to the time of
settlement admitted liability for such claim.
(ii) In the event any Indemnified Party should
have a claim for Losses against any Indemnifying Party
hereunder that does not involve a Loss being asserted against
or sought to be collected from it by a third party (for
example, but without limitation, a Loss resulting from a
breach of a representation, warranty or covenant), the
Indemnified Party shall send a Claim Notice with respect to
such claim to the Indemnifying Party. If the Indemnifying
Party does not notify the Indemnified Party within 30 days
from the date the claim notice is given that it disputes such
claim for Losses, the amount of such Losses shall be
conclusively deemed a liability of the Indemnifying Party
hereunder.
7.3 Sellers' Access to the Company. If the Closing occurs, then,
following such Closing and upon at least 48 hours' prior written notice, the
Sellers and their employees, representatives and agents shall be given access
during reasonable business hours to the facilities, properties, personnel,
books and non-privileged records of the Company for the purpose of satisfying
any obligations imposed upon the Sellers pursuant to this Agreement, including
without limitation the indemnification obligations imposed pursuant to Section
7.2; provided, however, that such investigation shall be conducted in a manner
that does not interfere with normal operations of the Company. The Company
will cause the employees, counsel, accountants and other representatives of the
Company to be available to the Sellers and their agents at all reasonable times
during business hours for such purposes.
7.4 Agreement Not to Compete.
(a) As a further inducement to the Purchaser to enter
into this Agreement, each Seller agrees that during the period from
the Closing Date until the fifth anniversary after the latest date
that any Seller ceases to be an employee of the Purchaser or any of
its subsidiaries:
(i) No Seller shall, directly or indirectly, for
their own account or for the account of others, as an officer,
director, passive stockholder, owner, partner, member,
promoter, consultant, advisor, employee, manager or otherwise,
participate in the promotion, financing, ownership, operation
or management of, or assist in, furnish advice with respect
to, or carry on through a proprietorship, partnership, joint
venture, limited liability company, corporation, other form of
business entity or otherwise, any business activity in a
geographic market within the State of Texas or any other state
where the Company is doing such business or has plans to do
such business, involving or relating to the business of
distributing, packaging, and processing tortillas, tortilla
chips and related products; provided, however, that nothing in
this clause (i) shall prohibit any Seller's aggregate
beneficial ownership
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of not in excess of 1% of any class of common stock that is
listed for trading on a national securities exchange; and
(ii) No Seller shall furnish advice to, solicit,
or do business with any customer (or any previous customer
within the last year) of the Company or any of its
subsidiaries relating to the business of the Company in any
geographic market within the State of Texas or any other state
where such customer is doing business with the Company or any
of its subsidiaries.
(iii) No Seller shall encourage or induce any
current or former employee of the Company or any of its
subsidiaries or affiliates to leave the employment of the
Company or any of its subsidiaries or affiliates, offer
employment, retain, hire or assist in the hiring of any such
employee by any person, association, or entity not affiliated
with the Company or any of its subsidiaries or affiliates.
(b) Although the parties to this Agreement have, in good
faith, used all reasonable efforts to make this covenant reasonable in
both geographic area and in duration, and it is not anticipated, nor
is it intended, by either of the parties to this Agreement that any
court of competent jurisdiction would find it necessary to reform this
covenant not to compete to make it reasonable in both geographic area
and in duration, or otherwise, the parties to this Agreement agree
that any court of competent jurisdiction making a determination that
it is necessary to reform this covenant not to compete to make it
reasonable in either geographic area or duration, or otherwise, shall
be, and hereby is, empowered and directed to reform this Agreement to
a reasonable restriction rather than invalidating this covenant or
otherwise rendering it unenforceable.
(c) In the event of breach by any Seller of this covenant
not to compete, it is understood and agreed (i) that the Purchaser or
the Company shall be entitled to injunctive relief as well as any and
all other applicable remedies at law and in equity; and (ii) that
damages, if any, for the breach of this covenant not to compete will
accrue and be recoverable by the Purchaser or any subsidiary as of and
from the date of the breach insofar as the damages for such breach
relate to an action that occurred within the scope of the geographic
area and duration of the covenant not to compete determined to be
reasonable (whether or not the covenant is reformed in connection with
such determination).
ARTICLE VIII
MISCELLANEOUS
8.1 Certain Definitions. The following terms as used in this
Agreement shall have the following meanings:
(a) The term "subsidiary" shall mean with respect to a
specified entity (i) in the case of a corporation, 40% or more of the
capital stock, the holders of which are regularly entitled to vote for
the election of directors, is owned directly or indirectly by such
entity, (ii) in the case of a trust, partnership or other entity, a
trust, partnership or entity of which such
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specified entity owns directly or indirectly 40% or more of the
beneficial interest or equity; and
(b) The term "affiliate" shall mean with respect to a
specified entity, an entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with the entity specified.
8.2 Expenses. Each party hereto shall bear its own legal,
accounting and other costs and expenses incident to the negotiation of this
Agreement and the performance of the transactions contemplated herein. All
expenses of the Company with respect to the transactions contemplated herein
shall be solely for the account of Sellers.
8.3 Notices. Any notice, communication, request, instruction or
other document required or permitted hereunder or under any document delivered
pursuant hereto shall be given in writing and delivered in person or sent by
U.S. Mail postage prepaid, return receipt requested, or by telex, facsimile or
telecopy to the addresses or facsimile numbers, as appropriate, as set forth
below.
If to the Sellers, and, prior to the Closing, the Company, to:
c/o Xx. Xxxxxxxx Xxxxx, Xx.
and Xx. Xxxxx X. Xxxxx
000 Xxxxxx
Xxxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
with a copy to:
Xx. Xxxx X. Xxxxxx
Cullen, Carsner, Xxxxxxx & Cullen, L.L.P.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
and in the case of the Purchaser, and after the Closing, the Company, to:
Authentic Specialty Foods, Inc.
c/o The Shansby Group
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Telecopy: (000) 000-0000
31
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with a copy to:
Xxxxxx & Xxxxxx L.L.P.
2300 First City Tower
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: J. Xxxx Xxxxx, Esq.
Telecopy: (000) 000-0000
or at such other address or facsimile number as may have been specified by like
notice.
8.4 Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only and do not
constitute a part of the Agreement.
8.5 Entire Agreement. This Agreement, the documents to be
executed hereunder, and the exhibits attached hereto constitute the entire,
completely integrated agreement between the parties hereto pertaining to the
subject matter hereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties
pertaining to the subject matter hereof, including without limitation that
certain letter of intent dated October 8, 1997 by and among the Purchaser, the
Company and Xxxxxxxx Xxxxx, Xx., as extended and amended by that certain letter
agreement dated December 15, 1997.
8.6 Waiver. At any time prior to the Closing, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of any other party hereto or (b) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed on behalf of
such party. The consummation of the transactions contemplated hereby shall not
be deemed a waiver of the right any party may have hereunder with respect to
any other party's representations, warranties, covenants or agreements
contained in or related to this Agreement being incorrect, untrue or breached.
8.7 Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto. No supplement,
alteration or modification of this Agreement shall be binding unless executed
in writing by the parties hereto.
8.8 Public Statements. After the date here of and prior to the
Closing Date, Sellers, the Company and the Purchaser shall consult with each
other with regard to all publicity, general employee announcements and public
announcements concerning this Agreement and the transactions contemplated
hereby and, except as required by applicable law or the applicable rules or
regulations of any governmental body or stock exchange (including, without
limitation, the Nasdaq Stock Market), no party shall issue a press release or
announcement concerning this Agreement and the transactions contemplated hereby
without the prior written consent of the other parties hereto, which shall not
be unreasonably withheld. On or after the Closing Date, Sellers shall not
issue a press release or announcement concerning this Agreement and the
transactions contemplated hereby without the prior written consent of the
Purchaser.
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8.9 Further Actions. Each party shall execute and deliver such
other certificates, agreements and other documents and take such other actions
as may reasonably be requested by the other parties in order to consummate or
implement the transactions contemplated by this Agreement. Without limiting
the foregoing, Sellers agree to perform any reasonable acts necessary to obtain
state, federal or foreign registration of any Xxxx currently used in the
Company's business as now conducted. Without limiting the foregoing, if, at
any time or from time to time after the Closing, the Purchaser, the Company or
any Seller shall identify any Related Asset that was not transferred to the
Company as required by Section 4.9, then the Sellers shall immediately
transfer, without additional consideration, all of their rights, ownership and
interest in any such Related Asset to the Company, free and clear of any
mortgage, pledge, lien, charge, encumbrance or other adverse claim. Such
transfer shall be effected pursuant to conveyance documents in form and
substance satisfactory to the Purchaser in its reasonable judgment.
8.10 Assignment. No Seller may assign or delegate any of its
rights or duties hereunder, without the prior written consent of the Purchaser.
Any assignment or delegation made without such consent shall be void. Except
as otherwise provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors,
assigns and legal representatives.
8.11 Independent Covenants. The covenants contained herein are
independent and separate, and in the event that any provision contained herein
is declared invalid or illegal, the other provisions hereof shall not be
affected or impaired thereby and shall remain valid and enforceable.
8.12 Specific Performance. In the event of a breach or threatened
breach by any party hereto of the provisions of this Agreement, any other party
hereto shall be entitled to specific performance. Nothing herein shall be
construed as prohibiting any party hereto from pursuing any other remedies
available for such breach or threatened breach, including the recovery of
damages.
8.13 Governing Law. This Agreement and the other documents
delivered pursuant hereto and the legal relations between the parties shall be
governed and construed in accordance with the laws of the State of Texas,
without giving effect to principles of conflict of laws.
8.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but
all of which together shall constitute one and the same instrument.
8.15 Withholding or Granting of Consent. Except as otherwise
provided in this Agreement, each party hereto may, with respect to any consent
or approval that it is entitled to grant pursuant to this Agreement or any
other document or instrument or agreement delivered or entered into pursuant
hereto, grant or withhold such consent or approval in its sole and uncontrolled
discretion, with or without cause, and subject to such conditions as it shall
deem appropriate.
8.16 No Third Party Beneficiaries. Nothing in this Agreement shall
provide any benefit to any third party or entitle any third party to any claim,
cause of action, remedy or right of any kind, it being the intent of the
parties that this Agreement shall not be construed as a third party beneficiary
contract; provided, however, that the indemnification provisions in Sections
7.2 shall inure to the benefit of the Purchaser Indemnitees and the Seller
Indemnitees as provided therein.
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34
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
AUTHENTIC SPECIALTY FOODS, INC.
By: /s/ XXXXXX X. XXXXXX, XX.
------------------------------
Xxxxxx X. Xxxxxx, Xx.
Vice President
THE TORTILLA KING, INC.
By: /s/ XXXXXXXX XXXXX, XX.
------------------------------
Xxxxxxxx Xxxxx, Xx.
President
/s/ XXXXXXXX XXXXX, XX.
---------------------------------
XXXXXXXX XXXXX, XX.
/s/ XXXXX X. XXXXX
---------------------------------
XXXXX X. XXXXX
SBJ TRUST
By /s/ XXXXXXXX XXXXX, XX.
-------------------------------
Xxxxxxxx Xxxxx, Xx.
Trustee
By /s/ XXXXX X. XXXXX
-------------------------------
Xxxxx X. Xxxxx
Trustee
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APPENDICES, EXHIBITS AND SCHEDULES
Appendix I Ownership of Common Stock
Appendix II Related Assets
Exhibit A Form of Lease Agreement
Exhibit B Form of Employment Agreement
Schedule 2.1 Foreign Jurisdictions
Schedule 2.2 Stock Ledger
Schedule 2.4 Governmental Authorizations
Schedule 2.5 Financial Statements
Schedule 2.6 Adverse Changes
Schedule 2.7(a) Leases
Schedule 2.8 Litigation
Schedule 2.9(a) Marks
Schedule 2.9(d) Certain Employees
Schedule 2.10(g) Environmental Reports and Records
Schedule 2.11(a) Options
Schedule 2.11(b) Service Agreements
Schedule 2.11(c) Agreements Relating to Real Property
Schedule 2.11(d) Construction Contracts
Schedule 2.11(e) Accounts Receivable
Schedule 2.11(f) Compensation
Schedule 2.11(g) Compensation Policies
Schedule 2.11(h) Pleadings and Complaints
Schedule 2.11(i) Depreciation Schedules
Schedule 2.11(j) Employee Benefits
Schedule 2.11(k) Credit Documents
Schedule 2.11(l) Material Contracts
Schedule 2.11(m) Agreements Not to Compete
Schedule 2.11(n) Royalty Agreements
Schedule 2.11(o) Contracts with Interested Parties
Schedule 2.12 Taxes
Schedule 2.13 Employee Benefit Plan, Employee Classification
Schedule 2.14 Conflicts
Schedule 2.17 Banks
Schedule 2.18 Officers and Directors
Schedule 2.19 Suppliers and Customers
Schedule 2.21 Outstanding Indebtedness
Schedule 2.22 Part I Insurance Information
Schedule 2.22 Part II Insurance Policies
Schedule 4.1(j) Capital Expenditures, Additions, and Improvements
Schedule 4.1(r) Certain Amendments
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APPENDIX I
OWNERSHIP OF COMMON STOCK
NUMBER OF
SHARES OF
NUMBER OF PORTION OF PURCHASER
SHARES OF CASH PURCHASE COMMON STOCK
COMMON STOCK PRICE TO TO BE
SELLER OWNED BE RECEIVED RECEIVED
------------------- ------------ ------------- ------------
Xxxxxxxx Xxxxx, Xx. 500 $2,375,000 120,313
Xxxxx X. Xxxxx 500 2,375,000 120,313
SBJ Trust 0 250,000 0
----- ---------- -------
Total 1,000 $5,000,000 240,626
===== ========== =======
