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EXHIBIT 2.3
AGREEMENT OF PURCHASE AND SALE OF STOCK
This AGREEMENT OF PURCHASE AND SALE OF STOCK ("Agreement") is made as
of the 14th day of April, 2000, by and among PET QUARTERS, INC., an Arkansas
corporation ("PetQuarters"), PQ Acquisition Company II, Inc., an Arkansas
corporation to be formed by and as a wholly-owned subsidiary of PetQuarters (the
"Purchaser"), CHARTENDURE LIMITED, a United Kingdom private company limited by
shares ("Chartendure"), and PATRIC JUDGE, the ESTATE OF HUGH O'NEILL, and TOM
McMEEKIN (collectively, the "Shareholders"). Chartendure and the Shareholders
are collectively referred to as the "Selling Parties."
RECITALS
WHEREAS, the Selling Parties and PetQuarters previously entered into an
Agreement of Purchase and Sale of Stock dated July 2, 1999 (the "Previous
Sale");
WHEREAS, the terms and conditions of the Previous Sale have not been
met, but the parties desire to complete the transaction contemplated by the
Previous Sale on different terms and conditions;
WHEREAS, the Shareholders have represented that they own all of the
outstanding stock of Chartendure;
WHEREAS, PetQuarters still desires to purchase from the Shareholders,
and the Shareholders still desire to sell to PetQuarters, all of the outstanding
stock of Chartendure (the "Shares");
WHEREAS, Chartendure still desires that the Transaction be
consummated;
WHEREAS, PetQuarters and the Shareholders have determined that the most
advantageous method for PetQuarters to acquire all of the Shares is by use of a
subsidiary wholly-owned by PetQuarters so that the Transaction is treated as a
statutory merger under Section 368 of the Code;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the terms identified below in this Article I
shall have the meanings indicated, unless a different and common meaning of the
term is clearly indicated by the context.
AFFILIATE. With respect to any person, Entity or Party, (i) any person,
Entity or Party controlling, controlled by or under common control with any such
person, Entity or Party or (ii) any director or executive officer of any such
person, Entity or Party or of any person, Entity or Party referred to in clause
(i) of this definition.
AGREEMENT. This Agreement of Purchase and Sale of Stock, including all
of its Schedules and Exhibits, and including all duly adopted amendments,
modifications, and supplements.
CLOSING. The completion of the Transaction, to take place as described
in Article IX hereof.
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CLOSING DATE. The date on which the Closing actually occurs, which
shall not be later than April 21, 2000, unless otherwise agreed by the parties,
but shall not in any event be prior to satisfaction or waiver of the conditions
to Closing set forth in Article VIII hereof.
CODE. The Internal Revenue Code of 1986, as amended and in effect at
the time of execution of the Agreement.
COMPANY FINANCIAL STATEMENTS. Chartendure's statement of account dated
March 31, 2000.
CONTROL. The possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a person, Entity or
Party, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
CONFIDENTIAL INFORMATION. As defined in Section 5.2.
CONTACT. Any person or Entity with whom Chartendure has had contractual
relationships, whether written or oral, material to the past operations of
Chartendure or the future operations of PetQuarters and the Purchaser.
DEFECT NOTICE. As defined in Section 4.14.
ENTITY. A corporation, partnership, sole proprietorship, trust, joint
venture, limited liability company or other form of organization formed for the
conduct of a business whether active or passive.
EQUITY. The shareholder's equity as reflected on the applicable Company
Financial Statements.
GAAP. Generally accepted accounting principles consistently applied, as
in effect on the date of any statement, report or determination that purports to
be, or is required to be, prepared or made in accordance with generally accepted
accounting principles.
INDEMNIFIED PARTY. As defined in Section 7.4.
INDEMNIFYING PARTY. As defined in Section 7.4.
INVENTORIES. All inventories of raw materials and supplies,
manufactured and purchased parts, work in progress and finished goods
customarily reflected as assets in balance sheets of Entities prepared in
accordance with GAAP.
LIABILITIES. At any point in time (the "Determination Time"), the
obligations of Chartendure, whether known or unknown, contingent or absolute,
recorded on its books or not, arising or resulting in any way from facts,
events, agreements, obligations or occurrences that existed or transpired at a
prior point in time, or resulted from the passage of time to the Determination
Time.
LOSSES. With respect to any person, Entity or Party, any payment, loss,
liability, obligation, damage (including, without limitation, consequential,
punitive, special or otherwise), deficiency, lien, judgment, cost or expense
(including, without limitation, reasonable attorneys' and accountants' fees and
expenses and court costs) of any kind, nature or description.
PARTIES. The Purchaser, PetQuarters and the Selling Parties.
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PAYABLES. Liabilities of Chartendure arising from the borrowing of
money or the incurring of obligations for its operations prior to the Closing
Date and disclosed in writing to Purchaser prior to the Closing Date. All
amounts owed by Chartendure to Shareholders shall be contributed to
Shareholders' equity in Chartendure prior to Closing.
PENSION PLAN. A "pension plan" or "employee pension benefit plan".
POUND OR L. The pound sterling as valid currency of the U.K.
PROPERTIES. The real and personal properties owned by Chartendure, as
described in Schedule 4.14A hereof.
PROPRIETARY RIGHTS. Trade secrets, copyrights, patents, trademarks,
service marks, and all similar types of intangible property developed, created,
or owned by Chartendure, or used by Chartendure in connection with its business,
whether or not the same are entitled to legal protection, specifically including
but not limited to the website listings petpage.co.us, petspages.co.uk,
petpages.com and petspages.com.
PURCHASE PRICE. As defined in Section 2.2.1.
PURCHASER. PQ Acquisition Company II, Inc., an Arkansas corporation.
PURCHASER INDEMNITEE. The Purchaser, any affiliate of the Purchaser,
any person or Entity with whom the Purchaser is affiliated or with whom the
Purchaser has a partnership or joint venture relationship (a "Purchaser
Partner"), and any officer, director, shareholder, employee, agent, attorney,
joint venturer, partner (limited or general), servant, representative, trustee,
successor or assign of the Purchaser or of any Purchaser Partner or of any
affiliate of the Purchaser or any Purchaser Partner.
REAL PROPERTY. Land plus all buildings, improvements and fixtures
located thereon.
RECEIVABLES. Accounts receivable, notes receivable, and other
obligations appearing as assets on the books of Chartendure, and customarily
reflected as assets in balance sheets of Entities prepared in accordance with
GAAP, indicating moneys owed to the Entity.
SEC. The Securities and Exchange Commission.
SEC DOCUMENTS. PetQuarters' latest Form 10 or 10-SB, Form 10-K or
10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter and any other reports, statements or other documents filed with the
SEC prior to the Closing Date.
SELLING PARTY INDEMNITEE. The Selling Parties, any affiliate of the
Selling Parties, and person or entity with whom any Selling Party is affiliated
or with whom a Selling Party has a partnership or joint venture relationship
("Selling Party Partner"), and any officer, director, shareholder, employee,
agent, attorney, joint venturer, partner (limited or general), servant,
representative, trustee, successor or assign of any Selling Party or of any
Selling Party Partner or of any affiliate of the Selling Party or any Selling
Party Partner.
SHARES. The 100 shares of Chartendure's voting stock, owned by the
Shareholders and representing all of the outstanding shares of Chartendure's
voting stock.
SHAREHOLDERS. Patric Judge, Tom McMeekin and the Estate of Hugh
O'Neill.
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SHAREHOLDER INDEMNIFIABLE CLAIMS. As defined in Section 7.2.
SELLING PARTIES. Chartendure and the Shareholders.
TAX OR TAXES. (i) All U.K. and U.S. federal, foreign, state, county or
local net or gross income, gross receipts, sales, use, ad valorem, value-added,
franchise, production, severance, windfall profit, withholding, payroll,
employment, excise or similar taxes, assessments, duties, fees, levies,
penalties, financial assurance or other governmental charges (together with any
interest thereon, any penalties, additions to tax or additional amounts with
respect thereto, and any interest in respect of such penalties, additions or
additional amounts), and (ii) liability for the payment of any consolidated tax
(together with any interest thereon, any penalties, additions to tax or
additional amounts with respect thereto, and any interest in respect of such
penalties, additions or additional amounts) of the type described in clause (i)
of this paragraph.
THIRD PARTY. As defined in Section 6.8.
THIRD PARTY CLAIM. As defined in Section 7.5.
THRESHOLD. As defined in Section 7.4.
TRANSACTION. The purchase and sale of the Shares as contemplated by
this Agreement and all incidental actions or related transactions contemplated
hereby.
U.K. The United Kingdom.
U.S. The United States of America.
VENDOR. Any third party selling or licensing a product or service to a
Customer or to the Company on or prior to the Closing Date.
ARTICLE II
THE TRANSACTION
2.1 THE TRANSACTION. Upon execution of this Agreement by PetQuarters,
Chartendure, and the Shareholders, PetQuarters shall form the Purchaser and
transfer 400,000 shares of common stock of PetQuarters (the "Purchase Shares")
to the Purchaser in exchange for all of the stock of the Purchaser. Thereafter,
upon the terms and subject to the conditions set forth in this Agreement, on the
Closing Date, the Shareholders shall sell, grant, convey, assign, transfer and
deliver to the Purchaser, and the Purchaser shall purchase and acquire from the
Shareholders all of the Shares. The exact number of Shares to be sold by the
Shareholders hereunder is 100 shares of Chartendure common stock, L.1 par
value.
2.2 PURCHASE PRICE.
2.2.1 PURCHASE PRICE. The purchase price for the Shares shall
be 400,000 shares of the common stock of PetQuarters (the "Purchase Price").
2.2.2 ALLOCATION OF PURCHASE PRICE The Purchase Price shall be
allocated to each of the Shareholders in proportion to his, her or its pro rata
ownership of all Shares as set forth below:
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<TABLE>
<S> <C>
Patric Judge 90 shares
Tom McMeekin 5 shares
The Estate of Hugh O'Neill 5 shares
</TABLE>
2.3 PARTIES TO THE AGREEMENT AND TRANSACTION. To the extent that any
provision of this Agreement calls for agreement by Chartendure as a party
hereto, such provision shall mean Chartendure as it exists prior to consummation
of the Transaction. If, after such consummation, any provision hereof requires
amendment, modification, interpretation, etc., the same may be accomplished by
the Shareholders and the Purchaser, without the participation of Chartendure.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PETQUARTERS AND THE PURCHASER
PetQuarters and the Purchaser hereby represent and warrant to the
Selling Parties:
3.1 ORGANIZATION AND QUALIFICATION. PetQuarters is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arkansas. Prior to Closing, the Purchaser shall be a corporation duly organized,
validly existing and in good standing under the laws of the State of Arkansas.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution and delivery of
this Agreement and the consummation of the Transaction have been duly authorized
and approved by the Board of Directors of PetQuarters and no other corporate
proceedings on the part of PetQuarters are necessary to approve and adopt this
Agreement or to approve the consummation of the Transaction. This Agreement has
been duly and validly executed and delivered by PetQuarters and constitutes a
valid and binding Agreement of PetQuarters, enforceable against PetQuarters in
accordance with its terms.
3.3 PURCHASE SHARES. The Purchase Shares to be delivered on the Closing
Date shall be duly authorized, validly issued and fully paid and non-assessable.
3.4 SEC DOCUMENTS. The SEC Documents are a full and fair summary of the
business and affairs of PetQuarters as it currently is carried on and is
contemplated in the future.
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the SEC
Documents, PetQuarters has not experienced any material adverse change in its
assets, business condition (financial or otherwise), or operations.
3.6 TAXES. PetQuarters has duly and timely filed or caused to be filed
all Tax returns (including, without limitation, consolidated and/or combined tax
returns), reports, and declarations that are required by applicable law to be
filed by it, and has paid, or made full and adequate provision for the payment
of, all Taxes shown to be due for the periods covered by such returns, reports,
and declarations, except such taxes, if any, as are adequately reserved against
in the PetQuarters' Financial Statements.
3.7 ACCURACY OF INFORMATION. None of PetQuarters representations,
warranties or statements contained in this Agreement or in any other document
delivered to Selling Parties in connection with the transactions contemplated by
this Agreement, contains or will contain any untrue statement of a material fact
or omits to state any material fact necessary in order to make any of such
representations, warranties or statements, in light of the circumstances under
which they were made, not
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misleading. The statements, data and information in the Offering Memorandum
relating to future actions do not constitute representations or warranties of
PetQuarters.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SELLING PARTIES
Each of the Selling Parties, jointly and severally, represents and
warrants to PetQuarters and the Purchaser as follows:
4.1 ORGANIZATION AND QUALIFICATION. Chartendure is a U.K. private
company limited by shares duly organized, validly existing and in good standing
under the laws of the U.K. and has the requisite corporate power and authority
to own its properties and carry on its business as it is now being conducted.
Chartendure is duly licensed or qualified to do business, and is in good
standing, in each jurisdiction where the character of the properties owned or
leased by it, or the nature of its activities, are such that qualification as a
foreign corporation or business entity in that jurisdiction is required by law,
except in any such case where the failure to be so qualified would not have a
material adverse effect on the assets, business, condition (financial or
otherwise), operations or prospects of Chartendure.
4.2 CAPITALIZATION; OWNERSHIP OF SHARES. The authorized capital of
Chartendure is L.1,000 consisting of 1,000 ordinary shares of L.1
each, of which only 100 shares are issued and outstanding. The Shares are duly
authorized, validly issued and fully paid, and have been issued in compliance
with U.K. laws. There are no outstanding subscriptions, options, warrants,
convertible instruments or other rights, agreements or commitments obligating
Chartendure to sell or issue, or to require the Shareholders to sell or
otherwise transfer, any capital stock or other securities of Chartendure. All of
the issued and outstanding Shares are owned of record and beneficially by the
Shareholders, free and clear of any liens, encumbrances, security interests,
options, pledges, agreements, claims, charges or restrictions of any nature
whatsoever. The Shareholders have full power to transfer the Shares to the
Purchaser without obtaining the further consent or approval of any other person,
Entity or governmental authority.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. This Agreement has been duly
and validly executed and delivered by the Selling Parties and constitutes a
valid and binding Agreement of each of the Selling Parties enforceable in
accordance with its terms. Chartendure has all requisite corporate power and
authority to enter into this Agreement and to carry out the Transaction, and its
doing so has been duly and sufficiently authorized by the Board of Directors of
Chartendure and the Shareholders.
4.4 ABSENCE OF BREACH; NO CONSENTS. The execution, delivery, and
performance of this Agreement, and the performance by Chartendure and the
Shareholders of their respective obligations hereunder will not (i) violate or
conflict with any of the provisions of the Articles of Association or Bylaws of
Chartendure as amended to the date hereof; (ii) contravene any law, ordinance,
rule, or regulation of the U.K. or of any applicable foreign jurisdiction, or
contravene any order, writ, judgment, injunction, decree, determination, or
award of any court or other authority having jurisdiction, or cause the
suspension or revocation of any authorization, consent, approval, or license,
presently in effect, which affects or binds Chartendure or any of its material
properties; (iii) result in a breach of any term or provision of, or constitute
a default under, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or the lapse of time or both) any
obligation under, or result in the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance of all or any part of the
property of Chartendure pursuant to any provision of, any order, judgment,
arbitration award, injunction, decree, indenture, mortgage, lease, license, lien
or other agreement or instrument to which Chartendure or the any of the
Shareholders are a party or by which any of them is bound; (iv) require the
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authorization, consent, approval of, or license, declaration, filing or
registration with, any governmental or regulatory authority or any third party;
or (v) constitute grounds for the loss or suspension of any permits, licenses,
or other authorizations used in the business of Chartendure.
4.5 BROKERS. No agent, broker, finder, investment banker, person,
Entity or firm acting on behalf of the Selling Parties or under their authority
is entitled to any brokerage, finder's, or other fee or commission in connection
with this Agreement or the Transaction.
4.6 FINANCIAL STATEMENTS. Correct copies of the Company Financial
Statements have been provided to PetQuarters, together with financial statements
for every year of Chartendure's existence beginning July 1999 and ending March
31, 2000. The Company Financial Statements (i) fairly and accurately present the
financial position and condition of Chartendure as at the dates thereof and for
the periods then ended, in accordance with GAAP (except as otherwise stated
therein), (ii) are complete, correct and in accordance with the books of account
and records of Chartendure and (iii) can be legitimately reconciled with the
financial records maintained and the accounting methods applied by it for U.K.
tax purposes. From the date hereof through the Closing Date, Chartendure will
continue to prepare financial statements on the same basis that it has done so
in the past, will promptly deliver the same to PetQuarters, and each Selling
Party agrees that from and after such delivery the foregoing representations
will be applicable to each financial statement so prepared and delivered.
4.7 NO UNDISCLOSED LIABILITIES. To the knowledge of Chartendure and the
Shareholders, Chartendure does not have any Liabilities which are not adequately
reflected or reserved against on the face of the Company Financial Statements,
except Liabilities incurred since the date of the Company Financial Statements
in the ordinary course of business and consistent with past practice, in each
case in normal amounts and none of which is materially adverse, or except as
otherwise disclosed herein. All Payables and Liabilities of Chartendure are set
forth in Schedule 4.7 hereto.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS SINCE JULY 2, 2000. Since July
2, 2000, Chartendure has not, except as set forth on Schedule 4.8 hereof:
(i) experienced any material adverse change in the assets,
business, condition (financial or otherwise), operations, or prospects
of Chartendure;
(ii) suffered any damage, destruction, or loss, whether
covered by insurance or not, having a material adverse effect on the
assets, business, condition (financial or otherwise), operations, or
prospects of Chartendure;
(iii) entered into, amended or terminated any material
commitment, contract, agreement, or transaction (including, without
limitation, any material borrowing or capital expenditure or sale or
other disposition of any material asset or assets) of or involving
Chartendure other than this Agreement;
(iv) redeemed, repurchased or otherwise acquired for value its
capital stock, or issued any of its capital stock or securities
convertible into or rights to acquire any such capital stock, or
declared, set aside or paid any dividend or distribution on its capital
stock;
(v) transferred or granted any rights under any of its
material leases, licenses, agreements, patents, trademarks, trade
names, or copyrights;
(vi) transferred, leased or otherwise disposed of any its
assets or properties other than in the ordinary course of business and
consistent with past practice or, except in the ordinary
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course of business and consistent with past practice, acquired any
assets or properties, or entered into any agreement relating to the
foregoing;
(vii) mortgaged, pledged, or subjected to any lien or other
encumbrance any of its assets or properties, other than in the ordinary
course of business, or entered into any agreement relating to the
foregoing;
(viii) made or granted any wage or salary increase applicable
to any group or classification of employees generally, entered into any
employment contract with, or made any loan to, or entered into any
material transaction with, any officer or employee, or changed the
nature of any supplemental benefits provided to any such executives or
other employees; or
(ix) modified inventory levels in relation to sales levels,
other than in the ordinary course of business and consistent with past
practice.
4.9 TAXES. Chartendure has duly and timely filed or caused to be filed
all U.K. and foreign Tax returns (including, without limitation, consolidated
and/or combined Tax returns), reports, and declarations that are required by
applicable law to be filed by it, and has paid, or made full and adequate
provision for the payment of, all U.K. and other Taxes shown to be due for the
periods covered by such returns, reports, and declarations, except such taxes,
if any, as are adequately reserved against in the Company Financial Statements.
Except as set forth on Schedule 4.9 hereof, no deficiency in payment of Taxes
for any period has been asserted by any taxing body and remains unsettled at the
date hereof.
4.10 NO BREACH OR DEFAULT. Chartendure is not in breach, violation or
default under any contract to which it is a party or by which it is bound, nor
has any event occurred which, after the giving of notice or the passage of time
or both, would constitute a breach, violation or default under any such
contract, and Chartendure has not received notice of any claim or assertion that
it is or may be in any such breach, violation or default. The Selling Parties
have no reason to believe that the parties to such contracts will not fulfill
their obligations under such contracts in all material respects or are
threatened with insolvency.
4.11 LITIGATION.
4.11.1 Schedule 4.11 hereof sets forth a list and a summary
description of all pending or, to the knowledge of Chartendure or any
of the Shareholders, threatened actions, suits, proceedings, disputes
or investigations by or against the any of the Shareholders,
Chartendure or any of its officers, directors, employees, agents or
affiliates involving, affecting or relating to .any assets, properties
or operations of Chartendure or the transactions contemplated by this
Agreement, setting forth, with respect to each action, suit,
proceeding, dispute or investigation, (i) any reserves reflected in the
Financial Statements and (ii) the existence and extent of insurance
coverage.
4.11.2 Except as set forth on Schedule 4.11 hereof, there are
no claims, actions, suits, proceedings or investigations pending or, to
the knowledge of Chartendure or any of the Shareholders, threatened
before any U.K. or U.S. federal, state or local court or governmental
or regulatory authority, domestic or foreign, or before any arbitrator
of any nature, brought by or against any of the Shareholders,
Chartendure or any of its respective officers, directors, employees,
agents or affiliates involving, affecting or relating to any assets,
properties or operations of Chartendure or the transactions
contemplated by this Agreement, nor does there exist any fact which
might reasonably be expected to give rise to any such suit, proceeding,
dispute or investigation.
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4.11.3 Except as set forth on Schedule 4.11 hereof, neither
Chartendure nor any of its assets or properties is subject to any
order, writ, judgment, award, injunction or decree of any U.K. or U.S.
federal, state or local court or governmental or regulatory authority
or arbitrator, which adversely affects or might reasonably be expected
to affect the assets, properties, business operations, prospects, net
income or financial condition of Chartendure or which would or might
reasonably be expected to interfere with the transactions contemplated
hereby.
4.12 EMPLOYEES, ETC. Except as disclosed in Schedule 4.12 hereof, there
are no collective bargaining, bonus, profit sharing, compensation, or other
plans, agreements, trusts, funds, or arrangements maintained by Chartendure for
the benefit of its directors, officers, or employees, and there are no
employment, consulting, severance, or indemnification arrangements, agreements
or understandings between Chartendure, on the one hand, and any current or
former directors, officers, or other employees (or affiliates thereof) of
Chartendure, on the other hand. Chartendure is not, and following the Closing
will not be, bound by any express or implied contract or agreement to employ,
directly or as a consultant or otherwise, any person for any specific period of
time or until any specific age except as specified in agreements in writing
identified on Schedule 4.12 hereof.
4.13 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.13 hereof,
Chartendure is not in default with respect to any order of any court,
governmental authority or arbitration board or tribunal to which Chartendure is
a party or is subject.
4.14 REAL PROPERTY. Chartendure does not own, rent or lease any real
property.
4.15 ASSETS. Schedule 4.15 hereof lists all of Chartendure's fixed
assets, and other tangible personal property owned, leased or used by
Chartendure in its business.
4.16 TITLE TO PROPERTY; ENCUMBRANCES. Chartendure has good and valid
title to all of its properties and assets, in each case free and clear of all
Encumbrances. Chartendure does not know of any potential action by any party,
governmental or other, and no proceedings with respect thereto have been
instituted of which Chartendure has notice, that would materially affect
Chartendure's ability to use and to utilize each of such assets in its business.
4.17 PROPRIETARY RIGHTS. Chartendure possesses full ownership of, or
adequate and enforceable long-term licenses or other rights to use (without
payment), all Proprietary Rights owned by or registered in the name of
Chartendure or used in the businesses of Chartendure; Chartendure has not
received any notice of conflict which asserts the rights of others with respect
thereto and is not aware of any infringing use of any of its Proprietary Rights;
and Chartendure has in all material respects performed all of the obligations
required to be performed by it, and is not in default in any material respect,
under any agreement relating to any Proprietary Right.
4.18 SUBSIDIARIES; AFFILIATED ENTITIES. Chartendure has no
subsidiaries. Chartendure does not own, directly or indirectly, a majority or
controlling equity or related interest in any partnership, corporation, joint
venture, business association or other Entity. No part of Chartendure's business
is conducted through Entities other than Chartendure.
4.19 TRADE NAMES. Chartendure does not use any fictitious business
names or trade names, except the names included as Proprietary Rights.
4.20 EMPLOYEE BENEFIT PLANS. Chartendure does not maintain or
contribute to any Pension Plan or any Welfare Plan, nor is Chartendure
presently, nor has it been within the last six years, a
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participating employer in any "multiemployer plan" (as defined in ERISA Section
3(37) or Section 414(f) of the Code).
4.21 ACCOUNTS RECEIVABLE. All Receivables of Chartendure, whether or
not reflected in the Company Financial Statements, represent transactions in the
ordinary course of business.
4.22 INVENTORIES. Chartendure has no inventory, products or supplies.
4.23 CONTRACTS. Except as identified on Schedule 4.23 hereof,
Chartendure has no contracts, agreements, or understandings, whether express or
implied, written or oral.
4.24 ACCOUNTS PAYABLE. The accounts payable reflected on the Company
Financial Statements do, and those reflected on the books of Chartendure at the
time of the Closing will, reflect all amounts owed by Chartendure in respect of
trade accounts due and other Payables, and the actual Liability of Chartendure
in respect of such obligations was not, and will not be, on any of such dates,
in excess of the amounts so reflected on the books of Chartendure. It is agreed,
however, that all amounts owed to Shareholders shall be contributed to
Shareholders' equity prior to Closing.
4.25 LABOR MATTERS. Except as set forth on Schedule 4.25 hereof, there
are no activities or controversies, including, without limitation, any labor
organizing activities, election petitions or proceedings, proceedings
preparatory thereto, unfair labor practice complaints, labor strikes, disputes,
slowdowns, or work stoppages, pending or, to the best of the knowledge of
Chartendure, threatened, between Chartendure and any of its employees.
4.26 INSURANCE. Chartendure has provided copies of each of
Chartendure's insurance policies to PetQuarters. Chartendure has not received
any notice of cancellation of any insurance agreement. Chartendure does not have
any material claims pending under any of its insurance policies. Chartendure
will maintain all of the insurance policies in full force and effect during the
period of time between the execution of this Agreement and the Closing.
4.27 ACCURACY OF INFORMATION. None of Chartendure's or the
Shareholders' representations, warranties or statements contained in this
Agreement, in the Schedules and Exhibits hereto or in any other document
delivered to Purchaser in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of a material fact or
omits to state any material fact necessary in order to make any of such
representations, warranties or statements, in light of the circumstances under
which they Chartendure made, not misleading.
4.28 JURISDICTIONS. Chartendure is presently qualified to do business
in the United Kingdom of Great Britain and Northern Ireland. Chartendure has
complied in all material respects with all applicable rules and regulations of
each regulatory agency therein.
4.29 RECORDS. Chartendure and the Shareholders have delivered or made
available to PetQuarters and its counsel true and complete copies of their
articles of incorporation, bylaws, minutes of all meetings of directors and
shareholders and certificates reflecting all actions taken by the directors or
shareholders without a meeting, partnership agreements and certificates, and
other organizational documents of Chartendure, and such documents are, except as
stated therein, in full force and effect on the date hereof. After consummation
of the transaction contemplated hereby, all such documents of Chartendure shall
be delivered to PetQuarters.
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ARTICLE V
COVENANTS OF THE PURCHASER AND PETQUARTERS
5.1 AFFIRMATIVE COVENANTS. From the date hereof through the Closing
Date, PetQuarters and the Purchaser will take every action reasonably required
of it in order to satisfy the conditions to Closing set forth in this Agreement
and otherwise to ensure the prompt and expedient consummation of the Transaction
substantially as contemplated hereby, and will exert all reasonable efforts to
cause the Transaction to be consummated, provided in all instances that the
representations and warranties of the Selling Parties in this Agreement are and
remain true and accurate and that the covenants and agreements of the Selling
Parties in this Agreement are honored and that the conditions to the obligations
of the Purchaser set forth in this Agreement are not incapable of satisfaction.
5.2 CONFIDENTIALITY OF INFORMATION. Except as and to the extent
required by law, PetQuarters and the Purchaser will not disclose or use, and
will direct their representatives not to disclose or use to the detriment of the
Selling Parties, any Confidential Information (as defined below) with respect to
Chartendure furnished, or to be furnished, by either the Selling Parties or
their respective representatives to PetQuarters, the Purchaser or their
representatives at any time or in any manner other than in connection with its
evaluation of the Transaction; provided, however, that any disclosure or use
that is deemed necessary by PetQuarters or the Purchaser in their reasonable
discretion to determine the transferability of any and all operating permits
shall not be deemed to be a violation of this Section 5.2. "Confidential
Information" means any information about Chartendure stamped "confidential" or
identified in writing as such to PetQuarters or the Purchaser by any of the
Selling Parties promptly following its disclosure (and specifically includes any
Company Disclosure Statements delivered to PetQuarters or the Purchaser), unless
(a) such information is already known to PetQuarters or the Purchaser or their
representatives or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of PetQuarters or the
Purchaser or their representatives, (b) the use of such information is necessary
or appropriate in making any filing or obtaining any consent or approval
required for the consummation of the Transaction, or (c) the furnishing or use
of such information is required by or necessary or appropriate in connection
with legal proceedings. Upon the written request of Chartendure in the event
this Agreement is terminated for any reason prior to Closing, PetQuarters and
the Purchaser will promptly return to Chartendure or destroy any Confidential
Information in their possession and certify in writing to Chartendure that they
have done so.
5.3 EXPENSES. Whether or not the Transaction is consummated, all costs
and expenses incurred by PetQuarters and the Purchaser in connection with this
Agreement and the Transaction shall be paid by the Purchaser.
5.4 UNREGISTERED SECURITIES. The Purchaser acknowledges that the Shares
are not registered under the Securities Act of 1933 nor under the Arkansas
Securities Act nor under the Arkansas Securities Act nor under the U.K.
securities laws and represents and warrants as follows:
(i) The Purchaser is acquiring the Shares for its own account
solely for the investment purposes and not with a view to resell said
Shares.
(ii) The Purchaser has such knowledge and experience in
business and financial matters as to enable it to be capable of
evaluating the risks and merits of this investment.
(iii) The Purchaser is able to bear the economic risks of an
investment in the Shares.
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(iv) The Shares will not be resold or otherwise transferred or
assigned without appropriate compliance with the registration
provisions of the Securities Act of 1933 and the applicable state Blue
Sky laws or exemption therefrom.
(v) The Purchaser has been provided with or permitted access
to all information which it deems material to formulating an investment
decision and that such information has been sufficient to make an
informed investment decision.
5.5 EMPLOYMENT AND BENEFITS. PetQuarters shall employ Patric Judge
pursuant to the Professional Services Agreement attached hereto as Exhibit
_____.
ARTICLE VI
COVENANTS OF THE SELLING PARTIES
6.1 RESTRICTIVE COVENANTS.
(a) CUSTOMER RESTRICTION. Each Shareholder covenants and
agrees that he or she shall not, for a period of two (2) years from and
after the Closing Date, working alone or in conjunction with one or
more other persons or Entities, for compensation or not, (i) provide or
offer to provide any product or service similar to that offered by
Chartendure, PetQuarters or Purchaser immediately prior to the Closing,
or (ii) induce or attempt to induce any person or Entity to withdraw,
curtail or cancel business of Chartendure, PetQuarters, or the
Purchaser or in any manner modify or fail to enter into any actual or
potential business relationship with PetQuarters, the Purchaser or
Chartendure.
(b) NON-RAID. Each Shareholder covenants and agrees that he or
she shall not, for a period of two (2) years from and after the Closing
Date, working alone or in conjunction with one or more other persons or
Entities, for compensation or not, (i) recruit or otherwise solicit or
induce any person or Entity who is, on the Closing Date or thereafter,
an employee, officer or director of Chartendure to terminate their
employment with, or otherwise cease their relationship with,
Chartendure, PetQuarters or the Purchaser or any of their respective
subsidiaries or affiliates, or (ii) hire, recruit or otherwise solicit
any person or Entity who, within the six months immediately preceding
the Closing Date, had been an employee, officer or director of
Chartendure; provided, however, that clause (ii) shall not prohibit any
Shareholder from hiring, recruiting or soliciting any person or Entity
with which Chartendure have terminated their relationship after the
Closing Date.
(c) NONCOMPETITION. Each Shareholder covenants and agrees that
such Shareholder shall not, for a period of two (2) years from and
after the Closing Date, working alone or in conjunction with one or
more other persons or Entities, for compensation or not, permit such
Shareholder's name to be used by or engage in or carry on, directly or
indirectly, either for himself or as a member, stockholder, partner,
investor (other than as an owner of less than 5% of any public traded
Entity), officer or director of an Entity (other than PetQuarters or
the Purchaser or a subsidiary or affiliate of PetQuarters or the
Purchaser) or as an employee, agent, associate or contractor of any
person or Entity (other than PetQuarters or the Purchaser and/or any of
its subsidiaries or affiliates), any business in competition with the
business of Chartendure as carried on by Chartendure immediately prior
to the Closing, but only for as long as such business is carried on by
(i) the Purchaser and/or any of its subsidiaries or affiliates or (ii)
any person or Entity deriving title from the Purchaser or any of its
subsidiaries or affiliates to the assets and goodwill of the business
being carried on by Chartendure immediately prior to the Closing. The
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Parties intend that the covenants contained in this Section 6.1(c)
shall be deemed to be a series of separate covenants, one for each
State or country in which Chartendure do business immediately prior to
the Closing and, except for geographic coverage, each such separate
covenant shall be identical in terms to the covenant contained in this
Section 6.1(c).
(d) REFORMATION. If, in any judicial proceeding, the court
shall refuse to enforce all of the separate covenants contained in
Section 6.1(a),6.1(b) or 6.1(c) hereof because the time limit is too
long, it is expressly understood and agreed between the Parties that
for purposes of such proceeding such time limitation shall be deemed
reduced to the extent necessary to permit enforcement of such
covenants. If, in any judicial proceeding, the court shall refuse to
enforce all of the separate covenants contained in Section 6.1(a),
6.1(b) or 6.1(c) hereof because they are more extensive (whether as to
geographic area, scope of business or otherwise) than necessary to
protect the business and goodwill of the Purchaser or any of its
subsidiaries or affiliates, it is expressly understood and agreed
between the Parties that for purposes of such proceeding the geographic
area, scope of business or other aspect shall be deemed reduced to the
extent necessary to permit enforcement of such covenants.
(e) INJUNCTIVE RELIEF. Each Shareholder acknowledges that a
breach of Section 6.1 hereof would cause irreparable damage to
PetQuarters and the Purchaser, and in the event of such Shareholder's
actual or threatened breach of the provisions of Section 6.1 hereof,
PetQuarters and the Purchaser shall be entitled to a temporary
restraining order and an injunction restraining such Shareholder from
breaching such covenants without the necessity of posting bond or
proving irreparable harm, such being conclusively admitted by such
Shareholder. Nothing shall be construed as prohibiting PetQuarters or
the Purchaser from pursuing any other available remedies for such
breach or threatened breach, including the recovery of damages from
such Shareholder. Each Shareholder acknowledges that the restrictions
set forth in Section 6.1 hereof are reasonable in scope and duration,
given the nature of the business of PetQuarters and the Purchaser. Each
Shareholder agrees that issuance of an injunction will not pose an
unreasonable restriction on such Shareholder's ability to obtain
employment or other work following the Closing Date.
(f) OTHER AGREEMENTS. The provisions of this Section 6.1 shall
be independent of and in addition to any other agreement between
PetQuarters, the Purchaser or Chartendure and any Shareholder regarding
the subject matter of this Section 6.1.
6.2 AFFIRMATIVE COVENANTS. From the date hereof through the Closing
Date, the Selling Parties will take every action reasonably required of either
of them to satisfy the conditions to Closing set forth in this Agreement and
otherwise to ensure the prompt and expedient consummation of the Transaction
substantially as contemplated hereby, and will exert all reasonable efforts to
cause the Transaction to be consummated, provided in all instances that the
representations and warranties of the Purchaser in this Agreement are and remain
true and accurate and that the covenants and agreements of the Purchaser in this
Agreement are honored and that the conditions to the obligations of Chartendure
set forth in this Agreement are not incapable of satisfaction.
6.3 ACCESS AND INFORMATION. The Selling Parties shall afford to
PetQuarters, the Purchaser and to the Purchaser's accountants, counsel and other
representatives reasonable access during normal business hours throughout the
period prior to the Closing to all of Chartendure's properties, books,
contracts, commitments, records and personnel, and, during such period,
Chartendure shall furnish promptly to the Purchaser (1) all written
communications from Chartendure to its directors or to its Shareholders
generally, (2) Chartendure's internal monthly financial statements when and as
available, and (3) all other information concerning its business, properties,
and personnel as the Purchaser may reasonably request, but no investigation
pursuant to this Section 6.3 shall affect any representations or
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warranties of the Selling Parties, or the conditions to the obligations of the
Purchaser to consummate the Transaction contemplated by this Agreement. The
Purchaser and its representatives shall assert their rights hereunder in such
manner as to minimize interference with the business of Chartendure.
6.4 NO SOLICITATION. The Selling Parties and those acting on their
behalf will not, and Chartendure will use their best efforts to cause their
officers, employees, agents, and representatives (including any investment
banker) not, directly or indirectly, to solicit, encourage, or initiate any
discussions with, or negotiate or otherwise deal with, or provide any
information to, any person or Entity other than the Purchaser and its officers,
employees, and agents, concerning any merger, sale of substantial assets, or
similar transaction involving Chartendure or division of Chartendure or any sale
of any of their capital stock or of any division. Chartendure will notify the
Purchaser immediately upon receipt of any inquiry, offer or proposal relating to
any of the foregoing. None of the foregoing shall prohibit providing information
to others in a manner in keeping with the ordinary conduct of Chartendure's
business, or providing information to government authorities.
6.5 CONDUCT OF BUSINESS.
6.5.1 AFFIRMATIVE COVENANTS. The Selling Parties covenant and
agree with the Purchaser that, on and after the date hereof and prior
to the consummation of the Transaction or the termination of this
Agreement pursuant to its terms, Chartendure shall, and the
Shareholders shall cause Chartendure to:
(i) conduct its business according to the ordinary
and usual course of business consistent with past practice;
(ii) use commercially reasonable efforts to preserve
intact their business organization and goodwill, to keep
available the services of their officers, directors and
employees, and maintain good relationships with suppliers,
lenders, creditors, distributors, employees, customers,
licensors, licensees and others having business or financial
relationships with them, and they shall immediately notify the
Purchaser of any event or occurrence or emergency material to,
and not in the ordinary and usual course of, their business;
(iii) continue properly and promptly to file when due
all federal, state, local, foreign, and other tax returns,
reports, and declarations required to be filed by them, and
will pay, or make full and adequate provision for the payment
of, all taxes and governmental charges due from or payable by
them;
(iv) comply in all material respects with all laws
and regulations applicable to them and their operations;
(v) maintain in full force and effect insurance
coverage of a type and amount customary in their business, but
not less than that presently in effect; and
(vi) maintain their assets and properties in good
repair and in the same condition, reasonable wear and tear
excepted, as they Chartendure on the date of this Agreement.
6.5.2 NEGATIVE COVENANTS. Without limiting the generality of
the foregoing, and except for actions listed on Schedule 6.5.2 hereof,
without the Purchaser's prior written consent, Chartendure shall not,
and the Shareholders shall cause Chartendure not to, on or after the
date
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<PAGE> 15
hereof and prior to the consummation of the Transaction or the
termination of this Agreement pursuant to its terms:
(i) amend their Articles of Incorporation or Bylaws;
(ii) split, combine, or reclassify any of their outstanding
securities or declare, set aside, or pay any dividend or other
distribution on or make or agree or commit to make any exchange for or
redemption of any such securities payable in cash, stock, or property;
(iii) issue or agree to issue any additional shares of, or
rights of any kind to acquire any shares of, their capital stock of any
class, enter into any contract, agreement, commitment, or arrangement
with respect to any of the foregoing or otherwise change their
capitalization as it exists on the date hereof;
(iv) create, incur, or assume any long-term or short-term
indebtedness for money borrowed, guarantee the payment of any such
indebtedness, or make any capital expenditures or commitment for
capital expenditures, except in the ordinary course of business and
consistent with past practice;
(v) adopt, enter into, or amend any bonus, profit-sharing,
compensation, stock option, warrant, pension, retirement, deferred
compensation, employment, severance, termination, or other employee
benefit plan, agreement, trust fund, or arrangement for the benefit or
welfare of any officer, director or employee;
(vi) agree to any material (in relation to historical
compensation) increase in the compensation payable or to become payable
to, or any increase in the contractual term of employment of, any
officer, director, or employee except, with respect to employees who
are not officers or directors, in the ordinary course of business in
accordance with past practice.
(vii) sell, lease, mortgage, encumber, or otherwise dispose of
or grant any interest in any of their assets or properties except for
sales, encumbrances, and other dispositions or grants in the ordinary
course of business and consistent with past practice and except for
liens for taxes not yet due or liens or encumbrances that are not
material in amount or effect and do not impair the use of the property,
or as specifically provided for or permitted in this Agreement;
(viii) enter into, amend or terminate any material contract,
agreement, commitment, or understanding;
(ix) enter into any agreement, commitment, or understanding,
whether in writing or otherwise, with respect to any of the foregoing;
or
(x) hold any meetings of its board of directors, or any
committee thereof, or of their Shareholders, without inviting a
representative selected by the Purchaser to attend the same (although
Chartendure may request that such representative absent himself or
herself during that portion of any such meeting that pertains to issues
arising under this Agreement).
6.6 COOPERATION. The Selling Parties will cooperate with PetQuarters,
the Purchaser and their counsel, accountants and agents in every way in carrying
out the transactions contemplated by this Agreement and in delivering all
documents and instruments deemed reasonably necessary or useful by PetQuarters
and the Purchaser.
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6.7 EXPENSES. Whether or not the Transaction is consummated, all costs
and expenses incurred by the Selling Parties in connection with this Agreement
and the Transaction paid by the Shareholders.
6.8 UNREGISTERED SECURITY. The Shareholders acknowledge that the shares
of common stock of PetQuarters ("PQ Shares") are not registered under the
Securities Act of 1933 nor under the Arkansas Securities Act nor under any U.K.
securities laws and represents and warrants as follows:
(i) The Shareholders are acquiring the PQ Shares for its own
account solely for the investment purposes and not with a view to
resell said PQ Shares.
(ii) The Shareholders have such knowledge and experience in
business and financial matters as to enable it to be capable of
evaluating the risks and merits of this investment.
(iii) The Shareholders are able to bear the economic risks of
an investment in the PQ Shares.
(iv) The PQ Shares will not be resold or otherwise transferred
or assigned without appropriate compliance with the registration
provisions of the Securities Act of 1933 and the applicable state Blue
Sky laws or exemption therefrom.
(v) The Shareholders have been provided with or permitted
access to all information which it deems material to formulating an
investment decision and that such information has been sufficient to
make an informed investment decision.
ARTICLE VII
MUTUAL COVENANTS
7.1 PUBLICITY. Prior to the Closing, no Party will issue or make any
reports, statements or releases to the public with respect to this Agreement or
the Transaction contemplated hereby without consulting the other as to the
content and wording of such disclosure or release; provided, however, that the
foregoing shall not be deemed to prohibit any disclosure required by applicable
law or by any governmental authority having jurisdiction over such matters, or
by the disclosure obligations of PetQuarters as a public company.
7.2 EXECUTION OF ADDITIONAL DOCUMENTS. Each Party will at any time, and
from time to time after the Closing Date, upon request of any other Party,
execute, acknowledge and deliver all such further deeds, assignments, transfers,
conveyances, power of attorney and assurance, and take all such further action,
as may be reasonably required to carry out the intent of this Agreement, and to
transfer and vest title to any Shares being transferred hereunder, and to
protect the right, title and interest in and enjoyment of all of the Shares
sold, granted, assigned, transferred, delivered and conveyed pursuant hereto;
provided, however, that this Agreement shall be effective regardless of whether
any such additional documents are executed.
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ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES/INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties by the Parties in Articles III and IV hereof or in any other Article
or Section hereof, or in any certificate or other document furnished or to be
furnished by the Parties pursuant hereto, shall survive delivery by the Parties
of the consideration to be given by them hereunder, and shall survive the
execution hereof, the Closing hereunder and the Closing Date, all such
representations and warranties to expire on the first anniversary of the Closing
Date.
8.2 INDEMNIFICATION BY SHAREHOLDERS. Upon the terms and subject to the
conditions set forth in Sections 8.4 and 8.5 hereof and this Section 8.2, each
of the Shareholders agrees, severally based upon the pro rata share of the
Purchase Price received by such Shareholder, to indemnify, defend, protect, save
and hold harmless the Purchaser and PetQuarters against, and will reimburse the
Purchaser or PetQuarters on demand for, any and all Losses made or incurred by
or asserted against the Purchaser or PetQuarters, at any time after the Closing
Date, directly or indirectly, arising out of, related to, caused by, or
resulting from any of the following ("Shareholder Indemnifiable Claims"):
(a) any inaccuracy or misrepresentation in, omission from, or
breach or nonfulfillment of representation, warranty, term, provision,
covenant or agreement on the part of any Shareholder contained in this
Agreement or in any certificate or other instrument furnished or to be
furnished by Chartendure or any Shareholder to the Purchaser pursuant
hereto; provided, however, that no Shareholder shall have any liability
to the Purchaser or PetQuarters for breach of any covenant set forth in
Section 6.1 hereof except for liability arising from such Shareholder's
own conduct; or
(b) any liability or obligation of Chartendure or any
Shareholder, whether imposed by any law or pursuant to any agreement,
for any Taxes with respect to periods or events or transactions
(including, without limitation, the events or transactions described or
permitted to be taken hereunder) prior to or ending on the Closing
Date, but only to the extent that such Taxes, in the aggregate, exceed
the amount of the aggregate reserves for such Taxes, if any, shown as
liabilities on the Interim Financial Statements.
The obligation of the Shareholders to indemnify the Purchaser and PetQuarters
with respect to any Shareholder Indemnifiable Claims shall not be affected by
the fact that the Purchaser, PetQuarters or their representatives conducted any
due diligence investigation.
8.3 INDEMNIFICATION BY THE PURCHASER. Upon the terms and subject to the
conditions set forth in Sections 8.4 and 8.5 hereof and this Section 8.3 and in
addition that indemnification contained in Section 5.5, the Purchaser and
PetQuarters, jointly and severally, agree to indemnify, defend, protect, save
and hold harmless each Shareholder against, and will reimburse each Shareholder
on demand for, any and all Losses made or incurred by or asserted against any
Shareholder, at any time after the Closing Date, directly or indirectly, arising
out of, related to, caused by, or resulting from any of the following
("Purchaser Indemnifiable Claims").
(a) Any inaccuracy or misrepresentation in, omission from, or
breach or nonfulfillment of any representation, warranty, term,
provision, covenant or agreement on the part of the Purchaser and/or
PetQuarters contained in this Agreement or in any certificate or other
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<PAGE> 18
instrument furnished or to be furnished by the Purchaser and/or
PetQuarters to any Shareholder pursuant hereto; and
(b) Any and all Liabilities, including, but not limited to,
any lawsuit (at law or in equity), administrative or other proceeding
initiated by any person or Entity against any Shareholder to enforce
the payment or performance of any such Liabilities, to the extent not
specifically subject to an indemnity by the Shareholders under the
terms of this Agreement; and
(c) The obligations of PetQuarters and/or the Purchaser
arising at any time (the "Determination Time") from the business
operations of PetQuarters and/or the Purchaser or resulting from
ownership of the Shares, whether known or unknown, contingent or
absolute, recorded on its/their books or not, and arising or resulting
in any way from facts, events, agreements, obligations or occurrences
that existed or transpired at a prior time or resulted from the passage
of time to the Determination Time, including, but not limited to, any
lawsuit (at law or in equity), administrative or other proceeding
initiated by any person or Entity against any Shareholder to enforce
the payment or performance of any such obligation, to the extent not
specifically subject to an indemnity by the Shareholders under the
terms of this Agreement.
8.4 LIMITATIONS ON INDEMNIFICATION. Rights to indemnification under
Section 8.2 or 8.3 hereof are subject to the following limitations:
(a) With respect to any Losses incurred by the Purchaser or
PetQuarters with respect to any Shareholder Indemnifiable Claim
relating to any representation or warranty of Shareholder set forth in
Section 4.2 or 4.9 hereof or any matter referred to in Section 8.2(b)
hereof, the Purchaser and PetQuarters shall be entitled to
indemnification under Section 8.2 hereof for all such Losses incurred
by them with respect to such Shareholder Indemnifiable Claim up to the
amount of the Purchase Price.
(b) Subject to Section 8.4(g) hereof, the obligations of the
Shareholders under Section 8.2 hereof with respect to any Losses
incurred by any Purchaser Indemnitee with respect to any Shareholder
Indemnifiable Claim relating to any representation or warranty of
Shareholder set forth in Section 4.9 hereof or any matters referred to
in Section 8.2(b) hereof shall terminate on the expiration of the
respective statute of limitations applicable to assessment and
collection of Taxes under the laws then applicable to such Taxes.
(c) The obligations of the Shareholders under Section 8.2
hereof with respect to any Losses incurred by either the Purchaser or
PetQuarters with respect to Shareholder Indemnifiable Claims relating
to any representation or warranty of Shareholder set forth in Section
4.2 hereof shall not expire.
(d) Subject to Section 8.4(g) hereof, the obligations of the
Shareholders under Section 8.2 hereof with respect to any Losses
incurred by either the Purchaser or PetQuarters with respect to any
Shareholder Indemnifiable Claim relating to any representation or
warranty hereunder (other than any representation or warranty of the
Shareholders set forth in Section 4.2 or 4.9 hereof) shall terminate on
the first anniversary of the Closing Date.
(e) Subject to Section 8.4(g) hereof, the obligations of the
Shareholders under Section 8.2 hereof with respect to any Losses
incurred by either the Purchaser or PetQuarters with respect to any
Shareholder Indemnifiable Claim arising out of or relating to any
covenant or agreement of the Shareholders set forth in this Agreement
shall terminate upon expiration, if any, of such covenant or agreement
as provided herein.
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(f) Subject to Section 8.4(g) hereof and not including any
indemnity provided by Sections 5.5, 8.3(b) and 8.3(c) hereof, the
obligations of the Purchaser under Section 8.3 hereof with respect to
any Losses incurred by any Shareholder with respect to any Purchaser
Indemnifiable Claim relating to any matter referred to in Section
8.3(a) hereof shall terminate on the first anniversary of the Closing
Date.
(g) The foregoing provisions of this section 8.4
notwithstanding, if, prior to the termination of any obligation to
indemnify, written notice of a Shareholder Indemnifiable Claim or a
Purchaser Indemnifiable Claim, as the case may be, is given by the
Party seeking indemnification (the "Indemnified Party") to the Party
from whom indemnification is sought (the "Indemnifying Party"), or a
suit or action based upon a Shareholder Indemnifiable Claim or a
Purchaser Indemnifiable Claim, as the case may be, is commenced against
the Indemnifying Party, the Indemnified Party shall not be precluded
from pursuing such claim, breach, occurrence, other matter, or suit or
action, or from recovering from the Indemnifying Party (whether through
the courts or otherwise) on the Shareholder Indemnifiable Claim or the
Purchaser Indemnifiable Claim, as the case may be, by any reason of the
termination otherwise provided for above in this Section 8.4, if any.
8.5 CONDITIONS OF INDEMNIFICATION. With respect to any actual or
potential claim, any written demand, the commencement of any action, or the
occurrence of any other event which involves any Shareholder Indemnifiable Claim
or Purchaser Indemnifiable Claim:
(a) Promptly after the Indemnified Party first receives
written documents pertaining to the Claim, or if such Claim does not
involve a third party Claim (a "Third Party Claim"), promptly after the
Indemnified Party first has actual knowledge of such Claim, the
Indemnified Party shall give notice to the Indemnifying Party of such
Claim in reasonable detail and stating the amount involved, if known,
together with copies of any written documents.
(b) The obligation of the Indemnifying Party to indemnify the
Indemnified Party with respect to any Claim shall not be affected by
the failure of the Indemnified Party to give the notice with respect
thereto in accordance with Section 8.5(a) hereof unless the
Indemnifying Party has been materially prejudiced thereby.
(c) If the Claim involves a Third Party Claim, then the
Indemnifying Party shall have the right, at its sole cost, expense and
ultimate liability regardless of the outcome, and through counsel of
its choice (which counsel shall be reasonably satisfactory to the
Indemnified Party), to litigate, defend, settle or otherwise attempt to
resolve such Third Party Claim; provided, however, that if in the
Indemnified Party's reasonable judgment a conflict of interest may
exist between the Indemnified Party and the Indemnifying Party with
respect to such Third Party Claim, then the Indemnified Party shall be
entitled to select counsel of its own choosing, reasonably satisfactory
to the Indemnifying Party, in which event the Indemnifying Party shall
be obligated to pay the fees and expenses of such counsel.
Notwithstanding the preceding sentence, the Indemnified Party may
elect, at any time and at the Indemnified Party's sole cost, expense
and ultimate liability, regardless of the outcome, and through counsel
of its choice, to litigate, defend, settle or otherwise attempt to
resolve such Third Party Claim. If the Indemnified Party so elects (for
reasons other than the Indemnifying Party's failure or refusal to
provide a defense to such Third Party Claim), then the Indemnifying
Party shall have no obligation to indemnify the Indemnified Party with
respect to such Third Party Claim, but such disposition will be without
prejudice to any other right the Indemnified Party may have to
indemnification under Section 8.2 or 8.3 hereof, regardless of the
outcome of such Third Party Claim. If the Indemnifying Party fails or
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refuses to provide a defense to any Third Party Claim, then the
Indemnified Party shall have the right to undertake the defense,
compromise or settlement of such Third Party Claim, through counsel of
its choice, on behalf of and for the account and at the risk of the
Indemnifying Party, and the Indemnifying Party shall be obligated to
pay the costs, expenses and attorney's fees incurred by the Indemnified
Party in connection with such Third Party Claim. In any event, the
Purchaser Indemnitees, the Company and the Shareholders shall fully
cooperate with each other and their respective counsel in connection
with any such litigation, defense, settlement or other attempted
resolution.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the
Purchaser to effect the Transaction shall be subject to the fulfillment at or
prior to the Closing of the following conditions, unless the Purchaser shall
waive such fulfillment:
(i) No injunction, restraining order or other order issued by
a court of competent jurisdiction that prohibits the consummation of
the Transaction shall be in effect and no action, suit or proceeding
before any court or any governmental body or authority pertaining to
the Transaction contemplated by this Agreement or to its consummation
shall have been instituted on or before the Closing Date;
(ii) There shall not have been taken or proposed any action,
and no statute, rule or regulation shall have been promulgated or
enacted, by any local, state, federal or foreign government or
governmental agency, that would render the consummation of the
Transaction illegal;
(iii) This Agreement and the transactions contemplated hereby
shall have received all approvals, consents, authorizations, and
waivers from governmental and other regulatory agencies and other third
parties (including lenders, holders of debt securities, and lessors)
required to consummate the Transaction;
(iv) Each of the Selling Parties shall have performed all
agreements and covenants and satisfied all conditions on their part to
be performed or satisfied on or prior to the Closing;
(v) No material adverse change shall, in the reasonable
judgment of the Purchaser, have taken place in the assets, business,
condition (financial or otherwise), operations, or prospects of
Chartendure since the date of Chartendure's Balance Sheet other than
those, if any, that result from the changes permitted by, and
transactions contemplated by, this Agreement;
(vi) The representations and warranties of each of the Selling
Parties set forth in this Agreement, the Schedules or Exhibits hereto
or in any written statement that shall be delivered to the Purchaser
shall be true and correct in all material respects on and as of the
Closing Date as if made on and as of such date;
(vii) The Purchaser shall have received from each of the
Selling Parties a certificate, executed by such Selling Party or its
authorized representative, dated as of the Closing Date, as to the
satisfaction of the conditions in paragraphs (iv), (v) and (vi) above;
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(viii) The Purchaser shall have received, on and as of the
Closing Date, such other closing documents and instruments as the
Purchaser shall reasonably request, in each case reasonably
satisfactory in form and substance to the Purchaser and its counsel;
(ix) The Selling Parties shall have delivered to the
Purchaser, except as otherwise requested by the Purchaser, the written
resignations of all of the officers and directors of Chartendure, and
will cause any other action to be taken with respect to those
resignations that the Purchaser may reasonably request; and
(x) PetQuarters shall have an received executed copy of the
Professional Services Agreement for Patric Judge.
9.2 CONDITIONS TO OBLIGATION OF THE SELLING PARTIES. The obligation of
the Selling Parties to effect the Transaction shall be subject to the
fulfillment at or prior to the Closing of the following conditions, unless the
Selling Parties shall waive such fulfillment:
(i) No injunction, restraining order or other order issued by
a court of competent jurisdiction that prohibits the consummation of
the Transaction shall be in effect and no action, suit or proceeding
before any court or any governmental body or authority pertaining to
the Transaction contemplated by this Agreement or to its consummation
shall have been instituted on or before the Closing Date;
(ii) There shall not have been taken any action, and no
statute, rule or regulation shall have been promulgated or enacted, by
any state, federal or foreign government or governmental agency, that
would render the consummation of the Transaction illegal;
(iii) This Agreement and the transactions contemplated hereby
shall have received all approvals, consents, authorizations, and
waivers from governmental and other regulatory agencies and other third
parties (including lenders, holders of debt securities, and lessors)
required to consummate the Transaction;
(iv) The Purchaser and PetQuarters shall have performed all
agreements and covenants and satisfied all conditions on its part to be
satisfied on or prior to the Closing; and
(v) The representations and warranties of the Purchaser and
PetQuarters set forth in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as if made on and
as of such date.
ARTICLE X
THE CLOSING
10.1 CLOSING. The Closing hereunder shall take place at the offices of
Wright, Lindsey & Jennings LLP in Little Rock, Arkansas, or at such other place
as the Purchaser and the Selling Parties may agree upon, on the Closing Date.
10.2 DELIVERY BY THE SELLING PARTIES. At the Closing, the Selling
Parties shall deliver to the Purchaser the following instruments, in form and
substance satisfactory to the Purchaser and its counsel, against delivery of the
items specified in Section 10.3:
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(i) Certificates representing all of the Shares, registered in
the names of the Shareholders, duly endorsed by the Shareholders for
transfer and upon which are affixed any documentary stock transfer
stamps required by law (executed in blank or in favor of the
Purchaser), together with all other documents necessary or appropriate
to validly transfer the Shares to the Purchaser free and clear of any
and all encumbrances. On submission of the certificates to Chartendure
for transfer, Chartendure shall issue to the Purchaser certificates
representing the Shares, registered in the Purchaser's name;
(ii) The stock books, stock ledgers, minute books and
corporate seals of Chartendure;
(iii) The certificates as provided in Section 9.1(vii);
(iv) The written resignations of Chartendure's officers and
directors as provided in Section 9.1(ix).
10.3 DELIVERY BY THE PURCHASER. At the Closing, the Purchaser shall
deliver to the Shareholders the following instruments, in form and substance
satisfactory to the Shareholders and their counsel, against delivery of the
items specified in Section 10.2:
(i) The stock certificates for the Purchase Price as provided
in Sections 2.2.
ARTICLE XI
TERMINATION, AMENDMENT, WAIVER
11.1 TERMINATION. This Agreement and the Transaction may be terminated
at any time prior to the Closing:
11.1.1 By mutual consent of the Purchaser and the Selling
Parties; or
11.1.2 By either the Purchaser or the Selling Parties, upon
written notice to the other, if the conditions to such Party's
obligations to consummate the Transaction, in the case of the
Purchaser, as provided in Section 9.1, or, in the case of the Selling
Parties, as provided in Section 9.2, Chartendure not, or cannot
reasonably be, satisfied within 60 days of the Closing Date, unless the
failure of condition is the result of the material breach of this
Agreement by the Party seeking to terminate.
Sections 5.2, 5.3, and 6.7 of this Agreement shall survive any termination of
this Agreement.
11.2 AMENDMENT. This Agreement may be amended by the Selling Parties
and the Purchaser by action taken at any time prior to the Closing, and by the
Shareholders and the Purchaser at any time subsequent to the Closing. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties required by the preceding sentence.
11.3 WAIVER. At any time prior to the Closing Date, the Purchaser or
the Selling Parties may (1) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (2) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (3) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a Party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party.
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ARTICLE XII
GENERAL PROVISIONS
12.1 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or delivered by an
overnight mail service such as UPS or Federal Express to the parties at the
following addresses (or at such other address for a Party as shall be specified
by like notice given at least five (5) business days prior thereto):
If to the Purchaser:
PetQuarters, Inc.
P.O. Box 410
Lonoke, Arkansas 72086
Attention: Steve Dempsey
with a copy to:
Wright, Lindsey & Jennings LLP
200 West Capitol
Suite 2200
Little Rock, Arkansas 72201-3699
Attention: C. Tad Bohannon
If to the Selling Parties or any of them:
Chartendure Limited
23 High Street
Tring, Hertfordshire
HP235AH, UK
Attention: Patric Judge, Managing Director
with copies to Chartendure's counsel:
Horne, Hollingsworth & Parker, P.A.
Suite 501
401 West Capitol Ave.
Little Rock, Arkansas 72201
Attention: Michael O. Parker
and
Clinton's Solicitors
55 Drury Lane
Covenant Garden
London, WC2B 55Q
Attention: David Landsman, Partner
Provided that Chartendure's counsel identified above are also representing
Patric Judge, but are not representing Shareholders Tom McMeekin or the Estate
of Hugh O'Neill in this Transaction.
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12.2 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.3 MISCELLANEOUS. This Agreement (1) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between the parties, with respect to the subject matter hereof, except as
specifically provided otherwise or referred to herein, so that no such external
or separate agreements relating to the subject matter of this Agreement shall
have any effect or be binding, unless the same is referred to specifically in
this Agreement or is executed by the parties after the date hereof; (2) is not
intended to confer upon any other person or Entity any rights or remedies
hereunder; (3) shall not be assigned by operation of law or otherwise except for
assignment of all or any part of the rights of the Purchaser hereunder, which
may be freely assigned by the Purchaser; and (4) shall be governed in all
respects, including validity, interpretation and effect, by the internal laws of
the State of Tennessee, without regard to the principles of conflict of laws
thereof. This Agreement may be executed in two or more counterparts which
together shall constitute a single agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
on the date first written above by their respective officers thereunto duly
authorized.
THE PURCHASER:
PETQUARTERS, INC.
By:
-------------------------------
Steve Dempsey, President
THE SELLER:
CHARTENDURE LIMITED
By:
-------------------------------
Patric Judge, Managing Director
THE SHAREHOLDERS:
---------------------------------- ------------------------------------
PATRIC JUDGE, individually TOM McMEEKIN, individually
----------------------------------
THE ESTATE OF HUGH O'NEILL,
by its authorized representative
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