STOCK PURCHASE AGREEMENT
By and Between
FLOOR DECOR, INC.,
a Delaware corporation
and
EAGLE EYE SCANDINAVIAN DISTRIBUTION LIMITED
An English private limited company
and
MASTER ENTERPRISES LIMITED AND OTHERS
and
XXXXXXXXXXX XXXXX
and
XXXX XXXXX
as of December 1, 2001
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TABLE OF CONTENTS
Page
ARTICLE I. - DEFINITIONS......................................................1
1.1 In the Agreed Form..........................................1
1.2 Assets......................................................1
1.3 Business....................................................2
1.4 Buyer.......................................................2
1.5 Closing Date................................................2
1.6 Code........................................................2
1.7 Collateral Agreements.......................................2
1.8 Company.....................................................2
1.9 Company Management Accounts.................................2
1.10 Consideration Shares........................................2
1.11 Contracts...................................................2
1.12 Damages.....................................................3
1.13 Disclosure Schedule.........................................3
1.14 Environmental Claim.........................................2
1.15 Environmental Law...........................................3
1.16 ERISA.......................................................3
1.17 FD Disclosure Schedule......................................3
1.18 FD Financial Statements.....................................4
1.19 FD Shares...................................................4
1.20 GAAP........................................................4
1.21 Governmental Authority......................................4
1.22 Hazardous Materials.........................................4
1.23 Hazardous Material Activity.................................4
1.24 Intangible Rights...........................................4
1.25 Material Adverse Effect.....................................4
1.26 Ordinary Course of Business.................................4
1.27 Permits.....................................................5
1.28 Purchase Price..............................................5
1.29 Release.....................................................5
1.30 Shares......................................................5
1.31 Tax or Taxes................................................5
1.32 The Warrantors..............................................5
ARTICLE II. - SALE AND PURCHASE OF THE ASSETS.................................5
2.1 Sale and Purchase of the Shares.............................5
2.2 Method of Transfer .........................................5
2.3 No Liens....................................................5
2.4 Assumed Liabilities.........................................5
ARTICLE III. - PURCHASE PRICE AND METHOD OF PAYMENT...........................6
3.1 Purchase Price..............................................6
3.2 Stock Consideration.........................................6
3.3 Allocation of Purchase Price................................6
3.4 Investment Restrictions.....................................6
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ARTICLE IV. - CLOSING.........................................................6
4.1 Closing.....................................................6
4.2 Warrantors and Company Performance
at Closing.................................................6
4.3 Buyer's Performance at Closing..............................9
4.4 Termination in Absence of Closing...........................10
ARTICLE V. - REPRESENTATIONS AND WARRANTIES OF THE
WARRANTORS AND OF THE COMPANY..................................11
5.1 Organization................................................12
5.2 Capitalization..............................................12
5.3 Corporate Documents.........................................12
5.4 Subsidiaries................................................12
5.5 Authority...................................................12
5.6 Company Management Accounts.................................13
5.7 Title to Assets.............................................13
5.8 Liabilities.................................................13
5.9 Obligations to Affiliates...................................13
5.10 Real Property...............................................13
5.11 Personal Property...........................................13
5.12 Employee Benefit............................................13
5.13 Employee Matters ...........................................15
5.14 Employment Practices........................................16
5.15 Insurance...................................................16
5.16 Contracts and Commitments...................................16
5.17 Inspection of Records.......................................17
5.18 Inventories.................................................17
5.19 Equipment and Other Tangible Property.......................17
5.20 Permits.....................................................17
5.21 Intangible Rights...........................................17
5.22 Unregistered Securities.....................................17
5.23 Litigation..................................................18
5.24 Compliance with Laws........................................18
5.25 Absence of Material Changes.................................18
5.26 Banking Information.........................................19
5.27 Tax Returns.................................................19
5.28 Accounts Receivable.........................................20
5.29 Brokers' Commissions........................................20
5.30 Books and Records...........................................20
5.31 Accuracy of Information.....................................20
5.32 Environmental Matters.......................................21
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ARTICLE VI. - REPRESENTATIONS AND WARRANTIES
OF FD ............................................................21
6.1 Organization................................................21
6.2 Capitalization..............................................21
6.3 Corporate Documents.........................................21
6.4 Authority...................................................22
6.5 Financial Statements........................................22
6.6 Title to Assets.............................................22
6.7 Liabilities.................................................22
6.8 Employee Benefit Plans......................................23
6.9 Employee Matters............................................24
6.10 Employment Practices........................................25
6.11 Insurance...................................................25
6.12 Inspection of Records.......................................25
6.13 Permits.....................................................25
6.14 Intangible Rights...........................................25
6.15 Litigation..................................................25
6.16 Compliance with Laws........................................26
6.17 Banking Information.........................................26
6.18 Tax Returns.................................................26
6.19 Accounts Receivable.........................................26
6.20 Brokers' Commissions........................................26
6.21 Books and Records...........................................27
6.22 Accuracy of Information.....................................27
6.23 Environmental Matters.......................................27
6.24 Public Filings..............................................27
ARTICLE VII. - OBLIGATIONS PRIOR TO CLOSING...................................28
7.1 As to the Company...........................................28
7.2 As to FD....................................................30
7.3 Consummation of Transactions................................30
7.4 No Negotiations.............................................31
7.5 Disclosure Schedule.........................................31
ARTICLE VIII. - CONDITIONS PRECEDENT TO THE CLOSING...........................32
8.1 Conditions to Obligations of Buyer .........................32
8.2 Conditions to Obligations of the Company
the Vendors and the Warrantors..............................33
ARTICLE IX. - POST-CLOSING OBLIGATIONS........................................34
9.1 Survival of the Closing.....................................34
9.2 Further Assurances..........................................34
9.3 Confidentiality.............................................34
9.3 Non-Competition Agreement...................................34
9.4 Publicity...................................................36
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ARTICLE X. - MISCELLANEOUS....................................................36
10.1 Costs and Expenses..........................................36
10.2 Remedies....................................................36
10.3 Disclosure Schedule.........................................36
10.4 Attorneys' Fees.............................................36
10.5 Risk of Loss................................................36
10.6 Assignment and Amendment of Agreement.......................36
10.7 Notices.....................................................36
10.8 Entire Agreement............................................37
10.9 Waiver......................................................37
10.10 Governing Law; Venue........................................38
10.11 Counterparts................................................38
10.12 Captions....................................................38
10.13 Successors and Assigns......................................38
10.14 Interpretation..............................................38
10.15 Severability................................................38
10.16 Rights of Third Parties.....................................38
Schedule 1 - The Vendors.............................................41
----------
Disclosure Schedule..................................................42
FD Disclosure Schedule
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of the
28th day of November, 2001, by and between FLOOR DECOR, INC., a Delaware
corporation ("Buyer" or "FD"), EAGLE EYE SCANDINAVIAN DISTRIBUTION LIMITED, an
English private limited company (the "Company"), THE PERSONS whose names and
addressed are set out in Schedule 1 hereto (collectively "the Vendors"), and
XXXXXXXXXXX XXXXX and XXXX XXXXX (collectively the "Warrantors").
R E C I T A L S
A. The Company markets and distributes certain vehicle communication
gateway systems and related electronic communications systems and equipment
within the European continent;
B. Buyer desires to purchase the issued share capital of the Company upon
the terms and subject to the conditions set forth herein.
C. The issued share capital of Buyer at the date hereof is approximately
54,000,000 shares of common stock with a par value of $0.001 each, of which
approximately 31,000,000 are fully tradeable and approximately 23,000,000 are
not fully tradeable.
D. Buyer, the Company, the Warrantors and the Directors of FD desire to
make certain representations, warranties and agreements in connection with this
Agreement and the transactions contemplated hereby.
Now, Therefore, in consideration of the premises and the mutual benefits to
be derived therefrom and of the respective mutual covenants and agreements
hereinafter set forth and such other good and valuable consideration, the
adequacy and receipt of which is hereby acknowledged, the parties hereto hereby
agree as follows:
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ARTICLE I. - DEFINITION
All capitalized terms used in this Agreement which are not otherwise
defined in this Agreement, are used as defined in this Article I or elsewhere in
this Agreement.
1.1. In the Agreed Form - in the form agreed between the parties and
initialed for the purposes of identification.
1.2. Assets - all of the assets of the Company, including without
limitation all of the Company's interest in all or any of the following (i)
inventory of the Company; (ii) cash in the Company's accounts; (iii) all
equipment, machinery, furniture, fixtures, and all other fixed assets owned by
the Company; (iv) the name Eagle Eye Scandinavian Distribution" and any other
service xxxx, trade xxxx, or trade name used in connection with all the
Company's Business at any time prior to the Closing Date and all related
goodwill; (v) tangible personal property, together with such additions thereto
and deletions therefrom as shall have occurred in the ordinary course of the
Business prior to the Closing Date; (vi) intangible personal property, including
any contracts and personal property leases pertaining to the Business to which
the Company is a party; (vii) the Company's interest in leased real property;
(viii) all books and records; (ix) all prepaid expenses of the Company and
security deposits with respect to the leases or any other acquired assets; (x)
all receivables of the Company; (xi) causes of action, lawsuits, judgments,
claims and demands of any nature available to or being pursued by the Company
with respect to the Business or ownership, use, function or value of any of the
Assets (xii) the Permits, to the extent assignable; (xiii) to the extent not
described above, all other assets comprising or used in the Business whether or
not reflected on the books and records of the Company.
1.3. Business- shall mean the marketing, sales, and distribution business
as conducted by the Company since the date of incorporation preceding the
execution of this Agreement and such additional sales generated thereafter
through the Closing Date.
1.4. Buyer - shall mean Floor Decor, Inc., a Delaware corporation.
1.5. Closing Date - shall mean February 11, 2002, subject to fulfillment of
all of the terms and conditions of this Agreement, or such other date thereafter
as may be agreed upon in writing by all parties hereto.
1.6. Code - shall mean the United States Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
1.7. Collateral Agreements - shall mean any and all agreements,
instruments, certificates or documents required or expressly provided for in
this Agreement or otherwise reasonably required by either party to be executed
and delivered in connection with the transaction contemplated by this Agreement.
1.8. Company - Eagle Eye Scandinavian Distribution Limited, an English
private limited company.
1.9. Company Management Accounts - the management accounts of the Company
in the agreed form from incorporation on October 9, 2001 to November, 2001 to be
prepared by Xx. Xxxxxxx Kong ACCA ACEA.
1.10. Consideration Shares - the 2,000,000 unregistered and previously
unissued FD Shares to be allotted and issued by FD to the Vendors as
consideration for the purchase of the Shares.
1.11. Contracts - shall mean any and all contracts, agreements,
understandings, arrangements, leases, licenses, registrations, authorizations,
easements, servitudes, rights of way, mortgages, bonds, notes, guaranties,
liens, indebtedness, approvals, or other instruments or undertakings to which
the Company or as the case may be FD is a party or to which or by which the
Company or as the case may be FD or the property of Company or as the case may
be FD is subject or bound, excluding any Permits.
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1.12. Damages - shall mean any and all damages, liabilities, obligations,
penalties, fines, judgments, claims, deficiencies, losses, costs, expenses, and
assessments, including all attorneys' fees and costs, and interest accruing on
such damages.
1.13. Disclosure Schedule - shall mean the Disclosure Schedule prepared by
the Company and the Warrantors containing the disclosures, exhibits, and
schedules required pursuant to the terms of this Agreement.
1.14. Environmental Claim - shall mean any investigation, notice,
violation, demand, allegation, action, suit, injunction, judgment, order,
consent, decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial or private in nature) arising (a) pursuant to, or in
connection with, an actual or alleged violation of any Environmental Law, (b) in
connection with any Hazardous Material, (c) in connection with any Hazardous
Material or actual or alleged Hazardous Material Activity, (d) from any
abatement, removal, remedial, corrective or other response action in connection
with a Hazardous Material, Environmental Law or other order of a Governmental
Authority, or (e) from any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
1.15. Environmental Law - shall mean any current or future legal
requirement pertaining to (a) the protection of health, safety and the indoor or
outdoor environment, (b) the conservation, management or use of natural
resources and wildlife, (c) the protection or use of surface water and
groundwater, (d) the management, manufacture, possession, presence, use,
generation, transportation, treatment, storage, disposal, Release, threatened
Release, abatement, removal, remediation or handling of, or exposure to, any
Hazardous Material or (e) pollution (including any Release to air, land, surface
water, and groundwater), and includes, in the case of the FD Warranties, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 X.X.X.xx. 9601, et seq., Solid Waste Disposal Act of 1976 and Hazardous
and Solid Waste Amendments of 1984, 42 X.X.X.xx. 6901, et seq., Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1977, 33 X.X.X.xx.
1251, et seq., Clean Air Act of 1966, as amended, 42 X.X.X.xx. 7401, et seq.,
Toxic Substance Control Act of 1976, 15 U.S.C. ss. 2601, et seq., Hazardous
material Transportation Act, 49 U.S.C. Xxx.xx. 1801, et seq., Occupational
Safety and Health Act of 1970, as amended, 29 X.X.X.xx. 651, et seq., Oil
Pollution act of 1990, 33 X.X.X.xx. 2701, et seq., Emergency Planning and
Community Right-to-Know Act of 1986, 42 X.X.X.xx. 11001, et seq., National
Environmental Policy Act of 1969, 42 X.X.X.xx. 4321, et seq., Safe Drinking
Water Act of 1974, as amended, 42 X.X.X.xx. 300(f), et seq., any similar,
implementation or successor law, and any amendment, rule, regulation, order or
directive issued thereunder.
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1.16. ERISA - shall mean the Employment Retirement Income Security Act of
1974, as amended.
1.17. FD Disclosure Schedule - the disclosure schedule prepared by the
Directors of FD containing the disclosures, exhibits and schedules required
pursuant to the terms of this agreement.
1.18. FD Financial Statements - FD's Form 10-KSB for the fiscal year ended
December 31, 2001, and Form 10 QSB for the quarter ended September 30, 2001, as
filed on XXXXX.
1.19. FD Shares - FD shares of common stock having a par value of $0.001
each.
1.20. GAAP - shall mean generally accepted accounting principles for
corporate financial statements prepared in the United States.
1.21. Governmental Authority - shall mean any nation, country (including,
but not limited to the United States of America) commonwealth, state, territory
or possession thereof and any political subdivision of any of the foregoing,
including, but not limited to courts, departments, commissions, boards, bureaus,
agencies, ministries or other instrumentalities.
1.22. Hazardous Materials - shall mean any and all elements or compounds
which are contained in a list of hazardous substances by the United States
Environmental Protection Agency ("EPA") and the list of toxic pollutants
designated by the United States Congress or the EPA or defined by any other
Federal, state or local statute, law, ordinance, code rule, regulation order or
degree regulating, relating to or imposing liability or standards of conduct
concerning any hazardous, medical, toxic or dangerous waste, substance or
material as now or at any time in effect.
1.23. Hazardous Material Activity - shall mean any activity, event or
occurrence involving a Hazardous Material, including, without limitation, the
manufacture, possession, presence, use, generation, transportation, treatment,
storage, disposal, Release, threatened Release, abatement, removal, remediation,
handling of or corrective or response action to any Hazardous Material.
1.24. Intangible Rights - shall mean any and all information, trade
secrets, patents, copyrights, trademarks, trade names and other intangible
properties that are necessary or customarily used by the Company in the
operation of its Business, or as the case may be, by FD in the operation of its
business.
1.25. Material Adverse Effect - shall mean an effect (or circumstance
involving a prospective effect) on the business, operations, assets,
liabilities, results of operations, cash flows, conditions (financial or
otherwise) or prospects of the Company which is materially adverse to the
Business, or as the case may be of FD, which is materially adverse to its
business.
1.26. Ordinary Course of Business - shall mean the conduct and operation of
the business of the Company, or as the case may be of FD, only in the manner in
which it conducted and operated such business during the twelve (12) months
preceding the Closing Date, following its usual and ordinary accounting
practices, making ordinary accruals, incurring ordinary liabilities and
expenditures, and making ordinary commitments for merchandise, insurance,
rentals and other ordinary business purposes.
4
1.27. Permits - shall mean any and all permits, licenses, agencies, orders
or contracts granted by any Governmental Authority necessary or used in the
operation of the Business by the Company, or as the case may, of FD's business,
in each case as presently conducted.
1.28. Purchase Price - shall mean the Consideration Shares deliverable to
the Vendors for the purchase of the Shares, all as more fully set forth in
Article III herein.
1.29. Release - shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the indoor or outdoor environment, including, without limitation,
the abandonment or discarding of barrels, drums, containers, tanks and other
receptacles containing or previously containing any Hazardous Material, or
Medical Waste.
1.30. Shares - shall mean all outstanding issued shares in the capital of
the Company.
1.31. Tax or Taxes - shall mean any federal, state, local or foreign,
income, gross receipt, license, payroll, employment, excise, communications,
severance, stamp, occupation, premium, windfall profits, environmental, customs,
duties, capital stock, franchise profits, withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transaction, transfer, registration, value added, alternative, estimated or
other tax of any kind whatsoever, including any interest, penalty or addition
thereto.
1.32. The Warrantors - Xxxxxxxxxxx Xxxxx and Xxxx Xxxxx, each being one of
the Vendors.
ARTICLE II. - SALE AND PURCHASE OF THE ASSETS
2.1 Sale and Purchase of the Shares - On the terms and subject to the
conditions of this Agreement, on the Closing Date the Vendors shall sell,
convey, assign, transfer, and deliver to Buyer, and Buyer shall purchase,
acquire, and accept delivery of the Shares.
2.2 Method of Transfer - The sale, transfer, conveyance, assignment, and
delivery by the Vendors of the Shares to the Buyer in accordance with Section
2.1 hereof shall be effected through the delivery by the Vendors of duly
executed stock transfer forms together with the relative share certificates for
all the Shares, and such other conveyances and transfers of documents (if any)
as are necessary in the reasonable discretion of the Buyer to vest lien free
title in Buyer in the Shares.
2.3 No Liens - The Vendors shall transfer good and marketable title to the
Shares to Buyer free and clear of all liens, charges, claims, security
interests, adverse interests, and encumbrances of any kind whatsoever owed to,
owed by, accrued to, or in favor of any person or party whatsoever.
5
2.4 Assumed Liabilities - Buyer shall assume all the liabilities and
obligations of the Company in existence at the Closing Date, as set out in the
Disclosure Schedule.
ARTICLE III. - PURCHASE PRICE AND METHOD OF PAYMENT
3.1 Purchase Price - Subject to the further terms and conditions of this
Agreement, as consideration for the Shares purchased by the Buyer, and subject
to compliance by the Warrantors, and the Company with the warranties and
undertakings contained in this Agreement, Buyer shall pay the Purchase Price by
issuing the Consideration Shares duly authorized, validly issued, fully paid and
non-assessable on the Closing Date to the Vendors in the amounts set out in
Schedule l on the further terms and the conditions described in this Agreement
and subject to Rule 144 of the United States Securities and Exchange Commission
referred to in the "investment restrictions" in Paragraph 3.4.
3.2 Stock Consideration - FD agrees that as soon as practicable after the
date of the Agreement and in any event on or prior to the Closing Date the
Consideration Shares will have a par value of $0.001 per share.
3.3 Allocation of Purchase Price - The purchase price for the Shares shall
be allocated in accordance with Section 1060 of the Internal Revenue Code as
determined by the parties at closing, and the parties shall cooperate to have
the transaction classified in Section 368(a) or other appropriate Internal
Revenue Code Section transaction in order to effectuate a tax free exchange.
3.4 Investment Restrictions - All the Consideration Shares shall be
"Restricted Securities" as that term is defined pursuant to the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (the
"1933 Act"). The Warrantors hereby represent that the Consideration Shares are
being acquired for investment purposes only and not with a view to the
distribution thereof except as may be permitted by the 1933 Act. Certificates
representing Consideration Shares when issued shall contain a restrictive legend
to the effect that the Consideration Shares have not been registered pursuant to
the 1933 Act or any state having jurisdiction thereof and may not be sold,
transferred or otherwise disposed of except in compliance with the 1933 Act or
unless Buyer receives an opinion of counsel reasonably satisfactory to it that
an exemption from registration is available. A stop transfer order shall be
placed on the Consideration Shares with Buyer's transfer agent. The Warrantors
and the Company agree that for a one (1) year period following the Closing Date,
they will not transfer, sell, hypothecate or pledge any of the Consideration
Shares without the prior written consent of Buyer.
ARTICLE IV. - CLOSING
4.1 Closing - Subject to the terms and conditions of this Agreement, the
Closing (the "Closing") shall take place at 9:30 a.m. on the Closing Date, or
such other date as is mutually agreed between the parties. The Closing shall
take place at the offices of counsel for the Buyer.
6
4.2 Warrantors and Company Performance at Closing - At or prior to the
Closing, the Warrantors and the Company shall deliver to Buyer:
(a) duly executed and issued transfer documents conveying the Shares to
Buyer;
(b) a certificate duly executed by the Warrantors to the effect that:
(i) all of the representations and warranties made by the Warrantors
and the Company in this Agreement are true and correct in all
material respects as of the Closing Date;
(ii) none of the covenants made by the Warrantors or the Company in
this Agreement have been breached in any material respect as of
the Closing Date;
(iii) all conditions precedent set forth in Section 8.1 have been
satisfied as of the Closing Date;
(iv) nothing has occurred which has caused a Material Adverse Effect
on the condition of the Company since the date of the Company
Management Accounts, whether financial or otherwise, through the
Closing Date;
(c) all approvals and consents of all appropriate Governmental
Authorities, if any, including all consents to the transfer of
ownership of the Company as it impacts the Company's Permits;
(d) written evidence that this Agreement and the transactions contemplated
hereunder have been approved by the Company's Board of Directors in
accordance with appropriate law;
(e) investment letters in a form acceptable to counsel for FD signed by
the Vendors and the Warrantors pertaining to the Consideration Shares;
(f) such other certificates, documents, and instruments as may be
reasonably requested by Buyer in connection with the transactions
contemplated by this Agreement.
(g) a legal of counsel in form and substance satisfactory to Buyer and its
counsel that:
(i) the Company has been duly organized and is validly existing and
in good standing under the laws of England and Wales and is duly
qualified to do business and is in good standing in each
jurisdiction in which the character and location of the
properties owned by them or the nature of the business transacted
by them makes such qualification necessary;
7
(ii) the Company has the full power to conduct its Business as
presently conducted and to execute and deliver this Agreement and
to perform its obligations hereunder;
(iii) the execution and delivery of the Agreement, performance by the
Company and the Warrantors of their obligations under the
Agreement and the exercise by the Company or the Warrantors of
the rights created by the Agreement do not (a) violate the
Company's Memorandum and Articles of Association; (b) to the best
of counsel's knowledge, constitute a breach of or a default under
any indenture, mortgage, lease or other agreement or instrument
to which any of the Company or the Warrantors is a party or by
which they or their assets are bound; (c) to the best of
counsel's knowledge, result in the creation of a mortgage, lien,
charges, resolutions, pledge, security interest, options, lease,
claim, right of any third party, easement, encroachment or other
encumbrance upon the capital stock or assets of the Company; or
(d) to the best of counsel's knowledge, violate any law, statute,
regulation, ordinance, rule, consent decree, settlement agreement
or governmental requirement enacted, promulgated, entered into,
agreed or imposed by the Governmental Authority;
(iv) the Company and the Warrantors have authorized the execution,
delivery and performance of this Agreement and the Collateral
Agreements by all necessary corporate and Warrantors action and
to the best of counsel's knowledge, this Agreement and the
Collateral Agreements each is a valid and binding obligation of
the Company and Warrantors enforceable against the Company and
the Warrantors in accordance with applicable law;
(v) no notice, report or other filing or registration with, and no
consent, approval or authorization of, any central or local
Governmental Authority is required to be submitted, made or
obtained by the Company in connection with the execution,
delivery and performance of the Agreement;
(vi) to the best of counsel's knowledge, neither the Company nor the
Warrantors are parties to any contract or subject to any other
legal resolution which would prevent or restrict complete and
full performance of any of the terms and conditions of this
Agreement or compliance with any of their obligations hereunder;
(vii) except as set forth in the Disclosure Schedule, to the best of
counsel's knowledge, there are no pending or threatened actions,
claims, investigations or other proceedings against the Company
or the Warrantors;
(viii) except as set forth in the Disclosure Schedule, the Company has
good and marketable title to all of its assets free and clear of
all liens, mortgages, pledges, conditional sales agreements,
security interests, restrictions, judgments, options, charges,
claims or encumbrances of any kind;
8
(ix) the Vendors and the Company have good and marketable title to the
common stock of the Company and of the Assets, respectively, in
each case free and clear of all liens, mortgages, pledges,
conditional sales agreements, security interests, restrictions,
judgments, options, charges, claims or encumbrances of any kind;
(x) the instruments of conveyance and assignment delivered by the
Vendors to Buyer in accordance with their terms have vested in
Buyer all right, title, and interest to the Shares, free and
clear of all liens, mortgages, pledges, conditional sales
agreements, security interests, restrictions, judgments, options,
charges, claims or encumbrances of any kind;
(xi) to the best of counsel's knowledge, all of the Contracts to which
the Company is a party are valid and subsisting and no default
exists thereunder;
(xii) to the best of counsel's knowledge, the Company is in compliance
with all central and local laws and regulations relating to it
and its Business.
4.3 Buyer's Performance at Closing - At or prior to Closing, Buyer shall
deliver or cause to be delivered to the Warrantors on behalf of the Vendors, the
following:
(a) the Consideration Shares as required in Section 3.1;
(b) a certificate duly executed by the President of FD to the effect
that :
(i) all of the representations and warranties made by the
Directors of FD in this Agreement are true and correct in
all material respects as of the Closing Date;
(ii) all conditions precedent set forth in Section 8.2 have been
satisfied as of the Closing Date;
(iii) nothing has occurred which has caused a Material Adverse
Effect on the condition of FD since the date of the FD
Financial Statements, whether financial or otherwise,
through the Closing Date;
(c) written evidence that this Agreement and the transactions contemplated
hereunder have been approved by the Board of Directors of FD in
accordance with appropriate law;
(d) satisfactory evidence that the Company's designees shall be the only
authorized signatories with respect to each of Buyer's bank accounts
and credit facilities, including such as are listed in the FD
Disclosure Schedule.
(e) such other certificates, documents and instruments as may be
reasonably requested by the Warrantors in connection with the
transactions contemplated by this Agreement;
(f) an opinion of counsel in form and substance satisfactory to the
Warrantors and his counsel that:
(i) FD has been duly organized and is validly existing and in good
standing under the laws of Delaware and is duly qualified to do
business and is in good standing in each jurisdiction in which
the character and location of the properties owned by it or the
nature of the business transacted by it makes such qualification
necessary;
9
(ii) FD has the full power to conduct its business as presently
conducted and to execute and deliver this Agreement and to
perform its obligations hereunder;
(iii) the execution and delivery of the Agreement, performance by FD
of its obligations under the Agreement and the exercise by FD of
the rights created by the Agreement to not (a) violate FD's
Articles or Certificate of Incorporation or By-laws; (b) to the
best of counsel's knowledge, constitute a beach of or a default
under any indenture, mortgage, lease or other agreement or
instrument to which FD is a party or by which it or its assets
are bound; (c) to the best of counsel's knowledge, result in the
creation of a mortgage, lien, charges, resolutions, pledge,
security interest, options, lease, claim, right of any third
party easement, encroachment or other encumbrances upon the
capital stock or assets of FD; and (d) to the best of counsel's
knowledge, violate any law, statute, regulation, ordinance, rule,
consent decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by the
Governmental Authority;
(iv) FD has authorized the execution, delivery and performance of this
Agreement and the Collateral Agreements by all necessary
corporate and Warrantors action and to the best of counsel's
knowledge, this Agreement and the Collateral Agreements each is a
valid and binding obligation of FD enforceable against it in
accordance with applicable law;
(v) no notice, report or other filing or registration with, and no
consent, approval or authorization of any Federal, state or local
Governmental Authority is required to be submitted, made or
obtained by FD in connection with the execution, delivery and
performance of the Agreement;
(vi) to the best of counsel's knowledge, FD is not a party to any
contract or subject to any other legal resolution which would
prevent or restrict complete and full performance of any of the
terms and conditions of this Agreement or compliance with any of
its obligations hereunder; and
(vii) except as set forth in the FD Disclosure Schedule, to the best
of counsel's knowledge, there are no pending or threatened
actions, claims, investigations or other proceedings against FD.
4.4 Termination in Absence of Closing
(a) If by the close of business on the Closing Date, the Closing has not
occurred (except as may otherwise be extended), then Buyer or the Vendors may
thereafter terminate this Agreement by written notice to the other parties
hereto, without liability of the terminating party to any other party to this
Agreement, unless the reason for closing having not occurred is (i) the
terminating party or parties breach of any of its or their obligations,
representations, warranties or covenants or other provisions of this Agreement;
or (ii) the failure of the terminating party or parties to perform its or their
obligations hereunder; provided, however, the defaulting parties shall have
twenty (20) days following written notice of any default within which to cure
such default. In such event, the defaulting party shall be liable to all other
parties for specific performance and for all Damages incurred by the terminating
party or parties, including but not limited to all expenses, costs and attorney
fees incurred in due diligence, negotiation of this Agreement, the drafting of
this Agreement and all Collateral Agreements by the terminating party or parties
and otherwise representing such non-defaulting parties.
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(b) This Agreement and the transactions contemplated herein may be
terminated and abandoned at any time on or prior to the Closing Date by Buyer
without liability, if:
(i) any representation or warranty made herein for the benefit of
Buyer or any certificate, schedule or document furnished to Buyer
pursuant to this Agreement is untrue in any material respect ; or
(ii) the Company or Warrantors shall have defaulted in any material
respect in the performance of any obligation under this
Agreement;
(iii) the Company's financial or business condition has suffered a
material adverse effect in the reasonable judgment of FD.
In the event that Buyer terminates this Agreement in accordance with the
provisions contained in this Section 4.4(b) then the Warrantors and the Company
shall be liable to Buyer for all Damages incurred by Buyer including, but not
limited to, all expenses, costs, and attorney's and accounting fees incurred in
the due diligence, negotiation and drafting of this Agreement in contemplation
of the transactions contained herein.
(c) This Agreement and the transactions contemplated herein may be
terminated and abandoned at any time on or prior to the Closing Date by the
Vendors, if:
(i) any representation or warranty made herein for the benefit of the
Vendors or any certificate, schedule or document furnished to the
Vendors, the Company or the Warrantors pursuant to this Agreement
is untrue in any material respect; or
(ii) the Buyer or FD shall have defaulted in any material respect in
the performance of any obligation under this Agreement; or
(iii) the Buyer's financial or business condition has suffered a
Material Adverse Effect in the reasonable judgment of the
Warrantors.
In the event that the Company terminates this Agreement in accordance with
the provisions contained in this Section 4.4(c), then the Company shall be
entitled to its reasonable attorney's fees and expenses incurred in connection
with this Agreement.
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ARTICLE V. - REPRESENTATIONS AND WARRANTIES
OF THE WARRANTORS AND OF THE COMPANY
The Warrantors and the Company represent and warrant to Buyer that, except
as set forth in the Disclosure Schedule (which Disclosure Schedule is dated the
date hereof and delivered by the Warrantors and the Company to Buyer and deemed
a part hereof by this reference), that the representations and warranties
contained in Article V are true and correct as of the date hereof:
5.1 Organization - The Company is a corporation duly organized, validly
existing, and in good standing under the laws of England The Company has the
corporate power to own, manage, lease and hold its assets and engage in its
businesses where such assets are located, is duly qualified to do business and
is in good standing in each jurisdiction in which the character and location of
the properties owned by it or the nature of the business transacted by it makes
such qualification necessary.
5.2 Capitalization - The Vendors together hold all the Shares. There are no
other classes of capital stock authorized by the Company. All of the Shares are
duly authorized, validly issued, fully paid and non-assessable. The Company has
not authorized and there is not outstanding at the date hereof, any preferred
stock, options, warrants or other rights to purchase any capital stock of the
Company. There is no shareholder, voting trust or any other agreements
restricting the transfer of the common stock. All of the Shares are owned free
and clear of any liens, encumbrances, claims, security agreements, pledges or
other restrictions. The Shares were not issued in violation of any preemptive
rights or of any laws.
5.3 Corporate Documents - The Memorandum and Articles of Association of the
Company attached to the Disclosure Schedule are true and correct as of the
Closing Date. The stock and minute books of the Company that have been made
available to Buyer for review contain a complete and accurate record of all
shareholders of the Company and all actions of the shareholders and directors
(and any committees thereof) of the Company.
5.4 Subsidiaries - The Company does not have any subsidiaries and neither
the Company nor any Vendor has any interest, direct or indirect, or has any
commitment to purchase any interest in, any other corporation, partnership,
joint venture or other business enterprise or entity which in any way consists
of any part of the Business. The Business is conducted only through the Company.
5.5 Authority - The Company and the Vendors have full power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement and any Collateral Agreement executed in connection with
the closing constitutes, or upon execution and delivery will constitute, the
legal, valid and binding obligations of such parties enforceable in accordance
with their terms. No consent of any central, municipal or other Governmental
Authority is required for the execution, delivery or performance of this
Agreement. Neither the execution and delivery of this Agreement and/or any
Collateral Agreement or other document or instrument contemplated by this
Agreement, nor the performance by the Company or the shareholder of the terms
and provisions hereof or thereof will (a) violate the Memorandum and Articles of
Association of the Company; (b) result in a breach or violation of any known
provision of, or constitute a default under, any indenture, mortgage, lease or
other agreement or instrument to which the Company or the Vendors are is a party
or by which any of the Company's assets are bound; (c) violate any law, statute,
regulation, ordinance, rule, order, decree, judgment, court decree, settlement
agreement or governmental requirement enacted, promulgated, entered into, agreed
or imposed by any Governmental Authority; or (d) result in the creation of any
mortgage, lien, charge, restriction, pledge, security interest, option, lease or
sublease, claim, right of any third party, easement, encroachment or encumbrance
on the common stock or on any of the assets of the Company.
12
5.6 Company Management Accounts - The Company Management Accounts, prepared
by Xxxxx Xxxxxxxx, CPA, are correct and are in accordance with the books and
records of the Company, do not reflect any transactions which are not bona-fide
transactions and do not contain any untrue statements of a material fact or omit
to state any material fact necessary to make the statements contained therein in
light of the circumstances in which they are made, not misleading. Since the
date of the Company Management Accounts, there has been no material adverse
change in the assets, liabilities, business, operations or condition, financial
or otherwise, of the Company from that shown on the Company Management Accounts.
5.7 Title to Assets - The Disclosure Schedule contains a list of all
tangible and intangible assets owned by the Company. Except as provided in the
Disclosure Schedule, the Company has good, marketable and insurable title to its
assets, free and clear of any and all liens, mortgages, pledges, conditional
sales assignments, security interests, judgments, options, adverse claims,
encumbrances or other restrictions or limitations whatsoever.
5.8 Liabilities - As of the date hereof, the Company had no liabilities,
fixed or contingent, which are not fully shown or provided for in the Company
Management Accounts or as listed in the Disclosure Schedule. All liabilities of
the Company have been incurred in the Ordinary Course of Business.
5.9 Obligations to Affiliates - Other than as disclosed, the Company is not
a party to any agreement with, and does not owe any amount or have any such
commitment to any of its shareholders, directors, officers, employees,
consultants or affiliates, and none of such persons owe any amounts to the
Company.
5.10 Real Property - The Company does not as at the date hereof, and will
not at Closing own, or have any option to own or any right of first refusal to
own or lease any real property.
5.11 Personal Property - There are no claims or rights of any third party
in connection with any personal property previously owned or held by the
Company.
5.12 Employee Benefit
(a) The Disclosure Schedule contains a description of all employee benefit
plans sponsored, maintained or contributed to by the Company for the benefit of
the Company' employees or which has been sponsored, maintained or contributed to
anytime during the Company's existence:
13
(i) each employee benefit plan as such term is defined inss.3(3) of
ERISA, including but not limited to employee benefit plans which
are not subject to the provisions of ERISA (collectively referred
to as "Plans");
(ii) each personnel policy, stock option plan, collective bargaining
agreement, bonus plan or arrangement, incentive award plan or
arrangement, vacation policy, severance pay policy or agreement,
deferred compensation agreement or arrangement and each other
employee benefit plan, agreement, arrangement, program, practice
or understanding benefit programs are true, correct and complete
copies of each of the Plans, related trusts and benefit programs
including all amendments thereto, have been furnished to FD.
(b) There has been furnished to FD, with respect to all Plans or benefit
programs required to comply with ERISA, all reports and summary plan
descriptions. Except as otherwise set forth in the Disclosure Schedule:
(i) the Company does not contribute to or have any obligation to
contribute to, and has not at any time contributed to or had an
obligation to contribute to, a multi-employer plan within the
meaning of ss. 3(37) of ERISA ("Multi-Employer Plan") or a
multiple employer plan within the meaning of ss. 413(b) and (c)
of the Code;
(ii) the Company has performed all obligations whether arising by
operation of law or by contract required to be performed by it in
connection with the Plans and benefit programs and there have
been no defaults or violations by any other party to the Plans or
benefit programs and will indemnify Buyer against any and all
obligations and liabilities related to the Plans and benefit
programs.
(iii) all reports and disclosures relating to the Plans required to be
filed with or furnished to governmental agencies, Plan
participants, or Plan beneficiaries have been filed or furnished
in accordance with applicable law in a timely manner and each
Plan and each benefit program has been administered in compliance
with its governing documents;
(iv) each of the Plans intended to be qualified underss.401 of the
Code satisfies the requirements of the Code and has received a
favorable determination letter from the Internal Revenue Service
regarding such status and has not, since receipt of the most
recent favorable determination letters, been amended or operated
in a way which could adversely affect such qualified status;
(v) there are no actions, suits, or claims pending (other than
routine claims for benefits) or threatened against or with
respect to, any of the Plans, benefit programs, or their
respective assets;
14
(vi) all contributions required to be made to the Plans and benefit
programs pursuant to their respective terms and provisions and
applicable law have been timely made;
(vii) as to any Plan subject to ERISA, no event or condition which
presents a risk of Plan termination or accumulated funding
deficiency within the meaning of ss. 302 of ERISA or ss. 412 of
the Code has occurred. No reportable event within the meaning of
ss. 4043 of ERISA has occurred, no notice of intent to terminate
the Plans has been given, no proceeding to terminate the Plan has
been instituted, there has been no termination of the Plan, and
no liability to the Pension Benefit Guaranty Corporation has been
incurred;
(viii) none of the Plans or their trustees has engaged in any
prohibited transactions or party in intent transactions as such
terms are defined inss.4975 of the Code andss.406 of ERISA;
(ix) there is no matter pending with respect to any Plan or benefit
program before the Internal Revenue Service, the U.S. Department
of Labor, or the Pension Benefit Guaranty Corporation;
(x) except as otherwise disclosed on any schedule attached to this
Agreement, neither the execution or delivery of this Agreement or
the consummation of the transactions contemplated hereby will:
(1) ....entitle any current or former employee of the Company to
severance pay, unemployment compensation, or any similar
payment;
(2) ....accelerate the time of payment or vesting or cause any
increase in the amount of any compensation due to any such
employee or former employee; or
(3).....directly or indirectly result in any payment made to or
on behalf of any person to constitute a parachute payment
within the meaning ofss.280G of the Code.
5.13 Employee Matters
(a) Except as set forth on the Disclosure Schedule, the Company is not a
party to any employment agreement or any collective bargaining agreement
pertaining to its employees. The Company is presently, and has at all times
been, in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including without limitation the following: the Fair Labor Standards Act
("FLSA"), the Comprehensive Omnibus Budget Reconciliation Act ("COBRA"), the
Immigration and Control Act ("IRCA"), the Workers Adjustment and Retraining
Notification Act ("WARN"), the Americans with Disabilities Act ("ADA"), and such
laws respecting employment discrimination, equal opportunity, affirmative
action, workers compensation, occupational safety and health requirements and
unemployment insurance and related matters.
15
(b) The Company does not have any (i) pending controversies between it and
its employees, (ii) unresolved labor liens, grievances or organization efforts;
or (iii) unfair labor practices or labor arbitration proceedings, pending or
threatened.
(c) The Company is not a party to any agreement and has not established any
policy or practice requiring the Company to make a payment or provide any other
form of compensation or benefit to any person performing services for the
Company upon termination of such services.
(d) The Disclosure Schedule sets forth by number and
employment classification the number of employees of the Company as of the date
hereof. The Company has not at any time had, or been threatened with, any work
stoppages or other labor disputes or controversies with respect to its
employees.
5.14 Employment Practices - The Company has paid in full to its employees
all wages, salaries, commissions, bonuses and other direct compensation for all
services performed by it, other than amounts which have not yet become payable
in accordance with the Company's customary practices.
5.15 Insurance - The Disclosure Schedule contains a list of all policies of
insurance owned by the Company, and the amounts of such coverage of each policy,
all premiums on such policies or renewals thereof having been paid.
5.16 Contracts and Commitments - Except as set forth on the Disclosure
Schedule, the Company is not, individually or collectively, a party to, or bound
or affected by any contract, lease, agreement, covenant, license, instrument or
commitment (whether written or oral) of any type, including the following:
(a) contracts for the employment or compensation of any officer or
individual employee, not terminable without further liability at any time:
(b) contracts with any labor union;
(c) continuing contracts for the future purchase of materials, supplies, or
equipment, at a cost of $1,000 or more, or to be delivered more than thirty (30)
days after the date hereof;
(d) continuing contracts for the future provision of services;
(e) distribution or agency contracts, franchise contracts, or advertising
commitments, which cannot be terminated without further liability to the Company
upon no more than thirty (30) days notice;
(f) pension, profit sharing, deferred compensation, retirement or stock
option or stock purchase plans in effect with respect to officers, employees or
others;
16
(g) leases under which it is lessor or lessee;
(h) underwriting agreements or agreements with a broker or finder;
(i) consulting agreements;
(j) contracts for the acquisition of a business, or substantially all of
the property, assets, or stock of a business under which there are any
continuing or unperformed obligations on the part of any of the parties thereto;
or
The Company expressly represents and warrants to Buyer as material
inducement to Buyer entering into this Agreement that the Contracts include: (i)
an exclusive ongoing distribution agreement for Scandinavia and Yugoslavia
between the Company and Eagle Eye Tracking Systems (UK), Limited, an English
private limited company, the sole manufacturer of the products sold, marketed,
and distributed by the Company; and (ii) orders for no less than two hundred and
fifty thousand (250,000) of the products which the Company sells, markets, and
distributes,.
All Contracts, are valid, binding and in full force and effect and are
enforceable in accordance with their terms against all other parties to such
Contracts. The Company has performed all obligations required to be performed by
it to date and is not in default in any material respect under any Contract to
which it is a party. None of the Contracts were arrived at, or otherwise
reflect, less than arms length negotiations or bargaining.
5.17 Inspection of Records - The Company and the Warrantors have made, or
will make, available for inspection by Buyer full and complete information
concerning the Company' customers, suppliers, vendors and all aspects of the
Company's Business, including complete copies of any customer, vendor, or
supplier contracts.
5.18 Inventories - The inventory of the Company now consists, and shall as
of the Closing Date, in all material respects consist of items of a quality,
condition, and quantity consistent with normal inventory levels of the Company
and be useable and saleable in the Ordinary Course of Business for the purposes
for which intended.
5.19 Equipment and Other Tangible Property - The Company' equipment,
furniture, machinery, vehicles, structures, fixtures and other tangible property
is and shall be as of the Closing Date, in all material respects suitable for
the purposes for which intended and in good operating condition and repair
consistent with normal industry standards, except for reasonable and ordinary
wear and tear.
5.20 Permits - The Company has all material Permits necessary to construct,
own, operate, use and/or maintain its assets and the Business in all locations
where the Company conducts such business. Such Permits are valid and subsisting
and all fees required to be paid thereon have been paid. No proceeding is
pending or threatened to modify, suspend, revoke, withdraw, terminate or
otherwise limit any Permit which could adversely affect the ability of the
Company to own, operate, use or conduct the Business currently operated.
Following the Closing, the Company shall continue to have the right to utilize
the Permits in the same manner and under the same conditions as prior to the
Closing Date.
17
5.21 Intangible Rights - The Company is the legal and equitable owner or
have the right to use all of the Intangible Rights listed on the Disclosure
Schedule. The conduct of the Business does not infringe or conflict with, and
has not in the past infringed or conflicted with, and the Company is not in
receipt of any notice or complaint of conflict with or infringement of, the
asserted rights of others in any Intangible Rights of others.
5.22 Unregistered Securities - The Warrantors and the Company: (a)
understand that the Consideration Shares which the Vendors will receive has not
been, and will not be registered under the 1933 Act, or under any state
securities laws and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving a public offering; (b) they do
not, and will not, have any right to require FD to register the Consideration
Shares either pursuant to or under the Act or any state securities laws; (c) are
acquiring the Consideration Shares solely for their own account for investment
purposes and not with a view to the distribution thereof; (d) have received
certain information concerning FD, including without limitation, FD's financial
statements (e) have had the opportunity to obtain additional information as
desired to evaluate the risks and merits inherent in owning and holding the
Consideration Shares; (f) have sufficient knowledge and experience in financial
business matters that they are capable of evaluating the merits and risks of an
investment in FD; and (g) confirm that the Vendors have the financial capacity
to withstand loss of their entire investment in the Consideration Shares.
5.23 Litigation - Except as set forth on the Disclosure Schedule, there are
no actions, suits, proceedings or investigations, either administrative or
judicial (whether or not on behalf of the Company) pending or, threatened
against or affecting the Company, its properties or which involve the
possibility of any judgment or liability not fully covered by insurance. The
Company is not in default with respect to any order, writ, injunction or decree
of any court or Governmental Authority. The Company is in compliance in all
material respects with all laws, rules, regulations and orders materially
applicable to its Business.
5.24 Compliance with Laws - The Company is, and has been at all times, in
compliance in all respects with any and all laws, regulations, ordinances,
rules, orders or decrees applicable to the Company. The Company has not received
or entered into any citation, complaints, consent order, compliance agreements
or other similar enforcement order or received written notice from any
Governmental Authority that would indicate that the Company is not currently in
compliance with all such laws, regulations, ordinances, rules, orders or
decrees.
5.25 Absence of Material Changes - From the date of the Company Management
Accounts to the date hereof, the Company has not:
(a) issued any capital stock or other corporate securities or granted any
option to any person for the acquisition of any capital stock or other corporate
securities;
18
(b) incurred any obligations or liabilities (absolute or contingent),
except current liabilities incurred, and obligations under Contracts entered
into in the Ordinary Course of Business;
(c) discharged or satisfied any lien or encumbrance or paid any obligation
or liability (absolute or contingent) other than obligations or liabilities
referred to in (b) above;
(d) declared or made any payment or distribution to any person, or
purchased or redeemed any shares of its capital stock;
(e) mortgaged, pledged, or subjected to any lien, charge, or other
encumbrance, any of its assets, tangible or intangible, other than liens for
taxes not yet due or which are being contested in good faith by appropriate
proceedings;
(f) sold or transferred any of its tangible assets or canceled any debts or
claims, except in each case in the Ordinary Course of Business;
(g) sold, assigned, or transferred any Permits or Intangible Rights;
(h) suffered any material operating or extraordinary loss or waived any
right of substantial value;
(i) made any loan to, borrowed money from, or entered into any contract or
understanding with, any employee, officer, director or Warrantors of the
Company;
(j) made any payment or contracted for payment of any bonus, gratuity, or
other compensation to employees, other than wages and salaries in effect as of
the date of the Company Management Accounts, except wage and salary adjustments
made in the Ordinary Course of Business;
(k) had any union or labor difficulties or work stoppage;
(l) entered into any transaction other than in the Ordinary Course of
Business (as herein defined in Article VII hereof);
(m) entered into any leases of real or personal property; or
(n) received any notice of termination of any contract, lease or other
agreement;
(o) entered into any Contracts for which the Company expects to incur a
loss from the provision of services.
5.26 Banking Information - The Disclosure Schedule contains a list of all
bank accounts and credit facilities and authorized signatories on bank accounts
and credit facilities of the Company. No other persons other than as listed on
the Disclosure Schedule are authorized to withdraw any funds on the bank
accounts or to draw down on such credit facilities.
19
5.27 Tax Returns - The Company has duly filed, or duly received extensions
for the filing, of all Tax returns (including but not limited to income,
payroll, sales and use taxes), required to have been filed by it and has paid
the Tax shown to be due on any such returns filed and no waivers or extension of
the statutory period of limitation within which assessments may be made have
been granted with respect to any such tax return. Federal income Tax returns of
the Company have never been examined by the Internal Revenue Service. The
Company is not a party to any action or proceeding by any governmental authority
for assessment or collection of Taxes nor have any claims for assessment and
collection been asserted against the Company. The Company shall (a) make
adequate provision on its books for all Taxes accruable, and (b) where
applicable, timely remit all withholding, 1099's, 1120's, employment, sales, ad
valorem, personal property and estimated Taxes due and payable to date and which
becomes due prior to, or on, the Closing Date. The Company has made available
copies of all the Company' federal, state and local Tax returns.
5.28 Accounts Receivable - The accounts receivable and other receivables
shown on the Company Management Accounts or thereafter acquired prior to the
Closing Date hereof, have been collected or are collectible, to the best of the
knowledge of the Company and the Warrantors, in amounts not less in the
aggregate than the net book amount thereof. All such accounts receivable arose
from bona fide transactions in the Ordinary Course of Business and the goods and
services involved have been sold, delivered and performed for the Company's
customers as covered by the account obligor. No further goods are required to be
provided and no services are required to be rendered in order to complete the
sales and to entitle the Company to collect the account receivables. None of the
accounts receivable are subject to set-off or counterclaim. Since the date of
the Company Management Accounts, there has been no significant reduction in the
accounts receivable and other receivables of the Company.
5.29 Brokers' Commissions - Neither the Company or the Warrantors have
entered into any agreement or understanding with any person, firm or entity or
have become indirectly a party to any agreement for the payment of any
commission, finders or brokerage fee in connection with this Agreement and the
transaction contemplated hereby. The Company and the Warrantors hereby agree to
indemnify and hold harmless the Buyer from any claims for a commission,
finder's, or broker's fee.
5.30 Books and Records - The books of account and other records of the
Company are materially complete and correct and in the aggregate present and
reflect all of the transactions entered into by it or to which it is a party.
The Company has no knowledge of any condition whether pending or threatened
which would have a Material Adverse Effect upon the Business of the Company or
prevent such Business from being carried on in substantially the same manner in
which it is presently carried on.
5.31 Accuracy of Information - All information provided to Buyer by the
Company and the Warrantors as an inducement to Buyer to enter into this
Agreement or in compliance with the provisions of this Agreement, including the
information contained in the Disclosure Schedule, is accurate and complete, to
the best of the knowledge of the Company and the Warrantors, and does not
contain any untrue statement of a material fact or omit any material fact
necessary to make the information provided not misleading. All information
relating to the Company or its Business which is known to, or would on
reasonable inquiry be known to the Warrantors and which is material to an
intended purchaser for value, has been disclosed to Buyer.
20
5.32 Environmental Matters - The Company has been, and presently is, in
compliance with all applicable Environmental Laws. The Company and the
Warrantors have not, and have no knowledge of any other person who has, caused
any Release, threatened Release, or disposal of any Hazardous Material The
Company, has, with respect to the Business, no liability for response or
corrective action, natural resource damage or other harm pursuant to CERCLA,
RCRA, or any comparable federal or state law. The Company is not subject to, has
no notice or knowledge of, and is not required to give any notice of, any
Environmental Claim involving the Business; there are no conditions or
occurrences which could form the basis for an Environmental Claim against the
Company. The Company is in compliance with all orders, directives, notices,
approvals, certificates, licenses and permits which have been issued to it and
holds all approvals, certificates, licenses and permits or other consents which
it is required to hold pursuant to any Environmental Law; correct and complete
copies of all currently in effect orders, directives, notices, approvals,
certificates, licenses, permits, and consents have been delivered to Buyer. To
the best of the Company's and Warrantors' knowledge, the Business and the
Company are in compliance with all applicable federal, state and local laws and
regulations governing the public health and safety and employee health and
safety (including all provisions of the Occupational Safety and Health Act) and
no charge, complaint, action, suit, proceeding, hearing, investigation, claim,
demand or notice has been filed or commenced against the Company alleging any
failure to comply with any such law or regulation.
ARTICLE VI. - REPRESENTATIONS AND WARRANTIES
OF FD
FD represents and warrants to the Vendors that, except as set forth in: (i)
the FD Disclosure Schedule (which Disclosure Schedule is dated the date hereof
and delivered by FD to the Vendors and deemed a part hereof by this reference)
or; (ii) in any public filings by Buyer with the United States Securities and
Exchange Commission or with the State of Delaware, that the representations and
warranties contained in Article VI are true and correct as of the date hereof:
6.1 Organization - Buyer is a corporation duly organized, validly existing,
and in good standing under the laws of Delaware. Buyer has the corporate power
to own, manage, lease and hold its assets and engage in its businesses where
such assets are located, is duly qualified to do business and is in good
standing in each jurisdiction in which the character and location of the
properties owned by it or the nature of the business transacted by it makes such
qualification necessary.
6.2 Capitalization - There is no capital stock of Buyer outstanding other
than the FD shares referred to in Recital C. The Consideration Shares will,
following their allotment and issue, constitute approximately 3.57% of the
outstanding share capital of Buyer. There are no other classes of capital stock
authorized by the Buyer. The Buyer has not authorized and there is not
outstanding at the date hereof, any preferred stock, options, warrants or other
rights to purchase any capital stock of the Buyer.
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6.3 Corporate Documents - The Articles of Incorporation of Buyer attached
to the FD Disclosure Schedule are true and correct as of the Closing Date. The
stock and minute books of the Buyer that have been made available to Warrantors
for review contain a complete and accurate record of all shareholders of Buyer
and all actions of the shareholders and directors (and any committees thereof)
of Buyer.
6.4 Authority - Subject to compliance with applicable United States federal
and Delaware securities laws and regulations, Buyer has full power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement and any Collateral Agreement executed in connection with
the Closing constitutes, or upon execution and delivery will constitute, the
legal, valid and binding obligations of such parties enforceable in accordance
with their terms. Neither the execution and delivery of this Agreement and/or
any Collateral Agreement or other document or instrument contemplated by this
Agreement, nor the performance by FD of the terms and provisions hereof or
thereof will (a) violate the Articles of Incorporation or By-laws of Buyer; (b)
result in a breach or violation of any known provision of, or constitute a
default under, any indenture, mortgage, lease or other agreement or instrument
to which Buyer is a party or by which any of Buyer's assets are bound; (c)
violate any law, statute, regulation, ordinance, rule, order, decree, judgment,
court decree, settlement agreement or governmental requirement enacted,
promulgated, entered into, agreed or imposed by any Governmental Authority; or
(d) result in the creation of any mortgage, lien, charge, restriction, pledge,
security interest, option, lease or sublease, claim, right of any third party,
easement, encroachment or encumbrance on the common stock or on any of the
assets of Buyer.
6.5 Financial Statements - The FD Financial Statements are correct and
complete and present fairly the financial condition of Buyer as of the date of
such balance sheets and for the periods in the statements of operations, cash
flows and shareholders equity. Such FD Financial Statements have been prepared
on a basis consistent with all prior periods in accordance with GAAP. FD
Financial Statements are in accordance with the books and records of Buyer, do
not reflect any transactions which are not bona-fide transactions and do not
contain any untrue statements of a material fact or omit to state any material
fact necessary to make the statements contained therein in light of the
circumstances in which they are made, not misleading. FD Financial Statements
make full and adequate disclosure of, or provision for, all obligations and
business of FD. Since the date of the FD Financial Statements, there has been no
material adverse change in the assets, liabilities, business, operations or
condition, financial or otherwise, of Buyer from that shown on the FD Financial
Statements.
6.6 Title to Assets - Except as provided in the FD Disclosure Schedule,
Buyer has good, marketable and insurable title to its assets, free and clear of
any and all liens, mortgages, pledges, conditional sales assignments, security
interests, judgments, options, adverse claims, encumbrances or other
restrictions or limitations whatsoever.
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6.7 Liabilities - As of the date hereof, Buyer had no liabilities, fixed or
contingent, which are not fully shown or provided for in the Financial
Statements or as listed in the FD Disclosure Schedule. All liabilities of Buyer
have been incurred in the Ordinary Course of Business.
6.8 Employee Benefit Plans
(a) The FD Disclosure Schedule contains a description of all employee
benefit plans sponsored, maintained or contributed to by Buyer for the benefit
of Buyers' employees or which has been sponsored, maintained or contributed to
anytime during the Buyers existence:
(i) each employee benefit plan as such term is defined inss.3(3) of ERISA,
including but not limited to employee benefit plans which are not
subject to the provisions of ERISA (collectively referred to as
"Plans");
(ii) each personnel policy, stock option plan, collective bargaining
agreement, bonus plan or arrangement, incentive award plan or
arrangement, vacation policy, severance pay policy or agreement,
deferred compensation agreement or arrangement and each other employee
benefit plan, agreement, arrangement, program, practice or
understanding benefit programs are true, correct and complete copies
of each of the Plans, related trusts and benefit programs including
all amendments thereto, have been furnished to the Warrantors.
(b) There has been furnished to the Warrantors, with respect to all Plans
or benefit programs required to comply with ERISA, all reports and summary plan
descriptions. Except as otherwise set forth in the FD Disclosure Schedule:
(i) FD does not contribute to or have any obligation to contribute to, and
has not at any time contributed to or had an obligation to contribute
to, a multi-employer plan within the meaning of ss.3(37) of ERISA
("Multi-Employer Plan") or a multiple employer plan within the meaning
of ss.413(b) and (c) of the Code;
(ii) FD has performed all obligations whether arising by operation of law
or by contract required to be performed by it in connection with the
Plans and benefit programs and there have been no defaults or
violations by any other party to the Plans or benefit programs and
will indemnify the Vendors against any and all obligations and
liabilities related to the Plans and benefit programs.
(iii) all reports and disclosures relating to the Plans required to be
filed with or furnished to governmental agencies, Plan participants,
or Plan beneficiaries have been filed or furnished in accordance with
applicable law in a timely manner and each Plan and each benefit
program has been administered in compliance with its governing
documents;
(iv) each of the Plans intended to be qualified underss.401 of the Code
satisfies the requirements of the Code and has received a favorable
determination letter from the Internal Revenue Service regarding such
status and has not, since receipt of the most recent favorable
determination letters, been amended or operated in a way which could
adversely affect such qualified status;
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(v) there are no actions, suits, or claims pending (other than routine
claims for benefits) or threatened against or with respect to, any of
the Plans, benefit programs, or their respective assets;
(vi) all contributions required to be made to the Plans and benefit
programs pursuant to their respective terms and provisions and
applicable law have been timely made;
(vii) as to any Plan subject to ERISA, no event or condition which presents
a risk of Plan termination or accumulated funding deficiency within
the meaning of ss.302 of ERISA or ss.412 of the Code has occurred. No
reportable event within the meaning of ss.4043 of ERISA has occurred,
no notice of intent to terminate the Plans has been given, no
proceeding to terminate the Plan has been instituted, there has been
no termination of the Plan, and no liability to the Pension Benefit
Guaranty Corporation has been incurred;
(viii) none of the Plans or their trustees has engaged in any prohibited
transactions or party in intent transactions as such terms are defined
inss.4975 of the Code andss.406 of ERISA;
(ix) there is no matter pending with respect to any Plan or benefit program
before the Internal Revenue Service, the US Department of Labor, or
the Pension Benefit Guaranty Corporation;
(x) except as otherwise disclosed on any schedule attached to this
Agreement, neither the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby will:
(1).....entitle any current or former employee of FD to severance pay,
unemployment compensation, or any similar payment;
(2).....accelerate the time of payment or vesting or cause any
increase in the amount of any compensation due to any such
employee or former employee; or
(3).....directly or indirectly result in any payment made to or on
behalf of any person to constitute a parachute payment within the
meaning ofss.280G of the Code.
6.9 Employee Matters -
(a) Except as set forth on the FD Disclosure Schedule, FD is not a party to
any employment agreement or any collective bargaining agreement pertaining to
its employees. FD is presently, and has at all times been, in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation the
following: the Fair Labor Standards Act ("FLSA"), the Comprehensive Omnibus
Budget Reconciliation Act ("COBRA"), the Immigration and Control Act ("IRCA"),
the Workers Adjustment and Retraining Notification Act ("WARN"), the Americans
with Disabilities Act ("ADA"), and such laws respecting employment
discrimination, equal opportunity, affirmative action, workers compensation,
occupational safety and health requirements and unemployment insurance and
related matters.
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(b) FD does not have any (i) pending controversies between it and its
employees, (ii) unresolved labor liens, grievances or organization efforts; or
(iii) unfair labor practices or labor arbitration proceedings, pending or
threatened.
(c) FD is not a party to any agreement and has not established any policy
or practice requiring FD to make a payment or provide any other form of
compensation or benefit to any person performing services for FD upon
termination of such services.
(d) The FD Disclosure Schedule sets forth by number and employment
classification the number of employees of FD as of the date hereof. FD has not
at any time had, or been threatened with, any work stoppages or other labor
disputes or controversies with respect to its employees.
6.10 Employment Practices - FD has paid in full to its employees all
wages, salaries, commissions, bonuses and other direct compensation for all
services performed by it, other than amounts which have not yet become payable
in accordance with the Company's customary practices.
6.11 Insurance - The FD Disclosure Schedule contains a list of all policies
of insurance owned by FD, and the amounts of such coverage of each policy, all
premiums on such policies or renewals thereof having been paid.
6.12 Inspection of Records - FD and the Directors of FD have made, or will
make, available for inspection by Warrantors full and complete information
concerning FD's customers, suppliers, vendors and all aspects of FD's business,
including complete copies of any customer, vendor, or supplier contracts.
6.13 Permits - FD has all material Permits necessary to construct, own,
operate, use and/or maintain its assets and its business in all locations where
FD conducts such business. Such Permits are valid and subsisting and all fees
required to be paid thereon have been paid. No proceeding is pending or
threatened to modify, suspend, revoke, withdraw, terminate or otherwise limit
any Permit which could adversely affect the ability of FD to own, operate, use
or conduct its business currently operated. Following the Closing, FD shall
continue to have the right to utilize the Permits in the same manner and under
the same conditions as prior to the Closing Date.
6.14 Intangible Rights - The conduct of the business of FD does not
infringe or conflict with, and has not in the past infringed or conflicted with,
and FD is not in receipt of any notice or complaint of conflict with or
infringement of, the asserted rights of others in any Intangible Rights of
others.
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6.15 Litigation - Except as set forth on the FD Disclosure Schedule, there
are no actions, suits, proceedings or investigations, either administrative or
judicial (whether or not on behalf of FD) pending or, threatened against or
affecting FD, its properties or which involve the possibility of any judgment or
liability not fully covered by insurance. FD is not in default with respect to
any order, writ, injunction or decree of any court or Governmental Authority. FD
is in compliance in all material respects with all laws, rules, regulations and
orders materially applicable to its business.
6.16 Compliance with Laws - FD is, and has been at all times, in compliance
in all respects with any and all laws, regulations, ordinances, rules, orders or
decrees applicable FD. FD has not received or entered into any citation,
complaints, consent order, compliance agreements or other similar enforcement
order or received written notice from any Governmental Authority that would
indicate that the FD is not currently in compliance with all such laws,
regulations, ordinances, rules, orders or decrees.
6.17 Banking Information - The FD Disclosure Schedule contains a list of
all bank accounts and credit facilities and authorized signatories on bank
accounts and credit facilities of FD. No other persons other than as listed on
the FD Disclosure Schedule are authorized to withdraw any funds on the bank
accounts or to draw down on such credit facilities.
6.18 Tax Returns - FD has duly filed, or duly received extensions for the
filing, of all Tax returns (including but not limited to income, payroll, sales
and use taxes), required to have been filed by it and has paid the Tax shown to
be due on any such returns filed and no waivers or extension of the statutory
period of limitation within which assessments may be made have been granted with
respect to any such tax return. Federal income Tax returns of FD have never been
examined by the Internal Revenue Service. FD is not a party to any action or
proceeding by any governmental authority for assessment or collection of Taxes
nor have any claims for assessment and collection been asserted against FD. FD
shall (a) make adequate provision on its books for all Taxes accruable, and (b)
where applicable, timely remit all withholding, 1099s, 1120s, employment, sales,
ad valorem, personal property and estimated Taxes due and payable to date and
which becomes due prior to, or on, the Closing Date. FD has made available
copies of all FD's federal, state and local Tax returns.
6.19 Accounts Receivable - The accounts receivable and other receivables
shown on the FD Financial Statements or thereafter acquired prior to the Closing
Date hereof, have been collected or are collectible, to the best of the
knowledge of FD and the Directors of FD, in amounts not less in the aggregate
than the net book amount thereof. All such accounts receivable arose from bona
fide transactions in the Ordinary Course of Business and the goods and services
involved have been sold, delivered and performed for the FD's customers as
covered by the account obligor. No further goods are required to be provided and
no services are required to be rendered in order to complete the sales and to
entitle FD to collect the account receivables. None of the accounts receivable
are subject to set-off or counterclaim. Since the date of the Financial
Statements, there has been no significant reduction in the accounts receivable
and other receivables of FD.
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6.20 Brokers' Commissions - FD has not entered into any agreement or
understanding with any person, firm or entity or has become indirectly a party
to any agreement for the payment of any commission, finders or brokerage fee in
connection with this Agreement and the transaction contemplated hereby. FD and
the Directors of FD hereby agree to indemnify and hold harmless the Vendors from
any claims for a commission, finder's, or broker's fee.
6.21 Books and Records - The books of account and other records of FD are
materially complete and correct and in the aggregate present and reflect all of
the transactions entered into by it or to which it is a party. FD has no
knowledge of any condition whether pending or threatened which would have a
Material Adverse Effect upon the business of FD or prevent such business from
being carried on in substantially the same manner in which it is presently
carried on.
6.22 Accuracy of Information - All information provided to the Warrantors
by the Directors of FD as an inducement to the Vendors to enter into this
Agreement or in compliance with the provisions of this Agreement, including the
information contained in the FD Disclosure Schedule, is accurate and complete,
to the best of the knowledge of the Directors of FD, and does not contain any
untrue statement of a material fact or omit any material fact necessary to make
the information provided not misleading. All information relating to FD or its
business which is known to, or would on reasonable inquiry be known to the
Directors of FD and which may be material to an intended purchaser for value,
has been disclosed to Warrantors.
6.23 Environmental Matters - FD has been, and presently is, in compliance
with all applicable Environmental Laws. FD has not and the Directors of FD have
no knowledge of any other person who has, caused any Release, threatened
Release, or disposal of any Hazardous Material FD, has, with respect to its
business, no liability for response or corrective action, natural resource
damage or other harm pursuant to CERCLA, RCRA, or any comparable federal or
state law. FD is not subject to, has no notice or knowledge of, and is not
required to give any notice of, any Environmental Claim involving its business;
there are no conditions or occurrences which could form the basis for an
Environmental Claim against FD. FD is in compliance with all orders, directives,
notices, approvals, certificates, licenses and permits which have been issued to
it and holds all approvals, certificates, licenses and permits or other consents
which it is required to hold pursuant to any Environmental Law; correct and
complete copies of all currently in effect orders, directives, notices,
approvals, certificates, licenses, permits, and consents have been delivered to
the Warrantors. To the best of the Directors of FD's knowledge, its business and
FD are in compliance with all applicable federal, state and local laws and
regulations governing the public health and safety and employee health and
safety (including all provisions of the Occupational Safety and Health Act) and
no charge, complaint, action, suit, proceeding, hearing, investigation, claim,
demand or notice has been filed or commenced against the Company alleging any
failure to comply with any such law or regulation.
6.24 Public Filings - Notwithstanding anything to the contrary in this
Section, if and to the extent any of the information otherwise required in this
disclosure schedule of the Buyer is set forth in a filing publicly made with any
United States governmental or state agency, the disclosure schedule obligation
of the Buyer shall be deemed to be satisfied by such filing.
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ARTICLE VII. - OBLIGATIONS PRIOR TO CLOSING
7.1 As to the Company:
(a) Operation of Business - The Company and the Warrantors agree that, from
the date hereof to the Closing Date, the Company shall conduct its Business and
affairs only in the Ordinary Course of business, following its usual and
ordinary accounting practices, making ordinary accruals, incurring ordinary
liabilities and expenditures, and making ordinary commitments for inventory,
equipment, insurance, rentals and other ordinary business purposes.
(b) Access to Books and Records - From and after the date hereof, the
Company shall (X) afford to the officers, employees and representatives of Buyer
full and free access to its assets, personnel, properties, records and books of
account at all reasonable times during business hours, (Y) to furnish to such
officers, employees and representatives such other information as Buyer may
reasonably request, and (c) to authorize its accountants and auditors to permit
Buyer's independent public accountants and representatives to examine records
pertaining to the books and records. Buyer agrees to treat all such material as
confidential and not make use of such materials except for the purposes
expressed in this Agreement.
(c) Negative Covenants - The Company and the Warrantors covenant that from
and after the date hereof and through the Closing Date, without the prior
written consent of Buyer, the Company will not:
(i) enter into any written or oral contract, agreement, or commitment
of any type, without the express written consent of Buyer,
including the following:
(A) contracts for the employment or compensation of any officer, director,
or individual employee;
(B) contracts with any labor union, except to the extent that the Company
is compelled to negotiate with a labor union and the Company provides notice of
such requirement;
(C) continuing contracts for the future purchase of inventory, materials,
supplies, or equipment at a cost of $1,000 or more;
(D) distribution or agency contracts, franchise contracts, or advertising
commitments;
(E) pension, profit sharing, deferred compensation retirement, stock
option, stock purchase plans, group health insurance, or similar plans with
respect to officers, directors, employees, or others;
28
(F) leases under which the Company is a lessor or lessee;
(G) underwriting agreements or agreements with a broker or finder;
(H) consulting agreements;
(I) contracts for the acquisition of a business or substantially all of the
property, assets or capital stock of a business;
(J) any other contract, agreement, or commitment involving $1,000 or more.
(ii) declare or pay any dividend, or make any distribution of its
properties or assets to the Vendors, or allow the issuance of any
of its securities;
(iii) discharge or satisfy any lien or encumbrance or pay any
obligation or liability, except in the Ordinary Course of
Business;
(iv) make any change in its Memorandum and Articles of Association;
(v) issue any capital stock or other corporate securities or grant
options, or rights of any kind to purchase any of its capital
stock or corporate securities;
(vi) mortgage, pledge or subject to any lien, charge or other
encumbrance any of its tangible or intangible assets;
(vii) make any payment, or enter into any contract for payment of any
bonus, gratuity or other compensation, or increase the rate or
form of compensation payable to any agent or employee, except
salary adjustments in the Ordinary Course of Business;
(viii) dispose of any of its properties or assets, except in the
Ordinary Course of Business;
(ix) incur any indebtedness, except for operating expenses in the
Ordinary Course of Business, nor allow a Material Adverse Effect
to its financial affairs, nor allow any Tax or other liability to
be extended by waiver of the statutes of limitation or otherwise;
(x) make any loan to, borrow any money from, or enter into any
contract or understanding with, any officer, director or a
shareholder of the Company or to Warrantors; or
(xi) enter into any other transaction, other than in the Ordinary
Course of Business.
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(d) Affirmative Covenants - The Company and the Warrantors covenant that
from and after the date hereof and through the Closing Date, FD will:
(i) keep its properties and assets insured consistent with its prior
practices in respect thereto;
(ii) perform in the Ordinary Course of Business all of its obligations
under Contracts, leases, and documents relating to or affecting
its assets, properties and business;
(iii) preserve intact its business, organization, and goodwill of the
Company to the end that the Company shall continue to operate as
a going business as now constituted, after the consummation of
the transactions contemplated hereunder.
7.2 As to FD:
(a) Operation of Business - FD agrees that from the date hereof to the
Closing Date, FD shall conduct its Business and affairs only in the Ordinary
Course of Business, following its usual and ordinary accounting practices,
making ordinary accruals, incurring ordinary liabilities and expenditures, and
making ordinary commitments for inventory, equipment, insurance, rentals and
other ordinary business purposes.
(b) Access to Books and Records - From and after the date hereof, FD shall
(X) afford to the officers, employees and representatives of the Company full
and free access to its assets, personnel, properties, records and books of
account at all reasonable times during business hours, (Y) to furnish to such
officers, employees and representatives such other information as Warrantors may
reasonably request, and (Z) to authorize its accountants and auditors to permit
Warrantors accountants and representatives to examine records pertaining to FD
books and records. Warrantors agree to treat all such material as confidential
and not make use of such materials except for the purposes expressed in this
Agreement.
(c) Affirmative Covenants - FD covenants that from and after the date
hereof and through the Closing Date, it will:
(i) keep its properties and assets insured consistent with their
prior practices in respect thereto;
(ii) perform in the Ordinary Course of business all of their
obligations under Contracts, leases, and documents relating to or
affecting their assets, properties and business;
(iii) preserve intact the Business, organization, and goodwill of FD.
7.3 Consummation of Transactions - Upon the terms and subject to the
conditions of this Agreement, the parties hereto shall use their best efforts to
take, or cause to be taken, all such actions and to do, or cause to be done, all
other things necessary to carry out their obligations hereunder and to
consummate and make effective, as soon as reasonably practicable, the
transactions contemplated by this Agreement, including satisfying the conditions
to the obligations of the other parties and obtaining all waivers, permits,
consents and approvals and effecting all registrations, filings and notices with
or to third parties or governmental or public bodies or authorities which are
necessary in connection with the transactions contemplated by this Agreement;
provided that this Section 7.4 shall not require any party to waive any
condition for its benefit or any performance hereunder by the other parties or
to make any payment to any third party, whether private or governmental, or to
expend any funds or incur any economic burden in connection with obtaining the
consent of any third party, whether private or governmental; and provided
further that this Section 7.4 shall not require any party to take any action the
result of which would be to impose material limitations on its ability to
consummate and retain the full benefits of the transactions contemplated hereby.
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7.4 No Negotiations - Except in the furtherance of the transactions
contemplated hereby, prior to the Closing Date each of the Company, Warrantors,
and FD respectively agree that (a) neither they nor any of their affiliates
shall, and each of them shall direct and use their best efforts to cause the
directors, officers, employees, representatives, or agents of the Company or FD
respectively (including, without limitation, any investment banker, attorney or
accountant retained by them or any of their affiliates) not to, directly or
indirectly, initiate, solicit or encourage any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to their stockholders), with respect to any merger,
acquisition, consolidation, share exchange, business combination or other
transaction involving, or which would result in, (i) the acquisition of any
outstanding capital stock in the Company or FD (other than capital stock which
may be acquired in the open market and that is otherwise not "restricted stock"
under Rule 144), or (ii) the acquisition of any material part of the Assets of
the Company or the assets of FD (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"), or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person or entity relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (b) they shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and they shall take the
necessary steps to inform any such parties of the obligations undertaken in this
Section 7.5; and (c) they shall notify FD or as the case may be the Company and
the Warrantors immediately if any such inquiries or proposals are received by
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with, them.
7.5 Disclosure Schedule - The Company shall prepare a disclosure schedule
which shall provide the detailed description of the items referenced elsewhere
herein as being part of the Disclosure Schedule and deliver same to the Buyer no
later than December 11, 2001, to allow Buyer to conduct a due diligence
investigation of the Company. The Buyer shall have until December 31, 2001, to
review all of the information included within the Disclosure Schedule. In the
event that the Disclosure Schedule contains any information which is materially
different than as represented by the Company or which was not disclosed to the
Buyer prior to the execution of this Agreement, the Buyer in its sole and
absolute discretion shall have the right to terminate this Agreement.
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ARTICLE VIII. - CONDITIONS PRECEDENT TO THE CLOSING
8.1 Conditions to Obligations of Buyer - The obligations of Buyer to
consummate this Agreement shall be subject to, and be conditioned upon, each of
the following conditions having been satisfied or waived on or before the
Closing Date:
(a) Properties Intact - No properties or assets of the Company shall have
suffered any destruction or damage by fire, accident or other casualty or Act of
God not fully covered by insurance or affecting in a material and adverse way
the conduct of the Business of the Company considered as a whole.
(b) Representations and Warranties - The representations and warranties
made by the Company and the Warrantors in Article V , and in the Disclosure
Schedule attached hereto shall be correct in all respects on and as of the
Closing Date with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date and none of the covenants
of the Company or the Warrantors contained in this Agreement shall have been
breached in any respect as of the Closing Date.
(c) No Adverse Changes - That since the date of the Company Management
Accounts and the date of the Disclosure Schedule there has been no adverse
change in the condition of the Company, financial or otherwise, from that set
forth in the Company Management Accounts.
(d) Approvals and Consents - All consents, approvals, authorizations,
actions, or orders of any individual, entity, court or Governmental Authority or
administrative body, if any, which are required for the consummation of the
transactions contemplated by this Agreement shall have been obtained and be in
effect on the Closing Date.
(e) Authorization of Agreement by the Company and Warrantors - All actions
of the Company necessary to authorize the execution, delivery and performance of
this Agreement by the Company and the Warrantors shall have been duly and
validly taken.
(f) No Litigation - No claim, proceeding, investigation, or litigation,
either administrative or judicial, shall be threatened or be pending against,
the Company or the Warrantors which, in the opinion of counsel for Buyer,
presents a reasonable probability that the transaction contemplated by this
Agreement would be enjoined or prevented or that the right of Buyer to continue
the operations of the property, assets and Business of the Company would be
materially affected.
(g) Fairness Opinion - Receipt by Buyer of a "fairness opinion" from a "Big
5" U.S. accounting firm or other qualified party acceptable to Buyer opining
that the conveyance of the FD Common Stock to the Vendors is for fair and valid
consideration under applicable U.S. Federal law and under Delaware law. The cost
of such "fairness opinion" shall be paid by Buyer.
32
(h) Due Diligence - Buyer shall have completed its due diligence
investigation pursuant to Section 7.5 hereof, and the results thereof shall not
have revealed that any of the representations, warranties, or covenants made by
the Company or the Shareholder in this Agreement are untrue or incorrect in any
material respect or otherwise be unsatisfactory to Buyer.
(i) No Change in Law - There shall have not been proposed or enacted
(including without limitation, any threatened proposal or enactment of) any
statute, rule, regulation, policy, guideline, or official interpretation, or any
modification in or to any existing statute, rule, regulation, policy or
guideline, which prohibits or delays or threatens to prohibit or delay, the
performance of the transactions contemplated by this Agreement or which changes,
or threatens to change, in an adverse manner the Business, financial condition,
revenues, income, liabilities (whether absolute, contingent or otherwise)
reserves or prospects of the Company from that reflected in Company Management
Accounts.
(j) No Violations of Law - At the Closing Date, there shall exist no
violations of any Federal, state or local law, ordinance or regulation affecting
the assets, properties or Business of the Company.
(k) Performance by Warrantors and the Company - All of the terms and
conditions of this Agreement to be complied with and performed by the Warrantors
and the Company on or before the Closing Date shall have been complied with and
performed.
8.2 Conditions to Obligations of the Company, the Vendors and the
Warrantors - The obligations of the Company, the Vendors and the Warrantors to
consummate this Agreement are subject to and shall be conditioned upon each of
the following conditions having been satisfied or waived on or before the
Closing Date:
(a) Representations and Warranties - The representations and warranties
made by FD in Article VI hereof, and in the FD Disclosure Schedule attached
hereto shall be correct in all respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date and none of the covenants of FD contained in
this Agreement shall have been breached in any respect as of the Closing Date.
(b) No Adverse Changes - That since the date of the FD Financial Statements
and the date of the FD Disclosure Schedule there has been no adverse change in
the condition of FD, financial or otherwise, from that set forth in the FD
Financial Statements.
(c) Approvals and Consents - All consents, approvals, authorizations or
orders of any individual, group, entity, court or Governmental Authority or
administrative body, if any, which are required for the consummation of the
transactions contemplated by this Agreement shall have been obtained and be in
effect on the Closing Date.
33
(d) Authorization of Agreement by FD - All actions of necessary to
authorize the execution, delivery and performance of this Agreement by FD shall
have been duly and validly taken.
(e) No Litigation - No claim, proceeding, investigation, or litigation,
either administrative or judicial, shall be threatened or be pending against FD
which, in the opinion of counsel for Warrantors, presents a reasonable
probability that the transaction contemplated by this Agreement would be
enjoined or prevented or that the property, assets or business of FD would be
materially affected.
(f) No Change in Law - There shall have not been proposed or enacted
(including without limitation, any threatened proposal or enactment of) any
statute, rule, regulation, policy, guideline, or official interpretation, or any
modification in or to any existing statute, rule, regulation, policy or
guideline, which prohibits or delays or threatens to prohibit or delay, the
performance of the transactions contemplated by this Agreement or which changes,
or threatens to change, in an adverse manner the business, financial condition,
revenues, income, liabilities (whether absolute, contingent or otherwise)
reserves or prospects of FD from that reflected in the FD Financial Statements.
(g) No Violations of Law - At the Closing Date, there shall exist no
violations of any Federal, state or local law, ordinance or regulation affecting
the assets, properties or business of FD.
(h) Performance by FD - All of the terms and conditions of this Agreement
to be complied with and performed by FD on or before the Closing Date shall have
been complied with and performed.
ARTICLE IX. - POST-CLOSING OBLIGATIONS
9.1 Survival of the Closing - All covenants, agreements, representations,
and warranties made hereunder and in any certificates delivered
at the Closing pursuant hereto shall survive the Closing.
9.2 Further Assurances - Following the Closing, each of the parties shall
execute and deliver such documents, and take such other actions as shall be
reasonably requested by any other party hereto to carry out the transactions
contemplated by this Agreement.
9.3 Non-Competition Agreement.
(a) The Warrantors, Vendors, and all officers and directors of the Company,
including without limitation Xxxx Xxxxx, covenant and agree that for a period of
two (2) years from the Closing Date none of them will be an employee (except
with FD or the Company), agent, director, stockholder or owner (except of not
more than four (4%) percent of the securities of a publicly traded entity),
partner, consultant, financial backer, creditor or be otherwise directly or
indirectly connected with or participate in the management, operation or control
of any business, firm, proprietorship, corporation, partnership, association,
entity or venture engaged in a business similar to the Business where the
Company is conducting business.
34
(b) The Warrantors, Vendors, and all officers and directors of the Company,
including without limitation Xxxx Xxxxx, covenant and agree that for a period of
four (4) years from the Closing Date except in connection with the Business of
the Company none of them will contact, call upon, solicit business from, sell or
render services to any customer of the Company with respect to the provision of
any services or supplies similar to the Business or otherwise directly or
indirectly aid or assist any other person, firm or entity to do any of the
aforesaid acts.
(c) The Warrantors, Vendors, and all officers and directors of the Company,
including without limitation Xxxx Xxxxx, covenant and agree that for a period of
four (4) years from the Closing Date, none of them will directly or indirectly
as principal, agent, owner, partner, stockholder, officer, director, employee
independent contractor or consultant or in any individual or representative
capacity for himself or on behalf of any business firm, corporation,
partnership, association or proprietorship enter into any agreements with or
solicit, or directly or indirectly cause others to solicit, the employment of
any officer or other employee of the Company, or of any of its subsidiaries and
affiliates for the purpose of causing said officer or employee to terminate
employment with the Company, its respective subsidiaries and affiliates.
(d) A breach or violation by Warrantors, or Vendors, or any officer or
director of the Company, including without limitation Xxxx Xxxxx, of any of the
covenants and agreements contained in Section 9.3 may cause irreparable harm and
Damage to FD and to the Company in a monetary amount which may be impossible to
ascertain. Warrantors, Vendors, and all officers and directors of the Company
including without limitation Xxxx Xxxxx, agree that Buyer shall be entitled to
an injunction from any court of competent jurisdiction enjoining or restraining
any breach or violation of any or all of the covenants and agreements contained
in this Section 9.3 and that such right to injunction shall be cumulative and in
addition to whatever other rights or remedies the Buyer may possess hereunder at
law or in equity.
(e) The covenants and agreements set forth in this Section 9.3 are to be
construed as broadly as the law permits and if and to the extent of any such
covenant or agreement is deemed not to be enforceable in whole by the
appropriate court or review tribunal, it is the intent of the parties that such
covenant or agreement not be stricken from this Agreement, but be reformed by
the aforesaid court or review tribunal to the broadest construction allowed by
law.
9.4 Confidentiality - FD and the Vendors agree that they shall not at any
time, disclose, directly or indirectly to any person, firm or entity any
confidential information about FD, the Company, the Business, the business of
FD, or any information concerning their respective financial condition,
customers and methods of obtaining business or any other methods generally of
doing and operating the Business, or the business of FD, except to the extent
that such information is required to be disclosed by law through judicial or
administrative process.
35
9.5 Publicity - Each of the Warrantors and FD agree that no public release
or announcement concerning this Agreement or the transaction contemplated hereby
shall be made, without the advance written approval of the form and substance
the other(s), which approval shall not be unreasonably withheld.
ARTICLE X. - MISCELLANEOUS
10.1 Costs and Expenses - Except as otherwise provided herein in this
Agreement, if this Agreement is terminated in accordance with Section 4.4, each
of the parties to this Agreement shall bear their own expenses incurred in
connection with the negotiation, preparation, execution and closing of this
Agreement and the transactions contemplated hereby, including but not limited
to, transfer taxes, legal fees, and accounting fees.
10.2 Remedies - The rights and remedies provided by this Agreement are
cumulative, and the use of any one right or remedy shall not preclude or
constitute a waiver of any party's right to use any and all other remedies.
10.3 Disclosure Schedules - The Disclosure Schedule and the FD Disclosure
Schedule shall in each instance, include the Schedules and the Exhibits referred
to herein and therein. The Disclosure Schedule and the FD Disclosure Schedule
shall be deemed an integral part hereof and are incorporated herein by this
reference.
10.4 Attorneys' Fees - In the event of any litigation arising out of this
Agreement, the prevailing party shall be entitled to an award of its attorneys'
fees and costs (including any fees and costs incurred in appellate proceedings)
against the non-prevailing party.
10.5 Risk of Loss - Prior to the closing, the risk of loss, damage to, or
destruction of any Assets of the Company shall remain with the Company.
10.6 Assignment and Amendment of Agreement - This Agreement shall not be
assignable by any of the parties hereto except with the written consent of the
other party. This Agreement may not be amended except by any written agreement
executed by the parties hereto.
10.7 Notices - Any notice or communication given pursuant hereto by either
party to the other party shall be in writing and delivered by hand or nationally
recognized overnight courier or mailed by U.S. first-class certified mail,
return receipt requested, postage prepaid, or by facsimile or email (provided
that this method of notice will be followed within twenty-four (24) hours by a
registered letter containing original), as follows:
If to Buyer: 0000 Xxxxxxxxx Xxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xx. X. X. Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
36
Copy to: Fieldstone Xxxxxx Xxxxx & Denberg
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Company c/o Xx. Xxxxxxxxxxx Xxxxx, Trustee
or the Warrantors: Eagle Eye Scandinavian Distribution Limited
xxxx@xxxxxxxx-xxxxxx.xxx
Copy to: Atlantic Law Solicitors and Attorneys
Xxx Xxxxx Xxxxxxxxxx Xxxxx
Xxxxxx, XXXXXXX X0X 0XX
Telephone: 000-0000-0000
Facsimile: 000-0000-0000
xxxxxxx.xxxxxxx@xxxxxxxx-xxx.xxx
If the Vendors, to the address given for them in Schedule 1.
If to the Directors of FD, to the address given for them in Schedule 2.
or at such other address as hereafter shall be furnished in writing by any party
hereto to the other parties in the manner aforesaid. Notice shall be deemed
given when received or refused.
10.8 Entire Agreement - This Agreement, together with the Disclosure
Schedule and the FD Disclosure Schedule, is the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written of the parties. No other agreement not specifically referred to herein,
oral or otherwise, shall be deemed to exist or to bind any of the parties. No
officer or employee of any party has any authority to make any representation or
promise not contained in this Agreement and each of the parties agrees that it
has not executed this agreement in reliance upon any such other representation
or promise.
10.9 Waiver - Any forbearance, failure, or delay by any of the parties
hereto to exercise any right, power, or remedy hereunder shall not be deemed a
waiver of such right, power, or remedy, and any single or partial exercise of
any such right, power or remedy hereunder shall not preclude the further
exercise thereof and every right, power, or remedy of either party shall
continue in full force and effect unless waived specifically by an instrument in
writing executed by such party.
10.10 Governing Law; Venue - This Agreement shall be construed and enforced
in accordance with the laws of the United States and of the State of Florida.
The parties submit to the exclusive jurisdiction of the State of Florida for the
determination of any matter arising out of this Agreement with exclusive venue
for the enforcement hereof being in any federal or Florida court located in
Broward County, Florida.
37
10.11 Counterparts - This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.12 Captions - The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
10.13 Successors and Assigns - All of the terms of this Agreement shall be
binding upon and inure to the benefit of, and be enforceable by and against the
parties and their respective successors and assigns.
10.14 Interpretation - Handwritten provisions inserted in this Agreement,
initialed in ink, shall control all typewritten provisions in conflict
therewith. This Agreement shall not be construed more strongly against or in
favor of any party, regardless of who is responsible for its preparation.
10.15 Severability - In the event any provision of this Agreement or the
application of such provision to any part shall be held by a court of competent
jurisdiction to be contrary to any rule of law or public policy, the remaining
provisions of this Agreement shall remain in full force and effect.
10.16 Rights of Third Parties - Except as may otherwise be specifically
provided in this Agreement, nothing expressed or implied in this Agreement is
intended, or shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto, any rights or remedies under or by
reason of this Agreement.
BUYER:
FLOOR DECOR, INC., a Delaware corporation
By:_______________________________________
___________________, President
----------------
[Corporate Seal]
38
COMPANY:
EAGLE EYE SCANDINAVIAN DISTRIBUTION LIMITED, an English
private limited company
By:_______________________________________
, Managing Director/Chairman
---------------------------------------
[Corporate Seal]
WARRANTORS:
Xxxxxxxxxxx Xxxxx
Xxxx Xxxxx
VENDORS:
master enterprises limited
By :
------------------------------------------------
Xxxxxxxxxxx Xxxxx
NORTHERN ROCK TRADING INC
By :
-------------------------------------------------
XXXXXXX CORPORATION
By :
-------------------------------------------------
ALESTRA CORPORATION
By :
-------------------------------------------------
MERIENA CORPORATION
By :
-------------------------------------------------
FLOURANTIS INVESTMENTS NV
By :
-------------------------------------------------
RADESCO CORPORATION NV
By :
-------------------------------------------------
39
FUNDAS INVESTMENTS NV
By :
-------------------------------------------------
XXXXXXXXX AVV
By :
-------------------------------------------------
HILLSIDE SAND CORPORATION
By :
-------------------------------------------------
LUKETON ENTERPRISES AVV
By :
-------------------------------------------------
SUNDERLAND INVESTMENTS AVV
By :
-------------------------------------------------
40
SCHEDULE 1
the Vendors
---------------------------- ---------- ------------------------- --------------
Name Shares Percentage of Consideration Shares
Shares
and Consideration
Shares
-------------------------- --------- ------------------ -------------------
Master Enterprises Ltd 25.4% 5,080,000
-------------------------- --------- ------------------ -------------------
Xxxxxxxxxxx Xxxxx 12.7% 2,540,000
-------------------------- --------- ------------------ -------------------
Northern Rock Trading Inc 6.2% 1,240,000
-------------------------- --------- ------------------ -------------------
Xxxxxxx Corporation 6.2% 1,240,000
-------------------------- --------- ------------------ -------------------
Alestra Corporation 6.2% 1,240,000
-------------------------- --------- ------------------ -------------------
Meriena Corporation 6.15% 1,230,000
-------------------------- --------- ------------------ -------------------
Flourantis Investments NV 6.15% 1,230,000
-------------------------- --------- ------------------ -------------------
Radesco Corporation NV 6.1% 1,220,000
-------------------------- --------- ------------------ -------------------
Fundas Investments NV 5.0% 1,000,000
-------------------------- --------- ------------------ -------------------
Xxxxxxxxx AVV 5.0% 1,000,000
-------------------------- --------- ------------------ -------------------
Hillside Sand Corporation 5.0% 1,000,000
-------------------------- --------- ------------------ -------------------
Luketon Enterprises AVV 5.0% 1,000,000
-------------------------- --------- ------------------ -------------------
Sunderland Investments AVV 4.9% 980,000
-------------------------- --------- ------------------ -------------------
Addresses of Vendors:_______________________.
41
DISCLOSURE SCHEDULE
(A) FUNDAMENTAL CORPORATE DOCUMENTS
(1) Certificate/Articles of Incorporation, as amended to date
(2) By-Laws, as amended to date
(3) Minutes of all meetings: Board of Directors, Committees thereof,
and Shareholders
(4) Certificates of Good Standing (to be ordered)
(5) List of states and foreign countries in which qualified to do
business or currently conducting business and a description of
the Company's business activities in each
(6) List of subsidiaries and/or Shareholders
(7) Any other agreements to purchase the stock or the assets of any
company or to merge with any company
(8) All consents, filings, and correspondence with or to federal or
state regulatory agencies
(9) Permits for conduct of business, including licenses, franchises,
concessions and distributorship agreements
(10) Current organizational chart for the Company and subsidiaries,
operating divisions, and hierarchy of officers
(11) All names under which the Company or any predecessor thereof has
done business in the past five years
(12) UCC Status Check
(B) COMMON STOCK, PREFERRED STOCK, WARRANTS, OPTIONS, DEBENTURES, BONDS,
PREEMPTIVE RIGHTS\REDEMPTIONS, ETC.
(1) Listing of holders of any other securities (i.e., options,
warrants, convertible debt with ---- copies of representative
documents
(2) Stock option plans or other stock plans for officers, directors
or employees along with form of restricted stock purchase
agreements or options
(3) Any voting trust agreements, general voting agreements, or other
Shareholder agreements (4) Powers of attorney with respect to
securities (5) Documents pertaining to any pre-emptive rights
outstanding with respect to any securities of the Company
(C) MATERIAL CONTRACTS AND AGREEMENTS
(1) List of suppliers and manufacturers and vendors, with copies of
significant agreements
(2) List of customers, with copies of agreement
(3) Agreements with distributors, dealers or sub-licensees
(4) All current loan agreements, debentures, lines of credit, deeds
of trusts, security agreements or other instruments, including
any guaranties, and any correspondence, with any lenders relating
to any default, acceleration or termination of those agreements
(5) Documentation relating to loans to or from officers, directors or
employees
42
(6) Leases for office equipment, furniture and automobiles
(7) Sample contracts with customers
(8) Sample contracts with suppliers
(9) Employment contracts
(10) Management incentive or bonus plans
(11) Partnership or joint venture agreements
(12) R&D agreements or any joint product development agreement with
outsiders
(13) License agreements (other than with respect to Company's
intellectual property)
(14) Consulting agreements
(15) List of exclusive distributorship agreements detailing the
geographic areas and limits of exclusivity
(16) No-compete and confidentiality agreements with any person or
entity
(D) INTELLECTUAL PROPERTY MATTERS:
(1) Provide contact at and arrange for parent, trademarks & copyright
counsel to be available for meeting with Purchaser's counsel
(2) Patents and pending applications (list)
(3) Patent assignments establishing title from inventor
(4) Prosecution files for all patents
(5) License agreements with respect to intellectual property
(6) Trademarks or pending applications for trademarks (state and
federal lists)
(7) Trademarks searches
(8) Miscellaneous agreements re trademarks (assignments, licenses,
etc.)
(9) Registered copyrights (list)
43
(10) Agreements with author of copyright work (employees or
independent contractors)
(11) Copyright agreements with non-author third parties (assignments,
etc.)
(12) Form of trade secret or other confidentiality agreements with
employees or consultants, or customers
(13) List of claims or threatened claims for infringement of an
parents, trademark or copyrights
(14) Record of fees paid to establish or maintain ownership of
intellectual property
(15) Software licenses (list) and copies of material licenses
(E) GOVERNMENTAL LICENSES, PERMITS, CONSENTS
(1) A copy of or schedule showing any permits or governmental
consents including regulatory compliance with the FTC, FDA, OSHA,
EPA, etc.
(2) All material correspondence from any regulatory agency
(3) All documents relating to permits, approvals or licenses obtained
or applied for
(F) INSURANCE
(1) A list of all insurance policies, with description of risks,
amount of coverage and premium
(2) A copy of any key-man insurance and present value calculation
(3) A description of any directors' and officers' indemnity\liability
insurance coverage
(4) Worker's compensation
(G) EMPLOYEE BENEFIT PLANS AND SALARIES; LABOR MATTERS
(1) Collective bargaining agreements, related letters of
understanding, etc.
(2) Grievance or summaries of all grievance filed in the last two
years
(3) Labor arbitration awards in the last 2 years and any pending
demands for arbitration
(4) Pension plan documents and records as to contribution, etc.
(5) A schedule describing all unfunded pension and related
liabilities under any pension or other employee benefit plan; and
actuarial reports for each defined benefit pension plan; tax
returns; reports, determination letters and other communications
or filing with the Internal Revenue Service, the Department of
Labor and the Pension Benefit Guaranty Corporation (including
Form 5500)
(6) Payroll, time and other work records documenting compliance with
wage and hour laws.
44
(7) Employee health or other benefit plans and documents and
Employer's record of contributions to same, any other profit
sharing, pension, bonus, incentive or other similar compensation
or retirement plans or arrangements, and any Internal Revenue
Service determination letters relating thereto
(8) Personnel records re liability for accrued vacations, severance
pay, stock options, and other benefits
(9) Employee handbooks, personnel policy manuals, forms of employment
contracts, and other personnel literature reciting terms &
conditions of employment and personnel procedures
(10) Employment agreements, contracts or commitments with any
individual and any bonus, deferred compensation, pension, profit
sharing, stock option, employee stock purchase, retirement or
other employee benefit plan for existing or former employees,
officers or directors and other agreement for work by individual
independent contractors
(11) Judicial or administrative complaints filed with any court or
agency in the last two years alleging any form of employment
discrimination, wrongful termination or breach of contract
related to employment and indicating disposition or present
status (judgment, settlement, pending, consent, decrees, etc.)
(12) Affirmative action plans, together with copies of contracts to
supply goods or services directly or indirectly to the federal
government
(13) Workers compensation and unemployment compensation claims
histories
(14) Records demonstrating compliance with COBRA
(15) A schedule of remuneration for the past and present year to the
five most highly compensated officers, and to all officers and
directors as a group, including salaries, directors' fees,
commissions, bonuses, deferred compensation, and other fringe
benefits
(H) LITIGATION\CLAIMS\LOSS CONTINGENCIES. PLEASE PROVIDE COPIES OF ALL
DOCUMENTATION RELATING TO PENDING OR THREATENED LITIGATION, ASSESSMENTS OR
CLAIMS, INCLUDING:
(1) List of all pending litigation, contractual disputes and
threatened claims and make available copies of documentation
relating to any lawsuit and relating pleadings (including
arbitration and governmental proceedings); unasserted possible
claims or assessments
(2) Correspondence, memoranda or notes concerning any dispute with
suppliers, competitors or customers regarding any claim for an
amount in excess of $5,000 or which could have a material impact
(3) Correspondence with auditors regarding threatened or pending
litigation, assessments or claims
(4) Correspondence, memoranda or notes concerning inquiries from
federal or state taxing authorities
45
(5) Correspondence, memoranda or notes concerning inquiries from
federal or state occupational safety and hazard officials
(6) Correspondence, memoranda or notes concerning inquiries from
federal or state authorities regarding equal opportunity
violations
(7) Correspondence, memoranda or notes concerning warranty claims
(8) Correspondence, memoranda or notes concerning inquiries from
federal or state agencies concerning potential violations of any
other law, rule or regulation
(9) Correspondence, memoranda or notes concerning any material
litigation, assessments or claims involving the import or export
of the Company's products
(10) Attorney's opinion letters to auditors in connection with audits
for the last five years
(11) Copies of any settlement agreements or correspondence regarding
such to which the Company or any of its directors, officers, or
key employees have been or are a party within the past three
years or which are threatened against any of them
(12) Any memoranda of counsel with respect to pending or threatened
litigation
(13) All consents decrees, judgments, other decrees or orders,
settlement agreements
(I) FINANCIAL MATTERS.
(1) List of banks or other lenders with whom Company has a financial
relationship (briefly describe nature of relationship lines of
credit, etc.) List of bank accounts and safe deposit boxes giving
authorized signatories
(2) Computations demonstrating compliance with covenants in existing
financing documents
(3) Audited or reviewed financial statements both consolidated and
consolidating for the last three years; income statement; balance
sheets, and other customary financials for the last five years
(4) Most recent projected financial and cash flow statements
(5) A schedule showing current accounts receivable, including
quality, aging and special cases thereof and payable list at the
end of most recent month and at the end of the last four quarters
(6) All interim income statements and balance sheets prepared since
the date of the last audited financial statements
(7) Pricing policies and compliance
(8) Identify and describe all (a) contingent liabilities not
reflected on the Company's financial statements; (b) monetary
reserves established for specific risk situations; (c)
disagreements with Company's outside auditors concerning
Company's financial reporting during preceding two years
(9) Brief description of nature of prepaid or deferred income or
expenses
(10) Any sales projections and estimates; current budget and any
budget projections
46
(11) Changes in accounting policies
(12) Documents relating to material write downs, or write offs of
note, accounting receivable or other assets
(J) TAX MATTERS
(1) State and Federal returns for latest closed and all open years
(federal, state and local)
(2) Communications between the Company and the IRS, including,
without limitation: (a) audit and revenue agents' reports
(federal, state and local); (b) settlement and consent documents
and correspondence; (c) agreements waiving statute of limitations
or extending time
(3) Copies of documents relating to IRS or state tax proceedings,
deficiencies assessed, or audits commenced
(4) Sub-chapter S elections
(5) List of states and foreign countries in which tax returns are
filed because of the ownership of property or conduct of business
by the Company
(K) REAL ESTATE MATTERS
(1) Leases
(2) All leases of all property and all leases of any substantial
amount of personal property to which the Company or any of its
subsidiaries is a party
(3) Title Policies
(4) Surveys
(L) INFORMATION DISSEMINATED CONCERNING THE COMPANY
(1) All present releases issued by the Company within the past year
(2) Samples or marketing and sales literature used for various
services
(3) All market studies, feasibility studies, analyzes, and similar
reports concerning the Company prepared within the past three
years
(4) All marketing and other descriptive brochures regarding the
Company prepared within the past three years
(M) OTHER MATTERS.
(1) All consultants' reports, within the last three years
(2) Recent business/strategic plans/projections
(3) Industry reports or market studies in Company's service lines
(4) Finders or brokers agreements
47
(5) Other material agreements
(6) UCC filings affecting any Company property
(7) Membership in trade associations
(8) Any other documents or information which in your judgment, are
significant with respect to the business of the Company and its
subsidiaries or which should be considered and reviewed or in
order to evaluate accurately the financial condition of the
Company and its subsidiaries and to determine the accuracy of the
statements in the Acquisition Agreement and the completeness of
the Exhibits and Schedules delivered pursuant thereto or
alternatively, and are necessary for counsel to the Company to
issue the opinion, required by the Acquisition Agreement.
48
FD DISCLOSURE SCHEDULE
49
