SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
F O R M 8 - K / A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of Report: November 11, 1999
---------------------------------
(Date of earliest event reported)
HOLIDAY RV SUPERSTORES, INCORPORATED
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA
----------------------------------------------
(State or other jurisdiction of Incorporation)
0-16448 59-1834763
- -------------------- -------------------------
(Commission File No.) (I.R.S. Employer I.D. No.)
Sand Lake West Executive Park
7851 Greenbriar Parkway
Orlando, Florida 32819
Telephone # (407) 363-9211
Fax # (407) 363-2065
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Holiday RV Superstores, Inc. ("Holiday RV") filed with the
commission a Current Report on Form 8-K on November 23, 1999 to report its
purchase of 100% of the outstanding common stock of County Line Select Cars,
Inc. ("County Line RV"). At Item 7 of the Report, the Company indicated that it
would file audited historical financial statements of the business acquired and
pro forma financial information at a later date. Set forth below is Item 7 of
such Report amended to include the audited and unaudited financial statements of
the business acquired and pro forma financial information.
Financial Statements of Business Acquired.
(a) Financial Statements - County Line Select Cars,
Inc. Years Ended December 31, 1997 and 1998
(1) Independent Auditor's Report.
(2) Balance Sheets as of December 31, 1997
and 1998.
(3) Statements of Operations for the years
ended December 31, 1997 and 1998.
(4) Statements of Shareholders' Equity.
(5) Statements of Cash Flows for the years
ended December 31, 1997 and 1998.
(b) Financial Statements - County Line Select Cars,
Inc. Nine months ended September 30, 1999
(1) Report of Independent Certified Public
Accountants.
(2) Balance Sheet as of September 30, 1999.
(3) Statement of Operations for the nine
months ended September 30, 1999.
(4) Statement of Shareholders' Equity.
(5) Statement of Cash Flows for the nine
months ended September 30, 1999.
(c) Pro Forma Financial Information
(1) Pro Forma Combining Condensed Balance
Sheet (unaudited) at September 30, 1999.
(2) Pro Forma Combining Condensed Statement
of Income (unaudited) for nine months
ended September 30, 1999.
(3) Pro Forma Combining Condensed Statement
of Income (unaudited) for the twelve
months ended October 31, 1998.
(d) Exhibits Index
EXHIBIT
NO.
-------
10.(ddddd) Stock Purchase Agreement by and among
Holiday RV Superstores, Inc. and County
Line Select Cars, Inc., and The Persons
Named Therein, (collectively, the
"STOCKHOLDERS") dated November 11, 1999.
99.1 Consent of Ernst & Young LLP.
<PAGE>
Description of Transaction
Holiday RV Superstores, Inc. acquired 100% of the issued and outstanding stock
of County Line Select Cars, Inc. on November 11, 1999. The total purchase price
paid to the County Line shareholders was $6.5 million, consisting of $5.0
million cash and $1.5 million in notes convertible into Holiday RV common stock.
In addition, Holiday RV advanced $1.6 million in cash to repay existing loans
from the shareholders to County Line RV. The business combination will be
accounted for as a purchase.
<PAGE>
FINANCIAL STATEMENTS
COUNTY LINE SELECT CARS, INC.
YEARS ENDED DECEMBER 31, 1997 AND 1998
<PAGE>
County Line Select Cars, Inc.
Financial Statements
Years ended December 31, 1997 and 1998
CONTENTS
Report of Independent Auditors.................................................1
Audited Financial Statements
Balance Sheets.................................................................2
Statements of Operations.......................................................3
Statements of Shareholders' Equity.............................................4
Statements of Cash Flows.......................................................5
Notes to Financial Statements..................................................6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
RV Centers, Inc. and Shareholders
County Line Select Cars, Inc.
We have audited the accompanying balance sheets of County Line Select Cars,
Inc., as of December 31, 1997 and 1998, and the related statements of
operations, shareholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of County Line Select Cars, Inc.,
at December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
---------------------
Houston, Texas
February 18, 1999
1
<PAGE>
COUNTY LINE SELECT CARS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------
1997 1998
--------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 853,908 $ 580,277
Accounts receivable 231,836 533,922
Due from shareholder -- 122,727
Inventories 10,177,300 14,187,252
Prepaid expenses 69,026 219,735
--------------- ---------------
Total current assets 11,332,070 15,643,913
Property and equipment, net 403,543 852,402
--------------- ---------------
Total assets $ 11,735,613 $ 16,496,315
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable $ 7,793,001 $ 11,361,440
Due to shareholders 1,020,194 1,229,345
Other short-term debt 140,000 650,000
Accounts payable 764,059 731,397
Accounts payable - related party 29,273 --
Accrued liabilities 311,784 591,083
--------------- ---------------
Total current liabilities 10,058,311 14,563,265
Other noncurrent liabilities 35,237 26,758
--------------- ---------------
Total liabilities 10,093,548 14,590,023
Commitments and contingencies
Shareholders' equity:
Common stock - $1 par value, 7,500 shares authorized, 100 shares
issued and outstanding 100 100
Paid-in capital in excess of par 500 500
Retained earnings 1,641,465 1,905,692
--------------- ---------------
Total shareholders' equity 1,642,065 1,906,292
--------------- ---------------
Total liabilities and shareholders' equity $ 11,735,613 $ 16,496,315
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE>
COUNTY LINE SELECT CARS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1997 1998
--------------------------------------
<S> <C> <C>
Revenue:
Vehicles $ 38,133,335 $ 52,633,320
Parts and service 1,192,442 2,511,199
Other, net 949,502 1,310,794
--------------- ---------------
40,275,279 56,455,313
Cost of sales:
Vehicles 33,232,534 46,604,133
Parts and service 606,763 1,295,742
--------------- ---------------
Gross profit 6,435,982 8,555,438
Selling, general, and administrative expenses
4,679,746 6,074,156
Other expense:
Interest expense (596,016) (800,931)
---------------- ---------------
Net income $ 1,160,220 $ 1,680,351
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
COUNTY LINE SELECT CARS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PAID-IN
COMMON CAPITAL IN RETAINED
STOCK EXCESS OF PAR EARNINGS TOTAL
--------------- ------------------ ------------------ ------------------
--------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $100 $500 $ 1,587,352 $ 1,587,952
Distributions to shareholders -- -- (1,106,107) (1,106,107)
Net income -- -- 1,160,220 1,160,220
--------------- ------------------ ------------------ ------------------
Balance at December 31, 1997 100 500 1,641,465 1,642,065
Distributions to shareholders (1,416,124) (1,416,124)
Net income 1,680,351 1,680,351
--------------- ------------------ ------------------ ------------------
Balance at December 31, 1998 $100 $500 $ 1,905,692 $ 1,906,292
=============== ================== ================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
COUNTY LINE SELECT CARS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1997 1998
--------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,160,220 $ 1,680,351
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 64,128 104,331
Changes in operating assets and liabilities:
Accounts receivable (134,017) (302,086)
Due to/from related parties (5,232) (152,000)
Inventories (1,690,377) (4,009,952)
Prepaid expenses (54,061) (150,709)
Floor plan notes payable 1,336,397 3,568,439
Accounts payable (72,129) (32,662)
Accrued liabilities 132,541 270,820
------------- -------------
Net cash provided by operating activities 737,470 976,532
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to property and equipment (211,905) (553,190)
------------- -------------
Net cash used in investing activities (211,905) (553,190)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on debt 60,000 650,000
Repayments on debt - (140,000)
Borrowings from shareholders 494,649 209,151
Distributions to shareholders (1,106,107) (1,416,124)
------------- -------------
Net cash used in financing activities (551,458) (696,973)
------------- -------------
Net change in cash and cash equivalents (25,893) (273,631)
Cash and cash equivalents at beginning of period 879,801 853,908
------------- -------------
Cash and cash equivalents at end of period $ 853,908 $ 580,277
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
County Line Select Cars, Inc. (the "Company") was incorporated in 1979 and
operates four recreational vehicle ("RV") dealerships in Florida. From 1979 to
1995, the Company grew from one dealership to three. During 1995, the Company
sold one of its larger dealerships and opened a smaller one in its place. The
Company continued to operate its three dealerships until 1998 when it opened its
fourth dealership in February of that year. In addition to new and used RV
sales, the Company offers complementary products and services including parts,
repair and maintenance services, body shop services, and financing and insurance
contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash,
contracts in transit, and all highly liquid investments with a maturity of three
months or less when purchased.
INVENTORIES
Inventories of new and used vehicles are stated at the lower of cost or market.
Cost is determined using the specific-identification method. New vehicle cost
includes the invoice price, delivery, and the cost of any special features added
to the vehicles. Used vehicle cost includes the purchase price plus
reconditioning and make-ready costs. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out basis.
PROPERTY AND EQUIPMENT
The cost of property is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using the straight-line method for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
YEARS
-------------
Buildings and improvements 15
Furniture and fixtures 5
Machinery, vehicles, and equipment 5
6
<PAGE>
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenue is recognized when vehicles are delivered, service is performed, and
parts are sold. Finance, insurance, and warranty revenues are recognized at the
time the contracts are sold.
OTHER REVENUE
Other revenue consists primarily of finance fees, insurance commissions and
extended warranty contract income.
The Company uses third-party financial institutions to assist its customers in
obtaining financing for vehicle purchases and earns a commission if the
third-party lender consummates a loan contract with the customer. These
contracts represent third-party financing arrangements for which the Company
provides no underwriting or credit approval services and does not service or
guarantee the collection of these loans. The Company forfeits the commission if
the loan is paid off or foreclosed on in a specific period of time, usually
limited to the first six months of the term. The Company records this commission
income at the time the contract is consummated less any allowance for charge
backs based upon estimates associated with historical experience related to
early loan payoffs or foreclosure.
Insurance income represents commissions earned on credit life, accident, and
disability insurance sold in connection with the vehicle on behalf of
third-party insurance companies. Warranty income represents revenues earned on
extended warranty contracts sold on behalf of a third party.
INCOME TAXES
The Company is an S corporation and, as such, no provision for income taxes has
been included in the accompanying financial statements since the Company's
taxable income is reported directly by the shareholders for tax purposes.
7
<PAGE>
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
The Company expenses the cost of advertising as incurred. Advertising expenses
totaled $511,423, and $443,988 for 1997 and 1998, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to various
market data and other valuation techniques, as appropriate. Unless otherwise
disclosed, the fair value of financial instruments approximates their recorded
values due to the short-term nature of the maturities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. INVENTORIES
DECEMBER 31
--------------------------------------
1997 1998
--------------------------------------
New vehicles $ 6,728,548 $ 9,183,129
Used vehicles 3,342,729 4,733,676
Parts and accessories 106,023 270,447
--------------- ---------------
$ 10,177,300 $ 14,187,252
=============== ===============
8
<PAGE>
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY AND EQUIPMENT
DECEMBER 31
--------------------------------------
1997 1998
--------------------------------------
Buildings and improvements $ 273,177 $ 311,647
Furniture and fixtures 165,798 326,651
Machinery, vehicles, and equipment 180,082 234,048
Construction in progress 77,512 377,413
--------------- ---------------
696,569 1,249,759
Less accumulated depreciation 293,026 397,357
--------------- ---------------
$ 403,543 $ 852,042
=============== ===============
5. FLOOR PLAN NOTES PAYABLE
DECEMBER 31
--------------------------------------
1997 1998
--------------------------------------
Floor plan notes payable to finance
companies, secured by new and
used vehicle inventories and
contracts in transit $ 7,793,001 $ 11,361,440
=============== ===============
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes are at prime to prime minus 1% during the
period presented. The average interest rate on floor plan notes was 7.9% and
7.5% for the years ended December 31, 1997 and 1998, respectively. The notes are
due upon the sale of the related inventory.
Interest paid for both the floor plan notes and other debt was $596,016 and
$800,931 for the years ended December 31, 1997 and 1998, respectively.
9
<PAGE>
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. OTHER SHORT-TERM DEBT
DECEMBER 31
--------------------------------------
1997 1998
--------------------------------------
Promissory notes with the Company's
shareholders, payable on demand,
interest at 10% at December 31, 1997
and 1998, secured by the net assets of
the Company $ 1,020,194 $ 1,229,345
$200,000 draft line of credit with a bank,
payable on demand, interest at 9%
and 9.25% at December 31, 1997 and
1998, secured by property of
the shareholders 140,000 --
$950,000 line of credit with a bank,
payable on demand, interest at prime
+ .5% at December 31, 1998, unsecured
-- 650,000
------------- -------------
$ 1,160,194 $ 1,879,345
============= =============
7. COMMITMENTS AND CONTINGENCIES
LITIGATION
In the normal course of business, the Company is subject to involvement in legal
actions. However, in the opinion of management, there are no outstanding matters
that will result in significant liability.
GOVERNMENTAL REGULATION
The Company is subject to federal, state, and local provisions regulating the
discharge of materials into the environment. Compliance with these provisions
has not had, nor does management expect such compliance to have, any material
effect upon the capital expenditures, net income, financial condition, or
competitive position of the Company. Management believes that its current
practices and procedures for the control and disposition of such wastes comply
with applicable federal and state requirements.
10
<PAGE>
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. RELATED PARTY TRANSACTIONS
The Company had vehicle sales to a related party totaling $413,000 and $619,468
for the years ended December 31, 1997 and 1998, respectively, for use in the
related party's rental business. The Company also leases its facilities from a
related party. These related party leases are renewed annually and vary in lease
payment amounts from year-to-year. Lease payments to the related party totaled
$267,000 and $633,697 for the years ended December 31, 1997 and 1998,
respectively.
11
<PAGE>
COUNTY LINE SELECT CARS, INC.
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<PAGE>
COUNTY LINE SELECT CARS, INC.
TABLE OF CONTENTS
- ------------------------------------------------------------------------
Page
Report of Independent Certified Public Accountants 1
Financial Statements:
Balance Sheet 2
Statement of Operations 3
Statement of Shareholders' Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders of the County Line Select Cars, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of County Line Select Cars, Inc. at
September 30, 1999, and the results of its operations and its cash flows for the
nine months then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS, LLP
- -------------------------------
November 11, 1999
1
<PAGE>
COUNTY LINE SELECT CARS, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
- ------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,456,938
Accounts receivable, net of allowance of $5,669 461,246
Inventories 15,422,999
Prepaid expenses and other 130,140
-----------
Total current assets 17,471,323
Property and Equipment, net 1,469,486
-----------
Total assets $18,940,809
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Floor plan notes payable $13,476,021
Due to shareholders 1,629,345
Other short-term debt 400,000
Accounts payable 1,049,657
Accrued liabilities and other 435,402
-----------
Total current liabilities 16,990,425
Other Noncurrent Liabilities 7,263
-----------
Total liabilities 16,997,688
-----------
Commitments and Contingencies
Shareholders' Equity:
Common stock - $1 par value; 7,500 shares authorized,
100 shares issued and outstanding 100
Paid-in capital in excess of par 500
Retained earnings 1,942,521
-----------
Total shareholders' equity 1,943,121
-----------
Total liabilities and shareholders' equity $18,940,809
===========
The accompanying notes are an integral part of these
financial statements.
2
<PAGE>
COUNTY LINE SELECT CARS, INC.
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------------------------------------------------
Revenue:
Vehicles $ 47,842,900
Parts and service 2,477,071
Other, net 1,583,614
------------
51,903,585
------------
Cost of Sales:
Vehicles 42,384,526
Parts and service 1,038,815
------------
43,423,341
------------
Gross Profit 8,480,244
Selling, General and Administrative Expenses 6,618,735
Other Expense:
Interest expense (875,787)
------------
Net Income $ 985,722
============
The accompanying notes are an integral part of these
financial statements.
3
<PAGE>
COUNTY LINE SELECT CARS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAID-IN
CAPITAL IN
COMMON EXCESS RETAINED
STOCK OF PAR EARNINGS TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ 100 $ 500 $ 1,905,692 $ 1,906,292
Distributions to shareholders -- -- (948,893) (948,893)
Net income -- -- 985,722 985,722
----------- ----------- ----------- -----------
Balance at September 30, 1999 $ 100 $ 500 $ 1,942,521 $ 1,943,121
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
COUNTY LINE SELECT CARS, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Cash Flows from Operating Activities:
Net income $ 985,722
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 120,076
Bad debt expense 5,669
Provision for excess and obsolete inventory 121,073
Changes in operating assets and liabilities:
Accounts receivable 67,007
Due to/from related parties 122,727
Inventories (1,356,820)
Prepaid expenses and other 89,595
Floor plan notes payable 2,114,581
Accounts payable 318,260
Accrued liabilities and other (155,681)
-----------
Net cash provided by operating activities 2,432,209
-----------
Cash Flows from Investing Activities:
Purchases of property and equipment (737,160)
-----------
Net cash used in investing activities (737,160)
-----------
Cash Flows from Financing Activities:
Net borrowings (payments) on debt (269,495)
Distributions to shareholders (948,893)
Capital contribution from shareholders 400,000
-----------
Net cash used in financing activities (818,388)
-----------
Net Increase in Cash and Cash Equivalents 876,661
Cash and Cash Equivalents at Beginning of Period 580,277
-----------
Cash and Cash Equivalents at End of Period $ 1,456,938
===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------------------------------------------------
1. ORGANIZATION AND BUSINESS:
County Line Select Cars, Inc. (the "Company") was incorporated in 1979
and operates four recreational vehicle ("RV") dealerships in Florida.
From 1979 to 1995, the Company grew from one dealership to three. During
1995, the Company sold one of its larger dealerships and opened a
smaller one in its place. The Company continued to operate its three
dealerships until 1998 when it opened its fourth dealership in February
of that year. In addition to new and used RV sales, the Company offers
complimentary products and services including parts, repair and
maintenance services, body shop services, and financing and insurance
contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash, contracts in transit, and all highly liquid investments with a
maturity of three months or less when purchased.
INVENTORIES
Inventories of new and used vehicles are stated at the lower of cost or
market. Cost is determined using the specific-identification method. New
vehicle cost includes the invoice price, delivery, and the cost of any
special features added to the vehicles. Used vehicle cost includes the
purchase price plus reconditioning and make-ready costs. Parts are
stated at the lower of cost or market, cost being determined on the
first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated
depreciation. The cost of additions and improvements are capitalized,
while maintenance and repairs are charged to expense when incurred. The
Company uses the straight-line method in computing depreciation for
financial reporting purposes.
Estimated useful lives of the assets are as follows:
Buildings and leasehold improvements 15 years
Furniture and fixtures 5 years
Machinery, vehicles and equipment 5 years
REVENUE RECOGNITION
Revenue is recognized when vehicles are delivered, service is performed,
and parts are sold. Finance, insurance and warranty revenues are
recognized at the time the contracts are sold.
6
<PAGE>
COUNTY LINE SELECT CARS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
OTHER REVENUE
Other revenue consists primarily of finance fees, insurance commissions
and extended warranty contract income.
Insurance income represents commissions earned on credit life, accident
and disability insurance sold in connection with the vehicle on behalf
of third-party insurance companies. Warranty income represents revenues
earned on extended warranty contracts sold on behalf of a third party.
INCOME TAXES
The Company is an S corporation and, as such, no provision for income
taxes has been included in the accompanying financial statements since
the Company's taxable income is reported directly by the shareholders
for tax purposes.
ADVERTISING
The Company expenses the cost of advertising as incurred. Advertising
expenses were approximately $270,000 for the nine months ended September
30, 1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107, DISCLOSURES
ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of fair
value information about financial instruments. Fair value estimates
discussed herein are based upon certain market assumptions and pertinent
information available to management as of September 30, 1999.
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash and cash equivalents, accounts receivable, accounts
payable, floor plan payables and accrued expenses. Fair values were
assumed to approximate carrying values for these financial instruments
since they are relatively short-term in nature and their carrying
amounts approximate fair values or they are receivable or payable on
demand.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
7
<PAGE>
3. INVENTORIES:
Inventories consist of the following at September 30, 1999:
New vehicles $10,028,049
Used vehicles 5,146,220
Parts and accessories 248,730
-----------
$15,422,999
===========
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at September 30, 1999:
Buildings and improvements $ 1,311,340
Furniture and fixtures 411,325
Machinery, vehicles and equipment 264,254
-----------
1,986,919
Less accumulated depreciation (517,433)
-----------
$ 1,469,486
===========
5. FLOOR PLAN NOTES PAYABLE:
Floor plan notes payable consist of the following at September 30, 1999:
Floor plan notes payable to finance companies,
collateralized by new and used vehicle inventories
and contracts in transit $13,476,021
===========
Interest rates on floor plan notes vary by product line and product age.
Interest rates on the floor plan notes are at prime to prime minus .5%
during the nine months ended September 30, 1999. The average interest
rate on floor plan notes was 7.06% for the nine months ended September
30, 1999. The notes are due upon the sale of the related inventory.
Interest paid for both the floor plan notes and other debt was $848,203
for the nine months ended September 30, 1999.
8
<PAGE>
6. OTHER SHORT-TERM DEBT:
Other short-term debt consists of the following at September 30, 1999:
Promissory notes with the Company's
shareholders, payable on demand,
interest at 10%; notes are
uncollateralized $1,629,345
$300,000 line of credit with a bank,
payable on demand, interest is
calculated based on 30-day LIBOR
plus 2.6% (8% at September 30,
1999); line is uncollateralized 250,000
$950,000 operating line of credit
with bank, payable on demand, interest
is calculated based on prime minus
.25% (8% at September 30, 1999);
collateralized by the assets
of the Company 150,000
----------
$2,029,345
==========
7. COMMITMENTS AND CONTINGENCIES:
LITIGATION
In the normal course of business, the Company is subject to involvement
in legal actions. However, in the opinion of management, there are no
outstanding matters that will result in significant liability.
GOVERNMENTAL REGULATION
The Company is subject to federal, state and local provisions regulating
the discharge of materials into the environment. Compliance with these
provisions has not had, nor does management expect such compliance to
have, any material effect upon the capital expenditures, net income,
financial condition or competitive position of the Company. Management
believes that its current practices and procedures for the control and
disposition of such wastes comply with applicable federal and state
requirements.
9
<PAGE>
7. COMMITMENTS AND CONTINGENCIES - CONTINUED:
THIRD-PARTY FINANCING
The Company uses third-party banks and/or finance companies to assist
its customers in obtaining financing for vehicle purchases. The Company
refers customers to one or more of these third-party financing sources
and earns a financing fee if the third-party lender consummates a loan
contract with the customer. These contractors represent third-party
financing, and the Company provides no underwriting or credit approval
services for the lender. The Company's financing fees are in fact a
commission and are typically based upon the difference between the
interest rate the customer pays under the contract with the lender and
an interest rate designated by the lender. At no time does the Company
service or guarantee the collection of these loans or receivables. The
Company could be charged back commission by the lender if the loan is
paid off or foreclosed in a specified period of time, usually limited to
the first six months of the term. The Company records this commission
income based upon the amount earned less allowances for chargebacks. In
determining the allowances for chargebacks, the Company takes into
consideration total customer loans outstanding and estimates the
exposure for potential chargebacks associated with early payoffs of
these loans. Finance chargebacks were approximately $114,000 for the
nine months ended September 30, 1999 and the chargeback allowance as of
September 30, 1999 was approximately $44,000.
CONCENTRATION OF RISK
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash and cash equivalents. The
Company places its funds with two high credit quality institutions. At
times, such monies may be in excess of the FDIC or other insurance
limits. Management feels the credit risk associated with these two
institutions is highly limited.
The Company relies on several manufacturers as suppliers for its product
lines. Approximately 76% of the Company's new vehicle sales for the nine
months ended September 30, 1999 consists of vehicles purchased from two
manufacturers. In the opinion of management, the loss of any one brand
of new recreational vehicle would not materially affect the Company.
However, the loss of all the brands sold by either of the two largest
manufacturers would have a material effect on the Company's sales. The
Company's management feels the loss of all brands from either of these
two manufacturers to be highly unlikely.
8. RELATED-PARTY TRANSACTIONS:
The Company had vehicle sales to a related party totaling approximately
$453,000 for the nine months ended September 30, 1999 for use in the
related party's rental business. The Company also leases certain of its
facilities from a related party. These related-party leases are renewed
annually and vary in lease payment amounts from year to year. Lease
payments to the related party totaled approximately $648,000 for the
nine months ended September 30, 1999.
10
<PAGE>
9. SUBSEQUENT EVENT:
On November 11, 1999, the Company and its shareholders entered into a
definitive agreement with Holiday RV Superstores, Incorporated
("Holiday"), in which Holiday purchased 100% of the outstanding common
stock of the Company.
11
<PAGE>
Unaudited Pro Forma Combined Condensed Financial Data
Holiday RV's historical fiscal year ends on October 31, while County Line RV's
historical fiscal year ends on December 31. For purposes of combining County
Line RV's historical financial data with Holiday RV's historical financial data
in the pro forma combined statement of income in this document, the unaudited
financial data of Holiday RV for the nine month period ending July 31, 1999 has
been combined with County Line RV's audited financial data for the nine month
period ending September 30, 1999. In addition, County Line RV's audited
financial data for the twelve months period ended December 31, 1998 has been
combined with Holiday RV's audited financial data for the twelve month period
ended October 31, 1998.
We have included this unaudited pro forma combined data only for the purpose of
illustration, and it does not necessarily indicate what the operating results or
financial position would have been if the merger of Holiday RV and County Line
RV had been completed at the dates indicated. Moreover, this data does not
necessarily indicate what the future operating results or financial position of
the combined company will be. You should read this unaudited pro forma combined
summary financial data in conjunction with the historical financial statements
of Holiday RV and County Line RV and the related notes thereto, included
elsewhere in this document and also incorporated by reference.
<PAGE>
Holiday RV Superstores, Inc.
Pro-forma Combining Condensed Balance Sheet
September 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACQUISITION
ADJUSTMENTS
HOLIDAY RV COUNTY LINE RV (NOTE 1) COMBINED
----------- -------------- ------------- --------
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $10,475 $ 1,457 (6,679) (a) $ 5,253
Accounts receivable:
Trade and contracts in transit 1,202 461 1,663
Other 287 0 287
Inventories 25,086 15,423 40,509
Deferred taxes and other 159 130 289
------- ------ --------
TOTAL CURRENT ASSETS 37,209 17,471 48,001
PROPERTY AND EQUIPMENT,
Less accumulated depreciation 3,740 1,470 5,210
GOODWILL 0 0 4,607 (b) 4,607
NONCURRENT DEFERRED TAXES AND OTHER 247 0 247
------- ------- --------
TOTAL ASSETS $41,196 $18,941 $ 58,065
======= ======= ========
CURRENT LIABILITIES
Floor plan contracts $19,638 $13,477 $ 33,115
Accounts payable 1,179 1,050 2,229
Accrued expenses and other 987 435 1,422
Notes payable 0 2,029 (129)(c) 1,900
------- ------- ---------
TOTAL CURRENT LIABILITIES 21,804 16,991 38,666
Other noncurrent liabilities 174 7 181
------- ------- ---------
TOTAL LIABILITIES: 21,978 16,998 38,847
------- ------- ---------
STOCKHOLDERS' EQUITY:
Common stock $.01 par - shares
Authorized 10,000,000; issued
7,485,000 75 0 75
Additional paid-in capital 5,148 1 (1)(d) 5,148
Retained earnings 14,534 1,942 (1,942)(d) 14,534
Treasury stock, at cost, 298,500 and
251,700 shares, respectively (539) 0 (539)
------- ------- -------
TOTAL STOCKHOLDERS' EQUITY 19,218 1,943 19,218
------- ------- -------
Total Liabilities and Stockholders' $41,196 $18,941 $58,065
Equity ======= ======= =======
</TABLE>
NOTE 1 - The pro forma balance sheet has been prepared to
reflect the acquisition of County Line Select Cars, Inc. by
Holiday RV Superstores, Inc. for an aggregate price of $6.5
million. Pro forma adjustments are made to reflect:
(a) The payment of $5.0 million cash to the sellers,
repayment of $1.629 million of shareholders loans to
County Line RV, and $50,000 of estimated acquisition
costs.
(b) The excess of acquisition cost over the fair value
of net assets acquired (goodwill).
(c) The repayment of $1.629 million of shareholder loans
to County Line RV and the issuance of $1.5 million of
convertible notes payable to the seller as part of
the purchase acquisition.
(d) The elimination of the common shareholders' equity
accounts of County Line RV.
<PAGE>
Holiday RV Superstores, Inc.
Pro-forma Combining Condensed Statement of Income
Nine months September 30, 1999
(In thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACQUISITION
ADJUSTMENTS
HOLIDAY RV COUNTY LINE RV (NOTE 1) COMBINED
----------- -------------- ------------ --------
<S> <C> <C> <C> <C>
SALES AND SERVICE REVENUE:
Vehicle and marine $57,182 $47,843 $105,025
Service, parts and accessories 6,596 2,477 9,073
Other, net 360 1,584 1,944
------- ------- --------
Total sales and service revenue 64,138 51,904 116,042
COST OF SALES AND SERVICES:
Vehicle and marine 50,785 42,385 93,170
Service, parts and accessories 2,500 1,039 3,539
-------- ------- --------
Total cost of sales and services 53,285 43,424 96,709
Gross Profit 10,853 8,480 19,333
Selling, General and Administrative 7,801 6,618 14,419
Expenses -------- ------- --------
Income from operations 3,052 1,862 4,914
Amortization of Goodwill 0 0 (173) (b) (173)
Interest Income 401 0 (347) (a) 54
Interest Expense (848) (876) 29 (c) (1,695)
Gain on sale of assets 316 0 316
------- ------- --------
Income Before Income Taxes 2,921 986 3,416
Income Taxes 1,139 0 193 (d) 1,332
------- ------- --------
Net Income $ 1,782 $ 986 $ 2,084
======= ======= ========
Earnings Per Share:
Basic $0.25 $0.29
Diluted $0.24 $0.28
Basic Shares 7,187 7,187
Diluted Shares 7,355 7,355
</TABLE>
NOTE 1 - The above statement gives effect to the following
pro forma adjustments necessary to reflect the acquisition:
(a) Reduction of interest income earned on cash
balances due to use of $6.6 million cash in
the acquisition and repayment of shareholder
loans.
(b) Amortization of goodwill on a straight-line basis
over 20 years.
(c) Increase in interest expense on $1.5 million of
convertible notes payable issued to the Sellers as
part of the acquisition price, offset by a reduction
in interest expense due to repayment of $1.629
million of shareholder loans.
(d) Increase in income taxes related to County
Line RV's income (previously not subject to
income tax as a Sub-chapter S corporation),
as well as the tax impact of adjustments (a)
through (c) above.
<PAGE>
Holiday RV Superstores, Inc.
Pro-forma Combining Condensed Statement of Income
Twelve months ended October 31, 1998
(In thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ACQUISITION
ADJUSTMENTS
HOLIDAY RV COUNTY LINE RV (NOTE 1) COMBINED
----------- -------------- ------------ --------
<S> <C> <C> <C> <C>
SALES AND SERVICE REVENUE:
Vehicle and marine $64,606 $52,633 $117,239
Service, parts and accessories 6,929 2,511 9,440
Other, net 2,757 1,311 4,068
------- ------- --------
Total Sales and service revenue 74,292 56,455 130,747
COST OF SALES AND SERVICES:
Vehicle and marine 57,448 46,604 104,052
Service, parts and accessories 3,650 1,296 4,946
------- ------- --------
Total cost of sales and service 61,098 47,900 108,998
Gross Profit 13,194 8,555 21,749
Selling, General and Administrative 9,611 6,074 15,685
Expenses ------- ------- --------
Income from operations 3,583 2,481 6,064
Amortization of Goodwill 0 0 (230) (b) (230)
Interest Income 517 0 (462) (a) 55
Interest Expense (1,363) (801) 39 (c) (2,125)
------- ------- --------
Income Before Income Taxes 2,737 1,680 3,764
Income Taxes 1,044 0 401 (d) 1,445
------- ------- --------
Net Income $ 1,693 $ 1,680 $ 2,319
======= ======= ========
Earnings Per Share:
Basic $0.23 $ 0.32
Diluted $0.23 $ 0.32
Basic Shares 7,301 7,301
Diluted Shares 7,348 7,348
</TABLE>
NOTE 1 - The above statement gives effect to the following
pro forma adjustments necessary to reflect the acquisition:
(a) Reduction in interest income earned on cash balances
due to use of $6.6 million cash in the acquisition
and repayment of shareholders loans.
(b) Amortization of goodwill on a straight-line basis
over 20 years.
(c) Increase in interest expense on $1.5 million of
convertible notes payable issued to the Seller as
part of the acquisition price, offset by a reduction
in interest expense due to repayment of $1.629
million of shareholder loans.
(d) Increase in income taxes related to County Line RV's
income (previously not subject to income tax as a
sub-chapter S corporation), as well as the tax
impact of adjustments (a) through (c) above
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on it's behalf by the
undersigned, thereunto duly authorized.
Date: January 24, 2000 By: /s/ W. HARDEE McALHANEY
----------------------------
Name: W. Hardee McAlhaney
Title: President, Chief
Executive Officer
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO.
- -----------
10.(ddddd) Stock Purchase Agreement by and among Holiday RV
Superstores, Inc. and County Line Select Cars, Inc., and The
Persons Named Therein, (collectively, the "STOCKHOLDERS")
dated November 11, 1999.
99.1 Consent of Ernst & Young LLP.
EXHIBIT 99-1
Consent of Independent Auditors
We consent to the incorporation by reference in the registration statements
(Form S-18 No. 33-17190-A and Form 8-A filed on December 22, 1987) of Holiday RV
Superstores, Incorporated of our report dated February 18, 1999, with respect to
the financial statements of County Line RV included in this Form 8-K/A for the
two years ended December 31, 1998.
ERNST & YOUNG LLP
Houston, Texas
January 21, 2000
STOCK PURCHASE AGREEMENT
By and Among
HOLIDAY RV SUPERSTORES, INC.
and
COUNTY LINE SELECT CARS, INC.
and
The Persons Named Therein, (collectively, the "STOCKHOLDERS")
dated November 11, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
NO.
---
1 THE SALE AND PURCHASE OF SHARES.............................................1
1.1 The Stock Purchase..................................................1
1.2 Purchase Price......................................................1
1.3 Payment of Purchase Price...........................................1
1.4 Certain Information with Respect to Capital Stock of Company........2
2 INTENTIONALLY OMITTED.......................................................2
3 CLOSING.....................................................................2
3.1 Location and Date...................................................2
3.2 Closing Deliveries..................................................2
4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS..........2
4.1 Due Organization...................................................2
4.2 Authorization; Validity............................................3
4.3 No Conflicts.......................................................3
4.4 Capital Stock of the Company.......................................4
4.5 Transactions in Capital Stock......................................4
4.6 Subsidiaries, Stock, and Notes.....................................4
4.7 Predecessor Status.................................................4
4.8 Absence of Claims Against the Company..............................5
4.9 The Company Financial Statement....................................5
4.10 Financial Statements...............................................5
4.11 Liabilities and Obligations........................................5
4.12 Accounts and Notes Receivables.....................................6
4.13 Books and Records..................................................6
4.14 Permits............................................................6
4.15 Real Property......................................................7
4.16 Personal Property..................................................8
4.17 Intellectual Property..............................................9
4.18 Material Contracts and Commitments................................10
4.19 Government Contracts..............................................11
4.20 Insurance.........................................................12
4.21 Labor and Employment Matters......................................12
4.22 Employee Benefit Plans............................................13
4.23 Conformity with Law; Litigation...................................15
4.24 Taxes.............................................................15
4.25 Absence of Changes................................................17
4.26 Deposit Accounts; Powers of Attorney..............................18
4.27 Environmental Matters.............................................19
4.28 Relations with Governments........................................20
<PAGE>
4.29 Disclosure........................................................20
4.30 Affiliates........................................................20
4.31 Location of Chief Executive Offices...............................20
4.32 Location of Equipment and Inventory...............................20
4.33 Year 2000 Compliance..............................................20
5 REPRESENTATIONS OF PURCHASER...............................................21
5.1 Due Organization...................................................21
5.2 Authorization; Validity of Obligations.............................21
5.3 No Conflicts.......................................................21
6 COVENANTS..................................................................22
6.1 Tax Matters........................................................22
6.2 Accounts Receivable................................................23
6.3 Related Party Agreement............................................23
6.4 Cooperation........................................................23
6.5 Conduct of Business Pending Closing................................24
6.6 Access to Information..............................................24
6.7 Prohibited Activities..............................................25
6.8 Notice to Bargaining Agents........................................26
6.9 Personal Guarantees................................................26
6.10 Form S-3 Registration Rights......................................26
7 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASE........................27
7.1 Representations and Warranties; Performance of Obligations........27
7.2 No Litigation.....................................................27
7.3 No Material Adverse Change........................................27
7.4 Consents and Approvals............................................27
7.5 Opinion of Counsel................................................27
7.6 Charter Documents; Good Standing Certificates.....................27
7.7 Board of Directors Approval.......................................28
7.8 Due Diligence Review..............................................28
7.9 Environmental Audit Indemnification...............................28
7.10 Employment Agreements.............................................28
7.11 Stockholders' Release.............................................28
7.12 S Corporation Status..............................................28
7.13 Shareholders Notes................................................28
8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
AND THE STOCKHOLDERS.....................................................28
8.1 Representation and Warranties; Performance of Obligations..........28
8.2 No Litigation......................................................29
8.3 Consents and Approvals.............................................29
8.4 Employment Agreements..............................................29
8.5 Environmental Audit Indemnification................................29
8.6 Shareholders Notes.................................................29
ii
<PAGE>
9 INDEMNIFICATION............................................................29
9.1 General Indemnification by the Stockholders........................29
9.2 Limitation and Expiration..........................................30
9.3 Indemnification Procedures.........................................30
9.4 Survival of Representations Warranties and Covenants...............32
9.5 Remedies Cumulative................................................32
9.6 Right to Set Off...................................................32
10 NONCOMPETITION............................................................32
10.1 Prohibited Activities.............................................32
10.2 Damages...........................................................33
10.3 Reasonable Restraint..............................................33
10.4 Severability; Reformation.........................................33
10.5 Independent Covenant..............................................34
10.6 Materiality.......................................................34
11 NONDISCLOSURE OF CONFIDENTIAL INFORMATION.................................34
11.1 Stockholders......................................................34
11.2 Purchaser.........................................................34
11.3 Damages...........................................................35
12 GENERAL...................................................................35
12.1 Termination......................................................35
12.2 Effect of Termination............................................35
12.3 Successors and Assigns...........................................36
12.4 Entire Agreement; Amendment; Waiver..............................36
12.5 Counterparts.....................................................36
12.6 Brokers and Agents...............................................36
12.7 Expenses.........................................................36
12.8 Specific Performance; Remedies...................................36
12.9 Notices..........................................................37
12.10 Governing Law....................................................37
12.11 Severability.....................................................38
12.12 Absence of Third-Party Beneficiary Rights........................38
12.13 Legal Representations............................................38
12.14 Public Announcement..............................................38
12.15 No Trading in Purchaser's Securities.............................38
12.16. Accounting Terms................................................38
12.17 Letter of Intent.................................................38
iii
<PAGE>
EXHIBITS
- --------
Exhibit A - Purchaser's Note
Exhibit B - Form of Employment Agreement
SCHEDULES
- ---------
Schedule 1.2 - Leasehold Improvements
Schedule 1.4 - Owners of Company Common Stock
Schedules to Article 4 - Schedules of Exceptions to Representations
and Warranties
Schedule 6.9 - List of Personal Guarantees of Stockholder
Schedule 7.13 - Shareholders Notes
iv
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "AGREEMENT") is made and entered
into this 11th day of November, 1999, by and among HOLIDAY RV SUPERSTORES, INC.,
a Florida corporation (the "PURCHASER"), and COUNTY LINE SELECT CARS, INC., a
Florida corporation (the "COMPANY"), and the stockholders of the Company (each a
"STOCKHOLDER" and collectively the "STOCKHOLDERS").
BACKGROUND
WHEREAS, the Company and its Stockholders have entered into a
confidential Letter of Intent dated August 31, 1999 (the "LETTER OF INTENT")
with the Purchaser.
WHEREAS, the Letter of Intent contemplates that Company and its
Stockholders will enter into this definitive agreement regarding the acquisition
by the Purchaser of all the outstanding shares of the Company from its
Stockholders.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE SALE AND PURCHASE OF SHARES
1.1 THE STOCK PURCHASE. Subject to the terms and conditions of
this Agreement and on the basis of and in reliance upon the representations,
warranties, covenants and agreements set forth herein, on the Closing Date (as
hereinafter defined) the Stockholders shall sell to Purchaser all of the Company
Common Stock (as defined in SECTION 1.4 hereof) and Purchaser shall purchase
(the "STOCK PURCHASE") from the Stockholders all of the Company Common Stock, in
exchange for the Purchase Price (as defined in SECTION 1.2 hereof), to be
computed as provided in SECTION 2.1 hereof.
1.2 PURCHASE PRICE. The purchase price is SIX MILLION FIVE HUNDRED
THOUSAND DOLLARS ($6,500,000) (the "PURCHASE PRICE"). The Purchase Price
includes the leasehold improvements described in SCHEDULE 1.2 hereof (the
"LEASEHOLD IMPROVEMENTS").
1.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
as follows:
A. FIVE MILLION DOLLARS ($5,000,000) cash at the Closing;
and
B. A Purchaser's promissory note for ONE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($1,500,000) in the form attached as
EXHIBIT A ("PURCHASER'S NOTE") for the balance of the
Purchase Price bearing an interest rate of prime at
closing paid quarterly, balance payable in full three (3)
years from the date of the Purchasers Note. The
Shareholders have the option to convert the Purchaser's
Note after 24 months, to common stock of Purchaser at a
conversion price of SEVEN AND 50/100THS DOLLARS ($7.50)
per share as provided herein.
<PAGE>
1.4 CERTAIN INFORMATION WITH RESPECT TO CAPITAL STOCK OF COMPANY.
As of the date of this Agreement, the authorized capital stock of Company
consists of Seven Thousand Five Hundred (7,500) shares of common stock, par
value ONE DOLLAR ($1.00) per share (the "COMPANY COMMON STOCK"), of which One
Hundred (100) shares are issued and outstanding. The Stockholders hold the
respective number of shares of Company Common Stock set forth in SCHEDULE 1.4.
All of the assets of the Company, of every kind or nature, whether tangible or
intangible, and whether or not on the Balance Sheets of the Company or reflected
in the Purchase Price, are owned by the Company and are acquired by the
Purchaser pursuant to this Agreement.
2. PARAGRAPH 2 IS INTENTIONALLY OMITTED.
3. CLOSING
3.1 LOCATION AND DATE. The Stock Purchase and the other
transactions contemplated by this Agreement (the "CLOSING") shall take place at
the offices of Purchaser in Orlando, Florida on November 11, 1999 (the "CLOSING
DATE"), providing that all conditions to the Closing shall have been satisfied
or waived, or at such other time and date designated by the Purchaser not
exceeding thirty (30) days from the Closing Date.
3.2 CLOSING DELIVERIES.
(a) At the Closing, the Stockholders, as the holders of all
outstanding certificates representing shares of Company Common Stock, shall
surrender such certificates to Purchaser and Purchaser shall deliver to the
Stockholders the Purchase Price set forth in SECTION 1.2 above in the form of
cash by wire transfer and the Purchaser's Note.
(b) The Stockholders shall deliver to the Purchaser at the Closing
the certificates representing the Company Common Stock, duly endorsed in blank
by the Stockholders, or accompanied by blank irrevocable stock powers, and with
all necessary transfer tax and other revenue stamps, acquired at the
Stockholders' expense, affixed and canceled and shall take such steps as shall
be necessary to cause Company to enter the Purchaser or its nominee(s) upon the
books of the Company as the holder of the Company Common Stock and to issue one
or more share certificates to Purchaser or its nominee(s) representing the
Company Common Stock. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the certificates or other documents of
conveyance with respect to such Company Common Stock or with respect to the
stock powers accompanying any Company Common Stock.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
To induce the Purchaser to enter into this Agreement and consummate the
transactions contemplated hereby, each Stockholder, jointly and severally,
represents and warrants to Purchaser as follows (for purposes of this Agreement,
the phrases "knowledge of the Stockholders" or the "Stockholders' knowledge," or
words of similar import, mean the knowledge of the Stockholders and the
directors and officers of the Company, including facts of which the directors
and officers, in the reasonably prudent exercise of their duties, should be
aware):
4.1 DUE ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and are duly authorized,
2
<PAGE>
qualified and licensed under all applicable laws, regulations, ordinances and
orders of public authorities to own, operate and lease its properties and to
carry on its business in the places and in the manner as now conducted except
where the failure to be so authorized, qualified or licensed would not have a
material adverse effect on the business, operations, properties, assets or
condition, financial or otherwise, of the Company, taken as a whole ("MATERIAL
ADVERSE EFFECT"). SCHEDULE 4.L hereto contains a list of all jurisdictions in
which the Company is authorized or qualified to do business. The Company is in
good standing in each such jurisdiction. The Company has delivered to the
Purchaser true, complete and correct copies of the Articles of Incorporation and
Bylaws of the Company. Such Articles of Incorporation and Bylaws are
collectively referred to as the "CHARTER DOCUMENTS." The Company is not in
violation of any Charter Documents. The minute books of the Company has been
made available to Purchaser (and as of the Closing, will have been delivered,
along with the Company's original stock ledger and corporate seal, to Purchaser)
and are correct and, except as set forth in SCHEDULE 4.1, complete in all
material respects.
4.2 AUTHORIZATION; VALIDITY. The Company has all requisite
corporate power and authority to enter into and perform their respective
obligations pursuant to the terms of this Agreement. The Company has the full
legal right, corporate power and authority to enter into this Agreement and the
transactions contemplated hereby. Each Stockholder has the full legal right and
authority to enter into this Agreement and the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the performance
by the Company of the transactions contemplated herein have been duly and
validly authorized by the Board of Directors of the Company and the
Stockholders, and this Agreement has been duly and validly authorized by all
necessary corporate action. This Agreement is a legal, valid and binding
obligation of the Company and each Stockholder, enforceable in accordance with
its terms.
4.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement, the consummation of the transactions contemplated hereby, and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of
the Charter Documents;
(b) conflict with, or result in a default (or an event that would
constitute a default but for any requirement of notice or lapse of time or both)
under, any document, agreement or other instrument to which the Company or any
Stockholder is a party or by which the Company or any Stockholder is bound, or
result in the creation or imposition of any lien, charge or encumbrance on any
of the Company's properties pursuant to (i) any law or regulation to which the
Company or any Stockholder or any of their respective property is subject, or
(ii) any judgment, order or decree to which the Company or any Stockholder is
bound or any of their respective property is subject;
(c) result in termination or any impairment of any permit,
license, franchise, contractual right or other authorization of the Company; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company or any Stockholder is subject or by which the
Company or any Stockholder is bound including, without limitation, the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"), together with
all rules and regulations promulgated thereunder.
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4.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of
the Company consists of Seven Thousand Five Hundred (7,500) shares of common
stock, ONE DOLLAR ($1.00) par value, of which One Hundred (100) shares are
issued and outstanding. All of the issued and outstanding shares of the capital
stock of the Company has been duly authorized and validly issued, are fully paid
and nonassessable and are owned of record and beneficially by the Stockholders
in the amounts set forth in SCHEDULE 4.4 free and clear of all Liens (defined
below). All of the issued and outstanding shares of the capital stock of the
Company was offered, issued, sold and delivered by the Company in compliance
with all applicable state and federal laws concerning the issuance of
securities. Further, none of such shares was issued in violation of any
preemptive rights. There are no voting agreements or voting trusts with respect
to any of the outstanding shares of the capital stock of the Company. For
purposes of this Agreement, "LIEN" means any mortgage, security interest,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge, preference, priority or other security
agreement, option, warrant, attachment, right of first refusal, preemptive,
conversion, put, call or other claim or right, restriction on transfer (other
than restrictions imposed by federal and state securities laws), or preferential
arrangement of any kind or nature whatsoever (including any restriction on the
transfer of any assets, any conditional sale or other title retention agreement,
any financing lease involving substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
4.5 TRANSACTIONS IN CAPITAL STOCK. No option, warrant, call,
subscription right, conversion right or other contract or commitment of any kind
exists of any character, written or oral, which may obligate the Company to
issue, sell or otherwise cause to become outstanding any shares of capital
stock. The Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of their respective equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. As a result of the Stock Purchase, Purchaser will be the record and
beneficial owner of all outstanding capital stock of the Company and rights to
acquire capital stock of the Company.
4.6 SUBSIDIARIES, STOCK, AND NOTES.
(a) Except as set forth on SCHEDULE 4.6(A), the Company has no
subsidiaries.
(b) Except as set forth on SCHEDULE 4.6(B), the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is the Company,
directly or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
(c) Except as set forth on SCHEDULE 4.6(C), there are no
promissory notes that have been issued to, or are held by, the Company.
4.7 PREDECESSOR STATUS. SCHEDULE 4.7 sets forth a list of all
names of all predecessors of the Company, including the names of any entities
from which the Company previously acquired significant assets. Except as set
forth on SCHEDULE 4.7, the Company has never been a subsidiary or division of
another corporation, nor have they been a part of an acquisition that was later
rescinded.
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4.8 ABSENCE OF CLAIMS AGAINST THE COMPANY. Except as set forth on
SCHEDULE 4.8, no Stockholder has any claims against the Company, and upon
consummation of the Stock Purchase and the distribution of the Purchase Price,
no Stockholder will have any claims against the Company.
4.9 THE COMPANY FINANCIAL CONDITIONS.
(a) the Company's Net Worth (i) as of the end of its most recent
fiscal year was not less than TWO MILLION SIXTY THREE THOUSAND FOUR HUNDRED
SEVENTY NINE DOLLARS ($2,063,479).
(b) the Company's Certified Pre-tax Earnings for its most recent
fiscal year was not less than ONE MILLION EIGHT HUNDRED THIRTY SEVEN THOUSAND
FIVE HUNDRED THIRTY EIGHT DOLLARS ($1,837,538).
4.10 FINANCIAL STATEMENTS. SCHEDULE 4.10 includes true, complete
and correct copies of the Company's unaudited balance sheet as of September 30,
1999 (the "BALANCE SHEET DATE") and statement of profit and loss for the nine
(9) month period then ended (collectively, the "COMPANY FINANCIAL STATEMENTS").
The Company Financial Statements have been prepared in accordance with GAAP
consistently applied, subject to (i) normal year-end adjustments, which
individually or in the aggregate will not be material; (ii) the exceptions
stated on SCHEDULE 4.10, (iii) subject to any adjustments to be subsequently
made by PriceWaterhouseCoopers, which individually or in the aggregate will not
be material, and (iv) the omission of footnote information. Each balance sheet
included in the Company Financial Statements presents fairly the financial
condition of the Company as of the date indicated thereon, and each of the
income statements included in the Company Financial Statements presents fairly
the results of its operations for the periods indicated thereon. Since the dates
of the Company Financial Statements, there have been no material changes in the
Company's accounting policies other than as requested by Purchaser to conform
the Company accounting policies to GAAP.
4.11 LIABILITIES AND OBLIGATIONS.
(a) The Company is not liable for or subject to any liabilities
except for:
(i) those liabilities reflected on the Interim Balance Sheet
and not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date
in the ordinary course of business consistent with past practice, which
liabilities are not, individually or in the aggregate, material.
(b) Set forth on SCHEDULE 4.11(B) is, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
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(c) SCHEDULE 4.11(C) also includes a summary description of all
current plans or projects involving the opening of new operations, expansion of
any existing operations or the acquisition of any real property or existing
business, to which management of the Company has made any material expenditure
in the two-year period prior to the date of this Agreement, which if pursued by
the Company would require additional material expenditures of capital.
(d) For purposes of this SECTION 4.11, the term "liabilities"
shall include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured. SCHEDULE 4.11(D)
contains a complete list of all indebtedness of the Company as of the Closing
Date.
4.12 ACCOUNTS AND NOTES RECEIVABLE. The Company has delivered to
Purchaser a complete and accurate list, as of a date not more than two (2)
business days prior to the date hereof, of the accounts and notes receivable of
the Company (including without limitation receivables from and advances to
employees, the Stockholders and affiliates), which includes an aging of all
accounts and notes receivable showing amounts due in 30-day aging categories
(collectively, the "ACCOUNTS RECEIVABLE"). All Accounts Receivable represent
valid obligations arising from sales actually made or services actually
performed in the ordinary course of business. The Accounts Receivable are
current and collectible net of any respective reserves shown on the Company's
books and records (which reserves are adequate and calculated consistent with
past practice). Subject to such reserves, each of the Accounts Receivable will
be collected in full, without any set-off, within ninety (90) days after the day
on which it first became due and payable. There is no contest, claim, or right
of set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of an Account Receivable relating to the
amount or validity of such Account Receivable.
4.13 BOOKS AND RECORDS. The Company has made and kept books and
records and accounts, which, in reasonable detail, accurately and fairly reflect
the activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
4.14 PERMITS. The Company owns or holds all licenses, franchises,
permits and other governmental authorizations, including without limitation
permits, titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises necessary for the
continued operation of their respective business as it is currently being
conducted (the "PERMITS"). The Permits are valid, and the Company has not
received any notice that any governmental authority intends to modify, cancel,
terminate or fail to renew any Permit. No present or former officer, manager,
member or employee of the Company or any affiliate thereof, or any other person,
firm, corporation or other entity, owns or has any proprietary, financial or
other interest (direct or indirect) in any Permits. The Company has conducted
and are conducting their business in compliance with the requirements,
standards, criteria and conditions set forth in the Permits and other applicable
orders, approvals, variances, rules and regulations and is not in violation of
any of the foregoing. The transactions contemplated by this Agreement will not
result in a default under, or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company by, any Permit.
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4.15 REAL PROPERTY.
(a) For purposes of this Agreement, "REAL PROPERTY" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
owned or used by the Company, together with any additions thereto or
replacements thereof.
(b) SCHEDULE 4.15(B) contains a complete and accurate description
of all Real Property (including street address, owner and Company's use thereof)
and, to the Stockholders' knowledge, any Liens on such Real Property. SCHEDULE
4.15(B) indicates whether the Real Property is owned or leased. The Real
Property listed on SCHEDULE 4.15(B) includes all interests in real property
necessary to conduct the business and operations of the Company.
(c) Except as set forth in SCHEDULE 4.15(B):
(i) The Company does not own any Real Property.
(ii) The Company has good and valid rights of ingress and
egress to and from all Real Property from and to the public street systems for
all usual street, road and utility purposes.
(iii) All water, sewer, gas, electric, telephone and
drainage facilities, and all other utilities required by any applicable law or
by the use and operation of the Real Property in the conduct of the Company's
business are installed to the property lines of the Real Property, are connected
pursuant to valid permits to municipal or public utility services or proper
drainage facilities, are fully operable and are adequate to service the Real
Property in the operation of the Company's business and to permit full
compliance with the requirements of all laws in the operation of such business.
No fact or condition exists which could result in the termination or material
reduction of the current access from the Real Property to existing roads or to
sewer or other utility services presently serving the Real Property.
(iv) The Real Property and all present uses and operations
of the Real Property comply with all applicable statutes, rules, regulations,
ordinances, orders, writs, injunctions, judgments, decrees, awards or
restrictions of any government entity having jurisdiction over any portion of
the Real Property (including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped)
(collectively, "LAWS"), covenants, conditions, restrictions, easements,
disposition agreements and similar matters affecting the Real Property. The
Company has obtained all approvals of governmental authorities (including
certificates of use and occupancy, licenses and permits) required in connection
with the use, occupation and operation of the Real Property.
(v) There are no pending or, to the Stockholders'
knowledge, threatened condemnation, fire, health, safety, building, zoning or
other land use regulatory proceedings, lawsuits or administrative actions
relating to any portion of the Real Property or any other matters which do or
may adversely affect the current use, occupancy or value thereof, nor has the
Company or any of the Stockholders received notice of any pending or threatened
special assessment proceedings affecting any portion of the Real Property.
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(vi) No portion of the Real Property has suffered any
damage by fire or other casualty which has not heretofore been completely
repaired and restored to its original condition.
(vii) There are no parties other than the Company in
possession of any of the Real Property or any portion thereof, and there are no
leases, subleases, licenses, concessions or other agreements, written or oral,
granting to any party or parties the right of use or occupancy of any portion of
the Real Property or any portion thereof.
(viii) There are no service contracts or other agreements
relating to the use or operation of the Real Property.
(ix) No portion of the Real Property is located in a
wetlands area, as defined by Laws, or in a designated or recognized flood plain,
flood plain district, flood hazard area or area of similar characterization. No
commercial use of any portion of the Real Property will violate any requirement
of the United States Corps of Engineers or Laws relating to wetlands areas.
(x) All written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to which the Company
leases from any other party any real property, including all amendments,
renewals, extensions, modifications or supplements to any of the foregoing or
substitutions for any of the foregoing (collectively, the "LEASES") are valid
and in full force and effect. The Company has provided the Purchaser with true
and complete copies of all of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material correspondence related
thereto, including all correspondence pursuant to which any party to any of the
Leases declared a default thereunder or provided notice of the exercise of any
options granted to such party under such Lease. The Company does not have any
oral leases. The Leases and the Company's interests thereunder are free of all
Liens, except as set forth on SCHEDULE 4.15(C).
(xi) None of the Leases requires the consent or approval
of any party thereto in connection with the consummation of the transactions
contemplated hereby.
(xii) SCHEDULE 1.2 contains a complete list of all
Leasehold Improvements.
4.16 PERSONAL PROPERTY.
(a) SCHEDULE 4.16(A) sets forth a complete and accurate list of
all personal property included on the Interim Balance Sheet and all other
personal property owned or leased by the Company with a current book value in
excess of FIVE THOUSAND DOLLARS ($5,000) both (i) as of the Balance Sheet Date
and (ii) acquired since the Balance Sheet Date, including in each case true,
complete and correct copies of leases for material equipment and an indication
as to which assets are currently owned, or were formerly owned, by any
Stockholder or business or personal affiliates of any Stockholder or of the
Company.
(b) The Company currently owns or leases all personal property
necessary to conduct the business and operations of the Company as they are
currently being conducted.
(c) All of the trucks and other material machinery and equipment
of the Company, including those listed on SCHEDULE 4.16(A), are in good working
order and condition, ordinary wear
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and tear excepted. All leases set forth on SCHEDULE 4.16(A) are in full force
and effect and constitute valid and binding agreements of the Company, and the
Company is not in breach of any of its terms. All fixed assets used by the
Company that are material to the operation of its business are either owned by
the Company or leased under an agreement listed on SCHEDULE 4.16(A).
(d) Attached hereto as SCHEDULE 4.16(D) are all assets personally
owned by the Stockholders and which the Stockholders agree to remove prior to
the Closing. The Stockholders have no other claims to assets of the Company,
except as set forth in SCHEDULE 4.16(D).
4.17 INTELLECTUAL PROPERTY.
(a) The Company is the true and lawful owner of, or is licensed or
otherwise possess legally enforceable rights to use, the registered and
unregistered Marks listed on SCHEDULE 4.17(A). Such schedule lists (i) all of
the Marks registered in the United States Patent and Trademark Office ("PTO") or
the equivalent thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks, that the Company now owns or
uses in connection with its businesses. Except with respect to those Marks shown
as licensed on SCHEDULE 4.17(A), the Company owns all of the registered and
unregistered trademarks, service marks, and trade names that they use. The Marks
listed on SCHEDULE 4.17(A) will not cease to be valid rights of the Company by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. For purposes of this
SECTION 4.17, the term "Mark" shall mean all right, title and interest in and to
any United States or foreign trademarks, service marks and trade names now held
by the Company, including any registration or application for registration of
any trademarks and services marks in the PTO or the equivalent thereof in any
state of the United States or in any foreign country, as well as any
unregistered marks used by the Company, and any trade dress (including logos,
designs, company names, business names, fictitious names and other business
identifiers) used by the Company in the United States or any foreign country.
(b) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the Patents
listed on SCHEDULE 4.17(B)(I) and in the Copyright registrations listed on
SCHEDULE 4.17(B)(II). Such Patents and Copyrights constitute all of the Patents
and Copyrights that the Company now own or are licensed to use. The Company owns
or is licensed to practice under all patents and copyright registrations that
the Company now owns or uses in connection with their businesses. For purposes
of this SECTION 4.17, the term "Patent" shall mean any United States or foreign
patent to which the Company has title as of the date of this Agreement, as well
as any application for a United States or foreign patent made by the Company;
the term "Copyright" shall mean any United States or foreign copyright owned by
the Company as of the date of this Agreement, including any registration of
copyrights, in the United States Copyright Office or the equivalent thereof in
any foreign country, as well as any application for a United States or foreign
copyright registration made by the Company.
(c) The Company is the true and lawful owner of, or is licensed or
otherwise possess legally enforceable rights to use, all rights in the trade
secrets, franchises, or similar rights (collectively, "OTHER RIGHTS"). Those
Other Rights constitute all of the Other Rights that the Company now own or are
licensed to use. The Company owns or is licensed to practice under all trade
secrets, franchises or similar rights that they own, use or practice under.
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(d) The Marks, Patents and Copyrights listed on SCHEDULES 4.17(A),
4.17(B)(I) and 4.17(B)(II), and the Other Rights are referred to collectively
herein as the "Intellectual Property." The Intellectual Property owned by the
Company is referred to herein collectively as the "COMPANY INTELLECTUAL
PROPERTY." All other Intellectual Property is referred to herein collectively as
the "THIRD PARTY INTELLECTUAL PROPERTY." Except as indicated on SCHEDULE
4.17(D), the Company has no obligations to compensate any person for the use of
any Intellectual Property nor has the Company granted to any person any license,
option or other rights to use in any manner any Intellectual Property, whether
requiring the payment of royalties or not.
(e) The Company is not, nor will they be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any Third Party Intellectual Property license,
sublicense or agreement described in SCHEDULE 4.17(A), (B) or (C). No claims
with respect to the Company Intellectual Property or Third Party Intellectual
Property are currently pending or, to the knowledge of the Stockholders, are
threatened by any person, nor, to the Stockholders' knowledge, do any grounds
for any claims exist: (i) to the effect that the manufacture, sale, licensing or
use of any product as now used, sold or licensed or proposed for use, sale or
license by the Company infringe on any copyright, patent, trademark, service
mark or trade secret; (ii) against the use by the Company of any trademarks,
trade names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in the Company's businesses as
currently conducted by the Company; (iii) challenging the ownership, validity or
effectiveness of any of the Company Intellectual Property or other trade secret
material to the Company; or (iv) challenging the Company's license or legally
enforceable right to use of the Third Party Intellectual Property. To the
Stockholders' knowledge, there is no unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any third party.
Neither the Company nor any of their subsidiaries (x) have been sued or charged
in writing as a defendant in any claim, suit, action or proceeding which
involves a claim or infringement of trade secrets, patents, trademarks, service
marks, or copyrights and which has not been finally terminated or been informed
or notified by any third party that the Company may be engaged in such
infringement or (y) have knowledge of any infringement liability with respect
to, or infringement by, the Company or any of their subsidiaries of any trade
secret, patent, trademark, service mark, or copyright of another.
(f) All Intellectual Property in the form of computer software
that is utilized by the Company in the operation of its business is capable of
processing date data between and within the twentieth and twenty-first
centuries.
4.18 MATERIAL CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 4.18(A) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which the Company is a party or by which it or its
properties are bound (including without limitation, joint venture or partnership
agreements, contracts with any labor organizations, employment agreements,
consulting agreements, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) and: (i) to which the Company and any affiliate of the Company or
any officer, director or stockholder of the Company is a party ("RELATED PARTY
AGREEMENTS"); or (ii) that may give rise to obligations or liabilities
exceeding, during the current term thereof, TWENTY THOUSAND DOLLARS ($20,000),
or that may generate revenues or income exceeding, during the current term
thereof, TWENTY THOUSAND DOLLARS ($20,000)
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(collectively with the Related Party Agreements, the "MATERIAL CONTRACTS"). The
Company has delivered to Purchaser true, complete and correct copies of the
Material Contracts that are in writing. The Company has complied with all of
their commitments and obligations and are not in default under any of the
Material Contracts, and no notice of default has been received with respect to
any thereof, and there are no Material Contracts that were not negotiated at
arm's length.
(b) Each Material Contract is valid and binding on the Company and
is in full force and effect and is not subject to any default thereunder by any
party obligated to the Company pursuant thereto. The Company will use its best
efforts to obtain all necessary consents, waivers and approvals of parties to
any Material Contracts that are required in connection with any of the
transactions contemplated hereby, or are required by any governmental agency or
other third party or are advisable in order that any such Material Contract
remain in effect without modification after the Stock Purchase and without
giving rise to any right to termination, cancellation or acceleration or loss of
any right or benefit ("THIRD PARTY CONSENTS"). The Company has no reason to
believe that it will be unable to secure the Third Party Consents. All Third
Party Consents are listed on SCHEDULE 4.18(B).
(c) The outstanding balances on all loans or credit agreements
either (i) between the Company and any Person in which any of the Stockholders
owns a material interest, or (ii) guaranteed by the Company for the benefit of
any Person in which any of the Stockholders owns a material interest, are set
forth in SCHEDULE 4.18(c).
(d) The pledge, hypothecation or mortgage of all or substantially
all of the Company's assets (including, without limitation, a pledge of the
Company's contract rights under any Material Contract) will not, except as set
forth on SCHEDULE 4.18(D), (i) result in the breach or violation of, (ii)
constitute a default under, (iii) create a right of termination under, or (iv)
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the assets of the Company (other than a lien created
pursuant to the pledge, hypothecation or mortgage described at the start of this
SECTION 4.18(D)) pursuant to any of the terms and provisions of, any Material
Contract to which the Company is a party or by which the property of the Company
is bound.
4.19 GOVERNMENT CONTRACTS.
(a) Except as set forth on SCHEDULE 4.19, the Company is not a
party to any government contracts.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Stockholders, have any suspension or debarment action been threatened or
commenced. There is no valid basis for the Company's suspension or debarment
from bidding on contracts or subcontracts for any agency of the United States
Government or any state or local government.
(c) Except as set forth in SCHEDULE 4.19, the Company has not
been, nor is it now being, audited, or investigated by any government agency, or
the inspector general or auditor general or similar functionary of any
government agency or instrumentality, nor, to the knowledge of the Stockholders,
has such audit or investigation been threatened.
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(d) The Company does not have any disputes pending before a
contracting office of, nor any current claim (other than the Accounts
Receivable) pending against, any agency or instrumentality of the United States
Government or any state or local government, relating to a contract.
(e) The Company does not have, with respect to any government
contract, received a cure notice advising the Company that they are or were in
default or would, if they failed to take remedial action, be in default under
such contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government or any state or local government.
(g) No employee, agent, consultant, representative, or affiliate
of the Company is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to the Company business
under circumstances where there is reason to believe that such receipt or
possession is unlawful or unauthorized.
(h) The Company's government contracts have been issued, awarded
or novated to the Company in the Company's name.
4.20 INSURANCE. SCHEDULE 4.20 sets forth a complete and accurate
list of all insurance policies carried by the Company and all insurance loss
runs or workmen's compensation claims received the trailing twenty-four (24)
month period to September 1, 1999. The Company has delivered to the Purchaser
true, complete and correct copies of all current insurance policies, all of
which are in full force and effect. All premiums payable under all such policies
have been paid and the Company is otherwise in full compliance with the terms of
such policies. Such policies of insurance are of the type and in amounts
customarily carried by persons conducting businesses similar to that of the
Company. The insurance carried by the Company with respect to its properties,
assets and business is, to the Stockholders' knowledge, with financially sound
insurers. To the knowledge of the Stockholders, there have been no threatened
terminations of, or material premium increases with respect to, any of such
policies.
4.21 LABOR AND EMPLOYMENT MATTERS. With respect to employees of and
service providers to the Company:
(a) The Company is and has been in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and have not and are not
engaged in any unfair labor practice;
(b) There is not now, nor within the past three years has there
been, any unfair labor practice complaint against the Company pending or, to the
Stockholders' knowledge, threatened, before the National Labor Relations Board
or any other comparable authority;
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(c) .There is not now, nor within the past three years has there
been, any labor strike, slowdown or stoppage actually pending or, to the
Stockholders' knowledge, threatened, against or directly affecting the Company;
(d) To the Stockholders' knowledge, no labor representation
organization effort exists nor has there been any such activity within the past
three years;
(e) No grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Stockholders' knowledge,
no claims therefor exist or have been threatened;
(f) The employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
(g) All persons classified by the Company as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and the Company has fully and accurately reported their compensation
on IRS Forms 1099 when required to do so.
4.22 EMPLOYEE BENEFIT PLANS. Attached hereto as SCHEDULE 4.22 are
complete and accurate copies of all employee benefit plans, all employee welfare
benefit plans, all employee pension benefit plans, all multi-employer plans and
all multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2),
(37) and (40), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), which are currently maintained and/or sponsored by
the Company, or to which the Company currently contribute, or have an obligation
to contribute in the future (including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions and
deferred compensation agreements), together with copies of any trusts related
thereto and a classification of employees covered thereby (collectively, the
"PLANS"). SCHEDULE 4.22 sets forth all of the Plans that have been terminated
within the past three years.
All Plans are in substantial compliance with all applicable provisions
of ERISA and the regulations issued thereunder, as well as with all other
applicable laws, and, in all material respects, have been administered, operated
and managed in substantial accordance with the governing documents. All Plans
that are intended to qualify (the "QUALIFIED PLANS") under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"), have been determined by
the Internal Revenue Service to be so qualified, and copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R filed with respect to each
such Qualified Plan or employee welfare benefit plan and most recent trustee or
custodian report, are included as part of SCHEDULE 4.22. To the extent that any
Qualified Plans have not been amended to comply with applicable law, the
remedial amendment period permitting retroactive amendment of such Qualified
Plans has not expired and will not expire within 120 days after the Closing
Date. All reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, annual reports, summary annual reports, actuarial reports, PBGC-1
Forms, audits or tax returns) have been timely filed or distributed. None of:
(i) the Stockholders; (ii) any Plan; or (iii) the Company has engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No Plan has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company does not currently have (nor at
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the Closing Date will have) any direct or indirect liability whatsoever
(including being subject to any statutory lien to secure payment of any such
liability), to the Pension Benefit Guaranty Corporation ("PBGC") with respect to
any such Plan under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty; and the Company nor any member of a "controlled group"
(as defined in ERISA Section 4001(a)(14)) currently has (or at the Closing Date
will have) any obligation whatsoever to contribute to any "multi-employer
pension plan" (as defined in ERISA Section 4001(a)(14)), nor has any withdrawal
liability whatsoever (whether or not yet assessed) arising under or capable of
assertion under Title IV of ERISA (including, but not limited to, Sections 4201,
4202, 4203, 4204, or 4205 thereof) been incurred by any Plan. Further:
(a) There have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to and
approval by the Internal Revenue Service;
(b) No Plan which is subject to the provisions of Title IV of
ERISA has been terminated;
(c) There have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(d) The valuation of assets of any Qualified Plan, as of the
Closing Date, shall exceed the actuarial present value of all accrued pension
benefits under any such Qualified Plan in accordance with the assumptions
contained in the Regulations of the PBGC governing the funding of terminated
defined benefit plans;
(e) With respect to Plans which qualify as "group health plans"
under Section 4980B of the Code and Section 607(1) of ERISA and related
regulations (relating to the benefit continuation rights imposed by "COBRA"),
the Company and the Stockholders have complied (and on the Closing Date will
have complied), in all respects with all reporting, disclosure, notice, election
and other benefit continuation requirements imposed thereunder as and when
applicable to such plans, and the Company have no (and will incur no) direct or
indirect liability and are not (and will not be) subject to any loss,
assessment, excise tax penalty, loss of federal income tax deduction or other
sanction, arising on account of or in respect of any direct or indirect failure
by the Company or the Stockholders, at any time prior to the Closing Date, to
comply with any such federal or state benefit continuation requirement, which is
capable of being assessed or asserted before or after the Closing Date directly
or indirectly against the Company or the Stockholders with respect to such group
health plans;
(f) The Company is not now nor have they been within the past five
years a member of a "controlled group" as defined in ERISA Section 4001(a)(14);
(g) There is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to the Stockholders'
knowledge, there is no threatened litigation, arbitration or disputed claim,
settlement or adjudication proceeding, or any governmental or other proceeding,
or investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(h) The Company Financial Statements as of the Balance Sheet Date
reflect the approximate total pension, medical and other benefit expense for all
Plans, and no material funding
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changes or irregularities are reflected thereon which would cause such Company
Financial Statements to be not representative of most prior periods; and
(i) The Company has not incurred liability under Section 4062 of
ERISA.
4.23 CONFORMITY WITH LAW; LITIGATION.
(a) Except as set forth on SCHEDULE 4.23(A), the Company is not in
violation of any law or regulation or under any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction which would have a Material
Adverse Effect. The Company has conducted and is conducting their business in
substantial compliance with the requirements, standards, criteria and conditions
set forth in applicable federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations and are not in
violation of any of the foregoing which might have a Material Adverse Effect.
(b) No Stockholder has, at any time: (i) committed any criminal
act (except for minor traffic violations); (ii) engaged in acts of fraud, gross
negligence or moral turpitude; (iii) filed for personal bankruptcy; or (iv) been
an officer, director, manager, trustee or controlling shareholder of a company
that filed for bankruptcy or Chapter 11 protection while he held such position
or within two years thereafter.
(c) Except as set forth on SCHEDULE 4.23(C), there are no claims,
actions, suits or proceedings, pending or, to the knowledge of the Stockholders,
threatened against or affecting the Company at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. There are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative agency or
by arbitration) against the Company or against any of their respective
properties or business.
4.24 TAXES.
(a) (i) The Company is a valid Subchapter S corporation and
entitled to be treated as a Subchapter S corporation under Section 1361, et seq,
of the Internal Revenue Code of 1986 and applicable Florida statutes, and the
election has not been revoked or terminated.
(ii) the Company has timely filed all Subchapter S Tax Returns
due on or before the Closing Date and all such Subchapter S Tax Returns are
true, correct and complete in all respects.
(iii) the Company has paid in full on a timely basis all Taxes
owed by it, whether or not shown on any Subchapter S Tax Return.
(iv) the amount of the Company's liability for unpaid Taxes as
of the Balance Sheet Date did not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the Interim
Balance Sheet, and the amount of the Company's liability for unpaid Taxes for
all periods or portions thereof ending on or before the Closing Date will not
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exceed the amount of the current liability accruals for Taxes (excluding
reserves for Deferred Taxes) as such accruals are reflected on the books and
records of the Company on the Closing Date.
(v) there are no ongoing examinations or claims against the
Company for Taxes, and no notice of any audit, examination or claim for Taxes,
whether pending or threatened, has been received.
(vi) the Company has had a taxable year ended on December 31 in
each year.
(vii) the Company currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not changed
in the past 10 years. The Company has not agreed to, and is not and will not be
required to, make any adjustments under Code Section 481(a) as a result of a
change in accounting methods.
(viii) the Company has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or third
party.
(ix) copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C) the Tax
Returns of the Company for the last five fiscal years have been delivered to
Purchaser.
(x) there are (and as of immediately following the Closing
there will be) no Liens on the assets of the Company relating to or attributable
to Taxes.
(xi) to the Stockholders' knowledge, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or otherwise
have a Material Adverse Effect.
(xii) there are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company that, individually or
collectively, could give rise to any payment (or portion thereof) that would not
be deductible pursuant to Sections 280G, 404 or 162 of the Code.
(xiii) except as set forth on SCHEDULE 4.24, the Company is
not, and has not been at any time, a party to a tax sharing, tax indemnity or
tax allocation agreement, and the Company has not assumed the tax liability of
any other person under contract.
(xiv) the Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
(b) For purposes of this Agreement:
(i) the term "TAX" shall include any tax or similar governmental
charge, impost or levy (including without limitation income taxes, franchise
taxes, transfer taxes or fees, sales taxes,
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use taxes, gross receipt taxes, value added taxes, employment taxes, excise
taxes, ad valorem taxes, property taxes, withholding taxes, payroll taxes,
minimum taxes or windfall profit taxes) together with any related penalties,
fines, additions to tax or interest imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof; and
(ii) the term "TAX RETURN" shall mean any return (including any
information return), report, statement, schedule, notice, form, estimate or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any tax.
4.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company
has conducted their businesses in the ordinary course and, except as
contemplated herein or as set forth on SCHEDULE 4.25, there has not been:
(a) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of the
Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of the Company;
(c) any change in the authorized capital of the Company or in
their outstanding securities or any change in their ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock, or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of the Company;
(e) any increase in the compensation, bonus, sales commissions or
fee arrangements payable or to become payable by the Company to any of its
officers, directors, Stockholders, employees, consultants or agents.
(f) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, which has had a Material
Adverse Effect;
(g) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person, including
without limitation the Stockholders and their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of the Stockholders and their affiliates, provided
that the Company may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
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(j) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of the Company;
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital commitment by the Company, either individually or
in the aggregate, exceeding TWENTY THOUSAND DOLLARS ($20,000);
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of their assets;
(p) any creation or assumption by the Company of any mortgage,
pledge, security interest or lien or other encumbrance on any asset (other than
liens arising under existing lease financing arrangements which are not material
and liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or
non- renewal by the Company of any contract, lease transaction, commitment or
other right or obligation requiring aggregate payments by the Company in excess
of TWENTY THOUSAND DOLLARS ($20,000);
(r) any loan by the Company to any person or entity, incurred by
the Company, of any indebtedness, guaranteed by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(s) the commencement or notice or, to the knowledge of the
Stockholders, threat of commencement, of any lawsuit or proceeding against, or
investigation of, the Company or any of its affairs; or
(t) any negotiation or agreement by Company or any officer or
employee thereof to do any of the things described in the preceding clauses (a)
through (s) (other than negotiations with Purchaser and its representatives
regarding the transactions contemplated by this Agreement).
4.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 4.26 sets forth
a complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company
has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
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(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and a
description of the terms of such power.
4.27 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Other than as set forth on SCHEDULE
4.27(A), no underground storage tanks and no amount of any substance that has
been designated by any Governmental Entity or by applicable federal, state,
local or other applicable law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies properly and safely maintained (a "HAZARDOUS MATERIAL"), are
present in, on or under any property, including the land and the improvements,
ground water and surface water thereof, that the Company have at any time owned,
operated, occupied or leased. SCHEDULE 4.27(A) identifies all underground and
aboveground storage tanks, and the capacity, age, and contents of such tanks,
located on Real Property owned or leased by the Company.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of or released, or exposed
their employees or others to, Hazardous Materials in violation of any law in
effect on or before the Closing Date, nor has the Company disposed of,
transported, sold, or manufactured any product containing a Hazardous Material
(collectively, "COMPANY HAZARDOUS MATERIALS ACTIVITIES") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of Company Hazardous Material Activities and
other business of the Company as such activities and business are currently
being conducted. All Environmental Permits are in full force and effect. The
Company (A) is in compliance in all material respects with all terms and
conditions of the Environmental Permits and (B) is in compliance in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the laws of all Governmental Entities relating to pollution or protection of the
environment or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder. To
the Stockholders' knowledge, there are no circumstances that may prevent or
interfere with such compliance in the future. SCHEDULE 4.27(C) includes a
listing and description of all Environmental Permits currently held by the
Company.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of the Stockholders, threatened concerning any Environmental Permit,
Hazardous Material or any Company Hazardous Materials Activity. There are no
past or present actions, activities, circumstances, conditions, events, or
incidents that could involve the Company (or any person or entity whose
liability the Company has retained or assumed, either by contract or operation
of law)
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in any environmental litigation, or impose upon the Company (or any person or
entity whose liability the Company has retained or assumed, either by contract
or operation of law) any environmental liability including, without limitation,
common law tort liability.
4.28 RELATIONS WITH GOVERNMENTS. The Company has not made, offered
or agreed to offer anything of value to any governmental official, political
party or candidate for government office, nor has it otherwise taken any action
that would cause the Company to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any law of similar effect.
4.29 DISCLOSURE. The Company has delivered to Purchaser true and
complete copies of each agreement, contract, commitment or other document (or
summaries thereof) that is referred to in the Schedules or that has been
requested in writing by Purchaser. Without limiting any exclusion, exception or
other limitation contained in any of the representations and warranties made
herein, this Agreement, the Schedules hereto and all other documents and
information furnished to Purchaser and its representatives pursuant hereto do
not and will not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading.
If any Stockholder becomes aware of any fact or circumstance which would change
a representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, the Stockholder shall immediately
give notice of such fact or circumstance to Purchaser. However, such
notification shall not relieve the Company or the Stockholder of their
respective obligations under this Agreement, and at the sole option of
Purchaser, the truth and accuracy of any and all warranties and representations
of the Stockholders, at the date of this Agreement and as of the Closing Date,
shall be a precondition to the consummation of this Agreement.
4.30 AFFILIATES. The Stockholders are the only persons who are, in
the reasonable judgment of Company and each of the Stockholders, affiliates of
the Company within the meaning of Rule 145 (each such person an "AFFILIATE")
promulgated under the 1933 Act.
4.31 LOCATION OF CHIEF EXECUTIVE OFFICES. SCHEDULE 4.31 sets forth
the location of Company's chief executive offices.
4.32 LOCATION OF EQUIPMENT AND INVENTORY. All Inventory and
Equipment held on the date hereof by the Company is located at one of the
locations shown on SCHEDULE 4.32. For purposes of this Agreement, (a) the term
"Inventory" shall mean any "inventory" as such term is defined in the Uniform
Commercial Code of the State of Florida ("FLORIDA UCC") owned by the Company as
of the date hereof, and, in any event, shall include, but shall not be limited
to, all merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods, supplies,
incidentals, packaging materials, labels, materials and any other items used or
usable in manufacturing, processing, packaging or shipping same; in all stages
of production, and all proceeds therefrom; and (b) the term "EQUIPMENT" shall
mean any "equipment," as such term is defined in the Florida UCC, owned by the
Company, and, in any event, shall include, but shall not be limited to, all
machinery, equipment, furnishings, fixtures and vehicles owned by the Company,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto.
4.33 YEAR 2000 COMPLIANCE. All software and computer systems
utilized by the Company, including any time-and-date related codes, data entry
features and internal subroutines thereof, is
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Year 2000 Compliant (as defined below). "YEAR 2000 COMPLIANT") shall mean that
the software and computer systems can, individually, and in combination and in
conjunction with all other systems, products or processes with which they are
required or designed to interface, continue to be used normally and to operate
successfully (both in functionality and performance in all material respects)
over the transition into the twenty-first century when used in accordance with
the documentation relating to the products, including being able to, before, on
and after January 1, 2000 substantially conform to the following: (i) use logic
pertaining to dates which allows users to identify and/or use the century
portion of any date fields without special processing; and (ii) respond to all
date elements and date input so as to resolve any ambiguity as to century in a
disclosed, defined and pre-determined manner and provide date information in
ways which are unambiguous as to century, either by permitting or requiring the
century to be specified or where the date element is represented without a
century, the correct century is unambiguous for all manipulations involving that
element.
5. REPRESENTATIONS OF PURCHASER
To induce the Company and the Stockholders to enter into this Agreement
and consummate the transactions contemplated hereby, Purchaser represents and
warrants to the Company and the Stockholders as follows:
5.1 DUE ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and to carry on its business in the places
and in the manner as now conducted, except where the failure to be so
authorized, qualified or licensed would not have a material adverse effect on
Purchaser. Copies of the Certificate of Incorporation and the Bylaws, each as
amended, of Purchaser (collectively, the "PURCHASER CHARTER DOCUMENTS") have
been made available to Company. Purchaser is not in violation of any Purchaser
Charter Document.
5.2 AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of
Purchaser executing this Agreement have all requisite corporate power and
authority to enter into and bind Purchaser to the terms of this Agreement.
Purchaser has the full legal right, power and corporate authority to enter into
this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by Purchaser and the performance by Purchaser of the
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of Purchaser, and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal, valid
and binding obligation of Purchaser enforceable in accordance with its terms.
5.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the
Purchaser Charter Documents;
(b) subject, until the time of Closing, to compliance with any
agreements between Purchaser and its lenders, conflict with, or result in a
default (or would constitute a default but for a requirement of notice or lapse
of time or both) under any document, agreement or other instrument to which
Purchaser is a party or by which the Company is bound, or result in the creation
or imposition of any lien, charge or encumbrance on any of Purchaser's
properties pursuant to (i) any
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law or regulation to which Purchaser or any of its property is subject, or (ii)
any judgment, order or decree to which Purchaser is bound or any of its property
is subject;
(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of
Purchaser; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which Purchaser is subject, or by which Purchaser is bound,
(including, without limitation, the HSR Act, together with all rules and
regulations promulgated thereunder).
6. COVENANTS
6.1 TAX MATTERS.
(a) the following provisions shall govern the allocation of
responsibility as between the Stockholders, on the one hand, and the Company, on
the other, for certain tax matters following the Closing Date:
(i) the Stockholders shall terminate the Subchapter S status for
the Company effective as of the day before the Closing Date (the "SUBCHAPTER S
CUT-OFF DATE"), and the Stockholders, at their expense, shall prepare or cause
to be prepared and file, or cause to be filed, within the time and in the manner
provided by law, all Subchapter S Tax Returns of the Company for all periods
ending on or before the Subchapter S Cut-Off Date. The Stockholders shall pay to
the Federal and State income tax authorities, on or before the due date of such
Tax Returns, the amount of all Taxes shown as due on such Tax Returns. Such
Returns shall be prepared and filed in accordance with applicable law and in a
manner consistent with past practices and shall be subject to the reasonable
review and approval by the Purchaser. To the extent reasonably requested by the
Stockholders, or required by law, the Purchaser and the Company shall
participate in the filing of any Tax Returns filed pursuant to this paragraph.
It is the intention of the parties that the Stockholders shall be responsible
for State and Federal income taxes for Income of the Company prior to the
Closing Date, including any stub period.
(ii) the Company shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns for Tax periods which begin after the
Subchapter S Cut-Off Date. For purposes of this SECTION 6.1, in the case of any
Taxes that are imposed on a periodic basis and are payable for a taxable period
that includes (but does not end on) the Subchapter S Cut-Off Date, the portion
of such Tax which relates to the portion of such taxable period ending on the
Subchapter S Cut-Off Date shall (x) in the case of any Taxes other than Taxes
based upon or related to income or receipts, be deemed to be the amount of such
Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Subchapter S
Cut-Off Date and the denominator of which is the number of days in the entire
taxable period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
taxable period ended on the Subchapter S Cut-Off Date. Any credits relating to a
taxable period that begins before and ends after the Subchapter S Cut-Off Date
shall be taken into account as though the relevant taxable period ended on the
Subchapter S Cut-Off Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of the Company.
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(iii) the Purchaser and the Company on one hand and the
Stockholders on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns pursuant
to this Section 6.1 and any audit, litigation or other proceeding with respect
to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating to tax matters pertinent to
the Company that is in their possession or under their control until the
expiration of any applicable statute of limitations or extensions thereof.
(iv) the Stockholders shall timely pay all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees arising from or
relating to the transactions contemplated by this Agreement, and the
Stockholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other Taxes and fees. If required by applicable law,
Purchaser and the Company will join in the execution of any such Tax Returns and
other documentation.
6.2 ACCOUNTS RECEIVABLE. The Purchaser and the Company will use
their reasonable best efforts to collect the Accounts Receivable. Any amounts
received by the Company for a particular Account Receivable (i) that was not
originally collected within ninety (90) days after the day on which it became
due and payable and (ii) for which the Purchaser or the Company has not received
indemnification pursuant to ARTICLE 9, shall be applied against amounts due on
that particular Account Receivable and such amount shall be subtracted from the
aggregate amount of Damages on the date of collection of such Account
Receivable. Any amounts received by the Company for a particular Account
Receivable (i) that was not originally collected within ninety (90) days after
the day on which it became due and payable and (ii) for which the Purchaser or
the Company has received indemnification pursuant to ARTICLE 9, shall be
remitted to the Stockholders within fifteen (15) days of receipt by the Company.
6.3 RELATED PARTY AGREEMENTS. The Company and/or the Stockholders,
as the case may be, shall terminate any Related Party Agreements which Purchaser
requests the Company or Stockholders to terminate in writing.
6.4 COOPERATION.
(a) the Company, the Stockholders and Purchaser shall each deliver
or cause to be delivered to the other on the Closing Date, and at such other
times and places as shall be reasonably agreed to, such instruments as the other
may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief financial officer of
the Company shall execute any documentation reasonably required by Purchaser's
independent public accountants (in connection with such accountants' audit of
the Company) or the Nasdaq National Market.
(b) the Stockholders and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with Purchaser on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
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(c) each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby.
(d) the Company, the Stockholders and Purchaser shall file all
notices and other information and documents required under the HSR Act (as
defined in SECTION 4.3) as promptly as practicable after the date hereof, unless
the Purchaser determines that this transaction is exempt from such a
requirement.
6.5 CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof
and the Closing Date, the Company will (except as requested or agreed by
Purchaser):
(a) carry on its business in substantially the same manner as it
has heretofore and not introduce any material new method of management,
operation or accounting;
(b) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present, ordinary
wear and tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and
preserve its business organization intact, retain its present officers and key
employees and maintain its relationships with suppliers, vendors, customers,
creditors and others having business relations with it;
(f) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(g) not disposing of any of its assets, except in the ordinary
course of business
(h) not materially increase the annual level of compensation for
any employees.
(i) not increase, terminate, amend or otherwise modify any plan
for the benefit of employees.
(j) not borrow any funds under existing credit lines other than in
the ordinary course of business.
6.6 ACCESS TO INFORMATION. Between the date of this Agreement and
the Closing Date, the Company will afford to the officers and authorized
representatives of Purchaser access to (i) all of the sites, properties, books
and records of the Company and (ii) such additional financial and operating data
and other information as to the business and properties of the Company as
Purchaser may from time to time reasonably request, including without
limitation, access upon reasonable request to the Company's employees,
customers, vendors, suppliers and creditors for due diligence inquiry. No
information or knowledge obtained in any investigation pursuant to this SECTION
6.6
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shall affect or be deemed to modify any representation or warranty contained in
this Agreement or the conditions to the obligations of the parties to consummate
the Stock Purchase.
6.7 PROHIBITED ACTIVITIES. Between the date hereof and the Closing
Date, the Company will not, without the prior written consent of Purchaser:
(a) make any change in its Articles of Incorporation or Bylaws
or authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities;
(c) declare or pay any dividend, or make any distribution (whether
in cash, stock or property) in respect of its stock whether now or hereafter
outstanding, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, or guarantee any
indebtedness, except in the ordinary course of business and consistent with past
practice, in an amount in excess of TWENTY THOUSAND DOLLARS ($20,000), including
contracts to provide services to customers;
(e) increase the compensation payable or to become payable to any
officer, director, Stockholder, employee, agent, representative or independent
contractor; make any bonus or management fee payment to any such person; make
any loans or advances; adopt or amend any Company Plan or Company Benefit
Arrangement; or grant any severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or
encumbrance upon any assets or properties whether now owned or hereafter
acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business consistent
with past practice;
(h) acquire or negotiate for the acquisition of (by stock purchase,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
Company;
(i) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(j) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice;
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(k) commit a breach of or amend or terminate any material
agreement, permit, license or other right;
(l) enter into any other transaction (i) that is not negotiated at
arm's length with a third party not affiliated with the Company or any officer,
director or Stockholder of the Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation,
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns, withholding
tax returns or sales tax returns) or any amendment to a Tax Return, enter into
any closing agreement, settle any tax claim or assessment, or consent to any tax
claim or assessment, without the prior written consent of Purchaser; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in SECTIONS 6.7(A) through (O) above, or any action which
would make any of the representations and warranties of the Company and the
Stockholders contained in this Agreement untrue or result in any of the
conditions set forth in ARTICLES 7 and 8 not being satisfied.
6.8 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, if requested by Purchaser in writing, and shall provide Purchaser
with proof that any required notice has been sent.
6.9 PERSONAL GUARANTEES. The Purchaser will indemnify and hold
harmless the Stockholders from all personal guarantees executed by the
Stockholders and disclosed in SCHEDULE 6.9 hereof. In addition, the Purchaser
shall cause the termination and cancellation of the Stockholders' floor plan
guarantees described in SCHEDULE 6.9 hereof within six (6) months of the Closing
Date.
6.10 FORM S-3 REGISTRATION RIGHTS. Upon the conversion of the
Purchaser's Note, the Stockholders shall have the right to require a Form S-3
Registration Statement to be filed for the underlying Shares. Upon receipt of
such notice, the Purchaser will file a Form S-3 Registration Statement within
thirty (30) days after the filing of the Company's next Form 10-K or Form10-KSB
subject to the normal indemnifications and other provisions of the Purchaser's
standard Registration Rights Agreement, and will use its best efforts to cause
such Registration Statement to become effective and to remain effective for a
period of twelve (12) months.
The Stockholders agree that they will not sell the Shares until
registered by the Purchaser and, thereafter, they will not sell more than Five
Percent (5%) of the total amount of converted Shares in any one calendar month.
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7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligation of Purchaser to effect the Stock Purchase is subject to
the satisfaction or waiver, at or before the Closing Date, of the following
conditions and deliveries:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
of the representations and warranties of the Stockholders and the Company
contained in this Agreement shall be true, correct and complete on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; all of the terms, covenants, agreements
and conditions of this Agreement to be complied with, performed or satisfied by
the Company and the Stockholders on or before the Closing Date shall have been
duly complied with, performed or satisfied; and a certificate to the foregoing
effects dated the Closing Date and signed on behalf of the Company and by each
of the Stockholders shall have been delivered to Purchaser.
7.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Purchaser's proposed acquisition of the Company, or limiting or restricting
Purchaser's conduct or operation of the business of the Company (or their own
businesses) following the Stock Purchase shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding of
any nature pending or threatened against Purchaser or the Company, their
respective properties or any of their officers or directors, that could
materially and adversely affect the business, assets, liabilities, financial
condition, results of operations or prospects of the Company.
7.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse changes in the business, operations, affairs, prospects, properties,
assets, existing and potential liabilities, obligations, profits or condition
(financial or otherwise) of the Company, taken as a whole, since the Balance
Sheet Date; and Purchaser shall have received a certificate signed by each
Stockholder dated the Closing Date to such effect. In addition, the Company
shall have a positive working capital ratio of 1.2:1 or more.
7.4 CONSENTS AND APPROVALS. All necessary consents of, and filings
with, any governmental authority or agency or third party, relating to the
consummation by the Company and the Stockholders of the transactions
contemplated hereby, shall have been obtained and made. Any waiting period
applicable to the consummation of the Stock Purchase under the HSR Act shall
have expired or been terminated, and no action by the Department of Justice or
Federal Trade Commission challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
7.5 OPINION OF COUNSEL. Purchaser shall have received an opinion
from counsel to Company and the Stockholders, dated the Closing Date, in a form
reasonably satisfactory to the Purchaser.
7.6 CHARTER DOCUMENTS; GOOD STANDING CERTIFICATES. Purchaser shall
have received (a) a copy of the Articles of Incorporation of the Company
certified by an appropriate authority in the
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state of incorporation, (b) a copy of the Bylaws of the Company certified by the
Secretary of the Company, and such documents shall be in form and substance
reasonably acceptable to Purchaser, and (c) a Good Standing Certificate from an
appropriate authority in the state of incorporation and any state in which they
do business.
7.7 BOARD OF DIRECTORS APPROVAL. The Board of Directors of the
Purchaser shall have approved the transaction contemplated by this Agreement.
7.8 DUE DILIGENCE REVIEW. The Company shall have made such
deliveries as are called for by this Agreement. Purchaser shall be fully
satisfied in its sole discretion with the results of its review of all of the
Schedules, whether delivered before or after the execution hereof, and such
deliveries, and its review of, and other due diligence investigations with
respect to, the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits and condition
(financial or otherwise) of the Company.
7.9 ENVIRONMENTAL AUDIT INDEMNIFICATION. ARMANDO ALONSO and
FRANCISCO ALONSO will deliver an indemnification of all environmental issues
disclosed in the Schedules attached hereto, or in the Phase I Environmental
Assessment Reports delivered by the Company to the Purchaser.
7.10 EMPLOYMENT AGREEMENTS. ARMANDO ALONSO and FRANCISCO ALONSO
shall have each entered into an employment agreement with the Company or
Purchaser in the forms attached hereto as EXHIBIT B.
7.11 STOCKHOLDERS' RELEASE. The Stockholders shall each have
delivered to Purchaser an instrument dated the Closing Date releasing the
Company and Purchaser from any and all claims of such Stockholder against the
Company.
7.12 S CORPORATION STATUS. The Company shall have filed a
termination of Subchapter S Corporate Status effective as of the Subchapter S
Cut-Off Date.
7.13 PAYOFF OF SHAREHOLDER NOTES. The Purchaser will have paid off
the Shareholders Notes in the amounts set forth in SCHEDULE 7.13 hereof.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE STOCKHOLDERS
The obligation of the Stockholders and the Company to effect the Stock
Purchase are subject to the satisfaction or waiver, at or before the Closing
Date, of the following conditions and deliveries:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
of the representations and warranties of Purchaser contained in this Agreement
shall be true, correct and complete on and as of the Closing Date with the same
effect as though such representations and warranties had been made as of such
date; all of the terms, covenants, agreements and conditions of this Agreement
to be complied with, performed or satisfied by Purchaser on or before the
Closing Date shall have been duly complied with, performed or satisfied; and a
certificate to the foregoing effects dated the Closing Date and signed by the
President or any Vice President of Purchaser shall have been delivered to
Company and the Stockholders.
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8.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Purchaser's proposed acquisition of the Company, or limiting or restricting
Purchaser's conduct or operation of the business of the Company (or their own
businesses) following the Stock Purchase shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding of
any nature pending or threatened, against Purchaser or the Company, their
respective properties or any of their officers or directors, that could
materially and adversely affect the business, assets, liabilities, financial
condition, results of operations or prospects of the Purchaser and its
subsidiaries taken as a whole.
8.3 CONSENTS AND APPROVALS. All necessary consents of, and filings
with, any governmental authority or agency or third party relating to the
consummation by Purchaser of the transactions contemplated herein, shall have
been obtained and made. Any waiting period applicable to the consummation of the
Stock Purchase under the HSR Act shall have expired or been terminated, and no
action by the Department of Justice or Federal Trade Commission challenging or
seeking to enjoin the consummation of the transactions contemplated hereby shall
be pending.
8.4 EMPLOYMENT AGREEMENTS. ARMANDO and FRANCISCO ALONSO shall each
have entered into an employment agreement with the Company or the Purchaser in
the forms attached as EXHIBIT B.
8.5 ENVIRONMENTAL AUDIT INDEMNIFICATION. ARMANDO ALONSO and
FRANCISCO ALONSO will deliver an indemnification of all environmental issues
disclosed in the Schedules attached hereto, or in the Phase I Environmental
Assessment Reports delivered by the Company to the Purchaser.
8.6 PAYOFF OF SHAREHOLDER NOTES. The Purchaser will have paid off
the Shareholders Notes in the amounts set forth in SCHEDULE 7.13 hereof.
9. INDEMNIFICATION
9.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. Each Stockholder,
jointly and severally, covenants and agrees to indemnify, defend, protect and
hold harmless Purchaser and the Corporation and their respective officers,
directors, employees, stockholders, assigns, successors and affiliates
(individually, an "INDEMNIFIED PARTY" and collectively, "INDEMNIFIED PARTIES")
from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages,
causes of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "DAMAGES") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
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(i) any breach of any representation or warranty of the
Stockholders or the Company set forth in this Agreement or any Schedule or
certificate, delivered by or on behalf of any Stockholder or the Company in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by
the Stockholders or, prior to the Closing Date, the Company, under this
Agreement; or
(iii) the business, operations or assets of the Company prior
to the Closing Date or the actions or omissions of Company's directors,
officers, shareholders, employees or agents prior to the Closing Date, other
than Damages arising from matters expressly disclosed in the Company Financial
Statements, this Agreement or the Schedules to this Agreement; or
(iv) the matters disclosed on SCHEDULES 4.23 (conformity with
law; litigation), 4.24 (taxes) and 4.27 (environmental matters); and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this SECTION 9.1.
9.2 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under SECTION
9.1 unless, and solely to the extent that, the aggregate amount of Damages (such
aggregate amount shall not include any Damages resulting from a breach of
representations and warranties in SECTION 4.9(A)) exceeds TEN THOUSAND DOLLARS
($10,000) (the "INDEMNIFICATION THRESHOLD"); provided, however, that the
Indemnification Threshold shall not apply to (i) adjustments to the Purchase
Price as set forth in SECTIONS 1.2 and 2.1; (ii) Damages arising out of any
breaches of the covenants of the Stockholders set forth in this Agreement or
representations and warranties made in SECTIONS 4.4 (capital stock of Company),
4.5 (transactions in capital stock), 4.9 (Company financial conditions), 4.18
(material contracts and commitments), 4.23 (conformity with law; litigation),
4.24 (taxes) and 4.27 (environmental matters); or (iii) Damages described in
SECTIONS 9.1(A)(IV) and 9.1(B).
(b) the aggregate amount of the Stockholders' liability under this
Article 9 shall not exceed the Purchase Price; provided, however, that the
Stockholders' liability for Damages arising out of any breaches of the
representations made in SECTIONS 4.24 (taxes) or 4.27 (environmental matters) or
Damages described in SECTIONS 9.1(A)(II), 9.1(A)(IV) and 9.1(B) shall not be
subject to such limitation;
(c) the indemnification obligations under this ARTICLE 9, or under
any certificate or writing furnished in connection herewith, shall terminate:
(i) on the second Anniversary Date of the closing Date;
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this SECTION 9.2(C) (such claims
referred to as "PENDING CLAIMS").
9.3 INDEMNIFICATION PROCEDURES. All claims or demands for
indemnification under this ARTICLE 9 ("CLAIMS") shall be asserted and resolved
as follows:
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(a) in the event that any Indemnified Party has a Claim against
any party obligated to provide indemnification pursuant to SECTION 9.1 hereof
(the "INDEMNIFYING PARTY") which does not involve a Claim being asserted against
or sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Stockholders of such Claim, specifying the
nature of such Claim and the amount or the estimated amount thereof to the
extent then feasible (the "CLAIM NOTICE"). If the Stockholder does not notify
the Indemnified Party within thirty (30) days after the date of delivery of the
Claim Notice that the Indemnifying Party disputes such Claim, with a detailed
statement of the basis of such position, the amount of such Claim shall be
conclusively deemed a liability of the Indemnifying Party hereunder. In case an
objection is made in writing in accordance with this SECTION 9.3(A), the
Indemnified Party shall respond in a written statement to the objection within
thirty days and, for sixty days thereafter, attempt in good faith to agree upon
the rights of the respective parties with respect to each of such Claims (and,
if the parties should so agree, a memorandum setting forth such agreement shall
be prepared and signed by both parties).
(b) (i) in the event that any Claim for which the Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third-Party Claim"), the Indemnified
Party shall deliver a Claim Notice to the Stockholders. The Stockholders shall
have thirty (30) days from the date of delivery of the Claim Notice to notify
the Indemnified Party (A) whether the Indemnifying Party disputes liability to
the Indemnified Party hereunder with respect to the Third-Party Claim, and, if
so, the basis for such a dispute, and (B) if such party does not dispute
liability, whether or not the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend against the Third-Party Claim,
provided that the Indemnified Party is hereby authorized (but not obligated) to
file any motion, answer or other pleading and to take any other action which the
Indemnified Party shall deem necessary or appropriate to protect the Indemnified
Party's interests.
(ii) in the event that Stockholders timely notifies the
Indemnified Party that the Indemnifying Party does not dispute the Indemnifying
Party's obligation to indemnify with respect to the Third-Party Claim, the
Indemnifying Party shall defend the Indemnified Party against such Third-Party
Claim by appropriate proceedings, provided that, unless the Indemnified Party
otherwise agrees in writing, the Indemnifying Party may not settle any
Third-Party Claim (in whole or in part) if such settlement does not include a
complete and unconditional release of the Indemnified Party. If the Indemnified
Party desires to participate in, but not control, any such defense or settlement
the Indemnified Party may do so at its sole cost and expense. If the
Indemnifying Party elects not to defend the Indemnified Party against a
Third-Party Claim, whether by failure of such party to give the Indemnified
Party timely notice as provided herein or otherwise, then the Indemnified Party,
without waiving any rights against such party, may settle or defend against such
Third-Party Claim in the Indemnified Party's sole discretion and the Indemnified
Party shall be entitled to recover from the Indemnifying Party the amount of any
settlement or judgment and, on an ongoing basis, all indemnifiable costs and
expenses of the Indemnified Party with respect thereto, including interest from
the date such costs and expenses were incurred.
(iii) if at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the
Stockholders, any Third-Party Claim seeks material prospective relief which
could have an adverse effect on any Indemnified Party or the Company, or any
subsidiary, the Indemnified Party shall have the right to control or assume (as
the case may be) the defense of any such Third-Party Claim and the amount of any
judgment or settlement and the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the Indemnifying
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Party hereunder. If the Indemnified Party elects to exercise such right, the
Indemnifying Party shall have the right to participate in, but not control, the
defense of such Third-Party Claim at the sole cost and expense of the
Indemnifying Party.
(c) nothing herein shall be deemed to prevent the Indemnified
Party from making a Claim, and an Indemnified Party may make a Claim hereunder,
for potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) subject to the provisions of SECTION 9.2, the Indemnified
Party's failure to give reasonably prompt notice as required by this SECTION 9.3
of any actual, threatened or possible claim or demand which may give rise to a
right of indemnification hereunder shall not relieve the Indemnifying Party of
any liability which the Indemnifying Party may have to the Indemnified Party
unless the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
(e) the parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this ARTICLE 9, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
9.4 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by the Company, the Stockholders,
and Purchaser in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of the Company and the Stockholders will
survive the Closing and will remain in effect until, and will expire upon, the
termination of the indemnification obligations as provided in SECTION 9.2. The
representations of Purchaser will survive the Closing and will remain in effect
until, and will expire upon the first anniversary of the Closing date.
9.5 REMEDIES CUMULATIVE. The remedies set forth in this ARTICLE 9
are cumulative and shall not be construed to restrict or otherwise affect any
other remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
9.6 RIGHT TO SET OFF. Purchaser shall have the right, but not the
obligation, to set off, in whole or in part, against the Purchaser Promissory
Note, amounts finally determined under SECTION 9.3 to be owed to Purchaser by
the Stockholders under this Agreement.
10. NON-COMPETITION
10.1 PROHIBITED ACTIVITIES. The Stockholders agree that for a
period of the greater of: (i) three (3) years following the Closing, or (ii)
three (3) years following Stockholders termination of employment with the
Company or Purchaser they shall not:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
selling any products or services in direct competition with the Company or
Purchaser, including without limitation the importing, brokerage, manufacture,
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assembly, packaging, distribution, shipping or marketing of motor vehicles,
recreational vehicles, trailers, boats or water craft sold by the Purchaser or
the Company (including, without limitation, hardgoods), or any business engaging
in the consolidation of the industry involving motor vehicles, recreational
vehicles, trailers, boats or water craft industries, within any state in which
the Company or the Purchaser is currently doing business or where the Purchaser
has letters of intent to purchase entities (the "TERRITORY");
(b) call upon any person who is, at that time, within the
Territory, an employee of Purchaser or any subsidiary of Purchaser in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of Purchaser or such subsidiary;
(c) call upon any person or entity which is, at that time, or
which has been, within one year prior to that time, a customer of Purchaser or
any subsidiaries of Purchaser, Company within the Territory for the purpose of
soliciting or selling motor vehicles, recreational vehicles, trailers, boats or
watercraft sold by the Purchaser or the Company within the Territory;
(d) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called upon by
any of them or for which any of them made an acquisition analysis for themselves
or Purchaser or any subsidiaries of Purchaser, the Company; or
(e) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any reason
or purpose whatsoever.
(f) undertake any solicitations or transactions through the
internet or world wide web which has the same effect as the foregoing.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Stockholders from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market or (ii) engaging
in any activity to which Purchaser shall have provided its prior written
consent.
10.2 DAMAGES. Because of the difficulty of measuring economic losses
to Purchaser and the Company as a result of the breach of the foregoing
covenant, and because of the immediate and irreparable damage that would be
caused to Purchaser and the Company for which they would have no other adequate
remedy, the Stockholders agree that, in the event of a breach by them of the
foregoing covenant, the covenant may be enforced by Purchaser or the Company by,
without limitation, injunctions and restraining orders.
10.3 REASONABLE RESTRAINT. It is agreed by the parties that the
foregoing covenants in this ARTICLE 10 impose a reasonable restraint on the
Stockholders in light of the activities and business of Purchaser on the date of
the execution of this Agreement and the current and future plans of Purchaser
and the Company (as successors to the businesses of Company).
10.4 SEVERABILITY; REFORMATION. The covenants in this ARTICLE 10 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the
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scope, time or territorial restrictions set forth are unreasonable, then it is
the intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall thereby be
reformed.
10.5 INDEPENDENT COVENANT. All of the covenants in this ARTICLE 10
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholders
against the Company or Purchaser, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement of such covenants.
It is specifically agreed that the period of three (3) years stated above, shall
be computed by excluding from such computation any time during which any
Stockholder is in violation of any provision of this ARTICLE 10 and any time
during which there is pending in any court of competent jurisdiction any action
(including any appeal from any judgment) brought by any person, whether or not a
party to this Agreement, in which action Purchaser or the Company seeks to
enforce the agreements and covenants of the Stockholders or in which any person
contests the validity of such agreements and covenants or their enforceability
or seeks to avoid their performance or enforcement; provided, however, that if
any Stockholder is found not to be in violation of the agreements or covenants
in any such activity the period during which the action was pending shall not be
excluded from such computation.
10.6 MATERIALITY. The Company and each Stockholder hereby agree
that the covenants set forth in this ARTICLE 10 are a material and substantial
part of the transactions contemplated by this Agreement, supported by adequate
consideration.
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
11.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that
they have in the past, currently have, and in the future may possibly have,
access to certain confidential information of the Company, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company and the Company's business.
The Stockholders agree that they will not disclose any confidential information
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of Purchaser, unless the
Stockholders can show that such information has become known to the public
generally through no fault of the Stockholders. In the event of a breach or
threatened breach by the Stockholders of the provisions of this ARTICLE 11,
Purchaser and the Company shall be entitled to an injunction restraining the
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Purchaser and the
Company from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
11.2 PURCHASER. Purchaser recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information of Company, such as lists of customers,
operational policies, pricing and cost policies that are valuable, special and
unique assets of the Company and the Company's business. Purchaser agrees that
it will not disclose any confidential information to any person, firm,
corporation, association, or other entity for any purpose or reason whatsoever,
prior to the Closing Date without prior written consent of the Stockholders. In
the event of a breach or threatened breach by Purchaser of the provisions of
this ARTICLE 11, the Stockholders shall be entitled to an injunction restraining
Purchaser from disclosing, in whole or in part, such confidential information.
Nothing contained herein shall be
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construed as prohibiting the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
11.3 DAMAGES. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which they would have
no other adequate remedy, Purchaser, the Company and the Stockholders agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
12. GENERAL
12.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date solely:
(a) by mutual consent of the boards of directors of Purchaser
and the Company; or
(b) by the Stockholders and the Company as a group, on the one
hand, or by Purchaser, on the other hand, if the Closing shall not have occurred
on or before the period set forth in SECTION 3.1 hereof, provided that the right
to terminate this Agreement under this SECTION 12.1(B) shall not be available to
either party (with the Stockholders and the Company deemed to be a single party
for this purpose) whose material misrepresentation, breach of warranty or
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date; or
(c) by the Stockholders and the Company as a group, on the one
hand, or by Purchaser, on the other hand, if there is or has been a material
breach, failure to fulfill or default on the part of the other party (with the
Stockholders and the Company deemed to be a single party for this purpose) of
any of the representations and warranties contained herein or in the due and
timely performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made or shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholders and the Company as a group, on the one
hand, or by Purchaser, on the other hand, if there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Stock Purchase; or there shall be any action taken, or any
statute, rule regulation or order enacted, promulgated or issued or deemed
applicable to the Stock Purchase by any governmental entity which would make the
consummation of the Stock Purchase illegal.
12.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to SECTION 12.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this ARTICLE 12 shall remain in full
force and effect and survive any termination of this Agreement; (ii) each party
shall remain liable for any breach of this Agreement prior to its termination;
and (iii) in the event of termination of this Agreement pursuant to SECTION
12.1(C) above, then notwithstanding the provisions of SECTION 12.7 below, the
breaching party (with the Stockholders and the Company deemed to be a single
party for purposes of this ARTICLE 12), shall be liable to the other party to
the extent of the expenses incurred by such other
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party in connection with this Agreement and the transactions contemplated
hereby, as well as any damages in accordance with applicable law.
12.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of Purchaser, and the heirs and legal representatives of the
Stockholders.
12.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement sets forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto, or in accordance with SECTION 12.4. Any
extension or waiver by any party of any provision hereto shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
12.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
12.6 BROKERS AND AGENTS. Purchaser, on the one hand, and the
Stockholders and the Company (as a group), on the other hand, represents and
warrants to the other that it has not employed any broker or agent in connection
with the transactions contemplated by this Agreement and agrees to indemnify the
other against all losses, damages or expenses relating to or arising out of
claims for fees or commission of any broker or agent employed or alleged to have
been employed by such party.
12.7 EXPENSES. The Purchaser will pay the fees, expenses and
disbursements of its agents, representatives, accountants and counsel incurred
in connection with the subject matter of this Agreement, as well as the auditors
specified in SECTION 2.1 hereof. The Stockholders (and not the Company) have and
will pay the fees, expenses and disbursements of the Stockholders, the Company,
and their agents, representatives, financial advisers, accountants and counsel
incurred in connection with the subject matter of this Agreement.
12.8 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges
that the other parties will be irreparably harmed and that there will be no
adequate remedy at law for any violation by any of them of any of the covenants
or agreements contained in this Agreement, including without limitation, the
non-competition provisions set forth in ARTICLE 10 and the confidentiality
obligations set forth in ARTICLE 11. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
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12.9 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
IF TO THE PURCHASER, TO:
Holiday RV Superstores, Inc.
7851 Greenbriar Parkway
Orlando, FL 32819
Attn: Hardee McAlhaney
Fax No.: (407) 363-2065
WITH A REQUIRED COPY TO:
Nida & Maloney, LLP
800 Anacapa Street
Santa Barbara, CA 93101
Attn: Theodore R. Maloney
Fax No.: (805) 568-1955
IF TO THE COMPANY, TO:
County Line Select Cars, Inc.
3040 N.W. Ginaesville Road
Ocala, FL 34470
Attn: Armando Alonso
Fax No.: (352) 429-2862
WITH A REQUIRED COPY TO:
Byrd F. Marshall, Jr.
Gray, Harris & Robinson
301 East Pine Street, #1200
Orlando, FL 32502-3066
Fax No. 407-244-5690
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
12.10 ..GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Florida, without giving effect to any of the conflicts of laws provisions
thereof that would require the application of the substantive laws of any other
jurisdiction.
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12.11 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable. The preceding sentence is in addition to and not in place of the
severability provisions in Section 11.4.
12.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
12.13 LEGAL REPRESENTATION. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
12.14 PUBLIC ANNOUNCEMENT. The Stockholders and the Company agree
that upon the execution of this Agreement, the Purchaser will be entitled to
issue a Press Release with respect to this transaction, which will be subject to
the prior reasonable review by the Stockholders. However, the content of the
press release will be subject to the final approval of securities counsel for
the Purchaser.
12.15 NO TRADING IN PURCHASER'S SECURITIES. The Stockholders
acknowledge that, since the date of the Letter of Intent, neither they nor any
affiliates or family member has entered into any transaction involving the
securities of the Purchaser, and the Stockholders agree for themselves and for
any affiliate or family members that they will not engage in any transaction
involving the securities of the Purchaser until the expiration of three (3)
trading days from the issuance of the Press Release described in SECTION 12.14
hereof.
12.16 ACCOUNTING TERMS. Except as otherwise expressly provided
herein or in the Schedules, all accounting terms used in this Agreement shall be
interpreted, and all financial statements, Schedules, certificates and reports
as to financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
12.17 LETTER OF INTENT. The Letter of Intent is hereby terminated
and is of no force and effect.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PURCHASER:
HOLIDAY RV SUPERSTORES, INC.
By: /s/ MICHAEL S. RILEY
--------------------
Name: Michael S. Riley
Title: Chairman
COMPANY:
COUNTY LINE SELECT CARS, INC.
By: /s/ ARMANDO ALONSO
------------------
Name: Armando Alonso
Title: President
STOCKHOLDERS:
/s/ ARMANDO ALONSO
-------------------------------
ARMANDO ALONSO
/s/ FRANCISCO ALONSO
-------------------------------
FRANCISCO ALONSO
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EXHIBIT A
TO
STOCK PURCHASE AGREEMENT
PURCHASER'S NOTE
<PAGE>
EXHIBIT B
TO
STOCK PURCHASE AGREEMENT
FORM OF EMPLOYMENT AGREEMENT
<PAGE>
SCHEDULES
---------
SCHEDULE 1.2 Leasehold Improvements
SCHEDULE 1.4 Owners of Company Common Stock
SCHEDULES TO ARTICLE 4 Schedules of Exceptions to representations
and warranties
Schedule 4.1 List of Jurisdictions in which the Company
is authorized or qualified to do business
Schedule 4.4 List of issued and outstanding shares of the
Company, fully paid and non-assessable and
owned or record and beneficially by the
Stockholders
Schedule 4.6(a) Company's Subsidiaries
Schedule 4.6(b) Any Securities convertible into capital
stock or any other equity interest in any
corporation, association or business entity
owned by Company, or any joint venture,
partnership or other non-corporate entity in
which Company participates
Schedule 4.6(c) Promissory Notes issued or held by the
Company
Schedule 4.7 List of names of predecessors of the
Company, including the names of entities
from which the Company previously acquired
significant assets
Schedule 4.8 Stockholder claims against the Company
Schedule 4.10 Company's Unaudited Balance Sheet as of
September 30, 1999 and a Statement of Profit
and Loss for the Nine Month Period then
ended.
Schedule 4.11(b) Estimate of maximum amount of liabilities
which may be payable
Schedule 4.11(c) Summary description of all current plans or
projects involving the opening of new
operations, expansion of existing operations
or the acquisition of any real property or
existing business to which Company's
management has made any material expenditure
in the 2-year period prior to the date of
this Agreement
Schedule 4.11(d) List of Indebtedness of the Company
Schedule 4.15(b) Company's Real Property, owned or leased
<PAGE>
Schedule 4.15(c) Liens on Company's Leases
Schedule 4.16(a) Equipment Leases
Schedule 4.16(d) Personal Assets of the Stockholders
Schedule 4.17(a) Marks and Trademarks of the Company
Schedule 4.17(b)(i) Patents of the Company
Schedule 4.17(b)(ii) Copyright Registrations of the Company
Schedule 4.17(d) Obligations of Company to compensate
any person for use of any Intellectual
Property
Schedule 4.18(a) Material Contracts and Commitments of
Company
Schedule 4.18(b) Third Party Consents
Schedule 4.18(c) Outstanding loans or credit agreements
between Company and any Person in which any
of the Stockholders owns a material interest
or are guaranteed by the Company
Schedule 4.18(d) Pledge, hypothecation or mortgage of any of
Company's assets, including any Material
Contract
Schedule 4.19 Government Contracts
Schedule 4.20 Insurance
Schedule 4.22 Employee Benefit Plans
Schedule 4.23(a) Violation of any law or regulation or under
any court order of any court or federal,
state, municipal or other governmental
department having jurisdiction which
would have a Material Adverse Effect
Schedule 4.23(c) Claims, actions, suits or proceedings
pending or threatened against or affecting
the Company
Schedule 4.24 Tax Sharing, Tax Indemnity or Tax Allocation
Agreement
Schedule 4.25 Changes since the Balance Sheet Date
Schedule 4.26 Deposit Accounts; Powers of Attorney
Schedule 4.27(a) Hazardous Materials
<PAGE>
Schedule 4.27(c) Environmental Permits
Schedule 4.31 Location of Chief Executive Offices
Schedule 4.32 Location of Equipment and Inventory
SCHEDULE 6.9 List of Personal Guarantees of Stockholder
SCHEDULE 7.13 Shareholders Notes
