Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DECORIZE, INC.
AND
STEP OF FAITH, INC
AND
FAITH WALK DESIGNS, INC.
AND
XXXX XXXXXXX XXXXXX AND XXXXX XXXXXX
July 31, 2001
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 Merger.....................................................4
1.2 Closing....................................................4
1.3 Effective Time.............................................4
ARTICLE II
TERMS OF MERGER
2.1 Corporate Charter..........................................5
2.2 By-Laws....................................................5
2.3 Directors..................................................5
2.4 Officers ..................................................5
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares.......................................5
3.2 Fractional Shares..........................................6
3.3 Exchange Procedures........................................6
3.4 Rights of From Faith Walk Designs Shareholders.............6
3.5 Termination of Exchange Fund...............................6
3.6 Lost or Destroyed Shares...................................7
3.7 Compliance with Federal and State Blue Sky Laws............7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FAITH WALK DESIGNS
AND FAITH WALK DESIGNS SHAREHOLDERS
4.1 Organization, Standing, and Power..........................7
4.2 Subsidiaries...............................................7
4.3 Capital Structure..........................................7
4.4 Authority..................................................8
4.5 Financial Statements.......................................9
4.6 Authorizations; Compliance With Applicable Laws............9
4.7 Litigation and Claims.....................................10
4.8 Taxes .................................................10
4.9 Certain Agreements........................................11
4.10 Benefit Plans.............................................11
4.11 Insurance.................................................11
4.12 Absence of Certain Changes or Events......................13
4.13 Properties, Leases and Other Agreements...................14
4.14 Patents, Trademarks and Trade Names.......................14
4.15 Votes Required............................................15
4.16 Tax Matters...............................................15
4.17 Conditions of Assets......................................15
4.18 Inventory.................................................15
4.19 Accounts Receivable.......................................15
4.20 Customers.................................................15
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4.21 Full Disclosure...........................................15
4.22 Securities Matters........................................15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DECORIZE AND STEP OF FAITH
5.1 Organization, Standing and Power..........................16
5.2 Subsidiaries..............................................16
5.3 Capital Structure.........................................17
5.4 Authority.................................................17
5.5 Financial Statements......................................17
5.6 Litigation and Claims.....................................18
5.7 Taxes.....................................................18
5.8 Absence of Certain Changes or Events......................18
5.9 Properties, Leases and Other Agreements...................19
5.10 Tax Matters...............................................19
5.11 Full Disclosure...........................................19
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS OF FAITH WALK DESIGNS
6.1 Affirmative Covenants.....................................19
6.2 Negative Covenants........................................20
6.3 Access and Information....................................21
6.4 Update Disclosure; Breaches...............................21
6.5 Tax Treatment.............................................22
ARTICLE VII
CERTAIN COVENANTS AND AGREEMENTS OF DECORIZE AND STEP OF FAITH
7.1 Affirmative Covenants.....................................22
7.2 Negative Covenants........................................22
7.3 Access and Information....................................23
7.4 Update Disclosure; Breaches...............................23
7.5 Tax Treatment.............................................24
7.6 Pledge of Real Property...................................24
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Brokers and Finders.......................................24
8.2 Additional Agreements; Reasonable Efforts.................24
8.3 Expenses..................................................24
3.7 Repayment of Loans........................................24
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to Obligations of Decorize and Step
of Faith..................................................25
9.2 Conditions to Obligations of Faith Walk Designs and
Faith Walk Designs Shareholders...........................26
ARTICLE X
TERMINATION
10.1 Termination and Abandonment...............................27
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10.2 Effect of Termination.....................................27
10.3 Extension Waiver..........................................27
10.4 Specific Performance and Other Remedies...................27
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by Faith Walk Designs Shareholders........27
11.2 Indemnification by Decorize and Step of Faith.............28
11.3 Indemnification Procedure.................................28
11.4 Indemnification Limits....................................28
11.5 Survival .................................................28
ARTICLE XII
GENERAL PROVISIONS
12.1 Survival of Representations, Warranties and Agreements....28
12.2 Notices .................................................29
12.3 Counterparts..............................................29
12.4 Entire Agreement; No Third Party Beneficiaries............29
12.5 Amendment.................................................29
12.6 Governing Law.............................................29
12.7 Publicity.................................................29
12.8 Assignment................................................29
12.9 Knowledge of the Parties..................................29
12.10 Confidentiality...........................................29
Exhibit "A-1" Form of Articles of Merger (Texas)
Exhibit "A-2" Form of Articles of Merger (Missouri)
Exhibit "B" Form of Promissory Note to Xxxx Xxxxxxx Xxxxxx and Xxxxx Xxxxxx
Exhibit "C" Form of Employment Agreement of Xxxx Xxxxxxx Xxxxxx
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), made and entered into the
31st day of July, 2001, by and among Decorize, Inc., a Delaware corporation
("Decorize"), Step of Faith, Inc., a Missouri corporation ("Step of Faith"),
Faith Walk Designs, Inc., a Texas corporation ("Faith Walk Designs") (all of
said corporations being hereinafter sometimes referred to individually as a
"Constituent Corporation" and collectively as the "Constituent Corporations"),
and Xxxx Xxxxxxx Xxxxxx and Xxxxx Xxxxxx (hereinafter sometimes referred to
collectively as the "Faith Walk Designs Shareholders").
W I T N E S S E T H:
WHEREAS, Decorize is a corporation duly organized and existing under
the laws of the State of Delaware, and has on the date hereof an authorized
capital consisting of 60,000,000 shares of stock, of which 50,000,000 shares are
common stock with a par value of $.001 per share and 10,000,000 shares are
preferred stock with a par value of $.001 per share, (the "Preferred Stock");
WHEREAS, Step of Faith is the wholly owned subsidiary of Decorize, and
has on the date hereof an authorized capital stock consisting of 30,000 shares
of common stock, par value $1.00 per share, of which on the date hereof 500
shares are issued and outstanding, and are held by Decorize;
WHEREAS, Faith Walk Designs is a corporation duly organized and
existing under the laws of the State of Texas, and has on the date hereof an
authorized capital consisting of 1,000 shares of common stock, par value of One
Dollar ($1.00) per share, of which on the date hereof 1,000 shares are issued
and outstanding, and which are held by the Faith Walk Designs Shareholders; and
WHEREAS, the respective Boards of Directors and shareholders of the
Constituent Corporations are of the opinion that the merger (the "Merger"),
pursuant to this Agreement, of Faith Walk Designs with and into Step of Faith on
the terms and conditions contained herein and in accordance with The General and
Business Corporation Law of Missouri (the "Missouri Corporation Law") is in the
best interests of the Constituent Corporations and their respective
shareholders, and therefore have approved this Agreement and the Merger on the
terms and conditions as set forth in this Agreement. At the effective time of
the Merger, the outstanding shares of common stock of Faith Walk Designs held by
the Faith Walk Designs Shareholders shall be converted into the right to receive
shares of common stock of Decorize, promissory notes of Decorize, or a
combination thereof, as set forth in this Agreement. As a result shareholders of
Faith Walk Designs shall become shareholders of Decorize, and Step of Faith, as
the wholly owned subsidiary of Decorize, shall continue to conduct, under its
corporate charter the business formerly conducted by Faith Walk Designs. The
transactions contemplated in this Agreement are subject to the satisfaction of
certain other conditions described in this Agreement. It is the intention of the
parties to this Agreement that the Merger, for federal income tax purposes,
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Faith Walk Designs Shareholders and the Constituent
Corporations desire to make certain representations, warranties and agreements
in connection with the Merger and to set forth the terms and conditions of the
Merger.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement and
the Missouri Corporation Law, at the Closing Date (as hereinafter defined),
Faith Walk Designs shall be merged with and into Step of Faith (the "Merger").
Step of Faith shall be the surviving corporation (hereinafter sometimes referred
to as the "Surviving
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Corporation") resulting from the Merger and shall operate under its corporate
charter. All of the property, rights, privileges, leases and patents of Faith
Walk Designs shall be transferred to and become the property of Step of Faith.
The corporate identity and existence of Faith Walk Designs, separate and apart
from Step of Faith, shall cease on consummation of the Merger.
1.2 Closing. The closing of the Merger (the "Closing") shall take place
at the offices of Neale & Xxxxxx, L.L.P., on July 31, 2001 (the "Closing Date")
or on a date that shall be no later than the business day following the
satisfaction or waiver of all conditions to the obligations of the parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective parties will take at the Closing itself), or
such other date as the parties may mutually determine.
1.3 Effective Time. On or as soon as practicable after the Closing
Date, articles of merger, in the form as attached hereto as Exhibits "A-1",
"A-2" and made a part hereof by this reference, shall be prepared and filed in
accordance with the Texas corporate law, Missouri Corporation Law and the Merger
shall be effective upon the later date of the issuance of a certificate of
merger by the Secretary of State of the State of Missouri or the Secretary of
State of the State of Texas, as the case may be, (said later date hereinafter
referred to as the "Effective Time" of the Merger).
ARTICLE II
TERMS OF MERGER
2.1 Corporate Charter. The articles of incorporation of Step of Faith
in effect immediately prior to the Effective Time shall be the articles of
incorporation of the Surviving Corporation unless otherwise amended or repealed.
The name of the Surviving Corporation shall be Step of Faith, Inc.
2.2 By-Laws. The By-Laws of Step of Faith in effect immediately prior
to the Effective Time shall be the By-Laws of the Surviving Corporation until
otherwise amended or repealed.
2.3 Directors. The directors of Step of Faith in office immediately
prior to the Effective Time shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the By-Laws of
the Surviving Corporation.
2.4 Officers. The officers of Step of Faith in office immediately prior
to the Effective Time, together with such additional persons as may hereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the By-Laws of the Surviving Corporation.
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. As of the Effective Time, by virtue of the
Merger and without any action on the part of a Constituent Corporation, or the
shareholders of a Constituent Corporation, but subject to adjustment as provided
herein, the shares of the Constituent Corporations shall be converted and
exchanged as follows:
(a) Each share of common stock of Decorize issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(b) Each share of common stock of Step of Faith issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(c) Each share of Faith Walk Designs common stock issued and
outstanding at the Effective Time shall cease to be outstanding, and
shall be automatically cancelled and retired and shall cease to exist.
The total consideration to be given to the Faith Walk Designs
Shareholders for their interest is to be Two Hundred Fifteen Thousand
Seven Hundred Forty-Four Dollars and Twenty Seven Cents ($215,744.27),
in the form of a promissory note, Two Hundred Eighty-Four Thousand Two
Hundred Fifty-Five Dollars and
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Seventy-Three Cents, ($284,255.73) in cash, and Five Hundred Ten
Thousand Dollars, ($510,000.00) in Decorize common stock for a total
value of One Million Ten Thousand Dollars, ($1,010,000.00), to be paid
as follows:
(i) Decorize shall pay in readily available funds to
the Faith Walk Designs Shareholders an amount equal to Two
Hundred Eighty-Four Thousand Two Hundred Fifty-Five Dollars
and Seventy-Three Cents ($284,255.73). This amount shall be
paid by the Faith Walk Designs Shareholders to Faith Walk
Designs at Closing to pay off all loans to shareholders,
officers and employees of Faith Walk Designs and the family
members of each as reflected on the books of Faith Walk
Designs as well as any accounts payable due to any of the
foregoing;
(ii) Decorize shall execute and deliver a promissory
note in the principal amount of Two Hundred Fifteen Thousand
Seven Hundred Forty-Four Dollars and Twenty Seven Cents
($215,744.27), (the "Xxxxxx Note), in the form as attached
hereto as Exhibit "B" and made a part hereof by this
reference; and
(iii) The right of the Faith Walk Designs
Shareholders to receive such a number of shares of common
stock of Decorize that would have an aggregate share price
equal to Five Hundred Ten Thousand Dollars, ($510,000.00),
based on the Trading Price (as defined in paragraph (iv)
below).
(iv) In addition to the adjustments contemplated in
accordance with Section 3.2 as hereinafter provided, the
actual number of common stock shares to be given in accordance
with subsection (iii) of this Section 3.1 shall be based upon
an average trading price per share of common stock in Decorize
calculated over the thirty (30) day period immediately
following the date of Closing as established by the closing
price per share of the common stock on the NASDAQ exchange
each trading day during such period, (the "Trading Price"). By
way of illustration, the Shareholders are entitled to receive
$500,000.00 worth of Decorize common stock at Closing, and if
the Trading Price is $4.00 per share, the Shareholders would
be entitled to receive on a pro rata basis 125,000 shares of
Decorize common stock. If the Trading Price is $2.00 per
share, then the Shareholders would be entitled to receive on a
pro rata basis 250,000 shares of Decorize common stock.
3.2 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Faith Walk Designs common stock exchanged
pursuant to the Merger who would otherwise be entitled to receive a fraction of
a share of Decorize common stock shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of the share of Decorize
common stock multiplied by the value of one share of Decorize common stock at
the Effective Time as valued in Section 3.1 (iv) and as further adjusted under
Section 3.2. No such holder shall be entitled to dividends, voting rights, or
any other rights as a shareholder in respect of any fractional shares.
3.3 Exchange Procedures. At the Closing, Decorize shall deposit with
Neale and Xxxxxx, L.L.P., (the "Exchange Agent"), for the benefit of the Faith
Walk Designs Shareholders, the Xxxxxx Note, the cash to be paid to the Faith
Walk Designs Shareholders, the cash to be paid in lieu of fractional shares, and
promptly after completion of the thirty (30) day trading period noted in section
3.1, certificates dated as of the Closing Date representing the shares of
Decorize common stock (the "Exchange Fund") to be issued and paid pursuant to
Section 3.1 hereof in exchange for the outstanding shares of Faith Walk Designs
common stock. As of the Closing Date, Decorize shall cause the Exchange Agent to
deliver to each Faith Walk Designs Shareholder (i) a letter of transmittal which
will specify that delivery shall be effective, and risk of loss and title to the
Faith Walk Designs certificates shall pass, only upon delivery of the Faith Walk
Designs certificates to the Exchange Agent and which shall be in such form and
have such other provisions as Faith Walk Designs and Decorize may reasonably
specify, and (ii) instructions for use in effectuating the surrender of the
Faith Walk Designs certificates in exchange for certificates representing shares
of Decorize common stock, the lump sum cash payments, cash to be paid in lieu of
any fractional share, and the Xxxxxx Note. Upon surrender of a Faith Walk
Designs Shareholder's Faith Walk Designs certificate or certificates for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, the holder of such Faith Walk Designs certificate(s) shall be
entitled to receive in exchange therefore,
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following said surrender, (1) immediately available funds in the amount of the
cash to be paid in lieu of a fractional share and the lump sum payments provided
above, and (2) the Xxxxxx Note, and the Faith Walk Designs certificate(s) so
surrendered shall forthwith be cancelled. The actual certificate for Decorize
common stock shall be issued no later than forty (40) days after the date of
Closing.
3.4 Rights of Former Faith Walk Designs Shareholders. At the Effective
Time, the stock transfer books of Faith Walk Designs shall be closed as to
holders of Faith Walk Designs common stock immediately prior to the Effective
Time and no transfer of Faith Walk Designs common stock by any such holder shall
thereafter be made or recognized. Until surrendered in exchange in accordance
with the provisions of Section 3.4 hereof, each certificate theretofore
representing shares of Faith Walk Designs common stock shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Section 3.1 hereof in exchange therefore.
3.5 Termination of Exchange Fund. Any portion of the Exchange Fund that
remains unclaimed by the Faith Walk Designs Shareholders for twelve (12) months
after the Closing Date shall be paid to Decorize. Any shareholders of Faith Walk
Designs who have not theretofore complied with this Article III shall thereafter
look only to Decorize for payment of their shares of Decorize common stock, the
Xxxxxx Note, the cash, and cash in lieu of any fractional share of Decorize
common stock, without any interest thereon. Notwithstanding the foregoing,
neither the Exchange Agent nor Decorize shall be liable to any former holder of
shares of Faith Walk Designs common stock for any amount properly delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar laws.
3.6 Lost or Destroyed Certificates. In the event any Faith Walk Designs
certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Faith Walk Designs
certificate to be lost, stolen or destroyed and, if required by the Exchange
Agent, the execution and delivery of an indemnity agreement whereby said person
shall agree to indemnify the Exchange Agent and Decorize against any claim that
may be made against it with respect to such Faith Walk Designs certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed Faith
Walk Designs certificate the shares of Decorize common stock and other
consideration in an amount as determined in accordance with Section 3.1 hereof,
deliverable in respect thereof pursuant to this Agreement.
3.7 Compliance with Federal and State Blue Sky Laws
(a) In connection with the transaction contemplated by this
Agreement, Decorize and the Faith Walk Designs Shareholders shall each
file, with the assistance of the other and their respective legal
counsel, such notices, applications, reports or other instruments as
may be deemed by them to be necessary or appropriate in an effort to
document reliance on such exemptions and the appropriate regulatory
authority in the states where the Faith Walk Designs Shareholders
reside unless an exemption requiring no filing is available in such
jurisdictions, all to the extent and in the manner as may be deemed by
such parties to be appropriate.
(b) In order to more fully document reliance on the exemptions
as provided herein, Decorize, Step of Faith and the Faith Walk Design
Shareholders shall execute and deliver to the other, at or prior to the
Closing, such further letters of representation, acknowledgment,
suitability or the like as Step of Faith or Decorize and their counsel
may reasonably request in connection with reliance on exemptions from
registration under such securities laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FAITH WALK DESIGNS,
FAITH WALK DESIGNS SHAREHOLDERS
Faith Walk Designs (both for itself and as successor in interest to
Odds & Ends, L.LP.) and the Faith Walk Designs Shareholders hereby jointly and
severally represent and warrant to Decorize and Step of Faith as follows:
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4.1 Organization, Standing, and Power. Faith Walk Designs is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas, and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted. Copies of the articles of incorporation and by-laws of Faith
Walk Designs, as certified by the secretary of Faith Walk Designs, have
heretofore been delivered to Decorize, and are complete and correct as of the
date of this Agreement. Faith Walk Designs is duly qualified to transact
business, and is in good standing as a foreign corporation in each jurisdiction
where the character of its activities requires such qualification, except where
the failure to so qualify would not have a material adverse effect on the
business, assets, financial condition, results of operations or prospects of
Faith Walk Designs taken as a whole.
4.2 Subsidiaries. Faith Walk Designs has no subsidiaries.
4.3 Capital Structure.
(a) As of the date hereof, the authorized capital stock of
Faith Walk Designs consists of 1,000 shares of common stock, par value
One Dollar ($1.00) per share.
(b) As of the date hereof, 1,000 shares of common stock of
Faith Walk Designs are issued and outstanding, and no shares of common
stock are held in treasury. All shares of common stock of Faith Walk
Designs are held by the Faith Walk Designs Shareholders, with each Xxxx
Xxxxxxx Xxxxxx and Xxxxx Xxxxxx owning 500 shares.
(c) Except as set forth in the Faith Walk Designs Disclosure
Letter (which is a letter delivered by Faith Walk Designs to Decorize
concurrently with this Agreement, and which identifies, as to each
matter disclosed therein, the Section of this Agreement to which the
matter relates), as of the date hereof, Faith Walk Designs has not
issued any outstanding bonds, debentures, notes or other indebtedness
having the right to vote (or convertible into securities having the
right to vote) on any matters on which shareholders may vote ("Voting
Debt"). All outstanding shares of Faith Walk Designs capital stock are
validly issued, fully paid and non-assessable and not subject to or
issued in violation of any preemptive rights, and there are no options,
warrants, calls, rights, or agreements of any character whatsoever to
which Faith Walk Designs is a party or by which it is bound obligating
Faith Walk Designs to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or Voting
Debt or obligating Faith Walk Designs to grant, extend or enter into
any such option, warrant, call, right, or agreement. There will be no
option, warrant, call, right or agreement obligating Faith Walk Designs
to issue, deliver or sell, or cause to be issued, delivered or sold,
any shares of its capital stock or Voting Debt or obligating Faith Walk
Designs to grant, extend or enter into any such option, warrant, call,
right or agreement after the date hereof.
(d) Faith Walk Designs has not purchased, redeemed, cancelled
or otherwise acquired any of its capital stock or Voting Debt during
the two (2) years preceding the date hereof, and there are no
obligations, contingent or otherwise, of Faith Walk Designs to
repurchase, redeem or otherwise acquire any shares of its capital stock
or Voting Debt.
4.4 Authority.
(a) Faith Walk Designs has all requisite corporate power and
authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement, and
the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Faith Walk Designs.
This Agreement has been duly executed and delivered by Faith Walk
Designs, and constitutes a valid and binding obligation of Faith Walk
Designs and the Faith Walk Designs Shareholders enforceable in
accordance with its terms, subject to compliance with the provisions of
the Missouri Corporation Law.
(b) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated herein, will not,
conflict with, or result in any violation of, or default (with or
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without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or
the loss of a benefit under, or the creation of a lien, pledge,
security interest or other encumbrance on assets (any such conflict,
violation, default, right of termination, cancellation or acceleration
loss or creation, a "Violation"), pursuant to the provisions of (i) the
articles of incorporation or by-laws of Faith Walk Designs, or (ii) any
loan or credit agreement, note, mortgage, indenture, lease, Faith Walk
Designs Benefit Plan (as hereinafter defined) or other agreement,
obligation, instrument, permit, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Faith
Walk Designs, or its properties or assets, which Violation would have a
material adverse effect on Faith Walk Designs.
(c) Other than in connection with or in compliance with the
provisions of the Missouri and Texas Corporation Law or as listed in
the Faith Walk Designs Disclosure Letter, no consent, approval, order
or authorization of, or registration, declaration or filing with, any
governmental entity or other person is required on the part of Faith
Walk Designs in connection with the execution and delivery of this
Agreement or the consummation by Faith Walk Designs of the transactions
contemplated hereby.
4.5 Financial Statements.
(a) The statement of financial condition of Faith Walk Designs
as of May 31, 2001, and the related statements of income, cash flow and
shareholder's equity for the period ending May 31, 2001 (the "Faith
Walk Designs Latest Statement Date"), in the form prepared for Faith
Walk Designs' internal use, copies which have been furnished by Faith
Walk Designs to Decorize, and the statement of financial condition of
Faith Walk Designs, as of May 31, 2001, and the related statements of
income, cash flow and shareholder's equity for the three (3) months
then ended, in the form prepared for Faith Walk Designs' internal use,
copies of which have been furnished by Faith Walk Designs to Decorize
(collectively the "Faith Walk Designs Financial Statements") have been
prepared in accordance with generally accepted accounting principles as
utilized in the Faith Walk Designs Financial Statements applied on a
consistent basis (except as may be indicated therein or in the notes
thereto), and present fairly the financial position of Faith Walk
Designs, at the dates and results of operations, changes in
shareholder's equity and cash flows for the periods stated therein. In
the case of interim fiscal periods, all adjustments, consisting only of
normal reoccurring items, which management of Faith Walk Designs
believes necessary for a fair presentation of such financial
information, have been made, none of which will have a material adverse
effect on Faith Walk Designs.
(b) Except as and to the extent set forth in the statement of
financial condition of Faith Walk Designs as of May 31, 2001, or in the
notes thereto, Faith Walk Designs has no liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) that
would be required to be reflected on a statement of financial
condition, or in the notes thereto, prepared in accordance with
generally accepted accounting principles, except for liabilities or
obligations incurred in the ordinary course of business since the Faith
Walk Designs Latest Statement Date that would not, individually or in
the aggregate, have a material adverse effect on Faith Walk Designs.
Except as set forth in the Faith Walk Designs Disclosure Letter, Faith
Walk Designs has no liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that are not required to be
reflected on a balance sheet, or in the notes thereto, except for
liabilities or obligations that do not, individually or in the
aggregate, have a material adverse effect on Faith Walk Designs.
4.6 Authorizations; Compliance With Applicable Laws.
(a) Faith Walk Designs holds all authorizations, permits,
licenses, variances, exemptions, orders and approvals of all
governmental entities which are material to the operations of its
business (the "Faith Walk Designs Permits"). All such Faith Walk
Designs Permits are in full force and effect as of the Closing Date,
and Faith Walk Designs is in compliance with the terms of the Faith
Walk Designs Permits, except where the failure to so comply could not
reasonably be expected to have a Material adverse effect on Faith Walk
Designs. Except as disclosed in the Faith Walk Designs Disclosure
Letter, the business of Faith Walk Designs is not now and has not been,
conducted in violation of any domestic (federal, state or local) law,
statute, ordinance or regulation of any governmental entity
(collectively "Laws") except for
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possible violations which individually or in the aggregate do not and,
insofar as reasonably can be foreseen, in the future will not, have a
material adverse effect on Faith Walk Designs. Except as set forth in
the Faith Walk Designs Disclosure Letter, as of the date hereof, no
investigation or review by any governmental entity with respect to
Faith Walk Designs is pending or, to the knowledge of Faith Walk
Designs, threatened, nor has any governmental entity indicated an
intention to conduct the same.
(b) The Faith Walk Designs Disclosure Letter identifies each
parcel of real estate currently owned, leased or otherwise possessed or
controlled by Faith Walk Designs on the date of this Agreement
(collectively, the "Faith Walk Designs Property"). Except as set forth
in the Faith Walk Designs Disclosure Letter, to the knowledge of Faith
Walk Designs, none of the Faith Walk Designs Property owned or leased
by Faith Walk Designs for use in the operation of its business is in
violation of any applicable zoning ordinance or other law, regulation
or requirement relating to operation of any properties used, including,
without limitation, applicable federal, state and local laws, rules and
regulations relating to the environment or to human health and safety
associated with the environment (collectively "Environmental Laws"),
other than violations that, in the aggregate, would not have a material
adverse effect on Faith Walk Designs; and Faith Walk Designs has not
received any notice of any such violation, or the existence of any
condemnation proceeding with respect to any Faith Walk Designs
Property. Except as set forth in the Faith Walk Designs Disclosure
Letter, to the knowledge of Faith Walk Designs, no Toxic Substances (as
defined below) have been deposited or disposed in, on or under any
Faith Walk Designs Property during the period in which Faith Walk
Designs has owned, occupied, managed, controlled or operated such
properties, except to the extent the same would not have a material
Adverse Effect. Except as set forth in the Disclosure Letter, to Faith
Walk Designs' knowledge, no portion of the Faith Walk Designs Property
has ever been used as a dump or gasoline service station by any person,
including past owners, occupants and operators of such properties. To
the knowledge of Faith Walk Designs, there are no underground or
aboveground storage tanks (whether or not currently in use) located on
or under the Faith Walk Designs Property, and no underground tank
previously located on the Faith Walk Designs Property has been removed
therefrom. To the knowledge of Faith Walk Designs, there are no
conditions or circumstances in connection with the Faith Walk Designs
Property that could reasonably be anticipated to (i) cause any Faith
Walk Designs Property to be subject to any restrictions on ownership,
occupancy, use or transferability under any applicable Environmental
laws, or (ii) materially reduce the value of any Faith Walk Designs
Property. To the knowledge of Faith Walk Designs, Faith Walk Designs
has not been identified as a potentially responsible party in a matter
arising under any Environmental Laws. For purposes of this Agreement,
(1) "Toxic Substances" shall mean petroleum or petroleum based
substance or waste, solid waste, PCBs, pesticides, herbicides, lead,
radioactive materials, asbestos or asbestos containing materials,
ureaformaldehyde foam installation, or substances defined as "hazardous
substances" or "toxic substances" in any Environmental Laws, and (2)
materials will be considered to be deposited or disposed in, on or
under any real property if such materials have been stored, treated,
recycled, used or accidentally or intentionally spilled, released,
dumped, emitted, or otherwise placed, deposited or disposed of, or used
in any construction, in, on or under such property.
4.7 Litigation and Claims. Except as disclosed in the Faith Walk
Designs Disclosure Letter:
(a) Faith Walk Designs is not subject to any continuing order
of, or written agreement or memorandum or understanding with any
governmental entity, or any judgment, order, writ, injunction, decree
or award of any governmental entity or arbitrator; and
(b) There is no action, suit, litigation, proceeding or
arbitration against or affecting Faith Walk Designs, or to the
knowledge of Faith Walk Designs or the Faith Walk Designs Shareholders,
any directors, officers, employees or agents of Faith Walk Designs (in
their respective capacities as directors, officers, employees or
agents) pending or, to the knowledge of Faith Walk Designs or the Faith
Walk Designs Shareholders, threatened, which would, if adversely
determined, have a material adverse effect on Faith Walk Designs or, to
the knowledge of Faith Walk Designs or the Faith Walk Designs
Shareholders, any basis therefore.
(c) There exists an outstanding contested claim by Xxxxxx &
Company, Inc. for approximately Nine Thousand Two Hundred Fifty Dollars
for accounting and consulting services
7
performed for Faith Walk Designs, (the "Xxxxxx Claim"). The Faith Walk
Designs Shareholders covenant to indemnify Decorize for any claims,
fees, expenses, charges or other amounts due directly or indirectly as
a result of the Xxxxxx Claim.
4.8 Taxes. Faith Walk Designs has filed all tax returns required to be
filed by it, all such returns are true and correct in all material respects and
reflect all amounts due with respect to the periods indicated, and Faith Walk
Designs has paid or has set up an adequate reserve for the payment of, all taxes
required to be paid as shown on such returns, except to the extent such
nonpayment did not result in a material adverse effect on Faith Walk Designs.
The Faith Walk Designs Disclosure Letter sets forth, as of the date hereof, the
following information with respect to Faith Walk Designs:
(a) Whether there is an examination pending by the Internal
Revenue Service ("IRS") with respect to Faith Walk Designs and, if so,
the tax years involved,
(b) Whether Faith Walk Designs has executed or filed with the
IRS any agreement which is still in effect extending the period for
assessment and collection of any federal tax, and if so, the tax years
covered by such agreement and the expiration of such extension, and
(c) Whether there are any existing material disputes as to
state or local taxes.
There are no liens for taxes upon the assets of Faith Walk
Designs, except for statutory liens for taxes not yet delinquent or the
validity of which is being contested in good faith by appropriate
proceedings and, in either case, only if adequate reserves therefor
have been established on Faith Walk Designs' books in accordance with
generally accepted accounting principles. Except as disclosed in the
Faith Walk Designs Disclosure Letter, Faith Walk Designs is not a party
to any action or proceeding by any governmental authority for
assessment and collection of taxes, and no claim for assessment and
collection of taxes has been asserted against it. For purposes of this
Agreement, the term "tax" shall include all federal, state and local
income, profits, franchise, gross receipts, payroll, sales, employment,
use, personal and real property, withholding, excise and other taxes,
duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
Faith Walk Designs has withheld from its employees (and timely paid to
the appropriate governmental agency) amounts which are proper and
accurate in all material respects for all periods through the date
hereof in material compliance with all tax withholding provisions of
applicable federal, state and local laws (including, without
limitation, income, social security and employment tax withholding for
all types of compensation).
4.9 Certain Agreements. Except as disclosed in the Faith Walk Designs
Disclosure Letter, and except for this Agreement, Faith Walk Designs is not a
party to any oral or written (i) consulting or employment agreement or other
agreement providing any term of employment, compensation guarantee, or severance
benefit, (ii) union or collective bargaining agreement, (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
option or stock purchase plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of the transactions
contemplated by this Agreement, (iv) contract, agreement or understanding to
repurchase assets previously sold (or to indemnify or otherwise compensate the
purchaser in respect of such assets) (other than contracts entered into in the
ordinary course of business,), (v) contract containing covenants which limit the
liability of Faith Walk Designs to compete in any line of business or with any
person or which involve any restriction of the geographical area in which, or
method by which, Faith Walk Designs may carry on its business, (vi) any
contract, agreement or other instrument or undertaking which is not terminable
by Faith Walk Designs without additional payment or penalty within sixty (60)
days and obligates Faith Walk Designs for payments or other consideration for a
value in excess of $10,000.00, or (vii) other executory material agreement.
Except as set forth in the Faith Walk Designs Disclosure Letter, Faith Walk
Designs is not in Violation of any loan or credit agreement, note, mortgage,
indenture or other agreement, obligation or instrument applicable to Faith Walk
Designs or its properties or assets, except for any such Violations that would
not, individually or in the aggregate, have a material adverse effect on Faith
Walk Designs, and neither Faith Walk Designs nor the Faith Walk Designs
Shareholders have knowledge of (i) events that with
8
notice or the passage of time would constitute a Violation, (ii) a Violation of
any third party, or (iii) intent of any third party to terminate.
4.10 Benefit Plans.
(a) The Faith Walk Designs Disclosure Letter lists (i) each
employee bonus, incentive, deferred compensation, stock purchase, stock
appreciation right, stock option, fringe benefit and severance pay
plan, (ii) each pension, profit sharing, stock bonus, thrift, savings
and employee stock ownership plan, (iii) each health, welfare,
disability, vacation, leave, perquisite or executive plan, program,
policy or practice, and (iv) every other employee benefit plan (within
the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (collectively "Faith Walk Designs
Benefit Plans"), which Faith Walk Designs maintains or to which Faith
Walk Designs contributes on behalf of current or former employees.
Except as disclosed in the Faith Walk Designs Disclosure Letter, to the
knowledge of Faith Walk Designs, all of the Faith Walk Designs Benefit
Plans listed in the Faith Walk Designs Disclosure Letter comply with
all applicable requirements of the Internal Revenue Code, ERISA and all
other applicable federal and state laws and regulations, including,
without limitation, the reporting and disclosure requirements of ERISA.
Each of the Faith Walk Designs Benefit Plans that is intended to be a
pension, profit sharing, stock bonus, thrift or savings plan that is
qualified under Code ss.401(a), has been determined by the IRS to so
qualify under Code ss.401(a), and, except as disclosed in the Faith
Walk Designs Disclosure Letter, to the knowledge of Faith Walk Designs,
there exists no circumstances that would adversely affect the qualified
status of any Faith Walk Designs Benefit Plan under that Section.
Except as set forth in the Faith Walk Designs Disclosure Letter, there
is no pending or, to the knowledge of Faith Walk Designs, threatened
litigation, governmental proceeding or investigation against or
relating to any Faith Walk Designs Benefit Plan, and to the knowledge
of Faith Walk Designs there is no reasonable basis for any material
proceedings, claims, actions or proceedings against Faith Walk Designs,
any Faith Walk Designs Benefit Plan, or any fiduciary of any Faith Walk
Designs Benefit Plan. Except as set forth in the Faith Walk Designs
Disclosure Letter, neither Faith Walk Designs nor any party in interest
(as defined in Section 3(14) of ERISA and Code ss.4975(e)) nor any
Faith Walk Designs Benefit Plan has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA and Code ss.4975(c))
since the date on which said Sections became applicable to such Plan,
and no Faith Walk Designs Benefit Plan has engaged in a transaction
involving the purchase or sale of employer securities by such Plan from
or to a "disqualified person" (within the meaning of Code ss.4975),
other than pursuant to an exemption provided therein. All Faith Walk
Designs Benefit Plans that are group health plans, within the meaning
of Code ss.4980B or Section 601 of ERISA, have been operated in
material compliance with the group health plan continuation coverage
requirements of Code ss.4980B and Section 601 of ERISA to the extent
such requirements are applicable.
(b) There has been no amendment to, written interpretation of,
or announcement (whether or not written) relating to, or any change in
employee participation or coverage under, any Faith Walk Designs
Benefit Plan that is not reflected in the text of such Faith Walk
Designs Benefit Plan which would materially increase the expense
(whether or not such expense is recognized under generally accepted
accounting principles) to the employer whose employees are covered by
such Faith Walk Designs Benefit Plan. Except as expressly provided by
applicable law or the terms of a Faith Walk Designs Benefit Plan, no
condition exists that would prevent the amendment or termination of any
Faith Walk Designs Benefit Plan with respect to any employee.
(c) Faith Walk Designs has delivered to Decorize copies of (i)
each Faith Walk Designs Benefit Plan or if no plan document exists, a
written summary of the material terms thereof, (ii) current summary
plan descriptions of each Faith Walk Designs Benefit Plan for which
they are required, (iii) each trust agreement, insurance policy or
other instrument relating to the funding of any Faith Walk Designs
Benefit Plan, (iv) the most recent Annual Reports (Form 5500 Series)
and accompanying schedules filed with the IRS or the United States
Department of Labor with respect to each Faith Walk Designs Benefit
Plan for which they are required, (v) the most recent determination
letter issued by the IRS with respect to each Faith Walk Designs
Benefit Plan that is intended to qualify under Code ss.401, (vi) the
most recent available financial statements for each Faith Walk Designs
Benefit Plan that has assets, and (vii) the most
9
recent audited financial statements for each Faith Walk Designs Benefit
Plan for which audited financial statements are required by ERISA.
(d) The Faith Walk Designs Disclosure Letter describes any
obligation that Faith Walk Designs has to provide health and welfare
benefits to retirees or other former employees or their dependents
(other than rights arising solely under Section 601 of ERISA or Code
ss.4980B) including information as to the number of retirees, other
former employees and dependents entitled to such coverage and their
ages.
4.11 Insurance. Faith Walk Designs is presently insured, and during
each of the past five calendar years has been insured, for reasonable amounts
with financially sound and reputable insurance companies against such risks as,
to the knowledge of Faith Walk Designs, companies engaged in the similar
business would, in accordance with good business practice, customarily be
insured. Faith Walk Designs does not have any liability for material unpaid
premiums or premium adjustments not properly reflected on the Faith Walk Designs
Financial Statements and no notice of cancellation or termination has been
received by Faith Walk Designs with respect to any material insurance policy
currently in effect. Within the last five years, except as disclosed in the
Faith Walk Designs Disclosure Letter, Faith Walk Designs has not been refused
any insurance with respect to any assets or operations, nor has any coverage
been limited in any material respect as to any assets or operations, by any
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance during the last five years.
4.12 Absence of Certain Changes or Events. Except as disclosed in the
Faith Walk Designs Disclosure Letter, and except as contemplated by this
Agreement, from and after January 1, 2001 through the date of this Agreement:
(a) Faith Walk Designs has carried on its business in the
ordinary and usual course consistent with past practices;
(b) Faith Walk Designs has not amended its articles of
incorporation;
(c) Faith Walk Designs has not issued or sold any of its
capital stock, or issued or sold any corporate debt securities or
otherwise incurred debt which would be classified as long term debt on
its balance sheet;
(d) Faith Walk Designs has not granted any option for the
purchase of its capital stock, effected any stock split, or otherwise
changed its capitalization;
(e) Faith Walk Designs has not declared, set aside, or paid a
dividend or other distribution in respect of its capital stock, or,
directly or indirectly, redeemed or otherwise acquired any of its
capital stock;
(f) Faith Walk Designs has not (i) incurred any material
obligations or liability (absolute or contingent), except obligations
or liabilities incurred in the ordinary course of business, or (ii)
mortgaged, pledged, or subjected to lien, claim, security interest,
charge, encumbrance or restriction any of its assets or properties;
(g) Faith Walk Designs has not discharged or set aside any
material lien, mortgage, pledge, claim, security interest, charge,
encumbrance, or restriction or paid any material obligation or
liability (absolute or contingent), other than in the ordinary course
of business;
(h) Faith Walk Designs has not sold, assigned, transferred,
leased, exchanged, or otherwise disposed of, other than in the ordinary
course of business, any of its properties or assets;
(i) Faith Walk Designs has not increased the rate of
compensation of, or paid any bonus to, any of its directors or
officers, except merit or promotion increases in accordance with
existing policy; entered into any new, or amended or supplemented any
existing, employment, management, consulting, deferred compensation,
severance, or other similar contract not heretofore provided to
Decorize and Step of
10
Faith; adopted, entered into, terminated, amended or modified any Faith
Walk Designs Benefit Plan in respect of any of its present or former
directors, officers or other employees; or agreed to any of the
foregoing;
(j) Faith Walk Designs has not suffered any material damage,
destruction or loss as a result of fire, accident, casualty, labor
trouble, or taking of property by any government or any agency of any
government, flood, or other similar or dissimilar casualty or event or
otherwise, and whether or not covered by insurance;
(k) Faith Walk Designs has not cancelled or compromised any
debt to the extent exceeding $10,000.00 owed to Faith Walk Designs or
claim to an extent exceeding $10,000.00 asserted by Faith Walk Designs;
(l) Faith Walk Designs has not entered, or agreed to enter,
into any agreement or arrangement granting any right of refusal or
other preferential right to purchase any of its material assets,
properties or rights or requiring the consent of any party to the
transfer or assignment of any such material assets, properties or
rights;
(m) There has not been any other transaction, commitment,
dispute or other event or condition of any character (whether or not in
the ordinary course of business) individually or in the aggregate
having or which, insofar as reasonably can be foreseen, in the future
is reasonably likely to have, a material adverse effect on Faith Walk
Designs; and
(n) There has not been any change in the method of accounting
or accounting practices of Faith Walk Designs, except as may be
required by generally accepted accounting principles. Except as set
forth in the Faith Walk Designs Disclosure Letter, Faith Walk Designs
has no knowledge of the announced or anticipated resignation of any
executive officer or key employee of Faith Walk Designs. From and after
the date of the latest Faith Walk Designs Financial Statement, through
the date of this Agreement, no customers of Faith Walk Designs have
indicated to Faith Walk Designs that they will stop or decrease the
rate of business done with Faith Walk Designs (except for changes in
the ordinary course of business) such as to, individually or in the
aggregate, have a material adverse effect on Faith Walk Designs.
4.13 Properties, Leases and Other Agreements. Except (i) as may be
reflected in the Faith Walk Designs Financial Statements, (ii) for any lien for
current taxes not yet delinquent, and (iii) for such other liens, security
interests, claims, charges, options or other encumbrances or imperfections of
title which do not materially affect the value of personal or real property
reflected in the Faith Walk Designs Financial Statements or acquired since the
date of such Financial Statements and which do not materially interfere with or
impair the present and continued use of such property, Faith Walk Designs has
good title, free and clear of any liens, security interests, claims, charges,
options or other encumbrances, to all of the personal and real property
reflected in the Faith Walk Designs Financial Statements, and all real and
personal property acquired since the date of such Statements, except such real
and personal property as has been disposed of in the ordinary course of
business. The Faith Walk Designs Disclosure Letter lists all acquisitions or
dispositions of capital assets planned as of the date of this Agreement by Faith
Walk Designs, other than individual transactions with a value not in excess of
$10,000.00 each. Substantially all of Faith Walk Designs' buildings and
equipment in regular use (including such buildings and equipment as are leased)
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted. The Faith Walk Designs Disclosure Letter contains a
brief description, including terms, of each lease for real or personal property
to which Faith Walk Designs is a party. Faith Walk Designs, as lessee, has a
valid and existing leasehold interest under each of such leases, true and
correct copies of which Faith Walk Designs has delivered to Decorize and Step of
Faith. There is not, under any of such leases relating to real property or any
other material leases, any material existing default by Faith Walk Designs, or,
to the knowledge of Faith Walk Designs, any other party thereto, or any event
with notice or lapse of time or both would constitute such a material default.
Faith Walk Designs owns, or has the right to use pursuant to a valid and
enforceable lease, license or similar contractual arrangement, all of the assets
(tangible and intangible) that are used or required for use in the operation of
the business as currently conducted.
11
4.14 Patents, Trademarks and Trade Names. The Faith Walk Designs
Disclosure Letter sets forth a correct and complete list of (i) all patents,
trademarks, trade names and registered copyrights owned by Faith Walk Designs
which are material to its business taken as a whole (collectively, the "Faith
Walk Designs Proprietary Intellectual Property") and (ii) all patents,
trademarks, trade names, copyrights, technology and processes used by Faith Walk
Designs in its business which are material to its business taken as a whole and
are used pursuant to a license or other right granted by a third party
(collectively the "Faith Walk Designs Licensed Intellectual Property", and
together with the Faith Walk Designs Proprietary Intellectual Property herein
referred to as the "Faith Walk Designs Intellectual Property"). Faith Walk
Designs owns or has the right to use pursuant to valid and effective agreements,
all Faith Walk Designs Intellectual Property, and the consummation of the
transactions contemplated hereby will not alter or impair any such rights. No
claims are pending or, to the best knowledge of Faith Walk Designs, threatened
against Faith Walk Designs by any person with respect to the use of any Faith
Walk Designs Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement relating to the same. The current use
by Faith Walk Designs of the Faith Walk Designs Intellectual Property does not
infringe on the rights of any person, except for such infringements which in the
aggregate could not reasonably be expected to have a material adverse effect
upon Faith Walk Designs' ownership or use of the Faith Walk Designs Intellectual
Property. There are no pending claims or charges brought by Faith Walk Designs
against any person with respect to the use of any Faith Walk Designs
Intellectual Property or the enforcement of any of Faith Walk Designs' rights
relating to the Faith Walk Designs Intellectual Property.
4.15 Votes Required. The execution of this Agreement by the Faith Walk
Designs Shareholders is the only vote of the holders of any class of Faith Walk
Designs capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
4.16 Tax Matters. Faith Walk Designs, to its knowledge, has not taken
or agreed to take any action which would prevent the Merger from qualifying as
one or more reorganizations under Codess.368(a)(1).
4.17 Condition of Assets. The improvements, equipment, furniture,
fixtures, inventory and tangible personal property owned, leased or held by
Faith Walk Designs for use in its business and operations are in the aggregate
in such condition and repair as are consistent with and suitable for their
present uses and there are no defects in of the assets used in the business and
operations of Faith Walk Designs which individually or in the aggregate would
have, or could reasonably be expected to have, a material adverse effect on
Faith Walk Designs.
4.18 Inventory. All inventories of Faith Walk Designs are of good,
useable and merchantable quality in all material respects and, except as set
forth in the Faith Walk Designs Disclosure Letter, do not include obsolete or
discontinued items. All inventories that are finished goods are saleable as
current inventories at the current prices thereof in the ordinary course of
business.
4.19 Accounts Receivable. All receivables of Faith Walk Designs
(including accounts receivable, loan receivable and advances) which are
reflected in the Faith Walk Designs Financial Statements, and all such
receivables which shall have arisen since the date thereof, have arisen only
from bona fide transactions in the ordinary course of Faith Walk Designs'
business and shall be (or have been) fully collected when due, or in the case of
each such account receivable within ninety (90) days after it arose, without
resort to litigation, in the aggregate face amounts thereof except to the extent
of the normal allowance for doubtful accounts with respect to accounts
receivable computed as a percentage of sales consistent with Faith Walk Designs'
prior practices as reflected on the Faith Walk Designs Financial Statements.
4.20 Customers. Faith Walk Designs has not received any notice or has
reason to believe that any significant customer of Faith Walk Designs (a) has
ceased, or will cease, to use the products, goods or services of Faith Walk
Designs, (b) has substantially reduced or will substantially reduce, the use of
products, goods or services of Faith Walk Designs, or (c) has sought, or is
seeking, to reduce the price it will pay for products, goods or services of
Faith Walk Designs, including in each case after the consummation of the
transactions contemplated hereby.
4.21 Full Disclosure. The representation and warranties of Faith Walk
Designs and the Faith Walk Designs Shareholders contained in this Agreement do
not omit any material fact necessary to make the statements contained therein,
in light of the circumstances under which they were made, not misleading. There
is no fact known to Faith Walk Designs or the Faith Walk Designs Shareholders
which has not been disclosed to Decorize
12
pursuant to this Agreement and the Faith Walk Designs Disclosure Letter, all
taken as a whole, which would reasonably be expected to have a material adverse
effect on Faith Walk Designs on the ability of Decorize, Step of Faith or Faith
Walk Designs to consummate the transactions contemplated hereby.
4.22 Securities Matters. The Faith Walk Design Shareholders acknowledge
and agree that the consummation of this Agreement, including the issuance of the
Decorize common stock to them in exchange for their respective equity interest
in Faith Walk Designs as contemplated hereby constitutes an offer and sale of
securities under the Securities Act and applicable state statutes. The Faith
Walk Designs Shareholders acknowledge that such transactions are being
consummated in reliance one exemptions from the registration and prospectus
delivery requirements of such statutes that depend, among other items, on the
circumstances under which such securities are acquired, and the Faith Walk
Designs Shareholders hereby represent, warrant and covenant as follows:
(a) The Faith Walk Designs Shareholders have been advised that the
Decorize shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities act in
reliance on exemptions therefrom;
(b) The Decorize shares are being acquired solely for the Faith Walk
Designs Shareholders own account, for investment and are not being
acquired with a view to or for the resale, distribution, subdivision or
fractionalization thereof, and the Faith Walk Designs Shareholders have
no present plans to enter into any such contract, undertaking,
agreement or arrangement. The Faith Walk Designs Shareholders further
understand that the Decorize shares may only be resold pursuant to a
registration statement under the Securities Act or pursuant to some
other available exemption;
(c) The Faith Walk Designs Shareholders acknowledge in connection with
the exchange of the Decorize shares that no representation has been
made by representatives of Decorize regarding its business, assets or
prospects other than that set forth herein and that it is relying upon
the information set forth in the filings made by Decorize pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended, the
Decorize Disclosure Letter (as hereinafter defined), and such other
representations and warranties as set forth in this Agreement;
(d) The Faith Walk Designs Shareholders have sufficient knowledge and
experience in financial and business matters so as to be capable of
evaluating the merits and risks of their investment in Decorize common
stock, and are capable of bearing the economic risks of such
investment. At Closing the Faith Walk Designs Shareholders shall
execute and deliver investment letters in a form acceptable to
Decorize.
(e) The Faith Walk Designs Shareholders agree that the certificate or
certificates representing the Decorize shares will be inscribe with the
following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933. The securities
have been acquired for investment and may not be sold,
transferred, or assigned in the absence of an effective
registration statement for these securities under the
Securities Act of 1933 or an opinion of Decorize's counsel
that registration is not required under said Act."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DECORIZE AND Step of Faith
Decorize and Step of Faith hereby represent and warrant to Faith Walk
Designs and the Faith Walk Designs Shareholders as follows:
5.1 Organization, Standing and Power. Decorize and Step of Faith are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and Missouri respectively, and have all requisite
power and authority to own, lease and operate their properties and to carry on
their business as now being conducted. Copies of the articles of incorporation
and by-laws of Decorize and Step of Faith, as certified by the respective
secretaries of Decorize and Step of Faith, have heretofore been delivered to
Faith Walk Designs, and are
13
complete and correct as of the date of this Agreement. Decorize and Step of
Faith are duly qualified to transact business, and are in good standing as a
foreign corporations in each jurisdiction where the character of their
activities requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the business, assets, financial
condition, results of operations or prospects of Decorize and Step of Faith
taken as a whole.
5.2 Subsidiaries. Decorize has no subsidiaries except Step of Faith and
Guildmaster, Inc., which are wholly owned by Decorize.
5.3 Capital Structure.
(a) As of the date hereof, the authorized capital stock of
Decorize is comprise of 60,000,000 shares of stock, of which 50,000,000
shares are common stock with a par value of $.001 per share and
10,000,000 shares are preferred stock with a par value of $.001 per
share, (the "Preferred Stock");
(b) As of the date hereof, 2,574,000 shares of common stock of
Decorize are issued and outstanding, and no shares of common stock of
Decorize are held in treasury, and 500 shares of Step of Faith are
issued and outstanding, and no shares of common stock of Step of Faith
are held in treasury.
(c) All outstanding shares of Decorize and Step of Faith
capital stock are validly issued, fully paid and non-assessable and are
not subject to or issued in violation of any preemptive rights. The
shares of Decorize common stock to be issued pursuant to or as
specifically contemplated by this Agreement will be validly issued,
fully paid and non-assessable and not subject to preemptive rights, but
shall be restricted as otherwise provided herein.
5.4 Authority.
(a) Decorize and Step of Faith have all requisite corporate
power and authority to enter into this Agreement and the Merger and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of Decorize and Step of
Faith. This Agreement has been duly executed and delivered by Decorize
and Step of Faith and constitutes a valid and binding obligations of
Decorize and Step of Faith enforceable in accordance with its terms,
subject to compliance with the provisions of the Delaware and Missouri
corporate law.
(b) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not,
result in any Violation pursuant to any provision of (i) the articles
of incorporation or by-laws of Decorize or Step of Faith, or (ii) any
loan or credit agreement, note, mortgage, indenture, lease, Benefit
Plan maintained by Decorize or Step of Faith or other agreement,
obligation, instrument, permit, franchise, license, judgment, order,
decree, statute, law ordinance, rule or regulation applicable to
Decorize or Step of Faith or their respective properties or assets,
which violation would have a material adverse effect upon Decorize.
5.5 Financial Statements.
(a) The balance sheet of Decorize as of December 31, 2001 and
the related statements of income, consolidated statements of cash flows
and statements of members' or stockholders' equity for the period ended
December 31, 2001 (the "Decorize Latest Statement Date"), copies of
which have been furnished by Decorize to Faith Walk Designs; and the
balance sheet of Decorize as of December 31, 2001 and the related
statement of income, statement of cash flows and statement of members'
or stockholders' equity for the three (3) months then ended in the form
prepared for Decorize's internal use, copies of which have been
furnished by Decorize to Faith Walk Designs (collectively, the
"Decorize Financial Statements"), have been prepared in accordance with
generally accepted accounting principles as utilized in the Decorize
Financial Statements applied on a consistent basis (except as may be
indicated therein or in the notes thereto), and present fairly the
financial condition of Decorize and Step of Faith at the dates, and the
results of operations, changes in stockholders' equity and cash flows
for the periods, stated therein. In
14
the case of interim fiscal periods, all adjustments, consisting only of
normal recurring items, which management of Decorize and Step of Faith
believe necessary for a fair presentation of such financial
information, have been made, none of which could reasonably be expected
to have a material adverse effect upon Decorize.
(b) Except as and to the extent set forth on the balance
sheets of Decorize, as of March 31, 2001, or in the notes thereto,
Decorize and Step of Faith have no liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would
be required to be reflected on a balance sheet, or in the notes
thereto, prepared in accordance with generally accepted accounting
principles, except for liabilities or obligations incurred in the
ordinary course of business since the Decorize Latest Statement Date
that would not, individually or in the aggregate, have a material
adverse effect upon Decorize. Except as disclosed in the Decorize
Disclosure Letter (which is a letter delivered by Decorize to Faith
Walk Designs concurrently with this Agreement, and which identifies, as
to each matter disclosed therein, the Section of this Agreement to
which the matter relates), Decorize and Step of Faith have no
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that are not required to be reflected on a
balance sheet, or in the notes thereto, except for liabilities or
obligations that do not, individually or in the aggregate, have a
material adverse effect upon Decorize.
5.6 Litigation and Claims. Except as disclosed in the Decorize
Disclosure Letter, (a) neither Decorize, Step of Faith nor any Decorize Property
is subject to any continuing order of, or written agreement or memorandum of
understanding with any governmental entity, or any judgment, order, writ,
injunction, decree or award of any governmental entity or arbitrator, and (b)
there is no action, suit, litigation, proceeding or arbitration against or
affecting Decorize or Step of Faith, or, to the knowledge of Decorize or Step of
Faith, any directors, officers, managers, employees or agents of Decorize or
Step of Faith (in their respective capacities as directors, officers, managers,
employees or agents) pending or, to the knowledge of Decorize or Step of Faith,
threatened, which would, if adversely determined, have a material adverse effect
upon Decorize or, to the knowledge of Decorize or Step of Faith, any basis
therefor.
5.7 Taxes. Decorize and Step of Faith have filed all tax returns
required to be filed by them, all such returns are true and correct in all
material respects and reflect all amounts due with respect to the periods
indicated, and Decorize and Step of Faith have paid or has set up an adequate
reserve for the payment of all taxes required to be paid by them, except to the
extent which nonpayment did not result in a material adverse effect upon
Decorize. The Decorize Disclosure Letter sets forth, as of the date hereof, the
following information with respect to Decorize and Step of Faith:
(a) Whether there is an examination pending by the IRS with
respect to Decorize or Step of Faith and, if so, the tax years
involved;
(b) Whether Decorize or Step of Faith has executed or filed
with the IRS any agreement which is still in effect extending the
period for assessment and collection of any federal tax and, if so, the
tax years covered by such agreement and the expiration date of such
extension; and
(c) Whether there are any existing material disputes as to
state or local taxes. There are no liens for taxes upon the assets of
Decorize or Step of Faith, except for statutory liens for taxes not yet
delinquent or the validity of which is being contested in good faith by
appropriate proceedings and, in either case, only if adequate reserves
therefor have been established on Decorize's or Step of Faith's books
in accordance with generally accepted accounting principles. Except as
disclosed in the Decorize Disclosure Letter, neither Decorize nor Step
of Faith is a party to any action or proceeding by any governmental
authority for assessment and collection of taxes, and no claim for
assessment and collection of taxes has been asserted against them.
Decorize and Step of Faith have withheld from their employees (and
timely paid to the appropriate governmental agency) amounts which are
proper and accurate in all material respects for all periods through
the date hereof in material compliance with all tax withholding
provisions of applicable federal, state, and local laws (including
without limitation income, social security and employment tax
withholding for all types of compensation).
15
5.8 Absence of Certain Changes or Events. Except as disclosed in the
Decorize Disclosure Letter, and except as contemplated by this Agreement, from
and after December 31, 2001 through the date of this Agreement:
(a) Neither Decorize nor Step of Faith has amended its
articles of incorporation (other than to effectuate the conversion from
Xxxxxxxx.xxx, L.L.C. to Decorize, Inc.);
(b) Neither Decorize nor Step of Faith has declared, set
aside, or paid any dividend or other distribution in respect to any of
its capital stock; and
(c) There has not been any material change in the method of
accounting or accounting practices of Decorize or Step of Faith, except
as required by generally accepted accounting principles. Except as set
forth in the Decorize Disclosure Letter, neither Decorize nor Step of
Faith has knowledge of the announced or anticipated resignation of any
executive officer or key employee of Decorize or Step of Faith. From
and after the date of the latest Decorize Financial Statement, through
the date of this Agreement, no customers of Decorize or Step of Faith
have indicated to Decorize or Step of Faith that they will stop or
decrease the rate of business done with Decorize or Step of Faith
(except for changes in the ordinary course of business) such as to,
individually or in the aggregate, have a material adverse effect upon
Decorize.
5.9 Properties, Leases and Other Agreements. Except (i) as may be
reflected in the Decorize Financial Statements, (ii) for any lien for current
taxes not yet delinquent, and (iii) for such other liens, security interests,
claims, charges, options or other encumbrances and imperfections of title which
do not materially affect the value of personal or real property reflected in the
Decorize Financial Statements or acquired since the date of such Financial
Statements and which do not materially interfere with or impair the present and
continued use of such property, Decorize and Step of Faith have good title, free
and clear of any liens, security interests, claims, charges, options or other
encumbrances, to all of the personal and real property reflected in the Decorize
Financial Statements, and all personal and real property acquired since the date
of such Statements, except such personal and real property as has been disposed
of in the ordinary course of business. Substantially all Decorize's and Step of
Faith's buildings and equipment in regular use (including such buildings and
equipment as are leased) have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted. There is not, under
any of such leases relating to real property or any other material leases, any
material existing default by Decorize or Step of Faith, to the knowledge of
Decorize or Step of Faith, any other party thereto, or any event with notice or
lapse of time or both would constitute such a material default. Decorize and
Step of Faith own, or have the right to use pursuant to a valid and enforceable
lease, license or similar contractual arrangement, all of the assets (tangible
or intangible) that are used or required for use in the operation of the
business as currently conducted.
5.10 Tax Matters. To the knowledge of Decorize and Step of Faith,
neither Decorize, Step of Faith, nor any of their affiliates has through the
date hereof taken or agreed to take any action that would prevent the Merger
from qualifying as one or more reorganizations under Code Section 368(a)(1).
5.11 Full Disclosure. The representations and warranties of Decorize or
Step of Faith contained in this Agreement do not omit any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. There is no fact known
to Decorize or Step of Faith which has not been disclosed to Faith Walk Designs
pursuant to this Agreement, and the Decorize Disclosure Letter, all taken
together as a whole, which would reasonably be expected to have a material
adverse effect upon Decorize or a material adverse effect on the ability of
Decorize or Faith Walk Designs to consummate the transactions contemplated
hereby.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS OF FAITH WALK DESIGNS
6.1 Affirmative Covenants. Faith Walk Designs hereby covenants and
agrees with Decorize and Step of Faith that prior to the Effective Time or until
the earlier termination or abandonment of this Agreement in
16
accordance with its terms, unless the prior written consent of Decorize and Step
of Faith shall have been obtained (which consent shall not be unreasonably
withheld) and except as otherwise contemplated herein, it will:
(a) operate its business only in the usual, regular and
ordinary course consistent with past practices;
(b) preserve substantially intact its business organization
and assets (except for acquisitions and dispositions of assets in the
ordinary course of business consistent with past practices, unless
otherwise required by the terms of this Agreement), and maintain its
rights and franchises, and use its reasonable best efforts to retain
the services of its officers and key employees (except that it shall
have the right to terminate the employment of any officer or key
employee in accordance with established employment procedures) and
maintain its relationships with customers;
(c) maintain its corporate existence in good standing and
maintain all books and records in accordance with accounting principles
and practices as utilized in the Faith Walk Designs Financial
Statements applied on a consistent basis, except as may be required to
implement changes in the generally accepted accounting principles;
(d) maintain and keep its properties in as good repair and
condition as at present, except for depreciation due to ordinary wear
and tear;
(e) keep in full force and effect, insurance and bonds
comparable in amount and scope of coverage to that now maintained by
it;
(f) perform in all material respects all obligations required
to be performed by it under all material contracts, leases, and
documents relating to or affecting its assets, properties, and
business; and
(g) conduct its business in a manner but does not violate any
Laws, except for possible violations which individually or in the
aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have a material adverse effect on Faith Walk Designs.
6.2 Negative Covenants. Except as specifically contemplated by this
Agreement, from the date hereof unto the Effective Time, Faith Walk Designs
shall not do, without the prior written consent of Decorize and Step of Faith
(which shall not be unreasonably withheld), any of the following:
(a) incur any material liabilities or material obligations,
whether directly or by way of guaranty, including any obligation for
borrowed money whether or not evidenced by a note, bond, debenture or
similar instrument, except in the ordinary course of business
consistent with past practice;
(b) (i) grant any general increase in compensation to its
employees as a class, or to its officers or directors, except in
accordance with past practice, or increases which are not material,
(ii) effect any change in retirement benefits to any class of employees
or officers (unless any such change shall be required by applicable
law) which would increase its retirement benefit liabilities, (iii)
adopt, enter into, amend or modify any Benefit Plan, or (iv) enter into
or amend any employment, severance or similar agreements or
arrangements with any directors or officers or former directors or
officers;
(c) declare or pay any dividend on, or make any other
distribution in respect to its outstanding shares of capital stock;
(d) (i) redeem, purchase or otherwise acquire any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options,
warrants, conversion or other rights to acquire any shares of its
capital stock or any such securities or obligations; (ii) merge with or
into any other corporation, permit any other corporation to merge into
it or consolidate with, any other corporation, or effect any
reorganization or recapitalization; (iii) purchase or otherwise acquire
any substantial portion of the assets, or more than 5% of any class of
stock, of any corporation, or other business; (iv) liquidate, sell
dispose of, or encumber any assets or acquire any assets, except in the
ordinary
17
course of its business consistent with past practice; or (v) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock;
(e) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale of, any shares of
its capital stock of any class (including shares held in treasury), any
Voting Debt or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, Voting Debt or convertible
securities;
(f) propose or adopt any amendments to its articles of
incorporation or by-laws in any way adverse to Decorize and Step of
Faith;
(g) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in
principle with respect to any acquisition of a material amount of
assets or securities or any release or relinquishment of any material
contract rights not in the ordinary course of business;
(h) with respect to properties leased by Faith Walk Designs,
renew, exercise an option to extend, cancel or surrender any lease of
real property or allow any such lease to lapse, without prior
consultation with Decorize and Step of Faith;
(i) change any of its methods of accounting in effect at May
31, 2001, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year
ending December 31, 2001, except as may be required by law or generally
accepted accounting principles;
(j) take action which would or is reasonably likely to
adversely affect Faith Walk Designs' ability to perform its covenants
and agreements under this Agreement; or
(k) agree in writing or otherwise to do any of the foregoing.
6.3 Access and Information. Upon reasonable prior notice, Faith Walk
Designs shall afford to Decorize's and Step of Faith's officers, employees,
accountants, counsel and other representatives, access, from time to time during
normal business hours during the period prior to the Effective Time, to all
books, papers and records relating to the assets, properties, operations,
obligations and liabilities of Faith Walk Designs, including without limitation
all books of account, tax records, minute books of directors' and stockholders'
meetings, contracts and agreements, accountants' work papers, litigation files
(other than attorney work product or materials protected by any attorney-client
privilege), documents relating to assets and title thereto, plans affecting
employees, securities transfer records and stockholder lists, and any books,
papers and records relating to other assets, business activities or prospects in
which Decorize or Step of Faith may have a reasonable interest. During such
period, Faith Walk Designs shall furnish promptly to Decorize and Step of Faith
(i) the monthly financial statements of Faith Walk Designs (as prepared by Faith
Walk Designs in accordance with its normal accounting procedures) promptly after
such financial statements are available, (ii) a summary of any action taken by
the Board of Directors, or any committee thereof, of Faith Walk Designs, (iii)
minutes of the Faith Walk Designs Board of Directors meetings and the reports of
management of Faith Walk Designs customarily provided to its Board of Directors,
and (iv) all other information concerning its business, properties and personnel
as Decorize and Step of Faith may reasonably request. During such period, Faith
Walk Designs shall instruct its officers, employees, counsel and accountants to
be available for, and respond to any questions of Decorize's and Step of Faith's
officers, employees, accountants, counsel and other representatives at
reasonable hours and with reasonable notice by Decorize and Step of Faith to
such individuals.
6.4 Update Disclosure; Breaches.
(a) From and after the date hereof until the Effective Time,
Faith Walk Designs shall promptly update the Faith Walk Designs
Disclosure Letter by notice to Decorize and Step of Faith to reflect
any matters which have occurred from and after the date hereof which,
if existing on the date hereof, would
18
have been required to be described therein; provided, however, that no
such update shall affect the conditions to the obligation of Decorize
and Step of Faith to consummate the transactions contemplated hereby,
except as provided herein, and any and all changes reflected in any
such update shall be considered in determining whether such conditions
have been satisfied.
(b) Faith Walk Designs shall, in the event it becomes aware of
the impending or threatened occurrence of any event or condition which
would cause or constitute a material breach (or would have caused or
constituted a breach had such event occurred or been known prior to the
date hereof) of any of its representations or agreements contained or
referred to herein or which would cause any of the conditions to the
obligations of any party set forth in Article IX hereof not to be
satisfied, give prompt written notice thereof to Decorize and use its
best efforts to prevent or promptly remedy the same.
6.5 Tax Treatment. Faith Walk Designs will use its best efforts to
cause the Merger to qualify as one or more reorganizations under Code Section
368(a)(1).
ARTICLE VII
CERTAIN COVENANTS AND AGREEMENTS OF DECORIZE AND STEP OF FAITH
7.1 Affirmative Covenants. Decorize and Step of Faith hereby covenant
and agree with Faith Walk Designs and the Faith Walk Designs Shareholders that
prior to the Effective Time, unless the prior written consent of Faith Walk
Designs shall have been obtained (which consent shall not be unreasonably
withheld) and except as otherwise contemplated herein, they will:
(a) operate their business only in the usual, regular and
ordinary course consistent with past practices;
(b) preserve substantially intact their business organization
and assets (except for acquisitions and dispositions of assets in the
ordinary course of business consistent with past practices unless
otherwise required by the terms of this Agreement), and maintain their
rights and franchises, and use their reasonable best efforts to retain
the services of their officers and key employees (except that they
shall have the right to terminate the employment of any officer or key
employee in accordance with established employment procedures) and
maintain their relationships with customers.
(c) maintain their corporate existence in good standing and
maintain all books and records in accordance with accounting principles
and practices as utilized in the Decorize Financial Statements applied
on a consistent basis, except as may be required to implement changes
in generally accepted accounting principles;
(d) maintain and keep their properties in as good repair and
condition as at present, except for depreciation due to ordinary wear
and tear;
(e) keep in full force and effect, insurance and bonds
comparable in amount and scope of coverage to that now maintained by
them;
(f) perform in all material respects all obligations required
to be performed by it them under all material contracts, leases, and
documents relating to or affecting their assets, properties, and
business; and
(g) conduct their business in a manner that does not violate
any Laws, except for possible violations which individually or in the
aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have a material adverse effect upon Decorize.
7.2 Negative Covenants. Except as specifically contemplated by this
Agreement, from the date hereof until the Effective Time, neither Decorize nor
Step of Faith shall do, or agree or commit to do, without the prior written
consent of Faith Walk Designs (which shall not be unreasonably withheld) any of
the following:
19
(a) incur any material liabilities or material obligations,
whether directly or by way of guaranty, including any obligation for
borrowed money whether or not evidenced by a note, bond, debenture or
similar instrument, except in the ordinary course of business
consistent with past practice;
(b) (i) grant any general increase in compensation to its
employees as a class, or to its officers or directors, except in
accordance with past practice, or increases which are not material,
(ii) effect any change in retirement benefits to any class of employees
or officers (unless any such change shall be required by applicable
law) which would increase its retirement benefit liabilities, (iii)
adopt, enter into, amend or modify any Benefit Plan, or (iv) enter into
or amend any employment, severance or similar agreements or
arrangements with any directors or officers or former directors or
officers;
(c) declare or pay any dividend on, or make any other
distribution in respect to its outstanding shares of capital stock;
(d) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale of, any shares of
its capital stock of any class (including shares held in treasury), any
Voting Debt or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, Voting Debt or convertible
securities;
(e) propose or adopt any amendments to its articles of
incorporation or by-laws in any way adverse to Faith Walk Designs or
the Faith Walk Designs Shareholders;
(f) change any of its methods of accounting in effect at
December 31, 2000, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year
ending December 31, 2000, except as may be required by law or generally
accepted accounting principles;
(g) take action which would or is reasonably likely to
adversely affect Decorize's ability to perform its covenants and
agreements under this Agreement; or
(h) agree in writing or otherwise to do any of the foregoing.
7.3 Access and Information. Upon reasonable prior notice Decorize and
Step of Faith shall afford to Faith Walk Designs' officers, employees,
accountants, counsel and other representatives, access, from time to time during
normal business hours during the period prior to the Effective Time, to all
books, papers and records relating to the assets, properties, operations,
obligations and liabilities of Decorize and Step of Faith, including without
limitation all books of account, tax records, minute books of members',
directors' and stockholders' meetings, contracts and agreements, accountants'
work papers, litigation files (other than attorney work product or materials
protected by any attorney-client privilege), documents relating to assets and
title thereto, plans affecting employees, securities transfer records and
stockholder lists, and any books, papers and records relating to other assets,
business activities or prospects in which Faith Walk Designs may have a
reasonable interest. During such period, Decorize and Step of Faith shall
furnish promptly to Faith Walk Designs (i) the monthly financial statements of
Decorize (as prepared by Decorize and Step of Faith in accordance with their
normal accounting procedures) promptly after such financial statements are
available; (ii) a summary of any action taken by the Board of Directors, or any
committee thereof, of Decorize and Step of Faith; (iii) minutes of the Decorize
and Step of Faith Boards of Directors meetings and the reports of management of
Decorize and Step of Faith customarily provided to their respective Boards of
Directors; and (iv) all other information concerning its business, properties
and personnel as Faith Walk Designs may reasonably request. During such period,
Decorize and Step of Faith shall instruct their officers, employees, counsel and
accountants to be available for, and respond to any questions of, Faith Walk
Designs' officers, employees, accountants, counsel and other representatives at
reasonable hours and with reasonable notice by Faith Walk Designs to such
individuals.
7.4 Update Disclosure; Breaches.
20
(a) From and after the date hereof until the Effective Time,
Decorize and Step of Faith shall promptly update the Decorize
Disclosure Letter by notice to Faith Walk Designs to reflect any
matters which have occurred from and after the date hereof which, if
existing on the date hereof, would have been required to be described
therein; provided, however, that no such update shall affect the
conditions to the obligation of Faith Walk Designs or the Faith Walk
Designs Shareholders to consummate the transactions contemplated
hereby, except as provided herein, and any and all changes reflected in
any such update shall be considered in determining whether such
conditions have been satisfied.
(b) Decorize and Step of Faith shall, in the event they become
aware of the impending or threatened occurrence of any event or
condition which would cause or constitute a material breach (or would
have caused or constituted a breach had such event occurred or been
known prior to the date hereof) of any of its their representations or
agreements contained or referred to herein or which would cause any of
the conditions to the obligations of any party set forth in Article IX
not to be satisfied, give prompt written notice thereof to Faith Walk
Designs and use their best efforts to prevent or promptly remedy the
same.
7.5 Tax Treatment. Decorize and Step of Faith will use their best
efforts to cause the Merger to qualify as one or more reorganizations under Code
ss.368(a)(1). Following the Merger, neither Decorize nor Step of Faith will take
any action the effect of which will prevent the Merger from qualifying as one or
more reorganizations under Code ss.368(a)(1).
7.6 Pledge of Real Property. Xxxx Xxxxxxx Xxxxxx and Xxxxx Xxxxxx shall
pledge for the benefit of Decorize as security for a loan or loans associated
with the transaction contemplated herein that certain real property (a 5.9231
acre tract of land in the Xxxx X. Xxxxxx Survey, Abstract No. 375), located in
Xxxxxx County Texas. This agreement shall survive closing.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Brokers or Finders. Each of the Constituent Corporations
represents, as to itself, and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, and each of the
Constituent Corporations respectively agrees to indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
affiliate.
8.2 Additional Agreements; Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including cooperating fully with the other party. In case at any
time after the Effective Time any further action is reasonably necessary or
desirable to carry out the purposes of this Agreement or to vest Step of Faith
with full title to all properties, assets, rights and franchises of Faith Walk
Designs, the proper officers and directors of each party to this Agreement shall
take all such necessary action.
8.3 Expenses.
(a) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all fees and expenses of
counsel, accountants, and consultants to the party and its affiliates)
incurred by a party or on its behalf in connection with the
consummation of the transactions contemplated by this Agreement.
(b) Except as otherwise provided herein, all Expenses incurred
by a party in connection with or related to the authorization,
preparation and execution of this Agreement and the Merger, and all
other
21
matters related to the closing of the transactions contemplated hereby,
including all fees and expenses of agents, representatives, counsel and
accountants employed by either such party or its affiliates, shall be
borne solely and entirely by the party which has incurred the same.
8.4 Repayment of Officer, Family Member and Employee Loans. Each of the
Shareholders of Faith Walk Designs covenant that at Closing they will pay to
Faith Walk Designs an amount equal to the sum of all Officer, shareholder, and
employee loans (and loans to family members of any of such group) outstanding as
of Closing for the purpose of retiring such loans, such amount presently being
$284,255.73.
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to Obligations of Decorize and Step of Faith. The
obligation of Decorize and Step of Faith to effect the Merger are subject to the
satisfaction of the following conditions, unless waived in writing by Decorize:
(a) Representations and Warranties. (i) Each of the
representations and warranties of Faith Walk Designs and the Faith Walk
Designs Shareholders set forth in this Agreement, without giving effect
to any update to the Faith Walk Designs Disclosure Letter or notice to
Decorize and Step of Faith under Section 6.4 hereof, shall be true and
correct as of the date of this Agreement, and (except to the extent
such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, and (ii)
Decorize and Step of Faith shall have received a certificate to such
effect signed on behalf of Faith Walk Designs by its chief executive
officer.
(b) Performance of Obligations of Faith Walk Designs. Faith
Walk Designs shall have performed in all material respects each of the
obligations required to be performed by it under this Agreement at or
prior to the Closing Date, and Decorize and Step of Faith shall have
received a certificate to such effect signed on behalf of Faith Walk
Designs by its chief executive officer.
(c) Consents Under Agreements. Faith Walk Designs shall have
obtained the consent or approval of each person whose consent or
approval shall be required in order to permit the succession by Step of
Faith pursuant to the Merger to any obligation, right or interest of
Faith Walk Designs under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument, except those for
which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a material adverse effect on
Faith Walk Designs, whether prior to or following the consummation of
the transactions contemplated hereby.
(d) No Material Adverse Change. There shall have been no
material adverse change since the date of this Agreement in the
business, operations, prospects or financial condition of Faith Walk
Designs or Decorize other than any such change attributable to or
resulting from any change in law or generally accepted accounting
principles which impairs both Faith Walk Designs and Decorize in a
substantially similar manner, and Decorize and Step of Faith shall have
received a certificate to such effect signed on behalf of Faith Walk
Designs by its chief executive officer.
(e) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority
shall be pending against Decorize, Step of Faith, Faith Walk Designs or
any affiliate, associate, officer or director of either of them seeking
to restrain, enjoin, prevent, change or rescind the transactions
contemplated hereby or questioning the validity or legality of any such
transactions.
(f) No Violation of Securities Laws. The consummation of the
transaction contemplated hereby will not violate applicable securities
laws of the United States and applicable states, including Texas,
Missouri and Delaware.
22
(g) Acquisition of Odds & Ends, L.L.P. Faith Walk Designs
shall have acquired all of the assets of Odds & Ends, L.L.P., prior to
the Closing.
(h) Employment Agreement. Xxxx Xxxxxxx Xxxxxx and Decorize
shall have executed and delivered the employment agreement in the form
as attached hereto as Exhibits "C", made a part hereof by this
reference.
(i) Officer, Director, Employee and Family Member
Transactions. Xxxx Xxxxxxx Xxxxxx and Xxxxx Xxxxxx shall have paid to
the Company all amounts due to Faith Walk Designs for all loans made to
officers, directors, employees or family members of such groups as
reflected on the records of Faith Walk Designs immediately prior to
Closing. In addition, Xxxx Xxxxxxx Xxxxxx and Xxxxx Xxxxxx shall have
paid on behalf of Faith Walk Designs all amounts owed by Faith Walk
Designs to Xxxx Xxx.
(j) Release of Guaranty. Sterling Bank, Houston, Texas, shall
have released Faith Walk Designs from any corporate guaranty and/or
security agreement executed in conjunction with any personal loan to
Xxxx Xxxxxx and Xxxxx Xxxxxx.
9.2 Conditions to Obligations of Faith Walk Designs and Faith Walk
Designs Shareholders. The obligations of Faith Walk Designs and the Faith Walk
Designs Shareholders to effect the Merger are subject to the satisfaction of the
following conditions, unless waived by Faith Walk Designs and the Faith Walk
Designs Shareholders:
(a) Representations and Warranties. (i) Each of the
representations and warranties of Decorize and Step of Faith set forth
in this Agreement, without giving effect to any update to the Decorize
Disclosure Letter or notice to Faith Walk Designs pursuant to Section
7.4, shall be true and correct as of the date of this Agreement and
(except to the extent such representations speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date,
and (ii) Faith Walk Designs shall have received a certificate to such
effect signed on behalf of Decorize by their chief executive officers.
(b) Performance of Obligations of Decorize and Step of Faith.
Decorize and Step of Faith shall have performed in all material
respects each of the obligations required to be performed by it them
under this Agreement at or prior to the Closing Date, and Faith Walk
Designs shall have received a certificate to such effect signed on
behalf of Decorize and Step of Faith by their chief executive officers.
(c) Consents Under Agreements. Decorize and Step of Faith
shall have obtained the consent or approval of each person whose
consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement,
note, mortgage, indenture, lease or other agreement or instrument,
except those for which failure to obtain such consents and approvals
would not, individually or in the aggregate, have a material adverse
effect upon Decorize whether prior to or following the consummation of
the transactions contemplated hereby.
(d) No Material Adverse Change. There shall have been no
material adverse change since the date of this Agreement in the
business, operations, prospects or financial condition of Decorize or
Step of Faith other than any such change attributable to or resulting
from any change in law, or generally accepted accounting principles
which impairs both Faith Walk Designs, Decorize and Step of Faith in a
substantially similar manner, and Faith Walk Designs shall have
received a certificate to such effect signed on behalf of Decorize and
Step of Faith by their chief executive officers.
(e) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority
shall be pending against Decorize, Step of Faith or Faith Walk Designs
or any affiliate, associate, officer or director or any of them seeking
to restrain, enjoin, prevent, change or resend the transactions
contemplated hereby or questioning the validity or legality of any such
transactions.
23
(f) No Violation of Securities Laws. The consummation of the
transaction contemplated hereby will not violate applicable securities
laws of the United States and applicable states, including Missouri.
(g) Employment Agreements. Xxxx Xxxxxxx Xxxxxx and Decorize
shall have executed and delivered the employment agreement in the form
as attached hereto as Exhibits "C", made a part hereof by this
reference.
ARTICLE X
TERMINATION
10.1 Termination and Abandonment. This Agreement and the Merger may be
terminated at any time prior to the Effective Time:
(a) by mutual agreement of the Board of Directors of Faith
Walk Designs and Decorize;
(b) by Decorize or Faith Walk Designs (i) if there has been a
breach in any material respect of any representation, warranty,
covenant or agreement on the part of Faith Walk Designs, on the one
hand, or Decorize or Step of Faith, on the other hand, as set forth in
this Agreement, or (ii) if the representations and warranties of Faith
Walk Designs, on the one hand, or Decorize or Step of Faith, on the
other hand, shall be discovered to have become materially untrue in the
aggregate; or
(c) by Decorize or Faith Walk Designs if the Merger shall not
have occurred by the close of business on or before sixty (60) days
from the date hereof (the "Termination Date").
10.2 Effect of Termination. In the event of termination of this
Agreement by Faith Walk Designs or Decorize as provided in Section 10.1 hereof,
this Agreement and the Merger shall forthwith become void and there shall be no
liability or obligation on the part of a Constituent Corporation or their
respective officers or directors except (a) with respect to Sections 8.1 and 8.3
hereof, and (b) to the extent that such termination results from the willful
breach by a party hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
10.3 Extension; Waiver. At any time prior to the Effective Time,
Decorize and Faith Walk Designs, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other party hereto, (ii) waive any inaccuracies in the representations and
warranties of the other contained herein or in any document delivered by the
other pursuant hereto, and (iii) waive compliance by the other with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
10.4 Specific Performance and Other Remedies. The parties hereto each
acknowledge that the rights of each party to consummate the transactions
contemplated hereby are special, unique and of extraordinary character, and
that, in the event that any party violates or fails or refuses to perform any
covenant or agreement made by it herein, the non-breaching party may be without
an adequate remedy at law. The parties each agree, therefore, that in the event
that either party violates or fails or refuses to perform any covenant or
agreement made by such party herein, the non-breaching party or parties may,
subject to the terms of this Agreement and in addition to any remedies at law
for damages or other relief, institute and prosecute an action in any court of
competent jurisdiction to enforce specific performance of such covenant or
agreement or seek any other equitable relief.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by Faith Walk Designs Shareholders. The Faith Walk
Designs Shareholders shall indemnify, defend and hold Decorize and Step of Faith
harmless from and against any liability, loss, cost, expense
24
(including, without limitation, attorney fees) or other damage (collectively
"Losses") incurred by Decorize and Step of Faith relating to, arising out of or
in connection with any breach of any representation, warranty or covenant of
Faith Walk Designs and the Faith Walk Designs Shareholders contained in this
Agreement. The obligations of the Faith Walk Designs Shareholders to indemnify
and hold Decorize and Step of Faith harmless shall be several and not joint, and
shall be in accordance with their proportionate interests in Faith Walk Designs
immediately prior to the Effective Time. In the event any amount is due to
Decorize under this provision, the Faith Walk Designs Shareholders agree that
Decorize shall be entitled to offset any amount due to them under the Xxxxxx
Note.
11.2 Indemnification by Decorize and Step of Faith. Decorize and Step
of Faith shall indemnify, defend and hold the Faith Walk Designs Shareholders
from and against any Losses incurred by the Faith Walk Designs Shareholders
relating to, arising out of or in connection with any breach of any
representation, warranty or covenant of Decorize or Step of Faith contained in
this Agreement. In no event shall the obligation of Decorize and Step of Faith
under this Section 11.2 exceed, in the aggregate, the amount of One Hundred
Thousand Dollars ($100,000.00).
11.3 Indemnification Procedure. If any party entitled to
indemnification hereunder (each, an "Indemnified Party") receives notice of any
claim or the commencement of any action or proceeding with respect to which the
other party (each, an "Indemnifying Party") is obligated to indemnify pursuant
hereto, the Indemnified Party shall promptly give the Indemnifying Party notice
thereof. Such notice shall describe the claim in reasonable detail and shall
indicate the amount (estimated if necessary) of the loss that has been or may be
sustained by the Indemnified Party in connection therewith. The Indemnifying
Party may elect to compromise or defend, at the Indemnifying Party's own expense
and by the Indemnifying Party's own counsel, any such matter involving the
asserted liability of the Indemnified Party. If the Indemnifying Party elects to
compromise or defend such asserted liability, it shall within thirty (30) days
(or sooner, if the nature of the asserted liability so requires) notify the
Indemnified Party of its intent to do so, and the Indemnified Party shall
cooperate, at the expense of the Indemnifying Party, in the compromise of, or
defense against, any such asserted liability. If: (a) the Indemnifying Party
elects not to compromise or defend against the asserted liability; (b) the
Indemnified Party reasonably determines that the Indemnifying Party's counsel
has a conflict of interest with the Indemnified Party or that the Indemnifying
Party or its counsel is not diligently defending the claim; or (c) the
Indemnifying Party fails to notify the Indemnified Party of its election to
compromise or defend such asserted liability as provided herein, then the
Indemnified Party may, if acting in accordance with its good faith business
judgment, pay, compromise or defend such asserted liability at the Indemnifying
Party's expense, and such settlement shall be binding on the Indemnifying Party
for purposes of this Agreement. Notwithstanding the foregoing, neither the
Indemnifying Party or the Indemnified Party may settle or compromise any claim
over the reasonable good faith objection of the other. In any event, the
Indemnifying Party and the Indemnified Party may each participate, at its own
expense, in the defense against the claim. If the Indemnifying Party chooses to
defend any claim, the Indemnified Party shall make available to the Indemnifying
Party any books, records or other documents within its control that are
necessary or appropriate for such defense.
11.4 Indemnification Limits. The Indemnified Party shall not be
entitled to any indemnification under this Agreement for any breach of any
representation or warranty unless and until the claim or claims by the
Indemnified Party for any and all claims, liabilities, obligations, losses,
costs, expenses, penalties, fines and damages to be indemnified by the
Indemnifying Party pursuant to this Agreement for breaches of representations
and warranties exceed an aggregate of Five Thousand Dollars ($5,000.00), but
shall thereafter be entitled to indemnification for the full amount of any such
claim or claims, including the first Five Thousand Dollars ($5,000.00) of such
claim or claims.
11.5 Survival. The indemnifications under this Article XI shall survive
Closing.
ARTICLE XII
GENERAL PROVISIONS
12.1 Survival of Representations, Warranties and Agreements. The
covenants and agreements of the parties set forth herein shall survive Closing
and remain in full force and effect until performed or waived by the
25
appropriate parties hereto. The representations and warranties contained in this
Agreement shall survive the execution and delivery of this Agreement, but only
to the extent specified below:
(a) Except as set forth in clause (b) below, the
representations and warranties shall survive for a period of three (3)
years following the Closing Date; and
(b) The representations and warranties contained in Sections
4.6(b), 4.7(c), 4.8, 4.13, and 5.8 shall survive without limitation.
12.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by nationally
recognized overnight courier service, telecopied (with receipt confirmed) or
mailed by registered or certified mail (return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Faith Walk Designs or the Faith Walk Designs Shareholders:
Faith Walk Designs, Inc.
00000 Xxxxxx Xxxx, Xxxxx X
Xxxxxxx, XX 00000
------------------------------
(f) if to Decorize or Step of Faith:
Decorize, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx X
Xxxxxxxxxxx, XX 00000
12.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
12.4 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof (b) except as expressly provided herein, is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
12.5 Amendment. This Agreement may not be amended, modified or
supplemented except by written agreement by the parties hereto.
12.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri.
12.7 Publicity. The parties hereto agree that they will consult with
each other concerning any proposed press release or public announcement
pertaining to the Merger and use their best efforts to agree upon the text of
such press release or public announcement prior to the publication of such press
release or the making of such public announcement.
12.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; except that Decorize may assign its rights
hereunder to any financial institution (and its successors and assigns)
extending credit to Decorize in connection with this transaction. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
12.9 Knowledge of the Parties. Wherever in this Agreement any
representation or warranty is made
26
upon the knowledge of a party hereto that is not an individual, such knowledge
shall include the knowledge, after due inquiry, of any executive officer of such
party or an executive officer of any subsidiary thereof.
12.10 Confidentiality. Except for information that is available to the
public, all information concerning Faith Walk Designs and its customers made
available to or in the possession of Decorize or Step of Faith shall be kept as
confidential. Except for information that is available to the public, all
information concerning Decorize, and Step of Faith, and their customers made
available to or in the possession of Faith Walk Designs shall be kept as
confidential.
[SIGNATURE PAGE FOLLOWS]
27
IN WITNESS WHEREOF, the Constituent Corporations have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
and the Faith Walk Designs Shareholders have executed this Agreement, all as of
the date first written above.
(Corporate Seal) FAITH WALK DESIGNS, INC.
ATTEST:
/S/ by Xxxx Xxxxxxx Xxxxxx By /S/ Xxxx Xxxxxxx Xxxxxx
-------------------------- -----------------------
Secretary/Assistant Secretary Xxxx Xxxxxxx Xxxxxx, President
"Faith Walk Designs"
(Corporate Seal) STEP OF FAITH, INC.
ATTEST:
/S/ by Xxxxxx Xxxx By /S/ Xxx Xxxxx
-------------------------- -----------------------
Secretary/Assistant Secretary Xxx Xxxxx, President
"Step of Faith"
(Corporate Seal) DECORIZE, INC.
ATTEST:
/S/ by Xxxxxx Xxxx By /S/ Xxx Xxxxx
-------------------------- -----------------------
Secretary/Assistant Secretary Xxx Xxxxx, President
"Decorize"
/S/ Xxxx Xxxxxx Xxxxxx
-----------------------
Xxxx Xxxxxxx Xxxxxx
/S/ Xxxxx Xxxxxx
-----------------------
Xxxxx Xxxxxx
"Faith Walk Designs Shareholders"
28
EXHIBIT "A-1"
TO: Secretary of State
State of Texas
ARTICLES OF MERGER OF FAITH WALK DESIGNS, INC.
INTO STEP OF FAITH, INC.
Pursuant to the provisions of Article 5.01 and 5.04 of the Texas
Business Act, Faith Walk Designs, Inc., a Texas corporation ("Faith Walk
Designs") and Step of Faith, Inc., a Missouri corporation ("Step of Faith")
(Faith Walk Designs and Step of Faith hereinafter sometimes referred to
collectively as the "Constituent Corporations") adopt and certify the following
Articles of Merger:
1. Faith Walk Designs is hereby merged with and into Step of Faith, so
that Step of Faith is the surviving corporation. The name of the surviving
corporation is Step of Faith, Inc.
2. The Board of Directors of each of the Constituent Corporations has
met, and by resolution adopted by a majority vote of the members of such Boards,
has approved the Plan of Merger as set forth in these Articles.
3. The Plan of Merger thereafter was submitted to a vote at the meeting
of the shareholders of each of the Constituent Corporations, and at such meeting
the following votes were recorded:
(a) Faith Walk Designs has outstanding 1,000 shares of common
stock, par value $1.00 per share, and has no other shares of stock
outstanding. All of its shares of common stock were voted for the Plan
of Merger and none of its shares of common stock was voted against the
Plan of Merger.
(b) Step of Faith has outstanding 500 shares of common stock,
par value $.01 per share, and has no other shares of stock outstanding.
All of its shares of common stock were voted for the Plan of Merger and
none of its shares of common stock was voted against the Plan of
Merger.
4. The Plan of Merger consists of the following:
(a) Step of Faith, Inc., a Missouri corporation, is the
surviving corporation.
(b) All of the property, rights, privileges, leases and
patents of Faith Walk Designs are to be transferred to and become the
property of Step of Faith, the survivor. The officers and Board of
Directors of Faith Walk Designs and Step of Faith are authorized to
execute all deeds, assignments and documents of every nature that may
be needed to effectuate a full and complete transfer of ownership.
(c) The officers and Board of Directors of Step of Faith shall
continue in office until their successors are duly elected and
qualified under the provisions of the By-Laws of the surviving
corporation.
(d) Each share of common stock of Step of Faith issued and
outstanding immediately prior to the merger shall remain issued and
outstanding from and after the merger.
(e) Step of Faith is the wholly owned subsidiary of Decorize,
Inc., a Missouri corporation ("Decorize"). Each share of Faith Walk
Designs common stock issued and outstanding shall cease to be
outstanding, and shall be automatically cancelled and retired and shall
cease to exist, and shall be converted into and exchanged for the right
to receive common stock of Decorize, fully paid and nonassessable, cash
and a promissory note from Decorize, as follows:
29
(i) Decorize shall pay in readily available funds to
the Faith Walk Designs Shareholders an amount equal to Two
Hundred Eighty-Four Thousand Two Hundred Fifty-Five Dollars
and Seventy-Three Cents ($284,255.73). This amount shall be
paid by the Faith Walk Designs Shareholders to Faith Walk
Designs at Closing to pay off all loans to shareholders,
officers and employees of Faith Walk Designs and the family
members of each as reflected on the books of Faith Walk
Designs as well as any accounts payable due to any of the
foregoing;
(ii) Decorize shall execute and deliver a promissory
note in the principal amount of Two Hundred Fifteen Thousand
Seven Hundred Forty-Four Dollars and Twenty Seven Cents
($215,744.27); and
(iii) The right of the Faith Walk Designs
Shareholders to receive such a number of shares of common
stock of Decorize that would have an aggregate share price
equal to Five Hundred Ten Thousand Dollars, ($510,000.00),
based on the Trading Price (as defined in the Plan of Merger).
5. The Certificate of Incorporation of the surviving corporation is not
amended.
6. An executed copy of the plan of merger is on file at the principle
place of business of Step of Faith at 000 Xxxxx Xxxxx Xxxxxx, Xxxxx X,
Xxxxxxxxxxx, Xxxxxxxx and a copy of the plan of merger will be furnished by such
entity, on written request and without cost, to any shareholder of each entity
that is a party to the plan of merger and to any creditor or obligee of the
parties to the merger at the time of the merger if such obligation is then
outstanding.
7. The plan of merger and the performance of its terms were duly
authorized by all action required by the laws under which each foreign
corporation or other entity that is a party to the merger was incorporated or
organized and by such entity's constituent documents.
[SIGNATURE PAGE FOLLOWS]
30
IN WITNESS WHEREOF, these Articles of Merger have been executed in
duplicate by the aforementioned corporations as of the day and year hereinafter
acknowledged.
FAITH WALK DESIGNS, INC.
(CORPORATE SEAL)
By:______________________________________
ATTEST: [Signature] Date
________________________________ ______________________________________
Secretary/Assistant Secretary Xxxx Xxxx Xxxxxx, President
"Faith Walk Designs"
STEP OF FAITH, INC.
(CORPORATE SEAL)
By:______________________________________
ATTEST: [Signature] Date
________________________________ ______________________________________
Secretary/Assistant Secretary Xxx Xxxxx, President
"Step of Faith"
STATE OF TEXAS )
) ss.
COUNTY OF XXXXXX )
I, __________________________________________, a notary public, do
hereby certify that on the _____ day of August, 2001, personally appeared before
me Xxxx Xxxx Xxxxxx, who being by me first duly sworn, declared that he is the
President of Faith Walk Designs, Inc., a Texas corporation, that he signed the
foregoing documents as the President of the Corporation, and that the statements
therein contained are true.
__________________________________
Notary Public
My commissions expires:
31
STATE OF MISSOURI )
) ss.
COUNTY OF XXXXXX )
I, __________________________________________, a notary public, do
hereby certify that on the _____ day of August, 2001, personally appeared before
me Xxx Xxxxx, who being by me first duly sworn, declared that he is the
President of Step of Faith, Inc., a Missouri corporation, that he signed the
foregoing documents as the President of the Corporation, and that the statements
therein contained are true.
__________________________________
Notary Public
My commissions expires:
00
XXXXXXX "X-0"
Xxxxx of Missouri
Xxxx Xxxxx, Secretary of State
Xxxxx X. Xxxxxxxxxxx State Information Center
000 X. Xxxx Xxxxxx, Xx 000,
Xxxxxxxxx Xxxx, XX 00000
Corporations Division
X.X. Xxx 000, Xxxxxxxxx Xxxx, XX 00000
Pursuant to the provisions of the General and business Corporation Law of
Missouri, the undersigned corporations certify the following:
1. That Step of Faith, Inc., of Missouri and Faith Walk Designs,
Inc., of Texas are hereby merged and that the above-named Step
of Faith, Inc., is the surviving corporation.
2. That the Board of Directors of each of the above-named
corporations met and by resolution adopted by a majority vote
of the members of such boards approved the Plan of Merger set
forth in these Articles.
3. The Plan of Merger thereafter was submitted to a vote at a
meeting of the shareholders of each of the above-named
corporations, and at such meeting the following votes were
recorded:
Corporation Number of Shares Outstanding Number Voting for Plan Number Voting Against Plan
----------- ---------------------------- ----------------------- --------------------------
Faith Walk Designs, Inc. 1,000 1,000 0
Step of Faith, Inc. 500 500 0
4. If the above-named surviving corporation is to be governed by
the laws of any state other than Missouri, the surviving
corporation agrees that it will promptly pay to the dissenting
shareholders of any Missouri Corporation which is a party to
this merger the amount, if any, to which they shall be
entitled under provisions of Missouri law with respect to the
rights of dissenting shareholders. It also agrees that it may
be served with process in this state, and irrevocably appoints
the Missouri Secretary of State as its agent to accept service
of processing any proceeding based upon any cause of action
against any such Missouri corporation arising in this state
prior to the issuance of the certificate of merger, and in any
proceeding for the enforcement of the rights of a dissenting
shareholder of any such Missouri corporation against the
surviving corporation. The address to which the service of
process in any such proceeding shall be mailed is: Neale and
Xxxxxx, LLP, P.O. Box 10327, 0000 Xxxx Xxxxxxxx, Xxxxxxxxxxx,
Xxxxxxxx 00000, ATTN: Xxxxxxx X. XxXxxxx.
5. PLAN OF MERGER
a. Step of Faith, Inc., of Missouri is the survivor.
b. All of the property, rights, privileges, leases and
patents of Faith Walk Designs, Inc. are to be
transferred to and become the property of Step of
Faith, Inc. The officers and board of directors of
the above-named corporations are authorized to
execute all deeds, assignments and documents of every
nature which may be needed to effectuate a full and
complete transfer of ownership.
c. The officers and board of directors of Faith Walk
Designs shall continue in office until their
successors are duly elected and qualified under the
provisions of the surviving corporation.
d. The outstanding shares of Faith Walk Designs shall be
exchanged on the following basis: Each share of Faith
Walk Designs common stock issued and outstanding
shall cease to be outstanding, and shall be
automatically cancelled and retired and shall cease
to exist, and shall
33
be converted into and exchanged for the right to
receive common stock of Decorize, Inc. a Delaware
corporation and parent corporation of Step of Faith,
Inc., cash and a promissory note from Decorize, as
follows:
(1) Decorize shall pay in readily available
funds to the Faith Walk Designs Shareholders an
amount equal to Two Hundred Eighty-Four Thousand Two
Hundred Fifty-Five Dollars and Seventy-Three Cents
($284,255.73);
(2) Decorize shall execute and deliver a
promissory note in the principal amount of Two
Hundred Fifteen Thousand Seven Hundred Forty-Four
Dollars and Twenty Seven Cents ($215,744.27); and
(3) The right of the Faith Walk Designs
Shareholders to receive such a number of shares of
common stock of Decorize that would have an aggregate
share price equal to Five Hundred Ten Thousand
Dollars, ($510,000.00), based on the Trading Price.
e. The Articles of Incorporation of the Survivor are
amended as follows:
Article One: The name of the corporation is Faith
Walk Designs, Inc.
IN WITNESS WHEREOF, these Articles of Merger have been executed in
duplicate by the aforementioned corporations as of the day and year hereafter
acknowledged.
[SIGNATURE PAGE FOLLOWS]
34
FAITH WALK DESIGNS, INC.
(CORPORATE SEAL)
By:_____________________________
ATTEST: Date
_________________________________ ________________________________
Secretary/Assistant Secretary Xxxx Xxxx Xxxxxx, President
________________________________
[Title]
"Faith Walk Designs"
STEP OF FAITH, INC.
(CORPORATE SEAL)
By:_____________________________
ATTEST: [Signature] Date
_________________________________ ________________________________
Secretary/Assistant Secretary Xxx Xxxxx, President
"Step of Faith"
STATE OF TEXAS )
) ss.
COUNTY OF XXXXXX )
I, __________________________________________, a notary public, do
hereby certify that on the _____ day of _________________, 2001, personally
appeared before me Xxxx Xxxx Xxxxxx, who being by me first duly sworn, declared
that he is the President of Faith Walk Designs, Inc., a Texas corporation, that
he signed the foregoing documents as the President of the Corporation, and that
the statements therein contained are true.
__________________________________
Notary Public
My commissions expires:
35
STATE OF MISSOURI )
) ss.
COUNTY OF XXXXXX )
I, __________________________________________, a notary public, do
hereby certify that on the _____ day of _________________, 2001, personally
appeared before me __________________________________, who being by me first
duly sworn, declared that he is the President of Step of Faith, Inc., a Missouri
corporation, that he signed the foregoing documents as the President of the
Corporation, and that the statements therein contained are true.
__________________________________
Notary Public
My commissions expires:
36
